FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

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

For the quarterly period ended                 March 31, 2003
                                   -----------------------------------

                                       OR

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

For the transition period from _________________________ to ____________________


                             Commission file number
                                     0-16850
                     ---------------------------------------


                            CNL Income Fund III, Ltd.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


       Florida                                         59-2809460
--------------------------------              ----------------------------------
(State or other jurisdiction of                    (I.R.S. Employer
incorporation or organization)                     Identification No.)


   450 South Orange Avenue
     Orlando, Florida                                     32801
--------------------------------              ----------------------------------
(Address of principal executive offices)             (Zip Code)


Registrant's telephone number
(including area code)                              (407) 540-2000
                                             -----------------------------------


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by  Sections  13 or 15(d)  of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. Yes X No _____

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act): Yes ____ No X



<PAGE>


                                    CONTENTS




                                                                         Page
Part I.

     Item 1.      Financial Statements:

                      Condensed Balance Sheets                            1

                      Condensed Statements of Income                      2

                      Condensed Statements of Partners' Capital           3

                      Condensed Statements of Cash Flows                  4

                      Notes to Condensed Financial Statements             5-7

     Item 2.      Management's Discussion and Analysis of Financial
                      Condition and Results of Operations                 8-10

     Item 3.      Quantitative and Qualitative Disclosures About
                      Market Risk                                         10

     Item 4.      Controls and Procedures                                 10


Part II.

     Other Information                                                    11-12




<PAGE>







                            CNL INCOME FUND III, LTD.
                         (A Florida Limited Partnership)
                            CONDENSED BALANCE SHEETS

<TABLE>


                                                                  March 31,             December 31,
                                                                     2003                   2002
                                                              -------------------    -------------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>


                             ASSETS

  Real estate properties with operating leases, net                $   7,310,285          $   7,362,460
  Real estate held for sale                                                   --                368,737
  Investment in joint ventures                                         2,081,549              2,084,178
  Cash and cash equivalents                                            1,250,294              1,994,246
  Receivables                                                                676                 10,195
  Accrued rental income                                                  101,489                 95,861
  Other assets                                                            37,322                 32,861
                                                              -------------------    -------------------

                                                                   $  10,781,615          $  11,948,538
                                                              ===================    ===================

                 LIABILITIES AND PARTNERS' CAPITAL

  Accounts payable                                                  $     13,975           $     21,199
  Real estate taxes payable                                               14,399                 11,892
  Distributions payable                                                  701,563              1,357,500
  Due to related parties                                                 194,040                243,170
  Rents paid in advance                                                   60,814                 35,424
                                                              -------------------    -------------------
      Total liabilities                                                  984,791              1,669,185

  Minority interest                                                      123,947                124,632

  Partners' capital                                                    9,672,877             10,154,721
                                                              -------------------    -------------------

                                                                   $  10,781,615          $  11,948,538
                                                              ===================    ===================

           See accompanying notes to condensed financial statements.

</TABLE>




<PAGE>


                            CNL INCOME FUND III, LTD.
                         (A Florida Limited Partnership)
                         CONDENSED STATEMENTS OF INCOME

<TABLE>

                                                                                Quarter Ended
                                                                                  March 31,
                                                                           2003                2002
                                                                      ---------------     ---------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>

Revenues:
    Rental income from operating leases                                  $   257,652          $  269,348
    Earned income from direct financing leases                                    --               8,976
    Contingent rental income                                                  23,363              27,020
    Interest and other income                                                    593               5,891
                                                                      ---------------     ---------------
                                                                             281,608             311,235
                                                                      ---------------     ---------------

Expenses:
    General operating and administrative                                      53,581              60,802
    Property expenses                                                            963               1,010
    State and other taxes                                                      2,313              21,030
    Depreciation                                                              52,176              52,176
                                                                      ---------------     ---------------
                                                                             109,033             135,018
                                                                      ---------------     ---------------
Income Before Minority Interest in Income of
    Consolidated Joint Venture and Equity in Earnings
    of Unconsolidated Joint Ventures                                         172,575             176,217

Minority Interest in Income of Consolidated
    Joint Venture                                                             (4,359 )            (4,203 )

Equity in Earnings of Unconsolidated Joint Ventures                           53,401              50,630
                                                                      ---------------     ---------------

Income from Continuing Operations                                            221,617             222,644
                                                                      ---------------     ---------------

Discontinued Operations:
    Loss from discontinued operations                                         (4,123 )           (26,638 )
    Gain on disposal of discontinued operations                                2,225                  --
                                                                      ---------------     ---------------
                                                                              (1,898 )           (26,638 )
                                                                      ---------------     ---------------

Net Income                                                               $   219,719          $  196,006
                                                                      ===============     ===============

Income (Loss) per Limited Partner Unit:
    Continuing operations                                                 $     4.43           $    4.45
    Discontinued operations                                                    (0.04 )             (0.53 )
                                                                      ---------------     ---------------
                                                                          $     4.39           $    3.92
                                                                      ===============     ===============

Weighted Average Number of Limited Partner
    Units Outstanding                                                         50,000              50,000
                                                                      ===============     ===============

           See accompanying notes to condensed financial statements.

</TABLE>


<PAGE>


                            CNL INCOME FUND III, LTD.
                         (A Florida Limited Partnership)
                    CONDENSED STATEMENTS OF PARTNERS' CAPITAL

<TABLE>

                                                                  Quarter Ended           Year Ended
                                                                    March 31,            December 31,
                                                                       2003                  2002
                                                                -------------------    ------------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>

General partners:
    Beginning balance                                                 $    371,371          $    371,371
    Net income                                                                  --                    --
                                                                -------------------    ------------------
                                                                           371,371               371,371
                                                                -------------------    ------------------

Limited partners:
    Beginning balance                                                    9,783,350            12,586,051
    Net income                                                             219,719               279,799
    Distributions ($14.03 and $61.65 per
       limited partner unit, respectively)                                (701,563 )          (3,082,500 )
                                                                -------------------    ------------------
                                                                         9,301,506             9,783,350
                                                                -------------------    ------------------

Total partners' capital                                              $   9,672,877         $  10,154,721
                                                                ===================    ==================


</TABLE>


<PAGE>


                            CNL INCOME FUND III, LTD.
                         (A Florida Limited Partnership)
                       CONDENSED STATEMENTS OF CASH FLOWS


<TABLE>

                                                                                      Quarter Ended
                                                                                        March 31,
                                                                                 2003                2002
                                                                            ----------------     --------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>

   Increase (Decrease) in Cash and Cash Equivalents

       Net Cash Provided by Operating Activities                                $   235,256         $  348,793
                                                                            ----------------     --------------

       Cash Flows from Investing Activities:
          Proceeds from sale of assets                                              383,336                 --
          Liquidating distribution from joint venture                                    --            106,521
                                                                            ----------------     --------------
                 Net cash provided by investing activities                          383,336            106,521
                                                                            ----------------     --------------

       Cash Flows from Financing Activities:
          Distributions to limited partners                                      (1,357,500 )         (437,500 )
          Distributions to holders of minority interests                             (5,044 )           (5,049 )
                                                                            ----------------     --------------
                 Net cash used in financing activities                           (1,362,544 )         (442,549 )
                                                                            ----------------     --------------

   Net Increase (Decrease) in Cash and Cash Equivalents                            (743,952 )           12,765

   Cash and Cash Equivalents at Beginning of Quarter                              1,994,246          1,242,931
                                                                            ----------------     --------------

   Cash and Cash Equivalents at End of Quarter                                 $  1,250,294        $ 1,255,696
                                                                            ================     ==============

   Supplemental Schedule of Non-Cash Investing and Financing
       Activities:

          Deferred real estate disposition fee incurred and unpaid
             at end of quarter                                                 $   12,375            $    --
                                                                            ================     ==============

          Distributions declared and unpaid at end of quarter                   $   701,563         $  975,000
                                                                            ================     ==============
</TABLE>

            See accompanying notes to condensed financial statements.
<PAGE>





                            CNL INCOME FUND III, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                     Quarters Ended March 31, 2003 and 2002


   1.    Basis of Presentation:
         ---------------------

         The accompanying  unaudited  condensed  financial  statements have been
         prepared in accordance  with the  instructions  to Form 10-Q and do not
         include  all  of the  information  and  note  disclosures  required  by
         generally  accepted  accounting  principles.  The financial  statements
         reflect all adjustments,  consisting of normal  recurring  adjustments,
         which are, in the opinion of the general partners,  necessary to a fair
         statement of the results for the interim periods  presented.  Operating
         results for the quarter  ended March 31, 2003 may not be  indicative of
         the results that may be expected for the year ending December 31, 2003.
         Amounts as of December 31, 2002,  included in the financial  statements
         have been derived from audited financial statements as of that date.

         These unaudited financial statements should be read in conjunction with
         the financial statements and notes thereto included in Form 10-K of CNL
         Income Fund III, Ltd. (the  "Partnership")  for the year ended December
         31, 2002.

         The Partnership  accounts for its 69.07%  interest in Tuscawilla  Joint
         Venture using the consolidation  method.  Minority interests represents
         the minority joint venture partners'  proportionate share of the equity
         in  the  Partnership's  consolidated  joint  venture.  All  significant
         intercompany accounts and transactions have been eliminated.

         In January  2003,  FASB issued FASB  Interpretation  No. 46 ("FIN 46"),
         "Consolidation  of  Variable  Interest  Entities"  to  expand  upon and
         strengthen  existing  accounting guidance that addresses when a company
         should include the assets, liabilities and activities of another entity
         in  its  financial  statements.   To  improve  financial  reporting  by
         companies  involved  with variable  interest  entities  (more  commonly
         referred  to  as   special-purpose   entities  or   off-balance   sheet
         structures),  FIN  46  requires  that a  variable  interest  entity  be
         consolidated by a company if that company is subject to a majority risk
         of loss from the variable interest  entity's  activities or entitled to
         receive a majority of the entity's  residual  returns or both. Prior to
         FIN 46, a company generally included another entity in its consolidated
         financial  statements  only if it controlled  the entity through voting
         interests.  Consolidation  of variable  interest  entities will provide
         more complete information about the resources,  obligations,  risks and
         opportunities   of  the   consolidated   company.   The   consolidation
         requirements of FIN 46 apply  immediately to variable interest entities
         created after  January 31, 2003,  and to older  entities,  in the first
         fiscal  year or  interim  period  beginning  after June 15,  2003.  The
         general partners believe adoption of this standard may result in either
         consolidation or additional disclosure requirements with respect to the
         Partnership's  unconsolidated  joint  ventures or properties  held with
         affiliates  of the  general  partners as  tenants-in-common,  which are
         currently  accounted  for  under  the  equity  method.   However,  such
         consolidation is not expected to significantly impact the Partnership's
         results of operations.

2.   Reclassification:
     ----------------

         Certain  items in the  prior  year's  financial  statements  have  been
         reclassified to conform to 2003 presentation.  These  reclassifications
         had no effect on total partners' capital or net income.


<PAGE>


                            CNL INCOME FUND III, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                     Quarters Ended March 31, 2003 and 2002


3.       Discontinued Operations:
         -----------------------

         During 2002, the Partnership  identified for sale three properties that
         were  classified  as  Discontinued   Operations  in  the   accompanying
         financial statements.  The Partnership sold two of the three properties
         during 2002. In February 2003, the Partnership sold the third property,
         and  recorded  a gain on  disposal  of assets of  approximately  $2,200
         during the quarter ended March 31, 2003. The  Partnership  had recorded
         provisions  for write-down of assets in previous years relating to this
         property.

         The  operating  results of the  discontinued  operations  for the above
         properties are as follows:

<TABLE>

                                                                         Quarter Ended March 31,
                                                                       2003                    2002
                                                                 ------------------       ---------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>

          Rental revenues                                                $      --            $   41,974
          Expenses                                                          (4,123 )             (22,256 )
          Provision for write-down of assets                                    --               (46,356 )
          Gain on disposal of assets                                         2,225                    --
                                                                 ------------------       ---------------
           Loss from discontinued operations                           $    (1,898)           $  (26,638 )
                                                                 ==================       ===============
</TABLE>

4.       Related Party Transactions:
         --------------------------

         An  affiliate  of the  Partnership  is  entitled to receive a deferred,
         subordinated real estate  disposition fee, payable upon the sale of one
         or more  properties,  based on the lesser of one-half of a  competitive
         real  estate  commission  or three  percent  of the sales  price if the
         Advisor  provides a substantial  amount of services in connection  with
         the sales.  However,  if the net sales  proceeds  are  reinvested  in a
         replacement  property,  no such real  estate  disposition  fees will be
         incurred  until  such  replacement  property  is sold and the net sales
         proceeds are  distributed.  The payment of the real estate  disposition
         fee is  subordinated  to the receipt by the  limited  partners of their
         aggregate, cumulative 10% Preferred Return, plus their adjusted capital
         contributions. During the quarter ended March 31, 2003, the Partnership
         incurred  a  deferred,  subordinated  real  estate  disposition  fee of
         $12,375  as a  result  of the  Partnership's  sale of the  property  in
         Fayetteville, North Carolina.

5.       Concentration of Credit Risk:
         -----------------------------

         The following  schedule  presents total rental revenues from individual
         lessees,  each representing  more than 10% of the  Partnership's  total
         rental revenues  (including the Partnership's  share of rental revenues
         from joint ventures and the properties held as  tenants-in-common  with
         affiliates  of the general  partners)  for each of the  quarters  ended
         March 31:

<TABLE>
                                                             2003                2002
                                                      ---------------     ---------------

<S>     <C>    <C>    <C>    <C>    <C>    <C>

                        IHOP Properties, Inc.           $   70,147          $   69,922
                        2 BAM, Ltd.                         34,663                 N/A
                        Golden Corral Corp.                    N/A              42,433


</TABLE>

<PAGE>


                            CNL INCOME FUND III, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                     Quarters Ended March 31, 2003 and 2002


5.       Concentration of Credit Risk - Continued:
         -----------------------------------------

         In addition, the following schedule presents total rental revenues from
         individual  restaurant  chains,  each representing more than 10% of the
         Partnership's  total rental revenues (including the Partnership's share
         of rental  revenues  from joint  ventures  and the  properties  held as
         tenants-in-common  with affiliates of the general partners) for each of
         the quarter ended March 31:

<TABLE>
                                             2003               2002
                                        --------------     -------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>

              IHOP                        $  70,147         $  69,922
              KFC                            64,303            70,971
              Pizza Hut                      50,036            48,582
              Taco Bell                      44,724            43,167
              Golden Corral Family
              Steakhouse Restaurants            N/A            69,927

</TABLE>

         The  information   denoted  by  N/A  indicates  that  for  each  period
         presented, the tenants or the chains did not represent more than 10% of
         the Partnership's total rental revenues.

         Although the Partnership's  properties have some geographical diversity
         in the United States and the Partnership's lessees operate a variety of
         restaurant concepts,  default by any one of these lessees or restaurant
         chains  will  significantly  impact the  results of  operations  of the
         Partnership  if the  Partnership is not able to re-lease the properties
         in a timely manner.



<PAGE>


ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

        CNL Income  Fund III,  Ltd.  (the  "Partnership")  is a Florida  limited
partnership  that was  organized  on June 1, 1987 to  acquire  for cash,  either
directly or through  joint  venture  arrangements,  both newly  constructed  and
existing restaurant  properties,  as well as land upon which restaurants were to
be constructed  (the  "Properties"),  which are leased primarily to operators of
selected national and regional fast-food restaurant chains. The leases generally
are  triple-net  leases,  with  the  lessees  responsible  for all  repairs  and
maintenance,  property taxes, insurance and utilities. As of March 31, 2002, the
Partnership owned 18 Properties  directly and six Properties  indirectly through
joint  venture or  tenancy in common  arrangements.  As of March 31,  2003,  the
Partnership owned 14 Properties  directly and six Properties  indirectly through
joint venture or tenancy in common arrangements.

Capital Resources

        Cash  from  operating  activities  was  $235,256  and  $348,793  for the
quarters ended March 31, 2003 and 2002, respectively.  The decrease in cash from
operating activities during the quarter ended March 31, 2003, as compared to the
same  period of 2002 was the  result of  changes  in the  Partnership's  working
capital and the distribution of proceeds from the sale of Properties during 2001
and 2002.

        Other sources and uses of cash included the following during the quarter
ended March 31, 2003.

        In February 2003,  the  Partnership  sold its Property in  Fayetteville,
North   Carolina,   to  a  third  party  and  received  net  sales  proceeds  of
approximately   $383,300,   resulting  in  a  gain  on  disposal  of  assets  of
approximately  $2,200 during the quarter ended March 31, 2003.  The  Partnership
had recorded  provisions  for write-down of assets in previous years relating to
this asset. In connection  with the sale, the  Partnership  incurred a deferred,
subordinated real estate disposition fee of $12,375.  Payment of the real estate
disposition fee is subordinated to the receipt by the limited  partners of their
aggregate,   cumulative  10%  Preferred  Return,  plus  their  adjusted  capital
contributions.  The  Partnership  distributed  the sales  proceeds  as a special
distribution to the limited partners, as described below.

        At March 31,  2003,  the  Partnership  had  $1,250,294  in cash and cash
equivalents,  as compared to $1,994,246 at December 31, 2002.  This decrease was
primarily a result of the  Partnership  distributing  to the  limited  partners,
sales  proceeds  that were held at December 31, 2002,  as described  below.  The
funds remaining at March 31, 2003, after the payment of distributions  and other
liabilities, will be used to meet the Partnership's working capital needs.

Short-Term Liquidity

        The Partnership's  investment strategy of acquiring  Properties for cash
and  leasing  them under  triple-net  leases to  operators  who  generally  meet
specified financial  standards  minimizes the Partnership's  operating expenses.
The general  partners  believe  that the leases will  generate  net cash flow in
excess of operating expenses.

        The Partnership's short-term liquidity requirements consist primarily of
the operating expenses of the Partnership.

        The general  partners have the right,  but not the  obligation,  to make
additional capital  contributions if they deem it appropriate in connection with
the operations of the Partnership.

        Total liabilities of the Partnership,  including  distributions payable,
were $984,791 at March 31, 2003, as compared to $1,669,185 at December 31, 2002.
The decrease in liabilities at March 31, 2003 was due to the Partnership  paying
a  special  distribution  to the  limited  partners  that had been  declared  at
December  31, 2002 and due to a decrease  in amounts  due to related  parties at
March 31, 2003, as compared to December 31, 2002. The general  partners  believe
that the  Partnership  has sufficient  cash on hand to meet its current  working
capital needs.

         The Partnership  generally  distributes cash from operations  remaining
after the payment of operating  expenses of the Partnership,  to the extent that
the general partners  determine that such funds are available for  distribution.
Based on  current  and  anticipated  future  cash from  operations,  and for the
quarter  ended  March  31,  2003,  the net sales  proceeds  from the sale of the
Property in  Fayetteville,  North Carolina,  and for the quarter ended March 31,
2002,  the net sales  proceeds from the 2001 sale of the Property in Washington,
Illinois  and  the  liquidating  distribution  received  from  Titusville  Joint
Venture, the Partnership declared  distributions to limited partners of $701,563
and $975,000 for the quarters ended March 31, 2003 and 2002, respectively.  This
represents  distributions  of $14.03 and $19.50 per unit for the quarters  ended
March 31, 2003 and 2002, respectively. Distributions for the quarter ended March
31,  2003  included  a  special  distribution  of  $350,000  as a result  of the
distribution  of the net sales  proceeds  from the 2003 sale of the  Property in
Fayetteville, North Carolina. Distributions for the quarter ended March 31, 2002
included a special  distribution of $600,000 as a result of the  distribution of
the net  sales  proceeds  from  the 2001  sale of the  Property  in  Washington,
Illinois and the 2002  liquidating  distribution  received from Titusville Joint
Venture.  These special  distributions were effectively a return of a portion of
the limited partners'  investment,  although, in accordance with the Partnership
agreement,  it was  applied  to the  limited  partner's  unpaid  cumulative  10%
Preferred Return. As a result of the sales of the Properties,  the Partnership's
total  revenue  was reduced  and is  expected  to remain  reduced in  subsequent
periods, while the majority of the Partnership's operating expenses remained and
are expected to remain  fixed.  Due to the sales of  Properties  and current and
anticipated  future cash from  operations,  distributions  of net cash flow were
adjusted  commencing  during the quarter ended March 31, 2003. No  distributions
were made to the  general  partners  for the  quarters  ended March 31, 2003 and
2002.  No amounts  distributed  to the limited  partners for the quarters  ended
March  31,  2003  and  2002  are  required  to be or have  been  treated  by the
Partnership  as a return of capital  for  purposes  of  calculating  the limited
partners'  return  on their  adjusted  capital  contributions.  The  Partnership
intends to continue to make  distributions of cash available for distribution to
the limited partners on a quarterly basis.
<PAGE>

Long-Term Liquidity

        The  Partnership  has no  long-term  debt or other  long-term  liquidity
requirements.

Results of Operations

        Total rental  revenues were $257,652  during the quarter ended March 31,
2003, as compared to $278,324  during the same period of 2002.  Rental  revenues
were lower  during  the  quarter  ended  March 31,  2003 due to the  Partnership
selling its  Property  in  Montgomery,  Alabama in May 2002.  The tenant of this
Property  experienced  financial  difficulties during 2002. Rental revenues were
also lower  during  the  quarter  ended  March 31,  2003 due to the  Partnership
terminating  the leases  relating to the  Properties  in Hastings,  Nebraska and
Wichita,  Kansas during 2002.  Each lease was  scheduled to expire in 2002.  The
Partnership  re-leased these  Properties  during 2002, each to a new tenant with
slightly lower rents.

        The Partnership also earned $53,401 attributable to net income earned by
unconsolidated  joint  ventures  during the  quarter  ended March 31,  2003,  as
compared to $50,630 during the same period of 2002.

        The  Partnership  earned $593 in interest  and other  income  during the
quarter  ended March 31, 2003,  as compared to $5,891  during the same period of
2002. Interest income was lower during 2003 because the Partnership  distributed
sales proceeds during 2002 that had been held in interest bearing bank accounts.

        During the quarter ended March 31, 2003, two lessees of the Partnership,
IHOP  Properties,  Inc., and 2BAM,  Ltd., each  contributed more than 10% of the
Partnership's   total  rental  revenues  (including  rental  revenues  from  the
Partnership's  consolidated joint venture and the Partnership's  share of rental
revenues from Properties owned by  unconsolidated  joint ventures and Properties
owned with  affiliates  of the  general  partners as  tenants-in-common).  It is
anticipated  that, based on the minimum rental payments  required by the leases,
both  of  these  tenants  will  continue  to  contribute  more  than  10% of the
Partnership's total rental revenues. In addition,  four restaurant chains, IHOP,
KFC,  Pizza  Hut  and  Taco  Bell,  each  accounted  for  more  than  10% of the
Partnership's  total  rental  revenues,  (including  rental  revenues  from  the
Partnership's  consolidated  joint  venture and the  Partnership's  share of the
rental  revenues from  Properties  owned by  unconsolidated  joint  ventures and
Properties owned with affiliates of the general partners as  tenants-in-common).
It is  anticipated  that these four  restaurant  chains,  each will  continue to
account for more than 10% of total rental  revenues to which the  Partnership is
entitled  under the terms of the leases.  Any failure of these lessees or any of
these restaurant chains could materially affect the Partnership's income, if the
Partnership is not able to re-lease these Properties in a timely manner.
<PAGE>

        Operating expenses, including depreciation expense, were $109,033 during
the quarter ended March 31, 2003, as compared to $135,018 during the same period
of 2002.  Operating expenses were lower during the quarter ended March 31, 2003,
due to a decrease in the amount of state tax expense  relating to several states
in which the Partnership  conducts business and a decrease in the costs incurred
for administrative expenses for servicing the Partnership and its Properties.

        During the year ended December 31, 2002, the Partnership  identified for
sale three  Properties that were  classified as  Discontinued  Operations in the
accompanying financial statements.  The Partnership recognized a net rental loss
(rental revenues less Property related expenses),  of $26,638 during the quarter
ended March 31, 2002 relating to these three  Properties.  The Partnership  sold
the Properties in Altus,  Oklahoma and Canton Township,  Michigan  subsequent to
March 31, 2002.  In February  2003,  the  Partnership  sold the third  Property,
located in  Fayetteville,  North  Carolina,  and  recorded a gain on disposal of
assets of  approximately  $2,200.  The Partnership  had recorded  provisions for
write-down  of  assets  in  previous  years  relating  to  this  Property.   The
Partnership  recognized  a net rental loss of $4,123  during the  quarter  ended
March 31, 2003 relating to this Property.

        In January  2003,  FASB  issued FASB  Interpretation  No. 46 ("FIN 46"),
"Consolidation  of Variable  Interest  Entities"  to expand upon and  strengthen
existing  accounting  guidance that  addresses when a company should include the
assets,   liabilities   and  activities  of  another  entity  in  its  financial
statements.  To improve financial  reporting by companies involved with variable
interest  entities (more  commonly  referred to as  special-purpose  entities or
off-balance sheet  structures),  FIN 46 requires that a variable interest entity
be  consolidated  by a company if that company is subject to a majority  risk of
loss from the variable  interest  entity's  activities  or entitled to receive a
majority of the entity's  residual  returns or both.  Prior to FIN 46, a company
generally included another entity in its consolidated  financial statements only
if it controlled the entity through voting interests.  Consolidation of variable
interest  entities will provide more complete  information  about the resources,
obligations,   risks  and  opportunities  of  the  consolidated   company.   The
consolidation  requirements  of FIN 46 apply  immediately  to variable  interest
entities  created after January 31, 2003,  and to older  entities,  in the first
fiscal  year or interim  period  beginning  after  June 15,  2003.  The  general
partners believe adoption of this standard may result in either consolidation or
additional   disclosure   requirements   with   respect  to  the   Partnership's
unconsolidated  joint ventures or Properties held with affiliates of the general
partners  as  tenants-in-common,  which are  currently  accounted  for under the
equity method.  However,  such  consolidation  is not expected to  significantly
impact the Partnership's results of operations.


ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Not applicable.


ITEM 4.    CONTROLS AND PROCEDURES

        The  general  partners  maintain  a  set  of  disclosure   controls  and
procedures  designed to ensure that information  required to be disclosed in the
Partnership's  filings  under the  Securities  Exchange Act of 1934 is recorded,
processed,  summarized  and reported  within the time  periods  specified in the
Securities and Exchange  Commission's  rules and forms. The principal  executive
and  financial  officers of the  corporate  general  partner have  evaluated the
Partnership's  disclosure  controls and  procedures  within 90 days prior to the
filing  of this  Quarterly  Report on Form  10-Q and have  determined  that such
disclosure controls and procedures are effective.

        Subsequent to the above evaluation, there were no significant changes in
internal  controls  or other  factors  that  could  significantly  affect  these
controls,   including  any   corrective   actions  with  regard  to  significant
deficiencies and material weaknesses.



<PAGE>


                           PART II. OTHER INFORMATION


Item 1.     Legal Proceedings.   Inapplicable.
            -----------------

Item 2.     Changes in Securities.  Inapplicable.
            ---------------------

Item 3.     Defaults upon Senior Securities.  Inapplicable.
            --------------------------------

Item 4.     Submission of Matters to a Vote of Security Holders.  Inapplicable.
            ---------------------------------------------------

Item 5.     Other Information.  Inapplicable.
            ------------------

Item 6.     Exhibits and Reports on Form 8-K.
            --------------------------------

             (a)  Exhibits

                      3.1      Certificate of Limited  Partnership of CNL Income
                               Fund  III,  Ltd.  (Included  as  Exhibit  3.1  to
                               Amendment No. 1 to the Registration Statement No.
                               33-15374 on Form S-11 and incorporated  herein by
                               reference.)

                      3.2      Amended and Restated Agreement and Certificate of
                               Limited  Partnership of CNL Income Fund III, Ltd.
                               (Included  as Exhibit 3.2 to Form 10-K filed with
                               the Securities  and Exchange  Commission on April
                               5, 1993, and incorporated herein by reference.)

                      4.1      Certificate of Limited  Partnership of CNL Income
                               Fund  III,  Ltd.  (Included  as  Exhibit  4.1  to
                               Amendment  No. 1 to  Registration  Statement  No.
                               33-15374 on Form S-11 and incorporated  herein by
                               reference.)

                      4.2      Amended and Restated Agreement and Certificate of
                               Limited  Partnership of CNL Income Fund III, Ltd.
                               (Included  as Exhibit 3.2 to Form 10-K filed with
                               the Securities  and Exchange  Commission on April
                               5, 1993, and incorporated herein by reference.)

                      10.1     Property   Management   Agreement   (Included  as
                               Exhibit   10.1  to  Form  10-K   filed  with  the
                               Securities  and Exchange  Commission  on April 5,
                               1993, and incorporated herein by reference.)

                      10.2     Assignment of Property Management  Agreement from
                               CNL   Investment   Company  to  CNL  Income  Fund
                               Advisors,  Inc. (Included as Exhibit 10.2 to Form
                               10-K  filed  with  the  Securities  and  Exchange
                               Commission  on March 30, 1995,  and  incorporated
                               herein by reference.)

                      10.3     Assignment of Property Management  Agreement from
                               CNL  Income  Fund  Advisors,  Inc.  to  CNL  Fund
                               Advisors,  Inc. (Included as Exhibit 10.3 to Form
                               10-K  filed  with  the  Securities  and  Exchange
                               Commission  on April 1,  1996,  and  incorporated
                               herein by reference.)

                      10.4     Assignment of Management  Agreement from CNL Fund
                               Advisors, Inc. to CNL APF Partners, LP. (Included
                               as  Exhibit  10.4 to Form  10-Q  filed  with  the
                               Securities and Exchange  Commission on August 10,
                               2001, and incorporated herein by reference.)

                      10.5     Assignment of Management  Agreement  from CNL APF
                               Partners,  LP  to  CNL  Restaurants  XVIII,  Inc.
                               (Included as Exhibit 10.5 to Form 10-Q filed with
                               the Securities and Exchange  Commission on August
                               14, 2002, and incorporated herein by reference.)


<PAGE>




                      99.1     Certification  of  Chief  Executive   Officer  of
                               Corporate  General Partner  Pursuant to 18 U.S.C.
                               Section  1350 as Adopted  Pursuant to Section 906
                               of  the   Sarbanes-Oxley   Act  of  2002.  (Filed
                               herewith.)

                      99.2     Certification  of  Chief  Financial   Officer  of
                               Corporate  General Partner  Pursuant to 18 U.S.C.
                               Section  1350 as Adopted  Pursuant to Section 906
                               of  the   Sarbanes-Oxley   Act  of  2002.  (Filed
                               herewith.)

            (b)      Reports on Form 8-K

                     No reports of Form 8-K were filed during the quarter  ended
                     March 31, 2003.




<PAGE>




                                   SIGNATURES



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

         DATED this 6th day of May, 2003.


                                              CNL INCOME FUND III, LTD.

                                              By:   CNL REALTY CORPORATION
                                                    General Partner


                                              By:   /s/ James M. Seneff, Jr.
                                                    ----------------------------
                                                    AMES M. SENEFF, JR.
                                                    Chief Executive Officer
                                                   (Principal Executive Officer)


                                              By:   /s/ Robert A. Bourne
                                                    ----------------------------
                                                    ROBERT A. BOURNE
                                                    President and Treasurer
                                                    (Principal Financial and
                                                       Accounting Officer)




<PAGE>




                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
                          OF CORPORATE GENERAL PARTNER

                 PURSUANT TO RULE 13a-14 AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


        I,  James M.  Seneff,  Jr.,  the Chief  Executive  Officer of CNL Realty
Corporation,  the  corporate  general  partner of CNL Income Fund III, Ltd. (the
"registrant"), certify that:

             1. I have  reviewed  this  quarterly  report  on  Form  10-Q of the
                registrant;

             2. Based on my knowledge,  this  quarterly  report does not contain
                any  untrue  statement  of a  material  fact or omit to  state a
                material fact necessary to make the statements made, in light of
                the  circumstances  under which such  statements  were made, not
                misleading  with respect to the period covered by this quarterly
                report;

             3. Based on my  knowledge,  the  financial  statements,  and  other
                financial  information included in this quarterly report, fairly
                present  in  all  material  respects  the  financial  condition,
                results of  operations  and cash flows of the  registrant as of,
                and for, the periods presented in this quarterly report;

             4. The registrant's  other certifying officer and I are responsible
                for  establishing  and  maintaining   disclosure   controls  and
                procedures  (as defined in Exchange Act Rules 13a-14 and 15d-14)
                for the registrant and we have:

                  a.  designed such disclosure controls and procedures to ensure
                      that  material  information  relating  to the  registrant,
                      including its consolidated subsidiaries,  is made known to
                      us by others within those  entities,  particularly  during
                      the  period  in  which  this  quarterly  report  is  being
                      prepared;

                  b.  evaluated the effectiveness of the registrant's disclosure
                      controls and  procedures as of a date within 90 days prior
                      to  the  filing  date  of  this   quarterly   report  (the
                      "Evaluation Date"); and

                  c.  presented in this quarterly  report our conclusions  about
                      the   effectiveness   of  the   disclosure   controls  and
                      procedures  based on our  evaluation as of the  Evaluation
                      Date;

             5. The registrant's  other certifying officer and I have disclosed,
                based  on  our  most  recent  evaluation,  to  the  registrant's
                auditors  and the  audit  committee  of  registrant's  board  of
                directors (or persons performing the equivalent function):

                  a.  all significant deficiencies in the design or operation of
                      internal   controls  which  could  adversely   affect  the
                      registrant's  ability to record,  process,  summarize  and
                      report   financial  data  and  have   identified  for  the
                      registrant's  auditors any material weaknesses in internal
                      controls; and

                  b.  any  fraud,   whether  or  not  material,   that  involves
                      management or other employees who have a significant  role
                      in the registrant's internal controls; and

             6. The registrant's  other certifying  officer and I have indicated
                in this quarterly  report whether or not there were  significant
                changes in  internal  controls  or in other  factors  that could
                significantly affect internal controls subsequent to the date of
                our most recent  evaluation,  including any  corrective  actions
                with regard to significant deficiencies and material weaknesses.

Date:  May 6, 2003


/s/ James M. Seneff, Jr.
---------------------------
 James M. Seneff, Jr.
Chief Executive Officer


<PAGE>


                    CERTIFICATION OF CHIEF FINANCIAL OFFICER
                          OF CORPORATE GENERAL PARTNER

                 PURSUANT TO RULE 13a-14 AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

        I, Robert A. Bourne,  President and Treasurer of CNL Realty Corporation,
the corporate  general  partner of CNL Income Fund III, Ltd. (the  "registrant")
certify that:

             1. I have  reviewed  this  quarterly  report  on  Form  10-Q of the
                registrant;

             2. Based on my knowledge,  this  quarterly  report does not contain
                any  untrue  statement  of a  material  fact or omit to  state a
                material fact necessary to make the statements made, in light of
                the  circumstances  under which such  statements  were made, not
                misleading  with respect to the period covered by this quarterly
                report;

             3. Based on my  knowledge,  the  financial  statements,  and  other
                financial  information included in this quarterly report, fairly
                present  in  all  material  respects  the  financial  condition,
                results of  operations  and cash flows of the  registrant as of,
                and for, the periods presented in this quarterly report;

             4. The registrant's  other certifying officer and I are responsible
                for  establishing  and  maintaining   disclosure   controls  and
                procedures  (as defined in Exchange Act Rules 13a-14 and 15d-14)
                for the registrant and we have:

                  a.  designed such disclosure controls and procedures to ensure
                      that  material  information  relating  to the  registrant,
                      including its consolidated subsidiaries,  is made known to
                      us by others within those  entities,  particularly  during
                      the  period  in  which  this  quarterly  report  is  being
                      prepared;

                  b.  evaluated the effectiveness of the registrant's disclosure
                      controls and  procedures as of a date within 90 days prior
                      to  the  filing  date  of  this   quarterly   report  (the
                      "Evaluation Date"); and

                  c.  presented in this quarterly  report our conclusions  about
                      the   effectiveness   of  the   disclosure   controls  and
                      procedures  based on our  evaluation as of the  Evaluation
                      Date;

             5. The registrant's  other certifying officer and I have disclosed,
                based  on  our  most  recent  evaluation,  to  the  registrant's
                auditors  and the  audit  committee  of  registrant's  board  of
                directors (or persons performing the equivalent function):

                  a.  all significant deficiencies in the design or operation of
                      internal   controls  which  could  adversely   affect  the
                      registrant's  ability to record,  process,  summarize  and
                      report   financial  data  and  have   identified  for  the
                      registrant's  auditors any material weaknesses in internal
                      controls; and

                  b.  any  fraud,   whether  or  not  material,   that  involves
                      management or other employees who have a significant  role
                      in the registrant's internal controls; and

             6. The registrant's  other certifying  officer and I have indicated
                in this quarterly  report whether or not there were  significant
                changes in  internal  controls  or in other  factors  that could
                significantly affect internal controls subsequent to the date of
                our most recent  evaluation,  including any  corrective  actions
                with regard to significant deficiencies and material weaknesses.

Date:  May 6, 2003


/s/ Robert A. Bourne
Robert A. Bourne
President and Treasurer


<PAGE>


                                  EXHIBIT INDEX


     Exhibit Number


             (c)  Exhibits

                  3.1      Certificate of Limited Partnership of CNL Income Fund
                           III, Ltd. (Included as Exhibit 3.1 to Amendment No. 1
                           to the  Registration  Statement No.  33-15374 on Form
                           S-11 and incorporated herein by reference.)

                  3.2      Amended and Restated  Agreement  and  Certificate  of
                           Limited  Partnership  of CNL  Income  Fund III,  Ltd.
                           (Included  as Exhibit 3.2 to Form 10-K filed with the
                           Securities and Exchange  Commission on April 5, 1993,
                           and incorporated herein by reference.)

                  4.1      Certificate of Limited Partnership of CNL Income Fund
                           III, Ltd. (Included as Exhibit 4.1 to Amendment No. 1
                           to  Registration  Statement No. 33-15374 on Form S-11
                           and incorporated herein by reference.)

                  4.2      Amended and Restated  Agreement  and  Certificate  of
                           Limited  Partnership  of CNL  Income  Fund III,  Ltd.
                           (Included  as Exhibit 3.2 to Form 10-K filed with the
                           Securities and Exchange  Commission on April 5, 1993,
                           and incorporated herein by reference.)

                  10.1     Property  Management  Agreement  (Included as Exhibit
                           10.1 to Form  10-K  filed  with  the  Securities  and
                           Exchange   Commission   on   April   5,   1993,   and
                           incorporated herein by reference.)

                  10.2     Assignment of Property Management  Agreement from CNL
                           Investment Company to CNL Income Fund Advisors,  Inc.
                           (Included as Exhibit 10.2 to Form 10-K filed with the
                           Securities and Exchange Commission on March 30, 1995,
                           and incorporated herein by reference.)

                  10.3     Assignment of Property Management  Agreement from CNL
                           Income Fund Advisors, Inc. to CNL Fund Advisors, Inc.
                           (Included as Exhibit 10.3 to Form 10-K filed with the
                           Securities and Exchange  Commission on April 1, 1996,
                           and incorporated herein by reference.)

                  10.4     Assignment  of  Management  Agreement  from  CNL Fund
                           Advisors,  Inc. to CNL APF Partners, LP. (Included as
                           Exhibit  10.4 to Form 10-Q filed with the  Securities
                           and  Exchange  Commission  on August  10,  2001,  and
                           incorporated herein by reference.)

                  10.5     Assignment  of  Management  Agreement  from  CNL  APF
                           Partners, LP to CNL Restaurants XVIII, Inc. (Included
                           as   Exhibit   10.5  to  Form  10-Q  filed  with  the
                           Securities  and  Exchange  Commission  on August  14,
                           2002, and incorporated herein by reference.)

                  99.1     Certification of Chief Executive Officer of Corporate
                           General Partner Pursuant to 18 U.S.C. Section 1350 as
                           Adopted Pursuant to Section 906 of the Sarbanes-Oxley
                           Act of 2002. (Filed herewith.)

                  99.2     Certification of Chief Financial Officer of Corporate
                           General Partner Pursuant to 18 U.S.C. Section 1350 as
                           Adopted Pursuant to Section 906 of the Sarbanes-Oxley
                           Act of 2002. (Filed herewith.)


<PAGE>



                                  EXHIBIT 99.1

<PAGE>

                                  EXHIBIT 99.2