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

                                    FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

    For the fiscal year ended December 31, 1998

                                       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 0-20151                Commission File Number 33-35868-01

             PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
                                       and
                   FFCA/PIP III INVESTOR SERVICES CORPORATION
               (Exact Name of Co-Registrants as Specified in Their
                            Organizational Documents)

Delaware                                            86-0665681
(Partnership State of                               (Partnership I.R.S.
Organization)                                       Employer Identification No.)

Delaware                                            86-0555605
(Corporation State of                               (Corporation I.R.S.
Incorporation)                                      Employer Identification No.)

The Perimeter Center
17207 North Perimeter Drive
Scottsdale, Arizona                                 85255
(Address of Principal Executive Offices)            (Zip Code)

Co-Registrants' telephone number, including area code: (602) 585-4500

        Securities Registered Pursuant to Section 12(b) of the Act: None

          Securities Registered Pursuant to Section 12(g) of the Act:

                      Limited Partnership Assignment Units
                                (Title of Class)

         Indicate by check mark  whether the  Co-Registrants  (1) have 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
Co-Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of the Co-Registrants' knowledge, in definitive proxy or information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [X]

         State  the  aggregate   market  value  of  the  voting  stock  held  by
non-affiliates of the Co-Registrants: Not applicable.

         The  limited  partnership   assignment  units  (the  "Units")  are  not
currently traded in any market.  Therefore,  there is no market price or average
bid and  asked  price for the  Units  within  60 days  prior to the date of this
filing.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None
<PAGE>
                                     PART I

ITEM 1.  BUSINESS.

         Participating  Income  Properties III Limited  Partnership,  a Delaware
limited partnership (the "Partnership"), was organized on July 9, 1990 under the
Delaware Revised Uniform Limited  Partnership Act. The Partnership was organized
primarily to purchase new but also existing travel plaza  facilities,  including
land,  buildings and equipment,  and to lease such  facilities on a net basis to
one or more qualified operators.  The general partner of the Partnership is FFCA
Participating  Management  Company  Limited  Partnership,   a  Delaware  limited
partnership (the "General Partner"). The managing general partner of the General
Partner is Franchise Finance Corporation of America III, a Delaware  corporation
("FFCA III"). Travel Plaza Management, Inc. ("TMI"), a subsidiary of PaineWebber
Group,  Inc.,  Morton H.  Fleischer and Paul Bagley are general  partners of the
General Partner.

         FFCA/PIP III Investor Services Corporation, a Delaware corporation, was
incorporated  on June 23,  1986 to serve as the initial  limited  partner of the
Partnership and the owner of record of the limited partnership  interests in the
Partnership,  the rights and  benefits of which are  assigned  by  FFCA/PIP  III
Investor  Services  Corporation  to investors in the  Partnership.  FFCA/PIP III
Investor  Services  Corporation   conducts  no  other  business  activity.   The
Partnership  and  FFCA/PIP  III Investor  Services  Corporation  are referred to
collectively as the "Co-Registrants."

         On April 10, 1991, the  Co-Registrants  commenced a public  offering of
$100,000,000  of  limited  partnership  assignment  units (the  "Units")  in the
Partnership  pursuant  to a  Registration  Statement  on  Form  S-11  under  the
Securities Act of 1933, as amended.  The  Co-Registrants  sold a total of 26,709
Units to investors at $1,000 per Unit for a total of $26,709,000.  Purchasers of
the Units (the "Holders")  acquired the following  number of Units from FFCA/PIP
III Investor Services  Corporation on each of the following dates:  14,119 Units
on August 30, 1991 and 12,590  Units on February 28,  1992.  Subsequent  to that
date, no Holder has made any additional capital contribution.  The Holders share
in the benefits of ownership of the Partnership's assets, including its real and
personal  property  investments,  according  to the  number  of  Units  held  in
substantially the same manner as limited partners in the Partnership.

         After deducting  organizational and offering expenses,  including sales
commissions,  the net proceeds of the offering of the Units totaled $23,236,830.
During the fiscal years ended December 31, 1993,  1992 and 1991, the Partnership
distributed cash to the limited partners aggregating $957,268,  which represents
a partial  return of the  limited  partners'  initial  $1,000  per unit  capital
contribution.  After  deducting  this return of capital from the net proceeds of
the offering of units,  the remaining  cash proceeds were fully  invested by the
Partnership  in three  "Flying J Travel  Plazas,"  one  located  in  Wytheville,
Virginia,  one located in Bakersfield,  California and one located in Ehrenberg,
Arizona.  "Flying J Travel Plaza"  facilities  offer a  full-service  operation,
generally including fuel facilities,  a restaurant,  convenience store and other
amenities for use by the trucking industry and traveling public in general.  The
Wytheville property was acquired in December 1991, the Bakersfield  property was
acquired in January 1993 and the  Ehrenberg  property was acquired in June 1993.
With  respect to the  Ehrenberg  property,  the  travel  plaza was  acquired  by
purchasing the land and making a loan to the franchisee for financing the travel
plaza building.

                                       2
<PAGE>
         As of  December  31,  1998,  two  of the  travel  plazas  owned  by the
Partnership were leased to CFJ Properties, a general partnership formed pursuant
to a joint venture  between  Flying J Inc.,  through its subsidiary Big West Oil
Company ("Big  West"),  and Douglas Oil Company of  California,  a subsidiary of
Conoco Inc.  ("Douglas  Oil").  With respect to the remaining  travel plaza, the
land is leased to TFJ, a Utah general partnership.  In addition, the Partnership
made a loan to TFJ to finance the travel plaza  building.  TFJ is a  partnership
owned 49.9% by Flying J and 50.1% by Pacific  Sunstone,  Inc.,  an  affiliate of
Flying J. The  operation of this travel  plaza  represents  TFJ's sole  business
activity.  The Partnership is not affiliated with CFJ Properties,  TFJ, Flying J
Inc. or Flying J Franchise Inc. ("FJFI"), a subsidiary of Flying J Inc.

         The Partnership  entered into purchase agreements with Flying J Inc. on
September 4, 1998 to sell  substantially all of the Partnership's  assets (those
assets comprising the travel plazas) for cash of $25,482,518 (the original sales
price of $27,220,000  less the partial pay down of the mortgage loan received by
the  Partnership  in December  1998).  The limited  partners  received a consent
solicitation  statement  describing the proposed  transaction and an affirmative
vote of investors  holding a majority of the  partnership  units was achieved on
October 26, 1998. The sale  transaction  was completed on March 22, 1999 and the
Partnership recognized a gain of approximately $7.8 million on the sale. The net
cash  proceeds  from  this  sale are being  held in U.S.  government  securities
pending distribution to investors.  The sale of the travel plazas represents the
disposition of substantially all of the Partnership's assets and the Partnership
has no  further  liability  in  connection  with any of the travel  plazas.  The
General  Partner  has begun the  process  of  winding  down the  affairs  of the
Partnership  that  includes  liquidation  and  distribution  of  assets  to  the
investors in accordance with the Partnership  agreement.  The liquidation of the
Partnership is expected to be completed in June 1999.

         As  part of the  sale  of the  travel  plazas,  approximately  $165,000
(representing  less than one percent of the  aggregate  sales price) may, at the
General Partner's discretion,  be deposited in a trust (the "Trust Fund") with a
bank. The Trust Fund,  including interest income,  would be available to satisfy
claims made directly or indirectly with respect to the liquidation,  dissolution
and  winding up of the  affairs of the  Partnership  during a period of up to 36
months  following  the  liquidation  date.  At the  end of  this  period,  final
decisions  will be made in  settlement of all disputed  claims,  if any, and the
remaining balance of the Trust Fund will be disbursed to the investors.

         Real estate  owned by the  Partnership  at December 31, 1998 was leased
for a term of 20 years. Two of the travel plazas also had equipment leases for a
term of eight years.  Lessees paid the  Partnership  annual rental  payments (in
monthly   installments)  equal  to  a  percentage  of  the  Partnership's  total
investment in the property.  With respect to the property  located in Ehrenberg,
the Partnership leased the land to the travel plaza operator and made a loan for
the travel  plaza  building.  The loan  provided  for  monthly  installments  of
interest at a rate of 7% per annum. In December 1998, the Partnership received a
partial  prepayment  on the mortgage  loan in the amount of  approximately  $1.7
million and on March 22, 1999 the  Partnership  received  the balance due on the
mortgage loan. As additional rent under the terms of the lease,  the Partnership
was  entitled  to receive a portion of the  operating  revenues  from the travel
plazas  subject to the lease  equal to (a) up to 3.5% of annual  gross  receipts
derived from the non-fuel sales of such travel plaza facility and (b) up to 3/10
of $.01 per gallon of fuel sold.  All leases were  terminated  on March 22, 1999
upon sale of the related travel plazas.

                                       3
<PAGE>
         Flying J Inc.,  through its subsidiary  Big West,  entered into a joint
venture with Douglas Oil to form CFJ Properties in February 1991.  Flying J Inc.
(and  subsidiaries)  is a fully integrated oil and gas company and is engaged in
the production,  refining,  transportation,  wholesaling and retail marketing of
petroleum  products and other  services  through its travel  plazas and gasoline
stations.  Flying J Inc.  operates  all of CFJ  Properties'  travel  plazas  and
related  facilities,  which included 78 interstate travel plaza properties as of
January 31,  1998.  At December  31, 1998,  the  Partnership  owned two of these
properties.  Flying J Inc. assigned its leasehold interests in the travel plazas
owned by the  Partnership to CFJ Properties and was released by the  Partnership
with respect to its obligations under those leases.

         The Partnership's leases with CFJ Properties were with full recourse to
the assets of CFJ Properties, but without recourse to Big West or Douglas Oil. A
default  on one  lease  constituted  a default  on all other  leases to the same
lessee by the Partnership and two prior partnerships  sponsored by affiliates of
the General  Partner,  all of whose travel plazas were leased to CFJ Properties,
Flying J Inc. or franchisees of FJFI.

         For the fiscal year ended January 31, 1998, CFJ Properties reported net
income of $16 million on revenues of $1.3  billion.  Revenues  rose 7% from $1.2
billion in the prior year. The higher revenues  resulted from the opening of six
new units and increases in fuel prices.  Net income  increased from $1.8 million
in the prior year due to higher gross profit margins.

         During the fiscal year ended January 31, 1998, CFJ Properties  reported
$41.7 million in net cash  provided by operating  activities.  This cash,  along
with  the cash  provided  by  financing  activities,  was  used to make  capital
expenditures.  As of January 31, 1998, CFJ Properties  reported cash balances of
approximately  $3.8 million,  with  liquidity  supported by net cash provided by
operating activities and a $150 million revolving line of credit with a bank. As
of January 31, 1998, CFJ Properties reported partners' capital of $155.5 million
and total assets of $463.7 million.

         CFJ Properties leases travel plazas and equipment under  non-cancelable
operating leases,  which generally expire at various dates over the next 9 to 15
years.  Payments  under these leases were $17.5 million in fiscal 1998 and $17.3
million in fiscal 1997, including percentage lease payments.

         The two  travel  plaza  properties  leased by CFJ  Properties  from the
Partnership generated a combined fuel and non-fuel gross profit (including other
income) of approximately  $7.7 million during the year ended January 31, 1998 as
compared to $6.8  million in fiscal year 1997.  Total  travel  plaza  unit-level
income for these two properties  (before  depreciation  and allocated  corporate
overhead)  totaled  approximately  $1.5  million  in 1998  with  both  of  these
properties  reporting  positive  unit-level  income.  The combined result of the
travel plaza  unit-level  income before  depreciation  and  allocated  corporate
overhead  increased from $844,000 in the prior year. This is primarily due to an
increase in fuel and  non-fuel  sales  volumes  and an increase in fuel  prices.
Volumes  and  margins  were  reduced  in 1997  due to CFJ's  curtailment  of its
relationship  with  a  third  party  billing  company  in  June  1996.  For  CFJ
Properties'  fiscal year ended January 31, 1998, the average unit-level base and
participating rents approximated 13.4% of the original cost of these properties.

                                       4
<PAGE>
         The Partnership's  third property is operated by TFJ. Fuel and non-fuel
gross  profits and other  income  generated by this  property  increased to $6.3
million  in 1998  from  $6.2  million  in 1997  due to an  increase  in fuel and
non-fuel  sales volumes and an increase in fuel prices.  The  property's  income
before  depreciation and allocated  corporate overhead for 1998 was $1.1 million
as compared  to $1.2  million in 1997.  Base and  participating  rents  remained
comparable  to 1997 at  approximately  9% of the  original  cost of the property
during TFJ's fiscal year ended January 31, 1998.

         As of December 31, 1998,  the  Partnership  had invested in real estate
located in one state in the  southeastern  portion of the United  States and two
states in the western United States,  and no real estate investments are located
outside of the United States. A presentation of revenues or assets by geographic
region is not  applicable and would not be material to an  understanding  of the
Partnership's business taken as a whole.

         The  Partnership  does not believe  that any aspect of its  business is
significantly  seasonal in nature. No portion of the  Partnership's  business is
subject to  renegotiation of profits or termination of contracts or subcontracts
at the  election  of the United  States  Government.  The  Partnership  does not
manufacture  any products and  therefore  does not require any raw  materials in
order to conduct its business.

         The  Partnership is managed by the General Partner and therefore has no
employees  of  its  own.  FFCA/PIP  III  Investor  Services  Corporation  has no
employees because it does not conduct any business operations.

         The   Partnership  has  completed  its  assessment  of  its  Year  2000
preparedness  and has determined  that any potential  consequences  of Year 2000
issues will not have a material effect on the partnership's business, results of
operation  or  financial  condition.  On March 22, 1999,  the  Partnership  sold
substantially  all of its assets to a third party. The sale of substantially all
of its assets will lead to the prompt  liquidation  of the  partnership  and the
distribution  of net  assets  to  the  limited  partners.  The  General  Partner
anticipates that the partnership  liquidation  will be accomplished  during 1999
and,  accordingly,  does not expect the  Partnership to be in existence when the
year 2000 arrives.

         The statements  contained in this Annual Report on Form 10-K, regarding
the planned dissolution and liquidation of the Partnership,  are forward-looking
statements and involve risks and  uncertainties  that could cause actual results
to  differ  materially  from  the  results,  financial  or  otherwise,  or other
expectations described in the forward-looking  statements.  Although the General
Partner  believes  that the  estimated  timing and  amounts  of the  liquidating
distributions   are  reasonable,   the  actual  costs  of  the  liquidation  and
dissolution  of the  Partnership  may vary from the estimates and that variation
could  be  material.   In  addition,   the  actual  timing  of  the  liquidating
distribution could vary from the estimate; therefore, forward-looking statements
should  not  be  relied  upon  as a  prediction  of  actual  future  results  or
occurrences.

ITEM 2. PROPERTIES.

         As of December 31, 1998, the Partnership had acquired or financed three
travel plaza properties: one located in Wytheville,  Virginia which was acquired
in 1991, one located in  Bakersfield,  California  which was acquired in January
1993, and one located in Ehrenberg,  Arizona which was acquired in June 1993. On
June 30, 1993, the Partnership became fully invested in travel plazas.

                                       5
<PAGE>
         On September 4, 1998, the Partnership  entered into purchase agreements
with Flying J Inc. to sell substantially all of the Partnership's  assets (those
assets comprising the travel plazas) for cash of $25,482,518 (the original sales
price of $27,220,000  less the partial pay down of the mortgage loan received by
the  Partnership  in December  1998).  The limited  partners  received a consent
solicitation  statement  describing the proposed  transaction and an affirmative
vote of investors  holding a majority of the  partnership  units was achieved in
October 1998. The sale  transaction was completed on March 22, 1999. The sale of
the  travel  plazas  represents  the  disposition  of  substantially  all of the
Partnership's  assets and the Partnership has no further liability in connection
with any of the travel plazas.

         The Partnership's travel plazas, divided into sections which serve both
the commercial and non-commercial  traveler,  generally offer a multi-use,  full
service  operation  including  fuel  facilities  for  the  storage  and  sale of
automotive and diesel fuels, a 24-hour restaurant, a convenience store, restroom
facilities with private showers,  and other amenities designed to meet the needs
of the trucking  industry and the traveling public in general.  All three of the
Partnership's  properties represented over 10% of the Partnership's total assets
at December 31, 1998:

     Location                                    Approximate % of Total Assets
     --------                                    -----------------------------
Wytheville, Virginia                                         30%

Bakersfield, California                                      22%

Ehrenberg, Arizona                                           36%

The following is a description  of each of the  properties  owned or financed by
the Partnership at December 31, 1998:

         WYTHEVILLE,  VIRGINIA.  The  Wytheville  travel plaza is a full-service
travel plaza, built on a parcel consisting of approximately 16.831 acres located
at the interchange of Frontage Road and Interstates 81 and 77.

         BAKERSFIELD,  CALIFORNIA.  The Bakersfield  travel plaza is an existing
full-service  travel  plaza,  opened  in  January  1992,  located  on  a  parcel
consisting of  approximately  15.4 acres at the Merced Avenue exit of California
Highway 99.

         EHRENBERG,   ARIZONA.  Located  at  the  Arizona/California  border  on
Interstate 10, the Ehrenberg travel plaza is an existing operation opened in May
1988. The two-story  travel plaza is situated on an approximate  11.7 acre tract
of land in the County of La Paz (formerly Yuma), Arizona.

         Independent  of  the  Partnership,   FFCA/PIP  III  Investor   Services
Corporation has no interest in any real or personal property.

                                       6
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.

         Neither  the  Co-Registrants  nor their  properties  are parties to, or
subject to, any material pending legal proceedings.

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

         A proposal to sell  substantially all of the  Partnership's  assets was
submitted to a vote of the security  holders during the fourth quarter of fiscal
year 1998. A Consent Solicitation Statement dated September 11, 1998 relating to
the proposal was sent to the security  holders.  Voting was completed on October
26,  1998  without a meeting.  The  results of the voting are as  follows:  FOR,
16,193 votes; AGAINST, 1,470 votes, and ABSTAIN, 377 votes.

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S UNITS AND RELATED SECURITY HOLDER MATTERS.

         MARKET  INFORMATION.  During  1998,  there  was no  established  public
trading  market for the Units,  and it is not  anticipated  that an  established
public trading market for the Units will develop.

         HOLDERS.  As of March 4, 1999,  there were 1,524 record  holders of the
Units.

         DISTRIBUTIONS.  For the two most recent fiscal years,  the  Partnership
made the following cash distributions to the Holders:

                                      1998

                               Per Unit Distribution            Total
                               ---------------------     ---------------------
  Date of          Number      Cash From                 Cash From
Distribution      of Units     Operations    Capital     Operations    Capital
------------      --------     ----------    -------     ----------    -------
March 31           26,709        $21.70         --        $579,585       --
June 30            26,709         21.69         --         579,318       --
September 30       26,709         21.70         --         579,585       --
December 31        26,709         21.69         --         579,318       --

                                       7
<PAGE>
                                      1997

                               Per Unit Distribution            Total
                               ---------------------     ---------------------
  Date of          Number      Cash From                 Cash From
Distribution      of Units     Operations    Capital     Operations    Capital
------------      --------     ----------    -------     ----------    -------
March 31           26,709        $21.69         --        $579,318        --
June 30            26,709         21.70         --         579,585        --
September 30       26,709         21.69         --         579,318        --
December 31        26,709         21.69         --         579,318        --

         Cash from  operations,  defined as disbursable cash in the agreement of
limited partnership that governs the Partnership, is distributed to the Holders.
Cash  proceeds  from the sale of property  are  distributed  to the Holders as a
return of capital.  The Adjusted  Capital  Contribution of a Holder is generally
the Holder's initial capital  contribution  reduced by the cash distributions to
the Holders of proceeds from the sale of  Partnership  properties and reduced by
any other cash  distributions  other than from operations.  The Adjusted Capital
Contribution  per Unit of the  Holders,  as defined in the  agreement of limited
partnership that governs the  Partnership,  was $964.16 as of December 31, 1998.
Any  differences in the amounts of  distributions  set forth in the above tables
from the information contained in Item 6 below are due to rounding the amount of
distributions  payable per Unit down to the nearest  whole cent and carrying any
fractional cents forward from one period to the next.

         The Partnership  expects to make cash  distributions from operations to
the Holders through the date of the sale of the travel plazas on March 22, 1999.
The liquidation of the Partnership is expected to be completed in June 1999. The
General Partner  estimates that the liquidating  distribution  will  approximate
$1,004 per limited  partnership unit. Although the General Partner believes that
the amount of the liquidating  distribution  is reasonable,  the actual costs of
the  liquidation  and dissolution of the Partnership may vary from the estimates
and that variation could be material.  As part of the sale of the travel plazas,
a portion of the aggregate  sales price of the travel plazas may, at the General
Partner's  discretion,  be deposited in a trust (the "Trust  Fund") with a bank.
The Trust Fund,  including interest income, would be available to satisfy claims
made  directly or  indirectly  arising  from the  liquidation,  dissolution  and
winding up of the affairs of the Partnership  during a period of up to 36 months
following the  liquidation  date. If, at the end of this period,  no claims have
been made or if final decisions have been rendered for all disputed claims,  the
remaining balance of the Trust Fund will be disbursed to the Holders.

                                       8
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.

         The following  selected  financial  data should be read in  conjunction
with the Financial  Statements  and related notes attached as an exhibit to this
Report.
<TABLE>
<CAPTION>
                                                   YEAR ENDED DECEMBER 31,
                              ---------------------------------------------------------------
                                  1998         1997         1996         1995         1994
                                  ----         ----         ----         ----         ----
<S>                           <C>          <C>          <C>          <C>          <C>
Revenues                      $ 2,739,353  $ 2,681,670  $ 2,636,853  $ 2,648,938  $ 2,634,461

Net Income                      1,893,343    1,893,355    1,891,905    1,889,914    1,889,998

Net Income Per Unit                 70.18        70.18        70.13        70.05        70.05

Total Assets                   20,214,504   20,620,916   21,078,466   21,516,076   21,985,630

Distributions of Cash from
  Operations to Holders         2,317,667    2,317,679    2,317,702    2,317,771    2,317,855

Distributions of Cash from
  Operations Per Unit               86.77        86.77        86.78        86.78        86.78

Return of Capital to Holders           --           --           --           --           --

Return of Capital Per Unit             --           --           --           --           --
</TABLE>

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

LIQUIDITY AND CAPITAL RESOURCES

         The Partnership  received $26,709,000 in gross proceeds from its public
offering of the Units.  After deducting  organizational  and offering  expenses,
including sales commissions, the Partnership had $23,012,902 in net proceeds for
investment  in  properties.  As of June  30,  1993,  the  Partnership  had  used
approximately  $22,390,000 to acquire or finance three travel plazas. The rental
and mortgage  interest  payments from lessees of the travel plazas have been the
Partnership's   primary  sources  of  income.  As  of  December  31,  1998,  the
Partnership had cash and marketable securities  aggregating  $2,243,462 of which
$579,318  was paid out to the Holders in January  1999 as their  fourth  quarter
distribution for fiscal year 1998.

         The Partnership  entered into purchase agreements with Flying J Inc. on
September 4, 1998 to sell  substantially all of the Partnership's  assets (those
assets comprising the travel plazas) for cash of $25,482,518 (the original sales
price of $27,220,000  less the partial pay down of the mortgage loan received by
the  Partnership  in December  1998).  The limited  partners  received a consent
solicitation  statement  describing the proposed  transaction and an affirmative
vote of investors  holding a majority of the  partnership  units was achieved on
October 26, 1998. The sale  transaction  was completed on March 22, 1999 and the
Partnership recognized a gain of approximately $7.8 million on the sale. The net
cash  proceeds  from  this  sale are being  held in U.S.  government  securities

                                       9
<PAGE>
pending distribution to investors.  The sale of the travel plazas represents the
disposition of substantially all of the Partnership's assets and the Partnership
has no  further  liability  in  connection  with any of the travel  plazas.  The
General  Partner  has begun the  process  of  winding  down the  affairs  of the
Partnership  that  includes  liquidation  and  distribution  of  assets  to  the
investors in accordance with the Partnership  agreement.  The liquidation of the
Partnership is expected to be completed in June 1999.

         As  part of the  sale  of the  travel  plazas,  approximately  $165,000
(representing  less than one percent of the  aggregate  sales price) may, at the
General Partner's discretion,  be deposited in a trust (the "Trust Fund") with a
bank. The Trust Fund,  including interest income,  would be available to satisfy
claims made directly or indirectly with respect to the liquidation,  dissolution
and  winding up of the  affairs of the  Partnership  during a period of up to 36
months  following  the  liquidation  date.  At the  end of  this  period,  final
decisions  will be made in  settlement of all disputed  claims,  if any, and the
remaining balance of the Trust Fund will be disbursed to the investors.

         FFCA/PIP  III  Investor  Services  Corporation  serves  as the  initial
limited  partner  of the  Partnership  and the owner of  record  of the  limited
partner  interests  in the  Partnership,  the rights and  benefits  of which are
assigned by FFCA/PIP  III  Investor  Services  Corporation  to  investors in the
Partnership.  FFCA/PIP III Investor  Services  Corporation has no other business
activity and has no capital resources.

RESULTS OF OPERATIONS

FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED TO
FISCAL YEAR ENDED DECEMBER 31, 1997

         The  Partnership's  total revenues for the year ended December 31, 1998
increased to $2,739,353  from  $2,681,670  for the year ended December 31, 1997.
The overall increase in revenues is due to an increase in participating rentals.
Participating  rental  revenues  increased to $595,857 in 1997 from  $536,509 in
1996 due to higher fuel and  non-fuel  travel plaza sales  volumes.  In December
1998, the Partnership received a $1.7 million partial prepayment of the mortgage
loan.

         Total  Partnership  expenses  in 1998 were  $846,010,  representing  an
increase  from  $788,315  in 1997.  The  increase  was  primarily a result of an
increase  in  general  partner  fees of $30,783  and an  increase  in  operating
expenses of $26,912. As described more fully in the Partnership  agreement,  the
General  Partner's  management fee is subordinated to a 9% return to the Holders
on their Adjusted Capital Contribution,  as defined. The increase in the General
Partner's   Management   fee  resulted   directly   from  the  increase  in  the
Partnership's  disbursable cash  (generally,  cash receipts from operations less
cash operating expenses).  The increase in operating expenses primarily resulted
from  increased  administrative  expenses  (such as  legal  and  accounting)  as
compared to the prior year.

         Net income for the year ended  December 31, 1998 amounted to $1,893,343
as compared to $1,893,355 for year ended December 31, 1997.

                                       10
<PAGE>
FISCAL YEAR ENDED DECEMBER 31, 1997 COMPARED TO
FISCAL YEAR ENDED DECEMBER 31, 1996

         The  Partnership's  total revenues for the year ended December 31, 1997
increased to $2,681,670  from  $2,636,853  for the year ended December 31, 1996.
The overall increase in revenues is due to an increase in participating rentals.
Participating  rental  revenues  increased to $536,509 in 1997 from  $492,391 in
1996 due to higher travel plaza sales volumes.

         Total  Partnership  expenses  in 1997 were  $788,315,  representing  an
increase  from  $744,948  in 1996.  The  increase  was  primarily a result of an
increase  in general  partner  fees of  $33,288.  The  increase  in the  General
Partner's   Management   fee  resulted   directly   from  the  increase  in  the
Partnership's disbursable cash.

         Net income for the year ended  December 31, 1997 amounted to $1,893,355
as compared to $1,891,905 for year ended December 31, 1996.

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

         The financial  instruments held by the Partnership at December 31, 1998
consist of cash equivalents  (primarily  investments in U.S. Treasury securities
or repurchase agreements that are collateralized by U.S. Treasury and government
obligations)  and receivables from lessees that are short- term in nature and do
not subject the Partnership to a material exposure to changes in interest rates.
The  Partnership  also has a mortgage loan  receivable at December 31, 1998 that
was paid off on March 22, 1999;  therefore,  this financial  instrument does not
subject the Partnership to a material exposure to changes in interest rates.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The financial  statements of the Co-Registrants  required by Regulation
S-X are attached to this Report. Reference is made to Item 14 below for an index
to the financial statements and financial statement schedules.

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

         None.
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.

         The  Partnership has no directors or executive  officers.  The managing
general  partner of the General  Partner is  Franchise  Finance  Corporation  of
America III, a Delaware corporation ("FFCA III"). Travel Plaza Management,  Inc.
("TMI"),  a subsidiary of PaineWebber  Group, Inc., Morton H. Fleischer and Paul
Bagley are general  partners of the General  Partner.  FFCA III was organized in
Delaware in July 1990 for the purpose of sponsoring limited partnerships such as

                                       11
<PAGE>
the  Partnership.  Set forth below are the directors  and executive  officers of
FFCA III, TMI and FFCA/PIP III Investor Services Corporation,  and the year that
they were elected or appointed to their respective offices:

FFCA III

                                    DIRECTORS
        Name                                               Position Held Since
        ----                                               -------------------
Morton H. Fleischer, Chairman                                     1990
Paul Bagley                                                       1990
John R. Barravecchia                                              1993
Christopher H. Volk                                               1993

                                    OFFICERS

                                                                 Associated With
        Name                    Positions Held                   FFCA III Since
        ----                    --------------                   --------------
Morton H. Fleischer    Chairman of the Board, President and           1990
                       Chief Executive Officer
John R. Barravecchia   Executive Vice President, Chief Financial      1990
                       Officer, Treasurer and Assistant Secretary
Christopher H. Volk    Executive Vice President, Chief Operating      1990
                       Officer, Secretary and Assistant Treasurer
Dennis L. Ruben        Executive Vice President, General Counsel      1993
                       and Assistant Secretary
Stephen G. Schmitz     Executive Vice President, Chief Investment     1995
                       Officer and Assistant Secretary
Catherine F. Long      Senior Vice President-Finance, Principal       1990
                       Accounting Officer, Assistant Secretary
                       and Assistant Treasurer

TRAVEL PLAZA MANAGEMENT, INC.

                                    DIRECTORS
        Name                                                 Position Held Since
        ----                                                 -------------------
Gerald F. Goertz, Jr.                                                 1994
Stephen R. Dyer                                                       1994
Carmine Fusco                                                         1998

                                       12
<PAGE>
                                    OFFICERS

        Name                  Positions Held                 Position Held Since
        ----                  --------------                 -------------------
Gerald F. Goertz, Jr.   President                                     1994
Stephen R. Dyer         Vice President and Secretary                  1994
Carmine Fusco           Vice President, Treasurer, Assistant          1998
                        Secretary and Chief Financial and
                        Accounting Officer

FFCA/PIP III INVESTOR SERVICES CORPORATION

                                    DIRECTOR
        Name                                                 Position Held Since
        ----                                                 -------------------

Morton H. Fleischer                                                   1986

                                    OFFICERS

       Name                  Positions Held                  Position Held Since
       ----                  --------------                  -------------------
Morton H. Fleischer     Chairman of the Board of Directors            1986
John R. Barravecchia    President, Secretary and Treasurer            1990
Christopher H. Volk     Vice President, Assistant Secretary and       1994
                        Assistant Treasurer

         All of the foregoing  directors and officers have been elected to serve
a one year term and until their successors are elected and qualified.  There are
no  arrangements  or  understandings  between  or among any of the  officers  or
directors  and any other  person  pursuant to which any officer or director  was
selected as such.  There are no family  relationships  among any  directors  and
officers.

BUSINESS EXPERIENCE

         The business experience during the past five years of each of the above
directors and officers is as follows:

             FFCA III AND FFCA/PIP III INVESTOR SERVICES CORPORATION

         Paul  Bagley,  age 56, has served as a director of FFCA III since 1990.
Mr.  Bagley is a founding  partner  of Stone Pine  Capital  LLC  (1994),  and is
chairman of FCM Fiduciary  Management  Co. LLC (1989 to date),  the advisor to a
mezzanine and private equity fund. For more than twenty years prior to 1990, Mr.
Bagley was engaged in investment  banking activities with Shearson Lehman Hutton
Inc. and its  predecessor,  E.F. Hutton & Company Inc., where he was responsible
for the  creation  and  management  of  over $5  billion  of  direct  investment

                                       13
<PAGE>
activities.  Mr.  Bagley  has  served on the  boards  of a number of public  and
private  companies.  Currently  he  is  on  the  boards  of  Fiduciary  Capital,
Hollis-Eden  Pharmaceuticals,  Consolidated  Capital of North  America,  and LMC
Corporation.

         MORTON H. FLEISCHER, age 62, has served as the Chairman of the Board of
FFCA Investor Services  Corporation 88-C since 1987 and has served as President,
Chief  Executive  Officer and a Director of FFCA II since its formation in 1988.
Mr. Fleischer was appointed Chairman of the Board of FFCA II in February of 1994
and currently serves as President,  Chief Executive  Officer and Chairman of the
Board of  Franchise  Finance  Corporation  of  America,  a Delaware  corporation
("FFCA").  He served as  President,  Chief  Executive  Officer and a Director of
Franchise  Finance  Corporation  of America I ("FFCA I"), a predecessor of FFCA,
from 1980 to 1994. Mr.  Fleischer is also an individual  general  partner of the
Partnership and is a general  partner (or general partner of a general  partner)
of the following public limited  partnerships:  Participating  Income Properties
1986,  L.P.;  Participating  Income  Properties  III  Limited  Partnership;  and
Scottsdale Land Trust Limited Partnership.

         JOHN R.  BARRAVECCHIA,  age 43, has served as President,  Secretary and
Treasurer of FFCA Investor  Services  Corporation 88-C since 1990. He has served
as Senior Vice President and Chief Financial  Officer of FFCA II since 1989, was
named Treasurer in December 1993 and was named  Assistant  Secretary in 1994. In
1995,  Mr.  Barravecchia  was named  Executive  Vice  President  of FFCA II. Mr.
Barravecchia  currently  serves as Executive  Vice  President,  Chief  Financial
Officer,  Treasurer  and  Assistant  Secretary  of FFCA and  served  in  various
capacities  for FFCA I from 1984 to 1994.  He was appointed  Vice  President and
Chief Financial Officer of FFCA I in December 1986, and Senior Vice President in
October 1989. Mr. Barravecchia was elected as a Director of FFCA I in March 1993
and Treasurer in December 1993.  Prior to joining FFCA I, Mr.  Barravecchia  was
associated with the international public accounting firm of Arthur Andersen LLP.

         CHRISTOPHER  H. VOLK, age 42, has served as Vice  President,  Assistant
Secretary and Assistant  Treasurer of FFCA Investor  Services  Corporation  88-C
since 1994 and served as Vice  President-Research  of FFCA II from 1989 to 1993.
Mr. Volk was named Senior Vice President-Underwriting and Research and Secretary
of FFCA II in December 1993. In 1995, he was named Chief  Operating  Officer and
Executive  Vice  President  of FFCA II. He currently  serves as  Executive  Vice
President,  Chief Operating Officer,  Secretary and Assistant Treasurer of FFCA.
He  joined  FFCA I in 1986 and has  served  in  various  capacities  in FFCA I's
capital   preservation  and  underwriting   areas  prior  to  being  named  Vice
President-Research in October 1989. In December 1993, he was appointed Secretary
and  Senior  Vice  President-Underwriting  and  Research  of FFCA I,  and he was
elected as a Director of FFCA I in March 1993.

         DENNIS L. RUBEN,  age 46,  served as Senior Vice  President and General
Counsel of FFCA II from December 1994 and was named  Executive  Vice  President,
General  Counsel  and  Assistant  Secretary  of FFCA  II in  February  1997.  He
currently  serves in the same  capacity for FFCA.  In 1991,  he joined FFCA I as
attorney and counsel.  In December 1993, he was appointed  Senior Vice President
and General Counsel of FFCA I. Prior to joining FFCA I, Mr. Ruben was associated
with the law firm of Kutak Rock from 1980 until March 1991.  Mr.  Ruben became a
partner of Kutak Rock in 1984.

                                       14
<PAGE>
         STEPHEN G. SCHMITZ,  age 44, served as Senior Vice  President-Corporate
Finance of FFCA II from January  1996 and was named  Executive  Vice  President,
Chief Investment Officer and Assistant Secretary of FFCA II in February 1997. He
currently  serves in the same capacity for FFCA.  Mr.  Schmitz served in various
positions as an officer of FFCA I from 1986 to June 1, 1994.

         CATHERINE F. LONG, age 42, was named Senior Vice  President-Finance  of
FFCA in February 1997, was named Principal  Accounting  Officer in December 1993
and was named Assistant Secretary and Assistant Treasurer in 1994. She currently
serves in the same  capacities for FFCA. In June 1990, she joined FFCA I as Vice
President-Finance.  In December  1993,  she was appointed  Principal  Accounting
Officer of FFCA I. Prior to joining  FFCA I, Ms.  Long was  associated  with the
international public accounting firm of Arthur Andersen LLP.

                          TRAVEL PLAZA MANAGEMENT, INC.

         GERALD F. GOERTZ,  JR.,  age 41, is President  and a Director of Travel
Plaza Management,  Inc. Mr. Goertz joined  PaineWebber  Incorporated in December
1990 and holds the position of Senior Vice President and Director of Specialized
Investment Services. Prior to joining PaineWebber  Incorporated,  Mr. Goertz was
associated with CG Realty Advisors and The Freeman Company.

         STEPHEN R. DYER, age 39, is a Vice President, Secretary and Director of
Travel Plaza Management,  Inc. He joined  PaineWebber  Incorporated in June 1988
and is currently a Senior Vice  President  and Director of Private  Investments.
Mr. Dyer is a Certified Public Accountant.

         CARMINE  FUSCO,  age  30,  is a Vice  President,  Treasurer,  Assistant
Secretary,  Chief Financial  Officer,  Chief Accounting  Officer and Director of
Travel Plaza Management,  Inc. He joined PaineWebber Incorporated in August 1998
as Assistant Vice President within their Private Investments  Department.  Prior
to joining  PaineWebber  Incorporated,  Mr. Fusco was affiliated with Deloitte &
Touche,  LLP in their Business Valuation Group from January 1997 to August 1998.
He was associated  with Dean Witter Reynolds  Incorporated  from October 1994 to
November 1995 as Commodity Fund Analyst in the Managed Futures Department.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

         Based  solely  upon a review  of Forms 3 and 4 and  amendments  thereto
furnished  to the  Co-Registrants  during  fiscal  year  1998  and  Forms  5 and
amendments  thereto furnished to the  Co-Registrants  with respect to the fiscal
year ended December 31, 1998 (the "Forms"),  and any written  representations by
the  directors  and  executive   officers  of  FFCA/PIP  III  Investor  Services
Corporation,  and FFCA III, the  Co-Registrants  have not identified  herein any
such person that failed to file on a timely basis the Forms  required by Section
16(a) of the Securities Exchange Act of 1934 for fiscal year 1998.

                                       15
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.

         The   Partnership  is  required  to  pay  an  acquisition   fee  and  a
subordinated  real  estate  disposition  fee  to  the  General  Partner  or  its
affiliate,  and the  General  Partner  is  entitled  to  receive a share of cash
distributions,  when and as made to the  Holders,  a share of profits and losses
and a subordinated share of any sale proceeds. Reference is made to Note (1) and
Note (6) of the Notes to  Financial  Statements  that are filed with this report
for a description of the fees and distributions paid in 1998.

         FFCA/PIP  III  Investor  Services  Corporation  serves as assignor  and
initial limited partner without  compensation  from the  Partnership.  It is not
entitled  to any  share of the  profits,  losses  or cash  distributions  of the
Partnership.  The  director  and  officers of  FFCA/PIP  III  Investor  Services
Corporation  serve  without  compensation  from  FFCA/PIP III Investor  Services
Corporation or the Partnership.

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

         As of March 4, 1999, no person or group was known by the Partnership to
own  directly  or  beneficially  more  than 5% of the  outstanding  Units of the
Partnership.

         Neither  the  General  Partner,  the  general  partners  of the General
Partner,  FFCA/PIP III Investor Services Corporation nor any director or officer
of FFCA/PIP III  Investor  Services  Corporation  owned any Units as of March 4,
1999. The directors and officers of FFCA III, as a group,  owned less than 1% of
the Units as of March 4, 1999.

         FFCA/PIP  III  Investor  Services  Corporation  has an  interest in the
Partnership as a limited  partner and it serves as the owner of record of all of
the limited partnership interests assigned by it to the Holders; however, it has
no  right to vote its  interest  on any  matter  and it must  vote the  assigned
interests as directed by the Holders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Since  the   beginning   of  the  last  fiscal  year  of  both  of  the
Co-Registrants,   there  have  been  no  significant  transactions  or  business
relationships among the Co-Registrants, the General Partners or their affiliates
or their management, other than as described in Items 1, 10 and 11 above.

                                     PART IV

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

     (a)  The following documents are filed as part of this Report:

       1. FINANCIAL STATEMENTS.  The  following  financial  statements  are
          included in the response to item 8 of this report:

          THE PARTNERSHIP

          Report  of  independent  public  accountants
          Balance  Sheets as of  December  31,  1998 and
          1997
          Statements   of  Income  for  the  year  ended
          December 31, 1998 1997 and 1996

                                   16
<PAGE>
          Statements of Changes In Partners' Capital for
          the years ended  December 31,  1998,  1997 and
          1996
          Statements  of Cash Flows for the years  ended
          December 31, 1998, 1997 and 1996
          Notes to Financial Statements

          FFCA/PIP III INVESTOR SERVICES CORPORATION

          Report of independent public accountants
          Balance Sheet as of December 31, 1998
          Notes to Balance Sheet

      2.  FINANCIAL STATEMENT SCHEDULES.

          Schedule   III-Schedule  of  Real  Estate  and
          Accumulated  Depreciation  as of December  31,
          1998

          All other  schedules are omitted since they are not required,  are
          inapplicable,  or the  required  information  is  included  in the
          financial statements or notes thereto.

      3.  EXHIBITS.

          The following is a complete list of exhibits filed as part of this
          Form 10-K.  For  electronic  filing  purposes  only,  this  report
          contains Exhibit 27, the Financial Data Schedule.  Exhibit numbers
          correspond  to the  numbers  in the  Exhibit  Table of Item 601 of
          Regulation S-K.

                Pursuant to  Rule  12b-32   under  the   Securities Exchange
          Act of 1934, as amended, the following  documents,  filed with the
          Securities   and   Exchange   Commission   as   exhibits   to  the
          Co-Registrants'  Form 10-K for the fiscal year ended  December 31,
          1991, Commission File No. 0-20151, are incorporated herein by this
          reference.

                                                              1991 FORM 10-K
                                                                EXHIBIT NO.
                                                                -----------

          The  Agreement of Limited  Partnership  of the
          General Partner                                           3-A

          The Certificate of  Incorporation  of FFCA/PIP
          III Investor  Services  Corporation,  as filed
          with the  Secretary  of State of  Delaware  on
          December 5, 1988                                          3-B

          Bylaws  of  FFCA/PIP  III  Investor   Services
          Corporation                                               3-C

                                   17
<PAGE>
                Pursuant to  Rule  12b-32   under  the   Securities Exchange
          Act of 1934, as amended,  the following  document,  filed with the
          Securities  and  Exchange   Commission  with  the  Co-Registrants'
          Registration Statement on Form S-11, Registration No. 33-35868, is
          incorporated herein by this reference.

          The Amended and Restated  Agreement of Limited
          Partnership of the Partnership.

               Pursuant to Rule 12b-32 under the Securities Exchange Act of
          1934,  as  amended,  the  following  documents,  filed  with  the
          Securities   and   Exchange   Commission   as   exhibits  to  the
          Co-Registrant's  Form 8-K dated March 22, 1999,  Commission  File
          No. 0-20151, are incorporated herein by this reference.

                                                                 March 22, 1999,
                                                                     Form 8-K
                                                                    Exhibit No.
                                                                    -----------

          Purchase  Agreement  dated  as of  September  4,  1998,      10.01
          between  Participating  Income  Properties  III Limited
          Partnership and CFJ Plaza Company I LLC,  including the
          First  Amendment  thereto  dated as of March  22,  1999


          Purchase  Agreement  dated  as of  September  4,  1998,      10.02
          between  Participating  Income  Properties  III Limited
          Partnership and FJI Plaza Company LLC

          Extension Agreement dated March 22, 1999                     10.03

          REPORTS ON FORM 8-K.

          No reports on Form 8-K were filed by the Co-Registrants during the
          last quarter of the fiscal year ended December 31, 1998.

                                       18
<PAGE>
                                   SIGNATURES

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

                                  PARTICIPATING INCOME PROPERTIES III LIMITED
                                  PARTNERSHIP

                                  By: FFCA PARTICIPATING MANAGEMENT COMPANY
                                      LIMITED PARTNERSHIP, General Partner

                                      By: FRANCHISE FINANCE CORPORATION OF
                                          AMERICA III, Managing General Partner


Date:  April 8, 1999              By /s/ Morton H. Fleischer
                                    -------------------------------------------
                                    Morton H. Fleischer, President and Chief
                                    Executive Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf of
the Partnership and in the capacities and on the dates indicated.


     SIGNATURES  OF  REQUIRED  OFFICERS  AND  DIRECTORS  OF  FRANCHISE
     FINANCE  CORPORATION OF AMERICA III,  MANAGING GENERAL PARTNER OF
     FFCA  PARTICIPATING   MANAGEMENT  COMPANY  LIMITED   PARTNERSHIP,
     GENERAL PARTNER OF  PARTICIPATING  INCOME  PROPERTIES III LIMITED
     PARTNERSHIP.


Date:  April 8, 1999                By /s/ Morton H. Fleischer
                                       ---------------------------------------
                                       Morton H. Fleischer, President, Chief
                                       Executive Officer and Director

Date:  April 8, 1999                By
                                      ----------------------------------------
                                      Paul Bagley, Director

Date:  April 8, 1999                By /s/ John Barravecchia
                                       ---------------------------------------
                                       John Barravecchia, Executive Vice
                                       President, Chief Financial Officer,
                                       Treasurer, Assistant Secretary and
                                       Director


Date:  April 8, 1999                By /s/ Christopher H. Volk
                                       ---------------------------------------
                                       Christopher H. Volk, Executive Vice
                                       President, Chief Operating Officer,
                                       Secretary, Assistant Treasurer and
                                       Director


Date:  April 8, 1999                By /s/ Catherine F. Long
                                       ---------------------------------------
                                       Catherine F. Long, Senior Vice President-
                                       Finance, Principal Accounting Officer,
                                       Assistant Secretary and Assistant
                                       Treasurer

                                       19
<PAGE>

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

                                      FFCA/PIP III INVESTOR SERVICES CORPORATION


Date:  April 8, 1999                  By /s/ Morton H. Fleischer
                                        ---------------------------------------
                                        Morton H. Fleischer, Sole Director


Date:  April 8, 1999                  By /s/ John Barravecchia
                                        ---------------------------------------
                                        John Barravecchia, President, Secretary,
                                        Treasurer, Principal Financial Officer
                                        and Principal Accounting Officer

                                       20
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Participating Income Properties III Limited Partnership:


We  have  audited  the  accompanying  balance  sheets  of  PARTICIPATING  INCOME
PROPERTIES  III LIMITED  PARTNERSHIP  (a  Delaware  limited  partnership)  as of
December 31, 1998 and 1997,  and the related  statements  of income,  changes in
partners' capital and cash flows for each of the three years in the period ended
December 31, 1998. These financial statements and the schedule referred to below
are the responsibility of the partnership's  general partner. Our responsibility
is to express an opinion on these financial statements and schedule 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 Participating Income Properties
III Limited Partnership as of December 31, 1998 and 1997, and the results of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 1998, in conformity with generally accepted accounting principles.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial  statements  taken  as a  whole.  The  schedule  of  Real  Estate  and
Accumulated  Depreciation  is  presented  for  purposes  of  complying  with the
Securities  and  Exchange  Commission's  rule and is not a required  part of the
basic  financial  statements.  This schedule has been  subjected to the auditing
procedures  applied in our audits of the basic financial  statements and, in our
opinion,  is fairly  stated in all  material  respects  in relation to the basic
financial statements taken as a whole.

                                               /s/ Arthur Andersen LLP

Phoenix, Arizona,
  March 22, 1999.

                                       21
<PAGE>
             PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP

                   BALANCE SHEETS - DECEMBER 31, 1998 AND 1997


                                                       1998            1997
                                                   ------------    ------------
                                     ASSETS
CASH AND CASH EQUIVALENTS                          $  2,243,462    $    635,446

RECEIVABLES FROM LESSEES                                 45,242          44,000

DEFERRED COSTS (Note 7)                                 169,547              --

MORTGAGE LOAN INTEREST RECEIVABLE                        45,208          45,208

MORTGAGE LOAN RECEIVABLE (Note 4)                     6,012,518       7,750,000

PROPERTY SUBJECT TO OPERATING LEASES (Note 3)        11,698,527      12,146,262
                                                   ------------    ------------

      Total assets                                 $ 20,214,504    $ 20,620,916
                                                   ============    ============


                       LIABILITIES AND PARTNERS' CAPITAL

DISTRIBUTION PAYABLE TO LIMITED PARTNERS           $    579,451    $    579,590

PAYABLE TO GENERAL PARTNER                               46,750              --

RENTAL DEPOSITS AND OTHER                               247,981         253,269
                                                   ------------    ------------

      Total liabilities                                 874,182         832,859
                                                   ------------    ------------

PARTNERS' CAPITAL (DEFICIT):
   General partner                                      (26,165)        (21,687)
   Limited partners                                  19,366,487      19,809,744
                                                   ------------    ------------

      Total partners' capital                        19,340,322      19,788,057
                                                   ------------    ------------

      Total liabilities and partners' capital      $ 20,214,504    $ 20,620,916
                                                   ============    ============


      The accompanying notes are an integral part of these balance sheets.

                                       22
<PAGE>
             PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP

                              STATEMENTS OF INCOME
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


                                               1998         1997         1996
                                            ----------   ----------   ----------
REVENUES:
  Rental                                    $1,579,480   $1,579,480   $1,579,480
  Participating rentals                        595,857      536,509      492,391
  Mortgage loan interest                       542,500      542,500      542,500
  Interest and other                            21,516       23,181       22,482
                                            ----------   ----------   ----------

                                             2,739,353    2,681,670    2,636,853
                                            ----------   ----------   ----------
EXPENSES:
  General partner fees  (Note 6)               273,606      242,823      209,535
  Depreciation                                 447,735      447,735      449,208
  Operating                                    124,669       97,757       86,205
                                            ----------   ----------   ----------

                                               846,010      788,315      744,948
                                            ----------   ----------   ----------

NET INCOME                                  $1,893,343   $1,893,355   $1,891,905
                                            ==========   ==========   ==========
NET INCOME ALLOCATED TO  (Note 1):
  General partner                           $   18,933   $   18,934   $   18,919
  Limited partners                           1,874,410    1,874,421    1,872,986
                                            ----------   ----------   ----------

                                            $1,893,343   $1,893,355   $1,891,905
                                            ==========   ==========   ==========
NET INCOME PER LIMITED PARTNERSHIP
  UNIT (based on 26,709 units held by
  limited partners)                         $    70.18   $    70.18   $    70.13
                                            ==========   ==========   ==========


        The accompanying notes are an integral part of these statements.

                                       23
<PAGE>
             PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP

                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


                                      General        Limited
                                      Partner        Partners          Total
                                   ------------    ------------    ------------

BALANCE, December 31, 1995          $ (12,718)     $20,697,718      $20,685,000

  Net income                           18,919        1,872,986        1,891,905

  Distributions to partners           (23,411)      (2,317,702)      (2,341,113)
                                    ---------      -----------      -----------

BALANCE, December 31, 1996            (17,210)      20,253,002       20,235,792

  Net income                           18,934        1,874,421        1,893,355

  Distributions to partners           (23,411)      (2,317,679)      (2,341,090)
                                    ---------      -----------      -----------

BALANCE, December 31, 1997            (21,687)      19,809,744       19,788,057

  Net income                           18,933        1,874,410        1,893,343

  Distributions to partners           (23,411)      (2,317,667)      (2,341,078)
                                    ---------      -----------      -----------

BALANCE, December 31, 1998          $ (26,165)     $19,366,487      $19,340,322
                                    =========      ===========      ===========

        The accompanying notes are an integral part of these statements.

                                       24
<PAGE>
             PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP

                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


                                            1998          1997          1996
                                        -----------   -----------   -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                             $ 1,893,343   $ 1,893,355   $ 1,891,905
 Adjustments to net income:
  Depreciation                              447,735       447,735       449,208
  Change in assets and liabilities:
   Decrease (increase) in receivables
     from lessees                            (1,242)       (6,000)        1,257
   Increase in deferred costs              (169,547)           --            --
   Increase (decrease) in payable to
     general partner                         46,750        (7,720)        7,720
   Increase (decrease) in rental
     deposits and other                      (5,288)       (2,235)        3,984
                                        -----------   -----------   -----------

   Net cash provided by operating
     activities                           2,211,751     2,325,135     2,354,074
                                        -----------   -----------   -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Receipt of mortgage loan paydown         1,737,482            --            --
                                        -----------   -----------   -----------
CASH FLOWS FOR FINANCING ACTIVITIES:
 Partner distributions declared
  (Note 1)                               (2,341,078)   (2,341,090)   (2,341,113)
 Increase (decrease) in distribution
  payable                                      (139)          140          (106)
                                        -----------   -----------   -----------
   Net cash used in financing
     activities                          (2,341,217)   (2,340,950)   (2,341,219)
                                        -----------   -----------   -----------
NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                        1,608,016       (15,815)       12,855

CASH AND CASH EQUIVALENTS,
  beginning of year                         635,446       651,261       638,406
                                        -----------   -----------   -----------
CASH AND CASH EQUIVALENTS,
  end of year                           $ 2,243,462   $   635,446   $   651,261
                                        ===========   ===========   ===========

        The accompanying notes are an integral part of these statements.

                                       25
<PAGE>
             PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP

                          Notes to Financial Statements
                           December 31, 1998 and 1997

1) ORGANIZATION:

         Participating   Income   Properties   III  Limited   Partnership   (the
Partnership)  was  formed on July 9, 1990  under the  Delaware  Revised  Uniform
Limited  Partnership  Act to purchase new and existing  "Flying J Travel  Plaza"
facilities,  including land, buildings and equipment to be leased on a net basis
to  affiliates  of  Flying J Inc.  The  Partnership  has also  made a loan to an
affiliate of Flying J Inc. to provide  financing for a travel plaza building and
equipment (the  underlying  land is owned by the  Partnership  and leased to the
affiliate).  The  "Flying  J  Travel  Plaza"  facilities  offer  a  full-service
operation, generally including fuel facilities, a restaurant,  convenience store
and other  amenities for use by the trucking  industry and  traveling  public in
general. The general partner of the Partnership is FFCA Participating Management
Company  Limited  Partnership,  a  Delaware  limited  partnership  (the  General
Partner). The Partnership will expire December 31, 2030, or sooner (see Note 7),
in accordance with the terms of the Partnership agreement.

         Investors acquired units of assigned limited partnership  interest (the
limited  partnership  units)  in the  Partnership  from  FFCA/PIP  III  Investor
Services  Corporation  (the Initial  Limited  Partner),  a Delaware  corporation
wholly-owned by an affiliate of the General  Partner.  Holders of the units have
all of the  economic  benefits and  substantially  the same rights and powers of
limited partners; therefore, they are referred to herein as "limited partners."

         The Partnership agreement provides for allocation of profits and losses
and cash distributions among its partners as follows:

         Profits and Losses: Allocated 99% to the limited partners and 1% to the
         General Partner.

         Cash Distributions: All cash from operations, as defined, after payment
         of fees to the General Partner is allocated 99% to the limited partners
         and 1% to the General  Partner.  In addition to cash  distributed  from
         operations,   a  portion  of  the  limited  partners'  initial  capital
         contributions has been distributed as return of capital, therefore, the
         limited  partner  Adjusted  Capital  Contribution,  as  defined  in the
         Partnership agreement, at December 31, 1998 is $964.16 per unit.

         The following is a reconciliation  of net income to cash  distributions
from operations as defined in the Partnership agreement:

                                              1998         1997         1996
                                           ----------   ----------   ----------
     Net income                            $1,893,343   $1,893,355   $1,891,905
     Adjustment to reconcile net income
      to cash distributions declared:
        Depreciation                         447,735      447,735      449,208
                                           ----------   ----------   ----------

          Cash distributions declared
           from operations                 $2,341,078   $2,341,090   $2,341,113
                                           ==========   ==========   ==========

                                       26
<PAGE>
2)  SIGNIFICANT ACCOUNTING POLICIES:

         FINANCIAL  STATEMENTS - The financial statements of the Partnership are
prepared on the accrual basis of  accounting.  The  preparation of the 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 at the date of the financial  statements and the reported
amounts of revenues and expenses during the
reporting  period.  Although  management  believes its estimates are reasonable,
actual results could differ from those estimates.

         CASH AND CASH  EQUIVALENTS  -  Investment  securities  that are  highly
liquid and have  maturities  of three months or less at the date of purchase are
classified as cash equivalents.  Cash equivalents include United States Treasury
securities of $224,876 and $451,567 at December 31, 1998 and 1997, respectively,
and bank  repurchase  agreements  (which  are  collateralized  by United  States
Treasury  and  Government  obligations)  of  $1,900,033  at December  31,  1998.
Short-term  investments  are  recorded  at cost  plus  accrued  interest,  which
approximates market value.

         LEASES - The Partnership leases its property under long-term net leases
which are classified as operating  leases.  Rental revenue from operating leases
is recognized as it is earned.

         DEPRECIATION  -  Depreciation   on  buildings  is  provided  using  the
straight-line method based upon an estimated useful life of 32 years.  Equipment
is depreciated  over an estimated  useful life of eight years,  assuming a 12.5%
salvage  value at the end of its useful life.  The cost of  properties  includes
miscellaneous acquisition and closing costs.

3)  PROPERTY SUBJECT TO OPERATING LEASES:

         The following is an analysis of the Partnership's  investment, at cost,
in property  subject to operating leases by major class at December 31, 1998 and
1997:
                                                   1998            1997
                                               -----------     -----------
         Land                                  $ 2,684,138     $ 2,684,138
         Buildings                              11,010,862      11,010,862
         Equipment                                 947,838         947,838
                                               -----------     -----------
                                                14,642,838      14,642,838
         Less - Accumulated depreciation         2,944,311       2,496,576
                                               -----------     -----------
                                               $11,698,527     $12,146,262
                                               ===========     ===========

         Lease agreements provide for monthly base rentals equal to a percentage
of the property's cost. As additional  rent, the Partnership  receives a portion
of the operating  revenues of the lessee equal to a percentage of gross receipts
(participating rentals) from travel plaza facilities and fuel sales. The term of
the leases is eight years for equipment and 20 years for land and buildings. All
Partnership  property is leased to affiliates of Flying J Inc. Scheduled minimum
future rentals (excluding  participating rentals) under noncancellable operating
leases as of December 31, 1998, are $1.6 million per year through the year 2011.

         All of the  Partnership's  property  comprising  the  travel  plazas is
subject to  agreements  entered  into with Flying J Inc. on September 4, 1998 in
which Flying J Inc. agreed to buy the property  (subject to certain  conditions)
for cash totaling approximately $27 million (see Note 7).

4) MORTGAGE LOAN RECEIVABLE:

         At December 31, 1998, the  Partnership had a first mortgage loan on the
building and  equipment of a  Partnership  travel  plaza  located in  Ehrenberg,
Arizona.  The loan provides for monthly installments of interest at a rate of 7%
per annum until June 30,  2003,  at which time the entire  principal  balance is
due. The loan may not be prepaid in full or in part, except upon exercise of the
purchase  option on the related travel plaza land or except with the approval of
the Partnership. In December 1998, the Partnership approved the approximate $1.7
million  partial  prepayment of the mortgage  loan. The cost of the mortgage for
Federal  income tax  purposes  is the same as the cost for  financial  reporting
purposes.

                                       27
<PAGE>
         The fair value of the first  mortgage loan is estimated by  discounting
the future cash flows using the current  rates at which  similar  loans would be
made to  borrowers  with  similar  credit  ratings  and for the  same  remaining
maturities.  The fair value at December 31, 1998, exceeds the carrying amount by
$260,000;  however, the fair value of the loan will not result in any additional
cash beyond  face  amount  unless that loan were to be sold (refer to Note 7 for
possible sale of the Partnership's assets to Flying J. Inc.).

5) INCOME TAXES:

         The Partnership is not directly subject to income taxes;  rather,  each
partner is subject to income taxes on his distributable share of taxable income.
The Partnership tax returns and the amount of distributable  partnership profits
or losses are subject to examination by Federal and state taxing authorities. If
examinations  by  taxing   authorities   result  in  changes  to   distributable
partnership  profits or losses,  the tax  liabilities  of the partners  could be
changed accordingly.

         The following is a reconciliation of net income for financial reporting
purposes to income  reported for Federal income tax purposes for the years ended
December 31, 1998, 1997 and 1996:

                                             1998         1997         1996
                                          ----------   ----------   ----------
     Net income for financial reporting
      purposes                            $1,893,343   $1,893,355   $1,891,905
     Differences for tax purposes in:
       Depreciation                          135,293      110,017       67,797
       Organization cost amortization
        and other                             (7,750)      (7,901)     (10,719)
                                          ----------   ----------   ----------
     Taxable income to partners           $2,020,886   $1,995,471   $1,948,983
                                          ==========   ==========   ==========

For  Federal  income tax  reporting  purposes,  taxable  income to  partners  is
reported  on the  accrual  basis of  accounting  and is  classified  as ordinary
income.

         At December 31,  1998,  the tax bases of the  Partnership's  assets and
liabilities  exceed the amounts  recorded for  financial  reporting  purposes by
$357,842.  This difference  results  primarily from  differences in depreciation
methods and the treatment of property  acquisition costs for financial reporting
and tax reporting purposes.

6) TRANSACTIONS WITH RELATED PARTIES:

         Under the terms of the  Partnership  agreement,  the General Partner is
entitled to  compensation  for certain  services  performed in  connection  with
managing the affairs of the  Partnership.  During 1998, 1997 and 1996, fees paid
to the General Partner were as follows:

                                                1998       1997       1996
                                              --------   --------   --------
         Disbursable cash fee                 $164,893   $136,483   $104,960
         Property management fee (4% of the
           Partnership's gross annual
            property revenues)                 108,713    106,340    104,575
                                              --------   --------   --------
                                              $273,606   $242,823   $209,535
                                              ========   ========   ========

                                       28
<PAGE>
         The General Partner is entitled to a disbursable cash fee equal to nine
percent of all revenues  received by the Partnership less Partnership  operating
expenses, only to the extent the limited partners have received an annual return
of nine percent on their Adjusted Capital Contribution,  as defined. The General
Partner or its  affiliate  may also be  entitled to a  subordinated  real estate
disposition  fee and an  incentive  share of sale  proceeds,  as  defined in the
Partnership agreement.

         An affiliate of the General  Partner  incurs  expenses on behalf of the
Partnership for maintenance of the books and records and for computer,  investor
and  legal  services   performed  for  the   Partnership.   These  expenses  are
reimbursable in accordance with the Partnership  agreement and are less than the
amount  which  the  Partnership  would  have  paid to  independent  parties  for
comparable services.  The Partnership  reimbursed the affiliate $61,670 in 1998,
$28,113 in 1997 and $22,689 in 1996 for such expenses.

7) SUBSEQUENT EVENT - SALE OF SUBSTANTIALLY ALL ASSETS:

         The Partnership  entered into purchase agreements with Flying J Inc. on
September 4, 1998 to sell  substantially all of the Partnership's  assets (those
assets comprising the travel plazas) for cash of $25,482,518 (the original sales
price of $27,220,000  less the partial pay down of the mortgage loan received by
the  Partnership  in December  1998).  The limited  partners  received a consent
solicitation  statement  describing the proposed  transaction and an affirmative
vote of investors  holding a majority of the  partnership  units was achieved on
October 26, 1998. The sale  transaction  was completed on March 22, 1999 and the
Partnership recognized a gain of approximately $7.8 million on the sale. The net
cash  proceeds  from  this  sale are being  held in U.S.  government  securities
pending distribution to investors.  The sale of the travel plazas represents the
disposition of substantially all of the Partnership's assets and the Partnership
has no  further  liability  in  connection  with any of the travel  plazas.  The
General  Partner  has begun the  process  of  winding  down the  affairs  of the
Partnership  that  includes  liquidation  and  distribution  of  assets  to  the
investors in accordance with the Partnership  agreement.  The liquidation of the
Partnership is expected to be completed in June 1999.

         As  part of the  sale  of the  travel  plazas,  approximately  $165,000
(representing  less than one percent of the  aggregate  sales price) may, at the
General Partner's discretion,  be deposited in a trust (the "Trust Fund") with a
bank. The Trust Fund,  including interest income,  would be available to satisfy
claims made directly or indirectly with respect to the liquidation,  dissolution
and  winding up of the  affairs of the  Partnership  during a period of up to 36
months  following  the  liquidation  date.  At the  end of  this  period,  final
decisions  will be made in  settlement of all disputed  claims,  if any, and the
remaining balance of the Trust Fund will be disbursed to the limited partners.

                                       29
<PAGE>
                                                                    SCHEDULE III
                                                                     Page 1 of 2

             PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
              SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
                             AS OF DECEMBER 31, 1998


                                   Initial Cost to Partnership and
                                  Gross Amount At December 31, 1998
                         -----------------------------------------------

Travel Plaza Location         Land        Buildings     Equipment        Total
---------------------         ----        ---------     ---------        -----
Ehrenberg, Arizona         $1,250,000    $        --    $      --    $ 1,250,000
Bakersfield, California       101,050      5,195,950      495,838      5,792,838
Wytheville, Virginia        1,333,088      5,814,912      452,000      7,600,000
                           ----------    -----------    ---------    -----------

TOTAL                      $2,684,138    $11,010,862    $ 947,838    $14,642,838
                           ==========    ===========    =========    ===========


                                 Accumulated Depreciation
                           -------------------------------------
                                                                       Date
Travel Plaza Location       Buildings     Equipment      Total       Acquired
---------------------       ---------     ---------      -----       --------
Ehrenberg, Arizona         $       --    $      --    $       --    Jun. 1993
Bakersfield, California       974,241      337,728     1,311,969    Jan. 1993
Wytheville, Virginia        1,287,154      345,188     1,632,342    Dec. 1991
                           ----------    ---------    ----------

TOTAL                      $2,261,395    $ 682,916    $2,944,311
                           ==========    =========    ==========

                                       30
<PAGE>
                                                                    SCHEDULE III
                                                                     Page 2 of 2

             PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
              SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
                            AS OF DECEMBER 31, 1998

NOTES:

(1)      There are no encumbrances on properties.

(2)      Cost for Federal  income tax purposes is the same as cost for financial
         reporting purposes.

(3)      All buildings and equipment are depreciated over estimated useful lives
         of 32 and eight years,  respectively.  The buildings and equipment were
         purchased as new properties.

(4)      Transactions  in real estate,  equipment and  accumulated  depreciation
         during 1998, 1997 and 1996 are summarized as follows:

                                                                   Accumulated
                                                      Cost         Depreciation
                                                  -----------      ------------

         Balance, December 31, 1995               $14,642,838      $  1,599,633
           Depreciation expense                            --           449,208
                                                  -----------      ------------

         Balance, December 31, 1996                14,642,838         2,048,841
           Depreciation expense                            --           447,735
                                                  -----------      ------------

         Balance, December 31, 1997                14,642,838         2,496,576
           Depreciation expense                            --           447,735
                                                  -----------      ------------

         Balance, December 31, 1998               $14,642,838      $  2,944,311
                                                  ===========      ============

                                       31
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To FFCA/PIP III Investor Services Corporation:


We have audited the accompanying balance sheet of FFCA/PIP III INVESTOR SERVICES
CORPORATION  (a Delaware  corporation)  as of December 31, 1998.  This financial
statement is the responsibility of the Company's management.  Our responsibility
is to express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material  misstatement.  An
audit includes examining,  on a test basis,  evidence supporting the amounts and
disclosures  in  the  balance  sheet.  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
audit provides a reasonable basis for our opinion.

In our opinion,  the balance sheet  referred to above  presents  fairly,  in all
material  respects,  the  financial  position of FFCA/PIP III Investor  Services
Corporation  as of December 31, 1998,  in  conformity  with  generally  accepted
accounting principles.

                                               /s/ Arthur Andersen LLP

Phoenix, Arizona,
  March 22, 1999.

                                       32
<PAGE>
                   FFCA/PIP III INVESTOR SERVICES CORPORATION

                        BALANCE SHEET - DECEMBER 31, 1998

                                     ASSETS

Cash                                                                        $100
Investment in Participating Income Properties III
  Limited Partnership, at cost                                               100
                                                                            ----

            Total Assets                                                    $200
                                                                            ====


                                   LIABILITY

Payable to Parent (Note 2)                                                  $100
                                                                            ----


                              STOCKHOLDER'S EQUITY


Common Stock; $l par value; 100 shares authorized,
     issued and outstanding                                                  100
                                                                            ----

            Liability and Stockholder's Equity                              $200
                                                                            ====

       The accompanying notes are an integral part of this balance sheet.

                                       33
<PAGE>
                   FFCA/PIP III INVESTOR SERVICES CORPORATION

                             NOTES TO BALANCE SHEET
                                DECEMBER 3l, l998


(l) Operations:

         FFCA/PIP III Investor  Services  Corporation  (a Delaware  corporation)
(the  Corporation)  was incorporated on December 5, 1988, and amended on July 9,
l990 to act as the assignor limited partner in Participating  Income  Properties
III Limited Partnership (PIP III).

         The  assignor  limited  partner  is the owner of record of the  limited
partnership units of PIP III. All rights and powers of the Corporation have been
assigned to the holders,  who are the registered  and  beneficial  owners of the
units.  Other than to serve as assignor limited partner,  the Corporation has no
other  business  purpose and will not engage in any other  activity or incur any
debt.

(2) Related Parties:

         Morton H. Fleischer is the sole stockholder of the Corporation.

                                       34
<PAGE>
                       PARTICIPATING INCOME PROPERTIES III
                               LIMITED PARTNERSHIP
                                       AND
                   FFCA/PIP III INVESTOR SERVICES CORPORATION

                                  EXHIBIT INDEX

         The following is a complete list of exhibits filed as part of this Form
10-K. For electronic  filing purposes only, this report contains Exhibit 27, the
Financial  Data  Schedule.  Exhibit  numbers  correspond  to the  numbers in the
Exhibit Table of Item 601 of Regulation S-K.

                                     EXHIBIT
                                     -------

               Pursuant  to Rule 12b-32  under the  Securities  Exchange  Act of
          1934, as amended, the following  documents,  filed with the Securities
          and Exchange Commission as exhibits to the  Co-Registrants'  Form 10-K
          for  the  fiscal  year  ended  December  31,  1991,   Commission  File
          No.0-20151, are incorporated herein by this reference.

                                                                  1991 FORM 10-K
                                                                    EXHIBIT NO.
                                                                    -----------

          The Agreement of Limited Partnership of the General
          Partner                                                        3-A

          The  Certificate of  Incorporation  of FFCA/PIP III
          Investor  Services  Corporation,  as filed with the
          Secretary  of State of Delaware on December 5, 1988            3-B

          Bylaws   of   FFCA/PIP   III   Investor    Services
          Corporation                                                    3-C

               Pursuant  to Rule 12b-32  under the  Securities  Exchange  Act of
          1934, as amended, the following  documents,  filed with the Securities
          and  Exchange   Commission  with  the   Co-Registrants'   Registration
          Statement on Form S-11,  Registration  No.  33-35868,  is incorporated
          herein by this reference.

          The Amended and Restated Agreement of Limited
          Partnership of the Partnership.

               Pursuant to Rule 12b-32 under the Securities Exchange Act of
          1934,  as  amended,  the  following  documents,  filed  with  the
          Securities   and   Exchange   Commission   as   exhibits  to  the
          Co-Registrant's  Form 8-K dated March 22, 1999,  Commission  File
          No. 0-20151, are incorporated herein by this reference.

                                                                 MARCH 22, 1999,
                                                                    FORM 8-K
                                                                   EXHIBIT NO.
                                                                   -----------

          Purchase  Agreement  dated  as of  September  4,  1998,      10.01
          between  Participating  Income  Properties  III Limited
          Partnership and CFJ Plaza Company I LLC,  including the
          First  Amendment  thereto  dated as of March  22,  1999


          Purchase  Agreement  dated  as of  September  4,  1998,      10.02
          between  Participating  Income  Properties  III Limited
          Partnership and FJI Plaza Company LLC

          Extension Agreement dated March 22, 1999                     10.03