SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                  FORM 10-K/A-1


                   ANNUAL REPORT UNDER SECTION 13 or 15(d) of
                       THE SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997



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 Organization)                    (Partnership IRS Employer
                                                           Identification No.)

             Delaware                                         86-0555605
------------------------------------                   -------------------------
(Corporation State of Incorporation)                   (Corporation IRS Employer
                                                          Identification No.)

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


Co-Registrants' telephone number, including area code:           (602) 585-4500
<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,  
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<PAGE>
the travel  plaza was acquired by  purchasing  the land and making a loan to the
franchisee for financing the travel plaza building.

         As of  December  31,  1997,  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's principal objectives are to (a) preserve, protect and
enhance   Partnership   capital;   (b)  provide   partially   tax-deferred  cash
distributions  to investors;  (c) provide the potential for increased income and
protection against inflation through  participation in the operating revenues of
travel plaza facilities owned by the Partnership;  and (d) to provide  potential
long-term  appreciation  in the  value of its  properties  through  real  estate
ownership.

         Real estate owned by the  Partnership is leased for a term of 20 years.
If a  franchisee-lessee,  however,  ceases to be a  franchisee  of Flying J Inc.
prior to the expiration of its 20-year lease term,  the  Partnership is entitled
in its sole discretion to terminate the lease with such  franchisee-lessee.  Two
of the travel  plazas also lease  equipment  for a term of eight years.  Lessees
must pay 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 leases the land to
the travel plaza  operator and made a loan for the travel  plaza  building.  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. As additional  rent under the terms of
the lease,  the  Partnership  is 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.  Reference is made
to Note (3) of the notes to the financial  statements filed with this Report for
a  schedule  of  the  minimum  future  lease  payments  to be  received  by  the
Partnership on its properties.

         In connection with leases to CFJ Properties and franchisees of Flying J
Inc., the General  Partner  granted to the lessee and to Flying J Inc. an option
(the "Option  Agreement") to purchase the leased equipment and real estate.  The
Option Agreement generally provides that upon expiration of its equipment lease,
and if the  lessee is not in  default  under its  lease,  a lessee  will have an
option to purchase its leased  equipment at its appraised fair market value.  In
addition, provided that the lessee is not in default under its lease at the time
of exercise,  a lessee will have an option exercisable from the end of the tenth
year  until the end of the  fifteenth  year of the lease  term to  purchase  its
leased  real  estate at the greater of (a) the  appraised  fair market  value of
land,  building and equipment,  or (b) the Partnership's total investment in the
property  plus a pro rata  portion of certain  fees and less any amounts paid by
such lessee to the Partnership for equipment under the Option Agreement.
                                        3
<PAGE>
         The  Partnership is dependent upon CFJ Properties and TFJ, its lessees,
since an adverse  change in the financial  condition of CFJ  Properties  and TFJ
could materially affect their ability to make lease and loan payments.

         On February 1, 1991,  Flying J Inc.,  through its  subsidiary Big West,
entered into a joint venture with Douglas Oil to form CFJ  Properties.  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. The Partnership owns two of these properties.  Under the terms
of the joint venture  agreement,  Big West sold to Douglas Oil certain  Flying J
Travel Plazas, which Douglas Oil contributed back to CFJ Properties. In addition
to this initial contribution,  Douglas Oil also made additional contributions to
CFJ  Properties.  As its  initial  contribution,  Big  West  transferred  to CFJ
Properties  certain  leasehold   interests  and  Flying  J  Travel  Plazas,  and
subsequently  contributed to CFJ Properties  various  assets  including  working
capital,  inventories and future development  sites.  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 are with full recourse to
the assets of CFJ Properties, but without recourse to Big West or Douglas Oil. A
default  on one  lease  constitutes  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 are 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.  Future minimum
annual rent obligations under non-cancelable  leases, as projected through 2003,
remain comparable to 1998 expense amounts.
                                       4
<PAGE>
         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.

         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.

         On February 2, 1998,  the  Partnership  entered into a letter of intent
with Flying J Inc. to sell  substantially  all of the  Partnership's  assets for
cash of  approximately  $27 million.  The sale is subject to certain  conditions
specified in the letter of intent,  including the  negotiation  and execution of
definitive  sale and  financing  agreements  with  respect  to the assets of the
Partnership  and the  approval,  by vote,  of a majority of the limited  partner
interests.  In accordance with the Partnership's  limited partnership  agreement
(the  "Partnership  Agreement"),  sale of  substantially  all of the assets will
result  in  dissolution  of  the   Partnership   and  liquidation  of  remaining
Partnership  assets,  net of  liabilities.  There can be no  assurance as to the
final terms of the proposed  transaction,  that the conditions will be satisfied
or that the proposed transaction will be consummated.  The limited partners will
receive a proxy  statement  containing  a complete  description  of the proposed
transaction when the sale and financing agreements are finalized.

         The  negotiated  sales price of  approximately  $27 million  would have
resulted in an  estimated  book gain of $7 million had the  proposed  sale taken
place at December 31, 1997. Subsequent to the proposed asset sale and conversion
of other  Partnership  assets into cash upon  liquidation,  a  liquidating  cash
distribution  will be made to  investors  in  accordance  with  the  Partnership
Agreement.  Had the sale (as  proposed)  occurred at December  31,  1997,  it is
estimated that the liquidating cash distribution would have been in the range of
$980 to $1000 per limited partnership unit. The actual liquidating  distribution
to be  received by  investors  will depend upon the actual date and terms of the
sale and the actual costs of liquidating the Partnership.

         The travel  plaza/truckstop  industry,  although highly fragmented,  is
also highly  competitive.  The  Partnership's  lessees are competing with, among
others, National Auto/Truckstops,  Petro and Pilot Corporation, as well as other
national, regional and local
                                       5
<PAGE>
truckstop  operators,  some of which may have  substantially  greater  financial
resources than the lessees.  The  Partnership's  lessees also compete with other
entities which provide  hospitality  goods and services to the trucking industry
and traveling public in general.  The major competitive  factors include,  among
others,  location,  ease of access, brand identification,  pricing,  product and
service selections, customer service, store appearance,  cleanliness and safety.
The  Flying  J  Travel  Plaza  facilities  owned  by  the  Partnership  offer  a
full-service  operation,  generally including fuel facilities,  a restaurant,  a
convenience  store and other  amenities  for use by the  trucking  industry  and
traveling  public in  general.  Flying J Inc.  reports  that the Flying J Travel
Plaza network  consists of more than 100 facilities  across the U.S.  interstate
highway  system.  The travel  plaza  sites have been  selected  based on traffic
patterns and volumes, and access to interstate highways, among other criteria.

         According to the American Trucking  Association,  the trucking industry
generated more than $345 billion in gross freight revenues,  representing 82% of
the nation's  freight bill in 1996.  This was up 4% from the prior year. Over 21
million trucks  registered in the United States for business  purposes  consumed
approximately 41 billion gallons of fuel and transported over 60% of all primary
shipments made in 1996.

         Through  ownership of the travel plazas,  the Partnership is subject to
the risks associated with the underground  storage of petroleum products such as
gasoline.  In this  regard,  the  Partnership's  lessees  are subject to various
federal,  state and local  regulations and  environmental  laws.  These laws and
regulations affect the storing,  dispensing and discharge of petroleum and other
wastes  and affect the  lessees  both in the  securing  of permits  for  fueling
operations and in the ongoing conduct of such operations.

         Federal,  state and local regulatory  agencies have adopted regulations
governing  underground  storage tanks  ("USTs")  that require the  Partnership's
lessees to make certain  expenditures  for  compliance.  In  particular,  at the
federal  level,  the  Resource   Conservation  and  Recovery  Act  requires  the
Environmental  Protection Agency ("EPA") to establish a comprehensive regulatory
program for the detection,  prevention and cleanup of leaking USTs.  Regulations
enacted  by the EPA in 1988  established  requirements  for (a)  installing  UST
systems;  (b) upgrading UST systems; (c) taking corrective action in response to
releases;  (d) closing UST systems;  (e) keeping  appropriate  records;  and (f)
maintaining  evidence of financial  responsibility  for taking corrective action
and  compensating  third parties for bodily injury and property damage resulting
from  releases.  These  regulations  permit  states to develop,  administer  and
enforce their own regulatory programs,  incorporating  requirements which are at
least as stringent as the federal  standards.  By the end of 1998, all USTs must
be corrosion protected,  overfill/spill protected and have leak detection. These
environmental  laws impose  strict  liability for owners and operators of faulty
and  leaking  storage  tanks  resulting  in damage to the  environment  or third
parties.

         The  General  Partner  has taken  various  steps to (a) ensure that the
lessees comply with applicable rules and regulations; (b) mitigate any potential
liabilities,  including the establishment of storage tank monitoring procedures;
and (c) require that lessees  indemnify the Partnership for all such liabilities
and obtain liability  insurance,  if reasonably  available.  The General Partner
requires each lessee to obtain an annual  environmental  audit,  performed by an
environmental  consulting  and  engineering  firm,  which includes the following
procedures, among others: 
                                       6
<PAGE>
month-end  cumulative fuel inventory  variance  analysis;  tank tightness tests;
automatic  tank gauging and leak  detection  system  operation  and  calibration
tests;  UST  excavation  zone  groundwater  and/or  soil vapor  monitoring  well
analysis;  piping system  tightness  tests;  piping  excavation zone groundwater
and/or soil vapor  monitoring well analysis;  pipe leak detector  inspection and
calibration  tests;  corrosion  protection system tests;  on-site sanitary sewer
treatment plant effluent  analysis;  and oil/water  separator  inspections.  The
consulting  and  engineering  firm hired by the General  Partner to conduct such
audits also reviews on-site environmental correspondence;  visually inspects the
UST system,  tank and piping excavation zone monitoring wells, areas adjacent to
all petroleum above-ground tanks, the stormwater and wastewater control systems,
and the travel plaza  facility;  and  discusses  employee  training  procedures,
recent  significant  environmental  events  (if  any),  repair  and  maintenance
activities, and regulatory compliance with travel plaza personnel.

         The most  recent  annual  environmental  audits  of the  travel  plazas
indicate that some remediation is necessary at one or more of the travel plazas.
Under  each  travel  plaza  lease,  the  lessee  is  responsible  for all  costs
associated with correcting  problems  identified by such audits and is obligated
to indemnify the Partnership for all liabilities related to the operation of the
travel plazas,  including those related to  remediation.  The lessees are in the
process of reviewing such  environmental  audits and have commenced  appropriate
corrective  actions.  The General  Partner does not believe that the  corrective
actions recommended in the audits will affect the lessees' ability to make their
scheduled lease and loan payments to the Partnership or have a material  adverse
effect upon the Partnership.

         The  Partnership  believes that its lessees are in compliance  with all
applicable  regulatory  requirements,  except as discussed  above,  and that its
lessees have all  governmental  licenses and permits required for their business
operations.  Management  knows  of  no  pending  or  threatened  proceedings  or
investigations,  under federal or state environmental laws; however,  management
cannot  predict  the impact on the  Partnership's  lessees  of new  governmental
regulations and  requirements.  Although the General Partner has taken necessary
steps,  as discussed  above,  to ensure  lessee  compliance  with  environmental
regulations,  there can be no assurance that  significant  cleanup or compliance
costs may not be incurred  which may affect the  lessees'  ability to make their
scheduled lease payments to the Partnership.

         As of December 31, 1997,  the  Partnership  has 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.
                                       7
<PAGE>
         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  pays an  affiliate  of the  General  Partner  for the
maintenance  of the books  and  records  of the  Partnership  and for  computer,
investor and legal services  performed for the  Partnership.  During 1997,  this
affiliate  of the  General  Partner  completed  the  design of a new  accounting
information  system  that was begun in 1996 and was  implemented  on  January 1,
1998. The new system is "Year 2000"  compliant  which means that the system will
be able to handle any dates that refer to the 21st century.  By the end of 1998,
all of the  affiliate's  significant  information  systems that would impact the
Partnership  will be "Year 2000"  compliant.  The affiliate is in the process of
assessing the key suppliers that it relies upon in addition to any other systems
that are sensitive to dates (such as the telephone and power systems, elevators,
security systems, and so on), and has developed a plan for any such systems that
are found to be noncompliant.

         A  five-phase  process to address the issues  associated  with the Year
2000  includes:  (1) an inventory and  assessment of the systems and  electronic
devices that maybe at risk; (2) the identification of potential  solutions;  (3)
the  implementation  of upgrades or replacements to affected systems or devices;
(4) the verification of compliance and testing of the revised  systems;  and (5)
the training of users on the new systems.  To date, the inventory and assessment
phase  of all  critical  computer  hardware  has  been  completed,  as have  the
operating  system and database  software;  statements of "Year 2000"  compliance
have been received from the related  vendors.  The  verification  of "Year 2000"
compliance  through  testing of these  systems  and  training of users is nearly
complete.

         As  discussed  previously,  the  Partnership  entered  into a letter of
intent with Flying J Inc. to sell substantially all of the Partnership's assets.
In accordance with the Partnership  Agreement,  sale of substantially all of the
assets  will  result  in  dissolution  of the  Partnership  and  liquidation  of
remaining Partnership assets, net of liabilities. Under these circumstances, the
"Year 2000" issue is not anticipated to have any affect on the Partnership.

Factors Affecting Future Operating Results

         The provisions of the Private Securities  Litigation Reform Act of 1995
(the "Act"), became effective in December 1995. The Act provides a "safe harbor"
for  companies  which  make  forward-looking  statements  providing  prospective
information. The "safe harbor" under the Act relates to protection for companies
with  respect  to  litigation  filed  on  the  basis  of  such   forward-looking
statements.

         The  Partnership   wishes  to  take  advantage  of  the  "safe  harbor"
provisions of the Act and is therefore  including  this section.  The statements
contained herein, if not historical,  are forward-looking statements and involve
risks and  uncertainties  which are  described  below  that could  cause  actual
results to differ materially from the results,  financial or otherwise, or other
expectations described in such forward-looking statements.  These statements are
identified with the words "anticipated,"  "expected,"  "intends," or "plans," or
words of similar meaning.  
                                       8
<PAGE>
Therefore,  forward-looking statements should not be relied upon as a prediction
of actual future results or occurrences.

         The  Partnership's  future  results may be subject to certain risks and
uncertainties including the following:

         o        On February 2, 1998, the Partnership  entered into a letter of
                  intent  with Flying J Inc.  to sell  substantially  all of the
                  Partnership's  assets for cash of  approximately  $27 million.
                  The sale is  subject to certain  conditions  specified  in the
                  letter of intent,  including the  negotiation and execution of
                  definitive  sale and financing  agreements with respect to the
                  assets of the  Partnership  and the  approval,  by vote,  of a
                  majority of the limited partner interests.  In accordance with
                  the Partnership  Agreement,  sale of substantially  all of the
                  assets  will  result in  dissolution  of the  Partnership  and
                  liquidation   of   remaining   Partnership   assets,   net  of
                  liabilities.  There can be no  assurance as to the final terms
                  of the  proposed  transaction,  that  the  conditions  will be
                  satisfied   or  that   the   proposed   transaction   will  be
                  consummated.

         o        Adverse  changes  in  general  or  local  economic  or  market
                  conditions may decrease  demand for products and services sold
                  at the Partnership's travel plazas.

         o        Competition  in the travel plaza  industry (see  discussion in
                  "Business"  above),  as well as competition  with  established
                  entities  and  private   investors  in  connection   with  the
                  acquisition,  sale  and  leasing  of  similar  properties  may
                  decrease sales at the Partnership's travel plazas and decrease
                  profit margins.

         o        Material  or   substantial   restrictions   on  travel   plaza
                  facilities  imposed  by  federal,  state  and  local  laws and
                  regulations  may result in  increased  operating  expenses and
                  capital  expenditures  for the operators of the  Partnership's
                  travel plazas.

         o        The  Partnership is dependent upon the financial  condition of
                  CFJ Properties and its ability to properly  operate the travel
                  plaza  facilities.  If CFJ  Properties  fails to  operate  the
                  travel plaza facilities  properly,  the Partnership's  revenue
                  stream may be adversely affected.

         o        The  Partnership  is  dependent  upon  petroleum  products and
                  factors  affecting  the  petroleum  industry,   including  the
                  following:  governmental  policies and programs  regarding oil
                  exploration,  production  and  marketing;  federal,  state and
                  local environmental laws, rules and regulations  regarding the
                  ownership,   operation  and   maintenance  of  oil  production
                  facilities,  refineries  and  petroleum  product  storage  and
                  marketing facilities; unrest in the Middle East; worldwide and
                  domestic  economic   conditions;   oil  import  quotas;  trade
                  embargoes;  the  imposition of gasoline or other energy taxes;
                  the  supply  and  price  of  oil;  and  effects  of all of the
                  foregoing on the transportation  and travel industries,  which
                  could result in smaller profit margins and volumes of sales of
                  petroleum  products  as well as  smaller  base  rental  income
                  revenues from lessees of the  properties.  This dependency may
                                       9
<PAGE>
                  decrease the availability, and increase the price of, products
                  and services sold at the Partnership's travel plazas which may
                  adversely affect its revenue stream.

         o        Condemnation  or  uninsured  losses may  adversely  affect the
                  ability of the travel plazas to profitably operate.

         o        Changing  demographics  and  changing  transport,  traffic and
                  travel  patterns  may  result  in a  decrease  in sales at the
                  Partnership's travel plazas.

         o        Relocation  and  construction  of highways  may  substantially
                  decrease  consumer demand and adversely  affect the operations
                  of the Partnership's travel plaza.

         o        Increased costs of food products would decrease profit margins
                  on food products.

         o        Failure  of  lessees  to  remediate   environmental   problems
                  identified  in recent  environmental  audits  may  affect  the
                  marketability of the travel plazas to third parties.
                                       10
<PAGE>
                                     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, 1997 and 1996 
                        Statements of Income for the year ended December 31, 
                          1997 1996 and 1995
                        Statements of Changes In Partners' Capital for the
                          years ended December 31, 1997, 1996 and 1995
                        Statements of Cash Flows for the years ended
                          December 31, 1997, 1996 and 1995
                        Notes to Financial Statements

                        FFCA/PIP III Investor Services Corporation

                        Report of independent public accountants
                        Balance Sheet as of December 31, 1997
                        Notes to Balance Sheet

                        CFJ Properties
                        (A General Partnership)

                        Independent Auditors' Report 
                          Balance Sheets as of January 31, 1998 and 1997  
                        Statements of Income and Partners' Capital for the
                          years ended January 31, 1998, 1997 and 1996
                        Statements of Cash Flows for the years ended
                          January 31, 1998, 1997 and 1996
                        Notes to Financial Statements

                        Wytheville Travel Plaza

                        Independent Auditors' Report
                        Statements of Revenues and Direct Operating Costs and 
                          Expenses for the years ended January 31, 1998, 1997 
                          and 1996
                        Statements of Cash Flows for the years ended January 31,
                          1998, 1997 and 1996
                        Note to Financial Statements
                                    11
<PAGE>
                        Bakersfield Travel Plaza

                        Independent Auditors' Report
                        Statements of Revenues and Direct Operating Costs and 
                          Expenses for the years ended January 31, 1998, 1997 
                          and 1996
                        Statements of Cash Flows for the years ended January  
                          31, 1998, 1997 and 1996
                        Note to Financial Statements

                        Ehrenberg Travel Plaza

                        Independent Auditors' Report
                        Statements of Revenues and Direct Operating Costs and 
                          Expenses for the years ended January 31, 1998, 1997 
                          and 1996
                        Statements of Cash Flows for the years ended January 31,
                          1998, 1997 and 1996
                        Note to Financial Statements

                  2.    Financial Statement Schedules.

                        Schedule III-Schedule of Real Estate and Accumulated
                          Depreciation as of December 31, 1997

                        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.

                        99. Annual Portfolio Valuation of Cushman & Wakefield
                            as of December 31, 1997

                           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.
                                       12
<PAGE>
                                                                  1991 Form 10-K
                                                                    Exhibit No.
                                                                    -----------

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

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

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

                           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.

         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, 1997.
                                       13
<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:  June 24, 1998                               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:  June 24, 1998                    By /s/ Morton H. Fleischer
                                           ------------------------------------
                                               Morton H. Fleischer, 
                                               President, Chief Executive
                                               Officer and Director

Date:  June 24, 1998                    By
                                           ------------------------------------
                                               Paul Bagley, Director

Date:  June 24, 1998                    By /s/ John Barravecchia
                                           ------------------------------------
                                               John Barravecchia, Executive 
                                               Vice President, Chief Financial
                                               Officer, Treasurer, Assistant 
                                               Secretary and Director
<PAGE>
Date:  June 24, 1998                    By /s/ Christopher H. Volk
                                           ------------------------------------
                                               Christopher H. Volk, Executive
                                               Vice President, Chief 
                                               Operating Officer, Secretary,
                                               Assistant Treasurer and Director


Date:  June 24, 1998                    By /s/ Catherine F. Long
                                           ------------------------------------
                                               Catherine F. Long, Senior Vice  
                                               President-Finance, Principal  
                                               Accounting Officer, Assistant  
                                               Secretary and Assistant Treasurer


         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:  June 24, 1998                   By /s/ Morton H. Fleischer
                                          -------------------------------------
                                              Morton H. Fleischer, Sole Director


Date:  June 24, 1998                   By /s/ John Barravecchia
                                          -------------------------------------
                                              John Barravecchia, President, 
                                              Secretary, Treasurer, Principal
                                              Financial Officer and Principal
                                              Accounting Officer
<PAGE>
Independent Auditors' Report

================================================================================










The Board of Directors
CFJ Properties:


We have audited the  accompanying  balance  sheets of CFJ  Properties (a general
partnership)  as of January 31, 1998 and 1997,  and the  related  statements  of
income  and  partners'  capital,  and cash  flows  for each of the  years in the
three-year  period ended January 31, 1998.  These  financial  statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of CFJ Properties as of January
31, 1998 and 1997, and the results of its operations and its cash flows for each
of the years in the three-year period ended January 31, 1998, in conformity with
generally accepted accounting principles.


                                             /s/ KPMG Peat Marwick LLP

Salt Lake City, Utah
March 31, 1998
<PAGE>
Balance Sheets

================================================================================


CFJ PROPERTIES
(A General Partnership)
January 31, 1998 and 1997
(In thousands)
<TABLE>
<CAPTION>
                                 Assets                                      1998            1997
--------------------------------------------------------------------------------------------------
<S>                                                                     <C>           <C>        
Current assets:
  Cash and cash equivalents                                             $   3,778     $     2,138
  Trade receivables, net of allowance for doubtful accounts
    of $114 in 1998 and $129 in 1997 (note 8)                              15,392          11,400
  Inventories (note 2)                                                     18,647          20,308
  Prepaid expenses                                                          3,321           2,141

--------------------------------------------------------------------------------------------------
              Total current assets                                         41,138          35,987
--------------------------------------------------------------------------------------------------
Land, buildings, and equipment:
  Land and improvements                                                   151,572         129,270
  Buildings                                                               169,203         145,875
  Equipment                                                               124,325         105,561
  Leasehold improvements                                                   24,330          24,317
  Construction-in-progress                                                 30,983          29,454
--------------------------------------------------------------------------------------------------
                                                                          500,413         434,477
  Less accumulated depreciation and amortization                           79,177          58,932
--------------------------------------------------------------------------------------------------
              Net land, buildings, and equipment                          421,236         375,545
--------------------------------------------------------------------------------------------------
Long-term notes receivable                                                     35             395
Other assets (note 3)                                                       1,339             957
--------------------------------------------------------------------------------------------------
                                                                        $ 463,748       $ 412,884
==================================================================================================


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

Current liabilities:
  Current installments  of long-term debt (note 5)                      $  10,000       $       0
  Accounts payable (note 8)                                                56,901          58,395
  Accrued liabilities (notes 4 and 8)                                      27,863          20,995
--------------------------------------------------------------------------------------------------
              Total current liabilities                                    94,764          79,390
Long-term debt, excluding current installments (note 5)                   209,300         190,000
Other liabilities                                                           4,206           4,016
--------------------------------------------------------------------------------------------------
              Total liabilities                                           308,270         273,406
--------------------------------------------------------------------------------------------------
Partners' capital                                                         155,478         139,478
Commitments and contingencies (notes 6 and 10)
--------------------------------------------------------------------------------------------------
                                                                        $ 463,748       $ 412,884
==================================================================================================
</TABLE>
See accompanying notes to financial statements.
                                        2
<PAGE>
Statements of Income and Partners' Capital

================================================================================


CFJ PROPERTIES
(A General Partnership)
Years ended January 31, 1998, 1997, and 1996
(In thousands)
<TABLE>
<CAPTION>
                                                      1998           1997           1996
-------------------------------------------------------------------------------------------
<S>                                               <C>            <C>            <C>        
Sales (note 1(f))                                 $ 1,864,637    $ 1,688,194    $ 1,413,270
Cost of sales                                       1,638,532      1,501,758      1,231,752
-------------------------------------------------------------------------------------------
              Gross profit                            226,105        186,436        181,518
-------------------------------------------------------------------------------------------
Operating, general, and administrative expense:
  Operating                                           183,569        162,236        145,959
  General and administrative                           14,215         11,732         11,753
-------------------------------------------------------------------------------------------
                                                      197,784        173,968        157,712
-------------------------------------------------------------------------------------------
              Income from operations                   28,321         12,468         23,806
-------------------------------------------------------------------------------------------
Other income (expense):
  Interest income                                         106            134             93
  Interest expense, net                               (12,311)       (10,659)        (6,642)
  Loss on sale of fixed assets, net                      (116)          (163)           (52)
-------------------------------------------------------------------------------------------
                                                      (12,321)       (10,688)        (6,601)
-------------------------------------------------------------------------------------------
              Net income                               16,000          1,780         17,205
Partners' capital, beginning of year                  139,478        137,698        120,493
-------------------------------------------------------------------------------------------
Partners' capital, end of year                    $   155,478    $   139,478    $   137,698
===========================================================================================
</TABLE>
See accompanying notes to financial statements.
                                       3
<PAGE>
Statements of Cash Flows

================================================================================

CFJ PROPERTIES
(A General Partnership)
Years ended January 31, 1998, 1997, and 1996
(In thousands)
<TABLE>
<CAPTION>
                                                                   1998         1997         1996
---------------------------------------------------------------------------------------------------
<S>                                                             <C>          <C>          <C>      
Cash flows from operating activities:
  Net income                                                    $  16,000    $   1,780    $  17,205
  Adjustments to reconcile net income to net cash provided by
    operating activites:
      Depreciation and amortization                                22,067       19,080       14,933
      Provision for losses on accounts receivable                     137           84           35
      Loss on sale of fixed assets                                    116          163           52
      Changes in assets and liabilities:
        Trade receivables                                          (4,129)         352       (3,838)
        Inventories                                                 1,661       (4,476)      (3,034)
        Prepaid expenses                                           (1,180)          88       (1,025)
        Other assets                                                 (575)        (106)        (128)
        Accounts payable and accrued liabilities                    7,382        4,723        8,817
        Other liabilities                                             190          607        2,739
---------------------------------------------------------------------------------------------------
              Net cash provided by operating activities            41,669       22,295       35,756
---------------------------------------------------------------------------------------------------
Cash flows from investing activities:
  Capital expenditures (note 8)                                   (69,689)     (56,111)    (104,107)
  Note receivable                                                     360          140         (535)
---------------------------------------------------------------------------------------------------
              Net cash used in investing activities               (69,329)     (55,971)    (104,642)
---------------------------------------------------------------------------------------------------
Cash flows from financing activities:
  Proceeds from issuance of notes payable                          25,000            0       25,000
  Net proceeds under line of credit agreements                      4,300       33,500       44,500
---------------------------------------------------------------------------------------------------
              Net cash provided by financing activities            29,300       33,500       69,500
---------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents                    1,640         (176)         614
Cash and cash equivalents, beginning of year                        2,138        2,314        1,700
---------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                          $   3,778    $   2,138    $   2,314
===================================================================================================

Supplemental Disclosure of Cash Flow Information
------------------------------------------------
  Cash paid for interest, net of capitalized amounts            $  11,530    $  10,854    $   6,387

Supplemental Disclosure of Noncash Investing Activities
-------------------------------------------------------
   The  capital  expenditures  noted  above are net of  accounts  payable
     increases  (decreases)  related to the  acquisition  of building and
     equipment of ($2,008), $2,888, and ($4,403) in 1998, 1997, and 1996,
     respectively.
</TABLE>
       See accompanying notes to financial statements.
                                        4
<PAGE>
Notes to Financial Statements

================================================================================

CFJ PROPERTIES
(A General Partnership)
January 31, 1998, 1997, and 1996


1) Summary of Significant Accounting Policies

The following  significant  accounting  policies are followed by CFJ  Properties
(the Partnership) in preparing and presenting its financial statements:

(a)  Organization  and Line of  Business  - The  Partnership  is a Utah  general
partnership with its principal business being the development and operation of a
national network of interstate travel plazas in North America.  A typical travel
plaza offers a 24-hour  service  operation  which  includes fuel  facilities,  a
restaurant or deli,  convenience store, and other amenities designed to meet the
needs of the trucking industry and traveling public.  Some travel plazas include
lodging and truck  service  centers.  The  Partnership  operated  78, 72, and 66
travel plazas, as of January 31, 1998, 1997, and 1996, respectively.

(b) Cash  Equivalents - The Partnership  considers all investments with original
maturities of three months or less to be cash equivalents.

(c) Inventories - Inventories include gasoline, diesel,  ready-to-use additives,
related petroleum products, food, and miscellaneous merchandise. Inventories are
stated at the  lower of cost or  market  value as  determined  by the  first-in,
first-out method.

(d) Land, Buildings,  and Equipment - Land, buildings,  and equipment are stated
at cost for constructed  and purchased  assets and fair market value at the date
contributed  for  contributions  from  the  general  partners.  Depreciation  is
provided using the  straight-line  method over the estimated useful lives of the
assets. Leasehold improvements are amortized using the straight-line method over
the lesser of the lease term or the estimated useful life of the related assets.

Interest is capitalized in connection  with the  construction  of travel plazas.
The  interest  capitalized  is recorded as part of the asset to which it relates
and  is  amortized  over  the  asset's  useful  life.  Interest  of  $2,284,000,
$1,634,000,   and  $2,925,000,   was  capitalized  for  1998,  1997,  and  1996,
respectively.


(e) Income Taxes - The Partnership is not directly subject to income taxes. Each
partner is  responsible  for income  taxes  related to their  portion of taxable
income.

(f) Retail  Fuel Sales - The  Partnership  includes  related  federal  and state
excise taxes in  petroleum  product  retail sales and cost of sales.  Such taxes
amounted to approximately $605,751,000, $516,381,000, and $475,900,000 for 1998,
1997, and 1996, respectively.

(g) New Plaza  Opening Costs - Opening  costs are expensed  when  incurred.  The
costs associated with new travel plaza openings were  approximately  $1,923,000,
$2,100,000, and $4,000,000 in 1998, 1997, and 1996, respectively.

(h)  Concentration  of Credit Risk -  Financial  instruments  which  potentially
subject the Partnership to concentrations of credit risk consist  principally of
cash and cash equivalents and trade receivables. The Partnership places its cash
and cash equivalent  investments with high quality credit financial institutions
and limits  the  amount of credit  exposure  to any one  financial  institution.
Concentrations  of credit risk with respect to trade receivables are limited due
to the large number of customers comprising the Partnership's customer base, and
their dispersion  across many different  geographical  regions.  The Partnership
routinely performs credit evaluations of its customers and maintains  allowances
for potential credit losses.

(i) Use of  Estimates  - The  Partnership  has made a number  of  estimates  and
assumptions  relating  to the  reporting  of  assets  and  liabilities  and  the
disclosure  of contingent  assets and  liabilities  to prepare  these  financial
statements in conformity with generally accepted accounting  principles.  Actual
results could differ from those estimates.

(j)  Reclassifications - Certain amounts in 1997 and 1996 have been reclassified
to conform with the 1998 presentation.

(2) Inventories

Inventories are summarized as follows (in thousands):

                                             1998       1997
                                        ---------   --------
Store merchandise and restaurant food   $  15,164     16,368
Petroleum products                          3,483      3,940
                                        ---------   --------
                                        $  18,647     20,308
                                        =========   ========
                                       5
<PAGE>

================================================================================

(3) Other Assets

Other assets consist of the following (in thousands):
                                        
                                             1998       1997
                                        ---------   --------
Land deposits                           $     908        630
Lease deposits                                232        232
Loan origination fees, net                    199         95
                                        ---------   --------
                                        $   1,339        957
                                        =========   ========
(4) Accrued Liabilities                 

Accrued liabilities are summarized as follows (in thousands):

                                        
                                             1998       1997
                                        ---------   --------
Fuel, property, and sales taxes         $  17,301     14,285
Expense incurred by                                         
    operator (note 8)                       5,914      4,222
Frequent fueler incentive program           2,668      1,473
Interest                                    1,664        883
Other                                         316        132
                                        ---------   --------
                                        $  27,863     20,995
                                        =========   ========
                                        
(5)      Long-term Debt

Under a revolving line of credit  agreement with the banks,  the Partnership may
borrow up to $150,000,000.  Interest is computed at the Partnership's option, at
the LIBOR rate plus plus .5 to 1 percent,  or the  higher of the  federal  funds
rate plus .5  percent  and the  administrative  agent  bank's  prime  rate.  The
agreement matures February 1, 2002 and requires letter of credit and committment
fees. The Partnership had $94,300,000 and $90,000,000 in outstanding  borrowings
under the  agreement  as of January  31, 1998 and 1997,  respectively.  Interest
rates on outstanding  borrowings range from 6.38 to 8.5 percent.  In addition to
the  borrowings  under the  agreement,  the  Partnership  had  letters of credit
totaling $3,315,000 outstanding as of January 31, 1998.

Under a fiscal 1995 Master Shelf Agreement,  the Partnership issued $125,000,000
in long-term notes payable to an insurance company. The notes bear interest from
7.37 to 9.45 percent and require quarterly interest  payments.  Annual principal
payments are required  beginning  March 1998 with the final  payment in November
2006.

Aggregate maturities of long-term debt are summarized as follows (in thousands):


1999                                                  $      10,000
2000                                                         15,000
2001                                                         17,000
2002                                                         16,000
2003                                                        108,300
Thereafter                                                   53,000
                                                      -------------
          Total                                       $     219,300
                                                      =============

(6)      Lease Commitments

The Partnership leases travel plazas and equipment under noncancelable operating
leases,  which expire at various  dates over the next 9 to 15 years.  The leases
are obligations of the Partnership without recourse to the general partners. The
operating  leases include  minimum and percentage  (contingent)  lease payments.
Contingent   lease  payments  are  based  upon  gallons  sold,   restaurant  and
merchandise sales, and other revenues.

Minimum lease payments under  noncancelable  operating leases were  $13,120,000,
$13,173,000,  and  $13,266,000  for the years ended January 31, 1998,  1997, and
1996,  respectively.  Contingent  lease payments under  noncancelable  operating
leases were $4,390,000,  $4,105,000,  and $4,348,000 for the years ended January
31, 1998, 1997, and 1996, respectively.

Future minimum payments under  noncancelable  operating leases as of January 31,
1998 are as follows (in thousands):


1999                                                  $      13,099
2000                                                         12,832
2001                                                         12,217
2002                                                         12,165
2003                                                         12,144
Thereafter                                                   74,458
                                                      -------------
          Total                                       $     136,915
                                                      =============
                                       6
<PAGE>

================================================================================

(7) Pension and Profit Sharing Plan

Currently, the Partnership has chosen to have all eligible employees participate
in the noncontributory,  defined contribution pension and profit sharing plan of
Flying J Inc.  (Flying J), the parent  company of one of the  general  partners.
Flying J's  contributions  to the plan,  which are made at the discretion of the
Board of Directors,  may be in cash or qualifying  common stock of Flying J. The
Partnership's  expenses related to the plan amounted to $1,972,000,  $1,591,000,
and  $1,212,000  for  the  years  ended  January  31,  1998,   1997,  and  1996,
respectively.

(8) Related Party Transactions

Flying J operates all travel plazas and related  facilities for the Partnership.
Under the terms of the operations agreement, the Partnership reimburses Flying J
for the cost of  operations  plus a  monthly  amount  for  overhead  costs.  The
overhead cost reimbursements amounted to $1,022,000,  $960,000, and $916,000 for
1998,  1997, and 1996,  respectively.  Flying J paid the  Partnership  $706,000,
$686,000, and $668,000 during 1998, 1997, and 1996,  respectively,  for services
performed by the Partnership for certain franchisees of Flying J.

During  its normal  course of  business,  the  Partnership  purchases  petroleum
products from the general  partners under supply  agreements.  It is the general
partners'  opinion that such  agreements  are under terms similar to those which
could be received  under  arms-length  contracts.  Purchases  from the partners'
amounted to approximately $1,517,297,000, $1,399,265,000, and $1,138,800,000 for
1998, 1997, and 1996, respectively.

Included in accounts receivable at January 31, 1998 and 1997, is $1,522,000, and
$1,827,000, respectively, due from affiliates.

Included  in  accounts  payable  and  accrued  liabilities  is  $38,325,000  and
$38,256,000  as of January 31, 1998 and 1997,  respectively,  due to the general
partners and their affiliates resulting from petroleum product purchases.

The  Partnership  periodically  contracts with Flying J for the  development and
construction of travel plazas.  Capitalized  expenditures under these agreements
totaled  $49,883,000 and $45,326,000 in 1998 and 1997,  respectively.  It is the
general  partners'  opinion that such purchases are under terms similar to those
which could be received under arms-length contracts.

Included in accounts payable is $5,868,000 and $7,761,000 as of January 31, 1998
and 1997, respectively, due to Flying J for construction costs.

(9) Disclosure About the Fair Value of Financial Instruments

The carrying value for certain short-term  financial  instruments that mature or
reprice  frequently at market rate,  approximates  their fair market value. Such
financial  instruments  include:  cash and cash equivalents,  trade receivables,
revolving  line of  credit,  accounts  payable,  and  accrued  liabilities.  The
carrying  value of the  long-term  notes payable also  approximates  fair market
value.

(10) Commitments and Contingencies

(a) Environmental Laws and Regulations - In connection with the operation of its
network of fuel  facilities,  the Partnership has become subject to increasingly
demanding   environmental   standards  imposed  by  federal,  state,  and  local
environmental  laws and  regulations.  It is the  policy of the  Partnership  to
comply with applicable environmental laws and regulations.

An estimated amount related to the remediation of environmental  issues has been
accrued  as  management's  best  estimate  of the  cost.  However,  governmental
regulations covering  environmental issues are highly complex and are subject to
change. Accordingly, changes in the regulations or interpretations thereof could
result in future costs to the Partnership in excess of the amounts accrued.

Management believes that preventative  measures, in addition to proper attention
to  these  regulations,  will  minimize  costs  related  to  compliance  to such
regulations.  Furthermore,  the Partnership  routinely  succeeds in recovering a
significant  portion of the cost of remediation from the states which administer
environmental clean-up funds for in-state fuel retailers.

(b) Litigation - The Partnership is involved in legal actions resulting from the
ordinary  course of  business.  Such  actions  relate to  routine  travel  plaza
operations and other general matters.  Management  believes that the Partnership
has adequate legal defenses or insurance coverage and, accordingly, the ultimate
outcome  of  such  actions  will  not  have a  material  adverse  effect  on the
Partnership's financial position or results of operations.
                                       7
<PAGE>
Independent Auditors' Report

================================================================================









To the General Partners
CFJ Properties:


We have audited the  accompanying  statements  of revenues and direct  operating
costs and expenses  and the  statements  of cash flows from direct  travel plaza
operations  for each of the years in the  three-year  period  ended  January 31,
1998, of the Wytheville  Travel Plaza  operated by CFJ Properties  (see note 1).
The land  and  related  plaza  facilities  are  owned  by  Participating  Income
Properties III, L. P. These statements are the responsibility of management. Our
responsibility is to express an opinion on these statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable   assurance  about  whether  the  statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statements.  An audit also includes assessing
the accounting principles used and significant estimates made by management,  as
well as  evaluating  the overall  statement  presentation.  We believe  that our
audits provide a reasonable basis for our opinion.

The statements referred to above were prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange  Commission and are not
intended  to be a  complete  representation  of the  Wytheville  Travel  Plaza's
statements of income and cash flows.

In our opinion, the statements referred to above present fairly, in all material
respects,  the  revenues  and direct  operating  costs and expenses and the cash
flows from direct  travel plaza  operations of the  Wytheville  Travel Plaza for
each of the years in the three-year period ended January 31, 1998, in conformity
with generally accepted accounting principles.

                                        /s/ KPMG Peat Marwick LLP

Salt Lake City, Utah
March 5, 1998
                                        1
<PAGE>
Statements of Revenues and Direct Operating Costs and Expenses

================================================================================

WYTHEVILLE  TRAVEL PLAZA 
Years ended January 31, 1998, 1997 and 1996 
(In thousands)
<TABLE>
<CAPTION>
                                                                                  1998      1997      1996
------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>       <C>       <C>    
Revenues                                                                         $22,993   $22,151   $20,007
------------------------------------------------------------------------------------------------------------
Direct operating costs and expenses:
  Cost of sales                                                                   19,167    18,748    16,241
  Labor costs                                                                      1,038     1,023     1,013
  Controllable operating expenses                                                    536       509       555
  Occupancy expenses                                                               1,173     1,144     1,142
------------------------------------------------------------------------------------------------------------
        Travel Plaza revenues in excess of direct operating costs and expenses   $ 1,079   $   727   $ 1,056
============================================================================================================
</TABLE>
See accompanying note to financial statements.
                                       2
<PAGE>
Statements of Cash Flows

================================================================================

WYTHEVILLE  TRAVEL PLAZA 
Years ended January 31, 1998, 1997 and 1996 
(In thousands)
<TABLE>
<CAPTION>
                                                                            1998     1997    1996
---------------------------------------------------------------------------------------------------
<S>                                                                        <C>      <C>      <C>   
Cash flows from operating activities:
  Travel Plaza revenues in excess of direct operating costs and expenses   $1,079   $  727   $1,056
  Add amortization of leasehold improvements and depreciation                  79       74       68
---------------------------------------------------------------------------------------------------
              Cash provided by direct Travel Plaza operations              $1,158   $  801   $1,124
===================================================================================================
</TABLE>
See accompanying note to financial statements.
                                       3
<PAGE>
Note to Financial Statements

================================================================================


WYTHEVILLE TRAVEL PLAZA
Years ended January 31, 1998, 1997 and 1996


(1) Summary of Significant Accounting Policies

(a) Organization and Business - The Wytheville  Travel Plaza (Travel Plaza) is a
24-hour service operation and includes fuel facilities,  restaurant, convenience
store and other  amenities  designed to meet the needs of the trucking  industry
and  traveling  public in  general.  The Travel  Plaza,  located in  Wytheville,
Virginia,  commenced  operations in April 1991 and is operated by CFJ Properties
(CFJ).   The  land  and  related  plaza   facilities  are  leased  by  CFJ  from
Participating Income Properties III, L.P. (PIP III) .

The  accompanying   statements  have  been  prepared  to  facilitate  PIP  III's
compliance  with the  rules  and  regulations  of the  Securities  and  Exchange
Commission.  The statements include only revenues and direct operating costs and
expenses.  Certain overhead costs such as corporate  administrative  allocations
are excluded.

(b) Controllable Operating Expenses - Controllable operating expenses consist of
supplies,  repairs  and  maintenance,   cleaning,   advertising  and  promotion,
telephone  and  utilities,  insurance,  credit  card  charges,  travel and other
operating expenses incurred at the Travel Plaza level.

(c)  Occupancy  Expenses  -  Occupancy  expenses  consist  of taxes,  insurance,
amortization and rent paid to PIP III.

(d) Leasehold  Improvements  Amortization - Leasehold improvements are amortized
using  the  straight-line  method  over  the  lesser  of the  lease  term or the
estimated useful lives of the related assets.

(e) Federal and State  Income  Taxes - Federal and state  income  taxes have not
been allocated to the Travel Plaza.
                                        4
<PAGE>
Independent Auditors' Report

================================================================================









To the General Partners
CFJ Properties:


We have audited the  accompanying  statements  of revenues and direct  operating
costs and expenses  and the  statements  of cash flows from direct  travel plaza
operations  for each of the years in the  three-year  period  ended  January 31,
1998, of the  Bakersfield  Travel Plaza operated by CFJ Properties (see note 1).
The land  and  related  plaza  facilities  are  owned  by  Participating  Income
Properties III, L.P. These statements are the responsibility of management.  Our
responsibility is to express an opinion on these statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable   assurance  about  whether  the  statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statements.  An audit also includes assessing
the accounting principles used and significant estimates made by management,  as
well as  evaluating  the overall  statement  presentation.  We believe  that our
audits provide a reasonable basis for our opinion.

The statements referred to above were prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange  Commission and are not
intended  to be a complete  representation  of the  Bakersfield  Travel  Plaza's
statements of income and cash flows.

In our opinion, the statements referred to above present fairly, in all material
respects,  the  revenues  and direct  operating  costs and expenses and the cash
flows from direct travel plaza  operations of the  Bakersfield  Travel Plaza for
each of the years in the three-year period ended January 31, 1998, in conformity
with generally accepted accounting principles.

                                        /s/ KPMG Peat Markwick LLP


Salt Lake City, Utah
March 5, 1998
                                        1
<PAGE>
Statements of Revenues and Direct Operating Costs and Expenses

================================================================================


BAKERSFIELD  TRAVEL PLAZA 
Years ended January 31, 1998, 1997 and 1996
(In thousands)
<TABLE>
<CAPTION>
                                                                                   1998      1997      1996
------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>       <C>       <C>    
Revenues                                                                         $19,226   $16,936   $17,486
------------------------------------------------------------------------------------------------------------
Direct operating costs and expenses:
  Cost of sales                                                                   15,305    13,540    13,814
  Labor costs                                                                      1,294     1,166     1,226
  Controllable operating expenses                                                    580       641       624
  Occupancy expenses                                                               1,076     1,028     1,039
------------------------------------------------------------------------------------------------------------
       Travel Plaza revenues in excess of direct operating costs and expenses    $   971   $   561   $   783
============================================================================================================
</TABLE>
See accompanying note to financial statements.
                                       2
<PAGE>
Statements of Cash Flows

================================================================================


BAKERSFIELD TRAVEL PLAZA 
Years ended January 31, 1998, 1997 and 1996 
(In thousands)
<TABLE>
<CAPTION>
                                                                            1998     1997     1996
---------------------------------------------------------------------------------------------------
<S>                                                                        <C>      <C>      <C>   
Cash flows from operating activities:
  Travel Plaza revenues in excess of direct operating costs and expenses   $  971   $  561   $  783
  Add amortization of leasehold improvements                                  113      100       93
---------------------------------------------------------------------------------------------------
              Cash provided by direct Travel Plaza operations              $1,084   $  661   $  876
===================================================================================================
</TABLE>
See accompanying note to financial statements.
                                        3
<PAGE>
Note to Financial Statements

================================================================================


BAKERSFIELD TRAVEL PLAZA
Years ended January 31, 1998, 1997 and 1996


(1) Summary of Significant Accounting Policies

(a) Organization and Business - The Bakersfield Travel Plaza (Travel Plaza) is a
24-hour service operation and includes fuel facilities,  restaurant, convenience
store and other  amenities  designed to meet the needs of the trucking  industry
and  traveling  public in general.  The Travel  Plaza,  located in  Bakersfield,
California,  commenced  operations  in  February  1992  and is  operated  by CFJ
Properties  (CFJ).  The land and related plaza facilities are leased by CFJ from
Participating Income Properties III, L.P. (PIP III).

The  accompanying   statements  have  been  prepared  to  facilitate  PIP  III's
compliance  with the  rules  and  regulations  of the  Securities  and  Exchange
Commission.  The statements include only revenues and direct operating costs and
expenses.  Certain overhead costs such as corporate  administrative  allocations
are excluded.

(b) Controllable Operating Expenses - Controllable operating expenses consist of
supplies,  repairs  and  maintenance,   cleaning,   advertising  and  promotion,
telephone  and  utilities,  insurance,  credit  card  charges,  travel and other
operating expenses incurred at the Travel Plaza level.

(c)  Occupancy  Expenses  -  Occupancy  expenses  consist  of taxes,  insurance,
amortization and rent paid to PIP III.

(d) Leasehold  Improvements  Amortization - Leasehold improvements are amortized
using  the  straight-line  method  over  the  lesser  of the  lease  term or the
estimated useful lives of the related assets.

(e) Federal and State  Income  Taxes - Federal and state  income  taxes have not
been allocated to the Travel Plaza.
                                        4
<PAGE>
Independent Auditors' Report

================================================================================










To the General Partners
TFJ Properties:


We have audited the  accompanying  statements  of revenues and direct  operating
costs and expenses  and the  statements  of cash flows from direct  travel plaza
operations  for each of the years in the  three-year  period  ended  January 31,
1998, of the Ehrenberg  Travel Plaza operated by FJ Properties (see note 1). The
land is owned by Participating  Income Properties III, L.P. These statements are
the responsibility of management. Our responsibility is to express an opinion on
these statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable   assurance  about  whether  the  statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statements.  An audit also includes assessing
the accounting principles used and significant estimates made by management,  as
well as  evaluating  the overall  statement  presentation.  We believe  that our
audits provide a reasonable basis for our opinion.

The statements referred to above were prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange  Commission and are not
intended  to be a  complete  representation  of  the  Ehrenberg  Travel  Plaza's
statements of income and cash flows.

In our opinion, the statements referred to above present fairly, in all material
respects,  the  revenues  and direct  operating  costs and expenses and the cash
flows from direct travel plaza operations of the Ehrenberg Travel Plaza for each
of the years in the three-year period ended January 31, 1998, in conformity with
generally accepted accounting principles.

                                        /s/ KPMG Peat Marwick LLP


Salt Lake City, Utah
March 5, 1998
                                        1
<PAGE>
Statements of Revenues and Direct Operating Costs and Expenses

================================================================================


EHRENBERG TRAVEL PLAZA
Years ended January 31, 1998, 1997 and 1996
(In thousands)
<TABLE>
<CAPTION>
                                                                                  1998      1997      1996
-----------------------------------------------------------------------------------------------------------
<S>                                                                             <C>       <C>       <C>    
Revenues                                                                        $30,927   $31,786   $26,922
-----------------------------------------------------------------------------------------------------------
Direct operating costs and expenses:
  Cost of sales                                                                  24,656    25,624    20,545
  Labor costs                                                                     2,257     2,278     2,292
  Controllable operating expenses                                                 1,089       946     1,198
  Occupancy expenses                                                              1,473     1,340     1,170
-----------------------------------------------------------------------------------------------------------
       Travel Plaza revenues in excess of direct operating costs and expenses   $ 1,452   $ 1,598   $ 1,717
===========================================================================================================
</TABLE>
See accompanying note to financial statements.
                                       2
<PAGE>
Statements of Cash Flows

================================================================================


EHRENBERG TRAVEL PLAZA
Years ended January 31, 1998, 1997 and 1996
(In thousands)
<TABLE>
<CAPTION>
                                                                             1998    1997     1996
---------------------------------------------------------------------------------------------------
<S>                                                                        <C>      <C>      <C>   
Cash flows from operating activities:
  Travel Plaza revenues in excess of direct operating costs and expenses   $1,452   $1,598   $1,717
  Add amortization of leasehold improvements and depreciation                 644      576      472
---------------------------------------------------------------------------------------------------
              Cash provided by direct Travel Plaza operations              $2,096   $2,174   $2,189
===================================================================================================
</TABLE>
See accompanying note to financial statements.
                                       3
<PAGE>
Note to Financial Statements

================================================================================


EHRENBERG TRAVEL PLAZA
Years ended January 31, 1998, 1997 and 1996


(1) Summary of Significant Accounting Policies

(a)  Organization  and Business - The Ehrenberg Travel Plaza (Travel Plaza) is a
24-hour service operation and includes fuel facilities, restaurant, motel, truck
service center, convenience store and other amenities designed to meet the needs
of the trucking  industry and  traveling  public in general.  The Travel  Plaza,
located in Ehrenberg,  Arizona, commenced operations in May 1988 and is operated
by FJ Properties. The land is leased by TFJ Properties from Participating Income
Properties III, L.P. (PIP III).

The  accompanying   statements  have  been  prepared  to  facilitate  PIP  III's
compliance  with the  rules  and  regulations  of the  Securities  and  Exchange
Commission.  The statements include only revenues and direct operating costs and
expenses.  Certain overhead costs such as corporate  administrative  allocations
are excluded.

(b) Controllable Operating Expenses - Controllable operating expenses consist of
supplies,  repairs  and  maintenance,   cleaning,   advertising  and  promotion,
telephone  and  utilities,  insurance,  credit  card  charges,  travel and other
operating expense incurred at the Travel Plaza level.

(c)  Occupancy  Expenses  -  Occupancy  expenses  consist  of taxes,  insurance,
depreciation, amortization and rent paid to PIP III.

(d) Leasehold  Improvements  Amortization - Leasehold improvements are amortized
using  the  straight-line  method  over  the  lesser  of the  lease  term or the
estimated useful lives of the related assets.

(e)  Buildings  and  Equipment   Depreciation  -  Buildings  and  equipment  are
depreciated  using the  straight-line  method over the estimated useful lives of
the assets.

(f) Federal and State  Income  Taxes - Federal and state  income  taxes have not
been allocated to the Travel Plaza.
                                       4