SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   ----------
                                    FORM 10-K

(Mark One)

[X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934

        For the fiscal year ended December 31, 1996

                                       OR

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

        For the transition period from ______________ to _______________

Commission File Number 0-20151


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

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

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

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


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


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

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

                      Limited Partnership Assignment Units
                      ------------------------------------
                                (Title of Class)

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

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

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

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

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None
<PAGE>
                                     PART I

Item 1.  Business.

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

         The  statements  contained  in  this  report,  if not  historical,  are
forward-looking  statements and involve risks and uncertainties that could cause
actual results to differ materially from the results, financial or otherwise, or
other  expectations   described  in  such  forward-looking   statements.   These
statements are identified with the words "anticipated" or "expected". Therefore,
forward-looking  statements  should not be relied upon as a prediction of actual
future results or occurrences.

         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
<PAGE>
unit capital  contribution.  After deducting this return of capital from the net
proceeds of the  offering  of units,  the  remaining  cash  proceeds  were fully
invested by the  Partnership in three "Flying J Travel  Plazas",  one located in
Wytheville, Virginia, one located in Bakersfield,  California and one located in
Ehrenberg,  Arizona.  "Flying J Travel Plaza"  facilities  offer a  full-service
operation, generally including fuel facilities, a restaurant,  convenience store
and other  amenities for use by the trucking  industry and  traveling  public in
general.  The Wytheville property was acquired in December 1991, the Bakersfield
property was acquired in January 1993 and the Ehrenberg property was acquired in
June 1993. With respect to the Ehrenberg property, the travel plaza was acquired
by  purchasing  the land and making a loan to the  franchisee  for financing the
travel plaza building.

         The Partnership's principal objectives are to (i) preserve, protect and
enhance   Partnership   capital,   (ii)  provide  partially   tax-deferred  cash
distributions to investors, (iii) 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 (iv) 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 (i) up to 3.5% of
annual  gross  receipts  derived  from the  non-fuel  sales of such travel plaza
facility and (ii) 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 (i) the  appraised  fair market  value of
land, building and equipment,  or (ii) 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.

         As of March 14, 1997, two of the travel plazas owned by the Partnership
were leased to 
                                       2
<PAGE>
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 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.  CFJ Properties is the franchisor and operator of the Flying J network
of  interstate  travel  plazas,  which  included 66 properties as of January 31,
1996. 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 Flying J Inc., CFJ
Properties or franchisees of FJFI. These three properties comprise substantially
all of the  Partnership's  assets,  and  therefore  their  unit-level  operating
performance and economic fundamentals are important.

         For the fiscal year ended  January 31, 1996,  CFJ  Properties  reported
earnings of $17.2 million on revenues of $937.4 million. Revenue rose 33.3% from
$703.4 million the prior year. The higher revenues  resulted from the opening of
twelve new units and  increases in average unit  volumes.  As a result of higher
revenues, net income increased to $17.2 million from $16.1 million in the fiscal
year ended January 31, 1995.

         During the fiscal year ended January 31, 1996, CFJ Properties  reported
$35.8 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, 1996, CFJ Properties  reported cash balances of
approximately  $2.3 million,  with  liquidity  supported by net cash 
                                       3
<PAGE>
provided by operating activities and a $70 million revolving line of credit with
a bank. As of January 31, 1996, CFJ  Properties  reported  partners'  capital of
$137.7 million and total assets of $369.4 million.

         CFJ Properties leases travel plazas and equipment under  non-cancelable
operating  leases,  which expire at various  dates over the next 15 to 20 years.
Payments  under these  leases were $13.3  million in both 1996 and 1995.  Future
minimum  annual rent  obligations  under  non-cancelable  leases,  as  projected
through 2001, remain comparable to 1996 expense amounts.

         The two travel plaza properties operated by CFJ Properties and Flying J
Inc.  generated a combined  fuel and  non-fuel  gross  profit  (including  other
income) of approximately  $7.4 million during the year ended January 31, 1996 as
compared to $7.6 million in 1995. Total travel plaza unit-level income for these
two properties (before  depreciation and allocated  corporate  overhead) totaled
approximately  $1.4  million  in 1996  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 decreased from $1.5
million  the  prior  year  due  to a  decrease  in  fuel  sales  volume  at  the
Bakersfield,  California travel plaza and decreased fuel gross profit margins at
the  Wytheville,  Virginia travel plaza.  For CFJ Properties'  fiscal year ended
January  31,  1996,  the  average   unit-level  base  and  participating   rents
approximated 13.2% of the original cost of these properties.

         The  Partnership's  third  property,  which is operated by TFJ,  had an
increase in fuel and non-fuel  gross profits and other income to $6.4 million in
1996 from $6.3 million in 1995 due to increased  fuel and non-fuel sales volume.
The property's income before  depreciation and allocated  corporate overhead for
1996 remained  comparable to 1995 at $1.3 million.  Base and participating rents
remained  comparable  to 1995 at  approximately  9% of the original  cost of the
property during TFJ's fiscal year ended January 31, 1996.

         The travel  plaza/truckstop  industry,  although highly fragmented,  is
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  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
grosses  more than  $340  billion  annually,  representing  78% of the  nation's
freight bill. The 20 million  commercial  trucks registered in the United States
consume  approximately  39 billion  gallons of fuel  annually.  The  Partnership
believes  that the  trucking  industry is  sensitive  to certain  aspects of 
                                       4
<PAGE>
the general economic environment, such as retail sales; the level, direction and
rate of change in inventories; international trade; vendor performance; the cost
and availability of fuel; labor issues; and technology. The trucking industry is
also affected by various government  policies,  including economic  regulations;
vehicle  size and weight  regulations;  and  health,  safety  and  environmental
protection regulations. These factors also may influence the competitive posture
of one mode of transportation compared to others; however, the trucking industry
has presented itself as an affordable and timely alternative to other methods of
transportation such as air freight and rail, particularly for short hauls.

         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  ("UST's") 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 UST's. Regulations
enacted  by the EPA in 1988  established  requirements  for (i)  installing  UST
systems; (ii) upgrading UST systems;  (iii) taking corrective action in response
to releases; (iv) closing UST systems; (v) keeping appropriate records; and (vi)
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  1998,  all  UST's  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 (i) ensure that the
lessees  comply  with  applicable  rules  and  regulations;  (ii)  mitigate  any
potential  liabilities,  including the  establishment of storage tank monitoring
procedures;  and (iii) 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:  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
                                       5
<PAGE>
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  Partnership  believes that its lessees are in compliance  with all
applicable  regulatory  requirements  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 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 February 24, 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.  The  Partnership  does not segregate  revenues or
assets by geographic  region, as such a presentation 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 do not require any raw materials in order to conduct its business.

         The Partnership and FFCA/PIP III Investor Services  Corporation have no
employees.

Item 2.  Properties.

         As of December 31, 1996, the Partnership had acquired or financed three
travel plaza properties: one located in Wytheville,  Virginia which was acquired
in 1991, one located in  Bakersfield,  California  which was acquired in January
1993, and one located in Ehrenberg,  Arizona which was acquired in June 1993. On
June 30, 1993, the Partnership became fully invested in travel plazas.

         The Partnership's travel plazas, divided into sections which serve both
the commercial and non-commercial  traveler,  generally offer a multi-use,  full
service  operation  including  fuel  facilities  for  the  storage  and  sale of
automotive and diesel fuels, a 24-hour restaurant, a convenience store, restroom
facilities with private showers,  and other amenities designed to meet the needs
of the trucking  industry and the traveling public in general.  All three of the
Partnership's properties represent over 10% of the Partnership's total assets:
                                       6
<PAGE>
     Location                                    Approximate % of Total Assets
     --------                                    -----------------------------
Wytheville, Virginia                                         31%
Bakersfield, California                                      23%
Ehrenberg, Arizona                                           43%

The following is a description of the properties acquired by the Partnership:

Wytheville, Virginia

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

Bakersfield, California

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

Ehrenberg, Arizona

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

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

         Reference is made to the Annual Portfolio Valuation prepared by Cushman
& Wakefield  which is filed with this  Report as an exhibit for the  properties'
appraised value as of December 31, 1996.

Item 3.  Legal Proceedings.

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

Item 4.  Submission of Matters to a Vote of Securities Holders.

         No  matter  was  submitted  to  a  vote  of  the  Holders  through  the
solicitation  of proxies or otherwise  during the fourth  quarter of fiscal year
1996.
                                       7
<PAGE>
                                     PART II

Item 5.  Market for Registrant's Units and Related Security Holder Matters.

         Market  Information.  During  1996,  there  was no  established  public
trading  market for the Units,  and it is not  anticipated  that an  established
public trading market for the Units will develop.

         Holders.  As of March 14, 1997,  there were 1,581 record holders of the
Units.

         Distributions.  For the two most recent fiscal years,  the  Partnership
made the following cash distributions to the Holders:
<TABLE>
<CAPTION>
                                                1996

                                             Per Unit
                                           Distribution                         Total
                                           ------------                         -----
       Date of          Number        Cash From                      Cash From
    Distribution       of Units       Operations      Capital        Operations           Capital
    ------------       --------       ----------      -------        ----------           -------
<S>                       <C>             <C>              <C>           <C>                   <C>
March 31                  26,709          $21.70           -             $579,585              -
June 30                   26,709           21.69           -              579,318              -
September 30              26,709           21.70           -              579,585              -
December 31               26,709           21.69           -              579,318              -
</TABLE>
<TABLE>
<CAPTION>
                                              1995

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

         Cash from  operations,  defined as disbursable cash in the agreement of
limited  partnership  which  governs  the  Partnership,  is  distributed  to the
Holders.  Cash proceeds from the sale of property are distributed to the Holders
as a return  of  capital.  The  Adjusted  Capital  Contribution  of a Holder  is
generally  the  Holder's  initial  capital  contribution  reduced  by  the  cash
distributions to the Holders of proceeds from the sale of Partnership properties
and  reduced by any other cash  distributions  other than from  operations.  The
Adjusted  Capital  Contribution  per  Unit of the  Holders,  as  defined  in the
agreement of limited  partnership which governs the Partnership,  was $964.16 as
of December 31, 1996.

         Any differences in the amounts of distributions  set forth in the above
tables from the
                                       8
<PAGE>
information  contained  in  Item 6 below  are  due to  rounding  the  amount  of
distributions  payable per Unit down to the nearest  whole cent and carrying any
fractional cents forward from one period to the next. The Partnership expects to
continue making cash  distributions to the Holders pursuant to the provisions of
the agreement of limited partnership which governs the Partnership.  The General
Partner  knows of no material  restrictions  that would limit the  Partnership's
ability to pay distributions to the Holders in the future.

Item 6.  Selected Financial Data.

         The following  selected  financial  data should be read in  conjunction
with the Financial  Statements  and related notes attached as an exhibit to this
Report.
<TABLE>
<CAPTION>
                                                          Year Ended December 31,
                                                          -----------------------
                                      1996         1995           1994         1993          1992
                                      ----         ----           ----         ----          ----
<S>                               <C>           <C>           <C>           <C>           <C>       
Revenues                          $2,636,853    $2,648,938    $2,634,461    $2,219,419    $1,373,808
Net Income                         1,891,905     1,889,914     1,889,998     1,536,414      $953,618
Net Income Per Unit                    70.13         70.05         70.05         56.95         38.20
Total Assets                      21,078,466    21,516,076    21,985,630    22,349,710    22,690,060
Distributions of Cash from
  Operations to Holders            2,317,702     2,317,771     2,317,855     1,742,185     1,163,266
Distributions of Cash from
  Operations Per Unit                  86.78         86.78         86.78         65.23         47.07*
Return of Capital to Holders             -             -               -       127,500       688,854
Return of Capital Per Unit               -             -               -          4.77         27.87*
</TABLE>
--------------------
* Per Unit  distributions  to Holders are calculated  using the weighted average
Units of 24,714 in 1992.  Distributions of $47.64 and $21.08 from operations and
capital,  respectively,  per Unit were paid to each Holder who acquired Units at
the  closing  on August  30,  1991.  Distributions  of $38.96  and  $31.06  from
operations  and  capital,  respectively,  per Unit were paid to each  Holder who
acquired Units at the closing on February 28, 1992.

Item 7.  Management's Discussion and Analysis of Financial Condition
                  and Results of Operations.

Liquidity and Capital Resources

         The Partnership  received $26,709,000 in gross proceeds from its public
offering of the Units.  After deducting  organizational  and offering  expenses,
including sales commissions, the Partnership had $23,236,830 in net proceeds for
investment  in  properties.  As of June  30,  1993,  the  Partnership  had  used
approximately  $22,390,000 to acquire or finance three travel plazas. The rental
and  mortgage  interest  payments  from  lessees  of the  travel  plazas are the
Partnership's primary sources of income.

         As of  December  31,  1996,  the  Partnership  had cash and  marketable
securities aggregating $651,261 of which $579,318 was paid out to the Holders in
January  1997 as their fourth  quarter  distribution  for fiscal year 1996.  The
Partnership uses the rental and mortgage  interest  revenues from its properties
to meet its  cash  needs,  and it is  anticipated  that  such  revenues  will be
                                       9
<PAGE>
sufficient  to meet  all of the  Partnership's  expenses  and  provide  cash for
distributions to the Limited Partners.

         The General Partner knows of no trends, demands, commitments, events or
uncertainties that will result in or that are reasonably likely to result in the
Partnership's liquidity increasing or decreasing in any material way.

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

Results of Operations

         The Partnership  began acquiring  travel plaza properties using the net
proceeds of the offering in 1991. As of June 30, 1993, the Partnership was fully
invested in travel plazas. The Partnership received or accrued 100% of the lease
and interest payments due it from its lessees in 1996, 1995 and 1994.

Fiscal Year Ended December 31, 1996 Compared to
  Fiscal Year Ended December 31, 1995

         The Partnership's total revenues for the fiscal year ended December 31,
1996 decreased to $2,636,853  from $2,648,938 for the fiscal year ended December
31,  1995.  Revenues  decreased  between  years as a  result  of a  decrease  in
participating  rental  revenue of $10,707  which is  attributable  to  decreased
overall  travel  plaza  sales.  In June 1996,  a credit  card issuer to Flying J
Travel Plaza customers  terminated its relationship with the travel plazas. As a
result,  volumes and margins at many Flying J Travel Plaza  locations  decreased
during  the  latter  part of 1996.  CFJ  Properties  expects  the  situation  to
stabilize and volumes to be restored by early 1997.

         Expenses for 1996 were $744,948 as compared to $759,024 for 1995 . This
decrease was primarily the result of decreased operating expenses in 1996. Also,
as described  more fully in the  Partnership  agreement,  the General  Partner's
management fee is  subordinated  to a 9% return to the Holders on their Adjusted
Capital  Contribution,  as  defined.  The  decrease  in  the  General  Partner's
Management  fee  resulted  directly  from  the  decrease  in  the  Partnership's
disbursable cash  (generally,  cash receipts from operations less cash operating
expenses).

         Net  income  for 1996 was  $1,891,905  as  compared  to net  income  of
$1,889,914 for 1995.  Total cash and cash  equivalents  increased to $651,261 in
1996 from  $638,406 in 1995.  This  increase  is  primarily  attributable  to an
increase in the payable to the general partner.

Fiscal Year Ended December 31, 1995 Compared to
  Fiscal Year Ended December 31, 1994

         The Partnership's total revenues for the fiscal year ended December 31,
1995 increased to $2,648,938  from $2,634,461 for the fiscal year ended December
31, 1994.  The increase in 
                                       10
<PAGE>
revenues was  primarily  the result of an increase in  participating  rentals to
$503,098 in fiscal year 1995 from  $495,692 in fiscal year 1994  resulting  from
increased travel plaza sales.

         Expenses for fiscal year 1995 were $759,024 as compared to $744,463 for
fiscal year 1994.  This  increase was primarily the result of an increase in the
General  Partner's  management  fee in  1995.  As  described  more  fully in the
Partnership agreement, the General Partner's management fee is subordinated to a
9% return to the Holders on their Adjusted Capital Contribution, as defined. The
increase in the General  Partner's  Management  fee resulted  directly  from the
increase in the  Partnership's  disbursable cash (generally,  cash receipts from
operations less cash operating expenses).

         Net income for 1995 was $1,889,914  which  remained  unchanged from net
income of $1,889,998 for 1994.  Total cash and cash  equivalents  decreased from
$654,948 in 1994 to $638,406 in 1995. This decrease is primarily attributable to
a decrease in other liabilities.


Item 8.  Financial Statements and Supplementary Data.

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

Item 9.  Changes in and Disagreements With Accountants on Accounting and
                  Financial Disclosure.

         None.

                                    PART III

Item 10. Directors and Executive Officers.

         The  Partnership has no directors or executive  officers.  The managing
general  partner of the General  Partner is  Franchise  Finance  Corporation  of
America III, a Delaware corporation ("FFCA III"). Travel Plaza Management,  Inc.
("TMI"),  a subsidiary of PaineWebber  Group,  Inc., and Morton H. Fleischer and
Paul Bagley are general partners of the General Partner.  FFCA III was organized
in Delaware in July 1990 for the purpose of sponsoring limited partnerships such
as the Partnership.  Set forth below are the directors and executive officers of
FFCA III, TMI and FFCA/PIP III Investor Services Corporation,  and the year they
were elected or appointed to their respective offices:

FFCA III

                                    Directors
            Name                                             Position Held Since
            ----                                             -------------------

Morton H. Fleischer, Chairman                                        1990
Paul Bagley                                                          1990
                                       11
<PAGE>
John R. Barravecchia                                                 1993
Christopher H. Volk                                                  1993


                                    Officers
                                                                      Associated
                                                                         With
                                                                       FFCA III
       Name                           Positions Held                     Since
       ----                           --------------                     -----

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


Travel Plaza Management, Inc.

                                    Directors
       Name                                                 Position Held Since
       ----                                                 -------------------

Gerald F. Goertz, Jr.                                              1994
Stephen R. Dyer                                                    1994
Joseph P. Ciavarella                                               1994

                                    Officers
                                                                
       Name                       Positions Held             Position Held Since
       ----                       --------------             -------------------
                                                                
Gerald F. Goertz, Jr.    President                                  1994
Stephen R. Dyer          Vice President and Secretary               1994
Joseph P. Ciavarella     Vice President, Treasurer, Assistant       1994
                         Secretary and Chief Financial and 
                         Accounting Officer
                                       12
<PAGE>
FFCA/PIP III Investor Services Corporation

                                    Director
      Name                                                  Position Held Since
      ----                                                  -------------------

Morton H. Fleischer                                                 1986


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

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

Business Experience

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

             FFCA III and FFCA/PIP III Investor Services Corporation

         Paul  Bagley,  age 54, has served as a director of FFCA III since 1990.
Mr.  Bagley is a founding  partner  of Stone Pine  Capital  LLC  (1994),  and is
chairman of FCM Fiduciary  Management  Co. LLC (1989 to date),  the advisor to a
mezzanine and private equity fund. For more than twenty years prior to 1990, Mr.
Bagley was engaged in investment  banking activities with Shearson Lehman Hutton
Inc. and its  predecessor,  E.F. Hutton & Company Inc., where he was responsible
for the  creation  and  management  of  over $5  billion  of  direct  investment
activities.  Mr.  Bagley  has  served on the  boards  of a number of public  and
private  companies.  Currently  he is on the boards of America  First  Financial
Fund,  Fiduciary  Capital,  EurekaBank,  Hollis-Eden  Pharmaceuticals,   Lithium
Technology,  Consolidated  Capital,  Logan Machinery Corp. and Pacific  Consumer
Funding.

         Morton H.  Fleischer,  age 60, has served as  Chairman  of the Board of
Directors  of 
                                       13
<PAGE>
FFCA/PIP  III  Investor  Services  Corporation  since  1990  and has  served  as
President,  Chief  Executive  Officer  and a  Director  of FFCA  III  since  its
formation in 1990. He was elected Chairman of the Board of FFCA III in 1994. Mr.
Fleischer currently serves as President, Chief Executive Officer and Chairman of
the Board of Franchise Finance  Corporation of America,  a Delaware  corporation
("FFCA"),  having previously served as President,  Chief Executive Officer and a
Director of Franchise Finance Corporation of America I ("FFCA I"), a predecessor
of FFCA, from 1980 to 1994. Mr. Fleischer is also an individual  general partner
of the  Partnership,  and is a general  partner (or general partner of a general
partner) of the following  public  limited  partnerships:  Participating  Income
Properties 1986, L.P.;  Participating  Income Properties II, L.P; and Scottsdale
Land Trust Limited Partnership.

         John R.  Barravecchia,  age 41, has served as President,  Secretary and
Treasurer of FFCA/PIP  III  Investor  Services  Corporation  since 1990.  He has
served as Senior Vice  President and Chief  Financial  Officer of FFCA III since
1990, was named Treasurer in December 1993 and was named Assistant  Secretary in
1994. In 1995, Mr.  Barravecchia was named Executive Vice President of FFCA III.
Mr. Barravecchia  currently serves as Executive Vice President,  Chief Financial
Officer,  Treasurer  and  Assistant  Secretary  of FFCA and  served  in  various
capacities  for FFCA I from 1984 to 1994.  He was appointed  Vice  President and
Chief Financial Officer of FFCA I in December 1986, and Senior Vice President in
October 1989. Mr. Barravecchia was elected as a Director of FFCA I in March 1993
and Treasurer in December 1993.  Prior to joining FFCA I, Mr.  Barravecchia  was
associated with the international public accounting firm of Arthur Andersen LLP.

         Christopher  H. Volk, age 40, has served as Vice  President,  Assistant
Secretary and Assistant Treasurer of FFCA/PIP III Investor Services  Corporation
since January 1996.  During 1995, Mr. Volk was named Chief Operating Officer and
Executive Vice President of FFCA III. Mr. Volk served as Vice President-Research
of FFCA III from 1990 to 1993 and was named Senior Vice President-  Underwriting
and Research and Secretary in December  1993.  He currently  serves as Executive
Vice President,  Chief Operating Officer,  Secretary and Assistant  Treasurer to
FFCA. He joined FFCA I in 1986 and has served in various  capacities in FFCA I's
capital   preservation  and  underwriting   areas  prior  to  being  named  Vice
President-Research in October 1989. In December 1993, he was appointed Secretary
and  Senior  Vice  President-Underwriting  and  Research  of FFCA I,  and he was
elected as a Director of FFCA I in March 1993. Prior to joining FFCA I, Mr. Volk
was  employed for six years with the  National  Bank of Georgia,  where his last
position was Assistant  Vice President and Senior  Correspondent  Banking Credit
Officer.  Mr. Volk is a member of the Association for Investment  Management and
Research and the Phoenix Society of Financial Analysts.

         Dennis L. Ruben,  age 44, was named Senior Vice  President  and General
Counsel  of FFCA III in  December  1993.  Mr.  Ruben  was named  Executive  Vice
President,  General  Counsel  and  Assistant  Secretary  in  February  1997.  He
currently  serves in the same  capacity for FFCA.  In 1991,  he joined FFCA I as
attorney and counsel.  In December 1993, he was appointed  Senior Vice President
and General Counsel of FFCA I. Prior to joining FFCA I, Mr. Ruben was 
                                       14
<PAGE>
associated with the law firm of Kutak Rock from 1980 until March 1991. Mr. Ruben
became a partner of Kutak Rock in 1984. Mr. Ruben has been admitted to the Iowa,
Nebraska and Colorado bars.

         Stephen   G.   Schmitz,   age   42,   has   served   as   Senior   Vice
President-Corporate  Finance of FFCA III since  January  1996.  Mr.  Schmitz was
named Executive Vice President, Chief Investment Officer and Assistant Secretary
in February 1997. He currently serves in the same capacity for FFCA. Mr. Schmitz
served in various  positions  as an officer of FFCA I from 1986 to June 1, 1994.
Prior to joining FFCA I, Mr. Schmitz was a commercial lender with Mellon Bank in
Pittsburgh, where his last position was Vice-President and Section Manager.

         Catherine F. Long, age 40, has served as Vice President-Finance of FFCA
III since 1990 and was named  Principal  Accounting  Officer in  December  1993.
During 1994, Ms. Long was named Assistant Secretary and Assistant Treasurer.  In
February 1997, she was also named Senior Vice President. She currently serves as
Senior Vice President-Finance, Principal Accounting Officer, Assistant Secretary
and  Assistant  Treasurer  for FFCA.  In June 1990,  she  joined  FFCA I as Vice
President-Finance.  In December  1993,  she was appointed  Principal  Accounting
Officer of FFCA I. From December 1978 to May 1990, Ms. Long was associated  with
the  international  public accounting firm of Arthur Andersen LLP. Ms. Long is a
certified public  accountant and is a member of the Arizona Society of Certified
Public Accountants.

                          Travel Plaza Management, Inc.

         Gerald F. Goertz,  Jr.,  age 39, is President  and a Director of Travel
Plaza Management,  Inc. Mr. Goertz joined  PaineWebber  Incorporated in December
1990 and holds the  position of Senior Vice  President  and  Director of Private
Investments.   Prior  to  joining  PaineWebber  Incorporated,   Mr.  Goertz  was
associated with CG Realty Advisors and The Freeman Company.

         Stephen R. Dyer, age 37, is a Vice President, Secretary and Director of
Travel Plaza Management, Inc. He joined PaineWebber Incorporated in June 1988 as
a Divisional Vice President and is currently a Corporate Vice  President.  Prior
to joining  PaineWebber  Incorporated,  Mr. Dyer had been  employed,  since June
1987, as an Assistant  Vice President in the Retail  National  Products Group of
L.F.  Rothschild & Co.  Incorporated.  Prior to joining L.F.  Rothschild  he was
employed,  beginning  in  January  1985,  as an  Associate  in the  Real  Estate
Department of Thomson  McKinnon  Securities  Inc. From July 1981 to August 1983,
Mr.  Dyer  was on the  audit  staff of the  accounting  firm of  Arthur  Young &
Company. Mr. Dyer is a Certified Public Accountant.

         Joseph P. Ciavarella, age 41, is a Vice President, Treasurer, Assistant
Secretary,  Chief Financial  Officer,  Chief Accounting  Officer and Director of
Travel Plaza Management,  Inc. He joined PaineWebber Incorporated in May 1994 as
Corporate  Vice  President.  Prior  to  joining  PaineWebber  Incorporated,  Mr.
Ciavarella  was affiliated  with Aviation  Capital Group in the area of aircraft
finance. He was associated with Integrated Resources,  Inc. from 1983 to 1993 as
Vice 
                                       15
<PAGE>
President  and First  Vice  President,  as well as Chief  Financial  Officer  of
various  subsidiaries  in the equipment  leasing,  aircraft  finance and venture
capital areas. Mr. Ciavarella is a Certified Public Accountant.

         Travel  Plaza  Management,  Inc.  was named as a  defendant  in a class
action lawsuit against PaineWebber Incorporated  ("PaineWebber") and a number of
its affiliates relating to PaineWebber's sale of 70 direct investment offerings,
including  the  offering  of the  Units of the  Partnership.  In  January  1996,
PaineWebber  signed a memorandum  of  understanding  with the  plaintiffs in the
class action  outlining  the terms under which the parties have agreed to settle
the case. Pursuant to that memorandum of understanding,  PaineWebber irrevocably
deposited  $125 million into an escrow fund under the  supervision of the United
States  District  Court  for the  Southern  District  of New  York to be used to
resolve the litigation in accordance with a definitive  settlement agreement and
plan of allocation,  which the parties  subsequently  submitted to the court for
its consideration  and approval.  The court held hearings on the fairness of the
settlement  in October  and  November  1996,  but has not yet issued a decision.
Until a definitive  settlement  and plan of allocation is approved by the court,
there can be no assurance what, if any, payment or non-monetary benefits will be
made available to unitholders in the Partnership.

         In February 1996, approximately 150 plaintiffs filed an action entitled
Abbate v.  PaineWebber  Inc. in  Sacramento,  California  Superior Court against
PaineWebber   Incorporated  and  various  affiliated   entities  concerning  the
plaintiff's  purchase of various limited  partnership  interests.  The complaint
alleges, among other things, that PaineWebber and its related entities committed
fraud and misrepresentations and breached fiduciary duties allegedly owed to the
plaintiffs by selling or promoting  limited  partnership  investments  that were
unsuitable for the plaintiffs and by overstating the benefits,  understating the
risks and  failing to state  material  facts  concerning  the  investments.  The
complaint seeks compensatory  damages of $15 million plus punitive damages.  The
parties have an agreement  in  principle to settle the matter.  The  Partnership
will not contribute to the settlement if and when finalized.

Compliance with Section 16(a) of the
Securities Exchange Act of 1934

         Based  solely  upon a review  of Forms 3 and 4 and  amendments  thereto
furnished  to the  Co-Registrants  during  fiscal  year  1996  and  Forms  5 and
amendments  thereto furnished to the  Co-Registrants  with respect to the fiscal
year ended December 31, 1996 (the "Forms"),  and any written  representations by
the  directors  and  executive   officers  of  FFCA/PIP  III  Investor  Services
Corporation and FFCA III, the Co-Registrants have not identified herein any such
person that failed to file on a timely basis the Forms required by Section 16(a)
of the Securities Exchange Act of 1934 for fiscal year 1996.

Item 11. Executive Compensation.

         The   Partnership  is  required  to  pay  an  acquisition   fee  and  a
subordinated real estate
                                       16
<PAGE>
disposition fee to the General Partner or its affiliate, and the General Partner
is  entitled to receive a share of cash  distributions,  when and as made to the
Holders,  a share of profits  and losses  and a  subordinated  share of any sale
proceeds.  Reference  is made to Note (1) and Note (6) of the Notes to Financial
Statements  which are filed with this report for a  description  of the fees and
distribution paid in 1996, 1995 and 1994.

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

Item 12. Security Ownership of Certain Beneficial Owners and Management.

         As of March 14, 1997,  no person or group was known by the  Partnership
to own directly or  beneficially  more than 5% of the  outstanding  Units of the
Partnership.

         Neither  the  General  Partner,  the  general  partners  of the General
Partner,  FFCA/PIP III Investor Services Corporation nor any director or officer
of FFCA/PIP III Investor  Services  Corporation  owned any Units as of March 14,
1997. The directors and officers of FFCA III, as a group,  owned less than 1% of
the Units as of March 14, 1997.

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

Item 13. Certain Relationships and Related Transactions.

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

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

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

                  1. Financial  Statements.  The following financial  statements
         are included in the response to item 8 of this report:
                                       17
<PAGE>
                     The Partnership

                     Report of independent public accountants
                     Balance Sheets as of December 31, 1996 and 1995 
                     Statements of Income for the year ended December 31, 1996,
                       1995 and 1994
                     Statements of Changes In Partners' Capital for the
                       years ended December 31, 1996, 1995 and 1994
                     Statements of Cash Flows for the years ended
                       December 31, 1996, 1995 and 1994
                     Notes to Financial Statements

                     FFCA/PIP III Investor Services Corporation

                     Report of independent public accountants
                     Balance Sheet as of December 31, 1996
                     Notes to Balance Sheet

                  2. Financial Statement Schedules.

                     Schedule III-Schedule of Real Estate and Accumulated
                       Depreciation as of December 31, 1996

                     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.

                     99. Annual Portfolio Valuation of Cushman & Wakefield as of
                         December 31, 1996

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

                                                                  1991 Form 10-K
                                                                    Exhibit No.
                                                                    -----------

                     The Agreement of Limited Partnership of
                     the General Partner                               3-A
                     
                                       18
<PAGE>
                     The Certificate of Incorporation of               3-B
                     FFCA/PIP III Investor Services
                     Corporation, as filed with the Secretary 
                     of State Delaware on December 5, 1988

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

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

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

        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, 1996.
                                       19

<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:  March 19, 1997                          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:  March 19, 1997                     By /s/ Morton H. Fleischer
                                            ----------------------------------
                                            Morton H. Fleischer, President,
                                            Chief Executive Officer and Director


Date:  March 10, 1997                     By /s/ Paul Bagley
                                            ----------------------------------
                                            Paul Bagley, Director
<PAGE>
Date:  March 19, 1997                     By /s/ John R. Barravecchia
                                            ----------------------------------
                                            John R. Barravecchia, Executive Vice
                                            President, Chief Financial Officer, 
                                            Treasurer, Assistant Secretary and 
                                            Director


Date:  March 19, 1997                     By /s/ Christopher H. Volk
                                            ----------------------------------
                                            Christopher H. Volk, Executive Vice
                                            President, Chief Operating Officer, 
                                            Secretary, Assistant Treasurer and
                                            Director

Date:  March 19, 1997                     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:  March 19, 1997                     By /s/ Morton H. Fleischer
                                            ----------------------------------
                                            Morton H. Fleischer, Sole Director


Date:  March 19, 1997                     By /s/ John R. Barravecchia
                                            ----------------------------------
                                            John R. Barravecchia, President, 
                                            Secretary, Treasurer, Principal 
                                            Financial Officer and Principal 
                                            Accounting Officer

<PAGE>
Report of Independent Public Accountants



To Participating Income Properties III Limited Partnership:

         We have audited the accompanying balance sheets of PARTICIPATING INCOME
PROPERTIES  III LIMITED  PARTNERSHIP  (a  Delaware  limited  partnership)  as of
December 31, 1996 and 1995,  and the related  statements  of income,  changes in
partners' capital and cash flows for each of the three years in the period ended
December 31, 1996. These financial statements and the schedule referred to below
are the responsibility of the partnership's  general partner. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.

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

         In our opinion,  the  financial  statements  referred to above  present
fairly, in all material respects, the financial position of Participating Income
Properties  III Limited  Partnership  as of December 31, 1996 and 1995,  and the
results of its  operations and its cash flows for each of the three years in the
period ended December 31, 1996 in conformity with generally accepted  accounting
principles.

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

/s/ Arthur Andersen LLP


Phoenix, Arizona,

     January 3, 1997.
<PAGE>
             PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
             -------------------------------------------------------

                   BALANCE SHEETS - DECEMBER 31, 1996 AND 1995
                   -------------------------------------------



                                                        1996           1995
                                                    ------------   ------------
                                     ASSETS
                                     ------

CASH AND CASH EQUIVALENTS                           $    651,261   $    638,406

RECEIVABLES FROM LESSEES                                  38,000         39,257

MORTGAGE LOAN INTEREST RECEIVABLE                         45,208         45,208

MORTGAGE LOAN RECEIVABLE (Note 4)                      7,750,000      7,750,000

PROPERTY SUBJECT TO OPERATING LEASES (Note 3)         12,593,997     13,043,205
                                                    ------------   ------------

         Total assets                               $ 21,078,466   $ 21,516,076
                                                    ============   ============



                       LIABILITIES AND PARTNERS' CAPITAL
                       ---------------------------------

DISTRIBUTION PAYABLE TO LIMITED PARTNERS            $    579,450   $    579,556

PAYABLE TO GENERAL PARTNER                                 7,720           --

RENTAL DEPOSITS AND OTHER                                255,504        251,520
                                                    ------------   ------------

         Total liabilities                               842,674        831,076
                                                    ------------   ------------


PARTNERS' CAPITAL (DEFICIT):
      General partner                                    (17,210)       (12,718)
      Limited partners                                20,253,002     20,697,718
                                                    ------------   ------------

         Total partners' capital                      20,235,792     20,685,000
                                                    ------------   ------------

         Total liabilities and partners' capital    $ 21,078,466   $ 21,516,076
                                                    ============   ============


      The accompanying notes are an integral part of these balance sheets.
<PAGE>
             PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
             -------------------------------------------------------

                              STATEMENTS OF INCOME
                              --------------------

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
              ----------------------------------------------------



                                               1996         1995         1994
                                            ----------   ----------   ----------

REVENUES:
   Rental                                   $1,579,480   $1,579,480   $1,579,480
   Participating rentals                       492,391      503,098      495,692
   Mortgage loan interest                      542,500      542,500      542,500
   Interest and other                           22,482       23,860       16,789
                                            ----------   ----------   ----------

                                             2,636,853    2,648,938    2,634,461
                                            ----------   ----------   ----------

EXPENSES:
   General partner fees  (Note 6)              209,535      212,053      188,357
   Depreciation                                449,208      451,269      451,270
   Operating                                    86,205       95,702      104,836
                                            ----------   ----------   ----------

                                               744,948      759,024      744,463
                                            ----------   ----------   ----------

NET INCOME                                  $1,891,905   $1,889,914   $1,889,998
                                            ==========   ==========   ==========

NET INCOME ALLOCATED TO  (Note 1):
   General partner                          $   18,919   $   18,899   $   18,900
   Limited partners                          1,872,986    1,871,015    1,871,098
                                            ----------   ----------   ----------

                                            $1,891,905   $1,889,914   $1,889,998
                                            ==========   ==========   ==========

NET INCOME PER LIMITED PARTNERSHIP
   UNIT (based on 26,709 units held by
   limited partners)                        $    70.13   $    70.05   $    70.05
                                            ==========   ==========   ==========


        The accompanying notes are an integral part of these statements.
<PAGE>
             PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
             -------------------------------------------------------

                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
                   ------------------------------------------

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
              ----------------------------------------------------



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

BALANCE, December 31, 1993         $     (3,692)   $ 21,591,231    $ 21,587,539

      Net income                         18,900       1,871,098       1,889,998

      Distributions to partners         (23,413)     (2,317,855)     (2,341,268)
                                   ------------    ------------    ------------

BALANCE, December 31, 1994               (8,205)     21,144,474      21,136,269

      Net income                         18,899       1,871,015       1,889,914

      Distributions to partners         (23,412)     (2,317,771)     (2,341,183)
                                   ------------    ------------    ------------

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

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

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

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


        The accompanying notes are an integral part of these statements.
<PAGE>
             PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
             -------------------------------------------------------

                            STATEMENTS OF CASH FLOWS
                            ------------------------

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
              ----------------------------------------------------

<TABLE>
<CAPTION>
                                                                1996           1995           1994
                                                            -----------    -----------    -----------
<S>                                                         <C>            <C>            <C>        
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                                              $ 1,891,905    $ 1,889,914    $ 1,889,998
    Adjustments to net income:
       Depreciation                                             449,208        451,269        451,270
       Change in assets and liabilities:
          Decrease (increase) in receivables from lessees         1,257          1,743         (6,000)
          Increase in payable to general partner                  7,720           --             --
          Increase (decrease) in rental deposits
              and other                                           3,984        (18,250)        23,041
                                                            -----------    -----------    -----------

          Net cash provided by operating activities           2,354,074      2,324,676      2,358,309
                                                            -----------    -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Partner distributions declared (Note 1)                  (2,341,113)    (2,341,183)    (2,341,268)
    Increase (decrease) in distribution payable                    (106)           (35)        64,149
                                                            -----------    -----------    -----------

          Net cash used in financing activities              (2,341,219)    (2,341,218)    (2,277,119)
                                                            -----------    -----------    -----------

NET INCREASE (DECREASE) IN CASH AND
    CASH EQUIVALENTS                                             12,855        (16,542)        81,190

CASH AND CASH EQUIVALENTS,
    beginning of year                                           638,406        654,948        573,758
                                                            -----------    -----------    -----------

CASH AND CASH EQUIVALENTS, end of year                      $   651,261    $   638,406    $   654,948
                                                            ===========    ===========    ===========
</TABLE>

        The accompanying notes are an integral part of these statements.
<PAGE>
             PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
             -------------------------------------------------------

                          Notes to Financial Statements
                          -----------------------------

                           December 31, 1996 and 1995
                           --------------------------

1)  ORGANIZATION:
    -------------

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

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

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

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

         Cash Distributions: All cash from operations, as defined, after payment
         of fees to the General Partner is allocated 99% to the limited partners
         and 1% to the General  Partner.  In addition to cash  distributed  from
         operations,   a  portion  of  the  limited  partners'  initial  capital
         contributions has been distributed as return of capital, therefore, the
         limited  partner  Adjusted  Capital  Contribution,  as  defined  in the
         Partnership agreement, at December 31, 1996 is $964.16 per unit.

         The following is a reconciliation  of net income to cash  distributions
from operations as defined in the Partnership agreement:
<TABLE>
<CAPTION>
                                                                1996         1995         1994
                                                             ----------   ----------   ----------
<S>                                                          <C>          <C>          <C>       
     Net income                                              $1,891,905   $1,889,914   $1,889,998
     Adjustment to reconcile net income to cash
        distributions declared:
           Depreciation                                         449,208      451,269      451,270
                                                             ----------   ----------   ----------

               Cash distributions declared from operations   $2,341,113   $2,341,183   $2,341,268
                                                             ==========   ==========   ==========
</TABLE>

2)  SIGNIFICANT ACCOUNTING POLICIES:
    --------------------------------

         Financial  Statements - The financial statements of the Partnership are
prepared on the accrual basis of  accounting.  The  preparation of the financial
statements in conformity with generally accepted accounting  principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial  statements and the reported
amounts of revenues and expenses during the
<PAGE>
reporting  period.  Although  management  believes its estimates are reasonable,
actual results could differ from those estimates.

         Cash and Cash  Equivalents  -  Investment  securities  that are  highly
liquid and have  maturities  of three months or less at the date of purchase are
classified as cash equivalents.  Cash equivalents include United States Treasury
securities of $474,865 and $476,709 at December 31, 1996 and 1995, respectively.
Short-term  investments  are  recorded  at cost  plus  accrued  interest,  which
approximates market value.

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

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

3)  PROPERTY SUBJECT TO OPERATING LEASES:
    -------------------------------------

         The following is an analysis of the Partnership's  investment, at cost,
in property  subject to operating leases by major class at December 31, 1996 and
1995:

                                                     1996            1995
                                                 -----------      -----------
         Land                                    $ 2,684,138      $ 2,684,138
         Buildings                                11,010,862       11,010,862
         Equipment                                   947,838          947,838
                                                 -----------      -----------
                                                  14,642,838       14,642,838
         Less - Accumulated depreciation           2,048,841        1,599,633
                                                 -----------      -----------

                                                 $12,593,997      $13,043,205
                                                 ===========      ===========

         Lease agreements provide for monthly base rentals equal to a percentage
of the property's cost. As additional  rent, the Partnership  receives a portion
of the operating  revenues of the lessee equal to a percentage of gross receipts
(participating rentals) from travel plaza facilities and fuel sales. The term of
the leases is eight  years for  equipment  and 20 years for land and  buildings.
Generally,  the lessee  has the option to  purchase  equipment  (at fair  market
value) at the end of the lease term and land and  buildings  (at the  greater of
fair  market  value or cost) at any time after the first ten years of the lease.
All Partnership property is leased to affiliates of Flying J Inc.

          Minimum  future  rentals  (excluding   participating   rentals)  under
noncancellable operating leases as of December 31, 1996, are as follows:

         Year Ending December 31,
         ------------------------
         1997                                   $  1,579,000
         1998                                      1,579,000
         1999                                      1,579,000
         2000                                      1,579,000
         2001                                      1,579,000
         Thereafter                               16,727,000
                                                ------------

         Total minimum future rentals            $24,622,000
                                                 ===========

4)  MORTGAGE LOAN RECEIVABLE:
    -------------------------

         At December 31, 1996, the  Partnership had a first mortgage loan on the
building and  equipment of a  Partnership  travel  plaza  located in  Ehrenberg,
Arizona.  The loan provides for monthly installments of interest at a 
<PAGE>
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.  The cost of
the  mortgage  for  Federal  income  tax  purposes  is the  same as the cost for
financial reporting purposes.

         The fair value of the first  mortgage loan is estimated by  discounting
the future cash flows using the  prevailing  interest rate at December 31, 1996,
and is lower than its carrying amount by $400,000.  Changes in the fair value of
the first mortgage loan do not result in the  realization or expenditure of cash
unless the loan is actually prepaid.

5)  INCOME TAXES:
    -------------

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

         The following is a reconciliation of net income for financial reporting
purposes to income  reported for Federal income tax purposes for the years ended
December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
                                                     1996           1995           1994    
                                                  ----------     ----------     ---------- 
<S>                                               <C>            <C>            <C>        
  Net income for financial reporting purposes     $1,891,905     $1,889,914     $1,889,998 
  Differences for tax purposes in:                                                         
    Depreciation                                      67,797         28,828        (45,620)
    Organization cost amortization and other         (10,719)       (11,552)       (11,552)
                                                  ----------     ----------     ---------- 
  Taxable income to partners                      $1,948,983     $1,907,190     $1,832,826 
                                                  ==========     ==========     ========== 
</TABLE>
                                                                                
For  Federal  income tax  reporting  purposes,  taxable  income to  partners  is
reported  on the  accrual  basis of  accounting  and is  classified  as ordinary
income.

         At December 31,  1996,  the tax bases of the  Partnership's  assets and
liabilities  exceed the amounts  recorded for  financial  reporting  purposes by
$128,032.  This difference  results  primarily from  differences in depreciation
methods and treatment of property  acquisition costs for financial reporting and
tax reporting purposes.

6)  TRANSACTIONS WITH RELATED PARTIES:
    ----------------------------------
 
         Under the terms of the  Partnership  agreement,  the General Partner is
entitled to  compensation  for certain  services  performed in  connection  with
managing the affairs of the  Partnership.  During 1996, 1995 and 1994, fees paid
to the General Partner were as follows:
<TABLE>
<CAPTION>
                                                                1996       1995       1994
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>     
          Disbursable cash fee                                $104,960   $107,050   $ 83,650
          Property management fee (4% of the
              Partnership's gross annual property revenues)    104,575    105,003    104,707
                                                              --------   --------   --------

                                                              $209,535   $212,053   $188,357
                                                              ========   ========   ========
</TABLE>

         The General Partner is entitled to a disbursable cash fee equal to nine
percent of all revenues  received by the Partnership less Partnership  operating
expenses, only to the extent the limited partners have received an annual return
of nine percent on their Adjusted Capital Contribution,  as defined. The General
Partner or its  affiliate  will also be entitled to a  subordinated  real estate
disposition  fee and an  incentive  share of sale  proceeds,  as  defined in the
Partnership agreement.
<PAGE>
         An affiliate of the General  Partner  incurs  expenses on behalf of the
Partnership for maintenance of the books and records and for computer,  investor
and  legal  services   performed  for  the   Partnership.   These  expenses  are
reimbursable in accordance with the Partnership  agreement and are less than the
amount  which  the  Partnership  would  have  paid to  independent  parties  for
comparable services.  The Partnership  reimbursed the affiliate $22,689 in 1996,
$23,777 in 1995 and $21,866 in 1994 for such expenses.
<PAGE>
                                                                    SCHEDULE III
                                                                     Page 1 of 2

             PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
             -------------------------------------------------------

              SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
              ----------------------------------------------------

                             AS OF DECEMBER 31, 1996
                             -----------------------
<TABLE>
<CAPTION>
                                     Initial Cost to Partnership and
                                    Gross Amount at December 31, 1996                        Accumulated Depreciation
                          ----------------------------------------------------   --------------------------------------
                                                                                                                             Date
Restaurant Location           Land       Buildings     Equipment      Total       Buildings     Equipment      Total       Acquired
--------------------      -----------   -----------   ----------   -----------   -----------   ----------   -----------   ----------
<S>                       <C>           <C>           <C>          <C>           <C>           <C>          <C>           <C> 
EHRENBERG, ARIZONA        $ 1,250,000   $      --     $     --     $ 1,250,000   $      --     $     --     $      --     June  1993
BAKERSFIELD, CALIFORNIA       101,050     5,195,950      495,838     5,792,838       649,494      240,208       889,702   Jan.  1993
WYTHEVILLE, VIRGINIA        1,333,088     5,814,912      452,000     7,600,000       923,723      235,416     1,159,139   Dec.  1991
                          -----------   -----------   ----------   -----------   -----------   ----------   -----------

              TOTAL       $ 2,684,138   $11,010,862   $  947,838   $14,642,838   $ 1,573,217   $  475,624   $ 2,048,841
                          ===========   ===========   ==========   ===========   ===========   ==========   ===========
</TABLE>
<PAGE>
                                                                    SCHEDULE III
                                                                     Page 2 of 2

             PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
             -------------------------------------------------------

              SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
              ----------------------------------------------------

                             AS OF DECEMBER 31, 1996
                             -----------------------

NOTES:

(1)      There are no encumbrances on properties.

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

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

(4)      Transactions  in real estate,  equipment and  accumulated  depreciation
         during 1996, 1995 and 1994 are summarized as follows:

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

         Balance, December 31, 1993                $14,642,838       $  697,094
                Depreciation expense                     -              451,270
                                                   -----------       ----------

         Balance, December 31, 1994                 14,642,838        1,148,364
                Depreciation expense                     -              451,269
                                                   -----------       ----------

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

         Balance, December 31, 1996                $14,642,838       $2,048,841
                                                   ===========       ==========
<PAGE>
Report of Independent Public Accountants



To FFCA/PIP III Investor Services Corporation:

              We have  audited the  accompanying  balance  sheet of FFCA/PIP III
INVESTOR SERVICES CORPORATION (a Delaware  corporation) as of December 31, 1996.
This financial statement is the responsibility of the Company's management.  Our
responsibility is to express an opinion on this financial statement based on our
audit.

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

              In our  opinion,  the balance  sheet  referred  to above  presents
fairly,  in all  material  respects,  the  financial  position of  FFCA/PIP  III
Investor  Services  Corporation  as of December 31,  1996,  in  conformity  with
generally accepted accounting principles.

/s/ Arthur Andersen LLP

Phoenix, Arizona,
     January 3, 1997.
<PAGE>
                   FFCA/PIP III INVESTOR SERVICES CORPORATION
                   ------------------------------------------


                        BALANCE SHEET - DECEMBER 31, 1996
                        ---------------------------------


                                     ASSETS


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

                    Total Assets                                            $200
                                                                            ====


                                   LIABILITY

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


                              STOCKHOLDER'S EQUITY


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

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

       The accompanying notes are an integral part of this balance sheet.
<PAGE>
                   FFCA/PIP III INVESTOR SERVICES CORPORATION
                   ------------------------------------------

                             NOTES TO BALANCE SHEET
                             ----------------------

                                DECEMBER 3l, l996
                                -----------------


(l) Operations:

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

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

(2) Related Parties:

           Morton H. Fleischer is the sole stockholder of the Corporation.
<PAGE>
                       PARTICIPATING INCOME PROPERTIES III
                               LIMITED PARTNERSHIP
                                       and
                   FFCA/PIP III INVESTOR SERVICES CORPORATION


                           __________________________

                                  Exhibit Index
                           __________________________

                                                                    Sequentially
                                  Exhibit                          Numbered Page

                  99.    Annual Portfolio Valuation of Cushman &
                         Wakefield as of December 31, 1996


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


                                                                  1991 Form 10-K
                                                                    Exhibit No.
                                                                    -----------

                      The  Agreement of Limited Partnership of         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 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  documents,  filed with the Securities
         and Exchange Commission with the Co-Registrants' Registration Statement
         on Form S-11, Registration No. 33-35868, is incorporated herein by this
         reference.

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