<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


[X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998

                                       OR

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

                         Commission file number 0-10474

                      IEA MARINE CONTAINER INCOME FUND III,
                       (A CALIFORNIA LIMITED PARTNERSHIP)
             (Exact name of registrant as specified in its charter)


           California                                          94-2717330
 (State or other jurisdiction of                            (I.R.S. Employer
 incorporation or organization)                            Identification No.)

         444 Market Street, 15th Floor, San Francisco, California 94111
               (Address of principal executive offices) (Zip Code)

                                 (415) 677-8990
              (Registrant's telephone number, including area code)


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


<PAGE>   2
                      IEA MARINE CONTAINER INCOME FUND III,
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                  REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD
                               ENDED JUNE 30, 1998

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                                         PAGE
                                                                                                         ----
<S>                                                                                                      <C>
PART I - FINANCIAL INFORMATION

 Item 1. Financial Statements
         Balance Sheets - June 30, 1998 (unaudited) and December 31, 1997                                  4
         Statements of Operations for the three and six months ended June 30, 1998 and 1997 (unaudited)    5
         Statements of Cash Flows for the six months ended June 30, 1998 and 1997 (unaudited)              6
         Notes to Financial Statements (unaudited)                                                         7
 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations            10
 Item 3. Quantitative and Qualitative Disclosures About Market Risk                                       12

PART II -  OTHER INFORMATION
 Item 1. Legal Proceedings                                                                                13
 Item 3. Defaults Upon Senior Securities                                                                  14
 Item 5. Other Information                                                                                14
 Item 6. Exhibits and Reports on Form 8-K                                                                 16
</TABLE>


                                       2


<PAGE>   3
                         PART I - FINANCIAL INFORMATION


Item 1. Financial Statements

        Presented herein are the Registrant's balance sheets as of June 30, 1998
        and December 31, 1997, statements of operations for the three and six
        months ended June 30, 1998 and 1997, and statements of cash flows for
        the six months ended June 30, 1998 and 1997.


                                       3


<PAGE>   4
                      IEA MARINE CONTAINER INCOME FUND III,
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                                 BALANCE SHEETS

                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                 June 30,         December 31,
                                                                                   1998               1997
                                                                              -------------       -------------
<S>                                                                           <C>                 <C>          
                 Assets
Current assets:
   Cash and cash equivalents, includes $248,507 at June 30, 1998 and
      $399,284 at December 31, 1997 in interest-bearing accounts              $     248,607       $     399,411
   Net lease receivables due from Leasing Company
      (notes 1 and 2)                                                                21,930              80,812
                                                                              -------------       -------------

         Total current assets                                                       270,537             480,223
                                                                              -------------       -------------

Container rental equipment, at cost                                               1,508,432           1,912,276
   Less accumulated depreciation                                                  1,035,332           1,318,038
                                                                              -------------       -------------
      Net container rental equipment                                                473,100             594,238
                                                                              -------------       -------------

                                                                              $     743,637       $   1,074,461
                                                                              -------------       -------------
            Partners' Capital

Partners' capital:
   General partners                                                           $         244       $       1,045
   Limited partners                                                                 743,393           1,073,416
                                                                              -------------       -------------

         Total partners' capital                                                    743,637           1,074,461
                                                                              -------------       -------------

                                                                              $     743,637       $   1,074,461
                                                                              =============       =============
</TABLE>


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


                                       4


<PAGE>   5
                      IEA MARINE CONTAINER INCOME FUND III,
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                            STATEMENTS OF OPERATIONS

                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                        Three Months Ended                 Six Months Ended
                                                 -------------------------------     -------------------------------
                                                   June 30,           June 30,          June 30,         June 30,
                                                     1998               1997              1998             1997
                                                 -------------     -------------     -------------     -------------
<S>                                              <C>               <C>               <C>               <C>          
Net lease revenue (notes 1 and 3)                $      52,516     $      42,848     $     101,105     $     150,589

Other operating expenses:
   Other general and administrative
   expenses                                             18,360            11,330            31,285            21,422
                                                 -------------     -------------     -------------     -------------

      Earnings from operations                          34,156            31,518            69,820           129,167

Other income:
   Interest income                                       3,715             5,535             8,112            12,635
   Net gain on disposal of equipment                    13,779            32,401            26,852            72,318
                                                 -------------     -------------     -------------     -------------
                                                        17,494            37,936            34,964            84,953

      Net earnings                               $      51,650     $      69,454     $     104,784     $     214,120
                                                 =============     =============     =============     =============

Allocation of net earnings:
   General partners                              $       2,297     $       5,565     $       3,554     $       8,764
   Limited partners                                     49,353            63,889           101,230           205,356
                                                 -------------     -------------     -------------     -------------

                                                 $      51,650     $      69,454     $     104,784     $     214,120
                                                 =============     =============     =============     =============

Limited partners' per unit share of net
earnings                                         $        1.64     $        2.13     $        3.37     $        6.85
                                                 =============     =============     =============     =============
</TABLE>


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


                                       5


<PAGE>   6
                      IEA MARINE CONTAINER INCOME FUND III,
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                            STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                             Six Months Ended
                                                      ---------------------------------
                                                         June 30,           June 30,
                                                           1998                1997
                                                      -------------       -------------
<S>                                                   <C>                 <C>          
Net cash provided by operating activities             $      33,729       $     234,208

Cash flows provided by investing activities:
   Proceeds from disposal of equipment                      251,076             330,956

Cash flows used in financing activities:
   Distribution to partners                                (435,609)           (761,216)
                                                      -------------       -------------

Net decrease in cash and cash equivalents                  (150,804)           (196,052)


Cash and cash equivalents at January 1                      399,411             656,333
                                                      -------------       -------------


Cash and cash equivalents at June 30                  $     248,607       $     460,281
                                                      =============       =============
</TABLE>


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


                                       6


<PAGE>   7
                      IEA MARINE CONTAINER INCOME FUND III,
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS


(1)  Summary of Significant Accounting Policies

     (a) Nature of Operations

         IEA Marine Container Income Fund III, (A California Limited
         Partnership) (the "Partnership"), was organized under the laws of the
         State of California on January 3, 1980 for the purpose of owning and
         leasing marine dry cargo containers. The managing general partner is
         Cronos Capital Corp. ("CCC"); the associate general partner is Lehman
         Brothers, Inc. CCC, with its affiliate, Cronos Containers Limited (the
         "Leasing Company"), manages the business of the partnership.

         The Partnership commenced operations on April 3, 1981, when the minimum
         subscription proceeds of $500,000 were obtained. The Partnership
         offered 30,000 units of limited partnership interest at $500 per unit,
         or $15,000,000. The offering terminated on June 26, 1981, at which time
         30,000 limited partnership units had been purchased.

         As of June 30, 1998, 8% of the original equipment remained in the
         Partnership's fleet and was comprised of 545 twenty-foot and 73
         forty-foot marine dry cargo containers. Commencing in 1991, the
         Partnership's 11th year of operations, the Partnership began focusing
         its attention on the disposition of its fleet in accordance with
         another of its original investment objectives, realizing the residual
         value of its containers after the expiration of their economic useful
         lives, estimated to be between 10 to 15 years after placement in leased
         service. During this phase, the Partnership has actively disposed of
         containers within its fleet, while cash proceeds from equipment
         disposals, in addition to cash from operations, provided the cash flow
         for distributions to the limited partners. The Partnership, in its 18th
         year of operations, will continue to focus its attention during the
         remainder of 1998 on disposing of its remaining fleet.

     (b) Leasing Company and Leasing Agent Agreement

         Pursuant to the Limited Partnership Agreement of the Partnership, all
         authority to administer the business of the Partnership is vested in
         CCC. CCC has entered into a Leasing Agent Agreement whereby the Leasing
         Company has the responsibility to manage the leasing operations of all
         equipment owned by the Partnership. Pursuant to the Agreement, the
         Leasing Company is responsible for leasing, managing and re-leasing the
         Partnership's containers to ocean carriers and has full discretion over
         which ocean carriers and suppliers of goods and services it may deal
         with. The Leasing Agent Agreement permits the Leasing Company to use
         the containers owned by the Partnership, together with other containers
         owned or managed by the Leasing Company and its affiliates, as part of
         a single fleet operated without regard to ownership. Since the Leasing
         Agent Agreement meets the definition of an operating lease in Statement
         of Financial Accounting Standards (SFAS) No. 13, it is accounted for as
         a lease under which the Partnership is lessor and the Leasing Company
         is lessee.

                                                                     (Continued)
                                       7


<PAGE>   8
                      IEA MARINE CONTAINER INCOME FUND III,
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS


     (b) Leasing Company and Leasing Agent Agreement - (Continued)

         The Leasing Agent Agreement generally provides that the Leasing Company
         will make payments to the Partnership based upon rentals collected from
         ocean carriers after deducting direct operating expenses and management
         fees to CCC. The Leasing Company leases containers to ocean carriers,
         generally under operating leases which are either master leases or term
         leases (mostly two to five years). Master leases do not specify the
         exact number of containers to be leased or the term that each container
         will remain on hire but allow the ocean carrier to pick up and drop off
         containers at various locations; rentals are based upon the number of
         containers used and the applicable per-diem rate. Accordingly, rentals
         under master leases are all variable and contingent upon the number of
         containers used. Most containers are leased to ocean carriers under
         master leases; leasing agreements with fixed payment terms are not
         material to the financial statements. Since there are no material
         minimum lease rentals, no disclosure of minimum lease rentals is
         provided in these financial statements.

     (c) Basis of Accounting

         The Partnership utilizes the accrual method of accounting. Net lease
         revenue is recorded by the Partnership in each period based upon its
         leasing agent agreement with the Leasing Company. Net lease revenue is
         generally dependent upon operating lease rentals from operating lease
         agreements between the Leasing Company and its various lessees, less
         direct operating expenses and management fees due in respect of the
         containers specified in each operating lease agreement.

     (d) Financial Statement Presentation

         These financial statements have been prepared without audit. Certain
         information and footnote disclosures normally included in financial
         statements prepared in accordance with generally accepted accounting
         procedures have been omitted. It is suggested that these financial
         statements be read in conjunction with the financial statements and
         accompanying notes in the Partnership's latest annual report on Form
         10-K.

         The preparation of financial statements in conformity with generally
         accepted accounting principles (GAAP) requires the Partnership to make
         estimates and assumptions that affect the reported amounts of assets
         and liabilities and disclosure of contingent assets and liabilities at
         the date of the financial statements and the reported amounts of
         revenues and expenses during the reported period. Actual results could
         differ from those estimates.

         The interim financial statements presented herewith reflect all
         adjustments of a normal recurring nature which are, in the opinion of
         management, necessary to a fair statement of the financial condition
         and results of operations for the interim periods presented.

                                                                     (Continued)
                                       8


<PAGE>   9
                      IEA MARINE CONTAINER INCOME FUND III,
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS


(2)  Net Lease Receivables Due from Leasing Company

      Net lease receivables due from the Leasing Company are determined by
      deducting direct operating payables and accrued expenses, base management
      fees and incentive fees payable to CCC and its affiliates from the rental
      billings payable by the Leasing Company to the Partnership under operating
      leases to ocean carriers for the containers owned by the Partnership. Net
      lease receivables at June 30, 1998 and December 31, 1997 were as follows:


<TABLE>
<CAPTION>
                                                                 June 30,         December 31,
                                                                   1998               1997
                                                               -------------     -------------
<S>                                                            <C>               <C>          
Lease receivables, net of doubtful accounts of $3,341
  at June 30, 1998 and $21,489 at December 31, 1997            $     122,716     $     158,688
Less:
Direct operating payables and accrued expenses                        74,173            38,347
Damage protection reserve                                             26,613            39,529
                                                               -------------     -------------
                                                               $      21,930     $      80,812
                                                               =============     =============
</TABLE>


(3)   Net Lease Revenue

      Net lease revenue is determined by deducting direct operating expenses and
      base management fees to CCC from the rental revenue billed by the Leasing
      Company under operating leases to ocean carriers for the containers owned
      by the Partnership. Net lease revenue for the three and six-month periods
      ended June 30, 1998 and 1997 was as follows:


<TABLE>
<CAPTION>
                                                   Three Months Ended                     Six Months Ended
                                             -------------------------------     -------------------------------
                                               June 30,           June 30,          June 30,          June 30,
                                                 1998               1997             1998               1997
                                             -------------     -------------     -------------     -------------
<S>                                          <C>               <C>               <C>               <C>          
Rental revenue                               $      74,765     $     126,392     $     158,359     $     272,536
Less:
Rental equipment operating expenses                  6,042            57,408            23,825            66,583
Base management fees                                16,207            26,136            33,429            55,364
                                             -------------     -------------     -------------     -------------
                                             $      52,516     $      42,848     $     101,105     $     150,589
                                             =============     =============     =============     =============
</TABLE>


                                       9


<PAGE>   10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

It is suggested that the following discussion be read in conjunction with the
Registrant's most recent annual report on Form 10-K.


1)    Material changes in financial condition between June 30, 1998 and 
      December 31, 1997.

      December 31, 1997 marked the completion of the Registrant's 17th year of
      operations. As discussed in the Registrant's report for the year ended
      December 31, 1997, the Registrant entered 1998 with a view towards
      disposing of its remaining container fleet. During the first six months of
      1998, the Registrant disposed of 164 containers as part of its ongoing
      container operations, contributing to a decline in the Registrant's
      operating results and related cash balances. At June 30, 1998, 8% of the
      original equipment remained in the Registrant's fleet, as compared to 10%
      at December 31, 1997. Due to the declining cash flows from operations and
      sales proceeds from a rapidly diminishing fleet, the managing general
      partner has determined that it is in the best interest of the limited
      partners to dispose of the remaining equipment in the fleet and dissolve
      the Partnership before such time that fixed operating costs exceed
      operating revenues. It is, therefore, the intent of the managing general
      partner to liquidate the containers and wind up the Registrant's
      operations as soon as it is feasible. The managing general partner is
      currently in the final stages of negotiations with an unaffiliated
      qualified buyer for the purchase of the remaining containers in the
      Registrant's fleet. When all of the equipment has been disposed and the
      Registrant's debt, receivables and liabilities have been collected and
      discharged, the Partnership will then be dissolved. The managing general
      partner will then undertake a final distribution of the Registrant's
      assets to the limited partners and proceed to cancel the Certificate of
      Limited Partnership, thus terminating the Partnership.

      At June 30, 1998, the Registrant's fleet was comprised of the following:


<TABLE>
<CAPTION>
                                         20-Foot      40-Foot
                                       -----------  
<S>                                    <C>          <C>
Containers on lease:
      Term leases                               44           10
      Master leases                            442           50
                                       -----------  -----------  
          Subtotal                             486           60

Containers off lease                            59           13
                                       -----------  -----------  

      Total container fleet                    545           73
                                       ===========  ===========
</TABLE>


<TABLE>
<CAPTION>
                                                     20-Foot                       40-Foot
                                          ----------------------------   ----------------------------
                                             Units            %              Units           %
                                          -------------  -------------   -------------  -------------
<S>                                       <C>            <C>             <C>            <C> 
Total purchases                                   7,257            100%            890            100%
     Less disposals                               6,712             92%            817             92%
                                          -------------  -------------   -------------  -------------

Remaining fleet at June 30, 1998                    545              8%             73              8%
                                          =============  =============   =============  =============
</TABLE>


                                       10


<PAGE>   11
      The Registrant's diminishing fleet size and its related operating
      performance contributed to a 73% decline in net lease receivables at June
      30, 1998, when compared to December 31, 1997. During the second quarter of
      1998, distributions from operations and sales proceeds amounted to
      $217,804, reflecting distributions to the general and limited partners for
      the first quarter of 1998. This amount was unchanged from the total
      distributed during the first quarter of 1998, reflecting distributions for
      the fourth quarter of 1997. The Registrant's efforts to dispose of the
      remaining fleet should produce lower operating results and, consequently,
      reduce distributions to its partners in subsequent quarters. Additionally,
      the Registrant may refrain from distributing cash generated from
      operations and sales proceeds to its partners in subsequent quarters,
      reserving all excess cash as part of its working capital in order to
      maintain sufficient cash reserves for expenses relating to its final
      liquidation and subsequent dissolution.

      Imbalances and reductions in trade volumes, fueled by the economic crisis
      in Asia, continue to affect the container leasing market and Partnership
      operations. Containerships leaving Asia are operating at full capacity.
      Yet, on the return eastbound trip they are going back to Asia with only a
      fraction of their holds utilized. This results in a shortage of containers
      available for exporting cargo from Asia and a surplus of containers in
      locations of low demand. As a consequence of this imbalance, container
      leasing companies are repositioning empty containers from low-demand
      locations back to Asian ports in order to keep equipment at the source of
      cargo and, at the same time, reduce the effects of additional depot
      charges for idle equipment and lost revenue. While there is a cost
      incurred when repositioning an empty container, revenue is lost while it
      is in transit. In spite of these market pressures, strong trade with other
      parts of the world is compensating for the imbalances with Asia. There is
      renewed demand for leased containers in locations such as Mexico, Canada,
      China, and areas of Europe where trade volumes of containerized goods are
      prospering. In light of the current market conditions, the Registrant's
      focus remains centered on strategic planning in order to reduce equipment
      imbalances and on improving collections to maximize returns.


2)    Material changes in the results of operations between the three and
      six-month periods ended June 30, 1998 and the three and six-month periods
      ended June 30, 1997.

      Net lease revenue for the three and six-month periods ended June 30, 1998
      was $52,516 and $101,105, respectively, an increase of 23% and a decrease
      of 33%, respectively, when compared to the same three and six-month
      periods in the prior year. Approximately 27% and 26%, respectively, of the
      Registrant's net earnings for the three and six-month periods ended June
      30, 1998 were from gain on disposal of equipment, as compared to 47% and
      34%, respectively, for the same three and six-month periods in the prior
      year. As the Registrant continues to dispose of its containers in
      subsequent periods, net gain on disposal may fluctuate and should
      contribute significantly to the Registrant's net earnings.

      Gross rental revenue (a component of net lease revenue) for the three and
      six-month periods ended June 30, 1998 was $74,765 and $158,359,
      respectively, reflecting a decline of 41% and 42%, respectively, from the
      same three and six-month periods in 1997. Gross rental revenue was
      impacted by the Registrant's diminishing fleet size and a decline in
      per-diem rental rates. Average per-diem rental rates decreased
      approximately 7% and 8%, respectively, when compared to the same three and
      six-month periods in the prior year. Average utilization rates declined
      when compared to the same three and six-month periods in the prior year.
      The Registrant's average fleet size and utilization rates for the three
      and six-month periods ended June 30, 1998 and June 30, 1997 were as
      follows:


<TABLE>
<CAPTION>
                                                           Three Months Ended              Six Months Ended
                                                     -----------------------------   -----------------------------
                                                        June 30,        June 30,         June 30,       June 30,
                                                         1998            1997             1998           1997
                                                     -------------   -------------   -------------   -------------
<S>                                                  <C>             <C>             <C>             <C>  
Average fleet size (measured in twenty-foot
    equivalent units (TEU))                                    716           1,164             773           1,274
Average Utilization                                             90%             92%             90%             91%
</TABLE>


                                       11


<PAGE>   12
      Rental equipment operating expenses were 8% and 15%, respectively, of the
      Registrant's gross lease revenue during the three and six-month periods
      ended June 30, 1998 as compared to 45% and 24%, respectively, of the
      Registrant's gross lease revenue during the three and six-month periods
      ended June 30, 1997. The Registrant's decision to dispose of its off-hire
      containers also contributed to lower rental equipment operating expenses,
      as well as lower base management fees.

      Year 2000

      The Registrant relies upon the financial and operational systems provided
      by the Leasing company and its affiliates, as well as the systems provided
      by other independent third parties to service the three primary areas of
      its business: investor processing/maintenance; container leasing/asset
      tracking; and accounting finance. The Registrant has received confirmation
      from its third-party investor processing/maintenance vendor that their
      system is Year 2000 compliant. The Registrant does not expect a material
      increase in its vendor servicing fee to reimburse Year 2000 costs.
      Container leasing/asset tracking and accounting/finance services are
      provided to the Registrant by CCC and its affiliate, Cronos Containers
      Limited (the "Leasing Company"), pursuant to the respective Limited
      Partnership Agreement and Leasing Agent Agreement. CCC and the Leasing
      Company have initiated a program to prepare their systems and applications
      for the Year 2000. Preliminary studies indicate that testing, conversion
      and upgrading of system applications is expected to cost CCC and the
      Leasing Company less than $500,000. Pursuant to the Limited Partnership
      Agreement, CCC or the Leasing Company, may not seek reimbursement of data
      processing costs associated with the Year 2000 program. The financial
      impact of making these required system changes is not expected to be
      material to the Registrant's financial position, results of operations or
      cash flows.

      Cautionary Statement

      This Quarterly Report on Form 10-Q contains statements relating to future
      results of the Registrant, including certain projections and business
      trends, that are "forward-looking statements" as defined in the Private
      Securities Litigation Reform Act of 1995. Actual results may differ
      materially from those projected as a result of certain risks and
      uncertainties, including but not limited to changes in: economic
      conditions; trade policies; demand for and market acceptance of leased
      marine cargo containers; competitive utilization and per-diem rental rate
      pressures; as well as other risks and uncertainties, including but not
      limited to those described in the above discussion of the marine container
      leasing business under Item 2., Management's Discussion and Analysis of
      Financial Condition and Results of Operations; and those detailed from
      time to time in the filings of Registrant with the Securities and Exchange
      Commission.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Not applicable.


                                       12


<PAGE>   13
                           PART II - OTHER INFORMATION


Item 1.  Legal Proceedings

         As reported in the Registrant's Current Report on Form 8-K and
         Amendment No. 1 to Current Report on Form 8-K, filed with the
         Commission on February 7, 1997 and February 26, 1997, respectively,
         Arthur Andersen, London, England, resigned as auditors of the Cronos
         Group, a Luxembourg corporation headquartered in Orchard Lea, England
         (the "Parent Company"), on February 3, 1997.

         The Registrant retained a new auditor, Moore Stephens, P.C. on April
         10, 1997, as reported in its Current Report on Form 8-K, filed April
         14, 1997.

         In connection with its resignation, Arthur Andersen also prepared a
         report pursuant to Section 10A(b)(2) of the Securities Exchange Act of
         1934 as amended, for filing by the Parent Company with the Securities
         and Exchange Commission ("SEC") citing its inability to obtain what it
         considered to be adequate responses to its inquiries primarily
         regarding the payment of $1.5 million purportedly in respect of
         professional fees relating to a proposed strategic alliance. This sum
         was returned to the Parent Company in January 1997.

         Following the report of Arthur Andersen, the SEC, on February 10, 1997,
         commenced a private investigation of the Parent Company for the purpose
         of investigating the matters discussed in such report and related
         matters. The SEC's investigation can result in several types of civil
         or administrative sanctions against the Parent Company and individuals
         associated with the Parent Company, including the assessment of
         monetary penalties. Actions taken by the SEC do not preclude additional
         actions by any other federal, civil or criminal authorities or by other
         regulatory organizations or by third parties.

         The SEC's investigation is continuing, and some of the Parent Company's
         present and former officers and directors and others associated with
         the Parent Company have given testimony. However, no conclusion of any
         alleged wrongdoing by the Parent Company or any individual has been
         communicated to the Parent Company by the SEC.

         The Registrant does not believe that the focus of the SEC's
         investigation is upon the Registrant or CCC. CCC is unable to predict
         the outcome of the SEC's ongoing private investigation of the Parent
         Company.

         As reported in the Registrant's Current Report on Form 8-K, filed with
         the SEC on May 21, 1998, the Parent Company reported that its Chairman
         and CEO, Stefan M. Palatin, was suspended from his duties pending the
         investigation of fraud charges against him by Austrian government
         authorities. On June 8, 1998, the Parent Company's Board of Directors
         removed Mr. Palatin as Managing Director and Chief Executive Officer.
         Mr. Palatin resigned from the Board of Directors of the Parent Company
         on July 6, 1998. Mr. Rudolf J. Weissenberger has been appointed to
         replace Mr. Palatin as an executive director and Chief Executive
         Officer. Also, on June 8, 1998, the Board approved a proposal to add
         two independent directors to the Board. The Board engaged legal counsel
         to provide legal advice and commence legal action, if appropriate,
         against former officers or directors of the Parent Company (including
         Mr. Palatin) if it is determined that they engaged in any misfeasance
         or improper self-dealing.

         Mr. Palatin had been a director of CCC; he resigned from his position
         as director on April 23, 1998.

         CCC further understands that Austrian authorities have initiated
         investigations of persons in addition to Mr. Palatin, including Mr.
         Weissenberger and Dr. Axel Friedberg. Dr. Friedberg has been a
         non-executive director of the Parent Company since 1997. Such
         investigations, which are still pending, have not resulted in any
         action being taken against Messrs. Weissenberger or Friedberg, and each
         has informed the Parent Company that they do not believe that there is
         any basis for any action to be taken against them.


                                       13


<PAGE>   14
Item 3.  Defaults Upon Senior Securities

         See Item 5. Other Information.


Item 5.  Other Information

         In 1993, the Parent Company negotiated a credit facility (hereinafter,
         the "Credit Facility") with several banks for the use of the Parent
         Company and its affiliates, including CCC. At December 31, 1996,
         approximately $73,500,000 in principal indebtedness was outstanding
         under the Credit Facility. As a party to the Credit Facility, CCC is
         jointly and severally liable for the repayment of all principal and
         interest owed under the Credit Facility. The obligations of CCC, and
         the five other subsidiaries of the Parent Company that are borrowers
         under the Credit Facility, are guaranteed by the Parent Company.

         Following negotiations in 1997 with the banks providing the Credit
         Facility, an Amended and Restated Credit Agreement was executed in June
         1997, subject to various actions being taken by the Parent Company and
         its subsidiaries, primarily relating to the provision of additional
         collateral. This Agreement was further amended in July 1997 and the
         provisions of the Agreement and its Amendment converted the facility to
         a term loan, payable in installments, with a final maturity date of May
         31, 1998. The terms of the Agreement and its Amendment also provided
         for additional security over shares in the subsidiary of the Parent
         Company that owns the head office of the Parent Company's container
         leasing operations. They also provided for the loans to the former
         Chairman of $5,900,000 and $3,700,000 to be restructured as obligations
         of the former Chairman to another subsidiary of the Parent Company (not
         CCC), together with the pledge to this subsidiary company of 2,030,303
         Common Shares beneficially owned by him in the Parent Company as
         security for these loans. They further provided for the assignment of
         these loans to the lending banks, together with the pledge of 1,000,000
         shares and the assignment of the rights of the Parent Company in
         respect of the other 1,030,303 shares. Additionally, CCC granted the
         lending banks a security interest in the fees to which it is entitled
         for the services it renders to the container leasing partnerships of
         which it acts as general partner, including its fee income payable by
         the Registrant. The Parent Company did not repay the Credit Facility at
         the amended maturity date of May 31, 1998.

         On June 30, 1998, the Parent Company entered into a third amendment
         (the "Third Amendment") to the Credit Facility. The Third Amendment
         became effective as of that date, subject to the satisfaction
         thereafter of various conditions, including: the Parent Company must
         deliver its audited financial statements for 1997 by a specified date
         and; on or prior to July 30, 1998, the Parent Company must furnish
         proof that any defaults under any other indebtedness have been waived
         and must also furnish various legal opinions, officers' certificates
         and other loan documentation. Under the Third Amendment, the remaining
         principal amount of $36,800,000 will be amortized in varying monthly
         amounts commencing on July 31, 1998 with $26,950,000 due on September
         30 and a final maturity date of January 8, 1999. All of these
         conditions will be fulfilled by August 14, 1998.

         The directors of the Parent Company are pursuing alternative sources of
         financing to meet the amended repayment obligations under the Third
         Amendment. Failure to meet revised lending terms would constitute an
         event of default with the lenders. The declaration of an event of
         default would result in further defaults with other lenders under loan
         agreement cross-default provisions. Should a default of the term loans
         be enforced, the Parent Company and CCC may be unable to continue as
         going concerns.

         CCC is currently in discussions with the management of the Parent
         Company to provide assurance that the management of the container
         leasing partnerships managed by CCC, including the Registrant, is not
         disrupted pending a refinancing or reorganization of the indebtedness
         of the Parent Company and its affiliates.


                                       14


<PAGE>   15
         The Registrant is not a borrower under the Credit Facility, and neither
         the containers nor the other assets of the Registrant have been pledged
         as collateral under the Credit Facility.

         CCC is unable to determine the impact, if any, these concerns may have
         on the future operating results and financial condition of the
         Registrant or CCC and the Leasing Company's ability to manage the
         Registrant's fleet in subsequent periods.


                                       15


<PAGE>   16
Item 6.   Exhibits and Reports on Form 8-K

(a)   Exhibits


<TABLE>
<CAPTION>
Exhibit
   No.                           Description                               Method of Filing
-------                          -----------                               ----------------
<S>         <C>                                                            <C>    
   3(a)     Limited Partnership Agreement of the Registrant, amended       *
            and restated as of February 11, 1981

   3(b)     Certificate of Limited Partnership of the Registrant           **

   27       Financial Data Schedule                                        Filed with this document
</TABLE>


(b)   Reports on Form 8-K

      On May 21, 1998, the Registrant filed a Report on Form 8-K reporting
      changes on the board of directors of the Parent Company.







----------------

*        Incorporated by reference to Exhibit "A" to the Prospectus of the
         Registrant dated February 12, 1981, included as part of Registration
         Statement on Form S-1 (No. 2-70401)

**       Incorporated by reference to Exhibit 3.4 to the Registration Statement
         on Form S-1 (No. 2-70401)


                                       16


<PAGE>   17
                                   SIGNATURES



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




                   IEA MARINE CONTAINER INCOME FUND III
                   (A California Limited Partnership)


                   By     Cronos Capital Corp.
                          The Managing General Partner




                   By     /s/ Dennis J. Tietz
                          ------------------------------------------------------
                          Dennis J. Tietz
                          President and Director of Cronos Capital Corp. ("CCC")
                          Principal Executive Officer of CCC




Date: August 14, 1998


                                       17


<PAGE>   18
                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
Exhibit
   No.                           Description                               Method of Filing
-------                          -----------                               ----------------
<S>         <C>                                                            <C>    
   3(a)     Limited Partnership Agreement of the Registrant, amended       *
            and restated as of February 11, 1981

   3(b)     Certificate of Limited Partnership of the Registrant           **

   27       Financial Data Schedule                                        Filed with this document
</TABLE>





----------------

*       Incorporated by reference to Exhibit "A" to the Prospectus of the
        Registrant dated February 12, 1981, included as part of Registration
        Statement on Form S-1 (No. 2-70401)

**      Incorporated by reference to Exhibit 3.4 to the Registration Statement
        on Form S-1 (No. 2-70401)