FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

         [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 [NO FEE REQUIRED]

For the transition period from..............to..................

Commission file number 0-16823

                        SILVER SCREEN PARTNERS III, L.P.
                        (a Delaware Limited Partnership)
                  (Exact name of registrant as specified in its
                Certificate and Agreement of Limited Partnership)

Delaware                            13-3372004
-------------------------------     --------------------
(State or other jurisdiction of     (I.R.S. Employer
 incorporation or organization)      Identification No.)

Chelsea Piers - Pier 62, Ste. 300
New York, New York                                   10011
----------------------------------------             ----------
(Address of principal executive offices)             (Zip Code)

Registrant's telephone number, including area code (212) 336-6700

Securities registered pursuant to Section 12(b) of the Act:  NONE

Securities registered pursuant to Section 12(g) of the Act:

                      UNITS OF LIMITED PARTNERSHIP INTEREST

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,  and (2) has 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 registrant's  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.[ ]

                                       1
<PAGE>


                                     PART I


ITEM 1.  BUSINESS.

     Silver Screen  Partners III,  L.P.  ("Silver  Screen III") was organized in
September  1986.  A public  offering  of units of assigned  limited  partnership
interests  was  completed  in January  1987,  which raised $300  million.  After
payment of offering costs and fees, approximately $270 million was available for
investment in films (the "Partnership Contribution").

     Silver  Screen III  entered  into a Joint  Venture  agreement  (the  "Joint
Venture  Agreement") with The Walt Disney Company  ("Disney") for the purpose of
financing (in whole or in part),  producing and  exploiting  all feature  length
theatrical  motion  pictures  selected  for  production  by Disney from the time
Disney  began to utilize  Silver  Screen III funds until all such funds had been
committed (the "Joint Venture Films"). Buena Vista Pictures  Distribution,  Inc.
(formerly Buena Vista Distribution,  Inc.) ("BV"), a wholly-owned  subsidiary of
Disney, has been licensed to distribute all Joint Venture Films in all media and
in all territories  throughout the world. BV has paid the expenses in connection
with the worldwide  distribution  of each Joint Venture  Film.  The  Partnership
Contribution has been fully committed.

     The business of Silver Screen III is managed by Silver  Screen  Management,
Inc., a Delaware  corporation  which is a general  partner of Silver  Screen III
(the  "Managing  General  Partner").  Silver  Screen  III  participates  through
Disney-Silver  Screen III Joint Venture (the "Joint Venture") in the production,
ownership and  exploitation  of the Joint Venture Films and in the  distribution
and marketing of the Joint  Venture Films in all primary and ancillary  markets.
The Managing  General  Partner is responsible for the preparation of reports and
tax information to be provided to the Limited Partners.

     Silver Screen III committed to fund nineteen films,  all of which have been
completed   and  released  with  total   budgets   amounting  to   approximately
$266,000,000,  of which  substantially  all had been expended as of December 31,
1993.  Accordingly,  the Partnership  Contribution  has been fully committed and
Silver Screen III will not finance or purchase any additional  motion  pictures.
These films are:  "Benji the Hunted,"  released  June 17, 1987;  "Adventures  in
Babysitting,"  released July 1, 1987;  "Can't Buy Me Love,"  released August 14,
1987; "Hello Again," released November 6, 1987; "Three Men and a Baby," released
November 25, 1987; "Good Morning Vietnam," released December 23, 1987; "Shoot to
Kill" released February 12, 1988;  "D.O.A.," released March 18, 1988; "Return to
Snowy River,  Part II," released April 15, 1988; "Big  Business,"  released June


                                       2
<PAGE>


10,  1988;  "Who Framed  Roger  Rabbit,"  released  June 22,  1988;  "Cocktail,"
released  July 29, 1988;  "The  Rescue,"  released  August 5, 1988;  "Heartbreak
Hotel," released September 30, 1988; "Ernest Saves Christmas," released November
11, 1988; "Oliver and Company," released November 18, 1988; "Honey, I Shrunk the
Kids,"  released  June 23, 1989 and "Cheetah and Friends,"  released  August 18,
1989.  "Stakeout," which was financed approximately 25% by Silver Screen III and
75% by Silver  Screen II,  L.P. (a separate  limited  partnership  with the same
Managing General Partner formed to finance previous Disney films),  was released
August 5, 1987.

Buyout
------

     Silver  Screen  III  has  entered  into a  Letter  Agreement  (the  "Buyout
Agreement")  with Disney  dated  September  11, 1995  providing  for the sale to
Disney of all of Silver Screen III's interest in the Joint  Venture.  The Buyout
Agreement provides for the payment of the purchase price of $125,000,000 in cash
(subject to certain  adjustments  with  respect to  revenues  received by Silver
Screen III from the  exploitation  of the film  "Oliver  and  Co.").  Closing is
scheduled to occur on  September  30, 1997  subject to  satisfaction  of certain
customary  conditions.  In addition to the purchase price,  the Buyout Agreement
provides  that BV will  continue to account  for and make  payments to the Joint
Venture as required by the  Distribution  Agreement  (as defined  below) for all
revenues  received by BV through August 31, 1997. The Buyout  Agreement has been
filed as an exhibit to Silver Screen III's  quarterly  report on Form 10-Q dated
September 30, 1995 and the terms thereof are incorporated herein by reference.

Joint Venture Agreement
-----------------------

     Each Joint Venture Film was produced in  accordance  with the Joint Venture
Agreement.  Under the Joint Venture Agreement,  Silver Screen III contributed to
the Joint Venture all amounts included in the Partnership  Contribution.  Disney
contributed all motion picture projects developed and selected for production by
Disney  until the  Partnership  Contribution  was fully  committed.  Disney also
furnished  production services for all the Joint Venture Films, and furnished or
obtained all financing not furnished by Silver Screen III.

     Some of the Joint  Venture  Films  were  acquired  by the Joint  Venture in
completed  form  (the  "Acquired  Films").  As  provided  in the  Joint  Venture
Agreement,  the  allocation of revenues from Acquired  Films are the same as for
Joint Venture Films,  except in instances where  alternative  arrangements  have
been entered into as permitted by the Joint Venture Agreement.  In addition, the
Joint Venture Agreement provides that special terms be applicable to "Who Framed
Roger Rabbit."


                                       3
<PAGE>


     Contributions  by Silver  Screen  III to the Joint  Venture  were made on a
film-by-film  basis and were based upon budgeted  production cost (the "Budgeted
Film Cost") of all Joint  Venture  Films  produced by the Joint Venture and upon
the  acquisition  cost (the  "Acquisition  Cost")  of all  Acquired  Films.  The
Partnership  Contribution was committed to the Joint Venture,  film-by-film,  in
the order that each Joint Venture Film  commenced  principal  photography by the
Joint Venture,  in an amount equal to 100% of the Budgeted Film Cost (or, in the
case of an Acquired Film, the Acquisition  Cost) of each such Joint Venture Film
until such time as the entire Partnership Contribution was so committed.  Silver
Screen  III was not  obligated  to commit  funds  with  respect to any one Joint
Venture Film (other than "Roger Rabbit") in excess of $20,000,000 in the case of
any Disney  animated  film or  Touchstone  Joint  Venture  Film, or in excess of
$15,000,000, in the case of any Disney non-animated Joint Venture Film.

     Disney  was  solely  responsible  for the  development  of  motion  picture
projects for  contribution  to the Joint  Venture,  the  production by the Joint
Venture of each Joint Venture Film and the delivery by the Joint Venture of each
such Joint Venture Film to BV in full  compliance  with the terms and conditions
of  the   Distribution   Agreement   between  the  Joint  Venture  and  BV  (the
"Distribution  Agreement").  Disney's production  responsibilities  included all
services customarily performed by a major studio. Disney was responsible for any
cost overruns and acted in effect as completion guarantor.

     The Budgeted  Film Cost of each Joint  Venture  Film  consists of all costs
customarily  included as direct production costs in the motion picture industry,
including  overhead of 17-1/2%.  The Budgeted  Film Cost also includes all fixed
deferments,  bonuses and  participations  in gross  receipts  payable before the
Joint Venture has recouped its  investment  in that Joint  Venture  Film,  fixed
deferments and bonuses  payable at or out of first net profits and an additional
development  fee to Disney in the amount of  $500,000.  The budget of each Joint
Venture Film was approved in writing by both parties  prior to the  commencement
of principal  photography.  Disney was empowered to grant  participations in the
profits  of any  Joint  Venture  Film to third  parties  on  behalf of the Joint
Venture up to an amount no greater in the aggregate  than 55% of 100% of the net
profits  of any  non-animated  Joint  Venture  Film  and  50% of 100% of the net
profits of any animated Joint Venture Film.


                                       4
<PAGE>


     If the average  production  cost per film for all Joint  Venture  Films was
less than $13,500,000,  Silver Screen III would be required by the Joint Venture
Agreement to pay Disney an  Underbudget  Bonus equal to the  difference  between
$13,500,000  and the average  production  cost,  up to a maximum of $500,000 per
Joint Venture Film,  multiplied by the total number of Joint Venture  Films.  If
the  average  production  cost was greater  than  $13,500,000,  Disney  would be
required to pay Silver Screen III an Overbudget  Penalty equal to the difference
between the average production cost and $13,500,000, up to a maximum of $500,000
per Joint Venture Film,  multiplied by the total number of Joint Venture  Films.
In December,  1988, an Underbudget Bonus of approximately $6,024,000 was paid to
Disney which increased the Budgeted Film Cost (or Acquisition Cost) of all Joint
Venture Films.  Upon revision,  an additional  Underbudget Bonus of $528,585 was
paid in August 1990. Production Cost excluded certain items included in Budgeted
Film Cost. No further Underbudget  bonuses or Overbudget  penalties are expected
to be paid.

     The revenue formula under the Joint Venture Agreement is designed to assure
that Silver  Screen III will receive Joint  Venture  distributions  equal to not
less than 100% of the Partnership  Contribution applied toward the Joint Venture
Films on a  film-by-film  basis before Disney  recoups cost overruns or receives
any share of profits.  All revenues of the Joint Venture are derived exclusively
from the revenues  allocated to the Joint Venture  pursuant to the  Distribution
Agreement  during the term  thereof.  Revenues  received by the Joint Venture in
respect of Joint Venture Films will be allocated between the parties as follows:

               ---100% to Silver  Screen III and Disney in  proportion  to their
          respective actual  investments in the Budgeted Film Cost of each Joint
          Venture Film until they have recovered the amount of the Budgeted Film
          Cost actually expended or the Acquisition Cost of such Film;

               ---thereafter,  100% to Disney until Disney has recouped any cost
          overruns; and

               ---thereafter, after payment of applicable participations, 75% to
          Silver  Screen III and 25% to Disney;  provided that in the event that
          Silver  Screen III has  committed  to less than the full amount of the
          Budgeted Film Cost or  Acquisition  Cost of a Film as permitted by the
          Joint  Venture  Agreement,  the  percentage  of revenues  allocable to
          Silver  Screen  III with  respect to such Film will be equal to 75% of
          the  percentage  of  such  Budgeted  Film  Cost  or  Acquisition  Cost
          committed  by Silver  Screen  III,  with the  remainder  allocated  to
          Disney.


                                       5
<PAGE>


     In addition, certain other payments in respect of "Revenue Shortfalls" were
payable to the Joint Venture.  The Revenue Shortfall for each Joint Venture Film
was the difference, if any, between the Budgeted Film Cost actually expended and
the sum of all revenues  actually  received by the Joint Venture from BV as of a
settlement  date (the  "Settlement  Date")  occurring  not later than five years
after the U.S.  theatrical release of such Joint Venture Film. On the Settlement
Date of each Joint Venture Film, BV was obligated to pay to the Joint Venture an
amount equal to the Revenue Shortfall (the "Revenue Shortfall Payment"), if any,
provided,  that in no event would the Revenue  Shortfall Payment be greater than
the  revenues  retained by BV with  respect to such Joint  Venture Film from all
markets,  subject to adjustment in certain cases.  Silver Screen III received no
Revenue Shortfall Payments during the years ended December 31, 1995 and 1996 and
received  $1.4 million  during the year ended  December  31, 1994.  All required
Revenue Shortfall Payments have been received by Silver Screen III.

Distribution Agreement
----------------------

     Pursuant  to the  Distribution  Agreement,  BV will  distribute  the  Joint
Venture Films for a term ending  September 30, 1997, in all media throughout the
world.

     BV  (either  directly  or  through  third-party   licensees  or  affiliated
companies)  is obligated  to release and  distribute  each of the Joint  Venture
Films delivered to it in accordance with and subject to customary and reasonable
business  practices in the motion picture  industry in all media  throughout the
world, including theatrical, non-theatrical,  television, cable television, home
video,   syndication,   music,   print   publication,   merchandising   and  new
technologies.

     BV has  paid  and  will  pay all  costs  incurred  in  connection  with the
promotion,  marketing and distribution of each Joint Venture Film. In connection
with the U.S. theatrical release of each Joint Venture Film, BV has committed to
expend certain minimum amounts.  The Distribution  Agreement provides that BV is
entitled to customary distribution fees, which vary in each medium, and that the
Joint  Venture is entitled to an  escalating  percentage  of the gross  proceeds
generated by theatrical distribution of each Joint Venture Film.

Competition
-----------

     Silver Screen III is in competition with other  institutions  which provide
financing  for films,  some of which have  substantially  greater  financial and
personnel  resources  than the Managing  General  Partner and Silver Screen III.
These institutions include the major film studios and television networks. There
is  substantial  competition  in the industry for a limited number of producers,
directors, actors and properties which are able to attract major distribution in
all media and all markets throughout the world.

     There is intense  competition  within the industry for  exhibition  time at
theaters  and for the  attention  of the  movie-going  public.  Competition  for
distribution  in other  media is as intense as the  competition  for  theatrical
distribution.


                                       6
<PAGE>


Employees
---------

     Silver  Screen  III has no  employees.  Silver  Screen  III's  business  is
administered by the staff of the Managing General Partner.



ITEM 2.  PROPERTIES.

     Silver  Screen III neither  owns nor leases any  physical  properties.  The
Managing General Partner leases offices in New York, New York.


ITEM 3.  LEGAL PROCEEDINGS.

     Silver  Screen III knows of no legal  proceedings  of a material  nature to
which it is a party or of which any of its properties is the subject.


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

     No matter was  submitted to a vote of security  holders  during the quarter
ended December 31, 1996.


                                     PART II


ITEM 5.  MARKET FOR THE REGISTRANT'S UNITS OF LIMITED
         PARTNERSHIP INTEREST AND RELATED SECURITY HOLDER MATTERS.

     As of  February  14,  1997,  there were 42,233  Limited  Partners of record
holding an aggregate of 600,000 limited  partnership  units of Silver Screen III
(the "Units").  The Units are not traded  securities in any established  trading
market.


                                       7
<PAGE>


     The Partnership  Agreement provides for quarterly  distributions to Limited
Partners out of receipts from operations,  net of certain expenses and reserves.
See the  material  set  forth  under  "Item  11.  Executive  Compensation."  Two
distributions  were  made  to the  Limited  Partners  in 1996  which  aggregated
$3,750,000.  The distributions per Unit were as follows:  January 26 - $3.25 and
July 26 - $3.00.  Two  distributions  were made to the Limited  Partners in 1995
which aggregated $3,480,000. The distributions per Unit were as follows: January
27 - $2.30 and October 23 - $3.50.

     During 1996,  certain groups not  affiliated  with Silver Screen III or the
Managing  General  Partner made limited  tender offers to acquire Units directly
from Limited  Partners.  Silver Screen III has advised Limited Partners that the
per Unit prices offered in such tender offers appears to be less than the amount
per Unit expected to be distributed to Limited  Partners upon the termination of
Silver  Screen  III  (expected  to be by the end of 1997) and  therefore  Silver
Screen III does not recommend that Limited Partners accept such offers.


                                       8
<PAGE>


ITEM 6.   SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>


                                    Year ended       Year ended         Year ended        Year ended        Year ended  
                                    December 31,     December 31,       December 31,      December 31,      December 31,
                                        1996             1995              1994              1993              1992     
                                    -----------       -----------       -----------       -----------       -----------
<S>                                 <C>               <C>               <C>               <C>               <C>        
REVENUES:                                                                                                          
Income from Joint Venture .......   $ 7,220,549       $ 4,515,810       $ 3,444,814       $ 5,096,264       $15,794,130
 Interest income ................       136,188           256,654           255,443           389,132           658,403
                                    -----------       -----------       -----------       -----------       -----------
                                      7,356,737         4,772,464         3,700,257         5,485,396        16,452,533
Expenses:
 General and administrative
 expenses .......................       680,512         1,013,517           826,356         1,218,472         1,871,897
                                    -----------       -----------       -----------       -----------       -----------

Income before tax ...............     6,676,225         3,758,947         2,873,901         4,266,924        14,580,636
Unincorporated business tax......       791,352                --                --                --                --
                                    -----------       -----------       -----------       -----------       -----------
Net income ......................   $ 5,884,873       $ 3,758,947       $ 2,873,901       $ 4,266,924       $14,580,636
                                    ===========       ===========       ===========       ===========       ===========

Net income per $500
 limited partnership
 unit (based on 600,000
 Units outstanding) .............   $      9.71       $      6.20       $      4.74       $      7.04       $     24.06
                                    ===========       ===========       ===========       ===========       ===========

Cash distribution
per $500 limited
partnership  unit ...............   $      6.25       $      5.80       $      3.70       $     43.95       $     30.90
                                    ===========       ===========       ===========       ===========       ===========

Total assets ....................   $ 7,414,529       $ 6,353,863       $ 6,936,262       $ 9,866,630       $43,094,833
                                    ===========       ===========       ===========       ===========       ===========

</TABLE>


                        See notes to financial statements


                                       9
<PAGE>


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

Results of Operations
---------------------

     The  following is an analysis of the results of operations of Silver Screen
III for the years ended 1996, 1995 and 1994.

     Silver Screen III is a partnership  and therefore  generally not subject to
U.S.  federal  taxes.  No provision has been made for federal  income taxes with
respect to Silver  Screen III's income since income or loss of Silver Screen III
is  required  to be reported  by the  respective  partners  on their  income tax
returns.

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

     Net  income  for  the  year  ended  December  31,  1996  was  approximately
$5,885,000 compared to approximately  $3,759,000 for the year ended December 31,
1995.  Revenue for the year ended December 31, 1996 consisted of income from the
Joint Venture of approximately  $7,221,000, a $2,705,000 increase from the prior
year.  Film revenues  continue to fluctuate since most of the films in which the
Partnership has an interest have been released in the theatrical, home video and
pay cable markets and are now making their way through the remaining  television
markets around the world. Income from the Joint Venture for 1996 was principally
derived from "Oliver and Company," and lesser amounts from "Honey,  I Shrunk the
Kids," "Benji the Hunted" and other films in the portfolio.

     Interest  income  generated  by  temporary  investments  of cash  which  is
distributed to partners for the year ended  December 31, 1996 was  approximately
$136,000 compared to $257,000 for the prior annual period. Interest rates ranged
from 4.8% to 5.79% in 1996 while  those for 1995  ranged  from 5% to 6.02%.  The
decrease  in  interest  rates  resulted  in a  decrease  in  interest  income of
approximately  $121,000 from 1995 to 1996. General and  administrative  expenses
were  approximately  $681,000  for the year ended  December 31, 1996, a $333,000
decrease  from the  prior  year due to costs  associated  with  preparation  for
negotiation of the sale of the Partnership's interest in the Joint Venture.

     On September  30, 1996 Silver  Screen III received an  assessment  from New
York City  regarding  unincorporated  business  tax  covering  all periods  from
inception  through  December  31, 1995 of $878,000  (including  interest).  This
liability was paid on the date of assessment.  The  Unincorporated  Business Tax
Expense  reflects  the  excess  of  this  payment  over  an  amount   previously
established as a contingency reserve plus a provision for 1996.


                                       10
<PAGE>


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

     Net  income  for  the  year  ended  December  31,  1995  was  approximately
$3,759,000 compared to approximately  $2,874,000 for the year ended December 31,
1994.  Income for the year ended  December 31, 1995 consisted of income from the
Joint Venture of approximately  $4,516,000, a $1,071,000 increase from the prior
annual period. Film revenues increased in 1995 due to certain films still making
their way through the remaining television markets around the world. Income from
the Joint Venture for 1995 was principally derived from "Cocktail, " "Oliver and
Company," "Shoot to Kill," and "Adventures in Babysitting."

     Interest  income  generated by the  investment in temporary  investments of
revenues  pending  distribution to partners for the year ended December 31, 1995
was approximately $257,000 compared to $255,000 for the prior annual period. The
weighted  average daily interest rate increased in 1995 to 5.771% from 4.194% in
1994 and the average funds  available for investment  decreased,  resulting in a
$2,000  increase  in  interest.   General  and   administrative   expenses  were
approximately  $1,014,000  for the year  ended  December  31,  1995,  a $188,000
increase  from the prior  annual  period.  The  increase is  attributable  to an
increase in  reporting to partners  expenses of $30,000 and to costs  associated
with preparations for negotiation of the sale of the  Partnership's  interest in
the Joint  Venture,  which  amounted to  approximately  $384,000.  This cost was
offset by a reduction  of  approximately  $55,000 in payroll  related  expenses,
$26,000 in audit fees,  $138,000 in interest on overhead fees payable and $7,000
in miscellaneous  expenses.  Expenses from the sale of partnership's interest in
the Joint  Venture are  considered  to benefit  each of the three  partnerships:
Silver Screen  Partners II, L.P.,  Silver  Screen  Partners III, L.P. and Silver
Screen Partners IV, L.P.  (collectively  and together with the Partnership,  the
"Silver Screen  Partnerships"),  and have been allocated among the Silver Screen
Partnerships   pro  rata  to  the  total  original   Limited   Partner   capital
contributions to each of the Silver Screen Partnerships.

Investment in Joint Venture
---------------------------

     The  investment  in the Joint  Venture was  accounted  for using the equity
method of  accounting.  Under the equity  method,  the  investment was initially
recorded  at  cost,  and was  thereafter  increased  by  additional  investment,
adjusted  by  Silver  Screen  III's  share of the  Joint  Venture's  results  of


                                       11
<PAGE>


operations and reduced by  distributions  received from the Joint  Venture.  The
Joint Ventures'  fiscal year ends September 30, while Silver Screen III's fiscal
year ends  December 31. The  investment  in the Joint Venture on January 1, 1996
totaled $2,862,545.

     Silver  Screen III entered  into the Buyout  Agreement  with  Disney  dated
September  11,  1995  providing  for the sale to Disney of all of Silver  Screen
III's  interest in the Joint  Venture.  The Buyout  Agreement  provides  for the
payment  of the  purchase  price of  $125,000,000  in cash  (subject  to certain
adjustment  with  respect  to  revenue  received  by Silver  Screen III from the
exploitation  of the film  "Oliver  & Co.")  Closing  is  scheduled  to occur on
September 30, 1997 subject to satisfaction of certain customary  conditions.  In
addition to the purchase price,  the Buyout  Agreement that Buena Vista Pictures
Distribution,  Inc. ("BV") will continue to account for and make payments to the
Joint  Venture,  as  required by the  Distribution  agreement  for all  revenues
received by BV through August 31, 1997.

     As a result of the Buyout  Agreement,  Silver  Screen III is using the cost
method  of  accounting   starting  January  1,  1996.  Under  the  cost  method,
distributions  received are recognized as income and investments will be reduced
in proportion that actual cash received bears to ultimate revenues expected.

Liquidity and Capital Resources
-------------------------------

     Inasmuch as the funding  obligations  of Silver  Screen III with respect to
the  financing  of the Joint  Venture  Films  have been fully  complied  with or
reserved  against,  Silver  Screen III has no material  commitments  for capital
expenditures  and does not intend to enter into any such  commitments.  Receipts
from temporary investments and from the Joint Venture, less reserves established
as determined by the Managing General Partner,  are the sources of liquidity for
Silver Screen III. Silver Screen III has no material  requirements for liquidity
other than its general and administrative  expenses and quarterly  distributions
to  holders  of  Units  of  limited  partnership  interests.  Such  sources  are
considered adequate for such needs.

     The Managing  General  Partner expects that Silver Screen III will continue
to receive  distributions  from the Joint  Venture until Silver Screen III sells
its interest in the Joint Venture on September 30, 1997. However,  revenues in a
particular  quarter may not be sufficient to justify making a cash  distribution
and therefore, future cash distributions may fluctuate and there may be quarters
where no distributions will be paid.


                                       12
<PAGE>


     Closing  under the Buyout  Agreement  with Disney is  scheduled to occur on
September 30, 1997.  Silver Screen III currently  expects to dissolve by the end
of 1997 upon disposition of its remaining assets and distribution of cash to the
partners.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     See the financial statements referenced in Item 14 of this annual report.


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

     None.


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     Silver Screen III is a limited  partnership managed by the Managing General
Partner and has no officers or  directors.  The  Managing  General  Partner also
serves as managing  general partner of Silver Screen  Partners,  L.P. and Silver
Screen  Partners  II,  L.P.,  limited  partnerships  formed to finance,  own and
exploit  feature-length  motion pictures  pursuant to a license agreement with a
subsidiary  of Home Box Office,  Inc. and pursuant to joint  venture  agreements
with Disney,  respectively.  The officers and directors of the Managing  General
Partner are also officers and directors of Silver  Screen  Management  Services,
Inc.  ("SSMS"),  which  serves as  managing  general  partner  of Silver  Screen
Partners  IV,  L.P. a limited  partnership  formed to  finance,  own and exploit
feature-length motion pictures pursuant to a joint venture agreement with Disney
shortly after the organization of SSMS in 1987. Neither the Limited Partners nor
any general partner of Silver Screen III other than the Managing General Partner
has the power to  participate  in the  management  of, have any control over the
business of or act for, sign for or bind Silver Screen III.

     Roland W. Betts,  50, is the President,  Treasurer,  a Director,  principal
shareholder and founder of the Managing General  Partner.  Mr. Betts is also the
President,  Treasurer,  a Director and principal  shareholder of SSMS. He is the
Individual  General  Partner of Silver  Screen  Partners,  L.P.,  Silver  Screen
Partners II, L.P.,  Silver Screen  Partners III, L.P. and Silver Screen Partners
IV, L.P.  Mr.  Betts has been  President  and a Director of  International  Film


                                       13
<PAGE>


Investors,  Inc. ("IFI"), which is the Managing General Partner of International
Film Investors,  L.P.,  since 1982 and has been an officer since 1980. Mr. Betts
is also the Individual  General Partner of that  Partnership.  Mr. Betts is also
the lead owner of the Texas Rangers  Baseball Club; and the Chairman and largest
shareholder of the Chelsea Piers  Management,  Inc. which is the general partner
of the Chelsea Piers, L.P., a limited partnership which developed and operates a
major public  recreation and  entertainment  complex at the Chelsea Piers in New
York City.  Prior to joining IFI in 1980,  Mr. Betts was engaged in the practice
of law as an attorney in the  Entertainment  Department of the law firm of Paul,
Weiss, Rifkind, Wharton & Garrison in New York.

     In addition to Mr.  Betts,  the  executive  officers  and  directors of the
Managing General Partner are as follows:


Name                                   Positions Held
----                                   --------------

Paul Bagley                            Chairman of the Board, Director
Tom A. Bernstein                       Executive Vice President,
                                        Secretary, Director
John A. Tommasini                      Director
William Turchyn, Jr.                   Director

     Paul Bagley,  54, is the founding partner of Stone Pine Capital LLC (1994),
and is Chairman  of FCM  Fiduciary  Capital  Managers,  LLC (1989 to date),  the
advisor to mezzanine and private equity funds.  For more than twenty years prior
to 1988, Mr. Bagley was engaged in investment  banking  activities with Shearson
Lehman Hutton Inc. and its  predecessor,  E.F.  Hutton & Company Inc. Mr. Bagley
serves as Chairman of the Board of Directors of Silver Screen  Management,  Inc.
and  International  Film  Investors,  Inc.,  which manage film  portfolios  with
aggregate assets of $1.0 billion. 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.  Mr. Bagley  graduated  from the  University of California at
Berkeley in 1965 with a B.S. in Business and Economics and from Harvard Business
School in 1968 with an M.B.A. in Finance.

     Tom A.  Bernstein,  44, has been  Executive  Vice President of the Managing
General  Partner  since  June 1983 and  Secretary,  a Director  and a  principal
shareholder  since  March  1985.  He has also  been  Executive  Vice  President,
Secretary,   a  Director  and  a  principal   shareholder   of  SSMS  since  its


                                       14
<PAGE>


organization.  Mr.  Bernstein is also  President  and Treasurer of Chelsea Piers
Management,  Inc.  which is the general  partner of Chelsea  Piers,  L.P.; and a
limited  partner of the Texas Rangers  Baseball  Club.  Prior to June 1983,  Mr.
Bernstein was engaged in the practice of law as an attorney in the Entertainment
Department of the law firm of Paul,  Weiss,  Rifkind,  Wharton & Garrison in New
York.

     John A. Tommasini,  52, the President of Laidlaw Equities, Inc., has been a
Director of the Managing General Partner since 1985 and a Director of SSMS since
its  organization.  He was Senior Vice President of Shearson  Lehman Hutton from
January 1988 until March 30, 1990. He was associated  with E.F. Hutton & Company
from 1972 until 1988 and served as First Vice  President  from  January  1985 to
January  1988.  He is  also an  Officer  and a  Director  of  American  National
Security, Inc.

     William  Turchyn,  Jr.,  51, has been a Director  of the  Managing  General
Partner and SSMS since their  respective  organizations.  He was Executive  Vice
President of Shearson from January 1988 until April 1989. He was associated with
E.F. Hutton & Company, Inc. from 1970 until 1988, was named First Vice President
in 1982 and served as Senior Vice  President  from 1983 until January 1988.  Mr.
Turchyn is presently  Senior  Managing  Director of the Private  Client Group at
Furman Selz Capital Management.


ITEM 11.  EXECUTIVE COMPENSATION.

     The  following  table sets forth the fees,  income,  distributions  and the
amounts  payable  to the  General  Partners  of  Silver  Screen  III  and  their
affiliates in connection with the management of Silver Screen III. The executive
officers and directors of the Managing  General  Partner  serve  without  direct
compensation  from Silver  Screen III.  Except as set forth  below,  the General
Partners  and  their  affiliates  will  receive  no  remuneration  of  any  type
whatsoever  from Silver  Screen III in  connection  with the  administration  of
Silver Screen III's affairs.


                                       15
<PAGE>


--------------------------------------------------------------------------------
     (A)                      (B)                             (C)
--------------------------------------------------------------------------------

Name of Entity        Capacities in which        Cash compensation
                        served

Silver Screen          Managing General          Overhead fee calculated as four
  Management, Inc.      Partner                  percent  of the  Budgeted  Film
                                                 Cost  (excluding  overhead)  of
                                                 each   Joint    Venture   Film.
                                                 Pursuant  to  the   Partnership
                                                 Agreement,   the  overhead  was
                                                 paid  in full  on  December  2,
                                                 1994.  In  addition,  until the
                                                 holders  of Units had  received
                                                 cash  distributions  sufficient
                                                 to   reduce   their    Adjusted
                                                 Capital  Contributions  plus an
                                                 amount  equal  to 8%  of  their
                                                 Adjusted Capital  Contributions
                                                 per annum to zero, the Managing
                                                 General  Partner was  allocated
                                                 0.9% of the profits, losses and
                                                 Disbursable   Cash;  from  that
                                                 time forward  until the holders
                                                 of    Units    have    received
                                                 sufficient  cash  distributions
                                                 to   reduce   their    Adjusted
                                                 Capital  Contributions  plus an
                                                 amount  equal  to 15% of  their
                                                 Adjusted Capital  Contributions
                                                 per annum to zero, the Managing
                                                 General  Partner was  allocated
                                                 9.9% of the profits, losses and
                                                 Disbursable  Cash;   thereafter
                                                 the  Managing  General  Partner
                                                 receives  19.9% of such  items.
                                                 $932,812 was distributed to the
                                                 Managing  General  Partner from
                                                 Disbursable Cash.

----------------------
  1  See   definitions


                                       16
<PAGE>


Roland W. Betts        Individual General        Mr. Betts is allocated  0.1% of
                        Partner                  the    profits,   losses    and
                                                 Disbursable   Cash.  Mr.  Betts
                                                 received  $4,688  therefrom  in
                                                 1996.


Definitions Used in Cash Compensation Table
-------------------------------------------

INITIAL CAPITAL
CONTRIBUTION .......... $500 per Unit

ADJUSTED CAPITAL
CONTRIBUTION .......... With   respect  to  each  Unit,   the  Initial   Capital
                        Contribution reduced by all cash distributions  thereon.
                        The Adjusted Capital  Contribution may not, however,  be
                        less  than  zero.  The  Adjusted  Capital  Contributions
                        differ from the Limited  Partners'  capital accounts for
                        tax and accounting purposes.

Disbursable Cash ...... Receipts from  operations,  after deducting cash used to
                        pay operating expenses (including expenses  reimbursable
                        to the Managing  General  Partner),  debt  service,  and
                        amounts  used  for  the  creation  or   restoration   of
                        reserves,  but without  deduction  for  depreciation  or
                        amortization   of  film   investments.   Receipts   from
                        operations include all items of income, whether ordinary
                        or extraordinary.


                                       17
<PAGE>


BUDGETED FILM COST .... The estimated  cost of a Joint  Venture Film,  including
                        contingency  reserves of 7-1/2% and overhead of 17-1/2%.
                        The   Budgeted   Film  Cost  also   includes  all  fixed
                        deferments, bonuses and participations in gross receipts
                        payable  before  the  Joint  Venture  has  recouped  its
                        investment in that Joint Venture Film,  fixed deferments
                        and  bonuses  payable at or out of first net profits and
                        an additional development fee to Disney in the amount of
                        $500,000.

     The  Partnership  Agreement  provides  that all Silver Screen III expenses,
including,  among other things, legal, auditing and accounting expenses, and the
expenses of preparing and distributing reports to the Limited Partners,  will be
billed to and paid by Silver Screen III.  Subject to  restrictions  contained in
the Partnership Agreement,  the Managing General Partner has been reimbursed for
certain  administrative  services. In addition, the Managing General Partner has
been  reimbursed for expenses  incurred in connection  with the  organization of
Silver Screen III and the public offering of the Units.


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

     No officer or Director of the Managing  General Partner  beneficially  owns
any equity  securities  of Silver  Screen III. To the knowledge of Silver Screen
III, no unitholder  beneficially owns more than 5% of the Units of Silver Screen
III.

     Roland W. Betts and Tom A. Bernstein are  controlling  shareholders  of the
Managing  General  Partner.   2,000,000  shares  of  the  3,750,000  issued  and
outstanding  shares of Common Stock of the Managing General Partner are owned by
Roland  W.  Betts  and  1,250,000  shares  are  owned  by Tom A.  Bernstein.  An
additional 500,000 shares have been issued to International Film Investors, L.P.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     See Items 10, 11 and 12 hereof.


                                       18
<PAGE>


                                     PART IV

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

     (a)1. Financial Statements

     The following  financial  statements of Silver Screen Partners III, L.P. (a
Limited Partnership) are included pursuant to Item 8 hereof: Page

                                                               Page
                                                               ----

         Independent auditors' reports .................       F-1

         Balance sheets as of December 31, 1996 and
                  1995 .....................................   F-2

         Statement of operations for the years ended
                  December 31, 1996, 1995 and 1994 .........   F-3

         Statement of partners' equity for the years
                  ended December 31, 1996, 1995 and 1994....   F-4

         Statement of cash flows for the years ended
                  December 31, 1996, 1995 and 1994..........   F-5

         Notes to Financial Statements..................       F6-12


     (a)2. Financial Statement Schedules

     No schedules  are listed  because they are not  applicable  or the required
information is shown in the financial statements or notes thereto.


     (a)3. Exhibits

        4       Amended and Restated Agreement of Limited Partnership2



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

2    Incorporated by reference to Silver Screen III's Registration  Statement on
     Form S-1, Registration No. 33-8059.


                                       19
<PAGE>


        10(a)   Joint  Venture  Agreement  dated as of September 25, 1986 by and
                between  Silver Screen III and the Walt Disney  Company.3

        10(b)   Distribution  Agreement  dated as of  September  25, 1986 by and
                between  Disney  --  Silver  Screen  III  Joint  Venture  and BV
                Distribution Co., Inc.4

        10(c)   Letter  Agreement dated September 11, 1995 by and between Silver
                Screen III and The Walt Disney Company.5

        (b)     Report on Form 8-K

     No reports on Form 8-K have been filed by Silver Screen III during the last
quarter of the period covered by this annual report.




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

3    Incorporated  by reference to exhibits filed with Amendment No. 1 to Silver
     Screen III's Registration Statement on Form S-1, Registration No. 33-8059.

4    See footnote three.

5    Incorporated  by  reference  as exhibit 10 filed with Form 10-Q,  quarterly
     report dated September 30, 1995.


                                       20
<PAGE>


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) 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.

                                            SILVER SCREEN PARTNERS III, L.P. 
                                            (a Delaware Limited Partnership)


                                            By    SILVER SCREEN MANAGEMENT, INC.
                                                  Managing General Partner

Dated:  March 31, 1997                       By   /s/ Roland W. Betts
                                                  ------------------------------
                                                  Roland W. Betts, 
                                                  President/Treasurer


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


Dated:  March 31, 1997                       By   /s/ Roland W. Betts
                                                  ------------------------------
                                                  Roland W. Betts

                                              SILVER SCREEN MANAGEMENT, INC.
                                              Managing General Partner

Dated:  March 31, 1997                       By   /s/ Roland W. Betts
                                                  ------------------------------
                                                  Roland W. Betts, 
                                                  President/Treasurer


Dated:  March 31, 1997                       By  /s/ Roland W. Betts           *
                                                 -------------------------------
                                                 Paul Bagley
                                                 Director,
                                                 Silver Screen Management, Inc.


Dated:  March 31, 1997                       By  /s/ Roland W. Betts           *
                                                 -------------------------------
                                                 Tom A. Bernstein
                                                 Director,
                                                 Silver Screen Management, Inc.


Dated: March 31, 1997                       By   /s/ Roland W. Betts         *
                                                 -------------------------------
                                                 John A. Tommasini
                                                 Director,
                                                 Silver Screen Management, Inc.


                                       21
<PAGE>


Dated: March 31, 1997                       By   /s/ Roland W. Betts          *
                                                 ------------------------------
                                                 William Turchyn, Jr.
                                                 Director,
                                                 Silver Screen Management, Inc.
----------
* By Roland W. Betts, Attorney-in-Fact


                                       22
<PAGE>