UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

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


                                   FORM 10-KSB

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

For the fiscal year ended December 31, 1997       Commission File Number 0-16615


                   PHOENIX LEASING CASH DISTRIBUTION FUND III,
--------------------------------------------------------------------------------
                        A CALIFORNIA LIMITED PARTNERSHIP
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

          California                                     68-0062480
-------------------------------             ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)


2401 Kerner Boulevard, San Rafael, California                  94901-5527
--------------------------------------------------------------------------------
(Address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code:     (415) 485-4500
                                                        --------------

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 if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-B 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-KSB or any  amendment to
this Form 10-KSB. ____________

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 _____

The Registrant's revenue for its most recent fiscal year was $2,733,000.

As of December 31, 1997,  516,662  Units of Limited  Partnership  interest  were
outstanding.  No  market  exists  for the  Units  of  Partnership  interest  and
therefore there exists no aggregate market value at December 31, 1997.

                    DOCUMENTS INCORPORATED BY REFERENCE: NONE

Transitional Small Business Disclosure Format:

                               Yes _____ No __X__


                                  Page 1 of 29

<PAGE>



                   PHOENIX LEASING CASH DISTRIBUTION FUND III,
                        A CALIFORNIA LIMITED PARTNERSHIP

                         1997 FORM 10-KSB ANNUAL REPORT


                                TABLE OF CONTENTS


                                                                            Page

                                     PART I

Item 1        Business ..................................................      3
Item 2        Properties ................................................      5
Item 3        Legal Proceedings .........................................      6
Item 4        Submission of Matters to a Vote of Security Holders .......      6


                                     PART II

Item 5.       Market for the Registrant's Securities and Related
              Security Holder Matters....................................      6
Item 6.       Management's Discussion and Analysis of Financial Condition
              and Results of Operations..................................      7
Item 7.       Financial Statements and Supplementary Data................      9
Item 8.       Disagreements on Accounting and Financial Disclosure
              Matters....................................................     26


                                    PART III

Item 9.       Directors and Executive Officers of the Registrant.........     26
Item 10.      Executive Compensation.....................................     27
Item 11.      Security Ownership of Certain Beneficial Owners and
              Management.................................................     28
Item 12.      Certain Relationships and Related Transactions.............     28


                                     PART IV

Item 13.      Exhibits, Financial Statement Schedules and Reports on
              Form 8-K...................................................     28


Signatures...............................................................     29


                                        2

<PAGE>



                                     PART I

Item 1.       Business.

General Development of Business.

         Phoenix  Leasing  Cash  Distribution  Fund III,  a  California  limited
partnership (the  Partnership),  was organized on June 29, 1987. The Partnership
was registered  with the Securities  and Exchange  Commission  with an effective
date of January 5, 1988 and shall continue to operate until its termination date
unless dissolved  sooner due to the sale of  substantially  all of the assets of
the  Partnership  or a vote  of  the  Limited  Partners.  The  Partnership  will
terminate  on  December  31,  1998.  The  General  Partner  is  Phoenix  Leasing
Incorporated,  a California  corporation.  The General Partner or its affiliates
also is or has been a general  partner in  several  other  limited  partnerships
formed to invest in capital equipment and other assets.

         The  initial   public   offering  was  for  400,000  units  of  limited
partnership  interest  at a price of $250 per unit with an option of  increasing
the public  offering  up to a maximum of 600,000  units.  The  Partnership  sold
528,151 units for a total  capitalization  of $132,037,750.  The public offering
terminated on December 31, 1990. Of the proceeds  received through the offering,
the  Partnership  has  incurred   $17,240,775  in  organizational  and  offering
expenses.

         Phoenix  Concept  Cablevision  of Indiana,  L.L.C.,  is a  wholly-owned
subsidiary  of the  Partnership.  The  Subsidiary  was formed  under the laws of
Delaware on February 2, 1996 to own and operate a cable television system in the
state of Indiana.

         Hereinafter,  these  entities  are  collectively  referred  to as  "the
Partnership."

Narrative Description of Business.

         The  Partnership  conducts  its  business  in  two  business  segments:
Equipment  Leasing  and  Financing  Operations,   and  Cable  Television  System
Operations. A discussion of these two segments follows:

Equipment Leasing and Financing Operations.

         From the initial  formation  of the  Partnership  through  December 31,
1997,  the total  investments  in equipment  leases and  financing  transactions
(loans),  including the  Partnership's  pro rata interest in investments made by
joint  ventures,  approximate  $219,986,000.  The average  initial  firm term of
contractual  payments from equipment subject to lease was 38.56 months,  and the
average  initial  net  monthly  payment  rate as a  percentage  of the  original
purchase price was 2.52%. The average initial firm term of contractual  payments
from loans was 59.38 months.

         The  Partnership's  principal  objective is to produce cash flow to the
investors on a  continuing  basis over the life of the  Partnership.  To achieve
this  objective,  the  Partnership  has  invested  in  various  types of capital
equipment and other assets to provide  leasing or financing of the same to third
parties, including Fortune 1000 companies and their subsidiaries,  middle-market
companies,  emerging growth  companies,  cable  television  system operators and
others,  on either a long-term or short-term  basis. The types of equipment that
the  Partnership  will invest in will include,  but is not limited to,  computer
peripherals, terminal systems, small computer systems, communications equipment,
IBM mainframes,  IBM-software compatible mainframes, office systems, CAE/CAD/CAM
equipment,  telecommunications  equipment,  cable television equipment,  medical
equipment, production and manufacturing equipment and software products.

         The Partnership has acquired  equipment  pursuant to either "Operating"
leases or  "Financing"  leases.  At December 31, 1997,  the remaining  equipment
owned by the Partnership was classified as Operating leases. The Partnership has
also  provided  financing  secured  by assets  in the form of notes  receivable.
Operating  leases are  generally  short-term  leases under which the lessor will
receive  aggregate  rental  payments in an amount that is less than the purchase
price of the equipment.  Financing leases were generally for a longer term under
which the  non-cancellable  rental  payments  due during the initial term of the
lease were at least sufficient to recover the purchase price of the equipment. A
significant  portion of the net offering  proceeds to the  Partnership  has been
invested in capital equipment subject to Operating leases.

         The Partnership  has made secured loans to emerging  growth  companies,
security  monitoring  companies,  cable television systems and other businesses.
These loans are asset-based and the Partnership  receives a security interest in
the assets financed.

                                        3

<PAGE>

         The  Partnership's  financing  activities have been concentrated in the
cable television  industry.  The Partnership has made secured loans to operators
of cable  television  systems for the  acquisition,  refinancing,  construction,
upgrade and extension of such systems located  throughout the United States. The
loans  to  cable  television  system  operators  are  secured  by  a  senior  or
subordinated  interest  in  the  assets  of the  cable  television  system,  its
franchise  agreements,  subscriber lists,  material  contracts and other related
assets. In some cases the Partnership has also received personal guarantees from
the owners of the systems.

         Several  of  the  cable   television   system  operators  to  whom  the
Partnership provided financing have experienced  financial  difficulties.  These
difficulties are believed to have been caused by several factors.  Some of these
factors are: a significant  reduction in the availability of debt from banks and
other  financial   institutions  to  finance  the  acquisition  and  operations,
uncertainties  related to future  government  regulation in the cable television
industry and the economic  recession in the United  States.  These  factors have
resulted in a  significant  decline in the demand for the  acquisition  of cable
systems and have further  caused an overall  decrease in the value of many cable
television  systems.  As a result of the above, many of the Partnership's  notes
receivable from cable television  system  operators have gone into default.  The
result is that the Partnership has not received scheduled  payments,  has had to
grant loan extensions, has experienced an increase in legal and collection costs
and in some cases,  has had to foreclose  on the cable  television  system.  The
impact of this has been a decrease  in the overall  return on the  Partnership's
investments in such notes.

         The  Partnership  has obtained an ownership  interest in several  cable
system joint ventures that it obtained through foreclosure.  These cable systems
have generated a positive  monthly cash flow and provided cash  distributions to
the Partnership during 1997 and 1996. The cable systems are managed and operated
by an  affiliate of the General  Partner.  Upon  foreclosure,  the assets of the
cable television system were booked at the lower of the Partnership's  cost (the
carrying value of the note) or the estimated fair value of the cable  television
system.

         Competition.  The General Partner has  concentrated  the  Partnership's
activities in the equipment leasing and financing industry, an area in which the
General  Partner has  developed an  expertise.  The computer  equipment  leasing
industry is  extremely  competitive.  The  Partnership  competes  with many well
established   companies  having   substantially   greater  financial  resources.
Competitive  factors include  pricing,  technological  innovation and methods of
financing (including use of various short-term and long-term financing plans, as
well as the  outright  purchase of  equipment).  Generally,  the impact of these
factors to the  Partnership  would be the  realization  of  increased  equipment
remarketing and storage costs, as well as lower residuals received from the sale
or remarketing of such equipment.

Cable Television Systems Operations.

         As of December 31, 1997, the Partnership's  only remaining  subsidiary,
Phoenix  Concept  Cablevision  of Indiana,  L.L.C.,  is in the cable  television
system  business  segment of the  Partnership's  operations.  The  Partnership's
previous majority-owned subsidiaries,  Phoenix Black Rock Cable J.V. and Phoenix
Grassroots Cable Systems, L.L.C., were also in this business segment.

         During the year ended  December  31,  1996,  the  Partnership  acquired
through foreclosure two cable television systems. Phoenix Concept Cablevision of
Indiana,  L.L.C. and Phoenix Grassroots Cable Systems, L.L.C. were formed to own
and operate these cable television systems.

         Phoenix  Concept   Cablevision  of  Indiana,   L.L.C.,  a  wholly-owned
subsidiary of the Partnership,  owns a cable  television  system in the state of
Indiana that was acquired through  foreclosure on a defaulted note receivable to
the Partnership on February 2, 1996. The net carrying value of the Partnership's
share of this defaulted note receivable was approximately $4,321,000,  which was
exchanged for a 100% ownership interest in this limited liability company.

         The cable  television  system owned by Phoenix  Concept  Cablevision of
Indiana, L.L.C. is located in the counties of Benton, Parke, Greene, Montgomery,
Putnam,  Boone,  Hendricks,  Clinton,  Hamilton,  and  Madison  in the  state of
Indiana. The cable television system consists of headend equipment and 166 miles
of plant passing approximately 9,449 homes with approximately 5,392 subscribers.
The Subsidiary operates under non-exclusive franchise agreements with several of
these counties and with communities located within these counties.

         Phoenix  Grassroots Cable Systems,  L.L.C., a majority owned subsidiary
of the  Partnership,  was  acquired  through  foreclosure  on a  defaulted  note
receivable  on February 14, 1996.  The net carrying  value of the  Partnership's
share of this  defaulted  note was exchanged for a 98.5%  ownership  interest in
this limited liability  company.  On August 30, 1996,  Phoenix  Grassroots Cable
Systems,  L.L.C.  sold  all  the  assets  used  in the  operation  of the  cable
television  system,  with a net carrying  value of $8.7  million,  receiving net
proceeds of approximately $8.9 million,  recognizing a gain  on the  sale of the

                                        4

<PAGE>



assets of the cable  television  system of $162,000.  As a result of the sale of
the cable television system's assets, the Subsidiary ceased operations.

         Phoenix  Black Rock Cable J.V.,  a  majority-owned  subsidiary  owned a
cable television system in the states of Nevada and California that was acquired
through foreclosure on a defaulted note receivable to the Partnership on January
10,  1992.  Phoenix  Black Rock Cable  J.V.  sold all of its assets  used in the
operation of the cable  television  system,  with a net  carrying  value of $1.4
million, on January 17, 1996,  receiving proceeds from the sale of the assets of
the cable system of $2.6 million, recognizing a gain on the sale of these assets
of $1.2  million.  As a result  of the  sale of the  cable  television  system's
assets, the Subsidiary ceased operations.

         Phoenix  Cable  Management  Inc.  (PCMI),  an  affiliate of the General
Partner,  provides  day  to day  management  services  in  connection  with  the
operation of the cable television systems.

         Cable  television  systems receive signals  transmitted by nearby radio
and television  broadcast  stations,  microwave relay systems and communications
satellites  and distribute  the signals to  subscribers  via coaxial cable.  The
subscribers pay a monthly fee to the cable television  system for such services.
Cable television  companies  operate under a non-exclusive  franchise  agreement
granted by each local government authority.  As part of the franchise agreement,
the  franchisee  typically pays a portion of the gross revenues of the system to
the local government.

         Any excess cash generated  from  operations of the cable system will be
used for upgrades and  improvements to the system in order to maximize the value
of the system.

         Competition.  The Partnership's  cable operations compete with numerous
other  companies  with far  greater  financial  resources.  In  addition,  cable
television  franchises are typically  non-exclusive and the Partnership could be
directly  competing with other cable television  systems.  Cable television also
competes  with  conventional   over-the-air   broadcast  television  and  direct
broadcast satellite  transmission.  Future  technological  developments may also
provide additional competitive factors.

         The Telecommunications Bill which was passed allows telephone companies
to enter  into  the  cable  television  business  and  vice-versa.  Large  cable
television  systems  that have  upgraded  their  systems  with fiber and two way
capabilities  may find themselves  getting a piece of the much larger  telephone
revenue.  For the  smaller  rural  cable  systems,  such as  those  owned by the
Partnership or through  investments in joint  ventures,  it is unlikely that the
Partnership will enter into telephone services nor will the telephone  companies
try to  seek  our  customers  in the  near  future.  The  systems  owned  by the
Partnership  are too small and not dense  enough to pay for the large  amount of
capital expenditures needed for these services.

         A  favorable  part of the  bill is that  small  cable  systems  will be
immediately deregulated from most regulations and that the definition of a small
cable operator is under 600,000 subscribers.  This will allow small operators to
raise rates if needed,  and eliminate the need to provide franchise  authorities
with costly  rate  filings  and  justifications.  The bill also allows the local
telephone companies to buy out small cable operators in their own region as well
as to joint venture with small cable operators.

         Please  see  Note  13 in the  Partnership's  financial  statements  for
financial information about the Partnership's business segments.

Other.

         A brief  description of the type of assets in which the Partnership has
invested as of December 31, 1997, together with information  concerning the uses
of assets is set forth in Item 2.


Item 2.       Properties.

Equipment Leasing and Financing Operations.

         The  Partnership  is engaged in the  equipment  leasing  and  financing
industry.  The primary  assets held by the  Partnership  are its  investments in
leases and loans,  either directly or through its investments in joint ventures,
to businesses located throughout the United States.


                                        5

<PAGE>



         As of  December  31,  1997,  the  Partnership  owns  equipment  and has
outstanding  loans to borrowers with an aggregate  original cost of $12,088,000.
The following  table  summarizes the type of equipment  owned or financed by the
Partnership,  including its pro rata interest in joint ventures, at December 31,
1997.

                                                                   Percentage of
         Asset Types                         Purchase Price(1)     Total Assets
------------------------------               -----------------     -------------
                                           (Amounts in Thousands)

Computer Mainframes                                $ 5,654              47%
Computer Peripherals                                 3,698              31
Reproduction Equipment                                 914               7
Financing Related to Cable Television Systems
  and Other Media                                      813               7
Capital Equipment Leased to Emerging Growth
  Companies                                            541               4
Small Computer Systems                                 468               4
                                                   -------             ---

TOTAL                                              $12,088             100%
                                                   =======             ===

(1) These amounts include the Partnership's pro rata interest in equipment joint
ventures of  $626,000  and  original  cost of  outstanding  loans of $813,000 at
December 31, 1997.

Cable Television System Operations.

     The  Subsidiaries'  principal  plants and  property  consist of  electronic
headend  equipment and its plant (cable).  The headends are located on land that
is owned or leased by the Subsidiaries.


Item 3.       Legal Proceedings.

         The   Registrant  is  not  a  party  to  any  material   pending  legal
proceedings.

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

         No matters were  submitted to a vote of limited  partners,  through the
solicitation of proxies or otherwise, during the year covered by this report.


                                     PART II

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

         (a)  The Registrant's  limited  partnership  interests are not publicly
              traded.   There  is  no  market  for  the   Registrant's   limited
              partnership interests and it is unlikely that any will develop.

         (b)  Approximate Number of Equity Security Investments:

                                                       Number of Unit Holders
                        Title of Class                 as of December 31, 1997
              ----------------------------------       -----------------------

              Limited Partners                                  12,541
              General Partner                                        1




                                        6

<PAGE>



Item 6.  Management's  Discussion  and  Analysis  of  Financial   Condition  and
         Results of Operations.


Results of Operations

         Phoenix  Leasing  Cash  Distribution  Fund III,  a  California  limited
partnership,  and Subsidiaries (the Partnership) reported net income of $770,000
during  the  years  ended  December  31,  1997,  as  compared  to net  income of
$4,542,000 during 1996. The decline in net income experienced in 1997,  compared
to 1996, is primarily attributable to declines in gain on sale of cable systems,
net  revenues  from  cable  television  system  operations  and  rental  income.
Additionally, the Partnership experienced a recovery of losses on receivables in
1996 which the Partnership did not have in 1997.

         Total revenues  decreased by $4,342,000 for the year ended December 31,
1997, as compared to the previous  year. The decrease in total revenues for 1997
is primarily  the result of a decline in revenues from the  Partnership's  cable
television  systems  business  segment.  Cable subscriber  revenue  decreased to
$1,710,000  in 1997  from  $3,114,000  in  1996.  Several  of the  Partnership's
subsidiaries  sold the assets of their cable  systems and ceased  operations  in
1996. During the year ended December 31, 1996,  Phoenix Black Rock Cable J.V., a
wholly  owned  subsidiary  of the  Partnership,  and  Phoenix  Grassroots  Cable
Systems, L.L.C., a majority owned subsidiary of the Partnership, sold the assets
of their cable  television  systems for a total of $11.5  million in cash.  As a
result of these sales the Partnership recognized a gain on sale of cable systems
of $1.3 million in 1996.

         During the year ended  December  31,  1997,  Phoenix  Grassroots  Cable
Systems, L.L.C. received proceeds of $169,000 which were held in escrow from the
sale of its assets. At the time of the sale, a portion of the proceeds were held
in escrow to cover  liabilities which may have arisen after the sale. The escrow
proceeds have been treated as an adjustment to the sales price, and as a result,
the  Partnership  recognized an additional gain on the sale of cable systems for
the year ended December 31, 1997 of $169,000.

         The decrease in rental income and interest income from notes receivable
for the year ended December 31, 1997,  compared to 1996, also contributed to the
decline in total  revenues.  Rental  income  decreased  by $530,000 and interest
income from notes  receivable  decreased by $732,000 for the year ended December
31,  1997,  compared to 1996.  The decrease in rental  income is  primarily  the
result of a reduction in the amount of equipment  owned by the  Partnership.  At
December 31, 1997, the Partnership owned equipment,  excluding the Partnership's
pro rata interest in joint  ventures,  with an aggregate  original cost of $10.6
million compared to $14.3 million at December 31, 1996.

         During the year ended  December 31, 1996,  the  Partnership  recognized
interest  income from notes  receivable  due to payoffs  which  exceeded the net
carrying  value on these notes.  There were no such payoffs during 1997 and as a
result,  the  Partnership  experienced  a decline  in  interest  income in notes
receivable.

         Total  expenses  decreased by $361,000 for the year ended  December 31,
1997,  compared to 1996.  All line items of expense have  decreased,  except for
provision  for losses on  receivable,  for the year ended  December 31, 1997, as
compared to 1996, with depreciation and amortization, as well as program service
and management fees contributing the most significant decreases. These decreases
are a result of several of the Partnership's  subsidiaries  selling their assets
and ceasing operations, as previously discussed.

         During the year ended  December 31, 1996, the  Partnership  reduced the
allowance  for loan losses by  $2,035,000  as a result of the  foreclosure  of a
cable television  system, in which the Partnership had extended credit.  The net
carrying value,  before allowance for loan losses,  for this note receivable was
carried over to the basis of the cable television system.  This reduction in the
allowance for loan losses was recognized as income during 1996.

         Inflation  affects the  Partnership  in relation to the current cost of
equipment  placed on lease and the residual  values  realized when the equipment
comes  off-lease and is sold.  During the last several years  inflation has been
low, thereby having very little impact upon the Partnership.

Liquidity and Capital Resources

         The   Partnership's   primary  source  of  liquidity   comes  from  its
contractual  obligations  with lessees and borrowers for fixed payment terms. As
the initial lease terms of the leases expire,  the Partnership  will continue to
renew,  remarket or sell the equipment.  The future liquidity of the Partnership
will depend upon the General Partner's success in collecting contractual amounts
and re-leasing and selling the  Partnership's equipment  as it comes  off lease.

                                        7

<PAGE>



As another source of liquidity,  the Partnership owns cable television  systems,
has  investments in foreclosed  cable systems joint ventures and  investments in
leasing joint ventures.

         The  Partnership  reported  net cash used by  operating  activities  of
$1,300,000 for the year ended December 31, 1997,  compared to net cash generated
by operating  activities of $1,528,000  during 1996.  This decrease is primarily
due to a decline in rental income and cable subscriber  revenue,  as well as the
payment of outstanding  liabilities  related to reimbursed  costs to the General
Partner.

         The Partnership  received  principal  payments from notes receivable of
$13,000 for the year ended December 31, 1997 compared to $2,020,000 during 1996.
Principal  payments  were  higher  during  1996  due to the  Partnership  having
received early payoffs from one of its notes.

         The  Partnership  received  proceeds  from  the sale of  securities  of
$151,000  for both the years ended  December 31, 1997 and 1996.  The  securities
sold for both years  consisted of common stock received  through the exercise of
stock warrants granted to the Partnership as part of a financing  agreement with
several emerging growth companies.

         As of December 31, 1997, the Partnership owned equipment held for lease
with an  aggregate  original  cost of  $2,857,000  and a net  book  value of $0,
compared to  $2,736,000  and $0,  respectively,  as of December  31,  1996.  The
General  Partner  is  actively  engaged,  on  behalf  of  the  Partnership,   in
remarketing and selling the Partnership's off-lease portfolio.

         The cash  distributed  to limited  partners  during  1997 and 1996 were
$11,625,000  and  $1,954,000,  respectively.  As a result,  the cumulative  cash
distributions  to the limited  partners are  $109,805,000  and $98,180,000 as of
December 31, 1997 and 1996,  respectively.  The General  Partner did not receive
cash distributions  during 1997 and 1996. The General Partner has elected not to
receive  payment,  at this  time,  for  its  share  of the  cash  available  for
distribution due to its negative capital account.

         The Partnership's  asset portfolio  continues to decline as a result of
the ongoing  liquidation  of assets,  and therefore it is expected that the cash
generated from  Partnership  leasing  operations will also decline.  As the cash
generated by  operations  continues to decline,  the rate of cash  distributions
made  to  limited  partners  will  also  decline.   The  Partnership   currently
distributes  on an annual basis with the first annual  distribution  having been
made on January 15, 1997.  As a result of the sale of certain  cable  television
systems and the  settlement  of an impaired  note during 1996,  the  Partnership
included  the excess  cash  provided  by these  events on the  January  15, 1997
distribution.

         Cash  generated  from leasing and financing  operations has been and is
anticipated  to continue to be sufficient to meet the  Partnership's  continuing
operational expenses and to provide for distributions to partners.

         Forward-looking statements in this report are made pursuant to the safe
harbor  provisions  of the  Private  Securities  Litigation  Reform Act of 1995.
Actual  results could differ from those  anticipated  by some of the  statements
made above. Limited Partners are cautioned that such forward-looking  statements
involve risks and uncertainties including without limitation the following:  (I)
the  Partnership's  plans are subject to change at any time at the discretion of
the General Partner of the Partnership,  (ii) future technological  developments
in the industry in which the Partnership operates, (iii) competitive pressure on
pricing or services,  (iv) substantial  customer defaults or cancellations,  (v)
changes  in  business  conditions  and the  general  economy,  (vi)  changes  in
government regulations affecting the Partnership's core businesses and (vii) the
ability of the Partnership to sell its remaining assets.


                                        8

<PAGE>





















        Item 7. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                       PHOENIX LEASING CASH DISTRIBUTION FUND III,
                    A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARIES

                            YEAR ENDED DECEMBER 31, 1997
















                                        9

<PAGE>










                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                    ----------------------------------------


To the  Partners of Phoenix  Leasing  Cash  Distribution  Fund III, a California
limited partnership:

We have audited the accompanying  consolidated  balance sheet of Phoenix Leasing
Cash Distribution Fund III, a California limited partnership and Subsidiaries as
of December  31, 1997 and the related  consolidated  statements  of  operations,
partners'  capital  and cash  flows for the year  then  ended.  These  financial
statements  are  the  responsibility  of  the  Partnership's   management.   Our
responsibility  is to  express  an opinion  on these  financial  statements  and
schedule  based  on  our  audit.  The  consolidated  statements  of  operations,
partners'  capital and cash flows of Phoenix Leasing Cash  Distribution Fund III
as of December  31,  1996,  were  audited by other  auditors  whose report dated
January 20, 1997, expressed an unqualified opinion on these statements.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of Phoenix Leasing Cash
Distribution Fund III, a California  limited  partnership and Subsidiaries as of
December 31, 1997 and the results of their  operations  and their cash flows for
the  year  then  ended,  in  conformity  with  generally   accepted   accounting
principles.

                                                          ARTHUR ANDERSEN LLP

San Francisco, California
  January 23, 1998


                                       10

<PAGE>



                   PHOENIX LEASING CASH DISTRIBUTION FUND III,
                A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                 (Amounts in Thousands Except for Unit Amounts)

                                                               December 31, 1997
                                                               -----------------
ASSETS

Cash and cash equivalents                                            $ 3,072

Accounts receivable (net of allowance for losses on
   accounts receivable of $73)                                           192

Notes receivable (net of allowance for losses on notes
   receivable of $604)                                                    45

Equipment on operating leases and held for lease (net of
   accumulated depreciation of $10,017)                                 --

Cable systems, property and equipment (net of accumulated
   depreciation of $521)                                               3,086

Cable subscriber lists (net of accumulated amortization of $380)       1,135

Investment in joint ventures                                             310

Capitalized acquisition fees (net of accumulated amortization
   of $8,266)                                                             10

Other assets                                                              38
                                                                     -------

     Total Assets                                                    $ 7,888
                                                                     =======

LIABILITIES AND PARTNERS' CAPITAL

Liabilities:

   Accounts payable and accrued expenses                             $   608
                                                                     -------

     Total Liabilities                                                   608
                                                                     -------

Partners' Capital:

   General Partner                                                       (18)

   Limited Partners, 600,000 units authorized, 528,151 units
     issued, 516,662 units outstanding                                 7,298
                                                                     -------

     Total Partners' Capital                                           7,280
                                                                     -------

     Total Liabilities and Partners' Capital                         $ 7,888
                                                                     =======

                     The accompanying notes are an integral
                           part of these statements.

                                       11

<PAGE>



                   PHOENIX LEASING CASH DISTRIBUTION FUND III,
                A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
               (Amounts in Thousands Except for Per Unit Amounts)

                                                For the Years Ended December 31,
                                                         1997       1996
                                                         ----       ----
INCOME

   Rental income                                       $   332    $   862

   Gain on sale of cable systems                           169      1,347

   Gain on sale of equipment                                74         68

   Interest income, notes receivable                       107        839

   Cable subscriber revenue                              1,710      3,114

   Equity in earnings (losses) from joint
     ventures, net                                         (83)       148

   Gain on sale of securities                              151        151

   Other income                                            273        546
                                                       -------    -------

     Total Income                                        2,733      7,075
                                                       -------    -------

EXPENSES

   Depreciation and amortization                           457      1,613

   Lease related operating expenses                         31         93

   Program service, cable system                           556        906

   Management fees to General Partner and
     affiliate                                             108        724

   Reimbursed administrative costs to General
     Partner                                               125        176

   Provision for (recovery of) losses on
     receivables                                            43     (2,294)

   Legal expense                                            83        259

   General and administrative expenses                     566        853
                                                       -------    -------

     Total Expenses                                      1,969      2,330
                                                       -------    -------

NET INCOME BEFORE MINORITY INTEREST                        764      4,745

   Minority Interest in losses (earnings)
     of subsidiary                                           6       (203)
                                                       -------    -------

NET INCOME                                             $   770    $ 4,542
                                                       =======    =======

NET INCOME PER LIMITED PARTNERSHIP UNIT                $  1.48    $  8.70
                                                       =======    =======

ALLOCATION OF NET INCOME:

     General Partner                                   $     7    $    46

     Limited Partners                                      763      4,496
                                                       -------    -------

                                                       $   770    $ 4,542
                                                       =======    =======

                     The accompanying notes are an integral
                            part of these statements.


                                       12

<PAGE>



                   PHOENIX LEASING CASH DISTRIBUTION FUND III,
                A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
                 (Amounts in Thousands Except for Unit Amounts)


                                  General
                                  Partner's Limited Partners' Unrealized  Total
                                   Amount   Units     Amount    Gains    Amount
                                  --------- ----------------- ---------- ------

Balance, December 31, 1995         $  (71) 516,716  $ 15,618   $  557  $ 16,104

Distributions to partners ($3.78
   per limited partnership unit)      --       --     (1,954)     --     (1,954)

Change for the year in unrealized
   gain on available-for-sale
   securities                         --       --       --       (557)     (557)

Net income                             46      --      4,496      --      4,542
                                   ------  --------  -------   ------  --------

Balance, December 31, 1996            (25)  516,716   18,160      --     18,135

Distributions to partners ($22.50
   per limited partnership unit)      --       --    (11,625)     --    (11,625)

Redemptions of capital                --        (54)    --        --       --

Net income                              7      --        763      --        770
                                   ------  --------  -------   ------  --------

Balance, December 31, 1997         $  (18)  516,662  $ 7,298   $  --   $  7,280
                                   ======  ========  =======   ======  ========


                     The accompanying notes are an integral
                           part of these statements.

                                       13

<PAGE>



                   PHOENIX LEASING CASH DISTRIBUTION FUND III,
                A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Amounts in Thousands)

                                            For the Years Ended December 31,
                                                    1997       1996
                                                    ----       ----
Operating Activities:
   Net income                                    $    770   $  4,542
   Adjustments to reconcile net income to
     net cash provided (used) by operating
     activities:
       Depreciation and amortization                  457      1,613
       Gain on sale of cable systems                 (169)    (1,347)
       Gain on sale of equipment                      (74)       (68)
       Gain on sale of securities                    (151)      (151)
       Equity in losses (earnings) from joint
         ventures, net                                 83       (148)
       Provision for (recovery of) early
         termination, financing leases               --          (81)
       Provision for (recovery of) losses on
         notes receivable                            --       (2,260)
       Provision for losses on accounts
         receivable                                    43         47
       Minority interest in earnings (losses)
         of subsidiary                                 (6)       203
       Increase in accounts receivable                 (7)      (222)
       Decrease in accounts payable and
         accrued expenses                          (2,223)      (977)
       Decrease (increase) in other assets            (23)         3
       Other                                         --          374
                                                 --------   --------

Net cash provided (used) by operating
  activities                                       (1,300)     1,528
                                                 --------   --------

Investing Activities:
   Principal payments, notes receivable                13      2,020
   Proceeds from sale of cable systems                169     11,510
   Proceeds from sale of equipment                     75         79
   Proceeds from sale of securities                   151        151
   Distributions from joint ventures                  154        343
   Cable systems, property and equipment             (153)      (337)
                                                 --------   --------

Net cash provided by investing activities             409     13,766
                                                 --------   --------

Financing Activities:
   Payments of principal, notes payable              --         (729)
   Distributions to partners                      (11,625)    (1,954)
   Distributions to minority partners                  (3)      (639)
                                                 --------   --------

Net cash used by financing activities             (11,628)    (3,322)
                                                 --------   --------

Increase (decrease) in cash and cash
  equivalents                                     (12,519)    11,972
Cash and cash equivalents, beginning
  of period                                        15,591      3,619
                                                 --------   --------

Cash and cash equivalents, end of period         $  3,072   $ 15,591
                                                 ========   ========

Supplemental Cash Flow Information:
   Cash paid for interest expense                $   --     $     26

                     The accompanying notes are an integral
                           part of these statements.

                                       14

<PAGE>



                   PHOENIX LEASING CASH DISTRIBUTION FUND III,
                A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 1997


Note 1.       Organization and Partnership Matters.

         Phoenix  Leasing  Cash  Distribution  Fund III,  a  California  limited
partnership (the Partnership), was formed on July 30, 1985, to invest in capital
equipment  of various  types and to lease  such  equipment  to third  parties on
either a long-term or  short-term  basis,  and to provide  financing to emerging
growth  companies  and cable  television  system  operators.  The  Partnership's
minimum  investment  requirements  were met January 21, 1988. The  Partnership's
termination date is December 31, 1998.

         The  Partnership  has also  made  investments  in joint  ventures  with
affiliated  partnerships  managed  by the  General  Partner  for the  purpose of
reducing the risks of financing or acquiring certain capital equipment leased to
third parties. (See Note 7.)

         The Partnership's  current and prior  subsidiaries,  Phoenix Black Rock
Cable  J.V.,  Phoenix  Concept  Cablevision  of  Indiana,   L.L.C.  and  Phoenix
Grassroots  Cable  Systems,  L.L.C.  were  formed  to  acquire  the  assets  and
liabilities of specific foreclosed cable television systems that the Partnership
had extended  credit.  The acquisition of assets and liabilities of the borrower
by the subsidiaries  through  foreclosure were accounted for using the "purchase
method" of  accounting  in which the  transfer  price was  allocated  to the net
assets in accordance  with the relative fair market value of the assets acquired
and liabilities assumed.

         On January 10, 1992, the Partnership foreclosed upon a cable television
system in Nevada  and  California  that was in default  on a  subordinated  loan
payable to the Partnership with a carrying amount of approximately  $1.6 million
which  was  carried  over  to the  basis  in the  cable  system.  As part of the
settlement  between the Partnership and the borrower,  the borrower  transferred
ownership  of  all  of  its  assets  and  liabilities  to a  subsidiary  of  the
Partnership,  Phoenix  Black Rock Cable J.V.  which was formed under the laws of
California  on  January  10,  1992  to own  and  operate  the  foreclosed  cable
television system.

         On January 17, 1996,  Phoenix  Black Rock Cable J.V., a majority  owned
subsidiary of the  Partnership,  sold all of the assets used in the operation of
its cable  television  system  receiving  net  proceeds  of  approximately  $2.6
million,  recognizing  a gain on the sale of the assets of this cable  system of
$1.2 million.  As a result of the sale of the cable television  system's assets,
the Subsidiary ceased operations.

         On February 2, 1996, the Partnership and Phoenix Concept Cablevision of
Indiana,  L.L.C.  (Phoenix Concept), a newly formed limited liability company in
the State of Delaware on November 9, 1995 and a wholly owned  subsidiary  of the
Partnership,  entered  into  a  Commercial  Code  Section  9505  Agreement  (the
"Agreement")  with Concept  Cablevision  of Indiana,  Inc.,  a cable  television
company that the Partnership had extended credit. The Agreement, which closed on
February 2, 1996, allowed Phoenix Concept to foreclose upon the cable television
system (the collateral for the note) of Concept Cablevision of Indiana, Inc. The
Partnership's  net carrying value for this  outstanding note receivable was $4.3
million at  February 2, 1996,  which was carried  over to the basis in the cable
system and exchanged  for a 100%  ownership  interest in this limited  liability
company.  The Partnership had no related allowance for this note receivable.  In
addition,  Phoenix  Concept made a cash payment of $200,000 and assumed  certain
liabilities,   including  a  note   payable  of  $600,000   and  certain   other
miscellaneous accounts payable as specified in the agreement.

         Phoenix Concept Cablevision of Indiana,  L.L.C. has accepted and agreed
to the terms stated on a Letter of Intent dated  December 1, 1997 to sell all or
substantially  all of its  assets  with a  carrying  value  of $4.2  million  at
December 31, 1997 for $6 million.  Cash, accounts  receivables,  automobiles and
certain  other   miscellaneous   items,   currently  owned  by  Phoenix  Concept
Cablevision  of Indiana,  L.L.C.  are  excluded  from this sale.  This Letter of
Intent is subject to a definitive  asset purchase  agreement  which is currently
being negotiated with the potential buyer.

         On February 14, 1996,  the  Partnership  and Phoenix  Grassroots  Cable
Systems,  L.L.C. (Phoenix Grassroots),  a newly formed limited liability company
in the  State of  Delaware  on  February  9,  1996 and  majority  owned  (98.5%)
subsidiary of the  Partnership,  entered in a Settlement  Agreement and Releases
(the  "Amendment")  with  Grassroots  Cable  Systems,  Inc., a cable  television
company that the Partnership had extended credit.  The Agreement,  which  closed

                                       15

<PAGE>



on  February  14,1996,  allowed  the  Partnership  to  foreclose  upon the cable
television  system (the  collateral  for the note) of Grassroots  Cable Systems,
Inc. The Partnership's net carrying value, before allowance for loan losses, for
this  outstanding  note receivable was $9.0 million at February 14, 1996,  which
was  carried  over to the basis in the cable  system and  exchanged  for a 98.5%
ownership  interest in this limited  liability  company.  The Partnership had an
allowance  for loan  losses  of $2.0  million  for  this  note  receivable.  The
Partnership reduced its allowance for loan losses by $2.0 million as a result of
the  acquisition of this cable system.  This reduction in the allowance for loan
losses was  recognized  as income  during the year ended  December 31, 1996.  In
addition,  Phoenix  Grassroots  assumed certain  liabilities  and  miscellaneous
payables as specified in the agreement.

         On August 30, 1996, Phoenix Grassroots Cable Systems,  L.L.C., sold the
assets of the cable  television  system  receiving net proceeds of approximately
$8.9  million,  recognizing  a gain on sale of these  assets of  $162,000.  As a
result of the sale of the  cable  television  system's  assets,  the  Subsidiary
ceased  operations.  On September 2, 1997, the Partnership  received  additional
proceeds of $169,000, which had been held in escrow for the sale of this system,
and recognized a gain of $169,000 during the year ended December 31, 1997.

         For financial reporting purposes, Partnership income shall be allocated
as follows:  (a) first,  to the General  Partner until the cumulative  income so
allocated is equal to the cumulative  distributions to the General Partner,  (b)
second, one percent to the General Partner and 99% to the Limited Partners until
the cumulative  income so allocated is equal to any cumulative  Partnership loss
and syndication  expenses for the current and all prior accounting periods,  and
(c) the balance,  if any, to the Unit Holders.  All Partnership  losses shall be
allocated one percent to the General Partner and 99% to the Unit Holders.

         The General  Partner is entitled  to receive  five  percent of all cash
distributions  until the Limited  Partners have recovered  their initial capital
contributions plus a cumulative return of 12% per annum. Thereafter, the General
Partner  will  receive 15% of all cash  distributions.  In the event the General
Partner has a deficit  balance in its capital account at the time of partnership
liquidation, it will be required to contribute the amount of such deficit to the
Partnership.  During 1996 and 1997 the General Partner did not draw its share of
the 1996 and 1997 cash available for distribution.

         As compensation for management services, the General Partner receives a
fee payable  quarterly,  subject to certain  limitations,  in an amount equal to
3.5% of the Partnership's gross revenues for the quarter from which such payment
is being made, which revenues shall include rental receipts,  maintenance  fees,
proceeds from the sale of equipment and interest income.

         Phoenix  Cable  Management  Inc.  (PCMI),  an  affiliate of the General
Partner,  provides  day  to day  management  services  in  connection  with  the
operation of the Subsidiaries.  The Subsidiaries will pay a management fee equal
to four and one-half  percent of the systems'  monthly  gross  revenue for these
services.  Revenues  subject to a management fee at the joint venture level will
not be subject to management fees at the Partnership level.

         The General Partner is compensated for services performed in connection
with the analysis of equipment  available to the  Partnership,  the selection of
such assets and the acquisition  thereof,  including  negotiating and concluding
agreements with equipment  manufacturers and obtaining leases for the equipment.
As compensation for such acquisition services,  the General Partner will receive
a fee equal to four percent of (a) the purchase  price of equipment  acquired by
the Partnership,  or equipment leased by manufacturers,  the financing for which
is provided by the Partnership,  or (b) financing provided to businesses such as
cable operators, or emerging growth companies,  payable upon such acquisition or
financing,  as the case may be. Such acquisition fees are amortized  principally
on a straight-line basis.

         Compensation  paid and  distributions  made to the General  Partner and
affiliates for the years ended December 31,
                                           1997            1996
                                           ----            ----
                                          (Amounts in Thousands)

         Management fees                 $     108      $     724
                                         ---------      ---------

                                         $     108      $     724
                                         =========      =========

         Redemptions  of Limited  Partner  units will only be made to the extent
permitted by applicable laws and regulations,  the Partnership Agreement and if,
in the  opinion  of the  General  Partner,  it is in the  best  interest  of the
Partnership. In addition, redemptions will not be made if such redemptions would
cause the  Partnership to be categorized as a publicly  traded  partnership  for
federal income tax purposes.

                                       16

<PAGE>



         The  Partnership  will acquire such  limited  partnership  units for an
amount  equal to 85% of the  "accrual  basis  capital  account"  relating to the
redeemed units.  The  Partnership  will retain the remaining 15% of the "accrual
basis capital account" relating to the redeemed units.  Redemptions  retained by
the  Partnership  were $0 during the years  ended  December  31,  1997 and 1996.
"Accrual  basis capital  account" is computed in  accordance  with the books and
records  regularly   maintained  by  the  Partnership  for  financial  reporting
purposes, utilizing the accrual method of accounting.


Note 2.       Summary of Significant Accounting Policies.

         Principles of  Consolidation.  The 1997 and 1996  financial  statements
include  the  accounts of Phoenix  Leasing  Cash  Distribution  Fund III and its
wholly owned  subsidiary,  Phoenix  Concept  Cablevision of Indiana,  L.L.C.  (a
Delaware limited liability company). Hereinafter these entities are collectively
referred to as "the  Partnership."  The 1996  financial  statements  include the
accounts of the  Partnership  and its majority owned  subsidiary,  Phoenix Black
Rock Cable J.V. and Phoenix  Grassroots  Cable Systems,  L.L.C.  All significant
intercompany accounts and transactions have been eliminated in consolidation.

         Leasing Operations.  The Partnership's  leasing operations consisted of
financing and operating  leases.  The financing  method of accounting for leases
records as  unearned  income at the  inception  of the lease,  the excess of net
rentals  receivable  and estimated  residual value at the end of the lease term,
over the cost of equipment leased. Unearned income is credited to income monthly
over the term of the lease on a declining basis to provide an approximate  level
rate of return on the unrecovered  cost of the investment.  Initial direct costs
of  consummating  new  leases  are  capitalized  and  included  in the  cost  of
equipment.  The  Partnership  reviews its  estimates of residual  value at least
annually.  If a decline in value has occurred which is other than  temporary,  a
reduction in the investment is recognized currently.

         Under the  operating  method  of  accounting  for  leases,  the  leased
equipment  is recorded as an asset at cost and  depreciated.  The  Partnerhsip's
leased  equipment is depreciated  primarily  using an  accelerated  depreciation
method over the estimated useful life of six years.

         The  Partnership's  policy  is to  review  periodically  the  remaining
expected  economic  life of its  rental  equipment  in  order to  determine  the
probability of recovering its  undepreciated  cost. Such reviews address,  among
other  things,  recent  and  anticipated  technological  developments  affecting
computer  equipment and  competitive  factors  within the computer  marketplace.
Where subsequent  reviews of the equipment  portfolio indicate that rentals plus
anticipated  sales proceeds will not exceed  expenses in any future period,  the
Partnership   revises  its  depreciation  policy  and  provides  for  additional
depreciation  as  appropriate.  As  a  result  of  such  periodic  reviews,  the
Partnership recognized additional depreciation expense of $0 and $26,000 ($0 and
$.05 per  limited  partnership  unit) for the year ended  December  31, 1997 and
1996, respectively.

         Rental  income  for the  year is  determined  on the  basis  of  rental
payments due for the period under the terms of the lease.  Maintenance,  repairs
and minor renewals of the leased equipment are charged to expense.

         Cable  Television  System  Operations.  The  consolidated  statement of
operations  includes the operating  activity of one Subsidiary,  Phoenix Concept
Cablevision  of Indiana,  L.L.C.  for the year ended December 31, 1997 and 1996.
The cable  television  system owned by Phoenix  Concept  Cablevision of Indiana,
L.L.C. is located in the counties of Benton, Parke, Greene, Montgomery,  Putnam,
Boone,  Hendricks,  Clinton,  Hamilton and Madison in the state of Indiana.  The
cable  television  system  consists of headend  equipment and 166 miles of plant
passing  approximately  9,449 homes with approximately  5,392  subscribers.  The
Subsidiary  operates under  non-exclusive  franchise  agreements with several of
these counties and with communities located within these counties.

         Phoenix  Black  Rock  Cable  J.V.  is  included  in  the   consolidated
statements  for the year ended December 31, 1996.  The cable  television  system
owned by Phoenix Black Rock Cable, J.V. was located in the counties of Clark and
Nye in the State of Nevada and in the county of Inyo in the State of California.
The cable television system consisted of headend equipment in five locations and
156 miles of plant passing approximately 2,900 homes and had approximately 1,820
cable   subscribers.   The  Subsidiary's  cable  television  system  serves  the
communities  of  Pahrumph,  Beatty and Blue  Diamond in Nevada and Cow Creek and
Grapevine  in  California.  The  Subsidiary  operates  under  one  non-exclusive
franchise  agreement with the county of Nye in Nevada, and under a National Park
Service Permit for Death Valley, California.


                                       17

<PAGE>



         Phoenix  Grassroots  Cable  Systems,  L.L.C.  is also  included  in the
consolidated  statements  for the  year  ended  December  31,  1996.  The  cable
television system owned by Phoenix Grassroots Cable Systems,  L.L.C. was located
in the counties of Franklin,  Hancock,  Kennebec,  Knox, Oxford and Penobscot in
the  State of Maine and the  counties  of  Carroll,  Coos,  Grafton,  Merrimack,
Strafford  and  Sullivan  in the State of New  Hampshire.  The cable  television
system   consisted  of  headend   equipment  and  676  miles  of  plant  passing
approximately 12,429 homes with approximately 7,197 subscribers.  The Subsidiary
operates under non-exclusive franchise agreements with several of these counties
and with communities located within these counties.

         Cable  systems,  property  and  equipment  are  depreciated  using  the
straight-line  method over estimated service lives ranging from five to thirteen
years.  Replacements,  renewals and improvements are capitalized and maintenance
and repairs are charged to expense as incurred.

         Cable  subscriber  lists are amortized using the  straight-line  method
over an estimated period of eight years.

         Cable  television  services are billed  monthly in advance.  Revenue is
deferred and recognized as the services are provided.

         Cash and Cash Equivalents.  Cash and cash equivalents  include deposits
at banks,  investments in money market funds and other highly liquid  short-term
investments with original maturities of less than 90 days.

         Portfolio  Valuation  Methodology.  The Partnership  uses the portfolio
method of accounting for the net realizable value of the Partnership's equipment
portfolio.

         Credit  and  Collateral.   The   Partnership's   activities  have  been
concentrated  in  the  equipment  leasing  and  financing  industry.   A  credit
evaluation  is performed  by the General  Partner for all leases and loans made,
with  the  collateral  requirements  determined  on a  case-by-case  basis.  The
Partnership's  loans are generally  secured by the equipment or assets  financed
and, in some cases,  other collateral of the borrower.  In the event of default,
the  Partnership  has the right to foreclose upon the collateral  used to secure
such loans.

         Notes  Receivable.  Notes  receivable  generally  are  stated  at their
outstanding unpaid principal balances, which includes accrued interest. Interest
income is accrued on the unpaid principal balance.

         Impaired Notes Receivable.  Generally,  notes receivable are classified
as impaired and the accrual of interest on such notes are discontinued  when the
contractual  payment of  principal  or  interest  has become 90 days past due or
management has serious doubts about further  collectibility  of the  contractual
payments,  even  though  the  loan  may  currently  be  performing.  When a note
receivable is classified as impaired,  income  recognition is discontinued.  Any
payments  received  subsequent  to the  placement of the note  receivable  on to
impaired  status  will  generally  be  applied  towards  the  reduction  of  the
outstanding  note  receivable  balance,  which may  include  previously  accrued
interest as well as principal.  Once the principal and accrued  interest balance
has been reduced to zero,  the  remaining  payments  will be applied to interest
income.  Generally,  notes  receivable  are restored to accrual  status when the
obligation is brought current,  has performed in accordance with the contractual
terms for a  reasonable  period of time and the ultimate  collectibility  of the
total contractual principal and interest is no longer in doubt.

         Allowance for Losses.  An allowance for losses is  established  through
provisions for losses charged  against  income.  Notes  receivable  deemed to be
uncollectible  are charged  against the  allowance  for losses,  and  subsequent
recoveries, if any, are credited to the allowance.

         Investment in Joint  Ventures.  Minority  investments  in net assets of
equipment joint ventures and foreclosed cable systems joint ventures reflect the
Partnership's  equity  basis  in  the  ventures.  Under  the  equity  method  of
accounting,  the  original  investment  is  recorded  at  cost  and is  adjusted
periodically  to recognize the  Partnership's  share of earnings,  losses,  cash
contributions and cash distributions  after the date of acquisition.  Foreclosed
cable  systems  were  non-performing  notes  receivable  where  foreclosure  has
occurred.

         Reclassification.  Certain  1996  amounts  have  been  reclassified  to
conform to the 1997 presentation.

         Use of Estimates. The preparation of financial statements in conformity
with  generally  accepted  accounting  principles  requires  management  to make
estimates  and  assumptions  that affect the amounts  reported in the  financial
statements  and  accompanying  notes.  Actual  results  could  differ from those
estimates.

                                       18
<PAGE>



Note 3.       Accounts Receivable.

         Accounts receivable consist of the following at December 31:

                                                                    1997
                                                                    ----
                                                          (Amounts in Thousands)

         Cable system service                                    $     155
         Lease payments                                                 56
         Other                                                          37
         General Partner                                                17
                                                                 ---------
                                                                       265

         Less:  allowance for losses on accounts receivable            (73)
                                                                 ---------

              Total                                              $     192
                                                                 =========


Note 4.       Notes Receivable.

         Notes receivable consist of the following at December 31:

                                                                    1997
                                                                    ----
                                                          (Amounts in Thousands)


         Notes receivable from cable television system
           operators with stated interest ranging from
           12% to 13% per annum, receivable in installments
           ranging from 60 to 117 months, collateralized by
           a security interest in the cable system assets.
           These notes have a graduated repayment schedule
           followed with a balloon payment.                      $    649

         Less:  allowance for losses on notes receivable             (604)
                                                                 --------

           Total                                                 $     45
                                                                 ========

         The  Partnership's   notes  receivable  from  cable  television  system
operators  provide for a monthly payment rate in an amount that is less than the
contractual  interest  rate.  The  difference  between the payment  rate and the
contractual interest rate is added to the principal and therefore deferred until
the maturity date of the note. Upon maturity of the note, the original principal
and  deferred  interest is due and  payable in full.  Although  the  contractual
interest  rates may be higher,  the amount of interest  being  recognized on the
Partnership's  outstanding notes receivable to cable television system operators
is being limited to the amount of the payments  received,  thereby deferring the
recognition of a portion of the deferred interest until the loan is paid off.

         At  December  31,  1997,  the  recorded  investment  in notes  that are
considered  to be impaired is  $649,000,  for which the  related  allowance  for
losses is $604,000. The average recorded investment in impaired loans during the
years  ended  December  31,  1997  and  1996  was  approximately   $652,000  and
$1,530,000, respectively. The Partnership recognized interest income totaling $0
and  $63,000  from these  impaired  notes  during the years ended 1997 and 1996,
respectively.

         During the year ended  December 31, 1996,  the  Partnership  received a
settlement  on one of its  notes  receivable  from  a  cable  television  system
operator which was considered to be impaired. The Partnership received a partial
recovery of $1,008,000 as a settlement  which was applied towards the $1,781,000
outstanding  note  receivable  balance.  The  remaining  balance of $773,000 was
written-off  through its related  allowance  for loan losses  provided  for in a
previous  year.  Upon receipt of the  settlement  of this note  receivable,  the
Partnership  reduced the  remaining  allowance  for loan losses for this note by
$150,000  during  the year  ended  December  31,  1996.  This  reduction  in the
allowance for loan losses was recognized as income during the period.


                                       19

<PAGE>



         The Partnership also wrote-off the outstanding note receivable  balance
of $243,000  during the year ended December 31, 1996 from a security  monitoring
system  company which was  considered to be impaired.  This note  receivable had
been fully reserved for in a previous year.

         During  the  year  ended  December  31,  1996,  the  Partnership   also
foreclosed on two notes  receivable from cable  television  system  operators as
discussed in Note 1.

         The activity in the allowance for losses on notes receivable during the
years ended December 31, is as follows:

                                                               1997
                                                               ----
                                                      (Amounts in Thousands)
         Beginning balance                                  $     604
              Provision for (recovery of) losses                  -
              Write downs                                         -
                                                            ---------
         Ending balance                                     $     604
                                                            =========


Note 5.       Equipment on Operating Leases.

         Equipment on lease consists primarily of computer peripheral  equipment
and  computer   mainframes  subject  to  operating  and  financing  leases.  The
Partnership's  operating  leases are for initial lease terms of approximately 12
to 48 months.

         The Partnership has agreements with one  manufacturer of its equipment,
whereby such  manufacturer will undertake to remarket  off-lease  equipment on a
best  efforts  basis.  These  agreements  permit the  Partnership  to assume the
remarketing  function directly if certain conditions contained in the agreements
are not met.  For  their  remarketing  services,  the  manufacturers  are paid a
percentage of net monthly rentals.

         The  Partnership has also entered into direct lease  arrangements  with
lessees  consisting of Fortune 1000 companies and other  businesses in different
industries  located  throughout  the  United  States.   Generally,   it  is  the
responsibility  of the lessee to provide  maintenance on leased  equipment.  The
General Partner  administers the equipment  portfolio of leases acquired through
the direct leasing program. Administration includes the collection of rents from
the lessees and remarketing of the equipment.

         Minimum rentals to be received on  noncancellable  operating leases for
the years ended December 31 are as follows:

                                                                Operating
                                                                ---------
                                                         (Amounts in Thousands)

         1998..........................................          $    31
                                                                 -------

         Totals                                                  $    31
                                                                 =======


Note 6.       Cable Systems, Property and Equipment.

         The cost of cable  systems,  property,  and  equipment  and the related
accumulated depreciation consist of the following at December 31:

                                       20

<PAGE>



                                                                  1997
                                                                  ----
                                                         (Amounts in Thousands)

         Distributions systems                                  $  2,362
         Headend equipment                                         1,065
         Automobiles                                                  97
         Land                                                         41
         Building                                                     42
                                                                --------
                                                                   3,607
         Less:  accumulated depreciation                            (521)
                                                                --------

         Net property, cable systems and equipment              $  3,086
                                                                ========

         Depreciation  expense totaled  approximately  $282,000 and $583,000 for
the years ended December 31, 1997 and 1996, respectively.


Note 7.       Investment in Joint Ventures.

Equipment Joint Ventures.

         The  Partnership  owns a limited or  general  partnership  interest  in
equipment joint ventures.  These  investments are accounted for using the equity
method of accounting.  The other partners of the ventures are entities organized
and managed by the General Partner.

         The  purpose of the joint  ventures is the  acquisition  and leasing of
various types of equipment.  The Partnership is  participating  in the following
equipment joint ventures:
                                                                Weighted
              Joint Venture                                Percentage Interest
              -------------                                -------------------

         Leveraged Joint Venture 1990-1                           35.29%
         Phoenix Joint Venture 1994-1                              4.64

         An analysis of the Partnership's investment in equipment joint ventures
is as follows:

                                                                          Net
                   Net Investment                                     Investment
                    at Beginning               Equity in                 at End
Date                 of Period   Contributions Earnings  Distributions of Period
----               ------------- ------------- --------  ------------- ---------
                                      (Amounts in Thousands)

Year Ended
 December 31, 1996    $    117      $    0     $   158      $   230     $   45
                       ========      ======     =======      =======     ======

Year Ended
 December 31, 1997    $     45      $    0     $    30      $   133     $  (58)
                       ========      ======     =======      =======     ======

         The aggregate  combined  financial  information of the equipment  joint
ventures is presented as follows:

                                                           December 31, 1997
                                                           -----------------
                                                         (Amounts in Thousands)

         Assets                                                 $  1,055
         Liabilities                                                 409
         Partners' Capital                                           646


                                       21

<PAGE>



                                             For the Years Ended December 31,
                                               1997                  1996
                                               ----                  ----
                                                  (Amounts in Thousands)

         Revenue                            $  1,571              $  3,338
         Expenses                              1,631                 1,961
         Net Income (Loss)                       (60)                1,377

         As of December 31, 1997,  the  Partnership's  pro rata  interest in the
equipment joint ventures' net book value of off-lease equipment was $0.

         The General Partner earns a management fee of 3.5% of the Partnership's
respective interest in gross revenues of each equipment joint venture.  Revenues
subject  to  management  fees at the  joint  venture  level are not  subject  to
management fees at the Partnership level.

Foreclosed Cable Systems Joint Ventures.

         The  Partnership   foreclosed  upon  nonperforming   outstanding  notes
receivable to cable  television  operators to whom the  Partnership,  along with
other  affiliated  partnerships  managed by the General  Partner,  had  extended
credit. The partnerships'  notes receivables were exchanged for interests (their
capital contribution), on a pro rata basis, in newly formed joint ventures owned
by the  partnerships  and  managed by the  General  Partner.  Title to the cable
television  systems  is held by the  joint  ventures.  Investments  in the joint
ventures are accounted for using the equity method of accounting.

         The joint  venture  investments  of the  Partnership,  along with their
percentage ownership is as follows:

                                                                Weighted
              Joint Venture                                Percentage Interest
              -------------                                -------------------

         Phoenix Black Rock Cable J.V.(2)(3)                      81.23%
         Phoenix Pacific Northwest J.V.                           37.72
         Phoenix Country Cable J.V.(1)                            40.00
         Phoenix Concept Cablevision, Inc.                        14.19
         Phoenix Independence Cable, LLC                          28.76

(1) cable system sold during 1995 and joint  venture  closed  during  1996.
(2) cable systems operations are consolidated during 1996.
(3) cable system sold and joint venture closed during 1996.

         An analysis of the  Partnership's  net  investment in foreclosed  cable
systems joint ventures at December 31, is as follows:

                                                                          Net
                Net Investment                                        Investment
                 at Beginning                  Equity in                at End
Date              of Period   Contributions(1)  Losses   Distributions of Period
----            ------------- ---------------- --------  ------------- ---------
                                   (Amounts in Thousands)

Year Ended
 December 31, 1996  $  625        $     0      $  (10)      $    113     $   502
                    ======        =======      ======       ========     =======

Year Ended
 December 31, 1997  $  502        $     0      $ (113)      $     21     $   368
                    ======        =======      ======       ========     =======


                                       22

<PAGE>



         The aggregate  combined  financial  information of the foreclosed cable
systems joint ventures is presented as follows:

                                                    December 31, 1997
                                                    -----------------
                                                  (Amounts in Thousands)

         Assets                                         $  2,071
         Liabilities                                         519
         Partners' Capital                                 1,552

                                             For the Years Ended December 31,
                                                1997                  1996
                                                ----                  ----
                                                   (Amounts in Thousands)

         Revenue                              $  1,011              $  1,033
         Expenses                                1,407                 1,076
         Net Loss                                 (396)                  (43)

         Phoenix  Cable  Management  Inc.  (PCMI),  an  affiliate of the General
Partner,  provides  day  to day  management  services  in  connection  with  the
operation of the foreclosed  cable systems joint ventures.  The foreclosed cable
systems  joint  ventures  will pay a  management  fee equal to four and one-half
percent of the  System's  monthly  gross  revenue for these  services.  Revenues
subject to a management  fee at the joint  venture  level will not be subject to
management fees at the Partnership level.

         Phoenix Concept  Cablevision of South Carolina,  Inc.,  which is wholly
owned by Phoenix Concept Cablevision, Inc., has accepted and agreed to the terms
stated  on  a  Letter  of  Intent  dated  December  23,  1997  to  sell  all  or
substantially  all of its assets with a net  carrying  value of $1.0  million at
December 31, 1997 for approximately  $1.8 million.  Cash,  accounts  receivable,
marketable  securities and similar  investments  will be excluded from the sale.
This Letter of Intent is subject to a definitive asset purchase  agreement which
is currently being negotiated with the potential buyer.


Note 8.       Accounts Payable and Accrued Expenses.

         Accounts  payable  and accrued  expenses  consist of the  following  at
December 31:

                                                                   1997
                                                                   ----
                                                          (Amounts in Thousands)

         General Partner and affiliates                         $     98
         Equipment lease operations                                  143
         Cable system service                                        144
         Other                                                       223
                                                                --------

              Total                                             $    608
                                                                ========


Note 9.       Income Taxes.

         Federal  and state  income tax  regulations  provide  that taxes on the
income  or loss  of the  Partnership  and  its  majority  owned  subsidiary  are
reportable by the partners in their individual income tax returns.  Accordingly,
no  provision  for  such  taxes  has  been  made in the  accompanying  financial
statements.

         The net differences  between the tax basis and the reported  amounts of
the Partnership's assets and liabilities are as follows at December 31, 1997:


                                       23

<PAGE>



                        Reported Amounts        Tax Basis         Net Difference
                        ----------------        ---------         --------------
                                         (Amounts in Thousands)

         Assets         $    7,888             $    8,461            $    (573)
         Liabilities           608                    279                  329


Note 10.      Related Entities.

         The General  Partner serves in the capacity of general partner in other
partnerships,  all of which are engaged in the  equipment  leasing and financing
business.


Note 11.      Reimbursed Costs to the General Partner.

         The General Partner incurs certain  administrative  costs, such as data
processing,   investor   and  lessee   communications,   lease   administration,
accounting,  equipment  storage  and  equipment  remarketing,  for  which  it is
reimbursed by the  Partnership.  These expenses  incurred by the General Partner
are to be  reimbursed at the lower of the actual costs or an amount equal to 90%
of the fair market value for such services.

         The  reimbursed  administrative  costs  to  the  General  Partner  were
$125,000  and  $176,000  for  the  years  ended  December  31,  1997  and  1996,
respectively.  The equipment  storage,  remarketing  and data  processing  costs
reimbursed to the General  Partner  during the years ended December 31, 1997 and
1996 were $4,000 and $12,000, respectively.

         In  addition,  the General  Partner  receives a  management  fee and an
acquisition fee (see Note 1).


Note 12.      Net Income and Distributions per Limited Partnership Unit.

         Net income and distributions per limited partnership unit were based on
the Limited  Partner's share of consolidated net income and  distributions,  and
the weighted average number of units  outstanding of 516,662 and 516,716 for the
years  ended  December  31,  1997 and 1996,  respectively.  For the  purposes of
allocating  consolidated  income  (loss) and  distributions  to each  individual
limited partner,  the Partnership  allocates  consolidated net income (loss) and
distributions   based  upon  each  respective   limited  partner's  net  capital
contributions.


Note 13.      Business Segments.

         The  Partnership  currently  operates  in two  business  segments:  the
equipment  leasing  and  financing  industry  and the  cable  TV  industry.  The
operations  in the cable TV industry  are for the years ended  December 31, 1997
and 1996.  Information about the Partnership's  operations in these two segments
are as follows:

                                                    1997               1996
                                                    ----               ----
                                                     (Amounts in Thousands)

Total Revenues
         Equipment leasing and financing         $       833         $    2,563
         Cable TV operations                           1,900              4,512
                                                 -----------         ----------
              Total                              $     2,733         $    7,075
                                                 ===========         ==========

Net Income
         Equipment leasing and financing         $       415         $    3,376
         Cable TV operations                             355              1,166
                                                 -----------         ----------
              Total                              $       770         $    4,542
                                                 ===========         ==========

Identifiable Assets
         Equipment leasing and financing         $     3,278         $   15,871
         Cable TV operations                           4,610              5,120
                                                 -----------         ----------
              Total                              $     7,888         $   20,991
                                                 ===========         ==========

                                       24

<PAGE>



Depreciation and Amortization Expense
         Equipment leasing and financing         $       (16)        $      687
         Cable TV operations                             473                926
                                                 -----------         ----------
              Total                              $       457         $    1,613
                                                 ===========         ==========

Capital Expenditures
         Cable TV operations                     $       153         $      337
                                                 -----------         ----------
              Total                              $       153         $      337
                                                 ===========         ==========


Note 14.      Fair Value of Financial Instruments.

         The carrying  amounts  reported on the balance  sheet for cash and cash
equivalents,  available-for-sale securities and notes receivable approximate the
fair values.


Note 15.      Subsequent Events.

         In January 1998,  cash  distributions  of  $1,292,000  were made to the
Limited Partners.




                                       25

<PAGE>



Item 8.       Disagreements on Accounting and Financial Disclosure Matters.

         None.


                                    PART III

Item 9.  Directors and Executive Officers of the Registrant.

         The  registrant  is  a  limited  partnership  and,  therefore,  has  no
executive  officers or  directors.  The  general  partner of the  registrant  is
Phoenix  Leasing  Incorporated,  a California  corporation.  The  directors  and
executive officers of Phoenix Leasing Incorporated (PLI) are as follows:

         GUS CONSTANTIN,  age 60, is President,  Chief  Executive  Officer and a
Director of PLI. Mr.  Constantin  received a B.S. degree in Engineering from the
University of Michigan and a Master's Degree in Management Science from Columbia
University.  From 1969 to 1972,  he served as Director,  Computer and  Technical
Equipment of DCL Incorporated  (formerly Diebold Computer Leasing Incorporated),
a  corporation  formerly  listed on the  American  Stock  Exchange,  and as Vice
President  and  General  Manager  of DCL  Capital  Corporation,  a  wholly-owned
subsidiary of DCL Incorporated. Mr. Constantin was actively engaged in marketing
manufacturer  leasing programs to computer and medical  equipment  manufacturers
and in directing DCL Incorporated's IBM System/370 marketing  activities.  Prior
to  1969,  Mr.  Constantin  was  employed  by IBM as a data  processing  systems
engineer for four years. Mr. Constantin is an individual general partner in four
active partnerships and is an NASD registered  principal.  Mr. Constantin is the
founder of PLI and the  beneficial  owner of all of the common  stock of Phoenix
American Incorporated.

         GARY W. MARTINEZ, age 47, is Executive Vice President,  Chief Operating
Officer and a Director of PLI. He has been  associated  with PLI since 1976.  He
manages the Asset Management Department, which is responsible for lease and loan
portfolio   management.   This  includes   credit   analysis,   contract  terms,
documentation  and  funding;  remittance  application,   change  processing  and
maintenance  of customer  accounts;  customer  service,  invoicing,  collection,
settlements and litigation;  negotiating lease renewals,  extensions,  sales and
buyouts; and management information  reporting.  From 1973 to 1976, Mr. Martinez
was a Loan Officer with Crocker National Bank, San Francisco.  Prior to 1973, he
was an Area Manager with Pennsylvania Life Insurance Company.  Mr. Martinez is a
graduate of California State University, Chico.

         HOWARD SOLOVEI, age 36, is the Chief Financial Officer, Treasurer and a
Director  of PLI.  He has been  associated  with PLI  since  1984.  Mr.  Solovei
oversees  the  Finance  Department.  He  is  responsible  for  the  structuring,
planning,  and monitoring of the  partnerships  sponsored by the General Partner
and its  affiliates,  as well as  maintaining  the  banking  relationships.  Mr.
Solovei graduated with a B.S. in Business  Administration from the University of
California, Berkeley.

         BRYANT J. TONG, age 43, is Senior Vice President,  Financial Operations
and a Director of PLI. He has been with PLI since 1982.  Mr. Tong is responsible
for  investor  services and overall  company  financial  operations.  He is also
responsible  for  the  technical  and  administrative  operations  of  the  cash
management,  corporate accounting,  partnership accounting,  accounting systems,
internal  controls and tax  departments,  in addition to Securities and Exchange
Commission and other regulatory agency reporting.  Prior to his association with
PLI, Mr. Tong was  Controller-Partnership  Accounting  with the Robert A. McNeil
Corporation for two years and was an auditor with Ernst & Whinney  (succeeded by
Ernst & Young) from 1977 through 1980. Mr. Tong holds a B.S. in Accounting  from
the University of California, Berkeley, and is a Certified Public Accountant.

         CYNTHIA E. PARKS, age 42, is Senior Vice President, General Counsel and
Assistant  Secretary  of PLI.  Prior to joining  PLI in 1984,  she was with GATX
Leasing  Corporation,  and had  previously  been  Corporate  Counsel  for  Stone
Financial  Companies,  and an Assistant  Vice  President of the Bank of America,
Bank Amerilease  Group. She has a bachelor's degree from Santa Clara University,
and earned her J.D. from the University of San Francisco School of Law.

         Neither the General  Partner nor any  Executive  Officer of the General
Partner has any family relationship with the others.

         Phoenix  Leasing  Incorporated  or its  affiliates  and  the  executive
officers of the General  Partner  serve in a similar  capacity to the  following
affiliated limited partnerships:


                                       26

<PAGE>



              Phoenix Leasing American Business Fund, L.P.
              Phoenix Leasing Cash Distribution Fund V, L.P.
              Phoenix Income Fund, L.P.
              Phoenix High Tech/High Yield Fund
              Phoenix Leasing Cash Distribution Fund IV and
              Phoenix Leasing Income Fund VII

Disclosure Pursuant to Section 16, Item 405 of Regulation S-K:

         The General  Partner (and any corporate  general partner of the General
Partner) of the  Registrant,  and the executive  officers of the General Partner
(or any corporate  general  partner of the General  Partner) of the  Registrant,
file reports  pursuant to Section 16(a) of the Securities  Exchange Act of 1934,
as amended.  Based solely on the Registrant's review of the copies of such forms
received by the Registrant,  the Registrant believes that, during 1997, all such
required  reports  were filed on a timely  basis,  except for  reports on Form 3
(Initial  Statement of Beneficial  Ownership of Securities) filed late by Howard
Solovei and Cynthia E. Parks,  each an executive  officer of the General Partner
(or any corporate general partner of the General Partner) of the Registrant.  No
units of limited partnership interest are held by such executive officers.

Certain Legal Proceedings.

         On October 28, 1997 a Class Action  Complaint was filed against Phoenix
Leasing  Incorporated,  Phoenix  Leasing  Associates,  II and III L.P.,  Phoenix
Securities  Inc.  and  Phoenix  American   Incorporated   (the  "Companies")  in
California  Superior Court for the County of Sacramento by eleven individuals on
behalf of investors in Phoenix Leasing Cash Distribution  Funds I through V (the
"Partnerships").  The  Companies  were served with the  Complaint on December 9,
1997. The Complaint  seeks  declaratory and other relief  including  accounting,
receivership,  imposition of  constructive  trust and judicial  dissolution  and
winding up of the Partnerships,  and damages based on fraud, breach of fiduciary
duty and  breach  of  contract  by the  Companies  as  general  partners  of the
Partnerships.  The  Companies  received  an  extension  of  time to  answer  the
Complaint  and formal  discovery  has not  commenced.  The  Companies  intend to
vigorously defend the Complaint.


Item 10.      Executive Compensation.

<TABLE>
         Set forth is the information  relating to all direct  remuneration paid
or accrued by the Registrant during the last year to the General Partner and its
affiliate.
<CAPTION>
         (A)                       (B)                                  (C)                                     (D)

                                                                  Cash and cash-                          Aggregate of
Name of Individual           Capacities in                        equivalent forms                        contingent forms
or persons in group          which served                         of remuneration                         of remuneration
-------------------          -------------           -------------------------------------------          -----------------
                                                             (C1)                      (C2)
                                                                              Securities or property
                                                Salaries, fees, directors'    insurance benefits or
                                                fees, commissions, and        reimbursement, personal
                                                bonuses                       benefits
                                                -------------------------     -----------------------
<S>                          <C>                        <C>                            <C>                      <C>
                                                               (Amounts in Thousands)
Phoenix Leasing
  Incorporated               General Partner            $     24(1)                    $ -                      $ -

Phoenix Cable                Manager                          84(1)                      -                        -
 Managment, Inc.                                        --------                       -----                    ---

                                                        $    108                       $ -                      $ -
                                                        ========                       =====                    ===
</TABLE>

(1)  consists of management fees.



                                       27

<PAGE>



Item 11.      Security Ownership of Certain Beneficial Owners and Management.

         (a)  No person  owns of record,  or is known by the  Registrant  to own
              beneficially,  more  than  five  percent  of any  class of  voting
              securities of the Registrant.

         (b)  The General Partner of the Registrant  owns the equity  securities
              of the Registrant set forth in the following table:

                (1)                         (2)                        (3)
         Title of Class          Amount Beneficially Owned      Percent of Class
         --------------          -------------------------      ----------------

     General Partner Interest   Represents a 5% interest in            100%
                                the Registrant's profits and
                                distributions, until the Limited
                                Partners have recovered their
                                capital contributions plus a
                                cumulative return of 12% per
                                annum, compounded quarterly, on
                                the unrecovered portion thereof.
                                Thereafter, the General Partner
                                will receive 15% interest in the
                                Registrant's profits and
                                distributions.

     Limited Partner Interest   177 units                              .03%


Item 12.      Certain Relationships and Related Transactions.

         None.

                                     PART IV

Item 13.      Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

                                                                        Page No.
                                                                        --------
(a)      1.   Financial Statements:

              Consolidated Balance Sheets as of December 31, 1997          11
              Consolidated Statements of Operations for the Years
                Ended December 31, 1997 and 1996                           12
              Consolidated Statements of Partners' Capital
                for the Years Ended December 31, 1997 and 1996             13
              Consolidated Statements of Cash Flows for the
                Years Ended December 31, 1997 and 1996                     14
              Notes to Consolidated Financial Statements                15-25

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

(b)      Reports on Form 8-K:

         No reports on Form 8-K were filed for  the quarter  ended  December 31,
         1997.

(c)      Exhibits

         21.  Additional Exhibits

              a)  Balance Sheet of Phoenix Leasing Incorporated      E21 1-14

              b)  Listing of all subsidiaries of the Registrant:

                  Phoenix Concept Cablevision of Indiana, LLC, a
                    wholly owned Subsidiary.

         27.  Financial Data Schedule

                                       28

<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.

                                     PHOENIX LEASING CASH DISTRIBUTION FUND III,
                                         A CALIFORNIA LIMITED PARTNERSHIP
                                                     (Registrant)

                                         BY:    PHOENIX LEASING INCORPORATED,
                                                A CALIFORNIA CORPORATION
                                                GENERAL PARTNER


         Date:  March 24, 1998           By:    /S/ GUS CONSTANTIN
                --------------                  -------------------------
                                                Gus Constantin, President

         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.

       Signature                      Title                         Date
       ---------                      -----                         ----


/S/ GUS CONSTANTIN         President, Chief Executive Officer  March 24, 1998
-------------------------  and a Director of                   --------------
(Gus Constantin)           Phoenix Leasing Incorporated
                           General Partner


/S/ GARY W. MARTINEZ       Executive Vice President,           March 24, 1998
-------------------------  Chief Operating Officer and a       --------------
(Gary W. Martinez)         Director of Phoenix Leasing
                           Incorporated
                           General Partner


/S/ HOWARD SOLOVEI         Chief Financial Officer,            March 24, 1998
-------------------------  Treasurer and a Director of         --------------
(Howard Solovei)           Phoenix Leasing Incorporated
                           General Partner


/S/ BRYANT J. TONG         Senior Vice President,              March 24, 1998
-------------------------  Financial Operations                --------------
(Bryant J. Tong)           (Principal Accounting Officer)
                           and a Director of
                           Phoenix Leasing Incorporated
                           General Partner




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