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, 1998       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 $2,431,000.

As of December 31, 1998,  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, 1998.

                    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

                         1998 FORM 10-KSB ANNUAL REPORT


                                TABLE OF CONTENTS


                                                                            Page

                                     PART I

Item 1.    Business........................................................  3
Item 2.    Properties......................................................  6
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............................................ 10
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  was
terminated on December 31, 1998. The remaining assets are being liquidated.

         The General Partner of the Partnership 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 November 9, 1995 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,
1998,  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, 1998,  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-cancelable  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.


                                       3
<PAGE>


         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.

         The Partnership's  financing  activities were concentrated in the cable
television  industry.  The Partnership  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  were  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 also received personal guarantees from the owners of the systems.

         Several  of  the  cable   television   system  operators  to  whom  the
Partnership  provided  financing  experienced  financial   difficulties.   These
difficulties were believed to have been caused by several factors. Some of these
factors were: 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 resulted
in a significant  decline in the demand for the acquisition of cable systems and
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 went into default. The result is that the
Partnership did not receive  scheduled  payments,  had to grant loan extensions,
experienced an increase in legal and collection  costs and in some cases, 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 1998 and 1997. 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, 1998, 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 5,248 subscribers.
The Subsidiary operates under non-exclusive franchise agreements with several of
these counties and with communities located within these counties.


                                       4
<PAGE>


         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
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 remaining cable television system.

         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  were
immediately deregulated from most regulations and that the definition of a small
cable  operator is under  600,000  subscribers.  This allows small  operators to
raise rates if needed, and eliminates 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, 1998, together with information  concerning the uses
of assets is set forth in Item 2.


                                       5
<PAGE>


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.

         As of  December  31,  1998,  the  Partnership  owns  equipment  and has
outstanding loans to borrowers with an aggregate original cost of $910,000.  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,
1998.


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

Computer Peripherals                                 $676               74%
Financing Related to Cable Television Systems
  and Other Media                                     116               13
Reproduction Equipment                                106               12
Small Computer Systems                                 12                1
                                                     ----              ---

TOTAL                                                $910              100%
                                                     ====              ===

(1)  These  amounts  include the  Partnership's  pro rata  interest in equipment
     joint  ventures of  $106,000  and  original  cost of  outstanding  loans of
     $116,000 at December 31, 1998.

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
which would have a material adverse impact on its financial position.

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, 1998
               --------------                     -----------------------

               Limited Partners                            12,511
               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 Subsidiary (the  Partnership)  reported net income of $435,000
during the year ended  December 31, 1998,  as compared to net income of $770,000
during 1997. The decline in net income experienced in 1998, compared to 1997, is
primarily attributable to a decline in total revenues.

         The  Subsidiary's  cable  operations has become the primary activity of
the Partnership.  Cable subscriber revenue and cable system operations  expenses
decreased  slightly for the year ended  December 31, 1998,  compared to the same
periods in 1997.

         Total  revenues  decreased by $302,000 for the year ended  December 31,
1998, as compared to the previous  year. The decrease in total revenues for 1998
is attributable  to decreases in interest income from notes  receivable and gain
on sale of cable  systems.  Additionally,  for the year ended December 31, 1998,
compared  to 1997,  the  Partnership  experienced  decreases  in gain on sale of
securities and rental income.

         Interest income from notes receivable  decreased  $101,000 for the year
ended  December 31, 1998,  compared to 1997.  During the year ended December 31,
1997, the Partnership  received additional  settlement proceeds from a defaulted
note  receivable  with a net carrying  value of $0. Such an  occurrence  did not
exist in 1998.

         Gain on sale of cable systems decreased  $169,000 during the year ended
December 31, 1998, as compared to 1997. 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 August 30, 1996 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 receipt of the escrow  proceeds  was
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.

         Also contributing to the decline in total revenues was the decreases in
rental  income of $107,000  and gain on sale of  securities  of $121,000 for the
year ended December 31, 1998, compared to 1997. The decrease in rental income is
primarily  the result of a  reduction  in the amount of  equipment  owned by the
Partnership.  At December 31, 1998, the Partnership  owned equipment,  excluding
the  Partnership's  pro rata  interest  in  joint  ventures,  with an  aggregate
original cost of $688,000 compared to $10.6 million at December 31, 1997.

         The Partnership exercised and sold stock warrants during the year ended
December 31, 1998,  as compared to 1997,  recognizing  a gain on  securities  of
$30,000,  compared to $151,000 for the same period in 1997. The  Partnership has
been granted stock  warrants as part of its lease or financing  agreements  with
certain emerging growth companies.

         The above mentioned  decreases in revenues were partially offset by the
increase  in  earnings  from  joint  ventures  of  $310,000.  This is due to one
equipment  joint venture having sold its remaining  equipment  which resulted in
the recovery of provision of doubtful  accounts  receivable and a write off of a
liability.

         Total  expenses  increased  by $27,000 for the year ended  December 31,
1998,  compared to 1997. This increase is a result of an increase in legal fees,
offset by a decrease in cable system operations  expenses.  Legal fees increased
as a result of legal costs  associated  to a Class  Action  Complaint as further
discussed in Note 15.

         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 cable
television system operations and joint ventures.  Additionally,  the Partnership
continues  to be in the  process of  liquidating  the assets of the  Partnership
which will provide  further  liquidity to the  Partnership  as proceeds from the
sale of these assets are received.


                                       7
<PAGE>
         The Partnership  reported net cash generated by operating activities of
$663,000 for the year ended  December 31, 1998,  as compared to net cash used by
operating activities  $1,300,000 during 1997. During the year ended December 31,
1997, the  Partnership's  net use of cash generated by operating  activities was
attributable to payments of outstanding  liabilities for reimbursements of costs
to the General Partner.

         The net cash generated by investing  activities was $350,000 during the
year  ended  December  31,  1998,  compared  to  $409,000  during the year ended
December  31,  1997.  This  decrease  during the year ended  December  31, 1998,
compared to 1997 is  primarily  due to the decline in proceeds  from the sale of
securities and proceeds from sale of cable systems. As previously discussed, the
Partnership exercised and sold stock warrants during the year ended December 31,
1998 and 1997. As a result,  the Partnership  received proceeds from the sale of
these  securities  of $31,000 and $151,000 for the year ended  December 31, 1998
and 1997,  respectively.  Additionally,  the  decline in net cash  generated  by
investing  activities  for the year ended December 31, 1998 compared to 1997, is
also due to the  absence of  proceeds  from sale of cable  system,  compared  to
$169,000 in 1997, as was further discussed in "Results of Operations".

         The increase in  distributions  from joint ventures of $178,000 for the
year ended  December 31, 1998 compared to 1997 is  attributable  to a foreclosed
cable joint venture receiving proceeds from the sale of its assets.

         During the year ended  December 31, 1998,  the  Partnership  received a
capital  contribution of $2,072,000 from the General Partner in order to restore
the General Partner's tax basis deficit capital balance.

         As of December 31, 1998, the Partnership owned equipment held for lease
with an aggregate original cost of $115,000 and a net book value of $0, compared
to $2,857,000 and $0, respectively, as of December 31, 1997. 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  1998 and 1997 were
$4,841,000 and  $11,625,000,  respectively.  As a result,  the  cumulative  cash
distributions  to the limited  partners are  $114,646,000 and $109,805,000 as of
December  31,  1998 and 1997,  respectively.  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. The General Partner did not receive cash distributions during
1998 and 1997. 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  operations  will  also  decline.  The  remaining  assets of the
Partnership  consist  primarily  of : Phoenix  Concept  Cablevision  of Indiana,
L.L.C., (a cable television system and wholly owned  Subsidiary),  an investment
in Phoenix Pacific  Northwest J.V. (a foreclosed cable  television  system joint
venture),  a note receivable from a cable television system operator and various
leased  equipment.  The General  Partner is continuing  its efforts in marketing
these assets for sale.

         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.

Impact of the Year 2000 Issue

         The General Partner has appointed  ReSource/Phoenix,  Inc. an affiliate
of the General Partner, to manage its Year 2000 project.

         Resource/Phoenix  has a Year  2000  project  plan in  place  and a "Y2K
Project Team" has been appointed. If the Year 2000 project is not completed in a
timely  manner,  the  Year  2000  issue  could  have a  material  impact  on the
Partnership's  operations.  The Y2K Project Team,  however,  has  identified Y2K

                                       8
<PAGE>

risks and issues and the  remediation  procedures  which need to be implemented.
The Y2K Project Team has budgeted for the necessary  changes,  built contingency
plans, and has progressed along the scheduled timelines.

         Installation  of any  remediation  changes to software  and hardware is
planned to be completed by June 30, 1999.

         Costs incurred by the Partnership  will be expensed as incurred and are
not currently anticipated to be material to the Partnership's financial position
or results of operations.

         The  Partnership's  customers  consist of lessees  and  borrowers.  The
Partnership  does  not have  exposure  to any  individual  customer  that  would
materially impact the Partnership  should the customer  experience a significant
Year 2000 problem.


                                       9
<PAGE>



                    Item 7. CONSOLIDATED FINANCIAL STATEMENTS
                            ---------------------------------

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

                          YEAR ENDED DECEMBER 31, 1998
                          ----------------------------




                                       10
<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 Subsidiary as
of December 31, 1998 and the related  consolidated  statements of operations and
comprehensive  income,  partners'  capital  and cash  flows for the years  ended
December 31, 1998 and 1997. 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 audits.

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

In our opinion, the 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 Subsidiary as of
December 31, 1998 and the results of their  operations  and their cash flows for
the years  ended  December  31,  1998 and 1997,  in  conformity  with  generally
accepted accounting principles.

                                                             ARTHUR ANDERSEN LLP

San Francisco, California,
  January 22, 1999


                                       11
<PAGE>

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

                                                               December 31, 1998
                                                               -----------------
ASSETS

Cash and cash equivalents                                             $1,316

Accounts receivable (net of allowance for losses on accounts
   receivable of $57)                                                    132

Notes receivable (net of allowance for losses on notes receivable
   of $21)                                                                43

Equipment on operating leases and held for lease (net of
   accumulated depreciation of $579)                                    --

Cable systems, property and equipment (net of accumulated
   depreciation of $811)                                               2,859

Cable subscriber lists (net of accumulated amortization of $570)         946

Investment in joint ventures                                             205

Other assets                                                              54
                                                                      ------

     Total Assets                                                     $5,555
                                                                      ======

LIABILITIES AND PARTNERS' CAPITAL

Liabilities:

   Accounts payable and accrued expenses                              $  593
                                                                      ------

     Total Liabilities                                                   593
                                                                      ------

Partners' Capital:

   General Partner                                                     2,058

   Limited Partners, 600,000 units authorized, 528,151 units
     issued, 516,662 units outstanding                                 2,888

   Accumulated other comprehensive income                                 16
                                                                      ------

     Total Partners' Capital                                           4,962
                                                                      ------

     Total Liabilities and Partners' Capital                          $5,555
                                                                      ======

        The accompanying notes are an integral part of these statements.


                                       12
<PAGE>




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

                                                For the Years Ended December 31,
                                                        1998         1997
                                                        ----         ----
INCOME

   Cable subscriber revenue                           $ 1,668      $ 1,710
   Rental income                                          299          406
   Interest income, notes receivable                        6          107
   Equity in earnings (losses) from joint
     ventures, net                                        227          (83)
   Gain on sale of securities                              30          151
   Gain on sale of cable systems                         --            169
   Other income                                           201          273
                                                      -------      -------
 
     Total Income                                       2,431        2,733
                                                      -------      -------

EXPENSES

   Depreciation and amortization                          488          457
   Lease related operating expenses                        35           31
   Cable system operations                                867          971
   Management fees to General Partner and
     affiliate                                             86          108
   Reimbursed administrative costs to General
     Partner                                              168          125
   Provision for losses on receivables                     28           43
   Legal expense                                          194           83
   General and administrative expenses                    130          151
                                                      -------      -------

     Total Expenses                                     1,996        1,969
                                                      -------      -------

NET INCOME BEFORE MINORITY INTEREST                       435          764

   Minority Interest in losses of subsidiary             --              6
                                                      -------      -------

NET INCOME                                                435          770

Other comprehensive income:
   Unrealized gains on securities:
     Unrealized holding gains arising during
        period                                             46          151
     Less:  reclassification adjustment for gains
       included in net income                             (30)        (151)
                                                      -------     --------

Other comprehensive income                                 16         --
                                                      -------     --------

COMPREHENSIVE INCOME                                  $   451      $   770
                                                      =======      =======


NET INCOME PER LIMITED PARTNERSHIP UNIT               $   .83      $  1.48
                                                      =======      =======

ALLOCATION OF NET INCOME:
     General Partner                                  $     4      $     7
     Limited Partners                                     431          763
                                                      -------      -------

                                                      $   435      $   770
                                                      =======      =======


        The accompanying notes are an integral part of these statements.



                                       13
<PAGE>


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

<TABLE>
<CAPTION>

                                                                              Accumulated
                                               General                           Other
                                               Partner's   Limited Partners'  Comprehensive Total
                                                Amount     Units      Amount     Income     Amount
                                                ------     -----------------  ------------- ------
<S>                                            <C>         <C>       <C>        <C>       <C>

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

Distributions to partners ($9.37 per limited
   partnership unit)                               --         --       (4,841)      --      (4,841)

Contribution from General Partner                 2,072       --         --         --       2,072

Other comprehensive income                         --         --         --           16        16

Net income                                            4       --          431       --         435
                                               --------    -------   --------   --------  --------

Balance, December 31, 1998                     $  2,058    516,662   $  2,888   $     16  $  4,962
                                               ========    =======   ========   ========  ========

<FN>
        The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
                                       14
<PAGE>



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

                                                For the Years Ended December 31,
                                                       1998        1997
                                                       ----        ----
Operating Activities:
--------------------
   Net income                                       $    435    $    770
   Adjustments to reconcile net income to
     net cash provided by (used in) operating
     activities:
       Depreciation and amortization                     488         457
       Gain on sale of cable systems                    --          (169)
       Gain on sale of equipment                         (48)        (74)
       Gain on sale of securities                        (30)       (151)
       Equity in losses (earnings) from joint
         ventures, net                                  (227)         83
       Provision for losses on accounts receivable        28          43
       Minority interest in losses of subsidiary        --            (6)
       Decrease (increase) in accounts receivable         32          (7)
       Decrease in accounts payable and accrued
         expenses                                        (15)     (2,223)
       Increase in other assets                         --           (23)
                                                    --------    --------

Net cash provided by (used in) operating
  activities                                             663      (1,300)
                                                    --------    --------

Investing Activities:
--------------------
   Principal payments, notes receivable                    2          13
   Proceeds from sale of cable systems                  --           169
   Proceeds from sale of equipment                        48          75
   Proceeds from sale of securities                       31         151
   Distributions from joint ventures                     332         154
   Cable systems, property and equipment                 (63)       (153)
                                                    --------    --------


Net cash provided by investing activities                350         409
                                                    --------    --------

Financing Activities:
--------------------
   Contribution from General Partner                   2,072        --
   Distributions to partners                          (4,841)    (11,625)
   Distributions to minority partners                   --            (3)
                                                    --------    --------

Net cash used in financing activities                 (2,769)    (11,628)
                                                    --------    --------

Decrease in cash and cash equivalents                 (1,756)    (12,519)
Cash and cash equivalents, beginning of period         3,072      15,591
                                                    --------    --------

Cash and cash equivalents, end of period            $  1,316    $  3,072
                                                    ========    ========

        The accompanying notes are an integral part of these statements.


                                       15
<PAGE>


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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 1998


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
reached the end of its term on December 31, 1998; however,  the remaining assets
have not yet been liquidated.

         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  which  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.  Phoenix  Blackrock  Grassroots  sold these
systems prior to 1997 and ceased operations.

         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 to which 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


                                       16
<PAGE>

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 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 Limited Partners.  All Partnership losses shall
be allocated one percent to the General Partner and 99% to the Limited Partners.

         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 1997 and 1998 the General Partner did not draw its share of
the 1997 and 1998 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  Subsidiary.  The Subsidiary 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  due to the General  Partner and  affiliates for the years
ended December 31,

                                         1998            1997
                                         ----            ----
                                        (Amounts in Thousands)

         Management fees                 $ 86            $108
                                         ----            ----

                                         $ 86            $108
                                         ====            ====


                                       17
<PAGE>


         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. As provided for by the partnership  agreement,  the
General  Partner has  determined  to  exercise  its  discretion  that no further
redemptions in the Partnership will be permitted after November 30, 1993.

         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,  1998 and 1997.
"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 1998 and 1997  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."

         Leasing  Operations.  Under  the  operating  method of  accounting  for
leases,  the leased  equipment is recorded as an asset at cost and  depreciated.
The Partnership'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.

         Rental income for the year is determined  on a  straight-line  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  statements of
operations  and  comprehensive  income  include  the  operating  activity of one
Subsidiary,  Phoenix Concept  Cablevision of Indiana,  L.L.C. for the year ended
December 31, 1998 and 1997. 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
5,248  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.

         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

                                       18
<PAGE>
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 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.

         Investment  in  Available-for-Sale   Securities.  The  Partnership  has
investments  in stock and stock  warrants  in  public  companies  that have been
determined to be available for sale. Available-for-sale securities are stated at
their fair market  value,  with the  unrealized  gains and losses  reported in a
separate component of partners' capital.

         Reclassification.  Certain  1997  amounts  have  been  reclassified  to
conform to the 1998 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.

         Comprehensive  Income.  As of January 1, 1998, the Partnership  adopted
Statement of Financial  Accounting  Standards No. 130, "Reporting  Comprehensive
Income" (SFAS 130). This statement  establishes  standards for the reporting and
display of comprehensive income and its components in the financial  statements.
For the  Partnership,  comprehensive  income includes net income reported on the
statement of operations and changes in the fair value of its  available-for-sale
investments reported as a component of partners' capital.

         Business Segments.  Effective January 1, 1998, the Partnership  adopted
Statement of Financial Accounting Standards No. 131, "Disclosures About Segments
of  an  Enterprise  and  Related   Information,"   (SFAS  131).  This  Statement
establishes  standards  for the  reporting  and  display  of  information  about
operating segments and related disclosures. The Partnership's operating segments
are described in Note 13.


Note 3.       Accounts Receivable.
              -------------------

         Accounts receivable consist of the following at December 31:

                                                                  1998
                                                                  ----
                                                          (Amounts in Thousands)

         Cable system service                                    $ 132
         General Partner and affiliates                             39
         Lease payments                                             18
                                                                 -----
                                                                   189

                                       19
<PAGE>
         Less:  allowance for losses on accounts receivable        (57)
                                                                 -----

              Total                                              $ 132
                                                                 =====


Note 4.       Notes Receivable.
              ----------------

         Notes receivable consist of the following at December 31:

                                                                   1998
                                                                   ----
                                                          (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 92 to 95 months, collateralized by
           a security interest in the cable system assets.
           These notes have a graduated repayment schedule
           followed with a balloon payment.                        $ 64

         Less:  allowance for losses on notes receivable            (21)
                                                                   ----

           Total                                                   $ 43
                                                                   ====

         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,  1998,  the  recorded  investment  in notes  that are
considered to be impaired is $64,000, for which the related allowance for losses
is $21,000.  The average recorded  investment in impaired loans during the years
ended  December  31,  1998 and 1997 was  approximately  $306,000  and  $652,000,
respectively.

         The Partnership  wrote-off the outstanding  balance of several impaired
notes  receivable from cable  television  system operators during the year ended
December 31, 1998 which totaled $583,000.  These notes receivable had been fully
reserved for in a previous year.

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

                                                       1998        1997
                                                       ----        ----
                                                     (Amounts in Thousands)

         Beginning balance                            $ 604       $ 604
              Provision for losses                     --          --
              Write downs                              (583)       --
                                                      -----       -----
         Ending balance                               $  21       $ 604
                                                      =====       =====


Note 5.       Equipment on Operating Leases.
              -----------------------------

         Equipment on lease consists primarily of computer peripheral  equipment
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 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.

                                       20
<PAGE>


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

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

         1999.............................................          $ 2
                                                                    ---

         Totals                                                     $ 2
                                                                    ===


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:

                                                                 1998
                                                                 ----
                                                        (Amounts in Thousands)

         Distributions systems                                 $ 2,413
         Headend equipment                                       1,076
         Automobiles                                               100
         Land                                                       37
         Building                                                   44
                                                               -------
                                                                 3,670
         Less:  accumulated depreciation                          (811)
                                                               -------

         Net property, cable systems and equipment             $ 2,859
                                                               =======

         Depreciation  expense totaled  approximately  $290,000 and $282,000 for
the years ended December 31, 1998 and 1997, 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(1)                         35.29%
         Phoenix Joint Venture 1994-1(1)                            4.64

(1) Closed during 1998.

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


                                       21
<PAGE>

                                                                          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, 1997     $     45      $    0     $    30      $   133     $  (58)
                       ========      ======     =======      =======     ======

Year Ended
 December 31, 1998     $    (58)     $    0     $   152      $    94     $    0
                       ========      ======     =======      =======     ======


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

                                                      December 31, 1998
                                                      -----------------
                                                    (Amounts in Thousands)

         Assets                                            $ --
         Liabilities                                         --
         Partners' Capital                                   --

                                               For the Years Ended December 31,
                                                    1998             1997
                                                    ----             ----
                                                    (Amounts in Thousands)

         Revenue                                   $   573          $ 1,571
         Expenses                                      662            1,631
         Net Loss                                      (89)             (60)

         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 Pacific Northwest J.V                              37.72%
         Phoenix Concept Cablevision, Inc. (1)                      14.19
         Phoenix Independence Cable, LLC(1)                         28.76

(1)cable system sold and joint venture closed during 1998.

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


                                       22
<PAGE>


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

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

Year Ended
 December 31, 1998     $    368      $    0     $    75      $   238     $  205
                       ========      ======     =======      =======     ======

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

                                                      December 31, 1998
                                                      -----------------
                                                    (Amounts in Thousands)

         Assets                                             $750
         Liabilities                                         242
         Partners' Capital                                   508

                                                For the Years Ended December 31,
                                                     1998           1997
                                                     ----           ----
                                                   (Amounts in Thousands)

         Revenue                                   $ 2,502       $ 1,011
         Expenses                                    1,386         1,407
         Net Income (Loss)                           1,116          (396)

         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.


Note 8.       Accounts Payable and Accrued Expenses.
              -------------------------------------

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

                                                                   1998
                                                                   ----
                                                          (Amounts in Thousands)

         General Partner and affiliates                            $159
         Equipment lease operations                                  11
         Cable system service                                       180
         Other                                                      216
         Trade                                                       27
                                                                   ----

              Total                                                $593
                                                                   ====

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, 1998:


                                       23
<PAGE>


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

         Assets          $5,555            $4,938            $  617
         Liabilities        593               175               418


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
$168,000  and  $125,000  for  the  years  ended  December  31,  1998  and  1997,
respectively.  The equipment  storage,  remarketing  and data  processing  costs
reimbursed to the General  Partner  during the years ended December 31, 1998 and
1997 were $15,000 and $4,000, 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 for the years ended
December 31, 1998 and 1997. 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  was  principally  engaged in  equipment  leasing  and
financing  operations.  It provided  leasing and  financing for various types of
capital  equipment  and other assets to Fortune  1000,  middle-market,  emerging
growth and other companies throughout the United States on either a long-term or
short-term basis.  Additionally,  the Partnership is engaged in cable television
system  operations   through  its  wholly  owned  subsidiary,   Phoenix  Concept
Cablevision of Indiana,  L.L.C.  These  activities are monitored and reported by
management as separate operating segments.

         The accounting policies of the segments are the same as those described
in Note 2. The Partnership evaluates segment performance based on profit or loss
from operations before income taxes not including nonrecurring gains and losses.

         Summarized financial  information for the years ended December 31, 1998
and 1997 concerning the Partnership's reportable segments is as follows:

                                                             1998         1997
                                                             ----         ----
                                                          (Amounts in Thousands)
Total Revenues
         Equipment leasing and financing                   $   749      $   833
         Cable TV operations                                 1,682        1,900
                                                           -------      -------
              Total                                        $ 2,431      $ 2,733
                                                           =======      =======


                                       24
<PAGE>
Net Income
         Equipment leasing and financing                   $   270      $   415
         Cable TV operations                                   165          355
                                                           -------      -------
              Total                                        $   435      $   770
                                                           =======      =======

Identifiable Assets
         Equipment leasing and financing                   $ 1,312      $ 3,278
         Cable TV operations                                 4,243        4,610
                                                           -------      -------
              Total                                        $ 5,555      $ 7,888
                                                           =======      =======

Depreciation and Amortization Expense
         Equipment leasing and financing                   $     9      $   (16)
         Cable TV operations                                   479          473
                                                           -------      -------
              Total                                        $   488      $   457
                                                           =======      =======

Capital Expenditures
         Cable TV operations                               $    63      $   153
                                                           -------      -------
              Total                                        $    63      $   153
                                                           =======      =======


Note 14. Fair Value of Financial Instruments.
         -----------------------------------

         The carrying  amounts  reported on the balance  sheet for cash and cash
equivalents and notes receivable approximate the fair values.


Note 15. Legal Proceedings.
         -----------------

         On October 28, 1997, a Class Action  Complaint  (the  "Complaint")  was
filed against Phoenix Leasing Inc., Phoenix Leasing Associates, II and III L.P.,
Phoenix   Securities  Inc.  and  Phoenix  American  Inc.  (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 sought  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.

         Plaintiffs  severed  one cause of action  from the  Complaint,  a claim
related to the marketing and sale of CDF V, and  transferred  it to Marin County
Superior  Court (the "Marin  Action").  Plaintiffs  then dismissed the remaining
claims in  Sacramento  Superior  Court and re-filed  them in a separate  lawsuit
making similar allegations (the "Sacramento Action").

         Plaintiffs have amended the Marin Action twice. Defendants have not yet
answered the Complaint and may file a demurrer to dismiss the claims.  Discovery
has not commenced. The Companies intend to vigorously defend the Complaint.

         In February  1999,  plaintiffs  requested a transfer of the  Sacramento
Action  to  Marin  County.  The  Court  granted  that  request,  and the case is
currently  in  transit.  Defendants  have not yet  responded  to the  Complaint.
Discovery  has not  commenced.  The Companies  intend to  vigorously  defend the
Complaint.

         During the year ended  December 31,  1998,  the  Partnerships  recorded
legal expenses of approximately $132,000 in connection with the above litigation
as indemnification to the General Partner.

         The  Partnership  is  not  a  party  to  any  material   pending  legal
proceedings  which  would  have a  material  adverse  impact  on  its  financial
position.


Note 16. Subsequent Events.
         -----------------

         In January of 1999, Phoenix Concept  Cablevision of Indiana,  L.L.C., a
wholly-owned  subsidiary of the  Partnership  sold all of its assets used in the
operation of its cable television system receiving net proceeds of $5.8 million.
The net carrying value of the assets was $4.2 million on December 31, 1998.

                                       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 61, 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 48, 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 37, 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 44, 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.

         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:

              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 and
              Phoenix Leasing Cash Distribution Fund IV


                                       26
<PAGE>


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.

Certain Legal Proceedings.

         On October 28, 1997, a Class Action  Complaint  (the  "Complaint")  was
filed against Phoenix Leasing Inc., Phoenix Leasing Associates, II and III L.P.,
Phoenix   Securities  Inc.  and  Phoenix  American  Inc.  (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 sought  declaratory and other relief  including  accounting,
receivership,  imposition of a 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.

         Plaintiffs  severed  one cause of action  from the  Complaint,  a claim
related to the marketing and sale of CDF V, and  transferred  it to Marin County
Superior  Court (the "Marin  Action").  Plaintiffs  then dismissed the remaining
claims in  Sacramento  Superior  Court and re-filed  them in a separate  lawsuit
making similar allegations (the "Sacramento Action").

         Plaintiffs have amended the Marin Action twice. Defendants have not yet
answered the Complaint and may file a demurrer to dismiss the claims.  Discovery
has not commenced. The Companies intend to vigorously defend the Complaint.

         In February  1999,  plaintiffs  requested a transfer of the  Sacramento
Action  to  Marin  County.  The  Court  granted  that  request,  and the case is
currently  in  transit.  Defendants  have not yet  responded  to the  Complaint.
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            $     75(1)                    $ -                      $ -

Phoenix Cable
   Managment, Inc.           Manager                          11(1)                      -                        -
                                                        --------                       -----                    ---

                                                        $     86                       $ -                      $ -
                                                        ========                       =====                    ===

<FN>
(1)  consists of management fees.
</FN>
</TABLE>
                                       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 Sheet as of December 31, 1998           12
              Consolidated Statements of Operations and
                Comprehensive Income for the Years Ended December
                31, 1998 and 1997                                          13
              Consolidated Statements of Partners' Capital
                for the Years Ended December 31, 1998 and 1997             14
              Consolidated Statements of Cash Flows for the
                Years Ended December 31, 1998 and 1997                     15
              Notes to Consolidated Financial Statements                16-25

         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,
1998.

(c)      Exhibits

         21.  Additional Exhibits

              a)  Balance Sheet of Phoenix Leasing Incorporated      E21 1-12

              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, 1999           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, 1999
-------------------------  and a Director of                   --------------
(Gus Constantin)           Phoenix Leasing Incorporated
                           General Partner
                           

/S/ GARY W. MARTINEZ       Executive Vice President,           March 24, 1999
-------------------------  Chief Operating Officer and a       --------------
(Gary W. Martinez)         Director of Phoenix Leasing
                           Incorporated
                           General Partner
                           

/S/ HOWARD SOLOVEI         Chief Financial Officer,            March 24, 1999
-------------------------  Treasurer and a Director of         --------------
(Howard Solovei)           Phoenix Leasing Incorporated
                           General Partner
                           

/S/ BRYANT J. TONG         Senior Vice President,              March 24, 1999
-------------------------  Financial Operations                --------------
(Bryant J. Tong)           (Principal Accounting Officer)
                           and a Director of
                           Phoenix Leasing Incorporated
                           General Partner


                                       29