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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   -----------

                                    FORM 10-K

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

For the fiscal year ended December 31, 1995      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-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
           ------  

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
                                    ---       ---

As of December 31, 1995,  516,716  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, 1995.

                    DOCUMENTS INCORPORATED BY REFERENCE: NONE



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                                                                    Page 2 of 37




                   PHOENIX LEASING CASH DISTRIBUTION FUND III,
                        A CALIFORNIA LIMITED PARTNERSHIP

                          1995 FORM 10-K ANNUAL REPORT


                                TABLE OF CONTENTS


                                                                          Page

                                     PART I

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


                                     PART II

Item 5.  Market for the Registrant's Securities and Related Security
         Holder Matters................................................      6
Item 6.  Selected Financial Data.......................................      6
Item 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations.....................................      8
Item 8.  Financial Statements and Supplementary Data...................     11
Item 9.  Disagreements on Accounting and Financial Disclosure Matters..     32


                                    PART III

Item 10. Directors and Executive Officers of the Registrant............     32
Item 11. Executive Compensation........................................     33
Item 12. Security Ownership of Certain Beneficial Owners and Management     34
Item 13. Certain Relationships and Related Transactions................     34


                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K    34


Signatures.............................................................     36


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                                                                    Page 3 of 37


                                     PART I

Item 1.  Business.

General Development of Business.

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

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

         Phoenix Black Rock Cable J.V. (the  "Subsidiary")  is a majority  owned
subsidiary  of the  Partnership  (hereinafter,  both  entities are  collectively
referred to as the "Consolidated Partnership").  The Subsidiary was formed under
the laws of California on January 10, 1992 to own and operate a cable television
system in the states of Nevada and California.

Narrative Description of Business.

         The  Consolidated  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,
1995,  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 38.64 months,  and the
average  initial  net  monthly  payment  rate as a  percentage  of the  original
purchase price was 2.53%. The average initial firm term of contractual  payments
from loans was 58.53 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, 1995  approximately  74% of the
equipment  owned by the  Partnership  was  classified as Financing  leases.  The
Partnership has also provided and intends to provide 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
are generally for a longer term under which the non-cancellable  rental payments
due during the initial term of the lease are at least  sufficient to recover the
purchase  price of the  equipment.  A  significant  portion of the net  offering
proceeds to the  Partnership has been invested in capital  equipment  subject to
Operating leases.

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


<PAGE>


                                                                    Page 4 of 37


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

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

         The  Partnership  has obtained an ownership  interest in several  cable
system joint ventures that it obtained through foreclosure.  These cable systems
currently  generate a positive monthly cash flow and provided cash distributions
to the  Partnership  during  1995 and 1994.  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 System Operations.

         Phoenix  Black Rock  Cable  J.V.  (the  Subsidiary),  a majority  owned
subsidiary of the Partnership,  owns 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. The net carrying value of the
Partnership's   share  of  this  defaulted  note  receivable  was  approximately
$1,620,000,  which was exchanged for an 81.22% ownership  interest in this joint
venture.  Phoenix  Cable  Management  Inc.  (PCMI),  an affiliate of the General
Partner,  provides  day  to day  management  services  in  connection  with  the
operation of the system.

         The cable  television  system owned by Phoenix Black Rock Cable J.V. is
located  in the  counties  of Clark and Nye in the  State of  Nevada  and in the
county of Inyo in the State of California.  The cable television system consists
of  headend  equipment  in  five  locations  and  156  miles  of  plant  passing
approximately  2,900 homes and has approximately  1,838 cable  subscribers.  The
Subsidiary's cable television system serves the communities of Pahrumph,  Beatty
and Blue  Diamond  in Nevada  and Cow Creek and  Grapevine  in  California.  The
Subsidiary operates under one non-exclusive  franchise agreement with the county
of Nye in Nevada,  which expires in 2009, and a National Park Service Permit for
Death Valley, California, which expires in 1996.

         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.


<PAGE>


                                                                    Page 5 of 37


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

         A  favorable  part of the  bill is that  small  cable  systems  will be
immediately deregulated from most regulations and that the definition of a small
cable operator is under 600,000 subscribers.  This will allow small operators to
raise rates if needed,  and eliminate the need to provide franchise  authorities
with costly rate filings and justifications.  The new 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. During 1995, the General Partner
has observed a renewed market interest in small cable systems.  The final impact
of the newly  passed  Telecommunications  Bill will not be known  fully  until a
technical rewrite is completed and all the legal challenges have been made.

         Please  see  Note  16 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, 1995, together with information  concerning the uses
of assets is set forth in Item 2.


Item 2.  Properties.

Equipment Leasing and Financing Operations.

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

         As of  December  31,  1995,  the  Partnership  owns  equipment  and has
outstanding  loans to borrowers with an aggregate  original cost of $38,539,000.
The  equipment  and loans have been made to  customers  located  throughout  the
United States.  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, 1995.

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

Financing Related to Cable Television
  Systems and Other Media                    $  16,674                  43%
Computer Peripherals                            11,298                  29
Computer Mainframes                              5,654                  15
Small Computer Systems                           1,698                   4
Reproduction Equipment                           1,670                   4
Capital Equipment Leased to Emerging
  Growth Companies                                 853                   2


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                                                                    Page 6 of 37


Miscellaneous                                      494                   2
Financing of Security Monitoring
  Systems Companies                                198                   1
                                              ---------               -----
TOTAL                                         $ 38,539                 100%
                                              =========               =====

(1)  These  amounts  include the  Partnership's  pro rata  interest in equipment
     joint  ventures of  $1,238,000,  cost of equipment  on financing  leases of
     $979,000 and original cost of outstanding  loans of $16,873,000 at December
     31, 1995.

Cable Television System Operations.

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


Item 3.  Legal Proceedings.

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

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

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


                                     PART II

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

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

         (b)  Approximate Number of Equity Security Investments:

                                                    Number of Unit Holders
              Title of Class                       as of December 31, 1995
              --------------                       -----------------------

              Limited Partners                               12,801


Item 6.       Selected Financial Data.

                              Amounts in Thousands Except for Per Unit Amounts
                              ------------------------------------------------
                                1995(1)   1994(1)   1993      1992      1991
                                ----      ----      ----      ----      ----

Total Income                 $  5,109  $  7,697  $ 15,345  $ 25,221  $ 34,245

Net Income (Loss)               3,800       945       194    (7,118)   (4,273)

Total Assets                   20,381    24,322    32,435    58,644    97,344

Long-term Debt Obligations       --        --        --       1,479     6,361

Distributions to Partners       7,751     7,751    18,886    18,323    18,382

Net Income (Loss) per
  Limited Partnership Unit       7.28       .85      --      (13.53)    (8.08)

Distributions per Limited
  Partnership Unit              15.00     15.00     36.43     35.17     33.80


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                                                                    Page 7 of 37


(1)  The  1995  and  1994  amounts  reflect  the  consolidated  activity  of the
     Partnership and its subsidiary.


         The above selected  financial  data should be read in conjunction  with
the financial statements and related notes appearing elsewhere in this report.


<PAGE>


                                                                    Page 8 of 37


Item 7.  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 $3,800,000
during the year ended  December 31, 1995,  as compared to net income of $945,000
and  $194,000  during 1994 and 1993,  respectively.  The  increase in net income
during 1995, as compared to 1994, is primarily  attributable to the recognition,
as income, of the recovery of a portion of the allowance for loan losses.

         Total revenues  decreased by $2,588,000 and $7,648,000  during 1995 and
1994,  respectively,  when compared to the same period in the previous year. The
decrease in total revenues is primarily the result of decreases in rental income
of $2,373,000 and $4,757,000 during 1995 and 1994, respectively,  as compared to
the same period in the previous year.  Rental income decreased  primarily as the
result of a decrease in the amount of equipment owned. At December 31, 1995, the
Partnership  owned equipment,  excluding the  Partnership's pro rata interest in
joint ventures, with an aggregate original cost of $20.4 million, as compared to
$48.6 million at December 31, 1994.  During 1994, the Partnership  also reported
declines in interest  income from notes  receivable  and a decreased gain on the
sale of equipment.

         During 1995, the Partnership  received  payoffs on six notes receivable
from cable  television  system  operators  totaling  $7.8  million of which $7.5
million was from notes  receivable  considered to be impaired.  The  Partnership
recognized  interest income of $1.1 million from the receipt of the final payoff
on  these  notes  receivable.  Included  in the  payoff  of  $7.8  million  is a
settlement  payment of $2.7 million on a defaulted note  receivable from a cable
television system operator.  The Partnership had provided a loan loss reserve in
an amount  equal to the net  carrying  value of this note in a prior year.  Upon
recovery of a portion of this defaulted note receivable, the Partnership reduced
the allowance for loan losses by $2 million  during 1995.  This reduction in the
allowance for loan losses was recognized as income during the period.

          At December 31, 1995,  the  Partnership  holds notes  receivable  from
cable television system operators and security  monitoring  companies with a net
carrying value of approximately $17 million,  of which $16 million is considered
to be impaired.  The  Partnership has suspended the accrual of interest on these
impaired  notes and has  provided  an  allowance  for loan  losses.  The General
Partner  is  currently  working  with the  borrowers,  other  creditors  and the
bankruptcy  court in order to seek  remedies  that will maximize the recovery of
the Partnership's investment in these notes.

         Total expenses  decreased by $5,436,000 and $8,430,000  during 1995 and
1994,  respectively,  as compared to the same period in the previous  year.  The
decrease in total expenses for these periods is primarily due to the decrease in
depreciation and amortization expense of $2,400,000 and $5,730,000,  during 1995
and 1994,  respectively,  as compared to the same period in the prior year.  The
decrease in  depreciation  and  amortization is a result of the reduction in the
amount  of  equipment  owned by the  Partnership.  Additionally,  an  increasing
portion of the equipment owned by the  Partnership  has been fully  depreciated.
Another factor  contributing to the decrease in total expenses during 1995, when
compared to 1994, was a recovery of a prior  provision for losses on receivables
as discussed previously.

         Lease related operating expenses experienced a decrease during 1995 and
1994,  as compared to the same period in the previous  year,  primarily due to a
decrease in remarketing and  administrative  expenses charged to the Partnership
on its  reproduction  equipment  that  is  leased  pursuant  to a  vendor  lease
agreement.  This  decrease  is  reflective  of the  decrease  in the  amount  of
reproduction  equipment owned by the Partnership and a corresponding decrease in
the rental revenues received from such equipment.

Cable Television System Operations:

         The Partnership  reported cable subscriber revenues from its Subsidiary
of $676,000 during 1995, as compared to $654,000 during 1994, and total expenses
of $582,000  during 1995 as compared to $527,000  during 1994.  During 1994, the
Partnership  determined  that the  financial  position of this cable  television
system had become  material to the operations of the  Partnership;  accordingly,
the  financial   statements  for  the  Partnership   1995  and  1994  have  been
consolidated.  However, during 1993, this cable television system subsidiary was
reflected as an  investment  in a foreclosed  cable system joint  venture on the
balance  sheet and the net  earnings  were  reported as equity in earnings  from
foreclosed cable system joint ventures.


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                                                                    Page 9 of 37


         The  Partnership  has also  foreclosed  upon the  collateral of several
notes receivable from certain cable television  system  operators.  As a result,
the  Partnership  has  ownership  interests in the  operating  cable  television
systems  organized as joint  ventures  with  affiliates  also holding  ownership
interests.  During 1995, the  Partnership  foreclosed  upon an additional  cable
television system in which it held a note receivable.  The Partnership's  equity
interest  in the  earnings  (losses)  from the  foreclosed  cable  system  joint
ventures was minimal during 1995 and 1994.

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

Liquidity and Capital Resources

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

         The net cash generated by operating  activities decreased by $2,960,000
and $3,668,000 during 1995 and 1994,  respectively,  as compared to the previous
year. This decrease is primarily due to a decrease in rental income, a result of
the decrease in the size of the  equipment  portfolio.  The decrease in proceeds
from the sale of equipment  during 1995 and 1994, as compared to the same period
in the prior year, is  attributable  to a decrease in the value of the equipment
sold.

         Principal payments from notes receivable increased substantially during
1995,  when  compared to the same period in 1994,  due to payoffs  from  several
outstanding notes receivable during 1995. During 1995, the Partnership  received
payoffs of notes receivable from seven cable television system operators.

         During  the  third  quarter  of  1995,  the  Partnership   invested  an
additional  $6,146,000  in a note  receivable  from a  cable  television  system
operator.  The  Partnership  had previously  extended credit with a net carrying
value  of  approximately  $2.9  million  of  subordinated  debt  to  this  cable
television system operator.  This cable television system operator is in default
on its  outstanding  debt.  The current  funding of $6.1 million was paid to the
senior  lender and the  Partnership  has now assumed a first and second  secured
position  in the assets of the cable  television  system.  The  General  Partner
believes  that it is now in a better  position  to  negotiate  a  settlement  or
foreclosure with the borrower in order to maximize the Partnership's recovery of
its  investment.  To help  finance  this  additional  funding,  the  Partnership
borrowed an additional $2,000,000 from a bank during 1995. The debt is repayable
over 30 months with  interest  tied to the bank's prime rate.  During 1995,  the
Partnership  repaid  $1,671,000  of this debt,  which  included a prepayment  of
$1,471,000 made in November of 1995.

         During  1995,  the  Partnership  reported  an overall  increase in cash
distributions  received  from  its  joint  ventures.  The  overall  increase  in
distributions  reflects  an  increase  in  distributions  from  equipment  joint
ventures and foreclosed cable system joint ventures. The increased distributions
from the  equipment  joint  venture  during  1995 is  related  to  distributions
received from a joint venture that was formed in October of 1994.  The increased
cash  distributions  from  foreclosed  cable system joint  ventures for 1995 was
attributable  to the  sale  of a  cable  system  in one  joint  venture  and the
distribution of excess cash from operations in the other remaining cable system.

         As of December 31, 1995, the Partnership owned equipment held for lease
with an aggregate  original cost of $3,690,000  and a net book value of $22,000,
compared to $18,707,000 and $447,000, respectively, as of December 31, 1994. 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 1995, 1994 and 1993 was
$7,751,000,   $7,751,000  and  $18,886,000,   respectively.  As  a  result,  the
cumulative  cash   distributions   to  the  limited  partners  are  $96,226,000,
$88,475,000   and   $80,724,000  as  of  December  31,  1995,   1994  and  1993,
respectively.  The General  Partner did not receive  cash  distributions  during
1995, 1994 and 1993. The General Partner has elected not to receive payment,  at
this  time,  for its share of the cash  available  for  distribution  due to its
negative capital account.

         The Partnership's  asset portfolio  continues to decline as a result of
the ongoing  liquidation  of assets,  and therefore it is expected that the cash
generated  from  Partnership  leasing operations will also decline.  As the cash
<PAGE>


                                                                   Page 10 of 37


generated by  operations  continues to decline,  the rate of cash  distributions
made to limited  partners will  also decline.  The  distributions to partners on
January 15, 1996 were made at  approximately  the same rate as the distributions
made  during  1995.   However,  after  the  January 15, 1996  distribution,  the
Partnership   will  switch  to  annual   distributions  with   the  first annual
distribution  expected to be made on January 15, 1997.

         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.


<PAGE>


                                                                   Page 11 of 37


















        Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

                            YEAR ENDED DECEMBER 31, 1995




<PAGE>


                                                                   Page 12 of 37


                         REPORT OF INDEPENDENT AUDITORS


The Partners
Phoenix Leasing Cash Distribution Fund III, a California limited partnership

We have audited the  consolidated  financial  statements of Phoenix Leasing Cash
Distribution Fund III, a California limited partnership, and Subsidiary,  listed
in the accompanying index to financial  statements (Item 14(a)). Our audits also
included the  financial  statement  schedule  listed in the Index at Item 14(a).
These  financial  statements  and the  schedule  are the  responsibility  of the
Partnership's  management.  Our responsibility is to express an opinion on these
financial statements and the 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  and schedule 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 listed in the accompanying
index to financial  statements  (Item  14(a))  present  fairly,  in all material
respects,   the  consolidated   financial   position  of  Phoenix  Leasing  Cash
Distribution  Fund III, a California  limited  partnership,  and Subsidiary,  at
December 31, 1995 and 1994, and the consolidated results of their operations and
their cash flows for each of the three years in the period  ended  December  31,
1995, in conformity with generally accepted accounting principles.  Also, in our
opinion,  the related financial statement schedule,  when considered in relation
to the  basic  financial  statements  taken as a whole,  presents  fairly in all
material respects the information set forth therein.


                                                               ERNST & YOUNG LLP

San Francisco, California
  January 19, 1996
  except for Note 15, as to which
  the date is February 14, 1996


<PAGE>


                                                                   Page 13 of 37

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

                                                         December 31,
                                                       1995         1994
                                                       ----         ----
ASSETS

Cash and cash equivalents                           $  3,619     $  4,636

Accounts  receivable (net of allowance for losses
   on accounts  receivable of $63 and $392 at
   December 31, 1995 and 1994, respectively)             254          910

Notes receivable (net of allowance for losses
   on notes receivable of $3,880 and $8,357 at
   December 31, 1995 and 1994, respectively)          13,153       13,668

Equipment on operating leases and held for lease
   (net of accumulated depreciation of $17,004
   and $38,267 at December 31, 1995 and 1994,
   respectively)                                          79          959

Net investment in financing leases (net of allowance
   for early terminations of $81 and $129 at December
   31, 1995 and 1994, respectively)                      227          971

Cable systems, property and equipment (net of
   accumulated depreciation of $548 and $394 at
   December 31, 1995 and 1994, respectively)           1,449        1,555

Investment in joint ventures                             742          951

Capitalized acquisition fees (net of accumulated
   amortization of $7,994 and $7,661 at December 31,
   1995 and 1994, respectively)                          283          615

Other assets                                             575           57
                                                    --------     --------
     Total Assets                                   $ 20,381     $ 24,322
                                                    ========     ========

LIABILITIES AND PARTNERS' CAPITAL

Liabilities:

   Accounts payable and accrued expenses            $  3,637     $  4,513

   Minority interest in subsidiary                       311          311

   Note payable                                          329         --
                                                    --------     --------
     Total Liabilities                                 4,277        4,824
                                                    --------     --------

Partners' Capital:

   General Partner                                       (71)        (109)

   Limited Partners, 600,000 units authorized,
     528,151 units issued, 516,716 units
     outstanding at December 31, 1995 and 1994        15,618       19,607

   Unrealized gains on marketable securities
     available-for-sale                                  557         --
                                                    --------     --------
     Total Partners' Capital                          16,104       19,498
                                                    --------     --------
     Total Liabilities and Partners' Capital        $ 20,381     $ 24,322
                                                    ========     ========

                     The accompanying notes are an integral
                            part of these statements.

<PAGE>


                                                                   Page 14 of 37


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

                                                For the Years Ended December 31,
                                                   1995       1994       1993
                                                   ----       ----       ----
INCOME

   Rental income                                 $ 2,125    $ 4,498    $ 9,255

   Earned income, financing leases                    69        268      1,043

   Gain on sale of equipment                         356      1,019      2,371

   Interest income, notes receivable               1,171        810      2,089

   Cable subscriber revenue                          676        654       --

   Other income                                      712        448        587
                                                 -------    -------    -------

     Total Income                                  5,109      7,697     15,345
                                                 -------    -------    -------

EXPENSES

   Depreciation and amortization                   1,149      3,549      9,279

   Lease related operating expenses                  280        805      1,571

   Program service, cable system                     181        154       --

   Management fees to General Partner                522        381        817

   Reimbursed administrative costs
     to General Partner                              321        403        489

   Provision for (recovery of) losses
     on receivables                               (2,245)       550      1,793

   Legal expense                                     619        379        673

   General and administrative expenses               458        500        529
                                                 -------    -------    -------

     Total Expenses                                1,285      6,721     15,151
                                                 -------    -------    -------

NET INCOME BEFORE MINORITY INTEREST              $ 3,824    $   976    $   194

   Minority Interest in earnings of subsidiary       (24)       (31)      --
                                                 -------    -------    -------

NET INCOME                                       $ 3,800    $   945    $   194
                                                 =======    =======    =======

NET INCOME PER LIMITED PARTNERSHIP UNIT          $  7.28    $   .85    $  --
                                                 =======    =======    =======

ALLOCATION OF NET INCOME:

     General Partner                             $    38    $   504    $   194

     Limited Partners                              3,762        441       --
                                                 -------    -------    -------

                                                 $ 3,800    $   945    $   194
                                                 =======    =======    =======

                     The accompanying notes are an integral
                            part of these statements.

<PAGE>


                                                                   Page 15 of 37


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


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

Balance, December 31, 1992        $   (807)  519,683  $46,049  $   --   $45,242

Distributions to partners ($36.43
   per limited partnership unit)       --        --   (18,886)     --   (18,886)

Redemptions of capital                 --     (2,967)    (246)     --      (246)

Net income                             194       --       --       --       194
                                   --------  -------- -------- -------- --------

Balance, December 31, 1993            (613)  516,716   26,917      --    26,304

Distributions to partners ($15.00
   per limited partnership unit)       --        --    (7,751)     --    (7,751)

Net income                             504       --       441      --       945
                                   --------  -------- -------- -------- --------

Balance, December 31, 1994            (109)  516,716   19,607      --    19,498

Distributions to partners ($15.00
   per limited partnership unit)       --        --    (7,751)     --    (7,751)

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

Net income                              38       --     3,762      --     3,800
                                   --------  -------- -------- -------- --------

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


                     The accompanying notes are an integral
                            part of these statements.

<PAGE>


                                                                   Page 16 of 37


                   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,
                                                    1995      1994       1993
                                                    ----      ----       ----
Operating Activities:
   Net income                                     $ 3,800   $   945   $    194
   Adjustments to reconcile net income to
     net cash provided by operating activities:
       Depreciation and amortization                1,149     3,549      9,279
       Gain on sale of equipment                     (356)   (1,019)    (2,371)
       Gain on sale of securities                      (7)     (154)      --
       Equity in losses (earnings) from
         joint ventures                              (240)       82        (45)
       Provision for early termination,
         financing leases                            --        --          120
       Provision for losses on notes receivable    (2,428)      576      1,404
       Provision for losses on accounts receivable    183       (26)       269
       Settlement                                    --        (106)      --
       Minority interest in earnings of subsidiary     24        31       --
       Decrease in accounts receivable                473       578      1,534
       Decrease in accounts payable and
         accrued expenses                            (876)     (239)    (2,065)
       Decrease in other assets                        39       378         70
       Other                                         --         126       --
                                                  -------   -------   --------

Net cash provided by operating activities           1,761     4,721      8,389
                                                  -------   -------   --------

Investing Activities:
   Principal payments, financing leases               695     1,620      4,139
   Principal payments, notes receivable             8,937       926      1,910
   Proceeds from sale of equipment                    623     1,965      4,133
   Proceeds from sale of securities                     7       165       --
   Distributions from joint ventures                  601        60      2,038
   Purchase of equipment                             --        (107)       (79)
   Investment in financing leases                    --         (40)        (2)
   Investment in notes receivable                  (6,146)     --          (47)
   Investment in joint ventures                      --        (117)        (4)
   Investment in securities                          --         (11)      --
   Cable systems, property and equipment              (49)      (32)      --
   Payment of acquisition fees                       --          (5)       (45)
                                                  -------   -------   --------

Net cash provided by investing activities           4,668     4,424     12,043
                                                  -------   -------   --------

Financing Activities:
   Proceeds from notes payable                      2,000      --         --
   Payments of principal, notes payable            (1,671)   (1,479)    (5,165)
   Redemptions of capital                            --        --         (246)
   Distributions to partners                       (7,751)   (7,751)   (18,886)
   Distributions to minority partners                 (24)      (46)      --
                                                  -------   -------   --------

Net cash used by financing activities              (7,446)   (9,276)   (24,297)
                                                  -------   -------   --------

Decrease in cash and cash equivalents              (1,017)     (131)    (3,865)
Cash and cash equivalents, beginning of period      4,636     4,767      8,632
                                                  -------   -------   --------

Cash and cash equivalents, end of period          $ 3,619   $ 4,636   $  4,767
                                                  =======   =======   ========

Supplemental Cash Flow Information:
   Cash paid for interest expense                 $    31   $    19   $    167

                     The accompanying notes are an integral
                            part of these statements.

<PAGE>


                                                                   Page 17 of 37


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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 1995


Note 1.  Organization and Partnership Matters.

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

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

         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  $1,620,000
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. (the  Subsidiary),  which was formed
under  the  laws of  California  on  January  10,  1992 to own and  operate  the
foreclosed  cable  television  system  (hereinafter,  the  Partnership  and  the
Subsidiary are collectively  referred to as the Consolidated  Partnership).  The
acquisition  of the assets and  liabilities  of the  borrower by the  Subsidiary
through  foreclosure was 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.

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

         The General  Partner is entitled  to receive  five  percent of all cash
distributions  until the Limited  Partners have recovered  their initial capital
contributions plus a cumulative return of 12% per annum. Thereafter, the General
Partner  will  receive 15% of all cash  distributions.  In the event the General
Partner has a deficit  balance in its capital account at the time of partnership
liquidation, it will be required to contribute the amount of such deficit to the
Partnership.  During  1993,  1994 and 1995 the General  Partner did not draw its
share of the 1993, 1994 and 1995 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  System's  monthly  gross  revenue  for these
services.  Revneues  subject to a management fee at the joint venture level will
not be subject to management fees at the Partnership level.

         The General  Partner  will be  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


<PAGE>


                                                                   Page 18 of 37


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.

         Schedule of  compensation  paid and  distributions  made to the General
Partner and affiliates for the years ended December 31,
                                         1995            1994           1993
                                         ----            ----           ----
                                               (Amounts in Thousands)
       Management fees              $     522       $     381         $  817
       Acquisition fees                    -                2              3
                                    ---------       ---------         ------

                                    $     522       $     383         $  820
                                    =========       =========         ======


Note 2.  Summary of Significant Accounting Policies.

       Principles of Consolidation.  The 1995 financial  statements  include the
accounts of the  Partnership  and its majority owned  subsidiary,  Phoenix Black
Rock Cable J.V. All significant intercompany accounts and transactions have been
eliminated in consolidation.

       During 1994, the Partnership  determined that the financial  position and
operations  of  Phoenix  Black  Rock  Cable  J.V.  had  become  material  to the
operations of the Partnership. Accordingly, the Partnership has consolidated the
financial results of this joint venture with those of the Partnership  beginning
in 1994. The Partnership  reported this joint venture using the equity method of
accounting  for 1993.  The effect of this change has no impact on the net income
or equity of the Partnership.  The impact on assets,  liabilities,  revenues and
expenses  between the  consolidation  versus  equity  method was not material to
1993.

       Leasing Operations.  The Partnership's leasing operations consist of both
financing and operating  leases.  The financing  method of accounting for leases
records as  unearned  income at the  inception  of the lease,  the excess of net
rentals  receivable  and estimated  residual value at the end of the lease term,
over the cost of equipment leased. Unearned income is credited to income monthly
over the term of the lease on a declining basis to provide an approximate  level
rate of return on the unrecovered  cost of the investment.  Initial direct costs
of  consummating  new  leases  are  capitalized  and  included  in the  cost  of
equipment.

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

         The  Partnership's  policy  is to  review  periodically  the  remaining
expected  economic  life of its  rental  equipment  in  order to  determine  the
probability of recovering its  undepreciated  cost. Such reviews address,  among
other  things,  recent  and  anticipated  technological  developments  affecting
computer  equipment and  competitive  factors  within the computer  marketplace.
Although  remarketing  rental  rates are  expected to decline in the future with
respect to some of the Partnership's rental equipment, such rentals are expected
to exceed projected  expenses and depreciation.  Where subsequent reviews of the
equipment  portfolio  indicate that rentals plus anticipated sales proceeds will
not  exceed  expenses  in  any  future  period,  the  Partnership   revises  its
depreciation policy and provides for additional depreciation as appropriate.  As
a  result  of such  periodic  reviews,  the  Partnership  recognized  additional
depreciation expense of $68,000,  $27,000 and $588,000 ($.13, $.05 and $1.13 per
limited  partnership  unit) for the year ended December 31, 1995, 1994 and 1993,
respectively.

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

       Cable  Television  System  Operations.   The  consolidated  statement  of
operations  includes the operating activity of the Subsidiary for the year ended
December 31, 1995 and 1994. The Subsidiary's  cable television system is located
in the  counties  of Clark and Nye in the State of Nevada  and in the  county of
Inyo in the State of California. The cable television system consists of headend
equipment in five locations and 156  miles of plant  passing approximately 2,900


<PAGE>


                                                                   Page 19 of 37


homes and has  approximately  1,838 cable  subscribers.  The Subsidiary's  cable
television system serves the communities of Pahrumph, Beatty and Blue Diamond in
Nevada and Cow Creek and Grapevine in California.  The Subsidiary operates under
one non-exclusive  franchise  agreement with the county of Nye in Nevada,  which
expires  in  2009,  and  a  National  Park  Service  Permit  for  Death  Valley,
California, which expires in 1996.

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

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

       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.

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

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

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

       Reclassification. Certain 1994 and 1993 amounts have been reclassified to
conform to the 1995 presentation.

       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.  The  Partnership
places its cash deposits in temporary cash investments with credit worthy,  high
quality  financial  institutions.  The  concentration  of such cash deposits and
temporary  cash  investments  is not deemed to create a significant  risk to the
Partnership.


<PAGE>


                                                                   Page 20 of 37


  Non Cash Investing Activities.
                                                For the Years Ended December 31,
                                                       1995    1994   1993
                                                       ----    ----   ----
                                                      (Amounts in Thousands)

   Contributions to a joint venture of assets
     received pursuant to a settlement agreement       $ --    $212    $ --

   Foreclosed notes receivable contributed
     to joint ventures                                  151     161     265

   Payoff of outstanding note receivable through 
     receipt of cash and the issuance of a new note
     receivable                                         --      --      371
                                                       ----    ----    ----

     Total                                             $151    $373    $636
                                                       ====    ====    ====

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

         Financial  Accounting  Pronouncements.  In March  1995,  the  Financial
Accounting Standards Board issued Statement of Financial Accounting Standard No.
121,  "Accounting  for the  Impairment of Long-Lived  Assets and for  Long-Lived
Assets to be Disposed  of," which  requires that  long-lived  assets and certain
identifiable  intangibles  to be held  and used by an  entity  be  reviewed  for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying amount of an asset may not be recoverable. In performing the review for
recoverability,  the entity  would  estimate  the future cash flows  expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected future cash flows  (undiscounted  and without interest charges) is less
than the  carrying  amount  of the  asset,  an  impairment  loss is  recognized.
Measurement  of an  impairment  loss  for  long-lived  assets  and  identifiable
intangibles  that an entity  expects to hold and use should be based on the fair
value of the asset.  Statement No. 121 is effective for financial statements for
fiscal years beginning after December 15, 1995. The Partnership  does not expect
the  adoption  of this  statement  to have a  material  impact on its  financial
position and results of operations. The Partnership plans to adopt Statement No.
121 on January 1, 1996.

         On  January 1,  1995,  the  Partnership  adopted  Financial  Accounting
Standards Board Statement No. 114,  "Accounting by Creditors for Impairment of a
Loan," and Statement No. 118,  "Accounting by Creditors for Impairment of a Loan
- Income  Recognition and Disclosures."  Statement No. 114 requires that certain
impaired  loans be measured  based on the present  value of expected  cash flows
discounted at the loan's  effective  interest  rate; or,  alternatively,  at the
loan's  observable  market price or the fair value of the collateral if the loan
is  collateral  dependent.  Prior to 1995,  the  allowance  for  losses on notes
receivable  was based on the  undiscounted  cash  flows or the fair value of the
collateral  dependent loans. The adoption of this statement had no impact on the
overall allowance for credit losses and did not effect the Partnership's  charge
offs or income recognition policies.

         In  accordance  with  Statement  No.  114,  a  loan  is  classified  as
in-substance foreclosure when the Company has taken possession of the collateral
regardless  of  whether  formal   foreclosure   proceedings  take  place.  Notes
receivable  previously  classified as in-substance  foreclosed cable systems but
for which the  Company  had not taken  possession  of the  collateral  have been
reclassified to notes receivable.

         Investment in Marketable Securities Available for Sale. The Partnership
has  investments  in stock warrants in public  companies.  The  Partnership  has
classified its investments in stock warrants as available-for-sale in accordance
with FASB  Statement No. 115,  "Accounting  for Certain  Investments in Debt and
Equity  Securities."  Available-for-sale  securities  are  stated at their  fair
market value, with unrealized gains and losses reported as a separate  component
of partners' capital. The stock warrants held by the Partnership were granted by
certain lessees or borrowers as additional compensation for leasing or financing
equipment.  At the date of grant,  such warrants were determined to have no fair
market value and were recorded at their historical cost of $0.


<PAGE>


                                                                   Page 21 of 37


         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.

Note 3.  Accounts Receivable.

    Accounts receivable consist of the following at December 31:

                                                        1995        1994
                                                        ----        ----
                                                     (Amounts in Thousands)

Lease payments                                        $   271     $   822
Reimbursement for sales and property tax                    2         429
Other                                                      37          48
General Partner                                             7           3
                                                      -------     -------
                                                          317       1,302

Less:  allowance for losses on accounts receivable        (63)       (392)
                                                      -------     -------
     Total                                            $   254     $   910
                                                      =======     =======

Note 4.  Notes Receivable.

    Notes receivable consist of the following at December 31:

                                                          1995         1994
                                                          ----         ----
                                                       (Amounts in Thousands)
Notes receivable from cable television system
  operators with stated interest ranging from 8%
  to 21% per annum, receivable in installments
  ranging from 57 to 117 months, collateralized
  by a security interest in the cable system assets. 
  These notes have a graduated repayment schedule
  followed with a balloon payment.                      $ 16,791     $ 20,868

Notes receivable from security monitoring companies
  with stated interest at 16% per annum, with
  payments  to be taken  out of the monthly payments
  received from assigned contracts,  collateralized
  by all assets of the borrower. At the end of 48
  months, the remaining balance, if any, is due and
  payable.                                                   242        1,157
                                                        --------     --------
                                                          17,033       22,025

Less:  allowance for losses on notes receivable           (3,880)      (8,357)
                                                        --------     --------
  Total                                                 $ 13,153     $ 13,668
                                                        ========     ========

         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.


<PAGE>


                                                                   Page 22 of 37


         At  December  31,  1995,  the  recorded  investment  in notes  that are
considered to be impaired under Statement 114 was $15,978,000.  Included in this
amount is  $11,673,000  of impaired  notes for which the related  allowance  for
losses is  $3,619,000  and  $4,305,000  of impaired  notes for which there is no
allowance.  The average  recorded  investment in impaired  loans during the year
ended  December  31,  1995  was  approximately   $16,448,000.   The  Partnership
recognized  interest income totaling $1,079,000 from these impaired notes during
the year ended 1995.

         During the year ended  December 31, 1995,  the  Partnership  received a
settlement  on one of its  notes  receivable  from  a  cable  television  system
operator  which was  considered  to be impaired  under  Statement  No. 114.  The
Partnership  received a partial recovery of $2,714,000 as a settlement which was
applied towards the $4,562,000  outstanding  note  receivable  balance which had
been fully reserved for in a previous year. The remaining  balance of $1,848,000
was written-off  through its related allowance for loan losses.  The Partnership
received  settlements from seven other impaired notes receivable,  a payoff from
one note  receivable to a cable  television  system operator and foreclosed upon
the assets of another note  receivable  to a cable  television  system  operator
during the year ended  December 31, 1995.  Upon  receipt of the  settlement  and
payoffs of the  above-mentioned  notes receivable,  the Partnership  reduced the
allowance for loan losses by $2,428,000 during the year ended December 31, 1995.
This  reduction in the allowance for loan losses was recognized as income during
the period.

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

                                                        1995          1994
                                                        ----          ----
                                                      (Amounts in Thousands)

    Beginning balance                                 $ 8,357        $7,781
         Provision for (recovery of) losses            (2,428)          576
         Write downs                                   (2,049)         --
                                                      -------        ------
    Ending balance                                    $ 3,880        $8,357
                                                      =======        ======


Note 5.  Equipment on Operating Leases and Investment in Financing Leases.

         Equipment on lease consists primarily of computer peripheral  equipment
and computer mainframes subject to operating and financing leases.

         The  Partnership's  operating  leases are for  initial  lease  terms of
approximately 12 to 48 months.  During the remaining terms of existing operating
leases,  the  Partnership  will not  recover all of the  undepreciated  cost and
related expenses of its rental equipment,  and therefore must remarket a portion
of its equipment in future years.

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

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

         The net  investment  in financing  leases  consists of the following at
December 31:

                                                        1995           1994
                                                        ----           ----
                                                      (Amounts in Thousands)

    Minimum lease payments to be received           $      30      $     826
    Estimated residual value of leased equipment
        (unguaranteed)                                    287            336
    Less:   unearned income                                (9)           (62)
            allowance for early termination               (81)          (129)
                                                     ---------      ---------

    Net investment in financing leases              $     227      $     971
                                                     =========      =========
<PAGE>


                                                                   Page 23 of 37


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

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

    1996 ..................................          $   518          $    30
    1997...................................               20               -
                                                     -------          -------
    Totals                                           $   538          $    30
                                                     =======          =======

         The net book value of equipment held for lease at December 31, 1995 and
1994 amounted to $22,000 and $447,000, respectively.


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:

                                                            1995       1994
                                                            ----       ----
                                                         (Amounts in Thousands)

    Distributions systems                                  $ 1,935   $ 1,899
    Building                                                    38        37
    Automobiles                                                 11         8
    Headend equipment                                           13         5
                                                           -------   -------
                                                             1,997     1,949
    Less:  accumulated depreciation                           (548)     (394)
                                                           -------   -------
    Net property, cable systems and equipment              $ 1,449   $ 1,555
                                                           =======   =======

         Depreciation  expense totaled  approximately  $154,000 and $150,000 for
the years ended December 31, 1995 and 1994, 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 ventues:
                                                                 Weighted
            Joint Venture                                   Percentage Interest
            -------------                                   -------------------

    Leveraged Joint Venture 1990-1                                 35.29%
    Phoenix Post Joint Venture(1)                                  26.69
    Phoenix Joint Venture 1994-1                                    4.64

(1) Closed during 1995

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


<PAGE>

<TABLE>
                                                                                                         Page 24 of 37

<CAPTION>
                             Net Investment                        Equity in                            Net Investment
                             at Beginning                          Earnings                                 at End
Date                            of Period       Contributions      (Losses)          Distributions         of Period
                             --------------     -------------      ---------         -------------      --------------
                                                                   (Amounts in Thousands)
<S>                             <C>               <C>                 <C>               <C>                  <C>  
Year Ended
  December 31, 1993             $  1,271          $    0              $  (267)          $   951              $      53
                                ========          ======              =======           =======              =========

Year Ended
  December 31, 1994             $     53          $  302              $  (104)          $     9              $     242
                                ========          ======              =======           =======              =========

Year Ended
  December 31, 1995             $    242          $    0              $   222           $   347              $     117
                                ========          ======              =======           =======              =========
</TABLE>
         The aggregate  combined  financial  information of the equipment  joint
ventures as of December 31 and for the years then ended is presented as follows:

                             COMBINED BALANCE SHEETS

                                     ASSETS

                                                             December 31,
                                                            1995      1994
                                                            ----      ----
                                                        (Amounts in Thousands)

    Cash and cash equivalents                              $  532    $  132
    Accounts receivable                                     1,772     2,155
    Operating lease equipment                               1,021     2,528
    Other assets                                              691       890
                                                           ------    ------

         Total Assets                                      $4,016    $5,705
                                                           ======    ======

                        LIABILITIES AND PARTNERS' CAPITAL

    Accounts payable                                       $  918    $  904
    Partners' capital                                       3,098     4,801
                                                           ------    ------

         Total Liabilities and Partners' Capital           $4,016    $5,705
                                                           ======    ======

                        COMBINED STATEMENTS OF OPERATIONS

                                     INCOME

                                              For the Years Ended December 31,
                                                  1995      1994      1993
                                                  ----      ----      ----
                                                   (Amounts in Thousands)

    Rental income                                $3,595    $2,583    $3,791
    Gain on sale of equipment                     1,637     1,096     1,177
    Other income                                    717        71        10
                                                 ------    ------    ------

         Total Income                             5,949     3,750     4,978
                                                 ------    ------    ------


<PAGE>


                                                                   Page 25 of 37


                                    EXPENSES
    Depreciation                                  1,186      1,248     1,677
    Lease related operating expenses              2,832      2,378     3,688
    Management fee to the General Partner           286        199       291
    Other expenses                                  268         62        57
                                                 ------    -------   -------

         Total Expenses                           4,572      3,887     5,713
                                                 ------    -------   -------

         Net Income (Loss)                       $1,377    $  (137)  $  (735)
                                                 ======    =======   =======

         As of December 31, 1995 and 1994, the  Partnership's  pro rata interest
in the  equipment  joint  ventures'  net book value of off-lease  equipment  was
$5,000 and $35,000, respectively.

         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  owns an interest in  foreclosed  cable  system  joint
ventures,  along with other partnerships  managed by the General Partner and its
affiliates.  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.  These  investments  are
accounted for using the equity method of accounting.

         The  joint  ventures  owned  by  the  Partnership,   along  with  their
percentage ownership is as follows:

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

    Phoenix Black Rock Cable J.V.(2)                            81.22%
    Phoenix Pacific Northwest J.V.                              37.72
    Phoenix Glacier J.V.(1)                                     45.78
    Phoenix Country Cable J.V.                                  40.00
    Phoenix Concept Cablevision, Inc.                           14.19
    Phoenix Independence Cable, LLC                             28.76

(1)  cable system sold and joint venture closed during 1993.
(2)  cable systems operations are consolidated during 1994 and 1995.

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


<PAGE>

<TABLE>
                                                                                                        Page 26 of 37

<CAPTION>
                           Net Investment                                                               Net Investment
                            at Beginning                          Equity in                                 at End
Date                         of Period          Contributions(1)   Earnings          Distributions         of Period
                           --------------       ----------------  ---------          -------------      -------------- 
                                                                   (Amounts in Thousands)
<S>                              <C>               <C>                <C>               <C>                   <C>
Year Ended
  December 31, 1993              $  2,462          $     269          $  312            $  1,087           $  1,956
                                 ========          =========          ======            ========           ========

Year Ended
  December 31, 1994              $  1,956          $  (1,218)         $   22            $     51           $    709
                                 ========          =========          ======            ========           ========

Year Ended
  December 31, 1995              $    709          $     152          $   18            $    254           $    625
                                 ========          =========          ======            ========           ========
</TABLE>

     (1) Includes   the   reclassification   effects   of   accounting   for  an
         unconsolidated  joint venture in 1993 as a  consolidated  subsidiary in
         1994.  This  foreclosed  cable  systems  joint  venture  is  now  being
         consolidated with the Partnership.
         (See Note 2.)

     The  aggregate  combined  financial  information  of the  foreclosed  cable
systems  joint  ventures  as of  December  31 and for the  years  then  ended is
presented as follows:

                             COMBINED BALANCE SHEETS

                                     ASSETS

                                                             December 31,
                                                            1995       1994
                                                            ----       ----
                                                         (Amounts in Thousands)

    Cash and cash equivalents                              $  375    $  203
    Accounts receivable                                        88       100
    Property, plant and equipment                           2,176     2,298
    Cable subscriber lists and franchise rights               116       145
    Other assets                                               22        67
    Deferred income taxes                                     118       142
                                                           ------    ------

         Total Assets                                      $2,895    $2,955
                                                           ======    ======

                        LIABILITIES AND PARTNERS' CAPITAL

    Accounts payable                                       $  323    $  265
    Notes payable                                            --          11
    Partners' capital                                       2,572     2,679
                                                           ------    ------

         Total Liabilities and Partners' Capital           $2,895    $2,955
                                                           ======    ======


<PAGE>


                                                                   Page 27 of 37


                        COMBINED STATEMENTS OF OPERATIONS

                                     INCOME

                                              For the Years Ended December 31,
                                                   1995     1994      1993
                                                   ----     ----      ----
                                                   (Amounts in Thousands)

    Subscriber revenue                           $ 1,065   $ 628     $1,082
    Gain on sale of cable systems                     25    --          476
    Other income                                      14       5         25
                                                 -------   -----     ------

         Total Income                              1,104     633      1,583
                                                 -------   -----     ------

                                    EXPENSES

    Depreciation                                     321     160        255
    Program services                                 328     192        302
    General and administrative expenses              310     164        300
    Management fees to an affiliate of the
      General Partner                                 48      28         98
    Provision for losses on accounts receivable       11       9         11
                                                 -------   -----     ------

         Total Expenses                            1,018     553        966
                                                 -------   -----     ------

         Net Income Before Income Taxes               86      80        617
         Income tax expense                          (39)    (19)      --
                                                 -------   -----     ------

         Net Income                              $    47   $  61     $  617
                                                 =======   =====     ======

         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:

                                                            1995      1994
                                                            ----      ----
                                                       (Amounts in Thousands)

    General Partner and affiliates                         $2,086    $2,068
    Equipment lease operations                              1,276     1,968
    Security deposits                                        --         258
    Other                                                     275       219
                                                           ------    ------

         Total                                             $3,637    $4,513
                                                           ======    ======


<PAGE>


                                                                   Page 28 of 37


Note 9.  Notes Payable.

    Notes payable consist of the following at December 31:
                                                           1995       1994
                                                           ----       ----
                                                       (Amounts in Thousands)

    Note payable to a bank, collateralized by
      the assets of the Partnership with interest
      tied to the bank's prime rate, with monthly
      payments of 30 months.                               $329      $ --
                                                           ----      ------

      Total                                                $329      $ --
                                                           ====      ======

         Principal payments due for 1996 are $329,000.

         The interest  rate was 8.75% at December 31, 1995.  The loan  agreement
contains  certain  restrictions on  distributions  made to partners and requires
pre-payment of the outstanding debt upon the sale of certain  significant assets
of the Partnership. The Partnership made a pre-payment of $1,471,000 on November
17, 1995.


Note 10. Settlement.

         On July 1, 1991,  Phoenix Leasing  Incorporated,  as General Partner to
the Partnership  and sixteen other  affiliated  partnerships,  filed suit in the
Superior  Court  for the  County  of  Marin,  Case  No.  150016,  against  Xerox
Corporation,  a  corporation  with which the General  Partner  had entered  into
contractual   agreements  for  the  acquisition  and  administration  of  leased
equipment. The lawsuit was settled out of court effective as of October 28, 1994
pursuant to the terms of a Confidential Settlement Agreement and Mutual Release.
The settlement  agreement  generally  provides for  compensation  payable to the
Partnership  and its  affiliates in cash and kind,  including the  assignment by
Xerox of certain goods and services. The agreement further provides for the sale
by Xerox to the  Partnership  and its affiliates of equipment  subject to lease.
The suit that was filed in the Superior Court for the County of Marin,  Case No.
150016, has been dismissed with prejudice on the merits.

         The  Partnership's pro rata share of the Xerox settlement was $175,000,
which consists of cash of $69,000,  and assigned monthly rentals and credits for
goods and services valued at $106,000.  In addition,  the Partnership  purchased
additional  leased equipment at an aggregate cost of $107,000.  The Partnership,
along with sixteen other affiliated partnerships managed by the General Partner,
contributed  its share of the assigned  monthly  rentals,  credits for goods and
services and purchased  equipment leases to a joint venture,  in exchange for an
interest in the joint venture.


Note 11.  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 is as follows at December 31:

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

1995
----
    Assets             $19,980            $23,407            $(3,427)
    Liabilities          3,876              3,763                113


<PAGE>


                                                                   Page 29 of 37


1994
----
    Assets             $23,909            $32,388            $(8,479)
    Liabilities          4,411              4,405                  6


Note 12. 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 13. 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
$321,000,  $403,000 and $489,000 for the years ended December 31, 1995, 1994 and
1993, respectively. The equipment storage, remarketing and data processing costs
reimbursed to the General Partner during the years ended December 31, 1995, 1994
and 1993 were $112,000, $264,000 and $471,000, respectively.

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


Note 14. 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 516,716, 516,716 and 518,380
for the years ended  December 31,  1995,  1994 and 1993,  respectively.  For the
purposes of  allocating  consolidated  income (loss) and  distributions  to each
individual limited partner,  the Partnership  allocates  consolidated net income
(loss)  and  distributions  based upon each  respective  limited  partner's  net
capital contributions.


Note 15. Subsequent Events.

         In January 1996,  cash  distributions  of  $1,954,000  were made to the
Limited Partners.

         On January 17, 1996,  Phoenix  Black Rock Cable J.V., a majority  owned
subsidiary  of  the  Partnership,   sold  its  cable   television   systems  for
approximately  $2.7 million.  The  identifiable  assets of this cable television
system at December 31, 1995 were approximately $1.7 million.

         On February 2, 1996,  Phoenix  Leasing Cash  Distribution  Fund III and
Phoenix Concept Cablevision of Indiana, L.L.C. (collectively referred to as "the
Partnership")  entered  into a  Commercial  Code  Section  9505  Agreement  (the
"Agreement")  with Concept  Cablevision  of Indiana,  Inc.,  a cable  television
company that the Partnership had extended credit. Phoenix Concept Cablevision of
Indiana,  L.L.C.  is a newly formed limited  liability  company and wholly owned
subsidiary of Phoenix  Leasing Cash  Distribution  Fund III. The closing date of
the Agreement was February 2, 1996.  This Agreement  allowed the  Partnership 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 $4,321,098 at December 31, 1995, for which
the  Partnership  had no related  allowance.  In addition,  the  Partnership  is
required to make a cash payment of  $200,000,  will assume  certain  liabilities
including a note payable of $600,000 and certain  other  miscellaneous  accounts
payable as specified in the agreement.

         On February 14, 1996,  Phoenix Leasing Cash  Distribution  Fund III and
Phoenix  Grassroots  Cable  Systems,  L.L.C.  (collectively  referred to as "the
Partnership") entered into a Settlement Agreement and Releases (the "Agreement")
with  Grassroots  Cable  Systems,  Inc.,  a cable  television  company  that the
Partnership had extended credit.  Phoenix  Grassroots Cable Systems, L.L.C. is a


<PAGE>


                                                                   Page 30 of 37


newly formed limited liability company and majority owned (98.5%)  subsidiary of
Phoenix  Leasing Cash  Distribution  Fund III. The closing date of the Agreement
was February 14, 1996. This Agreement  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 for this  outstanding note
receivable was $9,014,483 at December 31, 1995, for which the Partnership had an
allowance for losses on notes of  $2,035,301.  In addition,  the  Partnership is
required to make a cash payment of $75,000 and assume  certain  liabilities  and
miscellaneous payables as specified in the agreement.


Note 16. Business Segments.

         The  Consolidated   Partnership  currently  operates  in  two  business
segments:  the  equipment  leasing  and  financing  industry  and the  cable  TV
industry.  The  operations  in the  cable TV  industry  are for the  year  ended
December  31,  1995  and 1994  (segment  activity  for  1993 was not  material).
Information  about  the  Consolidated  Partnership's  operations  in  these  two
segments are as follows:

                                                             1995      1994
                                                             ----      ----
                                                        (Amounts in Thousands)

Total Revenues
         Equipment leasing and financing                   $ 4,422   $ 7,035
         Cable TV operations                                   687       662
                                                           -------   -------
              Total                                        $ 5,109   $ 7,697
                                                           =======   =======

Net Income (Loss)
         Equipment leasing and financing                   $ 3,695   $   810
         Cable TV operations                                   105       135
                                                           -------   -------
              Total                                        $ 3,800   $   945
                                                           =======   =======

Identifiable Assets
         Equipment leasing and financing                   $18,643   $22,571
         Cable TV operations                                 1,738     1,751
                                                           -------   -------
              Total                                        $20,381   $24,322
                                                           =======   =======

Depreciation and Amortization Expense
         Equipment leasing and financing                   $   995   $ 3,399
         Cable TV operations                                   154       150
                                                           -------   -------
              Total                                        $ 1,149   $ 3,549
                                                           =======   =======

Capital Expenditures
         Equipment leasing and financing                   $ 6,146   $   147
         Cable TV operations                                    49        32
                                                           -------   -------
              Total                                        $ 6,195   $   179
                                                           =======   =======


Note 17. Fair Value of Financial Instruments.

         During  the year ended  December  31,  1995,  the  Partnership  adopted
Statement of Financial  Accounting  Standard  No. 107,  "Disclosures  about Fair
Value of Financial  Instruments," which requires disclosure of the fair value of
financial  instruments  for which it is practicable to estimate fair value.  The
following  methods and assumptions  were used to estimate the fair value of each
class of financial instrument which it is practicable to estimate that value.

Cash and Cash Equivalents
The carrying amount of cash and cash equivalents approximates fair value because
of the short maturity of these instruments.


<PAGE>


                                                                   Page 31 of 37


Notes Receivable
The fair  value of notes  receivable  is  estimated  based on the  lesser of the
discounted  expected  future cash flows using the current rates at which similar
loans would be made to borrowers with similar credit  ratings,  or the estimated
fair value of the underlying collateral.

Marketable Securities
The fair values of investments in marketable  securities are estimated  based on
quoted market prices.

Notes Payable
The  carrying   amount  of  the   Partnership's   variable  rate  notes  payable
approximates fair value.

         The estimated fair values of the Partnership's financial instruments at
December 31, 1995 are as follows:

                                                          Carrying
                                                            Amount  Fair Value
                                                          --------  ----------
                                                         (Amounts in Thousands)

    Assets
         Cash and cash equivalents                         $ 3,619   $ 3,619
         Marketable securities                                 559       559
         Notes receivable                                   13,153    16,555
    Liabilities
         Notes payable                                         329       329


<PAGE>


                                                                   Page 32 of 37


Item 9.  Disagreements on Accounting and Financial Disclosure Matters.

         None.


                                    PART III

Item 10. 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 58, 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.

         PARITOSH K. CHOKSI,  age 42, is Senior Vice President,  Chief Financial
Officer and Treasurer of PLI. He has been  associated  with PLI since 1977.  Mr.
Choksi  oversees  the  finance,  accounting,  information  services  and systems
development  departments of the General  Partner and its Affiliates and oversees
the structuring,  planning and monitoring of the  partnerships  sponsored by the
General  Partner  and its  Affiliates.  Mr.  Choksi  graduated  from the  Indian
Institute of Technology, Bombay, India with a degree in Engineering. He holds an
M.B.A. degree from the University of California, Berkeley.

         GARY W. MARTINEZ,  age 45, is Senior Vice President 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.

         BRYANT J. TONG, age 41, is Senior Vice President,  Financial Operations
of PLI. He has been with PLI since 1982.  Mr. Tong is  responsible  for investor
services and overall company  financial  operations.  He is also responsible for
the technical and  administrative  operations of the cash management,  corporate
accounting,  partnership accounting,  accounting systems,  internal controls and
tax  departments,  in addition to Securities  and Exchange  Commission and other
regulatory  agency  reporting.  Prior to his association  with PLI, Mr. Tong was
Controller-Partnership  Accounting with the Robert A. McNeil Corporation for two
years and was an auditor with Ernst & Whinney  (succeeded by Ernst & Young) from
1977 through 1980.  Mr. Tong holds a B.S. in Accounting  from the  University of
California, Berkeley, and is a Certified Public Accountant.

         CYNTHIA E. PARKS, age 40, is Vice President, General Counsel, Assistant
Secretary and a Director of PLI. Prior to joining PLI in 1984, she was with GATX
Leasing  Corporation,  and had  previously  been  Corporate  Counsel  for  Stone
Financial  Companies,  and an Assistant  Vice  President of the Bank of America,
Bank Amerilease  Group. She has a bachelor's degree from Santa Clara University,
and earned her J.D. from the University of San Francisco School of Law.

         HOWARD SOLOVEI, age 34, is Vice President, Finance, Assistant Treasurer
and a Director of PLI. He has been associated with PLI since 1984. Mr. Solovei's
principal  activities  are in the areas of arranging  and managing the company's
banking relationships for its various corporations, partnerships and securitized
asset pools.  Mr. Solovei is  also involved  in corporate financial planning and


<PAGE>


                                                                   Page 33 of 37


various data  processing-related  projects. Mr. Solovei graduated with a B.S. in
Business from the University of California at Berkeley in 1984.

         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
              Phoenix Leasing Cash Distribution Fund IV
              Phoenix Leasing Cash Distribution Fund II
              Phoenix Leasing Capital Assurance Fund
              Phoenix Leasing Income Fund VII
              Phoenix Leasing Income Fund VI
              Phoenix Leasing Growth Fund 1982
              Phoenix Leasing Income Fund 1981 and
              Phoenix Leasing Income Fund 1977

         The  General  Partner  of the  Registrant,  which may be deemed to be a
"director"  of  Registrant  under the  rules  promulgated  under the  Securities
Exchange  Act of  1934,  as  amended  (the  "Exchange  Act"),  failed  to file a
Statement of Changes in  Beneficial  Ownership of  Securities  on Form 4 in July
1995 to reflect the purchase by the General  Partner in June 1995 of 17 units of
limited  partnership  interest  in the  Registrant  from a  limited  partner  of
Registrant.  Such  acquisition  was reported on Form 5 for the fiscal year ended
December 31, 1995, as filed with the Commission on behalf of the General Partner
on February 5, 1996.


Item 11. 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
                                                -------------------------     -----------------------
                                                               (Amounts in Thousands)
<S>                          <C>                        <C>                            <C>                      <C>
Phoenix Leasing
  Incorporated               General Partner            $    492(1)                    $   0                    $   0

Phoenix Cable                  
  Management, Inc.           Manager                          30(1)                        0                        0
                                                        --------                       -----                    -----
 
                                                        $    522                       $   0                    $   0
                                                        ========                       =====                    =====
</TABLE>

(1)  consists of management fees.


<PAGE>


                                                                   Page 34 of 37


Item 12. 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.
<TABLE>
         (b)  The General Partner of the Registrant  owns the equity  securities
              of the Registrant set forth in the following table:
<CAPTION>
                (1)                                            (2)                                       (3)
         Title of Class                         Amount Beneficially Owned                          Percent of Class
         --------------                         -------------------------                          ----------------
<S>  <C>                              <C>                                                                <C>
     General Partner Interest         Represents a 5% interest in the Registrant's profits               100%
                                      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%
</TABLE>

Item 13. Certain Relationships and Related Transactions.

         None.

                                     PART IV

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

                                                                       Page No.
(a) 1. Financial Statements:

       Consolidated Balance Sheets as of December 31, 1995 and 1994         13
       Consolidated Statements of Operations for the Years Ended
         December 31, 1995, 1994 and 1993                                   14
       Consolidated Statements of Partners' Capital for the 
         Years Ended December 31, 1995, 1994 and 1993                       15
       Consolidated Statements of Cash Flows for the Years Ended
         December 31, 1995, 1994 and 1993                                   16
       Notes to Consolidated Financial Statements                        17-31

    2. Financial Statement Schedule:

       Schedule II - Valuation and Qualifying Accounts and Reserves         37

         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 year ended December 31, 1995.

(c)    Exhibits

       21.  Additional Exhibits

            a)  Balance Sheet of Phoenix Leasing Incorporated          E21 1-9


<PAGE>


                                                                   Page 35 of 37


            b)  Listing of all subsidiaries of the Registrant:

                Phoenix   Black  Rock  Cable  J.V.,   a   California   general
                partnership and majority (81.22%) owned subsidiary.

       27.  Financial Data Schedule


<PAGE>


                                                                   Page 36 of 37

                                   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
                                                   (Registrant)

                                    BY:    PHOENIX LEASING INCORPORATED,
                                           A CALIFORNIA CORPORATION
                                           GENERAL PARTNER


         Date:  March 28, 1996      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 and a  March 28, 1996
----------------------- Director of Phoenix Leasing Incorporated  --------------
(Gus Constantin)        General Partner


/S/  PARITOSH K. CHOKSI Chief Financial Officer,                  March 28, 1996
----------------------- Senior Vice President                     --------------
(Paritosh K. Choksi)    and Treasurer of
                        Phoenix Leasing Incorporated
                        General Partner


/S/  BRYANT J. TONG     Senior Vice President, Financial          March 28, 1996
----------------------- Operations of                             --------------
(Bryant J. Tong)        (Principal Accounting Officer)
                        Phoenix Leasing Incorporated
                        General Partner


/S/  GARY W. MARTINEZ   Senior Vice President of                  March 28, 1996
----------------------- Phoenix Leasing Incorporated              --------------
(Gary W. Martinez)      General Partner


/S/ HOWARD SOLOVEI      Vice President, Finance                   March 28, 1996
----------------------- Assistant Treasurer and a                 --------------
(Howard Solovei)        Director of Phoenix Leasing Incorporated
                        General Partner


/S/  MICHAEL K. ULYATT  Partnership Controller                    March 28, 1996
----------------------- Phoenix Leasing Incorporated              --------------
                        General Partner


<PAGE>

<TABLE>
                                                                                                 Page 37 of 37

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

                                                        SCHEDULE II
                                                  (Amounts in Thousands)



SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES


<CAPTION>
              COLUMN A                     COLUMN B        COLUMN C       COLUMN D      COLUMN E     COLUMN F
           Classification                 Balance at      Charged to     Charged to    Deductions   Balance at
                                         Beginning of      Expense         Revenue                    End of
                                            Period                                                    Period
           --------------                ------------     ----------     ----------    ----------   ----------

<S>                                        <C>              <C>           <C>           <C>           <C>
    Year ended December 31, 1993
       Allowance for losses on accounts
         receivable                        $  398           $  269        $    0        $   74        $  593
       Allowance for early termination
         of financing leases                  141              120             0            33           228
       Allowance for losses on notes
         receivable                         6,393            1,404             0            16         7,781
                                           ------           ------        ------        ------        ------

         Totals                            $6,932           $1,793        $    0        $  123        $8,602
                                           ======           ======        ======        ======        ======


    Year ended December 31, 1994
       Allowance for losses on accounts
         receivable                        $  597(1)        $    6        $   32        $  179        $  392
       Allowance for early termination
         of financing leases                  228                0             0            99           129
       Allowance for losses on notes
         receivable                         7,781              576             0             0         8,357
                                           ------           ------        ------        ------        ------

         Totals                            $8,606           $  582        $   32        $  278        $8,878
                                           ======           ======        ======        ======        ======


    Year ended December 31, 1995
       Allowance for losses on accounts
         receivable                        $  392           $  183        $    0        $  512        $   63
       Allowance for early termination
         of financing leases                  129                0             0            48            81
       Allowance for losses on notes
         receivable                         8,357                0         2,428         2,049         3,880
                                           ------           ------        ------        ------        ------

         Totals                            $8,878           $  183        $2,428        $2,609        $4,024
                                           ======           ======        ======        ======        ======


(1)  Includes allowance for losses on accounts receivable of $4,000 for the Subsidiary which in prior years was not
     consolidated.
</TABLE>