Page 1 of 13


                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549



                                    FORM 10-Q

  X     QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
-----   ACT OF 1934
        

                For the quarterly period ended September 30, 1995

                                       OR

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

        For the transition period from ______________ to ______________.

                         Commission file number 0-16615


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

            California                                   68-0062480
       State of Jurisdiction                 I.R.S. Employer Identification No.



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


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
preceding requirements for the past 90 days.

                       Yes  X                    No
                           ---                       ---

<PAGE>


                                                                    Page 2 of 13

<TABLE>
                                      Part I. Financial Information
                                      Item 1. Financial Statements
                               PHOENIX LEASING CASH DISTRIBUTION FUND III,
                             A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARY
                                       CONSOLIDATED BALANCE SHEETS
                             (Amounts in Thousands Except for Unit Amounts)
                                               (Unaudited)
<CAPTION>
                                                                                            September 30,   December 31,
                                                                                                1995            1994
                                                                                                ----            ----
ASSETS
<S>                                                                                           <C>             <C>    
Cash and cash equivalents                                                                     $  4,873        $  4,636

Accounts receivable (net of allowance for losses on accounts receivable of $68
   and $392 at September 30, 1995 and December 31, 1994, respectively)                             358             910

Notes receivable (net of allowance for losses on notes receivable of $4,347 and
   $8,357 at September 30, 1995 and December 31, 1994, respectively)                            14,096          13,668

Equipment on operating leases and held for lease (net of accumulated depreciation
   of $20,739 and $38,267 at September 30, 1995 and December 31, 1994, respectively)               160             959

Net investment in financing leases (net of allowance for early terminations of $126 and
   $129 at September 30, 1995 and December 31, 1994, respectively)                                 219             971

Cable systems, property and equipment (net of accumulated depreciation of $509 and
   $394 at September 30, 1995 and December 31, 1994, respectively)                               1,485           1,555

Investment in joint ventures                                                                       996             951

Capitalized acquisition fees (net of accumulated amortization of $7,951 and $7,661
   at September 30, 1995 and December 31, 1994, respectively)                                      325             615

Other assets                                                                                         8              57
                                                                                              --------        --------

     Total Assets                                                                             $ 22,520        $ 24,322
                                                                                              ========        ========

LIABILITIES AND PARTNERS' CAPITAL
Liabilities

   Accounts payable and accrued expenses                                                      $  4,040        $  4,513

   Notes payable                                                                                 2,000            --

   Minority interest in subsidiary                                                                 305             311
                                                                                              --------        --------

     Total Liabilities                                                                           6,345           4,824
                                                                                              --------        --------

Partners' Capital

   General Partner                                                                                 (85)           (109)

   Limited Partners, 600,000 units authorized, 528,151 units issued and
     516,716 units outstanding at September 30, 1995 and December 31, 1994                      16,260          19,607
                                                                                              --------        --------

     Total Partners' Capital                                                                    16,175          19,498
                                                                                              --------        --------

     Total Liabilities and Partners' Capital                                                  $ 22,520        $ 24,322
                                                                                              ========        ========

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

<PAGE>


                                                                    Page 3 of 13

<TABLE>
                               PHOENIX LEASING CASH DISTRIBUTION FUND III,
                             A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARY
                                  CONSOLIDATED STATEMENTS OF OPERATIONS
                           (Amounts in Thousands Except for Per Unit Amounts)
                                              (Unaudited)
<CAPTION>
                                                Three Months Ended       Nine Months Ended
                                                   September 30,           September 30,
                                                 1995        1994        1995        1994
                                                 ----        ----        ----        ----
<S>                                            <C>         <C>         <C>         <C>
INCOME
   Rental income                               $   384     $ 1,014     $ 1,422     $ 3,712
   Gain on sale of equipment                        85         358         235         779
   Interest income, notes receivable                71         174         773         969
   Cable subscriber revenue                        166        --           509        --
   Equity in earnings (losses) from
     joint ventures                                 75         (20)        204          29
   Other income                                    153          53         393         294
                                               -------     -------     -------     -------

     Total Income                                  934       1,579       3,536       5,783
                                               -------     -------     -------     -------

EXPENSES
   Depreciation and amortization                   228         733         971       2,898
   Lease related operating expenses                 64         181         214         714
   Program service, cable system                    48        --           135        --
   Management fees to General Partner
     and affiliate                                  68          52         418         270
   Reimbursed administrative costs to
     General Partner                                70          97         240         290
   Provision for losses on receivables              27         192      (1,819)        576
   Legal expense                                   128          80         511         284
   General and administrative expenses             104          62         373         273
                                               -------     -------     -------     -------

     Total Expenses                                737       1,397       1,043       5,305
                                               -------     -------     -------     -------

NET INCOME BEFORE MINORITY INTEREST                197         182       2,493         478

Minority interest in earnings of subsidiary         (6)       --           (18)       --
                                               -------     -------     -------     -------

NET INCOME                                     $   191     $   182     $ 2,475     $   478
                                               =======     =======     =======     =======


NET INCOME PER LIMITED
PARTNERSHIP UNIT                               $   .36     $  --       $  4.74     $  --
                                               =======     =======     =======     =======

DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT                               $  3.74     $  3.74     $ 11.22     $ 11.22
                                               =======     =======     =======     =======

ALLOCATION OF NET INCOME:
     General Partner                           $     2     $   182     $    25     $   478
     Limited Partners                              189        --         2,450        --
                                               -------     -------     -------     -------
                                               $   191     $   182     $ 2,475     $   478
                                               =======     =======     =======     =======

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

<PAGE>


                                                                    Page 4 of 13


                   PHOENIX LEASING CASH DISTRIBUTION FUND III,
                 A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Amounts in Thousands)
                                   (Unaudited)
                                                              Nine Months Ended
                                                                September 30,
                                                             1995         1994
                                                             ----         ----
Operating Activities:
   Net income                                              $ 2,475      $   478
   Adjustments to reconcile net income to net
     cash provided  by operating activities:
       Depreciation and amortization                           971        2,898
       Gain on sale of equipment                              (235)        (779)
       Equity in earnings from joint ventures                 (204)         (29)
       Provision for losses on notes receivable             (2,000)         576
       Provision for losses on accounts receivable             181         --
       Gain on sale of securities                             --           (154)
       Decrease in accounts receivable                         371          619
       Decrease in accounts payable and
         accrued expenses                                     (473)        (165)
       Decrease in other assets                                 49          171
       Minority interest in earnings of subsidiary              18         --
                                                           -------      -------

Net cash provided by operating activities                    1,153        3,615
                                                           -------      -------

Investing Activities:
   Principal payments, financing leases                        661        1,370
   Principal payments, notes receivable                      7,567          406
   Proceeds from sale of equipment                             560        1,392
   Proceeds from sale of securities                           --            165
   Distributions from joint ventures                           310          255
   Investment in financing leases                             --            (40)
   Investment in notes receivables                          (6,146)        --
   Investment in  joint ventures                              --           (107)
   Cable systems, property and equipment                       (46)        --
   Investment in securities                                   --            (11)
   Payment of acquisition fees                                --             (5)
                                                           -------      -------

Net cash provided by investing activities                    2,906        3,425
                                                           -------      -------

Financing Activities:
   Proceeds from notes payable                               2,000         --
   Payments of principal, notes payable                       --         (1,479)
   Distributions to partners                                (5,798)      (5,797)
   Distributions to minority partners                          (24)        --
                                                           -------      -------

Net cash used by financing activities                       (3,822)      (7,276)
                                                           -------      -------

Increase (decrease) in cash and cash equivalents               237         (236)

Cash and cash equivalents, beginning of period               4,636        4,767
                                                           -------      -------

Cash and cash equivalents, end of period                   $ 4,873      $ 4,531
                                                           =======      =======

Supplemental Cash Flow Information:
   Cash paid for interest expense                          $  --        $    19

                     The accompanying notes are an integral
                            part of these statements.

<PAGE>


                                                                    Page 5 of 13


                   PHOENIX LEASING CASH DISTRIBUTION FUND III,
                 A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 1.       General.

         The accompanying  unaudited  condensed  financial  statements have been
prepared by the  Partnership in accordance  with generally  accepted  accounting
principles, pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of Management,  all adjustments (consisting of normal
recurring  accruals)  considered  necessary  for a fair  presentation  have been
included. Although management believes that the disclosures are adequate to make
the information  presented not misleading,  it is suggested that these condensed
financial  statements be read in conjunction  with the financial  statements and
the notes included in the Partnership's  Financial Statement,  as filed with the
SEC in the latest annual report on Form 10-K.

         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.

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.

         On December 31, 1994,  the  Partnership  determined  that the financial
position of Phoenix Black Rock Cable J.V. had become  material to the operations
of the  Partnership.  Accordingly,  the Partnership  consolidated  the financial
results of this joint  venture  with those of the  Partnership  at December  31,
1994. The Partnership has reported this joint venture using the equity method of
accounting  for the first three  quarters of 1994. The effect of this change has
no impact on the net income or equity of the Partnership.

         Non-Cash  Investing  Activity.  On September 20, 1995, the  Partnership
foreclosed  upon  a  nonperforming   outstanding  note  receivable  to  a  cable
television system operator 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 a newly formed joint venture owned by the
partnerships and managed by the General  Partner.  The amount of the outstanding
note receivable that was contributed to the joint venture was $151,000.


<PAGE>


                                                                    Page 6 of 13


Note 3.       Reclassification.

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


Note 4.       Income Taxes.

         Federal  and state  income tax  regulations  provide  that taxes on the
income  or loss of the  Partnership  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.

Note 5.       Notes Receivable.

         Impaired Notes Receivable.  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 for collateral dependent loans.

         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.

         At  September  30,  1995,  the  recorded  investment  in notes that are
considered to be impaired under Statement 114 was $17,377,000.  Included in this
amount is  $10,988,000  of impaired  notes for which the related  allowance  for
losses is  $3,144,000  and  $6,389,000  of impaired  notes for which there is no
allowance.  The average  recorded  investment in impaired  loans during the nine
months ended September 30, 1995 was approximately $16,604,000.  Generally, notes
receivable  are classified as impaired and the accrual of interest on such notes
is 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.  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.

         During the quarter  ended June 30,  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.  The
remaining  balance of $1,848,000 was written-off  through its related  allowance
for loan losses.  The related allowance for loan losses for this note receivable
was provided for in a previous year in an amount equal to the carrying  value of
the note.

         The  Partnership  received  settlements  from two other  impaired notes
receivable and foreclosed  upon the assets of another note receivable to a cable
television system operator during the nine months ended September 30, 1995.


<PAGE>


                                                                    Page 7 of 13



          Upon  receipt of the  settlements  and payoffs of the above  mentioned
notes  receivable,  the  Partnership  reduced the  allowance  for loan losses by
$2,000,000  during  the  quarter  ended June 30,  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
nine months ended September 30, is as follows:
                                                       1995               1994
                                                       ----               ----
                                                        (Amounts in Thousands)

Beginning balance                                    $ 8,357             $ 7,781
     Provision for losses                             (2,000)                576
     Write downs                                      (2,010)               --
                                                     -------             -------
Ending balance                                       $ 4,347             $ 8,357
                                                     =======             =======

Note 6.       Net Income (Loss) and Distributions Per Limited Partnership Unit.

         Net income and distributions per limited partnership unit were based on
the limited  partners' share of net income and  distributions,  and the weighted
average  number  of units  outstanding  of  516,716  for the nine  months  ended
September 30, 1995 and 1994.  For purposes of  allocating  net income (loss) and
distributions to each individual limited partner, the Partnership  allocates net
income (loss) and distributions based upon each respective limited partner's net
capital contributions.

Note 7.       Investment in Joint Ventures.

Equipment Joint Ventures

         The aggregate combined  statements of operations of the equipment joint
ventures is presented below:

                        COMBINED STATEMENTS OF OPERATIONS
                             (Amounts in Thousands)

                                        Three Months Ended    Nine Months Ended
                                           September 30,         September 30,
                                          1995       1994       1995      1994
                                          ----       ----       ----      ----
INCOME
Rental income                             $1,013    $ 408     $2,968    $ 1,728
Gain on sale of equipment                    359      199      1,164        871
Other income                                 569        1        674          1
                                          ------    -----     ------    -------
         Total income                      1,941      608      4,806      2,600
                                          ------    -----     ------    -------

EXPENSES
Depreciation                                 628      280      1,086        910
Lease related  operating expenses            726      454      2,142      1,738
Management fees to General Partner            94       33        221        141
General and administrative expenses            1       16          8         53
                                          ------    -----     ------    -------
         Total expenses                    1,449      783      3,457      2,842
                                          ------    -----     ------    -------
Net income (loss)                         $  492    $(175)    $1,349    $  (242)
                                          ======    =====     ======    =======


<PAGE>


                                                                    Page 8 of 13



Foreclosed Cable Systems Joint Ventures

         The aggregate combined statements of operations of the foreclosed cable
systems joint ventures is presented below:

                        COMBINED STATEMENTS OF OPERATIONS
                             (Amounts in Thousands)

                                            Three Months Ended Nine Months Ended
                                                September 30,     September 30,
                                                1995     1994     1995     1994
                                                ----     ----     ----     ----
INCOME
Subscriber revenue                              $ 267     $321    $ 794     $856
Other income                                        3        3        9        9
                                                -----     ----    -----     ----
         Total income                             270      324      803      865
                                                -----     ----    -----     ----

EXPENSES
Depreciation and amortization                      77       65      237      194
Program services                                   89       70      247      210
Management fees to an affiliate of the
  General Partner                                  12       15       36       38
General and administrative expenses                79       78      228      211
Provision for losses on accounts
  receivable                                        3        3        8        9
                                                -----     ----    -----     ----
         Total expenses                           260      231      756      662
                                                -----     ----    -----     ----
Net income before income taxes                     10       93       47      203
Income tax expense                                 (6)     --       (13)     --
                                                -----     ----    -----     ----
Net income                                      $   4     $ 93    $  34     $203
                                                =====     ====    =====     ====

Note 8.  Notes Payable.

         On September  21, 1995 the  Partnership  received  proceeds  from notes
payable  of  $2,000,000.  This  loan  is  collateralized  by the  assets  of the
Partnership and is payable in 30 monthly installments of principal and interest.
The interest rate is tied to the lender's  prime rate and was 8.75% at September
30, 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.


<PAGE>


                                                                    Page 9 of 13


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

Item 2.       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 $191,000 and
$2,475,000 for the three and nine months ended September 30, 1995, respectively,
as compared to net income of $182,000 and $478,000 for the same periods in 1994.
The  Partnership  reported a very small  increase in net income of $9,000 during
the three months  ended  September  30, 1995,  as compared to the same period in
1994.  The  $1,997,000  increase  in net  income  during the nine  months  ended
September  30,  1995,  as  compared  to the same  period in 1994,  is  primarily
attributable to the  recognition,  as income,  of a portion of the allowance for
loan losses.

         During the nine  months  ended  September  30,  1995,  the  Partnership
received 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 the
quarter  ended  September  30, 1995.  This  reduction in the  allowance for loan
losses was recognized as income during the period.

         Total revenues  decreased by $645,000 and  $2,247,000  during the three
and nine months ended  September  30, 1995,  respectively,  when compared to the
same  periods in 1994.  The  decrease is  primarily  the result of  decreases in
rental  income and a  decreased  gain on the sale of  equipment.  Rental  income
declined by $630,000 and $2,290,000 for these periods,  respectively,  primarily
as the result of a decrease in the amount of equipment  owned.  At September 30,
1995, the Partnership  owned  equipment,  excluding the  Partnership's  pro rata
interest in joint ventures, with an aggregate original cost of $27.1 million, as
compared to $55.6 million at September 30, 1994.

         The Partnership reported a gain on the sale of equipment of $85,000 and
$235,000 for the three and nine months ended  September 30, 1995,  respectively,
as compared to a gain on sale of equipment  of $358,000 and $779,000  during the
same periods in 1994.  The decreased gain on sale of equipment for the three and
nine months ended September 30, 1995, when compared to the same periods in 1994,
are  attributable  to a decrease in the sales proceeds  received on the sales of
such equipment. During the nine months ended September 30, 1995, the Partnership
sold equipment  with an aggregate  original cost of $21.5 million as compared to
$19.7 million during the same period in 1994.

         During the nine  months  ended  September  30,  1995,  the  Partnership
received a final payoff on four notes receivable, of which three were considered
impaired, and foreclosed upon the assets of another note receivable from a cable
television system operator.  The Partnership recognized interest income from the
receipt  of  the  final  payoff  on  certain  of  these  notes  receivable.  The
Partnership  holds notes receivable from cable  television  system operators and
security  monitoring  companies with a net carrying value of approximately $18.4
million, of which $17.4 are considered to be impaired at September 30, 1995. 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.


<PAGE>


                                                                   Page 10 of 13


         Total  expenses  decreased by $660,000 and $4,262,000 for the three and
nine months  ended  September  30, 1995,  respectively,  as compared to the same
periods in 1994.  The decrease in total  expenses for these periods is primarily
due to the decrease in  depreciation  and  amortization  expense of $505,000 and
$1,927,000, respectively, as compared to the same periods in the prior year. The
decrease in depreciation  and  amortization is due to a decrease in depreciation
for the  three  and nine  months  ended  September  30,  1995,  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.

         Lease  related  operating  expenses  decreased by $117,000 and $500,000
during  the  three and nine  months  ended  September  30,  1995,  respectively,
compared to the same periods in 1994, 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.

         The  Partnership  reported  cable  subscriber  revenues of $166,000 and
$509,000   during  the  three  and  nine  months  ended   September   30,  1995,
respectively, as compared to $0 during the same periods in 1994. On December 31,
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 for the three and nine
months ended September 30, 1995 have been consolidated.  However,  for the three
and  nine  months  ended  September  30,  1994,  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.

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


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 has investments in foreclosed cable
systems and investments in joint ventures.

         The net cash generated by operating  activities decreased by $3,171,000
during the nine months  ended  September  30,  1995,  when  compared to the same
period in 1994. This decrease is primarily due to a decrease in rental income, a
result of the decrease in the size of the equipment portfolio.

         Principal  payments from notes  receivable  increased  substantially by
$7,161,000 during the nine months ended September 30, 1995, when compared to the
same period in 1994.  During the nine  months  ended  September  30,  1995,  the
Partnership   received  final  payoffs  of  notes  receivable  from  four  cable
television system operators.



<PAGE>


                                                                   Page 11 of 13


         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 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 million was paid to the senior lendor 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.

         The decrease in proceeds from the sale of equipment of $832,000  during
the nine months ended  September 30, 1995, as compared to the same period in the
prior year, is  attributable  to a decrease in the value of the equipment  sold.
During the nine months ended September 30, 1995, the Partnership  sold equipment
having an aggregate original cost of $21.5 million, as compared to $19.7 million
of equipment sold during the same period in 1994.

         During the nine  months  ended  September  30,  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 a decrease in distributions from
foreclosed  cable system joint ventures  during the nine months ended  September
30, 1995.  During the first quarter of 1994, the Partnership  received its first
cash  distributions  from its  investment  in  foreclosed  cable  systems  joint
ventures.  The increased cash distribution for 1994 was attributable to the sale
of two cable systems and the  distribution of excess cash from operations in one
other remaining  cable system.  The increased  distributions  from the equipment
joint  venture  during the nine months  ended  September  30, 1995 is related to
distributions received from a joint venture that was formed in October of 1994.

         As of September 30, 1995,  the  Partnership  owned  equipment  held for
lease with an  aggregate  original  cost of  $7,770,000  and a net book value of
$48,000, compared to $19,188,000 and $305,000, respectively, as of September 30,
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 the nine months ended
September 30, 1995 and 1994 was $5,798,000 and  $5,797,000,  respectively.  As a
result,   the  cumulative  cash   distributions  to  the  limited  partners  are
$94,272,000 and $86,521,000 as of September 30, 1995 and 1994, respectively. The
General Partner did not receive cash distributions  during the nine months ended
September  30,  1995 and 1994.  The  General  Partner has elected not to receive
payment,  at this time, for its share of the cash available for distribution due
to its negative capital account.

         The Partnership's  asset portfolio  continues to decline as a result of
the ongoing  liquidation  of assets,  and therefore it is expected that the cash
generated from  Partnership  leasing  operations will also decline.  As the cash
generated by  operations  continues to decline,  the rate of cash  distributions
made  to  limited  partners  will  also  decline.  It is  anticipated  that  the
distributions  to partners on October 15, 1995 and January 15, 1996 will be made
at approximately  the same rate as the current  distributions  being made during
the nine months ended  September 30, 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 12 of 13


                   PHOENIX LEASING CASH DISTRIBUTION FUND III,
                        A CALIFORNIA LIMITED PARTNERSHIP

                               September 30, 1995

                           Part II. Other Information.


Item 1.       Legal Proceedings.  Inapplicable

Item 2.       Changes in Securities.  Inapplicable

Item 3.       Defaults Upon Senior Securities.  Inapplicable

Item 4.       Submission of Matters to a Vote of Securities Holders.Inapplicable

Item 5.       Other Information.  Inapplicable

Item 6.       Exhibits and Reports on 8-K:

              a)  Exhibits:

                  (27)       Financial Data Schedule

              b)  Reports on 8-K:  None


<PAGE>


                                                                   Page 13 of 13
<TABLE>
                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

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

<CAPTION>
           Date                                       Title                                      Signature
<S>                                            <C>                                      <C>

November 13, 1995                                                                       /S/ PARITOSH K. CHOKSI
-----------------                              Chief Financial Officer,                 ----------------------
                                               Senior Vice President                    (Paritosh K. Choksi)
                                               and Treasurer of
                                               Phoenix Leasing Incorporated
                                               General Partner


November 13, 1995                                                                       /S/ BRYANT J. TONG
-----------------                              Senior Vice President,                   ------------------
                                               Financial Operations                     (Bryant J. Tong)
                                               (Principal Accounting Officer)
                                               and a Director of
                                               Phoenix Leasing Incorporated
                                               General Partner


November 13, 1995                                                                       /S/ GARY W. MARTINEZ
-----------------                              Senior Vice President of                 --------------------
                                               Phoenix Leasing Incorporated             (Gary W. Martinez)
                                               General Partner


November 13, 1995                                                                       /S/ MICHAEL K. ULYATT
-----------------                              Partnership Controller                   ---------------------
                                               Phoenix Leasing Incorporated             (Michael K. Ulyatt)
                                               General Partner
</TABLE>