UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   ----------

                                   FORM 10-QSB

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

                For the quarterly period ended September 30, 1998

                                       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 
                                   ---         ---

516,662 Units of Limited  Partnership  Interest were outstanding as of September
30, 1998.

Transitional small business disclosure format:

                               Yes          No  X
                                   ---         ---

                                  Page 1 of 14


<PAGE>



                          Part I. Financial Information
                          -----------------------------
                          Item 1. Financial Statements
                   PHOENIX LEASING CASH DISTRIBUTION FUND III,
                A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                 (Amounts in Thousands Except for Unit Amounts)
                                   (Unaudited)
                                                      September 30, December 31,
                                                          1998          1997
                                                          ----          ----
ASSETS
Cash and cash equivalents                                $ 4,363      $ 3,072

Accounts receivable (net of allowance for losses
   on accounts receivable of $52 and $73 at
   September 30, 1998 and December 31, 1997,
   respectively)                                             102          192

Notes receivable (net of allowance for losses
   on notes receivable of $21 and $604 at September
   30, 1998 and December 31, 1997, respectively)              43           45

Equipment on operating leases and held for lease
   (net of accumulated depreciation of $1,221 and
   $10,017 at September 30, 1998 and December 31,
   1997, respectively)                                      --           --

Cable systems, property and equipment (net of
   accumulated depreciation of $738 and $521
   at September 30, 1998 and December 31, 1997,
   respectively)                                           2,915        3,086

Cable subscriber lists (net of accumulated
   amortization of $522 and $380 at September
   30, 1998 and December 31, 1997, respectively)             993        1,135

Investment in joint ventures                                 356          310

Other assets                                                  39           48
                                                         -------      -------

     Total Assets                                        $ 8,811      $ 7,888
                                                         =======      =======

LIABILITIES AND PARTNERS' CAPITAL

Liabilities

   Accounts payable and accrued expenses                 $   473      $   608
                                                         -------      -------

     Total Liabilities                                       473          608
                                                         -------      -------

Partners' Capital

   General Partner                                         2,056          (18)

   Limited Partners, 600,000 units authorized,
     528,151 units issued and 516,662 units
     outstanding at September 30, 1998 and
     December 31, 1997                                     6,282        7,298
                                                         -------      -------

   Total Partners' Capital                                 8,338        7,280
                                                         -------      -------

     Total Liabilities and Partners' Capital             $ 8,811      $ 7,888
                                                         =======      =======

        The accompanying notes are an integral part of these statements.


                                       2
<PAGE>


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

                                           Three Months Ended  Nine Months Ended
                                              September 30,      September 30,
                                              1998     1997      1998     1997
                                              ----     ----      ----     ----
INCOME
   Cable subscriber revenue                  $  410  $  426     $1,253  $1,278
   Rental income                                129     106        259     310
   Equity in earnings (losses) from joint
     ventures, net                              115     (40)       135       6
   Interest income, notes receivable           --        78          6     107
   Gain on sale of securities                  --         1         32     151
   Gain on sale of cable system                --       169       --       169
   Other income                                  82      58        151     237
                                             ------  ------     ------  ------
     Total Income                               736     798      1,836   2,258
                                             ------  ------     ------  ------

EXPENSES
   Depreciation and amortization                129     119        368     338
   Cable system operations                      241     242        715     744
   Lease related operating expenses              11       5         25      26
   Management fees to General Partner
     and affiliate                               23      33         66      86
   Reimbursed administrative costs to
     General Partner                             21      25         77     100
   Legal expense                                 57      21        167      59
   General and administrative expenses           37      67        140     147
                                             ------  ------     ------  ------
     Total Expenses                             519     512      1,558   1,500
                                             ------  ------     ------  ------

NET INCOME BEFORE MINORITY INTEREST             217     286        278     758

Minority interest in losses (earnings)
  of subsidiary                                --        (2)      --         6
                                             ------  ------     ------  ------

NET INCOME                                   $  217  $  284     $  278  $  764
                                             ======  ======     ======  ======

NET INCOME PER LIMITED
PARTNERSHIP UNIT                             $  .41  $  .55     $  .53  $ 1.47
                                             ======  ======     ======  ======

DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT                             $    -  $    -     $ 2.50  $22.50
                                             ======  ======     ======  ======



ALLOCATION OF NET INCOME:
     General Partner                         $    2  $    3     $    3  $    6
     Limited Partners                           215     281        275     758
                                             ------  ------     ------  ------
                                             $  217  $  284     $  278  $  764
                                             ======  ======     ======  ======

        The accompanying notes are an integral part of these statements.


                                       3
<PAGE>



                   PHOENIX LEASING CASH DISTRIBUTION FUND III,
                A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Amounts in Thousands)
                                   (Unaudited)
                                                            Nine Months Ended
                                                              September 30,
                                                            1998        1997
                                                            ----        ----
Operating Activities:
--------------------
   Net income                                             $    278   $    764
   Adjustments to reconcile net income to net
     cash provided (used) by operating activities:
       Depreciation and amortization                           368        338
       Gain on sale of equipment                               (21)       (51)
       Gain on sale of cable system                           --         (169)
       Equity in earnings from joint ventures, net            (135)        (6)
       Provision for losses on accounts receivable              22         40
       Gain on sale of securities                              (32)      (151)
       Decrease (increase) in accounts receivable               68         (7)
       Decrease in accounts payable and accrued expenses      (135)    (2,252)
       Decrease (increase) in other assets                       1        (23)
       Minority interest in losses of subsidiary              --           (6)
                                                          --------   --------
Net cash provided (used) by operating activities               414     (1,523)
                                                          --------   --------

Investing Activities:
--------------------
   Principal payments, notes receivable                          2         13
   Proceeds from sale of equipment                              21         52
   Proceeds from sale of securities                             32        151
   Proceeds from sale of cable system                         --          169
   Distributions from joint ventures                            88        102
   Cable systems, property and equipment                       (47)      (134)
                                                          --------   --------
Net cash provided by investing activities                       96        353
                                                          --------   --------

Financing Activities:
--------------------
   Contribution from General Partner                         2,072       --
   Distributions to partners                                (1,291)   (11,625)
   Distribution to minority partners                          --           (2)
                                                          --------   --------
Net cash provided (used) by financing activities               781    (11,627)
                                                          --------   --------

Increase (decrease) in cash and cash equivalents             1,291    (12,797)

Cash and cash equivalents, beginning of period               3,072     15,591
                                                          --------   --------

Cash and cash equivalents, end of period                  $  4,363   $  2,794
                                                          ========   ========


        The accompanying notes are an integral part of these statements.


                                       4
<PAGE>

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

Note 1.  General.
         -------

         The accompanying  unaudited condensed consolidated 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.

         The Partnership  Agreement  stipulates the methods by which income will
be allocated to the General Partner and the limited  partners.  Such allocations
will be made using income or loss calculated under Generally Accepted Accounting
Principles  for book purposes,  which varies from income or loss  calculated for
tax purposes.

         The  calculation  of items of income and loss for book and tax purposes
may result in book basis  capital  accounts that vary from the tax basis capital
accounts. The requirement to restore any deficit capital balances by the General
Partner  will  be  determined  based  on the  tax  basis  capital  accounts.  At
liquidation  of the  Partnership,  the General  Partner's  remaining  book basis
capital  accounts  will be reduced to zero through the  allocation  of income or
loss.

         In March of 1998,  Phoenix Concept  Cablevision of Indiana,  L.L.C. , a
wholly owned  subsidiary  of the  Partnership,  entered  into an Asset  Purchase
Agreement  to sell all or  substantially  all of its  assets  on or  before  the
closing date of July 31,  1998.  The  potential  buyer has been unable to secure
financing  for the  purchase of these assets  prior to the  contractual  closing
date.  The General  Partner is  continuing  its efforts in marketing  this cable
system for sale.

Note 2.  Reclassification.
         ----------------

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

Note 3.  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 4.  Notes Receivable.
         ----------------

         Impaired  Notes  Receivable.   At  September  30,  1998,  the  recorded
investment in notes that are considered to be impaired was $64,000 for which the
related  allowance for losses was $21,000.  The average  recorded  investment in

                                       5
<PAGE>

impaired  loans  during the nine months  ended  September  30, 1998 and 1997 was
approximately $387,000 and $653,000, respectively.

         The activity in the allowance for losses on notes receivable during the
nine months ended September 30, is as follows:

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

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

         The Partnership  wrote-off the outstanding  balance of several impaired
notes receivable from cable  television  system operators during the nine months
ended September 30, 1998 which totaled $583,000. These notes receivable had been
fully reserved for in a previous year.


Note 5.  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 516,662 and 516,716 for the nine months
ended September 30, 1998 and 1997, respectively.  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 6.  Investment in Joint Ventures.
         ----------------------------

Equipment Joint Ventures
------------------------

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

                                                September 30, December 31,
                                                    1998          1997
                                                    ----          ----
                                                  (Amounts in Thousands)

         Assets                                    $  331        $1,055
         Liabilities                                    7           409
         Partners' Capital                            324           646


                                       6
<PAGE>


                               Three Months Ended     Nine Months Ended
                                  September 30,         September 30,
                                 1998       1997       1998       1997
                                 ----       ----       ----       ----
                                         (Amounts in Thousands)

         Revenue               $  457     $  240     $  752      1,431
         Expenses                 686        901        840      1,569
         Net Loss                (229)      (661)       (88)      (138)


Foreclosed Cable Systems Joint Ventures
---------------------------------------

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

                                                September 30,  December 31,
                                                    1998          1997
                                                    ----          ----
                                                  (Amounts in Thousands)

         Assets                                    $1,591        $2,071
         Liabilities                                  329           519
         Partners' Capital                          1,262         1,552

                                     Three Months Ended  Nine Months Ended
                                        September 30,      September 30,
                                        1998    1997       1998     1997
                                        ----    ----       ----     ----
                                             (Amounts in Thousands)

         Revenue                       $ 255   $ 257      $ 688    $ 762
         Expenses                        234     278        747      829
         Net Income (Loss)                21     (21)       (59)     (67)

Note 7.  Legal Proceedings.
         -----------------

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

         Plaintiffs  severed  one cause of action  from the  Complaint,  a claim
related to the marketing and sale of CDF V, and  transferred  it to Marin County
Superior Court (the "Marin Action").  Plaintiffs  subsequently amended the Marin
Action on August 14, 1998. On October 23, 1998,  the Companies  filed a demurrer
to the Marin Action,  seeking its dismissal.  Discovery has not  commenced.  The
Companies intend to vigorously defend the Complaint.


                                       7
<PAGE>

         During the nine months  ended  September  30,  1998,  the  Partnerships
recorded legal expenses of  approximately  $110,000 in connection with the above
litigation as indemnification to the General Partner.

Note 8.  Subsequent Event.
         ----------------

         On October 19, 1998,  Phoenix Concept  Cablevision,  Inc., a foreclosed
cable television  system joint venture,  received proceeds of $1,681,000 for the
sale of its  assets.  The  Partnership  owns a.  14.19%  interest  in this joint
venture.


                                       8
<PAGE>


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

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 $217,000 and
$278,000 for the three and nine months ended  September 30, 1998,  respectively,
as compared to net income of $284,000 and $764,000 for the same periods in 1997.
The decrease in net income during the three and nine months ended  September 30,
1998,  as compared to the same periods in 1997, is primarily  attributable  to a
decline in total revenues.

         The  Subsidiary's  cable  operations has become the primary activity of
the Partnership.  Cable subscriber revenue and cable system operations  expenses
remained  relatively the same for the three and nine months ended  September 30,
1998, compared to the same periods in 1997.

         Total revenues  declined by $62,000 and $422,000 for the three and nine
months ended September 30, 1998,  respectively,  as compared to the same periods
in the prior  year.  The decline in total  revenues  for both the three and nine
months ended September 30, 1998,  compared to the previous year, is attributable
to decreases in interest income from notes  receivable and gain on sale of cable
system. Additionally,  for the nine months ended September 30, 1998, compared to
1997, the  Partnership  experienced  decreases in gain on sale of securities and
other  income  which were also  factors  contributing  to the  decrease in total
revenues for that period.

         Interest  income from notes  receivable was $0 and $6,000 for the three
and nine months ended September 30, 1998, respectively,  compared to $78,000 and
$107,000 for the same periods in 1997.  During the three months ended  September
30,  1997,  the  Partnership  received  additional  settlement  proceeds  from a
defaulted note receivable  with a net carrying value of $0 which  contributed to
increasing  interest income from notes receivable during both the three and nine
months ended September 30, 1997, such an occurrence does not exist in 1998.

         For both the  three and nine  months  ended  September  30,  1998,  the
Partnership  reported a gain on sale of cable system of $0, compared to $169,000
for both the three and nine months ended  September  30, 1997.  During the three
months ended September 30, 1997,  Phoenix  Grassroots  Cable Systems,  L.L.C., a
subsidiary of the  Partnership,  received a disbursement of proceeds of $169,000
which were held in escrow from the August 30,  1996 sale of assets.  At the time
of the sale, a portion of the proceeds were held in escrow to cover  liabilities
which may have arisen  after the sale.  The receipt of the escrow  proceeds  was
treated as an adjustment to the sales price,  and as a result,  the  Partnership
recognized  an  additional  gain on the sale of cable  systems for the three and
nine months ended September 30, 1997.

         The  Partnership  exercised  and sold  stock  warrants  during the nine
months ended  September  30, 1998  recognizing  a gain on securities of $32,000,
compared  to  $151,000  for the same period in 1997.  The  Partnership  has been
granted stock warrants as part of its lease or financing agreements with certain
emerging growth companies.


                                       9
<PAGE>


         The  decrease  in other  income of $86,000  for the nine  months  ended
September 30, 1998,  compared to the same period in 1997, is  attributable  to a
decrease  in  interest  income.  The  decrease  in  interest  income is due to a
reduction in the  Partnership's  cash balance  resulting  from a decline in cash
generated from the Partnership's  operating and investing activities during 1997
and 1998.

         The increase in earnings  from joint  ventures of $155,000 and $129,000
for the three and nine months ended  September 30, 1998, is due to one equipment
joint venture having sold its remaining equipment which resulted in the recovery
of provision for doubtful accounts receivable and a write off of a liability.

         The increase in total  expenses of $7,000 and $58,000 for the three and
nine months  ended  September  30, 1998,  respectively,  as compared to the same
periods in 1997 is a result of an increase in legal fees.  Legal fees  increased
by $36,000 and $108,000 for the three and nine months ended  September 30, 1998,
respectively, as compared to the same periods in 1997 as a result of legal costs
associated to a Class Action Complaint as further discussed in Note 7.

         Because  the  Partnership  is  in  its  liquidation  stage,  it is  not
expected  that the  Partnership  will acquire any  additional  equipment for its
leasing activities or provide any further financing.  As a result, revenues from
leasing  and  financing  activities  are  expected to continue to decline as the
portfolio is liquidated.  The aggregate  original cost of equipment owned by the
Partnership as of September 30, 1998 is $1,358,000 compared to $11,919,000 as of
September 30, 1997. The  Partnership  will reach the end of its term on December
31, 1998.

Liquidity and Capital Resources

         The  Partnership's   primary  source  of  liquidity  comes  from  cable
subscriber revenues. As another source of liquidity, the Partnership has entered
into contractual obligations with lessees and borrowers for fixed payment terms,
has  investments in foreclosed  cable system joint  ventures and  investments in
leasing joint ventures.

         The net cash generated by operating  activities was $414,000 during the
nine months ended September 30, 1998, as compared to net cash used of $1,523,000
during the same period in 1997. During the nine months ended September 30, 1997,
the  Partnership's  net  use of  cash  generated  by  operating  activities  was
attributable to payments of outstanding  liabilities for reimbursements of costs
to the General Partner.

         The net cash  generated by investing  activities was $96,000 during the
nine months  ended  September  30,  1998,  compared to $353,000  during the nine
months ended  September  30, 1997.  This  decrease  during the nine months ended
September 30, 1998, compared to 1997 is primarily due to the decline in proceeds
from the  sale of  securities  and  proceeds  from  sale of  cable  systems.  As
previously  discussed,  the Partnership exercised and sold stock warrants during
the nine months ended September 30, 1998 and 1997. As a result,  the Partnership
received  proceeds from the sale of these securities of $32,000 and $151,000 for
the nine months ended September 30, 1998 and 1997,  respectively.  Additionally,


                                       10
<PAGE>

the decline in net cash  generated by investing  activities  for the nine months
ended  September  30,  1998,  compared  to 1997,  is also due to the  absence of
proceeds from sale of cable system, compared to $169,000 in 1997, as was further
discussed in "Results of Operations".

         During the nine  months  ended  September  30,  1998,  the  Partnership
received a capital  contribution of $2,072,000 from the General Partner in order
to restore the General Partner's tax basis deficit capital balance.

         The cash  distributed to limited  partners during the nine months ended
September 30, 1998 and 1997 was $1,291,000 and $11,625,000,  respectively.  As a
result,   the  cumulative  cash   distributions  to  the  limited  partners  are
$111,095,000 and  $109,804,000 as of September 30, 1998 and 1997,  respectively.
The General  Partner did not receive cash  distributions  during the nine months
ended September 30, 1998 and 1997.

         The first annual distribution was made on January 15, 1997. As a result
of the  sale of  certain  cable  television  systems  and the  settlement  of an
impaired note receivable  during 1996, the Partnership  included the excess cash
provided by these events in the January 15, 1997  distribution.  The Partnership
anticipates making a distribution to partners on or before December 30, 1998.

         As of September 30, 1998,  the  Partnership  owned  equipment  held for
lease with an  aggregate  original  cost of $160,000 and a net book value of $0,
compared to  $2,944,000  and $0,  respectively,  as of September  30, 1997.  The
General  Partner  is  actively  engaged,  on  behalf  of  the  Partnership,   in
remarketing and selling the Partnership's off-lease portfolio.

         As the Partnership's  asset portfolio  continues to decline as a result
of the on-going  liquidation  of assets,  it is expected that the cash generated
from operations will also decline. Cash generated from cable television, leasing
and  financing  operations  has  been  and  is  anticipated  to  continue  to be
sufficient to meet the Partnership's on-going operational expenses.

         The General Partner  currently  anticipates  that it may not be able to
liquidate the remaining assets by December 31, 1998, as previously reported. The
remaining  assets of the  Partnership  consist  primarily  of:  Phoenix  Concept
Cablevision  of Indiana,  L.L.C.  (a cable  television  system and wholly  owned
subsidiary), an investment in Phoenix Pacific Northwest J.V. (a foreclosed cable
television  system joint venture),  a note  receivable  from a cable  television
system operator and various leased equipment.  The General Partner is continuing
its efforts in marketing these assets for sale.

         On October 19, 1998,  Phoenix Concept  Cablevision,  Inc., a foreclosed
cable system joint venture, received proceeds of $1,681,000 million for the sale
of its assets. The Partnership owns a 14.19% interest in this joint venture.

Impact of the Year 2000 Issue

         The "Year 2000 problem" arose because many existing  computer  programs
use only the last two digits to refer to a year. Therefore,  these computers and
computer programs do not properly recognize a year that begins with "20" instead
of the familiar "19." If not corrected, many computer applications could fail or
create erroneous results.


                                       11
<PAGE>


         The  General  Partner  has  performed  an  assessment  of the  computer
programs  used to conduct the  business of the  Partnership  that are subject to
Year 2000 risk.  The General  Partner and its  affiliates  are  currently in the
process  of  testing,  upgrading,  modifying  and  replacing  existing  computer
programs  that  have  been  determined  not to be  Year  2000  compliant.  It is
estimated  that this project will be  completed  in mid 1999.  However,  if this
project is not  completed in a timely  matter,  the Year 2000 issue could have a
material impact on the Partnership's operations.  The costs of these changes are
being incurred by the General Partner or its  affiliates.  Costs incurred by the
Partnership will be expensed as incurred and are not currently anticipated to be
material to the Partnership's  financial position or results of operations.  The
General Partner currently does not have a contingency plan, but will continue to
evaluate the need for such plan as systems and programs are tested.

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

         The assessments of the risks and costs of the Year 2000 issue are based
on management's  best estimates.  However,  there can be no guarantee that these
estimates will be achieved and the actual results could differ  materially  from
those estimates.


                                       12
<PAGE>




                   PHOENIX LEASING CASH DISTRIBUTION FUND III,
                        A CALIFORNIA LIMITED PARTNERSHIP

                               September 30, 1998

                           Part II. Other Information.
                                    -----------------


Item 1.       Legal Proceedings.
              -----------------

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

         Plaintiffs  severed  one cause of action  from the  Complaint,  a claim
related to the marketing and sale of CDF V, and  transferred  it to Marin County
Superior Court (the "Marin Action").  Plaintiffs  subsequently amended the Marin
Action on August 14, 1998. On October 23, 1998,  the Companies  filed a demurrer
to the Marin Action,  seeking its dismissal.  Discovery has not  commenced.  The
Companies intend to vigorously defend the Complaint.

         During the nine months  ended  September  30,  1998,  the  Partnerships
recorded legal expenses of  approximately  $110,000 in connection with the above
litigation as indemnification to the General Partner.

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



                                       13
<PAGE>


                                   SIGNATURES


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

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


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



November 11, 1998        Executive Vice President,          /S/ GARY W. MARTINEZ
-----------------        Chief Operating Officer            --------------------
                         and a Director of                  (Gary W. Martinez)
                         Phoenix Leasing Incorporated
                         General Partner


November 11, 1998        Chief Financial Officer,           /S/ HOWARD SOLOVEI
-----------------        Treasurer and a Director of        --------------------
                         Phoenix Leasing Incorporated       (Howard Solovei)
                         General Partner


November 11, 1998        Senior Vice President,             /S/ BRYANT J. TONG
-----------------        Financial Operations               --------------------
                         (Principal Accounting Officer)     (Bryant J. Tong)
                         and a Director of
                         Phoenix Leasing Incorporated
                         General Partner



                                       14