TEXTAINER FINANCIAL SERVICES CORPORATION
                        650 California Street, 16th Floor
                             San Francisco, CA 94108


March 29, 1999


Securities and Exchange Commission
Washington, DC  20549

Gentlemen:

Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,  we are
submitting herewith for filing on behalf of Textainer Equipment Income Fund III,
L.P. (the  "Partnership")  the Partnership's  Annual Report on Form 10-K for the
fiscal year ended December 31, 1998.

The financial  statements included in the enclosed Annual Report on Form 10-K do
not reflect a change from the  preceding  year in any  accounting  principles or
practices, or in the method of applying any such principles or practices.

This filing is being effected by direct  transmission to the Commission's  EDGAR
System.

Sincerely,

Nadine Forsman
Controller
<PAGE>




                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                               Washington DC 20549

                                    FORM 10-K

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

                   For the fiscal year ended December 31, 1998

                         Commission file number 0-20140

                    TEXTAINER EQUIPMENT INCOME FUND III, L.P.
             (Exact name of Registrant as specified in its charter)

          California                                              94-3121277
  (State or other jurisdiction                                  (IRS Employer
of incorporation or organization)                            Identification No.)

650 California Street, 16th Floor, 
San Francisco, CA                                                   94108
(Address of Principal Executive Offices)                          (ZIP Code)

                                 (415) 434-0551
               Registrant's telephone number, including area code:

Securities registered pursuant to Section 12(b) of the Act:

NONE

Securities registered pursuant to Section 12(g) of the Act:

               LIMITED PARTNERSHIP DEPOSITARY UNITS (THE "UNITS")
                                (TITLE OF CLASS)

              LIMITED PARTNERSHIP INTERESTS (UNDERLYING THE UNITS)
                                (TITLE OF CLASS)

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. 
[ X ]

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. 
[ X ]

State the aggregate  market value of the voting stock held by  nonaffiliates  of
the Registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold,  or the  average  bid and ask  prices of such
stock, as of a specified date within 60 days prior to the date of the filing.

Not Applicable.

Documents Incorporated by Reference

The Registrant's Prospectus as contained in Pre-Effective Amendment No. 2 to the
Registrant's Registration Statement dated and filed with the Commission December
21, 1990 as supplemented by Post-Effective  Amendments No. 1, 2 and 3 filed with
the  Commission  under  Section 8(c) of the  Securities  Act of 1933 on March 1,
1991, January 13, 1992 and February 4, 1992, respectively.


<PAGE>






                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

For more detailed information about the Registrant's  business, see "Business of
the Partnership" in the Registrant's Prospectus as supplemented.

(a)      General Development of Business

         The Registrant is a California  Limited  Partnership  formed as of July
         26, 1990 to purchase,  own, operate,  lease, and sell equipment used in
         the containerized  cargo shipping  industry.  The Registrant  commenced
         offering units representing  limited  partnership  interests (Units) to
         the public on January  16,  1991 in  accordance  with its  Registration
         Statement,  and  ceased  to offer  such  Units as of May 4,  1992.  The
         Registrant  raised  a total  of  $125,000,000  from  the  offering  and
         invested a substantial  portion of the money raised in  equipment.  The
         Registrant has since engaged in leasing this and other equipment in the
         international shipping industry.

         See  Item 10  herein  for a  description  of the  Registrant's  General
         Partners.  See Item 7 herein for a  description  of the current  market
         conditions affecting the Registrant's business.

(b)      Financial Information About Industry Segments

         Inapplicable.

(c)      Narrative Description of Business

(c)(1)(i)A  container   leasing   company   generally,   and    the   Registrant
         specifically,  is an  operating  business  comparable  to a rental  car
         business.  A customer can lease a car from a bank  leasing   department
         for a  monthly  charge  which  represents  the cost of the  car,   plus
         interest,  amortized  over the term of the lease;  or the customer  can
         rent the same car from a rental  car  company at a much  higher   daily
         lease rate.  The  customer is willing to pay the higher daily rate  for
         the convenience and  value-added  features  provided by the rental  car
         company, the most important of which is the ability to pick up the  car
         where it is most  convenient,  use it for the desired  period of  time,
         and then drop it off at a location convenient to the customer.   Rental
         car  companies  compete  with one another on the basis of lease  rates,
         availability of cars, and the provision of additional  services.   They
         generate  revenues  by  maintaining  the  highest  lease rates and  the
         highest  utilization factors that market conditions will allow, and  by
         augmenting this income with proceeds from sales of insurance,  drop-off
         fees, and other special charges.  A large percentage of lease  revenues
         earned by car rental  companies are  generated  under  corporate   rate
         agreements  wherein,  for a  stated  period  of time,  employees  of  a
         participating  corporation can rent cars at specific terms,  conditions
         and rental rates.

         Container leasing companies and the Registrant  operate  in  a  similar
         manner by owning  and  leasing  a  worldwide  fleet  of  new  and  used
         transportation containers to international  shipping  companies hauling
         various types of goods among numerous  trade routes.  All lessees pay a
         daily rental rate and in certain  markets may pay special handling fees
         and/or drop-off charges. In addition  to  these  fees  and  charges,  a
         lessee must either provide  physical damage and liability  insurance or
         purchase a damage  waiver  from  the  Registrant,  in  which  case  the
         Registrant agrees  to  pay the cost of repairing any physical damage to
         containers caused by lessees.  Container leasing companies compete with
         one another on  the basis of lease  rates,  availability  of  equipment
         and  services provided.   To  ensure  the  availability  of  equipment,
         container  leasing  companies   and   the  Registrant   may  reposition
         containers from low demand locations  to  higher  demand locations.  By
         maintaining   the   highest  lease  rates  and  the  highest  equipment
         utilization  factors  allowed  by  market  conditions,  the  Registrant
         generates  revenue and profit.  Rental revenues are primarily generated
         under  master  leases,  which are  comparable  to  the  corporate  rate
         agreements  used  by  rental  car companies.  The master leases provide
         that the lessee, for a specified period of time, may rent containers at
         specific terms, conditions and rental rates.  Although the terms of the
         master lease governing each container under  lease  do  not  vary,  the
         number of containers in use can vary from time to time within  the term
         of the master lease.  The terms and  conditions  of  the  master  lease
         provide  that the lessee pays a daily  rental rate for the entire  time
         the  container  is in his possession  (whether or not  he  is  actively
         using it), is responsible for any damage, and must insure the container
         against liabilities. For a  more  detailed  discussion  of  the  leases
         for  the  Registrant's equipment, see "Leasing Policy" under  "Business
         of the Partnership" in the Registrant's Prospectus as supplemented. The
         Registrant also sells containers in  the  course  of  its  business  if
         opportunities  arise or at the  end  of  the  container's  useful life.
         See  "Business  of  the  Partnership"  in  Registrant's  Prospectus, as
         supplemented.

(c)(1)(ii)  Inapplicable.

(c)(1)(iii) Inapplicable.

(c)(1)(iv)  Inapplicable.

(c)(1)(v)   Inapplicable.

(c)(1)(vi)  Inapplicable.

(c)(1)(vii) No single lessee had revenue for the years ended December 31,  1998,
            1997 and 1996 which was 10% or more of  the  total  revenue  of  the
            Registrant.

(c)(1)(viii)Inapplicable.

(c)(1)(ix)  Inapplicable.

(c)(1)(x)   There are approximately 80 container leasing  companies of which the
            top ten control approximately 93% of the total equipment held by all
            container leasing companies. The top two container leasing companies
            combined control approximately 39% of the total  equipment  held  by
            all container  leasing  companies.  Textainer  Equipment  Management
            Limited, an Associate General Partner  of  the  Registrant  and  the
            manager of its  marine container equipment,  is  the  third  largest
            container  leasing company and manages  approximately   10%  of  the
            equipment held by all container  leasing companies.  The  Registrant
            alone  is not a  material  participant  in the  worldwide  container
            leasing market.  The principal methods  of  competition  are  price,
            availability  and   the  provision  of  worldwide  service  to   the
            international shipping community.  Competition  in   the   container
            leasing market has increased over the past few  years.  Since  1996,
            shipping  alliances  and   other  operational  consolidations  among
            shipping lines have allowed  shipping lines to begin operating  with
            fewer  containers,   thereby  decreasing   the   demand  for  leased
            containers. This decrease in demand, along with  the  entry  of  new
            leasing  company  competitors offering low container rental rates to
            shipping lines, has increased  competition  among container  lessors
            such as the Registrant.

(c)(1)(xi)  Inapplicable.

(c)(1)(xii) Inapplicable.

(c)(1)(xiii)The  Registrant  has  no  employees.  Textainer  Financial  Services
            Corporation   (TFS),   the   Managing   General   Partner   of   the
            Registrant,  is  responsible  for  the  overall  management  of  the
            business  of  the  Registrant  and  at  December   31,  1998  had  6
            employees.     Textainer  Equipment  Management  Limited  (TEM),  an
            Associate  General Partner, is responsible for the management of the
            leasing  operations of the  Registrant  and at December 31, 1998 had
            a total of 162 employees.

(d)      Financial Information about Foreign and Domestic Operations and  Export
         Sales.

         The  Registrant  is involved in the leasing of shipping  containers  to
         international   shipping   companies   for  use  in  world   trade  and
         approximately  22%, 17%, and 17%, of the  Registrant's  rental  revenue
         during the years ended December 31, 1998, 1997 and 1996,  respectively,
         was derived from operations sourced or terminated  domestically.  These
         percentages do not reflect the proportion of the  Partnership's  income
         from  operations  generated  domestically  or  in  domestic  waterways.
         Substantially  all of  the  Partnership's  income  from  operations  is
         derived from assets  employed in foreign  operations.  See "Business of
         the  Partnership",  and  for a  discussion  of  the  risks  of  leasing
         containers for use in world trade,  "Risk Factors" in the  Registrant's
         Prospectus, as supplemented.

ITEM 2.  PROPERTIES

As of December 31, 1998, the Registrant owned the following types and quantities
of equipment:

    20-foot standard dry freight containers                               10,155
    40-foot standard dry freight containers                               12,759
    40-foot high cube dry freight containers                               6,323
                                                                         -------
                                                                          29,237
                                                                         =======

During  December 1998,  approximately  74% of these  containers were on lease to
international  shipping  companies and the balance was being stored at container
manufacturers' locations and a large number of storage depots located worldwide.

For  information  about  the  Registrant's   property,   see  "Business  of  the
Partnership" in the Registrant's Prospectus, as supplemented.

ITEM 3.  LEGAL PROCEEDINGS

The Registrant is not subject to any legal proceedings.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

Inapplicable.

                                     PART II

ITEM 5.  MARKET FOR THE  REGISTRANT'S  COMMON  EQUITY  AND  RELATED  STOCKHOLDER
         MATTERS

ITEM 201:

(a)      Market Information.

(a)(1)(i)  The Registrant's  limited  partnership  Units are not publicly traded
           and there  is  no  established  trading  market for such  Units.  The
           Registrant has a program whereby limited partners  may  redeem  Units
           for a specified redemption price. The program operates only when  the
           Managing  General  Partner  determines,  among  other  matters,  that
           payment for redeemed units will not impair the capital or  operations
           of the Registrant.

(a)(1)(ii) Inapplicable.

(a)(1)(iii)Inapplicable.

(a)(1)(iv) Inapplicable.

(a)(1)(v)  Inapplicable.

(a)(2)     Inapplicable.

(b)      Holders.

(b)(1)     As of January 1, 1999 there were 7,958 holders  of record of  limited
           partnership interests in the Registrant.

(b)(2)     Inapplicable.

(c)      Dividends.

           Inapplicable.

For details of the distributions which are made monthly by the Registrant to its
limited partners, see Item 6 "Selected Financial Data".

ITEM 701:  Inapplicable.

ITEM 6.  SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>

                                                        (Amounts in thousands except for per unit amounts)

                                                                    Year Ended December 31,
                                         -------------------------------------------------------------------------------
                                                1998             1997             1996              1995          1994
                                                ----             ----             ----              ----          ----

<S>                                          <C>              <C>             <C>               <C>          <C>      
Rental income                                $ 18,904         $ 19,361        $  21,349         $  23,724    $  23,007

Net earnings                                 $  3,886         $  5,173        $   7,795         $  10,319    $   8,217

Net earnings per unit of
    limited partnership interest             $   0.61         $   0.82        $    1.24         $    1.64    $    1.30

Distributions per unit of
    limited partnership interests            $   1.77         $   1.85        $    1.85         $    1.82    $    1.66

Distributions per unit of
   limited partnership interest
   representing a return of capital          $   1.16         $   1.03        $    0.61         $    0.18    $    0.36

Total assets                                 $ 74,579         $ 82,248        $  88,765         $  92,981    $  96,128

</TABLE>
<PAGE>


ITEM 7.  MANAGEMENT'S  DISCUSSION   AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
         RESULTS OF OPERATIONS

           (Amounts in thousands except for unit and per unit amounts)

The Financial  Statements contain  information,  which will assist in evaluating
the  financial  condition of the  Partnership  for the years ended  December 31,
1998, 1997 and 1996. Please refer to the Financial  Statements and Notes thereto
in connection with the following discussion.

Liquidity and Capital Resources

From  January  16,  1991  until May 4, 1992,  the  Partnership  offered  limited
partnership  interests  to the  public.  The  Partnership  received  its minimum
subscription  amount of $1,000 on February  11,  1991,  and on May 4, 1992,  the
Partnership's offering of limited partnership interests was closed at $125,000.

From time to time,  the  Partnership  redeems units from limited  partners for a
specified  redemption  value,  which  is  set  by  formula.  Up  to  2%  of  the
Partnership's outstanding units may be redeemed each year, although the 2% limit
may be exceeded at the Managing General  Partner's  discretion.  All redemptions
are subject to the Managing  General  Partner's  good faith  determination  that
payment for the redeemed units will not (i) cause the Partnership to be taxed as
a  corporation,  (ii) impair the capital or  operations of the  Partnership,  or
(iii) impair the ability of the Partnership to pay  distributions  in accordance
with its  distribution  policy.  During the year ended  December 31,  1998,  the
Partnership  redeemed  14,667  units  for a total  dollar  amount  of $153.  The
Partnership used cash flow from operations to pay for the redeemed units.

The Partnership  invests working capital and cash flow from operations  prior to
its  distribution  to  the  partners  in  short-term,  liquid  investments.  The
Partnership's  cash is  affected  by  cash  provided  by or  used in  operating,
investing and financing  activities.  These  activities  are discussed in detail
below.

During  the  year  ended  December  31,  1998,  the  Partnership  declared  cash
distributions  to limited  partners  pertaining to the period from December 1997
through November 1998, in the amount of $10,890.  These distributions  represent
9.25% on original  capital  (measured on an annualized  basis) on each unit from
December  1997 through June 1998 and 8.25% on original  capital  (measured on an
annualized  basis) on each unit for July 1998 through  November  1998. On a cash
basis, all of these distributions were from operations.  On a GAAP basis, $7,119
of these  distributions  was a return of capital  and the  balance  was from net
earnings.

At  December  31,  1998,  the  Partnership  has  committed  to  purchase  50 new
containers  at an  approximate  total  purchase  price of $139,  which  includes
acquisition  fees of $7. At December 31, 1998,  the  Partnership  had sufficient
cash on hand to meet these commitments. In the event the Partnership decides not
to purchase the containers,  one of the General  Partners or an affiliate of the
General Partners will acquire the containers for its own account.

Net cash provided by operating  activities for the years ended December 31, 1998
and 1997,  was  $12,419  and  $12,358,  respectively.  The  increase  of $61 was
primarily  attributable  to  fluctuations  in  accounts  receivable,   excluding
write-off.  The decrease in accounts receivable,  excluding write-off, of $1,041
in the year ended  December 31, 1998  compared to a decrease of $608 in the year
ended  December 31, 1997,  was primarily due to the resolution of payment issues
with one lessee and a decrease in the average collection period.

For the year ended December 31, 1998, net cash provided by investing  activities
(the purchase and sale of  containers)  was $1,849  compared to net cash used in
investing  activities of $2,883 for the year ended  December 31, 1997.  Net cash
from  investing  activities  fluctuated  $4,732  due to the  Partnership  having
purchased more containers  during the year ended December 31, 1997 than in 1998,
and due to the  Partnership  having  sold  more  containers  in the  year  ended
December 31, 1998 than in 1997. The decline in container purchases was primarily
due to the Partnership  purchasing containers during 1997 using excess cash from
operations  generated  prior to 1997. The increase in container sales was due to
the Partnership  selling older containers in surplus  locations where demand was
weak and  repositioning  costs were high. Until market conditions  improve,  the
Partnership  plans to continue to sell older  containers  in surplus  locations.
Additionally,  market  conditions  are expected to have an adverse effect on the
amount  of cash  provided  by  operations  available  for  additional  container
purchases,   which  will  result  in  lower  than  anticipated  reinvestment  in
containers.  Market  conditions  are  discussed  more fully  under  "Results  of
Operations".

Consistent with its investment  objectives,  the Partnership intends to continue
to reinvest  available cash from  operations and all or a significant  amount of
the proceeds from container sales in additional containers.  However, the number
of additional  containers purchased may not equal the number of containers sold,
despite the decline in average  container  prices from their most recent high in
1995,  as new  container  prices  are likely to be greater  than  proceeds  from
container sales.

Results of Operations

The  Partnership's  income from operations,  which consists  primarily of rental
income, container depreciation,  direct container expenses, management fees, and
reimbursement of administrative expenses was directly related to the size of the
container fleet during the years ended December 31, 1998, 1997 and 1996, as well
as certain other factors as discussed  below.  The following is a summary of the
container fleet (in units) available for lease during those periods:

                                                    1998        1997        1996
                                                    ----        ----        ----

     Beginning container fleet...............     31,342      30,605      30,236
     Ending container fleet..................     29,237      31,342      30,605
     Average container fleet.................     30,290      30,974      30,421

The decline in the average  container  fleet of 2% from the year ended  December
31, 1997 to the year ended December 31, 1998 was due to the  Partnership  having
sold more containers than it purchased since December 31, 1997. Although some of
the sales proceeds were used to purchase additional containers, fewer containers
were bought than sold,  resulting in a net decrease in the size of the container
fleet.  The  Partnership  plans to use the remaining  sales  proceeds for future
container  purchases.  As noted above,  when  containers are sold in the future,
sales  proceeds are not likely to be sufficient to replace all of the containers
sold.  This trend,  which is expected to continue,  has  contributed to a slower
rate of  reinvestment  than had been  expected  by the General  Partners.  Other
factors related to this trend are discussed  above under  "Liquidity and Capital
Resources."

Rental  income and direct  container  expenses are also  affected by the average
utilization  of the  container  fleet,  which was 78%,  80% and 84% during years
ended December 31, 1998, 1997 and 1996, respectively. In addition, rental income
is affected by daily rental rates and leasing incentives.

The  following is a comparative  analysis of the results of  operations  for the
years ended December 31, 1998, 1997 and 1996.

The  Partnership's  income from operations for the years ended December 31, 1998
and 1997 was $5,009 and $5,224,  respectively,  on rental  income of $18,904 and
$19,361,  respectively.  The decrease in rental  income of $457, or 2%, from the
year ended  December 31, 1997 to the year ended  December 31, 1998 was primarily
attributable to a decrease in income from container rentals, partially offset by
an increase in other rental  income.  Income from container  rentals,  the major
component  of  total  revenue,  decreased  $967,  or  5%,  primarily  due to the
decreases in the average  container fleet of 2%, average on-hire  utilization of
3% and average rental rates of 3%, offset by the decrease in leasing  incentives
of 43%.

The  Partnership's  income from operations for the years ended December 31, 1997
and 1996 was $5,224 and $7,569,  on total rental  income of $19,361 and $21,349,
respectively.  The decrease in rental income of $1,998, or 9%, was primarily due
to the decrease in income from container rentals.  Income from container rentals
decreased  $2,062,  or 10%,  primarily due to the  decreases in average  on-hire
utilization  of 5% and average  daily  rental  rates of 5%, and the  increase in
leasing incentives of 75%, offset by the increase in average fleet size of 2%.

Container  utilization  and rental rates have been  declining  since 1996.  This
resulted  from changes in the  business of shipping  line  customers  consisting
primarily of (i) over-capacity resulting from the additions of new, larger ships
to the existing  container  ship fleet at a rate in excess of the growth rate in
containerized  cargo trade;  (ii) shipping line alliances and other  operational
consolidations   that  have  allowed   shipping  lines  to  operate  with  fewer
containers;  and (iii) shipping lines purchasing containers to take advantage of
low  prices and  favorable  interest  rates.  The entry of new  leasing  company
competitors  offering low container  rental rates to shipping  lines resulted in
downward  pressure on rental rates, and caused leasing companies to offer higher
leasing  incentives and other  discounts to shipping  lines.  The decline in the
purchase price of new containers during this period and excess industry capacity
have also caused additional downward pressure on rental rates.

Additionally,  the weakening of many Asian  currencies in 1998 has resulted in a
significant  increase  in exports  from Asia to North  America  and Europe and a
corresponding  decrease in imports into Asia from North America and Europe. This
trade  imbalance has created a strong  demand for  containers in Asia and a weak
demand for  containers  in North  America and Europe.  While this  imbalance has
resulted in the decline in leasing  incentives,  it has also  contributed to the
further decline in average utilization and rental rates for the fleet managed by
TEM.  This  imbalance  has  also  resulted  in an  unusually  high  build-up  of
containers  in lower demand  locations  during the year ended  December 31, 1998
compared  to 1997.  In an effort to improve  utilization  and to  alleviate  the
container build-up,  the Partnership has repositioned,  and plans to continue to
reposition,  newer  containers  to  higher  demand  locations.  The  Partnership
incurred  increased  direct  container  expenses  as a result  of  repositioning
containers  from  these  lower  demand  locations  during  1998 and  anticipates
incurring  additional  direct  container  costs  in  1999  as it  continues  its
repositioning  efforts.  The  Partnership has also sold and plans to continue to
sell certain older containers located in lower demand locations. The decision to
sell such containers was based on the high costs to reposition  these containers
and on the current low demand for  containers  manufactured  prior to 1993.  The
General  Partners  believe  that the  especially  low  demand  for  these  older
containers is a temporary  situation caused by the market  conditions  discussed
above.

The low demand for these older  containers  has had an adverse  effect on rental
income and has resulted in the Partnership incurring losses on the sale of these
older containers.  Until market conditions improve,  rental income will continue
to be  adversely  affected and  additional  losses may be incurred if more older
containers are sold. Should the especially low demand for these older containers
turn  out to be a  permanent  situation,  the  Partnership  may be  required  to
increase its  depreciation  rate for container  rental  equipment.  For the near
term, the General  Partners do not foresee  material  changes in existing market
conditions  and caution  that both  utilization  and lease  rates could  further
decline, adversely affecting the Partnership's operating results.

Substantially  all of the  Partnership's  rental income was  generated  from the
leasing of the Partnership's containers under short-term operating leases.

The  balance of other  rental  income  consists  of other  lease-related  items,
primarily  income from charges to lessees for dropping off containers in surplus
locations,  less credits granted to lessees for leasing  containers from surplus
locations  (location  income),  income from  charges to lessees for handling and
returning  containers (handling income) and income from charges to lessees for a
Damage Protection Plan (DPP). For the year ended December 31, 1998, the total of
these other rental  income  items was $2,270,  an increase of $510 from the year
ended December 31, 1997. Other income increased  primarily due to an increase in
location  income  of $723,  offset by a  decrease  in  handling  income of $154.
Location  income  increased  primarily  due to a decrease  in  credits  given to
lessees  for picking up  containers  from  certain  locations.  Handling  income
decreased primarily due to a decrease in container movement.

For the year ended  December  31, 1997,  the total of these other rental  income
items was $1,760,  an increase of $74 from the year ended December 31, 1996. The
primary  components  of this net  increase  was an increase in handling of $203,
offset by a decrease in location income of $149.  Handling income increased as a
result of increased  container movement during the year ended December 31, 1997,
compared to 1996,  offset by a slightly lower average handling price charged per
container.  Location  income  decreased  primarily  due to lower  demand,  which
resulted in an increase in credits  granted to lessees for picking up containers
from less  desirable  locations,  offset by an increase in the average  drop-off
charges per container.

Direct  container  expenses  increased $277, or 7%, from the year ended December
31, 1997 to the year ended  December 31, 1998. The increase was primarily due to
an increase in  repositioning  expense of $519,  offset by decreases in handling
and  maintenance  expense of $75 and $51,  respectively.  Repositioning  expense
increased primarily due to an increase in the number of containers  repositioned
at a higher average repositioning cost per container. Handling expense decreased
primarily  due  to the  decrease  in  container  movement.  Maintenance  expense
decreased  due to decreases  in the average  repair cost per  container  and the
number of containers requiring repair.

Direct  container  expenses  increased $607, or 18%, for the year ended December
31,  1997,  compared to the year ended  December  31,  1996.  The  increase  was
primarily due to increases in storage, repositioning and maintenance expenses of
$274, $225, and $168, respectively. Storage costs increased as a result of lower
utilization  rates during the year ended  December 31, 1997 compared to the year
ended December 31, 1996. Repositioning expense increased due to a greater number
of  containers  being  transported  from low demand  locations to higher  demand
locations  during the year ended  December  31, 1997  compared to the year ended
December 31, 1996.  Maintenance  costs  increased due a greater  number of units
requiring repair and a higher average repair cost per container.

Bad debt expense  decreased  from an expense of $166 for the year ended December
31,  1997 to a  recovery  of $244 for the year  ended  December  31,  1998.  The
recovery  recorded for 1998 resulted  from the effect of the insurance  proceeds
received for certain  receivables  against  which  reserves had been recorded in
1994 and 1995, as well as from the resolution of payment issues with one lessee.
Bad debt expense  decreased  $88, or 35%, from the year ended December 31, 1996,
to the year ended December 31, 1997, primarily due to lower reserve requirements
for two specific lessees.

Depreciation  expense  decreased  $171, or 3%, from the year ended  December 31,
1997 to the year ended  December 31, 1998 primarily due to the decrease in fleet
size.  Depreciation  expense  increased $35, or 1%, from the year ended December
31, 1996 to the year ended  December 31, 1997  primarily  due to the increase in
the average fleet size.

New container  prices have been declining since 1995, and the cost of purchasing
new  containers  at  year-end  1998  was  significantly  less  than  the cost of
containers  purchased in the last several years.  The  Partnership has evaluated
the  recoverability  of the recorded  amount of container  rental  equipment and
determined  that a reduction to the  carrying  value of the  containers  was not
required,  but that a write-down in value of certain  containers  identified for
sale was required.  In the fourth  quarter of 1998, the  Partnership  recorded a
charge of $349 for the  expected  loss on  disposal of these  containers.  These
containers  were  manufactured  prior to 1993 and were  located in  certain  low
demand  locations.  This  charge  is  only  for  those  containers  specifically
identified as being for sale. If other  containers  manufactured  prior to 1993,
whether  situated in these or other locations,  are  subsequently  identified as
available for sale, the Partnership may incur additional losses.

Management  fees to  affiliates  decreased  $100,  or 6%,  from the  year  ended
December  31,  1997 to the year ended  December  31,  1998 due to  decreases  in
equipment and incentive  management fees.  Equipment  management fees, which are
based  primarily  on gross  revenue,  decreased  as a result of the  decrease in
rental  income  and  due  to an  adjustment  resulting  from  the  write-off  of
receivables for two lessees.  Incentive  management fees, which are based on the
Partnership's limited and general partner distribution  percentage and partners'
capital,  decreased  primarily  due  to the  decrease  in  the  limited  partner
distribution percentage from 9.25% to 8.25%, effective July 1, 1998.

Management  fees to  affiliates  decreased  $148,  or 8%,  from the  year  ended
December  31,  1997 to the year  ended  December  31,  1996  primarily  due to a
decrease in equipment  management fees.  Equipment management fees decreased due
to the decrease in rental income and were  approximately 7% of gross revenue for
the period.  Incentive  management fees were comparable at $480 and $481 for the
years ending December 31, 1997, and 1996, respectively.

General and administrative  costs to affiliates decreased $144, or 12%, from the
year ended  December  31,  1997 to the year ended  December  31, 1998 due to the
decrease in overhead costs allocated by TFS and TEM. General and  administrative
costs to affiliates  decreased $8, or 1%, from the year ended  December 31, 1997
to the  year  ended  December  31,  1996 due to a  decrease  in  overhead  costs
allocated by TFS, offset by an increase in overhead costs allocated by TEM.

Other expense increased $1,072 from the year ended December 31, 1997 to the year
ended  December  31, 1998 due to an increase in the loss on sale of  containers,
partially  offset  by an  increase  in  interest  income.  The  loss  on sale of
containers was primarily due to the Partnership  selling  containers  located in
low demand  locations  at a younger  age than they  would have been sold  during
previous  years,  as a result of current market  conditions.  As noted above, if
other containers are identified as available for sale, the Partnership may incur
additional losses.

Other income (expense) decreased from income of $266 for the year ended December
31,  1996 to an  expense  of $51 for the year  ended  December  31,  1997.  This
decrease was due to a fluctuation of gain/loss on sale of containers from a gain
of $140  for the year  ended  December  31,  1996 to a loss of $128 for the year
ended December 31, 1997.

Net earnings per limited partnership unit decreased from $0.82 to $0.61 from the
year ended December 31, 1997 to the year ended December 31, 1998, reflecting the
decrease in net earnings  allocated to limited  partners  from $5,053 to $3,771,
respectively.

Net earnings per limited partnership unit decreased from $1.24 to $0.82 from the
year ended December 31, 1996 to the year ended December 31, 1997, reflecting the
decrease in net earnings  allocated to limited  partners  from $7,675 to $5,053,
respectively.

Although  substantially  all of the  Partnership's  income  from  operations  is
derived from assets employed in foreign operations, virtually all of this income
is  denominated  in United  States  dollars.  The  Partnership's  customers  are
international  shipping  lines,  which transport  goods on  international  trade
routes.  The  domicile  of the lessee is not  indicative  of where the lessee is
transporting  the  containers.  The  Partnership's  business risk in its foreign
operations lies with the  creditworthiness of the lessees, and the Partnership's
ability to keep its containers under lease,  rather than the geographic location
of the  containers or the domicile of the lessees.  The containers are generally
operated on the international high seas rather than on domestic  waterways.  The
containers are subject to the risk of war or other political, economic or social
occurrence  where  the  containers  are used,  which  may  result in the loss of
containers,  which,  in turn,  may have a material  impact on the  Partnership's
results of operations  and  financial  condition.  The General  Partners are not
aware of any  conditions  as of December 31, 1998,  which would result in such a
risk materializing.

Other risks of the Partnership's  leasing  operations include  competition,  the
cost of  repositioning  containers  after  they come  off-lease,  the risk of an
uninsured  loss,  increases in maintenance  expenses or other costs of operating
the  containers,  and the effect of world trade,  industry trends and/or general
business and economic cycles on the Partnership's operations. See "Risk Factors"
in the Partnership's Prospectus, as supplemented,  for additional information on
risks of the Partnership's business.

Readiness for Year 2000

Many computer systems may experience difficulty processing dates beyond the year
1999; as a  consequence,  some computer  hardware and software at many companies
will need to be modified  or replaced  prior to the year 2000 in order to remain
functional.  The  Partnership  relies on the  financial  and  operating  systems
provided  by the  General  Partners;  these  systems  include  both  information
technology (IT) systems as well as non-information  technology (non-IT) systems.
For  IT  and   non-IT   systems   developed   by   independent   third   parties
(externally-developed)  the General Partners have obtained  representations from
their vendors and suppliers  that these systems are Year 2000 compliant and have
internally tested mission critical systems as operational.  The General Partners
have  reviewed  all  internally-developed  IT and non-IT  systems  for Year 2000
issues and  identified  certain of these systems which  required  revision.  The
General  Partners have  completed  the revision and testing of these  identified
systems, and these revised systems are now operational.

The cost of the revisions and testing  relating to these systems was incurred by
TEM and a  portion  of the  cost was  allocated  to the  Partnership  as part of
general and administrative costs allocated from TEM. While Year 2000 remediation
costs were not  specifically  identified,  it is estimated  that total Year 2000
related expenses included in allocated overhead from TEM were less than $25. The
Partnership  and the General  Partners do not anticipate  incurring  significant
additional  remediation costs related to the Year 2000 issue.  There has been no
material  effect  on  the  Partnership's  financial  condition  and  results  of
operations as a result of TEM's delay in routine systems projects as a result of
Year 2000 remediation.

As noted  above,  Year 2000  compliance  testing was  undertaken  by the General
Partners  on  both  externally-  and  internally-developed   systems.   Standard
transactions  were  processed  under  simulated  operating  conditions for dates
crossing  over  January  1, 2000 as well as for  other  critical  dates  such as
February 29, 2000. In the standard  business  scenarios  tested,  the identified
systems  appeared  to  function  correctly.   Under  nonstandard  conditions  or
unforeseen  scenarios,  the results may be  different.  Therefore,  these tests,
regardless of how  carefully  they were  conducted,  cannot  guarantee  that the
General  Partners'  systems  will  function  without  error in the Year 2000 and
beyond.  If these  systems  are not  operational  in the Year 2000,  the General
Partners have determined that they can operate manually for approximately two to
three months while correcting the system problems before  experiencing  material
adverse  effects on the  Partnership's  and the General  Partners'  business and
results of operations.  However,  shifting  portions of the daily  operations to
manual  processes  may result in time  delays and  increased  processing  costs.
Additionally,  the Partnership  and General  Partners may not be able to provide
lessees  with timely and  pertinent  information,  which may  negatively  affect
customer  relations and lead to the potential  loss of lessees,  even though the
immediate  monetary  consequences  of this  would  be  limited  by the  standard
Partnership lease agreements between the lessees and the Partnership.

The Partnership and the General Partners are also continuing their assessment of
Year 2000  issues  with third  parties,  comprised  of  lessees,  manufacturers,
depots,  and other  vendors and  suppliers,  with whom the  Partnership  and the
General  Partners  have  a  material  business   relationship  (Third  Parties).
Currently,   the  Partnership  and  the  General  Partners  believe  that  if  a
significant  portion of its lessees is non-compliant for a substantial length of
time, the Partnership's  operations and financial  condition would be materially
adversely  affected.  Non-compliance  by other Third  Parties is not expected to
have a material effect on the Partnership's  results of operations and financial
condition.  The General  Partners  have sent  letters to lessees and other Third
Parties  requesting  representations  on their Year 2000 readiness.  The General
Partners have  received  responses to 53% of the letters sent with all but three
respondents  representing  that  they  are  or  will  be  Year  2000  compliant.
Non-compliance  by these three  respondents  is not  expected to have a material
adverse  effect on the  Partnership's  operations  or financial  condition.  The
General  Partners  are  continuing  to follow up with  non-respondents  and will
continue to identify  additional  Third Parties whose Year 2000 readiness should
be assessed.  As this  assessment has not been completed,  the General  Partners
have not yet assumed that a lack of response means that any non-responding Third
Parties will not be Year 2000 compliant.

Nevertheless,  the  Partnership and the General  Partners  believe that they are
likely to encounter Year 2000 problems with certain Third Parties,  particularly
those  with  significant  operations  within  countries  that  are not  actively
promoting  correction of Year 2000 issues.  Possible  consequences  of Year 2000
non-compliance  among Third Parties  include,  but are not limited to, (i) TEM's
inability  to  provide  service to certain  areas of the world,  (ii)  delays in
container  movement,  (iii)  payment  and  collection  difficulties,   and  (iv)
invoicing errors due to late reporting of transactions.  These types of problems
could  result in  additional  operating  costs and loss of lessee  business.  As
discussed  above,  the General  Partners are prepared to shift portions of their
daily operations to manual processes in the event of Third Party non-compliance.
With respect to manufacturers, vendors and other suppliers, the General Partners
would also  attempt  to find  alternate  sources  for goods and  services.  With
respect to depots and agents who handle,  inspect or repair  containers,  if the
majority of the  computer  systems  and  networks  of TEM are  operational,  the
General Partners believe that they will be able to compensate manually for these
Third  Parties'  failures  (e.g.,  one field  office  performing  data entry for
another,  communication  with  depots  conducted  without  computers),  by using
temporary  personnel at additional cost.  Although costs will be incurred to pay
for the temporary  personnel,  the Partnership  and the General  Partners do not
expect these costs to be material to the  Partnership.  With respect to lessees'
non-compliance,   the  General  Partners  would  compensate  for  communications
failures  manually.  If a  lessee's  noncompliance  is broad  enough to  disrupt
significantly  the  operations of its shipping  business,  the resulting loss of
revenue could result in the lessee renting fewer containers. The Partnership and
the  General  Partners  are unable to  estimate  the  financial  impact of these
problems,  but to the extent that lessees'  problems result in weakening  demand
for  containers,  the  Partnership's  results  of  operations  would  likely  be
adversely  affected.  If Year 2000  problems  result  in delays in  collections,
either  because of the additional  time required to communicate  with lessees or
because of  lessees'  loss of  revenues,  the  Partnership's  cash flow could be
affected and distributions to general and limited partners could be reduced. The
Partnership  and the General  Partners  believe that these risks are inherent in
the industry and are not specific to the Partnership or General Partners.

Forward-Looking Statements and Other Risk Factors Relating to Year 2000

The foregoing analysis of Year 2000 issues includes  forward-looking  statements
and  predictions  about  possible or future  events,  results of operations  and
financial condition. As such, this analysis may prove to be inaccurate,  because
of the  assumptions  made by the  Partnership  and the  General  Partners or the
actual development of future events. No assurance can be given that any of these
forward-looking  statements and predictions  will ultimately prove to be correct
or  even  substantially  correct.  Some  of the  risks  relating  to  Year  2000
compliance are described above. In addition,  in analyzing Year 2000 issues, the
Partnership and the General Partners have assumed that the infrastructure of the
United States and most other  countries,  including  ports and customs,  remains
intact.  If the  infrastructure  of one or  more  countries  were to  fail,  the
resulting  business  disruption  would  likely  have an  adverse  effect  on the
Partnership and the General  Partners.  The Partnership and General Partners are
unable to determine a reasonably  likely worst case  scenario in the event of an
infrastructure failure or failures.

Various  other risks and  uncertainties  could also affect the  Partnership  and
could affect the Year 2000 analysis, causing the effect on the Partnership to be
more severe than discussed above. These risks and uncertainties include, but are
not limited to, the following.  The Partnerships' and the General Partners' Year
2000 compliance testing cannot guarantee that all computer systems will function
without error beyond the Year 2000. Tests were only conducted of normal business
scenarios, and no independent verification or testing was used. Risks also exist
with respect to Year 2000 compliance by Third Parties,  such as the risk that an
external  party,  who may have no  relationship  to the  Partnership  or General
Partners, but who has a significant relationship with one or more Third Parties,
may have a system failure that adversely  affects the  Partnership's  ability to
conduct  its  business.  While the  Partnership  and the  General  Partners  are
attempting  to identify such  external  parties,  no assurance can be given that
they will be able to do so. Furthermore, Third Parties with direct relationships
with the  Partnership,  whose systems have been  identified as likely to be Year
2000 compliant,  may suffer a breakdown due to unforeseen  circumstances.  It is
also possible that the information  collected by the General Partners from these
Third Parties regarding their compliance with Year 2000 issues may be incorrect.
Finally,  it should be noted that the  foregoing  discussion of Year 2000 issues
assumes that to the extent the General Partners' systems fail, either because of
unforeseen  complications  or because of Third  Parties'  failure,  switching to
manual  operations  will  allow the  Partnership  to  continue  to  conduct  its
business. While the Partnership and the General Partners believe this assumption
to be reasonable,  if it is incorrect,  the Partnership's  results of operations
would likely be adversely affected.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Inapplicable.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Attached pages 13 to 25.


<PAGE>



                          Independent Auditors' Report


The Partners
Textainer Equipment Income Fund III, L.P.:

We have audited the  accompanying  balance sheets of Textainer  Equipment Income
Fund III, L.P. (a California  limited  partnership)  as of December 31, 1998 and
1997, and the related  statements of earnings,  partners' capital and cash flows
for each of the years in the three-year  period ended  December 31, 1998.  These
financial statements are the responsibility of the Partnership's management. Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Textainer Equipment Income Fund
III, L.P. as of December 31, 1998 and 1997,  and the results of its  operations,
its partners' capital and its cash flows for each of the years in the three-year
period ended December 31, 1998, in conformity with generally accepted accounting
principles.


                                    KPMG LLP



San Francisco, California
February 19, 1999


<PAGE>
<TABLE>
<CAPTION>



TEXTAINER EQUIPMENT INCOME FUND III, L.P.
(a California Limited Partnership)

Balance Sheets

December 31, 1998 and 1997
(Amounts in thousands)
----------------------------------------------------------------------------------------------------------

                                                                           1998                 1997
                                                                     ----------------     ----------------
<S>                                                                  <C>                 <C>
Assets
Container rental equipment, net of accumulated
   depreciation of  $40,147 (1997:  $36,728)                          $       65,872      $        76,802
Cash                                                                           3,455                  370
Accounts receivable, net of allowance for doubtful
   accounts of $439 (1997: $1,534) (note 5)                                    4,185                4,713
Due from affiliates, net (note 2)                                              1,041                  191
Prepaid expenses                                                                  26                  172
                                                                     ----------------     ----------------
                                                                      $       74,579      $        82,248
                                                                     ================     ================

Liabilities and Partners' Capital
Liabilities:
   Accounts payable                                                   $          502      $           488
   Accrued liabilities                                                           163                  138
   Accrued recovery costs (note 1(j))                                            116                  119
   Accrued damage protection plan costs (note 1(k))                              291                  351
   Warranty claims (note 1(l))                                                   188                  228
   Deferred quarterly distributions (note 1(g))                                   97                  121
   Container purchases payable                                                    56                  365
                                                                     ----------------     ----------------
      Total liabilities                                                        1,413                1,810
                                                                     ----------------     ----------------

Partners' capital:
   General partners                                                                -                    -
   Limited partners                                                           73,166               80,438
                                                                     ----------------     ----------------
      Total partners' capital                                                 73,166               80,438
                                                                     ----------------     ----------------
Commitments (note 6)
                                                                      $       74,579      $        82,248
                                                                     ================     ================

See accompanying notes to financial statements                                        
</TABLE>


<PAGE>
<TABLE>
<CAPTION>


TEXTAINER EQUIPMENT INCOME FUND III, L.P.
(a California Limited Partnership)

Statements of Earnings

Years ended  December 31, 1998,  1997 and 1996 (Amounts in thousands  except for
unit and per unit amounts)
-------------------------------------------------------------------------------------------------------------

                                                             1998               1997              1996
                                                       -----------------  ----------------- -----------------
<S>                                                     <C>               <C>               <C>             
Rental income                                           $        18,904   $         19,361  $         21,349
                                                       -----------------  ----------------- -----------------

Costs and expenses:
      Direct container expenses                                   4,207              3,930             3,323
      Bad debt (recovery) expense                                  (244)               166               254
      Depreciation                                                6,646              6,817             6,782
      Write-down of containers (note 1(e))                          349                  -                 -
      Professional fees                                              41                 37                34
      Management fees to affiliates (note 2)                      1,718              1,818             1,966
      General and administrative costs
        to affiliates (note 2)                                    1,009              1,153             1,161
      Other general and administrative costs                        169                216               260
                                                       -----------------  ----------------- -----------------

                                                                 13,895             14,137            13,780
                                                       -----------------  ----------------- -----------------

      Income from operations                                      5,009              5,224             7,569
                                                       -----------------  ----------------- -----------------

Other (expense) income:
      Interest income                                               117                 77                86
      (Loss) gain on sale of containers                          (1,240)              (128)              140
                                                       -----------------  ----------------- -----------------

                                                                 (1,123)               (51)              226
                                                       -----------------  ----------------- -----------------

      Net earnings                                      $         3,886   $          5,173  $          7,795
                                                       =================  ================= =================

Allocation of net earnings (note 1(g)):
      General partners                                  $           115   $            120  $            120
      Limited partners                                            3,771              5,053             7,675
                                                       -----------------  ----------------- -----------------

                                                        $         3,886   $          5,173  $          7,795
                                                       =================  ================= =================
Limited partners' per unit share
      of net earnings                                   $          0.61   $           0.82  $           1.24
                                                       =================  ================= =================

Limited partners' per unit share
      of distributions                                  $          1.77   $           1.85  $           1.85
                                                       =================  ================= =================

Weighted average number of limited
      partnership units outstanding (note 1(m))               6,162,976          6,168,527         6,180,966
                                                       =================  ================= =================


See accompanying  notes to financial statements

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


TEXTAINER EQUIPMENT INCOME FUND III, L.P.
(a California Limited Partnership)

Statements of Partners' Capital

Years ended December 31, 1998, 1997 and 1996
(Amounts in thousands)
----------------------------------------------------------------------------------------------------

                                                             Partners' Capital
                                          ----------------------------------------------------------
                                             General                Limited               Total
                                          ---------------        --------------       --------------
<S>                                       <C>                   <C>                  <C>          
Balances at December 31, 1995              $           -         $      90,887        $      90,887

Distributions                                       (120)              (11,438)             (11,558)

Redemptions (note 1(n))                                -                  (323)                (323)

Net earnings                                         120                 7,675                7,795
                                          ---------------        --------------       --------------

Balances at December 31, 1996                          -                86,801               86,801
                                          ---------------        --------------       --------------


Distributions                                       (120)              (11,412)             (11,532)

Redemptions (note 1(n))                                -                    (4)                  (4)

Net earnings                                         120                 5,053                5,173
                                          ---------------        --------------       --------------

Balances at December 31, 1997                          -                80,438               80,438
                                          ---------------        --------------       --------------


Distributions                                       (115)              (10,890)             (11,005)

Redemptions (note 1(n))                                -                  (153)                (153)

Net earnings                                         115                 3,771                3,886
                                          ---------------        --------------       --------------

Balances at December 31, 1998              $           -         $      73,166        $      73,166
                                          ===============        ==============       ==============


See accompanying notes to financial statements
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


TEXTAINER EQUIPMENT INCOME FUND III, L.P.
(a California Limited Partnership)

Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996
(Amounts in thousands)
------------------------------------------------------------------------------------------------------------------------------------

                                                                                         1998               1997              1996
                                                                                    ---------------    --------------    -----------
<S>                                                                                <C>                <C>               <C>
Cash flows from operating activities:
   Net earnings                                                                      $       3,886     $       5,173     $    7,795
   Adjustments to reconcile net earnings to net cash provided
      by operating activities:
         Depreciation and container write-downs                                              6,995             6,817          6,782
         (Decrease) increase in allowance for doubtful accounts,
            excluding write-off (note 5)                                                      (415)              (82)           100
         Loss (gain) on sale of containers                                                   1,240               128           (140)
         (Increase) decrease in assets:
            Accounts receivable, excluding write-off (note 5)                                1,041               608            629
            Due from affiliates, net                                                          (410)             (267)           166
            Prepaid expenses                                                                   146              (127)             2
         Increase (decrease) in liabilities:
            Accounts payable and accrued liabilities                                            39               170            (56)
            Accrued recovery costs                                                              (3)               48             65
            Accrued damage protection plan costs                                               (60)              (71)            49
            Warranty claims                                                                    (40)              (39)           (39)
                                                                                    ---------------    --------------    -----------
            Net cash provided by operating activities                                       12,419            12,358         15,353
                                                                                    ---------------    --------------    -----------

Cash flows from investing activities:
     Proceeds from sale of containers                                                        3,329             1,601          1,355
     Container purchases                                                                    (1,480)           (4,484)        (3,349)
                                                                                    ---------------    --------------    -----------
            Net cash provided by (used in) investing activities                              1,849            (2,883)        (1,994)
                                                                                    ---------------    --------------    -----------

Cash flows from financing activities:
    Redemptions of limited partnership units                                                  (153)               (4)          (323)
    Distributions to partners                                                              (11,030)          (11,527)       (11,596)
                                                                                    ---------------    --------------    -----------
            Net cash used in financing activities                                          (11,183)          (11,531)       (11,919)
                                                                                    ---------------    --------------    -----------

Net increase (decrease) in cash                                                              3,085            (2,056)         1,440

Cash at beginning of period                                                                    370             2,426            986
                                                                                    ---------------    --------------    -----------
Cash at end of period                                                                $       3,455     $         370     $    2,426
                                                                                    ===============    ==============    ===========



See accompanying notes to financial statements

</TABLE>
<PAGE>
<TABLE>
<CAPTION>


TEXTAINER EQUIPMENT INCOME FUND III, L.P.
(A California Limited Partnership)

Statements of Cash Flows--Continued
Years Ended December 31, 1998, 1997 and 1996
(Amounts in thousands)
----------------------------------------------------------------------------------------------------------


Supplemental Disclosures:

Supplemental schedule of non-cash investing and financing activities:

The following table summarizes the amounts of container purchases, distributions
to partners,  and proceeds  from sale of  containers  which had not been paid or
received  by the  Partnership  as of  December  31,  1998,  1997,  1996 and 1995
resulting in  differences  in amounts  recorded and amounts of cash disbursed or
received by the Partnership, as shown in the Statements of Cash Flows.

                                                                   1998           1997            1996            1995
                                                                   ----           ----            ----            ----
<S>                                                             <C>            <C>           <C>              <C>
Container purchases included in:
     Due to affiliates.......................................... $   16         $   42        $      -         $    86
     Container purchases payable................................     56            365             580             738

Distributions to partners included in:
     Due to affiliates..........................................      9             10              10              42
     Deferred quarterly distributions...........................     97            121             116             122

Proceeds from sale of containers included in:
     Due from affiliates........................................    812            399             381             348
     Accounts receivable........................................      -              -               -              19

The following table summarizes the amounts of container purchases, distributions
to partners,  and proceeds from sale of containers  recorded by the  Partnership
and the amounts  paid or received as shown in the  Statements  of Cash Flows for
the years ended December 31, 1998, 1997 and 1996.

                                                                                  1998            1997           1996
                                                                                  ----            ----           ----

Container purchases recorded...........................................       $  1,145        $  4,311       $  3,105
Container purchases paid...............................................          1,480           4,484          3,349

Distributions to partners declared.....................................         11,005          11,532         11,558
Distributions to partners paid.........................................         11,030          11,527         11,596

Proceeds from sale of containers recorded..............................          3,742           1,619          1,369
Proceeds from sale of containers received..............................          3,329           1,601          1,355


See accompanying notes to financial statements

</TABLE>
<PAGE>


TEXTAINER EQUIPMENT INCOME FUND III, L.P.
(A California Limited Partnership)

Notes to Financial Statements
Years ended December 31, 1998, 1997, and 1996
(Amounts in thousands except for unit and per unit amounts)
--------------------------------------------------------------------------------

Note 1.  Summary of Significant Accounting Policies

      (a)  Nature of Operations

      Textainer Equipment Income Fund III, L.P. (TEIF III or the Partnership), a
      California  limited  partnership,  with a maximum  life of 20  years,  was
      formed  on July 26,  1990.  The  Partnership  was  formed to engage in the
      business  of owning,  leasing  and  selling  both new and used  containers
      related  to  the  international  containerized  cargo  shipping  industry,
      including,   but  not  limited   to,   containers,   trailers   and  other
      container-related  equipment. On January 16, 1991, TEIF III began offering
      units representing limited partnership interests (Units) to the public. On
      May 4, 1992,  the  Partnership  had admitted  the maximum  number of units
      allowed  into  the  Partnership.   On  that  date,   admittance  into  the
      Partnership was closed with 6,250,000 units, for a total of $125,000.

      Textainer  Financial  Services  Corporation  (TFS) is the managing general
      partner of the Partnership  and is a wholly-owned  subsidiary of Textainer
      Capital Corporation (TCC).  Textainer  Equipment  Management Limited (TEM)
      and  Textainer   Limited  (TL)  are  associate  general  partners  of  the
      Partnership.  The  managing  general  partner  and the  associate  general
      partners  are  collectively  referred to as the General  Partners  and are
      commonly  owned by Textainer  Group Holdings  Limited  (TGH).  The General
      Partners also act in this capacity for other limited  partnerships.  Prior
      to its liquidation in October 1998, Textainer Acquisition Services Limited
      (TAS),  a former  affiliate of the General  Partners,  performed  services
      related to the  acquisition  of  containers  outside the United  States on
      behalf of the  Partnership.  Effective  November 1998,  these services are
      being  performed  by TEM.  The  General  Partners  manage and  control the
      affairs of the Partnership.

      (b)  Basis of Accounting

      The  Partnership  utilizes the accrual  method of  accounting.  Revenue is
      recorded  when  earned  according  to the  terms of the  container  rental
      contracts.  These  contracts are classified as operating  leases or direct
      financing   leases  if  they  so  qualify  under  Statement  of  Financial
      Accounting Standards No. 13: "Accounting for Leases". Substantially all of
      the  Partnership's  rental  income was  generated  from the leasing of the
      Partnership's containers under short-term operating leases.

      (c)  Use of Estimates

      Certain   estimates  and  assumptions  were  made  by  the   Partnership's
      management that affect the reported amounts of assets and liabilities, and
      disclosures  of  contingent  assets  and  liabilities  at the  date of the
      financial  statements  and the  reported  amounts of revenue and  expenses
      during the  reporting  period.  Actual  results  could  differ  from those
      estimates.

      (d)  Fair Value of Financial Instruments

      In  accordance  with the Statement of Financial  Accounting  Standards No.
      107,  "Disclosures  about  Fair  Value  of  Financial   Instruments,"  the
      Partnership  calculates  the  fair  value  of  financial  instruments  and
      includes  this  additional  information  in the  notes  to  the  financial
      statements  when the fair value is different  than the book value of those
      financial  instruments.  At December 31, 1998 and 1997,  the fair value of
      the Partnership's financial instruments approximate the related book value
      of such instruments.

      (e)  Container Rental Equipment

      Container  rental  equipment  is  recorded  at  the  cost  of  the  assets
      purchased,  which includes  acquisition fees, less  depreciation  charged.
      Depreciation of new containers is computed using the straight-line  method
      over an  estimated  useful life of 12 years to a 28% salvage  value.  Used
      containers are  depreciated  based upon their estimated  remaining  useful
      life at the date of  acquisition  (from 2 to 11  years).  When  assets are
      retired  or  otherwise  disposed  of,  the  cost and  related  accumulated
      depreciation  are removed from the  equipment  accounts and any  resulting
      gain or loss is recognized in income for the period.

      In  accordance  with the Statement of Financial  Accounting  Standards No.
      121,  "Accounting  for the Impairment of Long-Lived  Assets and Long-Lived
      Assets  to be  Disposed  of"  (SFAS  121),  the  Partnership  periodically
      compares  the carrying  value of its  containers  to expected  future cash
      flows for the purpose of  assessing  the  recoverability  of the  recorded
      amounts.  If the carrying value exceeds  expected  future cash flows,  the
      assets are written down to estimated fair value.  In addition,  containers
      identified  for disposal  are recorded at the lower of carrying  amount or
      fair value less cost to sell.

      New  container  prices have been  declining  since  1995,  and the cost of
      purchasing new containers at year-end 1998 was significantly less than the
      cost of containers  purchased in the last several years.  The  Partnership
      has  evaluated  the  recoverability  of the  recorded  amount of container
      rental  equipment and determined that a reduction to the carrying value of
      the containers was not required, but that a write-down in value of certain
      containers  identified  for sale was  required.  In the fourth  quarter of
      1998, the  Partnership  recorded a charge of $349 for the expected loss on
      disposal of these containers.  These containers were manufactured prior to
      1993 and were located in certain low demand locations. This charge is only
      for those containers  specifically  identified as being for sale. If other
      containers  manufactured prior to 1993, whether situated in these or other
      locations,   are  subsequently  identified  as  available  for  sale,  the
      Partnership may incur additional losses.

      The write-down was recorded as  accumulated  depreciation  during the year
      ended December 31, 1998.

      (f)  Nature of Income from Operations

      Although  substantially all of the Partnership's income from operations is
      derived from assets employed in foreign operations,  virtually all of this
      income  is  denominated  in  United  States  dollars.   The  Partnership's
      customers  are  international  shipping  lines  that  transport  goods  on
      international  trade routes.  The domicile of the lessee is not indicative
      of where the lessee is  transporting  the  containers.  The  Partnership's
      business risk in its foreign operations lies with the  creditworthiness of
      the lessees rather than the  geographic  location of its containers or the
      domicile of the lessees.

      For the years ended  December 31, 1998,  1997  and  1996, no single lessee
      accounted for more than 10% of the Partnership's revenues.

      (g)  Allocation of Net Earnings and Partnership Distributions

      In accordance with the Partnership  Agreement,  net earnings or losses and
      distributions  are generally  allocated 1% to the General Partners and 99%
      to the Limited Partners. However, notwithstanding this general allocation,
      each year  gross  income,  as  defined in the  Partnership  Agreement,  is
      specially  allocated  to the General  Partners to the extent  necessary to
      cause their aggregate Capital Account balance to be not less than zero.

      Actual  cash  distributions  to  the  limited  partners  differ  from  the
      allocated net earnings as presented in these financial  statements because
      cash  distributions  are based on cash  available for  distribution.  Cash
      distributions  are paid to the general  and limited  partners on a monthly
      basis in accordance with the provisions of the Partnership Agreement. Some
      limited partners have elected to have their  distributions paid quarterly.
      The Partnership  has recorded  deferred  distributions  of $97 and $121 at
      December 31, 1998 and 1997, respectively.

      (h)  Income Taxes

      The Partnership is not subject to income taxes. Accordingly,  no provision
      for income taxes has been made.  The  Partnership  files federal and state
      information  returns  only.  Taxable  income or loss is  reportable by the
      individual partners.

      (i)  Acquisition Fees

      In  accordance  with the  Partnership  Agreement,  acquisition  fees equal
      to 5% of the  container purchase  price were  paid  to  TEM  beginning  in
      November  1998 and TAS through  October  1998.  These fees are capitalized
      as part of the cost of the containers.

      (j)  Recovery Costs

      The  Partnership  accrues an estimate  for  recovery  costs as a result of
      defaults under its leases that it expects to incur, which are in excess of
      estimated insurance  proceeds.  At December 31, 1998 and 1997, the amounts
      accrued were $116 and $119, respectively.

      (k)  Damage Protection Plan

      The  Partnership  offers a Damage  Protection Plan (DPP) to lessees of its
      containers.  Under  the terms of DPP,  the  Partnership  earns  additional
      revenues  on a daily  basis  and,  in return,  has agreed to bear  certain
      repair costs.  It is the  Partnership's  policy to recognize  revenue when
      earned  and  provide  a  reserve  sufficient  to cover  the  Partnership's
      obligation for estimated future repair costs. DPP expenses are included in
      direct  container  expenses in the  Statements of Earnings and the related
      reserve at December 31, 1998 and 1997, was $291 and $351, respectively.

      (l)  Warranty Claims

      During 1992 and 1995, the  Partnership  settled  warranty claims against a
      container  manufacturer.  The  Partnership  is amortizing  the  settlement
      amounts  over the  remaining  estimated  useful  lives  of the  applicable
      containers (between six and seven years),  reducing maintenance and repair
      costs over that time.  At  December  31,  1998 and 1997,  the  unamortized
      portion  of  the   settlement   amounts   was  equal  to  $188  and  $228,
      respectively.

      (m)  Limited Partners' Per Unit Share of Net Earnings and Distributions

      Limited  partners'  per unit share of both net earnings and  distributions
      were  computed  using the  weighted  average  number of units  outstanding
      during  the years  ended  December  31,  1998,  1997 and 1996,  which were
      6,162,976, 6,168,527, and 6,180,966, respectively.

      (n)  Redemptions

      The following  redemption  offerings were  consummated by the  Partnership
      during the years ended December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>

                                                          Units                  Average
                                                         Redeemed            Redemption Price      Amount Paid
                                                         --------            ----------------      -----------
<S>                                                      <C>                    <C>                 <C>     
          Balance Forward Dec. 31, 1995:                   55,907                 $15.56              $    870
                                                           ------                                     --------


          Year ended December 31, 1996:
                1st quarter................                 4,350                 $13.94                    61
                3rd quarter................                14,265                 $12.88                   184
                4th quarter................                 6,576                 $11.86                    78
                                                           ------                                     --------
                                                           25,191                 $12.81                   323
                                                           ------                                     --------

          Year ended December 31, 1997:
                1st quarter................                   375                 $10.43                     4
                                                           ------                                     --------

          Year ended December 31, 1998:
                3rd quarter................                 7,538                 $10.59                    80
                4th quarter................                 7,129                 $10.23                    73
                                                           ------                                     --------
                                                           14,667                 $10.42                   153
                                                           ------                                     --------

          Partnership to Date..............                96,140                 $14.05              $  1,350
                                                           ======                                     ========
</TABLE>

      The redemption price is fixed by formula.

Note 2.   Transactions with Affiliates

      As part of the operation of the Partnership,  the Partnership is to pay to
      the General Partners, or TAS prior to its liquidation, an acquisition fee,
      an equipment  management fee, an incentive management fee and an equipment
      liquidation  fee.  These  fees  are  for  various  services   provided  in
      connection with the administration and management of the Partnership.  The
      Partnership  capitalized $55, $216, and $156 of equipment acquisition fees
      as part of  container  rental  equipment  costs  during  the  years  ended
      December 31, 1998, 1997 and 1996,  respectively.  The Partnership incurred
      $454, $480, and $481 of incentive management fees during each of the three
      years ended December 31, 1998,  1997,  and 1996. No equipment  liquidation
      fees were incurred during these years.

      The  Partnership's  containers are managed by TEM. In its role as manager,
      TEM has authority to acquire, hold, manage, lease, sell and dispose of the
      containers.  TEM holds,  for the payment of direct operating  expenses,  a
      reserve of cash that has been collected from leasing operations; such cash
      is included in due from affiliates, net at December 31, 1998 and 1997.

      Subject to certain reductions, TEM receives a monthly equipment management
      fee equal to 7% of gross lease revenues  attributable to operating  leases
      and 2% of gross revenues  attributable to full payout net leases.  For the
      years ended December 31, 1998,  1997 and 1996,  equipment  management fees
      totaled  $1,264,  $1,338,  and  $1,485,  respectively.  The  Partnership's
      containers  are leased by TEM to third party  lessees on operating  master
      leases,  spot leases, term leases and full payout net leases. The majority
      of the Partnership's leases are operating leases with limited terms and no
      purchase option.

      Certain  indirect  general  and  administrative  costs  such as  salaries,
      employee  benefits,   taxes  and  insurance  are  incurred  in  performing
      administrative  services  necessary to the  operation of the  Partnership.
      These  costs  are  incurred  and paid by TEM and TFS.  Total  general  and
      administrative costs allocated to the Partnership were as follows:

                                                  1998         1997         1996
                                                  ----         ----         ----

          Salaries                              $  547       $  628       $  610
          Other                                    462          525          551
                                                 -----        -----        -----
             Total general and
               Administrative costs             $1,009       $1,153       $1,161
                                                 =====        =====        =====

      TEM allocates these general and administrative costs based on the ratio of
      the  Partnership's  interest  in  the  managed  containers  to  the  total
      container  fleet  managed by TEM during the period.  TFS  allocates  these
      costs  based on the  ratio of the  Partnership's  containers  to the total
      container  fleet of all limited  partnerships  managed by TFS. The General
      Partners allocated the following general and  administrative  costs to the
      Partnership:

                                                  1998         1997         1996
                                                  ----         ----         ----

          TEM                                   $  914       $1,020       $1,011
          TFS                                       95          133          150
                                                 -----        -----        -----
             Total general and
               administrative costs             $1,009       $1,153       $1,161
                                                 =====        =====        =====

      The General Partners,  or TAS through October 1998, may acquire containers
      in their own name and hold title on a  temporary  basis for the purpose of
      facilitating the acquisition of such containers for the  Partnership.  The
      containers may then be resold to the Partnership on an all-cash basis at a
      price equal to the actual cost, as defined in the  Partnership  Agreement.
      In addition,  the General Partners and, prior to its liquidation,  TAS are
      entitled  to  an  acquisition  fee  for  any  containers   resold  to  the
      Partnership.

      At December 31, 1998 and 1997, due from  affiliates,  net is comprised of:

                                                            1998            1997
                                                            ----            ----
      Due from affiliates:
       Due from TEM...................................    $1,087          $  297
                                                           -----           -----

      Due to affiliates:
       Due to TFS.....................................        37              48
       Due to TAS.....................................         -              42
       Due to TCC.....................................         8              15
       Due to TL......................................         1               1
                                                           -----           -----
                                                              46             106
                                                           -----           -----

      Due from affiliates, net                            $1,041          $  191
                                                           =====           =====

      These amounts  receivable  from and payable to affiliates were incurred in
      the ordinary course of business between the Partnership and its affiliates
      and represent  timing  differences  in the accrual and payment of expenses
      and fees  described  above and in the accrual and remittance of net rental
      revenues from TEM.

Note 3.   Rentals under Operating Leases

      The following are the future  minimum rent  receivables  under  cancelable
      long-term  operating leases at December 31, 1998.  Although the leases are
      generally  cancelable  at  the  end of  each  twelve-month  period  with a
      penalty,  the  following  schedule  assumes  that the  leases  will not be
      terminated.

      Year ending December 31,

      1999....................................................            $681
      2000....................................................              17
      2001....................................................               2
      2002....................................................               1
                                                                           ---
      Total minimum future rentals receivable.................            $701
                                                                           ===

Note 4.   Income Taxes

      As of December 31, 1998, 1997, and 1996, there were temporary  differences
      of $53,100,  $56,085,  and  $47,038  respectively,  between the  financial
      statement carrying value of certain assets and liabilities and the federal
      income tax basis of such assets and liabilities. The reconciliation of net
      income for financial  statement  purposes to net income (loss) for federal
      income tax purposes for the years ended  December 31, 1998,  1997 and 1996
      is as follows:
<TABLE>
<CAPTION>

                                                                              1998              1997             1996
                                                                              ----              ----             ----
<S>                                                                        <C>               <C>             <C>     
     Net income per financial statements...........................        $ 3,886           $ 5,173         $  7,795

     (Decrease) increase in provision for bad debt.................         (1,095)              (82)             100
     Depreciation for income tax purposes in excess of
       depreciation for financial statement purposes...............           (782)          (10,389)         (11,757)
     Gain on sale of fixed assets for federal income tax
       purposes in excess of gain/loss recognized for
       financial statement purposes................................          4,962             1,534              703
     (Decrease) increase in damage protection plan costs...........            (60)              (71)              49
     Warranty reserve income for tax purposes in excess of
       financial statement purposes................................            (40)              (39)             260
                                                                             ------           -------          -------

     Net income (loss) for federal income tax purposes.............        $ 6,871          $ (3,874)        $ (2,850)
                                                                             ======           =======          =======
</TABLE>

Note 5.   Accounts Receivable Write-Off

      During 1998, the Partnership wrote-off $680 of delinquent receivables from
      two lessees against which reserves were recorded in 1994 and 1995.

Note 6.   Commitments

      At December 31, 1998,  the  Partnership  has  committed to purchase 50 new
      containers at an approximate  total purchase price of $139, which includes
      acquisition  fees of $7.  This  commitment  was made to TEM,  which as the
      contracting  party,  has in turn committed to purchase these containers on
      behalf of the Partnership.

Note 7.   Readiness for Year 2000

      Many computer  systems may experience  difficulty  processing dates beyond
      the year 1999; as a  consequence,  some computer  hardware and software at
      many companies will need to be modified or replaced prior to the year 2000
      in order to remain functional. The Partnership relies on the financial and
      operating systems provided by the General Partners;  these systems include
      both information technology systems as well as non-information  technology
      systems.  There can be no assurance  that issues  related to the Year 2000
      will not have a material  impact on the  financial  condition,  results of
      operations or cash flows of the Partnership.


ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE.

There have been none.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Registrant has no officers or directors.

As described in the Prospectus, the Registrant's three original general partners
were TCC, TEM and Textainer  Inc.  (TI),  which  comprised the Textainer  Group.
Effective  October 1, 1993, the Textainer Group  streamlined its organization by
forming a new holding  company,  Textainer Group Holdings Limited (TGH), and the
shareholders  of the  underlying  companies  which include the General  Partners
accepted shares in TGH in exchange for their shares in the individual companies.
Textainer  Financial Services  Corporation (TFS) is the Managing General Partner
of the Partnership  (prior to its name change on April 4, 1994, TFS was known as
Textainer Capital  Corporation).  TFS is a wholly-owned  subsidiary of Textainer
Capital  Corporation  (TCC) (prior to its name change on April  4,1994,  TCC was
known as Textainer  (Delaware) Inc.).  Textainer  Equipment  Management  Limited
(TEM) is an Associate  General Partner of the  Partnership.  TI was an Associate
General  Partner  of the  Partnership  through  September  30,  1993 when it was
replaced in that  capacity by Textainer  Limited  (TL),  pursuant to a corporate
reorganization  effective  October 1, 1993, which caused TFS, TEM and TL to fall
under  the  common  ownership  of  TGH.  Pursuant  to  this  restructuring,   TI
transferred  substantially  all of its  assets  including  all of its rights and
duties as Associate  General  Partner to TL. This  transfer was  effective  from
October 1, 1993.  The end  result  was that TFS now serves as  Managing  General
Partner and TEM and TL now serve as  Associate  General  Partners.  The Managing
General Partner and Associate  General Partners are collectively  referred to as
the General Partners and are wholly-owned or substantially-owned subsidiaries of
TGH.  The  General  Partners  also  act  in  this  capacity  for  other  limited
partnerships.  Prior to its liquidation in October 1998,  Textainer  Acquisition
Services  Limited  (TAS) was an affiliate of the General  Partners and performed
services  related to the  acquisition of equipment  outside the United States on
behalf of the Partnership. Effective November 1998, these services are performed
by TEM.

TFS,  as  the  Managing  General  Partner,   is  responsible  for  managing  the
administration  and operation of the  Registrant,  and for the  formulation  and
administration of investment policies.

TEM, an Associate  General Partner,  manages all aspects of the operation of the
Registrant's equipment.

TL, an Associate  General  Partner,  owns a fleet of container  rental equipment
which is  managed  by TEM.  TL  provides  advice  to the  Partnership  regarding
negotiations  with financial  institutions,  manufacturers and equipment owners,
and regarding the terms upon which particular items of equipment are acquired.

Section 16(a) Beneficial Ownership Reporting Compliance.

      Section  16(a)  of the  Securities  Exchange  Act  of  1934  requires  the
      Partnership's  General Partners,  policy-making  officials and persons who
      beneficially  own more than ten  percent  of the Units to file  reports of
      ownership  and  changes in  ownership  with the  Securities  and  Exchange
      Commission.  Copies  of  these  reports  must  also  be  furnished  to the
      Partnership.

      Based  solely on a review of the  copies of such  forms  furnished  to the
      Partnership or on written  representations  that no forms were required to
      be filed,  the  Partnership  believes that with respect to its most recent
      fiscal year ended December 31, 1998, all Section 16(a) filing requirements
      were complied  with. No member of  management,  or beneficial  owner owned
      more than 10  percent  of any  interest  in the  Partnership.  None of the
      individuals  subject  to  section  16(a)  failed to file or filed late any
      reports of transactions in the Units.

The directors and executive officers of the General Partners are as follows:
<TABLE>
<CAPTION>

Name                              Age    Position

<S>                              <C>    <C>
Neil I. Jowell                     65    Director and Chairman of TGH, TEM, TL, TCC and TFS
John A. Maccarone                  54    President, CEO and Director of TGH, TEM, TL, TCC and TFS
John R. Rhodes                     49    Executive  Vice  President,  CFO, and Secretary of TGH, TEM, TL, TCC and TFS
                                         and Director of  TEM, TCC and TFS
James E. Hoelter                   59    Director of TGH, TEM, TL, TCC and TFS
Alex M. Brown                      60    Director of TGH, TEM, TL, TCC and TFS
Harold J. Samson                   77    Director of TGH and TL
Philip K. Brewer                   42    Senior Vice President - Asset Management Group, Director of TCC and TFS
Robert D. Pedersen                 40    Senior Vice President - Leasing Group, Director of TEM
Wolfgang Geyer                     45    Regional Vice President - Europe/Middle East/Persian Gulf
Mak Wing Sing                      41    Regional Vice President - South Asia
Masanori Sagara                    43    Regional Vice President - North Asia
Stefan Mackula                     46    Vice President - Equipment Resale
Anthony C. Sowry                   46    Vice President - Operations and Acquisitions
Ernest J. Furtado                  43    Vice  President - Finance and  Assistant  Secretary of TGH, TL, TEM, TCC and
                                         TFS, Director of TCC and TFS
Brian W. Anderson                  42    Vice President - Information Systems
Richard G. Murphy                  46    Vice President - Risk Management
Janet S. Ruggero                   50    Vice President - Administration and Marketing Services
Jens W. Palludan                   48    Vice President - Logistics Division
Isam K. Kabbani                    64    Director of TGH and TL
James A. C. Owens                  59    Director of TGH and TL
S. Arthur Morris                   65    Director of TGH, TEM and TL
Dudley R. Cottingham               47    Assistant Secretary, Vice President and Director of TGH, TEM and TL
Cara D. Smith                      36    Member of Investment Advisory Committee
Nadine Forsman                     31    Controller of TCC and TFS
</TABLE>

          Neil I. Jowell is Director and  Chairman of TGH,  TEM, TL, TCC and TFS
and a member of the Investment  Advisory Committee (see "Committees"  below). He
has served on the Board of Trencor Ltd.  since 1966 and as Chairman  since 1973.
He is also a director of Mobile Industries, Ltd. (1969 to present), an Affiliate
of Trencor,  and a non-executive  director of Forward  Corporation Ltd. (1993 to
present).  Trencor is a publicly traded  diversified  industrial group listed on
the Johannesburg Stock Exchange. Its business is the leasing,  owning,  managing
and  financing of marine cargo  containers  worldwide  and the  manufacture  and
export of containers for international  markets.  In South Africa, it is engaged
in manufacturing, transport, trading and exports of general commodities. Trencor
also has an interest in Forward  Corporation  Ltd.,  a publicly  traded  holding
company  listed  on  the  Johannesburg  Stock  Exchange.  It  has  interests  in
industrial  and consumer  businesses  operating in South Africa and abroad.  Mr.
Jowell  became  affiliated  with the General  Partners and its  affiliates  when
Trencor became,  through its beneficial ownership in two controlled companies, a
major  shareholder of the Textainer Group in 1992. Mr. Jowell has over 36 years'
experience  in the  transportation  industry.  He holds an  M.B.A.  degree  from
Columbia  University  and a Bachelor of Commerce  L.L.B.  from the University of
Cape Town.

          John A. Maccarone is President,  CEO and director of TGH, TEM, TL, TCC
and TFS. In this capacity he is responsible for overseeing the management of and
coordinating  the  activities  of  Textainer's  worldwide  fleet of marine cargo
containers  and the activities of TCC and TFS.  Additionally,  he is Chairman of
the Equipment  Investment  Committee,  the Credit  Committee and the  Investment
Advisory Committee (see "Committees",  below). Mr. Maccarone was instrumental in
co-founding  Intermodal Equipment  Association (IEA), a marine container leasing
company based in San Francisco,  and held a variety of executive  positions with
IEA from 1979 until 1987, when he joined the Textainer  Group. Mr. Maccarone was
previously a Director of Marketing for Trans Ocean Leasing  Corporation  in Hong
Kong with responsibility for all leasing activities in Southeast Asia. From 1969
to 1977, Mr. Maccarone was a marketing  representative  for IBM Corporation.  He
holds a  Bachelor  of  Science  degree in  Engineering  Management  from  Boston
University and an M.B.A. from Loyola University of Chicago.

          John R. Rhodes is Executive Vice President,  Chief  Financial  Officer
and  Secretary of TGH,  TEM, TL, TCC and TFS and a director of TEM, TCC and TFS.
In this capacity he is responsible for all accounting, financial management, and
reporting  functions  for  the  Textainer  Group.  He is  also a  member  of the
Equipment  Investment  Committee,  the Credit Committee and Investment  Advisory
Committee  (see  "Committees",  below).  Prior to joining  Textainer in November
1987,  Mr.  Rhodes  was  Vice  President  of  Finance  for  Greenbrier   Capital
Corporation in San Francisco,  a trailer  leasing and management  company,  from
1986 to 1987;  from 1981 to 1985,  he was  employed by Gelco Rail  Services,  an
intermodal refrigerated trailer company in San Francisco,  first in the capacity
of Vice  President and  Controller and then as Senior Vice President and General
Manager.  Mr. Rhodes'  earlier  business  affiliations  include  serving as Vice
President  and  General  Manager  of  Itel  Capital  Corporation  and as  senior
accountant with Arthur Andersen & Co., both in San Francisco.  He is a Certified
Public Accountant and holds a B.A. in economics from Stanford  University and an
M.B.A. in accounting from Golden Gate University.

          James E.  Hoelter is a director  of TGH,  TEM,  TL,  TCC  and TFS.  In
addition,  Mr. Hoelter is a member of the Equipment Investment Committee and the
Investment  Advisory  Committee (see  "Committees",  below).  Mr Hoelter was the
president and chief executive  officer of TGH and TL from 1993 to 1998. Prior to
joining the  Textainer  Group in 1987,  Mr.  Hoelter was  president  of IEA. Mr.
Hoelter  co-founded  IEA in 1978  with  Mr.  Maccarone  and was  president  from
inception  until 1987.  From 1976 to 1978,  Mr.  Hoelter was vice  president for
Trans Ocean Ltd., San Francisco,  a marine container  leasing company,  where he
was  responsible  for  North  America.  From 1971 to 1976,  he  worked  for Itel
Corporation,  San Francisco,  where he was director of financial leasing for the
container  division.  Mr.  Hoelter  received  his  B.B.A.  in  finance  from the
University of Wisconsin, where he is an emeritus member of its Business School's
Dean's  Advisory  Board,  and his M.B.A.  from the  Harvard  Graduate  School of
Business Administration.

          Alex  M.  Brown  is  a  director  of  TGH,   TEM,  TL,  TCC  and  TFS.
Additionally,  he is a member  of the  Equipment  Investment  Committee  and the
Investment   Advisory   Committee  (see   "Committees",   below).   Among  other
directorships,  Mr.  Brown is a director of Trencor  Ltd.  (1996 to present) and
Forward  Corporation  (1997 to present).  Both companies are publicly traded and
are listed on the Johannesburg Stock Exchange.  Mr. Brown became affiliated with
the  Textainer  Group in April 1986.  From 1987 until 1993, he was President and
Chief  Executive  Officer of  Textainer,  Inc. and the Chairman of the Textainer
Group.  Mr. Brown was the managing  director of Cross County  Leasing in England
from 1984 until it was  acquired by Textainer  in 1986.  From 1993 to 1997,  Mr.
Brown was Chief Executive Officer of AAF, a company affiliated with Trencor Ltd.
Mr.  Brown  was  also  Chairman  of WACO  International  Corporation,  based  in
Cleveland, Ohio until 1997.

          Harold  J.  Samson  is a  director  of TGH and TL and is a  member  of
the Investment  Advisory Committee (see "Committees",  below). Mr. Samson served
as a consultant to various securities firms from 1981 to 1989. From 1974 to 1981
he was  Executive  Vice  President of Foster & Marshall,  Inc., a New York Stock
Exchange  member  firm based in Seattle.  Mr.  Samson was a director of IEA from
1979 to 1981. From 1957 to 1984 he served as Chief Financial  Officer in several
New York Stock  Exchange  member  firms.  Mr.  Samson  holds a B.S.  in Business
Administration  from the University of California,  Berkeley and is a California
Certified Public Accountant.

          Philip K. Brewer was  President of TCC and TFS from January 1, 1998 to
December  31,  1998  until his  appointment  as Senior  Vice  President  - Asset
Management Group. As President of TCC, Mr. Brewer was responsible for overseeing
the  management  of, and  coordinating  the activities of TCC and TFS. As Senior
Vice President,  he is responsible  for optimizing the capital  structure of and
identifying  new sources of finance for  Textainer,  as well as  overseeing  the
management of and  coordinating  the activities of Textainer's  risk management,
logistics  and the resale  divisions.  Mr.  Brewer is a member of the  Equipment
Investment  Committee,  the Credit  Committee and was a member of the Investment
Advisory Committee through December 31, 1998 (see "Committees"  below). Prior to
joining Textainer in 1996, Mr. Brewer worked at Bankers Trust from 1990 to 1996,
starting  as a Vice  President  in  Corporate  Finance  and  ending as  Managing
Director  and Country  Manager  for  Indonesia;  from 1989 to 1990,  he was Vice
President in Corporate  Finance at Jarding  Fleming;  from 1987 to 1989,  he was
Capital  Markets   Advisor  to  the  United  States  Agency  for   International
Development;  and from  1984 to 1987 he was an  Associate  with  Drexel  Burnham
Lambert in New York.  Mr.  Brewer  holds an M.B.A.  in Finance from the Graduate
School of Business at Columbia University, and a B.A. in Economics and Political
Science from Colgate University.

          Robert D.  Pedersen  is Senior  Vice-President  - Leasing  Group and a
Director  of  TEM,   responsible  for  worldwide  sales  and  marketing  related
activities and operations.  Mr. Pedersen is a member of the Equipment Investment
Committee and the Credit Committee (see "Committees" below). He joined Textainer
in 1991 as Regional Vice  President for the Americas  Region.  Mr.  Pedersen has
extensive  experience  in the industry  having held a variety of positions  with
Klinge Cool, a manufacturer of refrigerated  container  cooling units (from 1989
to 1991), where he was worldwide sales and marketing director, XTRA, a container
lessor (from 1985 to 1988) and Maersk Line, a container shipping line (from 1978
to  1984).  Mr.  Pedersen  is  a  graduate  of  the  A.P.  Moller  shipping  and
transportation program and the Merkonom Business School in Copenhagen,  majoring
in Company Organization.

         Wolfgang  Geyer is based  in  Hamburg,  Germany  and is  Regional  Vice
President - Europe/ Middle East/ Persian Gulf,  responsible for coordinating all
leasing  activities in these areas of operation.  Mr. Geyer joined  Textainer in
1993 and was the Marketing  Director in Hamburg  through July 1997. From 1991 to
1993,  Mr. Geyer most recently was the Senior Vice  President for Clou Container
Leasing,  responsible for its worldwide leasing activities.  Mr. Geyer spent the
remainder of his leasing career, 1975 through 1991, with Itel Container,  during
which time he held numerous  positions in both  operations and marketing  within
the company.

         Mak Wing Sing is based in Singapore and is the Regional Vice  President
- South Asia,  responsible  for container  leasing  activities in  North/Central
People's  Republic of China,  Hong Kong,  South China (PRC), and Southeast Asia.
Mr. Mak most recently was the Regional Manager,  Southeast Asia, for Trans Ocean
Leasing, working there from 1994 to 1996. From 1987 to 1994, Mr. Mak worked with
Tiphook as their Regional General Manager,  and with OOCL from 1976 to 1987 in a
variety of positions, most recently as their Logistics Operations Manager.

          Masanori  Sagara is based in Yokohama,  Japan and is the Regional Vice
President - North Asia,  responsible for container leasing  activities in Japan,
Korea,  and Taiwan.  Mr. Sagara  joined  Textainer in 1990 and was the company's
Marketing  Director  in  Japan  through  1996.  From  1987 to  1990,  he was the
Marketing Manager at IEA. Mr. Sagara's other experience in the container leasing
business includes marketing  management at Genstar from 1984 to 1987 and various
container  operations  positions  with Thoresen & Company from 1979 to 1984. Mr.
Sagara  holds a Bachelor  of Science  degree in  Economics  from  Aoyama  Bakuin
University.

          Stefan Mackula is Vice President - Equipment  Resale,  responsible for
coordinating the worldwide sale of equipment into secondary markets. Mr. Mackula
also  served  as Vice  President  -  Marketing  from  1989 to 1991  where he was
responsible for coordinating all leasing  activities in Europe,  Africa, and the
Middle East.  Mr. Mackula  joined  Textainer in 1983 as Leasing  Manager for the
United Kingdom. Prior to joining Textainer, Mr. Mackula held, beginning in 1972,
a variety of positions in the international container shipping industry.

          Anthony C. Sowry is Vice President - Operations and  Acquisitions.  He
is also a member of the Equipment  Investment Committee and the Credit Committee
(see  "Committees",  below).  Mr. Sowry supervises all  international  container
operations  and  maintenance  and  technical  functions  for  the  fleets  under
Textainer's  management.  In addition,  he is responsible for the acquisition of
all new and used  containers for the Textainer  Group.  He began his affiliation
with  Textainer in 1982,  when he served as Fleet  Quality  Control  Manager for
Textainer  Inc.  until 1988.  From 1980 to 1982, he was  operations  manager for
Trans  Container  Services in London;  and from 1978 to 1982, he was a technical
representative  for Trans Ocean  Leasing,  also in London.  He received his B.A.
degree in business management from the London School of Business. Mr. Sowry is a
member of the Technical  Committee of the  International  Institute of Container
Lessors and a certified container inspector.

          Ernest J. Furtado is Vice President - Finance and Assistant  Secretary
of TGH, TL, TEM, TCC and TFS and a Director of TCC and TFS, in which capacity he
is responsible for all accounting, financial management, and reporting functions
for TGH, TL, TEM,  TCC and TFS.  Additionally,  he is a member of the  Equipment
Investment  Committee and the Investment  Advisory Committee for which he serves
as Secretary (see "Committees",  below). Prior to joining Textainer in May 1991,
Mr.  Furtado was Controller for Itel Instant Space and manager of accounting for
Itel Containers International  Corporation,  both in San Francisco, from 1984 to
1991. Mr.  Furtado's  earlier  business  affiliations  include  serving as audit
manager for Wells Fargo Bank and as senior accountant with John F. Forbes & Co.,
both in San Francisco.  He is a Certified Public  Accountant and holds a B.S. in
business  administration  from the  University  of California at Berkeley and an
M.B.A. in information systems from Golden Gate University.

          Brian  Anderson is Vice  President  of  Information  Systems.  In this
capacity,  he is responsible for the worldwide information systems of Textainer.
He has been in the container  industry  since 1991 and has more than 15 years of
Information   Systems/Information   Technology  experience.   Prior  to  joining
Textainer in 1994, Mr. Anderson was the  Vice-President  of Information  Systems
for  Trans-Ocean  Leasing  Corporation  from  1991 to 1994.  Mr.  Anderson  is a
Certified Public Accountant and in the past has been technology  consultant with
Price  Waterhouse  and several  Silicon  Valley  startups.  Mr.  Anderson  holds
Bachelors  degrees in Philosophy and English and Masters  degrees in Information
Technology and Accounting.

          Richard G. Murphy is Vice President, Risk Management,  responsible for
all credit and risk management functions.  He also supervises the administrative
aspects of  equipment  acquisitions.  He is a member of and acts as secretary to
the Equipment  Investment and Credit  Committees (see  "Committees",  below). He
previously  served as TEM's Director of Credit and Risk  Management from 1989 to
1991  and as  Controller  from  1988  to  1989.  Prior  to the  takeover  of the
management of the Interocean  Leasing Ltd. fleet by TEM in 1988, Mr. Murphy held
various  positions in the accounting and financial  areas with that company from
1980,  acting as Chief  Financial  Officer from 1984 to 1988.  Prior to 1980, he
held various  positions with firms of public  accountants in the U.K. Mr. Murphy
is an Associate of the Institute of Chartered  Accountants  in England and Wales
and holds a Bachelor of Commerce degree from the National University of Ireland.

          Janet S.  Ruggero  is Vice  President,  Administration  and  Marketing
Services.  Ms.  Ruggero is  responsible  for the  tracking and billing of fleets
under TEM management, including direct responsibility for ensuring that all data
is input in an  accurate  and timely  fashion.  She assists  the  marketing  and
operations  departments by providing statistical reports and analyses and serves
on the Credit Committee (see "Committees", below). Prior to joining Textainer in
1986,  Ms.  Ruggero held various  positions with Gelco CTI over the course of 15
years,  the last one as Director of Marketing and  Administration  for the North
American  Regional  office in New York City.  She has a B.A. in  education  from
Cumberland College.

          Jens W.  Palludan  is based in  Hackensack, New Jersey and is the Vice
President  -  Logistics   Division,   responsible  for  coordinating   container
logistics.   He  joined   Textainer  in  1993  as  Regional  Vice   President  -
Americas/Africa/Australia,  responsible for coordinating all leasing  activities
in North and South America, Africa and Australia/New Zealand. Mr. Palludan spent
his career from 1969 through 1992 with Maersk Line of  Copenhagen,  Denmark in a
variety of key management positions in both Denmark and overseas. Mr. Palludan's
most recent position was that of General Manager, Equipment and Terminals, where
he was  responsible  for a fleet of over 200,000  TEUs.  Mr.  Palludan  holds an
M.B.A. from the Centre European D'Education Permanente, Fontainebleau, France.

          Sheikh Isam K. Kabbani is a director of TGH and TL. He is Chairman and
principal  stockholder of the IKK Group,  Jeddah,  Saudi Arabia, a manufacturing
and trading group which is active both in Saudi Arabia and  internationally.  In
1959 Sheikh Isam Kabbani joined the Saudi Arabian  Ministry of Foreign  Affairs,
and in 1960 moved to the Ministry of Petroleum for a period of ten years. During
this time he was seconded to the Organization of Petroleum  Exporting  Countries
(OPEC).  After a period as Chief  Economist of OPEC, in 1967 he became the Saudi
Arabian  member of OPEC's  Board of  Governors.  In 1970 he left the ministry of
Petroleum to establish his own business, the National Marketing Group, which has
been his principal business activity for the past 18 years. Sheikh Kabbani holds
a B.A.  degree from  Swarthmore  College,  Pennsylvania,  and an M.A.  degree in
Economics and International Relations from Columbia University.

          James  A.C. Owens is a director  of TGH and TL.  Mr.  Owens  has  been
associated  with the Textainer Group since 1980. In 1983 he was appointed to the
Board of Textainer  Inc., and served as President of Textainer Inc. from 1984 to
1987. From 1987 to 1998, Mr. Owens served as an alternate director on the Boards
of TI, TGH and TL. Apart from his  association  with the  Textainer  Group,  Mr.
Owens has been  involved in insurance  and  financial  brokerage  companies  and
captive insurance companies.  He is a member of a number of Boards of Directors.
Mr.  Owens  holds a Bachelor of Commerce  degree  from the  University  of South
Africa.

          S. Arthur  Morris is a director  of TGH,  TEM and TL. He is a founding
partner in the firm of Morris and Kempe,  Chartered Accountants  (1962-1977) and
currently  functions  as a  correspondent  member of a number  of  international
accounting  firms through his firm Arthur Morris and Company (1978 to date).  He
is also President and director of Continental Management Limited (1977 to date).
Continental  Management Limited is a Bermuda corporation that provides corporate
representation,   administration  and  management  services  and  corporate  and
individual  trust  administration   services.  Mr.  Morris  has  over  30  years
experience in public  accounting and serves on numerous  business and charitable
organizations  in the Cayman  Islands and Turks and Caicos  Islands.  Mr. Morris
became a director of TL and TGH in 1993, and TEM in 1994.

          Dudley R.  Cottingham  is Assistant  Secretary,  Vice  President and a
director  of TGH,  TEM and TL. He is a partner  with  Arthur  Morris and Company
(1977 to date) and a Vice  President  and  director  of  Continental  Management
Limited (1978 to date), both in the Cayman Islands and Turks and Caicos Islands.
Continental  Management Limited is a Bermuda corporation that provides corporate
representation,   administration  and  management  services  and  corporate  and
individual  trust  administration  services.  Mr.  Cottingham  has over 20 years
experience  in  public   accounting  with   responsibility   for  a  variety  of
international and local clients.  Mr. Cottingham became a director of TL and TGH
in 1993, and TEM in 1994.

          Cara D. Smith is a member of the  Investment  Advisory  Committee (see
"Committees", below). Ms. Smith was the President and Chief Executive Officer of
TCC  Securities  Corporation  through  June 1997 and a  director  of TCC and TFS
through August 1997. Ms. Smith joined  Textainer in 1992, and prior to 1996, was
Vice President of Marketing. Ms. Smith has worked in the securities industry for
the past 13 years. Ms. Smith's  extensive  experience ranges from compliance and
investor  relations  to  administration  and  marketing  of  equipment  leasing,
multi-family  housing  and  tax  credit  investment  programs.  She  holds  five
securities licenses and is a registered principal. Ms. Smith is also a member of
the International Association of Financial Planners.

         Nadine Forsman is the Controller of TCC and TFS. Additionally, she is a
member  of the  Investment  Advisory  Committee  (See  "Committees"  below).  As
Controller  of  TCC  and  TFS,  she is  responsible  for  accounting,  financial
management  and reporting  functions  for TCC and TFS as well as overseeing  all
communications  with the Limited Partners and as such,  supervises  personnel in
performing this function. Prior to joining Textainer in August 1996, Ms. Forsman
was employed by KPMG Peat  Marwick  LLP,  holding  various  positions,  the most
recent of which was  manager,  from 1990 to 1996.  Ms.  Forsman  holds a B.S. in
Accounting and Finance from San Francisco  State  University and holds a general
securities license and a financial and operations principal securities license.

Committees

The Managing  General Partner has established the following three  committees to
facilitate decisions involving credit and organizational matters,  negotiations,
documentation, management and final disposition of equipment for the Partnership
and for other programs organized by the Textainer Group:

          Equipment  Investment  Committee.  The Equipment  Investment Committee
will review the equipment leasing programs of the Partnership on a regular basis
with emphasis on matters involving equipment purchases, the equipment mix in the
Partnership's  portfolio,  equipment remarketing issues, and decisions regarding
ultimate  disposition  of  equipment.  The members of the  committee are John A.
Maccarone  (Chairman),  James E.  Hoelter,  John R.  Rhodes,  Anthony C.  Sowry,
Richard G.  Murphy  (Secretary),  Alex M.  Brown,  Philip K.  Brewer,  Robert D.
Pedersen and Ernest J. Furtado.

          Credit  Committee.  The Credit Committee will establish credit  limits
for every lessee and potential lessee of equipment and periodically review these
limits. In setting such limits,  the Credit Committee will consider such factors
as customer trade routes,  country,  political risk, operational history, credit
references, credit agency analyses, financial statements, and other information.
The members of the Credit Committee are John A. Maccarone (Chairman), Richard G.
Murphy (Secretary),  Janet S. Ruggero, John R. Rhodes,  Anthony C. Sowry, Philip
K. Brewer and Robert D. Pedersen.

          Investment  Advisory Committee. The Investment Advisory Committee will
review investor program  operations on at least a quarterly  basis,  emphasizing
matters  related  to cash  distributions  to  investors,  cash flow  management,
portfolio  management,  and liquidation.  The Investment  Advisory  Committee is
organized  with a view to  applying  an  interdisciplinary  approach,  involving
management,  financial,  legal  and  marketing  expertise,  to the  analysis  of
investor program  operations.  The members of the Investment  Advisory Committee
are John A. Maccarone  (Chairman),  James E. Hoelter,  Cara D. Smith,  Ernest J.
Furtado (Secretary),  John R. Rhodes, Nadine Forsman,  Harold J. Samson, Alex M.
Brown and Neil I. Jowell.

ITEM 11. EXECUTIVE COMPENSATION

The Registrant  has no executive  officers and does not reimburse TFS, TEM or TL
for the  remuneration  payable  to their  executive  officers.  For  information
regarding  reimbursements  made by the Registrant to the General  Partners,  see
note 2 of the Financial Statements in Item 8.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a)       Security Ownership of Certain Beneficial Owners

          There is no person or "Group" who is known to the Registrant to be the
          beneficial owner of more than five percent of the outstanding units of
          limited partnership investment of the Registrant.

(b)       Security Ownership of Management

          As of January 1, 1999:
                                                            Number
          Name of Beneficial Owner                         Of Units   %All Units
                                                           --------   ----------

          James E. Hoelter.................................  2,500      0.0405%
          John A. Maccarone................................  2,520      0.0409%
          John R. Rhodes...................................    280      0.0045%
          Harold J. Samson.................................  2,500      0.0405%
          Anthony C. Sowry.................................    274      0.0044%
                                                            ------      -------

          Officers and Management
             as a Group....................................   8,074     0.1308%
                                                            =======     =======

(c)      Changes in control

         Inapplicable.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                                          (Amounts in thousands)

(a)      Transactions with Management and Others.

         At  December  31,  1998 and 1997, due from affiliates, net is comprised
         of:

                                                                 1998       1997
                                                                 ----       ----
         Due from affiliates:
           Due from TEM....................................  $  1,087    $   297
                                                               ------      -----

         Due to affiliates:
           Due to TFS......................................        37         48
           Due to TAS......................................         -         42
           Due to TCC......................................         8         15
           Due to TL.......................................         1          1
                                                               ------      -----
                                                                   46        106
                                                               ------      -----

         Due from affiliates, net                            $  1,041    $   191
                                                               ======      =====

         These amounts  receivable  from and payable to affiliates were incurred
         in the  ordinary  course of business  between the  Partnership  and its
         affiliates and represent timing  differences in the accrual and payment
         of expenses  and fees and in the accrual and  remittance  of net rental
         revenues from TEM.

         In addition,  the Registrant paid or will pay the following  amounts to
         the General Partners and TAS:

         Acquisition  fees in  connection  with the  purchase of  containers  on
         behalf of the Registrant:

                                                 1998        1997        1996
                                                 ----        ----        ----

         TAS.................................  $   39      $  216       $ 156
         TEM.................................      16           -           -
                                                 ----        ----        ----

         Total...............................  $   55      $  216       $ 156
                                                 ====        ====        ====

         Management fees in connection with the operations of the Registrant:

                                                 1998        1997        1996
                                                 ----        ----        ----

         TEM.................................  $1,364      $1,443      $1,590
         TFS.................................     354         375         376
                                                -----       -----       -----
         Total...............................  $1,718      $1,818      $1,966
                                                =====       =====       =====

         Reimbursement  for  administrative  costs  in  connection  with  of the
         operations of the Registrant:

                                                 1998        1997        1996
                                                 ----        ----        ----

         TEM.................................  $  914      $1,020      $1,011
         TFS.................................      95         133         150
                                                -----       -----       -----
         Total...............................  $1,009      $1,153      $1,161
                                                =====       =====       =====

(b)      Certain Business Relationships.

         Inapplicable.

(c)      Indebtedness of Management

         Inapplicable.

(d)      Transactions with Promoters

         Inapplicable.

See the  "Management"  and  "Compensation  of General  Partners and  Affiliates"
sections of the Registrant's Prospectus,  as supplemented,  and the Notes to the
Financial Statements in Item 8.


                                     PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)      1.       Audited financial statements  of  the  Registrant for the year
                  ended  December  31,  1998  are  contained  in  Item 8 of this
                  Report.

         2.       Financial Statement Schedules.

                  (i)      Independent   Auditors'    Report   on  Supplementary
                           Schedule.

                  (ii)     Schedule II - Valuation and Qualifying Accounts.

         3.       Exhibits Incorporated by reference.

                  (i)      The   Registrant's   Prospectus   as   contained   in
                           Pre-Effective  Amendment  No.  2 to the  Registrant's
                           Registration Statement (No. 33-36255),  as filed with
                           the  Commission on December 21, 1990 as  supplemented
                           by  Post-Effective  Amendments  No.  1, 2 and 3 filed
                           with  the  Commission   under  Section  8(c)  of  the
                           Securities Act of 1933 on March 1, 1991,  January 13,
                           1992 and February 4, 1992, respectively.

                  (ii)     The  Registrant's   limited   partnership  agreement,
                           Exhibit A to the Prospectus.

(b) During the year  ended  1998,  no reports on Form 8-K have been filed by the
    Registrant.



<PAGE>













             Independent Auditors' Report on Supplementary Schedule







The Partners
Textainer Equipment Income Fund III, L.P.:

Under the date of February  19,  1999,  we  reported  on the  balance  sheets of
Textainer  Equipment Income Fund III, L.P. (the  Partnership) as of December 31,
1998 and 1997 and the related statements of earnings, partners' capital and cash
flows for each of the years in the  three-year  period ended  December 31, 1998,
which are included in the 1998 annual report on Form 10-K.  In  connection  with
our audits of the  aforementioned  financial  statements,  we also  audited  the
related  financial  statement  schedule  as  listed in Item 14.  This  financial
statement  schedule is the responsibility of the Partnership's  management.  Our
responsibility  is to express an opinion on this  financial  statement  schedule
based on our audits.

In our  opinion,  such  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.



                                    KPMG LLP




San Francisco, California
February 19, 1999


<PAGE>
<TABLE>
<CAPTION>



TEXTAINER EQUIPMENT INCOME FUND III, L.P.
(a California Limited Partnership)

Schedule II - Valuation and Qualifying Accounts

(Amounts in thousands)
--------------------------------------------------------------------------------------------------------------

                                                                 Charged                                            Balance
                                              Balance at         to Costs         Charged                            at End
                                               Beginning            and           to Other                             Of
                                               of Period         Expenses         Accounts        Deduction          Period
                                               ---------         --------         --------        ---------          ------

<S>                                           <C>                <C>              <C>             <C>               <C>
For the year ended December 31, 1998:

Allowance for
  doubtful accounts                           $    1,534         $   (244)        $  (680)        $  (171)         $   439
                                                  ------           ------           ------           -----           ------

Recovery cost reserve                         $      119         $    232         $     -         $  (235)         $   116
                                                  ------           ------           ------           -----           ------

Damage protection
  plan reserve                                $     351          $    299         $     -         $  (359)         $   291
                                                  ------           ------           ------           -----           ------



For the year ended December 31, 1997:

Allowance for
  doubtful accounts                           $    1,616         $    166         $     -         $  (248)         $ 1,534
                                                  ------           ------           ------           -----           ------

Recovery cost reserve                         $       71         $    244         $     -         $  (196)         $   119
                                                  ------           ------           ------           -----           ------

Damage protection
  plan reserve                                $      422         $    303         $     -         $  (374)         $   351
                                                  ------           ------           ------           -----           ------



For the year ended December 31, 1996:

Allowance for doubtful accounts                  $ 1,516         $    254         $      -        $  (154)         $ 1,616
                                                  ------           ------            ------          -----           ------

Recovery cost reserve                            $     6         $    225         $      -        $  (160)         $    71
                                                  ------           ------            ------          -----           ------

Damage protection plan reserve                   $   373         $    411         $      -        $  (362)         $   422
                                                  ------           ------            ------          -----           ------


</TABLE>


<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.

                                     TEXTAINER EQUIPMENT INCOME FUND III, L.P.
                                     A California Limited Partnership

                                     By Textainer Financial Services Corporation
                                     The Managing General Partner

                                     By_______________________________
                                         John R. Rhodes
                                         Executive Vice President

Date:  March 29, 1999

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Textainer  Financial
Services  Corporation,  the managing  general partner of the Registrant,  in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>

Signature                                        Title                                        Date



<S>                                              <C>                                          <C>
_____________________                            Executive   Vice President                   March 29, 1999
John R. Rhodes                                   (Principal Financial and
                                                 Accounting Officer), Secretary
                                                 and Director


_____________________                            President(Principal Executive                March 29, 1999
John A. Maccarone                                Officer), Director


_____________________                            Vice President Finance,                      March 29, 1999
Ernest J. Furtado                                Assistant Secretary and Director




</TABLE>
<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.

                                     TEXTAINER EQUIPMENT INCOME FUND III, L.P.
                                     A California Limited Partnership

                                     By Textainer Financial Services Corporation
                                     The Managing General Partner

                                     By /s/John R. Rhodes
                                       _______________________________
                                        John R. Rhodes
                                        Executive Vice President

Date: March 29, 1999

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Textainer  Financial
Services  Corporation,  the managing  general partner of the Registrant,  in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>

Signature                                        Title                                        Date



<S>                                              <C>                                          <C>
/s/ John R. Rhodes                               Executive Vice President                     March 29, 1999
_____________________                            (Principal Financial and
John R. Rhodes                                   Accounting Officer), Secretary
                                                 and Director

/s/ John A. Maccarone                            President (Principal Executive               March 29, 1999
_____________________                            Officer), Director
John A. Maccarone                                

/s/ Ernest J. Furtado                            Vice President Finance,                      March 29, 1999
_____________________                            Assistant Secretary and Director
Ernest J. Furtado                                

</TABLE>