-43-





                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                               -------------------
                                    FORM 10-K



[X]       Annual  Report  Pursuant  to  Section  13 or 15(d)  of the  Securities
          Exchange Act of 1934 For the fiscal year ended December 31, 2001.

[ ]       Transition  Report  Pursuant to Section 13 or 15(d) of the  Securities
          Exchange Act of 1934 For the transition period from     to

                         Commission file number 1-10813
                             -----------------------

                          PLM EQUIPMENT GROWTH FUND III
             (Exact name of registrant as specified in its charter)

              California                                  68-0146197
    (State or other jurisdiction of                    (I.R.S. Employer
    incorporation or organization)                    Identification No.)

         120 Montgomery street
     Suite 1350, San Francisco, CA                           94104
         (Address of principal                            (Zip code)
          executive offices)

        Registrant's telephone number, including area code (415) 445-3201
                             -----------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No ______

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) 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]

Aggregate market value of voting stock:  N/A

Indicate  the number of units  outstanding  of each of the  issuer's  classes of
depositary units, as of the latest practicable date:

             Class                               Outstanding at March 26, 2002
             -----                               -----------------------------
Limited partnership depositary units:                             9,871,209
General Partnership units:                                                1

An index of exhibits filed with this Form 10-K is located at page 20.
Total number of pages in this report:  52.


<PAGE>



                                     PART I

ITEM 1. BUSINESS

(A)  Background

In October 1987, PLM Financial  Services,  Inc. (FSI or the General Partner),  a
wholly-owned subsidiary of PLM International,  Inc. (PLM International or PLMI),
filed a  Registration  Statement  on Form S-1 with the  Securities  and Exchange
Commission with respect to a proposed  offering of 10,000,000  depositary  units
(the units) in PLM Equipment Growth Fund III, a California  limited  partnership
(the Partnership, the Registrant, or EGF III). The Partnership's offering became
effective on March 21, 1988. FSI, as General Partner,  owns a 5% interest in the
Partnership. The Partnership engages in the business of investing in diversified
equipment portfolio consisting primarily of used,  long-lived,  low-obsolescence
capital equipment that is easily transportable by and among prospective users.

The Partnership's primary objectives are:

     (1) to maintain a diversified  portfolio of  long-lived,  low-obsolescence,
high  residual-value  equipment with the net proceeds of the initial partnership
offering,  supplemented by debt financing and  reinvestment of cash generated by
operations.  All  transactions  of over $1.0 million must be approved by the PLM
International  Credit  Review  Committee  (the  Committee),  which is made up of
members  of PLM  International  Senior  Management.  In  determining  a lessee's
creditworthiness,   the  Committee  will  consider,  among  other  factors,  its
financial  statements,  internal and  external  credit  ratings,  and letters of
credit.

     (2) to generate sufficient net operating cash flow from lease operations to
meet liquidity  requirements  and to generate cash  distributions to the limited
partners  until  such  time  as  the  General  Partner   commences  the  orderly
liquidation of the  Partnership  assets or unless the  Partnership is terminated
earlier upon sale of all Partnership property or by certain other events;

     (3) to selectively  sell equipment when the General Partner  believes that,
due to market conditions,  market prices for equipment exceed inherent equipment
values or that expected future benefits from continued ownership of a particular
asset will have an adverse affect on the  Partnership.  As the Partnership is in
the  liquidation  phase,  proceeds  from these sales,  together  with excess net
operating cash flows from operations (net cash provided by operating  activities
plus distributions from an unconsolidated  special-purpose  entity (USPE)),  are
used to pay distributions to the partners.

     (4) To  preserve  and protect the value of the  portfolio  through  quality
management, maintaining diversity, and constantly monitoring equipment markets.

The offering of the units of the Partnership closed on May 11, 1989. The General
Partner contributed $100 for its 5% general partner interest in the Partnership.
On August 16, 1991, the units of the  Partnership  began trading on the American
Stock Exchange (AMEX).  Thereupon each unitholder  received a depositary receipt
representing  ownership  of the number of units  owned by such  unitholder.  The
General Partner  delisted the  Partnership's  depositary  units from the AMEX on
April 8, 1996. The last day for trading on the AMEX was March 22, 1996.

As of December 31, 2001, there were 9,871,210 depositary units outstanding.

Beginning in the eleventh year of operations of the Partnership, which commenced
on January 1, 2000, the General  Partner began the  dissolution  and liquidation
the assets of the Partnership in an orderly fashion. The General Partner filed a
certificate of dissolution  on behalf of the  Partnership  with the Secretary of
State for the State of California on December 22, 2000, and following completion
of the liquidation of the Partnership which is anticipated to occur in 2002, the
General Partner will file a certificate of cancellation.


<PAGE>


Table  1,  below,  lists  the  equipment  and the cost of the  equipment  in the
Partnership's portfolio, as of December 31, 2001 (in thousands of dollars):
<TABLE>
<CAPTION>

                                     TABLE 1

 Units                             Type                                     Manufacturer                    Cost
----------------------------------------------------------------------------------------------------------------------

Owned equipment held for operating leases:

<S>                                                                                                     <C>
    708    Non-pressurized tank railcars                         Various                                $   17,083
    435    Pressurized tank railcars                             Various                                    10,797
    110    Coal railcars                                         Various                                     4,425
    176    Intermodal trailers                                   Various                                     3,036
    119    Marine containers                                     Various                                     2,390
                                                                                                        --------------

               Total owned equipment held for operating leases                                          $   37,731 (1)
                                                                                                       ==============

(1)  Includes equipment purchased with the proceeds from capital  contributions,
     undistributed  cash  flow  from  operations,  and  Partnership  borrowings.
     Includes  costs  capitalized  subsequent  to the date of  acquisition,  and
     equipment   acquisition   fees   paid  to  PLM   Transportation   Equipment
     Corporation.  All  equipment  was used  equipment  at the time of purchase,
     except for 50 marine containers and 164 dry intermodal trailers.
</TABLE>

Railcars  are  leased  under  operating  leases  with terms of six months to six
years.  The   Partnership's   marine  containers  are  leased  to  operators  of
utilization-type  leasing  pools that include  equipment  owned by  unaffiliated
parties.  In such instances,  revenues received by the Partnership  consist of a
specified  percentage of revenues  generated by leasing the pooled  equipment to
sublessees,  after  deducting  certain direct  operating  expenses of the pooled
equipment.

The lessees of the equipment  include:  Canadian  Pacific  Railway  Corporation,
Union  Pacific  Railraod  Corporation,  Trans Ocean Ltd.,  Terra  Nitrogen,  and
Kankakee, Beaverville & Southern Railroad (KBS).

(B) Management of Partnership Equipment

The  Partnership  has entered into an equipment  management  agreement  with PLM
Investment  Management,  Inc.  (IMI), a wholly owned  subsidiary of FSI, for the
management  of  the  Partnership's   equipment.   The  Partnership's  management
agreement with IMI is to co-terminate  with the dissolution of the  Partnership,
unless the limited  partners vote to terminate the agreement  prior to that date
or at the  discretion  of the  General  Partner.  IMI has agreed to perform  all
services  necessary to manage the equipment on behalf of the  Partnership and to
perform or contract for the  performance of all  obligations of the lessor under
the Partnership's  leases. In consideration for its services and pursuant to the
Partnership agreement,  IMI is entitled to a monthly management fee (see Notes 1
and 2 to the audited financial statements).




















<PAGE>


(C) Competition

(1) Operating Leases versus Full Payout Leases

The equipment owned by the Partnership is leased out on an operating lease basis
wherein the rents received  during the initial  noncancelable  term of the lease
are insufficient to recover the  Partnership's  purchase price of the equipment.
The short to mid-term  nature of operating  leases  generally  commands a higher
rental rate than  longer-term,  full payout leases and offers  lessees  relative
flexibility in their equipment  commitment.  In addition,  the rental obligation
under an operating lease need not be capitalized on the lessee's balance sheet.

The Partnership  encounters  considerable  competition from lessors that utilize
full payout leases on new  equipment,  i.e.  leases that have terms equal to the
expected  economic  life  of  the  equipment.  While  some  lessees  prefer  the
flexibility offered by a shorter-term  operating lease, other lessees prefer the
rate  advantages  possible with a full payout lease.  Competitors may write full
payout  leases  at  considerably  lower  rates  and for  longer  terms  than the
Partnership offers, or larger competitors with a lower cost of capital may offer
operating leases at lower rates,  which may put the Partnership at a competitive
disadvantage.

(2) Manufacturers and Equipment Lessors

The Partnership competes with equipment manufacturers who offer operating leases
and full payout leases.  Manufacturers may provide  ancillary  services that the
Partnership  cannot offer, such as specialized  maintenance  service  (including
possible substitution of equipment),  training,  warranty services, and trade-in
privileges.

The  Partnership  also  competes  with many  equipment  lessors,  including  ACF
Industries,  Inc.  (Shippers Car Line Division),  GATX General  Electric Railcar
Services Corporation, and other investment programs that lease the same types of
equipment.

(D) Demand

The Partnership currently operates in three primary operating segments:  railcar
leasing,  trailer leasing, and marine container leasing. Each  equipment-leasing
segment  engages in  short-term  to  mid-term  operating  leases to a variety of
customers.  The  Partnership's  equipment  is used to  transport  materials  and
commodities, rather than people.

The following  section describes the international and national markets in which
the Partnership's capital equipment operates:

(1) Railcars

(a) General Purpose (Nonpressurized) Tank Cars

These railcars are used to transport bulk liquid  commodities  and chemicals not
requiring pressurization, such as certain petroleum products, liquefied asphalt,
lubricating  oils,  molten sulfur,  vegetable oils, and corn syrup.  The overall
health of the market for these types of  commodities is closely tied to both the
US and  global  economies,  as  reflected  in  movements  in the Gross  Domestic
Product, personal consumption expenditures,  retail sales, and currency exchange
rates.  The  manufacturing,  automobile,  and  housing  sectors  are the largest
consumers of chemicals.  Within North America, 2001 carloadings of the commodity
group that  includes  chemicals  and  petroleum  products fell over 5% from 2000
levels. Utilization of the Partnership's nonpressurized tank cars decreased from
90% at the beginning of 2001 to 85% at year-end.

(b) Pressurized Tank Cars

Pressurized  tank cars are used to transport  liquefied  petroleum  gas (natural
gas) and  anhydrous  ammonia  (fertilizer).  The US markets  for natural gas are
industrial  applications,  residential use,  electrical  generation,  commercial
applications,  and  transportation.  Natural gas consumption is expected to grow
over the next few years as most new electricity  generation capacity planned for
is expected to be natural gas fired. Within the fertilizer industry, demand is a
function of several  factors,  including  the level of grain  prices,  status of
government  farm subsidy  programs,  amount of farming  acreage and mix of crops
planted,  weather patterns,  farming practices,  and the value of the US dollar.
Population growth and dietary trends also play an indirect role.

On an  industry-wide  basis,  North American  carloadings of the commodity group
that includes  petroleum and chemicals  decreased over 5% compared to 2000. Even
with this decrease in  industry-wide  demand,  the  utilization  of this type of
railcar within the Partnership continued to be in the 98% range through 2001

(c) Coal Railcars

Since most coal is shipped to domestic  electric  utilities,  demand for coal is
greatly  influenced  by the demand for  electricity,  in  particular  summer air
conditioning,  and  to  a  lesser  extent  winter  heating  requirements.   Coal
carloadings  in the United  States in 2001  increased by  approximately  5% when
compared to 2000 levels.

The coal  railcars  owned by the  Partnership  were on a lease  that  expired on
December 31, 2001.  The lessee has returned the cars,  and they were disposed of
in 2002.

(2) Intermodal (Piggyback) Trailers

Intermodal  trailers  are used to  transport  a variety  of dry goods by rail on
flatcars,  usually for  distances  of over 400 miles.  Over the past five years,
intermodal   trailers  have  continued  to  be  rapidly  displaced  by  domestic
containers  as  the  preferred   method  of  transport  for  such  goods.   This
displacement  occurs because  railroads  offer  approximately  20% lower freight
rates on domestic  containers compared to trailer rates. During 2001, demand for
intermodal  trailers was much more volatile than historic  norms.  Unusually low
demand  occurred  over the  second  half of the year  due to a  rapidly  slowing
economy and low rail freight rates for 53-foot domestic  containers.  Due to the
decline in demand which occurred over the latter half of 2001, shipments for the
year within the intermodal trailer market declined approximately 10% compared to
the prior year. Average  utilization of the entire US intermodal fleet rose from
73% in 1998 to 77% in  1999,  and  then  declined  to 75% in  2000  and  further
declined to a record low of 63% in 2001.

The General  Partner  continued  its  aggressive  marketing  program in a bid to
attract new customers for the  Partnership's  intermodal  trailers  during 2001.
Even with these efforts,  average  utilization of the  Partnership's  intermodal
trailers for the year 2001 dropped 8% to approximately  73%, still 10% above the
national average.

The trend towards using domestic  containers  instead of intermodal  trailers is
expected to accelerate in the future. Overall,  intermodal trailer shipments are
forecast  to  decline  by 10%  to 15% in  2002,  compared  to  2001,  due to the
anticipated  continued weakness of the overall economy.  As such, the nationwide
supply of intermodal trailers is expected to have approximately  25,000 units in
surplus for 2002.  Maintenance costs have increased  approximately 10% from 2000
due to improper repair methods performed by the railroads' vendors and billed to
owners.  For the  Partnership's  intermodal  fleet,  the  General  Partner  will
continue to seek to expand its customer base while  minimizing  trailer downtime
at  repair  shops  and  terminals.  Significant  efforts  will  continue  to  be
undertaken to reduce maintenance costs and cartage costs.

(3) Marine Containers

The  Partnership's  fleet of both standard dry and specialized  containers is in
excess  of 12 years of age,  and is  generally  no  longer  suitable  for use in
international  commerce,  either due to its specific physical condition,  or the
lessees' preferences for newer equipment.  As individual containers are returned
from their  specific  lessees,  they are being  marketed  for sale on an "as is,
where is" basis.  The market for such sales,  although highly dependent upon the
specific location and type of container,  has softened somewhat in the last year
primarily due to the worldwide  recession.  In addition to this overall softness
in residual values, the Partnership has continued to experience reduced residual
values on the sale of refrigerated  containers,  due primarily to  technological
obsolescence associated with this equipment's refrigeration machinery.

(E) Government Regulations

The use,  maintenance,  and  ownership  of equipment  are  regulated by federal,
state,  local, or foreign  government  authorities.  Such regulations may impose
restrictions and financial burdens on the Partnership's  ownership and operation
of  equipment.  Changes  in  government  regulations,   industry  standards,  or
deregulation  may also  affect  the  ownership,  operation,  and  resale  of the
equipment.  Substantial  portions of the Partnership's  equipment  portfolio are
either registered or operated internationally.  Such equipment may be subject to
adverse  political,   government,  or  legal  actions,  including  the  risk  of
expropriation  or loss arising from  hostilities.  Certain of the  Partnership's
equipment is subject to extensive  safety and operating  regulations,  which may
require its removal from service or extensive  modification of such equipment to
meet  these  regulations,   at  considerable  cost  to  the  Partnership.   Such
regulations include but are not limited to:

(1) The  Montreal  Protocol on  Substances  that Deplete the Ozone Layer and the
U.S. Clean Air Act  Amendments of 1990,  which call for the control and eventual
replacement  of  substances   that  have  been  found  to  cause  or  contribute
significantly to harmful effects to the stratospheric  ozone layer and which are
used extensively as refrigerants in refrigerated marine cargo containers.

(2) The U.S.  Department of  Transportation's  Hazardous  Materials  Regulations
regulates the classification and packaging  requirements of hazardous  materials
that apply  particularly to  Partnership's  tank railcars.  The Federal Railroad
Administration  has mandated that  effective July 1, 2000 all tank railcars must
be  re-qualified  every ten years  from the last  test  date  stenciled  on each
railcar to insure tank shell integrity.  Tank shell  thickness,  weld seams, and
weld  attachments  must be inspected and repaired if necessary to re-qualify the
tank railcar for  service.  The average  cost of this  inspection  is $3,600 for
jacketed tank railcars and $1,800 for non-jacketed tank railcars.  This does not
including any necessary repairs.  This inspection is to be performed at the next
scheduled tank test and every ten years  thereafter.  The Partnership  currently
owns 1,143 of this type of  railcars.  As of December  31,  2001,  103 have been
inspected and no significant defects have been discovered.

As of December  31,  2001,  the  Partnership  was in  compliance  with the above
government  regulations.   Typically,   costs  related  to  extensive  equipment
modifications to meet government regulations are passed on to the lessee of that
equipment.

ITEM 2. PROPERTIES

The Partnership  neither owns nor leases any properties other than the equipment
it has purchased.  As of December 31, 2001, the Partnership owned a portfolio of
transportation  and  related  equipment  as  described  in Item 1,  Table 1. The
Partnership  acquired equipment with the proceeds of the Partnership offering of
$199.7  million,   proceeds  from  debt  financing  of  $41.9  million,  and  by
reinvesting a portion of its operating cash flow in additional equipment.

The Partnership  maintains its principal office at 120 Montgomery Street,  Suite
1350, San Francisco, California 94104. All office facilities are provided by FSI
without reimbursement by the Partnership.

ITEM 3. LEGAL PROCEEDINGS

The Partnership,  together with affiliates,  has initiated litigation in various
official  forums in India  against  two  defaulting  Indian  airline  lessees to
repossess  Partnership  property and to recover  damages for failure to pay rent
and failure to maintain  such  property in  accordance  with the relevant  lease
contracts. The Partnership has repossessed all of its property previously leased
to these airlines,  causing one of the airline lessees to cease  operations.  In
response to the  Partnership's  collection  efforts,  the airline  lessees filed
counter-claims  against the  Partnership in excess of the  Partnership's  claims
against  the  airline.   The  General   Partner   believes  that  the  airline's
counterclaims  are  completely  without  merit,  and the  General  Partner  will
vigorously defend against such counterclaims.

During 2001, an arbitration  between one India lessee and the  Partnership  took
place and the Partnership was awarded a settlement.  The General Partner and the
lessee  are in the  process  of  negotiating  the  settlement  in a manner  that
benefits all parties  involved.  The General  Partner  decided not to accrue the
amount of the settlement  because  collection of the  settlement is remote.  The
General  Partner  will  continue  to try  to  collect  the  full  amount  of the
settlement.

During 2001, the General Partner has decided to minimize its collection  efforts
from the other  India  lessee in order to save the  Partnership  from  incurring
additional  expenses  associated with trying to collect from a lessee that has a
limited ability to pay.

The  Partnership  is involved as plaintiff or defendant in various legal actions
incidental  to its  business.  Management  does  not  believe  that any of these
actions will be material to the financial  condition or results of operations of
the Partnership.



<PAGE>


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

No matters were submitted to a vote of the Partnership's limited partners during
the fourth quarter of its fiscal year ended December 31, 2001.


                                     PART II

ITEM 5. MARKET FOR THE PARTNERSHIP'S EQUITY AND RELATED DEPOSITARY UNIT MATTERS

Pursuant  to the terms of the  partnership  agreement,  the  General  Partner is
entitled  to a 5%  interest  in the  profits,  losses and  distributions  of the
Partnership.  The General  Partner is the sole holder of such interest.  Special
allocations  of income  are made to the  General  Partner  equal to the  deficit
balance,  if any, in the capital  account of the  General  Partner.  The General
Partner's annual allocation of net income will generally be equal to the General
Partner's  cash  distributions  paid  during the  current  year.  The  remaining
interests in the profits, losses and distributions of the Partnership are owned,
as of December 31, 2001, by the 8,512 unit holders in the Partnership

There are several  secondary markets that will facilitate sales and purchases of
depositary  units.  Secondary markets are characterized as having few buyers for
depositary units and,  therefore,  are generally viewed as inefficient  vehicles
for the sale of depositary units.  Presently,  there is no public market for the
units and none is likely to develop.

The Partnership is listed on the OTC Bulletin Board under the symbol GFZPZ.

To prevent the units from being considered  publicly traded and thereby to avoid
taxation of the Partnership as an association treated as a corporation under the
Internal Revenue Code, the depositary units will not be transferable without the
consent  of  the  General  Partner,  which  may  be  withheld  in  its  absolute
discretion. The General Partner intends to monitor transfers of depositary units
in an  effort  to  ensure  that  they do not  exceed  the  percentage  or number
permitted by certain safe harbors promulgated by the Internal Revenue Service. A
transfer may be  prohibited  if the intended  transferee  is not a United States
citizen or if the transfer  would cause any portion of the units of a "Qualified
Plan" as defined by the  Employee  Retirement  Income  Security  Act of 1974 and
Individual Retirement Accounts to exceed the allowable limit.














                      (this space intentionally left blank)


<PAGE>


ITEM 6. SELECTED FINANCIAL DATA

Table 2, below, lists selected financial data for the Partnership:

                                     TABLE 2

                        For the Years Ended December 31,
   (In thousands of dollars, except weighted-average depositary unit amounts)
<TABLE>
<CAPTION>

                                                2001          2000            1999            1998            1997
                                              -------------------------------------------------------------------------

Operating Results:
<S>                                         <C>            <C>              <C>           <C>             <C>
  Total revenues                            $    11,484    $   21,010       $  17,494     $    22,507     $   28,592
  Net gain on disposition
    of equipment                                  4,139         9,707           2,197           3,808          5,629
  Equity in net income (loss) of uncon-
    solidated special-purpose entity                (10)          918           1,413              49            857
  Net income                                      5,278        11,898           4,039           2,917          1,937

At year-end:
  Total assets                              $    14,482    $   10,037       $  18,690     $    35,512     $   56,395
  Note payable                                       --            --           7,458          18,540         29,290
  Total liabilities                                 511           721          10,362          21,219         34,397

Cash distribution                           $       623    $   10,910       $   7,793     $    10,394     $   10,391

Cash distribution representing
    a return of capital to the limited
    Partners                                $        --    $       --       $   3,754     $     7,477     $    8,454

Per weighted-average depositary unit

  Net income                                $      0.53    $     1.15 (1)   $    0.37 (1) $      0.24 (1) $     0.14 (1)

  Cash distribution                         $      0.06    $     1.05       $    0.75     $      1.00     $     1.00

  Cash distribution representing
    a return of capital to the limited
    Partners                                $        --    $       --       $    0.38     $      0.76     $     0.86

__________________________________

(1)  After an increase  of income of $0.2  million  ($0.03 per  weighted-average
     depositary  unit) in 2001  and $0.1  million  ($0.01  per  weighted-average
     depositary  unit)  in  2000,  representing  allocations  from  the  General
     Partner.   After   reduction   of  income  of  $0.2   million   ($0.02  per
     weighted-average   depositary  unit)  in  1999,  $0.4  million  ($0.04  per
     weighted-average   depositary   unit)  in  1998  and   1997,   representing
     allocations   to  the  General   Partner  (see  Note  1  to  the  financial
     statements).
</TABLE>



<PAGE>


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

(A) Introduction

Management's  discussion  and  analysis of  financial  condition  and results of
operations relates to the financial  statements of PLM Equipment Growth Fund III
(the Partnership).  The following  discussion and analysis of operations focuses
on the  performance of the  Partnership's  equipment in the various  segments in
which  it  operates  and  its  effect  on the  Partnership's  overall  financial
condition.

(B) Results of Operations -- Factors Affecting Performance

(1) Re-leasing Activity and Repricing Exposure to Current Economic Conditions

The exposure of the Partnership's  equipment  portfolio to repricing risk occurs
whenever the leases for the equipment expire or are otherwise terminated and the
equipment must be remarketed.  Major factors influencing the current market rate
for Partnership's equipment include, supply and demand for similar or comparable
types of  transport  capacity,  desirability  of the  equipment  in the  leasing
market,  market  conditions  for the  particular  industry  segment in which the
equipment is to be leased, overall economic conditions,  and various regulations
concerning  the use of the  equipment.  Equipment that is idle or out of service
between the expiration of one lease and the assumption of a subsequent lease can
result in a  reduction  of  contribution  to the  Partnership.  The  Partnership
experienced  re-leasing  or  repricing  activity  in 2001  across  its  railcar,
trailer, and marine container portfolio.

     (a) Railcars:  The  relatively  short  duration of most leases  exposes the
railcars to  considerable  re-leasing  activity.  As of December 31,  2001,  the
Partnership had 210 railcars off-lease. Additional railcar leases will expire in
2002. The Partnership's  lease revenue declined  approximately $0.2 million from
2000 to 2001 due to the disposition of railcars during 2000 and 2001.

     (b) Trailers:  The Partnership's trailer portfolio operates with short-line
railroad  systems.  The  relatively  short  duration  of most  leases  in  these
operations  exposes  the  trailers  to  considerable  re-leasing  activity.  The
Partnership's  lease revenue decreased  approximately  $0.2 million from 2000 to
2001 primarily due to the disposition of trailers in 2000 and 2001.

     (c)  Marine  containers:   The  Partnership's  remaining  marine  container
portfolio operates in  utilization-based  leasing pools and, as such, is exposed
to  considerable   repricing  activity.   The  Partnership's   marine  container
contribution declined approximately $0.1 million from 2000 to 2001 primarily due
to the disposition of marine containers in 2000 and 2001.

(2) Equipment Liquidations

Liquidation of Partnership equipment and the Partnership's investment in an USPE
represents a reduction in the size of the equipment  portfolio and may result in
a reduction of contribution to the  Partnership.  During the year ended December
31, 2001, the Partnership sold or disposed of aircraft,  railcars, trailers, and
marine  containers,  with an  aggregate  net  book  value of $1.7  million,  for
proceeds of $5.8 million.

(3) Equipment Valuation

In accordance  with Financial  Accounting  Standards  Board (FASB)  Statement of
Financial  Accounting  Standards  (SFAS)  SFAS  No.  121,  "Accounting  for  the
Impairment of Long-Lived  Assets and Long-Lived  Assets to be Disposed of" (SFAS
No. 121), the General  Partner  reviews the carrying value of the  Partnership's
equipment portfolio at least quarterly and whenever  circumstances indicate that
the carrying value of an asset would not be recoverable  due to expected  future
market conditions.  If the projected undiscounted cash flows and the fair market
value of the equipment are less than the carrying value of the equipment, a loss
on  revaluation  is recorded.  A $0.2 million loss on  revaluation  was recorded
during 2000. No reductions  to the equipment  carrying  values were required for
the years ended  December 31, 2001 or 1999 or to partially  owned USPE equipment
in 2001, 2000, or 1999

In October 2001,  FASB issued SFAS No. 144,  "Accounting  for the  Impairment or
Disposal of Long-Lived Assets" (SFAS No. 144), which replaces SFAS No. 121. SFAS
No. 144 provides updated guidance  concerning the recognition and measurement of
an impairment loss for certain types of long-lived assets,  expands the scope of
a discontinued  operation to include a component of an entity and eliminates the
current  exemption to consolidation  when control over a subsidiary is likely to
be  temporary.  SFAS No. 144 is  effective  for  fiscal  years  beginning  after
December 15, 2001.

The  Partnership  will apply the new rules on accounting  for the  impairment or
disposal of long-lived  assets  beginning in the first quarter of 2002, and they
are not anticipated to have an impact on the Partnership's earnings or financial
position.

(C) Financial Condition -- Capital Resources and Liquidity

The General Partner purchased the Partnership's initial equipment portfolio with
capital raised from its initial equity offering and permanent debt financing. No
further capital contributions from the original partners are permitted under the
terms of the  limited  partnership  agreement.  As of  December  31,  2001,  the
Partnership had no outstanding indebtedness. The Partnership relies on operating
cash flow to meet its operating obligations.

For the year ended December 31, 2001, the Partnership generated $3.2 million in
cash to meet its operating obligations, and make distributions (total in 2001 of
$0.6 million) to the partners.

During the year ended  December 31, 2001,  the  Partnership  sold or disposed of
aircraft,  railcars, trailers, and marine containers, with an aggregate net book
value of $1.7 million in 2001, for proceeds of $5.8 million.

Accounts  receivable  decreased  $0.2 million during 2001 due to the decrease in
lease revenue caused by the reduction in the size of the equipment portfolio.

Accounts  payable and accrued expenses  decreased  $46,000 during the year ended
December 31, 2001 due to the decrease in payments to vendors  resulting from the
reduction in the size of the equipment portfolio.

The  Partnership's  lessee  deposits  and reserve for repairs  decreased by $0.2
million  during  the year ended  December  31,  2001.  A $0.1  million  decrease
resulted  from the return of  security  deposits to the buyer who  purchased  an
aircraft  during 2001.  A $0.1  million  decrease  resulted  from lower  prepaid
aircraft revenue due to the sale of the aircraft.

The General  Partner has not  planned any  expenditures,  nor is it aware of any
contingencies  that would  cause it to require  any  additional  capital to that
mentioned above.

The Partnership is in its active liquidation phase. As a result, the size of the
Partnership's remaining equipment portfolio and, in turn, the amount of net cash
flows from  operations will continue to become  progressively  smaller as assets
are sold.  Significant  asset sales may result in special  distributions  to the
partners.

The amounts  reflected for assets and  liabilities of the  Partnership  have not
been adjusted to reflect  liquidation  values.  The equipment  portfolio that is
actively being marketed for sale by the General Partner  continues to be carried
at the lower of depreciated  cost or fair value less cost of disposal.  Although
the  General  Partner   estimates  that  there  will  be  distributions  to  the
Partnership  after final disposal of assets and settlement of  liabilities,  the
amounts  cannot  be  accurately  determined  prior  to  actual  disposal  of the
equipment.

(D) Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires the General Partner
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent  assets and liabilities at the date
of the financial  statements  and the reported  amounts of revenues and expenses
during the reporting  period.  On a regular basis,  the General  Partner reviews
these estimates including those related to asset lives and depreciation methods,
impairment of long-lived  assets including  intangibles,  allowance for doubtful
accounts,  and  contingencies  and litigation.  These estimates are based on our
historical experience and on various other assumptions believed to be reasonable
under the  circumstances.  Actual results may differ from these  estimates under
different assumptions or conditions. The General Partner believes, however, that
the estimates,  including those for the  above-listed  items, are reasonable and
that actual results will not vary significantly from the estimated amounts.

The General Partner believes the following critical  accounting  policies affect
the more  signifigant  judgments and estimates  used in the  preparation  of our
financial statements:

Asset  lives  and  depreciation  methods:  The  Partnership's  primary  business
involves the purchase and  subsequent  lease of  long-lived  transportation  and
related  equipment.  The General Partner has chosen asset lives that it believes
correspond to the economic life of the related  asset.  The General  Partner has
chosen  a  deprecation  method  that it  believes  matches  the  benefit  to the
Partnership from the asset with the associated costs.  These judgments have been
made based on the General Partner's expertise in each equipment segment that the
Partnership  operates. If the asset life and depreciation method chosen does not
reduce the book value of the asset to at least the  potential  future cash flows
from the asset to the Partnership, the Partnership would be required to record a
loss on revaluation. Likewise, if the net book value of the asset was reduced by
an amount greater than the economic value has deteriorated,  the Partnership may
record a gain on sale upon final disposition of the asset.

Impairment of long-lived assets: On a regular basis, the General Partner reviews
the carrying  value of its  equipment,  investments  in  unconsolidated  special
purpose entities and intangible assets to determine if the carrying value of the
asset may not be recoverable in consideration  of current  economic  conditions.
This requires the General Partner to make estimates related to future cash flows
from each asset as well as the  determination if the  deterioration is temporary
or  permanent.  If these  estimates  or the  related  assumptions  change in the
future, the Partnership may be required to record additional impairment charges.

Allowance  for doubtful  accounts:  The  Partnership  maintains  allowances  for
doubtful  accounts for  estimated  losses  resulting  from the  inability of the
lessees to make the lease  payments.  These estimates are primarily based on the
amount of time that has lapsed  since the related  payments  were due as well as
specific  knowledge  related to the ability of the lessees to make the  required
payments.  If the  financial  condition  of the  Partnership's  lessees  were to
deteriorate,  additional  allowances could be required that would reduce income.
Conversely,  if the  financial  condition  of the lessees  were to improve or if
legal  remedies to collect past due amounts were  successful,  the allowance for
doubtful accounts may need to be reduced and income would be increased.

Contingencies  and litigation:  The Partnership is subject to legal  proceedings
involving  ordinary and routine  claims  related to its  business.  The ultimate
legal and financial  liability  with respect to such matters cannot be estimated
with  certainty and requires the use of estimates in recording  liabilities  for
potential litigation settlements.  Estimates for losses from litigation are made
after  consultation  with outside  counsel.  If  estimates  of potential  losses
increase  or the  related  facts and  circumstances  change in the  future,  the
Partnership may be required to record additional litigation expense.

(E) Results of Operations -- Year-to-Year Detailed Comparison

(1)  Comparison  of the  Partnership's  Operating  Results  for the Years  Ended
December 31, 2001 and 2000

(a) Owned Equipment Operations

Lease  revenues  less  direct  expenses  (defined  as repairs  and  maintenance,
equipment  operating and asset-specific  insurance  expenses) on owned equipment
decreased  during  2001  compared  to  2000.  Gains or  losses  from the sale of
equipment,  interest and other income, and certain expenses such as depreciation
and general and administrative  expenses relating to the operating segments (see
Note 5 to the  audited  financial  statements),  are not  included  in the owned
equipment  operation  discussion  because  they are indirect in nature and not a
result of operations but the result of owning a portfolio of equipment.



<PAGE>


The following  table presents  lease revenues less direct  expenses by equipment
type (in thousands of dollars):

<TABLE>
<CAPTION>
                                                  For the Years
                                                Ended December 31,
                                             2001               2000
                                        -------------------------------------

<S>                                     <C>                <C>
   Railcars                             $         4,493    $         4,572
   Trailers                                         192                352
   Aircraft                                          81              3,403
   Marine containers                                 25                 76
</TABLE>

Railcars: Railcars lease revenues and direct expenses were $6.4 million and $1.9
million,  respectively,  for the year ended December 31, 2001,  compared to $6.6
million and $2.0  million,  respectively,  during the same  period of 2000.  The
decrease in railcar  contribution in the year ended December 31, 2001 was due to
a decrease in railcar utilization in 2001, compared to 2000.

Trailers:  Trailer lease revenues and direct expenses were $0.4 million and $0.2
million,  respectively,  for 2001,  compared to $0.6  million and $0.2  million,
respectively,  during 2000. The number of trailers owned by the  Partnership has
been  declining due to  dispositions.  The result of this  declining  fleet is a
decrease in trailer contribution.

Aircraft: Aircraft lease revenues and direct expenses were $0.2 million and $0.1
million,  respectively,  for 2001,  compared to $3.9  million and $0.5  million,
respectively,  during 2000. The $3.3 million  decrease in aircraft  contribution
during 2001 compared to 2000 was due to the sale of the Partnership's'  aircraft
during 2001.

Marine  containers:  Marine  container  lease revenues and direct  expenses were
$26,000 and $1,000, respectively, for 2001, compared to $0.1 million and $4,000,
respectively for 2000. The number of marine  containers owned by the Partnership
has been declining due to dispositions.  The result of this declining fleet is a
decrease in marine container contribution.

(b) Indirect Operating Expenses Related to Owned Equipment Operations

Total  indirect  expenses of $3.9  million for the year ended  December 31, 2001
decreased from $7.3 million for the same period of 2000.  Significant  variances
are explained as follows:

     (i) A decrease of $2.9 million in depreciation  and  amortization  expenses
from 2000 levels due to the  disposition of  Partnership  assets during 2001 and
2000.

     (ii) A  decrease  of  $0.3  million  in  interest  expense  was  due to the
repayment of the Partnership's debt during 2000.

     (iii) Loss on revaluation  of equipment  decreased $0.2 million during 2001
compared to 2000.  During 2000,  the  Partnership  reduced the carrying value of
trailers to their  estimated net realizable  value.  There was no revaluation of
equipment required during 2001.

     (iv) A decrease of $0.2 million in management  fees to affiliate  from 2000
levels was due to lower lease revenues during 2001, compared to 2000.

     (v) A decrease of $47,000 in general and administrative  expenses was due a
decrease of $0.1 million in computer and other allocated expenses.  The decrease
was offset by an increase of $50,000 for professional  services  required by the
Partnership.

     (vi) A increase of $0.2 million for the  provision for bad debts expense in
2001 was due to a $0.1 million increase due to the General Partner's  evaluation
of the  collectability  of receivables due from certain  lessees.  An additional
$0.1 million  increase was due to the  collection  of an accounts  receivable in
2000 that had previously been written off as a bad debt. A similar event did not
occur in 2001.


<PAGE>


(c) Net Gain on Disposition of Owned Equipment

Net gain on the  disposition  of equipment for the year ended  December 31, 2001
total $4.1 million,  and resulted from the sale of aircraft,  marine containers,
trailers,  and  railcars  with an  aggregate  net book value of $1.7 million for
proceeds of $5.8  million.  Net gain on  disposition  of equipment  for the year
ended  December 31, 2000 totaled $9.7 million,  which  resulted from the sale of
aircraft, marine containers,  trailers, and railcars, with an aggregate net book
value of $2.8 million, for proceeds of $12.5 million.

(d)  Equity in Net Income  (Loss) of an  Unconsolidated  Special-Purpose  Entity
(USPE)

Equity in net income (loss) of an USPE represents the Partnership's share of the
net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method of  accounting.  This entity was single  purpose and
had no debt.  The  following  table  presents  equity  in net  income  (loss) by
equipment type (in thousands of dollars):
<TABLE>
<CAPTION>
                                                                For the Years
                                                              Ended December 31,
                                                           2001               2000
                                                      -------------------------------------

<S>                                                   <C>                <C>
Aircraft, aircraft engines, and rotables              $            --    $            23
Marine vessel                                                     (10)               895
                                                      -------------------------------------
    Equity in net income (loss) of an USPE            $           (10)   $           918
                                                      =====================================
</TABLE>

Aircraft,  aircraft engines, and rotables: As of December 31, 2001 and 2000, the
Partnership had no remaining interest in an entity that owned aircraft, aircraft
engines,  or rotables.  The  Partnership  had no revenues or expenses in an USPE
that owned aircraft,  aircraft  engines,  or rotables in the year ended December
31, 2001. The Partnership's share of aircraft revenues and expenses were $23,000
and $-0-,  respectively,  for the year ended  December 31, 2000.  The $23,000 of
aircraft  revenues  for the year ended  December 31, 2000  represented  interest
income earned on accounts receivable.

Marine  vessel:  As of  December  31,  2001 and  2000,  the  Partnership  had no
remaining interest in an entity that owned marine vessels. During the year ended
December 31, 2001,  insurance settlement proceeds of $6,000 was offset by direct
expenses, and administrative expenses of $16,000,  compared to lease revenues of
$0.7  million and the gain of $1.1  million  from the sale of the  Partnership's
interest in an entity that owned a marine  vessel being  offset by  depreciation
expense,  direct expenses, and administrative expenses of $0.9 million for 2000.
The decrease in lease  revenues and expenses of marine vessels for 2001 compared
to 2000 was due to the sale of the  Partnership's  interest  in an  entity  that
owned a marine vessel during 2000.

(e) Net Income

As a result of the foregoing, the Partnership had net income of $5.3 million for
the year ended December 31, 2001, compared to net income of $11.9 million in the
same period of 2000. The  Partnership's  ability to operate or liquidate assets,
secure leases,  and re-lease those assets whose leases expire is subject to many
factors. Therefore, the Partnership's performance in the year ended December 31,
2001 is not necessarily indicative of future periods. In the year ended December
31, 2001, the Partnership  distributed  $0.6 million to the limited  partners or
$0.06 per weighted average depositary unit.

(2)  Comparison  of the  Partnership's  Operating  Results  for the Years  Ended
December 31, 2000 and 1999

In September 1999, PLM Financial  Services,  Inc. (FSI or the General  Partner),
amended the corporate-by-laws of certain USPEs in which the Partnership,  or any
affiliated  program,  owns an interest  greater than 50%.  The  amendment to the
corporate-by-laws  provided that all decisions  regarding  the  acquisition  and
disposition of the investment as well as other significant business decisions of
that  investment  would  be  permitted  only  upon  unanimous   consent  of  the
Partnership  and all the  affiliated  programs  that  have an  ownership  in the
investment (the Amendment). As such, although the Partnership may own a majority
interest in an USPE,  the  Partnership  does not control its management and thus
the equity method of accounting will be used after adoption of the Amendment. As
a result of the Amendment, as of September 30, 1999, all jointly owned equipment
in which the Partnership owned a majority interest, which had been consolidated,
were  reclassified  to investments in USPEs.  Lease revenues and direct expenses
for jointly owned  equipment in which the Partnership  held a majority  interest
were reported under the consolidation method of accounting during the year ended
December 31, 1999 and were included with the owned equipment operations. For the
three months ended  December 31, 1999 and twelve months ended December 31, 2000,
lease  revenues and direct  expenses for these  entities are reported  under the
equity method of accounting and are included with the operations of the USPE.

(a) Owned Equipment Operations

Lease  revenues  less  direct  expenses  (defined  as repairs  and  maintenance,
equipment  operating and asset-specific  insurance  expenses) on owned equipment
decreased for the year ended  December 31, 2000 when compared to the same period
of 1999. The following  table  presents  lease revenues less direct  expenses by
segment (in thousands of dollars):
<TABLE>
<CAPTION>
                                              For the Years
                                            Ended December 31,
                                         2000               1999
                                    -------------------------------------
<S>                                 <C>                <C>
Railcars                            $         4,572    $         5,100
Aircraft                                      3,403              4,977
Trailers                                        352                512
Marine containers                                76                118
Marine vessel                                    --                660
</TABLE>

Railcars:  Railcar lease revenues and direct expenses were $6.6 million and $2.0
million,  respectively,  for 2000,  compared to $6.9  million and $1.8  million,
respectively,  during 1999.  Revenue  declined as a result of lower lease rates.
The  increase in direct  expenses of $0.2  million was a result of more  repairs
being required on rail equipment in 2000 than was needed during 1999.

Aircraft: Aircraft lease revenues and direct expenses were $3.9 million and $0.5
million,  respectively,  for 2000,  compared to $5.6  million and $0.7  million,
respectively,  during 1999. The decrease in lease  revenues and direct  expenses
was due to the sale of a total of four aircraft during 2000 and 1999.

Trailers:  Trailer lease revenues and direct expenses were $0.6 million and $0.2
million,  respectively,  for 2000,  compared to $0.7  million and $0.2  million,
respectively,  during 1999. The number of trailers owned by the  Partnership has
been declining due to dispositions.  The result of this declining fleet has been
a decrease in trailer contribution.

Marine  containers:  Marine  containers  lease revenues and direct expenses were
$0.1  million  and $4,000,  respectively  in 2000  compared to $0.1  million and
$2,000, respectively, in 1999. The number of containers owned by the Partnership
has been declining due to  dispositions.  The result of this declining fleet has
been a decrease in containers contribution.

Marine vessel:  Marine vessel lease  revenues and direct  expenses were zero for
2000, compared to $1.5 million and $0.8 million, respectively, for 1999.

The September 30, 1999 Amendment that changed the accounting  method of majority
held equipment from the consolidation  method of accounting to the equity method
of accounting  impacted the reporting of lease  revenues and direct  expenses of
one marine vessel. As a result of the Amendment,  during the year ended December
31, 2000,  lease revenues  decreased $1.5 million and direct expenses  decreased
$0.8 million when compared to 1999.


(b) Interest and Other Income

Interest and other income decreased by $0.2 million in 2000 compared to 1999 due
to lower income on the railcars related to mileage charges.

(c) Indirect Expenses Related to Owned Equipment Operations

Total  indirect  expenses of $7.3  million for the year ended  December 31, 2000
decreased  from $11.4 million for 1999.  Significant  variances are explained as
follows:

     (i) A decrease of $2.9 million in  depreciation  and  amortization  expense
from 1999 levels resulted from an approximately $2.3 million decrease due to the
sale of certain  assets during 2000 and 1999, and a decrease of $0.6 million was
the  result of the  Amendment  which  changed  the  accounting  method  used for
majority  held  equipment  from the  consolidation  method of  accounting to the
equity method of accounting.

     (ii)A decrease of $0.7 million in interest expense was due to the repayment
of the Partnership's debt in 2000.

     (iii) Bad debt expense  decreased  $0.4 million in 2000 compared to 1999. A
$0.3  million  decrease  was  due to the  General  Partner's  evaluation  of the
collectability  of  receivables  due from  certain  lessees,  and a $0.1 million
decrease was due to collection of $0.1 million from unpaid invoices in 2000 that
had previously been reserved for as bad debts. A similar  recovery did not occur
in 1999.

     (iv)A  decrease of $0.2 million in management  fees to affiliate was due to
lower lease revenues in 2000, compared to 1999.

     (v) A decrease of $0.1 million in general and administrative  expenses from
1999 levels was due to the reduction of the size of the Partnership's  equipment
portfolio.

     (vi)An  increase of $0.2 million in revaluation of equipment was due to the
loss on revaluation  of trailer  equipment in 2000. A similar loss did not occur
in 1999.

(d) Net Gain on Disposition of Owned Equipment

Net gain on  disposition  of  equipment  was  $9.7  million  for the year  ended
December 31, 2000 resulting from the disposition of marine containers, trailers,
railcars,  and aircraft with an aggregate  net book value of $2.8  million,  for
proceeds of $12.5  million.  The net gain on  disposition  of equipment was $2.2
million for the same period of 1999  resulting  from the  disposition  of marine
containers, trailers, railcars, and an aircraft with an aggregate net book value
of $1.6 million, for proceeds of $3.8 million.

(e) Equity in Net Income (Loss) of USPE

Equity in net income (loss) of an USPE represents the Partnership's share of the
net income (loss) generated from the operation of jointly-owned assets accounted
for under the  equity  method  (see Note 4 to the  financial  statements).  This
entity  was  single  purpose  and did not have any  debt.  The  following  table
presents  equity  in net  income  (loss)  by  equipment  type (in  thousands  of
dollars):
<TABLE>
<CAPTION>
                                  For the Years
                               Ended December 31,
                                                      2000               1999
                                                 -------------------------------------
<S>                                              <C>                    <C>
Marine vessel                                    $           895        $      (64)
Aircraft, aircraft engines, and rotables                      23             1,477
                                                 -------------------------------------
  Equity in net income of an USPE                $           918        $    1,413
                                                 =====================================
</TABLE>

Marine  vessel:  The  Partnership's  share of  revenues  and  expenses of marine
vessels was $1.8 million, and $0.9 million,  respectively,  for 2000 compared to
$0.2 million and $0.3 million,  respectively, for 1999. During the third quarter
of 2000, the  Partnership's  56% interest in an entity owing a marine vessel was
sold for a gain of $1.1 million.

An increase in marine  vessel  revenues of $1.1 million was due to the gain from
the sale.  An  increase in marine  vessel  lease  revenues  of $0.5  million and
depreciation  expense,  direct  expenses,  and  administrative  expenses of $0.6
million during the year ended December 31, 2000, was caused by the September 30,
1999  Amendment  that changed the  accounting  method of majority held equipment
from the  consolidation  method of accounting to the equity method of accounting
for one marine vessel.

The lease revenues and depreciation expense, direct expenses, and administrative
expenses  for  the  majority   owned  marine  vessel  were  reported  under  the
consolidation  method of accounting under Owned Equipment  Operations during the
first nine months of 1999. The lease revenues and depreciation  expense,  direct
expenses, and administrative  expenses for the majority owned marine vessel were
reported under the equity method of accounting under USPE operations  during the
fourth quarter of 1999 and all of 2000.

Aircraft,  aircraft  engines,  and  rotables:  As  of  December  31,  2000,  the
Partnership  had no remaining  interest in an entity owning  aircraft,  aircraft
engines,  or rotables.  The interest in the trust that owned this  equipment was
sold in 1999, for a gain of $1.6 million.  The Partnership's  share of aircraft,
aircraft  engines,  and rotables  lease revenue and expenses of $23,000 and zero
for 2000 compared to zero and $0.1 million  respectively,  for 1999. The $23,000
of aircraft  revenues for 2000  represented  interest  income earned on accounts
receivable.  The  decrease  in revenue  and  expenses  is due to the sale of the
aircraft, aircraft engines, and rotables in the first quarter of 1999.

(f) Net Income

As a result of the foregoing,  the  Partnership's  net income for 2000 was $11.9
million,  compared to net income of $4.0 million during 1999. The  Partnership's
ability to operate,  liquidate  assets,  and re-lease  those assets whose leases
expire is subject to many factors, and the Partnership's  performance during the
year ended December 31, 2000 is not necessarily indicative of future periods. In
the year ended December 31, 2000, the Partnership  distributed  $10.4 million to
the limited partners, or $1.05 per weighted-average depositary unit.

(F) Geographic Information

Certain  of the  Partnership's  equipment  operates  in  international  markets.
Although these operations expose the Partnership to certain currency, political,
credit, and economic risks, the General Partner believes these risks are minimal
or has  implemented  strategies  to control the risks.  Currency  risks are at a
minimum because all invoicing,  with the exception of a small number of railcars
operating in Canada, is conducted in U.S. dollars. Political risks are minimized
generally  through the avoidance of  operations in countries  that do not have a
stable judicial system and established  commercial business laws. Credit support
strategies  for lessees range from letters of credit  supported by U.S. banks to
cash  deposits.  Although these credit support  mechanisms  generally  allow the
Partnership  to  maintain  its lease  yield,  there are  risks  associated  with
slow-to-respond  judicial  systems  when legal  remedies  are required to secure
payment or repossess equipment. Economic risks are inherent in all international
markets  and the  General  Partner  strives to  minimize  this risk with  market
analysis prior to committing equipment to a particular geographic area. Refer to
Note 6 to the financial  statements for information on the revenues,  net income
(loss), and net book value of equipment in various geographic regions.

Revenues and net operating income (loss) by geographic region are impacted by
the time period the asset is owned and the useful life ascribed to the asset for
depreciation purposes. Net income (loss) from equipment is significantly
impacted by depreciation charges, which are greatest in the early years of
ownership due to the use of the double-declining balance method of depreciation.
The relationships of geographic revenues, net income (loss), and net book value
of equipment are expected to significantly change in the future as assets come
off lease and decisions are made to either redeploy the assets in the most
advantageous geographic location, or sell the assets.

The  Partnership's  owned  equipment  on  lease to the  U.S.  domiciled  lessees
consisted of railcars and trailers.  During 2001, U.S. lease revenues  accounted
for 37% of the lease revenues generated by wholly-and  jointly-owned  equipment.
U.S. operations resulted in a net loss of $0.4 million.

The  Partnership's  owned  equipment  on  lease  to  Canadian-domiciled  lessees
consisted of an owned aircraft and railcars.  Canadian lease revenues  accounted
for 62% of total lease revenues generated by wholly-and jointly-owned equipment.
Canadian operations generated net income of $2.6 million including the gain from
this region of $0.2 million.

(G) Inflation

Inflation had no significant impact on the Partnership's operations during 2001,
2000, or 1999.

(H) Forward-Looking Information

Except for historical  information contained herein, the discussion in this Form
10-K contains  forward-looking  statements that involve risks and uncertainties,
such as statements of the Partnership's  plans,  objectives,  expectations,  and
intentions.  The cautionary  statements made in this Form 10-K should be read as
being applicable to all related forward-looking  statements wherever they appear
in this Form 10-K. The Partnership's actual results could differ materially from
those discussed here.

(I) Outlook for the Future

Since the Partnership is in its active  liquidation  phase,  the General Partner
will be seeking to  selectively  re-lease or sell assets as the existing  leases
expire.  Sale decisions will cause the operating  performance of the Partnership
to decline over the remainder of its life.  Throughout the remaining life of the
Partnership,  the Partnership may periodically make special distributions to the
partners as asset sales are completed.

Liquidation of the Partnership's equipment will cause a reduction in the size of
the  equipment  portfolio and may result in a reduction of  contribution  to the
Partnership. Other factors that may affect the Partnership's contribution in the
year 2002 include:

1.   The  Partnership's  fleet of marine containers is in excess of twelve years
     of age and is no longer suitable for use in  international  commerce either
     due to its specific physical condition,  or lessees'  preferences for newer
     equipment.  Demand for the Partnership's marine containers will continue to
     be weak due to their age.

2.   Railcar loadings in North America have weakened over the past year.  During
     2001,  utilization  and lease rates  decreased.  Railcar  contribution  may
     decrease  in  2002  as  existing  leases  expire  and  renewal  leases  are
     negotiated.

The  ability  of the  Partnership  to  realize  acceptable  lease  rates  on its
equipment in the different equipment markets is contingent on many factors, such
as specific market conditions and economic activity, technological obsolescence,
and government or other regulations.  The General Partner  continually  monitors
both the equipment markets and the performance of the Partnership's equipment in
these  markets.  The  General  Partner  may make an  evaluation  to  reduce  the
Partnership's  exposure  to  equipment  markets in which it  determines  that it
cannot operate equipment and achieve acceptable rates of return.

Several other factors may affect the Partnership's operating performance in 2002
and beyond, including changes in the markets for the Partnership's equipment and
changes in the regulatory environment in which that equipment operates.

The other  factors that may affect the  Partnership's  contribution  in 2002 and
beyond include:

(1) Repricing Risk

Certain of the Partnership's  marine  containers,  railcars and trailers will be
remarketed  in 2002 as existing  leases  expire,  exposing  the  Partnership  to
repricing   risk/opportunity.   Additionally,   the   Partnership   entered  its
liquidation  phase on January 1, 2000, and has commenced an orderly  liquidation
of the  Partnership's  assets.  The General  Partner intends to re-lease or sell
equipment at  prevailing  market  rates;  however,  the General  Partner  cannot
predict  these  future  rates  with  any  certainty  at this  time,  and  cannot
accurately assess the effect of such activity on future Partnership performance.

(2) Impact of Government Regulations on Future Operations

The General  Partner  operates the  Partnership's  equipment in accordance  with
current applicable regulations (see Item 1, Section E, Government  Regulations).
However, the continuing implementation of new or modified regulations by some of
the  authorities  mentioned  previously,  or others,  may  adversely  affect the
Partnership's  ability to continue to own or operate equipment in its portfolio.
Additionally,  regulatory  systems  vary  from  country  to  country,  which may
increase the burden to the Partnership of meeting regulatory  compliance for the
same equipment  operated  between  countries.  Ongoing changes in the regulatory
environment, both in the United States and internationally,  cannot be predicted
with any accuracy and preclude the General  Partner from  determining the impact
of such changes on Partnership operations, or sale of equipment.

The  U.S.  Department  of  Transportation's   Hazardous  Materials   Regulations
regulates the classification and packaging  requirements of hazardous  materials
that apply  particularly to  Partnership's  tank railcars.  The Federal Railroad
Administration  has mandated that  effective July 1, 2000 all tank railcars must
be  re-qualified  every ten years  from the last  test  date  stenciled  on each
railcar to insure tank shell integrity.  Tank shell  thickness,  weld seams, and
weld  attachments  must be inspected and repaired if necessary to re-qualify the
tank railcar for  service.  The average  cost of this  inspection  is $3,600 for
jacketed tank railcars and $1,800 for non-jacketed tank railcars,  not including
any necessary repairs.  This inspection is to be performed at the next scheduled
tank test and every ten years thereafter.  The Partnership  currently owns 1,143
of this type of railcars.  As of December 31, 2001, 103 have been inspected with
no significant defects have been discovered.



<PAGE>


(3) Distributions

During the active  liquidation  phase,  the Partnership  will use operating cash
flow and proceeds from the sale of equipment to meet its operating  obligations,
and to the extent  available,  make  distributions to the partners.  In the long
term,  changing market conditions and used equipment values preclude the General
Partner from accurately determining the impact of future re-leasing activity and
equipment sales on Partnership performance and liquidity.

(4) Liquidation

Liquidation of the Partnership's equipment represents a reduction in the size of
the  equipment  portfolio and may result in a reduction of  contribution  to the
Partnership.

The Partnership,  in accordance with the limited partnership agreement,  entered
its  liquidation  phase  on  January  1,  2000  and  has  commenced  an  orderly
liquidation of the Partnership  assets.  The General Partner filed a certificate
of dissolution on behalf of the Partnership  with the Secretary of State for the
State of  California  on December  22, 2000,  and  following  completion  of the
liquidation  of the  Partnership  which is  anticipated  to  occur in 2001,  the
General Partner will file a certificate of cancellation.

Since  the  Partnership  is in its  active  liquidation  phase,  the size of the
Partnership's remaining equipment portfolio and, in turn, the amount of net cash
flows from  operations will continue to become  progressively  smaller as assets
are sold.  Significant asset sales may result in potential special distributions
to unitholders.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The  Partnership's  primary market risk exposure is currency  devaluation  risk.
During 2001, 62% of the Partnership's  total lease revenues came from non-United
States  domiciled  lessees.  Most of the leases require payment in United States
(US) currency.  If these lessees' currency  devalues against the US dollar,  the
lessees  could  potentially   encounter  difficulty  in  making  the  US  dollar
denominated lease payments.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The  financial  statements  for the  Partnership  are  listed  in the  Index  to
Financial Statements included in Item 14(a) of this Annual Report on Form 10-K.

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

     (A) Disagreements with Accountants on Accounting and Financial Disclosures

         None

     (B) Changes in Accountants

In September  2001,  the General  Partner  announced  that the  Partnership  had
engaged  Deloitte & Touche LLP as the  Partnership's  auditors and had dismissed
KPMG LLP. KPMG LLP issued  unqualified  opinions on the 1999 and 2000  financial
statements  during 1999, 2000 and the subsequent  interim period  preceding such
dismissal, there were no disagreements with KPMG LLP on any matter of accounting
principles or practices,  financial statement  disclosure,  or auditing scope or
procedure.












                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF PLM FINANCIAL SERVICES, INC.

As of the date of this annual  report,  the directors and executive  officers of
PLM Financial  Services,  Inc. (and key executive  officers of its subsidiaries)
are as follows:
<TABLE>
<CAPTION>

Name                                     Age     Position
---------------------------------------- ------- ------------------------------------------------------------------


<S>                                      <C>
Gary D. Engle                            52      Director, PLM Financial Services, Inc., PLM Investment
                                                 Management Inc., and PLM Transportation Equipment Corp.

James A. Coyne                           41      Director and Secretary, PLM Financial Services Inc., PLM
                                                 Investment Management, Inc., and PLM Transportation Equipment
                                                 Corp.

Stephen M. Bess                          55      President and Director, PLM Financial Services, Inc., PLM
                                                 Investment Management Inc., and PLM Transportation Equipment
                                                 Corp.
</TABLE>

Gary D. Engle was  appointed  a Director  of PLM  Financial  Services,  Inc.  in
January 2002. He was appointed a director of PLM International, Inc. in February
2001. He is a director and President of MILPI.  Since  November  1997, Mr. Engle
has been Chairman and Chief Executive Officer of Semele Group Inc. ("Semele"), a
publicly traded company.  Mr. Engle is President and Chief Executive  Officer of
Equis  Financial  Group  ("EFG"),  which he  joined  in 1990 as  Executive  Vice
President.  Mr. Engle purchased a controlling  interest in EFG in December 1994.
He is also President of AFG Realty, Inc.

James A. Coyne was appointed a Director and Secretary of PLM Financial  Services
Inc. in April 2001.  He was  appointed a director of PLM  International,  Inc in
February  2001. He is a director,  Vice  President  and Secretary of MILPI.  Mr.
Coyne has been a director, President and Chief Operating Officer of Semele since
1997. Mr. Coyne is Executive Vice  President of Equis  Corporation,  the general
partner of EFG. Mr. Coyne joined EFG in 1989,  remained until 1993, and rejoined
in November 1994.

Stephen M. Bess was appointed a Director of PLM Financial Services, Inc. in July
1997.  Mr. Bess was  appointed  President  of PLM  Financial  Services,  Inc. in
October  2000. He was appointed  President  and Chief  Executive  Officer of PLM
International,  Inc. in October 2000.  Mr. Bess was  appointed  President of PLM
Investment  Management,  Inc.  in August  1989,  having  served  as Senior  Vice
President of PLM Investment  Management,  Inc. beginning in February 1984 and as
Corporate Controller of PLM Financial Services,  Inc. beginning in October 1983.
He served as Corporate  Controller of PLM, Inc.  beginning in December 1982. Mr.
Bess was  Vice  President-Controller  of  Trans  Ocean  Leasing  Corporation,  a
container  leasing  company,  from  November  1978 to November  1982,  and Group
Finance  Manager  with the Field  Operations  Group of  Memorex  Corporation,  a
manufacturer  of computer  peripheral  equipment,  from October 1975 to November
1978.

The directors of PLM Financial Services, Inc. are elected for a one-year term or
until their successors are elected and qualified.  No family relationships exist
between any director or executive officer of PLM Financial  Services,  Inc., PLM
Transportation Equipment Corp., or PLM Investment Management, Inc.









<PAGE>


ITEM 11. EXECUTIVE COMPENSATION

The Partnership has no directors, officers, or employees. The Partnership had no
pension,  profit  sharing,  retirement,  or similar benefit plan in effect as of
December 31, 2001.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(A) Security Ownership of Certain Beneficial Owners

     The General  Partner is generally  entitled to a 5% interest in the profits
     and losses (subject to certain  allocations of income) and distributions of
     the  Partnership.  As of December  31,  2001,  no investor was known by the
     General Partner to beneficially own more than 5% of the depositary units of
     the Partnership.

(B) Security Ownership of Management

     Neither the General Partner and its affiliates nor any executive officer or
     director of the General Partner and its affiliates own any depositary units
     of the Partnership as of December 31, 2001.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Transactions with Management and Others

     During 2001,  management  fees to IMI were $0.5 million.  During 2001,  the
     Partnership   reimbursed   FSI  or  its   affiliates   $0.4   million   for
     administrative services and data processing expenses performed on behalf of
     the Partnership.











                    (This space is intentionally left blank)



<PAGE>



                                     PART IV

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

(A)  1. Financial Statements

          The financial statements listed in the accompanying Index to Financial
          Statements are filed as part of this Annual Report on Form 10-K.

     2. Financial Statements required under Regulation S-X Rule 3-09

          The  following  financial  statements  are filed as  Exhibits  of this
          Annual Report on Form 10-K:

          a. TAP Trust

(B)  Reports on Form 8-K

     None.

(C)  Financial Statement Schedule

          Schedule II Valuation and Qualifying Accounts

          All other  financial  statement  schedules  have been omitted,  as the
          required  information  is not  pertinent to the  Registrant  or is not
          material,  or because  the  information  required  is  included in the
          financial statements and notes thereto.

(D) Exhibits

     4.   Limited   Partnership   Agreement  of  Partnership.   Incorporated  by
          reference  to the  Partnership's  Registration  Statement  on Form S-1
          (Reg. No.  33-18104),  which became  effective with the Securities and
          Exchange Commission on March 25, 1988.

     4.1  Amendment,  dated November 18, 1991, to Limited Partnership  Agreement
          of Partnership.  Incorporated by reference to the Partnership's Annual
          Report on Form 10-K dated  December 31, 1991 filed with the Securities
          and Exchange Commission on March 30, 1992.

     10.1 Management   Agreement   between   Partnership   and  PLM   Investment
          Management,  Inc.  Incorporated  by  reference  to  the  Partnership's
          Registration  Statement on Form S-1 (Reg. No. 33-18104),  which became
          effective  with the  Securities  and Exchange  Commission on March 25,
          1988.

     Financial Statements required under Regulation S-X Rule 3-09:

     99.1 TAP Trust



<PAGE>


                                   SIGNATURES

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

The Partnership has no directors or officers.  The General Partner has signed on
behalf of the Partnership by duly authorized officers.


Date:  March 26, 2002            PLM EQUIPMENT GROWTH FUND III
                                 PARTNERSHIP

                                 By:      PLM Financial Services, Inc.
                                          General Partner


                                 By:      /s/ Stephen M. Bess
                                         --------------------------
                                         Stephen M. Bess
                                         President and Current Chief Accounting
                                         Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  directors of the  Partnership's  General
Partner on the dates indicated.


Name                                 Capacity                        Date




/s/ Gary D. Engle
------------------
Gary D. Engle                        Director, FSI               March 26, 2002




/s/ James A. Coyne
------------------
James A. Coyne                       Director, FSI               March 26, 2002




/s/ Stephen M. Bess
--------------------
Stephen M. Bess                      Director, FSI               March 26, 2002



<PAGE>



                          PLM EQUIPMENT GROWTH FUND III
                             (A Limited Partnership)
                          INDEX TO FINANCIAL STATEMENTS


                                  (Item 14(a))


                                                                          Page

Independent auditors' reports                                            23-24

Balance sheets as of December 31, 2001 and 2000                             25

Statements of income for the years ended December 31,
     2001, 2000, and 1999                                                   26

Statements of changes in partners' capital for the years
     ended December 31, 2001, 2000, and 1999                                27

Statements of cash flows for the years ended December 31,
     2001, 2000, and 1999                                                   28

Notes to financial statements                                            29-39

Independent auditors' reports on financial statement schedule            40-41

Schedule II Valuation and Qualifying Accounts                               42


<PAGE>




INDEPENDENT AUDITORS' REPORT



The Partners
PLM Equipment Growth Fund III:

We have audited the accompanying  balance sheet of PLM Equipment Growth Fund III
(the  "Partnership")  as of  December  31, 2001 and the  related  statements  of
income,  changes in  partners'  capital  and cash flows for the year then ended.
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 audit.

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

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects, the financial position of the Partnership as of December 31, 2001, and
the  results  of its  operations  and its cash  flows for the year then ended in
conformity with accounting principles generally accepted in the United States of
America.

As  described  in  Note 1 to  the  financial  statements,  the  Partnership,  in
accordance with the limited partnership agreement, entered its liquidation phase
on January 1, 2000 and has commenced an orderly  liquidation of the  Partnership
assets.  During the liquidation phase, the Partnership's assets will continue to
be reported at the lower of carrying amount or fair value less cost to sell. The
General  Partner filed a certificate of dissolution on behalf of the Partnership
with the  Secretary of State for the State of  California  on December 31, 2000,
and  following  completion  of  the  liquidation  of  the  Partnership  that  is
anticipated  to occur in 2002,  will file a  certificate  of  cancellation.  The
General Partner is currently marketing all of the Partnership's assets for sale.



/s/ Deloitte & Touche LLP


Certified Public Accountants

Tampa, Florida
March 8, 2002


<PAGE>




INDEPENDENT AUDITORS' REPORT



The Partners
PLM Equipment Growth Fund III:

We have audited the accompanying  balance sheet of PLM Equipment Growth Fund III
("the  Partnership")  as of  December  31, 2000 and the  related  statements  of
income, changes in partners' capital and cash flows for each of the years in the
two-year  period ended  December 31, 2000.  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 auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

As described in Note 1 to the financial  statements,  PLM Equipment  Growth Fund
III,  in  accordance  with  the  limited  partnership  agreement,   entered  its
liquidation phase on January 1, 2000 and has commenced an orderly liquidation of
the Partnership  assets.  The General Partner filed a certificate of dissolution
on  behalf  of the  Partnership  with the  Secretary  of State  for the State of
California on December 22, 2000, and following  completion of the liquidation of
the Partnership, which is anticipated to occur in 2001, the General Partner will
file a certificate of cancellation.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the PLM Equipment Growth Fund
III as of December 31, 2000, and the results of its operations and its cash
flows for each of the years in the two-year period ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States of
America.




/s/ KPMG LLP

SAN FRANCISCO, CALIFORNIA
March 2, 2001



<PAGE>



                          Plm Equipment Growth Fund Iii
                             (A Limited Partnership)
                                 Balance Sheets
                                  December 31,
                 (In Thousands of Dollars, Except Unit Amounts)

<TABLE>
<CAPTION>




                                                                           2001                2000
                                                                       ----------------------------------
Assets

<S>                                                                     <C>                 <C>
Equipment held for operating leases, at cost                            $   37,731          $   40,028
Less accumulated depreciation                                              (33,833)            (34,361)
                                                                        ---------------------------------
                                                                             3,898               5,667
Equipment held for sale                                                         --               1,703
                                                                        ---------------------------------
    Net equipment                                                            3,898               7,370

Cash and cash equivalents                                                   10,141               1,832
Restricted cash                                                                 --                 125
Accounts receivable, net of allowance for doubtful
    accounts of $518 in 2001 and $455 in 2000                                  420                 591
Investment in an unconsolidated special-purpose entity                          --                  76
Prepaid expenses and other assets                                               23                  43
                                                                        ---------------------------------

      Total assets                                                      $   14,482          $   10,037
                                                                        =================================

Liabilities and Partners' Capital

Liabilities
Accounts payable and accrued expenses                                   $      416          $      462
Due to affiliates                                                               66                  72
Lessee deposits and reserve for repairs                                         29                 187
                                                                        ---------------------------------
  Total liabilities                                                            511                 721
                                                                        ---------------------------------

Commitments and contingencies

Partners' capital
Limited partners (9,871,210 depositary units
    as of December 31, 2001 and 2000)                                       13,971               9,316
General Partner                                                                 --                  --
                                                                        ---------------------------------
  Total partners' capital                                                   13,971               9,316
                                                                        ---------------------------------

      Total liabilities and partners' capital                           $   14,482          $   10,037
                                                                        =================================
</TABLE>














                 See accompanying notes to financial statements.

<PAGE>



                          PLM EQUIPMENT GROWTH FUND III
                             (A LIMITED PARTNERSHIP)
                              STATEMENTS OF INCOME
                        FOR THE YEARS ENDED DECEMBER 31,
         (IN THOUSANDS OF DOLLARS, EXCEPT WEIGHTED-AVERAGE UNIT AMOUNTS)

<TABLE>
<CAPTION>

                                                                  2001           2000            1999
                                                              --------------------------------------------
REVENUES

<S>                                                            <C>            <C>             <C>
Lease revenue                                                  $   7,027      $   11,098      $  14,852
Interest and other income                                            318             205            445
Net gain on disposition of equipment                               4,139           9,707          2,197
                                                               -------------------------------------------
  Total revenues                                                  11,484          21,010         17,494
                                                               -------------------------------------------

EXPENSES

Depreciation and amortization                                      1,891           4,773          7,628
Repairs and maintenance                                            2,169           2,564          2,619
Equipment operating expenses                                          36              33            668
Insurance expenses                                                   140             132            237
Management fees to affiliate                                         463             634            807
Interest expense                                                      --             306          1,021
General and administrative expenses to affiliates                    384             410            504
Other general and administrative expenses                          1,049           1,070          1,098
Provision for (recovery of) bad debts                                 64             (94)           308
Revaluation of equipment                                              --             202             --
                                                               -------------------------------------------
  Total expenses                                                   6,196          10,030         14,890
                                                               -------------------------------------------

Minority interests                                                    --              --             22
                                                               -------------------------------------------

Equity in net (loss) income of an unconsolidated
      special-purpose entity                                         (10)            918          1,413
                                                               -------------------------------------------

      Net income                                               $   5,278      $   11,898      $   4,039
                                                               ===========================================

PARTNERS' SHARE OF NET INCOME

Limited partners                                               $   5,247      $   11,353      $   3,649
General Partner                                                       31             545            390
                                                               -------------------------------------------

      Total                                                    $   5,278      $   11,898      $   4,039
                                                               ===========================================

Limited partners' net income per weighted-average
  depositary unit                                              $    0.53      $     1.15      $    0.37
                                                               ===========================================

Cash distribution                                              $     623      $   10,910      $   7,793
                                                               ===========================================

Cash distribution per weighted-average depositary unit         $    0.06      $     1.05      $    0.75
                                                               ===========================================
</TABLE>









                 See accompanying notes to financial statements.


<PAGE>



                          PLM EQUIPMENT GROWTH FUND III
                             (A LIMITED PARTNERSHIP)
                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
                            (IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>

                                                       Limited            General
                                                       Partners           Partner            Total
                                                     --------------------------------------------------

<S>                                <C> <C>            <C>                 <C>              <C>
  Partners' capital as of December 31, 1998           $   12,082          $     --         $   12,082

Net income                                                 3,649               390              4,039

Cash distribution                                         (7,403)             (390)            (7,793)
                                                      --------------------------------------------------

  Partners' capital as of December 31, 1999                8,328                --              8,328

Net income                                                11,353               545             11,898

Cash distribution                                        (10,365)             (545)           (10,910)
                                                      --------------------------------------------------

  Partners' capital as of December 31, 2000                9,316                --              9,316

Net income                                                 5,247                31              5,278

Cash distribution                                           (592)              (31)              (623)
                                                      --------------------------------------------------

  Partners' capital as of December 31, 2001           $   13,971          $     --         $   13,971
                                                      ==================================================
</TABLE>































                 See accompanying notes to financial statements.

<PAGE>



                          PLM EQUIPMENT GROWTH FUND III
                             (A LIMITED PARTNERSHIP)
                            STATEMENTS OF CASH FLOWS
                        FOR THE YEARS ENDED DECEMBER 31,
                            (IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
                                                                           2001            2000            1999
                                                                       ---------------------------------------------
OPERATING ACTIVITIES
<S>                                                                     <C>            <C>              <C>
Net income                                                              $   5,278      $   11,898       $   4,039
Adjustments to reconcile net income
      To net cash provided by (used in) operating activities:
  Depreciation and amortization                                             1,891           4,773           7,628
  Net gain on disposition of equipment                                     (4,139)         (9,707)         (2,197)
  Revaluation of equipment                                                     --             202              --
  Equity in net loss (income) from a unconsolidated special-
      purpose entity                                                           10            (918)         (1,413)
  Changes in operating assets and liabilities:
    Accounts receivable                                                       171             136             210
    Restricted cash                                                           125            (125)             --
    Prepaid expenses and other assets                                          20              17             (33)
    Accounts payable and accrued expenses                                     (46)           (324)           (482)
    Due to affiliates                                                          (6)            (27)             (6)
    Lessee deposits and reserves for repairs                                 (158)         (1,232)            478
    Minority interests                                                         --              --            (224)
                                                                        --------------------------------------------
      Net cash provided by operating activities                             3,146           4,693           8,000
                                                                        --------------------------------------------

INVESTING ACTIVITIES
Due to affiliates                                                              --              --             (36)
Payment for capitalized repairs                                              (118)           (231)            (26)
Proceeds from disposition of equipment                                      5,838          12,512           3,790
Liquidating distribution from an unconsolidated
    special-purpose entity                                                     --           3,218           3,548
Distribution from an unconsolidated special-purpose entity                     66             122              56
                                                                        --------------------------------------------
      Net cash provided by investing activities                             5,786          15,621           7,332
                                                                        --------------------------------------------

FINANCING ACTIVITIES
Net receipts (repayments to) from affiliate                                    --            (600)            600
Principal payments on note payable                                             --          (7,458)        (11,082)
Cash distribution paid to limited partners                                   (592)        (10,365)         (7,403)
Cash distribution paid to General Partner                                     (31)           (545)           (390)
                                                                        --------------------------------------------
      Net cash used in financing activities                                  (623)        (18,968)        (18,275)
                                                                        --------------------------------------------

Net increase (decrease) in cash and cash equivalents                        8,309           1,346          (2,943)
Cash and cash equivalents at beginning of year                              1,832             486           3,429
                                                                        --------------------------------------------
Cash and cash equivalents at end of year                                $  10,141      $    1,832       $     486
                                                                        ============================================

SUPPLEMENTAL INFORMATION
Interest paid                                                           $      --      $      306       $   1,021
                                                                        ============================================
</TABLE>






                 See accompanying notes to financial statements.


<PAGE>


                          PLM EQUIPMENT GROWTH FUND III
                             (A LIMITED PARTNERSHIP)
                          NOTES TO FINANCIAL STATEMENTS


1. BASIS OF PRESENTATION

ORGANIZATION

PLM  Equipment   Growth  Fund  III,  a  California   limited   partnership  (the
Partnership),  was formed on October 15, 1987. The Partnership engages primarily
in the business of owning, leasing, or otherwise investing in predominately used
transportation and related equipment.  PLM Financial Services, Inc. (FSI) is the
General  Partner of the  Partnership.  FSI is a wholly owned  subsidiary  of PLM
International, Inc. (PLM International).

The Partnership,  in accordance with the limited partnership agreement,  entered
its  liquidation  phase  on  January  1,  2000  and  has  commenced  an  orderly
liquidation  of the  Partnership  assets.  During  the  liquidation  phase,  the
Partnership's  assets  will  continue  to be  reported  at the lower of carrying
amount or fair value less cost to sell. The General  Partner filed a certificate
of dissolution on behalf of the Partnership  with the Secretary of State for the
State of  California  on December  31, 2000,  and  following  completion  of the
liquidation of the Partnership that is anticipated to occur in 2002, will file a
certificate of cancellation.  The General Partner is currently  marketing all of
the Partnership's assets for sale.

FSI  manages  the  affairs of the  Partnership.  The cash  distributions  of the
Partnership  are generally  allocated 95% to the limited  partners and 5% to the
General Partner (see Net Income and Distributions  per Depositary Unit,  below).
Net income is allocated to the General Partner to the extent  necessary to cause
the General Partner's capital account to equal zero. The General Partner is also
entitled to a subordinated incentive fee equal to 7.5% of surplus distributions,
as defined in the limited  partnership  agreement,  remaining  after the limited
partners have  received a certain  minimum rate of return.  The General  Partner
does not anticipate that this fee will be earned.

ESTIMATES

The accompanying financial statements have been prepared on the accrual basis of
accounting in accordance with accounting  principles  generally  accepted in the
Unites  States of  America.  This  requires  management  to make  estimates  and
assumptions  that  affect  the  reported  amounts  of  assets  and  liabilities,
disclosures  of contingent  assets and  liabilities at the date of the financial
statements,  and the  reported  amounts  of  revenues  and  expenses  during the
reporting period. Actual results could differ from those estimates.

OPERATIONS

The  equipment of the  Partnership  is managed,  under a  continuing  management
agreement by PLM Investment Management, Inc. (IMI), a wholly-owned subsidiary of
FSI. IMI receives a monthly management fee from the Partnership for managing the
equipment  (see  Note 2).  FSI,  in  conjunction  with its  subsidiaries,  sells
equipment to investor  programs and third  parties,  manages  pools of equipment
under agreements with the investor  programs,  and is a general partner of other
programs.

ACCOUNTING FOR LEASES

The Partnership's  leasing  operations  consist of operating  leases.  Under the
operating  lease method of accounting,  the leased asset is recorded at cost and
depreciated  over its  estimated  useful life.  Rental  payments are recorded as
revenue over the lease term as earned in accordance  with Statement of Financial
Accounting Standards (SFAS) No. 13, "Accounting for Leases" (SFAS No. 13). Lease
origination  costs are  capitalized  and  amortized  over the term of the lease.
Periodically, the Partnership leases equipment with lease terms that qualify for
direct finance lease classification, as required by SFAS No. 13.


<PAGE>


                          PLM EQUIPMENT GROWTH FUND III
                             (A LIMITED PARTNERSHIP)
                          NOTES TO FINANCIAL STATEMENTS


1. BASIS OF PRESENTATION (continued)

DEPRECIATION AND AMORTIZATION

Depreciation of  transportation  equipment held for operating leases is computed
on the  double-declining  balance method,  taking a full month's depreciation in
the month of  acquisition,  based upon  estimated  useful  lives of 15 years for
railcars  and 12 years  for  other  types of  equipment.  Certain  aircraft  are
depreciated under the double-declining  balance method over the lease term which
approximates  the asset's  economic  life.  The  depreciation  method changes to
straight-line when annual  depreciation  expense using the straight-line  method
exceeds that calculated by the double-declining balance method. Acquisition fees
and certain other acquisition costs have been capitalized as part of the cost of
the equipment.  Lease  negotiation fees are amortized over the initial equipment
lease term. Major  expenditures  that are expected to extend the useful lives or
reduce future operating expenses of equipment are capitalized and amortized over
the remaining life of the equipment.

TRANSPORTATION EQUIPMENT

Equipment held for operating leases is stated at cost less any reductions to the
carrying  value as required by SFAS No. 121  "Accounting  for the  impairment of
Long-Lived  Assets and for Long-Lived  Assets to Be Disposed Of" (SFAS No. 121).
Equipment  held for sale is stated at the lower of the  equipment's  depreciated
cost of fair value,  less cost to sell, and is subject to a pending contract for
sale.

In accordance  with SFAS No. 121, the General Partner reviews the carrying value
of the  Partnership's  equipment  portfolio  at  least  quarterly  and  whenever
circumstances  indicate  that  the  carrying  value  of an  asset  would  not be
recoverable  due  to  expected  future  market  conditions.   If  the  projected
undiscounted cash flows and the fair market value of the equipment are less than
the carrying value of the equipment,  a loss on revaluation is recorded.  A loss
on  revaluation  of $0.2 million was recorded  during 2000. No reductions to the
carrying  values of equipment  were  required  during 2001 or 1999, or partially
owned equipment in 2001, 2000 or 1999.

In October 2001, the Financial  Accounting  Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," (SFAS No. 144)
which replaces SFAS No. 121. SFAS No 144 provides  updated  guidance  concerning
the  recognition  and  measurement  of an  impairment  loss for certain types of
long-lived  assets,  expands the scope of a discontinued  operation to include a
component of an entity and  eliminates  the current  exemption to  consolidation
when  control  over a  subsidiary  is likely to be  temporary.  SFAS No.  144 is
effective for fiscal years beginning after December 15, 2001.

The  Partnership  will apply the new rules on accounting  for the  impairment or
disposal of long-lived  assets  beginning in the first quarter of 2002, and they
are not anticipated to have an impact on the Partnership's earnings or financial
position.

INVESTMENT IN AN UNCONSOLIDATED SPECIAL-PURPOSE ENTITY

As of December  31, 2001,  the  Partnership's  had no remaining  interests in an
unconsolidated   special-purpose   entity   (USPE)  that  owned   transportation
equipment. As of December 31, 2000, the Partnership owned a majority interest in
one such entity.  Prior to September 30, 1999,  the  Partnership  controlled the
management of this entity and thus it was  consolidated  into the  Partnership's
financial  statements.  On September  30, 1999,  the  corporate-by-laws  of this
entity were changed to require a unanimous  vote by all owners on major business
decisions.  Thus,  from  September 30, 1999 forward,  the  Partnership no longer
controlled  the  management of this entity,  and the  accounting  method for the
entity was changed from the consolidation method to the equity method.



<PAGE>


                          PLM EQUIPMENT GROWTH FUND III
                             (A LIMITED PARTNERSHIP)
                          NOTES TO FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION (continued)

Investment in an Unconsolidated Special-Purpose Entity - continued

The  Partnership's   investment  in  an  USPE  includes  acquisition  and  lease
negotiation  fees  paid  by  the  Partnership  to PLM  Transportation  Equipment
Corporation  (TEC). TEC is a wholly-owned  subsidiary of FSI. The  Partnership's
interest in an USPE is managed by IMI. The Partnership's  equity interest in the
net income (loss) of an USPE is reflected net of management fees paid or payable
to IMI and the  amortization of acquisition and lease  negotiation  fees paid to
TEC.

REPAIRS AND MAINTENANCE

Repair  and  maintenance  costs  for  railcars  and  trailers  are  usually  the
obligation of the Partnership.  Maintenance  costs for the marine containers are
the  obligation of the lessee.  If they are not covered by the lessee,  they are
charged against operations as incurred.

Net Income and Distributions Per Depositary Unit

Cash  distributions  are  allocated  95% to the limited  partners  and 5% to the
General  Partner  and may  include  amounts  in  excess of net  income.  Special
allocation  of  income  are made to  (from)  the  General  Partner  equal to the
deficiency  (equity)  balance,  if any,  in the  capital  account of the General
Partner.  The limited partners' net income (loss) is allocated among the limited
partners based on the number of depositary  units owned by each limited  partner
and  on  the  number  of  days  of  the  year  each  limited  partner  is in the
Partnership.  In 2001,  the  General  Partner  specially  allocated  the limited
partners  $0.2  million in income to cause its capital  account to be zero ($0.1
million in 2000).  In 1999,  the General  Partner was allocated  $0.2 million in
excess of its pro rata ownership share.

Cash  distributions  are recorded when paid. Cash  distributions  to the limited
partners of $5.0 million, $-0-, and $-0-, for the years ended December 31, 2001,
2000, and 1999, respectively, were paid 2002, 2001 and 2000, respectively.

Cash  distributions to investors in excess of net income are considered a return
of capital.  Cash  distributions to the limited partners of $3.8 million in 1999
was deemed to be a return of capital.  None of the cash distributions in 2001 or
2000 were deemed a return of capital.

NET INCOME PER WEIGHTED-AVERAGE DEPOSITARY UNIT

Net income per  weighted-average  depositary  unit was  computed by dividing net
income  attributable  to  limited  partners  by the  weighted-average  number of
depositary  units deemed  outstanding  during the period.  The  weighted-average
number of depositary  units deemed  outstanding  during the years ended December
31, 2001, 2000, and 1999 were 9,871,210.

CASH AND CASH EQUIVALENTS

The Partnership considers highly liquid investments that are readily convertible
into known amounts of cash with  original  maturities of three months or less as
cash  equivalents.  The carrying amount of cash  equivalents  approximates  fair
market value due to the short-term nature of the investments.

COMPREHENSIVE INCOME

The  Partnership's  net income was equal to  comprehensive  income for the years
ended December 31, 2001, 2000, and 1999.




<PAGE>


                          PLM EQUIPMENT GROWTH FUND III
                             (A LIMITED PARTNERSHIP)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


2.   GENERAL PARTNER AND TRANSACTIONS WITH AFFILIATES

An officer of FSI contributed $100 of the Partnership's  initial capital.  Under
the  equipment  management  agreement,  IMI  receives a monthly  management  fee
attributable  to either owned  equipment  or interest in equipment  owned by the
USPE  equal  to the  greater  of (a)  the  fees  that  would  be  charged  by an
independent  third party for similar  services for similar  equipment or (b) the
sum of (i) 5% of the gross lease  revenues  attributable  to  equipment  that is
subject to operating leases, (ii) 2% of the gross lease revenues attributable to
equipment  that is subject to full payout net leases,  and (iii) 7% of the gross
lease revenues  attributable to equipment for which IMI provides both management
and  additional  services  relating to the  continued  and active  operation  of
program  equipment,  such as on-going  marketing  and  re-leasing  of equipment,
hiring or arranging for the hiring of crew or operating personnel for equipment,
and similar services. The Partnership's  management fee in 2001 was less than an
independent  third party management fee charged for similar services for similar
equipment.  The Partnership reimbursed FSI and its affiliates $0.4 million, $0.4
million,  and $0.5  million  in  2001,  2000 and  1999,  respectively,  for data
processing  expenses  and  administrative  services  performed  on behalf of the
Partnership.

The Partnership's  proportional  share of USPE management fees to affiliate were
$-0-, $36,000, and $0.1 million during 2001, 2000, and 1999,  respectively,  and
the  Partnership's  proportional  share of  administrative  and data  processing
expenses to affiliate were $-0-,  $10,000,  and $16,000  during 2001,  2000, and
1999,  respectively.  Both of these affiliate  expenses reduce the Partnership's
proportional share of the equity interest in income in USPEs.

The Partnership owned certain equipment in conjunction with affiliated  programs
(see Note 4).

During 2000, the  Partnership  borrowed a total of $4.6 million from the General
Partner in addition to the $0.6 million  outstanding  on December 31, 1999.  The
General Partner charged the Partnership market interest rates. Total interest to
the General Partner was $0.1 million. All borrowings were repaid by December 31,
2000.

3. EQUIPMENT

The  components  of owned  equipment  as of  December  31,  are as  follows  (in
thousands of dollars):
<TABLE>
<CAPTION>

 Equipment Held for Operating Leases:                    2001               2000
 -----------------------------------                 ---------------------------------

<S>                                                   <C>                <C>
Railcars                                              $   32,305         $   33,370
Trailers                                                   3,036              3,428
Marine containers                                          2,390              3,230
                                                      --------------------------------
                                                          37,731             40,028
Less accumulated depreciation                            (33,833)           (34,361)
                                                      --------------------------------
                                                           3,898              5,667
Equipment Held for Sale                                       --              1,703
                                                      --------------------------------
  Net equipment                                       $    3,898         $    7,370
                                                      ================================
</TABLE>

Revenues  are  earned  by  placing   equipment  under  operating   leases.   The
Partnership's  marine  containers  are leased to operators  of  utilization-type
leasing pools that include  equipment  owned by  unaffiliated  parties.  In such
instances,   revenues  received  by  the  Partnership  consist  of  a  specified
percentage of revenues generated by leasing the equipment to sub lessees,  after
deducting  certain direct  operating  expenses of the pooled  equipment.  Rental
revenues  for  trailers  are  based on a  per-diem  lease  in the  free  running
interchange with the railroads. Rents for railcars are based on fixed rates.



<PAGE>



                          PLM EQUIPMENT GROWTH FUND III
                             (A LIMITED PARTNERSHIP)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000

3. EQUIPMENT - continued

As of December 31, 2001, all owned equipment in the Partnership portfolio was on
lease except for 100 railcars, with an aggregate net book value of $0.3 million.
As of December 31, 2000, all owned equipment in the Partnership portfolio was on
lease except for 88 railcars, 25 trailers, and aircraft, that were held for sale
at December 31, 2001, with an aggregate net book value of $0.6 million.

During 2001, the General  Partnership  disposed of aircraft,  marine containers,
trailers,  and railcars  owned by the  Partnership,  with an aggregate  net book
value of $1.7 million,  for proceeds of $5.8 million.  A Boeing 737-200 Stage II
commercial  aircraft and a Dash 8-300 Stage II commuter  aircraft,  subject to a
pending  contract  for sale,  were held for sale as of December  31, 2000 at the
lower of the  equipment's  depreciated  cost or fair  value,  less cost to sell.
During 2000, the Partnership disposed of marine containers,  trailers, railcars,
and aircraft  with an  aggregate  net book value of $2.8 million for proceeds of
$12.5 million.

During 2000, there was a $0.2 million reduction to the carrying value of trailer
equipment.  There were no reductions to the carrying values of equipment in 2001
or 1999.

All owned equipment on lease is being accounted for as operating leases.  Future
minimum  rents under  noncancelable  operating  leases as of  December  31, 2001
during  each of the next five years are $4.6  million in 2002,  $3.2  million in
2003,  $1.7 million in 2004, $0.9 million in 2005, $0.2 million in 2006 and $-0-
thereafter. Per diem and short-term rentals consisting of utilization rate lease
payments  included  in revenue  amounted to  approximately  $0.4  million,  $0.2
million, and $0.3 million in 2001, 2000, and 1999, respectively.

4. INVESTMENT IN AN UNCONSOLIDATED SPECIAL PURPOSE ENTITY

The Partnership  owned equipment  jointly with  affiliated  programs  through an
investment  in an  unconsolidated  special  purpose  entity.  This  was a single
purpose entity that did not have any debt.

In September 1999, the General Partner amended the  corporate-by-laws of certain
USPEs in which the  Partnership,  or any  affiliated  program,  owns an interest
greater  than 50%.  The  amendment to the  corporate-by-laws  provided  that all
decisions  regarding the  acquisition  and  disposition  of the as well as other
significant  business  decisions of that investment would be permitted only upon
unanimous  consent of the Partnership and all the affiliated  programs that have
an ownership in the  investment.  As such,  although the  Partnership  may own a
majority interest in a USPE, the Partnership does not control its management and
thus  the  equity  method  of  accounting  will be used  after  adoption  of the
amendment.  As a result of the amendment,  as of September 30, 1999, all jointly
owned equipment in which the Partnership  owned a majority  interest,  which had
been consolidated,  were reclassified to investment in an USPE. Accordingly,  as
of December 31, 2000, the balance sheet reflects the investment in an USPE on an
equity basis.

As of December 31, 2001,  the  Partnership  owned no interest in an USPE.  As of
December 31, 2000, the Partnership's remaining interest in the entity that owned
a marine vessel represents $0.1 million of receivables from the former lessee.



<PAGE>


                          PLM EQUIPMENT GROWTH FUND III
                             (A LIMITED PARTNERSHIP)
                          NOTES TO FINANCIAL STATEMENTS


4. INVESTMENT IN AN UNCONSOLIDATED SPECIAL PURPOSE ENTITY - continued

The following  summarizes  the  financial  information  for the special  purpose
entity and the  Partnership's  interest  therein  as of and for the years  ended
December 31, (in thousands of dollars):
<TABLE>
<CAPTION>

                                    2001                          2000                         1999
                         ---------------------------   ---------------------------   -------------------------
                                            Net                           Net                         Net
                            Total        Interest         Total        Interest        Total       Interest
                            USPE            of            USPE            Of            USPE          of
                                        Partnership                   Partnership                 Partnership
                         ------------   ------------   ------------   ------------   -----------  ------------
<S>                      <C>            <C>            <C>            <C>            <C>          <C>
Net investments          $        --    $        --    $       135    $        76    $    4,881   $     2,498
Lease revenues                    --             --          1,273            713         1,910           243
Net income (loss)                (18)           (10)         1,628            918         8,902         1,413
</TABLE>

The net  investment  in an USPE  consisted of a 56% interest in a trust owning a
bulk-carrier  marine vessel (and related assets and  liabilities)  totaling $0.1
million as of December  31, 2000.  This vessel was sold in the third  quarter of
2000 and the Partnership  received  liquidation proceeds of $3.2 million for its
net investment of $2.1 million.

5. OPERATING SEGMENTS

The  Partnership  operates or operated  primarily  in five  different  segments:
aircraft  leasing,  marine  container  leasing,  marine vessel leasing,  trailer
leasing,  and  railcar  leasing.  Each  equipment  leasing  segment  engages  in
short-term to mid-term operating leases to a variety of customers.

The General Partner evaluates the performance of each segment based on profit or
loss from operations before allocation of general and  administrative  expenses,
interest  expense,  and  certain  other  expenses.   The  segments  are  managed
separately due to different business strategies for each operation.


<PAGE>


                          PLM EQUIPMENT GROWTH FUND III
                             (A LIMITED PARTNERSHIP)
                          NOTES TO FINANCIAL STATEMENTS

5. OPERATING SEGMENTS - continued

The following  tables present a summary of the operating  segments (in thousands
of dollars):
<TABLE>
<CAPTION>

                                                     Marine
                                           Aircraft  Container  Trailer   Railcar
     For the Year Ended December 31, 2001  Leasing   Leasing    Leasing   Leasing     Other (1)  Total
     ------------------------------------  -------   -------    -------   -------     -----      -----

     REVENUES
<S>                                        <C>       <C>        <C>       <C>        <C>       <C>
       Lease revenue                       $    185  $     26   $    404  $  6,412   $     --  $  7,027
       Interest income and other                 39        --         --        20        259       318
       Net gain on disposition of             3,688        82         32       337         --     4,139
     equipment
                                           -------------------------------------------------------------
         Total revenues                       3,912       108        436     6,769        259    11,484
                                           -------------------------------------------------------------

     EXPENSES
       Operations support                       104         1        212     1,919        109     2,345
       Depreciation and amortization            151        29        151     1,560         --     1,891
       Management fees to affiliate               2         1         21       439         --       463
       General and administrative expenses      223        --         80       259        871     1,433
       Provision for (recovery of) bad           --        --         (9)       73         --        64
     debts
                                           -------------------------------------------------------------
         Total costs and expenses               480        31        455     4,250        980     6,196
                                           -------------------------------------------------------------
     Equity in net income of an USPE             --        --         --        --        (10)      (10)
                                           -------------------------------------------------------------
     Net income (loss)                     $  3,432  $     77   $    (19) $  2,519   $   (731) $  5,278
                                           =============================================================
     Total assets as of December 31, 2001  $     --  $     41   $    808  $  3,469   $ 10,164  $ 14,482
                                           =============================================================
</TABLE>
<TABLE>
<CAPTION>

                                                     Marine
                                           Aircraft Container    Marine   Trailer    Railcar
     For the Year Ended December 31, 2000  Leasing   Leasing     Vessel   Leasing    Leasing    Other (2)   Total
     ------------------------------------  -------   -------     ------   -------    -------    -----       -----

     REVENUES
<S>                                        <C>       <C>        <C>       <C>        <C>       <C>        <C>
       Lease revenue                       $  3,867  $     80   $     --  $    560   $  6,591  $     --   $ 11,098
       Interest income and other                (18 )      --         --        --         12       211        205
       Net gain on disposition of             9,460        62         --        79        106        --      9,707
     equipment
                                           ------------------------------------------------------------------------
         Total revenues                      13,309       142         --       639      6,709       211     21,010
                                           ------------------------------------------------------------------------
     EXPENSES
       Operations support                       464         4         --       208      2,019        34      2,729
       Depreciation and amortization          2,784        72         --       255      1,633        29      4,773
       Interest expense                          --        --         --        --         --       306        306
       Management fees to affiliate             142         4         --        29        459        --        634
       General and administrative expenses      251         1         --       100        267       861      1,480
       Revaluation of equipment                  --        --         --       202         --        --        202
       Recovery of bad debts                     --        --         --        (7)       (87)       --        (94)
                                           ------------------------------------------------------------------------
         Total costs and expenses             3,641        81         --       787      4,291     1,230     10,030
                                           ------------------------------------------------------------------------
     Equity in net income of an USPE             23        --        895        --         --        --        918
                                           ------------------------------------------------------------------------
     Net income (loss)                     $  9,691  $     61   $    895  $   (148)  $  2,418  $ (1,019)  $ 11,898
                                           ========================================================================

     Total assets as of December 31, 2000  $  1,837  $    149   $     76  $    965   $  5,135  $  1,875   $ 10,037
                                           ========================================================================



(1)  Includes  certain assets not  identifiable to a specific  segment,  such as
     cash and prepaid  expenses.  Also  includes  interest  income and costs not
     identifiable to a particular  segment,  such as certain  operations support
     and general and administrative  expense.  Also includes loss from an entity
     that owned a marine vessel.

(2)  Includes  certain assets not  identifiable to a specific  segment,  such as
     cash, and prepaid  expenses.  Also includes  interest  income and costs not
     identifiable  to a particular  segment,  such as interest and  amortization
     expense, certain operations support and general and administrative expense.
</TABLE>



<PAGE>



                          PLM EQUIPMENT GROWTH FUND III
                             (A LIMITED PARTNERSHIP)
                          NOTES TO FINANCIAL STATEMENTS



5.   OPERATING SEGMENTS (continued)

<TABLE>
<CAPTION>

                                                     Marine
                                           Aircraft Container    Marine   Trailer    Railcar
     For the Year Ended December 31, 1999  Leasing   Leasing     Vessel   Leasing    Leasing    Other (1)   Total
     ------------------------------------  -------   -------     ------   -------    -------    -----       -----

     REVENUES
<S>                                        <C>       <C>        <C>       <C>        <C>       <C>        <C>
       Lease revenue                       $  5,632  $    120   $  1,477  $    741   $  6,882  $     --   $ 14,852
       Interest income and other                 47        --         45        --        170       183        445
       Net gain (loss) on disposition of
         Equipment                            1,760        96         --       (42)       383        --      2,197
                                           ------------------------------------------------------------------------
         Total revenues                       7,439       216      1,522       699      7,435       183     17,494

     EXPENSES
       Operations support                       656         2        817       229      1,782        38      3,524
       Depreciation and amortization          4,693       114        643       344      1,766        68      7,628
       Interest expense                          --        --         --        --         --     1,021      1,021
       Management fees to affiliate             213         6         75        41        472        --        807
       General and administrative expenses      419         4         45       132        270       732      1,602
       Provision for (recovery of) bad          222        --         --       (15)       101        --        308
     debts
                                           ------------------------------------------------------------------------
         Total costs and expenses             6,203       126      1,580       731      4,391     1,859     14,890
                                           ------------------------------------------------------------------------
       Minority interests                        --        --         --        --         --        22         22
                                           ------------------------------------------------------------------------
     Equity in net income (loss) of an        1,477        --        (64)       --         --        --      1,413
     USPE
                                           ------------------------------------------------------------------------
     Net income (loss)                     $  2,713  $     90   $   (122) $    (32)  $  3,044  $ (1,654)  $  4,039
                                           ========================================================================

(1)  Includes certain interest income and costs not identifiable to a particular
     segment such as interest and  amortization  expense and certain  operations
     support and general and administrative expenses.
</TABLE>


6.   GEOGRAPHIC INFORMATION

The   Partnership   owns   certain   equipment   that  is  leased  and  operated
internationally.   A  limited  number  of  the  Partnership's  transactions  are
denominated  in a foreign  currency.  Gains or  losses  resulting  from  foreign
currency  transactions  are  included in the results of  operations  and are not
material.

The Partnership leases or leased its aircraft, railcars, and trailers to lessees
domiciled in four  geographic  regions:  the United States,  Canada,  Europe and
Asia. Marine containers are leased to multiple lessees in different regions that
operate worldwide.

The  table  below  sets  forth  lease  revenues  by  geographic  region  for the
Partnership's  owned equipment and investments in an USPE grouped by domicile of
the lessee as of and for the years ended December 31, (in thousands of dollars):
<TABLE>
<CAPTION>

           Region                       Owned Equipment                   Investment in an USPE
-----------------------------  -----------------------------------  -----------------------------------
                                   2001        2000        1999         2001        2000        1999
                               -----------------------------------  -----------------------------------

<S>                            <C>         <C>          <C>         <C>         <C>          <C>
United States                  $    2,623  $    2,513   $   3,651   $       --  $       --   $      --
Canada                              4,378       6,364       6,768           --          --          --
Europe                                 --       2,141       2,836           --          --          --
Rest of the world                      26          80       1,597           --         713         243
                               -----------------------------------  -----------------------------------
   Lease revenues              $    7,027  $   11,098   $  14,852   $       --  $      713   $     243
                               ===================================  ===================================
</TABLE>





                                     <PAGE>


                          PLM EQUIPMENT GROWTH FUND III
                             (A LIMITED PARTNERSHIP)
                          NOTES TO FINANCIAL STATEMENTS



6.   GEOGRAPHIC INFORMATION (CONTINUED)

The following  table sets forth net income (loss)  information by region for the
owned  equipment and  investment in an USPE for the years ended December 31, (in
thousands of dollars):
<TABLE>
<CAPTION>

           Region                       Owned Equipment                   Investment in an USPE
-----------------------------  -----------------------------------  -----------------------------------
                                   2001        2000        1999         2001        2000        1999
                               -----------------------------------  -----------------------------------

<S>                            <C>         <C>           <C>        <C>         <C>          <C>
United States                  $     (410) $   (1,021)   $    (64)  $       --  $       --   $      --
Canada                              2,616       8,642       4,375           --          23       1,477
Europe                                 --       5,921         621           --          --          --
Asia                                   --      (1,530)     (1,627)          --          --          --
Rest of the world                      --          61          38           --         895         (64)
                               -----------------------------------  -----------------------------------
Regional income                     2,206      12,073       3,343           --         918       1,413
Administrative and other            3,082      (1,093)       (717)         (10)        --          --
                               -----------------------------------  -----------------------------------
     Net income (loss)         $    5,288  $   10,980    $  2,626   $      (10) $      918   $   1,413
                               ===================================  ===================================
</TABLE>

The net book  value of these  assets  as of  December  31,  was as  follows  (in
thousands of dollars):
<TABLE>
<CAPTION>

           Region                    Owned Equipment                  Investments in an USPE
-----------------------------  ----------------------------         ----------------------------
                                  2001         2000                     2001        2000
                               ----------------------------         ----------------------------
<S>                            <C>         <C>                      <C>         <C>
United States                  $   1,793   $    2,694               $       --  $       --
Europe                                --           --                       --          --
Canada                             2,082        4,454                                   --
Asia                                  --          150                       --          --
Rest of the world                     23           72                       --          76
                               ----------------------------         ----------------------------
    Net book value             $   3,898   $    7,370               $       --  $       76
                               ============================         ============================
</TABLE>

7. CONCENTRATIONS OF CREDIT RISK

No single lessee accounted for more than 10% of total consolidated  revenues for
the years ended December 31, 2001,  2000, and 1999.  During 2000,  however,  BCI
Aircraft Leasing,  Inc.  purchased two Boeing 737's from the Partnership and the
gain from the sale  accounted  for 33%, of total  revenues  from the wholly- and
jointly-owned equipment in that year.

As of December 31, 2001 and 2000, the General  Partner  believes the Partnership
had no other  significant  concentrations  of  credit  risk  that  could  have a
material adverse effect on the Partnership.

8. INCOME TAXES

The  Partnership  is not  subject  to  income  taxes,  as any  income or loss is
included  in  the  tax  returns  of the  individual  partners.  Accordingly,  no
provision  for income  taxes has been made in the  financial  statements  of the
Partnership.



<PAGE>


                          PLM EQUIPMENT GROWTH FUND III
                             (A LIMITED PARTNERSHIP)
                          NOTES TO FINANCIAL STATEMENTS


8. INCOME TAXES (continued)

As of  December  31,  2001,  the  federal  income tax basis was higher  than the
financial  statement carrying amount of assets and liabilities by $20.8 million,
primarily due to differences in depreciation  methods,  and the tax treatment of
underwriting commissions and syndication costs.

9. CONTINGENCIES

The Partnership,  together with affiliates,  has initiated litigation in various
official  forums in India  against  two  defaulting  Indian  airline  lessees to
repossess  Partnership  property and to recover  damages for failure to pay rent
and failure to maintain  such  property in  accordance  with the relevant  lease
contract.  The Partnership has repossessed all of its property previously leased
to these airlines,  causing one of the airline lessees to cease  operations.  In
response to the  Partnership's  collection  efforts,  the airline  lessees filed
counter-claims  against the  Partnership in excess of the  Partnership's  claims
against  the  airline.   The  General   Partner   believes  that  the  airline's
counterclaims  are  completely  without  merit,  and the  General  Partner  will
vigorously defend against such counterclaims.

During 2001, an arbitration  between one India lessee and the  Partnership  took
place and the Partnership was awarded a settlement.  The General Partner and the
lessee  are in the  process  of  negotiating  the  settlement  in a manner  that
benefits all parties  involved.  The General  Partner  decided not to accrue the
amount of the settlement  because  collection of the  settlement is remote.  The
General  Partner  will  continue  to try  to  collect  the  full  amount  of the
settlement.

During 2001, the General Partner has decided to minimize its collection  efforts
from the other  India  lessee in order to save the  Partnership  from  incurring
additional  expenses  associated with trying to collect from a lessee that has a
limited ability to pay.

The  Partnership  is involved as plaintiff  or defendant in various  other legal
actions  incidental  to its  business.  Management  does not believe that any of
these  actions  will be  material  to the  financial  condition  or  results  of
operations of the Partnership.

10. LIQUIDATION OF PARTNERSHIP

During the first quarter of 2000, the Partnership completed its eleventh year of
operations.  The General Partner filed a certificate of dissolution on behalf of
the  Partnership  with the  Secretary  of State for the State of  California  on
December  22,  2000,  and  following   completion  of  the  liquidation  of  the
Partnership which is anticipated to occur in 2002, the General Partner will file
a certificate of  cancellation.  The General  Partner is actively  marketing the
remaining  equipment  portfolio with the intent of maximizing sale proceeds.  As
sale proceeds are received,  the General Partner intends to periodically declare
special  distributions  to distribute the sale proceeds to the partners.  During
the  liquidation  phase of the  Partnership,  the equipment  will continue to be
leased under  operating  leases until sold.  Operating cash flows, to the extent
they exceed Partnership  expenses,  will continue to be distributed from time to
time to  partners.  The  amounts  reflected  for assets and  liabilities  of the
Partnership have not been adjusted to reflect  liquidation values. The equipment
portfolio  continues  to be  reported at the lower of  depreciated  cost of fair
value  less cost to  dispose.  Any excess  proceeds  over  expected  Partnership
obligations  will be  distributed  to the Partners  throughout  the  liquidation
period. Upon final liquidation, the Partnership will be dissolved.

There have been no special distributions in 2001, 2000, or 1999. The Partnership
is not permitted to reinvest  proceeds from sales or  liquidations of equipment.
These proceeds,  in excess of operational cash requirement are periodically paid
out to  limited  partners  in the form of special  distributions.  The sales and
liquidations  occur because of the  determination by the General Partner that it
is the  appropriate  time to maximize the return on an asset through the sale of
that asset, and, in some leases,  the ability of the lessee to exercise purchase
options.


<PAGE>


                          PLM EQUIPMENT GROWTH FUND III
                             (A LIMITED PARTNERSHIP)
                          NOTES TO FINANCIAL STATEMENTS


11. QUARTERLY RESULTS OF OPERATIONS (unaudited)

The following is a summary of the quarterly  results of operations  for the year
ended December 31, 2001 (in thousands of dollars, except per share amounts):
<TABLE>
<CAPTION>

                                 March        June         September         December
                                  31,         30,             30,               31,            Total
                              ----------------------------------------------------------------------------

Operating results:
<S>                           <C>         <C>          <C>               <C>                <C>
  Total revenues              $    5,865  $    1,963   $         1,797   $         1,859    $   11,484
  Net income                       3,873         427               588               390         5,278

Per weighted-average
  depositary unit

Net income                    $     0.39  $     0.04   $          0.06   $          0.04    $     0.53
</TABLE>


In the first quarter of 2001, the Partnership  sold aircraft,  railcars,  marine
containers, and trailers for a gain of $3.8 million.

The following is a summary of the quarterly  results of operations  for the year
ended December 31, 2000 (in thousands of dollars, except per share amounts):
<TABLE>
<CAPTION>

                                 March        June         September         December
                                  31,         30,             30,               31,            Total
                              ----------------------------------------------------------------------------

Operating results:
<S>                           <C>         <C>          <C>               <C>                <C>
  Total revenues              $    3,205  $    3,050   $        12,664   $         2,091    $   21,010
  Net income (loss)                  551         213            11,433              (299)       11,898

Per weighted-average
  depositary unit

Net income (loss)             $     0.05  $     0.02   $          1.16   $         (0.08)   $     1.15
</TABLE>

In the third quarter of 2000, the Partnership  sold aircraft,  railcars,  marine
containers,  trailers,  and a 56% interest in an USPE (marine vessel) for a gain
of $10.7 million.

In the fourth quarter of 2000, a net loss $0.3 was due to  depreciation  expense
from off-lease aircraft.


<PAGE>






INDEPENDENT AUDITORS' REPORT

The Partners
PLM Equipment Growth Fund III:


We have audited the financial  statements of PLM Equipment  Growth Fund III (the
"Partnership")  as of December 31, 2001,  and for the year then ended,  and have
issued our report thereon dated March 8, 2002; such report is included elsewhere
in this Form 10-K. Our audit also included the financial  statement  schedule of
PLM  Equipment  Growth  Fund III,  listed in Item 14. This  financial  statement
schedule  is  the   responsibility   of  the   Partnership's   management.   Our
responsibility is to express an opinion based on our audit. In our opinion, such
financial statement schedule, when considered in relation to the basic financial
statements  taken as a whole,  presents  fairly  in all  material  respects  the
information set forth therein.









/s/ Deloitte & Touche, LLP

Certified Public Acccountants

Tampa, Florida
March 8, 2002


<PAGE>






INDEPENDENT AUDITORS' REPORT




The Partners
PLM Equipment Growth Fund III:


Under date of March 2, 2001,  we reported on the balance  sheet of PLM Equipment
Growth Fund III as of December 31, 2000,  and the related  statements of income,
changes  in  partners'  capital,  and cash  flows  for each of the  years in the
two-year  period ended December 31, 2000, as contained in the 2001 annual report
to the partners.  These financial statements and our report thereon are included
in the  annual  report on Form 10-K for the year ended  December  31,  2001.  In
connection with our audits of the aforementioned  financial statements,  we also
audited the related  financial  statement  schedule for each of the years in the
two-year  ended  December 31, 2000.  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 financial statement schedule,  when considered in relation
to the basic financial  statements  taken as a whole,  presents  fairly,  in all
material  respects,  the  information set forth therein for each of the years in
the two-year period ended December 31, 2000.




/s/ KPMG LLP

SAN FRANCISCO, CALIFORNIA
March 2, 2001


<PAGE>


                                   SCHEDULE II


                          PLM EQUIPMENT GROWTH FUND III
                             (A LIMITED PARTNERSHIP)
                        VALUATION AND QUALIFYING ACCOUNTS

                  Years Ended December 31, 2001, 2000, and 1999
                            (in thousands of dollars)

<TABLE>
<CAPTION>

                                                                  Additions
                                             Balance at          Charged to                          Balance at
                                            Beginning of          Cost and                            Close of
                                                Year               Expense           Deductions         Year
                                           ----------------    ----------------     --------------  -------------
<S>                                        <C>                <C>                   <C>             <C>
  Year Ended December 31, 2001
       Allowance for Doubtful Accounts     $        455       $           64        $        (1)    $      518
                                           ======================================================================

  Year Ended December 31, 2000
       Allowance for Doubtful Accounts     $      1,757       $           --        $    (1,302)    $      455
                                           ======================================================================

  Year Ended December 31, 1999
       Allowance for Doubtful Accounts     $      1,469       $          308        $       (20)    $    1,757
                                           ======================================================================

</TABLE>



<PAGE>




                          PLM EQUIPMENT GROWTH FUND III

                                INDEX OF EXHIBITS



Exhibit                                                                   Page

  4.     Limited Partnership Agreement of Partnership.                     *

  4.1    Amendment to Limited Partnership Agreement of Registrant          *

 10.1    Management Agreement between Partnership and PLM Investment       *
         Management, Inc.

         Financial Statements required under Regulation S-X Rule 3-09

 99.1    TAP Trust                                                         44


































* Incorporated by reference. See page 20 of this report.