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, 1999.

[  ]        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.)

ONE MARKET, STEUART STREET TOWER
  SUITE 800, SAN FRANCISCO, CA                                   94105-1301
      (Address of principal                                      (Zip code)
        executive offices)

        Registrant's telephone number, including area code (415) 974-1399
                             -----------------------
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 17, 2000
     Limited partnership depositary units:               9,871,073
     General Partnership units:                                  1

An index of  exhibits  filed  with this Form 10-K is  located  at page  27.Total
number of pages in this report: 49.
<PAGE>

                                     PART I
ITEM 1.    BUSINESS

(A)  Background

On October 27, 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 which were purchased with the net proceeds of the
initial  partnership  offering,  supplemented  by debt  financing,  and  surplus
operating cash during the investment phase of the Partnership.  All transactions
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, the lessee's 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 continual ownership of a particular
asset will have an adverse affect on the Partnership. Proceeds from these sales,
together  with  excess  net cash flow from  operations  (net  cash  provided  by
operating  activities plus  distributions  from  unconsolidated  special-purpose
entities  (USPEs)),  are used for distributions to the partners or for repayment
of outstanding debt;

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

     (5) To maximize sales proceeds through the timely marketing of equipment.

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, 1999, there were 9,871,073 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  Partnership  will
terminate on December 31, 2000,  unless the  Partnership  is terminated  earlier
upon sale of all of the Partnership's equipment or by certain other events.


<PAGE>


Table  1,  below,  lists  the  equipment  and the cost of the  equipment  in the
Partnership's   portfolio,   and  the  cost  of  investments  in  unconsolidated
special-purpose entities, as of December 31, 1999 (in thousands of dollars):
<TABLE>
<CAPTION>

                                                      TABLE 1

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

Owned equipment held for operating leases:

    <S>    <C>                                                   <C>                                    <C>
      3    737-200 Stage II commercial aircraft                  Boeing                                 $   30,506
      1    Dash 8-300 Stage II commuter aircraft                 Dehavilland                                 5,748
      1    737-200 Stage III commercial aircraft                 Boeing                                      5,746
    724    Non-pressurized tank railcars                         Various                                    17,470
    472    Pressurized tank railcars                             Various                                    11,314
    119    Coal railcars                                         Various                                     4,788
    255    Marine containers                                     Various                                     4,453
     53    Refrigerated trailers                                 Various                                     1,599
    162    Intermodal trailers                                   Various                                     2,503
     12    Dry trailers                                          Stoughton and Strick                           64
                                                                                                        --------------

               Total owned equipment held for operating leases                                          $   84,191<F1>1
                                                                                                        ==============

Investments in unconsolidated special-purpose entitiy:

   0.56    Bulk carrier marine vessel                            Naikai Zosen                           $    7,163<F2>2
                                                                                                        --------------

               Total investments in unconsolidated special-purpose entity                               $    7,163
 <FN>
<F1> 1    Includes equipment and investments 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 piggyback trailers.
<F2> 2    Jointly owned:  EGF III (56%) and an affiliated program.
</FN>                                                                                                      ==============
</TABLE>


The equipment is leased under  operating  leases with terms of one to six years.
All  of  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 majority of rents for railcars are based on a fixed rate; in some
cases  they are based on mileage  traveled,  rents for all other  equipment  are
based on fixed rates.

As of  December  31,  1999,  approximately  29%  of  the  Partnership's  trailer
equipment is operated in rental yards owned and maintained by PLM Rental,  Inc.,
the short-term trailer rental subsidiary of PLM International  doing business as
PLM Trailer Leasing.  Rents are reported as revenue in accordance with Financial
Accounting  Standards  Board Statement  No.13  "Accounting  For Leases".  Direct
expenses  associated with the equipment are charged directly to the Partnership.
An allocation of indirect  expenses of the rental yard  operations is charged to
the Partnership  monthly. The remaining trailer fleet operated with a short-line
railroad system.

The  lessees  of the  equipment  include  but are not  limited  to:  Continental
Airlines,  Inc., Canadian Airlines International,  Varig S.A. (Viaco Aerea Rio -
Grandense), Time Air, Inc., and Terra Nitrogen.

<PAGE>







(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 financial statements).

(C)  Competition

(1)  Operating Leases versus Full Payout Leases

The  equipment  owned or  invested  in 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  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 Corp.,  General  Electric
Railcar  Services  Corporation,   General  Electric  Capital  Aviation  Services
Corporation, XTRA Corporation, and other investment programs that lease the same
types of equipment.

(D)  Demand

The Partnership currently operates in five primary operating segments:  aircraft
leasing, marine vessel leasing,  marine container leasing,  railcar leasing, and
trailer  leasing.  Each  equipment  leasing  segment  engages in  short-term  to
mid-term  operating leases to a variety of customers.  Except for those aircraft
leased to passenger air carriers, the Partnership's  transportation 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:


<PAGE>



(1)      Aircraft

(a) Commercial Aircraft

After  experiencing  relatively robust growth over the prior four years,  demand
for commercial  aircraft softened  somewhat in 1999. Boeing and Airbus,  the two
primary manufacturers of new commercial aircraft, saw a decrease in their volume
of orders,  which  totaled 368 and 417 during  1999,  compared to 656 and 556 in
1998.  The slowdown in aircraft  orders can be partially  attributed to the full
implementation  of US Stage III environmental  restrictions,  which became fully
effective on December 31, 1999. Since these  restrictions  effectively  prohibit
the operation of noncompliant aircraft in the United States after 1999, carriers
operating  within or into the United States  either  replaced or modified all of
their  noncompliant  aircraft before the end of the year. The continued weakness
of the Asian economy has also served to slow the volume of new aircraft  orders.
However,  with the Asian economy now showing signs of recovery,  air carriers in
this region are beginning to resume their fleet building efforts.

Demand for, and values of, used commercial aircraft have been adversely affected
by the Stage III environmental  restrictions and an oversupply of older aircraft
as  manufacturers  delivered more new aircraft that the overall market required.
Boeing predicts that the worldwide fleet of jet-powered commercial aircraft will
increase  from  approximately  12,600  airplanes  as of the end of 1998 to about
13,700  aircraft by the end of 2003, an average  increase of 220 units per year.
However,  actual  deliveries  for the first two years of this  period,  1998 and
1999,  already  averaged  839 units  annually.  Although  some of the  resultant
surplus  used  aircraft  have been  retired,  the net effect has been an overall
increase  in the  number of used  aircraft  available.  This has  resulted  in a
decrease in both market prices and lease rates for used  aircraft.  The weakness
in the used  commercial  aircraft  market  may be  mitigated  in the  future  as
manufacturers  bring their new production more in line with demand and given the
anticipated continued growth in air traffic. Worldwide, demand for air passenger
services is expected  to increase at about 5% annually  and freight  services at
about 6% per year, for the foreseeable future.

This fund owns one Stage III-compliant  aircraft and four Stage II aircraft, the
latter of which are operating  outside the United States and thus not subject to
Stage III environmental  restrictions.  Four of these aircraft remained on lease
throughout 1999 and were not affected by changes in market conditions;  however,
one Stage II aircraft, which was off lease, has been impacted by the soft market
conditions described above.

(b)      Commuter Aircraft

Major changes have occurred in the commuter market due to the 1993  introduction
of small regional jets. The original  concept for regional jets was to take over
the North American hub-and-spoke routes served by the large turboprops, but they
are also finding successful niches in point-to-point routes. The introduction of
this smaller  aircraft has allowed major  airlines to shift the regional jets to
those marginal routes previously operated by narrowbody (single-aisle) aircraft,
allowing  larger-capacity  aircraft  to  be  more  efficiently  employed  in  an
airline's route system.

The Partnership leases commuter turboprops containing from 36 to 50 seats. These
aircraft all fly in North  America,  which  continues to be the  fastest-growing
market for commuter  aircraft in the world. The  Partnership's  aircraft possess
unique performance capabilities,  compared to other turboprops, which allow them
to readily operate at maximum  payloads from unimproved  surfaces,  hot and high
runways,  and short  runways.  However,  the growing use of regional jets in the
commuter  market has resulted in an increase in demand for regional  jets at the
expense of turboprops. Several major turboprop programs have been terminated and
all  turboprop  manufacturers  are  cutting  back on  production  due to reduced
demand.

These conditions have adversely  affected the market for the  Partnership's  one
turboprop aircraft. As a result, this aircraft was off lease during 1999.


<PAGE>



(2)  Railcars

(a)  Nonpressurized, General Purpose Tank Cars

These cars,  which are used to transport bulk liquid  commodities  and chemicals
not requiring  pressurization,  such as certain  petroleum  products,  liquefied
asphalt,  lubricating  and  vegetable  oils,  molten  sulfur,  and  corn  syrup,
continued to be in high demand during 1999. The overall health of the market for
these types of commodities in 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,  1999 carloadings of the commodity group that includes  chemicals
and  petroleum  products  rose  2.5%  over  1998  levels.   Utilization  of  the
Partnership's nonpressurized tank cars was above 98% again during 1999.

(b)  Pressurized Tank Cars

Pressurized tank cars are used to transport  primarily  liquefied  petroleum gas
(natural  gas) and  anhydrous  ammonia  (fertilizer).  The major US markets  for
natural  gas are  industrial  applications  (40% of  estimated  demand in 1998),
residential use (21%),  electrical generation (15%), and commercial applications
(14%). Within the fertilizer industry,  demand is a function of several factors,
including  the level of grain  prices,  the 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 industrywide basis, North American carloadings of the commodity group that
includes  petroleum  and  chemicals  increased  2.5% in 1999,  compared to 1998.
Correspondingly,  demand for  pressurized  tank cars remained solid during 1999,
with utilization of this type of railcar within the Partnership  remaining above
98%. While renewals of existing leases continue at similar rates, some cars have
been renewed for "winter only" terms of approximately  six months.  As a result,
it is  anticipated  that  there  will be more  pressurized  tank cars than usual
coming up for renewal in the spring.

(c)   Coal Railcars

Since most coal is shipped to domestic  electric  utilities,  demand for coal is
greatly  influenced by summer air  conditioning  and to a lesser extent,  winter
heating  requirements.  Coal car loadings in North America in 1999  increased 3%
from 1998.

Coal railcars owned by the Partnership  are on long-term  leases and operated at
100% utilization during 1999.

(3)  Marine Containers

The marine container leasing market started 1999 with  industrywide  utilization
rates in the mid 70% range, down somewhat from the beginning of 1998. The market
strengthened  throughout  the year such that most  container  leasing  companies
reported utilization of 80% by the end of 1999.  Offsetting this favorable trend
was a continuation  of historically  low  acquisition  prices for new containers
acquired in the Far East,  predominantly China. These low prices put pressure on
fleetwide per diem leasing rates.

Industry consolidation continued in 1999 as the parent of one of the world's top
ten  container  lessors  finalized  the  outsourcing  of the  management  of its
container fleet to a competitor. However, the General Partner believes that such
consolidation is a positive trend for the overall  container  leasing  industry,
and ultimately  will lead to higher  industrywide  utilization and increased per
diem rates.  Since this  Partnership  is in the  liquidation  phase,  containers
remain  off  lease  while  waiting  to be  sold  and  thus  utilization  on  the
Partnerships containers decreased in 1999.


<PAGE>



(4)  Trailers

(a)  Refrigerated Trailers

After a very  strong year in 1998,  the  temperature-controlled  trailer  market
leveled off somewhat in 1999,  as  equipment  users began to absorb the expanded
equipment  supply created over the prior two years.  Refrigerated  trailer users
have been actively retiring their older units and consolidating  their fleets in
response to improved refrigerated trailer technology.  Concurrently,  there is a
backlog of six to nine months on orders for new equipment.  As a result of these
changes in the  refrigerated  trailer  market,  it is anticipated  that trucking
companies and shippers will utilize short-term trailer leases more frequently to
supplement  their existing  fleets.  Such a trend should benefit the Fund, whose
trailers are typically leased on a short-term basis.

(b)      Intermodal (Piggyback) Trailers

Intermodal  (piggyback) trailers are used to transport a variety of goods either
by truck  or by  rail.  Over the past  decade,  intermodal  trailers  have  been
gradually  displaced by domestic containers as the preferred method of transport
for such goods.  During 1999,  demand for intermodal  trailers was more volatile
than usual. Slow demand occurred over the first half of the year due to customer
concerns  over  rail  service  problems  associated  with  mergers  in the  rail
industry,  however,  demand picked up significantly  over the second half of the
year  due to both a  resolution  of these  service  problems  and the  continued
strength of the US economy.  Due to rise in the demand which  occurred  over the
latter half of 1999,  overall  activity  within the  intermodal  trailer  market
declined less than expected for the year, as total intermodal  trailer shipments
decreased by only approximately 1.8% compared to the prior year.

The General  Partner stepped up its marketing and asset  management  program for
the  Partnership's  intermodal  trailers during 1999.  These efforts resulted in
average  utilization of the Partnership's  intermodal  trailers of approximately
82% for the year, up to 2% compared to 1998 levels.

Although the trend  towards  using  domestic  containers  instead of  intermodal
trailers is expected to  continue  in the  future,  overall  intermodal  trailer
shipments  are  forecast  to decline by only 2% to 3% in 2000,  compared  to the
prior year, due to the anticipated continued strength of the overall economy. As
such,  the  nationwide  supply of  intermodal  trailers  is  expected  to remain
essentially  in balance with demand for 2000. For the  Partnership's  intermodal
fleet,  the General Partner will continue to minimize trailer downtime at repair
shops and terminals.

(c)  Nonrefrigerated (Dry) Trailers

The US nonrefrigerated (dry) trailer market continued it's growth, as the strong
domestic  economy  resulted in heavy freight  volumes.  With  unemployment  low,
consumer  confidence  high, and  industrial  production  sound,  the outlook for
leasing this type of trailer  remains  positive,  particularly  as the equipment
surpluses of recent years are being absorbed by the buoyant market.  In addition
to  high  freight  volumes,  improvements  in  inventory  turnover  and  tighter
turnaround times have lead to a stronger overall trucking industry and increased
equipment demand.  After remaining well above 70% during 1998, the Partnership's
dry van fleet ended 1999 at 77% utilization.

(5)  Dry Bulk Vessel

The  Partnership has an investment  with an affiliated  program in a small,  dry
bulk  vessel that  operates in  international  markets  carrying  commodity-type
cargoes.  Demand  for  commodity-based  shipping  is closely  tied to  worldwide
economic growth  patterns,  which can affect demand by causing changes in volume
on trade routes. The General Partner operates the Partnership's  vessels through
period  charters,  an approach that provides the flexibility to adapt to changes
in market conditions.

Dry bulk shipping is a cyclical business that induces capital  investment during
periods of high freight  rates and leads to a contraction  in investment  during
periods of low rates. Currently, the industry environment is one of slow growth.
Fleet size is  relatively  stable,  the overall bulk carrier  fleet grew by less
than 1% in 1999, as measured by deadweight  tons,  and the total number of ships
shrank slightly.

Freight rates, after declining in 1998 due in large part to the Asian recession,
improved for dry bulk vessels of all sizes during 1999.  Freight rates increased
during  the year such that by the end of 1999,  they had  reverted  back to 1997
levels,  although these levels are still moderate by historical comparison.  The
1999  improvement was driven by increases in United States grain exports as well
as stronger trade in iron ore and steel products.

Total dry bulk trade, as measured in deadweight tons, is estimated to have grown
by approximately 2% during 1999, compared to a flat year in 1998.  Forecasts for
2000 indicate that bulk trade should continue to grow, albeit at slow rates.

During 1999, ship values reversed the declines of the prior year, ending as much
as 30% above the levels seen at the  beginning  of the year for  certain  vessel
types.  This upturn in ship values was due to a general  improvement in dry bulk
trade as well as  increases  in the cost of new  building as compared to 1998. A
slow but steady rise in trade volumes,  combined with low fleet expansion,  both
of which are  anticipated  to  continue  in 2000,  may  provide  some  basis for
increases in freight  rates and ship values in the future.  For  example,  it is
believed that should growth in demand return to historic  levels of 3% annually,
this could stimulate increases in freight rates and ship values, and ultimately,
induce further investment in new building.

(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  to meet these
regulations,  at considerable cost to the Partnership.  Such regulations include
but are not limited to:

(1) the US Oil Pollution Act of 1990, which established  liability for operators
and owners of vessels that create environmental  pollution.  This regulation has
resulted  in  higher  oil  pollution  liability  insurance.  The  lessee  of the
equipment typically reimburses the Partnership for these additional costs;

(2) the US Department of  Transportation's  Aircraft Capacity Act of 1990, which
limits or eliminates  the operation of commercial  aircraft in the United States
that do not meet certain  noise,  aging,  and corrosion  criteria.  In addition,
under United States Federal  Aviation  Regulations,  after December 31, 1999, no
person may operate an aircraft to or from any airport in the  contiguous  United
States  unless  that  aircraft  has been  shown to comply  with  Stage III noise
levels.  The  Partnership  has  Stage II  aircraft  that do not meet  Stage  III
requirements.  The cost to husk-kit a Stage II aircraft  is  approximately  $2.0
million,  depending on the type of aircraft. The Partnership's Stage II aircraft
are with air carriers that are outside Stage  III-legislated  areas,  or are for
sale.

(3) the Montreal  Protocol on Substances that Deplete the Ozone Layer and the US
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 and
refrigerated trailers;

(4) the US Department of Transportation's Hazardous Materials Regulations, which
regulate the classification of and packaging requirements of hazardous materials
and which apply  particularly to the  Partnership's  tank railcars.  The Federal
Railroad  Administration  has mandated that effective July 1, 2000, all jacketed
and  non-jacketed  tank  railcars  must be  re-qualified  to insure  tank  shell
integrity.  Tank shell  thickness,  weld  seams,  and weld  attachments  must be
inspected  and repaired if  necessary to  re-qualify a tank railcar for service.
The average cost of this inspection is $1,800 for non-jacketed tank railcars and
$3,600 for jacketed tank  railcars,  not including any necessary  repairs.  This
inspection is to be performed at the next scheduled tank test.

As of  December  31 1999,  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  its  interests  in entities  that own  equipment  for leasing
purposes.  As of  December  31,  1999,  the  Partnership  owned a  portfolio  of
transportation and related equipment and investments in equipment owned by USPEs
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 One Market,  Steuart Street
Tower, Suite 800, San Francisco,  California  94105-1301.  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 a defaulting Indian airline lessee to repossess
Partnership  property and to recover damages for failure to pay rent and failure
to maintain such  property in accordance  with  relevant  lease  contracts.  The
Partnership  has  repossessed  all of its  property  previously  leased  to such
airline, and the airline has ceased operations. In response to the Partnership's
collection efforts, the airline 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.  The General
Partner believes the liklihood of an unfavorable  outcome from the counterclaims
is remote.

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, 1999.



















                      (This space intentionally left blank)



<PAGE>



                                     PART II

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


As of March 17, 2000, there were 9,871,073  depositary units outstanding.  There
are 8,701 depositary unitholders of record as of the date of this report.

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 viewed as inefficient  vehicles for the sale
of depositary  units.  Presently,  there is no public market for the  depositary
units and none is likely to develop.

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 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 an US citizen or if the transfer
would cause any portion of the depositary 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.

On January 10, 2000 the General Partner  announced that it has begun recognizing
transfers  involving  trading of units in the  partnership for the 2000 calendar
year.  The  partnership  is listed on the OTC  Bulletin  Board under the symbols
GFZPZ.

In making the  announcement,  the General  Partner  noted  that,  as in previous
years,  it will continue to monitor the volume of such trades to ensure that the
Partnership  remain in  compliance  with Internal  Revenue  Service (IRS) Notice
88-75 and IRS Code  Section  7704.  These IRS  regulations  contain  safe harbor
provisions  stipulating  the  maximum  number of  partnership  units that can be
traded  during a  calendar  year in order for a  partnership  not to be deemed a
publicly traded partnership for income tax purposes.

Should the Partnership  approach the annual safe harbor  limitation  later on in
2000,  the General  Partner will,  at that time,  cease to recognize any further
transfers  involving  trading  of  Partnership  units.   Transfers  specifically
excluded from the safe harbor  limitations,  referred to in the  regulations  as
"transfers not involving  trading," which include transfers at death,  transfers
between family members,  and transfers involving  distributions from a qualified
retirement  plan,  will  continue  to  be  recognized  by  the  General  Partner
throughout the year.

Pursuant  to the terms of the  partnership  agreement,  the  General  Partner is
entitled to a 5% interest  in the  profits and losses and  distributions  of the
Partnership subject to certain special allocation provisions.

The Partnership  engaged in a plan to repurchase up to 250,000  depositary units
on behalf of the  Partnership.  There were no repurchases of depositary units in
1999 and 1998.  As of  December  31,  1999,  the  Partnership  had  purchased  a
cumulative  total of 128,853  depositary  units at a total cost of $0.9 million.
The General Partner does not plan any future  repurchase of depositary  units on
behalf of the Partnership.












<PAGE>



ITEM 6.  SELECTED FINANCIAL DATA

Table 2, below, lists selected financial data for the Partnership:
<TABLE>
<CAPTION>

                                                      TABLE 2

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

                                                     1999            1998            1997             1996            1995
                                                 --------------------------------------------------------------------------------

    <S>                                          <C>             <C>             <C>              <C>              <C>
    Operating results:
      Total revenues                             $   17,494      $   22,507      $   28,592       $   28,374       $   28,055
        Of equipment                                  2,197           3,808           5,629            6,450            2,936
      Equity in net income of unconsolidated
         Special-purpose entities                     1,413              49             857            7,475               --
      Net income                                      4,039           2,917           1,937            9,760            2,706

    At year-end:
      Total assets                               $   18,690      $   35,512      $   56,395       $   82,272       $   83,317
      Total liabilities                              10,362          21,219          34,397           51,117           52,980
      Note payable                                    7,458          18,540          29,290           40,284           41,000

    Cash distribution                            $    7,793      $   10,394      $   10,391       $   11,964       $   16,737

    Cash distribution representing a return
      of capital to the limited partners         $    3,754      $    7,477      $    8,454       $    2,204       $   14,031

    Per weighted-average depositary unit:

    Net income                                   $     0.37<F1>1 $     0.24<F1>1 $     0.14<F1>1  $     0.93<F1>1  $     0.19<F1>1


    Cash distribution                            $     0.75      $     1.00      $     1.00       $     1.15       $     1.60

    Cash distribution representing a return
      of capital to the limited partners         $     0.38      $     0.76      $     0.86       $     0.22       $     1.41


<FN>
<F1>
----------------------------------

1  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,  $0.1  million  ($0.01 per  weighted-average  depositary
unit) in 1996,  $0.7 million  ($0.07 per  weighted-average  depositary  unit) in
1995,  representing  allocations  to  the  General  Partner  resulting  from  an
amendment to the partnership agreement (see Note 1 to the financial statements).
</FN>
</TABLE>


<PAGE>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
         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 of 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 1999 primarily
in its aircraft, marine containers, trailers, railcars and marine vessel.

     (a)  Aircraft:  One Boeing  737-200 Stage III  commercial  aircraft was off
lease during 1999. One DC-9 commercial aircraft came off lease during the end of
the third quarter and was sold in the fourth quarter of 1999.

     (b) Marine  containers:  All of the  Partnership's  marine  containers  are
operated in utilization-based  leasing pools and, as such, are highly exposed to
repricing  activity.  The  Partnership  saw  lower  utilization  on  the  marine
container fleet during 1999.

     (c)  Trailers:  All of the  Partnership's  trailer  portfolio  operates  in
short-term  rental  facilities or short-line  railroad  systems.  The relatively
short  duration  of most  leases in these  operations  exposes  the  trailers to
considerable re-leasing activity.

     (d) Railcars:  While this equipment  experienced some re-leasing  activity,
lease  rates in this  market  remain  relatively  constant.  While  renewals  of
existing  leases  continue  at similar  rates,  some cars have been  renewed for
"winter only" terms of approximately  six months. As a result, it is anticipated
that there will be more  pressurized  tank cars than usual coming up for renewal
in the spring.

     (e) Marine vessel: Freight rates increased during the year such that by the
end of 1999,  they had reverted back to 1997 levels,  although  these levels are
still moderate by historical comparison. The vessel in which the Partnership has
an  interest  operates in a  short-term  charter  market and is thus  subject to
repricing risk.

(2)  Equipment Liquidations

Liquidation  of  Partnership  equipment and  investments  in USPEs  represents a
reduction in the size of the  equipment  portfolio and may result in a reduction
of contribution to the Partnership.  In 1999, the Partnership  disposed of owned
equipment that included marine containers,  trailers,  railcars, and an aircraft
for total proceeds of $3.8 million.

(3)  Equipment Valuation

In accordance  with  Financial  Accounting  Standards  Board  Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be  Disposed  Of",  the  General  Partner  reviews  the  carrying  value  of the
Partnership's  equipment portfolio at least quarterly and whenever circumstances
indicate the carrying  value of an asset may not be  recoverable  in relation to
expected   future   market   conditions   for  the  purpose  of  assessing   the
recoverability of the recorded amounts.  If projected  undiscounted future lease
revenues plus residual values are less than the carrying value of the equipment,
a loss on  revaluation  is recorded.  No  reductions  to the carrying  values of
equipment were required during 1999, 1998, or 1997.

As of December 31, 1999, the General  Partner  estimated the current fair market
value of the  Partnership's  equipment  portfolio,  including the  Partnership's
interest in equipment  owned by USPEs,  to be $49.0  million.  This  estimate is
based on recent market  transactions for equipment  similar to the Partnership's
equipment portfolio and the Partnership's  interest in equipment owned by USPEs.
Ultimate  realization  of  fair  market  value  by the  Partnership  may  differ
substantially from the estimate due to specific market conditions, technological
obsolescence,  and government regulations,  among other factors that the General
Partner cannot accurately predict.

(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 of $199.7 million and permanent
debt  financing of $41.9  million.  No further  capital  contributions  from the
limited  partners are  permitted  under the terms of the  Partnership's  limited
partnership agreement. The Partnership relies on operating cash flow to meet its
operating obligations and to make cash distributions to the limited partners.

For the year ended December 31, 1999, the Partnership  generated $8.1 million in
operating cash (net cash provided by operating activities plus minority interest
less  additional  investments in USPEs) to fund operations to meet its operating
obligations  and to make  distributions  (total of $7.8  million in 1999) to the
partners.

The Partnership's note payable,  which bears interest at 1.5% over LIBOR, had an
outstanding  balance of $7.5 million as of December 31, 1999 and March 17, 2000.
Commencing October 1, 1997, the loan required quarterly principal payments equal
to the net proceeds from asset sales from that quarter,  or maintain the minimum
of the facility  balance  specified  in the loan  agreement.  During  1999,  the
Partnership  paid $11.1  million of the  outstanding  loan  balance  mainly as a
result of asset sales.

In September  1999, the General Partner loaned the  Partnership  $600,000.  This
loan was repaid in full including interest of $10,000 on February 1, 2000.

The  Partnership  lessee  deposits  and reserve for  repairs  increased  by $0.3
million,  due to the increase in engine  reserves for the aircraft on lease to a
South American lessee.

The Partnership is in the active  liquidation phase. As a result the size of the
Partnerships  remaining  equipment  portfolio  and, in turn,  the amount of cash
flows from  operations will continue to become  progressively  smaller as assets
are sold. Although  distribution levels may be reduced,  significant asset sales
may  result in special  distributions  to the  Partners.  The  Partnership  will
terminate on December 31, 2000,  unless the  Partnership  is terminated  earlier
upon sale of all Partnership property or by certain other events.

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.

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

(1)  Comparison of the Partnership's Operating Results for the Years Ended
December 31, 1999 and 1998

(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, 1999 when compared to the same period
of 1998.  Certain expenses such as depreciation and amortization 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 these expenses are more indirect in nature,  not a result of
operations but more the result of owning a portfolio of equipment.

In September  1999, the General  Partner  amended the  corporate-by-laws  of the
USPEs in which the Partnership  owns an interest greater than 50%. The amendment
to the  corporate-by-law  provides 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  regardless of the  percentage of  ownership.  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 is used for this
entity 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.  Accordingly,  as of December 31, 1999, the balance sheet reflects all
investments in USPEs on an equity basis.

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

                                                         For the Years
                                                      Ended December 31,
                                                    1999              1998
  ------------------------------------------------------------------------------

  Rail equipment                               $         5,100   $         4,768
  Aircraft                                               4,977             5,150
  Marine vessel                                            660             1,215
  Trailers                                                 512             1,035
  Marine containers                                        118               272
  Mobile offshore drilling unit                             --               738

Rail equipment: Railcar lease revenues and direct expenses were $6.9 million and
$1.8 million, respectively, for 1999, compared to $7.1 million and $2.4 million,
respectively,  during 1998.  The decrease in lease  revenues of $0.2 million was
due to the  disposition of rail equipment  during 1999 and 1998. The decrease in
direct  expenses of $0.6  million was a result of fewer  running  repairs  being
required on rail equipment in 1999 than was needed during 1998.

Aircraft: Aircraft lease revenues and direct expenses were $5.6 million and $0.7
million,  respectively,  for 1999,  compared to $6.5  million and $1.3  million,
respectively,  during 1998. A $0.9 million decrease in lease revenues was due to
an aircraft being offlease  during the entire year of 1999 and another  aircraft
coming off lease in the third  quarter of 1999.  Both of these  aircraft were on
lease for all of 1998. The decrease in lease revenue was partially offset by the
increase in lease revenue of $0.5 million from an aircraft that was  transferred
into the Partnership's  owned equipment portfolio from a trust during the second
quarter  of 1998.  Direct  expense  decreased  by $0.6  million  due to  repairs
required on one aircraft in 1998 that were not needed in 1999.

Marine  vessel:  Marine  vessel  lease  revenues and direct  expenses  were $1.5
million and $0.8 million,  respectively,  for 1999, compared to $2.5 million and
$1.3 million  respectively  for 1998.  In September  1999,  the General  Partner
amended  the  coporate-by-laws  of the  USPEs in which the  Partnership  owns an
interest  greater than 50%. As a result of the amendment and the related  change
in accounting for these USPEs from  consolidation  basis to equity basis,  lease
revenues  for the  Partnership's  majority  held marine  vessel  decreased  $0.6
million for the year ended  December 31, 1999,  when compared to the same period
of 1998. Direct expenses for the Partnership's  majority held marine vessel also
decreased $0.2 due to the amendment and related change in accounting.

Trailers:  Trailer lease revenues and direct expenses were $0.7 million and $0.2
million,  respectively,  for 1999,  compared to $1.3  million and $0.2  million,
respectively,  during 1998. The number of trailers owned by the  Partnership has
been declining due to sales and 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 $2,000,  respectively  in 1999  compared to $0.3  million and
$6,000  respectively in 1998.  Lease revenues  decreased by $0.2 million in 1999
compared to 1998 due to lower utilization rates.

Mobile  offshore  drilling  unit:  Mobile  offshore  drilling  unit (MODU) lease
revenues and direct  expenses were $0.8 million and $19,000,  respectively,  for
1998. The decrease in  contribution in 1999 compared to 1998 was due to the sale
of the Partnership's MODU in June of 1998.

 (b) Indirect Expenses Related to Owned Equipment Operations

Total  indirect  expenses of $11.4 million for 1999 decreased from $14.3 million
for 1998. Significant variances are explained as follows:

     (i) A decrease of $2.8 million in  depreciation  and  amortization  expense
from 1998 levels resulted from an approximately $0.7 million decrease due to the
sale of certain  assets during 1999 and 1998 and an  approximately  $2.1 million
decrease  resulting from the use of the  double-declining  balance  depreciation
method  which  results  in  greater  depreciation  the  first  years an asset is
owned.reflects the sale or disposition of certain Partnership assets.

     (ii)A decrease of $0.7 million in interest expense was due to lower average
debt balance outstanding during 1999 when compared to 1998.

     (iii)A decrease of $0.2 million in  management  fees was due to lower lease
revenues in 1999, compared to 1998.

     (iv)An  increase of $0.6  million in bad debt  expense from 1998 was due to
the  collection of $0.4 million from past due  receivables  during 1999 that had
previously been reserved for as a bad debt and the General Partner's  evaluation
of the collectability of receivables due from certain lessees.

     (v) An increase of $0.2 million in general and administrative  expenses was
primarily  due  to  higher  legal  and  consulting  fees  related  to one of the
Partnership's aircraft.

(c)  Net Gain on Disposition of Owned Equipment

The net gain on  disposition of equipment was $2.2 million for 1999 and resulted
from the disposition of marine containers,  trailers, railcars, and an aircraft.
These  assets had an  aggregate  net book value of $1.6 million and were sold or
liquidated  for  proceeds  of $3.8  million.  The net  gain  on  disposition  of
equipment  totaled $3.8 million for 1998 and resulted  from the  disposition  of
marine  containers,  trailers,  railcars,  and a mobile offshore  drilling unit.
These  assets had an  aggregate  net book value of $8.3 million and were sold or
liquidated for proceeds of $12.1 million.


<PAGE>

(d)      Interest and Other Income

Interest  and other  income  increased  by $0.2  million  for 1999 due to higher
income on the railcars related to mileage charges.

(e)  Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities

Net income (loss) generated from the operation of jointly-owned assets accounted
for under the  equity  method is shown in the  following  table by  segment  (in
thousands of dollars):

                                                            For the Years
                                                          Ended December 31,
                                                       1999             1998
                                                  ------------------------------
  Aircraft, aircraft engines, and rotables        $    1,477    $       49
  Marine vessel                                          (64)           --
                                                  ==============================
    Equity in net income of USPEs                 $    1,413    $       49
                                                  ==============================

Aircraft,  aircraft  engines,  and  rotables:  As  of  December  31,  1999,  the
Partnership  had no remaining  interest in entities  owning  aircraft,  aircraft
engines, or rotables.  The interest in the trust was sold in 1999, for a gain of
$1.6 million. The Partnerships share of aircraft, aircraft engines, and rotables
revenue and expenses were $0 and $0.1 million  respectively,  for 1999, compared
to $1.2 million and $1.2  million  resepectively,  during 1998.  The decrease in
revenue and expenses is due to the sale of the aircraft,  aircraft engines,  and
rotables in the first quarter of 1999.

Marine  vessel:  The  Partnership's  share of  revenues  and  expenses of marine
vessels was $0.2 million and $0.3 million,  respectively, for 1999. In September
1999, the General Partner amended the coporate-by-laws of the USPEs in which the
Partnership  owns an interest greater than 50%. As a result of the amendment and
the related  change in accounting  for these USPEs from  consolidation  basis to
equity  basis,  lease  revenues  and  direct  expenses  are  discussed  in owned
equipment  operations for the nine months ended  September 30, 1999, and for the
entire year ended December 31,1998,  for the Partnership's  majority held marine
vessel

(f) Net Income

As a result of the  foregoing,  the  Partnership's  net income for 1999 was $4.0
million,  compared to net income of $2.9 million during 1998. 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, 1999 is not necessarily indicative of future periods. In
the year ended  December 31, 1999 and 1998,  the  Partnership  distributed  $7.4
million and $9.9 million,  respectively  to the limited  partners,  or $0.75 and
$1.00 per weighted-average depositary unit, respectively.


<PAGE>



(2)  Comparison of the Partnership's Operating Results for the Years Ended
December 31, 1998 and 1997

(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, 1998 when compared to the same period
of 1997.  Certain expenses such as depreciation and amortization 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 these expenses are more indirect in nature,  not a result of
operations but more the result of owning a portfolio of equipment. The following
table presents  lease revenues less direct  expenses by segment (in thousands of
dollars):

                                                         For the Years
                                                      Ended December 31,
                                                    1998              1997
                                               ---------------------------------
  Aircraft                                     $         5,150   $         6,499
  Rail equipment                                         4,768             5,319
  Marine vessels                                         1,215               573
  Trailers                                               1,035             1,539
  Mobile offshore drilling unit                            738             1,612
  Marine containers                                        272             1,077

Aircraft: Aircraft lease revenues and direct expenses were $6.5 million and $1.3
million,  respectively,  for 1998,  compared to $7.9  million and $1.4  million,
respectively,  during 1997. A decrease of $1.5 million in lease revenues was due
to the sale of a total of two aircraft  during the third and fourth  quarters of
1997 and a $0.5 million  decrease in lease revenues was due to one aircraft that
went offlease  during the third  quarter of 1998.  The decrease in lease revenue
was partially  offset by the  incremental  lease revenue of $0.7 million  earned
from an aircraft that was  transferred  into the  Partnership's  owned equipment
portfolio from a trust during the second quarter of 1998.

Rail equipment: Railcar lease revenues and direct expenses were $7.1 million and
$2.4 million, respectively, for 1998, compared to $7.5 million and $2.2 million,
respectively,  during  1997.  The  decrease  in  lease  revenues  was due to the
disposition  of rail  equipment  during  1998 and 1997.  The  increase in direct
expenses resulted from running repairs required on certain rail equipment in the
fleet during 1998 that were not needed during 1997.

Marine  vessels:  Marine  vessel lease  revenues and direct  expenses  were $2.5
million and $1.3 million, respectively,  1998, compared to $2.5 million and $1.9
million,  respectively,  during 1997. The decrease in direct expenses was due to
lower insurance expenses in 1998 when compared to 1997.

Trailers:  Trailer lease revenues and direct expenses were $1.3 million and $0.2
million,  respectively,  for 1998,  compared to $1.8  million and $0.3  million,
respectively,  during 1997. The number of trailers owned by the  Partnership has
been declining due to sales and dispositions. The result of this declining fleet
has been a decrease in trailers net contribution.

Mobile  offshore  drilling  unit:  Mobile  offshore  drilling  unit (MODU) lease
revenues and direct  expenses were $0.8 million and $19,000,  respectively,  for
1998,  compared to $1.6 million and  $31,000,  respectively,  during  1997.  The
decrease in contribution was due to the sale of the  Partnership's  MODU in June
of 1998.

Marine  containers:  Marine  containers  lease revenues and direct expenses were
$0.3 million and $6,000,  respectively,  for 1998,  compared to $1.1 million and
$10,000, respectively, during 1997. The number of marine containers owned by the
Partnership has been declining due to sales and dispositions. The result of this
declining fleet has been a decrease in marine container net contribution.

(b)  Indirect Expenses Related to Owned Equipment Operations

Total  indirect  expenses of $14.4 million for 1998 decreased from $21.6 million
for 1997. Significant variances are explained as follows:

     (i) A decrease of $4.7 million in  depreciation  and  amortization  expense
from 1997  levels.  A $1.2 million  decrease in  depreciation  and  amortization
expense  reflects the sale or disposition of certain  Partnership  assets during
1998 and 1997. A $3.5 million decrease in depreciation and amortization  expense
reflects  the  Partnership's  use  of the  double-declining  balance  method  of
depreciation,  which results in greater depreciation in the first years an asset
is owned.

     (ii)A decrease of $1.5 million in interest expense was due to lower average
debt  outstanding  during 1998 when compared to 1997.

     (iii) A decrease of $0.8  million in bad debt  expense from 1997 due to the
collection  of $0.4  million  from  past due  receivables  during  1998 that had
previously been reserved for as a bad debt and the General Partner's  evaluation
of the collectability of receivables due from certain lessees.

     (iv)A decrease of $0.3 million in general and  administrative  expenses was
primarily due to reduced legal fees to collect outstanding  receivables due from
an aircraft lessee.

     (v) A decrease of $0.2  million in  management  fees was due to lower lease
revenues in 1998, compared to 1997.

     (vi)An  increase  of $0.3  million in  minority  interests  was due to $0.3
million decrease in insurance expenses.

(c)  Net Gain on Disposition of Owned Equipment

The net gain on  disposition of equipment was $3.8 million for 1998 and resulted
from the  disposition of marine  containers,  trailers,  railcars,  and a mobile
offshore  drilling  unit.  These assets had an aggregate  net book value of $8.3
million and were sold or liquidated for proceeds of $12.1 million.  The net gain
on disposition of equipment  totaled $5.6 million for 1997 and resulted from the
disposition of marine containers, trailers, railcars, and aircraft. These assets
had an aggregate net book value of $6.5 million and were sold or liquidated  for
proceeds of $12.1 million.

(d)  Interest and Other Income

Interest  and other income  decreased by $0.2 million for 1998  compared to 1997
primarily due to lower cash balances available for investment.

(e)  Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
(USPEs)

Net income (loss) generated from the operation of jointly-owned assets accounted
for under the  equity  method is shown in the  following  table by  segment  (in
thousands of dollars):

                                                        For the Years
                                                      Ended December 31,
                                                       1998               1997
                                             -----------------------------------
Aircraft, aircraft engines, and rotables     $            49    $           857
                                             ===================================
  Equity in net income of USPEs              $            49    $           857
                                             ===================================

Aircraft,  aircraft engines,  and rotables:  The Partnership's share of aircraft
revenues and  expenses  were $1.2 million and $1.2  million,  respectively,  for
1998, compared to $2.8 million and $1.9 million,  respectively,  during 1997. As
of December  31, 1998 and 1997,  the  Partnership  had an interest in two trusts
that own a total of three  commercial  aircraft,  two  aircraft  engines,  and a
portfolio of aircraft  rotables.  As of December 31, 1997, the Partnership  also
owned an interest in a trust that owned four commercial  aircraft.  The aircraft
in this  trust was  transferred  out of the trust into the  Partnership's  owned
equipment  portfolio in the second quarter of 1998. The decrease of $1.0 million
in lease  revenues  was due to the  renewal  of the  leases  in 1998  for  three
commercial aircraft,  two aircraft engines, and a portfolio of aircraft rotables
at a lower rate than was in place  during the same period of 1997.  In addition,
the lease  revenues  decreased  $0.6 million  because of the aircraft  that was
transferred out of a trust into the Partnership's owned equipment portfolio went
offlease during the second quarter of 1998. Depreciation expenses decreased $0.5
million as a result of this transfer and $0.2 million  decrease in  depreciation
expenses was due to the double-declining  balance method of depreciation,  which
results in greater depreciation in the first years an asset is owned.

(f) Net Income

As a result of the  foregoing,  the  Partnership's  net income for 1998 was $2.9
million,  compared to net income of $1.9 million during 1997. 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, 1998 is not necessarily indicative of future periods. In
the year ended  December 31, 1998 and 1997,  the  Partnership  distributed  $9.9
million to the limited partners, or $1.00 per weighted-average depositary unit.

(E)  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 that 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 number of railcars
operating in Canada, is conducted in United States (US) dollars. Political risks
are  minimized by avoiding  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 US banks to
cash deposits. Although these credit support mechanisms 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
audited 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 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 change  significantly 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  United  States  domiciled
lessees consisted of railcars,  trailers, and an aircraft. During 1999, US lease
revenues  accounted  for  24% of the  lease  revenues  generated  by  wholly-and
partially-owned equipment, and these operations accounted for a $0.1 million net
loss while the Partnership had total aggregate net income of $4.0 million.

The  Partnership's  owned  equipment  on  lease  to  Canadian-domiciled  lessees
consisted  of  railcars  and  an  aircraft   that  was   transferred   into  the
Partnership's  owned equipment  portfolio from a trust during the second quarter
of 1998.  Canadian  lease  revenues  accounted  for 40% of total lease  revenues
generated  by  wholly-and  partially-owned  equipment,  while  these  operations
accounted for $4.3 million in net income of the Partnerships total aggregate net
income of $4.0 million.

The Partnership's owned equipment and investments in equipment owned by USPEs on
lease to Europeon  domiciled  leases,  consisted of three owned  aircraft and an
interest  in two trusts  that own three  aircraft,  two  aircraft  engines,  and
aircraft  rotable  components.   During  1999,  the  lease  revenues  for  these
operations  accounted  for 24% of total lease  revenues  generated by wholly-and
partially-owned  equipment  and  accounted for income of $0.7 million in 1999 of
the Partnership's total aggregate net income of $4.0 million.

The Partnership's owned equipment and investments in equipment owned by USPEs on
lease to lessees in the rest of the world  consisted of marine  containers and a
partially owned marine vessel.  During 1999, lease revenues for these operations
accounted  for  12%  of  the  total  lease   revenue   generated  by  wholly-and
partially-owned  equipment,  while these operations accounted for $26,000 in net
loss while the Partnership had total aggregate net income of $4.0 million.


<PAGE>



(F)  Effects of Year 2000

As of March 24, 2000, the Partnership has not experienced any material Year 2000
(Y2K)  issues  with  either  its  internally  developed  software  or  purchased
software. In addition, to date, the Partnership has not been impacted by any Y2K
problems  that may  have  impacted  our  customers  and  suppliers.  The  amount
allocated to the  Partnership by the General  Partner  related to Y2K issues has
bot been material.  The General Partner continues to monitor its systems for any
potential Y2K issues.

(G)  Inflation

Inflation did not significantly  impact on the  Partnership's  operations during
1999, 1998, or 1997.

(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

The Partnership  entered its  liquidation  phase on January 1, 2000. The General
Partner is 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. The General Partner  anticipates that
the  liquidation  of  Partnership  assets  will be  completed  by the  scheduled
termination of the Partnership at the end of the year 2000.

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  unpredictability of these factors, or
of their  occurrence,  makes it  difficult  for the  General  Partner to clearly
define trends or influences that may impact the performance of the Partnership's
equipment.  The General Partner continually  monitors both the equipment markets
and the performance of the Partnership's equipment in these markets. The General
Partner  may  decide to reduce the  Partnership's  exposure  to those  equipment
markets in which it  determines  that it cannot  operate  equipment  and achieve
acceptable rates of return.

The  Partnership  intends  to use cash  flow  from  operations  to  satisfy  its
operating  requirements,  pay loan principal on debt, and pay cash distributions
to the investors.

Factors affecting the Partnership's contribution during the year 2000:

1.   A worldwide  increase in available  marine  containers  to lease has led to
     declining rates for this equipment.  In addition, some of the Partnership's
     refrigerated  marine  containers  have become  delaminated.  This condition
     lowers the demand for these marine  containers  which has lead to declining
     lease rates and lower utilization.

2.   Depressed  economic  conditions  in Asia  during  most  of 1999  has led to
     declining  freight  rates for dry bulk marine  vessels.  As Asia begins its
     economic recovery and in the absence of new additional orders,  this market
     would be expected to stabilize and improve over the next one to two years.

3.   Railcar  loading in North  America has  continued  to be high,  however,  a
     softening  in the  market in the last  quarter  of 1999,  may lead to lower
     utilization  and lower  contribution  to the Partnership as existing leases
     expire and renewal leases are negotiated.

Several other factors may affect the Partnership's  operating performance in the
year 2000, including changes in the markets for the Partnership's  equipment and
changes in the regulatory environment in which that equipment operates.

(1)  Repricing Risk

Certain of the Partnership's aircraft, marine containers,  railcars and trailers
will be remarketed in 2000 as existing  leases expire,  exposing the Partnership
to some 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.  In either case, the General Partner intends to 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.  Currently,  the General Partner has
observed  rising  insurance  costs  to  operate  certain  vessels  in US  ports,
resulting  from  implementation  of the US Oil  Pollution  Act of 1990.  Ongoing
changes  in  the  regulatory   environment,   both  in  the  United  States  and
internationally,  cannot be predicted  with  accuracy,  and preclude the General
Partner from  determining the impact of such changes on Partnership  operations,
purchases,  or sale of equipment.  Under US Federal Aviation Regulations,  after
December 31,  1999,  no person may operate an aircraft to or from any airport in
the contiguous  United States unless that aircraft has been shown to comply with
Stage III noise levels.  The  Partnership has Stage II aircraft that do not meet
Stage  III   requirements.   The  cost  to  husk-kit  a  Stage  II  aircraft  is
approximately $2.0 million, depending on the type of aircraft. The Partnership's
Stage II aircraft are either positioned with air carriers that are outside Stage
III-legislated  areas or  anticipated  to be sold or leased outside of Stage III
areas before the year 2000.

(3) Distributions

During the liquidation  phase,  the Partnership will use operating cash flow and
proceeds from the sale of equipment to meet its operating obligations, make loan
principal and interest payments on debt, and make distributions to the partners.
Although  the  General  Partner  intends  to  maintain  a  sustainable  level of
distributions prior to final liquidation of the Partnership,  actual Partnership
performance  and  other  considerations  may  require  adjustments  to  existing
distribution  levels which could include using available  operating cash flow to
meet future  Partnership  debt  obligations.  Pending  asset  sales,  the use of
operating cash flows to meet  Partnership  debt  obligation  could result in the
Partnership being unable to make a regularly scheduled  quarterly  distribution,
as occured in the fourth  quarter  of 1999.  In the long term,  changing  market
conditions precludes the General Partner from accurately  determining the impact
of future re-leasing activity and equipment sales on Partnership performance and
liquidity.

Since the Partnership has entered the 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. Although  distribution levels may be reduced,  significant asset sales
may result in special distributions to unitholders.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The  Partnership's  primary  market risk exposures are that of interest rate and
currency  devaluation risk. The Partnership's  senior secured note is a variable
rate debt. The Partnership  estimates a one percent  increase or decrease in the
Partnership's  variable  rate debt  would  result in an  increase  or  decrease,
respectively,  in  interest  expense of $0.1  million in 2000.  The  Partnership
estimates a two percent increase or decrease in the Partnership's  variable rate
debt would result in an increase or decrease,  respectively, in interest expense
of $0.15 million in 2000.

During 1999,  76% of the  Partnership's  total lease  revenues  from  wholly-and
partially-owned equipment came from non-United States domiciled lessees. Most of
the  Partnership's  leases require payment in United States  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
None.


<PAGE>



                                   (PART III)

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

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

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

<S>                                      <C>    <C>
Robert N. Tidball                        61      Chairman of the Board, Director, President, and Chief Executive
                                                 Officer, PLM International, Inc.;
                                                 Director, PLM Financial Services, Inc.;
                                                 Vice President, PLM Railcar Management Services, Inc.;
                                                 President, PLM Worldwide Management Services Ltd.

Randall L.-W. Caudill                    52      Director, PLM International, Inc.

Douglas P. Goodrich                      53      Director and Senior Vice President, PLM International, Inc.;
                                                 Director and President, PLM Financial Services, Inc.; President,
                                                 PLM Transportation Equipment Corporation; President, PLM Railcar
                                                 Management Services, Inc.

Warren G. Lichtenstein                   34      Director, PLM International, Inc.

Howard M. Lorber                         51      Director, PLM International, Inc.

Harold R. Somerset                       64      Director, PLM International, Inc.

Robert L. Witt                           59      Director, PLM International, Inc.

Robin L. Austin                          53      Vice President, Human Resources, PLM International, Inc. and PLM
                                                 Financial Services, Inc.

Stephen M. Bess                          53      President, PLM Investment Management, Inc.; Vice President and
                                                 Director, PLM Financial Services, Inc.

Richard K Brock                          37      Vice President and Chief Financial Officer, PLM International,
                                                 Inc. and PLM Financial Services, Inc.

Susan C. Santo                           37      Vice President, Secretary, and General Counsel, PLM
                                                 International, Inc. and PLM Financial Services, Inc.

</TABLE>

Robert N.  Tidball  was  appointed  Chairman  of the  Board in  August  1997 and
President and Chief Executive Officer of PLM International in March 1989. At the
time of his  appointment  as  President  and  Chief  Executive  Officer,  he was
Executive Vice President of PLM International.  Mr. Tidball became a director of
PLM  International  in April 1989.  Mr.  Tidball was appointed a Director of PLM
Financial Services, Inc. in July 1997 and was elected President of PLM Worldwide
Management Services Limited in February 1998. He has served as an officer of PLM
Railcar  Management  Services,  Inc.  since June 1987. Mr. Tidball was Executive
Vice President of Hunter Keith,  Inc., a  Minneapolis-based  investment  banking
firm,  from March  1984 to  January  1986.  Prior to Hunter  Keith,  he was Vice
President, General Manager, and Director of North American Car Corporation and a
director of the American Railcar Institute and the Railway Supply Association.


<PAGE>



Randall L.-W.  Caudill was elected to the Board of Directors in September  1997.
He is  President  of  Dunsford  Hill  Capital  Partners,  a San  Francisco-based
financial  consulting firm serving emerging growth companies.  Prior to founding
Dunsford  Hill Capital  Partners,  Mr.  Caudill held senior  investment  banking
positions at Prudential  Securities,  Morgan Grenfell Inc., and The First Boston
Corporation. Mr. Caudill also serves as a director of Northwest Biotherapeutics,
Inc., VaxGen, Inc., SBE, Inc., and RamGen, Inc.

Douglas  P.  Goodrich  was  elected  to the  Board of  Directors  in July  1996,
appointed  Senior  Vice  President  of PLM  International  in  March  1994,  and
appointed Director and President of PLM Financial  Services,  Inc. in June 1996.
Mr.  Goodrich  has also served as Senior Vice  President  of PLM  Transportation
Equipment Corporation since July 1989 and as President of PLM Railcar Management
Services,  Inc. since September 1992,  having been a Senior Vice President since
June 1987.  Mr.  Goodrich was an executive  vice  president of G.I.C.  Financial
Services  Corporation of Chicago,  Illinois, a subsidiary of Guardian Industries
Corporation, from December 1980 to September 1985.

Warren G.  Lichtenstein  was elected to the Board of Directors in December 1998.
Mr.  Lichtenstein  is the Chief  Executive  Officer of Steel  Partners II, L.P.,
which is PLM International's  largest  shareholder,  currently owning 16% of the
Company's common stock. Additionally,  Mr. Lichtenstein is Chairman of the Board
of Aydin Corporation,  a NYSE-listed defense  electronics  concern, as well as a
director of Gateway  Industries,  Rose's Holdings,  Inc., and Saratoga  Beverage
Group,  Inc. Mr.  Lichtenstein is a graduate of the University of  Pennsylvania,
where he received a Bachelor of Arts degree in economics.

Howard M.  Lorber was elected to the Board of  Directors  in January  1999.  Mr.
Lorber is President and Chief Operating  Officer of New Valley  Corporation,  an
investment banking and real estate concern. He is also Chairman of the Board and
Chief  Executive  Officer  of  Nathan's  Famous,  Inc.,  a  fast  food  company.
Additionally,  Mr. Lorber is a director of United Capital  Corporation and Prime
Hospitality  Corporation and serves on the boards of several  community  service
organizations.  He is a graduate of Long Island University,  where he received a
Bachelor  of Arts  degree and a Masters  degree in  taxation.  Mr.  Lorber  also
received charter life  underwriter and chartered  financial  consultant  degrees
from the American  College in Bryn Mawr,  Pennsylvania.  He is a trustee of Long
Island University and a member of the Corporation of Babson College.

Harold R. Somerset was elected to the Board of Directors of PLM International in
July 1994.  From February 1988 to December 1993, Mr.  Somerset was President and
Chief Executive  Officer of California & Hawaiian Sugar Corporation (C&H Sugar),
a subsidiary of Alexander & Baldwin,  Inc. Mr. Somerset joined C&H Sugar in 1984
as Executive Vice President and Chief  Operating  Officer,  having served on its
Board of Directors  since 1978.  Between 1972 and 1984, Mr.  Somerset  served in
various  capacities  with  Alexander & Baldwin,  Inc., a publicly  held land and
agriculture company headquartered in Honolulu,  Hawaii, including Executive Vice
President of Agriculture  and Vice President and General  Counsel.  Mr. Somerset
holds a law  degree  from  Harvard  Law  School  as well as a  degree  in  civil
engineering  from the  Rensselaer  Polytechnic  Institute and a degree in marine
engineering from the U.S. Naval Academy.  Mr. Somerset also serves on the boards
of directors for various other companies and organizations, including Longs Drug
Stores, Inc., a publicly held company.

Robert L. Witt was elected to the Board of Directors  in June 1997.  Since 1993,
Mr. Witt has been a principal with WWS  Associates,  a consulting and investment
group specializing in start-up situations and private  organizations about to go
public.  Prior to that, he was Chief Executive Officer and Chairman of the Board
of Hexcel  Corporation,  an international  advanced materials company with sales
primarily in the aerospace,  transportation, and general industrial markets. Mr.
Witt also serves on the boards of  directors  for various  other  companies  and
organizations.

Robin  L.  Austin  became  Vice  President,  Human  Resources  of PLM  Financial
Services,  Inc. in 1984, having served in various capacities with PLM Investment
Management,  Inc., including Director of Operations, from February 1980 to March
1984.  From June 1970 to September 1978, Ms. Austin served on active duty in the
United  States Marine Corps and served in the United States Marine Corp Reserves
from 1978 to 1998.  She retired as a Colonel of the United  States  Marine Corps
Reserves  in 1998.  Ms.  Austin  has  served  on the Board of  Directors  of the
Marines'  Memorial  Club  and is  currently  on the  Board of  Directors  of the
International Diplomacy Council.


<PAGE>



Stephen M. Bess was appointed a Director of PLM Financial Services, Inc. in July
1997.  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. Mr. Bess 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.

Richard K Brock was appointed Vice President and Chief Financial  Officer of PLM
International  and PLM Financial  Services,  Inc. in January 2000,  after having
served as Acting CFO since June 1999. Mr. Brock served as an accounting  manager
beginning in September  1991 and as Director of Planning and General  Accounting
beginning in February 1994. Mr. Brock was a division controller of Learning Tree
International,  a technical  education company,  from February 1988 through July
1991.

Susan C. Santo  became Vice  President,  Secretary,  and General  Counsel of PLM
International and PLM Financial Services,  Inc. in November 1997. She has worked
as an  attorney  for PLM  International  since  1990 and  served  as its  Senior
Attorney since 1994.  Previously,  Ms. Santo was engaged in the private practice
of law in San  Francisco.  Ms. Santo  received her J.D.  from the  University of
California, Hastings College of the Law.

The directors of PLM  International,  Inc. are elected for a three-year term and
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  International  Inc. or PLM
Financial Services,  Inc., PLM Transportation Equipment Corp., or PLM Investment
Management, Inc.























                    (This space is intentionally left blank)







<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, 1999.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(A)    Security Ownership of Certain Beneficial Owners

The  General  Partner is entitled to a 5% interest in the profits and losses and
distributions of the Partnership  subject to certain  allocations of income.  In
addition  to  its  General  Partner  interest,  FSI  owned  8,000  units  in the
Partnership  as of December 31, 1999.  As of December 31, 1999,  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

Table 3,  below,  sets  forth,  as of the date of this  report,  the  amount and
percent of the Partnership's  outstanding depositary units beneficially owned by
each of the  directors  and  executive  officers and all directors and executive
officers as a group of the General Partner and its affiliates:

                                     TABLE 3

Name                             Depositary Units             Percent of Units

Robert N. Tidball                   2,000                            *

All directors and officers
As a group (1 person)               2,000                            *

* Less than 1%.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions with Management and Others

During 1999,  the  Partnership  paid or accrued the following fees to FSI or its
affiliates: management fees, $0.8 million. The Partnership reimbursed FSI or its
affiliates  $0.5  million  for  administrative  and  data  processing   services
performed on behalf of the Partnership during 1999.

During  1999,  the  USPEs  paid  or  accrued  the  following  fees to FSI or its
affiliates  (based  on  the  Partnership's  proportional  share  of  ownership):
management  fees,  $12,000  and  administrative  and data  processing  services,
$6,000.









<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.

(B)    Reports on Form 8-K

       None.

(C)    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.

       10.2   $41,000,000  Credit  Agreement  dated as of December 13, 1994 with
              First  Union  National  Bank of  North  Carolina  incorporated  by
              reference to the  Partnership's  Annual  Report on Form 10-K dated
              December  31,  1994,   filed  with  the  Securities  and  Exchange
              Commission on March 24, 1995.

       24.    Powers of Attorney.


<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 24, 2000               PLM EQUIPMENT GROWTH FUND III
                                    PARTNERSHIP

                                    By:  PLM Financial Services, Inc.
                                         General Partner



                                    By:   /s/ Douglas P. Goodrich
                                          Douglas P. Goodrich
                                          President & Director



                                    By:   /s/ Richard K Brock
                                          Richard K Brock
                                          Chief Financial 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


*___________________
Robert N. Tidball        Director, FSI                   March 24, 2000


*___________________
Douglas P. Goodrich      Director, FSI                   March 24, 2000


*___________________
Stephen M. Bess          Director, FSI                   March 24, 2000

*Susan C. Santo,  by signing her name hereto,  does sign this document on behalf
of the persons  indicated  above pursuant to powers of attorney duly executed by
such persons and filed with the Securities and Exchange Commission.



/s/ Susan C. Santo
Susan C. Santo
Attorney-in-Fact



<PAGE>



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


                                  (Item 14(a))


                                                                        Page

Independent auditors' report                                              30

Balance sheets as of December 31, 1998 and 1998                           31

Statements of income for the years ended December 31,
     1999, 1998, and 1997                                                 32

Statements of changes in partners' capital for
     the years ended December 31, 1999, 1998, and
     1997                                                                 33

Statements of cash flows for the years ended December 31,
     1999, 1998, and 1997                                                 34

Notes to financial statements                                          35-45


All other financial  statement  schedules have been omitted because 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.



<PAGE>




                          INDEPENDENT AUDITORS' REPORT


The Partners
PLM Equipment Growth Fund III:



We have audited the  accompanying  financial  statements of PLM Equipment Growth
Fund III (the  Partnership)  as listed in the  accompanying  index to  financial
statements.   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 have  conducted our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements 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  Partnership  will terminate on December 31, 2000,
unless terminated earlier upon sale of all equipment or by certain other events.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial position of PLM Equipment Growth Fund III
as of December 31, 1999 and 1998, and the results of its operations and its cash
flows for each of the years in the three-year  period ended December 31, 1999 in
conformity with generally accepted accounting principles.



/s/ KPMG LLP
SAN FRANCISCO, CALIFORNIA
March 24, 2000


<PAGE>



                                        PLM EQUIPMENT GROWTH FUND III
                                           (A Limited Partnership)
                                                BALANCE SHEETS
                                                 December 31,
                                (in thousands of dollars, except unit amounts)




<TABLE>
<CAPTION>

                                                                            1999                 1998
                                                                        -----------------------------------
  Assets

  <S>                                                                    <C>                 <C>
  Equipment held for operating leases, at cost                           $   84,191          $   109,680
  Less accumulated depreciation                                             (69,303)             (81,298)
                                                                         ---------------------------------
      Net equipment                                                          14,888               28,382

  Cash and cash equivalents                                                     486                3,429
  Accounts receivable, net of allowance for doubtful
      accounts of $1,757 in 1999 and $1,469 in 1998                             727                1,328
  Investments in unconsolidated special-purpose entities                      2,498                2,160
  Lease negotiation fees to affiliates, net of accumulated
      amortization of $0 in 1999 and $155 in 1998                                --                   50
  Debt issuance costs, net of accumulated
      amortization of $309 in 1999 and $248 in 1998                              31                   91
  Prepaid expenses and other assets                                              60                   72
                                                                         ---------------------------------

        Total assets                                                     $   18,690          $    35,512
                                                                         =================================

  Liabilities, minority interest and partners' capital

  Liabilities
  Accounts payable and accrued expenses                                  $      786          $     1,369
  Due to affiliates                                                             699                  168
  Lessee deposits and reserve for repairs                                     1,419                1,142
  Note payable                                                                7,458               18,540
                                                                         ---------------------------------
    Total liabilities                                                        10,362               21,219
                                                                         ---------------------------------

  Minority interests                                                             --                2,211

  Partners' capital
  Limited partners (9,871,073 depositary units
      as of December 31, 1999 and 1998)                                       8,328               12,082
  General Partner                                                                --                   --
                                                                         ---------------------------------
    Total partners' capital                                                   8,328               12,082
                                                                         ---------------------------------

        Total liabilities, minority interests and partners' capital      $   18,690          $    35,512
                                                                         =================================



</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>


                                                                            1999            1998           1997
                                                                        --------------------------------------------
  <S>                                                                    <C>            <C>             <C>
  Revenues

  Lease revenue                                                          $  14,852      $   18,413      $  22,515
  Interest and other income                                                    445             286            448
  Net gain on disposition of equipment                                       2,197           3,808          5,629
                                                                         -------------------------------------------
    Total revenues                                                          17,494          22,507         28,592
                                                                         -------------------------------------------

  Expenses

  Depreciation and amortization                                              7,628          10,461         15,177
  Repairs and maintenance                                                    2,619           3,978          3,954
  Equipment operating expenses                                                 668           1,006          1,110
  Insurance expense to affiliate                                                10             (20)           180
  Other insurance expenses                                                     227             323            721
  Management fees to affiliate                                                 807           1,049          1,279
  Interest expense                                                           1,021           1,706          3,164
  General and administrative expenses to affiliates                            504             587            809
  Other general and administrative expenses                                  1,098             863            952
  Provision for (recovery of) bad debts                                        308            (335)           458
  ------------------------------------------------------------------------------------------------------------------
    Total expenses                                                          14,890          19,618         27,804
                                                                         -------------------------------------------

  Minority interests                                                            22             (21)           292

  Equity in net income of unconsolidated
        special-purpose entities                                             1,413              49            857
                                                                         -------------------------------------------

        Net income                                                       $   4,039       $   2,917      $   1,937
                                                                         ===========================================

  Partners' share of net income

  Limited partners                                                       $   3,649       $   2,397      $   1,417
  General Partner                                                              390             520            520
                                                                         -------------------------------------------

        Total                                                            $   4,039       $   2,917      $   1,937
                                                                         ===========================================

  Net income per weighted-average depositary unit                        $    0.37            0.24      $    0.14
                                                                         ===========================================

  Cash distribution                                                      $   7,793          10,394      $  10,391
                                                                         ===========================================

  Cash distribution per weighted-average depositary unit                 $    0.75            1.00      $    1.00
                                                                         ===========================================

</TABLE>


                 See accompanying notes to financial statements.







                          PLM EQUIPMENT GROWTH FUND III
                             (A Limited Partnership)
                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
              For the Years Ended December 31, 1999, 1998, and 1997
                            (in thousands of dollars)


<TABLE>
<CAPTION>


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

  <S>                                                  <C>                 <C>             <C>
    Partners' capital as of December 31, 1996          $   28,013          $   --          $   28,013

  Net income                                                1,417             520               1,937

  Cash distribution                                        (9,871)           (520)            (10,391)
                                                       ------------------------------------------------

    Partners' capital as of December 31, 1997              19,559              --              19,559

  Net income                                                2,397             520               2,917

  Cash distribution                                        (9,874)           (520)            (10,394)
                                                       ------------------------------------------------

    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
                                                       ================================================


</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>

                                                                            1999            1998            1997
                                                                        ---------------------------------------------
  <S>                                                                    <C>             <C>             <C>
  Operating activities
  Net income                                                             $    4,039      $    2,917      $    1,937
  Adjustments to reconcile net income
        to net cash provided by (used in) operating activities:
    Depreciation and amortization                                             7,628          10,461          15,177
    Net gain on disposition of equipment                                     (2,197)         (3,808)         (5,629)
    Equity in net income from unconsolidated special-
        purpose entities                                                     (1,413)            (49)           (857)
    Changes in operating assets and liabilities:
      Restricted cash                                                            --              --           5,966
      Accounts receivable                                                       210             207             246
      Prepaid expenses and other assets                                         (33)             23              41
      Accounts payable and accrued expenses                                    (482)           (275)             79
      Due to affiliates                                                          (6)           (267)           (881)
      Lessee deposits and reserves for repairs                                  478             (94)         (6,716)
      Minority interests                                                       (224)           (228)           (703)
                                                                         --------------------------------------------
        Net cash provided by operating activities                             8,000           8,887           8,660
                                                                         --------------------------------------------

  Investing activities
  Equipment purchased and placed in unconsolidated
      special-purpose entities                                                   --          (1,198)             --
  Due to affiliates                                                             (36)             --              --
  Payment of capitalized repairs                                                (26)           (126)           (248)
  Payments of acquisition fees to affiliate                                      --             (54)             --
  Payments of lease negotiation fees to affiliate                                --             (12)              -
  Proceeds from disposition of equipment                                      3,790          12,077          12,085
  Liquidation distribution from unconsolidated
      special-purpose entities                                                3,548              --              --
  (Investment in ) distribution from unconsolidated
      special-purpose entities                                                   56           2,552           1,921
                                                                         -------------------------------------------
        Net cash provided by investing activities                             7,332          13,239          13,758
                                                                         -------------------------------------------

  Financing activities
  Net receipts (repayments to) from affiliate                                   600          (1,792)          1,792
  Principal payments on note payable                                        (11,082)        (10,750)        (10,994)
  Cash distribution paid to limited partners                                 (7,403)         (9,874)         (9,871)
  Cash distribution paid to General Partner                                    (390)           (520)           (520)
                                                                         --------------------------------------------
        Net cash used in financing activities                               (18,275)        (22,936)        (19,593)
                                                                         --------------------------------------------

  Net (decrease) increase in cash and cash equivalents                       (2,943)           (810)          2,825
  Cash and cash equivalents at beginning of year                              3,429           4,239           1,414
                                                                         --------------------------------------------
  Cash and cash equivalents at end of year                               $      486      $    3,429      $    4,239
                                                                         ============================================

  Supplemental information
  Interest paid                                                          $    1,021      $    1,712      $    3,339
                                                                         ============================================


</TABLE>


                 See accompanying notes to financial statements.


<PAGE>


                            EQUIPMENT GROWTH FUND III
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1999

1.   Basis of Presentation

     Organization

     PLM  Equipment  Growth  Fund III, a  California  limited  partnership  (the
     Partnership),  was formed on October 15, 1987 to engage 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).

     Beginning in the Partnership's  eleventh year of operations which commenced
     on January 1, 2000,  the General  Partner began the orderly  liquidation of
     the Partnership's  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  Partnership  will  terminate on December 31,
     2000,  unless  terminated  earlier upon sale of all equipment or by certain
     other events.

     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.  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.

     These  financial  statements  have been  prepared on the  accrual  basis of
     accounting in accordance  with generally  accepted  accounting  principles.
     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  owned by 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.  Lease  origination  costs were
     capitalized and amortized over the term of the lease.

     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 most other types of  equipment.
     Certain aircraft are depreciated under the double-declining  balance method
     over the lease  term  which  approximates  the assets  economic  life.  The
     depreciation method is changed to straight-line method
<PAGE>


                          PLM EQUIPMENT GROWTH FUND III
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1999

1.   Basis of Presentation (continued)

     Depreciation and Amortization (continued)

     when annual  depreciation  expense using the  straight-line  method exceeds
     that calculated by the  double-declining  balance method.  Acquisition fees
     have been  capitalized  as part of the cost of the  equipment and amortized
     over the equipment's depreciable life. Lease negotiation fees are amortized
     over the initial  equipment  lease term.  Debt placement fees are amortized
     over the term of the related loan. Major  expenditures that are expected to
     extend the useful lives or reduce  future  operating  expenses of equipment
     are  capitalized  and amortized  over the estimated  remaining  life of the
     equipment.

     Transportation Equipment

     In accordance with Financial  Accounting Standards Board Statement No. 121,
     "Accounting  for the  Impairment  of Long-Lived  Assets and for  Long-Lived
     Assets to Be Disposed Of", the General  Partner  reviews the carrying value
     of the  Partnership's  equipment  portfolio at least quarterly and whenever
     circumstances   indicate  the  carrying  value  of  an  asset  may  not  be
     recoverable  in relation  to  expected  future  market  conditions  for the
     purpose  of  assessing  the  recoverability  of the  recorded  amounts.  If
     projected  undiscounted  future cash flows are less than the carrying value
     of the equipment,  a loss on revaluation is recorded.  No reductions to the
     carrying values of equipment were required during 1999, 1998, or 1997.

     Investments in Unconsolidated Special-Purpose Entities

     In September 1999, the General Partner amended the corporate-by-laws of the
     USPEs in which the  Partnership  owns an  interest  greater  than 50%.  The
     amendment to the corporate-by-law provides 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  regardless  of the  percentage  of
     ownership. 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  is used  for  this  entity  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.
     Accordingly,  as of December  31,  1999,  the balance  sheet  reflects  all
     investments in USPEs on an equity basis.

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

     Repairs and Maintenance

     Repair and maintenance costs for railcars, marine vessels and trailers, are
     usually the obligation of the Partnership.  Maintenance  costs of the other
     equipment are the obligation of the lessee.  If they are not covered by the
     lessee,  they are  charged  against  operations  as  incurred.  To meet the
     maintenance requirements of certain aircraft airframes and engines, reserve
     accounts  are  prefunded by the lessee.  Estimated  costs  associated  with
     marine  vessel dry docking are accrued and charged to income  ratably  over
     the period prior to such dry-docking.  The reserve accounts are included in
     the balance sheet as lessee deposits and reserve for repairs.



<PAGE>



                          PLM EQUIPMENT GROWTH FUND III
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1999

1.   Basis of Presentation (continued)

     Net Income (Loss) and Distributions Per Depositary Unit

     Cash  distributions  of the  Partnership  are  allocated 95% to the limited
     partners and 5% to the General Partner and may include amounts in excess of
     net  income.  Net  income  is  allocated  to the  General  Partner  through
     allocation to the extent necessary to cause the General  Partner's  capital
     account to equal zero.  The General  Partner  received an allocation in the
     amount of $0.2 million,  $0.4 million, and $0.4 million from the gross gain
     on disposition  of equipment for the years ended  December 31, 1999,  1998,
     and 1997,  respectively.  The  limited  partners'  net  income  (loss)  and
     distributions  are 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.

     Cash  distributions are recorded when paid. 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,  $7.5 million,  and
     $8.5  million  for the years  ended  December  31,  1999,  1998,  and 1997,
     respectively, were deemed to be a return of capital.

     Cash distributions relating to the fourth quarter of 1998 and 1997, of $2.1
     million and $2.6 million, respectively,  were paid during the first quarter
     of 1999 and 1998. There were no cash  distributions  relating to the fourth
     quarter of 1999 paid in 2000.

     Net Income (Loss) Per Weighted-Average Depositary Unit

     Net income  (loss) per  weighted-average  depositary  unit was  computed by
     dividing  net  income  (loss)  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, 1999, 1998, and 1997 were 9,871,073.

     Comprehensive Income

     The  Partnership's  net  income was equal to  comprehensive  income for the
     years ended December 31, 1999, 1998, and 1997.

     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 to be cash equivalents.



<PAGE>



                          PLM EQUIPMENT GROWTH FUND III
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1999

2.   General Partner and Transactions with Affiliates

     An  officer of FSI,  a  wholly-owned  subsidiary  of the  General  Partner,
     contributed $100 of the Partnership's initial capital.  Under the equipment
     management  agreement,  IMI,  subject  to  certain  reductions,  receives a
     monthly  management fee attributable to either owned equipment or interests
     in  equipment  owned by the USPEs  equal to the lesser 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 or  operating  personnel  for  equipment,  and  similar  services.  The
     Partnership's  proportional  share of USPE  management  fees of $12,000 and
     $3,000 were  payable as of December  31, 1999 and 1998,  respectively.  The
     Partnership's  proportional  share of USPEs  management  fee expense during
     1999, 1998, and 1997 was $0.1 million.  The Partnership  reimbursed FSI and
     its  affiliates   $0.5  million,   $0.6  million,   and  $0.8  million  for
     administrative  and data  processing  services  performed  on behalf of the
     Partnership in 1999, 1998, 1997, respectively.

     The  Partnership's  proportional  share  of USPEs  administrative  and data
     processing  services  reimbursed  to FSI was  $6,000,  $26,000  and $38,000
     during 1999, 1998, and 1997, respectively.

     The  Partnership  paid  $2,000  and  $6,000  to  Transportation   Equipment
     Indemnity  Company Ltd.  (TEI), an affiliate of the General  Partner,  that
     provides marine insurance  coverage and other insurance  brokerage services
     in 1998 and 1997,  respectively.  No fees for owned  equipment were paid to
     TEI in 1999. The Partnership received a refund of $0.1 million in 1998 from
     lower loss-of-hire  insurance claims from the Partnership and other insured
     affiliated  programs.  No similar refund was received  during 1997 or 1999.
     PLM International liquidated TEI in the first quarter of 2000.

     The Partnership  paid lease  negotiation and equipment  acquisition fees of
     $0.1  million  to TEC and PLM WMS during  1998.  No lease  negotiation  and
     equipment acquisition fees were paid to TEC or WMS during 1999 or 1997.

     As of December 31, 1999,  approximately  29% of the  Partnership's  trailer
     equipment  was in  rental  facilities  operated  by PLM  Rental,  Inc.,  an
     affiliate of the General  Partner,  doing business as PLM Trailer  Leasing.
     Revenues  under  short-term   rental  agreements  with  the  rental  yards'
     customers are reported as revenue in accordance  with Financial  Accounting
     Standards Board Statement  No.13  "Accounting For Leases".  Direct expenses
     associated with the equipment are charged directly to the  Partnership.  An
     allocation of indirect expenses of the rental yard operations is charged to
     the Partnership monthly.

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

     During  1999,  the  Partnership  borrowed a total of $0.6  million from the
     General  Partner.  The  General  Partner  charged  the  Partnership  market
     interest rates. Total interest paid to the General Partner was $10,000.

     The balance due to affiliates as of December 31, 1999 included $0.1 million
     due to FSI and its affiliates  for management  fees and $0.6 million to FSI
     for the loan made to the  Partnership.  The balance due to affiliates as of
     December 31, 1998 included $0.2 million due to FSI and its  affiliates  for
     management fees.



<PAGE>


                          PLM EQUIPMENT GROWTH FUND III
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1999

3.   Equipment

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

  Equipment Held for Operating Leases:               1999              1998
                                                --------------------------------

  Aircraft                                      $   42,000         $   52,028
  Rail equipment                                    33,572             33,999
  Marine containers                                  4,453              5,606
  Trailers                                           4,166              5,257
  Marine vessel                                         --             12,790
                                                --------------------------------
                                                    84,191            109,680
  Less accumulated depreciation                    (69,303)           (81,298)
                                                --------------------------------
  Net equipment                                 $   14,888         $   28,382
                                                ================================

     Revenues are earned by placing the equipment under operating leases. All of
     the   Partnership's   marine   containers   are  leased  to   operators  of
     utilization-type   leasing  pools,   which  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  majority  of rents for
     railcars are based on a fixed rate; in some cases they are based on mileage
     traveled, rents for all other equipment are based on fixed rates.

     During September 1999, the Partnership's  investment in a marine vessel was
     reclassified  to an investment in  unconsolidated  special  purpose entity.
     (See Note 1).

     As of December 31, 1999, all owned equipment in the  Partnership  portfolio
     was on lease or  operating  in  PLM-affiliated  short-term  trailer  rental
     yards,  except for 40 railcars,  and an aircraft.  As of December 31, 1998,
     all owned equipment in the Partnership  portfolio was on lease or operating
     in  PLM-affiliated  short-term  trailer rental yards,  except for 25 marine
     containers,  69 railcars,  and an aircraft. The aggregate net book value of
     equipment  off lease was $1.2  million and $2.4  million as of December 31,
     1999 and 1998, respectively.

     During  1999,  the  Partnership  sold or  disposed  of  marine  containers,
     trailers,  railcars,  and an aircraft  with an aggregate  net book value of
     $1.6 million for proceeds of $3.8 million.

     During  1998,  the  Partnership  sold or  disposed  of  marine  containers,
     trailers,  railcars,  and a mobile offshore drilling unit with an aggregate
     net book value of $8.3 million for proceeds of $12.1 million.

     In the fourth quarter of 1996, the Partnership  ended its investment  phase
     in  accordance  with  the  limited  partnership  agreement;  therefore,  no
     equipment was purchased during 1999, 1998, or 1997. Capital improvements to
     the  Partnership's  existing  equipment of $26,000 million and $0.1 million
     were made during 1999 and 1998, respectively.

     All leases for owned equipment are being accounted for as operating leases.
     Future minimum rentals under noncancelable leases for owned equipment as of
     December 31, 1999 during 2000 are approximately $10.7 million. Per diem and
     short-term  rentals consisting of untilization rate lease payments included
     in revenue amounted to approximately $0.3 million,  $0.8 million,  and $3.9
     million in 1999, 1998, and 1997, respectively.


<PAGE>



                          PLM EQUIPMENT GROWTH FUND III
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1999

4.   Investments in Unconsolidated Special Purpose Entities

     In September 1999, the General Partner amended the corporate-by-laws of the
     USPEs in which the  Partnership  owns an  interest  greater  than 50%.  The
     amendment to the corporate-by-law provides 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  regardless  of the  percentage  of
     ownership. 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  is used  for  this  entity  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.
     Accordingly,  as of December  31,  1999,  the balance  sheet  reflects  all
     investments in USPEs on an equity basis.

     The net investments in USPEs include the following  jointly-owned equipment
     (and related  assets and  liabilities)  as of December 31, (in thousands of
     dollars):

     <TABLE>
<CAPTION>
                                                                                1999               1998
                                                                           -----------      -----------
     <S>                                                                  <C>              <C>
     56% interest in an entity owning a bulk-carrier marine vessel         $    2,440       $       --
     25% interest in a trust that owned four 737-200 Stage II commercial
          aircraft                                                                 58              106
     17% interest in two trusts that owned a total of three 737-200
          Stage II commercial aircraft, two Stage II aircraft engines, and
          a portfolio of aircraft rotables

                                                                                   --            2,054
                                                                           -----------      -----------
             Net investments                                               $    2,498       $    2,160
                                                                           ===========      ===========
</TABLE>


     During 1999, the Partnership sold the 17% interest in two trusts that owned
     a total of three commercial aircraft, two aircraft engines, and a portfolio
     of aircraft rotables.

     During September 1999, the Partnership's  investment in a marine vessel was
     reclassified  to an investment in  unconsolidated  special  purpose entity.
     (See Note 1).

     During 1998,  the  Partnership  increased its  investment in a trust owning
     four  commercial  aircraft by funding the  installation  of a hushkit on an
     aircraft  assigned to the  Partnership  in the trust for $1.2 million.  The
     Partnership  paid a total of $0.1 million lease  negotiation  and equipment
     acquisition  fees  to  TEC  for  the  installation  of  the  hushkit.   The
     Partnership   was  required  to  install  a  hushkit  per  the  Partnership
     agreement.  In  this  trust,  all of the  commercial  aircraft  except  the
     commercial  aircraft  designated  to  the  Partnership  were  sold  by  the
     affiliated  programs.  The  aircraft,  designated to the  Partnership,  was
     transferred  out  of the  trust  into  the  Partnership's  owned  equipment
     portfolio. As of December 31, 1999, the Partnership's remaining interest in
     the trust were $0.1 million of receivables from the former lessee.

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

                                           1999                          1998                         1997
                                ---------------------------   ---------------------------   -------------------------
                                                   Net                         Net                           Net
                                   Total         Interest        Total        Interest         Total       Interest
                                   USPEs            of           USPEs           Of            USPEs          of
                                                Partnership                  Partnership                  Partnership
                                ------------    -----------   ------------   ------------   ------------  -----------
        <S>                     <C>             <C>            <C>            <C>           <C>           <C>
        Net investments         $     4,881     $    2,498     $   12,581     $    2,160    $    39,471   $    6,075
        Lease revenues                1,910            243          6,279          1,229         16,356        2,785
        Net income                    8,902          1,413          9,214             49         11,741          857


</TABLE>

<PAGE>


                          PLM EQUIPMENT GROWTH FUND III
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1999

5.   Operating Segments

     The Partnership  operates or operated primarily in six different  segments:
     aircraft leasing,  marine container leasing,  mobile offshore drilling unit
     (MODU)  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.

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

                                                     Marine
                                           Aircraft  Container   Marine   Trailer    Railcar     All
     For the Year Ended December 31, 1999  Leasing   Leasing     Vessel   Leasing    Leasing    Other<F1>   Total
     ------------------------------------  -------   -------     ------   -------    -------    -----       -----

     <S>                                   <C>       <C>        <C>       <C>       <C>        <C>        <C>
     Revenues
       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 fee expense                   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 USPEs     1,477        --        (64)       --         --        --      1,413
                                           ------------------------------------------------------------------------
                                           ========================================================================
     Net income (loss)                     $  2,713  $     90   $   (122) $    (32)  $  3,044  $ (1,654)  $  4,039
                                           ========================================================================

     As of December 31, 1999
     Total assets                          $  6,954  $    325   $  2,443  $  1,738   $  6,588  $    642   $ 18,690
                                           ========================================================================
<FN>
<F1>

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


<PAGE>



                                           PLM EQUIPMENT GROWTH FUND III
                                              (A Limited Partnership)
                                           NOTES TO FINANCIAL STATEMENTS
                                                 December 31, 1999

5.   Operating Segments (continued)

<TABLE>
<CAPTION>

                                                      Marine
                                           Aircraft  Container    MODU    Trailer    Railcar     All
     For the Year Ended December 31, 1998  Leasing   Leasing    Leasing   Leasing    Leasing    Other<F1>1  Total
     ------------------------------------  -------   -------    -------   -------    -------    -----       -----

     Revenues
       <S>                                 <C>       <C>        <C>       <C>        <C>       <C>        <C>
       Lease revenue                       $  6,471  $    278   $    756  $  1,256   $  7,144  $  2,508   $ 18,413
       Interest income and other                 23        --         --        --         78       185        286
       Net gain (loss) on disposition of
         equipment                              (14 )      60      3,619      (123)       266        --      3,808
                                           ------------------------------------------------------------------------
         Total revenues                       6,480       338      4,375     1,133      7,488     2,693     22,507

     Expenses
       Operations support                     1,321         6         18       221      2,376     1,345      5,287
       Depreciation and amortization          6,240       240        512       496      1,849     1,124     10,461
       Interest expense                          --        --         --        --         --     1,706      1,706
       Management fee                           298        14         38        77        497       125      1,049
       General and administrative expenses      211         5          6       186        285       757      1,450
       Provision for (recovery of) bad         (358 )      --         --        44        (22 )       1       (335 )
     debts
                                           ------------------------------------------------------------------------
         Total costs and expenses             7,712       265        574     1,024      4,985     5,058     19,618
                                           ------------------------------------------------------------------------
       Minority interests                        --        --         --        --         --        21         21
                                           ------------------------------------------------------------------------
     Equity in net income of USPEs               49        --         --        --         --        --         49
                                           ------------------------------------------------------------------------
                                           ========================================================================
     Net income (loss)                     $ (1,183 )$     73   $  3,801  $    109   $  2,503  $ (2,386 ) $  2,917
                                           ========================================================================

     As of December 31, 1998
     Total assets                          $ 14,788  $    512   $     --  $  2,148   $  8,072  $  9,992   $ 35,512
                                           ========================================================================

                                                      Marine
                                           Aircraft  Container    MODU    Trailer    Railcar     All
     For the Year Ended December 31, 1997  Leasing   Leasing    Leasing   Leasing    Leasing    Other<F1>1  Total
     ------------------------------------  -------   -------    -------   -------    -------    -----       -----

     Revenues
       Lease revenue                       $  7,873  $  1,087   $  1,642  $  1,850   $  7,537  $  2,526   $ 22,515
       Interest income and other                 45        17         --        --         82       304        448
       Net gain on disposition of
         equipment                            5,493        48         --        51         37        --      5,629
                                           ------------------------------------------------------------------------
         Total revenues                      13,411     1,152      1,642     1,901      7,656     2,830     28,592

     Expenses
       Operations support                     1,374        10         30       311      2,218     2,022      5,965
       Depreciation and amortization          8,943       753      1,487       725      1,941     1,328     15,177
       Interest expense                          12        --         --        --         --     3,152      3,164
       Management fee                           351        54         83       121        517       153      1,279
       General and administrative expenses      181         8         21       287        284       980      1,761
       Provision for bad debts                  379         1         --         5         71         2        458
                                           ------------------------------------------------------------------------
         Total costs and expenses            11,240       826      1,621     1,449      5,031     7,637     27,804
                                           ------------------------------------------------------------------------
       Minority interests                        --        --         --        --         --      (292)      (292)
                                           ------------------------------------------------------------------------
                                           ------------------------------------------------------------------------
     Equity in net income of USPEs              857        --         --        --         --        --        857
                                           ------------------------------------------------------------------------
                                           ========================================================================
     Net income (loss)                     $  3,028  $    326   $     21  $    452   $  2,625  $ (4,515)  $  1,937
                                           ========================================================================

     As of December 31, 1997
     Total assets                          $ 22,249  $  1,168   $  7,422  $  3,434   $ 10,031  $ 12,091   $ 56,395
                                           ========================================================================
<FN>
<F1>

1    Includes costs not  identifiable  to a particular  segment such as interest
     expense,  certain amortization expense,  certain interest income and other,
     operations support expenses and general and administrative expenses.

</FN>
</TABLE>




<PAGE>



                          PLM EQUIPMENT GROWTH FUND III
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1999

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. The marine vessels,  mobile offshore  drilling unit, and
     marine  containers are leased to multiple lessees in different regions that
     operate this equipment worldwide.

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

           Region                       Owned Equipment                    Investments in USPEs
-----------------------------  -----------------------------------  -----------------------------------
                                   1999        1998        1997         1999        1998        1997
                               -----------------------------------  -----------------------------------

<S>                            <C>         <C>           <C>        <C>         <C>          <C>
United States                  $    3,651  $    4,917    $  5,227   $       --  $       --   $      --
Canada                              5,984       5,474       5,479           --         449       1,019
Europe                              3,620       3,619       3,620           --         780       1,766
Asia                                   --         861       2,558           --          --          --
Rest of the world                   1,597       3,542       5,631          243          --          --
                               ===================================  ===================================
   Lease revenues              $   14,852  $   18,413    $ 22,515   $      243  $    1,229   $   2,785
                               ===================================  ===================================

     The following table sets forth net income (loss)  information by region for
     the owned  equipment and  investments in USPEs for the years ended December
     31, (in thousands of dollars):

           Region                       Owned Equipment                    Investments in USPEs
-----------------------------  -----------------------------------  -----------------------------------
                                   1999        1998        1997         1999        1998        1997
                               -----------------------------------  -----------------------------------

United States                  $      (64) $    1,513       1,130   $       --  $       --   $      --
Canada                              4,273       1,556       3,340        1,477          10          84
Europe                                723        (551)     (2,662)          --          39         773
Asia                               (1,627)     (1,138)      3,771           --          --          --
Rest of the world                      38       3,836         569          (64)         --          --
                               -----------------------------------  -----------------------------------
Regional income (loss)              3,343       5,216       6,148          (64 )        49         857
Administrative and other
net loss                             (717)     (2,348)     (5,068)          --          --          --
                               ===================================  ===================================
     Net income                     2,626  $    2,868       1,080   $    1,413  $       49   $     857
                               ===================================  ===================================

     The net book value of these  assets as of December  31, were as follows (in
thousands of dollars):

           Region                       Owned Equipment                    Investments in USPEs
-----------------------------  -----------------------------------  -----------------------------------
                                   1999        1998        1997         1999        1998        1997
                               -----------------------------------  -----------------------------------
United States                  $    6,470  $    6,475       8,639   $       --  $       --   $      --
Europe                                 --       7,258      11,175           --       2,054       4,021
Canada                              4,400       7,114       6,866           58         106       2,054
Asia                                1,051       1,951       2,852           --          --          --
Rest of the world                   2,967       5,584      14,629        2,440          --          --
                               ===================================  ===================================
    Net book value             $   14,888  $   28,382      44,161   $    2,498  $    2,160   $   6,075
                               ===================================  ===================================

</TABLE>

                          PLM EQUIPMENT GROWTH FUND III
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1999

7.   Note Payable

     The Partnership had a note  outstanding for $7.5 million as of December 31,
     1999,  with  interest  computed at LIBOR plus 1.5% per annum.  The interest
     rate was 7.69% as of December  31, 1999 and 6.8% as of December  31,  1998.
     Commencing October 1, 1997,  quarterly  principal payments will be equal to
     75% of net  proceeds  from asset sales from that  quarter,  or maintain the
     minimum facility balance specified on the loan agreements. During 1999, the
     Partnership  paid $11.1 million of the outstanding loan balance mainly as a
     result of asset sales.

     The General Partner  believes that the book value of the debt  approximates
     fair market value due to its variable interest rate.

8.   Concentrations of Credit Risk

     No single lessee accounted for more than 10% of total consolidated revenues
     for the year ended December 31, 1999, 1998, and 1997. However, R & B Falcon
     Drilling,   Inc.  purchased  a  mobile  offshore  drilling  unit  from  the
     Partnership  and  the  gain  from  the  sale  accounted  for  15% of  total
     consolidated  revenues from  wholly-and  partially-owned  equipment  during
     1998.  Aramco Associated Co. purchased an aircraft from the Partnership and
     the gain from the sale  accounted  for 16% of total  consolidated  revenues
     from wholly-and partially-owned equipment during 1997.

     As of  December  31,  1999 and  1998,  the  General  Partner  believes  the
     Partnership  had no  significant  concentrations  of credit risk that could
     have a material adverse effect on the Partnership.

9.   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.

     As of December 31, 1999, the financial  statement carrying amount of assets
     and  liabilities  was  approximately  $35.7  million lower than the federal
     income  tax  basis  of  such  assets  and  liabilities,  primarily  due  to
     differences in depreciation methods, equipment reserves,  provision for bad
     debt, prepaid deposits,  and the tax treatment of underwriting  commissions
     and syndication costs.

10.  Contingencies

     The  Partnership,  together with  affiliates,  has initiated  litigation in
     various official forums in India against a defaulting Indian airline lessee
     to repossess Partnership property and to recover damages for failure to pay
     rent and failure to maintain  such  property in  accordance  with  relevant
     lease  contracts.  The  Partnership  has  repossessed  all of its  property
     previously leased to such airline,  and the airline has ceased  operations.
     In response to the  Partnership's  collection  efforts,  the airline  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.  The General Partner believes
     the liklihood of an unfavorable outcome from the counter claims is remote.


<PAGE>



                          PLM EQUIPMENT GROWTH FUND III
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1999

11.  Liquidation of Partnership

     During the first quarter of 2000, the  Partnership  completed its 11th year
     of operations.  The Partnership  must be liquidated by the end of 2000. 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 on a quarterly
     basis 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.


<PAGE>




                          PLM EQUIPMENT GROWTH FUND III

                                INDEX OF EXHIBITS



  Exhibit                                                                Page

    4.     Limited Partnership Agreement of Partnership.                   *

    4.1    Amendment, dated November 18, 1991, to Limited Partnership      *
           Agreement of Partnership.

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

   10.2    $41,000,000 Credit Agreement dated as of December 13, 1994 with *
           First Union National Bank of North Carolina.

   24.     Powers of Attorney.                                            24

















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* Incorporated by reference.  See page 27 of this report.

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