UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                               -------------------
                                    FORM 10-Q




         [X]      Quarterly  Report  Pursuant  to  Section  13 or  15(d)  of the
                  Securities  Exchange Act of 1934 For the fiscal  quarter ended
                  June 30, 1998

         [  ]     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 ______




<PAGE>




                          PLM EQUIPMENT GROWTH FUND III

                             (A Limited Partnership)
                                 BALANCE SHEETS
                 (in thousands of dollars, except unit amounts)
<TABLE>
<CAPTION>




                                                                                        June 30,          December 31,
                                                                                         1998                 1997
                                                                                     ------------------------------
<S>                                                                                   <C>                   <C>        
Assets

Equipment held for operating lease, at cost                                           $      98,525         $   105,308
Less accumulated depreciation                                                               (70,303 )           (67,234 )
                                                                                    ---------------------------------------
  Net equipment                                                                              28,222              38,074

Cash and cash equivalents                                                                     2,470               4,239
Accounts receivable, net of allowance for doubtful
    accounts of $1,442 in 1998 and $1,837 in 1997                                             1,568               1,316
Due from affiliates                                                                           1,556                  --
Investments in unconsolidated special-purpose entities                                        5,408               9,179
Prepaid expenses and other assets                                                                24                  71
Deferred charges, net of accumulated amortization of
    $340 in 1998 and $348 in 1997                                                               193                 307
                                                                                    ---------------------------------------

    Total assets                                                                      $      39,441         $    53,186
                                                                                    =======================================

Liabilities and partners' capital



Liabilities:
Accounts payable and accrued expenses                                                 $       1,114         $     1,294
Due to affiliates                                                                               139               2,208
Lessee deposits and reserves for repairs                                                      1,042                 835
Note payable                                                                                 18,540              29,290
                                                                                    ---------------------------------------
  Total liabilities                                                                          20,835              33,627
                                                                                    ---------------------------------------

Partners' capital:
Limited partners (9,871,073 depositary units as
    of June 30, 1998 and December 31, 1997)                                                  18,606              19,559
General Partner                                                                                  --                  --
                                                                                    ---------------------------------------
  Total partners' capital                                                                    18,606              19,559
                                                                                    ---------------------------------------

    Total liabilities and partners' capital                                           $      39,441         $    53,186
                                                                                    =======================================


</TABLE>










                       See accompanying notes to financial
                                  statements.


<PAGE>




                          PLM EQUIPMENT GROWTH FUND III
                            (A Limited Partnership)
                            STATEMENTS OF OPERATIONS
        (in thousands of dollars, except weighted-average unit amounts)


<TABLE>
<CAPTION>


                                                                 For the Three Months                 For the Six Months
                                                                    Ended June 30,                      Ended June 30,

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

Lease revenue                                                  $   4,275       $   5,233           $    8,557       $   10,224
Interest and other income                                             56              93                  114              188
Net gain on disposition of equipment                               3,734              35                3,725              124
                                                              -------------------------------------------------------------------
  Total revenues                                                   8,065           5,361               12,396           10,536
                                                              -------------------------------------------------------------------

Expenses

Depreciation and amortization                                      2,411           3,544                4,807            7,100
Management fees to affiliate                                         265             302                  507              594
Repairs and maintenance                                              731             870                1,301            2,285
Equipment operating expense                                          (12 )            14                   28               20
Interest expense                                                     514             807                1,043            1,604
Insurance expense to affiliate                                       (42 )            --                  (42)              --
Other insurance expense                                              125              66                  208              112
General and administrative expenses to affiliates                    144             171                  299              353
Other general and administrative expenses                            214             236                  318              381
Recovery of bad debts                                               (491 )           (20)                (364)             (46)
                                                              -------------------------------------------------------------------
  Total expenses                                                   3,859           5,990                8,105           12,403
                                                              -------------------------------------------------------------------

Equity in net income (loss) of unconsolidated
    special-purpose entities                                         (35 )           157                  (40)             342
                                                              -------------------------------------------------------------------

    Net income (loss)                                          $   4,171       $    (472)          $    4,251       $   (1,525)
                                                              ===================================================================

Partners' share of net income (loss)

Limited partners                                               $   4,041       $    (602)          $    3,991       $   (1,785)
General Partner                                                      130             130                  260              260
                                                              -------------------------------------------------------------------

    Total                                                      $   4,171       $    (472)          $    4,251       $   (1,525)
                                                              ===================================================================

Net income (loss) per weighted-average depositary
    unit (9,871,073 units as of June 30, 1998 and 1997)        $    0.41       $   (0.06)          $     0.40       $    (0.18)
                                                              ===================================================================

Cash distributions                                             $   2,607       $   2,598           $    5,204       $    5,195
                                                              ===================================================================
Cash distributions per weighted-average
    depositary unit                                            $    0.25       $    0.25           $     0.50       $     0.50
                                                              ===================================================================

</TABLE>





                       See accompanying notes to financial
                                  statements.



<PAGE>




                          PLM EQUIPMENT GROWTH FUND III
                             (A Limited Partnership)
                       STATEMENTS OF CHANGES IN PARTNERS'
                  CAPITAL For the Period from December 31, 1996
                                to June 30, 1998
                           (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 distributions                                         (9,871)            (520)            (10,391)
                                                     -----------------------------------------------------

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

Net income                                                  3,991              260               4,251

Cash distributions                                         (4,944)            (260)             (5,204)
                                                     -----------------------------------------------------

  Partners' capital as of June 30, 1998                $   18,606          $    --          $   18,606
                                                     =====================================================

</TABLE>

































                       See accompanying notes to financial
                                  statements.


<PAGE>




                          PLM EQUIPMENT GROWTH FUND III
                            (A Limited Partnership)
                            STATEMENTS OF CASH FLOWS
                             (thousands of dollars)

<TABLE>
<CAPTION>

                                                                                                    For the Six Months
                                                                                                      Ended June 30,
                                                                                                   1998            1997
                                                                                               ----------------------------
<S>                                                                                              <C>              <C>        
Operating activities

Net income (loss)                                                                                $    4,251       $  (1,525 )
Adjustments to reconcile net income (loss) to net cash provided by (used in)
    operating activities:
  Depreciation and amortization                                                                       4,807           7,100
  Net gain on disposition of equipment                                                               (3,725)           (124 )
  Equity in net (income) loss from unconsolidated special-purpose entities                               40            (342 )
  Changes in operating assets and liabilities:
    Restricted cash and marketable securities                                                            --            (153 )
    Accounts and note receivable, net                                                                  (184)            236
    Prepaid expenses and other assets                                                                    47              41
    Accounts payable and accrued expenses                                                              (180)           (592 )
    Due to affiliates                                                                                (2,069)           (441 )
    Lessee deposits and reserves for repairs                                                            207            (148 )
                                                                                               --------------------------------
      Net cash provided by operating activities                                                       3,194           4,052
                                                                                               --------------------------------

Investing activities

Payments for capitalized improvements                                                                   (34)           (137 )
Equipment purchased and placed in unconsolidated special-purpose entity                              (1,198)             --
Distributions from unconsolidated special-purpose entities                                            2,318           1,835
Proceeds from disposition of equipment                                                               11,461             725
                                                                                               --------------------------------
      Net cash provided by investing activities                                                      12,547           2,423
                                                                                               --------------------------------

Financing activities

Due from affiliates                                                                                  (1,556)             --
Principal payments on note payable                                                                  (10,750)           (461 )
Cash distributions paid to limited partners                                                          (4,944)         (4,935 )
Cash distributions paid to General Partner                                                             (260)           (260 )
                                                                                               --------------------------------
      Net cash used in financing activities                                                         (17,510)         (5,656 )
                                                                                               --------------------------------

Net increase (decrease) in cash and cash equivalents                                                 (1,769)            819
Cash and cash equivalents at beginning of period                                                      4,239           1,414
                                                                                               --------------------------------
Cash and cash equivalents at end of period                                                       $    2,470       $   2,233
                                                                                               ================================

Supplemental information

Interest paid                                                                                    $    1,049       $   1,772
                                               ================================================================================
Sale proceeds in accounts receivable                                                             $       74       $      --
                                               ================================================================================
Noncash transfer of equipment at net book value from
  unconsolidated special-purpose entity                                                          $    2,611       $      --
                                               ================================================================================

</TABLE>




                       See accompanying notes to financial
                                  statements.


<PAGE>



                          PLM EQUIPMENT GROWTH FUND III
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                  June 30, 1998


1.   Opinion of Management

In the opinion of the  management  of PLM Financial  Services,  Inc. (FSI or the
General Partner),  the accompanying  unaudited financial  statements contain all
adjustments  necessary,  consisting  primarily of normal recurring accruals,  to
present  fairly the  financial  position of PLM  Equipment  Growth Fund III (the
Partnership)  as of June 30, 1998 and  December  31,  1997,  the  statements  of
operations for the three months and six months ended June 30, 1998 and 1997, the
statements  of changes in partners'  capital from  December 31, 1996 to June 30,
1998,  and the  statements  of cash flows for the six months ended June 30, 1998
and  1997.  Certain  information  and  note  disclosures  normally  included  in
financial  statements  prepared in accordance with generally accepted accounting
principles  have been  condensed  or  omitted  from the  accompanying  financial
statements.  For further information,  reference should be made to the financial
statements and notes thereto included in the Partnership's Annual Report on Form
10-K for the  year  ended  December  31,  1997,  on file at the  Securities  and
Exchange Commission.

2.   Cash Distributions

Cash  distributions  are  recorded  when paid and totaled  $2.6 million and $5.2
million for the three and six months ended June 30, 1998 and 1997, respectively.
Cash  distributions  to  unitholders  in excess of net income are  considered to
represent a return of capital. Cash distributions to unitholders of $1.0 million
and  $4.9  million  during  the  six  months  ended  June  30,  1998  and  1997,
respectively,  were deemed to be a return of capital. Cash distributions related
to the  results  from the second  quarter of 1998,  of $2.6  million,  were paid
during the third quarter of 1998.

3.   Transactions with General Partner and Affiliates

The Partnership's  proportional share of the affiliated expenses incurred by the
unconsolidated special-purpose entities (USPEs) during 1998 and 1997, are listed
in the following table (in thousands of dollars):

<TABLE>
<CAPTION>

                                                     For the Three Months                 For the Six Months
                                                        Ended June 30,                      Ended June 30,
                                                      1998           1997                1998            1997
                                                 ------------------------------------------------------------------


<S>                                                <C>             <C>                 <C>              <C>      
Management fees                                    $      33       $      46           $      60        $      88
Data processing and administrative
    expenses                                              12              12                  26               24
Insurance expense                                         10              25                  12               52


</TABLE>

The  Partnership's  proportional  share of  USPE-affiliated  management fees, of
$19,000 and $0.1  million,  were  payable as of June 30, 1998 and  December  31,
1997, respectively.

Transportation  Equipment  Indemnity  Company,  Ltd.  (TEI), an affiliate of the
General   Partner,   provided   certain  marine   insurance   coverage  for  the
Partnership's  equipment and other insurance  brokerage services during 1998 and
1997.  TEI did not provide the same insurance  coverage  during 1998 as had been
provided  during 1997.  These  services were provided by an  unaffiliated  third
party.

During 1998, the Partnership  received a $46,000  loss-of-hire  insurance refund
from TEI due to lower  claims from the  insured  Partnership  and other  insured
affiliated partnerships.

The balance due to  affiliates  as of June 30, 1998 was $0.1  million due to FSI
and its  affiliate  for  management  fees.  The balance due to  affiliates as of
December  31,  1997  includes  $0.4  million  due to FSI and its  affiliate  for
management fees and $1.8 million due to affiliated USPEs.



<PAGE>



                          PLM EQUIPMENT GROWTH FUND III
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                  June 30, 1998



4.    Equipment

Owned  equipment  held for operating  lease is stated at cost. The components of
owned  equipment  held for  operating  leases are as follows  (in  thousands  of
dollars):

<TABLE>
<CAPTION>

                                                                June 30,           December 31,
                                                                  1998                 1997
                                                              -----------------------------------


<S>                                                            <C>                    <C>       
Aircraft                                                       $    51,974            $   46,282
Rail equipment                                                      34,423                34,859
Marine containers                                                    6,370                 7,421
Trailers                                                             5,758                 7,080
Mobile offshore drilling unit                                           --                 9,666
                                                                    98,525               105,308
Less accumulated depreciation                                      (70,303)              (67,234 )
                                                              ---------------------------------------
    Net equipment                                              $    28,222            $   38,074
                                                              =======================================
</TABLE>

As of June 30, 1998,  all equipment in the  Partnership  portfolio was either on
lease or operating in PLM-affiliated short-term trailer rental facilities,  with
the exception of 69 rail  equipment and 25 marine  containers  with an aggregate
net book value of $0.4  million.  As of December 31, 1997,  all equipment in the
Partnership  portfolio  was  either  on lease  or  operating  in  PLM-affiliated
short-term rental facilities,  with the exception of 28 marine containers and 41
rail equipment with an aggregate carrying value of $0.3 million.

In the fourth quarter of 1996, the Partnership  ended its reinvestment  phase in
accordance with the limited partnership agreement;  therefore,  no equipment was
purchased  during  the  six  months  ended  June  30,  1998  and  1997.  Capital
improvements  to the  Partnership's  equipment  of $34,000 and $0.1 million were
made during the six months ended June 30, 1998 and June 30, 1997, respectively.

During the six months ended June 30, 1998, the  Partnership  sold or disposed of
marine  containers,  trailers,  rail equipment,  and a mobile offshore  drilling
unit, with an aggregate net book value of $7.8 million,  for aggregate  proceeds
of $11.5  million.  During the six months ended June 30, 1997,  the  Partnership
sold or disposed of marine  containers,  trailers,  and rail equipment,  with an
aggregate  net book  value  of $0.6  million,  for  aggregate  proceeds  of $0.7
million.

During the six months ended June 30, 1998, a commercial  aircraft which was in a
trust the  Partnership  had a 25% interest in was  transferred  out of the trust
into the Partnership's owned equipment portfolio (see Note 5).



<PAGE>




                          PLM EQUIPMENT GROWTH FUND III
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                  June 30, 1998


5.   Investments in Unconsolidated Special-Purpose Entities

The net  investment  in  unconsolidated  special-purpose  entities  included the
following  jointly-owned  equipment  (and related  assets and  liabilities)  (in
thousands of dollars):

<TABLE>
<CAPTION>

                                                                                        June 30,      December 31,

                                                                                   1998               1997
                                                                              --------------------------------


<S>                                                                            <C>                  <C>        
56% interest in an entity owning a marine vessel                               $    3,050           $     3,104
17% interest in two trusts that own three commercial aircraft, two
aircraft engines, and a portfolio of rotable components                             2,298                 4,021
25% interest in a trust that owned four commercial aircraft                            60                 2,054
                                                                             -------------------------------------


    Net investments                                                            $    5,408           $     9,179
                                                                             =====================================

</TABLE>

During the six  months  ended  June 30,  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  that  was  paid to FSI.  In  this  Trust,  all of the
commercial aircraft except the commercial aircraft designated to the Partnership
were sold by the affiliated  programs.  This aircraft was transferred out of the
Trust into the Partnership's owned equipment portfolio (see Note 4).






<PAGE>



ITEM 2.  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND
RESULTS OF OPERATIONS

(I)  RESULTS OF OPERATIONS

Comparison of Equipment Growth Fund III's (the Partnership's)  Operating Results
for the Three Months Ended June 30, 1998 and 1997

(A)  Owned Equipment Operations

Lease  revenues  less  direct  expenses  (repairs  and  maintenance,   equipment
operating  expenses,  and asset-specific  insurance expenses) on owned equipment
decreased  for the quarter  ended June 30, 1998,  compared to the same period of
1997. The following table presents results by owned equipment type (in thousands
of dollars):

<TABLE>
<CAPTION>

                                                      For the Three Months
                                                         Ended June 30,
                                                    1998                1997
                                             ----------------------------------------


<S>                                             <C>                <C>            
Aircraft                                        $         1,717    $         1,852
Rail equipment                                            1,157              1,277
Mobile offshore drilling unit                               342                396
Trailers                                                    245                526
Marine containers                                            48                269
Marine vessel                                               (22)                --

</TABLE>

Aircraft:  Aircraft  lease  revenues and direct  expenses  were $1.7 million and
$18,000,  respectively,  for the quarter  ended June 30, 1998,  compared to $2.0
million and $0.1 million,  respectively,  during the same period of 1997.  Lease
revenues  decreased  $0.3  million  during the three months ended June 30, 1998,
when  compared  to the  same  period  in 1997  due to the sale of a total of two
aircraft during the third and fourth  quarters of 1997.  During the three months
ended June 30, 1997,  the  Partnership  incurred  $0.1 million in repairs on one
aircraft to prepare it for re-lease; a similar expense was not needed during the
same period of 1998.

Rail  equipment:  Rail equipment  lease  revenues and direct  expenses were $1.8
million and $0.6  million,  respectively,  for the quarter  ended June 30, 1998,
compared to $1.9 million and $0.6 million, respectively,  during the same period
of 1997. The decrease in rail equipment  contribution  was due to lower revenues
resulting from the disposition of rail equipment in 1998 and 1997, and more rail
equipment  being off lease in the second  quarter of 1998,  compared to the same
period of 1997.

Mobile offshore  drilling unit: Mobile offshore drilling unit lease revenues and
direct  expenses  were $0.4  million and $9,000,  respectively,  for the quarter
ended June 30, 1998, compared to $0.4 million and $14,000, respectively, for the
quarter ended June 30, 1997. The Partnership  sold its mobile offshore  drilling
unit in June of 1998 with a gain of $3.6 million.

Trailers:  Trailer lease revenues and direct expenses were $0.3 million and $0.1
million,  respectively,  for the quarter  ended June 30, 1998,  compared to $0.6
million and $0.1  million,  respectively,  during the same  period of 1997.  The
number of trailers owned by the  Partnership has been declining due to sales and
dispositions.  The  result of this  declining  fleet is a  decrease  in  trailer
contribution.

Marine  containers:  Marine  container  lease revenues and direct  expenses were
$50,000 and $2,000, respectively,  for the quarter ended June 30, 1998, compared
to $0.3 million and $2,000,  respectively,  during the same period of 1997.  The
number of marine  containers  owned by the Partnership has been declining due to
sales and  dispositions.  The result of this  declining  fleet and a decrease in
utilization has been a decrease in marine container contribution.

Marine vessel:  Marine vessel lease  revenues and direct  expenses were zero and
$22,000,  respectively,  for the quarter  ended June 30, 1998,  compared to zero
revenues  and  direct   expenses  during  the  same  period  of  1997.  All  the
Partnership's marine vessels were sold during 1996.



<PAGE>



(B)      Indirect Operating Expenses Related to Owned Equipment Operations

Total  indirect  expenses of $3.1  million  for the quarter  ended June 30, 1998
decreased from $5.1 million for the same period of 1997.  Significant  variances
are explained as follows:

     (1) A decrease of $1.1 million in depreciation  and  amortization  expenses
from 1997 levels reflects the sale or disposition of certain  Partnership assets
during  1998  and  1997  and by 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.

     (2) A  decrease  of  $0.5  million  in  bad  debt  expense  was  due to the
collection in outstanding  receivables from certain lessees that were previously
reserved for as bad debts.

     (3) A decrease  of $0.3  million  in  interest  expense  was due to a lower
average debt outstanding  during the three months ended June 30, 1998,  compared
to the same quarter in 1997.

(C)      Net Gain on Disposition of Owned Equipment

The net gain on the  disposition  of owned  equipment for the second  quarter of
1998 was $3.7 million,  resulting  from the  disposition  of marine  containers,
trailers, rail equipment,  and a mobile offshore drilling unit with an aggregate
net book value of $7.6 million,  for aggregate proceeds of $11.3 million. In the
second quarter of 1997, the net gain of $35,000 resulted from the disposition of
marine  containers,  trailers,  and rail  equipment,  with an aggregate net book
value of $0.3 million, for aggregate proceeds of $0.4 million.

(D)      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 equipment  type
(in thousands of dollars):

<TABLE>
<CAPTION>

                                                    For the Three Months
                                                       Ended June 30,

                                                  1998               1997
                                            ---------------------------------------

<S>                                          <C>                <C>             
Aircraft, aircraft engines, and rotables     $            (30)  $            215
Marine vessels                                             (5)               (58)
                                            ---------------------------------------
    Equity in net income (loss) of USPEs     $            (35)  $            157
                                            =======================================

</TABLE>

Aircraft,  aircraft  engines,  and rotables:  As of June 30, 1998 and 1997,  the
Partnership  had an interest in two trusts that own three  commercial  aircraft,
two aircraft engines, and a portfolio of aircraft rotables. As of June 30, 1997,
the  Partnership  also had an  interest  in a trust  that  owned six  commercial
aircraft.  The  Partnership's  share of aircraft  revenues and expenses was $0.4
million and $0.4  million,  respectively,  for the quarter  ended June 30, 1998,
compared to $0.7 million and $0.5 million, respectively,  during the same period
of 1997. The decrease in lease revenues was due to the renewal of the leases 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.  The
decrease in lease revenues was partially  offset by lower direct expenses due to
the  double-declining  balance method of  depreciation  which results in greater
depreciation in the first years an asset is owned.

Marine vessels: As of June 30, 1998 and 1997, the Partnership had an interest in
an entity that owns a marine  vessel.  The  Partnership's  share of revenues and
expenses of marine vessels was $0.4 million and $0.4 million,  respectively, for
the quarter  ended June 30,  1998,  compared to $0.3  million and $0.4  million,
respectively,  for the same period of 1997.  The increase in lease  revenues was
due to higher  lease  rates for the  three  months  ended  June 30,  1998,  when
compared to the same quarter in 1997.

(E)      Net Income (Loss)

As a result of the foregoing,  the  Partnership had a net income of $4.2 million
in the second  quarter  of 1998  compared  to a net loss of $0.5  million in the
second  quarter of 1997.  The  Partnership's  ability to operate,  or  liquidate
assets,  secure leases, and re-lease those assets whose leases expire is subject
to many factors.  Therefore, the Partnership's  performance for the three months
ended June 30, 1998 is not  necessarily  indicative  of future  periods.  In the
second quarter of 1998, the Partnership  distributed $2.5 million to the limited
partners, or $0.25 per weighted-average depositary unit.

Comparison of the Partnership's  Operating Results for the Six Months Ended June
30, 1998 and 1997

(A)               Owned Equipment Operations

Lease  revenues  less  direct  expenses  (repairs  and  maintenance,   equipment
operating  expenses,  and asset-specific  insurance expenses) on owned equipment
decreased  for the six months  ended 1998 when  compared  to the same  period of
1997. The following table presents results by owned equipment type (in thousands
of dollars):

<TABLE>
<CAPTION>

                                                     For the Six Months
                                                        Ended June 30,
                                                   1998               1997
                                            ---------------------------------------


<S>                                           <C>                <C>             
Aircraft                                      $         3,274    $          2,756
Rail equipment                                          2,468               2,810
Mobile offshore drilling unit                             737                 794
Trailers                                                  510                 927
Marine containers                                         164                 571
Marine vessels                                            (63)                 (5)

</TABLE>

Aircraft: Aircraft lease revenues and direct expenses were $3.4 million and $0.1
million,  respectively, for the six months ended June 30, 1998, compared to $4.0
million and $1.2 million,  respectively,  during the same period of 1997.  Lease
revenues  decreased $0.6 million during the six months ended June 30, 1998, when
compared to the same  period in 1997 due to the sale of a total of two  aircraft
during the third and fourth  quarters of 1997.  During the six months ended June
30, 1997,  the  Partnership  incurred $1.2 million in repairs on one aircraft to
prepare it for re-lease; a similar expense was not needed during the same period
of 1998.

Rail  equipment:  Rail equipment  lease  revenues and direct  expenses were $3.7
million and $1.2 million,  respectively, for the six months ended 1998, compared
to $3.8 million and $1.0 million, respectively,  during the same period of 1997.
The  increase in direct  expenses  resulted  from  running  repairs  required on
certain  rail  equipment  in the fleet  during the first six months of 1998 that
were not needed during the first six months of 1997.  Additionally,  there was a
decrease in lease revenues due to the disposition of rail equipment  during 1998
and 1997 and more rail equipment  being off lease during the first six months of
1998 when compared to the first six months of 1997.

Mobile offshore  drilling unit: Mobile offshore drilling unit lease revenues and
direct expenses were $0.8 million and $19,000,  respectively, for the six months
ended June 30, 1998, compared to $0.8 million and $20,000, respectively, for the
six months ended June 30, 1997.  The decrease in mobile  offshore  drilling unit
contribution was due to the sale of the  Partnership's  mobile offshore drilling
unit on June 1998.

Trailers:  Trailer lease revenues and direct expenses were $0.6 million and $0.1
million,  respectively, for the six months ended June 30, 1998, compared to $1.0
million and $0.1  million,  respectively,  during the same  period of 1997.  The
number of trailers owned by the  Partnership has been declining due to sales and
dispositions.  The  result of this  declining  fleet is a  decrease  in  trailer
contribution.

Marine containers: Marine container lease revenues and direct expenses were $0.2
million  and  $3,000,  respectively,  for the six months  ended  June 30,  1998,
compared to $0.6  million and  $5,000,  respectively,  during the same period of
1997.  The  number  of  marine  containers  owned  by the  Partnership  has been
declining due to sales and dispositions. The result of this declining fleet is a
decrease in marine container net contribution.

Marine vessel:  Marine vessel lease  revenues and direct  expenses were zero and
$0.1  million  for the six months  ended  June 30,  1998,  compared  to zero and
$5,000,  respectively,  during the same  period of 1997.  All the  Partnership's
marine vessels were sold during 1996. The direct expense of $0.1 million for the
six months  ended June 30,  1998 was due to  additional  supplemental  liability
insurance  charged to the Partnership  for sold vessels by the former  insurance
company.  This expense was  partially  offset by loss of hire  insurance  refund
received  during  the  second  quarter  of 1998  from  Transportation  Equipment
Indemnity Company, Ltd. (TEI), an affiliate of the General Partner, due to lower
claims from the insured Partnership and other insured affiliated partnerships.

(B) Indirect Operating Expenses Related to Owned Equipment Operations

Total  indirect  expenses of $6.6 million for the six months ended June 30, 1998
decreased from $10.0 million for the same period of 1997.  Significant  variance
is explained as follows:

     (1) A decrease in depreciation  and  amortization  expenses of $2.3 million
from 1997 levels reflects the sale or disposition of certain  Partnership assets
during 1998 and 1997 and the  double-declining  balance  method of  depreciation
which results in greater depreciation in the first years an asset is owned.

     (2) A decrease of $0.6 million in interest expense was due to lower average
debt outstanding  during the six months ended June 30, 1998 when compared to the
same period of 1997.

     (3) A  decrease  of  $0.3  million  in  bad  debt  expense  was  due to the
collection in outstanding  receivables from certain lessees that were previously
reserved for as bad debts.

     (4) A decrease of $0.1 million in  management  fees to affiliate  from 1997
levels was due to lower  lease  revenue in 1998,  compared to the same period of
1997.

(C)       Net Gain on Disposition of Owned Equipment

The net gain on the disposition of equipment was $3.7 million for the six months
ended  June 30,  1998,  resulting  from the  disposition  of marine  containers,
trailers, rail equipment,  and a mobile offshore drilling unit with an aggregate
net book value of $7.8 million, for aggregate proceeds of $11.5 million. For the
six months ended June 30, 1997,  the net gain of $0.1 million  resulted from the
disposition of marine containers, trailers, and rail equipment with an aggregate
net book value of $0.6 million, for aggregate proceeds of $0.7 million.

(D)      Interest and Other Income

Interest  and other  income  decreased  by $0.1 million for the six months ended
June 30, 1998  compared to the same period of 1997  primarily  due to lower cash
balances available for investment.

(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 equipment  type
(in thousands of dollars):

<TABLE>
<CAPTION>

                                                       For the Six Months
                                                         Ended June 30,
                                                    1998                1997
                                             ----------------------------------------


<S>                                             <C>                <C>            
Aircraft, aircraft engines, and rotables        $            43    $           431
Marine vessels                                              (83)               (89 )
    Equity in net income (loss)                 $           (40)   $           342
                       ===============================================================

</TABLE>

Aircraft,  aircraft  engines,  and rotables:  As of June 30, 1998 and 1997,  the
Partnership  had an interest in two trusts that own three  commercial  aircraft,
two aircraft engines, and a portfolio of aircraft rotables. As of June 30, 1997,
the  Partnership  also owned an  interest  in a trust  that owns six  commercial
aircraft.  The  Partnership's  share of aircraft  revenues and expenses was $0.8
million and $0.8 million,  respectively, for the six months ended June 30, 1998,
compared to $1.4 million and $1.0 million, respectively,  during the same period
of 1997. The decrease in lease revenues was due to the renewal of the leases 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.  The
decrease in lease revenues was partially  offset by lower direct expenses due to
the  double-declining  balance  method of  depreciation  which  results in great
depreciation in the first years an asset is owned.

Marine vessels: As of June 30, 1998 and 1997, the Partnership had an interest in
an entity that owns a marine  vessel.  The  Partnership's  share of revenues and
expenses in marine  vessels was $0.7 million and $0.8 million for the six months
ended June 30, 1998 and 1997.

(F)  Net Income (Loss)

As a result of the foregoing, the Partnership had net income of $4.3 million for
the six months  ended June 30,  1998,  compared to a net loss of $1.5 million in
the same period of 1997.  The  Partnership's  ability to operate,  or  liquidate
assets,  secure leases, and re-lease those assets whose leases expire is subject
to many factors.  Therefore,  the  Partnership's  performance  in the six months
ended  June 30,  1998 is not  necessarily  indicative  of  future  periods.  The
Partnership  distributed  $4.9  million to the  limited  partners,  or $0.50 per
weighted-average depositary unit in the six months ended June 30, 1998.





<PAGE>




(II)  FINANCIAL CONDITION -- CAPITAL RESOURCES, LIQUIDITY, AND DISTRIBUTIONS

For the six months ended June 30, 1998,  the  Partnership  generated  sufficient
operating cash of $5.5 million (net cash provided by operating activities,  plus
non-liquidating  distributions from unconsolidated  special-purpose entities) to
meet its operating  obligations and maintain the current level of  distributions
(total for six months ended June 30, 1998 of approximately  $5.2 million) to the
partners.

During the six months ended June 30, 1998, the General Partner sold equipment on
behalf of the Partnership and realized proceeds of $11.5 million.

During the first six months of 1998, the Partnership  paid down $10.8 million of
the outstanding note balance as a result of asset sales.

(III)  YEAR 2000 COMPLIANCE

The General  Partner is currently  addressing  the year 2000  computer  software
issue and creating a timetable for carrying out any program  modifications  that
may be required.  The General Partner does not anticipate that the cost of those
modifications allocable to the Partnership will be material.

(IV)  ACCOUNTING PRONOUNCEMENTS

In  June  1997,  the  Financial   Accounting  Standards  Board  issued  two  new
statements:  SFAS No. 130,  "Reporting  Comprehensive  Income,"  which  requires
enterprises to report,  by major  component and in total,  all changes in equity
from  nonowner  sources;  and SFAS No. 131,  "Disclosures  about  Segments of an
Enterprise  and  Related  Information,"  which  establishes  annual and  interim
reporting  standards  for a public  company's  operating  segments  and  related
disclosures about its products, services, geographic areas, and major customers.
Both statements are effective for the  Partnership's  fiscal year ended December
31, 1998, with earlier  application  permitted.  The effect of adoption of these
statements  will  be  limited  to the  form  and  content  of the  Partnership's
disclosures and will not impact the  Partnership's  results of operations,  cash
flow, or financial position.

In June 1998,  the  Financial  Accounting  Standards  Board issued SFAS No. 133,
"Accounting   for  Derivative   Instruments  and  Hedging   Activities",   which
standardizes  the  accounting  for  derivative  instruments,  including  certain
derivative instruments embedded in other contracts,  by requiring that an entity
recognize  those items as assets or  liabilities  in the  statement of financial
position and measure  them at fair value.  This  statement is effective  for all
quarters of fiscal years beginning after June 15, 1999. As of June 30, 1998, the
General  Partner  is  reviewing  the  effect  this  standard  will  have  on the
Partnership's financial statements.

(V)  OUTLOOK FOR THE FUTURE

Since the  Partnership  is in its holding or passive  liquidation  phase through
December 31, 1998, the General  Partner will be seeking to selectively  re-lease
or sell assets as the existing  leases  expire.  Sale  decisions  will cause the
operating  performance  of the  Partnership to decline over the remainder of its
life. 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  Partnership  intends  to use cash  flow  from  operations  to  satisfy  its
operating  requirements,  pay loan principal on debt,  maintain  working capital
reserves, and pay cash distributions to the investors.

(VI)  FORWARD-LOOKING INFORMATION

Except for the historical  information  contained herein, the discussion in this
Form  10-Q   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-Q
should be read as being  applicable  to all related  forward-looking  statements
wherever they appear in this Form 10-Q. The  Partnership's  actual results could
differ materially from those discussed here.



<PAGE>




                          PART II -- OTHER INFORMATION

Item 6.           Exhibits and Reports on Form 8-K

         (a)      Exhibits

              None.

         (b)      Reports on Form 8-K

              None.




<PAGE>



Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



                                      PLM EQUIPMENT GROWTH FUND III

                                      By: PLM Financial Services, Inc.
                                          General Partner




Date:  August 11, 1998                By: /s/ Richard K Brock
                                          -------------------
                                          Richard K Brock
                                          Vice President and
                                          Corporate Controller



<PAGE>