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 September 30, 2001

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

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

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


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

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


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


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








<PAGE>





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

<TABLE>
<CAPTION>
                                                                         September 30,          December 31,
                                                                            2001                 2000
                                                                       ------------------------------------
<S>                                                                     <C>                 <C>
ASSETS

Equipment held for operating lease, at cost                             $     38,750        $     40,028
Less accumulated depreciation                                                (34,420)            (34,361)
                                                                        -----------------------------------
                                                                               4,330               5,667
Equipment held for sale                                                           --               1,703
                                                                        -----------------------------------
  Net equipment                                                                4,330               7,370

Cash and cash equivalents                                                      9,077               1,832
Restricted cash                                                                   --                 125
Accounts receivable, net of allowance for doubtful
    accounts of $458 in 2001 and $455 in 2000                                    649                 591
Investments in unconsolidated special-purpose entity                              --                  76
Prepaid expenses and other assets                                                 25                  43
                                                                        -----------------------------------

    Total assets                                                        $     14,081        $     10,037
                                                                        ===================================

LIABILITIES AND PARTNERS' CAPITAL

Liabilities:
Accounts payable and accrued expenses                                   $        430        $        462
Due to affiliates                                                                 70                  72
Lessee deposits and reserves for repairs                                          --                 187
                                                                        -----------------------------------
  Total liabilities                                                              500                 721
                                                                        -----------------------------------

Partners' capital:
Limited partners (9,871,073 depositary units as
    of September 30, 2001 and December 31, 2000)                              13,581               9,316
General Partner                                                                   --                  --
                                                                        -----------------------------------
  Total partners' capital                                                     13,581               9,316
                                                                        -----------------------------------

    Total liabilities and partners' capital                             $     14,081        $     10,037
                                                                        ===================================
</TABLE>















       See accompanying notes to unaudited condensed financial statements.

<PAGE>



                          PLM EQUIPMENT GROWTH FUND III
                             (A Limited Partnership)
                         CONDENSED STATEMENTS OF INCOME
         (in thousands of dollars, except weighted-average unit amounts)
                                   (unaudited)
<TABLE>
<CAPTION>
                                                         For the Three Months             For the Nine Months
                                                         Ended September 30,             Ended September 30,
                                                          2001            2000            2001           2000
                                                      ----------------------------     ---------------------------
<S>                                                   <C>             <C>              <C>            <C>

Lease revenue                                         $    1,688      $    2,962       $   5,363      $   9,130
Interest and other income                                     78              67             248            109
Net gain on disposition of equipment                          31           9,635           4,015          9,680
                                                      ----------------------------     ---------------------------
  Total revenues                                           1,797          12,664           9,626         18,919
                                                      ----------------------------     ---------------------------

EXPENSES

Depreciation and amortization                                428           1,175           1,464          3,932
Repairs and maintenance                                      483             552           1,574          1,713
Equipment operating expenses                                   9               7              26             23
Insurance expense                                             20              32             115            101
Management fees to affiliate                                 119             160             354            510
Interest expense                                              --              39              --            306
General and administrative expenses to
  affiliates                                                  60              97             310            301
Other general and administrative expenses                    182             224             880            720
Loss on revaluation of equipment                              --              11              --            202
Provision for (recovery of) bad debts                        (92)             36               4            (69)
                                                      ----------------------------     ---------------------------
  Total expenses                                           1,209           2,333           4,727          7,739
                                                      ----------------------------     ---------------------------

Equity in net income (loss) of unconsolidated
    special-purpose entities                                  --           1,102             (10)         1,017
                                                      ----------------------------     ---------------------------

    Net income                                        $      588      $   11,433       $   4,889         12,197
                                                      ============================     ===========================

PARTNERS' SHARE OF NET INCOME

Limited partners                                      $      588      $   11,433       $   4,858      $  12,197
General Partner                                               --              --              31             --
                                                      ----------------------------     ---------------------------

    Total                                             $      588      $   11,433       $   4,889      $  12,197
                                                      ============================     ===========================

Limited partners net income per weighted-
    average depositary unit                           $     0.06      $     1.16       $    0.49      $    1.24
                                                      ============================     ===========================

Cash distribution                                     $       --      $       --       $     624      $      --
                                                      ============================     ===========================

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





       See accompanying notes to unaudited condensed financial statements.

<PAGE>



                          PLM EQUIPMENT GROWTH FUND III
                             (A Limited Partnership)
              CONDENSED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
           For the Period from December 31, 1999 to September 30, 2001
                            (in thousands of dollars)
                                   (unaudited)
<TABLE>
<CAPTION>
                                                        Limited          General
                                                       Partners          Partner           Total
                                                     -------------------------------------------------

<S>                                                   <C>                <C>             <C>
  Partners' capital as of December 31, 1999           $    8,328         $   --          $    8,328

Net income                                                11,353            545              11,898

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

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

Net income                                                 4,858             31               4,889

Cash distribution                                           (593)           (31)               (624)
                                                      ------------------------------------------------

  Partners' capital as of September 30, 2001          $   13,581         $   --          $   13,581
                                                      ================================================
</TABLE>
































       See accompanying notes to unaudited condensed financial statements.

<PAGE>



                          PLM EQUIPMENT GROWTH FUND III
                             (A Limited Partnership)
                       CONDENSED STATEMENTS OF CASH FLOWS
                            (in thousands of dollars)
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                                    For the Nine Months
                                                                                    Ended September 30,
                                                                                    2001           2000
                                                                                ----------------------------
<S>                                                                             <C>             <C>
OPERATING ACTIVITIES

Net income                                                                      $    4,889      $   12,197
Adjustments to reconcile net income to net cash provided by (used in)
    operating activities:
  Depreciation and amortization                                                      1,464           3,932
  Loss on revaluation of equipment                                                      --             202
  Net gain on disposition of equipment                                              (4,015)         (9,680)
  Equity in net loss (income) from unconsolidated special-purpose entities              10          (1,017)
  Changes in operating assets and liabilities:
    Restricted cash                                                                    125              --
    Accounts receivable, net                                                           (23)             17
    Prepaid expenses and other assets                                                   18              51
    Accounts payable and accrued expenses                                              (32)           (307)
    Due to affiliates                                                                   (2)              2
    Lessee deposits and reserves for repairs                                          (187)         (1,261)
                                                                                 ----------------------------
      Net cash provided by operating activities                                      2,247           4,136
                                                                                 ----------------------------

INVESTING ACTIVITIES

Payments for capitalized improvements                                                  (70)            (78)
Distributions from unconsolidated special-purpose entities                              66             160
Distributions from liquidation of unconsolidated special-purpose entity                 --           3,164
Proceeds from disposition of equipment                                               5,626          12,466
                                                                                 ----------------------------
      Net cash provided by investing activities                                      5,622          15,712
                                                                                 ----------------------------

FINANCING ACTIVITIES

Principal payments on note payable                                                      --          (7,458)
Proceeds of short-term loan from affiliate                                              --           4,550
Payments of short-term loan from affiliate                                              --          (5,150)
Cash distributions paid to limited partners                                           (593)             --
Cash distributions paid to General Partner                                             (31)             --
                                                                                 ----------------------------
      Net cash used in financing activities                                           (624)         (8,058)
                                                                                 ----------------------------

Net increase in cash and cash equivalents                                            7,245          11,790
Cash and cash equivalents at beginning of period                                     1,832             486
                                                                                 ----------------------------
Cash and cash equivalents at end of period                                       $   9,077      $   12,276
                                                                                 ============================

SUPPLEMENTAL INFORMATION

Interest paid                                                                    $      --      $      316
                                                                                 ============================
</TABLE>



       See accompanying notes to unaudited condensed financial statements.


<PAGE>


                          PLM EQUIPMENT GROWTH FUND III
                             (A Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (unaudited)

1. OPINION OF MANAGEMENT

In the opinion of the  management  of PLM Financial  Services,  Inc. (FSI or the
General Partner),  the accompanying  unaudited  condensed  financial  statements
contain all  adjustments  necessary,  consisting  primarily of normal  recurring
accruals,  to present fairly the condensed  financial  position of PLM Equipment
Growth Fund III (the  Partnership)  as of  September  30, 2001 and  December 31,
2000,  the  condensed  statements of income for the three months and nine months
ended  September  30,  2001 and 2000,  the  condensed  statements  of changes in
partners'  capital for the period from  December 31, 1999 to September 30, 2001,
and the condensed  statements of cash flows for the nine months ended  September
30, 2001 and 2000. Certain information and note disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted from the
accompanying condensed 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, 2000,
on file at the Securities and Exchange Commission.

2. SCHEDULE OF PARTNERSHIP PHASES

The Partnership,  in accordance with its limited partnership agreement,  entered
its  liquidation  phase  on  January  1,  2000  and  has  commenced  an  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 General  Partner filed a certificate
of dissolution on behalf of the Partnership  with the Secretary of State for the
State of  California  on December  31, 2000,  and  following  completion  of the
liquidation of the Partnership that is anticipated to occur in 2002, will file a
certificate of cancellation.  The General Partner is currently  marketing all of
the Partnership's assets for sale.

3. CASH DISTRIBUTIONS

Cash  distributions  are recorded when paid and may include amounts in excess of
net income that are  considered  to represent a return of capital.  For the nine
months ended September 30, 2001,  cash  distributions  were $0.6 million.  There
were no cash  distributions  for the three months ended  September  30, 2001 and
there were no cash  distributions  for the three and nine months ended September
30, 2000. None of the cash  distributions in the nine months ended September 30,
2001 were considered a return of capital.

4. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES

The balance due to  affiliates  as of  September  30, 2001 and December 31, 2000
included $0.1 million due to FSI and its affiliate for management fees.

The Partnership's  proportional  share of unconsolidated  special purpose entity
(USPE) -  affiliated  management  fees  payable to FSI and its  affiliate  as of
September 30, 2001 and December 31, 2000 was $-0- and $10,000, respectively.

The Partnership's  proportional share of the affiliated expenses incurred by the
USPE  during 2001 and 2000 is listed in the  following  table (in  thousands  of
dollars):
<TABLE>
<CAPTION>
                                                    For the Three Months               For the Nine Months
                                                     Ended September 30,               Ended September 30,
                                                    2001            2000              2001            2000
                                                   -------------------------------------------------------------
<S>                                                <C>           <C>                 <C>            <C>
Management fees                                    $   --        $     9             $   --         $    36
Data processing and administrative
    expenses                                           --              3                  1               9
</TABLE>


<PAGE>


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

5. EQUIPMENT

Owned equipment held for operating leases is stated at cost.  Equipment held for
sale is stated at the lower of the equipment's  depreciated  cost or fair value,
less cost to sell, and is subject to a pending contract for sale. The components
of owned equipment were as follows (in thousands of dollars):
<TABLE>
<CAPTION>
                                                                September 30,          December 31,
                                                                   2001                  2000
                                                              --------------------------------------

<S>                                                            <C>                   <C>
Rail equipment                                                 $    32,757           $    33,370
Trailers                                                             3,202                 3,428
Marine containers                                                    2,791                 3,230
                                                               -------------------------------------
                                                                    38,750                40,028
Less accumulated depreciation                                      (34,420)              (34,361)
                                                               -------------------------------------
                                                                     4,330                 5,667
Equipment held for sale                                                 --                 1,703
                                                               -------------------------------------
    Net equipment                                              $     4,330           $     7,370
                                                               =====================================
</TABLE>

As of September  30, 2001,  all  equipment in the  Partnership  portfolio was on
lease except for 113 railcars.  As of December 31, 2000, all owned  equipment in
the Partnership portfolio was on lease except for 88 railcars, 25 trailers,  and
an aircraft.  The net book value of the equipment off lease was $0.4 million and
$0.6 million as of September 30, 2001 and December 31, 2000, respectively.

A Boeing 737-200 Stage II commercial aircraft and a Dash 8-300 Stage II commuter
aircraft,  subject  to a pending  contract  for  sale,  were held for sale as of
December  31,  2000 at the  lower of the  equipment's  depreciated  cost or fair
value, less cost to sell.

Capital  improvements to the  Partnership's  equipment of $0.1 million were made
during the nine months ended September 30, 2001 and 2000.

During the nine months ended  September 30, 2001,  the  Partnership  disposed of
aircraft, marine containers,  trailers, and railcars, with an aggregate net book
value of $1.6 million,  for proceeds of $5.7 million. The aircraft were reported
as equipment held for sale as of December 31, 2000. During the nine months ended
September 30, 2000, the  Partnership  disposed of marine  containers,  trailers,
railcars,  and aircraft with an aggregate  net book value of $2.8  million,  for
proceeds of $12.5 million.

During the nine months ended  September 30, 2000,  the  Partnership  reduced the
carrying  value  of  refrigerated  and  dry  trailers  by  $0.2  million  to the
equipment's  estimated realizable value. There were no revaluations of equipment
required in the nine months ended September 30, 2001.

6. INVESTMENTS IN UNCONSOLIDATED SPECIAL-PURPOSE ENTITY

The  Partnership's  net  investment in a USPE  consisted of a 56% interest in an
entity that owned a marine vessel (and related assets and liabilities)  totaling
$-0- and $76,000 as of September 30, 2001 and December 31, 2000, respectively.



<PAGE>


                          PLM EQUIPMENT GROWTH FUND III
                             (A Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (unaudited)

7. OPERATING SEGMENTS

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

The following  tables present a summary of the operating  segments (in thousands
of dollars):
<TABLE>
<CAPTION>
                                                                Marine
     For the three months ended            Aircraft  Railcar    Container Trailer
          September 30, 2001               Leasing   Leasing    Leasing   Leasing     Other(1)   Total
          ------------------               -------   -------    -------   -------     -----      -----


<S>                                        <C>       <C>        <C>       <C>        <C>       <C>
     REVENUES
       Lease revenue                       $     --  $  1,586   $     (3) $    105   $     --  $  1,688
       Interest income and other                 --        --         --        --         78        78
       Gain (loss) on disposition of             (5)       23         11         2         --        31
     equipment
                                           -------------------------------------------------------------
         Total revenues                          (5)    1,609          8       107         78     1,797

     Costs and Expenses
       Operations support                        77       362         --        57         16       512
       Depreciation and amortization             --       386          7        35         --       428
       Management fees                           (2)      116         --         5         --       119
       General and administrative expenses       --        48         --        26        168       242
       Recovery of bad debts                     --       (92)        --        --         --       (92)
                                           -------------------------------------------------------------
         Total costs and expenses                75       820          7       123        184     1,209
                                           -------------------------------------------------------------
     Net income (loss)                     $    (80) $    789   $      1  $    (16)  $   (106) $    588
                                           =============================================================

     Total assets as of September 30, 2001 $     --  $  4,083   $     58  $    838   $  9,102  $ 14,081
                                           =============================================================
</TABLE>
<TABLE>
<CAPTION>

                                                              Marine     Marine
   For the three months ended            Aircraft  Railcar    Vessel    Container  Trailer
       September 30, 2000                Leasing   Leasing    Leasing    Leasing   Leasing    Other(1)    Total
       ------------------                -------   -------    -------    -------   -------    -----       -----


<S>                                      <C>       <C>        <C>       <C>        <C>       <C>        <C>
    REVENUES
     Lease revenue                       $ 1,227   $  1,584   $    --   $      15  $   136   $     --   $  2,962
     Interest income and other                 1          9        --          --       --         57         67
     Gain on disposition of equipment      9,460         68        --          23       84         --      9,635
                                         ------------------------------------------------------------------------
       Total revenues                     10,688      1,661        --          38      220         57     12,664

   COSTS AND EXPENSES
     Operations support                       23        498        --           1       60          9        591
     Depreciation and amortization           696        403        --          17       60         (1)     1,175
     Interest expense                         --         --        --          --       --         39         39
     Management fees                          47        105        --          --        8         --        160
     General and administrative expenses      58         51        --           1       28        183        321
     Loss on revaluation of equipment         --         --        --          --       11         --         11
     Provision for bad debts                  --         36        --          --       --         --         36
                                         ------------------------------------------------------------------------
       Total costs and expenses              824      1,093        --          19      167        230      2,333
                                         ------------------------------------------------------------------------
   Equity in net income of USPE's             --         --     1,102          --       --         --      1,102
                                         ------------------------------------------------------------------------
   Net income (loss)                     $ 9,864   $    568   $ 1,102   $      19  $    53   $   (173) $ 11,433
                                         ========================================================================

   Total assets as of September 30, 2000 $ 2,078   $  5,464   $   191   $     191  $ 1,054   $ 12,285   $ 21,263
                                         ========================================================================


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


<PAGE>


                          PLM EQUIPMENT GROWTH FUND III
                             (A Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (unaudited)

7.   OPERATING SEGMENTS (continued)

<TABLE>
<CAPTION>

                                                             Marine       Marine
  For the nine months ended            Aircraft   Railcar    Vessel      Container Trailer
      September 30, 2001               Leasing    Leasing    Leasing     Leasing   Leasing     Other(1)     Total
      ------------------               -------    -------    -------     -------   -------     -----      -----
<S>                                    <C>        <C>        <C>         <C>       <C>        <C>       <C>
  REVENUES
    Lease revenue                      $    185   $  4,864   $      --   $     20  $    294   $     --  $  5,363
    Interest income and other                39         --          --         --        --        209       248
    Gain on disposition of equipment      3,694        247          --         51        23         --     4,015
                                       --------------------------------------------------------------------------
      Total revenues                      3,918      5,111          --         71       317        209     9,626

  COSTS AND EXPENSES
    Operations support                      104      1,363          --         --       155         93     1,715
    Depreciation and amortization           151      1,174          --         23       116         --     1,464
    Management fees                           2        336          --          1        15         --       354
    General and administrative              215        178          15          1        64        717     1,190
  expenses
    Provision for bad debts                  --          4          --         --        --         --         4
                                       --------------------------------------------------------------------------
      Total costs and expenses              472      3,055          15         25       350        810     4,727
                                       --------------------------------------------------------------------------
  Equity in net loss of USPE's               --         --         (10)        --        --         --       (10)
                                       --------------------------------------------------------------------------
  Net income (loss)                    $  3,446   $  2,056   $     (25)  $     46  $    (33)  $   (601) $  4,889
                                       ==========================================================================

  Total assets as of September 30,     $     --   $  4,083   $      --   $     58  $    838   $  9,102  $ 14,081
  2001
                                       ==========================================================================
</TABLE>
<TABLE>
<CAPTION>

                                                             Marine       Marine
  For the nine months ended            Aircraft   Railcar    Vessel      Container Trailer
      September 30, 2000               Leasing    Leasing    Leasing     Leasing   Leasing     Other(1)   Total
      ------------------               -------    -------    -------     -------   -------     -----      -----


<S>                                    <C>        <C>        <C>         <C>       <C>        <C>       <C>
  REVENUES
    Lease revenue                      $  3,654   $  4,972   $      --   $     68  $    436   $     --  $  9,130
    Interest income and other                 3         12          --         --        --         94       109
    Gain on disposition of equipment      9,460        106          --         36        78         --     9,680
                                       --------------------------------------------------------------------------
      Total revenues                     13,117      5,090          --        104       514         94    18,919

  Costs and Expenses
    Operations support                      231      1,411          --          2       164         29     1,837
    Depreciation and amortization         2,429      1,230          --         59       184         30     3,932
    Interest expense                         --         --          --         --        --        306       306
    Management fees                         138        345          --          3        24         --       510
    General and administrative              151        160          --          1        75        634     1,021
  expenses
    Loss on revaluation of equipment         --         --          --         --       202         --       202
    Recovery of bad debts                    --        (58)         --         --        (1)       (10)      (69)
                                       --------------------------------------------------------------------------
      Total costs and expenses            2,949      3,088          --         65       648        989     7,739
                                       --------------------------------------------------------------------------
  Equity in net income of USPE's             22         --         995         --        --         --     1,017
                                       --------------------------------------------------------------------------
  Net income (loss)                    $ 10,190   $  2,002   $     995   $     39  $   (134)  $   (895) $ 12,197
                                       ==========================================================================

  Total assets as of September 30,     $  2,078   $  5,464   $     191   $    191  $  1,054   $ 12,285  $ 21,263
                                       ==========================================================================

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

8. NET INCOME PER WEIGHTED-AVERAGE PARTNERSHIP UNIT

Net income per  weighted-average  Partnership  unit was computed by dividing net
income  attributable  to  limited  partners  by the  weighted-average  number of
Partnership units deemed  outstanding  during the period.  The  weighted-average
number of Partnership units deemed  outstanding during the three and nine months
ended September 30, 2001 and 2000 was 9,871,073.






<PAGE>


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

9. CONTINGENCIES

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

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

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

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

10. LIQUIDATION AND SPECIAL DISTRIBUTIONS

On January 1, 2000,  the  General  Partner  began the  liquidation  phase of the
Partnership and commenced an orderly  liquidation of the Partnership assets. 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.  The amounts reflected for assets and liabilities of
the  Partnership  have not been  adjusted  to reflect  liquidation  values.  The
equipment  portfolio continues to be carried at the lower of depreciated cost or
fair value less cost to dispose.  Although the General  Partner  estimates  that
there will be distributions  after  liquidation of assets and  liabilities,  the
amounts  cannot be  accurately  determined  prior to actual  liquidation  of the
equipment.  Any excess proceeds over expected  Partnership  obligations  will be
distributed to the Partners.  Upon final  liquidation,  the Partnership  will be
dissolved.

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




<PAGE>


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

(I)  RESULTS OF OPERATIONS

COMPARISON  OF PLM  EQUIPMENT  GROWTH FUND III'S (THE  PARTNERSHIP'S)  OPERATING
RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000

(A) Owned Equipment Operations

Lease  revenues  less  direct  expenses  (defined  as repairs  and  maintenance,
equipment  operating and asset-specific  insurance  expenses) on owned equipment
decreased  during the three months ended September 30, 2001 compared to the same
period of 2000.  Gains or losses from the sale of equipment,  interest and other
income,  and certain  expenses such as depreciation and amortization and general
and  administrative  expenses relating to the operating  segments (see Note 7 to
the unaudited  condensed  financial  statements),  are not included in the owned
equipment  operation  discussion  because these expenses are indirect in nature,
not a result of  operations  but the result of owning a portfolio of  equipment.
The following  table presents lease revenues less direct expenses by segment (in
thousands of dollars):
<TABLE>
<CAPTION>
                                                      For the Three Months
                                                      Ended September 30,
                                                    2001               2000
                                               -------------------------------------

<S>                                            <C>                <C>
Railcars                                       $         1,224    $         1,086
Trailers                                                    48                 76
Marine containers                                           (3)                14
Aircraft                                                   (77)             1,204
</TABLE>

Railcars:  Railcar lease revenues and direct expenses were $1.6 million and $0.4
million,  respectively,  for the quarter ended  September 30, 2001,  compared to
$1.6  million and $0.5  million,  respectively,  during the same period of 2000.
Direct  expenses  decreased $0.1 million during the three months ended September
30, 2001 due to fewer required repairs compared to the same period of 2000.

Trailers:  Trailer lease revenues and direct expenses were $0.1 million and $0.1
million, respectively, for the quarters ended September 30, 2001 and 2000.

Marine  containers:  Marine  container  lease revenues and direct  expenses were
$(3,000)  and $-0-  respectively,  for the quarter  ended  September  30,  2001,
compared to $15,000 and  $1,000,  respectively,  during the same period of 2000.
The decrease in marine  container  contribution in the third quarter of 2001 was
due to the disposition of marine containers in 2000 and 2001. The negative lease
revenues  during the three months ended September 30, 2001, was caused by actual
lease  revenues  during  the  second  quarter  of 2001  being less than had been
previously reported.

Aircraft:  Aircraft  lease  revenues  and  direct  expenses  were  $-0- and $0.1
million,  respectively,  for the quarter ended  September 30, 2001,  compared to
$1.2 million and $23,000,  respectively,  during the same period of 2000.  Lease
revenues decreased $1.2 million during the three months ended September 30, 2001
compared  to the  same  period  in 2000  due to the  sale  of the  Partnership's
remaining wholly-owned aircraft during the first quarter of 2001.

(B) Indirect Expenses Related to Owned Equipment Operations

Total indirect expenses of $0.7 million for the quarter ended September 30, 2001
decreased from $1.7 million for the same period of 2000.  Significant  variances
are explained as follows:

     (i)  A $0.7 million decrease in depreciation and amortization expenses from
          2000 levels was due to the  disposition of  Partnership  assets during
          2001 and 2000.

     (ii) A $0.1 million  decrease in  administrative  expenses during the third
          quarter 2001 was primarily due to a decrease in professional  services
          required by the Partnership.

     (iii)A $0.1 million  decrease in bad debt expense from the third quarter of
          2000 was due to the recovery of a $0.1 million  receivable  previously
          reserved for as a bad debt. A similar bad debt  recovery did not occur
          in the third quarter of 2000.

     (iv) A decrease of $39,000 in interest  expense was due to the repayment of
          the Partnership's debt during 2000.

(C) Net Gain on Disposition of Owned Equipment

The net gain on the disposition of owned equipment for the third quarter of 2001
was $31,000, resulting from the disposition of marine containers,  trailers, and
railcars,  with an  aggregate  net book value of $19,000,  for  proceeds of $0.1
million.  The net gain on the  disposition  of  owned  equipment  for the  third
quarter  of 2000 was $9.6  million,  resulting  from the  disposition  of marine
containers, railcars, trailers, and aircraft with an aggregate net book value of
$2.6 million, for proceeds of $12.2 million.

(D) Equity in Net Income of Unconsolidated Special-Purpose Entities (USPE's)

Net income  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 September 30,
                                                  2001               2000
                                             -------------------------------------

<S>                                          <C>                <C>
Marine vessel                                $            --    $         1,102
                                             -------------------------------------
    Equity in net income of USPE's           $            --    $         1,102
                                             =====================================
</TABLE>

Marine  vessel:  As of September  30,  2001,  the  Partnership  had no remaining
interest in an entity that owned a marine  vessel.  Marine  vessel  revenues and
expenses were $-0- for the quarter ended  September 30, 2001,  compared to lease
revenues  of $0.2  million  and the  gain of $1.1  million  from the sale of the
marine vessel entity in which the Partnership owned an interest offset, in part,
by depreciation expense,  direct expenses,  and administrative  expenses of $0.2
million, respectively, for the same period of 2000. The decrease in revenues and
expenses  of marine  vessels in the third  quarter of 2001  compared to the same
period of 2000 was due to the sale of the  Partnership's  interest  in an entity
that owned a marine vessel during the third quarter of 2000.

(E) Net Income

As a result of the foregoing,  the  Partnership had a net income of $0.6 million
in the third  quarter of 2001  compared  to net  income of $11.4  million in the
third  quarter of 2000.  The  Partnership's  ability to  operate  and  liquidate
assets,  secure leases, and re-lease those assets whose leases expire is subject
to many factors.  Therefore,  the Partnership's  performance in the three months
ended September 30, 2001 is not necessarily indicative of future periods.









                      (This space intentionally left blank)


<PAGE>


COMPARISON  OF THE  PARTNERSHIP'S  OPERATING  RESULTS FOR THE NINE MONTHS  ENDED
SEPTEMBER 30, 2001 AND 2000

(A) Owned Equipment Operations

Lease  revenues  less  direct  expenses  (defined  as repairs  and  maintenance,
equipment  operating and asset-specific  insurance  expenses) on owned equipment
decreased  during the nine months ended  September 30, 2001 compared to the same
period of 2000. The following table presents lease revenues less direct expenses
by equipment type (in thousands of dollars):
<TABLE>
<CAPTION>
                                                    For the Nine Months
                                                    Ended September 30,
                                                  2001               2000
                                             -------------------------------------

<S>                                          <C>                <C>
Railcars                                     $         3,501    $         3,561
Trailers                                                 139                272
Aircraft                                                  81              3,423
Marine containers                                         20                 66
</TABLE>

Railcars: Railcars lease revenues and direct expenses were $4.9 million and $1.4
million, respectively, for the nine months ended September 30, 2001, compared to
$5.0 million and $1.4 million, respectively, during the same period of 2000. The
decrease in railcar contribution in the nine months ended September 30, 2001 was
due to a decrease in railcar utilization in 2001, compared to the same period in
2000.

Trailers:  Trailer lease revenues and direct expenses were $0.3 million and $0.2
million, respectively, for the nine months ended September 30, 2001, compared to
$0.4 million and $0.2 million, respectively, during the same period of 2000. The
number  of  trailers  owned  by  the  Partnership  has  been  declining  due  to
dispositions.  The  result of this  declining  fleet is a  decrease  in  trailer
contribution.

Aircraft: Aircraft lease revenues and direct expenses were $0.2 million and $0.1
million, respectively, for the nine months ended September 30, 2001, compared to
$3.7 million and $0.2 million, respectively, during the same period of 2000. The
$3.3  million  decrease in aircraft  contribution  during the nine months  ended
September  30,  2001  compared to the same period in 2000 was due to the sale of
the Partnership's' aircraft during the first quarter of 2001.

Marine  containers:  Marine  container  lease revenues and direct  expenses were
$20,000 and $-0-,  respectively,  for the nine months ended  September 30, 2001,
compared to $0.1  million and  $2,000,  respectively,  during the same period of
2000.  The  number  of  marine  containers  owned  by the  Partnership  has been
declining due to dispositions.  The result of this declining fleet is a decrease
in marine container contribution.

(B) Indirect Operating Expenses Related to Owned Equipment Operations

Total indirect  expenses of $3.0 million for the nine months ended September 30,
2001  decreased  from $5.9  million  for the same  period  of 2000.  Significant
variances are explained as follows:

     (i)  A decrease of $2.5 million in depreciation and  amortization  expenses
          from 2000 levels due to the  disposition of Partnership  assets during
          2001 and 2000.

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

     (iii)Loss on  revaluation  of equipment  decreased  $0.2 million during the
          nine months ended  September  30, 2001  compared to the same period of
          2000. During the nine months ended September 30, 2000, the Partnership
          reduced  the  carrying  value  of  trailers  to  their  estimated  net
          realizable  value.  There was no  revaluation  of  equipment  required
          during the same period of 2001.

     (iv) A decrease of $0.2 million in management  fees to affiliate  from 2000
          levels was due to lower lease  revenues  during the nine months  ended
          September 30, 2001, compared to the same period of 2000.

     (v)  An increase of $0.2 million in general and administrative expenses was
          due to an increase of $0.1  million in legal fees  related to aircraft
          litigation.  Allocations  by the General  Partner also  increased $0.1
          million,  of which $30,000 was due to severance costs related to staff
          reductions.

     (vi) An increase of $0.1 million in bad debt expense during the nine months
          ended  September 30, 2001 compared to the same period of 2000.  During
          the nine months  ended  September  30,  2001,  the  General  Partner's
          evaluation  of the  collectability  of  receivables  due from  certain
          lessees of $0.1  million was offset by the  recovery  of $0.1  million
          receivable  previously  reserved  for as a bad debt.  During  the same
          period of 2000, the General Partner's evaluation of the collectability
          of receivables  due from certain  lessees of $36,000 was offset by the
          recovery of $0.1 million receivable  previously  reserved for as a bad
          debt.

(C) Net Gain on Disposition of Owned Equipment

The net gain on the  disposition  of  equipment  was $4.0  million  for the nine
months ended  September 30, 2001,  resulting  from the  disposition of aircraft,
marine  containers,  trailers,  and railcars with an aggregate net book value of
$1.6 million,  for proceeds of $5.7 million.  The net gain on the disposition of
equipment  was $9.7  million  for the nine  months  ended  September  30,  2000,
resulting from the disposition of marine  containers,  trailers,  railcars,  and
aircraft with an aggregate net book value of $2.8 million, for proceeds of $12.5
million.

(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 Nine Months
                                                    Ended September 30,
                                                  2001               2000
                                             -------------------------------------

<S>                                          <C>                <C>
Aircraft, aircraft engines, and rotables     $            --    $            20
Marine vessel                                            (10)               997
                                             -------------------------------------
    Equity in net income (loss) of USPE's    $           (10)   $         1,017
                                             =====================================
</TABLE>

Aircraft,  aircraft  engines,  and  rotables:  As of  September  30,  2001,  the
Partnership had no remaining interests in entities that owned aircraft, aircraft
engines, or rotables. The Partnership had no revenues or expenses in USPE's that
owned aircraft, aircraft engines, or rotables in the nine months ended September
30, 2001. The Partnership's share of aircraft revenues and expenses were $20,000
and $-0-,  respectively,  for the nine months  ended  September  30,  2000.  The
$20,000 of  aircraft  revenues  for the nine  months  ended  September  30, 2000
represented interest income earned on accounts receivable.

Marine  vessel:  As of September 30, 2001,  the  Partnership's  had no remaining
interests in entities  that owned marine  vessels.  During the nine months ended
September 30, 2001, lease revenues of $6,000 was offset by depreciation expense,
direct  expenses,  and  administrative  expenses of  $16,000,  compared to lease
revenues  of $0.7  million  and the  gain of $1.1  million  from the sale of the
Partnership's  interest in an entity that owned a marine  vessel being offset by
depreciation  expense,  direct  expenses,  and  administrative  expenses of $0.8
million,  for the same  period  of 2000.  The  decrease  in lease  revenues  and
expenses of marine vessels for the nine months ended September 30, 2001 compared
to the same period of 2000 was due to the sale of the Partnership's  interest in
an entity that owned a marine vessel during 2000.


<PAGE>



(E) Net Income

As a result of the foregoing, the Partnership had net income of $4.9 million for
the nine  months  ended  September  30,  2001,  compared  to net income of $12.2
million in the same period of 2000.  The  Partnership's  ability to operate,  or
liquidate assets,  secure leases,  and re-lease those assets whose leases expire
is subject to many factors. Therefore, the Partnership's performance in the nine
months ended September 30, 2001 is not necessarily indicative of future periods.
In the nine months ended  September 30, 2001, the Partnership  distributed  $0.6
million to the limited partners or $0.06 per weighted average depository unit.

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

For the  nine  months  ended  September  30,  2001,  the  Partnership  generated
operating cash of $2.3 million (net cash provided by operating  activities  plus
non-liquidating distributions from USPE's) to meet its operating obligations and
make  distributions to the partners (total of $0.6 million the nine months ended
September 30, 2001).

During the nine months ended  September  30, 2001,  the  Partnership  sold owned
equipment and received aggregate proceeds of $5.6 million.

Restricted  cash decreased  $0.1 million during the nine months ended  September
30, 2001 due to the return of the security deposit to the buyer of an aircraft.

During the nine months ended September 30, 2001, accounts  receivable  increased
$0.1 million due to the timing of cash receipts.

During the nine months ended  September 30, 2001,  accounts  payable and accrued
expenses decreased $32,000 due to the reduction in the size of the Partnership's
equipment portfolio.

During the nine months ended  September 30, 2001,  lessee  deposits and reserves
for repairs decreased $0.2 million.  This reflects a decrease of $0.1 million in
lessee  deposits  due to the  return of  security  deposits  to the  buyers  who
purchased an aircraft during the first quarter of 2001. Additionally, a decrease
of $0.1 million in prepaid aircraft revenue was due to the sale of an aircraft.

The General  Partner has not  planned  any  expenditure,  nor is it aware of any
contingencies  that  would  cause the  Partnership  to  require  any  additional
capital.

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

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

(III) OUTLOOK FOR THE FUTURE

The Partnership  entered its  liquidation  phase on January 1, 2000. The General
Partner is actively  marketing all of the  Partnership's  assets for sale.  Sale
decisions  will cause the operating  performance  of the  Partnership to decline
over the  remainder of its life.  The General  Partner  filed a  certificate  of
dissolution  on behalf of the  Partnership  with the  Secretary of State for the
State  of  California  in  December  2000,  and  following   completion  of  the
liquidation  of the  Partnership  which is  anticipated  to  occur in 2002,  the
General Partner will file a certificate of cancellation.

Several  factors  may  affect the  Partnership's  operating  performance  in the
remainder  of  2001  and  beyond,  including  changes  in the  markets  for  the
Partnership's  equipment and changes in the regulatory environment in which that
equipment operates.

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

Other factors  affecting  the  Partnership's  contribution  in the year 2001 and
beyond include:

1.   The cost of new marine containers have been at historical lows for the past
     several  years  which has caused  downward  pressure  on the per diem lease
     rates for this type of equipment.

2.   Railcar  loadings in North  America  for the nine  months  ending 2001 were
     below those of 2000.  This decrease has led to lower  utilization and lower
     contribution  to the  Partnership  as  existing  leases  expire and renewal
     leases are negotiated.

The  ability  of the  Partnership  to  realize  acceptable  lease  rates  on its
equipment in the different equipment markets is contingent on many factors, such
as specific market conditions and economic activity, technological obsolescence,
and government or other regulations.  The  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  Partnership  intends to use cash flow from  operations  and  proceeds  from
disposition  of  equipment  and cash  currently  held to satisfy  its  operating
requirements,  maintain working capital reserves,  and to pay cash distributions
to the unitholders.

(IV) FORWARD-LOOKING INFORMATION

Except for the historical  information contained herein, 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Partnership's primary market risk exposure is currency devaluation risk.

During the nine months ended September 30, 2001, 64% 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 (U.S.) currency.  If these lessees  currency  devalues against the
U.S. dollar,  the lessees could potentially  encounter  difficulty in making the
U.S. dollar denominated lease payments.








                      (This space intentionally left blank)



<PAGE>



                          PART II -- OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
         --------------------------------

         (a)  Exhibits

              None.

         (b)  Reports on Form 8-K

              Report  dated  September  5, 2001  announcing  the  engagement  of
              Deloitte  &  Touche  LLP as the  Partnership's  auditors  and  the
              dismissal of KPMG, LLP.





















                      (This space intentionally left blank)



<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:  November 13, 2001              By: /s/ Stephen M. Bess
                                         -----------------------------------
                                         Stephen M. Bess
                                         President and
                                         Current Chief Accounting Officer