TEXTAINER EQUIPMENT INCOME FUND III L P - 10-Q Quarterly Report

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

November 19, 2002

Securities and Exchange Commission
Washington, DC 20549

Ladies and Gentlemen:

Pursuant to the requirements of the Securities Exchange Act of 1934, we are
submitting herewith for filing on behalf of Textainer Equipment Income Fund III,
L.P. (the "Partnership") the Partnership's Quarterly Report on Form 10-Q for the
Third Quarter ended September 30, 2002.

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

Sincerely,

Nadine Forsman
Controller

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002

Commission file number 0-20140

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

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

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

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

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 [ ]

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

Quarterly Report on Form 10-Q for the
Quarter Ended September 30, 2002

Table of Contents
- ----------------------------------------------------------------------------------------------------------------

Page

Item 1. Financial Statements (unaudited)

Balance Sheets - September 30, 2002
and December 31, 2001................................................................. 3

Statements of Operations for the three and nine months
ended September 30, 2002 and 2001..................................................... 4

Statements of Partners' Capital for the nine months
ended September 30, 2002 and 2001..................................................... 5

Statements of Cash Flows for the nine months
ended September 30, 2002 and 2001..................................................... 6

Notes to Financial Statements......................................................... 8

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................................. 15

Item 3. Quantitative and Qualitative Disclosures about Market Risk............................ 23

Item 4. Controls and Procedures............................................................... 24

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

Balance Sheets

September 30, 2002 and December 31, 2001
(Amounts in thousands)
(unaudited)
- ---------------------------------------------------------------------------------------------------------------

2002 2001
--------------- ---------------

Assets
Container rental equipment, net of accumulated
depreciation of $38,104, (2001: $42,049) (note 4) $ 33,740 $ 42,867
Cash 448 3,253
Accounts receivable, net of allowance for doubtful
accounts of $201, (2001: $232) 2,266 2,455
Due from affiliates, net (note 2) 364 454
Prepaid expenses - 16
--------------- ---------------

$ 36,818 $ 49,045
=============== ===============

Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 370 $ 490
Accrued liabilities 308 182
Accrued recovery costs 129 194
Accrued damage protection plan costs 173 162
Warranty claims 40 69
Deferred quarterly distributions 65 54
Deferred damage protection plan revenue 158 149
--------------- ---------------

Total liabilities 1,243 1,300
--------------- ---------------

Partners' capital:
General partners - -
Limited partners 35,575 47,745
--------------- ---------------

Total partners' capital 35,575 47,745
--------------- ---------------

$ 36,818 $ 49,045
=============== ===============

See accompanying notes to financial statements

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

Statements of Operations

For the three and nine months ended September 30, 2002 and 2001
(Amounts in thousands except for unit and per unit amounts)
(unaudited)
- -----------------------------------------------------------------------------------------------------------------------------

Three months Three months Nine months Nine months
Ended Ended Ended Ended
Sept. 30, 2002 Sept. 30, 2001 Sept. 30, 2002 Sept. 30, 2001
---------------- ---------------- ---------------- ----------------

Rental income $ 2,427 $ 2,909 $ 6,857 $ 9,268
---------------- ---------------- ---------------- ---------------

Costs and expenses:
Direct container expenses 716 1,068 2,281 3,472
Bad debt expense (benefit) 14 23 (4) (45)
Depreciation (note 4) 1,788 1,354 4,166 4,153
Write-down of containers (note 4) 359 166 1,366 366
Professional fees 13 6 42 24
Management fees to affiliates (note 2) 189 268 609 881
General and administrative costs
to affiliates (note 2) 114 142 385 476
Other general and administrative costs 70 35 213 114
Loss on sale of containers, net (note 4) 276 18 723 199
---------------- ---------------- ---------------- ---------------

3,539 3,080 9,781 9,640
---------------- ---------------- ---------------- ---------------

Loss from operations (1,112) (171) (2,924) (372)
---------------- ---------------- ---------------- ---------------

Interest income 3 18 31 79
---------------- ---------------- ---------------- ---------------

Net loss $ (1,109) $ (153) $ (2,893) $ (293)
================ ================ ================ ===============

Allocation of net (loss) earnings (note 2):
General partners $ 15 $ 18 $ 88 $ 63
Limited partners (1,124) (171) (2,981) (356)
---------------- ---------------- ---------------- ---------------

$ (1,109) $ (153) $ (2,893) $ (293)
================ ================ ================ ===============
Limited partners' per unit share
of net loss $ (0.19) $ (0.03) $ (0.49) $ (0.06)
================ ================ ================ ===============

Limited partners' per unit share
of distributions $ 0.24 $ 0.28 $ 1.42 $ 0.98
================ ================ ================ ===============

Weighted average number of limited
partnership units outstanding 5,953,813 6,093,588 6,038,505 6,098,380
================ ================ ================ ===============

See accompanying notes to financial statements

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

Statements of Partners' Capital

For the nine months ended September 30, 2002 and 2001
(Amounts in thousands)
(unaudited)
- -------------------------------------------------------------------------------------------------------

Partners' Capital
----------------------------------------------------------
General Limited Total
-------------- --------------- --------------

Balances at January 1, 2001 $ - $ 56,884 $ 56,884

Distributions (63) (6,000) (6,063)

Redemptions (note 5) - (160) (160)

Net (loss) earnings 63 (356) (293)
-------------- --------------- --------------

Balances at September 30, 2001 $ - $ 50,368 $ 50,368
============== =============== ==============

Balances at January 1, 2002 $ - $ 47,745 $ 47,745

Distributions (88) (8,590) (8,678)

Redemptions (note 5) - (599) (599)

Net (loss) earnings 88 (2,981) (2,893)
-------------- --------------- --------------

Balances at September 30, 2002 $ - $ 35,575 $ 35,575
============== =============== ==============

See accompanying notes to financial statements

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

Statements of Cash Flows

For the nine months ended September 30, 2002 and 2001
(Amounts in thousands)
(unaudited)
- ------------------------------------------------------------------------------------------------------------------

2002 2001
---------------- ---------------

Cash flows from operating activities:
Net loss $ (2,893) $ (293)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation 4,166 4,153
Write-down of containers (note 4) 1,366 366
Decrease in allowance for doubtful accounts (31) (226)
Loss on sale of containers, net 723 199
Decrease (increase) in assets:
Accounts receivable 278 967
Due from affiliates, net (122) 438
Prepaid expenses 16 15
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 6 (95)
Accrued recovery costs (65) 28
Accrued damage protection plan costs 11 (68)
Deferred damage protection plan revenue 9 152
Warranty claims (29) (30)
---------------- ---------------

Net cash provided by operating activities 3,435 5,606
---------------- ---------------

Cash flows from investing activities:
Proceeds from sale of containers 3,019 1,573
Container purchases 5 (1,427)
---------------- ---------------

Net cash provided by investing activities 3,024 146
---------------- ---------------

Cash flows from financing activities:
Redemptions of limited partnership units (599) (160)
Distributions to partners (8,665) (6,091)
---------------- ---------------

Net cash used in financing activities (9,264) (6,251)
---------------- ---------------

Net decrease in cash (2,805) (499)

Cash at beginning of period 3,253 2,875
---------------- ---------------

Cash at end of period $ 448 $ 2,376
================ ===============

See accompanying notes to financial statements

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

Statements Of Cash Flows--Continued

For the nine months ended September 30, 2002 and 2001
(Amounts in thousands)
(unaudited)
- --------------------------------------------------------------------------------

Supplemental Disclosures:

Supplemental schedule of non-cash investing and financing activities:

The following table summarizes the amounts of container purchases, distributions
to partners, and proceeds from sale of containers which had not been paid or
received as of September 30, 2002 and 2001, and December 31, 2001 and 2000,
resulting in differences in amounts recorded and amounts of cash disbursed or
received by the Partnership, as shown in the Statements of Cash Flows for the
nine-month periods ended September 30, 2002 and 2001.

Sept. 30 Dec. 31 Sept. 30 Dec. 31
2002 2001 2001 2000
-------- -------- -------- --------

Container purchases included in:
Due to (from) affiliates....................... $ - $ (7) $ - $ -
Container purchases payable.................... - - - 646

Distributions to partners included in:
Due to affiliates.............................. 7 5 5 8
Deferred quarterly distributions............... 65 54 54 79

Proceeds from sale of containers included in:
Due from affiliates............................ 505 708 373 281

The following table summarizes the amounts of container purchases, distributions
to partners and proceeds from sale of containers recorded by the Partnership and
the amounts paid or received as shown in the Statements of Cash Flows for the
nine-month periods ended September 30, 2002 and 2001.

2002 2001
---- ----

Container purchases recorded..................................... $ 2 $ 781
Container purchases paid......................................... (5) 1,427

Distributions to partners declared............................... 8,678 6,063
Distributions to partners paid................................... 8,665 6,091

Proceeds from sale of containers recorded........................ 2,816 1,665
Proceeds from sale of containers received........................ 3,019 1,573

The Partnership has entered into direct finance leases, resulting in the
transfer of containers from container rental equipment to accounts receivable.
The carrying value of containers transferred during the nine-month periods ended
September 30, 2002 and 2001 was $58 and $44, respectively.

See accompanying notes to financial statements

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

Notes To Financial Statements

For the three and nine months ended September 30, 2002 and 2001
(Amounts in thousands except for unit and per unit amounts)
(unaudited)
- --------------------------------------------------------------------------------

Note 1. General

Textainer Equipment Income Fund III, L.P. (the Partnership), a California
limited partnership with a maximum life of 20 years, was formed in 1990.
The Partnership owns a fleet of intermodal marine cargo containers, which
are leased to international shipping lines.

In April 2002, the Partnership entered its liquidation phase, which may
last from two to six or more years depending on whether the containers are
sold (i) in one or more large transactions or (ii) gradually, either as
they reach the end of their useful marine lives or when an analysis
indicates that their sale is warranted based on existing market conditions
and the container's age, location and condition. The Partnership
anticipates that all excess cash, after redemptions and working capital
reserves, will be distributed to the general and limited partners on a
monthly basis.

The final termination and winding up of the Partnership, as well as payment
of liquidating and/or final distributions, will occur at the end of the
liquidation phase when all or substantially all of the Partnership's
containers have been sold and the Partnership begins its dissolution.

The accompanying interim comparative financial statements have not been
audited by an independent public accountant. However, all adjustments
(which were only normal and recurring adjustments) which are, in the
opinion of management, necessary to fairly present the financial position
of the Partnership as of September 30, 2002 and December 31, 2001 and the
results of its operations for the three and nine-month periods ended
September 30, 2002 and 2001 and changes in partners' capital and cash flows
for the nine-month periods ended September 30, 2002 and 2001, have been
made.

The financial information presented herein should be read in conjunction
with the audited financial statements and other accompanying notes included
in the Partnership's annual audited financial statements as of and for the
year ended December 31, 2001, in the Annual Report filed on Form 10-K.

Certain estimates and assumptions were made by the Partnership's management
that affect the reported amounts of assets and liabilities and disclosures
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. The Partnership's management evaluates its estimates on
an on-going basis, including those related to the container rental
equipment, accounts receivable and accruals.

These estimates are based on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments regarding the carrying
values of assets and liabilities. Actual results could differ from those
estimates under different assumptions or conditions.

The Partnership's management believes the following critical accounting
policies affect its more significant judgments and estimates used in the
preparation of its financial statements.

The Partnership maintains allowances for doubtful accounts for estimated
losses resulting from the inability of its lessees to make required
payments. These allowances are based on management's current assessment of
the financial condition of the Partnership's lessees and their ability to
make their required payments. If the financial condition of the
Partnership's lessees were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be required.

The Partnership depreciates its container rental equipment based on certain
estimates related to the container's useful life and salvage value. These
estimates are based upon assumptions about future demand for leased
containers and the estimated sales price at the end of the container's
useful life. The Partnership will evaluate the estimated residual values
and remaining estimated useful lives on an on-going basis and will revise
its estimates as needed. As a result, depreciation expense may fluctuate in
future periods based on fluctuations in these estimates.

Additionally, the recoverability of the recorded amounts of containers to
be held for continued use and identified for sale in the ordinary course of
business are evaluated to ensure that containers held for continued use are
not impaired and that containers identified for sale are recorded at
amounts that do not exceed the estimated fair value of the containers.
Containers to be held for continued use are considered impaired and are
written down to estimated fair value when the estimated future undiscounted
cash flows are less than the recorded values. Containers identified for
sale are written down to estimated fair value when the recorded value
exceeds the estimated fair value. In determining the estimated future
undiscounted cash flows and fair value of containers, assumptions are made
regarding future demand and market conditions for leased containers and the
sales prices for used containers. If actual market conditions are less
favorable than those projected or if actual sales prices are lower than
those estimated by the Partnership, additional write-downs may be required
and/or losses may be realized.

In August 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting
for Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supercedes
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets to be
Disposed of," and elements of Accounting Principles Board Opinion 30,
"Reporting the Results of Operations - Reporting the Effects on Disposal of
a Segment of a Business and Extraordinary, Unusual or Infrequently
Occurring Events and Transactions."

SFAS No. 144 establishes a single-accounting model for long-lived assets to
be disposed of while maintaining many of the provisions relating to
impairment testing and valuation. The Partnership adopted SFAS No. 144 on
January 1, 2002 and there was no material impact on the Partnership's
financial condition, operating results or cash flow.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statement
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." SFAS No. 145 rescinds FASB Statement No. 4, "Reporting Gains
and Losses of Debt Extinguishments" and an amendment of that Statement,
FASB Statement No. 64. SFAS No. 145 also rescinds FASB Statement No. 44,
"Accounting for Intangible Assets of Motor Carriers." FASB 145 also amends
FASB Statement No. 13, "Accounting for Leases", to eliminate an
inconsistency between the required accounting for sale-leaseback
transactions and the required accounting for certain lease modifications
that have economic effects similar to sale-leaseback transactions. These
rescissions and amendment are not anticipated to have a material impact on
the financial statements of the Partnership.

In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated
With Exit or Disposal Activities". SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3
"Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." This Statement requires that a liability for a cost
associated with an exit or disposal activity be recognized when the
liability is incurred. The provisions of this Statement are effective for
exit or disposal activities that are initiated after December 31, 2002,
with early application encouraged. The Partnership anticipates that the
adoption of SFAS No. 146 will not have a material impact on its financial
statements.

Certain reclassifications, not affecting net earnings (loss), have been
made to prior year amounts in order to conform to the 2002 financial
statement presentation.

Note 2. Transactions with Affiliates

Textainer Financial Services Corporation (TFS) is the managing general
partner of the Partnership and is a wholly-owned subsidiary of Textainer
Capital Corporation (TCC). Textainer Equipment Management Limited (TEM) and
Textainer Limited (TL) are associate general partners of the Partnership.
The managing general partner and the associate general partners are
collectively referred to as the General Partners and are commonly owned by
Textainer Group Holdings Limited (TGH). The General Partners also act in
this capacity for other limited partnerships. The General Partners manage
and control the affairs of the Partnership.

In accordance with the Partnership Agreement, sections 3.08 through 3.12,
net earnings or losses and distributions are generally allocated 1% to the
General Partners and 99% to the Limited Partners. If the allocation of
distributions exceeds the allocation of net earnings (loss) and creates a
deficit in the General Partners' aggregate capital account, the Partnership
Agreement provides for a special allocation of gross income equal to the
amount of the deficit to be made to the General Partners.

As part of the operation of the Partnership, the Partnership is to pay to
the General Partners, an acquisition fee, an equipment management fee, an
incentive management fee and an equipment liquidation fee. These fees are
for various services provided in connection with the administration and
management of the Partnership. No acquisition fees were incurred during the
nine-month period ended September 30, 2002. The Partnership capitalized $37
of container acquisition fees as a component of container costs during the
nine-month period ended September 30, 2001. The Partnership incurred $20
and $130 of incentive management fees during the three and nine-month
periods ended September 30, 2002, respectively, and $64 and $244 during the
equivalent periods in 2001, respectively. No equipment liquidation fees
were incurred during these periods.

The Partnership's container fleet is managed by TEM. In its role as
manager, TEM has authority to acquire, hold, manage, lease, sell and
dispose of the Partnership's containers. TEM holds, for the payment of
direct operating expenses, a reserve of cash that has been collected from
leasing operations; such cash is included in due from affiliates, net at
September 30, 2002 and December 31, 2001.

Subject to certain reductions, TEM receives a monthly equipment management
fee equal to 7% of gross revenues attributable to operating leases and 2%
of gross revenues attributable to full payout net leases. These fees
totaled $169 and $479 for the three and nine-month periods ended September
30, 2002, respectively, and $204 and $637, respectively, during the
comparable periods in 2001.

Certain indirect general and administrative costs such as salaries,
employee benefits, taxes and insurance are incurred in performing
administrative services necessary to the operation of the Partnership.
These costs are incurred and paid by TFS and TEM. General and
administrative costs allocated to the Partnership during the three and
nine-month periods ended September 30, 2002 and 2001 were as follows:

Three months Nine months
ended Sept. 30, ended Sept. 30,
--------------- ---------------
2002 2001 2002 2001
---- ---- ---- ----

Salaries $ 77 $ 92 $250 $282
Other 37 50 135 194
--- --- --- ---
Total general and
administrative costs $114 $142 $385 $476
=== === === ===

TEM allocates these general and administrative costs based on the ratio of
the Partnership's interest in the managed containers to the total container
fleet managed by TEM during the period. TFS allocates these costs based on
the ratio of the Partnership's containers to the total container fleet of
all limited partnerships managed by TFS. The General Partners allocated the
following general and administrative costs to the Partnership during the
three and nine-month periods ended September 30, 2002 and 2001:

Three months Nine months
ended Sept. 30, ended Sept. 30,
--------------- ---------------
2002 2001 2002 2001
---- ---- ---- ----

TEM $100 $123 $330 $413
TFS 14 19 55 63
--- --- --- ---
Total general and
administrative costs $114 $142 $385 $476
=== === === ===

The General Partners were entitled to acquire containers in their own name
and hold title on a temporary basis for the purpose of facilitating the
acquisition of such containers for the Partnership. The containers could
then be resold to the Partnership on an all-cash basis at a price equal to
the actual cost, as defined in the Partnership Agreement. One or more
General Partners could have also arranged for the purchase of containers in
its or their names, and the Partnership could then have taken title to the
containers by paying the seller directly. In addition, the General Partners
were entitled to an acquisition fee for containers acquired by the
Partnership under any of these arrangements.

At September 30, 2002 and December 31, 2001, due from affiliates, net is
comprised of:

2002 2001
---- ----
Due from affiliates:
Due from TEM.................... $407 $502
--- ---

Due to affiliates:
Due to TFS...................... 23 25
Due to TCC...................... 19 22
Due to TL....................... 1 1
--- ---
43 48
--- ---

Due from affiliates, net $364 $454
=== ===

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

Note 3. Lease Rental Income

Leasing income arises principally from the renting of containers to various
international shipping lines. Revenue is recorded when earned according to
the terms of the container rental contracts. These contracts are typically
for terms of five years or less. The following is the lease mix of the
on-lease containers (in units) at September 30, 2002 and 2001:

2002 2001
---- ----

On-lease under master leases 10,822 10,588
On-lease under long-term leases 6,157 5,326
------ ------

Total on-lease containers 16,979 15,914
====== ======

Under master lease agreements, the lessee is not committed to lease a
minimum number of containers from the Partnership during the lease term and
may generally return any portion or all the containers to the Partnership
at any time, subject to certain restrictions in the lease agreement. Under
long-term lease agreements, containers are usually leased from the
Partnership for periods of between three to five years. Such leases are
generally cancelable with a penalty at the end of each twelve-month period.
Under direct finance leases, the containers are usually leased from the
Partnership for the remainder of the container's useful life with a
purchase option at the end of the lease term.

The remaining containers are off-lease and are located primarily at a large
number of storage depots. At September 30, 2002, the Partnership's
off-lease containers were in the following locations:

Americas 2,085
Europe 902
Asia 1,174
Other 78
-----

Total off-lease containers 4,239
=====

At September 30, 2002 approximately 17% of the Partnership's off-lease
containers had been specifically identified as for sale.

Note 4. Container Rental Equipment

Effective July 1, 2002, the Partnership revised its estimate for container
salvage value from a percentage of equipment cost to an estimated dollar
residual value. The effect of this change for the three and nine-month
periods ended September 30, 2002 was an increase to depreciation expense of
$690. The Partnership will evaluate the estimated residual values and
remaining estimated useful lives on an on-going basis and will revise its
estimates as needed. As a result, depreciation expense may fluctuate in
future periods based on fluctuations in these estimates.

New container prices steadily declined from 1995 through 1999. Although
container prices increased in 2000, these prices declined again in 2001 and
have remained low during 2002. As a result, the cost of new containers
purchased in recent years is significantly less than the average cost of
containers purchased in prior years. The Partnership evaluated the
recoverability of the recorded amount of container rental equipment at
September 30, 2002 and 2001 for containers to be held for continued use and
determined that a reduction to the carrying value of these containers was
not required. The Partnership also evaluated the recoverability of the
recorded amount of containers identified for sale in the ordinary course of
business and determined that a reduction to the carrying value of these
containers was required. The Partnership wrote down the value of these
containers to their estimated fair value, which was based on recent sales
prices less cost of sales. During the nine-month periods ended September
30, 2002 and 2001 the Partnership recorded write-down expenses of $1,366
and $366, respectively, on 1,874 and 751 containers identified for sale and
requiring a reserve. For the three-month periods ended September 30, 2002
and 2001, the Partnership recorded write-down expenses of $359 and $166,
respectively, on 418 and 350 containers identified for sale and requiring a
reserve. During the three and nine-month periods ended September 30, 2002,
the Partnership also reclassified 262 containers from containers identified
for sale to containers held for continued use due to the improvement in
demand for leased containers in Asia. There were no reclassifications
during the three and nine-month periods ended September 30, 2001. At
September 30, 2002 and 2001, the net book value of the 705 and 461
containers identified for sale was $585 and $524, respectively.

The Partnership sold 1,961 previously written down containers for a loss of
$252 during the nine-month period ended September 30, 2002 and sold 588
previously written down containers for a loss of $97 during the same period
in 2001. During the three-month period ended September 30, 2002, the
Partnership sold 653 previously written down containers for a loss of $77
and sold 334 previously written down containers for a loss of $71 during
the same period in 2001. The Partnership incurred losses on the sale of
some containers previously written down as the actual sales prices received
on these containers were lower than the estimates used for the write-downs.

The Partnership also sold containers that had not been written down and
recorded losses of $471 and $102 during the nine-month periods ended
September 30, 2002 and 2001, respectively. During the three-month periods
ended September 30, 2002 and 2001 the Partnership recorded a loss of $199
and a gain of $53, respectively, on the sale of containers that had not
been written down.

As more containers are subsequently identified for sale or if container
sales prices continue to decline, the Partnership may incur additional
write-downs on containers and/or may incur losses on the sale of
containers. The Partnership will continue to evaluate the recoverability of
the recorded amounts of container rental equipment and cautions that a
write-down of container rental equipment may be required in future periods
for some of its container rental equipment.

Note 5. Redemptions

The following redemptions were consummated by the Partnership during the
nine-month periods ended September 30, 2002 and 2001:

Units Average
Redeemed Redemption Price Amount Paid
---------- ------------------ -----------

Total Partnership redemptions as of
December 31, 2000..................... 135,538 $12.34 $1,673

Nine-month period ended
September 30, 2001..................... 20,874 $ 7.66 160
------- -----

Total Partnership redemptions as of
September 30, 2001..................... 156,412 $11.72 $1,833
======= =====

Total Partnership redemptions as of
December 31, 2001..................... 162,075 $11.55 $1,871

Nine-month period ended
September 30, 2002.................... 134,112 $ 4.47 599
------- -----

Total Partnership redemptions as of
September 30, 2002..................... 296,187 $ 8.34 $2,470
======= =====

The redemption price is fixed by formula.

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

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

The Financial Statements contain information which will assist in evaluating the
financial condition of the Partnership for the three and nine-month periods
ended September 30, 2002 and 2001. Please refer to the Financial Statements and
Notes thereto in connection with the following discussion.

Textainer Financial Services Corporation (TFS) is the Managing General Partner
of the Partnership and is a wholly-owned subsidiary of Textainer Capital
Corporation (TCC). Textainer Equipment Management Limited (TEM) and Textainer
Limited (TL) are Associate General Partners of the Partnership. The General
Partners manage and control the affairs of the Partnership.

Liquidity and Capital Resources

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

In April 2002, the Partnership entered its liquidation phase, which may last
from two to six or more years depending on whether the containers are sold (i)
in one or more large transactions or (ii) gradually, either as they reach the
end of their useful marine lives or when an analysis indicates that their sale
is warranted based on existing market conditions and the container's age,
location and condition. The Partnership anticipates that all excess cash, after
redemptions and working capital reserves, will be distributed to the general and
limited partners on a monthly basis. These distributions will consist of cash
from operations and/or cash from sales proceeds. As the Partnership's container
fleet decreases, cash from operations is expected to decrease, while cash from
sales proceeds is expected to fluctuate based on the number of containers sold
and the actual sales price per container received. Consequently, the Partnership
anticipates that a large portion of all future distributions will be a return of
capital. Additionally, the May 2002 distribution, the first distribution paid
during the liquidation period, included cash from reserves, as the General
Partners decided to decrease the Partnership's working capital reserves now that
the Partnership is in its liquidation phase.

The final termination and winding up of the Partnership, as well as payment of
liquidating and/or final distributions, will occur at the end of the liquidation
phase when all or substantially all of the Partnership's containers have been
sold and the Partnership begins its dissolution.

The Partnership invests working capital, cash flow from operations and investing
activities prior to its distribution to the partners in short-term, liquid
investments. Rental income is the Partnership's principal source of liquidity
and provides a major source of funds for distributions. Rental income has been
adversely affected by current market conditions for leased containers, and these
market conditions may continue or worsen. Market conditions are discussed more
fully in "Results of Operations." The Partnership's cash is affected by cash
provided by or used in operating, investing and financing activities. These
activities are discussed in detail below.

During the nine-month period ended September 30, 2002, the Partnership declared
cash distributions to limited partners pertaining to the period from December
2001 through August 2002, in the amount of $8,590, which represented $1.42 per
unit. On a cash basis (after redemptions and general partner distributions),
$2,748 of these distributions was from current year operating activities, $407
was from cash provided by previous years' operating activities (that had not
been distributed or used to purchase containers or redeem units) and the balance
of $5,435 was a return of capital. On a financial statement basis, all of these
distributions were a return of capital.

From time to time, the Partnership redeems units from limited partners for a
specified redemption value, which is set by formula. Up to 2% of the
Partnership's outstanding units may be redeemed each year, although the 2% limit
may be exceeded at the Managing General Partner's discretion. All redemptions
are subject to the Managing General Partner's good faith determination that
payment for the redeemed units will not (i) cause the Partnership to be taxed as
a corporation, (ii) impair the capital or operations of the Partnership, or
(iii) impair the ability of the Partnership to pay distributions in accordance
with its distribution policy. During the nine-month period ended September 30,
2002, the Partnership redeemed 134,112 units for a total dollar amount of $599.
The Partnership used cash flow from operations to pay for the redeemed units.

Net cash provided by operating activities for the nine-month periods ended
September 30, 2002 and 2001, was $3,435 and $5,606, respectively. The decrease
of $2,171, or 39%, was primarily attributable to the decrease in net earnings,
adjusted for non-cash transactions, and fluctuations in gross accounts
receivable and due from affiliates, net. Net earnings, adjusted for non-cash
transactions, decreased primarily due to the decline in rental income, which is
discussed more fully in "Results of Operations." The decrease in gross accounts
receivable of $278 during the nine-month period ended September 30, 2002 was
primarily due to the decrease in rental income, and was partially offset by the
increase in the average collection period of accounts receivable. The decrease
in gross accounts receivable of $967 for the comparable period in 2001 was
primarily due to the decrease in rental income and a decline in the average
collection period of accounts receivable. The fluctuations in due from
affiliates, net, resulted from timing differences in the payment of expenses,
fees and distributions and the remittance of net rental revenues and container
sales proceeds, as well as fluctuations in these amounts.

For the nine-month periods ended September 30, 2002 and 2001, net cash provided
by investing activities (the purchase and sale of containers) was $3,024 and
$146, respectively. Net cash provided by investing activities increased $2,878
due to the decrease in cash used for container purchases and the increase in
proceeds from container sales. Cash used for container purchases decreased
$1,432, as the Partnership did not purchase containers during the nine-month
period ended September 30, 2002. Proceeds from container sales increased $1,446
as the Partnership sold more containers in low demand locations during the
nine-month period ended September 30, 2002 than in the same period in 2001. This
increase was partially offset by the decrease in the average sales price
received on container sales. The sales prices received on container sales
continued to decrease as a result of current market conditions, which have
adversely affected the value of used containers. Until demand for containers
improves in certain low demand locations, the Partnership plans to continue
selling some of its containers that are off-lease in these locations. Other
containers will also likely be sold as the Partnership continues its liquidation
phase as discussed above. The number of containers sold, both in low demand
locations and elsewhere, as well as the average sales price, will affect how
much the Partnership will pay in future distributions.

Due, in part, to these market conditions and their effect on demand for used
containers, the Partnership has been primarily selling containers only if the
containers are at the end of their useful lives or if they are located in these
low demand locations. Therefore, the Partnership has implemented its liquidation
phase to date by selling containers gradually. The Partnership will continue to
evaluate its options for selling containers in the context of both these market
conditions and the Partnership's liquidation plans. The number of containers
sold both in low demand locations and elsewhere, as well as the amount of sales
proceeds, will affect how much the Partnership will pay in future distributions
to Partners.

Results of Operations

The Partnership's income from operations, which consists primarily of rental
income less costs and expenses (including container depreciation, direct
container expenses, management fees, and reimbursement of administrative
expenses) was directly related to the size of the container fleet during the
nine-month periods ended September 30, 2002 and 2001, as well as certain other
factors as discussed below. The following is a summary of the container fleet
(in units) available for lease during those periods:

2002 2001
---- ----

Beginning container fleet............... 24,561 27,152
Ending container fleet.................. 21,218 26,023
Average container fleet................. 22,890 26,588

The average container fleet decreased 14% from the nine-month period ended
September 30, 2001 to the comparable period in 2002, primarily due to continuing
sales of containers (i) that had reached the end of their useful lives or (ii)
that an analysis had indicated their sale was otherwise warranted. Included in
this second group were containers located in low demand locations. The
Partnership expects that the size of its container fleet will further decline as
additional containers are sold for these reasons and as the Partnership
continues its liquidation plans. The decline in the container fleet has
contributed to an overall decline in rental income from the nine-month period
ended September 30, 2001 to the same period in 2002. This decline is expected to
continue in future years, as the size of the Partnership's container fleet
continues to decrease.

Rental income and direct container expenses are also affected by the utilization
of the container fleet, which was 62% and 65% on average during the nine-month
periods ended September 30, 2002, and 2001, respectively. The remaining
container fleet is off-lease and is located primarily at a large number of
storage depots. At September 30, 2002, the Partnership's off-lease containers
(in units) were in the following locations:

Americas 2,085
Europe 902
Asia 1,174
Other 78
-----
Total off-lease containers 4,239
=====

At September 30, 2002 approximately 17% of the Partnership's off-lease
containers had been specifically identified as for sale.

In addition to utilization, rental income is affected by daily rental rates. The
average daily rental rate decreased 10% between the periods. The decrease in the
average rental rate was due to declines in both master and long term lease
rates, which are the two principal types of leases for the Partnership's
containers. The majority of the Partnership's rental income was generated from
leasing of the Partnership's containers under master operating leases, but an
increasing percentage of the Partnership's containers are on lease under long
term leases, 36% as of September 30, 2002 versus 33% as of September 30, 2001.
Long term leases generally have lower rental rates than master leases because
the lessees have contracted to lease the containers for several years and cannot
return the containers prior to the termination date without a penalty.
Fluctuations in rental rates under either type of lease generally will affect
the Partnership's operating results.

The following is a comparative analysis of the results of operations for the
nine-month periods ended September 30, 2002 and 2001.

The Partnership's loss from operations for the nine-month periods ended
September 30, 2002 and 2001 was $2,924 and $372, respectively, on rental income
of $6,857 and $9,268, respectively. The decrease in rental income of $2,411 or
26%, from the nine-month period ended September 30, 2001 to the same period in
2002 was attributable to the decreases in container rental income and other
rental income, which is discussed below. Income from container rentals, the
major component of total revenue, decreased $2,219, or 27%, primarily due to the
decreases in average fleet size of 14%, average rental rates of 10% and average
on-hire utilization of 5% between the periods.

In the fourth quarter of 2000, utilization began to decline and continued to
decline during 2001 and the beginning of 2002. This decline was due to lower
overall demand by shipping lines for leased containers, which was primarily a
result of the worldwide economic slowdown. Two other factors reduced the demand
for leased containers. Shipping lines added larger vessels to their fleets,
which combined with lower cargo volume growth, made it easier for them to use
otherwise empty vessel space to reposition their own containers back to high
demand locations. Additionally, in anticipation of the delivery of these new,
larger vessels, many shipping lines placed large orders for new containers in
2000 and 2001, thus temporarily reducing their need to lease containers. These
orders for additional containers are part of a general increase in vessel
capacity for the shipping lines. This increase in vessel capacity amounted to
12% in 2001. An additional increase in vessel capacity of approximately 12% is
expected in 2002.

Utilization has improved steadily since March 2002 due to:
o An increase in export cargo out of Asia
o Prior repositioning of containers to Asia which placed large quantities
of containers in areas of high demand
o Disposal of older containers and fewer purchases of new containers by both
container lessors and shipping lines in 2001 and 2002, resulting in an
overall better-balanced supply of containers
o The labor disagreement that is currently affecting U.S. West Coast ports is
having a short-term positive effect on demand for containers as shipping
lines are not able to reposition enough containers to Asia and must lease
more containers to meet their customers' demands

This utilization improvement has continued into the fourth quarter of 2002 but
the General Partners caution that market conditions could deteriorate again due
to global economic conditions. Demand for leased containers could therefore
weaken again and result in a decrease in utilization and further declines in
lease rates and container sale prices, adversely affecting the Partnership's
operating results.

Despite the improvement in utilization, the Partnership continues to sell
(rather than reposition) some older containers located in low demand locations.
For the number of off-lease containers located in the lower demand locations in
the Americas and Europe, see chart above. The decision to sell containers is
based on the current expectation that the economic benefit of selling these
containers is greater than the estimated economic benefit of continuing to own
these containers. The majority of the containers sold are older containers. The
expected economic benefit of continuing to own these older containers is
significantly less than that of newer containers. This is due to their shorter
remaining marine life, the cost to reposition them, and the shipping lines'
preference for leasing newer containers when they have a choice.

Once the decision had been made to sell containers, the Partnership wrote down
the value of these specifically identified containers when the carrying value
was greater than the container's estimated fair value, which was based on recent
sales prices less cost of sales. Due to declines in container sales prices, the
actual sales prices received on some containers were lower than the estimates
used for the write-down, resulting in the Partnership incurring losses upon the
sale of some of these containers. Until market conditions improve, the
Partnership may incur further write-downs and/or losses on the sale of such
containers. Should the decline in economic value of continuing to own such
containers turn out to be permanent, the Partnership may be required to
write-down the value of some of its container rental equipment.

Other rental income consists of other lease-related items, primarily income from
charges to lessees for dropping off containers in surplus locations less credits
granted to lessees for leasing containers from surplus locations (location
income), income from charges to lessees for handling related to leasing and
returning containers (handling income) and income from charges to lessees for a
Damage Protection Plan (DPP). For the nine-month period ended September 30,
2002, other rental income was $939, a decrease of $192 from the equivalent
period in 2001. The decrease was primarily due to the decrease in DPP and
location income of $128 and $105, offset by an increase in handling income of
$42, respectively. DPP income declined primarily due to the decrease in the
number of containers covered under DPP and a decrease in the average DPP price
charged per container. Location income declined primarily due to a decrease in
charges to lessees for dropping off containers in surplus locations. Handling
income increased primarily due to the increase in average handling charged per
container offset by a decrease in container movement.

Direct container expenses decreased $1,191, or 34%, from the nine-month period
ended September 30, 2001 to the same period in 2002, primarily due to the
decrease in average fleet size. Repositioning, maintenance, and DPP expenses
decreased $627, $228, and $160, respectively. Repositioning expense decreased
due to shorter average repositioning moves resulting in decreased average
repositioning costs per container and a decrease in the number of containers
repositioned. Maintenance expense decreased due to the decrease in the number of
containers requiring maintenance and a decrease in the average maintenance cost
per container. DPP expense declined primarily due to the decrease in the number
of containers covered under DPP and a decrease in the average DPP repair cost.

Bad debt benefit was $4 and $45 for the nine-month periods ended September 30,
2002 and 2001, respectively. Fluctuations in bad debt benefit reflect the
adjustment to the bad debt allowance and are based on management's then current
estimates of the portion of accounts receivable that may not be collected, and
which will not be covered by insurance. These estimates are based primarily on
management's current assessment of the financial condition of the Partnership's
lessees and their ability to make their required payments. The benefits recorded
during the nine-month periods ended September 30, 2002 and 2001 reflect lower
reserve estimates from December 31, 2001 and 2000.

Depreciation expense increased $13, or less than 1%, from the nine-month period
ended September 30, 2001 to the comparable period in 2002, as the increase in
the depreciation rate as a result of a change in estimated salvage values as
discussed below was offset by the decline in the average fleet size.

Effective July 1, 2002, the Partnership revised its estimate for container
salvage value from a percentage of equipment cost to an estimated dollar
residual value. The effect of this change for the three and nine-month periods
ended September 30, 2002 was an increase to depreciation expense of $690. The
Partnership will evaluate the estimated residual values and remaining estimated
useful lives on an on-going basis and will revise its estimates as needed. As a
result, depreciation expense may fluctuate in future periods based on
fluctuations in these estimates. If the estimates regarding residual value and
remaining useful life of the containers were to decline, depreciation expense
would increase, adversely affecting the Partnership's operating results.

New container prices steadily declined from 1995 through 1999. Although
container prices increased in 2000, these prices declined again in 2001 and have
remained low during 2002. As a result, the cost of new containers purchased in
recent years is significantly less than the average cost of containers purchased
in prior years. The Partnership evaluated the recoverability of the recorded
amount of container rental equipment at September 30, 2002 and 2001 for
containers to be held for continued use and determined that a reduction to the
carrying value of these containers was not required. The Partnership also
evaluated the recoverability of the recorded amount of containers identified for
sale in the ordinary course of business and determined that a reduction to the
carrying value of these containers was required. The Partnership wrote down the
value of these containers to their estimated fair value, which was based on
recent sales prices less cost of sales. During the nine-month periods ended
September 30, 2002 and 2001 the Partnership recorded write-down expenses of
$1,366 and $366, respectively, on 1,874 and 751 containers identified as for
sale and requiring a reserve. During the nine-month period ended September 30,
2002, the Partnership also reclassified 262 containers from containers
identified for sale to containers held for continued use due to the improvement
in demand for leased containers in Asia. There were no reclassifications during
the nine-month period ended September 30, 2001. At September 30, 2002 and 2001,
the net book value of the 705 and 461 containers identified as for sale was $585
and $524, respectively.

The Partnership sold 1,961 previously written down containers for a loss of $252
during the nine-month period ended September 30, 2002 and sold 588 previously
written down containers for a loss of $97 during the same period in 2001. The
Partnership incurred losses on the sale of some containers previously written
down as the actual sales prices received on these containers were lower than the
estimates used for the write-downs.

The Partnership also sold containers that had not been written down and recorded
losses of $471 and $102 during the nine-month periods ended September 30, 2002
and 2001, respectively.

As more containers are subsequently identified for sale or if container sales
prices continue to decline, the Partnership may incur additional write-downs on
containers and/or may incur losses on the sale of containers. The Partnership
will continue to evaluate the recoverability of the recorded amounts of
container rental equipment and cautions that a write-down of container rental
equipment may be required in future periods for some of its container rental
equipment.

Management fees to affiliates decreased $272, or 31%, from the nine-month period
ended September 30, 2001 to the comparable period in 2002 due to decreases in
both equipment and incentive management fees. Equipment management fees
decreased due to the decrease in rental income, upon which equipment management
fees are primarily based. These fees were approximately 7% of rental income for
both nine-month periods ended September 30, 2002 and 2001. Incentive management
fees, which are based on the Partnership's limited and general partner
distributions made from cash from operations and partners' capital, decreased
primarily due to (i) the decrease in the amount of distributions paid from cash
from operations and (ii) decreases in partners' capital due to redemptions of
limited partners units.

General and administrative costs to affiliates decreased $91, or 19%, from the
nine-month period ended September 30, 2001 to the same period in 2002, primarily
due to a decrease in the allocation of overhead costs from TEM, as the
Partnership represented a smaller portion of the total fleet managed by TEM.

The Partnership Agreement provides for the ongoing payment to the General
Partners of the management fees and the reimbursement of the expenses discussed
above. Since these fees and expenses are established by the Agreement, they
cannot be considered the result of arms' length negotiations with third parties.
The Partnership Agreement was formulated at the Partnership's inception and was
part of the terms upon which the Partnership solicited investments from its
limited partners. The business purpose of paying the General Partners these fees
is to compensate the General Partners for the services they render to the
Partnership. Reimbursement for expenses is made to offset some of the costs
incurred by the General Partners in managing the Partnership and its container
fleet. More details about these fees and expenses are included in footnote 2 to
the Financial Statements.

Loss on sale of containers increased $524 from the nine-month period ended
September 30, 2001 to the comparable period in 2002. The increase was primarily
due to the increase in the average loss recorded on container sales and the
increase in the number of containers sold during the nine-month period ended
September 30, 2002, compared to the same period in 2001.

Net loss per limited partnership unit increased from $0.06 to $0.49 from the
nine-month period ended September 30, 2001 to the equivalent period in 2002,
respectively, reflecting the increase in net loss allocated to limited partners
from $356 to $2,981, respectively. The allocation of net loss for the nine-month
periods ended September 30, 2002 and 2001 included a special allocation of gross
income to the General Partners of $117 and $66, respectively, in accordance with
the Partnership Agreement.

The following is a comparative analysis of the results of operations for the
three-month periods ended September 30, 2002 and 2001.

The Partnership's loss from operations for the three-month periods ended
September 30, 2002 and 2001 was $1,112 and $171, respectively, on rental income
of $2,427 and $2,909, respectively. The decrease in rental income of $482, or
17%, from the three-month period ended September 30, 2001 to the comparable
period in 2002 was attributable to decreases in container rental income and
other rental income. Income from container rentals decreased $388, or 16%,
primarily due to decreases in the average fleet size of 17% and average rental
rates of 12% offset by an increase in average on-hire utilization of 18%.

For the three-month period ended September 30, 2002, other rental income was
$358, a decrease of $94 from the equivalent period in 2001. The decrease was
primarily due to the decrease in location income of $133, offset by an increase
in handling income of $56. The decrease in location income was primarily due to
the increase in credits granted to lessees for picking up containers from
certain locations and the decrease in charges to lessees for dropping off
containers in surplus locations. Handling income increased primarily due to the
increase in container movement.

Direct container expenses decreased $352, or 33% from the three-month period
ending September 30, 2001 to the equivalent period in 2002. Storage and
repositioning expenses decreased $214 and $108, respectively. Storage expense
decreased due to the increase in utilization and decrease in average fleet size
noted above. Repositioning expense decreased due to a decrease in the average
repositioning cost per container, offset by an increase in the number of
containers repositioned.

Bad debt expense decreased from $23 to $14 for the three-month periods ended
September 30, 2001 and 2002, respectively. The decline was due to a lower
adjustment to bad debt estimate during the three-month period ended September
30, 2002 compared to the same period in 2001.

Depreciation expense increased $434, or 32%, from the three-month period ended
September 30, 2001 to the comparable period in 2002 primarily due to the change
in estimated salvage values used to calculate depreciation expense as noted
above.

During the three-month periods ended September 30, 2001 and 2000, the
Partnership recorded write-down expenses of $359 and $166, respectively, on 418
and 350 containers identified for sale and requiring a reserve. The Partnership
sold 653 previously written down containers for a loss of $77 during the
three-month period ended September 30, 2002 and sold 334 previously written down
containers for a loss of $71 during the same period in 2001. The Partnership
also sold containers that had not been written down and recorded a loss of $199
and a gain $53, during the three-month periods ended September 30, 2002 and
2001, respectively.

Management fees to affiliates decreased $79, or 29%, from the three-month period
ended September 30, 2001 to the comparable period in 2002, due to decreases in
both incentive and equipment management fees. Incentive management fees,
decreased primarily due to (i) the decrease in the amount of distributions paid
from cash from operations and (ii) decreases in partners' capital due to
redemptions of limited partners units. Equipment management fees decreased due
to the decrease in rental income and were approximately 7% of rental income for
both periods.

General and administrative costs to affiliates decreased $28, or 20%, from the
three-month period ended September 30, 2001 to the equivalent period in 2002
primarily due to a decrease in the allocation of overhead costs from TEM, as the
Partnership represented a smaller portion of the total fleet managed by TEM.

Loss on sale of containers increased $258 from the three-month period ended
September 30, 2001 to the comparable period in 2002. The increase was primarily
due to the increase in the average loss recorded on container sales and the
increase in the number of containers sold during the three-month period ended
September 30, 2002, compared to the same period in 2001.

Net loss per limited partnership unit increased from $0.03 to $0.19 from the
three-month period ended September 30, 2001 to the same period in 2002,
respectively, reflecting the increase in net loss allocated to limited partners
from $171 to $1,124, respectively. The allocation of net loss included a special
allocation of gross income to the General Partners in accordance with the
Partnership Agreement.

Critical Accounting Policies and Estimates

The Partnership's discussion and analysis of its financial condition and results
of operations are based upon the Partnership's financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America. Certain estimates and assumptions were made by the
Partnership's management that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. The Partnership's management evaluates its estimates on an
on-going basis, including those related to the container rental equipment,
accounts receivable and accruals.

These estimates are based on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments regarding the carrying
values of assets and liabilities. Actual results could differ from those
estimates under different assumptions or conditions.

The Partnership's management believes the following critical accounting policies
affect its more significant judgments and estimates used in the preparation of
its financial statements.

The Partnership maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its lessees to make required payments. These
allowances are based on management's current assessment of the financial
condition of the Partnership's lessees and their ability to make their required
payments. If the financial condition of the Partnership's lessees were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required, which would adversely affect the
Partnership's operating results.

The Partnership depreciates its container rental equipment based on certain
estimates related to the container's useful life and salvage value. These
estimates are based upon assumptions about future demand for leased containers
and the estimated sales price at the end of the container's useful life.
Effective July 1, 2002, the Partnership revised its estimate for container
salvage value from a percentage of equipment cost to an estimated dollar
residual value. The Partnership will evaluate the estimated residual values and
remaining estimated useful lives on an on-going basis and will revise its
estimates as needed. As a result, depreciation expense may fluctuate in future
periods based on fluctuations in these estimates. If the estimates regarding
residual value and remaining useful life of the containers were to decline,
depreciation expense would increase, adversely affecting the Partnership's
operating results.

Additionally, the recoverability of the recorded amounts of containers to be
held for continued use and identified for sale in the ordinary course of
business are evaluated to ensure that containers held for continued use are not
impaired and that containers identified for sale are recorded at amounts that do
not exceed the estimated fair value of the containers. Containers to be held for
continued use are considered impaired and are written down to estimated fair
value when the estimated future undiscounted cash flows are less than the
recorded values. Containers identified for sale are written down to estimated
fair value when the recorded value exceeds the estimated fair value. In
determining the estimated future undiscounted cash flows and fair value of
containers, assumptions are made regarding future demand and market conditions
for leased containers and the sales prices for used containers. If actual market
conditions are less favorable than those projected or if actual sales prices are
lower than those estimated by the Partnership, additional write-downs may be
required and/or losses may be realized. Any additional write-downs or losses
would adversely affect the Partnership's operating results.

Accounting Pronouncement

In August 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supercedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets to be Disposed of," and
elements of Accounting Principles Board Opinion 30, "Reporting the Results of
Operations - Reporting the Effects on Disposal of a Segment of a Business and
Extraordinary, Unusual or Infrequently Occurring Events and Transactions."

SFAS No. 144 establishes a single-accounting model for long-lived assets to be
disposed of while maintaining many of the provisions relating to impairment
testing and valuation. The Partnership adopted SFAS No. 144 on January 1, 2002
and there was no material impact on the Partnership's financial condition,
operating results or cash flow.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statement No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS No. 145 rescinds FASB Statement No. 4, "Reporting Gains and Losses of Debt
Extinguishments" and an amendment of that Statement, FASB Statement No. 64. SFAS
No. 145 also rescinds FASB Statement No. 44, "Accounting for Intangible Assets
of Motor Carriers." FASB 145 also amends FASB Statement No. 13, "Accounting for
Leases", to eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain lease
modifications that have economic effects similar to sale-leaseback transactions.
These rescissions and amendment are not anticipated to have a material impact on
the financial statements of the Partnership.

In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated With
Exit or Disposal Activities". SFAS No. 146 addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3 "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." This Statement requires
that a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. The provisions of this Statement are
effective for exit or disposal activities that are initiated after December 31,
2002, with early application encouraged. The Partnership anticipates that the
adoption of SFAS No. 146 will not have a material impact on its financial
statements.

Risk Factors and Forward Looking Statements

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

Other risks of the Partnership's leasing operations include competition, the
cost of repositioning containers after they come off-lease, the risk of an
uninsured loss, including bad debts, increases in maintenance expenses or other
costs of operating the containers, and the effect of world trade, industry
trends and/or general business and economic cycles on the Partnership's
operations. See "Risk Factors" in the Partnership's Prospectus, as supplemented,
for additional information on risks of the Partnership's business. See "Critical
Accounting Policies and Estimates" above for information on the Partnership's
critical accounting policies and how changes in those estimates could adversely
affect the Partnership's results of operations.

The foregoing includes forward-looking statements and predictions about possible
or future events, results of operations and financial condition. These
statements and predictions may prove to be inaccurate, because of the
assumptions made by the Partnership or the General Partners or the actual
development of future events. No assurance can be given that any of these
forward-looking statements or predictions will ultimately prove to be correct or
even substantially correct. The risks and uncertainties in these forward-looking
statements include, but are not limited to, changes in demand for leased
containers, changes in global business conditions and their effect on world
trade, future modifications in the way in which the Partnership's lessees
conduct their business or of the profitability of their business, increases or
decreases in new container prices or the availability of financing therefor,
alterations in the costs of maintaining and repairing used containers, increases
in competition, changes in the Partnership's ability to maintain insurance for
its containers and its operations, the effects of political conditions on
worldwide shipping and demand for global trade or of other general business and
economic cycles on the Partnership, as well as other risks detailed herein and
from time to time in the Partnership's filings with the Securities and Exchange
Commission. The Partnership does not undertake any obligation to update
forward-looking statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Inapplicable.

Item 4. Controls and Procedures

Based on an evaluation of the Partnership's disclosure controls and procedures
(as defined in Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934)
conducted within ninety days of the filing date of this report, the managing
general partner's principal executive officer and principal financial officer
have found those controls and procedures to be effective. There have been no
significant changes in the Partnership's internal controls or in other factors
that could significantly affect these controls subsequent to the date of their
evaluation including any corrective actions with regard to significant
deficiencies and material weaknesses.

Part II

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits 99.1 and 99.2 Certifications pursuant to 18 U.S.C. Section
1350, as adopted, and regarding Section 906 of the Sarbanes-Oxley
Act of 2002.

b) Not applicable.

SIGNATURES

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.

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

By Textainer Financial Services Corporation
The Managing General Partner

By _______________________________
Ernest J. Furtado
Chief Financial Officer

Date: November 19, 2002

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Textainer Financial
Services Corporation, the Managing General Partner of the Registrant, in the
capacities and on the dates indicated:

Signature Title Date

________________________ Chief Financial Officer, Senior November 19, 2002
Ernest J. Furtado Vice President and Secretary

________________________ President November 19, 2002
John A. Maccarone

Part II

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits 99.1 and 99.2 Certifications pursuant to 18 U.S.C. Section
1350, as adopted, and regarding Section 906 of the Sarbanes-Oxley Act
of 2002.

(b) Not applicable.

SIGNATURES

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.

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

By Textainer Financial Services Corporation
The Managing General Partner

By /s/Ernest J. Furtado
______________________________________
Ernest J. Furtado
Chief Financial Officer

Date: November 19, 2002

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Textainer Financial
Services Corporation, the Managing General Partner of the Registrant, in the
capacities and on the dates indicated:

Signature Title Date

/s/Ernest J. Furtado
___________________________________ Chief Financial Officer, Senior November 19, 2002
Ernest J. Furtado Vice President and Secretary

/s/John A. Maccarone
___________________________________ President November 19, 2002
John A. Maccarone

CERTIFICATIONS

I, John A. Maccarone, certify that:

1. I have reviewed this quarterly report on form 10-Q of Textainer Equipment
Income Fund III, L.P.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:

a.) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;

b.) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report ( the "Evaluation Date"); and

c.) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a.) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material
weaknesses in internal controls ; and

b.) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

November 19, 2002

/s/ John A. Maccarone
___________________________________
John A. Maccarone
President and Director of TFS

CERTIFICATIONS

I, Ernest J. Furtado, certify that:

1. I have reviewed this quarterly report on form 10-Q of Textainer Equipment
Income Fund III, L.P.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:

a.) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;

b.) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report ( the "Evaluation Date"); and

c.) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a.) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material
weaknesses in internal controls ; and

b.) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

November 19, 2002

/s/ Ernest J. Furtado
_______________________________________________
Ernest J. Furtado
Chief Financial Officer, Senior Vice President,
Secretary and Director of TFS

EXHIBIT 99.1

CERTIFICATION PURSUANT TO

18 U.S.C. ss. 1350,

AS ADOPTED, REGARDING SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Textainer Equipment Income Fund III,
L.P., (the "Registrant") on Form 10-Q for the quarterly period ended September
30, 2002, as filed on November 19, 2002 with the Securities and Exchange
Commission (the "Report"), I, John A. Maccarone, the President and Director of
Textainer Financial Services Corporation ("TFS") and Principal Executive Officer
of TFS, the Managing General Partner of the Registrant, certify, pursuant to 18
U.S.C. ss. 1350, as adopted, regarding Section 906 of the Sarbanes-Oxley Act of
2002, that:

(i) The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and

(ii) The information contained in the Report fairly presents, in all material
respects, the financial condition, results of operations and cash flows of
the Registrant.

November 19, 2002

By /s/ John A. Maccarone
______________________________________
John A. Maccarone
President and Director of TFS

EXHIBIT 99.2

CERTIFICATION PURSUANT TO

18 U.S.C. ss. 1350,

AS ADOPTED, REGARDING SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Textainer Equipment Income Fund III,
L.P., (the "Registrant") on Form 10-Q for the quarterly period ended September
30, 2002, as filed on November 19, 2002 with the Securities and Exchange
Commission (the "Report"), I, Ernest J. Furtado, Chief Financial Officer, Senior
Vice President, Secretary and Director of Textainer Financial Services
Corporation ("TFS") and Principal Financial and Accounting Officer of TFS, the
Managing General Partner of the Registrant, certify, pursuant to 18 U.S.C. ss.
1350, as adopted, regarding Section 906 of the Sarbanes-Oxley Act of 2002, that:

(i) The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and

(ii) The information contained in the Report fairly presents, in all material
respects, the financial condition, results of operations and cash flows of
the Registrant.

November 19, 2002

By /s/ Ernest J. Furtado
_________________________________________________
Ernest J. Furtado
Chief Financial Officer, Senior Vice President,
Secretary and Director of TFS