SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K


(Mark One)

[X]     Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
        Act of 1934 for the fiscal year ended December 31, 1996

[  ]    Transition report pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934

                         Commission file number 33-44158


                        CAPITAL PREFERRED YIELD FUND-III
             (Exact name of registrant as specified in its charter)

             DELAWARE                                 84-1248907
     (State of organization)             (I.R.S. Employer Identification Number)

7175 W. JEFFERSON AVENUE, LAKEWOOD, COLORADO             80235
  (Address of principal executive offices)             (Zip Code)

       Registrant's telephone number, including area code: (303) 980-1000

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  None


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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

State the aggregate market value of the voting stock held by  non-affiliates  of
the registrant. Not applicable.


                        Exhibit Index Appears on Page 45

                               PAGE 1 OF 46 PAGES



<PAGE>




Item 1.  Business
         --------

Capital  Preferred Yield Fund-III,  L.P., a Delaware  limited  partnership  (the
"Partnership"), was organized on November 2, 1993 and is engaged in the business
of owning and leasing  equipment.  CAI  Equipment  Leasing IV Corp.,  a Colorado
corporation and an affiliate of Capital Associates, Inc. ("CAI"), is the general
partner of the Partnership.

Capital Associates  International,  Inc.  ("CAII"),  an affiliate of the general
partner, is the sole Class B limited partner of the Partnership. In exchange for
the Class B limited partner  interest,  the Class B limited partner was required
to  contribute  cash in the amount of $10,000 for each  $1,000,000 of investors'
capital  contribution  (i.e.,  cash  investments  in  the  Partnership)  to  the
Partnership.   In  addition,   the  Class  B  limited   partner's   interest  in
Distributable  Cash is subordinated to the Class A limited  partners'  interest.
The contributions of the Class B limited partner were made  simultaneously  with
the  purchase of  equipment by the  Partnership.  As of December 31, 1996,  CAII
contributed  $500,000 to the Partnership making CAII the largest single investor
in the Partnership.

The Partnership  commenced business operations on June 14, 1994. The Partnership
reached its goal of selling a maximum of 500,000  Class A limited  partner units
on April 10,  1996.  A  summary  of the  Partnership's  offering  activities  is
presented below:
<TABLE>
<CAPTION>


                                              Class A                           Sales
                                              Limited          Number           Gross           Commissions            Net
                                              Partner            of            Offering         and Offering         Offering
                                             Units Sold       Investors        Proceeds           Expenses           Proceeds
                                             ----------       ---------      ------------       ------------        ------------

<S>                                           <C>              <C>          <C>                 <C>                <C>
Year ended December 31, 1994                   130,993            990        $ 13,099,253        $ 1,888,566        $ 11,210,687
Year ended December 31, 1995                   252,777          1,300          25,277,699          3,607,116          21,670,583
Year ended December 31, 1996                   116,230          2,685          11,623,048          1,688,920           9,934,128
                                               -------          -----       -------------       ------------      --------------

          Totals                               500,000          4,975        $ 50,000,000        $ 7,184,602        $ 42,815,398
                                               =======          =====        ============        ===========        ============
</TABLE>


The  Partnership's  overall  investment  objectives are to (i) raise the maximum
allowable   capital  from  investors  for  investment  in  accordance  with  the
Partnership's  investment  objectives  described in the Prospectus;  (ii) invest
such capital and related  indebtedness  in a diversified  portfolio of equipment
subject to leases to  creditworthy  businesses  with terms  ranging  from two to
seven years;  (iii) if funds are available for  distribution,  make monthly cash
distributions to the Class A limited partners during the reinvestment  period (a
period that ends  approximately  June 30,  2000);  (iv)  re-invest all available
undistributed  cash from operations and cash from sales in additional  equipment
during the  reinvestment  period to  increase  the  Partnership's  portfolio  of
revenue-  generating   equipment,   provided  that  suitable  equipment  can  be
identified and acquired;  and (v) sell or otherwise dispose of the Partnership's
equipment  and other assets in an orderly  manner and promptly  distribute  cash
from sales  thereof to the Partners  within one to three years of the end of the
reinvestment period.



                                       -2-

<PAGE>



Item 1.  Business, continued
         --------

During 1996, the Partnership  acquired capital  equipment of various types under
lease to third parties. All of the equipment was purchased by CAII directly from
manufacturers  or  from  other   independent  third  parties  and  sold  to  the
Partnership.  The equipment was generally comprised of (among others),  material
handling equipment,  computer and peripheral  equipment,  industrial  equipment,
furniture  and  fixtures,   telecommunications   equipment,   and  research  and
development  equipment.  See Item 13 of this report,  "Certain Relationships and
Related Transactions" for the detail listing of equipment purchased during 1996.
The Partnership  expects that a majority of the equipment  purchased during 1997
will be similar in nature to that mentioned above.

The Partnership may assign the rentals from leases to financial institutions, or
acquire  leases  subject  to such  assignments,  at  fixed  interest  rates on a
nonrecourse  basis. This non-recourse debt financing will be utilized to finance
the  purchase of equipment  under lease or to invest the  proceeds  therefrom in
additional  equipment  under  lease.  In the event of default  by a lessee,  the
financial institution has a first lien on the underlying leased equipment,  with
no further recourse against the Partnership. Cash proceeds from such financings,
or financings  assumed in the acquisition of leases, are recorded on the balance
sheet as  discounted  lease  rentals.  As lessees  make  payments  to  financial
institutions, leasing revenue and interest expense are recorded.

During 1996, the  Partnership  leased  equipment to investment  grade lessees in
diverse industries including the financial services, retail, telecommunications,
energy and  manufacturing  industries.  Approximately  69% of the  Partnership's
total  equipment  under  lease was  leased to  investment  grade  lessees  as of
December 31, 1996.  Pursuant to the Partnership  Agreement,  an investment grade
lessee is a company (i) with a net worth in excess of $100,000,000  (and no debt
issues  that are  rated),  or (ii) with a credit  rating of not less than Baa as
determined by Moody's Investor  Services,  Inc. or comparable  credit rating, as
determined by another  recognized  credit rating  service;  or a lessee,  all of
whose lease  payments  have been  unconditionally  guaranteed  or supported by a
letter of credit issued by a company meeting one of the above requirements.  The
Partnership may limit its credit risk through selective use of non-recourse debt
financing of future lease rentals, as described above.

The  Partnership  only  acquires  equipment  that  is on  lease  at the  time of
acquisition. After the initial term of its lease, each item of equipment will be
expected to provide  additional  investment income from its re-lease or ultimate
sale. Upon expiration of the initial lease, the Partnership attempts to re-lease
or sell the  equipment  to the  existing  lessee.  If a re-lease  or sale to the
lessee cannot be negotiated,  the Partnership  will attempt to lease or sell the
equipment to a third party.

The Partnership's business is not subject to seasonal variations.

The ultimate rate of return on leases depends,  in part, on the general level of
interest  rates at the time the leases  are  originated.  Because  leasing is an
alternative to financing equipment purchases with debt, lease rates tend to rise
and fall with  interest  rates  (although  lease rate  movements  generally  lag
interest rate changes in the capital  markets).  Interest rates have  fluctuated
over the past several years as follows:  (i) rates decreased from 1990 until the
early part of 1994,  (ii) rates then  increased  through the early part of 1995,
and (iii)  rates have  decreased  to the  present  time.  It is unclear  whether
interest rates will continue to decrease, and what effect, if any, such interest
rate decreases will have on lease rates.


                                       -3-

<PAGE>




Item 1.  Business, continued
         --------

The Partnership has no employees.  The officers,  directors and employees of the
general  partner  and  its  affiliates   perform   services  on  behalf  of  the
Partnership. The general partner is entitled to receive certain fees and expense
reimbursements in connection with the performance of these services. See Item 10
of this Report,  "Directors and Executive  Officers of the Partnership" and Item
13 of this Report,  "Certain  Relationships and Related Transactions," which are
incorporated herein by reference.

The  Partnership  competes  in  the  leasing  marketplace  as a  lessor  with  a
significant  number  of  other  companies,  including  equipment  manufacturers,
leasing companies and financial institutions. The Partnership competes mainly on
the basis of the  expertise  of its general  partner in  remarketing  equipment,
terms offered in its transactions, pricing and service. Although the Partnership
does not account for a significant percentage of the leasing market, the general
partner  believes  that the  Partnership's  marketing  strategies  and financing
capabilities will enable it to continue to compete  effectively in the equipment
leasing and remarketing markets.

The  Partnership  leases  equipment to a significant  number of lessees.  No one
lessee and its affiliates accounted for more than 10% of total rental revenue of
Partnership during 1996.

The  Partnership  is required to dissolve  and  distribute  all of its assets no
later than December 31, 2011. However,  the general partner anticipates that all
equipment  will be sold  prior to that  date and  that the  Partnership  will be
liquidated earlier.


Item 2.  Properties
         ----------

Per the  Partnership  Agreement,  the  Partnership  does  not own or  lease  any
physical properties other than the equipment discussed in Item 1 of this Report,
"Business," which is incorporated herein by reference.


Item 3.  Legal Proceedings
         -----------------

Neither the Partnership nor any of the Partnership's equipment is the subject of
any material pending legal proceedings.


Item 4.  Submission of Matters to a Vote of Security Holders
         ---------------------------------------------------

No matters were submitted to a vote of the limited  partners of the Partnership,
through the  solicitation  of proxies or  otherwise,  during the fourth  quarter
ended December 31, 1996.





                                       -4-

<PAGE>




Item 5.  Market for the  Partnership's  Common  Equity and  Related  Stockholder
         ----------------------------------------------------------------------
         Matters
         -------

(a)          The  Partnership's  limited partner units and general partner units
             are not publicly  traded.  There is no  established  public trading
             market for such units and none is expected to develop.


(b)          As of December 31, 1996, the number of limited partners was 4,968.


(c)          Distributions
             -------------

             During 1996,  the  Partnership  made twelve (12)  distributions  (a
             substantial  portion of which  constituted  a return of capital) to
             Class A limited partners as follows:
<TABLE>
<CAPTION>


                                                        Distributions Per
                                                        $100 Investment
                  For the                Payment         (computed on            Total
               Period Ended            made during      weighted average)    Distributions
               ------------            -----------      -----------------    -------------


            <S>                      <C>                    <C>               <C>
             December 31, 1995        January 1996           $ 0.875           $    313,566
             January 31, 1996         February 1996            0.875                345,254
             February 28, 1996        March 1996               0.875                376,218
             March 31, 1996           April 1996               0.875                414,345
             April 30, 1996           May 1996                 0.875                434,253
             May 31, 1996             June 1996                0.875                435,339
             June 30, 1996            July 1996                0.875                436,957
             July 31, 1996            August 1996              0.875                435,339
             August 31, 1996          September 1996           0.875                434,827
             September 30, 1996       October 1996             0.875                436,228
             October 31, 1996         November 1996            0.875                434,346
             November 30, 1996        December 1996            0.875                433,908
                                                             -------           ------------
                                                             $ 10.50           $  4,930,580
                                                             =======           ============
</TABLE>


             A  substantial   portion  of  such  distributions  is  expected  to
             constitute a return of capital.  Distributions may be characterized
             for tax, accounting and economic purposes as a return of capital, a
             return on capital or a portion  of both.  The  portion of each cash
             distribution by a partnership  which exceeds its net income for the
             fiscal  period  may be deemed a return of  capital  for  accounting
             purposes.  However, the total percentage of a leasing partnership's
             return on capital  over its life can only be  determined  after all
             residual cash flows (which include proceeds from the re-leasing and
             sale of  equipment)  have been realized at the  termination  of the
             Partnership.


                                       -5-

<PAGE>




Item 5.  Market for the  Partnership's  Common  Equity and  Related  Stockholder
         ----------------------------------------------------------------------
         Matters, continued
         -------

             The  distribution  for the month ended December 31, 1996,  totaling
             $435,790,  was paid to the Class A limited  partners  on January 4,
             1997.  Distributions  to the  general  partner  and Class B limited
             partner  during  1996  are  discussed  in Item  13 of this  Report,
             "Certain Relationships and Related Transactions."

             The general  partner  believes that the  Partnership  will generate
             sufficient  cash flows from  operations  during  1996,  to (1) meet
             current  operating  requirements,   (2)  enable  it  to  fund  cash
             distributions  to both the Class A and Class B limited  partners at
             annualized  rates  of 10.5%  (substantial  portions  of  which  are
             expected  to  constitute  returns  of  capital),  on their  capital
             contributions,  and (3)  reinvest  in  additional  equipment  under
             leases,  provided  that suitable  equipment  can be identified  and
             acquired.

             During 1995,  the  Partnership  made twelve (12)  distributions  (a
             substantial  portion of which  constituted  a return of capital) to
             Class A limited partners as follows:
<TABLE>
<CAPTION>


                                                        Distributions Per
                                                        $100 Investment
                  For the                Payment         (computed on            Total
               Period Ended            made during      weighted average)    Distributions
               ------------            -----------      -----------------    -------------


            <S>                      <C>                   <C>                <C>
             December 31, 1994        January 1995          $ 0.875            $    100,629
             January 31, 1995         February 1995           0.875                 120,915
             February 28, 1995        March 1995              0.875                 141,950
             March 31, 1995           April 1995              0.875                 164,318
             April 30, 1995           May 1995                0.875                 180,853
             May 31, 1995             June 1995               0.875                 199,626
             June 30, 1995            July 1995               0.875                 217,423
             July 31, 1995            August 1995             0.875                 232,032
             August 31, 1995          September 1995          0.875                 246,432
             September 30, 1995       October 1995            0.875                 260,734
             October 31, 1995         November 1995           0.875                 279,394
             November 30, 1995        December 1995           0.875                 296,927
                                                            -------            ------------

                                                            $ 10.50            $  2,441,233
                                                            =======            ============
</TABLE>





                                       -6-

<PAGE>



Item 6.  Selected Financial Data
         -----------------------

The following  selected  financial data relates to 1996, 1995 and 1994. The data
should be read in conjunction with Item 7, "Management's Discussion and Analysis
of Financial  Condition and Results of Operations" and the financial  statements
and notes thereto appearing elsewhere herein.
<TABLE>
<CAPTION>


                                                                Years ended December 31,
                                                     ----------------------------------------
                                                          1996          1995          1994*
                                                          ----          ----          ----

<S>                                                 <C>            <C>           <C>        
Total revenue                                        $ 17,245,131   $ 8,195,180   $   512,864
Net income                                              2,074,001       553,710        42,939
Net income per weighted average Class A
  limited partner unit outstanding                           4.13          1.91          0.27
Total assets                                           63,125,629    48,463,584    12,365,947
Discounted lease rentals                               23,437,868    16,863,892     1,159,380
Distributions declared to Class A limited partners      5,052,804     2,660,332       451,009
Distributions declared per weighted average
  Class A limited partner unit outstanding                  10.52         10.48          5.88
</TABLE>


       *For the period from June 14, 1994 (commencement of operations) to
                               December 31, 1994


Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         -----------------------------------------------------------------------
         of Operations
         -------------

Results of Operations
---------------------

Presented below are schedules  (prepared  solely to facilitate the discussion of
results  of  operations  that  follows)   showing   condensed  income  statement
categories and analyses of changes in those  condensed  categories  derived from
the Statements of Income.
<TABLE>
<CAPTION>

                                                      Condensed                              Condensed
                                                 Statements of Income                   Statements of Income   
                                                   for the years        The effect on      for the years         The effect on
                                                 ended December 31,     net income of    ended December 31,      net income of
                                            -------------------------     changes     -------------------------     changes
                                               1996           1995      between years     1995         1994*     between years
                                            -----------   -----------   ------------- -----------   -----------  -------------


     <S>                                   <C>           <C>           <C>           <C>           <C>           <C>        
      Leasing margin                        $ 2,442,000   $ 1,044,113   $ 1,397,887   $ 1,044,113   $    66,108   $   978,005
      Equipment sales margin                    110,831             -       110,831             -             -             -
      Interest income                           320,679       238,293        82,386       238,293       102,583       135,710
      Provision for losses                      (50,000)     (275,000)      225,000      (275,000)            -      (275,000)
      Management fees paid to general
        partner                                (390,559)     (156,351)     (234,208)     (156,351)       (7,056)     (149,295)
      Direct services from general partner      (93,690)      (93,598)          (92)      (93,598)      (36,875)      (56,723)
      General and administrative               (265,260)     (203,747)      (61,513)     (203,747)      (81,821)     (121,926)
                                            -----------   -----------   -----------   -----------   -----------   -----------
             Net income                     $ 2,074,001   $   553,710   $ 1,520,291   $   553,710   $    42,939   $   510,771
                                            ===========   ===========   ===========   ===========   ===========   ===========
</TABLE>


       *For the period from June 14, 1994 (commencement of operations) to
                               December 31, 1994

                                       -7-

<PAGE>



Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         -----------------------------------------------------------------------
         of Operations, continued
         -------------

Results of Operations, continued
---------------------

LEASING MARGIN

Leasing margin consists of the following:
<TABLE>
<CAPTION>


                                                           Years ended December 31,
                                               ----------------------------------------------
                                                    1996             1995            1994*
                                                    ----             ----            ----

<S>                                           <C>              <C>              <C>         
Operating lease rentals                        $ 16,399,312     $  7,683,820     $    402,415
Direct finance lease income                         414,309          273,067            7,866
Depreciation and amortization                   (12,585,981)      (5,895,602)        (321,561)
Interest expense on discounted lease rentals     (1,785,640)      (1,017,172)         (22,612)
                                               ------------     ------------     ------------

  Leasing margin                               $  2,442,000     $  1,044,113     $     66,108
                                               ============     ============     ============

  Leasing margin ratio                                   15%              13%              16%
                                               ============     ============     ============
</TABLE>


       * For the period from June 14, 1994 (commencement of operations) to
                               December 31, 1994.

All  components of leasing margin  increased due to growth in the  Partnership's
lease portfolio.

The ultimate rate of return on leases depends,  in part, on the general level of
interest  rates at the time the leases  are  originated.  Because  leasing is an
alternative to financing equipment purchases with debt, lease rates tend to rise
and fall with  interest  rates  (although  lease rate  movements  generally  lag
interest rate changes in the capital  markets).  Interest rates have  fluctuated
over the past several years as follows:  (i) rates decreased from 1990 until the
early part of 1994,  (ii) rates then  increased  through the early part of 1995,
and (iii)  rates have  decreased  to the  present  time.  It is unclear  whether
interest rates will continue to decrease, and what effect, if any, such interest
rate decreases will have on lease rates.

EQUIPMENT SALES MARGIN

Equipment sales margin consists of the following:
                                           Year ended December 31, 1996
                                           ----------------------------

Equipment sale revenue                             $   454,045
Cost of equipment sales                               (343,214)
                                                   -----------
Equipment sales margin                             $   110,831
                                                   ===========

The  Partnership  is in the  reinvestment  period.  Currently,  a portion of the
Partnership's  initial  leases are  expiring and  equipment is being  remarketed
(i.e.,  re-leased or sold to either the  original  lessee or a third party) and,
accordingly,  the timing  and  amount of  equipment  sales  cannot be  projected
accurately.

                                       -8-

<PAGE>




Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         -----------------------------------------------------------------------
         of Operations, continued
         -------------

Results of Operations, continued
---------------------


INTEREST INCOME

Interest  income  increased  due to an increase  in invested  cash from sales of
Class A  investment  units  pending the  Partnership's  initial  acquisition  of
equipment.


EXPENSES

Management   fees,   direct  services  from  general  partner  and  general  and
administrative  expenses  increased  due to  growth in the  Partnership's  lease
portfolio.


PROVISION FOR LOSSES

The  remarketing  of  equipment  for an amount  greater  than its book  value is
reported as equipment  sales margin (if the equipment is sold) or leasing margin
(if the equipment is re-leased). The realization of less than the carrying value
of equipment (which is typically not known until  remarketing  subsequent to the
initial lease termination has occurred) is recorded as provision for losses.

Residual values are established equal to the estimated value to be received from
the equipment following termination of the lease. In estimating such values, the
Partnership considers all relevant facts regarding the equipment and the lessee,
including,  for  example,  the  likelihood  that the lessee  will  re-lease  the
equipment.  The nature of the  Partnership's  leasing  activities is that it has
credit  exposure and residual value exposure and,  accordingly,  in the ordinary
course of business,  it will incur losses from those exposures.  The Partnership
performs  on-going   quarterly   assessments  of  its  assets  to  identify  any
other-than-temporary losses in value.

The  provision  for  losses  recorded  during  the  fourth  quarter  of 1996 was
primarily for a deficiency  resulting from a lessee default under a note secured
by a high pressure cleaning unit under lease to the lessee.  Although the lessee
has not filed for bankruptcy,  they have discontinued  their operations and have
ceased making rental  payments.  The equipment was  repossessed  and sold by the
lender pursuant to the terms of the non-recourse debt agreement. The sale of the
equipment went toward retiring the debt and the general  partner  believes it is
unlikely that the deficiency will be recovered.

The  provision for losses  recorded  during 1995 was related to two lessees that
filed for bankruptcy protection.







                                       -9-

<PAGE>



Liquidity and Capital Resources
-------------------------------

The Partnership reached its goal of $50 million in unit sales to Class A limited
partners on April 10, 1996.

A summary of the Partnership's  offering  activities for the year ended December
31, 1996 is presented below:
<TABLE>
<CAPTION>


                                                                           Offering activities for the
                                                                           year ended December 31, 1996
                                                                           ----------------------------

    <S>                                                                                <C>
     Class A limited partner units sold                                                       116,230
                                                                                        =============

     Gross offering proceeds                                                            $  11,623,048
     Sales commissions                                                                     (1,162,305)
     Non-accountable organization and offering expenses reimbursement                        (464,922)
     Due diligence expenses                                                                   (61,693)
                                                                                        -------------

         Net offering proceeds                                                          $   9,934,128
                                                                                        =============

     Class B limited partner (CAII) cash contribution                                   $     130,000
                                                                                        =============
</TABLE>


The  Partnership  was  formed  on  November  2,  1993.  On April 18,  1994,  the
Partnership commenced offering 500,000 Class A limited partner units at $100 per
unit. On June 14, 1994,  the  Partnership  held its initial  closing,  receiving
gross  offering  proceeds of $1,200,000  from the sale of 12,000 Class A limited
partner  units.  A summary of the  Partnership's  offering  activities  from the
commencement of operations to December 31, 1996 is presented below:
<TABLE>
<CAPTION>

                                                                              Offering activities from the
                                                                               Commencement of Operations
                                                                                    (June 14, 1994)
                                                                                  to December 31, 1996
                                                                              ----------------------------

    <S>                                                                                <C>    
     Class A limited partner units sold                                                      500,000
                                                                                        ============
     Gross offering proceeds                                                            $ 50,000,000
     Sales commissions                                                                    (5,000,000)
     Non-accountable organization and offering expenses reimbursement                     (2,000,000)
     Due diligence expenses                                                                 (184,602)
                                                                                        -------------

         Net offering proceeds                                                          $ 42,815,398
                                                                                        ============

     Class B limited partner (CAII) cash contribution                                   $    500,000
                                                                                        ============
</TABLE>


The Partnership funds its operating activities principally with cash from rents,
discounted lease rentals  (non-recourse  debt),  interest  income,  and sales of
off-lease  equipment.  Available cash and cash reserves of the  Partnership  are
invested  in  short-term   government  securities  pending  the  acquisition  of
equipment or distribution to the partners.



                                      -10-

<PAGE>



Liquidity & Capital Resources, continued
-----------------------------

During 1996, 1995 and 1994, the Partnership acquired equipment subject to leases
with  a  total  equipment  purchase  price  of  $35,688,393,   $36,496,213,  and
$11,067,496, respectively. Also, during 1996 and 1995 the Partnership discounted
future rental payments from certain leases to non-recourse  lenders and received
proceeds of $4,767,017 and  $15,969,859,  respectively.  Non-recourse  borrowing
against unleveraged leases in the Partnership's lease portfolio may occur in the
future as well, when the general  partner,  in its  discretion,  determines that
such non-recourse financing is in the best interest of the Partnership.

During June 1995,  CAII and the  Partnership  entered into an  agreement  with a
lender to debt finance up to $50 million of lease receivables as part of a lease
securitization   program.  Under  this  program,  the  Partnership's   financing
obligations are collateralized by the leased equipment and related rentals,  and
the Partnership  has no recourse  liability to the lender for repayment of debt.
In addition, this securitized debt vehicle provides an attractive interest rate.
Aggregate  closings  through  December  31,  1996  were  $10.3  million  for the
Partnership.

During  1996,  1995 and  1994  the  Partnership  declared  distributions  to the
partners of  $5,154,680,  $2,712,186 and $453,996,  respectively.  A substantial
portion of such  distributions  is expected to  constitute  a return of capital.
Distributions may be characterized for tax,  accounting and economic purposes as
a return of  capital,  a return on capital or a portion of both.  The portion of
each cash  distribution  by a  partnership  which exceeds its net income for the
fiscal  period  may be  deemed a return  of  capital  for  accounting  purposes.
However, the total percentage of a partnership's return on capital over its life
will only be determined  after all residual cash flows (which  include  proceeds
from the re-leasing and sale of equipment) have been realized at the termination
of the Partnership.

The general partner believes that the Partnership will generate  sufficient cash
flows from operations during 1997, to (1) meet current  operating  requirements,
(2) enable it to fund cash distributions to both the Class A and Class B limited
partners  at  annualized  rates  of 10.5%  (substantial  portions  of which  are
expected to constitute returns of capital), on their capital contributions,  and
(3) reinvest in  additional  equipment  under  leases,  provided  that  suitable
equipment can be identified and acquired.


                                      -11-

<PAGE>




Item 8.  Financial Statements and Supplementary Data
         -------------------------------------------

         Index to Financial Statements and
         Financial Statement Schedule

                                                                           Page
                                                                          Number
                                                                          ------
         Financial Statements
         --------------------

           Independent Auditors' Report                                     13

           Balance Sheets at December 31, 1996 and 1995                     14
 
           Statements of Income for the years ended December 31,
             1996,  1995  and the  period  from  June  14,  1994
             (commencement of operations)
             through December 31, 1994                                      15

           Statements of Partners' Capital for the years ended 
             December 31, 1996, 1995 and the period from 
             June 14, 1994 (commencement of operations)
             through December 31, 1994                                      16
 
           Statements of Cash Flows for the years ended December
             31,  1996,  1995 and the period  from June 14, 1994
             (commencement of operations)
             through December 31, 1994                                     17-18

           Notes to Financial Statements                                   19-29



         Financial Statement Schedule
         ----------------------------

           Independent Auditors' Report                                     30

           Schedule II - Valuation and Qualifying Accounts                  31


                                      -12-

<PAGE>



                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------



THE PARTNERS
CAPITAL PREFERRED YIELD FUND-III, L.P.:

We have  audited the  accompanying  balance  sheets of Capital  Preferred  Yield
Fund-III,  L.P. as of December 31, 1996 and 1995, and the related  statements of
income,  partners' capital, and cash flows for each of the years in the two-year
period ended  December 31, 1996 and the period from June 14, 1994  (commencement
of  operations)  to  December  31,  1994.  These  financial  statements  are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position  of Capital  Preferred  Yield
Fund-III,  L.P.  as of  December  31,  1996 and  1995,  and the  results  of its
operations and its cash flows for each of the years in the two-year period ended
December 31, 1996 and the period from June 14, 1994 (commencement of operations)
to December  31,  1994 and in  conformity  with  generally  accepted  accounting
principles.

                                      /s/KPMG Peat Marwick LLP
                                      --------------------------
                                      KPMG PEAT MARWICK LLP

Denver, Colorado
January 31, 1997

                                      -13-

<PAGE>



                     CAPITAL PREFERRED YIELD FUND-III, L.P.

                                 BALANCE SHEETS


                                     ASSETS
<TABLE>
<CAPTION>


                                                                                   December 31,  December 31,
                                                                                       1996           1995
                                                                                   ------------  ------------

<S>                                                                                <C>           <C>        
Cash and cash equivalents                                                           $   798,140   $ 6,774,071
Accounts receivable                                                                     883,201     1,366,351
Receivable from affiliates                                                               42,691             -
Net investment in direct finance leases                                               5,479,265     4,294,046
Leased equipment, net                                                                55,261,435    35,943,402
Deferred financing costs                                                                  6,577        85,714
                                                                                    -----------   -----------

    Total assets                                                                    $62,471,309   $48,463,584
                                                                                    ===========   ===========


                        LIABILITIES AND PARTNERS' CAPITAL

Liabilities:
    Accounts payable and accrued liabilities                                        $   684,684   $   401,786
    Payable to affiliates                                                                54,351       106,196
    Rents received in advance                                                           461,450       236,186
    Distributions payable to partners                                                   444,611       319,907
    Discounted lease rentals                                                         23,437,868    16,863,892
                                                                                    -----------   -----------

    Total liabilities                                                                25,082,964    17,927,967
                                                                                    -----------   -----------

Partners' capital:
    General partner                                                                           -             -
    Limited partners:
          Class A 500,000 units authorized; 496,660 and 382,115 units
             issued and outstanding in 1996 and 1995, respectively                   36,936,407    30,183,575
          Class B                                                                       451,938       352,042
                                                                                    -----------   -----------

                  Total partners' capital                                            37,388,345    30,535,617
                                                                                    -----------   -----------

                  Total liabilities and partners' capital                           $62,471,309   $48,463,584
                                                                                    ===========   ===========
</TABLE>


                 See accompanying notes to financial statements.

                                      -14-

<PAGE>



                     CAPITAL PREFERRED YIELD FUND-III, L.P.

                              STATEMENTS OF INCOME
<TABLE>
<CAPTION>


                                                                              For the period
                                                                             from June 14, 1994
                                                                              (commencement of
                                                                               operations) to
                                                 December 31,  December 31,      December 31,
                                                     1996          1995            1994
                                                 ------------  ------------  ------------------
<S>                                              <C>           <C>             <C>

REVENUE:
    Operating lease rentals                       $16,399,312   $ 7,683,820     $   402,415
    Direct finance lease income                       414,309       273,067           7,866
    Equipment sales margin                            110,831             -               -
    Interest income                                   320,679       238,293         102,583
                                                  -----------   -----------     -----------

          Total revenue                            17,245,131     8,195,180         512,864
                                                  -----------   -----------     -----------

EXPENSES:
    Depreciation and amortization                  12,585,981     5,895,602         321,561
    Management fees payable to general partner        390,559       156,351           7,056
    Direct services from general partner               93,690        93,598          36,875
    General and administrative                        265,260       203,747          81,821
    Interest on discounted lease rentals            1,785,640     1,017,172          22,612
    Provision for losses                               50,000       275,000               -
                                                  -----------   -----------     -----------
             Total expenses                        15,171,130     7,641,470         469,925
                                                  -----------   -----------     -----------

Net income                                        $ 2,074,001   $   553,710     $    42,939
                                                  ===========   ===========     ===========

Net income allocated:
    To the general partner                        $    68,376   $    64,746     $    21,772
    To the Class A limited partners                 1,985,340       483,976          20,934
    To the Class B limited partner                     20,285         4,988             233
                                                  -----------   -----------     -----------

                                                  $ 2,074,001   $   553,710     $    42,939
                                                  ===========   ===========     ===========

Net income per weighted average Class A limited
    partner unit outstanding                      $      4.13   $      1.91     $      0.27
                                                  ===========   ===========     ===========

Weighted average Class A limited partner
    units outstanding                                 480,456       253,759          76,646
                                                  ===========   ===========     ===========
</TABLE>





                 See accompanying notes to financial statements.

                                      -15-

<PAGE>



                     CAPITAL PREFERRED YIELD FUND-III, L.P.

                         STATEMENTS OF PARTNERS' CAPITAL
         For the year ended December 31, 1996, 1995 and the period from
                   June 14, 1994 (commencement of operations)
                            through December 31, 1994
<TABLE>
<CAPTION>



                                                                       Class A
                                                                       Limited         Class A          Class B
                                                       General         Partner         Limited          Limited
                                                       Partner          Units          Partners         Partner           Total
                                                       -------         -------         --------         -------           -----

<S>                                               <C>              <C>              <C>              <C>              <C>         
Capital contributions                              $        100          130,993     $ 13,099,253     $    130,000     $ 13,229,353
Commissions and offering costs on
  sale of Class A limited partner units                 (18,885)               -       (1,869,681)               -       (1,888,566)
Net income                                               21,772                -           20,934              233           42,939
Distributions declared to partners                       (2,987)               -         (451,009)               -         (453,996)
                                                   ------------     ------------     ------------     ------------     ------------

Partners' capital, December 31, 1994                          -          130,993       10,799,497          130,233       10,929,730

Capital contributions                                         -          252,777       25,277,699          240,000       25,517,699
Commissions and offering costs on
  sale of Class A limited partner units                 (36,071)               -       (3,571,045)               -       (3,607,116)
Redemptions                                                   -           (1,655)        (146,220)               -         (146,220)
Net income                                               64,746                -          483,976            4,988          553,710
Distributions declared to partners                      (28,675)               -       (2,660,332)         (23,179)      (2,712,186)
                                                   ------------     ------------     ------------     ------------     ------------

Partners' capital, December 31, 1995                          -          382,115       30,183,575          352,042       30,535,617

Capital contributions                                         -          116,230       11,623,048          130,000       11,753,048
Commissions and offering costs on
  sale of Class A limited partner units                 (16,889)               -       (1,672,031)               -       (1,688,920)
Redemptions                                                   -           (1,685)        (130,721)               -         (130,721)
Net income                                               68,376                -        1,985,340           20,285        2,074,001
Distributions declared to partners                      (51,487)               -       (5,052,804)         (50,389)      (5,154,680)
                                                   ------------     ------------     ------------     ------------     ------------

Partners' capital, December 31, 1996              $           -          496,660     $ 36,936,407     $    451,938     $ 37,388,345
                                                   ============     ============     ============     ============     ============

</TABLE>




                 See accompanying notes to financial statements.

                                      -16-

<PAGE>



                     CAPITAL PREFERRED YIELD FUND-III, L.P.
                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                                                 For the period from
                                                                                                                     June 14, 1994
                                                                                                                    (commencement of
                                                                                                                       operations)
                                                                                 December 31,       December 31,     to December 31,
                                                                                     1996               1995               1994
                                                                                 ------------       -----------  -------------------
<S>                                                                             <C>                <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                                                                   $  2,074,001       $    553,710       $     42,939
    Adjustments to reconcile net income to net cash
      provided by operating activities:
      Depreciation and amortization                                                12,585,981          5,895,602            321,561
      Provision for losses                                                             50,000            275,000                  -
      Cost of equipment sales                                                         343,214                  -                  -
      Recovery of investment in direct finance leases                               2,204,916            737,285             32,107
      Changes in assets and liabilities:
         (Increase) decrease in accounts receivable                                   484,435         (1,231,163)           (76,646)
         (Increase) decrease in receivable from affiliates                            (42,691)            19,917            (19,917)
         Increase in accounts payable and accrued liabilities                         282,898            282,983            118,803
         Increase (decrease) in payable to affiliates                                 (51,845)            16,301             13,924
         Increase in rents received in advance                                        225,264            229,446              6,740
         (Increase) decrease in deferred financing costs                               79,137            (85,714)                 -
                                                                                 ------------       ------------       ------------
Net cash provided by operating activities                                          18,235,310          6,693,367            439,511
                                                                                 ------------       ------------       ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchases of equipment on operating leases from affiliate                     (23,483,867)       (29,208,749)        (9,546,159)
    Investment in direct financing leases, acquired from affiliates                  (836,057)        (4,602,039)          (287,857)
                                                                                 ------------       ------------       ------------
Net cash used in investing activities                                             (24,319,924)       (33,810,788)        (9,834,016)
                                                                                 ------------       ------------       ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from Class A capital contributions                                    11,623,048         25,277,699         13,099,353
    Proceeds from Class B capital contributions                                       130,000            240,000            130,000
    Proceeds from discounted lease rentals                                          4,767,017         15,969,859                  -
    Principal payments on discounted lease rentals                                 (9,561,511)        (2,950,770)           (74,100)
    Redemptions                                                                      (130,721)          (146,220)                 -
    Commissions paid to affiliate in connection with the sale of
      Class A limited partner units                                                (1,162,305)        (2,500,740)        (1,294,805)
    Non-accountable organization and offering expenses
      reimbursement paid to the general partner in
      connection with the sale of Class A limited partner units                      (526,615)        (1,064,160)          (560,006)
    Distributions to partners                                                      (5,030,230)        (2,489,733)          (350,380)
                                                                                 ------------       ------------       ------------
Net cash provided by financing activities                                             108,683         32,335,935         10,950,062
                                                                                 ------------       ------------       ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                               (5,975,931)         5,218,514          1,555,557
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                    6,774,071          1,555,557                  -
                                                                                 ------------       ------------       ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                       $    798,140       $  6,774,071       $  1,555,557
                                                                                 ============       ============       ============
</TABLE>


                                      -17-

<PAGE>



                     CAPITAL PREFERRED YIELD FUND-III, L.P.
                            STATEMENTS OF CASH FLOWS
                                   (continued)
<TABLE>
<CAPTION>


                                                                                                                 For the period from
                                                                                                                     June 14, 1994
                                                                                                                    (commencement of
                                                                                                                       operations)
                                                                                 December 31,       December 31,     to December 31,
                                                                                     1996               1995               1994
                                                                                 ------------       -----------  -------------------

<S>                                                                             <C>                <C>                 <C>
Supplemental disclosure of cash flow information:
    Interest paid on discounted lease rentals                                    $ 1,785,640        $ 1,017,172         $    22,612
Supplemental disclosure of noncash investing and
  financing activities:
    Reduction in Partner's capital accounts for commissions 
      and offering costs payable to affiliates                                             -             42,217              33,754
    Discounted lease rentals assumed in equipment acquisitions                    11,368,469          2,685,425           1,233,480
</TABLE>





























                 See accompanying notes to financial statements.

                                      -18-

<PAGE>


                     CAPITAL PREFERRED YIELD FUND-III, L.P.

                          NOTES TO FINANCIAL STATEMENTS

1.     Organization and Summary of Significant Accounting Policies
       -----------------------------------------------------------

       Organization

       Capital Preferred Yield Fund-III,  L.P. (the "Partnership") was organized
       on November 2, 1993 as a limited  partnership under the laws of the State
       of  Delaware  pursuant  to  an  Agreement  of  Limited  Partnership  (the
       "Partnership  Agreement").  The Partnership was formed for the purpose of
       acquiring   and  leasing  a   diversified   portfolio   of  equipment  to
       unaffiliated third parties.  The Partnership will continue until December
       31, 2011 unless  terminated  earlier in accordance  with the terms of the
       Partnership  Agreement.  All Partnership equipment is expected to be sold
       and the Partnership liquidated between 2000 and 2003. The general partner
       of the  Partnership  is CAI  Equipment  Leasing IV Corp.,  a wholly owned
       subsidiary of Capital Associates, Inc. ("CAI").

       The general  partner  manages the  Partnership,  including  investment of
       funds,  purchase  and sale of  equipment,  lease  negotiation  and  other
       administrative  duties. The Partnership  commenced business operations on
       June 14, 1994, and from the date of  commencement  of operations  through
       December 31, 1996,  500,000  Class A limited  partner  units were sold to
       4,968 investors at a price of $100 per Class A limited partner unit.

       Capital  Associates   International,   Inc.  ("CAII"),   a  wholly  owned
       subsidiary  of CAI, is the Class B limited  partner.  The Class B limited
       partner is required to contribute cash, upon acquisition of equipment, in
       an amount equal to 1% of gross offering  proceeds  received from the sale
       of Class A limited  partner  units.  As of December  31,  1996,  CAII has
       contributed $500,000 to the Partnership.

       Use of Estimates

       The  preparation  of financial  statements in conformity  with  generally
       accepted accounting  principles requires management to make estimates and
       assumptions  that affect the reported  amounts of assets and  liabilities
       and  disclosure of contingent  assets and  liabilities at the date of the
       financial  statements  and the  reported  amounts of revenue and expenses
       during the  reporting  period.  For leasing  entities,  this includes the
       estimate of residual  values,  as discussed  below.  Actual results could
       differ from those estimates.

       Partnership Allocations

          Cash Distributions
          ------------------

          During  the  Reinvestment   Period  (as  defined  in  the  Partnership
          Agreement), available cash is distributed to the partners as follows:


                                      -19-

<PAGE>


                     CAPITAL PREFERRED YIELD FUND-III, L.P.

                    NOTES TO FINANCIAL STATEMENTS, continued

1.     Organization and Summary of Significant Accounting Policies, continued
       -----------------------------------------------------------

       Partnership Allocations, continued

          Cash Distributions, continued
          ------------------

              First,  1.0% to the  general  partner  and  99.0%  to the  Class A
              limited  partners  until  the  class A  limited  partners  receive
              annual,  non-compounded cumulative distributions equal to 10.5% of
              their contributed capital.

              Second,  1.0% to the  general  partner  and  99.0% to the  Class B
              limited partner until the Class B limited partner  receives annual
              non-compounded  cumulative  distributions  equal  to  10.5% of its
              contributed capital.

              Third,  any  remaining   available  cash  will  be  reinvested  or
              distributed  to the  partners  as  specified  in  the  Partnership
              Agreement.

          After  the   Reinvestment   Period  (as  defined  in  the  Partnership
          Agreement),  available  cash will be  distributed  to the  partners as
          follows:

              First, in accordance with the first and second  allocations during
              the Reinvestment Period as described above.

              Second,  99.0% to the  Class A  limited  partners  and 1.0% to the
              general partner, until the Class A limited partners achieve Payout
              (as defined in the Partnership Agreement).

              Third,  99.0% to the Class B limited partner,  1.0% to the general
              partner,  until the Class B limited  partner  achieves  Payout (as
              defined in the Partnership Agreement).

              Fourth,  99.0% to the Class A and Class B limited  partners  (as a
              class)  and 1.0% to the  general  partner,  until  the Class A and
              Class B limited partners receive cash distributions  equal to 170%
              of their capital contributions.

          Thereafter,  90% to the  Class A and Class B  limited  partners  (as a
          class) and 10% to the general partner.

          Profits and Losses
          ------------------

          There  are  several  special  allocations  that  precede  the  general
          allocations   of  profits  and  losses  to  the  partners.   The  most
          significant special allocations are as follows:


                                      -20-

<PAGE>


                     CAPITAL PREFERRED YIELD FUND-III, L.P.

                    NOTES TO FINANCIAL STATEMENTS, continued

1.     Organization and Summary of Significant Accounting Policies, continued
       -----------------------------------------------------------

          Profits and Losses (continued)
          ------------------

              First,  commissions  and expenses paid in connection with the sale
              of Class A limited partner units are allocated 1.0% to the general
              partner and 99.0% to the Class A limited partners.

              Second,  depreciation  relating to  Partnership  equipment and any
              losses   resulting  from  the  sale  of  equipment  are  generally
              allocated  1.0% to the  general  partner  and 99.0% to the limited
              partners  (shared  99.0%/1.0%  by the  Class A and Class B limited
              partners,  respectively)  until  the  cumulative  amount  of  such
              depreciation  and such losses  allocated to each  limited  partner
              equals  such  limited  partner's  contributed  capital  reduced by
              commissions and other expenses paid in connection with the sale of
              Class  A  limited   partner  units   allocated  to  such  partner.
              Thereafter,  gain on sale of equipment,  if any, will be allocated
              to  the  general  partner  in  an  amount  equal  to  the  sum  of
              depreciation and loss on sale of equipment previously allocated to
              the general partner.

              Third,  notwithstanding  anything in the Partnership  Agreement to
              the contrary,  and before any other  allocation is made,  items of
              income  and  gain  for the  current  year  (or  period)  shall  be
              allocated,  as quickly as possible,  to the general partner to the
              extent of any deficit  balance  existing in the general  partner's
              capital account as of the close of the immediately preceding year,
              in order to restore the balance in the general  partner's  capital
              account to zero.

          After giving effect to special allocations, profits (as defined in the
          Partnership  Agreement)  are first  allocated in proportion to, and to
          the extent of, any previous losses, in reverse chronological order and
          priority.  Any  remaining  profits are allocated in the same order and
          priority as cash distributions.

          After giving effect to special allocations,  losses (as defined in the
          Partnership  Agreement)  are  allocated in  proportion  to, and to the
          extent of, any previous profits,  in reverse  chronological  order and
          priority.  Any  remaining  losses are  allocated  1.0% to the  general
          partner and 99.0% to the limited  partners  (shared  99.0%/1.0% by the
          Class A and Class B limited partners, respectively).

       Financial Reporting
       -------------------

          For  financial  reporting  purposes,  net income is  allocated  to the
          partners  in  a  manner   consistent   with  the  allocation  of  cash
          distributions.

       Recently Issued Financial Accounting Standards

          The Partnership  adopted Statement of Financial  Accounting  Standards
          No. 121,  Accounting for the  Impairment of Long-lived  Assets and for
          Long-lived  Assets to be  Disposed  Of  ("SFAS  No.  121"),  effective
          January  1,  1996.  SFAS No.  121  requires  that  long-lived  assets,
          including operating leases, and certain identifiable intangibles to be
          held and used by an entity be reviewed for impairment whenever

                                      -21-

<PAGE>


                     CAPITAL PREFERRED YIELD FUND-III, L.P.

                    NOTES TO FINANCIAL STATEMENTS, continued

 1.    Organization and Summary of Significant Accounting Policies, continued
       -----------------------------------------------------------

       Recently Issued Financial Accounting Standards, continued

          events or changes in  circumstances  indicate that the carrying amount
          of an asset may not be  recoverable.  In  performing  the  review  for
          recoverability,  the entity  should  estimate  the  future  cash flows
          expected  to  result  from  the  use of the  asset  and  its  eventual
          disposition.   If  the  sum  of  the   expected   future   cash  flows
          (undiscounted  and without interest charges) is less than the carrying
          amount of the asset, an impairment loss is recognized.  Otherwise,  an
          impairment loss is not  recognized.  Measurement of an impairment loss
          for long-lived  assets,  including  operating leases, and identifiable
          intangibles  held by the Partnership is based on the fair value of the
          asset  calculated by discounting  the expected future cash flows at an
          appropriate interest rate. The adoption of this statement did not have
          a material effect on the Partnership's  financial condition or results
          of operations.

       Lease Accounting

          Statement of Financial  Accounting  Standards No. 13,  Accounting  for
          Leases,  requires  that a lessor  account for each lease by the direct
          finance,   sales-type  or  operating  lease  method.  The  Partnership
          currently  utilizes the direct financing and operating methods for all
          of the Partnership's  equipment under lease. Direct finance leases are
          defined  as  those  leases  which  transfer  substantially  all of the
          benefits and risks of ownership  of the  equipment to the lessee.  For
          all  types of  leases,  the  determination  of  profit  considers  the
          estimated value of the equipment at lease termination,  referred to as
          the residual  value.  After the inception of a lease,  the Partnership
          may engage in financing of lease  receivables  on a nonrecourse  basis
          (i.e.,  "non-recourse  debt" or  "discounted  lease  rentals")  and/or
          equipment sale transactions to reduce or recover its investment in the
          equipment.

       The  Partnership's  accounting  methods  and  their  financial  reporting
       effects are described below.

       Net Investment in Direct Financing Leases ("DFLs")

          The cost of the  equipment,  including  acquisition  fees  paid to the
          general  partner,  is  recorded  as  net  investment  in  DFLs  on the
          accompanying balance sheet. Leasing revenue,  which is recognized over
          the term of the lease,  consists of the excess of lease  payments plus
          the estimated  residual value over the equipment's cost. Earned income
          is recognized  monthly to provide a constant  yield and is recorded as
          direct  finance lease income on the  accompanying  income  statements.
          Residual  values  are  established  at  lease  inception  equal to the
          estimated   value  to  be  received  from  the   equipment   following
          termination  of the  initial  lease  (which in  certain  circumstances
          includes anticipated re-lease proceeds),  as determined by the general
          partner.  In estimating such values, the general partner considers all
          relevant information regarding the equipment and the lessee.


                                      -22-

<PAGE>


                     CAPITAL PREFERRED YIELD FUND-III, L.P.

                    NOTES TO FINANCIAL STATEMENTS, continued

1.     Organization and Summary of Significant Accounting Policies, continued
       -----------------------------------------------------------


       Equipment on Operating Leases ("OLs")

          The cost of equipment,  including acquisition fees paid to the general
          partner,  is recorded as leased equipment in the accompanying  balance
          sheets and is depreciated on a straight-line basis over the lease term
          to an  amount  equal to the  estimated  residual  value  at the  lease
          termination  date.  Leasing  revenue  consists  principally of monthly
          rents and is recognized as operating lease rentals in the accompanying
          income statements.  Residual values are established at lease inception
          equal  to the  estimated  value  to be  received  from  the  equipment
          following   termination   of  the  initial  lease  (which  in  certain
          circumstances  includes anticipated re-lease proceeds),  as determined
          by the general partner. In estimating such values, the general partner
          considers all relevant  information  and  circumstances  regarding the
          equipment and the lessee.  Because revenue,  depreciation  expense and
          the resultant  profit margin before interest expense are recorded on a
          straight-line  basis, and interest expense on discounted lease rentals
          (discussed  below) is recorded on the interest  method,  lower returns
          are  realized  in the  early  years  of the  term of an OL and  higher
          returns in later years.


       Nonrecourse Discounting of Rentals

          The Partnership may assign the future rentals from leases to financial
          institutions,  or acquire leases subject to such assignments, at fixed
          interest  rates on a  nonrecourse  basis.  In return for such assigned
          future rentals,  the Partnership  receives the discounted value of the
          rentals in cash.  In the event of default by a lessee,  the  financial
          institution has a first lien on the underlying leased equipment,  with
          no further recourse  against the Partnership.  Cash proceeds from such
          financings, or the assumption of such financings,  are recorded on the
          balance sheet as discounted lease rentals. As lessees make payments to
          financial  institutions,  leasing  revenue  and  interest  expense are
          recorded.


       Allowance for Losses

          An allowance  for losses is  maintained  at levels  determined  by the
          general  partner to  adequately  provide for any  other-than-temporary
          declines in asset values. In determining losses,  economic conditions,
          the activity in the used equipment  markets,  the effect of actions by
          equipment  manufacturers,  the  financial  condition  of lessees,  the
          expected  courses of action by lessees with regard to leased equipment
          at  termination of the initial lease term, and other factors which the
          general  partner   believes  are  relevant,   are  considered.   Asset
          chargeoffs  are recorded upon the  termination  or  remarketing of the
          underlying  assets.  The lease  portfolio  is  reviewed  quarterly  to
          determine the adequacy of the allowance for losses.


                                      -23-

<PAGE>


                     CAPITAL PREFERRED YIELD FUND-III, L.P.

                    NOTES TO FINANCIAL STATEMENTS, continued

1.     Organization and Summary of Significant Accounting Policies, continued
       -----------------------------------------------------------


       Transactions Subsequent to Initial Lease Termination

          After the initial term of equipment under lease expires, the equipment
          is either sold or re-leased to the  existing  lessee or another  third
          party.  The remaining net book value of equipment  sold is removed and
          gain or loss  recorded  when  equipment is sold.  The  accounting  for
          re-leased equipment is consistent with the accounting  described under
          "Net  Investment  in  Direct  Financing   Leases"  and  "Equipment  on
          Operating Leases" above.


       Income Taxes

          No  provision  for  income  taxes  has  been  made  in  the  financial
          statements  since taxable income or loss is recorded in the tax return
          of the individual partners.


       Cash Equivalents

          The Partnership considers  short-term,  highly liquid investments that
          are  readily   convertible  to  known  amounts  of  cash  to  be  cash
          equivalents.

          Cash  equivalents  of $746,511 and $6,129,000 at December 31, 1996 and
          1995,  respectively,  are  comprised of an investment in a mutual fund
          which  invests  solely  in  U.S.   Government  treasury  bills  having
          maturities of 90 days or less.


       Deferred Financing Costs

          Deferred  financing  costs,  which were incurred by the Partnership in
          connection  with an  agreement  with a lender  to debt  finance  lease
          rentals,  are charged  ratably to operations  as  additional  interest
          expense over the expected life of the underlying indebtedness.


       Net Income Per Class A Limited Partner Unit

          Net income per Class A limited  partner  unit is  computed by dividing
          the net  income  allocated  to the  Class A  limited  partners  by the
          weighted  average number of Class A limited partner units  outstanding
          during the period.

                                      -24-

<PAGE>


                     CAPITAL PREFERRED YIELD FUND-III, L.P.

                    NOTES TO FINANCIAL STATEMENTS, continued

2.     Net Investment in Direct Financing Leases
       -----------------------------------------

       The  components  of the net  investment  in direct  finance  leases as of
       December 31, 1996 and 1995 were:

                                                         1996           1995
                                                      -----------   -----------

       Minimum lease payments receivable              $ 5,340,323   $ 4,578,583
       Estimated residual values                          749,760       399,190
       Less unearned income                              (610,818)     (683,727)
                                                      -----------   -----------
              Total                                   $ 5,479,265   $ 4,294,046
                                                      ===========   ===========

3.     Leased Equipment
       ----------------

       The  Partnership's  investment in equipment on operating  leases by major
       classes as of December 31, 1996 and 1995 were:
                                                     1996              1995
                                                 --------------    ------------

       Transportation and industrial equipment   $   47,672,965    $ 28,559,213
       Computers and peripherals                     12,437,727       8,385,064
       Furniture, fixtures and equipment             13,329,611       4,976,613
       Other                                            657,330         514,675
                                                 --------------    ------------
                                                     74,097,633      42,435,565
       Less accumulated depreciation                (18,658,399)     (6,217,163)
       Allowance for losses                            (177,799)       (275,000)
                                                 --------------    -------------
                                                 $   55,261,435    $ 35,943,402
                                                 ==============    ============

       Depreciation expense for 1996, 1995 and 1994 was $12,585,981,  $5,895,602
       and $321,561, respectively.

4.     Future Minimum Lease Payments
       -----------------------------

       Future minimum lease payments receivable from noncancelable  leases as of
       December 31, 1996 are:

          Years Ending December 31                       DFLs          OLs
          ------------------------                       ----          ---

                  1997                                $ 2,559,652  $ 17,185,667
                  1998                                  1,506,699    12,021,012
                  1999                                  1,138,012     7,313,606
                  2000                                    134,024     2,805,128
                  2001                                      1,936       782,883
                  Thereafter                                   -        640,214
                                                      ----------  -------------
                           Total                      $ 5,340,323  $ 40,748,510
                                                      ===========  ============


                                      -25-

<PAGE>


                     CAPITAL PREFERRED YIELD FUND-III, L.P.

                    NOTES TO FINANCIAL STATEMENTS, continued

5.     Discounted Lease Rentals
       ------------------------     

       Discounted  lease rentals  outstanding at December 31, 1996 bear interest
       at rates primarily ranging between 6.00% and 10.75%. Aggregate maturities
       of such non-recourse obligations are:

          Years Ending December 31
          ------------------------

                  1997                                $ 11,016,766
                  1998                                   7,266,530
                  1999                                   4,348,795
                  2000                                     716,761
                  2001                                      81,534
                  Thereafter                                 7,482
                                                      ------------

                                   Total              $ 23,437,868
                                                      ============


6.     Transactions With the General Partner and Affiliates
       ----------------------------------------------------

          Sales Commissions and Offering Costs
          ------------------------------------

          Under  the  terms  of  the  Partnership   Agreement,   CAI  Securities
          Corporation,  an  affiliate  of the  general  partner,  is entitled to
          receive sales  commissions  and  wholesaling  fees equal to 10% of the
          Class A limited partners' capital contributions, up to 9% of which are
          paid to participating broker-dealers.  During 1996, 1995 and 1994, CAI
          Securities  Corporation  earned  commissions and fees in the amount of
          $1,162,305,  $2,527,770 and $1,309,925, of which $991,974,  $2,188,649
          and   $1,124,052,    respectively,    was   paid   to    participating
          broker-dealers.

          As provided in the Partnership  Agreement,  the general partner earned
          $464,922,  $1,011,108  and  $523,970,  as  reimbursement  for expenses
          incurred during 1996, 1995 and 1994, respectively,  in connection with
          the  organization  of the  Partnership  and the  offering  of  Class A
          limited  partner  units.  The general  partner also received  $61,693,
          $68,238 and  $54,672,  as  reimbursement  for due  diligence  expenses
          incurred during 1996, 1995 and 1994, respectively.


          Capital Contributions
          ---------------------

          Under terms of the Partnership Agreement,  the Class B limited partner
          made capital  contributions  to the Partnership of $130,000,  $240,000
          and $130,000, during 1996, 1995 and 1994, respectively.


                                      -26-

<PAGE>


                     CAPITAL PREFERRED YIELD FUND-III, L.P.

                    NOTES TO FINANCIAL STATEMENTS, continued

6.     Transactions With the General Partner and Affiliates, continued
       ----------------------------------------------------

          Origination Fee and Evaluation Fee
          ----------------------------------

          The general partner receives a fee equal to 3.5% of the sales price of
          equipment sold to the Partnership (up to a maximum  cumulative  amount
          as specified in the Partnership  Agreement),  1.5% of which represents
          compensation   for  selecting,   negotiating  and   consummating   the
          acquisition of the equipment and 2% of which represents  reimbursement
          for services rendered in connection with evaluating the suitability of
          the  equipment and the credit  worthiness of the lessees.  Origination
          and  evaluation  fees totaled  $1,184,888,  $1,209,816 and $374,040 in
          1996, 1995 and 1994,  respectively,  all of which were  capitalized by
          the  Partnership as part of the cost of equipment on operating  leases
          and net investment in direct financing leases.


          Management Fees
          ---------------

          The general  partner  receives  management  fees as  compensation  for
          services  performed in  connection  with  managing  the  Partnership's
          equipment  equal to 2% of gross  rentals  received as permitted  under
          terms  of the  Partnership  Agreement.  Such  fees  totaled  $390,559,
          $156,351 and 7,056 for 1996, 1995 and 1994, respectively.


          Direct Services
          ---------------

          The general partner and its affiliates  provide  accounting,  investor
          relations,   billing,   collecting,   asset   management,   and  other
          administrative services to the Partnership. The Partnership reimburses
          the general  partner  for these  services  performed  on its behalf as
          permitted  under  the  terms  of  the  Partnership   Agreement.   Such
          reimbursements totaled $93,690,  $93,598 and $36,875 during 1996, 1995
          and 1994, respectively.


          Equipment Purchases
          -------------------

          The Partnership  purchased  equipment from CAII, with a total purchase
          price  of  $35,688,393,   $36,496,213   and   $11,067,496   (including
          $11,368,469,  $2,685,425 and  $1,233,480 of discounted  lease rentals)
          during 1996, 1995 and 1994,  respectively.  The Partnership  purchased
          the equipment at CAII's  historical cost plus  reimbursement  of other
          net acquisition costs, as provided for in the Partnership Agreement.



                                      -27-

<PAGE>


                     CAPITAL PREFERRED YIELD FUND-III, L.P.

                    NOTES TO FINANCIAL STATEMENTS, continued

6.     Transactions With the General Partner and Affiliates, continued
       ----------------------------------------------------

          Payable to Affiliates
          ---------------------

          Payable to  affiliates  of $54,351 and $106,196  during 1996 and 1995,
          respectively,  consists of direct  services,  management  fees,  sales
          commissions,  wholesaling  fees and  organization and offering expense
          reimbursements  with respect to Class A limited  partner units payable
          to the general partner and its affiliates.

          Receivable from Affiliates
          --------------------------

          Receivable from affiliates  represents  deferred financing costs for a
          lender financing agreement charged proportionately to affiliates.


7.     Tax Information (Unaudited)
       ---------------------------

       The following  reconciles net income for financial  reporting purposes to
       the income for federal  income tax purposes for the year and period ended
       December 31,:
<TABLE>
<CAPTION>

                                                                                          1996          1995
                                                                                    ------------    ------------

       <S>                                                                         <C>             <C>         
        Net income per financial statements                                         $  2,074,001    $    553,710
        Direct financing leases                                                        2,192,802         737,287
        Depreciation                                                                  (6,587,214)     (3,820,726)
        Provision for losses                                                              50,000         275,000
        Other                                                                            595,201         (24,469)
                                                                                    ------------    ------------
        Partnership income for federal income tax purposes                          $ (1,675,210)   $ (2,279,198)
                                                                                    ============    ============
</TABLE>


        The  following  reconciles  partners'  capital for  financial  reporting
        purposes to  partners'  capital for federal  income tax purposes for the
        year and period ended December 31,:
<TABLE>
<CAPTION>


                                                                                         1996           1995
                                                                                    ------------    ------------

       <S>                                                                         <C>             <C>         
        Partners' capital per financial statements                                  $ 37,388,345    $ 30,535,617
        Commissions and offering costs                                                 7,184,603       5,495,683
        Direct financing leases                                                        2,962,196         769,394
        Depreciation                                                                 (10,906,852)     (4,319,638)
        Provision for losses                                                             325,000         275,000
        Other                                                                            582,258          (8,487)
                                                                                    ------------    ------------
        Partners' capital for federal income tax purposes                           $ 37,535,550    $ 32,747,569
                                                                                    ============    ============
</TABLE>



                                      -28-

<PAGE>


                     CAPITAL PREFERRED YIELD FUND-III, L.P.

                    NOTES TO FINANCIAL STATEMENTS, continued

8.     Concentration of Credit Risk
       ----------------------------

       Approximately 69% of the  Partnership's  equipment under lease was leased
       to investment grade companies.  Pursuant to the Partnership Agreement, an
       investment  grade  lessee is a company  (i) with a net worth in excess of
       $100,000,000  (and no debt issues that are rated),  or (ii) with a credit
       rating of not less than Baa as determined by Moody's  Investor  Services,
       Inc. or comparable  credit  rating as  determined  by another  recognized
       credit rating service; or a lessee, all of whose lease payments have been
       unconditionally guaranteed or supported by a letter of credit issued by a
       company meeting one of the above requirements.

       The  Partnership's  cash balance is maintained with a high credit quality
       financial  institution.  At times,  such balances may be in excess of the
       FDIC insurance  limit due to the receipt of lockbox amounts that have not
       cleared the  presentment  bank (generally for less than two days). As the
       funds become available, they are invested in a money market mutual fund.

9.     Bankrupt Lessee
       ---------------

       Anchor Glass filed for protection under Chapter 11 of the bankruptcy code
       on September 13, 1996.  The aggregate net book value with this lessee was
       $232,887 at December  31,  1996.  Potential  outcomes  are (i) the lessee
       affirms its lease and the  Partnership  collects  all rents due under the
       lease or (ii) the lessee  rejects the lease and  returns  the  underlying
       equipment to the Partnership.  If the lease is rejected and the equipment
       is returned to the  Partnership or sold to a third party,  it is possible
       that  remarketing  proceeds  will be less than the net book  value of the
       equipment.  However,  if the lessee  affirms the lease,  the  Partnership
       would not be  subject to a loss.  The lessee has not made its  intentions
       known at this time and,  accordingly,  the amount of loss, if any, cannot
       be  determined  as of  December  31,  1996.  Regardless  of the  lessee's
       decision to accept or reject the lease, the general partner believes that
       the  ultimate  outcome  will not have a  material  adverse  impact on the
       Partnership's financial position or results of operations.


10.    Disclosures about Fair Value of Financial Instruments
       -----------------------------------------------------

       Statement of Financial  Standards No. 107 ("SFAS No.  107"),  Disclosures
       about Fair Value of Financial  Instruments  specifically excludes certain
       items from its disclosure  requirements such as the Company's  investment
       in leased assets.  The carrying amounts at December 31, 1996 for cash and
       cash  equivalents,  accounts  receivable,  accounts  payable  and accrued
       liabilities,  payable to affiliates,  rents and sale proceeds received in
       advance  and  distributions  payable to partners  approximate  their fair
       values due to the short maturity of these instruments.

       As of December 31, 1996,  discounted  lease rentals of $23,437,868  had a
       fair value of $22,995,187.  The fair value was estimated utilizing market
       rates of comparable debt having similar  maturities and credit quality as
       of December 31, 1996.

                                      -29-

<PAGE>





                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------
               


THE PARTNERS
CAPITAL PREFERRED YIELD FUND-III, L.P.:

Under date of January 31,  1997,  we  reported on the balance  sheets of Capital
Preferred Yield Fund-III, L.P. as of December 31, 1996 and 1995, and the related
statements of income, partners' capital, and cash flows for each of the years in
the two-year  period  ended  December 31, 1996 and the period from June 14, 1994
(commencement  of  operations)  to  December  31,  1994,  as  contained  in  the
Partnership's  annual report on Form 10-K for the year 1996. In connection  with
our audits and of the aforementioned financial statements,  we have also audited
the  related  financial  statement  Schedule  II, as listed in the  accompanying
index.  This  financial   statement   schedule  is  the  responsibility  of  the
Partnership's  management.  Our  responsibility is to express an opinion on this
financial statement schedule based on our audits.

In our opinion,  the related financial  statement  schedule,  when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.

                                      /s/KPMG Peat Marwick LLP
                                      --------------------------
                                      KPMG PEAT MARWICK LLP

Denver, Colorado
January 31, 1997


                                      -30-

<PAGE>



                     CAPITAL PREFERRED YIELD FUND-III, L.P.
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                Year and Period Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>



COLUMN A                                          COLUMN B                COLUMN C                COLUMN D         COLUMN E
--------                                          --------      -----------------------------     --------         --------
                                                                                Additions
                                                 Balance at     Additions       (deductions)                        Balance
                                                 beginning      charged to       charged to                          at end
Classification                                   of period      expenses       other accounts    Deductions        of period
--------------                                   ----------     ----------     --------------    ----------        ---------

<S>                                             <C>            <C>            <C>              <C>               <C>      
     1996
---------------------

Allowance for losses:
  Equipment on operating leases                  $ 275,000      $  50,000      $     1,331      $   (148,532)     $ 177,799
                                                 =========      =========      ===========      ============      =========



     1995
---------------------

Allowance for losses:
  Equipment on operating leases                  $       -      $ 275,000      $         -      $          -      $ 275,000
                                                 =========      =========      ===========      ============      =========
</TABLE>




















                  See accompanying independent auditor's report

                                      -31-

<PAGE>



Item 9.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
         -----------------------------------------------------------------------
         Financial Disclosure
         --------------------

None.


Item 10. Directors and Executive Officers of the Partnership
         ---------------------------------------------------


The Partnership  has no officers and directors.  The general partner manages and
controls  the  affairs of the  Partnership  and has general  responsibility  and
authority in all matters  affecting its  business.  Information  concerning  the
directors and executive officers of the general partner is as follows:

                      CAI Equipment Leasing IV Corporation

           Name                        Positions Held
           ----                        --------------

     John F. Olmstead           President and Director

     Dennis J. Lacey            Senior Vice President and Director

     John E. Christensen        Senior Vice President, Principal Financial and
                                Chief Administrative Officer and Director

     Anthony M. DiPaolo         Senior Vice President, Assistant Secretary and
                                Director

     Robert A. Golden           Vice President and Director

     Daniel J. Waller           Vice President and Director

     Richard H. Abernethy       Vice President and Director

     John A. Reed               Vice President, Assistant Secretary and Director

     David J. Anderson          Chief Accounting Officer and Secretary


JOHN F. OLMSTEAD, age 52, joined CAII as Vice President in December,  1988, is a
Senior  Vice  President  of CAI and CAII  and is head of  CAII's  Public  Equity
division.  He has served as Chairman of the Board for Neo-kam Industries,  Inc.,
Matchless Metal Polish Company, Inc. and ACL, Inc. for more than 5 years. He has
over 20 years of experience  holding various  positions of responsibility in the
leasing  industry.  Mr. Olmstead holds a Bachelor of Science degree from Indiana
University and a Juris Doctorate degree from Indiana Law School.



                                      -32-

<PAGE>



Item 10. Directors and Executive Officers of the Partnership, continued
         ---------------------------------------------------
              

DENNIS J. LACEY,  age 43, joined CAI as Vice President,  Operations,  in October
1989.  Mr. Lacey was  appointed  Treasurer on January 1, 1991,  Chief  Financial
Officer on April 11, 1991, a director on July 19, 1991,  and President and Chief
Executive  Officer on September 6, 1991.  Prior to joining CAI, Mr. Lacey was an
audit partner for the public accounting firm of Coopers & Lybrand.  Mr. Lacey is
also a director and senior officer of CAII, CAI Equipment  Leasing I Corp.,  CAI
Equipment  Leasing II Corp.,  CAI  Equipment  Leasing III Corp.,  CAI  Equipment
Leasing IV Corp., CAI Equipment  Leasing V Corp., CAI Leasing Canada,  Ltd., CAI
Partners   Management   Company,   CAI   Securities   Corporation,   CAI   Lease
Securitization I Corp. and Capital Equipment Corporation  (collectively referred
to  herein as the "CAI  Affiliates"),  all of which  are  first- or  second-tier
wholly-owned subsidiaries of CAI.

JOHN E.  CHRISTENSEN,  age 49,  joined CAII as Vice  President  and Treasurer in
November  1988.  He now  serves  as Senior  Vice  President,  Finance  and Chief
Financial  Officer  of CAI and CAII.  Mr.  Christensen  previously  held  senior
management  positions at Maxicare Health Plans,  Inc.,  Global Marine,  Inc. and
Santa Fe International,  Inc. Mr.  Christensen  obtained his MBA in Finance from
the  University of Michigan and his Bachelor of Arts degree from Michigan  State
University.

ANTHONY M. DIPAOLO,  age 37, joined CAII in July 1990 as an Assistant  Treasurer
and is currently Senior Vice  President-Business  Development.  He has also held
the  positions  of  Senior  Vice   President-Controller   and   Assistant   Vice
President-Credit  Administration for the Company. Mr. DiPaolo has held financial
management  positions as Chief Financial Officer for Mile High Kennel Club, Inc.
from 1988 to 1990 and was Vice President/Controller for VICORP Restaurants, Inc.
from 1986  through  1988.  Mr.  DiPaolo  holds a Bachelor  of Science  degree in
Accounting from the University of Denver.

ROBERT A. GOLDEN,  age 51, is Vice  President and the National  Sales Manager of
the Company.  Mr. Golden joined the Company in 1993 as a Branch Manager.  He was
promoted  to his  current  position  in  September  1994.  Prior to joining  the
Company, he was an Executive Vice President with the U.S. Funds Group, President
of BoCon Capital  Group and Vice  President  with  Ellco/GE  Capital for fifteen
years. Mr. Golden is an officer, but not a director, of CAII.

DANIEL J.  WALLER,  age 38,  joined CAII in July 1990,  as a manager of Investor
Relations.  Mr.  Waller  assumed  the  responsibility  for the asset  management
department a short time later, and is currently Vice President,  Capital Markets
Group.  Prior to joining  CAII,  Mr.  Waller was an audit manager with Coopers &
Lybrand for over three years and gained  considerable  experience in the leasing
industry.  While at  Coopers &  Lybrand,  Mr.  Waller  held  positions  with the
International Accounting and Auditing Committee as well as the national Auditing
Directorate.  Mr. Waller holds a Bachelor of Arts degree in accounting  from the
University of Northern Iowa.

RICHARD H. ABERNETHY,  age 42, joined CAII in April 1992 as Equipment  Valuation
Manager  and  currently  serves  as Vice  President  of  Asset  Management.  Mr.
Abernethy has thirteen years experience in the leasing industry, including prior
positions with Barclays  Leasing Inc.,  from November 1986 to February 1992, and
Budd Leasing  Corporation,  from January 1981 to November  1986.  Mr.  Abernethy
holds a Bachelor of Arts in Business Administration from the University of North
Carolina at Charlotte.

                                      -33-

<PAGE>



Item 10. Directors and Executive Officers of the Partnership, continued
         ---------------------------------------------------

JOHN A. REED,  age 41,  joined  CAII in  January  1990 as the Tax  Director  and
Assistant  Secretary.  Mr. Reed is currently the Vice President of Marketing and
is  responsible  for all  lease  documentation  and  management  of  transaction
structuring and processing.  Prior to joining the Marketing Department, Mr. Reed
was Vice  President  of Credit and Debt  Administration.  He spent seven and one
half years with Coopers & Lybrand in the Tax Department and served on CAII's tax
consulting engagement during that time. Mr. Reed holds a Bachelor of Arts degree
in Social  Sciences and Masters of Science in  Accounting,  from Colorado  State
University.

DAVID J.  ANDERSON,  age 43,  joined CAII in August 1990 as Manager of Billing &
Collections and currently  serves as Assistant  Vice-President/Chief  Accounting
Officer. Prior to joining CAII, Mr. Anderson was Vice-  President/Controller for
Systems  Marketing,  Inc.,  from 1985 to 1990,  and  previous to that working in
several senior staff  positions at the Los Alamos  National  Laboratory and with
Ernst & Whinney. Mr. Anderson holds a Bachelor of Business Administration degree
in Accounting from the University of Wisconsin.


Item 11. Executive Compensation
         ----------------------

No compensation was paid by the Partnership to the officers and directors of the
general partner. See Item 13 of this Report,  "Certain Relationships and Related
Transactions,"  which is incorporated herein by reference,  for a description of
the  compensation and fees paid to the general partner and its affiliates by the
Partnership during 1996.

Item 12. Security Ownership of Certain Beneficial Owners and Management
         --------------------------------------------------------------

     (a)      As of the date hereof, no person is known by the Partnership to be
              the  beneficial  owner  of  more  than 5% of the  Class A  limited
              partner units of the Partnership. The Partnership has no directors
              or  officers,  and  neither  the  general  partner nor the Class B
              limited partner of the Partnership own any Class A limited partner
              units.

              CAII,  an  affiliate  of the  general  partner,  owns  100% of the
              Partnership's Class B units.

              CAI Partners  Management  Company  owns 100% of the  Partnership's
              general partner units.

              The names and  addresses  of the  general  partner and the Class B
              limited partner are as follows:

              General Partner
              ---------------

              CAI Equipment Leasing IV Corp.
              7175 West Jefferson Avenue
              Suite 4000
              Lakewood, Colorado 80235


                                      -34-

<PAGE>




Item 12. Security Ownership of Certain Beneficial Owners and Management
         --------------------------------------------------------------

              Class B Limited Partner
              -----------------------

              Capital Associates International, Inc.
              7175 West Jefferson Avenue
              Suite 4000
              Lakewood, Colorado 80235

     (b)      No  directors  or officers  of the general  partner or the Class B
              limited  partner  owned any Class A  limited  partner  units as of
              December 31, 1996.

     (c)      The Partnership knows of no  arrangements, the  operation of which
              may at a  subsequent date  result in a  change in  control  of the
              Partnership.


Item 13. Certain Relationships and Related Transactions
         ----------------------------------------------

The general partner and its affiliates  receive  certain types of  compensation,
fees  or  other   distributions   in  connection  with  the  operations  of  the
Partnership.

Following is a summary of the amounts paid or payable to the general partner and
its affiliates during 1996:


Sales Commissions
-----------------

CAI Securities Corporation (the  "Dealer-Manager"),  an affiliate of the general
partner, earned commissions of 10% of the sales price of Class A limited partner
units sold, up to 9% of which was paid to participating  broker-dealers.  During
1996, the Dealer-Manager  earned commissions  totaling  $1,162,305 (all of which
was paid in 1996) of which $991,974 was paid to broker-dealers.


Due Diligence Expense Reimbursement
-----------------------------------

The  Dealer-Manager is reimbursed for due diligence  expenses which it incurs up
to a maximum of 1/2% of gross offering  proceeds.  The  Dealer-Manager  incurred
$61,693 for due diligence expenses during 1996 (all of which was paid in 1996).

Organization and Offering Expense Reimbursement
-----------------------------------------------

The general partner is reimbursed for the organization and offering  expenses it
incurs in organizing the  Partnership and offering Class A limited partner units
for sale to the public. The general partner earned $464,922 for organization and
offering expenses during 1996 (all of which was paid in 1996).

                                      -35-

<PAGE>



Item 13. Certain Relationships and Related Transactions, continued
         ----------------------------------------------

                        ACQUISITION AND OPERATING STAGES

Acquisition Fee and Acquisition Cost Reimbursement
--------------------------------------------------

The general partner receives a fee equal to 3.5% of the sales price of equipment
sold to the Partnership,  1.5% of which  represents  compensation for selecting,
negotiating  and  consummating  the acquisition of the equipment and 2% of which
represents reimbursement for services rendered in connection with evaluating the
suitability  of  the  equipment  and  the  credit   worthiness  of  the  Lessee.
Origination  and evaluation  fees totaled  $1,184,888 in 1996, all of which were
capitalized  by the  Partnership  as part of the cost of  equipment on operating
leases and net investment in direct financing leases.

Management Fees
---------------

The general  partner  receives  management  fees as  compensation  for  services
rendered in connection with managing the Partnership's  equipment equal to 2% of
gross rentals  received.  Such fees totaled  $390,559 for 1996 (of which $47,591
will be paid during 1997).

Accountable General and Administrative Expenses
-----------------------------------------------

The general  partner is entitled to  reimbursement  of certain  expenses paid on
behalf  of  the   Partnership   which  are  incurred  in  connection   with  the
Partnership's operations.  Such reimbursable expenses amounted to $93,690 during
1996,  $86,930 of which were  reimbursed  during 1996 ($6,760 were reimbursed in
January 1997).

Additionally,   the  general  partner  is  allocated  1%  of  Partnership   cash
distributions  and net income  relating to its general  partner  interest in the
Partnership.  Distributions  and net income  allocated  to the  general  partner
totaled  $51,487 and  $68,376,  respectively,  for 1996.  Distributions  and net
income  allocated to the Class B limited  partner  totaled  $50,389 and $20,285,
respectively, for 1996.

During 1996, the Partnership acquired the equipment described below from CAII:
<TABLE>
<CAPTION>


                                                                                                   Cost to
                                                                                                  Partnership
                                                                                                   Including
   Date                                                                                 Cost to   Acquisition     Debt       Annual
Purchased  Lessee                             Term   Equipment Description                CAII        Fees*      Assumed     Rents
---------  ------                             ----   ---------------------             ---------  ------------  ---------   --------

<C>       <C>                                  <C>  <C>                              <C>         <C>           <C>        <C>      
01/12/96   Thompson Saginaw                     60   Material handling equipment      $   77,164  $   79,838    $      0   $  14,769
01/12/96   ICI Americas                         60   Forklifts                            38,913      40,261           0       8,464
01/12/96   Cerplex                              48   Semiconductor                       557,437     576,753           0     156,089
02/02/96   Television City                      48   Environmental monitoring equip.     171,735     177,686           0      53,337
01/04/96   Thomson Saginaw                      60   Material handling equipment          59,880      61,955           0      11,461
04/17/96   HK Systems                           60   Lift truck                          575,731     595,680           0     123,897
02/13/96   Consolidated Diesel                  60   Forklifts                            59,719      61,788           0      12,111
02/26/96   Brown Strauss                        48   Forklifts                            83,000      85,876           0      18,077
02/28/96   Wayne Farms                          60   Spiral freezer                      502,758     512,713           0     102,224
02/29/96   Brown Strauss                        36   Forklifts                            90,795      93,941           0      23,776

                                                              -36-

<PAGE>



Item 13. Certain Relationships and Related Transactions, continued
         ----------------------------------------------
                                                                                                   Cost to
                                                                                                  Partnership
                                                                                                   Including
   Date                                                                                 Cost to   Acquisition     Debt       Annual
Purchased  Lessee                             Term   Equipment Description                CAII        Fees*      Assumed     Rents
---------  ------                             ----   ---------------------             ---------  ------------  ---------   --------

03/12/96   Lever Brothers                       42   HP Server                            47,070      48,701           0      14,798
03/08/96   Louisiana Workers                    26   Memory board                          6,531       6,757           0       3,387
03/08/96   Honeywell                            36   Sequencer                           264,699     273,194           0      78,096
03/12/96   In Home Health                       60   Modular furniture                   120,339     124,508           0      24,642
03/22/96   General Motors                       36   Lift truck                           36,120      37,372           0      12,088
03/28/96   NBC                                  24   Video equipment                     259,730     268,729           0     113,323
03/29/96   Atlantic Steel                       59   Mill equipment                      971,059   1,004,707           0     207,511
04/02/96   Thomson Saginaw                      60   Industrial machinery                 60,130      62,214           0      11,509
04/08/96   Lever Brothers                       42   HP 9000                              20,828      21,550           0       5,940
04/02/96   HK Systems                           60   Phone system                        150,000     155,198           0      32,280
04/18/96   General Motors                       36   Lift truck                           76,161      78,800           0      25,494
04/19/96   Xerox                                40   Forklifts                           137,740     142,513           0      33,252
04/22/96   Xerox                                44   Lift truck                          120,660     124,841           0      28,104
05/10/96   ITT Automotive                       60   Mailing equipment                    20,362      21,068           0       4,850
05/10/96   General Motors                       36   Material handling equipment          59,208      61,260           0      19,710
05/10/96   General Motors                       36   Material handling equipment          59,343      61,399           0      19,710
05/14/96   General Motors                       36   Material handling equipment          17,486      18,092           0       5,853
05/17/96   Barber-Colman                        50   Machine tools                        82,905      85,778      77,666      17,721
05/17/96   Barber-Colman                        19   Machine tools                        12,401      12,831      11,735       7,744
05/17/96   Barber-Colman                        55   Machine tools                       218,375     225,942     203,849      43,642
05/17/96   Barber-Colman                        22   Machine tools                        30,966      32,039      29,208      16,814
05/17/96   Barber-Colman                        22   Machine tools                         9,351       9,675       8,821       5,078
05/17/96   Barber-Colman                        22   Machine tools                         6,320       6,539       5,962       3,432
05/17/96   Barber-Colman                        22   Machine tools                         3,039       3,144       2,866       1,650
05/17/96   Barber-Colman                        24   Manufacturing equipment              22,908      23,702      21,551      11,086
05/17/96   Barber-Colman                        22   Machine tools                        13,801      14,279      13,017       7,494
05/17/96   Barber-Colman                        22   Machine tools                         5,352       5,537       5,048       2,906
05/17/96   Barber-Colman                        23   Machine tools                        21,362      22,102      20,038      11,114
05/17/96   Barber-Colman                        23   Machine tools                        10,661      11,030      10,000       5,547
05/17/96   Barber-Colman                        23   Machine tools                         1,999       2,068       1,875       1,040
05/17/96   Barber-Colman                        23   Machine tools                        20,858      21,581      19,565      10,852
05/17/96   Barber-Colman                        23   Peripheral controllers               26,189      27,096      24,458      13,566
05/17/96   Barber-Colman                        24   Machine tools                        73,855      76,414      67,591      31,835
05/17/96   Barber-Colman                        24   Machine tools                        38,952      40,302      35,648      16,790
05/17/96   Barber-Colman                        24   Machine tools                        28,382      29,365      25,975      12,234
05/17/96   Barber-Colman                        23   PC's networking                      24,351      25,195      23,194      11,332
05/17/96   Barber-Colman                        52   Machine tools                       176,593     182,712     163,653      37,141
05/17/96   Barber-Colman                        31   PC's networking                      68,069      70,428      63,103      25,550
05/17/96   Barber-Colman                        57   Manufacturing equipment              79,286      82,033      75,047      17,806
05/17/96   Barber-Colman                        45   PC's networking                      87,826      90,869      83,802      24,132
05/17/96   Foxboro Company                      41   PC's networking                      94,680      97,961      91,092      30,683
05/17/96   Foxboro Company                      42   Furniture and fixtures               32,831      33,969      31,094      10,334
05/17/96   Foxboro Company                      44   PC's networking                      60,796      62,903      58,483      18,702
05/17/96   Foxboro Company                      42   PC's networking                      60,022      62,102      57,729      19,161
05/17/96   Foxboro Company                      44   PC's networking                      64,671      66,912      62,202      19,728

                                      -37-

<PAGE>



Item 13. Certain Relationships and Related Transactions, continued
         ----------------------------------------------
                                                                                                   Cost to
                                                                                                  Partnership
                                                                                                   Including
   Date                                                                                 Cost to   Acquisition     Debt       Annual
Purchased  Lessee                             Term   Equipment Description                CAII        Fees*      Assumed     Rents
---------  ------                             ----   ---------------------             ---------  ------------  ---------   --------

05/17/96   Foxboro Company                      28   Manufacturing equipment              22,961      23,757      21,990      10,193
05/17/96   Foxboro Company                      53   PC's networking                     125,644     129,998     121,471      32,010
05/17/96   Foxboro Company                      44   PC's networking                     105,586     109,245     101,633      31,437
05/17/96   Foxboro Company                      32   PC's networking                     539,488     558,181     516,882     191,770
05/17/96   Foxboro Company                      32   PC's networking                      28,650      29,643      27,450      10,184
05/17/96   Foxboro Company                      56   Furniture and fixtures               31,018      32,093      29,388       7,005
05/17/96   Foxboro Company                      32   Furniture and fixtures               66,268      68,564      64,320      26,019
05/17/96   Foxboro Company                      32   Research equipment                   42,146      43,606      40,698      16,572
05/17/96   Foxboro Company                      56   Manufacturing equipment              74,091      76,658      70,196      16,732
05/17/96   Foxboro Company                      57   Manufacturing equipment             212,775     220,148     201,590      47,311
05/17/96   Foxboro Company                      34   PC's networking                     785,128     812,333     752,701     268,617
05/17/96   Foxboro Company                      34   Manufacturing equipment             183,511     189,870     184,152      68,613
05/17/96   Foxboro Company                      34   Furniture and fixtures                2,444       2,529       2,377         918
05/17/96   Foxboro Company                      58   Forklifts                             6,305       6,523       5,967       1,408
05/17/96   Foxboro Company                      58   Furniture and fixtures               10,198      10,551       9,652       2,278
05/17/96   Keystone Investments                 21   Office automation equipment           5,780       5,980       5,301       3,254
05/17/96   Keystone Investments                 23   Peripheral printers                  17,533      18,141      16,275       9,168
05/17/96   Keystone Investments                 27   PC's networking                     312,217     323,035     298,486     132,369
05/17/96   Keystone Investments                 33   PC's networking                     120,227     124,393     114,148      43,624
05/17/96   Keystone Investments                 27   PC's networking                   1,086,011   1,123,641    1,038,394    461,971
05/17/96   Keystone Investments                 57   Furniture and fixtures               32,414      33,537      30,925       7,783
05/17/96   Keystone Investments                 34   Peripheral printers                  33,613      34,778      32,198      11,972
05/17/96   Lucas Industries                     38   Furniture and fixtures               47,329      48,969      43,389      14,213
05/17/96   Lucas Industries                     39   Manufacturing equipment              44,119      45,648      40,485      12,975
05/17/96   Lucas Industries                     41   Furniture and fixtures               30,228      31,275      27,409       8,539
05/17/96   Lucas Industries                     41   Furniture and fixtures              163,330     168,989     147,284      46,137
05/17/96   Lucas Industries                     19   PC's networking                      24,190      25,028      21,925      13,924
05/17/96   Lucas Industries                     45   PC's networking                     147,931     153,057     127,030      40,013
05/17/96   Lucas Industries                     22   CPU's - DEC                          51,904      53,702      47,026      26,140
05/17/96   Lucas Industries                     48   Research equipment                   78,475      81,194      72,324      19,530
05/17/96   Lucas Industries                     31   PC's networking                     381,594     394,816     359,625     134,680
05/17/96   Rawlings Sporting                    18   Peripheral printers                   5,474       5,664       5,175       3,636
05/17/96   Rawlings Sporting                    19   PC's networking                      54,894      56,796      52,863      35,303
05/17/96   Rawlings Sporting                    19   PC's networking                     114,439     118,404     108,260      72,171
05/17/96   Rawlings Sporting                    19   PC's networking                     153,110     158,415     147,425      98,280
05/17/96   Rawlings Sporting                    19   PC's networking                      35,431      36,659      34,118      22,743
05/17/96   Rawlings Sporting                    19   PC's networking                       6,042       6,251       5,716       3,810
05/17/96   Rawlings Sporting                    19   CPU's                               197,668     204,517     190,324     126,795
05/17/96   Rawlings Sporting                    26   Peripheral printers                   2,218       2,295       2,101       1,038
05/17/96   Stop & Shop                          37   PC's networking                      26,588      27,509      25,188       9,225
05/17/96   Stop & Shop                          37   PC's networking                       8,214       8,499       7,782       2,850
05/17/96   Stop & Shop                          37   PC's networking                       3,451       3,571       3,269       1,197
05/17/96   Stop & Shop                          37   PC's networking                       3,440       3,559       3,259       1,193
05/17/96   Stop & Shop                          37   PC's networking                       3,296       3,410       3,122       1,143
05/17/96   Stop & Shop                          37   PC's networking                       1,260       1,304       1,193         437

                                      -38-

<PAGE>



Item 13. Certain Relationships and Related Transactions, continued
         ----------------------------------------------
                                                                                                   Cost to
                                                                                                  Partnership
                                                                                                   Including
   Date                                                                                 Cost to   Acquisition     Debt       Annual
Purchased  Lessee                             Term   Equipment Description                CAII        Fees*      Assumed     Rents
---------  ------                             ----   ---------------------             ---------  ------------  ---------   --------

05/17/96   Stop & Shop                          37   PC's networking                       5,923       6,128       5,611       2,055
05/17/96   Stop & Shop                          37   PC's networking                       5,923       6,128       5,611       2,055
05/17/96   Stop & Shop                          37   PC's networking                       5,923       6,128       5,611       2,055
05/17/96   Stop & Shop                          37   PC's networking                       5,923       6,128       5,611       2,055
05/17/96   Stop & Shop                          37   PC's networking                       5,923       6,128       5,611       2,055
05/17/96   Stop & Shop                          37   PC's networking                       6,496       6,721       6,154       2,254
05/17/96   Stop & Shop                          37   PC's networking                       5,923       6,128       5,611       2,055
05/17/96   Stop & Shop                          37   PC's networking                       6,496       6,721       6,154       2,254
05/17/96   Stop & Shop                          37   PC's networking                       6,496       6,721       6,154       2,254
05/17/96   Stop & Shop                          37   PC's networking                       5,923       6,128       5,611       2,055
05/17/96   Stop & Shop                          37   PC's networking                       5,923       6,128       5,611       2,055
05/17/96   Stop & Shop                          31   PC's networking                      50,271      52,013      47,837      20,518
05/17/96   Stop & Shop                          38   PC's networking                       7,756       8,025       7,346       2,631
05/17/96   Stop & Shop                          38   PC's networking                       7,756       8,025       7,346       2,631
05/17/96   Stop & Shop                          38   PC's networking                       7,756       8,025       7,346       2,631
05/17/96   Stop & Shop                          39   PC's networking                      32,958      34,100      31,198      10,929
05/17/96   Stop & Shop                          39   PC's networking                      10,880      11,257      10,298       3,608
05/17/96   Stop & Shop                          39   PC's networking                       5,005       5,178       4,738       1,660
05/17/96   Stop & Shop                          39   PC's networking                      10,767      11,140      10,192       3,571
05/17/96   Stop & Shop                          39   Furniture and fixtures               55,090      56,999      51,292      15,935
05/17/96   Stop & Shop                          40   PC's networking                       5,092       5,268       4,803       1,651
05/17/96   Stop & Shop                          40   PC's networking                       7,452       7,710       7,029       2,416
05/17/96   Stop & Shop                          40   PC's networking                       5,092       5,268       4,803       1,651
05/17/96   Stop & Shop                          40   PC's networking                       5,259       5,441       4,961       1,705
05/17/96   Stop & Shop                          40   PC's networking                       6,427       6,650       6,062       2,084
05/17/96   Stop & Shop                          40   PC's networking                       1,335       1,381       1,259         433
05/17/96   Stop & Shop                          40   PC's networking                     178,944     185,144     168,792      58,024
05/17/96   Stop & Shop                          40   PC's networking                      11,011      11,393      10,387       3,571
05/17/96   Stop & Shop                          40   Furniture and fixtures               39,556      40,927      36,686      11,225
05/17/96   Stop & Shop                          40   Furniture and fixtures               50,749      52,507      47,067      14,401
05/17/96   Stop & Shop                          40   Furniture and fixtures               39,548      40,918      36,679      11,222
05/17/96   Stop & Shop                          41   PC's networking                      11,276      11,667      10,631       3,594
05/17/96   Stop & Shop                          41   PC's networking                      11,276      11,667      10,631       3,594
05/17/96   Stop & Shop                          41   PC's networking                      11,276      11,667      10,631       3,594
05/17/96   Stop & Shop                          41   PC's networking                      11,276      11,667      10,631       3,594
05/17/96   Stop & Shop                          41   PC's networking                      38,529      39,864      36,325      12,280
05/17/96   Stop & Shop                          42   PC's networking                      49,471      51,185      46,630      15,576
05/17/96   Stop & Shop                          42   PC's networking                      11,202      11,590      10,559       3,527
05/17/96   Stop & Shop                          42   PC's networking                      11,626      12,029      10,958       3,660
05/17/96   Stop & Shop                          42   PC's networking                      11,626      12,029      10,958       3,660
05/17/96   Stop & Shop                          42   PC's networking                       6,916       7,156       6,519       2,178
05/17/96   Stop & Shop                          42   PC's networking                      11,638      12,041      10,970       3,664
05/17/96   Stop & Shop                          42   PC's networking                       5,450       5,639       5,137       1,716
05/17/96   Stop & Shop                          42   PC's networking                       5,330       5,515       5,024       1,678
05/17/96   Stop & Shop                          42   PC's networking                      11,556      11,956      10,893       3,639

                                      -39-

<PAGE>



Item 13. Certain Relationships and Related Transactions, continued
         ----------------------------------------------
                                                                                                   Cost to
                                                                                                  Partnership
                                                                                                   Including
   Date                                                                                 Cost to   Acquisition     Debt       Annual
Purchased  Lessee                             Term   Equipment Description                CAII        Fees*      Assumed     Rents
---------  ------                             ----   ---------------------             ---------  ------------  ---------   --------

05/17/96   Stop & Shop                          42   PC's networking                      11,556      11,956      10,893       3,639
05/17/96   Stop & Shop                          42   PC's networking                      11,556      11,956      10,893       3,639
05/17/96   Stop & Shop                          42   PC's networking                      11,556      11,956      10,893       3,639
05/17/96   Stop & Shop                          41   PC's networking                       3,428       3,547       3,233       1,102
05/17/96   Stop & Shop                          41   PC's networking                       3,428       3,547       3,233       1,102
05/17/96   Stop & Shop                          41   PC's networking                       3,428       3,547       3,233       1,102
05/17/96   Stop & Shop                          41   PC's networking                       3,428       3,547       3,233       1,102
05/17/96   Stop & Shop                          41   PC's networking                       3,428       3,547       3,233       1,102
05/17/96   Stop & Shop                          41   PC's networking                       3,428       3,547       3,233       1,102
05/17/96   Stop & Shop                          41   PC's networking                       6,544       6,771       6,171       2,104
05/17/96   Stop & Shop                          41   PC's networking                       6,544       6,771       6,171       2,104
05/17/96   Stop & Shop                          41   PC's networking                       6,544       6,771       6,171       2,104
05/17/96   Stop & Shop                          41   PC's networking                       6,544       6,771       6,171       2,104
05/17/96   Stop & Shop                          41   PC's networking                       6,544       6,771       6,171       2,104
05/17/96   Stop & Shop                          41   PC's networking                       6,544       6,771       6,171       2,104
05/17/96   Stop & Shop                          41   PC's networking                       6,544       6,771       6,171       2,104
05/17/96   Stop & Shop                          41   PC's networking                       6,544       6,771       6,171       2,104
05/17/96   Stop & Shop                          41   PC's networking                       6,544       6,771       6,171       2,104
05/17/96   Stop & Shop                          41   PC's networking                       6,544       6,771       6,171       2,104
05/17/96   Stop & Shop                          41   PC's networking                       3,428       3,547       3,233       1,102
05/17/96   Stop & Shop                          41   PC's networking                       6,544       6,771       6,171       2,104
05/17/96   Stop & Shop                          41   PC's networking                       3,428       3,547       3,233       1,102
05/17/96   Stop & Shop                          41   PC's networking                       3,428       3,547       3,233       1,102
05/17/96   Stop & Shop                          41   PC's networking                       3,428       3,547       3,233       1,102
05/17/96   United Artists                       43   Furniture and fixtures              168,696     174,541     158,296      49,556
05/17/96   United Artists                       43   Furniture and fixtures              124,630     128,948     116,946      36,611
05/17/96   United Artists                       43   Furniture and fixtures              123,970     128,266     116,328      36,417
05/17/96   United Artists                       43   Furniture and fixtures              128,896     133,362     120,950      37,864
05/17/96   United Artists                       43   Furniture and fixtures              116,699     120,743     109,505      34,281
05/17/96   United Artists                       43   Furniture and fixtures              122,292     126,529     114,753      35,924
05/17/96   General Motors                       60   Forklifts                            76,077      78,713           0      14,792
05/17/96   General Motors                       60   Forklifts                           116,620     120,661           0      21,818
05/17/96   Alloy Polymers                       30   Manufacturing equipment              95,296      98,598           0      30,934
05/17/96   Alterations Plus                     20   Manufacturing equipment              31,375      32,463           0      15,180
05/17/96   Applied Radiological Control         26   Manufacturing equipment             106,993     110,700           0      45,615
05/17/96   Autry Greer & Sons, Inc.             36   Furniture and fixtures               78,119      80,825           0      24,468
05/17/96   Bojangles' Restaurants, Inc.         27   Furniture and fixtures              239,536     247,836           0      94,656
05/17/96   C & H Knit Products, Inc.            16   Manufacturing equipment             213,101     220,485           0     101,111
05/17/96   C & H Knit Products, Inc.            32   Manufacturing equipment              86,111      89,095           0      28,862
05/17/96   Country Cupboard Food Stores         42   Office automation equipment         148,317     153,456           0      42,955
05/17/96   C. T. Harris, Inc.                   11   Forklifts                           366,146     378,288           0     188,656
05/17/96   Envirosafe Service, Inc.             30   Forklifts                            56,110      57,999           0      19,162
05/17/96   Floyd Marine Storage, Inc.           17   Forklifts                            58,932      60,974           0      25,182
05/17/96   Freestate Petroleum Corp.            37   Furniture and fixtures               83,827      86,732           0      28,618
05/17/96   Freestate Petroleum Corp.            37   Furniture and fixtures               95,782      99,101           0      32,446

                                      -40-

<PAGE>



Item 13. Certain Relationships and Related Transactions, continued
         ----------------------------------------------
                                                                                                   Cost to
                                                                                                  Partnership
                                                                                                   Including
   Date                                                                                 Cost to   Acquisition     Debt       Annual
Purchased  Lessee                             Term   Equipment Description                CAII        Fees*      Assumed     Rents
---------  ------                             ----   ---------------------             ---------  ------------  ---------   --------

05/17/96   Freestate Petroleum Corp.            39   Furniture and fixtures              117,961     122,048           0      36,964
05/17/96   Freestate Petroleum Corp.            39   Furniture and fixtures              127,676     132,100           0      40,116
05/17/96   Hokkins Systemation, Inc.            16   Furniture and fixtures              151,534     156,785           0      69,642
05/17/96   Hough Petroleum                      19   Furniture and fixtures              140,741     145,617           0      82,912
05/17/96   Hough Petroleum                      16   Furniture and fixtures               70,782      73,234           0      43,958
05/17/96   Hough Petroleum                      15   Furniture and fixtures               45,985      47,579           0      29,808
05/17/96   Kessel Food Markets Inc.             43   Furniture and fixtures            1,046,603   1,082,868           0     296,530
05/17/96   Kop-Flex, Inc.                        8   Manufacturing equipment             122,553     126,799           0      66,528
05/17/96   Lykins Oil Company, Inc.             29   Furniture and fixtures               35,292      36,515           0      12,992
05/17/96   Lykins Oil Company, Inc.             19   Furniture and fixtures               86,044      89,026           0      38,848
05/17/96   Madden Services, Inc.                16   Misc. warehouse equipment           599,055     619,812           0     281,814
05/17/96   Madden Services, Inc.                17   Misc. warehouse equipment            81,901      84,739           0      40,408
05/17/96   Mcgavren Guild Inc.                  28   Furniture and fixtures               69,826      72,246           0      25,059
05/17/96   Mcgavren Guild Inc.                  28   Furniture and fixtures              231,485     239,506           0      83,076
05/17/96   Mt Pleasant Publish                  54   PC's networking                      45,732      47,317           0      12,066
05/17/96   Mt Pleasant Publish                  52   PC's networking                      27,006      27,941           0       7,326
05/17/96   Perimeter Oil Company                40   Furniture and fixtures               96,437      99,778           0      29,797
05/17/96   Quality Oil Company, Inc.            17   Furniture and fixtures               58,006      59,937           0      27,373
05/17/96   Quality Oil Company, Inc.            19   Furniture and fixtures                8,580       8,865           0       3,953
05/17/96   Rainbow Marketers, Inc.              29   Furniture and fixtures              160,637     166,203           0      60,732
05/17/96   Recycled Materials                        Construction equipment              174,469     180,514           0      71,815
05/17/96   Rogers Petroleum, Inc.               42   Research equipment                   55,122      57,032           0      16,256
05/17/96   Shapiro Packing Company              15   Food processing equipment            59,914      61,990           0      33,398
05/17/96   Shapiro Packing Company              21   Food processing equipment            53,048      54,886           0      23,613
05/17/96   Shapiro Packing Company              25   Food processing equipment           174,073     180,105           0      66,933
05/17/96   Shapiro Packing Company              18   Food processing equipment            72,353      74,860           0      32,720
05/17/96   Shoex, Inc.                          27   Furniture and fixtures              243,501     251,939           0      89,088
05/17/96   Sos Transport, Inc.                   6   Transport trucks                     85,239      88,192           0      47,962
05/17/96   Tennessee River, Inc.                13   Manufacturing equipment              55,362      57,281           0      24,784
05/17/96   The Hanson-Whitney Co.               40   Machine tools                        79,202      81,946           0      23,847
05/17/96   Trammell Crow Distribution            9   Above ground mining equip           405,893     419,957           0     220,032
05/17/96   Valley Innovative Mgmt Svcs          22   Furniture and fixtures               91,888      95,072           0      44,925
05/17/96   Vfl Technology Corporation           10   Forklifts                           442,178     457,500           0     220,681
05/17/96   Vision Art Design & Animation        17   Communication equipment              27,568      28,523           0      16,500
05/17/96   White Consolidated                    6   Manufacturing equipment              85,246      88,199           0      54,000
05/21/96   System One                           36   PC's networking                     160,207     165,758           0      56,970
05/15/96   Thomson Industries                   60   Machine tools                        43,248      44,747           0       7,864
05/17/96   Home Depot                           35   Transport trucks                     74,690      77,221           0      20,018
05/17/96   Home Depot                           35   Forklifts                           739,889     764,981           0     188,646
05/17/96   USS Kobe                             84   Forklifts                           102,722     106,281           0      17,053
05/17/96   USS Kobe                             84   Forklifts                            29,283      30,298           0      16,861
05/17/96   Thomson Industries                   60   Machine tools                       199,798     206,721           0      36,328
06/06/96   Ball Foster                          36   Trucks                              259,065     267,850           0      66,485
06/18/96   System One                           36   Relay System                         89,224      92,315           0      31,771
06/20/96   Ball Foster                          60   Forklifts                           177,381     183,528           0      36,528

                                      -41-

<PAGE>



Item 13. Certain Relationships and Related Transactions, continued
         ----------------------------------------------
                                                                                                   Cost to
                                                                                                  Partnership
                                                                                                   Including
   Date                                                                                 Cost to   Acquisition     Debt       Annual
Purchased  Lessee                             Term   Equipment Description                CAII        Fees*      Assumed     Rents
---------  ------                             ----   ---------------------             ---------  ------------  ---------   --------

06/20/96   Ball Foster                          36   Forklifts                            63,364      65,560           0       1,343
06/20/96   Ball Foster                          36   Forklifts                            41,780      43,228           0         882
06/28/96   Allied Signal                        39   Computer/semiconductor equip        146,832     151,865           0       2,987
07/08/96   Staples, Inc.                        28   Copiers                             333,585     345,144           0     138,807
07/08/96   Staples, Inc.                        27   Copiers                             129,475     133,961           0      55,302
07/08/96   Staples, Inc.                        26   Copiers                             125,946     130,310           0      55,302
07/08/96   Staples, Inc.                        25   Copiers                             205,014     212,118           0      92,723
07/08/96   Staples, Inc.                        24   Copiers                             337,593     349,291           0     157,241
07/08/96   Staples, Inc.                        23   Copiers                              38,393      39,724           0      18,434
07/09/96   Ball Foster                          36   Forklifts                            85,388      88,221           0      21,914
07/09/96   Ball Foster                          60   Front end loader                     58,476      60,398           0      12,078
07/09/96   Ball Foster                          36   Lift Trucks                         111,692     115,543           0      28,664
07/09/96   Ball Foster                          36   Forklifts                            17,064      17,643           0       4,379
07/11/96   Ball Foster                          36   Lift Trucks                          47,169      48,795           0      12,105
07/15/96   Brown Strauss                        36   Forklift                             90,641      93,782           0      23,736
07/16/96   Pacific Coast                        60   Forklift                             46,826      48,449           0       9,159
07/19/96   General Motors                       60   Material handling equipment          15,259      15,787           0       2,875
07/19/96   General Motors                       60   Material handling equipment          30,414      31,467           0       5,888
07/19/96   General Motors                       60   Material handling equipment          30,199      31,246           0       5,888
07/19/96   General Motors                       60   Material handling equipment         463,511     479,572           0      89,750
07/19/96   General Motors                       60   Material handling equipment          37,297      38,589           0       7,232
07/29/96   Compsource                           48   Furniture and fixtures              232,855     240,268           0      56,796
07/29/96   In Home Health                       60   Furniture and fixtures               18,013      18,637           0       3,966
07/31/96   In Home Health                       60   Telephone System                     34,585      35,783           0      11,375
07/31/96   International Paper                  57   Sweepers                            272,213     281,645           0      59,607
07/31/96   International Paper                  57   Forklift                             35,045      36,259           0       7,642
07/31/96   International Paper                  33   Loaders                              52,138      53,945           0      14,396
08/09/96   Xerox                                36   Forklift                              4,285       4,433           0       1,320
08/09/96   Georgetown Steel                     36   Forklift                             26,796      27,724           0       7,803
08/02/96   In Home Health                       36   Personal Computers                   26,553      27,473           0       9,263
08/05/96   Ball Foster                          60   Scrubber                              8,659       8,948           0       1,788
08/06/96   In Home Health                       36   FF&E                                 86,900      89,912           0      30,116
08/09/96   General Motors                       60   Material handling equipment         632,280     654,189           0     121,954
08/09/96   General Motors                       60   Material handling equipment         214,665     222,103           0      41,637
08/09/96   General Motors                       60   Material handling equipment          70,727      73,177           0      13,836
08/15/96   General Motors                       60   Material handling equipment          59,984      62,063           0      11,775
08/15/96   General Motors                       60   Material handling equipment         176,911     183,041           0      34,728
08/29/96   Ball Foster                          36   Forklifts                            53,428      55,240           0      13,711
09/16/96   Merritt Ford, Inc.                   60   Auto alignment equipment             25,335      26,212      22,858       6,816
09/16/96   Lakeland Chrysler/Plymouth           60   Auto alignment equipment             36,071      37,321      33,040       9,541
09/16/96   E & R, Inc.                          60   Auto alignment equipment             29,145      30,155      26,588       7,560
09/16/96   Bickerstaff Imports, Inc.            60   Auto alignment equipment             13,837      14,317      11,571       4,935
09/16/96   Southway Tire and Auto, Inc.         60   Auto alignment equipment              8,897       9,205       6,319       4,524
09/16/96   Kelley, Donald                       48   Auto alignment equipment             12,068      12,486       5,207       9,156
09/16/96   David Tire Company                   60   Auto alignment equipment             22,241      23,011      18,210       8,466

                                      -42-

<PAGE>



Item 13. Certain Relationships and Related Transactions, continued
         ----------------------------------------------
                                                                                                   Cost to
                                                                                                  Partnership
                                                                                                   Including
   Date                                                                                 Cost to   Acquisition     Debt       Annual
Purchased  Lessee                             Term   Equipment Description                CAII        Fees*      Assumed     Rents
---------  ------                             ----   ---------------------             ---------  ------------  ---------   --------

09/16/96   Bob King Pontiac-GMC, Inc.           60   Auto alignment equipment             29,767      30,799      22,036      13,692
09/16/96   Decamps, William L                   60   Auto alignment equipment             17,854      18,473      13,500       8,040
09/16/96   Feurer, Dennis R                     60   Auto alignment equipment              8,732       9,035       6,629       3,948
09/16/96   Feurer, Dennis R                     60   Auto alignment equipment              7,624       7,888       6,246       2,904
09/16/96   Tom's Tire & Service Center          60   Auto alignment equipment             17,158      17,752      13,834       6,852
09/16/96   Crystal Ford and Mercury, Inc.       60   Auto alignment equipment             17,865      18,484      14,805       6,492
09/16/96   KOVCO                                36   Auto alignment equipment             15,069      15,591       7,091      10,956
09/16/96   Smoky Jennings Chevrolet, Inc.       60   Auto alignment equipment             29,539      30,563      24,561      10,476
09/16/96   Whaley, Jane C                       60   Auto alignment equipment             19,463      20,137      16,119       7,068
09/16/96   McKay, Dane                          60   Auto alignment equipment             19,752      20,437      16,872       6,660
09/16/96   Riverside Chrysler Plymouth          60   Auto alignment equipment             14,750      15,261      12,815       4,716
09/16/96   Three Rivers Motor Car Co            60   Auto alignment equipment             12,251      12,676      10,666       3,840
09/16/96   Brickhouse Enterprises, Inc.         60   Auto alignment equipment             20,420      21,128      17,972       6,204
09/16/96   Foote & Davies, Inc.                 73   Printing press equipment            770,154     796,840     411,226     267,178
09/16/96   Foote & Davies, Inc.                 73   Printing press equipment            997,537   1,032,102     532,638     346,061
09/16/96   J.J. Collins' Sons, Inc.             82   Printing press equipment            603,325     624,231     380,696     150,275
09/16/96   Champion Business Forms, Inc.        89   Printing press equipment          1,223,706   1,266,108     847,274     311,796
09/16/96   D.L. Phillips Investment Build       36   Forklifts                             6,769       7,004       1,991       4,068
09/16/96   D.L. Phillips Investment Build       36   Forklifts                             7,748       8,016       3,666       3,840
09/16/96   Hyplains Beef, L.C                   36   Forklifts                             9,342       9,665       3,915       5,399
09/16/96   Hyplains Beef, L.C                   36   Forklifts                            10,696      11,067       3,750       6,594
09/16/96   Keystone Consolidated Ind            36   Forklifts                            74,037      76,603      48,453      28,856
09/16/96   National Beef Packing Co., L.P.      36   Forklifts                            39,604      40,976      11,841      24,188
09/16/96   Scott Company of California          36   Forklifts                            18,370      19,006      10,516       8,400
09/16/96   Scott Company of California          36   Forklifts                            35,859      37,101      18,239      19,104
09/16/96   Scott Company of California          36   Forklifts                            36,948      38,229      19,676      19,104
09/16/96   Stampede Meat, Inc.                  36   Forklifts                             5,590       5,783       3,579       3,240
09/16/96   Stampede Meat, Inc.                  36   Forklifts                             3,290       3,404       2,647       1,356
09/16/96   Stampede Meat, Inc.                  36   Forklifts                             2,898       2,998       2,028       1,620
09/16/96   Lane Steel, Inc.                     48   Forklifts                            31,775      32,876      26,048       8,813
09/16/96   Major Brands, Inc.                   48   Forklifts                             3,312       3,427       1,728       2,154
09/16/96   Pretech Corporation                  48   Forklifts                            37,187      38,476      26,537      10,225
09/16/96   Roadmaster Corporation               48   Forklifts                            12,572      13,007       8,827       4,683
09/16/96   Stampede Meat, Inc.                  48   Forklifts                            19,663      20,344      14,137       6,780
09/16/96   Stampede Meat, Inc.                  48   Forklifts                            22,056      22,820      16,753       6,780
09/16/96   Acme Battery Manufacturing Co.       60   Forklifts                             8,437       8,729       3,622       4,122
09/16/96   American Laminates, Inc.             60   Forklifts                            17,506      18,112      13,528       4,870
09/16/96   Canoak USA, Inc.                     60   Forklifts                            15,910      16,461       8,600       6,492
09/16/96   Central Air Freight Services         60   Forklifts                            12,410      12,840       8,956       4,164
09/16/96   Ceradyne, Inc.                       60   Forklifts                            16,316      16,882      12,631       5,112
09/16/96   Elmore-Pisgah, Inc.                  60   Forklifts                            10,890      11,267       7,757       3,720
09/16/96   Esselte Pendaflex Corporation        60   Forklifts                            33,313      34,467      25,787      11,307
09/16/96   Esselte Pendaflex Corporation        60   Forklifts                            32,920      34,060      27,389       9,087
09/16/96   Esselte Pendaflex Corporation        60   Forklifts                            45,743      47,328      38,484      12,299
09/16/96   Esselte Pendaflex Corporation        60   Forklifts                            32,920      34,060      27,389       9,087

                                      -43-

<PAGE>



Item 13. Certain Relationships and Related Transactions, continued
         ----------------------------------------------
                                                                                                   Cost to
                                                                                                  Partnership
                                                                                                   Including
   Date                                                                                 Cost to   Acquisition     Debt       Annual
Purchased  Lessee                             Term   Equipment Description                CAII        Fees*      Assumed     Rents
---------  ------                             ----   ---------------------             ---------  ------------  ---------   --------

09/16/96   Esselte Pendaflex Corporation        60   Forklifts                            43,945      45,467      33,508      14,292
09/16/96   Esselte Pendaflex Corporation        60   Forklifts                            35,736      36,975      27,340      11,065
09/16/96   Esselte Pendaflex Corporation        60   Forklifts                            54,959      56,863      45,454      15,379
09/16/96   Esselte Pendaflex Corporation        60   Forklifts                            14,635      15,142      10,004       5,507
09/16/96   Esselte Pendaflex Corporation        60   Forklifts                            26,601      27,523      18,475       9,803
09/16/96   Esselte Pendaflex Corporation        60   Forklifts                            29,250      30,264      19,988      11,002
09/16/96   Esselte Pendaflex Corporation        60   Forklifts                            37,774      39,083      25,811      14,207
09/16/96   Haldex Corporation                   60   Forklifts                            11,214      11,603       6,291       4,749
09/16/96   IAMS Company-Heartland PLT           60   Forklifts                            15,690      16,234      11,806       5,328
09/16/96   Interactive Marketing Services       60   Forklifts                            16,639      17,215      10,356       5,700
09/16/96   Kansas Oxide Corporation             60   Forklifts                            19,511      20,187      15,701       5,420
09/16/96   Midstate Construction & Maint        60   Forklifts                            79,433      82,185      64,991      19,380
09/16/96   North Amer. Packaging Corp           60   Forklifts                             9,954      10,299       6,132       3,984
09/16/96   Schroeders Wholesale, Inc.           60   Forklifts                            12,712      13,153      11,178       3,228
09/16/96   Sea-Lect Wholesale Seafood           60   Forklifts                            16,154      16,714      13,987       3,918
09/16/96   Silverado Foods, Inc.                60   Forklifts                            11,005      11,386       8,249       3,256
09/16/96   Straight-Line Water Sports, Inc.     60   Forklifts                            19,472      20,147      14,440       5,700
09/16/96   United States Mineral Prod           60   Forklifts                            52,712      54,538      41,315      15,204
09/16/96   Warehouse, Inc.                      60   Forklifts                            16,904      17,490      13,800       4,332
09/04/96   Basic Vegetable                      60   Forklifts                           206,842     214,009           0      39,341
09/05/96   Thomson Saginaw                      60   Material handling equipment          35,420      36,647           0       6,779
09/06/96   In Home Health                       36   Computer equipment                   36,228      37,483           0      12,733
09/24/96   Basic Vegetable                      60   Lift truck                           15,698      16,242           0       3,015
09/23/96   In Home Health                       60   Furniture, fixtures & equip           5,297       5,481           0       1,144
09/24/96   Lucent Technologies                  36   Semiconductor                     1,410,646   1,459,524           0     383,178
09/18/96   Ball Foster                          36   Forklifts                            94,287      97,554           0      24,277
09/18/96   Ball Foster                          60   Forklifts                            87,385      90,413           0      18,107
10/21/96   HK Systems                           48   Phone system                         10,495      10,859           0       9,645
11/14/96   HK Systems                           48   Phone system                         42,475      43,947           0      12,697
12/13/96   Basic Vegetable                      60   Forklifts                            75,564      78,182           0      14,372
12/18/96   In Home Health                       60   Computer equipment                  101,943     105,475           0      22,008
12/30/96   TRW                                  31   Furniture, fixtures & equip         214,207     221,629           0      69,356
12/30/96   Thomson Industries                   60   Machine tools                       257,215     266,128           0       3,885
                                                                                      ---------- ----------- ----------- -----------

           Total equipment sold to the partnership                                   $34,503,505 $35,688,393 $11,368,469 $11,127,878
                                                                                     =========== =========== =========== ===========
</TABLE>



*          The  lower of (a) the price for the equipment plus all costs incurred
           in  maintaining the equipment  (including,  without  limitation,  the
           reasonable,   necessary  and  actual  expenses,   as  determined  in
           accordance   with  generally  accepted  accounting   principles,   of
           storage,   carrying,  warehousing,  repair, marketing,  financing and
           taxes)  from  the date of  acquisition  thereof,  provided  that any
           proceeds  accrued from the first basic rent date thereof and retained
           by the  general  partner or an  affiliate  thereof  from  leasing the
           equipment or any other  arrangement  with  respect to  the  equipment
           shall be deemed a credit  towards  the  purchase   price  paid by the
           Partnership,  or (b)  the fair  market  value of such  equipment,  as
           determined   by  an  independent   nationally   recognized  appraiser
           selected by the general partner.


                                      -44-

<PAGE>



Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
         ---------------------------------------------------------------

     (a)
     and
     (d)   The following documents are filed as part of this Report:

           1.    Financial Statements:  (Incorporated  by reference to Item 8 of
                 this Report, "Financial Statements and Supplementary Data").

           2.    Financial  Statement  Schedule:  (Incorporated  by reference to
                 Item 8 of this Report, "Financial Statements and  Supplementary
                 Data").

     (b)   The  Partnership  did  not file any  reports on Form  8-K  during the
           quarter ended December 31, 1996.

     (c)   Exhibits required to be filed.

           Exhibit                                   Exhibit
           Number                                     Name

             4.1*          Capital Preferred Yield Fund-III  Limited Partnership
                           Agreement

             4.2*          First  Amendment  to  Limited  Partnership  Agreement
                           dated June 14, 1994

             4.3*          Amended and Restated Agreement of Limited Partnership
                           of Capital Preferred Yield Fund-III, L.P.

              *            Not filed herewith. In accordance with Rule 12b-32 of
                           the   General   Rules  and   Regulations   under  the
                           Securities Exchange Act of 1934, reference is made to
                           the document previously filed with the Commission.

                                      -45-

<PAGE>


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

Dated:    March 10, 1997         Capital Preferred Yield Fund-III, L.P.
                                 By:      CAI Equipment Leasing IV Corporation

                                 By:      /s/John F. Olmstead
                                          ---------------------
                                          John F. Olmstead
                                          President and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the general partner
of the Partnership and in the capacities indicated on March 10, 1997.

Signature                       Title
---------                       -----


/s/John F. Olmstead
------------------------
John F. Olmstead                President and Director


/s/Dennis J. Lacey
------------------------
Dennis J. Lacey                 Senior Vice President and Director


/s/John E. Christensen
------------------------
John E. Christensen             Senior Vice  President, Principal  Financial and
                                Chief Administrative Officer and Director

/s/Anthony M. DiPaolo
------------------------
Anthony M. DiPaolo              Senior Vice President,  Assistant  Secretary and
                                Director


/s/Robert A. Golden             Vice President and Director
------------------------
Robert A. Golden


/s/Daniel J. Waller
------------------------
Daniel J. Waller                Vice President and Director


/s/Richard H. Abernethy
------------------------
Richard H. Abernethy            Vice President and Director


/s/John A. Reed
------------------------
John A. Reed                    Vice President, Assistant Secretary and Director


/s/David J. Anderson
------------------------
David J. Anderson               Chief Accounting Officer and Secretary

                                      -46-