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, 2001

[ ]  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, L.P.
                     --------------------------------------
             (Exact name of registrant as specified in its charter)

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

2750 South Wadsworth, C-200, Denver, CO                          80227
(Address of principal executive offices)                      (Zip Code)

       Registrant's telephone number, including area code: (720) 963-9600

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 35

                               Page 1 of 36 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. ("CAIEL-IV"), a
Colorado corporation, is the general partner of the Partnership. CAIEL-IV was a
wholly owned subsidiary of Capital Associates, Inc. ("CAI") until September 12,
2000, the date it was purchased in its entirety by Mishawaka Leasing Company,
Inc. ("MLC"). CAI discontinued its operations on December 15, 2000 and filed
Chapter 11 Bankruptcy on October 15, 2001.

Capital Associates International, Inc. ("CAII") was the Class B limited partner
of the Partnership prior to September 12, 2000. In exchange for its Class B
limited partner interest, CAII contributed $500,000 (i.e., $10,000 for each
$1,000,000 contribution to the Partnership made by the Class A limited partners)
to the Partnership making it the largest single investor in the Partnership. The
contributions of CAII were made simultaneously with the purchase of equipment by
the Partnership. MLC became the Class B limited partner as of September 12,
2000.

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 and Class B limited partners during the
reinvestment period (a period that ended 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 three years of the end
of the reinvestment period.

Since its formation, the Partnership acquired equipment of various types under
lease to third parties on short-term leases (generally five years or less). All
of the equipment was purchased by CAII directly from manufacturers or from other
independent third parties and sold to the Partnership. The equipment generally
comprises material handling equipment, computer and peripheral equipment,
industrial equipment, and telecommunications equipment, among others. The
Partnership entered its liquidation stage, as defined in the Partnership
Agreement, in July 2000. During the liquidation stage, purchases of equipment
ceased (other than for prior commitments and equipment upgrades). The
Partnership was 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 and the Partnership liquidated prior to that date.

The Partnership may assign the rentals from leases to financial institutions, or
acquire leases subject to such assignments, at fixed interest rates on a
non-recourse basis. The proceeds of this non-recourse debt financing will be
utilized to finance the purchase of equipment under lease or to invest 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.

                                       2
<PAGE>
Item 1. Business, continued
        --------

The Partnership leases equipment to investment grade lessees in diverse
industries including the financial services, retail, telecommunications, energy
and manufacturing industries. Approximately 67% of the Partnership's total
equipment under lease was leased to investment grade lessees. 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 (iii) 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 limits 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 is
expected to provide additional investment income from its re-lease or 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 as well as future equipment
values and on-going lessee creditworthiness. 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). The amount of future distributions to the
partners will depend, in part, on future interest rates.

The Partnership has no employees. Prior to September 12, 2000, the Partnership
relied upon the services of CAII for origination of leases, administrative and
accounting services, and remarketing of leases and equipment, among other
services. From September 12, 2000 on, the general partner has contracted with
MLC to provide the above services. Many of the management and administrative
personnel of MLC formerly worked for CAII and serviced the Partnership leases.
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".

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, financing
capabilities, and remarketing expertise enable it to compete effectively in the
equipment leasing and remarketing markets.

The Partnership leases equipment to a significant number of lessees. One lessee
and its affiliates accounted for 13% of Partnership total leasing and
remarketing revenue during 2001.

                                       3
<PAGE>
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."

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, 2001.

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

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

(b)     At December 31, 2001, there were 2,853 Class A limited partners.

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

        During 2001, the Partnership made twelve (12) distributions (a 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, 2000              January 2001               $  1.256                 $   616,800
January 31, 2001               February 2001                 0.394                     193,519
February 28, 2001              March 2001                    1.510                     741,344
March 31, 2001                 April 2001                    0.635                     311,923
April 30, 2001                 May 2001                      1.753                     860,617
May 31, 2001                   June 2001                     1.368                     671,666
June 30, 2001                  July 2001                     2.043                   1,003,029
July 31, 2001                  August 2001                   0.599                     294,035
August 31, 2001                September 2001                1.231                     604,458
September 30, 2001             October 2001                  2.524                   1,239,078
October 31, 2001               November 2001                 2.477                   1,216,248
November 30, 2001              December 2001                 0.758                     372,337
                                                          ---------                 -----------
                                                          $  16.55                  $8,125,054
                                                          =========                 ===========
</TABLE>

                                       4
<PAGE>

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

(c)       Distributions, continued
          -------------

          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.

          The distribution for the month ended December 31, 2001, totaling
          $777,721, was paid to the Class A limited partners in January, 2001.
          Distributions to the general partner and Class B limited partner
          during 2001 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 2001, to (1) meet current
          operating requirements, and (2) enable it to fund cash distributions
          to the Class A limited partners in accordance with the Partnership
          Agreement. Distributions during the liquidation period will be based
          upon cash availability and may vary. All distributions are expected to
          be a return of capital for economic purposes.

          During 2000, the Partnership made twelve (12) distributions (a 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, 1999           January 2000             $  0.875                $   431,424
January 31, 2000            February 2000               0.875                    429,279
February 28, 2000           March 2000                  0.875                    429,279
March 31, 2000              April 2000                  0.875                    431,424
April 30, 2000              May 2000                    0.875                    429,279
May 31, 2000                June 2000                   0.875                    428,906
June 30, 2000               July 2000                   0.875                    431,050
July 31, 2000               August 2000                 0.875                    428,906
August 31, 2000             September 2000              3.750                  1,839,910
September 30, 2000          October 2000                1.990                    977,812
October 31, 2000            November 2000               1.320                    648,933
November 30, 2000           December 2000               2.000                    983,985
                                                      -------                -----------
                                                      $ 16.06                $ 7,890,187
                                                      =======                ============
</TABLE>

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

(c)     Distributions, continued
        -------------


The following represents annual and cumulative distributions per Class A limited
partner unit, as described in note 1 to Notes to Consolidated Financial
Statements.

                        Distribution Amount             Distribution %
                        per $100 Class A               per $100 Class A
                       Limited Partner Unit          Limited Partner Unit
   Payment               (computed on                   (computed on
Made During             weighted average)            weighted average) (1)
-----------            --------------------          ---------------------

   1994                   $   5.25                         10.5%
   1995                      10.50                         10.5%
   1996                      10.50                         10.5%
   1997                      10.50                         10.5%
   1998                      10.50                         10.5%
   1999                      10.50                         10.5%
   2000                      16.06                         16.1%
   2001                      16.55                         16.5%
                          --------
                          $  90.36
                          ========

        (1)     Cumulative distributions, as described in note 1 to Notes to
                Consolidated Financial Statements, began July 1994.

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

The following selected financial data relates to the years ended December 31,
1997 through 2001. 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 with Item 8
herein.

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                                 ------------------------
                                                           2001              2000           1999           1998           1997
                                                           ----              ----           ----           ----           ----

<S>                                                    <C>               <C>           <C>             <C>           <C>
Total revenue                                          $11,421,913       $15,392,908   $17,896,120     $18,490,540   $ 20,994,438
Net income    (loss)                                      (366,977)          473,136     2,200,668       1,745,560      4,414,329
Net income (loss) per weighted average Class A
  limited partner unit outstanding                           (0.91)             0.79          4.32            3.40           8.71
Total assets                                            20,677,301        32,441,172    42,103,741      47,803,687     53,890,874
Discounted lease rentals                                 4,985,065         8,686,491     9,257,171      12,603,909     15,828,174
Distributions declared to partners                       8,405,024         8,208,014     5,271,238       5,275,471      5,307,605
Distributions declared per weighted average
  Class A limited partner unit outstanding                   16.88             16.44         10.50           10.50          10.50
</TABLE>

                                       6
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
        -----------------------------------------------------------------------
        of Operations, continued
        -------------

I.      Results of Operations

Critical Accounting Policies

Accounting for leases falls under guidelines that have been substantially
unchanged since at least 1975. For operating leases, revenue and depreciation
are recorded on a straight-line basis over the lease term. For direct finance
leases, revenue and amortization are recorded using the interest method (i.e.
similar to amortization of a home mortgage).

For both types of leases, two critical assumptions include the probability of
future contractual rent collections and an estimate of future residual value.
The Partnership must make judgments when evaluating both of these assumptions
before entering into a lease. The probability of future rent collection is
addressed during the credit evaluation process. When estimating future
residuals, 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.

Future reported results could differ considerably from expected results if
conditions arise that significantly affect these two critical assumptions.
However, the Partnership believes the likelihood of materially different
reported results is minimized (but not removed) because in the normal course of
business the Partnership a) assigns future rents to financial institutions for
an up front cash payment and b) attempts to keep the Partnership's portfolio
diversified as to lessee and equipment type concentrations.

Operating Results

Presented below are schedules (prepared solely to facilitate the discussion of
results of operations that follows) showing condensed categories and analyses of
changes in those condensed categories derived from the Statements of Operations:

<TABLE>
<CAPTION>
                                       Years Ended December 31,                   Years Ended December 31,
                                       ------------------------                   ------------------------
                                 2001           2000           Change         2000           1999           Change
                             ------------   -----------    ------------   -----------    -----------    ------------

<S>                          <C>            <C>            <C>            <C>            <C>            <C>
Leasing margin               $ 1,857,241    $ 2,532,535    $  (675,294)   $ 2,532,535    $ 3,375,087    $  (842,552)
Equipment sales margin           427,592        933,489       (505,897)       933,489      1,187,086       (253,597)
Interest income                   54,127        136,770        (82,643)       136,770        390,199       (253,429)
Management fees paid to
    general partner             (245,156)      (317,680)        72,524       (317,680)      (348,688)        31,008
Direct services from
    general partner             (216,350)       (83,615)      (132,735)       (83,615)      (135,846)        52,231
General and administrative      (628,681)      (496,241)      (132,440)      (496,241)      (276,855)      (219,386)
Provision for losses          (1,615,750)    (2,232,122)       616,372     (2,232,122)    (1,990,315)      (241,807)
                             -----------    -----------    -----------    -----------    -----------    -----------
  Net income (loss)          $  (366,977)   $   473,136    $  (840,113)   $   473,136    $ 2,200,668    $(1,727,532)
                             ===========    ===========    ===========    ===========    ===========    ===========
</TABLE>

The Partnership is in its liquidation stage, as defined in the Partnership
Agreement, and is not purchasing additional equipment. Initial leases are
expiring, and the amount of equipment being remarketed (i.e., re-leased, renewed
or sold) is decreasing. As a result, both the size of the Partnership's leasing
portfolio and the amount of total revenue are declining ("portfolio runoff").

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

Leasing Margin

Leasing margin consists of the following:

<TABLE>
<CAPTION>
                                                          Years Ended December 31,
                                                          ------------------------

                                                    2001            2000             1999
                                                    ----            ----             ----

<S>                                            <C>             <C>              <C>
Operating lease rentals                        $ 10,545,224    $ 14,073,931     $ 16,104,518
Direct finance lease income                         394,970         248,718          214,317
Depreciation                                     (8,531,511)    (10,923,830)     (12,284,633)
Interest expense on discounted lease rentals       (551,442)       (866,284)        (659,115)
                                               ------------    ------------     ------------
  Leasing margin                               $  1,857,241    $  2,532,535     $  3,375,087
                                               ============    ============     ============

Leasing margin ratio                                   17 %              18%              21%
                                               ============    ============     ============
</TABLE>

Leasing margin ratio will vary due to changes in the portfolio, including, among
other things, the mix of operating leases versus direct finance leases, the
average maturity of leases comprising the portfolio, the average residual value
of leases in the portfolio, and the amount of discounted lease rentals financing
the portfolio.

Leasing margin and its related components generally decreased due to portfolio
runoff.

Direct finance lease income increased due to the renewal of operating leases as
direct finance leases.

Interest expense on discounted lease rentals decreased during 2001 compared to
2000 due to portfolio runoff. Interest expense on discounted lease rentals
increased during 2000 compared to 1999 due to an increase in leases financed
with non-recourse debt.

The ultimate rate of return on leases depends, in part, on interest rates at the
time the leases are originated, as well as future equipment values and on-going
lessee creditworthiness. 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).

Equipment Sales Margin

Equipment sales margin from remarketing consists of the following:

                                       Years Ended December 31,
                                       ------------------------
                              2001              2000              1999
                              ----              ----              ----

Equipment sales revenue   $ 1,889,127       $ 3,822,554       $ 6,784,879
Cost of equipment sales    (1,461,535)       (2,889,065)       (5,597,793)
                           ----------        ----------        ----------
Equipment sales  margin   $   427,592       $   933,489       $ 1,187,086
                          ===========       ===========       ===========

Equipment sales margin is affected by the number and dollar amount of equipment
leases that mature in a particular period. Currently, a portion of the
Partnership's initial leases have expired and the equipment is either being
re-leased or sold to the lessee or third parties. Equipment sales margin
decreased primarily due to portfolio runoff.

                                       8
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
        -----------------------------------------------------------------------
        of Operations, continued
        -------------

Interest Income

Interest income varies due to (1) the amount of cash available for investment
(pending distribution or equipment purchases) and (2) the interest rate on such
invested cash.

Expenses

Management fees paid to general partner decreased due to portfolio run-off.

Direct services from the general partner increased in 2001 compared to 2000
primarily due to activities related to converting the Partnership's assets from
the CAII computer systems to the MLC computer systems. Direct services from the
general partner decreased in 2000 compared to 1999 primarily due to portfolio
runoff.

General and administrative expenses increased in 2001 compared to 2000 primarily
due to insurance and audit costs, and consulting costs related to converting the
Partnership's assets from the CAII computer systems to the MLC computer systems.

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 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 and residual value exposure and, accordingly, in the ordinary course of
business, it will incur losses from those exposures. The Partnership performs
quarterly assessments of the estimated residual values of its assets to identify
any other-than-temporary losses in value.

The provision for losses recorded during 2001 related to the following:

o       $109,960 related to the estimated decline in residual value of computer
        equipment returned to the Partnership at lease maturity.
o       $678,076 was recognized as a fair market value write-down of certain
        transportation and industrial equipment, computer, furniture, fixtures
        and equipment.
o       $527,714 was recorded due to the decline in the realizable values of
        leased furniture, fixtures, semiconductor and other equipment.
o       $300,000 for estimated uncollectible accounts receivable. The reserve
        was recorded due to the uncertainty of collection. However, management
        will continue its efforts to collect the receivables.

The provision for losses recorded during 2000 related to the following:

o       $293,807 related to the estimated decline in residual value of computer
        equipment returned to the Partnership at lease maturity

                                       9
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
        -----------------------------------------------------------------------
        of Operations, continued
        -------------

o       $874,150 was recognized as a fair market value write-down of certain
        transportation and industrial equipment, computer, furniture, fixtures
        and equipment.
o       $173,000 related to lessees who have filed for Chapter 11 bankruptcy
        protection during 2000.
o       $117,000 was accrued to recognize an anticipated loss on the sale of
        certain computer equipment.
o       $90,000 was recorded as a reserve for uncollectible accounts receivable
o       $277,165 was recorded due to the decline in the realizable values of
        leased furniture, fixtures and other equipment.
o       $300,000 was recorded as a reserve for a lessee that was placed on
        credit watch in January 2001.
o       $107,000 was recorded as a reserve for estimated uncollectible accounts
        receivable.

The provision for losses recorded during 1999 related to the following:

o       $298,120 related to computer equipment that has been returned to the
        Partnership with fair market values that are lower than the book values.
o       $160,287 related to declines in the fair market value of forklifts
        returned to the Partnership at lease maturity.
o       $282,000 was recognized as losses on the sales of certain
        telecommunications, computer, furniture, fixtures, forklift and aircraft
        equipment.
o       $262,000 was recognized as losses on sales of certain computer
        equipment.
o       $687,898 related to anticipated declines of telecommunications and other
        miscellaneous equipment.
o       $300,000 was recorded to cover a portion of the Receivable from
        Affiliates balance.

II.     Liquidity and Capital Resources
        -------------------------------

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.

During 2000 and 1999, the Partnership acquired equipment subject to leases with
a total equipment purchase price of approximately $11,649,000, and $13,586,000
respectively, net of assumed non-recourse debt to lenders of approximately
$3,720,000, and $6,646,000, respectively. Also, during 2000 and 1999, the
Partnership discounted future rental payments from certain leases to
non-recourse lenders and received proceeds of approximately $897,000 and
$206,000, respectively. During July 2000, the Partnership entered its
liquidation period, as defined in the Partnership Agreement. Consequently,
material purchases of equipment subject to leases have ceased.

During 2001, 2000 and 1999 the Partnership declared distributions to the
partners of approximately $8,405,000, $8,208,000, and $5,271,000, respectively.
A substantial portion of such distributions are 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 that 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
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.

                                       10
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
        -----------------------------------------------------------------------
        of Operations, continued
        -------------

The general partner believes that the Partnership will generate sufficient cash
flows from operations during 2001 to (1) meet current operating requirements,
and (2) enable it to fund cash distributions to the Class A limited partners in
accordance with the Partnership Agreement. Distributions during the liquidation
period will be based upon cash availability and may vary. All distributions are
expected to be a return of capital for economic purposes.

Until September 2000, the Partnership relied upon the services of CAII, its
affiliate, for origination of leases, administrative and accounting services and
remarketing of leases and equipment, among other services. The General Partner
has terminated its relationship with CAII (see discussion below) and has
contracted with MLC to provide billing, administrative, remarketing and
accounting services. Many of the management and administrative personnel of MLC
formerly worked for CAII and serviced the Partnership leases.

CAII owed the Partnership $370,324 for rents, remarketing proceeds and other
amounts (the "Prior Rents") collected by CAII on behalf of the Partnership
during the periods prior to February 1, 2000. On September 12, 2000, as part of
the Sale of the General Partnership interest owned by CAII to MLC, MLC repaid in
full the Prior Rents owed by CAII to the Partnership. During 2000, as CAII was
preparing to liquidate, which it did on December 15, 2000, CAII was unable to
provide investment opportunities for reinvestment to the Partnership and
consequently the Partnership's cash balances were higher than normal. Also
during the same period, CAII did not keep up with collections of accounts
receivable, which were higher than normal. Both of these events adversely
affected the Partnership's performance. CAII subsequently filed Chapter 11
Bankruptcy on October 15, 2001.

New Accounting Pronouncements
-----------------------------

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141 ("SFAS No. 141"), "Business
Combinations" which requires the purchase method and eliminates the option of
using the pooling-of-interests method of accounting for all business
combinations. The provisions of SFAS No. 141 apply to all business combinations
initiated after June 30, 2001, and all business combinations accounted for using
the purchase method for which the date of acquisition is July 1, 2001, or later.
The Partnership does not believe the adoption of this statement will have a
material impact on the Partnership's financial position, results of operations
or cash flows.

In July 2001, FASB issued Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" which requires that all intangible assets
acquired, other than those acquired in business combination, be initially
recognized and measured based on the asset's fair value. In addition, the
intangible asset should be amortized based upon its useful life. If the
intangible asset is determined to have an indefinite useful life, it shall not
be amortized until its useful life can be determined. The Partnership does not
believe the adoption of this statement will have a material impact on the
Partnership's financial position, results of operations or cash flows.

In June 2001, FASB issued Statement of Financial Accounting Standards No. 143
("SFAS No. 143"), "Accounting for Asset Retirement Obligations", effective for
the Partnership on January 1, 2003. SFAS No. 143 addresses financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. The Partnership
does not believe the adoption of this statement will have a material impact on
the Partnership's financial position, results of operations or cash flows.

                                       11
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
        -----------------------------------------------------------------------
        of Operations, continued
        -------------

In August 2001, FASB issued Statement of Financial Accounting Standards No. 144
("SFAS No. 144"), "Accounting for the Impairment or Disposal of Long-Lived
Assets", effective for the Partnership on January 1, 2002. SFAS No. 144
supercedes Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
and other related accounting guidance. The Partnership does not believe the
adoption of this statement will have a material impact on the Partnership's
financial position, results of operations or cash flows.

IV.   "Safe Harbor" Statement Under the Private Securities Litigation Reform Act
      --------------------------------------------------------------------------
      of 1995
      -------

The statements contained in this report which are not historical facts may be
deemed to contain forward-looking statements with respect to events, the
occurrence of which involve risks and uncertainties, and are subject to factors
that could cause actual future results to differ both adversely and materially
from currently anticipated results, including, without limitation; the level of
lease originations; realization of residual values; customer credit risk;
competition from other lessors, specialty finance lenders or banks; and the
availability and cost of financing sources. Certain specific risks associated
with particular aspects of the Partnership's business are discussed in detail
throughout Parts I and II when and where applicable.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk
         ----------------------------------------------------------

The Partnership's leases with equipment users are non-cancelable and have lease
rates which are fixed at lease inception. The Partnership finances its leases,
in part, with discounted lease rentals at fixed debt rate. The Partnership's
other assets and liabilities are also at fixed rates. Consequently, the
Partnership has no interest rate risk or other market risk exposure.

                                       12
<PAGE>

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

         Index to Financial Statements and
         Financial Statement Schedule

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

                 Independent Auditors' Report                                14

                 Balance Sheets as of December 31, 2001 and 2000             15

                 Statements of Operations for the years ended
                   December 31, 2001, 2000 and 1999                          16

                 Statements of Partners' Capital for the years ended
                   December 31, 2001, 2000 and 1999                          17

                 Statements of Cash Flows for the years ended
                   December 31, 2001, 2000 and 1999                       18-19

                 Notes to Financial Statements                            20-29



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

                 Independent Auditors' Report                                30

                 Schedule II - Valuation and Qualifying Accounts             31


                                       13
<PAGE>


                          Independent Auditor's 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, 2001 and 2000, and the related statements of
operations, partners' capital, and cash flows for each of the years in the
three-year period ended December 31, 2001. 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 auditing standards generally accepted
in the United States of America. 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, 2001 and 2000, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States of America.

                                            /s/KPMG LLP
                                            -----------
                                            KPMG LLP

Denver, Colorado
March 22, 2002

                                       14
<PAGE>
               CAPITAL PREFERRED YIELD FUND-III, L.P.

                                 BALANCE SHEETS
                        As of December 31, 2001 and 2000
<TABLE>
<CAPTION>
                                     ASSETS

                                                                2001           2000
                                                                ----           ----

<S>                                                         <C>           <C>
Cash and cash equivalents                                   $ 1,603,588   $ 1,529,900
Accounts receivable, net of allowance for losses
    of $369,211 in 2001 and $117,000 in 2000                  1,257,040       967,890
Equipment held for sale                                         349,333       135,328
Net investment in direct finance leases                       2,348,080     2,531,647
Leased equipment, net                                        15,119,260    27,276,407
                                                            -----------   -----------

    Total assets                                            $20,677,301   $32,441,172
                                                            ===========   ===========

                        LIABILITIES AND PARTNERS' CAPITAL

Liabilities:
    Accounts payable and accrued liabilities                $ 1,805,041   $ 1,018,178
    Payables to affiliates                                       48,806       194,756
    Rents received in advance                                    40,205       108,751
    Distributions payable to partners                           789,971       652,782
    Discounted lease rentals                                  4,985,065     8,686,491
                                                            -----------   -----------

    Total liabilities                                         7,669,088    10,660,958
                                                            -----------   -----------

Partners' capital:
    General partner                                                --            --
    Limited partners:
          Class A 500,000 units authorized; 491,016 units
             issued and outstanding in 2001 and 2000         12,719,270    21,451,760
          Class B                                               288,943       328,454
                                                            -----------   -----------

                  Total partners' capital                    13,008,213    21,780,214
                                                            -----------   -----------

                  Total liabilities and partners' capital   $20,677,301   $32,441,172
                                                            ===========   ===========
</TABLE>

                 See accompanying notes to financial statements.

                                       15
<PAGE>
                     CAPITAL PREFERRED YIELD FUND-III, L.P.

                            STATEMENTS OF OPERATIONS
              For the Years Ended December 31, 2001, 2000 and 1999

<TABLE>
<CAPTION>
                                                              2001            2000            1999
                                                         ------------    ------------    ------------
<S>                                                      <C>             <C>             <C>
Revenue:
    Operating lease rentals                              $ 10,545,224    $ 14,073,931    $ 16,104,518
    Direct finance lease income                               394,970         248,718         214,317
    Equipment sales margin                                    427,592         933,489       1,187,086
    Interest income                                            54,127         136,770         390,199
                                                         ------------    ------------    ------------

          Total revenue                                    11,421,913      15,392,908      17,896,120
                                                         ------------    ------------    ------------

Expenses:
    Depreciation                                            8,531,511      10,923,830      12,284,633
    Management fees paid to general partner                   245,156         317,680         348,688
    Direct services from general partner                      216,350          83,615         135,846
    General and administrative                                628,681         496,241         276,855
    Interest on discounted lease rentals                      551,442         866,284         659,115
    Provision for losses                                    1,615,750       2,232,122       1,990,315
                                                         ------------    ------------    ------------

             Total expenses                                11,788,890      14,919,772      15,695,452
                                                         ------------    ------------    ------------

Net income (loss)                                        $   (366,977)   $    473,136    $  2,200,668
                                                         ============    ============    ============

Net income (loss) allocated:
    To the general partner                               $     84,050    $     82,094    $     52,712
    To the Class A limited partners                          (446,516)        387,131       2,126,476
    To the Class B limited partner                             (4,511)          3,911          21,480
                                                         ------------    ------------    ------------

                                                         $   (366,977)   $    473,136    $  2,200,668
                                                         ============    ============    ============

Net income (loss) per weighted average Class A limited
    partner unit outstanding                             $      (0.91)   $       0.79    $       4.32
                                                         ============    ============    ============

Weighted average Class A limited partner
    units outstanding                                         491,016         491,184         491,874
                                                         ============    ============    ============
</TABLE>

                 See accompanying notes to financial statements.

                                       16
<PAGE>
                     CAPITAL PREFERRED YIELD FUND-III, L.P.
                         STATEMENTS OF PARTNERS' CAPITAL
              For the Years Ended December 31, 2001, 2000 and 1999

<TABLE>
<CAPTION>
                                                         Class A
                                                         Limited          Class A          Class B
                                         General         Partner          Limited          Limited
                                         Partner          Units           Partners         Partner         Total
                                         -------       -----------        --------         -------         -----

<S>                                    <C>             <C>             <C>             <C>             <C>
Partners' capital, January 1, 1999     $       --           492,145    $ 32,239,114    $    408,063    $ 32,647,177

Redemptions                                    --              (675)        (41,552)           --           (41,552)
Net income                                   52,712            --         2,126,476          21,480       2,200,668
Distributions declared to partners          (52,712)           --        (5,166,026)        (52,500)     (5,271,238)
                                       ------------    ------------    ------------    ------------    ------------

Partners' capital, December 31, 1999           --           491,470      29,158,012         377,043      29,535,055

Redemptions                                    --              (454)        (19,963)           --           (19,963)
Net income                                   82,094            --           387,131           3,911         473,136
Distributions declared to partners          (82,094)           --        (8,073,420)        (52,500)     (8,208,014)
                                       ------------    ------------    ------------    ------------    ------------

Partners' capital, December 31, 2000           --           491,016      21,451,760         328,454      21,780,214

Net income (loss)                            84,050            --          (446,516)         (4,511)       (366,977)
Distributions declared to partners          (84,050)           --        (8,285,974)        (35,000)     (8,405,024)
                                       ------------    ------------    ------------    ------------    ------------
Partners' capital, December 31, 2001   $       --           491,016    $ 12,719,270    $    288,943    $ 13,008,213
                                       ============    ============    ============    ============    ============
</TABLE>

                 See accompanying notes to financial statements.

                                       17
<PAGE>
                     CAPITAL PREFERRED YIELD FUND-III, L.P.
                            STATEMENTS OF CASH FLOWS
              For the Years Ended December 31, 2001, 2000 and 1999

<TABLE>
<CAPTION>
                                                                            2001            2000           1999
                                                                       ------------    ------------    ------------
<S>                                                                    <C>             <C>             <C>
Cash flows from operating activities:
    Net income (loss)                                                  $   (366,977)   $    473,136    $  2,200,668
    Adjustments to reconcile net income (loss) to net cash
      provided by operating activities:
      Depreciation                                                        8,531,511      10,923,830      12,284,633
      Provision for losses                                                1,615,750       2,232,122       1,990,315
      Cost of equipment sales                                             1,461,535       2,889,065       5,597,793
      Recovery of investment in direct finance leases                       915,388       1,151,837       1,934,798

      Purchases of equipment on operating leases from affiliate                --        (6,832,595)     (6,730,220)
      Investment in direct financing leases, acquired from affiliate           --        (1,089,823)       (209,885)
      Changes in assets and liabilities:
          (Increase) decrease in accounts receivable, net                  (686,625)        539,758          45,254
          (Increase) decrease in receivable from affiliates                    --           715,524        (965,001)
          Increase (decrease) in accounts payable and accrued
               liabilities                                                  786,863      (1,319,233)        828,792
          Increase (decrease) in payables to affiliates                    (145,950)        134,351          12,045
          Decrease in rents received in advance                             (68,546)       (362,602)        (83,471)
                                                                       ------------    ------------    ------------

Net cash provided by operating activities                                12,042,949       9,455,370      16,905,721
                                                                       ------------    ------------    ------------

Cash flows from financing activities:
    Proceeds from discounted lease rentals                                     --           896,890         205,734
    Principal payments on discounted lease rentals                       (3,701,426)     (5,187,197)    (10,141,287)
    Redemptions of Class A limited partnership units                           --           (19,963)        (41,553)
    Distributions to partners                                            (8,267,835)     (7,997,578)     (5,269,691)
                                                                       ------------    ------------    ------------
Net cash used in by financing activities                                (11,969,261)    (12,307,848)    (15,246,797)
                                                                       ------------    ------------    ------------


Netb increase (decrease) in cash and cash equivalents                        73,688      (2,852,478)      1,658,924
Cash and cash equivalents at beginning of year                            1,529,900       4,382,378       2,723,454
                                                                       ------------    ------------    ------------

Cash and cash equivalents at end of year                               $  1,603,588    $  1,529,900    $  4,382,378
                                                                       ============    ============    ============
</TABLE>

                 See accompanying notes to financial statements.

                                       18
<PAGE>
                     CAPITAL PREFERRED YIELD FUND-III, L.P.
                            STATEMENTS OF CASH FLOWS
              For the Years Ended December 31, 2001, 2000 and 1999

<TABLE>
<CAPTION>
                                                                             2001         2000         1999
                                                                             ----         ----         ----
<S>                                                                      <C>          <C>          <C>
Supplemental disclosure of cash flow information:
    Interest paid on discounted lease rentals                            $  551,421   $  860,742   $  651,468
Supplemental disclosure of noncash investing and financing activities:
    Discounted lease rentals assumed in equipment acquisitions                 --      3,719,626    6,645,920
Discounted lease rentals for bankrupt lessee written-off
    as uncollectible                                                           --           --         57,104
Rents deducted from cash paid for equipment acquisitions                       --          1,502         --
Miscellaneous deduction from equipment acquisitions                            --          7,988         --
</TABLE>

                 See accompanying notes to financial statements.

                                       19
<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 equipment owned by the Partnership is expected
       to be sold and the Partnership liquidated between 2002 and 2003. The
       general partner of the Partnership is CAI Equipment Leasing IV Corp., a
       wholly owned subsidiary of Mishawaka Leasing Company, Inc. ("MLC").

       The general partner manages the Partnership, including investment of
       funds, purchase and sale of equipment, lease negotiation and other
       administrative duties. The Partnership initially sold 500,000 Class A
       limited partner units to 4,968 investors at a price of $100 per Class A
       limited partner unit.

       MLC is the Class B limited partner. The Class B limited partner
       contributed 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.

       Use of Estimates

       The preparation of financial statements in conformity with accounting
       principles generally accepted in the United States of America 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:

                                       20
<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.

       Federal Income Tax Basis 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:

                                       21
<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

       Federal Income Tax Basis 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 - Profits and Losses
       ----------------------------------------

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

                                       22
<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

       In July 2001, the Financial Accounting Standards Board ("FASB") issued
       Statement of Financial Accounting Standards No. 141 ("SFAS No. 141"),
       "Business Combinations" which requires the purchase method and eliminates
       the option of using the pooling-of-interests method of accounting for all
       business combinations. The provisions of SFAS No. 141 apply to all
       business combinations initiated after June 30, 2001, and all business
       combinations accounted for using the purchase method for which the date
       of acquisition is July 1, 2001, or later. The Partnership does not
       believe the adoption of this statement will have a material impact on the
       Partnership's financial position, results of operations or cash flows.

       In July 2001, FASB issued Statement of Financial Accounting Standards No.
       142, "Goodwill and Other Intangible Assets" which requires that all
       intangible assets acquired, other than those acquired in business
       combination, be initially recognized and measured based on the asset's
       fair value. In addition, the intangible asset should be amortized based
       upon its useful life. If the intangible asset is determined to have an
       indefinite useful life, it shall not be amortized until its useful life
       can be determined. The Partnership does not believe the adoption of this
       statement will have a material impact on the Partnership's financial
       position, results of operations or cash flows.

       In June 2001, FASB issued Statement of Financial Accounting Standards No.
       143 ("SFAS No. 143"), "Accounting for Asset Retirement Obligations",
       effective for the Partnership on January 1, 2003. SFAS No. 143 addresses
       financial accounting and reporting for obligations associated with the
       retirement of tangible long-lived assets and the associated asset
       retirement costs. The Partnership does not believe the adoption of this
       statement will have a material impact on the Partnership's financial
       position, results of operations or cash flows.

       In August 2001, FASB issued Statement of Financial Accounting Standards
       No. 144 ("SFAS No. 144"), "Accounting for the Impairment or Disposal of
       Long-Lived Assets", effective for the Partnership on January 1, 2002.
       SFAS No. 144 supercedes Statement of Financial Accounting Standards No.
       121, "Accounting for the Impairment of Long-Lived Assets and for
       Long-Lived Assets to Be Disposed Of" and other related accounting
       guidance. The Partnership does not believe the adoption of this statement
       will have a material impact on the Partnership's financial position,
       results of operations or cash flows.

       Long-Lived Assets

       The Partnership accounts for long-lived assets under the provisions of
       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"). SFAS No. 121 requires that long-lived assets,
       including equipment subject to operating leases and certain identifiable
       intangibles to be held and used by an entity, be reviewed for impairment
       whenever 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 net cash flows
       expected to result from the use of the asset and its eventual
       disposition. If the sum of the expected future net cash flows
       (undiscounted and without interest charges) is less than the carrying
       amount of the asset, an impairment loss is recognized. Measurement of an
       impairment loss for long-lived assets, including equipment subject to
       operating lease and identifiable intangibles held by the Partnership, is

                                       23
<PAGE>
                     CAPITAL PREFERRED YIELD FUND-III, L.P.

                    NOTES TO FINANCIAL STATEMENTS, continued


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

       based on the fair value of the asset. The fair value of the asset may be
       calculated by discounting the expected future net cash flows at an
       appropriate discount rate.


       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 that 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 Finance 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 Statements of Operations. Residual
       values are established at lease inception equal to the estimated value to
       be received from the equipment following termination of the initial lease
       as determined by the general partner. In estimating such values, the
       general partner considers all relevant information regarding the
       equipment and the lessee.

       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 Statements of
       Operations. Residual values are established at lease inception equal to
       the estimated value to be received from the equipment following
       termination of the initial lease 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.

                                       24
<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 Finance Leases" and "Equipment on Operating Leases"
       discussed 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 approximately $1,595,000 and $1,518,000 at December 31,
       2001 and 2000, respectively, are comprised of investments in a mutual
       fund which invests solely in U.S. Government treasury bills having
       maturities of 90 days or less.

       Net Income (Loss) Per Class A Limited Partner Unit

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

                                       25
<PAGE>
                     CAPITAL PREFERRED YIELD FUND-III, L.P.

                    NOTES TO FINANCIAL STATEMENTS, continued


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

       The components of the net investment in direct finance leases as of
       December 31, 2001 and 2000 were:

<TABLE>
<CAPTION>
                                                                                     2001            2000
                                                                                ------------    ------------

       <S>                                                                      <C>             <C>
       Minimum lease payments receivable                                        $  2,361,398    $  2,559,381
       Estimated residual values                                                     347,924         415,146
       Unearned income                                                              (361,242)       (442,880)
                                                                                ------------    ------------
              Total                                                             $  2,348,080    $  2,531,647
                                                                                ============    ============
</TABLE>

3.     Leased Equipment, net

       The Partnership's investment in equipment on operating leases by major
       classes as of December 31, 2001 and 2000 were:

<TABLE>
<CAPTION>
                                                                                     2001            2000
                                                                                ------------    ------------

       <S>                                                                      <C>             <C>
       Transportation and industrial equipment                                  $ 18,969,709    $ 23,664,000
       Computers and peripherals                                                   6,637,647      12,608,284
       Furniture, fixtures and equipment                                           7,680,409      14,634,573
       Other                                                                       1,667,539       2,292,590
                                                                                ------------    ------------
                                                                                  34,955,304      53,199,447
       Accumulated depreciation                                                  (19,836,044)    (25,923,040)
                                                                                ------------    ------------
                                                                                $ 15,119,260    $ 27,276,407
                                                                                ============    ============
</TABLE>

       Depreciation expense for 2001, 2000 and 1999 was $8,531,511, $10,923,830
       and $12,284,633, respectively.

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

       Future minimum lease payments receivable from noncancelable leases as of
       December 31, 2001 are:

Years Ending December 31,        Direct Finance Leases         Operating Leases
-------------------------        ---------------------         ----------------

        2002                        $  1,105,824                   $ 5,520,984
        2003                             741,818                     2,582,258
        2004                             493,696                     1,278,176
        2005                              20,060                       127,781
        Thereafter                             -                         7,139
                                    ------------                   -----------
                 Total              $  2,361,398                   $ 9,516,338
                                    ============                   ===========

                                       26
<PAGE>
                     CAPITAL PREFERRED YIELD FUND-III, L.P.

                    NOTES TO FINANCIAL STATEMENTS, continued

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

       Discounted lease rentals outstanding at December 31, 2001 bear interest
       at rates primarily ranging between 6% and 11%. Aggregate maturities of
       such non-recourse obligations are:

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

                  2002                      $ 2,494,519
                  2003                        1,590,734
                  2004                          876,433
                  2005                           23,379
                                            -----------
                          Total             $ 4,985,065
                                            ===========

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

       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 creditworthiness of the lessees. No origination and evaluation
       fees were paid during 2001. Origination and evaluation fees totaled
       approximately $385,000 and $415,000 in 2000 and 1999, 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 Paid to General Partner
       ---------------------------------------

       The general partner earns management fees 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.
       The general partner earned approximately $245,000, $318,000, and $349,000
       during 2001, 2000 and 1999, respectively.

       Direct Services from General Partner
       ------------------------------------

       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. The Partnership
       recorded approximately $216,000, $84,000, and $136,000 of direct services
       from the general partner during 2001, 2000 and 1999, respectively.

                                       27
<PAGE>
                     CAPITAL PREFERRED YIELD FUND-III, L.P.

                    NOTES TO FINANCIAL STATEMENTS, continued

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

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

       The Partnership did not purchase any equipment during 2001. The
       Partnership purchased equipment from CAII, with a total purchase price of
       approximately $11,649,000 and $13,583,000 (including approximately
       $3,720,000 and $6,646,000 of discounted lease rentals) during 2000 and
       1999, 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.

       Payables to Affiliates
       ----------------------

       Payables to affiliates of approximately $49,000 and $195,000 during 2001
       and 2000, respectively, consists of $19,000 for management fees paid to
       the general partner, $9,000 for reimbursable general and administrative
       expenses and $21,000 for direct services from general partner for 2001;
       and $24,000 for management fees paid to general partner and $171,000 for
       reimbursable general and administrative expenses for 2000.

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

       The following reconciles net income (loss) for financial reporting
       purposes to the income for federal income tax purposes for the year and
       period ended December 31,:

<TABLE>
<CAPTION>
                                                         2001           2000           1999
                                                     ------------   -----------    ------------

<S>                                                  <C>            <C>            <C>
Net income (loss) per financial statements           $  (366,977)   $   473,136    $ 2,200,668
Direct finance leases                                  1,417,606      1,169,570      1,875,238
Depreciation                                          (1,273,495)    (1,712,124)    (1,555,692)
Provision for losses                                   1,615,750      2,232,122      1,990,315
Gain (loss) on sale of equipment                        (221,757)       222,475        550,629
Other                                                     71,179       (577,061)      (124,300)
                                                     -----------    -----------    -----------
Partnership income for federal income tax purposes   $ 1,242,306    $ 1,808,118    $ 4,936,858
                                                     ===========    ===========    ===========
</TABLE>

                                       28
<PAGE>
                     CAPITAL PREFERRED YIELD FUND-III, L.P.

                    NOTES TO FINANCIAL STATEMENTS, continued

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

       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>
                                                         2001            2000            1999
                                                    ------------    ------------    ------------

<S>                                                 <C>             <C>             <C>
Partners' capital per financial statements          $ 13,008,213    $ 21,780,214    $ 29,535,055
Commissions and offering costs                         7,184,603       7,184,603       7,184,603
Direct finance leases                                 11,622,899      10,205,293       9,035,723
Depreciation                                         (22,127,010)    (20,853,515)    (19,141,391)
Provision for losses                                   7,663,186       6,047,436       3,815,314
Gain on sale of equipment                                    615         222,372             897
Other                                                    307,319         235,138         818,080
                                                    ------------    ------------    ------------
Partners' capital for federal income tax purposes   $ 17,659,825$     24,822,541    $ 31,248,281
                                                    ============    ============    ============
</TABLE>

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

       Approximately 67% of the Partnership's total equipment under lease was
       leased to investment grade companies as of December 31, 2001. 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 (iii) 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 limits its credit risk through
       selective use of non-recourse debt financing of future lease rentals, as
       described above.

       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.

       The Partnership leases equipment to a significant number of lessees. One
       lessee and its affiliates accounted for more than 13% of total revenue of
       the Partnership during 2001.

                                       29
<PAGE>




                          Independent Auditor's Report
                          ----------------------------



The Partners
Capital Preferred Yield Fund-III, L.P.:

Under date of March 22, 2002, we reported on the balance sheets of Capital
Preferred Yield Fund-III, L.P. as of December 31, 2001 and 2000, and the related
statements of operations, partners' capital, and cash flows for each of the
years in the three-year period ended December 31, 2001 as contained in the
Partnership's annual report on Form 10-K for the year 2001. In connection with
our audits of the aforementioned financial statements, we also audited the
related financial statement Schedule II. 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, such 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 LLP
                                          -----------
                                          KPMG LLP

Denver, Colorado
March 22, 2002

                                       30
<PAGE>
                     CAPITAL PREFERRED YIELD FUND-III, L.P.
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
              For the Years Ended December 31, 2001, 2000 and 1999


COLUMN A                       COLUMN B     COLUMN C      COLUMN D      COLUMN E
--------                       --------     --------      --------      --------
                              Balance at    Additions                   Balance
                               Beginning   Charged to                   at End
Classification                of Period     Expenses    Deductions(1)  of Period
--------------                ----------    --------    -----------    ---------

       2001
       ----

Allowance for losses:
 Accounts receivable            $ 117,000    $ 300,000    $ (47,789)   $ 369,211


       2000
       ----

Allowance for losses:
 Accounts receivable            $  10,000    $ 107,000    $    --      $ 117,000
 Receivable from affiliates       300,000        --       (300,000)        --
                                ---------    ---------    ---------    ---------
                                $ 310,000    $ 107,000    $(300,000)   $ 117,000
                                =========    =========    =========    =========

       1999
       ----

Allowance for losses:
 Accounts receivable            $  10,000    $    --      $    --      $  10,000
 Receivable from affiliates          --        300,000         --        300,000
                                ---------    ---------    ---------    ---------
                                $  10,000    $ 300,000    $    --      $ 310,000
                                =========    =========    =========    =========



(1) Principally charge-offs against the established allowances or amounts
transferred from other accounts.

                  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


John F. Olmstead, age 58, is President of Mishawaka Leasing Co., Inc. since its
formation in September 2000. He was Senior Vice President of CAI from December,
1988 until June 2000. He has served as Chairman of the Board for Neo-kam
Industries, Inc., Matchless Metal Polish Company, Inc. and ACL, Inc. since 1983.
He has over 30 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.

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 2001.

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.



          MLC is the Class B limited partner.

          CAI Equipment Leasing IV Corp. is the general partner.

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

                                       32
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management,
         --------------------------------------------------------------
         continued


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

              CAI Equipment Leasing IV Corp.
              2750 South Wadsworth
              C-200
              Denver, Colorado 80227

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

              Mishawaka Leasing Company, Inc.
              2750 South Wadsworth
              C-200
              Denver, Colorado 80227

       (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, 2001.

       (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.

                                       33
<PAGE>
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 2001:

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

The general partner earns 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 approximately $245,000 for 2001.

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

The general partner is entitled to reimbursement of certain expenses paid on
behalf of the Partnership that are incurred in connection with the Partnership's
operations. Such reimbursable expenses totaled approximately $216,000 during
2001.

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 $84,050 and $84,050, respectively, for 2001. Distributions and net loss
allocated to the Class B limited partner totaled $35,000 and $ (4,511),
respectively, for 2001.

                                       34
<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").


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

       (b)    The Partnership did not file any reports on Form 8-K during the
              quarter ended December 31, 2001.

       (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.


                                       35
<PAGE>
                                   SIGNATURES

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

Dated:  April 11, 2002               Capital Preferred Yield Fund-III, L.P.

                                     By: CAI Equipment Leasing IV Corporation

                                     By:
                                         -------------------------------------
                                         Joseph F. Bukofski
                                         Chief Accounting Officer

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 April 11, 2002.

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



John F. Olmstead                    President and Director

                                       36
<PAGE>
                                   SIGNATURES

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

Dated:  April 11, 2002               Capital Preferred Yield Fund-III, L.P.

                                     By:  CAI Equipment Leasing IV Corporation

                                     By:  /s/Joseph F. Bukofski
                                          ------------------------------------
                                          Joseph F. Bukofski
                                          Chief Accounting Officer

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 April 11, 2002.

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

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



                                       36