SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2002
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission file number 33-44158
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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 No.)
2750 South Wadsworth, C-200
Denver, Colorado 80227
---------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (720) 963-9600
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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 .
---
Exhibit Index appears on Page 15
Page 1 of 18 Pages
CAPITAL PREFERRED YIELD FUND-III, L.P.
Quarterly Report on Form 10-Q
For the Quarter Ended
September 30, 2002
Table of Contents
-----------------
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements (Unaudited)
Balance Sheets - September 30, 2002 and December 31, 2001 3
Statements of Operations - Three and Nine Months Ended
September 30, 2002 and 2001 4
Statements of Cash Flows - Nine Months Ended
September 30, 2002 and 2001 5
Notes to Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
Item 4. Controls and Procedures 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 16
Certifications 17-18
2
CAPITAL PREFERRED YIELD FUND-III, L.P.
BALANCE SHEETS
ASSETS
September 30, December 31,
2002 2001
------------ ------------
(Unaudited)
Cash and cash equivalents $ 1,325,843 $ 1,603,588
Accounts receivable 109,380 1,257,040
Equipment held for sale or re-lease 105,738 349,333
Net investment in direct finance leases 1,601,179 2,348,080
Leased equipment, net 9,561,510 15,119,260
----------- -----------
Total assets $12,703,650 $20,677,301
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued liabilities $ 1,005,229 $ 1,805,041
Payables to affiliates 46,955 48,806
Rents received in advance 165,623 40,205
Distributions payable to partners 409,258 789,971
Discounted lease rentals 2,967,234 4,985,065
----------- -----------
Total liabilities 4,594,299 7,669,088
----------- -----------
Partners' capital:
General partner -- --
Limited partners:
Class A 7,844,093 12,719,270
Class B 265,258 288,943
----------- -----------
Total partners' capital 8,109,351 13,008,213
----------- -----------
Total liabilities and partners' capital $12,703,650 $20,677,301
=========== ===========
See accompanying notes to financial statements.
3
CAPITAL PREFERRED YIELD FUND-III, L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
2002 2001 2002 2001
---- ---- ---- ----
Revenue:
Operating lease rentals $ 1,806,509 $ 2,794,892 $ 6,146,996 $ 8,318,265
Direct finance lease income 58,417 85,587 187,685 271,006
Equipment sales margin 69,316 23,446 349,897 376,670
Interest income 4,719 10,235 17,439 40,436
----------- ----------- ----------- -----------
Total revenue 1,938,961 2,914,160 6,702,017 9,006,377
----------- ----------- ----------- -----------
Expenses:
Depreciation 1,284,242 2,473,903 4,443,640 6,798,919
Management fees to general partner 42,188 61,918 140,772 193,777
Direct services from general partner 67,955 69,389 200,946 154,601
General and administrative 94,067 71,162 396,994 523,984
Interest on discounted lease rentals 66,623 46 905 248,572 385,556
Provision for losses 300,500 565,000 520,500 1,040,000
----------- ----------- ----------- -----------
Total expenses 1,855,575 3,288,277 5,951,424 9,096,837
----------- ----------- ----------- -----------
Net income (loss) $ 83,386 $ (374,117) $ 750,593 $ (90,460)
=========== =========== =========== ===========
Net income (loss) allocated:
To the general partner $ 15,865 $ 21,680 $ 56,495 $ 60,057
To the Class A limited partners 66,846 (391,839) 687,156 (149,012)
To the Class B limited partner 675 (3,958) 6,942 (1,505)
----------- ----------- ----------- -----------
$ 83,386 $ (374,117) $ 750,593 $ (90,460)
=========== =========== =========== ===========
Net income (loss) per weighted average Class A
limited partner unit outstanding $ 0.14 $ (0.80) $ 1.40 $ (0.30)
=========== =========== =========== ===========
Weighted average Class A limited
partner units outstanding 491,011 491,011 491,011 491,011
=========== =========== =========== ===========
See accompanying notes to financial statements.
4
CAPITAL PREFERRED YIELD FUND-III, L.P.,
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
-------------
2002 2001
---- ----
Net cash provided by operating activities $ 7,770,248 $ 9,010,172
----------- -----------
Cash flows from financing activities:
Principal payments on discounted lease rentals (2,017,831) (3,003,885)
Distributions to partners (6,030,162) (5,399,126)
----------- -----------
Net cash used in financing activities (8,047,993) (8,403,011)
----------- -----------
Net decrease in cash and cash equivalents (277,745) 607,161
Cash and cash equivalents at beginning of period 1,603,588 1,529,900
----------- -----------
Cash and cash equivalents at end of period $ 1,325,843 $ 2,137,061
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid on discounted lease rentals $ 248,572 $ 385,556
=========== ===========
See accompanying notes to financial statements.
5
CAPITAL PREFERRED YIELD FUND-III, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
---------------------
The accompanying unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United
States of America for interim financial information and the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and disclosures required by accounting
principles generally accepted in the United States of America for annual
financial statements. In the opinion of the General Partner, all
adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. The balance sheet at
December 31, 2001 was derived from the audited financial statements
included in the Partnership's 2001 Form 10-K. For further information,
refer to the financial statements of Capital Preferred Yield Fund-III, L.P.
(the "Partnership"), and the related notes, included in the Partnership's
Annual Report on Form 10-K for the year ended December 31, 2001, previously
filed with the Securities and Exchange Commission.
Recently Issued Financial Accounting Standards
In April 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 145 ("SFAS 145"),
"Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections". SFAS 145 updates, clarifies
and simplifies existing accounting pronouncements. SFAS 145 rescinds
Statement 4, which required all gains and losses from extinguishments of
debt to be aggregated and, if material, classified as an extraordinary
item, net of related income tax effect. As a result, the criteria in APB
Opinion 30 will now be used to classify those gains and losses. Statement
64 amended Statement 4, and is no longer necessary because Statement 4 has
been rescinded. Statement 44 was issued to establish accounting
requirements for the effects of transition to the provisions of the Motor
Carrier Act of 1980. Because the transition has been completed, Statement
44 is no longer necessary. SFAS 145 amends Statement 13 to require that
certain lease modifications that have economic effects similar to
sale-leaseback transactions be accounted for in the same manner as
sale-leaseback transactions. This amendment is consistent with the FASB's
goal of requiring similar accounting treatment for transactions that have
similar economic effects. SFAS 145 also makes technical corrections to
existing pronouncements. The Partnership does not believe the adoption of
SFAS 145 will have a material impact on the Partnership's financial
position, results of operations or cash flows.
In July 2002, the FASB issued Statement of Financial Accounting Standards
No. 146 ("SFAS 146"), "Accounting for Costs Associated With Exit or
Disposal Activities." SFAS 146 addresses financial accounting and reporting
for costs associated with exit or disposal activities, and nullifies
Emerging Issues Task Force Issue No. 94-3 ("EITF 94-3"), "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to
Exit an Activity (including Certain Costs Incurred in a Restructuring)".
SFAS 146 requires recognition of a liability for a cost associated with an
exit or disposal activity when the liability is incurred, as opposed to
6
being recognized at the date an entity commits to an exit plan under EITF
94-3. SFAS 146 also establishes that fair value is the objective for
initial measurement of the liability. SFAS 146 is effective for exit or
disposal activities that are initiated after December 31, 2002, with
earlier application encouraged.
2. Transactions With the General Partner and Affiliates
----------------------------------------------------
Management Fees to General Partner
In accordance with the Partnership Agreement, the General Partner earns a
management fee in connection with its management of the equipment,
calculated as a percentage of the monthly gross rentals received, and paid
monthly in arrears. At September 30, 2002, management fees of $14,831 are
included in payables to affiliates.
Direct Services from General Partner
The General Partner and an affiliate 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. At September 30, 2002, direct services from the
General Partner of $23,750 are included in payables to affiliates.
General and Administrative Expenses
The General Partner and an affiliate are reimbursed for the actual cost of
administrative expenses incurred on behalf of the Partnership per the terms
of the Partnership Agreement. At September 30, 2002, general and
administrative costs of $8,374 are included in payables to affiliates.
7
CAPITAL PREFERRED YIELD FUND-III, L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
- ---------------------
Presented below are schedules (prepared solely to facilitate the discussion of
results of operations that follows) showing items of income and expense and
changes in those items derived from the Statements of Income:
Three Months Nine Months Nine Months
Ended September 30, Ended September 30,
------------------------------------------ ------------------------------------------
2002 2001 Change 2002 2001 Change
---- ---- ------ ---- ---- ------
Leasing margin $ 514,061 $ 359,671 $ 154,390 $ 1,642,469 $ 1,404,796 $ 237,673
Equipment sales margin 69,316 23,446 45,870 349,897 376,670 (26,773)
Interest income 4,719 10,235 (5,516) 17,439 40,436 (22,997)
Management fees to general partner (42,188) (61,918) 19,730 (140,772) (193,777) 53,005
Direct services from general partner (67,955) (69,389) 1,434 (200,946) (154,601) (46,345)
General and administrative (94,067) (71,162) (22,905) (396,994) (523,984) 126,990
Provision for losses (300,500) (565,000) 264,500 (520,500) (1,040,000) 519,500
----------- ----------- ----------- ----------- ----------- -------
Net income (loss) $ 83,386 $ (374,117) $ 457,503 $ 750,593 $ (90,460) $ 841,053
=========== =========== =========== =========== =========== ===========
The Partnership is in its liquidation period, as defined in the Partnership
Agreement, and is not purchasing additional equipment. Furthermore, initial
leases are expiring and the amount of equipment being remarketed (i.e.
re-leased, renewed or sold) is generally decreasing. As a result, both the size
of the Partnership's portfolio and the amount of total revenue are decreasing
("portfolio runoff").
Leasing Margin
Leasing margin consists of the following:
Three Months Nine Months
Ended September 30, Ended September 30,
---------------------------- ----------------------------
2002 2001 2002 2001
---- ---- ---- ----
Operating lease rentals $ 1,806,509 $ 2,794,892 $ 6,146,996 $ 8,318,265
Direct finance lease income 58,417 85,587 187,685 271,006
Depreciation (1,284,242) (2,473,903) (4,443,640) (6,798,919)
Interest expense on discounted lease rentals (66,623) (46,905) (248,572) (385,556)
----------- ----------- ----------- -----------
Leasing margin $ 514,061 $ 359,671 $ 1,642,469 $ 1,404,796
=========== =========== =========== ===========
Leasing margin ratio 28% 12% 26% 16%
== == == ==
8
CAPITAL PREFERRED YIELD FUND-III, L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations, continued
Results of Operations, continued
- ---------------------
Leasing Margin, continued
Nearly all components of leasing margin decreased for the three and nine months
ended September 30, 2002 compared to the three and nine months ended September
30, 2001 primarily as a result of portfolio runoff.
Leasing margin ratio varies due to changes in the portfolio including, among
other things, the mix of operating leases versus direct finance leases, the
average maturity of operating leases in the portfolio, the percentage of leases
in the portfolio that have entered their remarketing stage, and the amount of
discounted lease rentals financing the portfolio. Leasing margin ratio increased
for the three and nine months ended September 30, 2002 compared to the three and
nine months ended September 30, 2001 primarily as a result of an increase in
both a) the average maturity of operating leases in the Partnership's portfolio,
and b) the percentage of leases being remarketed. Leasing margin ratio for a
direct finance lease is fixed over the term of the lease. However, leasing
margin ratio for an operating lease financed with non-recourse debt increases as
the lease matures since rents and depreciation are typically fixed while
interest expense declines as the related non-recourse debt principle is repaid.
Leasing margin is generally higher as leases enter their remarketing stage
because the rate of return on remarketed leases is generally higher.
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 consists of the following:
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
2002 2001 2002 2001
Equipment sales revenue $ 174,696 $ 46,528 $ 1,339,599 $ 1,703,392
Cost of equipment sales (105,380) (23,082) (989,702) (1,326,722)
----------- ----------- ----------- -----------
Equipment sales margin $ 69,316 $ 23,446 $ 349,897 $ 376,670
=========== =========== =========== ===========
Equipment sales margin fluctuates based on the composition of equipment
available for sale. Currently, the Partnership is in its liquidation period (as
defined in the Partnership Agreement). Initial leases are expiring and the
equipment is either being re-leased or sold to the lessee or a third party.
Equipment sales margin varies with the number and dollar amount of equipment
leases that mature in a particular period and the current market for specific
equipment.
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations, continued
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 the General Partner are calculated as a percentage of
rents collected and decreased for the three and nine months ended September 30,
2002 as compared to the corresponding period in 2001 primarily due to portfolio
run-off.
Direct services from the General Partner increased for the three and nine months
ended September 30, 2002 compared to the three and nine months ended September
30, 2001 primarily due to increased costs related to management's efforts to
collect receivables owed to the partnership.
General and administrative expenses decreased for the nine months ended
September 30, 2002 compared to the nine months ended September 30, 2001
primarily because the nine month period during 2001 included a) a one-time
charge for software and computer equipment, and b) charges for data processing
and a computer system conversion, all of which were related to a change in the
ownership of the General Partner.
Provision for Losses
The realization of greater than the carrying value of equipment (which occurs
when the equipment is remarketed subsequent to the termination of the initial
lease) is reported with 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 such that it
has credit and residual value exposure and will incur losses from those
exposures in the ordinary course of business. The Partnership performs quarterly
assessments of the estimated residual values of its assets to identify any
other-than-temporary declines in value that, if any, are also recorded as
provision for losses.
The provision for losses of $300,500 and $520,500 recorded during the three and
nine months ended September 30, 2002 related primarily to lower of cost or
market write downs of equipment in inventory in addition to residual value write
downs of leased equipment.
10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations, continued
Liquidity & Capital Resources
- -----------------------------
The Partnership is in its liquidation period, as defined in the Partnership
Agreement. The Partnership is not purchasing additional equipment and initial
leases are expiring. As a result, both the size of the Partnership's lease
portfolio and the amount of leasing revenue are declining.
The Partnership funds its operating activities principally with cash from rents
and sales of off-lease equipment. Available cash and cash reserves of the
Partnership are invested in short-term government securities pending
distribution to the partners.
During the nine months ended September 30, 2002, the Partnership declared
distributions to the Class A limited partners of $5,562,330 ($405,360 of which
was paid during October 2002). All such distributions are expected to constitute
a return of capital for economic purposes. 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 that
exceeds its net income for the fiscal period may be deemed a return of capital
for accounting purposes. However, the total percentage of the partnership's
return on capital over its life will only be determined after all residual cash
flows (which include proceeds from the re-leasing and sale of equipment) have
been realized at the termination of the Partnership.
The General Partner believes that the Partnership will generate sufficient cash
flows from operations during the remainder of 2002, to (1) meet current
operating requirements, (2) fund cash distributions to Class A limited partners
in accordance with the Partnership Agreement. All distributions are expected to
be a return of capital for economic purposes.
11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations, continued
New Accounting Pronouncements
- -----------------------------
In April 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 145 ("SFAS 145"), "Rescission of
FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections". SFAS 145 updates, clarifies and simplifies existing
accounting pronouncements. SFAS 145 rescinds Statement 4, which required all
gains and losses from extinguishments of debt to be aggregated and, if material,
classified as an extraordinary item, net of related income tax effect. As a
result, the criteria in APB Opinion 30 will now be used to classify those gains
and losses. Statement 64 amended Statement 4, and is no longer necessary because
Statement 4 has been rescinded. Statement 44 was issued to establish accounting
requirements for the effects of transition to the provisions of the Motor
Carrier Act of 1980. Because the transition has been completed, Statement 44 is
no longer necessary. SFAS 145 amends Statement 13 to require that certain lease
modifications that have economic effects similar to sale-leaseback transactions
be accounted for in the same manner as sale-leaseback transactions. This
amendment is consistent with the FASB's goal of requiring similar accounting
treatment for transactions that have similar economic effects. SFAS 145 also
makes technical corrections to existing pronouncements. The Partnership does not
believe the adoption of SFAS 145 will have a material impact on the
Partnership's financial position, results of operations or cash flows.
In July 2002, the FASB issued Statement of Financial Accounting Standards No.
146 ("SFAS 146"), "Accounting for Costs Associated With Exit or Disposal
Activities." SFAS 146 addresses financial accounting and reporting for costs
associated with exit or disposal activities, and nullifies Emerging Issues Task
Force Issue No. 94-3 (EITF 94-3"), "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)". SFAS 146 requires recognition of a
liability for a cost associated with an exit or disposal activity when the
liability is incurred, as opposed to being recognized at the date an entity
commits to an exit plan under EITF 94-3. SFAS 146 also establishes that fair
value is the objective for initial measurement of the liability. SFAS 146 is
effective for exit or disposal activities that are initiated after December 31,
2002, with earlier application encouraged.
"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, the availability and cost of
financing sources and the ultimate outcome of any contract disputes. Certain
specific risks associated with particular aspects of the Partnership's business
are discussed under Results of Operations in this report and under Results of
Operations in the 2001 Form 10-K when and where applicable.
12
CAPITAL PREFERRED YIELD FUND-III, L.P.
Item 3. 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 a 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.
Item 4. Controls and Procedures
Within 90 days prior to the date of this quarterly report, an evaluation was
performed under the supervision and with the participation of the General
Partner's management, including the President and Director, and the Chief
Accounting Officer, of the effectiveness of the design and operation of the
Partnership's disclosure controls and procedures. Based on that evaluation, the
General Partner's management, including the President and Director, and the
Chief Accounting Officer, concluded that the Partnership's disclosure controls
and procedures are effective in timely alerting them to material information
relating to the Partnership required to be included in the Partnership's
periodic SEC reports. There have been no significant changes in the
Partnership's internal controls or in other factors that could significantly
affect internal controls subsequent to the date of their evaluation.
13
CAPITAL PREFERRED YIELD FUND-III, L.P.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership is involved in routine legal proceedings incidental
to the conduct of its business. The General Partner believes none of
these legal proceedings will have a material adverse effect on the
financial condition or operations of the Partnership.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(b) The Partnership did not file any reports on Form 8-K during the
quarter ended September 30, 2002.
14
CAPITAL PREFERRED YIELD FUND-III, L.P.
Index to Exhibits
Exhibit
Number Description
------ -----------
* 99.1 Certification by John F. Olmstead pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
* 99.2 Certification by Joseph F. Bukofski pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
* Filed herewith
15
CAPITAL PREFERRED YIELD FUND-III, L.P.
Signatures
Pursuant to the requirements 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.
CAPITAL PREFERRED YIELD FUND-III, L.P.
By: CAI Equipment Leasing IV Corp.
Dated: November 14, 2002 By: /s/John F. Olmstead
-------------------
John F. Olmstead
President and Director
(Principal Executive Officer)
CAPITAL PREFERRED YIELD FUND-III, L.P.
By: CAI Equipment Leasing IV Corp.
Dated: November 14, 2002 By: /s/Joseph F. Bukofski
---------------------
Joseph F. Bukofski
Chief Accounting Officer
(Principal Accounting and Financial Officer)
16
CERTIFICATION
I, John F. Olmstead, President and Director of CAI Equipment Leasing IV Corp.,
the General Partner of Capital Preferred Yield Fund-III, L.P. (the
"Partnership"), certify that:
1. I have reviewed this report on Form 10-Q of the Partnership;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading as with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Partnership as of, and for, the periods presented in this quarterly report;
4. The Partnership's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Partnership and have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the Partnership, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report in being
prepared;
b. evaluated the effectiveness of the Partnership's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The Partnership's other certifying officer and I have disclosed,
based on our most recent evaluation, to the Partnership's auditors:
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the Partnership's
ability to record, process, summarize and report financial data and
have identified for the Partnership's auditors any material weaknesses
in internal controls; and
b. any fraud, whether of not material, that involves
management or other employees who have a significant role in the
Partnership's internal controls; and
6. The Partnership's other certifying officer and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our
most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
/s/John F. Olmstead
-------------------
John F. Olmstead
President and Director
(Principal Executive Officer)
November 14, 2002
17
CERTIFICATION
I, Joseph F. Bukofski, Chief Accounting Officer of CAI Equipment
Leasing IV Corp., the General Partner of Capital Preferred Yield Fund-III, L.P.
(the "Partnership"), certify that:
1. I have reviewed this report on Form 10-Q of the Partnership;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading as with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Partnership as of, and for, the periods presented in this quarterly report;
4. The Partnership's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Partnership and have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the Partnership, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report in being
prepared;
b. evaluated the effectiveness of the Partnership's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The Partnership's other certifying officer and I have disclosed,
based on our most recent evaluation, to the Partnership's auditors:
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the Partnership's
ability to record, process, summarize and report financial data and
have identified for the Partnership's auditors any material weaknesses
in internal controls; and
b. any fraud, whether of not material, that involves
management or other employees who have a significant role in the
Partnership's internal controls; and
6. The Partnership's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
/s/Joseph F. Bukofski
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Joseph F. Bukofski
Chief Accounting Officer
(Principal Accounting and Financial Officer)
November 14, 2002
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