SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-KSB
(Mark One)
[ X ] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934 For the fiscal year ended December 31, 2001

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

Commission File Number: 33-84336-LA
JetFleet III
(Name of small business issuer in its charter)

California 94-3208983
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)

1440 Chapin Avenue, Suite 310
Burlingame, California 94010
(Address of principal executive offices) (Zip Code)

Issuer's telephone number, including area code: (650) 340-1880
Securities registered pursuant to Section 12(b) of the Act: None

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

Check whether the Issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 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
---- ----

Check if there no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained herein, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. [X]

Revenues for the issuer's most recent fiscal year: $2,655,400

On March 28, 2002 the aggregate market value of the voting and non-voting common
equity held by non-affiliates (computed by reference to the price at which the
common equity was sold) was $0.

As of March 28, 2002 the Issuer had 815,200 Shares of Common Stock and 195,465
Shares of Series A Preferred Stock outstanding.

Transitional Small Business Disclosure Format (check one): Yes No X
----- ------

Documents Incorporated by Reference: None

PART I

Forward-Looking Statements

Certain statements contained in this report and, in particular, the discussion
regarding the Company's beliefs, plans, objectives, expectations and intentions
regarding the Company's lack of significant operating expenses in connection
with assets that remain on lease and the sufficiency of the Company's cash flow
to meet interest obligations and fund sinking fund deposits; are forward looking
statements. While the Company believes that such statements are accurate, actual
results may differ due to the depth and length of the current aircraft industry
downturn, unanticipated defaults or terminations by lessees, and future trends
and results that cannot be predicted with certainty. The Company's actual
results could differ materially from those discussed in such forward looking
statements. Factors that could cause or contribute to such differences include
those discussed below in the section entitled "Factors that May Affect Future
Results." The cautionary statements made in this Report should be read as being
applicable to all related forward-looking statements wherever they appear in
this Report.

Item 1. Description of Business.

Business of the Company

JetFleet III (the "Company") was incorporated in the state of California in
August 1994 ("Inception"). The Company was formed solely for the purpose of
offering up to $20,000,000 in $1,000 Series A Units, each Unit consisting of one
$850 Bond, maturing on November 1, 2003, and 15 shares of Preferred Stock (the
"Offering"). Capitalized terms not defined in this report are defined in the
Prospectus for the Offering and are incorporated herein by reference to the
Prospectus.

All of the Company's outstanding common stock is owned by JetFleet Holding Corp.
("JHC"), a California corporation formed in January 1994. In May 1998, JetFleet
Management Corp., the sole shareholder of the Company was renamed JetFleet
Holding Corp. The rights and obligations under the management agreement between
the Company and JHC were assigned by JHC to its newly-created wholly-owned
subsidiary named "JetFleet Management Corp." ("JMC"). JMC also manages
AeroCentury Corp., a Delaware corporation, and AeroCentury IV, Inc., a
California corporation, which are affiliates of JHC and which have objectives
similar to the Company's. Neal D. Crispin, the President of the Company, holds
the same position with JHC and JMC and owns a significant amount of the common
stock of JHC.

The directors of the Company are Neal D. Crispin, Chairman and Edwin S.
Nakamura, Director. The officers of the Company are Neal D. Crispin, President
and Secretary and Marc J. Anderson, Senior Vice President and Chief Operating
Officer.

The Company received Securities and Exchange Commission ("SEC") clearance for
the Offering on September 27, 1995. Between September 1995 and June 1997, the
Company raised $13,031,000 in the Offering. The Bonds bore interest at 12.94%
from issuance through October 31, 1998, and thereafter, a variable rate,
adjusted annually on November 1, equal to the one-year United States Treasury
Bill rate plus 200 basis points, but not less than 8.24%. The current interest
rate payable on the Bonds is 8.24%, and the next adjustment date is November 1,
2002. The Company may prepay all or a portion of the outstanding principal of
the Bonds at any time beginning November 1, 1998. The Preferred Stock was issued
for $10 per share and is entitled to receive 50% in the aggregate, of any
remaining proceeds after (1) the Preferred Stock has been redeemed at $10 per
share and (2) the Common Stock has been redeemed at $1 per share. A dividend can
only be paid on the Common Stock if a dividend has also been paid on each share
of Preferred Stock in any amount equal to ten times the per-share dividend paid
on the Common Stock.

The proceeds of the Offering have been used to purchase Income Producing Assets
("Income Producing Assets"). These assets consist of aircraft and aircraft
engines subject to operating leases.

The revenue generated from the Income Producing Assets is used to fund interest
payments on the Bonds and, since November 1, 2001, deposits to a sinking fund
account established to facilitate repayment of principal on the Bonds on their
maturity (or such earlier time if the Company decides to make prepayments on the
principal of the Bonds). At the maturity date of the Bonds, the Company is to
pay off the outstanding principal using proceeds of the resale of the Company's
Income Producing Assets, the funds in the Sinking Fund Account and/or proceeds
of third-party lender refinancing. Upon repayment of the entire Bond
indebtedness, the Company may also, with such approval of its shareholders as
required under California law, dissolve and liquidate all of its assets. Any
remaining liquidation proceeds would be distributed to the Preferred
Shareholders up to the amount of their liquidation preference, then to the
Common Shareholders in an amount equal to $1.00 per share. Residual proceeds, if
any, would be distributed equally between the Preferred Shareholders, as a
class, and the Common Shareholders, as a class.

Aircraft and Aircraft Engines

At December 31, 2001, the Company owned a deHavilland DHC-8-100, serial number
13 ("S/N 13"), a deHavilland DHC-8-102, serial number 106 ("S/N 106"), a Pratt &
Whitney JT8D-9A aircraft engine, serial number 674267 ("S/N 674267"), three
deHavilland DHC-6-300 aircraft ("S/Ns 640, 751 and 696") and a Saab 340A, serial
number 24 ("S/N 24"). During January 2001, the Company sold its 50% interest in
a Shorts SD 3-60, serial number S/N 3676 ("S/N 3676"). As discussed below, it
also received, during June and July 2001, insurance and sales proceeds for its
other Shorts SD 3-60, serial number S/N 3656 ("S/N 3656"). The Company purchased
S/N 106 during October 2001.

S/N 13 has been on a series of short-term leases with the same lessee
since June 2001. The aircraft is on lease through March 31, 2002 and the Company
is currently discussing the terms of the lessee's continued use of it.

S/N 674267 was used on a McDonnell Douglas DC-9 and was subject to a
60-month sublease that expired in November 2001. S/N 674267 was sold to the
lessee, a Mexican-based regional carrier, during March 2002.

S/Ns 640 and 751 are subject to similar 36-month leases, originally
expiring in July 2001, with a U.S. regional carrier. Both leases were extended
from their expiration dates to their pre-return inspection completion. S/N 751
was returned during August and was re-leased during October 2001 to a carrier in
the Maldives, for a term expiring in October 2004. The Company is currently
seeking re-lease opportunities for S/N 640, which was returned during February
2002.

S/N 696 is leased to to a regional carrier in the United Kingdom for a
term expiring in April 2003.

At the time of purchase, S/N 3676 (owned 50% by the Company) was
subject to a 48-month lease, expiring in July 2001, with a British regional
airline. In early 2000, the lessee filed for reorganization and subsequently
returned the aircraft to the Company. During January 2001, the aircraft was
sold.

S/N 24 is subject to a lease, expiring in October 2002, with a regional
carrier in North America.

S/N 106 is subject to a lease, expiring in November 2004, with a
regional carrier in the Caribbean.

Item 2. Description of Property.

The Company does not own or lease any real property, plant or materially
important physical properties other than equipment under operating lease as set
forth in Item 1.

The Company maintains its principal office at 1440 Chapin Avenue, Suite 310,
Burlingame, California, 94010. All office facilities are provided by JMC without
reimbursement by the Company.

Item 3. Legal Proceedings.

The Company is not involved in any material legal proceedings.

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

None.

PART II

Item 5. Market for the Common Equity and Related Stockholder Matters.

General

There is no established trading market for the Units and their constituent
securities (collectively, the "Securities"), and none of the Securities are
listed on any securities exchange.

Number of Security Holders

Approximate number of holders of Series A
Units ("Unitholders") as of March 28, 2002: 800

Dividends

The Company has not declared a dividend on either the Preferred Stock or Common
Stock since Inception. The Company is not permitted to pay any dividends on the
Common Stock unless the shares of Preferred Stock also receive a per share
dividend equal to ten times the per share dividend paid to the Common Stock. The
Company intends to retain earnings, if any, to finance the development and
expansion of its business. In accordance with the Indenture under which the
Bonds were issued, dividends may not be paid until the Bonds are repaid in full.

Item 6. Management's Discussion and Analysis or Plan of Operation.

Results of Operations

The Company recorded net loss of ($5,440) or ($0.01) per share and ($153,710) or
($0.19) per share for the years ended December 31, 2001 and 2000, respectively.

Rent income was approximately $278,000 lower in 2001 than 2000, due to the sale
of aircraft during the fourth quarter of 2000 and January 2001 and the
disposition of S/N 3656 during the second quarter of 2001, the effect of which
was only partially offset by the acquisition of S/N 106 during the fourth
quarter of 2001. Gain on sale of aircraft was approximately $351,000 higher in
2001 versus 2000 due to the disposition of two aircraft during 2001 which both
resulted in gains versus two aircraft in 2000, one of which resulted in a loss.
Interest income was higher in 2001 by approximately $34,000, due to higher cash
balances as a result of asset sales and excess cash flow from leases which was
not reinvested until October 2001.

Depreciation decreased approximately $104,000 during 2001 due to the asset
dispositions noted above, which decrease was only partially offset by the
additional depreciation for S/N 106 after its acquisition during the fourth
quarter of 2001. Maintenance expense was approximately $245,000 higher in 2001
than in 2000, primarily because of the purchase of a replacement engine for S/N
3656 in January 2001. The replacement was necessary because of hours flown by
the previous lessee, which filed for reorganization and returned the aircraft
during late 2000. Rather than overhaul the original engine, the Company
determined that it was more cost-effective to purchase a replacement, which
purchase was partially funded by maintenance reserves collected from the new
lessee. The Company recorded a provision for impairment in value for aircraft
during both 2001 and 2000, but the amount recorded during 2001 was approximately
$209,000 less. Professional fees and general and administrative expenses were
approximately $49,000 higher in 2000 due to legal expense incurred in connection
with the re-lease of S/N 3656 and S/N 696.

Capital Resources and Liquidity

Since Inception, the Company's funds have come primarily in the form of an
initial contribution from JHC, proceeds from the Offering and rental revenue
from the Income Producing Assets purchased using those proceeds. The Company's
liquidity varies, increasing to the extent cash flows from operations exceed
expenses, and decreasing as interest payments are made to the Unitholders and to
the extent expenses exceed cash flows from leases.

The Company's primary use of its operating cash flow is interest payments to its
Unitholders. Excess cash flow, after payment of interest and operating expenses
has been held for investment in additional Income Producing Assets. Since the
Company has acquired Income Producing Assets which are subject to triple net
leases (the lessee pays operating and maintenance expenses, insurance and
taxes), the Company has not and does not anticipate that it will incur
significant operating expenses in connection with ownership of its Income
Producing Assets while they remain on lease.

The Company currently has available adequate reserves to meet its immediate cash
requirements. The leases for the Company's aircraft expire at varying times
between March 2002 and November 2004. The revenue generated from the Income
Producing Assets is used to fund interest payments on the Bonds and deposits to
a sinking fund account established to facilitate repayment of principal of the
Bonds on their maturity (or such earlier time if the Company decides to make
prepayments on the principal of the Bonds).

As discussed in Item 1, on February 13, 2001, the majority of the creditors of
one of the Company's lessees approved a reorganization plan, which provided that
unsecured creditors, like the Company, would not receive any recovery of
pre-reorganization claims. In projecting its cash reserves, the Company has
always anticipated that these claims would not be collected.

As discussed in Item 1, the interest rate on the Bonds was 12.94% through
October 31, 1998 and has been a variable rate thereafter, calculated annually on
November 1. The variable rate is equal to the higher of (i) 2% plus the annual
yield rate on one-year U.S. Treasury Bills on the last business day of October
of that year or (ii) 8.24%. Based on the one-year Treasury Bill rate at the
measurement dates, the Bonds have borne interest at the rate of 8.24% per annum
for the periods November 1, 1998 through October 31, 2001. The Company has
determined that the rate will remain at 8.24% through October 31, 2002.

The Company's decrease in cash flow from operations was due primarily to lower
net income, excluding the gain on sale of aircraft, during 2001 versus 2000 and
by the effect of the change in rent receivable, payable to affiliates and
maintenance deposits from year to year. The effect of these changes was
partially offset by the effect of the change in deposits, accounts receivable,
deferred taxes, accounts payable and security deposits.

The decrease in cash flow provided by investing activities from year to year was
due to the Company's acquisition of S/N 106 during 2001. There were no cash
flows from financing activities during 2001 or 2000 because the Offering
terminated during June 1997.

Outlook

As discussed in "Capital Resources and Liquidity", the revenue generated from
the Income Producing Assets is used to fund interest payments on the Bonds and,
since November 2001, deposits to a sinking fund account established to
facilitate repayment of principal on the Bonds on their maturity (or such
earlier time if the Company decides to make prepayments on the principal of the
Bonds).

Currently, all of the Company's assets are on lease and generating revenue. The
Company believes it will continue to have sufficient cash flow to meet its
interest obligations and make deposits into the sinking fund.

The Company's ability to repay the principal due under the Bonds at maturity on
November 1, 2003 is dependent upon two factors. First, continued on-lease status
of its assets with no unexpected expenses as a result of lessee defaults or
early terminations must continue in order to permit significant contributions to
the sinking fund. Second, but a more significant factor, is the amount of
proceeds available from the ultimate sale or refinance of the Company's aircraft
portfolio.

The aircraft industry is currently in the midst of a downturn due to the global
economic situation exacerbated by the events of September 11, 2001. The downturn
increases the chances of a lessee default or early terminations of leases. A
lessee may experience less traffic and realize less revenue from operations, and
may be forced to return excess leased aircraft, or in the worst case, may be
driven out of business. The downturn also may make it more difficult for the
Company to re-lease assets to existing lessees or find replacement lessees upon
expiration of the current leases.

More importantly, the downturn has reduced demand for aircraft assets, with an
attendant decrease in aircraft valuations. Depressed valuations, if still
present at the time the Company begins disposition of its assets, may result in
less proceeds (either through sale or refinance) to the Company than it had
previously anticipated.

It is unclear how long it will take for the industry to recover. Because the
time period until maturity of the Bonds is less than two years from now, the
speed of the recovery of the industry has heightened importance as a factor in
the Company's ability to fully repay the Bond principal upon maturity.

Factors that May Affect Future Results

Ability to Repay Bonds. The Company's ability to repay the Bonds at their
maturity date is dependent in part upon reinvestment of excess cash flows in
additional Income Producing Assets. To the extent that the Company realizes less
than anticipated lease rentals due to lessee rental defaults, early termination
of leases, or lower than expected remarketing proceeds during the term of the
Bonds or realizes significant unexpected expenses due to lessee defaults in rent
or other obligations, this may result in lower than expected excess cash flow.
As a result, the Company's ability to repay the Bonds in full at maturity may be
negatively affected by such events even if the Company is able to meet its
scheduled interest payments.

The Company's ability to repay the Bonds at their maturity date is also
dependent in part upon its ability to refinance the Bonds or sell its aircraft
portfolio at a price sufficient to retire the outstanding Bond principal. If,
due to the risks described below under "Ownership Risks" and "Leasing Risks",
the values of the Company's aircraft portfolio are in a depressed state at the
maturity date of the Bonds, the Company may be unable to repay the entire Bond
indebtedness on the maturity date.

Ownership Risks. All of the Company's portfolio is leased under operating
leases, where the terms of the leases do not take up the entire useful life of
an asset. The Company's ability to recover its purchase investment in an asset
subject to an operating lease is dependent upon the Company's ability to
profitably re-lease or sell the asset after the expiration of the initial lease
term. Some of the factors that have an impact on the Company's ability to
re-lease or sell include worldwide economic conditions, general aircraft market
conditions, regulatory changes that may make an asset's use more expensive or
preclude use unless the asset is modified, changes in the supply or cost of
aircraft equipment and technological developments which cause the asset to
become obsolete. In addition, a successful investment in an asset subject to an
operating lease depends in part upon having the asset returned by the lessee in
serviceable condition as required under the lease. If the Company is unable to
remarket its aircraft equipment on favorable terms when the operating lease for
such equipment expires, the Company's business, financial condition, cash flow,
ability to service debt and results of operation could be adversely affected.

Leasing Risks. The Company's successful negotiation of lease extensions,
re-leases and sales may be critical to its ability to achieve its financial
objectives, and will involve a number of substantial risks. Demand for lease or
purchase of the assets depends on the economic condition of the airline industry
which is in turn highly sensitive to general economic conditions. Ability to
remarket equipment at acceptable rates may depend on the demand and market
values at the time of remarketing. The market for used aircraft is cyclical, and
generally, but not always, reflects economic conditions and the strength of the
travel and transportation industry. The demand for and value of many types of
older aircraft in the recent past has been depressed by such factors as airline
financial difficulties, increased fuel costs, the number of new aircraft on
order and the number of older aircraft coming off lease. The Company's
concentration in a limited number of airframe and aircraft engine types
(generally, turboprop equipment) subjects the Company to economic risks if those
airframe or engine types should decline in value. The recent introduction of
"regional jets" to serve on short routes previously thought to be economical
only for turboprop aircraft operation could decrease the demand for turboprop
aircraft, while at the same time increasing the supply of used turboprop
aircraft. This could result in lower lease rates and values for the Company's
turboprop aircraft.

Risks Related to Regional Air Carriers. Because the Company's leases are all
with regional air carriers, it will be subject to certain risks. First, lessees
in the regional air carrier market include a number of companies that are
start-up, low capital, low margin operations. Often, the success of such
carriers is dependent upon arrangements with major trunk carriers, which may be
subject to termination or cancellation by such major carrier. This market
segment is also characterized by low entry costs, and thus, there is strong
competition in this industry segment from start-ups as well as major airlines.
Thus, leasing transactions with these types of lessees results in a generally
higher lease rate on aircraft, but may entail higher risk of default or lessee
bankruptcy.

General Economic Conditions. The market for used aircraft has been cyclical, and
usually reflects economic conditions and the strength of the travel and
transportation industry. At any time, the market for used aircraft may be
adversely affected by such factors as airline financial difficulties, higher
fuel costs, and improved availability and economics of new replacement aircraft.

An adverse change in the global air travel industry, however, could result in
reduced carrier revenue and excess capacity and increase the risk of failure of
some weaker regional air carriers. While the Company believes that with proper
asset and lessee selection the impact of such changes on the Company can be
reduced, there is no assurance that the Company's business will escape the
effects of such a global downturn, or a regional downturn in an area where the
Company has placed a significant amount of its assets.

Reliance on JMC. All management of the Company is performed by JMC pursuant to a
management agreement between JMC and the Company. The Board of Directors does,
however, have ultimate control and supervisory responsibility over all aspects
of the Company and does owe fiduciary duties to the Company and its
stockholders. In addition, while JMC may not owe any fiduciary duties to the
Company by virtue of the management agreement, the officers of the Company are
also officers or employees of JMC, and in that capacity owe fiduciary duties to
the Company and the stockholders by virtue of holding such offices. Although the
Company has taken steps to prevent such conflicts, such conflicts of interest
arising from such dual roles may still occur.

Lessee Credit Risk. If a lessee defaults upon its obligations under a lease, the
Company may be limited in its ability to enforce remedies. Most of the Company's
lessees are small domestic and foreign regional passenger airlines, which may be
even more sensitive to airline industry market conditions than the major
airlines. As a result, the Company's inability to collect rent under a
significant lease or to repossess equipment in the event of a default by a
lessee could have a material adverse effect on the Company's revenue. If a
lessee that is a certified U.S. airline is in default under the lease and seeks
protection under Chapter 11 of the United States Bankruptcy Code, under Section
1110 of the Bankruptcy Code, the Company would be automatically prevented from
exercising any remedies for a period of 60 days. By the end of the 60 day
period, the lessee must agree to perform the obligations and cure any defaults,
or the Company would have the right to repossess the equipment. This procedure
under the Bankruptcy Code has been subject to significant recent litigation,
however, and it is possible that the Company's enforcement rights may still be
further adversely affected by a declaration of bankruptcy by a defaulting
lessee. Even if an aircraft can be repossessed, the Company may be unable to
recover damages from the lessee if the condition of the aircraft when
repossessed was worse than that required by the lease.

International Risks. The Company's portfolio includes leases with foreign air
carriers. Leases with foreign lessees may present somewhat different credit
risks than those with domestic lessees.

Foreign laws, regulations and judicial procedures may be more or less protective
of lessor rights as those which apply in the United States. The Company could
experience collection problems related to the enforcement of its lease
agreements under foreign local laws and the remedies in foreign jurisdictions.
The protections potentially offered by Section 1110 of the Bankruptcy Code would
not apply to non-U.S. carriers, and applicable local law may not offer similar
protections. Certain countries do not have a central registration or recording
system with which to locally establish the Company's interest in equipment and
related leases. This could add difficulty in recovering an aircraft in the event
that a foreign lessee defaults.

Leases with foreign lessees are subject to risks related to the economy of the
country or region in which such lessee is located even if the U.S. economy
remains strong. On the other hand, a foreign economy may remain strong even
though the domestic U.S. economy does not. A foreign economic downturn may occur
and impact a foreign lessee's ability to make lease payments, even though the
U.S. and other economies remain stable. Furthermore, foreign lessees are subject
to risks related to currency conversion fluctuations. Although the Company's
current leases are all payable in U.S. dollars, in the future, the Company may
agree to leases that permit payment in foreign currency, which would subject
such lease revenue to monetary risk due to currency fluctuations. Even with
dollar-denominated lease payment provisions, the Company could still be affected
by a devaluation of the lessee's local currency which would make it more
difficult for a lessee to meet its dollar-denominated lease payments, increasing
the risk of default of that lessee, particularly if that carrier's revenue is
primarily derived in the local currency.

Competition. The Company has many competitors in the aircraft leasing industry,
including leasing companies, banks and other financial institutions and aircraft
leasing partnerships. The market is highly competitive. Most of the Company's
competitors have substantially greater financial and other resources than the
Company.

Casualties, Insurance Coverage. The Company, as owner of transportation
equipment, may be named in a suit claiming damages for injuries or damage to
property caused by its assets. As a triple net lessor, the Company is generally
protected against such claims, since the lessee would be responsible for, insure
against and indemnify the Company for such claims. Further, some protection may
be provided by the United States Aviation Act with respect to its aircraft
assets. It is, however, not clear to what extent such statutory protection would
be available to the Company and such act may not apply to aircraft operated in
foreign countries. Also, although the Company may carry insurance or require a
lessee to insure against a risk, there may be certain cases where the loss is
not entirely covered by the lessee or its insurance. Though this is a remote
possibility, an uninsured loss with respect to the equipment or an insured loss
for which insurance proceeds are inadequate would result in a possible loss of
invested capital in and any profits anticipated from such equipment.

Item 7. Financial Statements.

(a) Financial Statements and Schedules

(1) Financial statements for JetFleet III:

Report of Independent Auditors, Vocker Kristofferson
and Co. Balance Sheet as of December 31, 2001
Statements of Operations for the Years Ended December
31, 2001 and 2000 Statements of Changes in
Shareholders' Equity for the Years Ended
December 31, 2001 and 2000
Statements of Cash Flows for the Years Ended December
31, 2001 and 2000
Notes to Financial Statements

(2) Schedules:

All schedules have been omitted since the required
information is presented in the financial statements
or is not applicable.

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders
of JetFleet III

We have audited the accompanying balance sheet of JetFleet III, a California
corporation, as of December 31, 2001 and the related statements of operations,
shareholders' equity and cash flows for the years ended December 31, 2001 and
2000. These financial statements are the responsibility of the Company'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 audits 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 JetFleet III at December 31,
2001 and the related statements of operations, shareholders' equity and cash
flows for the years ended December 31, 2001 and 2000, in conformity with
accounting principles generally accepted in the United States of America.

VOCKER KRISTOFFERSON AND CO.

/s/ Vocker Kristofferson & Co.

March 25, 2002
San Mateo, California

JETFLEET III
Balance Sheet
December 31, 2001

ASSETS

Current assets:
Cash $ 1,045,450
Deposits 1,545,380
Accounts receivable 98,570
-------------
Total current assets 2,689,400

Aircraft and aircraft engines under operating leases,
net of accumulated depreciation of $2,267,450 11,692,710
Debt issue costs, net of accumulated
amortization of $1,242,310 419,140
Deferred taxes 284,060
Prepaid expenses 3,540
-------------

Total assets $ 15,088,850
=============

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable $ 174,470
Interest payable 152,120
Prepaid rents 95,850
Security deposits 276,000
Maintenance deposits 1,362,910
-------------
Total current liabilities 2,061,350

Medium-term secured bonds 11,076,350
-------------

Total liabilities 13,137,700
-------------

Preferred stock, no par value,
300,000 shares authorized, 195,465
issued and outstanding 1,661,450
Common stock, no par value,
1,000,000 shares authorized, 815,200
issued and outstanding 815,200
Accumulated deficit (525,500)
-------------
Total shareholders' equity 1,951,150
-------------

Total liabilities and shareholders' equity $ 15,088,850
=============

The accompanying notes are an integral part of these statements.

JETFLEET III
Statements of Operations

For the Years Ended
December 31,
2001 2000
---- ----

Revenues:

Rent income $ 1,981,390 $ 2,259,550
Gain on sale of aircraft 494,450 143,870
Interest income 179,560 145,290
------------- -------------

2,655,400 2,548,710

Expenses:

Depreciation 543,640 647,490
Provision for impairment in value of aircraft 384,280 593,720
Amortization 228,620 228,620
Interest 912,690 912,690
Maintenance 328,660 83,600
Professional fees and general and administrative 64,770 113,970
Management fees 195,470 195,470
------------- -------------

2,658,130 2,775,560

Loss before taxes (2,730) (226,850)

Tax provision/(benefit) 2,710 (73,140)
------------- -------------

Net loss $ (5,440) $ (153,710)
============= =============

Weighted average common shares outstanding 815,200 815,200
============= =============

Basic loss per common share $ (0.01) $ (0.19)
============= =============

The accompanying notes are an integral part of these statements.

JETFLEET III
Statements of Shareholders' Equity
For the Years Ended December 31, 2001 and 2000

Total
Preferred Common Accumulated Shareholders'
Stock Stock Deficit Equity
----- ----- ------- ------

Balance, December 31, 1999 $ 1,661,450 $ 815,200 $ (366,350) $ 2,110,300

Net loss for the period - - (153,710) (153,710)
------------- ------------- ------------- -------------

Balance, December 31, 2000 1,661,450 815,200 (520,060) 1,956,590

Net loss for the period - - (5,440) (5,440)
------------- ------------- ------------- -------------

Balance, December 31, 2001 $ 1,661,450 $ 815,200 $ (525,500) $ 1,951,150
============= ============= ============= =============

The accompanying notes are an integral part of these statements.

JETFLEET III
Statements of Cash Flows

For the Years Ended December 31,
2001 2000
---- ----

Operating activities:
Net loss $ (5,440) $ (153,710)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 543,640 647,490
Provision for impairment 384,280 593,720
Amortization 228,620 228,620
Gain on sale of aircraft (494,450) (143,870)
Deferred taxes (830) (88,780)
Change in operating assets and liabilities:
Deposits (208,310) (514,910)
Accounts receivable 33,010 (69,680)
Rent receivable - 68,850
Prepaid taxes 13,050 (13,050)
Prepaid expenses (580) 10,000
Accounts payable 139,710 10,860
Payable to affiliate (53,440) 53,440
Prepaid rents (12,350) 10,310
Security deposits 133,040 54,160
Maintenance deposits 34,120 541,900
Taxes payable - (8,210)
-------------- -------------
Net cash provided by operating activities 734,070 1,227,140
-------------- -------------

Investing activities:
Purchase of interests in aircraft (3,863,520) (554,740)
Proceeds from sale of aircraft 1,386,810 1,227,450
-------------- -------------
Net cash (used)/provided by investing activities (2,476,710) 672,710
-------------- -------------

Net (decrease)/increase in cash (1,742,640) 1,899,850

Cash, beginning of period 2,788,090 888,240
-------------- -------------

Cash, end of period $ 1,045,450 $ 2,788,090
============== =============

Supplemental disclosures of cash flow information:
Cash paid during the period for: 2001 2000
---- ----
Interest (net of amount capitalized) $ 912,690 $ 912,690
Income taxes 2,400 36,900

The accompanying notes are an integral part of these statements.

JETFLEET III
Notes to Financial Statements

1. Summary of Significant Accounting Policies

Basis of Presentation

JetFleet III (the "Company") was incorporated in the state of
California in August 1994 ("Inception"). The Company was formed solely for the
purpose of acquiring Income Producing Assets. The Company offered up to
$20,000,000 in $1,000 Series A Units (the "Offering") consisting of $850 of
bonds maturing on November 1, 2003 (the "Bonds") and $150 of preferred stock
(the "Preferred Stock") pursuant to a prospectus dated September 27, 1995 (the
"Prospectus").

All of the Company's outstanding common stock is owned by JetFleet
Holding Corp. ("JHC"), a California corporation formed in January 1994. In May
1998, JetFleet Management Corp., the sole shareholder of the Company was renamed
JetFleet Holding Corp. The rights and obligations under the management agreement
between the Company and JHC were assigned by JHC to its newly-created
wholly-owned subsidiary named "JetFleet Management Corp." ("JMC"). JMC also
manages AeroCentury Corp., a Delaware corporation, and AeroCentury IV, Inc., a
California corporation, which are affiliates of JHC and which have objectives
similar to the Company's. Neal D. Crispin, the President of the Company, holds
the same position with JHC and JMC and owns a significant amount of the common
stock of JHC.

Cash and Cash Equivalents/Deposits

The Company considers highly liquid investments readily convertible
into known amounts of cash, with original maturities of 90 days or less, as cash
equivalents. Deposits represent cash balances held related to maintenance
reserves and security deposits and generally are subject to withdrawal
restrictions. As of December 31, 2001, the Company maintained $2,173,210 of its
cash balances in two money market funds held by regional brokerage firms, which
are not federally insured.

Aircraft and Aircraft Engines Under Operating Leases

The Company's interests in aircraft are recorded at cost, which include
acquisition costs (see Note 2). Depreciation is computed using the straight-line
method over each aircraft's estimated economic life to its estimated residual
value.

Impairment of Long-lived Assets

In accordance with SFAS No. 121, "Accounting for the Impairment of
Long-lived Assets and Long-lived Assets to Be Disposed Of," assets are reviewed
for impairment whenever events or changes in circumstances indicate that the
book value of the asset may not be recoverable. Periodically, the Company
reviews its long-lived assets for impairment based on estimated future
nondiscounted cash flows attributable to the assets.
In the event such cash flows are not expected to be sufficient to recover the
recorded value of the assets, the assets are written down to their estimated
realizable value.

Organization and Offering Costs

Pursuant to the terms of the Prospectus, the Company paid an
Organization and Offering Expense Reimbursement to JHC in cash in an amount up
to 2.0% of Aggregate Gross Offering Proceeds for reimbursement of certain costs
incurred in connection with the organization of the Company and the Offering
(the "Reimbursement").

JETFLEET III
Notes to Financial Statements

1. Summary of Significant Accounting Policies (continued)

Organization and Offering Costs (continued)

JHC contributed $450,000 of the total it paid for organization and
offering expenses as a common stock investment in the Company (the "Initial
Contribution"). The Company issued 450,000 shares of common stock to JHC in
return for the Initial Contribution. To the extent that JHC incurred expenses in
excess of the 2.0% cash limit, such excess expenses were repaid to JHC in the
form of Common Stock issued by the Company at a price of $1.00 per share (the
"Excess Stock"). The amount of Excess Stock that the Company issued was limited
according to the amount of Aggregate Gross Offering Proceeds raised by the
Company.

The Company capitalized the portions of both the Reimbursement paid and
the Initial Contribution related to the Bonds (85%) and amortizes such costs
over the life of the Bonds (approximately eight years). The remainder of any of
the Initial Contribution and Reimbursement is deducted from shareholders'
equity.

Assets Subject to Lien

The Company's obligations under the Bonds are secured by a security
interest in all of the Company's right, title and interest in the Income
Producing Assets acquired by the Company.

Income Taxes

The Company follows the liability method of accounting for income taxes
as required by the provisions of Statement of Financial Accounting Standards No.
109 - Accounting for Income Taxes.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.

Recent Accounting Pronouncements

SFAS No. 138, which amended the effective date of SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, was issued in June
1999. The Company adopted SFAS No. 133 on January 1, 2001. This statement
establishes accounting and reporting standards requiring that all derivative
instruments are recorded on the balance sheet as either an asset or a liability,
measured at fair value. The statement requires that changes in the derivative's
fair value be recognized currently in earnings unless specific hedge accounting
criteria are met and such hedge accounting treatment is elected. Because the
Company does not hold any derivatives as defined in SFAS No. 133, its adoption
did not have a material impact on its results of operations or financial
position.

In August 2001, the Financial Accounting Standards Board issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-lived Assets," which
supercedes SFAS No. 121, "Accounting for the Impairment of Long-lived Assets and
Long-lived Assets to Be Disposed of." SFAS No. 144 is effective for financial
statements issued for fiscal years beginning after December 15, 2001, and
interim periods within those fiscal years. The Company will adopt SFAS No. 144
on January 1, 2002. Because SFAS No. 144 retains the fundamental provisions of
SFAS No. 121 for (a) recognition and measurement of the impairment of long-lived
assets to be held and used and (b) measurement of long-lived assets to be
disposed of by sale, the adoption of SFAS No. 144 is not expected to have a
material effect on the Company's results of operations or financial position.

JETFLEET III
Notes to Financial Statements

2. Aircraft and Aircraft Engines Under Operating Leases

Aircraft and Aircraft Engines

The Company owns a deHavilland DHC-8-100, serial number 13 ("S/N 13"),
a deHavilland DHC-8-102, serial number 106 ("S/N 106"), a Pratt & Whitney
JT8D-9A aircraft engine, serial number 674267 ("S/N 674267"), three deHavilland
DHC-6-300 aircraft ("S/Ns 640, 751 and 696") and a Saab 340A, serial number 24
("S/N 24"). During January 2001, the Company sold its 50% interest in a Shorts
SD 3-60, serial number S/N 3676 ("S/N 3676"). As discussed below, it sold its
other Shorts SD 3-60, serial number S/N 3656 ("S/N 3656") in July 2001. The
Company purchased S/N 106 during November 2001.

S/N 13 was re-leased in June 2000 to the same sub-lessee, an Australian
carrier, for a one-year term. Since June 2001, it has been on lease with the
same Australian carrier under a series of short-term lease extensions and is on
lease through March 31, 2002. The Company is currently discussing the terms of
the lessee's continued use of the aircraft.

S/N 674267 is used on a McDonnell Douglas DC-9 and was subject to a
60-month sublease, expiring in November 2001, between the seller and a Mexican
based regional carrier. During 2001, the Company recorded as expense
approximately $384,000 to reflect a reduction in the carrying value of S/N
674267. As discussed in Note 7, S/N 674267 was sold to the lessee during March
2002 for book value.

S/Ns 640 and 751 were subject to similar 36-month leases, originally
expiring in July 2001, with a U.S. regional carrier. Both leases were extended
from their expiration dates to their pre-return inspection completion. S/N 751
was returned during August and was re-leased during October. The Company is
currently seeking re-lease opportunities for S/N 640, which the Company expects
to be ready for return by year end. During June 2000, the Company and the lessee
for S/N 696, which had been leased to the same carrier as S/Ns 640 and 751,
agreed to an early termination of the lease for S/N 696. S/N 696 was returned by
the lessee and, after undergoing certain maintenance and upgrade work, was
re-leased in June 2000 to a regional carrier in the United Kingdom for a term
expiring in April 2003.

S/N 3656 was subject to a three-year lease, expiring in May 2003 with a
regional carrier in Ireland. In February 2001, S/N 3656 sustained significant
damage while landing. During June 2001, the Company received a settlement of
$545,000 from the insurer and sold one of the aircraft's engines. The remaining
components of the aircraft were sold during July 2001. The Company also retained
$184,340 of maintenance reserves. The Company recorded a total gain of $382,960
as a result of the insurance settlement, the various sales proceeds and the
reserves retained.

At the time of purchase, S/N 3676 (owned 50% by the Company) was
subject to a 48-month lease, expiring in July 2001, with a British regional
airline. During 2000, the lessee filed for reorganization and subsequently
returned the aircraft to the Company. The owners agreed that they would realize
a greater benefit if they sold the aircraft "as is" rather than fund the
maintenance work necessary to return the aircraft to a condition which would
allow it to possibly be re-leased to a new lessee. Therefore, the Company
reduced the carrying value of the aircraft to $170,000 and recognized a
provision for impairment of $245,350 during 2000. The aircraft was sold during
January 2001. At that time, the Company received net proceeds of $167,450 and
recognized a gain of $34,470. During the second quarter of 2001, the lessee paid
all amounts owed to the Company and, since the aircraft had been sold, the
Company recognized an additional gain of $77,020, representing maintenance
reserves retained.

S/N 24 is subject to a lease, expiring in October 2002, with a regional
carrier in North America.

S/N 106 is subject to a lease, expiring in November 2004, with a
regional carrier in the Caribbean.

JETFLEET III
Notes to Financial Statements

2. Aircraft and Aircraft Engines Under Operating Leases (continued)

Detail of Investment

The following schedule provides an analysis of the Company's investment
in aircraft under operating leases and the related accumulated depreciation for
the years ended December 31, 2000 and 2001:

Accumulated Allowance for
Cost Depreciation Impairment Net
---- ------------ ---------- ---

Balance, December 31, 1999 $ 13,196,230 $ (1,776,710) $ - $ 11,419,520

Additions 554,740 (647,490) (593,720) (686,470)

Disposals (1,331,560) 247,980 - (1,083,580)
------------- ------------- ------------- -------------

Balance, December 31, 2000 12,419,410 (2,176,220) (593,720) 9,649,470

Additions 3,863,530 (543,640) (384,280) 2,935,610

Disposals (1,671,900) 452,410 327,120 (892,370)
------------- ------------- ------------- -------------

Balance, December 31, 2001 $ 14,611,040 $ (2,267,450) $ (650,880) $ 11,692,710
============= ============= ============= =============

3. Operating Segments

The Company operates in one business segment, aircraft leasing, and
therefore does not present separate segment information for lines of business.

Approximately 35% and 44% of the Company's operating lease revenue was
derived from lessees domiciled in the United States during 2001 and 2000,
respectively. All leases relating to aircraft leased and operated
internationally are denominated and payable in U.S. dollars.

JETFLEET III
Notes to Financial Statements

3. Operating Segments (continued)

The table below sets forth geographic information about the Company's
operating leased aircraft equipment grouped by domicile of the lessee:

Operating Lease Revenue Net Book Value of Operating Leased Assets
For the Year Ended December 31, December 31,
Country 2001 2000 2001 2000
------- ---- ---- ---- ----

United States $ 697,970 $ 989,520 $ 2,889,640 $ 3,702,990
Australia 663,000 672,000 3,209,570 3,280,000
United Kingdom 308,950 267,300 1,044,050 1,308,080
Other 311,470 330,730 4,549,450 1,358,400
------------- ------------- ------------- -------------
$ 1,981,390 $ 2,259,550 $ 11,692,710 $ 9,649,470
============= ============= ============= =============

For the year ended December 31, 2001, the Company had four significant
customers, which accounted for 33%, 23%, 15% and 13%, respectively, of lease
revenue. For the year ended December 31, 2000, the Company had three significant
customers, which accounted for 30%, 20% and 18%, respectively, of lease revenue.

As of December 31, 2001, minimum future lease rent payments receivable
under noncancelable leases were as follows:

Year Amount

2002 $ 1,631,250
2003 975,000
2004 730,000
-------------

$ 3,336,250
=============

4. Medium-Term Secured Bonds

The Company raised $13,031,000 through the Offering from November 1995
to June 1997. Each $1,000 Unit subscribed in the offering included an $850
medium-term secured bond maturing on November 1, 2003. The Bonds bore interest
at an annual rate of 12.94% through October 31, 1998 and, thereafter, a variable
rate, adjusted annually on November 1, equal to the one-year United States
Treasury bill rate plus 2%, but not less than 8.24%. Based on the one-year
Treasury Bill rate at the measurement dates, the Bonds have borne interest at
the rate of 8.24% per annum for the periods November 1, 1998 through October 31,
2001. The rate will remain at 8.24% through October 31, 2002. The carrying
amount of the Bonds approximates fair value.

JETFLEET III
Notes to Financial Statements

5. Income Taxes

The items comprising income tax expense are as follows:

2001 2000
---- ----

Current tax provision
Federal $ - $ -
State 3,500 15,640
------------- --------------
Current provision 3,500 15,640
------------- --------------

Deferred tax provision/(benefit)
Federal (3,790) (83,980)
State 2,960 (4,800)
------------- --------------
Deferred tax provision (830) (88,780)
------------- --------------

Total provision/(benefit) for income taxes $ 2,670 $ (73,140)
============= ==============

The total provision/(benefit) for income taxes differs from the amount
which would be provided by applying the statutory federal income tax rate to
pretax earnings as illustrated below:

2001 2000
---- ----

Income tax expense/(benefit) at statutory federal income tax rate $ (930) $ (77,130)
State taxes net of federal benefit (40) (2,950)
Tax rate differences 3,640 6,940
------------- --------------
Total provision/(benefit) for income taxes $ 2,670 $ (73,140)
============= ==============

Temporary differences and carryforwards which gave rise to a
significant portion of deferred tax assets and liabilities as of December 31,
2001 are as follows:

Deferred tax assets:
Net operating loss $ 217,010
Maintenance deposits 439,820
Prepaid rent and other 34,190
-------------
Subtotal 691,020
Valuation allowance -
-------------
Net deferred tax assets 691,020
Deferred tax liability -
Depreciation of aircraft (406,960)
-------------
$ 284,060
=============

The Company expects to generate adequate future taxable income to
realize the benefits of the remaining deferred tax assets on the balance sheet.
The Company's net operating losses of $623,990 may be carried forward for
fifteen or twenty years, depending on when they were created, and begin to
expire in 2012.

JETFLEET III
Notes to Financial Statements

6. Related Party Transactions

The Company's Income Producing Asset portfolio is managed and
administered under the terms of a management agreement with JMC. Under this
agreement, on the last day of each calendar quarter, JMC receives a quarterly
management fee equal to 0.375% of the Company's Aggregate Gross Proceeds
received through the last day of such quarter. In 2001 and 2000, the Company
accrued a total of $195,470 and $195,470, respectively, in management fees.

JMC may receive an acquisition fee for locating assets for the Company
and a remarketing fee in connection with the sale of the Company's assets,
provided that such fees are not more than the customary and usual fees that
would be paid to an unaffiliated party for such a transaction. The total of the
Aggregate Purchase Price plus the acquisition fee cannot exceed the fair market
value of the asset based on appraisal. JMC may also receive reimbursement of
Chargeable Acquisition Expenses incurred in connection with a transaction which
are payable to third parties. Because the Company did not purchase aircraft
during the first nine months of 2001 or 2000, it did not pay any acquisition
fees or Chargeable Acquisitions Expenses to JMC. During 2001, the Company paid
acquisition fees of $108,000 and remarketing fees of $16,580 to JMC in
connection with the acquisition and sale of aircraft. During 2000, remarketing
fees of $15,830 were accrued to JMC in connection with the sale of aircraft.

As discussed in Note 1, the Company reimbursed JHC for certain costs
incurred in connection with the organization of the Company and the Offering.
The Company made no such payments during 2001 or 2000.

7. Subsequent Events

During March 2002, the Company sold S/N 674267 to the lessee for an
amount equal to the engine's net book value.

Item 8. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure.

None.

PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act.

General

Pursuant to a Management Agreement between the Company and JMC, JMC is
responsible for most management decisions, has responsibility for supervising
the Company's day-to-day operations, including compliance with legal and
regulatory requirements, and is responsible for cash management and
communications between the Company and the holders of Bonds and Preferred Stock.
The Management Agreement authorizes JMC, in its sole discretion, to acquire,
hold title to, sell, lease, re-lease or otherwise dispose of Income Producing
Assets or any interest therein, on behalf of the Company when and upon such
terms as JMC determines to be in the best interests of the Company, subject to
certain limitations set forth in the Prospectus.

The JMC Advisory Board has responsibilities including, but not limited to,
attendance at meetings of the Board of Directors and its committees in a
non-voting, advisory capacity, giving advice to the Directors and officers and
reviewing JMC's strategic plans, financial affairs and offering advice, analysis
and insight about them.

Directors and Officers

The directors, executive officers and key employees of the Company and JMC, each
of whom serves until his successor is elected and qualified, are as follows:

Name Position Held

Neal D. Crispin President and Chairman of the Board of Directors of
the Company and Chief Financial Officer and
Secretary of the Company

Edwin S. Nakamura Director of the Company

Marc J. Anderson Senior Vice President of the Company

Neal D. Crispin, age 56. Mr. Crispin is Chairman of the Board of Directors and
President of the Company. He is also President and a Director of ACY, JHC, JMC
and CMA Consolidated, Inc. ("CMA"). Prior to forming CMA in 1983, Mr. Crispin
was vice president-finance of an oil and gas company. Previously, Mr. Crispin
was a manager with Arthur Young & Co., Certified Public Accountants. Mr. Crispin
is the husband of Toni M. Perazzo, a Director and Officer of JHC, JMC and ACY.
He received a Bachelors degree in Economics from the University of California at
Santa Barbara and a Masters degree in Business Administration (specializing in
Finance) from the University of California at Berkeley. Mr. Crispin, a certified
public accountant, is a member of the American Institute of Certified Public
Accountants and the California Society of Certified Public Accountants.

Edwin S. Nakamura, age 64, Director. Mr. Nakamura holds a B.S. in Business from
San Francisco State University. A certified public accountant, Mr. Nakamura has
been the Chief Executive Officer and owner of U.S.A. Publishing, Inc. since
1981.

Marc J. Anderson, age 65. Mr. Anderson is the Company's Senior Vice President
and is also Senior Vice President of JHC, JMC and ACY and a Director of ACY.
Prior to joining JMC in 1994, Mr. Anderson was an aviation consultant (1992 to
1994) and prior to that spent seven years (1985 to 1992) as Senior Vice
President-Marketing for PLM International, a transportation equipment leasing
company. He was responsible for the acquisition, modification, leasing and
remarketing of all aircraft. Prior to PLM, Mr. Anderson served as
Director-Contracts for Fairchild Aircraft Corp., Director of Aircraft Sales for
Fairchild SAAB Joint Venture, and Vice President, Contracts for SHORTS Aircraft
USA, Inc. Prior to that, Mr. Anderson was employed by several airlines in
various roles of increasing responsibility beginning in 1959.

Item 10. Executive Compensation.

The Company has no employees. The following is a summary of the compensation and
reimbursements paid to the parent of the Company and related parties by the
Company for the years ended December 31, 2000 and 2001.

Compensation

The Company's Income Producing Asset portfolio is managed and administered under
the terms of a management agreement with JMC. Under this agreement, on the last
day of each calendar quarter, JMC receives a quarterly management fee equal to
0.375% of the Company's Aggregate Gross Proceeds received through the last day
of such quarter. In 2001 and 2000, the Company accrued a total of $195,470 and
$195,470, respectively, in management fees due JMC.

JMC may receive an acquisition fee for locating assets for the Company and a
remarketing fee in connection with the sale of the Company's assets, provided
that such fees are not more than the customary and usual fees that would be paid
to an unaffiliated party for such a transaction. The total of the Aggregate
Purchase Price plus the acquisition fee cannot exceed the fair market value of
the asset based on appraisal. JMC may also receive reimbursement of Chargeable
Acquisition Expenses incurred in connection with a transaction which are payable
to third parties. Because the Company did not purchase aircraft during the first
nine months of 2001 or 2000, it did not pay any acquisition fees or Chargeable
Acquisitions Expenses to JMC. During 2001, the Company paid acquisition fees of
$108,000 and remarketing fees of $16,580 to JMC in connection with the
acquisition and sale of aircraft. During 2000, remarketing fees of $15,830 were
accrued to JMC in connection with the sale of aircraft.

As discussed in Note 1, the Company reimbursed JHC for certain costs incurred in
connection with the organization of the Company and the Offering. The Company
made no such payments during 2001 or 2000.

Item 11. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.

No person is known to the Company to be the beneficial owner of more than 5% of
the Units. No officer or director of JHC or JMC or any of its related parties
beneficially owns any Units.

JHC owns 100% of the issued and outstanding common stock of the Company. Mr.
Crispin, President of JHC, and Toni M. Perazzo, Senior Vice President-Finance of
JHC, collectively own the majority of the issued and outstanding common stock of
JHC, including shares owned by CMA Consolidated, an affiliated company
controlled by Mr. Crispin. Marc J. Anderson, Senior Vice President of JMC owns
approximately 1% of JHC's common stock.

Item 12. Certain Relationships and Related Transactions.

See Item 10, above.

Item 13. Exhibits and Reports on Form 8-K.

(a) Exhibits

None

(b) Reports on Form 8-K Filed in Last Quarter

None

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
caused this Report on Form 10-KSB to be signed on its behalf by the undersigned,
thereunto duly authorized on March 28, 2002.

JETFLEET III

By: /s/ Neal D. Crispin
-------------------------------
Neal D. Crispin

Title: President