SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

(Mark One)

[X]  Annual report  pursuant to Section 13 or 15(d) of the  Securities  Exchange
     Act of 1934 for the fiscal year ended December 31, 1998

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

                         Commission file number 33-80849


                      CAPITAL PREFERRED YIELD FUND-IV, L.P.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)
  

       DELAWARE                                        84-1331690
(State of organization)                  (I.R.S. Employer Identification Number)

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

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

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

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


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

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

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


                        Exhibit Index Appears on Page 39

                               Page 1 of 40 Pages


<PAGE>



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

Capital  Preferred  Yield Fund-IV,  L.P., a Delaware  limited  partnership  (the
"Partnership"),  was  organized  on  December  18,  1995 and is  engaged  in the
business of owning and  leasing  equipment.  CAI  Equipment  Leasing V Corp.,  a
Colorado  corporation and a wholly owned subsidiary of Capital Associates,  Inc.
("CAI"), is the general partner of the Partnership.

The Partnership  commenced business operations on April 16, 1996. On February 9,
1998, the Partnership  sold the remaining  planned maximum  placement of 500,000
Class A  limited  partner  units.  During  1998,  the  Partnership  entered  its
reinvestment  period as defined in the Partnership  Agreement.  A summary of the
Partnership's offering activities is presented below:

<TABLE>
<CAPTION>

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

<S>                                 <C>            <C>            <C>                <C>              <C>

Year ended December 31, 1996         154,553          867          $ 15,455,281       $ 2,230,270      $ 13,225,011
Year ended December 31, 1997         302,080        1,371          $ 30,207,960       $ 4,316,105      $ 25,891,855
Year ended December 31, 1998          43,367          107             4,336,754           682,777         3,653,977
                                    --------       ------          ------------       -----------      ------------
                                     500,000        2,345          $ 49,999,995       $ 7,229,152      $ 42,770,843
                                    ========       ======          ============       ===========      ============
</TABLE>

Capital Associates  International,  Inc.  ("CAII"),  an affiliate of the general
partner, is the Class B limited partner of the Partnership.  In exchange for its
Class B limited  partner  interest,  CAII  contributed  cash of $10,000 for each
$1,000,000 of investors'  capital  contributions  (i.e., cash investments in the
Partnership)  to the  Partnership.  CAII's  interest  in  Distributable  Cash is
subordinated to the Class A limited  partners'  interest.  The  contributions of
CAII were made simultaneously with the purchase of equipment by the Partnership.
Through December 31, 1998, CAII contributed $500,000 to the Partnership.

The  Partnership's  overall  investment  objectives are to (i) raise the maximum
allowable   capital  from  investors  for  investment  in  accordance  with  the
Partnership's  investment  objectives  described  in the  Prospectus  (which was
reached on February 9, 1998); (ii) invest such capital and related  indebtedness
in a  diversified  portfolio of equipment  subject to leases with terms  ranging
from two to seven years;  (iii) if funds are  available for  distribution,  make
monthly cash  distributions  to the Class A and Class B limited  partners during
the reinvestment  period (a period that ends  approximately June 30, 2003); (iv)
re-invest all available  undistributed  cash from operations and cash from sales
in  additional   equipment  during  the  reinvestment  period  to  increase  the
Partnership's  portfolio  of  revenue-generating   equipment  provided  suitable
equipment can be identified and acquired;  and (v) sell or otherwise  dispose of
the  Partnership's  equipment and other assets in an orderly manner and promptly
distribute cash from sales thereof to the Partners within three years of the end
of the reinvestment period.

During 1998, the Partnership  acquired equipment of various types under lease to
third  parties.  All of the  equipment  was  purchased  by  CAII  directly  from
manufacturers  or  from  other   independent  third  parties  and  sold  to  the
Partnership.   The  equipment  is  generally  comprised  of  transportation  and
industrial  equipment,   office  furniture  and  equipment,   and  computer  and
peripheral  equipment,  among  others  (the  "equipment").  See  Item 13 of this
report,  "Certain Relationships and Related Transactions" for the detail listing


                                       -2-

<PAGE>



Item 1.   Business, continued
          --------
    
of equipment  purchased during 1998. The Partnership  expects that a majority of
the equipment  purchased  during 1999 will be similar in nature to the equipment
acquired in 1998. As of December 31, 1998,  the general  partner has  identified
approximately  $600,000 of additional equipment that satisfied the Partnership's
acquisition  criteria  that is expected to be acquired  during the first quarter
1999.

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

During 1998, the  Partnership  leased  equipment to investment  grade lessees in
diverse  industries  including  the material  handling,  telecommunications  and
manufacturing industries. Approximately 77% of the Partnership's equipment under
lease was leased to investment  grade lessees as of December 31, 1998.  Pursuant
to the Partnership Agreement, an investment grade lessee is a company (i) with a
net worth in excess of $100,000,000 (and no debt issues that are rated); or (ii)
with a credit  rating of not less than Baa as  determined  by  Moody's  Investor
Services,  Inc. or comparable credit rating, as determined by another recognized
credit rating service;  or (iii) a lessee, all of whose lease payments have been
unconditionally  guaranteed  or  supported  by a letter  of  credit  issued by a
company meeting one of the above requirements. The Partnership limits its credit
risk  through  selective  use of  non-recourse  debt  financing  of future lease
rentals, as described above.

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

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

The  ultimate  rate of  return  of the  Partnership's  leasing  transactions  is
dependent,  in part,  on the  general  level of  interest  rates at the time the
leases are originated,  as well as future  equipment  values and on-going lessee
creditworthiness.  Because  leasing is an  alternative  to  financing  equipment
purchases  with  debt,  lease  rates tend to rise and fall with  interest  rates
(although  lease rate  movements  generally  lag  interest  rate  changes in the
capital  markets).  The  amount of future  distributions  to the  partners  will
depend, in part, on future interest rates.

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

                                       -3-

<PAGE>



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

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

The Partnership leases equipment to a significant  number of lessees.  No lessee
accounted for more than 10% of total revenue of the Partnership during 1998.

The  Partnership  is required to dissolve  and  distribute  all of its assets no
later than December 31, 2007. However,  the general partner anticipates that all
equipment  will be sold and the  Partnership  will be  liquidated  prior to that
date.


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

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


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

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

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

No matters were submitted to a vote of the limited  partners of the Partnership,
through the  solicitation  of proxies or  otherwise,  during the fourth  quarter
ended December 31, 1998.

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

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

(b)  At December 31, 1998, there were 2,345 Class A limited partners.


                                       -4-

<PAGE>



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

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

     During 1998, the Partnership  made twelve (12)  distributions (a portion of
     which  constituted  a return of  capital)  to Class A limited  partners  as
     follows:

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

     December 31, 1997      January 1998          $  0.875         $   425,478
     January 31, 1998       February 1998            0.875             379,360
     February 28, 1998      March 1998               0.875             405,854
     March 31, 1998         April 1998               0.875             488,864
     April 30, 1998         May 1998                 0.875             408,547
     May 31, 1998           June 1998                0.875             408,547
     June 30, 1998          July 1998                0.875             488,330
     July 31, 1998          August 1998              0.875             408,424
     August 31, 1998        September 1998           0.875             408,109
     September 30, 1998     October 1998             0.875             487,997
     October 31, 1998       November 1998            0.875             408,109
     November 30, 1998      December 1998            0.875             408,109
                                                  --------         -----------
                                                  $  10.50         $ 5,125,728
                                                  ========         ===========

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

     The distribution for the month ended December 31, 1998,  totaling $487,997,
     was paid to the Class A limited partners on January 4, 1999.  Distributions
     to the  general  partner  and  Class B  limited  partner  during  1998  are
     discussed in Item 13 of this  Report,  "Certain  Relationships  and Related
     Transactions."

     The general partner believes the Partnership will generate  sufficient cash
     flows  from  operations   during  1998,  to  (1)  meet  current   operating
     requirements,  (2) enable it to fund cash distributions to both the Class A
     and Class B limited  partners at annualized rates of 10.5% of their capital
     contributions,  (portions  of which are expected to  constitute  returns of
     capital) and (3) reinvest in additional  equipment  under leases,  provided
     that suitable equipment can be identified and acquired.

                                       -5-

<PAGE>



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

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

     During 1997, the Partnership  made twelve (12)  distributions (a portion of
     which  constituted  a return of  capital)  to Class A limited  partners  as
     follows:

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

     December 31, 1996      January 1997          $ 0.875         $   126,682
     January 31, 1997       February 1997           0.875             148,000
     February 28, 1997      March 1997              0.875             165,833
     March 31, 1997         April 1997              0.875             209,988
     April 30, 1997         May 1997                0.875             206,805
     May 31, 1997           June 1997               0.875             225,213
     June 30, 1997          July 1997               0.875             282,582
     July 31, 1997          August 1997             0.875             267,496
     August 31, 1997        September 1997          0.875             290,656
     September 30, 1997     October 1997            0.875             355,921
     October 31, 1997       November 1997           0.875             326,231
     November 30, 1997      December 1997           0.875             342,134
                                                  -------         -----------
                                                  $ 10.50         $ 2,947,541
                                                  =======         ===========

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

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

             1996                  $  7.72                      11.0%
             1997                    10.50                      10.5%
             1998                    10.50                      10.5%
                                   -------
                                   $ 28.72
                                   =======     

         (1)  Cumulative  distributions,  as described  in  note  1 to  Notes to
              Consolidated Financial Statements, began May 1996.



                                       -6-

<PAGE>



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

The following  selected  financial  data relates to the years ended December 31,
1998,  1997 and  1996.  The data  should  be read in  conjunction  with  Item 7,
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" and the financial statements and notes thereto appearing with Item 8
herein.

<TABLE>
<CAPTION>

                                                         1998          1997           1996*     
                                                      ------------  ------------  ------------

<S>                                                  <C>           <C>           <C>         

Total revenue                                         $ 19,560,413  $ 11,907,740  $    940,346
Net income                                               2,031,561       955,418       102,627
Net income per weighted average Class A
  limited partner unit outstanding                            3.95          2.82          1.33
Total assets                                            54,877,835    56,161,440    16,652,457
Discounted lease rentals                                15,708,835    17,633,047     2,765,239
Distributions declared to partners                       5,293,514     3,310,427       448,237
Distributions declared per monthly weighted average
  Class A limited partner unit outstanding                   10.50         10.50          7.72

</TABLE>

     *    For the period from April 16, 1996  (commencement  of  operations)  to
          December 31, 1996.

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

I.    Results of Operations
      ---------------------

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

<TABLE>
<CAPTION>
                                         Years Ended December 31,                    Years Ended December 31,
                                        -------------------------                  --------------------------
                                           1998          1997         Change          1997            1996         Change   
                                        -----------   -----------   -----------    -----------    -----------    -----------

<S>                                    <C>           <C>           <C>            <C>            <C>            <C>        
Leasing margin                          $ 2,598,528   $ 1,185,661   $ 1,412,867    $ 1,185,661    $   203,467    $   982,194
Equipment sales margin                      196,434             -       196,434              -              -              -
Interest income                             122,325       253,514      (131,189)       253,514         50,763        202,751
Management fees paid to general partner    (422,321)     (250,233)     (172,088)      (250,233)       (17,688)      (232,545)
Direct services from general partner       (167,569)      (78,767)      (88,802)       (78,767)       (41,376)       (37,391)
General and administrative                 (190,836)     (154,757)      (36,079)      (154,757)       (92,539)       (62,218)
Provision for losses                       (105,000)            -      (105,000)             -              -              -
                                        -----------   -----------   -----------    -----------    -----------    -----------

  Net income                            $ 2,031,561   $   955,418   $ 1,076,143    $   955,418    $ 102,627      $   852,791
                                        ===========   ===========   ===========    ===========    ===========    ===========
</TABLE>

     *    For the period from April 16, 1996  (commencement  of  operations)  to
          December 31, 1996.



                                       -7-

<PAGE>


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

I.    Results of Operations, continued
      ---------------------

LEASING MARGIN

Leasing margin consists of the following:

                                                Years Ended December 31,
                                       -----------------------------------------
                                          1998           1997           1996*
                                          ----           ----           ----

Operating lease rentals               $ 18,926,287    $ 11,394,668   $  881,778
Direct finance lease income                315,367         259,558        7,805
Depreciation                           (15,287,524)     (9,213,581)    (659,574)
Interest on discounted lease rentals    (1,355,602)     (1,254,984)     (26,542)
                                      ------------    ------------   ----------
  Leasing margin                      $  2,598,528    $  1,185,661   $  203,467
                                      ============    ============   ==========

  Leasing margin ratio                          14%             10%          23%
                                      ============    ============   ==========

     *    For the period from April 16, 1996  (commencement  of  operations)  to
          December 31, 1996.

All  components of leasing margin  increased due to growth in the  Partnership's
lease portfolio.  Leasing margin ratio fluctuates  primarily due to non-recourse
interest expense.  Interest on discounted lease rentals did not increase in 1998
at the same rate as the other components of leasing margin. As a result, leasing
margin ratio increased for the year ended December 31, 1998 compared to the year
ended  December 31, 1997.  As of December  31,  1997,  approximately  40% of the
Partnership's portfolio consisted of operating leases financed with non-recourse
debt  while for the  comparable  period in 1996,  the  portfolio  was  minimally
financed with non-recourse debt and therefore, leasing margin was not materially
impacted by interest  expense.  Leasing  margin and the related  leasing  margin
ratio for an operating lease financed with  non-recourse  debt increases  during
the term of the lease since rents and  depreciation  are  typically  fixed while
interest expense declines as the related non-recourse debt is repaid.

The ultimate rate of return on leases depends, in part, on interest rates at the
time the leases are originated, as well as, future equipment values and on-going
lessee  creditworthiness.   Because  leasing  is  an  alternative  to  financing
equipment  purchases with debt,  lease rates tend to rise and fall with interest
rates (although lease rate movements  generally lag interest rate changes in the
capital markets).

EQUIPMENT SALES MARGIN

Equipment sales margin from remarketing consists of the following:

                                                            1998
                                                            ----

Equipment sales revenue                                 $ 1,095,706
Cost of equipment sales                                    (899,272)
                                                        -----------
Equipment sales margin                                  $   196,434
                                                        ===========

                                       -8-

<PAGE>




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

I.    Results of Operations, continued
      ---------------------

EQUIPMENT SALES MARGIN, continued

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

INTEREST INCOME

Interest  income  decreased  in 1998  compared  to 1997  due to an  increase  in
equipment  purchases and a corresponding  decrease in invested cash.  Throughout
1997, the Partnership was in its offering period and as such,  invested cash was
generally  higher pending  purchases of additional  equipment.  Interest  income
increased in 1997 compared to 1996 because the  Partnership  was in the offering
period for only part of 1996.

EXPENSES

Management  fees paid to the  general  partner,  direct  services  from  general
partner and  general  and  administrative  expenses  increased  in 1998 and 1997
compared to 1996 due to growth in the Partnership's lease portfolio.

PROVISION FOR LOSSES

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

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

The  Partnership  recorded a provision  for loss of $105,000  for 1998.  Of that
amount,  $75,000  related  primarily  to  lessees  returning  equipment  to  the
Partnership  and $30,000 was recorded as a reserve for  estimated  uncollectible
accounts receivable.

There was no provision for losses recorded during 1997 or 1996.





                                       -9-

<PAGE>


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


II.   Liquidity and Capital Resources
      -------------------------------
 
The  Partnership  was  formed on  December  18,  1995.  On April 16,  1996,  the
Partnership commenced offering 500,000 Class A limited partner units at $100 per
unit for sale to investors.  As of February 9, 1998, all 500,000 Class A limited
partner units were sold.

A  summary  of the  Partnership's  offering  activities  for  1998  and from the
commencement of operations to December 31, 1998 is presented below:

                                                         1998       Cumulative
                                                         ----       ----------

Class A limited partner units sold                        43,367        500,000
                                                     ===========   ============

Gross offering proceeds                              $ 4,336,754   $ 49,999,995
Sales commissions                                       (433,676)    (5,000,000)
Organization and offering expenses                      (173,470)    (2,000,000)
Due diligence expenses                                   (75,631)      (229,152)
                                                     -----------   ------------
  Net offering proceeds                              $ 3,653,977   $ 42,770,843
                                                     ===========   ============

  Class B limited partner (CAII) cash contribution   $    40,000   $    500,000
                                                     ===========   ============

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

During 1998, the Partnership  acquired  equipment subject to leases with a total
purchase  price of  $18,542,605  (including  $3,223,219  of  equipment  acquired
subject to existing  non-recourse  debt).  Also  during  1998,  the  Partnership
discounted  future rental payments from certain leases to  non-recourse  lenders
and received proceeds of $3,994,817.  Non-recourse borrowing against unleveraged
leases in the  Partnership's  lease  portfolio  may occur in the future as well,
when the general partner,  in its discretion,  determines that such non-recourse
financing is in the best interest of the  Partnership.  As of December 31, 1998,
the  general  partner  had  identified  $600,000 of  additional  equipment  that
satisfied the Partnership's  acquisition criteria and is expected to be acquired
during 1999.

During 1998 and 1997,  the  Partnership  declared  distributions  to the Class A
limited partners of $5,188,246 and $3,246,338,  respectively,  of which $487,997
was paid during  January  1999. A portion of such  distributions  is expected to
constitute  a return of capital.  Distributions  may be  characterized  for tax,
accounting and economic purposes as a return of capital,  a return on capital or
a portion of both. The portion of each cash  distribution by a partnership which
exceeds  its net income for the fiscal  period may be deemed a return of capital
for accounting purposes. However, the total percentage of a partnership's return
on capital over its life can only be  determined  after all residual  cash flows
(which include  proceeds from the  re-leasing and sales of equipment)  have been
realized at the termination of the Partnership.


                                      -10-

<PAGE>


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

II.   Liquidity and Capital Resources, continued
      -------------------------------

The general partner believes that the Partnership will generate  sufficient cash
flows from operations during 1998, to (1) meet current  operating  requirements,
(2) enable it to fund cash distributions to both the Class A and Class B limited
partners at annualized rates of 10.5% of their capital  contributions  (portions
of which are expected to  constitute  returns of  capital),  and (3) reinvest in
additional  equipment  under leases,  provided  that  suitable  equipment can be
identified and acquired.

YEAR 2000 ISSUES

An affiliate provides accounting and other  administrative  services,  including
data  processing  services to the  Partnership.  The  affiliate  has conducted a
comprehensive  review of its computer  systems to identify systems that could be
affected  by the Year 2000  issue.  The Year 2000 issue  results  from  computer
programs  being  written  using  two  digits  rather  than  four to  define  the
applicable year.  Certain computer programs which have  time-sensitive  software
could  recognize  a date using "00" as the year 1900  rather than the year 2000.
This could result in major system  failures or  miscalculations.  Certain of the
affiliate's  software has already been updated to correctly account for the Year
2000  issue.  In  addition,  the  affiliate  is engaged in a system  conversion,
whereby the affiliate's  primary lease tracking and accounting software is being
replaced  with new systems which will account for the Year 2000  correctly.  The
affiliate  expects that the new system will be fully operational by December 31,
1999,  and therefore will be fully Year 2000  compliant.  The affiliate does not
expect any other changes required for the Year 2000 to have a material effect on
its financial position or results of operations.  As such, the affiliate has not
developed any specific  contingency  plans in the event it fails to complete the
conversion to a new system by December 31, 1999. In addition, the affiliate does
not expect any Year 2000 issues  relating to its customers and vendors to have a
material effect on its financial position or results of operations.

III.  New Accounting Pronouncements
      -----------------------------

In June 1997,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial   Accounting   Standards  No.  130,  Reporting   Comprehensive  Income
("Statement  130"),  which  requires   comprehensive   income  to  be  displayed
prominently within the financial statements.  Comprehensive income is defined as
all  recognized  changes in equity during a period from  transactions  and other
events and  circumstances  except those resulting from investments by owners and
distributions to owners. Net income and items that previously have been recorded
directly in equity are included in comprehensive  income.  Statement 130 affects
only the reporting and  disclosure of  comprehensive  income but does not affect
recognition  or  measurement  of income.  Statement  130 is effective for fiscal
years beginning after December 15, 1997, with earlier application permitted. The
Partnership adopted Statement 130 in the first quarter of 1998. The adoption did
not have an impact on its financial reporting.

In June 1997,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  No.  131,  Disclosures  about  Segments  of an
Enterprise and Related  Information  ("Statement  131").  Statement 131 provides
guidance for reporting  information about operating segments in annual financial

                                      -11-

<PAGE>


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

III.  New Accounting Pronouncements, continued
      -----------------------------

statements  and  requires  reporting  of selected  information  about  operating
segments in interim financial reports of public companies.  An operating segment
is defined as a component of a business that engages in business activities from
which it may earn  revenue  and incur  expenses,  a  component  whose  operating
results are regularly  reviewed by the company's chief operating decision maker,
and a component for which discrete financial information is available. Statement
131 establishes  quantitative thresholds for determining operating segments of a
company.  Statement 131 is effective for fiscal years  beginning  after December
15, 1997, with earlier application permitted.  The Partnership adopted Statement
131 in the first  quarter of 1998.  Since the  Partnership  operates in a single
business  segment,  the  adoption  did  not  have  an  impact  on its  financial
reporting.

In June 1998,  the  Financial  Accounting  Standards  Board issued SFAS No. 133,
Accounting for Derivative  Instruments and Hedging Activities ("Statement 133").
Statement 133  establishes  accounting  and reporting  standards for  derivative
instruments and for hedging activities. It requires that an entity recognize all
derivatives  as either  assets or  liabilities  in the  statement  of  financial
position and measure those instruments at fair value. Statement 133 is effective
for  fiscal  years  beginning  after June 15,  1999,  with  earlier  application
permitted.  The  Partnership  will adopt  Statement  133 in the first quarter of
1999. The General  Partner does not expect the adoption to have an impact on its
financial reporting.

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

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

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

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


                                      -12-

<PAGE>





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

          Index to Financial Statements

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

            Independent Auditors' Report                                    14

            Balance Sheets as of December 31, 1998 and 1997                 15

            Statements of Income for the years ended
              December 31, 1998 and 1997 and for the period
              from April 16, 1996 (commencement of operations)
              to December 31, 1996                                          16

            Statements of Partners' Capital for the years ended
              December 31, 1998 and 1997 and for the period from
              April 16, 1996 (commencement of operations) to
              December 31, 1996                                             17

            Statements of Cash Flows for the years ended
              December 31, 1998 and 1997 and for the period
              from April 16, 1996 (commencement of operations)
              to December 31, 1996                                         18-19

            Notes to Financial Statements                                  20-30


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

            Independent Auditors' Report                                    31

            Schedule II - Valuation and Qualifying Accounts                 32


                                      -13-

<PAGE>



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




THE PARTNERS
CAPITAL PREFERRED YIELD FUND-IV, L.P.

We have  audited the  accompanying  balance  sheets of Capital  Preferred  Yield
Fund-IV,  L.P. as of December 31, 1998 and 1997,  and the related  statements of
income,  partners' capital, and cash flows for the years ended December 31, 1998
and 1997 and the period  from April 16, 1996  (commencement  of  operations)  to
December 31, 1996.  These  financial  statements are the  responsibility  of the
Partnership's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position  of Capital  Preferred  Yield
Fund-IV,  L.P.  as of  December  31,  1998  and  1997,  and the  results  of its
operations and its cash flows for the years ended December 31, 1998 and 1997 and
the period from April 16, 1996  (commencement  of  operations)  to December  31,
1996, in conformity with generally accepted accounting principles.




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

Denver, Colorado
February 22, 1999



                                      -14-

<PAGE>



                      Capital Preferred Yield Fund-IV, L.P.

                                 BALANCE SHEETS
                           December 31, 1998 and 1997

                                     ASSETS

                                                          1998          1997
                                                       -----------   -----------

Cash and cash equivalents                             $  2,634,551  $  4,676,747
Accounts receivable, net                                   465,374       383,407
Receivable from related party                              216,074        10,000
Equipment held for sale or re-lease                        410,599             -
Net investment in direct finance leases                  3,810,382     4,602,977
Leased equipment, net                                   47,340,855    46,488,309
                                                      ------------  ------------

   Total assets                                       $ 54,877,835  $ 56,161,440
                                                      ============  ============


                        LIABILITIES AND PARTNERS' CAPITAL

Liabilities:
   Accounts payable and accrued liabilities           $  1,080,333  $    411,814
   Payables to affiliates                                   46,652        58,722
   Rents received in advance                               597,415       817,900
   Distributions payable to partners                       497,346       433,396
   Discounted lease rentals                             15,708,835    17,633,047
                                                      ------------  ------------

   Total liabilities                                    17,930,581    19,354,879
                                                      ------------  ------------

Partners' capital:
   General partner                                               -             -
   Limited partners:
     Class A 500,000 units authorized; 496,844 and
       455,953 units issued and outstanding in 1998
       and 1997, respectively                           36,507,167    36,374,010
     Class B                                               440,087       432,551
                                                      ------------  ------------

   Total partners' capital                              36,947,254    36,806,561
                                                      ------------  ------------

   Total liabilities and partners' capital            $ 54,877,835  $ 56,161,440
                                                      ============  ============




                 See accompanying notes to financial statements.

                                      -15-

<PAGE>



                      Capital Preferred Yield Fund-IV, L.P.

                              STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                   Period from
                                                          Years Ended             April 16, 1996
                                                          December 31,             (Commencement
                                                -----------------------------    of Operations) to
                                                    1998             1997        December 31, 1996
                                                ------------     ------------    -----------------

<S>                                            <C>              <C>                  <C>      
REVENUE:
   Operating lease rentals                      $ 18,926,287     $ 11,394,668         $ 881,778
   Direct finance lease income                       315,367          259,558             7,805
   Equipment sales margin                            196,434                -                 -
   Interest income                                   122,325          253,514            50,763
                                                ------------     ------------         ---------

     Total revenue                                19,560,413       11,907,740           940,346
                                                ------------     ------------         ---------

EXPENSES:
   Depreciation                                   15,287,524        9,213,581           659,574
   Management fees paid to general partner           422,321          250,233            17,688
   Direct services from general partner              167,569           78,767            41,376
   General and administrative                        190,836          154,757            92,539
   Provision for losses                              105,000                -                 -
   Interest on discounted lease rentals            1,355,602        1,254,984            26,542
                                                ------------     ------------         ---------

     Total expenses                               17,528,852       10,952,322           837,719
                                                ------------     ------------         ---------

NET INCOME                                      $  2,031,561     $    955,418         $ 102,627
                                                ============     ============         =========

NET INCOME ALLOCATED:
   To the general partner                       $     60,459     $     74,673         $  26,271
   To the Class A limited partners                 1,951,241          871,799            75,564
   To the Class B limited partner                     19,861            8,946               792
                                                ------------     ------------         ---------
                                                $  2,031,561     $    955,418         $ 102,627
                                                ============     ============         =========

Net income per weighted average Class A
  limited partner unit outstanding              $       3.95             2.82         $    1.33
                                                ============     ============         =========

Weighted average Class A limited partner
  units outstanding                                  494,222          309,586            56,931
                                                ============     ============         =========

</TABLE>


                 See accompanying notes to financial statements.

                                      -16-

<PAGE>



                      Capital Preferred Yield Fund-IV, L.P.

                         STATEMENTS OF PARTNERS' CAPITAL
                 For the Years Ended December 31, 1998 and 1997
                       and the Period from April 16, 1996
                          (Commencement of Operations)
                              to December 31, 1996

<TABLE>
<CAPTION>

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

<S>                                      <C>           <C>        <C>               <C>            <C>         
Capital contributions                     $       -     154,553    $ 15,455,281      $ 150,000      $ 15,605,281
Commissions and offering costs on
  sales of Class A limited partner units    (22,303)          -      (2,207,967)            -         (2,230,270)
Redemptions                                       -         (50)         (4,784)            -             (4,784)
Net income                                   26,271           -          75,564            792           102,627
Distributions declared to partners           (3,968)          -        (439,720)        (4,549)         (448,237)
                                          ---------   ---------    ------------      ---------      ------------

Partners' capital, December 31, 1996              -     154,503      12,878,374        146,243        13,024,617
Capital contributions                             -     302,080      30,207,960        310,000        30,517,960
Volume discount                                   -           -          (6,000)             -            (6,000)
Commissions and offering costs on
  sales of Class A limited partner units    (43,222)          -      (4,272,883)             -        (4,316,105)
Redemptions                                       -        (630)        (58,902)             -           (58,902)
Net income                                   74,673           -         871,799          8,946           955,418
Distributions declared to partners          (31,451)          -      (3,246,338)       (32,638)       (3,310,427)
                                          ---------   ---------    ------------      ---------      ------------

Partners' capital, December 31, 1997              -     455,953      36,374,010        432,551        36,806,561
Capital contributions                             -      43,367       4,336,754         40,000         4,376,754
Volume discount                                   -            -        (68,895)             -           (68,895)
Commissions and offering costs on
  sales of Class A limited partner units     (7,516)          -        (675,261)             -          (682,777)
Redemptions                                       -      (2,476)       (222,436)             -          (222,436)
Net income                                   60,459           -       1,951,241         19,861         2,031,561
Distributions declared to partners          (52,943)          -      (5,188,246)       (52,325)       (5,293,514)
                                          ---------   ---------    ------------      ---------      ------------

Partners' capital, December 31, 1998      $       -     496,844    $ 36,507,167      $ 440,087      $ 36,947,254
                                          =========   =========    ============      =========      ============

</TABLE>





                 See accompanying notes to financial statements.

                                      -17-

<PAGE>



                      Capital Preferred Yield Fund-IV, L.P.
                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                                   Period from
                                                                                          Years Ended             April 16, 1996
                                                                                          December 31,             (Commencement
                                                                                -----------------------------    of Operations) to
                                                                                    1998             1997        December 31, 1996
                                                                                ------------     ------------    -----------------

<S>                                                                            <C>              <C>               <C>          
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                      $  2,031,561     $    955,418      $     102,627
   Adjustments to reconcile net income to net cash
   provided by operating activities:
     Depreciation                                                                 15,287,524        9,213,581            659,574
     Provision for losses                                                            105,000                -                  -
     Cost of equipment sales                                                         899,272                -                  -
     Recovery of investment in direct finance leases                               1,745,557        1,057,640             20,040
   Changes in assets and liabilities:
     Increase in accounts receivable                                                 (47,265)        (319,755)           (76,524)
     Increase in receivable from related party                                      (206,074)               -                  -
     Increase in accounts payable and accrued liabilities                            668,519          122,980            651,476
     (Decrease) increase in payables to affiliates                                   (12,070)          15,239             43,483
     (Decrease) increase in rents received in advance                               (220,485)         416,514             31,991
                                                                                ------------     ------------      -------------
Net cash provided by operating activities                                         20,251,539       11,461,617          1,432,667
                                                                                ------------     ------------      -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of equipment on operating leases from affiliates                    (14,699,101)     (28,986,004)       (12,939,697)
   Investment in direct financing leases, acquired from affiliates                  (620,284)      (2,123,638)          (202,368)
                                                                                ------------     ------------      -------------
Net cash used in investing activities                                            (15,319,385)     (31,109,642)       (13,142,065)
                                                                                ------------     ------------      -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from Class A capital contributions                                     4,336,754       30,207,960         15,455,281
   Proceeds from Class B capital contributions                                        40,000          300,000            150,000
   Proceeds from discounted lease rentals                                          3,994,817        3,687,846          1,923,239
   Principal payments on discounted lease rentals                                 (9,142,248)      (5,766,722)            (7,244)
   Redemptions of Class A limited partner units                                     (222,436)         (58,902)            (4,784)
   Commissions paid to affiliate in connection with
     the sale of Class A limited partner units                                      (434,326)      (3,020,146)        (1,545,528)
   Non-accountable organization and offering expense
     reimbursement paid to the general partner in connection
     with the sale of Class A limited partner units                                 (317,347)      (1,301,960)          (656,155)
   Distributions to partners                                                      (5,229,564)      (3,009,376)          (319,339)
                                                                                ------------     ------------      -------------
Net cash (used in) provided by financing activities                               (6,974,350)      21,038,700         14,995,470
                                                                                ------------     ------------      -------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                              (2,042,196)       1,390,675          3,286,072
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                   4,676,747        3,286,072                  -
                                                                                ------------     ------------      -------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                      $  2,634,551     $  4,676,747      $   3,286,072
                                                                                ============     ============      =============

                                      -18-

<PAGE>



                                           Capital Preferred Yield Fund-IV, L.P.
                                                 STATEMENTS OF CASH FLOWS


                                                                                                                   Period from
                                                                                          Years Ended             April 16, 1996
                                                                                          December 31,             (Commencement
                                                                                -----------------------------    of Operations) to
                                                                                    1998             1997        December 31, 1996
                                                                                ------------     ------------    -----------------

Supplemental disclosure of cash flow information:
   Interest paid on discounted lease rentals                                    $  1,343,176     $  1,238,980     $       26,542
Supplemental disclosure of noncash investing and
   financing activities:
   Reduction in Partners' capital accounts for
     commissions and offering costs payable to affiliates                                  -           18,879             28,587
   Discounted lease rentals assumed in equipment acquisitions                      3,223,219       16,946,684            849,244

</TABLE>



























                 See accompanying notes to financial statements.

                                      -19-

<PAGE>



                      Capital Preferred Yield Fund-IV, L.P.
                          NOTES TO FINANCIAL STATEMENTS

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

    ORGANIZATION

    Capital Preferred Yield Fund-IV,  L.P. (the  "Partnership") was organized on
    December  18, 1995 as a limited  partnership  under the laws of the State of
    Delaware  pursuant to an Agreement of Limited  Partnership (the "Partnership
    Agreement").  The  Partnership  was formed for the purpose of acquiring  and
    leasing a diversified  portfolio of equipment to unaffiliated third parties.
    The  Partnership  will continue  until  December 31, 2007 unless  terminated
    earlier  in  accordance  with the terms of the  Partnership  Agreement.  All
    Partnership equipment is expected to be sold and the Partnership  liquidated
    between  2003 and  2007.  The  general  partner  of the  Partnership  is CAI
    Equipment Leasing V Corp., a wholly owned subsidiary of Capital  Associates,
    Inc. ("CAI").

    The general partner manages the Partnership,  including investment of funds,
    purchase and sale of equipment,  lease negotiation and other  administrative
    duties. The Partnership commenced business operations on April 16, 1996, and
    from that date through  December 31, 1998,  500,000 Class A limited  partner
    units  were sold to  approximately  2,345  investors  at a price of $100 per
    Class A limited partner unit.

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

    USE OF ESTIMATES

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

    PARTNERSHIP ALLOCATIONS

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

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

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

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

                                      -20-

<PAGE>


                      Capital Preferred Yield Fund-IV, L.P.
                    NOTES TO FINANCIAL STATEMENTS, continued

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

    PARTNERSHIP ALLOCATIONS, continued

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

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

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

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

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

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

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

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

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

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

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

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

                                      -21-

<PAGE>


                      Capital Preferred Yield Fund-IV, L.P.
                    NOTES TO FINANCIAL STATEMENTS, continued

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

    PARTNERSHIP ALLOCATIONS, continued

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

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

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

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

    Financial Reporting - Profits and Losses
    ----------------------------------------

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

    RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS

    In June 1997, the Financial  Accounting  Standards Board issued Statement of
    Financial  Accounting  Standards  No. 130,  Reporting  Comprehensive  Income
    ("Statement  130"),  which  requires  comprehensive  income to be  displayed
    prominently within the financial statements. Comprehensive income is defined
    as all recognized  changes in equity during a period from  transactions  and
    other events and  circumstances  except those resulting from  investments by
    owners and  distributions  to owners.  Net income and items that  previously
    have been recorded directly in equity are included in comprehensive  income.
    Statement  130 affects only the reporting  and  disclosure of  comprehensive
    income but does not affect  recognition or measurement of income.  Statement
    130 is effective for fiscal years  beginning  after December 15, 1997,  with
    earlier application permitted.  The Partnership adopted Statement 130 in the
    first quarter of 1998.  The adoption did not have an impact on its financial
    reporting.

    In June 1997, the Financial  Accounting  Standards Board issued Statement of
    Financial  Accounting  Standards No. 131,  Disclosures  about Segments of an
    Enterprise and Related Information ("Statement 131"). Statement 131 provides
    guidance  for  reporting  information  about  operating  segments  in annual



                                      -22-

<PAGE>


                      Capital Preferred Yield Fund-IV, L.P.
                    NOTES TO FINANCIAL STATEMENTS, continued

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

    RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS, continued

    financial  statements and requires  reporting of selected  information about
    operating  segments in interim  financial  reports of public  companies.  An
    operating  segment is defined as a component  of a business  that engages in
    business  activities  from which it may earn revenue and incur  expenses,  a
    component  whose operating  results are regularly  reviewed by the company's
    chief operating decision maker, and a component for which discrete financial
    information is available.  Statement 131 establishes quantitative thresholds
    for determining operating segments of a company.  Statement 131 is effective
    for fiscal years beginning after December 15, 1997, with earlier application
    permitted.  The  Partnership  adopted  Statement 131 in the first quarter of
    1998.  Since the  Partnership  operates in a single  business  segment,  the
    adoption did not have an impact on its financial reporting.

    In June 1998, the Financial  Accounting Standards Board issued SFAS No. 133,
    Accounting for Derivative  Instruments  and Hedging  Activities  ("Statement
    133").  Statement 133  establishes  accounting  and reporting  standards for
    derivative  instruments  and for hedging  activities.  It  requires  that an
    entity  recognize all  derivatives  as either assets or  liabilities  in the
    statement of financial position and measure those instruments at fair value.
    Statement 133 is effective for fiscal years  beginning  after June 15, 1999,
    with earlier application permitted. The Partnership will adopt Statement 133
    in the first  quarter  of 1999.  The  General  Partner  does not  expect the
    adoption to have an impact on its financial reporting.

    LONG-LIVED ASSETS

    The  Partnership  accounts for  long-lived  assets under the  provisions  of
    Statement of Financial  Accounting  Standards  No. 121,  Accounting  for the
    Impairment of Long-lived  Assets and for Long-lived Assets to be Disposed Of
    ("SFAS No. 121").  SFAS No. 121 requires that long-lived  assets,  including
    equipment subject to operating leases and certain  identifiable  intangibles
    to be held and used by an entity, be reviewed for impairment whenever events
    or changes in  circumstances  indicate that the carrying  amount of an asset
    may not be  recoverable.  In performing the review for  recoverability,  the
    entity should estimate the future net cash flows expected to result from the
    use of the asset and its  eventual  disposition.  If the sum of the expected
    future net cash flows  (undiscounted  and without interest  charges) is less
    than the carrying  amount of the asset,  an impairment  loss is  recognized.
    Measurement of an impairment loss for long-lived assets, including equipment
    subject  to  operating  leases  and  identifiable  intangibles  held  by the
    Partnership,  is based on the fair value of the asset. The fair value of the
    asset may be calculated by discounting the expected future net cash flows at
    an appropriate interest rate.

    LEASE ACCOUNTING

    Statement of Financial  Accounting  Standards No. 13, Accounting for Leases,
    requires  that a lessor  account  for  each  lease  by the  direct  finance,
    sales-type or operating lease method. The Partnership currently utilizes the
    direct  financing  and  operating  methods  for  all  of  the  Partnership's


                                      -23-

<PAGE>


                      Capital Preferred Yield Fund-IV, L.P.
                    NOTES TO FINANCIAL STATEMENTS, continued

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

    LEASE ACCOUNTING, continued

    equipment  under lease.  Direct  finance  leases are defined as those leases
    which transfer  substantially  all of the benefits and risks of ownership of
    the equipment to the lessee.  For all types of leases,  the determination of
    profit considers the estimated value of the equipment at lease  termination,
    referred to as the  residual  value.  After the  inception  of a lease,  the
    Partnership  may engage in financing of lease  receivables  on a nonrecourse
    basis (i.e.,  "non-recourse  debt" or  "discounted  lease  rentals")  and/or
    equipment sale transactions to reduce or recover its investment in the equip
    ment.

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

    NET INVESTMENT IN DIRECT FINANCE LEASES ("DFLS")

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

    EQUIPMENT ON OPERATING LEASES ("OLS")

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

    NON-RECOURSE DISCOUNTING OF RENTALS

    The  Partnership  may assign the future  rentals  from  leases to  financial
    institutions,  or  acquire  leases  subject  to such  assignments,  at fixed
    interest rates on a non-recourse  basis.  In return for such assigned future
    rentals,  the  Partnership  receives the discounted  value of the rentals in

                                      -24-

<PAGE>


                      Capital Preferred Yield Fund-IV, L.P.
                    NOTES TO FINANCIAL STATEMENTS, continued

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

    NON-RECOURSE DISCOUNTING OF RENTALS, continued

    cash. In the event of default by a lessee,  the financial  institution has a
    first lien on the  underlying  leased  equipment,  with no further  recourse
    against  the  Partnership.  Cash  proceeds  from  such  financings,  or  the
    assumption  of  such  financings,  are  recorded  on the  balance  sheet  as
    discounted   lease   rentals.   As  lessees   make   payments  to  financial
    institutions, leasing revenue and interest expense are recorded.

    ALLOWANCE FOR LOSSES

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

    TRANSACTIONS SUBSEQUENT TO INITIAL LEASE TERMINATION

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

    INCOME TAXES

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

    CASH EQUIVALENTS

    The Partnership  considers  short-term,  highly liquid  investments that are
    readily  convertible to known amounts of cash to be cash  equivalents.  Cash
    equivalents of approximately  $2,634,000 and $4,676,000 at December 31, 1998
    and 1997, respectively,  are comprised of investments in a mutual fund which
    invests solely in U.S.  Government  treasury  bills having  maturities of 90
    days or less.

    NET INCOME PER CLASS A LIMITED PARTNER UNIT

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

                                      -25-

<PAGE>


                      Capital Preferred Yield Fund-IV, L.P.
                    NOTES TO FINANCIAL STATEMENTS, continued

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

    The components of the net investment in direct finance leases as of December
    31, 1998 and 1997 were:

                                                        1998           1997 
                                                     -----------    -----------

    Minimum lease payments receivable                $ 3,428,760    $ 4,420,096
    Estimated residual values                            805,340        781,773
    Less unearned income                                (423,718)      (598,892)
                                                     -----------    -----------
            Total                                    $ 3,810,382    $ 4,602,977
                                                     ===========    ===========

3.  Leased Equipment, net
    ---------------------

    The  Partnership's  investment  in equipment  on  operating  leases by major
    classes as of December 31, 1998 and 1997 were:

                                                       1998            1997 
                                                   ------------    ------------

     Transportation and industrial equipment       $ 32,877,921    $ 26,164,592
     Computers and peripherals                       18,389,166      14,774,631
     Office furniture and equipment                  17,214,503      13,168,649
     Other                                            2,278,628       2,228,605
                                                   ------------    ------------
                                                     70,760,218      56,336,477
     Less:
     Accumulated depreciation                       (23,344,363)     (9,848,168)
     Allowance for losses                               (75,000)              -
                                                   ------------    ------------
                                                   $ 47,340,855    $ 46,488,309
                                                   ============    ============

    Depreciation expense for 1998, 1997 and 1996 was $15,287,524, $9,213,581 and
    $659,574, respectively.

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

    Future minimum lease payments  receivable  from  noncancelable  leases as of
    December 31, 1998 are as follows:

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

                  1999                           $ 1,797,586      $ 16,623,450
                  2000                               811,458        10,507,362
                  2001                               416,245         5,980,934
                  2002                               286,812         2,404,272
                  Thereafter                         116,659           689,370
                                                 -----------      ------------
                           Total                 $ 3,428,760      $ 36,205,388
                                                 ===========      ============

                                      -26-

<PAGE>


                      Capital Preferred Yield Fund-IV, L.P.
                    NOTES TO FINANCIAL STATEMENTS, continued

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

    Discounted  lease rentals  outstanding at December 31, 1998 bear interest at
    rates  primarily  ranging between 6% and 10%.  Aggregate  maturities of such
    non-recourse obligations are:

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

                  1999                                        $  8,255,175
                  2000                                           4,459,942
                  2001                                           2,607,625
                  2002                                             344,540
                  Thereafter                                        41,553
                                                              ------------
                                                              $ 15,708,835
                                                              ============

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

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

    Under the terms of the  Partnership  Agreement,  an affiliate of the general
    partner is entitled to receive sales  commissions and wholesaling fees equal
    to 10% of the Class A limited partners' capital  contributions,  up to 9% of
    which  is  paid to  participating  broker-dealers.  During  1998  and  1997,
    respectively,  the Partnership  incurred sales  commissions of approximately
    $434,000 and $3,021,000, including $363,000 and $2,562,000 that were paid to
    participating broker-dealers.

    As  provided  in the  Partnership  Agreement,  the  general  partner  earned
    approximately  $174,000 and $1,208,000 as  reimbursement  for offering costs
    incurred  during  1998  and  1997,  respectively,  in  connection  with  the
    organization  of the Partnership and the offering of Class A limited partner
    units. The general partner also received  approximately  $75,000 and $88,000
    as reimbursement  for due diligence  expenses incurred during 1998 and 1997,
    respectively.

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

    Under terms of the Partnership  Agreement,  the Class B limited partner made
    capital contributions to the Partnership of $40,000 and $310,000 during 1998
    and 1997, respectively.

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

    The  general  partner  earns  a fee  equal  to 3.5% of the  sales  price  of
    equipment  sold to the  Partnership  (up to a maximum  cumulative  amount as
    specified  in  the  Partnership  Agreement),   1.5%,  of  which,  represents
    compensation for selecting,  negotiating and consummating the acquisition of
    the  equipment  and 2%,  of which,  represents  reimbursement  for  services
    rendered in connection  with evaluating the suitability of the equipment and
    the creditworthiness of the lessees. Origination and evaluation fees totaled
    approximately $606,000 and $1,586,000 in 1998 and 1997, respectively, all of
    which were  capitalized by the  Partnership as part of the cost of equipment
    on operating leases and net investment in direct financing leases.

                                      -27-

<PAGE>


                      Capital Preferred Yield Fund-IV, L.P.
                    NOTES TO FINANCIAL STATEMENTS, continued

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

    Management Fees Paid to General Partner
    ---------------------------------------

    The  general  partner  earns  management  fees  for  services  performed  in
    connection  with managing the  Partnership's  equipment equal to 2% of gross
    rentals received as permitted under terms of the Partnership Agreement.  The
    general  partner  earned  approximately  $422,000,  $250,000  and $18,000 of
    management fees during 1998, 1997, and 1996, respectively.

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

    The  general  partner  and  its  affiliates  provide  accounting,   investor
    relations,  billing,  collecting, asset management, and other administrative
    services to the Partnership.  The Partnership reimburses the general partner
    for these services  performed on its behalf as permitted  under the terms of
    the Partnership Agreement.  The partnership recorded approximately $168,000,
    $79,000 and $41,000 of direct  services  from general  partner  during 1998,
    1997 and 1996, respectively.

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

    The Partnership  purchased  equipment from CAII, with a total purchase price
    of  approximately   $18,542,605  (including   approximately   $3,223,219  of
    discounted  lease  rentals)  during  1998.  The  Partnership  purchased  the
    equipment  at  CAII's  historical  cost  plus  reimbursement  of  other  net
    acquisition costs, as provided for in the Partnership Agreement.

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

    Payables  to  affiliates  of  approximately  $47,000 and $59,000 in 1998 and
    1997,  respectively,  consists of $8,000 for direct  services  from  general
    partner, $35,000 for management fees paid to general partner, and $4,000 for
    reimbursable  general and  administrative  expenses in 1998,  and $8,000 for
    direct  services from general  partner,  $32,000 for management fees paid to
    general partner, and $19,000 for due diligence expenses in 1997.

    Receivable From Related Party
    -----------------------------

    The General  Partner  collects and applies  rental  payments to the lessee's
    account with the  Partnership,  for those lessees who remit  directly to the
    General   Partner.   The  rental  payments  are  then   transferred  to  the
    Partnership,  eliminating the receivable from related party balance.  At the
    end of December 1998,  $216,074 in rents were applied by the General Partner
    that were transferred to the Partnership in January 1999.




                                      -28-

<PAGE>


                      Capital Preferred Yield Fund-IV, L.P.
                    NOTES TO FINANCIAL STATEMENTS, continued

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

    The following  reconciles net income for financial reporting purposes to the
    income for federal income tax purposes for the periods ended December 31:

<TABLE>
<CAPTION>
                                                               1998                 1997                1996
                                                               ----                 ----                ----

   <S>                                                   <C>                   <C>                  <C>       
    Net income per financial statements                   $  2,031,561          $    955,418         $  102,627
    Direct finance leases                                    1,745,558             1,057,640             20,040
    Depreciation                                            (4,962,903)           (4,245,112)          (567,815)
    Provision for losses                                       105,000                     -                  -
    Loss on sale of equipment                                 (494,248)                    -                  -
    Other                                                      245,990               400,382             87,042
                                                          ------------          ------------         ----------
    Partnership income for federal income tax purposes    $ (1,329,042)         $ (1,831,672)        $ (358,106)
                                                          ============          ============         ==========

</TABLE>

    The following  reconciles partners' capital for financial reporting purposes
    to partners' capital for federal income tax purposes as of December 31:

<TABLE>
<CAPTION>
                                                               1998                 1997                1996
                                                               ----                 ----                ----

   <S>                                                   <C>                   <C>                  <C>         
    Partners' capital per financial statements            $ 36,947,254          $ 36,806,561         $ 13,024,617
    Commissions and offering costs                           7,304,048             6,552,375            2,230,270
    Direct finance leases                                    2,823,238             1,077,680               20,040
    Depreciation                                            (9,775,830)           (4,812,927)            (567,815)
    Provision for losses                                       105,000                     -                    -
    Loss on sale of equipment                                 (494,248)                    -                    -
    Other                                                      751,712               476,622               81,277
                                                          ------------          ------------         ------------
    Partners' capital for federal income tax purposes     $ 37,661,174          $ 40,100,311         $ 14,788,389
                                                          ============          ============         ============

</TABLE>

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

    Approximately 77% of the  Partnership's  equipment under lease was leased to
    investment  grade  companies.  Pursuant  to the  Partnership  Agreement,  an
    investment  grade  lessee  is a  company  (i) with a net  worth in excess of
    $100,000,000  (and no debt  issues  that are  rated),  or (ii) with a credit
    rating of not less than Baa as determined by Moody's Investor Services, Inc.
    or  comparable  credit rating as  determined  by another  recognized  credit
    rating  service;  or (iii) a lessee,  all of whose lease  payments have been
    unconditionally  guaranteed  or supported by a letter of credit  issued by a
    company meeting one of the above requirements.

    No  single  lessee  accounted  for more  than 10% of  total  revenue  of the
    Partnership during 1998.

    One lessee accounted for  approximately 12% ($1,387,000) of total revenue of
    the Partnership during 1997.


                                      -29-

<PAGE>


                      Capital Preferred Yield Fund-IV, L.P.
                    NOTES TO FINANCIAL STATEMENTS, continued

8.  Concentration of Credit Risk, continued
    ----------------------------

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

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

    Statement of Financial  Standards No. 107,  Disclosures  about Fair Value of
    Financial   Instruments   specifically   excludes  certain  items  from  its
    disclosure  requirements  such as the  Partnership's  investment  in  leased
    assets.  The  carrying  amounts  at  December  31,  1998  for  cash and cash
    equivalents,  accounts receivable, accounts payable and accrued liabilities,
    payable to  affiliates,  rents and sale  proceeds  received  in advance  and
    distributions  payable to partners  approximate their fair values due to the
    short maturity of these instruments.

    As  of  December  31,  1998,   discounted  lease  rentals  of  approximately
    $15,709,000 had fair values of  $14,844,000.  The fair values were estimated
    utilizing  market rates of comparable  debt having  similar  maturities  and
    credit quality as of December 31, 1998.







                                      -30-

<PAGE>













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



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

Under date of February  22, 1999,  we reported on the balance  sheets of Capital
Preferred Yield Fund-IV,  L.P. as of December 31, 1998 and 1997, and the related
statements  of income,  partners'  capital,  and cash flows for the years  ended
December 31, 1998 and 1997, and the period from April 16, 1996  (commencement of
operations)  to December 31, 1996,  as  contained  in the  Partnership's  annual
report on Form 10-K for the year  1998.  In  connection  with our  audits of the
aforementioned  financial  statements,  we also  audited the  related  financial
statement  Schedule  II, as listed in the  accompanying  index.  This  financial
statement  schedule is the responsibility of the Partnership's  management.  Our
responsibility  is to express an opinion on this  financial  statement  schedule
based on our audits.

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



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

Denver, Colorado
February 22, 1999








                                      -31-

<PAGE>



                      CAPITAL PREFERRED YIELD FUND-IV, L.P.

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                      for the year ended December 31, 1998


COLUMN A                           COLUMN B    COLUMN C     COLUMN D   COLUMN E
--------                          ----------  ----------   ----------  --------
                                  Balance at   Additions               Balance
                                  Beginning   Charged to               at End
Classification                     of Year     Expenses    Deductions  of Year
--------------                    ----------  ----------   ----------  --------

             1998
-------------------------------

Allowance for losses:
  Accounts receivable              $     -    $  30,000      $    -    $  30,000
  Equipment on operating leases          -       75,000           -       75,000
                                   -------    ---------      ------    ---------

                                   $     -    $ 105,000      $    -    $ 105,000
                                   =======    =========      ======    =========


























                  See accompanying independent auditors' report

                                      -32-

<PAGE>



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

None.


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

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

                          CAI Equipment Leasing V Corp.

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

     John F. Olmstead           President and Director

     Anthony M. DiPaolo         Senior Vice  President, Principal  Financial and
                                Chief Administrative Officer and Director

     Richard H. Abernethy       Vice President and Director

     Joseph F. Bukofski         Vice President, Assistant Secretary and Director

     Robert A. Golden           Director

     Mick Myers                 Director

     Ann Danielson              Assistant Vice President
 
     David J. Anderson          Chief Accounting Officer and Secretary

JOHN F. OLMSTEAD, age 54, joined CAII as Vice President in December,  1988, is a
Senior  Vice  President  of CAI and CAII  and is head of  CAII's  Public  Equity
division.  He has served as Chairman of the Board for Neo-kam Industries,  Inc.,
Matchless Metal Polish Company, Inc. and ACL, Inc. for more than 5 years. He has
over 20 years of experience  holding various  positions of responsibility in the
leasing  industry.  Mr. Olmstead holds a Bachelor of Science degree from Indiana
University and a Juris Doctorate degree from Indiana Law School.

ANTHONY M. DIPAOLO,  age 40, joined CAII in July 1990 as Assistant Treasurer and
is currently Senior Vice  President-Chief  Financial  Officer.  He also held the
positions   of   Senior   Vice    President-Controller    and   Assistant   Vice
President-Credit  Administration  for the Company.  Mr. DiPaolo has held similar
senior financial management positions with two public companies between 1986 and
June 1990, and prior to then was an audit manager for the public accounting firm
of  Coopers &  Lybrand.  Mr.  DiPaolo  holds a  Bachelor  of  Science  degree in
Accounting from the University of Denver.


                                      -33-

<PAGE>



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

RICHARD H. ABERNETHY,  age 45, joined CAII in April 1992 as Equipment  Valuation
Manager and  currently  serves as Vice  President of Portfolio  Management.  Mr.
Abernethy has thirteen years experience in the leasing industry, including prior
positions with Barclays  Leasing Inc.,  from November 1986 to February 1992, and
Budd Leasing  Corporation,  from January 1981 to November  1986.  Mr.  Abernethy
holds a Bachelor of Arts in Business Administration from the University of North
Carolina at Charlotte.

JOSEPH F. BUKOFSKI, age 43, joined CAII in June 1990 as a Financial Analyst. Mr.
Bukofski is currently the Vice President-Pricing. Prior to joining the Marketing
Department,  Mr. Bukofski was Assistant Vice President and Controller.  Prior to
joining the Company,  he was a geologist  with Barringer  Geoservices,  Inc. for
eleven  years.  Mr.  Bukofski  holds a Bachelor of Science  degree in  Secondary
Education - Earth Science from Bloomsburg University and a Masters of Science in
Accounting from the University of Colorado.

ROBERT A. GOLDEN,  age 53, is Vice  President and the National  Sales Manager of
the Company.  Mr. Golden joined the Company in 1993 as a Branch Manager.  He was
promoted  to his  current  position  in  September  1994.  Prior to joining  the
Company, he was an Executive Vice President with the U.S. Funds Group, President
of BoCon Capital  Group and Vice  President  with  Ellco/GE  Capital for fifteen
years. Mr. Golden is an officer, but not a director, of CAII.

MICK MYERS, age 41, joined CAI in February 1992 as a Senior  Portfolio  Manager.
Currently he is Assistant Vice President of Asset Management. Mr. Myers has nine
years experience in the leasing industry.  Previously,  he has held the position
of Senior End of Lease  Negotiator  with  ELLCO/GE  Capital.  Mr.  Myers holds a
Bachelor of Science degree from the University of Wyoming.

ANN DANIELSON,  age 35, joined CAII in February 1990 and is currently  Assistant
Vice  President,  Assistant  Treasurer and is responsible for the Company's cash
management and collections functions. Prior to joining the Company, she was with
U.S.  West  financial  Services  and Coopers & Lybrand.  Ms.  Danielson  holds a
Bachelor of Arts Degree from the University of Northern Iowa.

DAVID J.  ANDERSON,  age 46,  joined CAII in August 1990 as Manager of Billing &
Collections   and   currently   serves  as  Assistant   Vice-President/Assistant
Controller.  Prior to joining CAII, Mr. Anderson was Vice-  President/Controller
for Systems  Marketing,  Inc., from 1985 to 1990, and previous to that worked in
several senior staff  positions at the Los Alamos  National  Laboratory and with
Ernst & Whinney. Mr. Anderson holds a Bachelor of Business Administration degree
in Accounting from the University of Wisconsin.


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

No compensation was paid by the Partnership to the officers and directors of the
general partner. See Item 13 of this Report,  "Certain Relationships and Related
Transactions,"  which is incorporated herein by reference,  for a description of
the  compensation and fees paid to the general partner and its affiliates by the
Partnership during 1998.


                                      -34-

<PAGE>





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

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

          CAII,  an  affiliate  of the  general  partner  is the Class B limited
          partner.

          CAI Equipment Leasing V Corp. is the general partner.

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

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

          CAI Equipment Leasing V Corp.
          7175 W. Jefferson Avenue
          Suite 4000
          Lakewood, Colorado 80235
 
          Class B Limited Partner
          -----------------------

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

     (b)  No directors or officers of the general partner or the Class B limited
          partner owned any Class A limited partner units as of March 18, 1999.

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


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

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

Following is a summary of the amounts paid or payable to the general partner and
its affiliates during 1998:

                                      -35-

<PAGE>

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

                         ORGANIZATION AND OFFERING STAGE

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

CAI Securities Corporation (the  "Dealer-Manager"),  an affiliate of the general
partner, earned commissions of 10% of the sales price of Class A limited partner
units sold, up to 9% of which was paid to participating  broker-dealers.  During
1998, the Dealer-Manager  earned commissions totaling $433,676 (362,775 of which
was paid to broker-dealers)

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

The  Dealer-Manager is reimbursed for bona fide due diligence  expenses which it
incurs up to a maximum of 1/2% of gross offering  proceeds.  The  Dealer-Manager
incurred $74,621 for due diligence expenses during 1998.

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

The general partner is reimbursed for the organization and offering  expenses it
incurs in organizing the  Partnership and offering Class A limited partner units
for sale to the public. The general partner earned $173,830 for organization and
offering expenses during 1998.


                        ACQUISITION AND OPERATING STAGES


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

The general partner receives a fee equal to 3.5% of the sales price of equipment
sold to the Partnership,  1.5% of which  represents  compensation for selecting,
negotiating  and  consummating  the acquisition of the equipment and 2% of which
represents reimbursement for services rendered in connection with evaluating the
suitability  of  the  equipment  and  the  credit   worthiness  of  the  Lessee.
Origination  and  evaluation  fees totaled  $605,565 in 1998,  all of which were
capitalized  by the  Partnership  as part of the cost of  equipment on operating
leases and net investment in direct financing leases.

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

The general  partner  receives  management  fees as  compensation  for  services
rendered in connection with managing the Partnership's  equipment equal to 2% of
gross rentals received. Such fees totaled $422,321 for 1998.

                                      -36-

<PAGE>



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

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

The general  partner is entitled to  reimbursement  of certain  expenses paid on
behalf  of  the   Partnership   which  are  incurred  in  connection   with  the
Partnership's operations. Such reimbursable expenses amounted to $167,569 during
1998.

Additionally,   the  general  partner  is  allocated  1%  of  Partnership   cash
distributions  and net income  relating to its general  partner  interest in the
Partnership.  Distributions  and net income  allocated  to the  general  partner
totaled  $52,943 and  $60,459,  respectively,  for 1998.  Distributions  and net
income  allocated to the Class B limited  partner  totaled  $52,325 and $19,929,
respectively, during 1998.

During 1998, the Partnership acquired the equipment described below from CAII:

<TABLE>
<CAPTION>
                                                                                           Cost to
                                                                                         Partnership
                                                                                          Including
                                                                                         Acquisition       Debt        Annual
Lessee                         Equipment Description                      Cost to CAII      Fees*         Assumed       Rents     
------                         ---------------------                      ------------   ------------   -----------  -----------

<S>                           <C>                                        <C>            <C>            <C>          <C> 
Advanced Micro                 Wafer Fabrication                          $  2,048,294   $  2,119,267   $         -  $   523,296
Alliant Techsystems, Inc.      Lathes                                          143,867        148,852             -       26,812
Alliant Techsystems, Inc.      PBX system                                      711,132        735,773             -        9,218
Alliant Techsystems, Inc.      Sweeper/Scrubber                                 20,818         21,539             -        4,891
Alliant Techsystems, Inc.      Wedge bonder                                     95,713         99,029             -       29,531
Ball Corporation               Can inspection system                           113,570        117,505             -       23,534
Brown-Strauss Steel Div.       Forklift                                         95,526         98,836             -       24,788
Busy Beaver Building Ctrs.     Retail furniture, fixtures & equipment          236,536        244,815             -       51,036
CH2M Hill, Inc.                Office furniture, fixtures & equipment          115,119        119,108       101,630       24,744
CMC Industries                 Solder machine                                1,100,000      1,138,115             -      272,923
Conair                         Crown lifts                                      47,282         48,920             -        9,904
Consolidated Diesel            Electric PU                                       5,611          5,805             -        1,757
Consolidated Diesel            Forklift                                        127,851        132,281             -       26,223
Consolidated Diesel            Boom lift                                        33,750         34,919             -        6,882
Consolidated Diesel            Copier                                           53,388         55,238             -       19,208
Consolidated Diesel            Lift truck                                       19,235         19,901             -        4,340
Consolidated Diesel            Projector                                         6,649          6,879             -        2,402
Consolidated Diesel            Reach trucks                                     12,570         13,006             -        4,068
Darigold, Inc.                 Hyster forklift                                   3,486          3,607             -        1,154
Darigold, Inc.                 Rider pallet truck                                8,543          8,839             -        2,827
Dupont                         Yard tractor                                     63,756         65,965             -       12,004
E Trade                        Furniture, fixtures & equipment               1,830,347      1,893,769     1,572,599      607,901
Fingerhut Corp.                Proofing system                                  40,000         41,386             -       11,358
Furr's SuperMarkets            Restaurant furniture, fixtures & equipment      406,623        420,855       332,679      134,952
GEICO                          PC's                                          1,480,185      1,531,474     1,216,311      484,455
General Motors Corp.           Hyster - walkie                                  19,864         20,552             -        6,322
General Motors Corp.           Lawn mower                                       16,085         16,642             -        3,270
General Motors Corp.           Material handler                                 83,063         85,941             -       17,400
General Motors Corp.           Scrubber                                        228,127        236,032             -       47,788
General Motors Corp.           Sweeper                                          99,203        102,640             -       20,766
General Motors Corp.           Sweeper/Scrubber                                231,872        239,906             -       51,989
General Motors Corp.           Tractor                                          57,844         59,848             -       10,985

                                                              -37-

<PAGE>



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

Accountable General and Administrative Expenses, continued
-----------------------------------------------

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

Georgetown Steel               Hyster forklift                            $     48,867   $     50,560   $         -  $    17,892
Glassmaster Company            Machine tools                                   566,785        586,623             -      134,049
ICI Americas Inc.              Boom lift                                        72,266         74,770             -       15,326
ICI Americas Inc.              Material handler                                 76,750         79,409             -       14,814
ICI Americas Inc.              Personal computers                               17,300         17,899             -            0
ICI Americas Inc.              Scissor lift                                      8,300          8,588             -        5,189
ICI Americas Inc.              Scrubber                                         29,640         30,667             -        6,691
International Paper Co.        Boom lift                                        35,934         37,179             -        7,204
International Paper Co.        Forklift                                         38,783         40,127             -        7,779
International Paper Co.        Lift truck                                       48,577         50,261             -        9,282
New York State Electric        PC's/Networking                                 292,311        302,542             -      147,795
Owens Corning Fiberglass       PC's/Networking                               2,255,722      2,334,672             -      966,522
Pharmacia Iovision Inc.        Microscopic equipment                           159,650        165,182             -       50,780
Polo Ralph Lauren              Personal computers                              367,426        380,286             -      203,454
Prairie International          Tractor                                         443,220        458,577             -      103,726
Red Mountain Mining Inc.       Forklifts                                       422,968        437,772             -       98,652
Rohr                           Hyster - forklift                                23,886         24,714             -        6,316
Tasc, Inc.                     Computer equipment                              389,166        401,549             -      127,153
Teleflex Inc.                  PC's/Networking                                 166,992        172,836             -       76,116
Things Remembered              Point-of-sale equipment                         809,665        838,003             -      412,907
Thomson Industries, Inc.       Drilling machine                                324,066        335,295             -       64,772
Thomson Industries, Inc.       Machine tools                                   955,105        971,258             -      273,532
Thomson Industries, Inc.       Thread grinder                                  251,060        259,759             -       48,923
Universal Forest Products      Forklift                                         47,580         49,229             -       13,019
Versar                         Personal computers                               84,712         87,647             -       29,241
WPM Inc.                       Construction equipment                          444,398        459,952             -       93,012
                                                                          ------------   ------------   -----------  -----------

                                                                          $ 17,937,040   $ 18,542,605   $ 3,223,219  $ 5,412,872
                                                                          ============   ============   ===========  ===========
</TABLE>


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

                                      -38-

<PAGE>



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

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

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

          (b)  The Partnership did not file any  reports on Form 8-K during  the
               quarter ended December 31, 1998.

          (c)  Exhibits required to be filed.

               Exhibit
               Number                          Exhibit Name  
               -------                         ------------

                4.1*     Capital  Preferred  Yield  Fund-IV  Limited Partnership
                         Agreement

                4.2*     First Amendment to Limited  Partnership Agreement dated
                         November 23, 1996

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

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

                                      -39-

<PAGE>


                                   SIGNATURES

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

Dated:   March 30, 1999              Capital Preferred Yield Fund-IV, L.P.

                                     By:   CAI Equipment Leasing V Corporation

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

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the general partner
of the Partnership and in the capacities indicated on March 30, 1999.

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

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


/s/Anthony M. DiPaolo
--------------------------      Senior  Vice  President, Principal Financial and
Anthony M. DiPaolo              Chief Administrative Officer and Director


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


/s/Joseph F. Bukofski
--------------------------
Joseph F. Bukofski              Vice President, Assistant Secretary and Director


/s/Robert A. Golden
--------------------------
Robert A. Golden                Director


/s/Mick Myers
--------------------------
Mick Myers                      Director


/s/Ann Danielson
--------------------------
Ann Danielson                   Assistant Vice President


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

                                      -40-