SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934

For the quarterly period ended                   June 30, 1998
                               -------------------------------------------------

                                       OR

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13  OR 15(D)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from                         to
                               -------------------------------------------------
Commission file number                               0-19164
                       ---------------------------------------------------------

         Capital Preferred Yield Fund, A California Limited Partnership
         --------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


            California                                    68-0190817
      -----------------------               ------------------------------------
      (State of organization)               (I.R.S. Employer Identification No.)

 7175 West Jefferson Avenue, Suite 4000
          Lakewood, Colorado                                 80235
----------------------------------------                  ----------
(Address of principal executive offices)                  (Zip Code)


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

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

                        Exhibit Index appears on Page 12

                               Page 1 of 13 Pages



<PAGE>



                          CAPITAL PREFERRED YIELD FUND
                        A California Limited Partnership

                          Quarterly Report on Form 10-Q
                              For the Quarter Ended
                                  June 30, 1998


                               Table of Contents
                               -----------------


PART I.   FINANCIAL INFORMATION                                             PAGE
                                                                            ----
     Item 1.  Financial Statements (Unaudited)

              Balance Sheets-June 30, 1998 and December 31, 1997              3

              Statements of Income - Three and Six Months Ended
              June 30, 1998 and 1997                                          4

              Statements of Cash Flows - Six Months Ended
              June 30, 1998 and 1997                                          5

              Notes to Financial Statements                                  6-7

     Item 2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                     8-11


PART II.  OTHER INFORMATION


     Item 1.  Legal Proceedings                                              12

     Item 6.  Exhibits and Reports on Form 8-K                               12

              Signature                                                      13

                                        2

<PAGE>



                          CAPITAL PREFERRED YIELD FUND
                        A California Limited Partnership

                                 BALANCE SHEETS


                                     ASSETS

                                                  June 30,          December 31,
                                                    1998               1997
                                                 ------------     --------------
                                                  (Unaudited)

Cash and cash equivalents                        $ 3,655,429       $  2,839,510
Accounts receivable, net                           4,729,660          7,579,737
Receivable from related party                         59,858                  -
Equipment held for sale or re-lease                  268,244            887,865
Net investment in direct finance leases              315,574            229,696
Leased equipment, net                                357,416          1,074,600
                                                 -----------       ------------

Total assets                                     $ 9,386,181       $ 12,611,408
                                                 ===========       ============

                        LIABILITIES AND PARTNERS' CAPITAL

Liabilities:
  Payables to affiliates                         $    49,751       $     44,916
  Accounts payable and accrued liabilities         1,205,853            905,979
  Rents received in advance                           92,801            162,931
  Distributions payable to partners                2,402,589          1,241,334
  Financed operating lease rentals                   494,013          1,131,105
                                                 -----------       ------------
                                                 
Total liabilities                                  4,245,007          3,486,265
                                                 -----------       ------------


Partners' capital:
  General partner                                          -                  -
  Limited partners:
    Class A                                        3,224,503          6,923,098
    Class B                                        1,916,671          2,202,045
                                                 -----------       ------------

Total partners' capital                            5,141,174          9,125,143
                                                 -----------       ------------

Total liabilities and partners' capital          $ 9,386,181       $ 12,611,408
                                                 ===========       ============


   The accompanying notes are an integral part of these financial statements.

                                        3

<PAGE>



                          CAPITAL PREFERRED YIELD FUND
                        A California Limited Partnership

                              STATEMENTS OF INCOME
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                             Three Months Ended                   Six Months Ended
                                                                  June 30,                              June 30,
                                                        -------------------------------     -----------------------------
                                                            1998              1997               1998            1997
                                                        ------------      -------------     ------------    -------------
<S>                                                     <C>               <C>               <C>             <C>        
Revenue:
  Operating lease rentals                                $   50,755        $ 1,606,275       $  160,928      $ 3,168,487
  Direct finance lease income                                 9,594            264,957          104,308          514,379
  Equipment sales margin                                    165,344            110,068          558,006          237,562
  Interest income                                            16,294             22,102           35,433           42,170
                                                         ----------        -----------       ----------      -----------
     Total revenue                                          241,987          2,003,402          858,675        3,962,598
                                                         ----------        -----------       ----------      -----------

Expenses:
  Depreciation                                               22,467            936,231          128,783        1,944,767
  Management fees paid to general partner                     9,944            112,996           18,514          226,100
  Direct services from general partner                       34,856             39,058           58,639           84,149
  Interest on discounted lease rentals                            -             55,031               28          125,223
  Interest on financed operating lease rentals               14,398             13,505           27,037           26,662
  General and administrative                                125,198             96,233          180,576          162,142
  Provision for losses                                      425,000            100,000          475,000          225,000
                                                         ----------        -----------       ----------      -----------
     Total expenses                                         631,863          1,353,054          888,577        2,794,043
                                                         ----------        -----------       ----------      -----------

Net income (loss)                                        $ (389,876)       $   650,348       $  (29,902)     $ 1,168,555
                                                         ==========        ===========       ==========      ===========

Net income (loss) allocated:
  To the general partner                                 $   92,018        $   111,785       $  177,934      $   217,953
  To the Class A limited partners                          (448,042)           500,718         (193,244)         883,802
  To the Class B limited partner                            (33,852)            37,845          (14,592)          66,800
                                                         ----------        ------------      ----------      -----------

                                                         $ (389,876)       $   650,348       $  (29,902)     $ 1,168,555
                                                         ==========        ===========       ==========      ===========
  Net income (loss) per weighted average
     Class A limited partner units outstanding           $    (1.78)       $      1.99       $    (0.77)     $      3.51
                                                         ==========        ===========       ==========      ===========

  Weighted average Class A limited
      partner unit outstanding                              251,388            251,614          251,388          251,661
                                                         ==========        ===========       ==========      ===========
</TABLE>





   The accompanying notes are an integral part of these financial statements.

                                        4

<PAGE>



                          CAPITAL PREFERRED YIELD FUND
                        A California Limited Partnership

                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                             Six Months Ended
                                                                                 June 30,
                                                                    ---------------------------------
                                                                        1998                  1997
                                                                    -----------           -----------

<S>                                                                <C>                   <C>        
Net cash provided by operating activities                           $ 4,245,823           $ 5,855,778
                                                                    -----------           -----------

Cash flows from financing activities:
  Principal payments on financed operating lease rentals               (629,257)             (232,463)
  Principal payments on discounted lease rentals                         (7,835)           (1,372,128)
  Distributions to partners                                          (2,792,812)           (5,287,568)
  Redemptions of limited partner units                                        -               (15,669)
                                                                    -----------           -----------

Net cash used in financing activities                                (3,429,904)           (6,907,828)
                                                                    -----------           -----------

Net increase (decrease) in cash and cash equivalents                    815,919            (1,052,050)

Cash and cash equivalents at beginning of period                      2,839,510             2,672,112
                                                                    -----------           -----------

Cash and cash equivalents at end of period                          $ 3,655,429           $ 1,620,062
                                                                    ===========           ===========

Supplemental disclosure of cash flow information:
  Interest paid on discounted lease rentals                         $        28           $   125,223
  Interest paid on financed operating lease rentals                      27,037                26,662

</TABLE>













   The accompanying notes are an integral part of these financial statements.

                                        5

<PAGE>


                          CAPITAL PREFERRED YIELD FUND
                        A California Limited Partnership

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)


1.   Basis of Presentation
     ---------------------

     The  accompanying  unaudited  financial  statements  have been  prepared in
     accordance  with  generally  accepted  accounting  principles  for  interim
     financial  information and the  instructions to Form 10-Q and Rule 10-01 of
     Regulation S-X. Accordingly, they do not include all of the information and
     disclosures required by generally accepted accounting principles for annual
     financial   statements.   In  the  opinion  of  the  general  partner,  all
     adjustments  (consisting only of normal recurring  adjustments)  considered
     necessary for a fair presentation have been included.  The balance sheet at
     December 31, 1997 has been derived  from the audited  financial  statements
     included in the Partnership's 10-K. For further  information,  refer to the
     financial  statements of Capital Preferred Yield Fund, A California Limited
     Partnership  (the  "Partnership"),  and the related notes,  included in the
     Partnership's  Annual  Report on Form 10-K for the year ended  December 31,
     1997, previously filed with the Securities and Exchange Commission.

     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.

2.   Transactions With the General Partner and Affiliate
     ---------------------------------------------------

     DIRECT SERVICES FROM GENERAL PARTNER:

     The  general  partner  and  an  affiliate  provide   accounting,   investor
     relations,  billing, collecting, asset management, and other administrative
     services to the Partnership. The Partnership reimburses the general partner
     for these services  performed on its behalf as permitted under the terms of
     the  Partnership  Agreement.  The  Partnership  recorded  $58,639 of direct
     services  from the general  partner for the six months ended June 30, 1998.
     Of that amount $26,688 is included in payables to affiliates.



                                        6

<PAGE>


                          CAPITAL PREFERRED YIELD FUND
                        A California Limited Partnership

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

2.   Transactions With the General Partner and Affiliate, continued
     ---------------------------------------------------

     MANAGEMENT FEES PAID TO GENERAL PARTNER:

     In accordance with the Partnership  Agreement,  the general partner earns a
     management  fee  in  connection  with  its  management  of  the  equipment,
     calculated as a percentage of the monthly gross rentals received,  and paid
     monthly in arrears.  The  Partnership  recorded a management fee of $18,514
     for the six months ended June 30, 1998.

     GENERAL AND ADMINISTRATIVE EXPENSES:

     The general  partner and an affiliate are reimbursed for the actual cost of
     administrative  expenses paid on behalf of the Partnership per the terms of
     the  Partnership  Agreement.  At June 30,  1998,  $23,063  of  reimbursable
     expenses are included in payables to affiliates.

     RECEIVABLE FROM RELATED PARTY:

     The  general  partner  collects  and  applies  rental  payments to lessees'
     accounts 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 June 1998, $59,858 in rents were applied by the general partner that
     were transferred to the Partnership in July 1998.




                                        7

<PAGE>



                          CAPITAL PREFERRED YIELD FUND
                        A California Limited Partnership

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

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

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

<TABLE>
<CAPTION>


                                                Condensed Statements                        Condensed Statements
                                                   of Income for         The Effect on          of Income for        The Effect on
                                                 the Three Months         Net Income           the Six Months          Net Income
                                                   Ended June 30,         of Changes           Ended June 30,          of Changes
                                            ---------------------------     Between     --------------------------       Between
                                                1998           1997         Periods         1998          1997           Periods
                                            ------------   ------------ --------------  -----------  -------------   --------------

<S>                                         <C>            <C>          <C>            <C>           <C>             <C>         
Leasing margin                               $    23,484    $  866,465   $  (842,981)   $   109,388   $ 1,586,214     $(1,476,826)
Equipment sales margin                           165,344       110,068        55,276        558,006       237,562         320,444
Interest income                                   16,294        22,102        (5,808)        35,433        42,170          (6,737)
Management fees paid to general partner           (9,944)     (112,996)      103,052        (18,514)     (226,100)        207,586
Direct services from general partner             (34,856)      (39,058)        4,202        (58,639)      (84,149)         25,510
General and administrative                      (125,198)      (96,233)      (28,965)      (180,576)     (162,142)        (18,434)
Provision for losses                            (425,000)     (100,000)     (325,000)      (475,000)     (225,000)       (250,000)
                                             -----------    ----------   -----------    -----------   -----------     -----------
Net income (loss)                            $ (389,876)    $  650,348   $(1,040,224)   $   (29,902)  $ 1,168,555     $(1,198,457)
                                             ===========    ==========   ===========    ===========   ===========     ===========
</TABLE>

The  Partnership  is in its  liquidation  period as defined  in the  Partnership
Agreement  and,  as  expected,  the  Partnership  is not  purchasing  additional
equipment,  initial  leases  are  expiring  and the  amount of  equipment  being
remarketed (i.e., re-leased,  renewed, or sold) will increase. As a result, both
the size of the  Partnership's  leasing  portfolio  and the  amount  of  leasing
revenue are declining.  The Partnership recorded a net loss for the 1998 quarter
and the 1998 period  primarily due to the provision for loss  (discussed  below)
taken on equipment returned to the Partnership.

LEASING MARGIN

Leasing margin consists of the following:

<TABLE>
<CAPTION>

                                                    Three Months Ended                    Six Months Ended
                                                         June 30,                              June 30,
                                                -----------------------------       -----------------------------
                                                   1998              1997               1998              1997
                                                -----------       -----------       -----------       -----------
<S>                                            <C>               <C>               <C>               <C>

Operating lease rentals                         $    50,755       $ 1,606,275       $   160,928       $ 3,168,487
Direct financing lease income                         9,594           264,957           104,308           514,379
Depreciation                                        (22,467)         (936,231)         (128,783)       (1,944,767)
Interest expense on related financed
  operating lease rentals                           (14,398)          (13,505)          (27,037)          (26,662)
Interest expense on related discounted
  lease rentals                                           -           (55,031)              (28)         (125,223)
                                                -----------       -----------       -----------       -----------
   Leasing margin                               $    23,484       $   866,465       $   109,388       $ 1,586,214
                                                ===========       ===========       ===========       ===========

       Leasing margin ratio                              39%               46%               41%               43%
                                                ===========       ===========       ===========       ===========

</TABLE>


                                        8

<PAGE>


                          CAPITAL PREFERRED YIELD FUND
                        A California Limited Partnership

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

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

LEASING MARGIN, continued

The  components  of leasing  margin have  declined  and are  expected to decline
further due to portfolio run- off.

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

EQUIPMENT SALES MARGIN

Equipment sales margin consists of the following:

                                  Three Months Ended        Six Months Ended
                                       June 30,                June 30,
                            -------------------------  -------------------------
                               1998          1997         1998          1997
                            -----------  -----------   -----------   -----------

Equipment sales revenue     $  498,472   $  220,845    $ 1,238,897  $ 1,478,046
Cost of equipment sales       (333,128)    (110,777)      (680,891)  (1,240,484)
                            ----------   ----------    -----------  ------------

   Equipment sales margin   $  165,344   $  110,068    $   558,006  $   237,562
                            ==========   ==========    ===========  ===========

The  Partnership is in it's  liquidation  period (as defined in the  Partnership
Agreement).  Currently,  a  portion  of the  Partnership's  initial  leases  are
expiring  and  equipment  is being  remarketed  (i.e.,  re-leased or sold to the
original  lessee or third  parties).  Equipment  sales  margin  increased as the
Partnership was successful in realizing  amounts on equipment greater than their
net book values.

INTEREST INCOME

Interest income  decreased due to a decrease in cash available for investment as
the Partnership is in liquidation and therefore  distributing excess cash to the
partners.

PROVISION FOR LOSSES

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



                                        9

<PAGE>


                          CAPITAL PREFERRED YIELD FUND
                        A California Limited Partnership

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

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

PROVISION FOR LOSSES, continued

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
ongoing  quarterly  assessments  of its assets to identify  other-than-temporary
losses.

The provision for losses recorded for the six months ended June 30, 1998 and for
the same period in 1997 was primarily related to lessees returning  equipment to
the  Partnership.  For the 1998  quarter,  the  Partnership  recorded  a loss of
$425,000  on mining  and  transportation  equipment  and  office  furniture  and
fixtures held for sale or re-lease.  The Partnership had previously  expected to
realize the carrying value of this equipment  through proceeds from the sales of
equipment to the  original  lessees.  The fair market value of the  equipment is
less than anticipated.

EXPENSES

The  increase in general and  administrative  expenses was  primarily  due to an
increase in  non-resident  withholding tax for 1997, paid and expensed on behalf
of the limited partners during the second quarter of 1998.

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

The Partnership funds its operating activities principally with cash from rents,
non-recourse debt, interest income and sales of off-lease  equipment.  Available
cash and cash reserves of the Partnership are invested in interest  bearing cash
accounts and short-term U.S. Government  securities pending distributions to the
partners.

During  the  three  months  ended  June  30,  1998,  the  Partnership   declared
distributions to the partners of $2,044,833 ($1,784,872 of which was paid during
July 1998). A portion of such distributions  constituted a return of capital for
accounting purposes.  Distributions may be characterized for tax, accounting and
economic  purposes  as a return of  capital,  a return on capital  or 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.  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  after  initial lease terms expire) have been
realized  at the  termination  of the  Partnership.  The  Partnership  is in its
liquidation  period (as defined in the Partnership  Agreement) and distributions
during  the  liquidation  period  will vary based  upon cash  availability.  All
distributions are expected to be a return of capital for economic purposes.


                                       10

<PAGE>


                          CAPITAL PREFERRED YIELD FUND
                        A California Limited Partnership

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

Liquidity and Capital Resources, continued
-------------------------------

The general partner  currently  anticipates  that the Partnership  will generate
cash flow from  operations  and  equipment  sales  during the  remainder of 1998
which,  when  added  to cash  and  cash  equivalents  on  hand,  should  provide
sufficient  cash to  enable  the  Partnership  to  meet  its  current  operating
requirements.

The  Class  B  limited  partner   distributions  of  cash  from  operations  are
subordinated to the Class A limited  partners  receiving  distributions  of cash
from  operations,  as  scheduled  in  the  Partnership  Agreement  (i.e.,  13%).
Therefore,  because of the anticipated  decrease in distributions to the Class A
limited  partners,  CAII,  the sole Class B limited  partner,  ceased  receiving
distributions  of cash from  operations as of August 1997.  The general  partner
believes these cumulative  distributions will be paid when the proceeds from the
sale of certain equipment become available for  distribution.  Such proceeds are
currently recorded in accounts receivable.

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
affiliates's  software  have already been  updated to software  which  correctly
accounts for the Year 2000.  In addition,  the  affiliate is engaged in a system
conversion, whereby the affiliates's main lease tracking and accounting software
is  being  replaced  with new  systems  which  will  account  for the Year  2000
correctly.  The general  partner does not expect any other changes  required for
the Year 2000 to have a material effect on the financial  position or results of
operations of the Partnership.  In addition, the general partner does not expect
any Year 2000 issues  relating  to  customers  and vendors  will have a material
effect on its financial  position or results of  operations of the  Partnership.
Costs  incurred  by the  Partnership  to  address  the Year 2000 issue have been
immaterial.


                                       11

<PAGE>



                          CAPITAL PREFERRED YIELD FUND
                        A California Limited Partnership

                                    PART II.

                                OTHER INFORMATION


Item 1.  Legal Proceedings

               The   Partnership  is  involved  in  routine  legal   proceedings
               incidental  to the conduct of its business.  The general  partner
               believes  none of these  legal  proceedings  will have a material
               adverse  effect on the  financial  condition or operations of the
               Partnership.


Item 6.  Exhibits and Reports on Form 8-K

               (a) None

               (b) The  Partnership  did not file any reports on Form 8-K during
                   the three months ended June 30, 1998

                                       12

<PAGE>



                                    Signature



Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Partnership  has duly  caused  this  report to be  signed  on its  behalf by the
undersigned thereunto duly authorized.




                                CAPITAL PREFERRED YIELD FUND
                                A California Limited Partnership

                                By:  CAI Partners Management Company

Dated:  August 12, 1998         By:  /s/Anthony M. DiPaolo
                                     --------------------------------
                                     Anthony M. DiPaolo
                                     Senior Vice President


                                       13