SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q
(Mark One)

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


For the quarterly period ended                   September 30, 1997
                              --------------------------------------------------

                                       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                               0-21382
                       ---------------------------------------------------------

                      Capital Preferred Yield Fund-II, L.P.
                      -------------------------------------
             (Exact name of registrant as specified in its charter)

        Delaware                                         84-1184628
-----------------------                     ------------------------------------
(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 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      .
                                       -----    -----
                  
                        Exhibit Index appears on Page 12

                               Page 1 of 13 Pages



<PAGE>



                      CAPITAL PREFERRED YIELD FUND-II, L.P.

                          Quarterly Report on Form 10-Q
                              for the Quarter Ended
                               September 30, 1997


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

PART I.     FINANCIAL INFORMATION                                           PAGE
                                                                            ----

   Item 1.  Financial Statements (Unaudited)

            Balance Sheets - September 30, 1997 and December 31, 1996        3

            Statements of Income - Three and Nine months ended
            September 30, 1997 and 1996                                      4

            Statements of Cash Flows - Nine months ended
            September 30, 1997 and 1996                                      5

            Notes to Financial Statements                                    6

   Item 2.  Management's Discussion and Analysis of Financial Condition
            and Results of Operations                                       7-11


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-II, L.P.

                                 BALANCE SHEETS
                                   (Unaudited)


                                     ASSETS

                                                     September 30,  December 31,
                                                         1997           1996
                                                     ------------   -----------

Cash and cash equivalents                             $ 1,531,717   $ 1,768,824
Accounts receivable, net                                  396,465       149,316
Equipment held for sale or re-lease                       534,921       448,552
Net investment in direct finance leases                 4,018,368     4,978,823
Leased equipment, net                                  20,750,579    26,171,270
                                                      -----------   -----------

         Total assets                                 $27,232,050   $33,516,785
                                                      ===========   ===========

                        LIABILITIES AND PARTNERS' CAPITAL

Liabilities:
     Accounts payable and accrued liabilities         $   851,710   $   611,147
     Payable to affiliates                                 21,508        26,033
     Rents received in advance                            108,642       110,946
     Distributions payable to partners                    508,106       341,384
     Discounted lease rentals                           9,093,120    12,397,890
     Financed operating lease rentals                   2,445,971     3,161,139
                                                      -----------   -----------

         Total liabilities                             13,029,057    16,648,539
                                                      -----------   -----------

Partners' capital:
     General partner                                            -             -
     Limited partners:
         Class A                                       13,991,999    16,637,978
         Class B                                          210,994       230,268
                                                      -----------   -----------
         Total partners' capital                       14,202,993    16,868,246
                                                      -----------   -----------

         Total liabilities and partners' capital      $27,232,050   $33,516,785
                                                      ===========   ===========



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

                                        3

<PAGE>



                      CAPITAL PREFERRED YIELD FUND-II, L.P.

                              STATEMENTS OF INCOME
                                   (Unaudited)

<TABLE>
<CAPTION>


                                                       Three Months Ended               Nine Months Ended
                                                           September 30,                  September 30,
                                                   -----------------------------   -----------------------------
                                                       1997             1996           1997            1996
                                                   ------------     ------------   -------------    ------------
<S>                                               <C>              <C>             <C>              <C>        
REVENUE:
     Operating lease rentals                       $ 2,324,022      $ 2,596,100     $ 7,182,958      $ 7,245,223
     Direct finance lease income                        98,048          119,973         309,000          338,493
     Equipment sales margin                            118,458          103,519         213,078          189,435
     Interest income                                    19,443           44,542          58,604          172,366
                                                   -----------      -----------     -----------      -----------

         Total revenue                               2,559,971        2,864,134       7,763,640        7,945,517
                                                   -----------      -----------     -----------      -----------

EXPENSES:
     Depreciation and amortization                   1,704,436        2,030,847       5,574,064        5,696,866
     Interest on discounted lease rentals              176,326          260,289         588,579          637,467
     Interest on financed operating lease rentals       42,262           64,129         142,675          220,483
     Management fees paid to general partner            48,464           49,285         155,693          230,734
     Direct services from general partner               24,022           16,958          78,750           90,397
     General and administrative                         45,997           74,443         178,848          211,491
     Provision for losses                               25,000           75,000         225,000          500,000
                                                   -----------      -----------     -----------      -----------

         Total expenses                              2,066,507        2,570,951       6,943,609        7,587,438
                                                   -----------      -----------     -----------      -----------

NET INCOME                                         $   493,464      $   293,183     $   820,031      $   358,079
                                                   ===========      ===========     ===========      ===========

NET INCOME ALLOCATED:
     To the general partner                        $    14,233      $    10,254     $    34,717      $    30,774
     To the Class A limited partners                   474,386          280,067         777,364          323,977
     To the Class B limited partner                      4,845            2,862           7,950            3,328
                                                   -----------      -----------     -----------      -----------

                                                   $   493,464      $   293,183     $   820,031      $   358,079
                                                   ===========      ===========     ===========      ===========

  Net income per weighted average
      Class A limited partner unit outstanding     $     3.54       $      2.08     $      5.79      $      2.41
                                                   ==========       ===========     ===========      ===========

  Weighted average Class A
       limited partner units outstanding              134,178           134,418         134,258          134,504
                                                   ==========       ===========     ===========      ===========

</TABLE>

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

                                        4

<PAGE>



                      CAPITAL PREFERRED YIELD FUND-II, L.P.

                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                        Nine months ended
                                                                                  ------------------------------
                                                                                  September 30,    September 30,
                                                                                     1997              1996
                                                                                  -----------      -------------

<S>                                                                              <C>              <C>        
NET CASH PROVIDED BY OPERATING ACTIVITIES                                         $ 8,186,146      $ 9,284,363
                                                                                  -----------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases from affiliate of equipment on operating leases                        (1,062,284)      (5,128,171)
  Investment in direct financing leases, acquired from affiliate                      (22,469)        (115,445)
                                                                                  -----------      -----------

Net cash used in investing activities                                              (1,084,753)      (5,243,616)
                                                                                  -----------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Principal payments on discounted lease rentals                                   (3,304,770)      (2,974,374)
  Principal payments on financed operating lease rentals                             (715,168)        (834,547)
  Proceeds from discounting of lease rentals                                                -           11,425
  Proceeds from financing of operating lease rentals                                        -        4,272,657
  Distributions to partners                                                        (3,304,889)      (3,079,379)
  Redemptions of Class A limited partner units                                        (13,673)        (115,558)
                                                                                  -----------      -----------

Net cash used in financing activities                                              (7,338,500)      (2,719,776)
                                                                                  -----------      -----------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                 (237,107)       1,320,971

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                    1,768,824        2,092,691
                                                                                  -----------      -----------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                        $ 1,531,717      $ 3,413,662
                                                                                  ===========      ===========

Supplemental disclosure of cash flow information:
  Interest paid on discounted lease rentals                                       $   588,579      $   637,467
  Interest paid on financed operating lease rentals                                   142,675          220,483
Supplemental disclosure of noncash investing and financing activities:
  Discounted lease rentals assumed in equipment acquisitions                                -        6,002,723

</TABLE>


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

                                        5

<PAGE>


                      CAPITAL PREFERRED YIELD FUND-II, L.P.

                          NOTES TO FINANCIAL STATEMENTS
                             (Unaudited), continued


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, 1996 has been derived  from the audited  financial  statements
     included in the Partnership's Annual Report on Form 10-K for the year ended
     December  31,  1996,  (the  "1996  Form  10-K")  previously  filed with the
     Securities and Exchange Commission.

2.   Equipment Purchases
     -------------------

     During the nine months ended September 30, 1997, the  Partnership  acquired
     the equipment described below from Capital Associates  International,  Inc.
     ("CAII").

<TABLE>
<CAPTION>

                                                                                         Acquisition         Total
                                         Equipment                      Cost of            Fees and         Equipment
               Lessee                   Description                    Equipment        Reimbursements    Purchase Price
      ----------------------     ---------------------------        ------------        --------------    --------------

     <S>                                                            <C>                 <C>               <C>        
      System One                 Network equipment                   $   126,250         $  5,050          $   131,300
      Consolidated Diesel        Furniture                                23,035              921               23,956
      Owens Corning              Desktop PC                                  163                0                  163
      General Motors Corp.       Transport - trucks                       20,947              838               21,785
      General Motors Corp.       FF & E                                   32,425            1,297               33,722
      General Motors Corp.       FF & E                                   15,163              607               15,770
      E Trade                    Desktop PC                              496,279           16,712              512,991
      General Motors Corp.       FF & E                                    9,631              385               10,016
      Consolidated Diesel        Office automation                        21,605              864               22,469
      Texas Instruments          Manufacturing-semiconductor             300,558           12,023              312,581
                                                                     -----------         --------          -----------

                                                                     $ 1,046,056         $ 38,697          $ 1,084,753
                                                                     ===========         ========          ===========

</TABLE>




                                        6

<PAGE>



                      CAPITAL PREFERRED YIELD FUND-II, L.P.

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

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

Presented below are schedules  (prepared  solely to facilitate the discussion of
results of  operations  that  follows)  showing  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 nine months           net income
                                     ended September 30,        of changes         ended September 30,         of changes
                                  -------------------------      between        -------------------------       between
                                     1997          1996          periods           1997           1996          periods
                                  ----------    -----------   -------------     -----------    ----------    -------------
<S>                              <C>            <C>             <C>            <C>            <C>            <C>        
Leasing margin                    $ 499,046      $  360,808      $ 138,238      $ 1,186,640    $ 1,028,900    $   157,740
Equipment sales margin              118,458         103,519         14,939          213,078        189,435         23,643
Interest income                      19,443          44,542        (25,099)          58,604        172,366       (113,762)
Management fees paid to
   general partner                  (48,464)        (49,285)           821         (155,693)      (230,734)        75,041
Direct services from
   general partner                  (24,022)        (16,958)        (7,064)         (78,750)       (90,397)        11,647
General and administrative          (45,997)        (74,443)        28,446         (178,848)      (211,491)        32,643
Provision for losses                (25,000)        (75,000)        50,000         (225,000)      (500,000)       275,000
                                  ---------      ----------      ---------      -----------    -----------    -----------
Net income (loss)                 $ 493,464      $  293,183      $ 200,281      $   820,031    $   358,079    $   461,952
                                  =========      ==========      =========      ===========    ===========    ===========

</TABLE>

The Partnership  entered its liquidation period (as set forth in the Partnership
Agreement)  in July 1997.  As the  liquidation  period  continues,  purchases of
equipment under lease will cease (other than for prior commitments and equipment
upgrades),  initial  leases  will  expire  and the  amount  of  equipment  being
remarketed (i.e., re-leased,  renewed or sold) will increase.  Because a leasing
portfolio declines in size as it matures, these circumstances have resulted in a
decline  in  the  Partnership's   leasing  portfolio  (referred  to  in  further
discussions as "portfolio run-off").

LEASING MARGIN

Leasing margin consists of the following:

<TABLE>
<CAPTION>

                                                        Three months ended               Nine months ended
                                                            September 30,                   September 30,
                                                  ----------------------------    -----------------------------
                                                      1997            1996            1997             1996
                                                  ------------    ------------    ------------     ------------

<S>                                              <C>              <C>            <C>              <C>         
Operating lease rentals                           $  2,324,022     $  2,596,100   $  7,182,958     $  7,245,223
Direct finance lease income                            98,048           119,973        309,000          338,493
Leasing costs and expenses                          (1,704,436)      (2,030,847)    (5,574,064)      (5,696,866)
Interest expense on discounted lease rentals          (176,326)        (260,289)      (588,579)        (637,467)
Interest expense on financed operating
   lease rentals                                       (42,262)         (64,129)      (142,675)        (220,483)
                                                  ------------     ------------   -----------      ------------
   Leasing margin                                 $    499,046     $    360,808   $  1,186,640     $  1,028,900
                                                  ============     ============   ============     ============

   Leasing margin ratio                                     21%              13%            16%              14%
                                                            ==               ==             ==               ==

</TABLE>

                                        7

<PAGE>


                      CAPITAL PREFERRED YIELD FUND-II, L.P.

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

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.  Leasing  margin ratio  increased  primarily
because a portion of the  Partnership's  portfolio  consists of operating leases
financed with non-recourse debt (including discounted lease rentals and financed
operating  lease  rentals).  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 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).  Interest rates have  fluctuated
over the past several years as follows:  (i) rates decreased from 1990 until the
early part of 1994, (ii) rates then increased through the early part of 1995 and
(iii) rates have decreased to the present time. It is unclear  whether  interest
rates will  continue to decrease,  and what effect,  if any,  such interest rate
decreases will have on lease rates.  Annual average 5-year U.S.  Treasury yields
for the past seven years were as follows:

Annual average 5-year U.S. Treasury Yield

       Year                                 Yield
       ----                                 -----

       1990                                  8.37
       1991                                  7.37
       1992                                  6.19
       1993                                  5.14
       1994                                  6.69
       1995                                  6.53
       1996                                  6.18

EQUIPMENT SALES MARGIN

Equipment sales margin consists of the following:

                               Three months ended          Nine months ended
                                  September 30,              September 30,
                          --------------------------   -------------------------
                             1997          1996          1997          1996
                          -----------  ------------   ----------   ------------

Equipment sales revenue   $  407,449   $  1,474,128   $  896,871   $  2,462,307
Cost of equipment sales     (288,991)    (1,370,609)    (683,793)    (2,272,872)
                          ----------   ------------   ----------   ------------
 Equipment sales margin   $  118,458   $    103,519   $  213,078   $    189,435
                          ==========   ============   ==========   ============

                                        8

<PAGE>


                      CAPITAL PREFERRED YIELD FUND-II, L.P.

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

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

INTEREST INCOME

Interest income  decreased due to a decrease in the amount of cash available for
investment.


EXPENSES

Management  fees  decreased  during the nine months  ended  September  30, 1997,
compared to the corresponding  period in 1996, due to the financing of operating
lease  rentals that  occurred  during  first  quarter of 1996.  Under  generally
accepted accounting principles the transaction was accounted for as a financing.
Per the  Partnership  Agreement,  proceeds  received  from the  transaction  are
defined as prepaid rents and, accordingly,  management fees of $85,453 were paid
on the prepaid rents.

General and administrative expenses and direct services from the general partner
decreased  primarily due to a reduction in costs associated with warehousing and
selling equipment returned to the Partnership.


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  exposure 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 in value.

The provision  for losses  recorded  during the nine months ended  September 30,
1997 related to the following:

*  $100,000  related to lessees  returning  equipment  to the  Partnership.  The
   Partnership  had  previously  expected to realize the carrying  value of that
   equipment  through lease renewals and proceeds from the sale of the equipment
   to the original lessee.  The fair market value of the equipment  re-leased or
   sold to a third party is considerably less than was anticipated.


                                        9

<PAGE>


                      CAPITAL PREFERRED YIELD FUND-II, L.P.

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

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

PROVISION FOR LOSSES, continued

*  $80,000 for a deficiency  related to a lease with Ernst Home Center, a lessee
   that filed for Chapter 11 bankruptcy  protection on July 12, 1996.  The lease
   was funded with non-recourse debt and the lending institution repossessed and
   liquidated  the equipment  during March 1997 resulting in a deficiency to the
   Partnership.  Accordingly,  the Partnership recorded the provision for losses
   during the first quarter of 1997.

*  $45,000 related to equipment which has been returned to the Partnership.  The
   Partnership  had  previously  expected to realize the carrying  value of this
   equipment  through lease renewals and proceeds from the sale of the equipment
   to the original lessees.  The fair market value of the equipment re-leased or
   sold to a third party was less than anticipated.

The provision  for losses  recorded  during the nine months ended  September 30,
1996 related to the following items:

*  $245,000  related to  Barney's,  Inc.,  a lessee  that  filed for  Chapter 11
   bankruptcy  protection on January 10, 1996. In July 1996,  negotiations  were
   finalized and a settlement was received for the Partnership's claim.

*  $180,000  related to  Norcross  Footwear,  a lessee that filed for Chapter 11
   bankruptcy  protection  on February 9, 1996.  The lease was  rejected  during
   second  quarter  1996 and the  equipment  has been  sold or  returned  to the
   Partnership.  The fair market value of the  equipment  re-leased or sold to a
   third party was considerably less than anticipated.

*  $75,000 related to a lessee returning an MRI system to the  Partnership.  The
   Partnership  had  previously  expected to realize the carrying  value of that
   equipment  through lease  renewals and proceeds from sale of the equipment to
   the original lessee.  The fair market value of the equipment returned or sold
   to a third party is considerably less than was anticipated.


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

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

                                       10

<PAGE>


                      CAPITAL PREFERRED YIELD FUND-II, L.P.

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

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

During the nine months  ended  September  30,  1997,  the  Partnership  acquired
equipment subject to leases with a total equipment purchase price of $1,084,753.
The Partnership  entered its  liquidation  period (as defined in the Partnership
Agreement) in July 1997. During the liquidation  period,  purchases of equipment
under  lease  will  cease  (other  than  for  prior  commitments  and  equipment
upgrades).

During the nine months  ended  September  30,  1997,  the  Partnership  declared
distributions  to the  partners of  $3,471,611,  ($508,106  of which was paid in
October 1997). A substantial portion of such distributions  constituted a return
of capital.  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  for  accounting  purposes.
However, the total percentage of a partnership's return on capital over its life
will only be determined  after all residual cash flows (which  include  proceeds
from the re-leasing and sale of equipment after initial lease terms expire) have
been realized at the termination of the Partnership.

The general partner believes that the Partnership will generate  sufficient cash
flow from operations  during the remainder of 1997 to (1) meet current operating
requirements and (2) fund cash  distributions to the Class A limited partners in
accordance with the Partnership Agreement.  Distributions during the liquidation
period will be based upon cash  availability and will vary and all distributions
are expected to be a return of capital for economic purposes.



                                       11

<PAGE>



                      CAPITAL PREFERRED YIELD FUND-II, L.P.

                                    PART II.

                                OTHER INFORMATION



Item 1.    Legal Proceedings

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

Item 6.    Exhibits and Reports on Form 8-K

           (a)  None.

           (b)  The  Partnership did not file any reports on Form 8-K during the
                quarter ended September 30, 1997.


                                       12

<PAGE>



                      CAPITAL PREFERRED YIELD FUND-II, L.P.

                                    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-II, L.P.

                                      By:  CAI Equipment Leasing III Corp.


Dated:  November 13, 1997             By:  /s/Anthony M. DiPaolo
                                           ---------------------
                                           Anthony M. DiPaolo
                                           Senior Vice President



















                                       13