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

                      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
                                  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-II, L.P.

                                 BALANCE SHEETS



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

Cash and cash equivalents                        $  1,128,999     $  1,897,763
Accounts receivable, net                              278,382          620,453
Receivable from related party                          30,296                -
Equipment held for sale or re-lease                   312,421          646,787
Net investment in direct finance leases             3,370,142        3,839,687
Leased equipment, net                              14,319,392       18,028,040
                                                 ------------     ------------

Total assets                                     $ 19,439,632     $ 25,032,730
                                                 ============     ============

                        LIABILITIES AND PARTNERS' CAPITAL

Liabilities:
  Accounts payable and accrued liabilities       $    901,568     $    882,678
  Payables to affiliates                               69,299           20,257
  Rents received in advance                            36,328          102,410
  Distributions payable to partners                   316,717          508,106
  Discounted lease rentals                          6,196,307        7,961,882
  Financed operating lease rentals                  1,874,628        2,257,035
                                                 ------------     ------------

Total liabilities                                   9,394,847       11,732,368
                                                 ------------     ------------

Partners' capital:
  General partner                                           -                -
  Limited partners:
    Class A                                         9,849,908       13,092,164
    Class B                                           194,877          208,198
                                                 ------------     ------------

Total partners' capital                            10,044,785       13,300,362
                                                  -----------     ------------

Total liabilities and partners' capital          $ 19,439,632     $ 25,032,730
                                                 ============     ============



   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                   Six Months Ended
                                                                  June 30,                              June 30,
                                                        -------------------------------     -----------------------------
                                                            1998              1997               1998            1997
                                                        ------------      -------------     ------------    -------------
<S>                                                     <C>               <C>               <C>             <C>        
Revenue:
  Operating lease rentals                                $ 1,686,865       $ 2,382,057       $ 3,497,671     $ 4,858,936
  Direct finance lease income                                 98,928           104,365           195,194         210,952
  Equipment sales margin                                      55,503            87,544           235,370          94,620
  Interest income                                             19,509            21,165            49,057          39,161
                                                         -----------       -----------       -----------     -----------

     Total revenue                                         1,860,805         2,595,131         3,977,292       5,203,669
                                                         -----------      ------------       -----------     -----------

Expenses:
  Depreciation                                             1,320,252         1,898,596         2,751,836       3,869,628
  Interest on discounted lease rentals                       124,007           195,743           262,914         412,253
  Interest on financed operating lease rentals                34,203            29,289            69,809         100,413
  Management fees paid to general partner                     38,298            53,255            77,658         107,229
  Direct services from general partner                        31,127            26,461            62,548          54,728
  General and administrative                                  62,300            61,589           114,301         132,851
  Provision for losses                                       100,000           100,000           125,000         200,000
                                                         -----------       -----------       -----------     -----------

    Total expenses                                         1,710,187         2,364,933         3,464,066       4,877,102
                                                         -----------       ------------      -----------     -----------

Net income                                               $   150,618       $   230,198       $   513,226     $   326,567
                                                         ===========       ===========       ===========     ===========

Net income allocated:
  To the general partner                                 $    17,768       $    10,242       $    37,557     $    20,484
  To the Class A limited partners                            131,494           217,729           470,839         302,978
  To the Class B limited partner                               1,356             2,227             4,830           3,105
                                                         -----------       -----------       -----------     -----------

                                                         $   150,618       $   230,198       $   513,226     $   326,567
                                                         ===========       ===========       ===========     ===========

  Net income per weighted average
    Class A limited partner unit outstanding             $      0.98       $      1.62       $      3.52     $      2.26
                                                         ===========       ===========       ===========     ===========

  Weighted average Class A
    limited partner units outstanding                        133,579           134,298           133,636         134,298
                                                         ===========     =============       ===========     ===========
</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>

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

<S>                                                               <C>              <C>        
Net cash provided by operating activities                          $  5,339,410     $   5,336,015
                                                                   ------------     -------------

Cash flows from investing activities:
  Purchases of equipment on operating leases from affiliate                   -          (749,703)
  Investment in direct financing leases, acquired from affiliate              -           (22,469)
                                                                   ------------     -------------

Net cash used in investing activities                                         -          (772,172)
                                                                   ------------     -------------

Cash flows from financing activities:
  Principal payments on discounted lease rentals                     (1,765,575)       (2,119,709)
  Principal payments on financed operating lease rentals               (382,407)         (440,777)
  Distributions to partners                                          (3,947,067)       (2,048,303)
  Redemptions of Class A limited partner units                          (13,095)                -
                                                                   ------------     -------------

Net cash used in financing activities                                (6,108,174)       (4,608,789)
                                                                   ------------     -------------

Net decrease in cash and cash equivalents                              (768,764)          (44,946)

Cash and cash equivalents at beginning of period                      1,897,763         1,768,824
                                                                   ------------     -------------

Cash and cash equivalents at end of period                            1,128,999     $   1,723,878
                                                                   ============     =============

Supplemental disclosure of cash flow information:
  Interest paid on discounted lease rentals                            262,914      $     412,253
  Interest paid on financed operating lease rentals                     69,809            100,413

</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)

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  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 Annual Report on Form 10-K for the year ended
     December  31,  1997,  (the  "1997  Form  10-K")  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 Affiliates
     ----------------------------------------------------

     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 $77,658
     for the six months ended June 30, 1998. Of that amount  $21,547 is included
     in payables to affiliates.

     DIRECT SERVICES FROM GENERAL PARTNER:

     The  general  partner  and  an  affiliate  provide   accounting,   investor
     relations,  billing, collecting, asset management, and other administrative
     services to the Partnership. The Partnership reimburses the general partner
     for these services  performed on its behalf as permitted under the terms of
     the  Partnership  Agreement.  The  Partnership  recorded  $62,548 of direct
     services  from the general  partner for the six months ended June 30, 1998.
     Of that amount $22,458 is included in payables to affiliates.

                                        6

<PAGE>


                      CAPITAL PREFERRED YIELD FUND-II, L.P.

                          NOTES TO FINANCIAL STATEMENTS
                             (Unaudited), continued

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

     GENERAL AND ADMINISTRATIVE EXPENSES:

     The general  partner and an affiliate are reimbursed for the actual cost of
     administrative  expenses paid on behalf of Partnership per the terms of the
     Partnership  Agreement.  At June 30, 1998, $25,294 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, $30,296 in rents were applied by the general partner that
     were transferred to the Partnership in July 1998.

                                        7

<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 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                               $   307,331    $  362,794   $ (55,463)     $  608,306    $  687,594      $ (79,288)
Equipment sales margin                            55,503        87,544     (32,041         235,370        94,620        140,750
Interest income                                   19,509        21,165      (1,656)         49,057        39,161          9,896
Management fees paid to general partner          (38,298)      (53,255)     14,957         (77,658)     (107,229)        29,571
Direct services from general partner             (31,127)      (26,461)     (4,666)        (62,548)      (54,728)        (7,820)
General and administrative                       (62,300)      (61,589)       (711)       (114,301)     (132,851)        18,550
Provision for losses                            (100,000)     (100,000)          -        (125,000)     (200,000)        75,000
                                             -----------    ----------   ---------      -----------   ----------      ---------

Net income                                   $   150,618    $  230,198   $ (79,580)     $  513,226    $  326,567      $ 186,659
                                             ===========    ==========   =========      ==========    ==========      =========
</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) is increasing. As a result, both
the size of the  Partnership's  leasing  portfolio  and the  amount  of  leasing
revenue are declining.

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                         $   1,686,865     $   2,382,057     $  3,497,671     $  4,858,936
Direct finance lease income                            98,928           104,365          195,194          210,952
Depreciation                                       (1,320,252)       (1,898,596)      (2,751,836)      (3,869,628)
Interest expense on discounted lease rentals         (124,007)         (195,743)        (262,914)        (412,253)
Interest expense on financed operating
   lease rentals                                      (34,203)          (29,289)         (69,809)        (100,413)
                                                -------------     -------------     ------------     ------------
   Leasing margin                               $     307,331     $     362,794     $    608,306     $    687,594
                                                =============     =============     ============     ============

   Leasing margin ratio                                    17%               15%              16%              14%
                                                           ==                ==               ==               ==

</TABLE>

                                                             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
---------------------

LEASING MARGIN, continued

All  components  of leasing  margin  decreased for the six months ended June 30,
1998 due to portfolio runoff. Leasing margin ratio increased, and is expected to
increase  further  primarily  because a portion of the  Partnership's  portfolio
consists of operating leases financed with non-recourse debt. 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 consists of the following:

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

Equipment sales revenue    $  393,374   $  379,243    $ 1,324,769    $  489,422
Cost of equipment sales      (337,871)    (291,699)    (1,089,399)     (394,802)
                           ----------   ----------    -----------    ----------

  Equipment sales margin   $   55,503   $   87,544    $   235,370    $   94,620
                           ==========   ==========    ===========    ==========

Equipment sales margin has increased for the six months ended June 30, 1998 as a
result of  increasing  amounts  of  equipment  available  for sale  because  the
Partnership  is in  its  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).

INTEREST INCOME

Interest  income  varies based on the amount of cash  available  for  investment
(pending distribution) and the interest rate on such invested cash.



                                        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
---------------------

EXPENSES

Management fees paid to general partner and general and administrative  expenses
decreased  during  the  six  months  ended  June  30,  1998,   compared  to  the
corresponding period in 1997, due to portfolio run-off.

Direct services from the general partner increased  primarily due to an increase
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  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.

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 in value.

The  provision  for losses  recorded  during the six months  ended June 30, 1998
related  primarily  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 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  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  six  months  ended  June  30,  1998,   the   Partnership   declared
distributions to the partners of $3,755,707, ($316,717 of which was paid in July
1998).  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 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 1998 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 vary based upon cash availability. All distributions are expected to
be a return of capital for economic purposes.

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-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 June 30, 1998.


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



















                                       13