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                  March 31, 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 11

                               Page 1 of 12 Pages



<PAGE>



                      CAPITAL PREFERRED YIELD FUND-II, L.P.

                          Quarterly Report on Form 10-Q
                              for the Quarter Ended
                                 March 31, 1998


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

                                                                            PAGE
PART I.  FINANCIAL INFORMATION                                              ----

     Item 1.  Financial Statements (Unaudited)

              Balance Sheets - March 31, 1998 and December 31, 1997          3

              Statements of Income - Three Months Ended
              March 31, 1998 and 1997                                        4

              Statements of Cash Flows - Three Months Ended
              March 31, 1998 and 1997                                        5

              Notes to Financial Statements                                  6

     Item 2.  Management's Discussion and Analysis of Financial
              Condition and Results of Operations                           7-10


PART II. OTHER INFORMATION

     Item 1.  Legal Proceedings                                              11

     Item 6.  Exhibits and Reports on Form 8-K                               11

              Signature                                                      12


                                        2

<PAGE>



                      CAPITAL PREFERRED YIELD FUND-II, L.P.

                                 BALANCE SHEETS



                                     ASSETS
                                                       (Unaudited)
                                                         March 31,  December 31,
                                                           1998        1997
                                                       -----------  ------------

Cash and cash equivalents                              $ 2,264,707   $ 1,897,763
Accounts receivable, net                                   181,400       620,453
Equipment held for sale or re-lease                        432,116       646,787
Net investment in direct finance leases                  3,600,856     3,839,687
Leased equipment, net                                   16,001,233    18,028,040
                                                       -----------   -----------

Total assets                                           $22,480,312   $25,032,730
                                                       ===========   ===========

                        LIABILITIES AND PARTNERS' CAPITAL

Liabilities:
     Accounts payable and accrued liabilities          $   671,283   $   882,678
     Payable to affiliates                                  21,221        20,257
     Rents received in advance                             116,399       102,410
     Distributions payable to partners                     760,631       508,106
     Discounted lease rentals                            7,116,115     7,961,882
     Financed operating lease rentals                    2,115,661     2,257,035
                                                       -----------   -----------

Total liabilities                                       10,801,310    11,732,368
                                                       -----------   -----------

Partners' capital:
     General partner                                             -             -
     Limited partners:
         Class A                                        11,476,405    13,092,164
         Class B                                           202,597       208,198
                                                       -----------   -----------

Total partners' capital                                 11,679,002    13,300,362
                                                       -----------   -----------

Total liabilities and partners' capital                $22,480,312   $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)

                                                           Three Months Ended
                                                                March 31,
                                                         -----------------------
                                                            1998         1997
                                                         ----------   ----------
REVENUE:
     Operating lease rentals                             $1,810,806   $2,476,879
     Direct finance lease income                             96,266      106,587
     Equipment sales margin                                 179,867        7,076
     Interest income                                         29,548       17,996
                                                         ----------   ----------

Total revenue                                             2,116,487    2,608,538
                                                         ----------   ----------

EXPENSES:
     Depreciation and amortization                        1,431,584    1,971,032
     Interest on discounted lease rentals                   138,907      216,510
     Interest on financed operating lease rentals            35,606       71,124
     Management fees paid to general partner                 39,360       53,974
     Direct services from general partner                    31,421       28,267
     General and administrative                              52,001       71,262
     Provision for losses                                    25,000      100,000
                                                         ----------   ----------

Total expenses                                            1,753,879    2,512,169
                                                         ----------   ----------

NET INCOME                                               $  362,608   $   96,369
                                                         ==========   ==========

NET INCOME ALLOCATED:
     To the general partner                              $   19,789   $   10,242
     To the Class A limited partners                        339,345       85,249
     To the Class B limited partner                           3,474          878
                                                         ----------   ----------

                                                         $  362,608   $   96,369
                                                         ==========   ==========

  Net income per weighted average
      Class A limited partner unit outstanding           $     2.54   $     0.63
                                                         ==========   ==========

  Weighted average Class A
       limited partner units outstanding                    133,694      134,298
                                                         ==========   ==========



   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>


                                                                       Three Months Ended
                                                                    --------------------------
                                                                      March 31,      March 31,
                                                                        1998           1997
                                                                    -----------    -----------

<S>                                                                <C>            <C>        
NET CASH PROVIDED BY OPERATING ACTIVITIES                           $ 3,085,527    $ 2,324,118
                                                                    -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of equipment on operating leases from affiliate                   -       (226,696)
  Investment in direct financing leases, acquired from affiliate              -        (22,469)
                                                                    -----------    -----------

Net cash used in investing activities                                         -       (249,165)
                                                                    -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Principal payments on discounted lease rentals                       (845,767)    (1,051,483)
  Principal payments on financed operating lease rentals               (141,374)      (242,191)
  Distributions to partners                                          (1,726,338)    (1,024,152)
  Redemptions of Class A limited partner units                           (5,104)             -
                                                                    -----------    -----------

Net cash used in financing activities                                (2,718,583)    (2,317,826)
                                                                    -----------    -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                    366,944       (242,873)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                      1,897,763      1,768,824
                                                                    -----------    -----------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                          $ 2,264,707    $ 1,525,951
                                                                    ===========    ===========

Supplemental disclosure of cash flow information:
     Interest paid on discounted lease rentals                      $   138,907    $   216,510
     Interest paid on financed operating lease rentals                   35,606         71,124

</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.




                                        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:

                                                 Condensed
                                           Statements of Income     The Effect
                                           for the Three Months    on Net Income
                                             Ended March 31,         of Changes
                                         -----------------------      Between
                                            1998        1997          Periods
                                         ----------  -----------   -------------

Leasing margin                           $ 300,975    $ 324,800     $ (23,825)
Equipment sales margin                     179,867        7,076       172,791
Interest income                             29,548       17,996        11,552
Management fees paid to general partner    (39,360)     (53,974)       14,614
Direct services from general partner       (31,421)     (28,267)       (3,154)
General and administrative expenses        (52,001)     (71,262)       19,261
Provision for losses                       (25,000)    (100,000)       75,000
                                         ---------    ---------     ---------
  Net income                             $ 362,608    $  96,369     $ 266,239
                                         =========    =========     =========

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:

                                                         Three Months Ended
                                                             March 31,
                                                   -----------------------------
                                                       1998            1997
                                                   -----------     -------------

Operating lease rentals                            $ 1,810,806      $ 2,476,879
Direct finance lease income                             96,266          106,587
Depreciation                                        (1,431,584)      (1,971,032)
Interest expense on discounted lease rentals          (138,907)        (216,510)
Interest expense on financed operating
  lease rentals                                        (35,606)         (71,124)
                                                   -----------      -----------
     Leasing margin                                $   300,975      $   324,800
                                                   ===========      ===========

     Leasing margin ratio                                   16%              13%
                                                   ===========      ===========

                                        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

All  components of leasing  margin  decreased 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
                                                             March 31,
                                                       -------------------------
                                                         1998             1997
                                                       ---------      ----------

Equipment sales revenue                                $ 931,395      $ 110,179
Cost of equipment sales                                 (751,528)      (103,103)
                                                       ---------      ---------
   Equipment sales margin                              $ 179,867      $   7,076
                                                       =========      =========

Equipment  sales  margin  has  increased  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.




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

EXPENSES

Management fees and general and  administrative  expenses  decreased  during the
three months ended March 31, 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 three months ended March 31, 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.

The provision for losses  recorded  during the three months ended March 31, 1997
related to the following items:

*      $80,000  for a  deficiency  related to 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.

*      $20,000 related to equipment which was 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.

                                        9

<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
-------------------------------

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.

During  the  three  months  ended  March  31,  1998,  the  Partnership  declared
distributions  to the  partners of  $1,978,864,  ($760,631  of which was paid in
April 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.

                                       10

<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 March 31, 1998.


                                       11

<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:    May 14, 1998                    By:  /s/Anthony M. DiPaolo
                                               ---------------------
                                               Anthony M. DiPaolo
                                               Senior Vice President



















                                       12