SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

(Mark One)

[X] Annual report  pursuant to Section 13 or 15(d) of the  Securities  Exchange
    Act of 1934 for the fiscal year ended December 31, 2000

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

                         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 Number)


2750 South Wadsworth C-200, Denver, Colorado                   80227
 (Address of principal executive offices)                    (Zip Code)

       Registrant's telephone number, including area code: (720) 963-9600

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

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


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

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

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

                        Exhibit Index Appears on Page 36

                               Page 1 of 37 Pages

<PAGE>
Item 1.  Business
         --------

Capital Preferred Yield Fund-II, L.P., a Delaware limited partnership (the
"Partnership"), was organized on November 19, 1991 and is engaged in the
business of owning and leasing equipment. CAI Equipment Leasing III Corp., a
Colorado corporation was a wholly owned subsidiary of Capital Associates, Inc.
("CAI"). CAI Equipment Leasing III Corp. became a wholly owned subsidiary of
Mishawaka Leasing Company, Inc. ("MLC") on September 12, 2000 and is the general
partner of the Partnership. CAI discontinued its operations on December 15,
2000.

Until September 2000, the Partnership relied upon the services of Capital
Associates International, Inc. ("CAII") for origination of leases,
administrative and accounting services and remarketing of leases and equipment,
among other services. The General Partner has terminated its relationship with
CAII and has contracted with MLC to provide billing, administrative, remarketing
and accounting services. Many of the management and administrative personnel of
MLC formerly worked for CAII and serviced the Partnership leases.

CAII owed the Partnership for rents, remarketing proceeds and other amounts (the
"Prior Rents") collected by CAII on behalf of the Partnership during the periods
prior to February 1, 2000. On September 12, 2000, as part of the Sale of the
General Partnership interest owned by CAII to MLC, MLC repaid in full the Prior
Rents owed by CAII to the Partnership. Included in payables to affiliates is
$77,494 of administrative expenses that are reimbursable to the General Partner.
During the year CAII was preparing to liquidate, which it did on December 15,
2000, CAII was unable to provide investment opportunities for reinvestment to
the Partnership and consequently the Partnership cash balances are higher than
normal. Also during the same period, CAII did not keep up with collections of
accounts receivable, which are higher than normal. Both of these events have
adversely affected the Partnership's performance.

The Partnership entered its liquidation stage, as defined in the Partnership
Agreement, in July 1997. During the liquidation stage, purchases of equipment
have ceased (other than for prior commitments and equipment upgrades). The
Partnership is required to dissolve and distribute all of its assets no later
than December 31, 2009. However, the general partner anticipates that all
equipment will be sold prior to that date and that the Partnership will be
liquidated between 2001 and 2002.

Capital Associates International, Inc. ("CAII") was the Class B limited partner
of the Partnership through September 12, 2000. In exchange for its Class B
limited partner interest, CAII contributed $330,000 (i.e., $10,000 for each
$1,000,000 contribution to the Partnership made by the Class A limited partners)
to the Partnership making it the largest single investor in the Partnership. The
contributions of CAII were made simultaneously with the purchase of equipment by
the Partnership. CAII's interest in Distributable Cash, as defined in the
Partnership Agreement, is subordinated to the Class A limited partners'
interest. MLC became the Class B limited partner as of September 12, 2000.

                                      -2-
<PAGE>
Item 1.  Business, continued
         --------

The Partnership's overall investment objectives are to (i) raise the maximum
allowable capital from investors for investment in accordance with the
Partnership's investment objectives described in the Prospectus; (ii) invest
such capital and related indebtedness in a diversified portfolio of equipment
subject to leases with creditworthy businesses with terms ranging from two to
seven years; (iii) if funds are available for distribution, make monthly cash
distributions to the Class A and Class B Limited Partners during the
reinvestment period (a period that ended June 30, 1997); (iv) re-invest all
available undistributed cash from operations and cash from sales in additional
equipment during the reinvestment period to increase the Partnership's portfolio
of revenue-generating equipment, provided that suitable equipment can be
identified and acquired; and (v) sell or otherwise dispose of the Partnership's
equipment and other assets in an orderly manner and promptly distribute cash
from sales thereof to the Partners within four years of the end of the
reinvestment period.

The Partnership has assigned certain rentals from leases to financial
institutions, or acquired leases subject to such assignments, at fixed interest
rates on a non-recourse basis. In the event of a default by a lessee, the
financial institution has a first lien on the underlying leased equipment, with
no further recourse against the Partnership. Cash proceeds from such financings,
or financings assumed in the acquisition of leases, are recorded on the balance
sheet as discounted lease rentals. As lessees make payments to financial
institutions, leasing revenue and interest expense are recorded.

During 2000, the Partnership had equipment on lease to investment grade lessees
in the financial services, transportation services and manufacturing industries,
among others. Since the Partnership's formation, approximately 71% of the
Partnership's equipment under lease was leased to investment grade lessees.
Pursuant to the Partnership Agreement, an investment grade lessee is a company
(i) with a net worth in excess of $100 million (and no debt issues that are
rated); or (ii) with a credit rating of not less than Baa as determined by
Moody's Investor Service, Inc., or comparable credit rating, as determined by
another recognized credit rating service; or (iii) a lessee, all of whose lease
payments have been unconditionally guaranteed or supported by a letter of credit
issued by a company meeting one of the above requirements. The Partnership
limits its credit risk through selective use of non-recourse debt financing of
future lease rentals, as described above.

During the reinvestment stage, as defined in the Partnership Agreement, the
Partnership acquired equipment that was on lease at the time of acquisition.
After the initial term of each lease, each item of equipment is expected to
produce additional investment income from its re-lease or sale. Upon expiration
of the initial lease, the Partnership attempts to re-lease or sell the equipment
to the existing lessee. If a re-lease or sale to the lessee cannot be
negotiated, the Partnership will attempt to lease or sell the equipment to a
third party.

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

The ultimate rate of return on leases depends, in part, on the general level of
interest rates at the time 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).

                                      -3-
<PAGE>
Item 1.  Business, continued
         --------

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

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

The Partnership leased equipment to a significant number of lessees. One lessee
and its affiliates accounted for 23% ($685,198) of total leasing and remarketing
revenue of the Partnership during 2000.


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

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


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

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

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

No matters were submitted to a vote of the limited partners of the Partnership,
through the solicitation of proxies or otherwise, during the fourth quarter
ended December 31, 2000.


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

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

(b)  As of December 31, 2000, the number of Class A limited partners was 1,719.

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

     During 2000, the Partnership made eleven (11) distributions (a portion of
     which constituted a return of capital) to Class A limited partners, as
     follows:

<TABLE>
<CAPTION>
                                                       Distributions Per
                                                         $250 Class A
                                                       Limited Partner Unit
        For the                     Payment             (computed on                  Total
      Month Ended                  Made During          weighted average)           Distributions
-----------------------         ----------------      ---------------------         -------------
<S>                             <C>                         <C>                    <C>
January 31, 2000                February 2000               $  5.64                $    752,895
February 28, 2000               March 2000                     2.71                     361,350
March 31, 2000                  April 2000                     1.11                     148,500
April 30, 2000                  May 2000                       0.74                      99,000
May 31, 2000                    June 2000                      1.93                     257,400
June 30, 2000                   July 2000                      3.34                     445,500
July 31, 2000                   August 2000                    0.55                      73,755
August 31, 2000                 September 2000                 1.31                     174,240
September 30, 2000              October 2000                   1.24                     165,330
October 31, 2000                November 2000                  1.25                     166,320
November 30, 2000               December 2000                  0.84                     112,365
                                                            -------                 -----------
                                                            $ 20.66                 $ 2,756,655
                                                            =======                 ===========
</TABLE>

     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 can only be determined after all residual cash flows
     (which include proceeds from the re-leasing and sale of equipment) have
     been realized at the termination of the Partnership.

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

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

     The distribution for the month ended December 31, 2000, totaling $174,240,
     was paid to the Class A limited partners during January 2001. Distributions
     to the general partner and Class B limited partner during 2000 are
     discussed in Item 13 of this Report, "Certain Relationships and Related
     Transactions."

     The general partner believes that the Partnership will generate sufficient
     cash flow from operations during 2001 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 may vary.
     All distributions are expected to be a return of capital for economic
     purposes.

     During 1999, the Partnership made thirteen (13) distributions (a portion of
     which constituted a return of capital) to Class A limited partners, as
     follows:

<TABLE>
<CAPTION>
                                                    Distributions Per
                                                      $250 Class A
                                                  Limited Partner Unit
     For the                    Payment              (computed on                  Total
  Month Ended                Made During           weighted average)           Distributions
---------------------       ----------------      ----------------------       -------------

<S>                          <C>                       <C>                    <C>
December 31, 1998            January 1999              $  3.75                $    500,000
January 31, 1999             February 1999                1.50                    200,000
February 28, 1999            March 1999                   1.50                    200,000
March 31, 1999               April 1999                   5.07                    676,838
April 30, 1999               May 1999                     2.08                    277,497
May 31, 1999                 June 1999                    4.12                    549,791
June 30, 1999                July 1999                    1.28                    170,676
July 31, 1999                August 1999                  2.23                    297,396
August 31, 1999              September 1999               0.74                     99,000
September 30, 1999           October 1999                 0.74                     99,000
October 31, 1999             November 1999                1.48                    198,000
November 30, 1999            December 1999                1.48                    198,000
December 31, 1999            December 1999                0.74                     99,000
                                                       -------                -----------
                                                       $ 26.71                $ 3,565,198
                                                       =======                ============
</TABLE>

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

                                      -6-
<PAGE>


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

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

                   Distribution Amount          Distribution % per
                    per $250 Class A               $250 Class A
                   Limited Partner Unit        Limited Partner Unit
   Payment            (computed on                 (computed on
Made During        weighted average)           weighted average) (1)
-----------        ---------------------       ----------------------

     1992              $ 15.00                         12%
     1993                30.00                         12%
     1994                30.00                         12%
     1995                30.00                         12%
     1996                30.00                         12%
     1997                35.45                         14%
     1998                48.15                         19%
     1999                26.71                         11%
     2000                20.66                          8%
                       -------
                       $265.97
                       =======

     (1)  Cumulative distributions, as described in note 1 to Notes to
          Consolidated Financial Statements began July 1992.


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

The following selected financial data relates to the years ended December 31,
1996 through 2000 and should be read in conjunction with Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and notes thereto appearing with Item 8 herein.

<TABLE>
<CAPTION>
                                                                        Years Ended December 31,
                                                  ------------------------------------------------------------------
                                                     2000          1999          1998          1997          1996
                                                     ----          ----          ----          ----          ----

<S>                                             <C>            <C>           <C>           <C>           <C>
Total revenue                                   $ 2,172,896    $ 4,668,842   $ 7,578,793   $10,309,337   $10,870,083
Net income (loss)                                  (100,952)       408,915     1,035,755     1,456,778       231,258
Net income(loss) per weighted average Class A
  limited partner unit outstanding                    (0.97)          2.80          7.19         10.40          1.40
Total assets                                      4,196,381      8,593,113    14,344,900    25,032,730    33,516,785
Discounted and financed operating
  lease rentals                                     763,794      2,321,818     4,612,151    10,218,917    15,559,029
Distributions declared to partners                2,960,500      3,099,217     6,537,374     4,995,930     4,101,808
Distributions declared per monthly weighted
   average Class A limited partner unit               21.97          22.97         48.18         36.69         30.00
</TABLE>

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

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

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

<TABLE>
<CAPTION>
                                                  Years Ended December 31,                   Years Ended December 31,
                                       ------------------------------------------   -----------------------------------------
                                             2000           1999          Change          1999          1998           Change
                                             ----           ----          ------          ----          ----           ------
<S>                                    <C>            <C>            <C>            <C>            <C>            <C>
Leasing margin                         $   550,991    $   986,528    $  (435,537)   $   986,528    $ 1,311,823    $  (325,295)
Equipment sales margin                     293,428        480,241       (186,813)       480,241        686,049       (205,808)
Interest income                             51,701         30,932         20,769         30,932         73,671        (42,739)
Management fees paid to general
  Partner                                  (61,544)      (103,977)        42,433       (103,977)      (156,307)        52,330
Direct services from general partner       (51,942)       (90,393)        38,451        (90,393)      (137,348)        46,955
General and administrative                (233,286)      (183,548)       (49,738)      (183,548)      (232,133)        48,585
Provision for losses                      (650,300)      (710,868)        60,568       (710,868)      (510,000)      (200,868)
                                       -----------    -----------    -----------    -----------    -----------    -----------
Net income(loss)                       $  (100,952)   $   408,915    $  (509,867)   $   408,915    $ 1,035,755    $  (626,840)
                                       ===========    ===========    ===========    ===========    ===========    ===========
</TABLE>

The Partnership is in its liquidation stage, as defined in the Partnership
Agreement, and 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>
                                                               Years Ended December 31,
                                                      -------------------------------------------
                                                            2000          1999            1998
                                                            ----          ----            ----

<S>                                                      <C>          <C>             <C>
Operating lease rentals                                  1,701,438    $ 3,924,612     $ 6,457,667
Direct finance lease income                                126,329        233,057         361,406
Depreciation                                            (1,167,438)    (2,919,980)     (4,942,188)
Interest expense on discounted lease rentals              (109,338)      (251,161)       (466,086)
Interest expense on financed operating lease rentals          --             --           (98,976)
                                                       -----------    -----------     -----------

     Leasing margin                                    $   550,991    $   986,528     $ 1,311,823
                                                       ===========    ===========     ===========

     Leasing margin ratio                                     30 %             24%             19%
                                                              ==               ==              ==
</TABLE>

                                      -8-
<PAGE>
Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations, continued
         --------------

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

Leasing Margin, continued

All components of leasing margin decreased for the year ended December 31, 2000
compared to the years ended December 31, 1999 and December 31, 1998 due to
portfolio runoff. Leasing margin ratio increased and is expected to increase
further as non-recourse debt is repaid. 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:

                                           Years Ended December 31,
                                -----------------------------------------------
                                    2000              1999              1998
                                    -----             ----              ----
Equipment sales revenue         $ 1,112,166      $  2,114,523     $   3,936,815
Cost of equipment sales            (818,738)       (1,634,282)       (3,250,766)
                                -----------      ------------     -------------
Equipment sales margin          $   293,428      $    480,241     $     686,049
                                ===========      ============     =============

The Partnership is in its liquidation stage (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 either
the original lessee or a third party). Equipment sales margin varies with the
number and dollar amount of equipment leases that mature in a particular period
and the current market for specific equipment.

Interest Income

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

Expenses

Management fees paid to General Partner decreased due to portfolio run-off.

The decrease in direct services from the General Partner is due primarily to
portfolio runoff. There are fewer leases which, therefore, require less time for
asset management services.

                                      -9-
<PAGE>
Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations, continued
         -------------

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

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 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 will incur losses from those exposures in
the ordinary course of business. The Partnership performs assessments of the
estimated residual values of its assets to identify other-than-temporary losses
in value.

The provision for losses recorded during 2000 related to the following:

*    $299,600 related to declines in the net realizable value of off-lease
     computer and industrial equipment.

*    $171,700 related primarily to lessees returning certain industrial and
     medical 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
     lessees. The fair market value of the equipment re-leased or sold to third
     parties was less than anticipated.

*    $126,000 related to computer equipment returned to the Partnership. The
     fair market value of this equipment was lower than anticipated.

*    $53,000 related to declines in the realizable value of on-lease
     transportation and industrial equipment.

The provision for losses recorded during 1999 related to the following:

*    $79,000 related to declines in the net realizable value of off-lease
     forklifts

*    $367,085 related primarily to lessees returning certain manufacturing
     and mining 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
     lessees. The fair market value of the equipment re-leases or sold to third
     parties was less than anticipated.

*    $89,783 related to semiconductor equipment returned to the Partnership. The
     fair market value of this equipment is lower than anticipated.

*    $175,000 related to declines in the realizable value of on-lease computer
     and manufacturing equipment.

                                      -10-
<PAGE>
Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations, continued
         -------------

The provision for losses recorded during 1998 related to the following:
I.   Results of Operations, continued
     ---------------------

*     $285,000 related primarily to lessees returning certain computer and
     manufacturing 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
     lessees. The fair market value of the equipment re-leased or sold to third
     parties was less than was anticipated.

*    $125,000 related to anticipated declines in the realizable value of
     on-lease mining equipment.

*    $100,000 related to a lessee that filed for Chapter 11 bankruptcy
     protection in April 1998. The general partner has received information that
     the lessee liquidated the equipment and has filed a claim as an unsecured
     creditor.


II.  Liquidity and Capital Resources
     ------------------------------

The Partnership is in its liquidation stage, as defined in the Partnership
Agreement. The Partnership is not purchasing additional equipment, initial
leases are expiring and equipment is being remarketed (i.e., re-leased, renewed,
or sold). As a result, both the size of the Partnership's leasing portfolio and
the amount of leasing revenue are declining.

The Partnership funds its operating activities principally with cash from rents,
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 2000, 1999 and 1998, the Partnership declared distributions to the
partners of $2,960,500, $3,099,217, and $6,537,374, respectively. 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 2001 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 stage are based
upon cash availability and may vary. All distributions are expected to be a
return of capital for economic purposes.

                                      -11-
<PAGE>
Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations, continued
         -------------

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

Until September 2000, the Partnership relied upon the services of Capital
Associates International, Inc. ("CAII") for origination of leases,
administrative and accounting services and remarketing of leases and equipment,
among other services. The General Partner has terminated its relationship with
CAII and has contracted with MLC to provide billing, administrative, remarketing
and accounting services. Many of the management and administrative personnel of
MLC formerly worked for CAII and serviced the Partnership leases.

CAII owed the Partnership for rents, remarketing proceeds and other amounts (the
"Prior Rents") collected by CAII on behalf of the Partnership during the periods
prior to February 1, 2000. On September 12, 2000, as part of the Sale of the
General Partnership interest owned by CAII to MLC, MLC repaid in full the Prior
Rents owed by CAII to the Partnership. Included in payables to affiliates is
$77,494 of administrative expenses that are reimbursable to the General Partner.
During the year CAII was preparing to liquidate, which it did on December 15,
2000, CAII was unable to provide investment opportunities for reinvestment to
the Partnership and consequently the Partnership cash balances are higher than
normal. Also during the same period, CAII did not keep up with collections of
accounts receivable, which are higher than normal. Both of these events have
adversely affected the Partnership's performance.


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

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities ("Statement 133").
Statement 133 establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Statement 133 is effective
for fiscal years beginning after June 15, 1999, with earlier application
permitted. In June 1999, the Financial Accounting Standards Board issued SFAS
No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral
of the Effective Date of FASB Statement 133, an Amendment of FASB Statement 133.
Statement 137 effectively extends the required application of Statement 133 to
all fiscal quarters of all fiscal years beginning after June 15, 2000, with
earlier application permitted. The Partnership adopted Statement 133 in the
first quarter of 1999, and such adoption had no material impact on the
Partnership.


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

The statements contained in this report which are not historical facts may be
deemed to contain forward-looking statements with respect to events, the
occurrence of which involve risks and uncertainties, and are subject to factors
that could cause actual future results to differ both adversely and materially
from currently anticipated results, including, without limitation, the level of
lease originations, realization of residual values, the availability and cost of
financing sources and the ultimate outcome of any contract disputes. Certain
specific risks associated with particular aspects of the Partnership's business
are discussed under Results of Operations in this report.

                                      -12-
<PAGE>
Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations, continued
         -------------

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

The partnership is in the liquidation stage (as defined in the Partnership
Agreement). Consequently, the partnership is no longer originating new leases.
The partnership's existing leases are non-cancelable, have fixed rates and are
financed with fixed rate debt. Therefore, the partnership has no significant
exposure to fluctuations in interest rates or other market risk exposure.

                                      -13-
<PAGE>
Item 8.  Financial Statements and Supplementary Data
         --------------------------------------------

         Index to Financial Statements and
         Financial Statement Schedule

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

           Independent Auditors' Report                                   15

           Balance Sheets as of December 31, 2000 and 1999                16

           Statements of Income for the years ended
             December 31, 2000, 1999 and 1998                             17

           Statements of Partners' Capital for the years ended
             December 31, 2000, 1999 and 1998                             18

           Statements of Cash Flows for the years ended
             December 31, 2000, 1999 and 1998                             19

           Notes to Financial Statements                                  20-30



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

           Independent Auditors' Report                                   31

           Schedule II - Valuation and Qualifying Accounts                32


                                      -14-
<PAGE>
                          Independent Auditor's Report
                          ----------------------------



The Partners
Capital Preferred Yield Fund-II, L.P.:

We have audited the accompanying balance sheets of Capital Preferred Yield
Fund-II, L.P. as of December 31, 2000 and 1999, and the related statements of
income, partners' capital, and cash flows for each of the years in the
three-year period ended December 31, 2000. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Capital Preferred Yield
Fund-II, L.P. as of December 31, 2000 and 1999, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America.

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



Denver, Colorado
April 12, 2001

                                      -15-
<PAGE>
                      CAPITAL PREFERRED YIELD FUND-II, L.P.

                                 BALANCE SHEETS
                           December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                     ASSETS
                                                                            2000           1999
                                                                            ----           ----

<S>                                                                    <C>            <C>
Cash and cash equivalents                                              $   758,682    $ 1,345,288
Accounts receivable, net                                                   119,034        332,475
Receivable from affiliates                                                    --          243,586
Equipment held for sale                                                     74,996        566,714
Net investment in direct finance leases                                  1,246,976      1,946,226
Leased equipment, net                                                    1,996,693      4,158,824
                                                                       -----------    -----------

          Total assets                                                 $ 4,196,381    $ 8,593,113
                                                                       ===========    ===========

                        LIABILITIES AND PARTNERS' CAPITAL

Liabilities:
     Accounts payable and accrued liabilities                          $ 1,091,170    $ 1,171,040
     Payable to affiliates                                                  82,588         12,655
     Rents received in advance                                              57,169          1,303
     Distributions payable to partners                                     178,815          2,000
     Discounted lease rentals                                              763,794      2,321,818
                                                                       -----------    -----------

          Total liabilities                                            $ 2,173,536    $ 3,508,816
                                                                       -----------    -----------
Partners' capital:
     General partner                                                          --           --
     Limited partners:
          Class A 260,000 units authorized; 133,418 and 133,418 units
          issued and outstanding in 2000 and 1999, respectively          1,841,515      4,901,714
          Class B                                                          181,330        182,583
                                                                       -----------    -----------

     Total partners' capital                                             2,022,845      5,084,297
                                                                       -----------    -----------

     Total liabilities and partners' capital                           $ 4,196,381    $ 8,593,113
                                                                       ===========    ===========
</TABLE>

                 See accompanying notes to financial statements.

                                      -16-
<PAGE>
                      CAPITAL PREFERRED YIELD FUND-II, L.P.

                              STATEMENTS OF INCOME
                  Years ended December 31, 2000, 1999 and 1998
<TABLE>
<CAPTION>

                                                             2000           1999          1998
                                                             ----           ----          ----
<S>                                                     <C>            <C>           <C>
Revenue:
     Operating lease rentals                            $ 1,701,438    $ 3,924,612   $ 6,457,667
     Direct finance lease income                            126,329        233,057       361,406
     Equipment sales margin                                 293,428        480,241       686,049
     Interest income                                         51,701         30,932        73,671
                                                        -----------    -----------   -----------

          Total revenue                                   2,172,896      4,668,842     7,578,793
                                                        -----------    -----------   -----------

Expenses:
     Depreciation                                         1,167,438      2,919,980     4,942,188
     Interest on discounted lease rentals                   109,338        251,161       466,086
     Interest on financed operating lease rentals              --             --          98,976
     Management fees paid to general partner                 61,544        103,977       156,307
     Direct services from general partner                    51,942         90,393       137,348
     General and administrative                             233,286        183,548       232,133
     Provision for losses                                   650,300        710,868       510,000
                                                        -----------    -----------   -----------

          Total expenses                                  2,273,848      4,259,927     6,543,038
                                                        -----------    -----------   -----------

Net income (loss)                                       $  (100,952)   $   408,915   $ 1,035,755
                                                        ===========    ===========   ===========

Net income (loss) allocated:
     To the general partner                             $    29,605    $    30,994   $    65,374
     To the Class A limited partners                       (129,304)       374,059       960,533
     To the Class B limited partner                          (1,253)         3,862         9,848
                                                        -----------    -----------   -----------

                                                        $  (100,952)   $   408,915   $ 1,035,755
                                                        ===========    ===========   ===========

Net income (loss) per weighted average Class
     A limited partner unit outstanding                 $     (0.97)   $      2.80   $      7.19
                                                        ===========    ===========   ===========

Weighted average Class A limited partner
     units outstanding                                      133,418        133,425       133,582
                                                        ===========    ===========   ===========
</TABLE>

                 See accompanying notes to financial statements.

                                      -17-
<PAGE>
                      CAPITAL PREFERRED YIELD FUND-II, L.P.

                         STATEMENTS OF PARTNERS' CAPITAL
                  Years ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                        Class A
                                                        Limited        Class A         Class B
                                          General       Partner        Limited         Limited
                                          Partner        Units         Partners        Partner          Total
                                          -------        -----         --------        -------          -----

<S>                                    <C>           <C>            <C>             <C>           <C>
Partners' capital, January 1, 1998     $     --      $   133,718    $ 13,092,164    $  208,198    $ 13,300,362

Redemptions                                  --             (200)        (15,996)         --           (15,996)
Net income                                 65,374           --           960,533         9,848       1,035,755
Distributions declared to partners        (65,374)          --        (6,435,700)      (36,300)     (6,537,374)
                                       ----------    ------------    ----------     ----------     -----------

Partners' capital, December 31, 1998         --          133,518       7,601,001       181,746       7,782,747

Redemptions                                  --             (100)         (8,148)         --            (8,148)
Net income                                 30,994           --           374,059         3,862         408,915
Distributions declared to partners        (30,994)          --        (3,065,198)       (3,025)     (3,099,217)
                                       ----------    ------------    ----------     ----------    ------------

Partners' capital, December 31, 1999         --          133,418       4,901,714       182,583       5,084,297

Net income (loss)                          29,605           --          (129,304)       (1,253)       (100,952)
Distributions declared to partners        (29,605)          --        (2,930,895)         --        (2,960,500)
                                       -----------   -----------    ------------    -----------   ------------

Partners' capital, December 31, 2000   $     --      $   133,418    $  1,841,515    $  181,330    $  2,022,845
                                       ===========   ===========    ============    ===========   ============
</TABLE>

                 See accompanying notes to financial statements.

                                      -18-
<PAGE>
                      CAPITAL PREFERRED YIELD FUND-II, L.P.

                            STATEMENTS OF CASH FLOWS
                  Years ended December 31, 2000, 1999 and 1998
<TABLE>
<CAPTION>
                                                                                   2000            1999          1998
                                                                                   ----            ----          ----
<S>                                                                          <C>             <C>             <C>
Cash flows from operating activities:
     Net income (Loss)                                                       $   (100,952)   $    408,915    $  1,035,755

     Adjustments to reconcile net income to net cash provided by operating
         activities:
         Depreciation                                                           1,167,438       2,919,980       4,942,188
         Provision for losses                                                     650,300         710,868         510,000
         Cost of equipment sales                                                  818,738       1,634,282       3,250,766
         Recovery of investment in direct finance leases                          747,466         874,706         964,247
         Changes in assets and liabilities:
           Decrease (increase) in accounts receivable, net                        426,184         419,322         (92,267)
           Increase (decrease) in payables to affiliates                           69,933        (233,073)        (18,115)
           Increase (decrease) in accounts payable and
            accrued liabilities                                                   (79,870)       (163,384)        451,744
           Increase (decrease) in rents received in advance                        55,866        (104,029)          2,922
                                                                             ------------    ------------    ------------
     Net cash provided by operating activities                                  3,755,103       6,467,587      11,047,240
                                                                             ------------    ------------    ------------

Cash flows from investing activities:
     Purchases of equipment on operating leases from affiliate                       --            (3,364)           --
                                                                             ------------    ------------    ------------
     Net cash used in investing activities                                           --            (3,364)           --
                                                                             ------------    ------------    ------------

Cash flows from financing activities:
     Principal payments on discounted lease rentals                            (1,558,024)     (2,290,333)     (3,349,731)
     Principal payments on financed operating lease rentals                          --              --        (2,257,035)
     Distributions to partners                                                 (2,783,685)     (3,605,321)     (6,537,374)
     Redemptions of Class A limited partner units                                    --            (8,148)        (15,996)
                                                                             ------------    ------------    ------------
     Net cash used in financing activities                                     (4,341,709)     (5,903,802)    (12,160,136)
                                                                             ------------    ------------    ------------

Net increase (decrease) in cash and cash equivalents                             (586,606)        560,421      (1,112,896)
Cash and cash equivalents at beginning of year                                  1,345,288         784,867       1,897,763
                                                                             ------------    ------------    ------------
Cash and cash equivalents at end of year                                     $    758,682    $  1,345,288    $    784,867
                                                                             ============    ============    ============

Supplemental disclosure of cash flow information:
     Interest paid on discounted lease rentals                               $    109,338    $    251,161    $    466,086
     Interest paid on financed lease rentals                                         --              --            98,976
</TABLE>

                 See accompanying notes to financial statements.

                                     -19-
<PAGE>
                      CAPITAL PREFERRED YIELD FUND-II, L.P.
                          NOTES TO FINANCIAL STATEMENTS

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

     Organization

     Capital Preferred Yield Fund-II, L.P. (the "Partnership"), was organized on
     November 19, 1991 as a limited partnership under the laws of the State of
     Delaware pursuant to an Agreement of Limited Partnership (the "Partnership
     Agreement"). The Partnership was formed for the purpose of acquiring and
     leasing a diversified portfolio of equipment to unaffiliated third parties.
     The Partnership will continue until December 31, 2009 unless terminated
     earlier in accordance with the terms of the Partnership Agreement. The
     Partnership entered its liquidation stage, as defined in the Partnership
     Agreement, in July 1997. All equipment owned by the Partnership is expected
     to be sold and the Partnership liquidated prior to 2009. The general
     partner of the Partnership is CAI Equipment Leasing III Corp., a wholly
     owned subsidiary of Mishawaka Leasing Company, Inc. ("MLC").

     The general partner manages the Partnership, including investment of funds,
     purchase and sale of equipment, lease negotiation and other administrative
     duties. The Partnership initially sold 135,774 Class A limited partner
     units to 1,796 investors at a price of $250 per Class A limited partner
     unit.

     Mishawaka Leasing Company, Inc. is the Class B limited partner. The Class B
     limited partner was required to contribute cash, upon acquisition of
     equipment, in an amount equal to 1% of gross offering proceeds received
     from the sale of Class A limited partner units. The Class B limited partner
     contributed $330,000 to the Partnership. The Class B limited partner has no
     remaining obligation to contribute cash to the Partnership.

     Use of Estimates

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

     Partnership Cash Distributions and Allocations of Profit and Loss

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

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


                                      -20-
<PAGE>
                      CAPITAL PREFERRED YIELD FUND-II, L.P.
                    NOTES TO FINANCIAL STATEMENTS, Continued

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

     Partnership Cash Distributions and Allocations of Profit and Loss,
     continued

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

          First, 1.0% to the general partner and 99.0% to the Class A limited
          partners until the Class A limited partners received annual,
          non-compounded cumulative distributions equal to 12% of their
          contributed capital.

          Second, 1.0% to the general partner and 99.0% to the Class B limited
          partner until the Class B limited partner received annual
          non-compounded cumulative distributions equal to 11% of its
          contributed capital.

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

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

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

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

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

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

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

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

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

                                      -21-
<PAGE>
                      CAPITAL PREFERRED YIELD FUND-II, L.P.
                          NOTES TO FINANCIAL STATEMENTS

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

     Partnership Cash Distributions and Allocations of Profit and Loss,
     continued

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

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

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

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

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

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

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

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

                                      -22-
<PAGE>
1.   Organization and Summary of Significant Accounting Policies, continued
     -----------------------------------------------------------

     Recently Issued Financial Accounting Standards

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
     Accounting for Derivative Instruments and Hedging Activities ("Statement
     133"). Statement 133 establishes accounting and reporting standards for
     derivative instruments and for hedging activities. It requires that an
     entity recognize all derivatives as either assets or liabilities in the
     statement of financial position and measure those instruments at fair
     value. In June 1999, the Financial Accounting Standards Board issued SFAS
     No. 137, Accounting for Derivative Instruments and Hedging Activities -
     Deferral of the Effective Date of FASB No. 133, an Amendment of FASB
     Statement 133. Statement 137 effectively extends the required application
     of Statement 133 to all fiscal quarters of all fiscal years beginning after
     June 15, 2000, with earlier application permitted. The Partnership adopted
     Statement 133 in the first quarter of 1999, and such adoption had no
     material impact on the Partnership.

     Lease Accounting

     Statement of Financial Accounting Standards No. 13, Accounting for Leases,
     requires that a lessor account for each lease by the direct finance,
     sales-type or operating lease method. The Partnership currently utilizes
     the direct financing and operating methods for all of the Partnership's
     equipment under lease. Direct finance leases are defined as those leases
     which transfer substantially all of the benefits and risks of ownership of
     the equipment to the lessee. For all types of leases, the determination of
     profit considers the estimated value of the equipment at lease termination,
     referred to as the residual value. After the inception of a lease, the
     Partnership may engage in financing of lease receivables on a non-recourse
     basis (i.e., "non-recourse debt" or "discounted lease rentals") and/or
     equipment sale transactions to reduce or recover its investment in the
     equipment.


                                      -23-
<PAGE>
1.   Organization and Summary of Significant Accounting Policies, continued
     -----------------------------------------------------------

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

     Net Investment in Direct Finance Leases ("DFLs")

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

     Equipment on Operating Leases ("OLs")

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

     Non-recourse Discounting of Rentals

     The Partnership may assign the future rentals from leases to financial
     institutions, or acquire leases subject to such assignments, at fixed
     interest rates on a non-recourse basis. In return for such assigned future
     rentals, the Partnership receives the discounted value of the rentals in
     cash. In the event of default by a lessee, the financial institution has a
     first lien on the underlying leased equipment, with no further recourse
     against the Partnership. Cash proceeds from such financings, or the
     assumption of such financings, are recorded on the balance sheet as
     discounted lease rentals. As lessees make payments to financial
     institutions, leasing revenue and interest expense are recorded.


                                      -24-
<PAGE>
     1.  Organization and Summary of Significant Accounting Policies, continued
         -----------------------------------------------------------

     Non-recourse Financing of Operating Lease Rentals

     The Partnership may assign substantially all of its rights under certain
     operating leases to a purchaser, and subsequently, the purchaser may assign
     the rentals from such leases to a financial institution at fixed interest
     rates on a non-recourse basis. The Partnership receives the discounted
     value of the rentals in cash from the financial institution. As with
     discounted lease rentals discussed above, in the event of default by a
     lessee, the financial institution has a first lien on the underlying leased
     equipment, with no further recourse against the Partnership or the
     Partnership's assets. The purchaser cannot be the owner of the equipment
     for financial reporting purposes because the purchaser has not made a
     sufficient investment in the equipment and does not have significant risks
     of ownership. Therefore, the transaction cannot be recorded as a sale.
     Accordingly, cash proceeds from financings related to such transactions are
     recorded on the balance sheet as financed operating lease rentals. As
     lessees make payments to financial institutions, leasing revenue and
     interest expense are recorded.

     Allowance for Losses

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

     Transactions Subsequent to Initial Lease Termination

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

     Income Taxes

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

                                      -25-
<PAGE>
     1.  Organization and Summary of Significant Accounting Policies, continued
         -----------------------------------------------------------

     Cash Equivalents

     The Partnership considers short-term, highly liquid investments that are
     readily convertible to known amounts of cash to be cash equivalents. Cash
     equivalents of approximately $754,000 and $786,000 at December 31, 2000 and
     1999, respectively, are comprised of investments in a money market fund
     which invests solely in U.S. Government securities having maturities of 90
     days or less.

     Equipment Held for Sale

     Equipment held for sale, recorded at the lower of cost or market value
     expected to be realized, consists of equipment previously leased to end
     users which has been returned to the Partnership following lease
     expiration.

     Net Income Per Class A Limited Partner Unit

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

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

     The components of net investment in direct finance leases as of December
     31, 2000 and 1999 were:

                                         2000          1999
                                         ----          ----

Minimum lease payments receivable   $   420,708    $ 1,171,361
Estimated residual values               879,576        961,661
Less unearned income                    (53,308)      (186,796)
                                    -----------    -----------

                                    $ 1,246,976    $ 1,946,226
                                    ===========    ===========

                                      -26-
<PAGE>
3.    Leased Equipment
      ----------------

     The Partnership's investments in equipment on operating leases by major
     classes as of December 31, 2000 and 1999 were:

                                               2000            1999
                                               ----            ----

Transportation and industrial equipment   $  6,436,564    $  8,755,266
Computers and peripherals                       63,167       1,786,631
Office furniture and equipment                 424,896       1,481,627
                                          ------------    ------------
                                             6,924,627      12,023,524
Less:
   Accumulated depreciation                 (4,813,758)     (7,800,289)
   Allowance for losses                       (114,176)        (64,411)
                                          ------------    ------------
                                          $  1,996,693    $  4,158,824
                                          ============    ============

      Depreciation expense for 2000, 1999 and 1998 was $1,167,438, $2,919,980
and $4,942,188, respectively.

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

      Future minimum lease payments receivable from non-cancelable leases at
December 31, 2000 are as follows:

Year Ending December 31,      Direct Finance Leases        Operating Leases
------------------------      ---------------------        ----------------

       2001                        $ 413,616                   $ 563,288
       2002                            6,432                      20,520
       2003                              660                       9,027
                                   ---------                   ---------
              Total                $ 420,708                   $ 592,835
                                   =========                   =========
5.    Discounted Lease Rentals
      ------------------------

      Discounted lease rentals outstanding at December 31, 2000 bear interest at
      rates primarily ranging between 6% and 9.5%. Aggregate maturities of such
      non-recourse obligations are as follows:

            Year Ending December 31,
            ------------------------

                       2001                   $    763,794
                                              -------------
                           Total              $    763,794
                                              =============

                                      -27-
<PAGE>
6.    Transactions With the General Partner and Affiliates
      ----------------------------------------------------

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

      The general partner earns management fees as compensation for services
      performed in connection with managing the Partnership's equipment equal to
      2% of gross rentals received as permitted under terms of the Partnership
      Agreement. The general partner earned approximately $62,000, $104,000 and
      $156,000 of management fees during 2000, 1999 and 1998, respectively.

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

      The general partner and its affiliates provide accounting, investor
      relations, billing, collecting, asset management, and other administrative
      services to the Partnership. The Partnership reimburses the general
      partner for these services performed on its behalf as permitted under the
      terms of the Partnership Agreement. The Partnership recorded approximately
      $52,000, $90,000 and $137,000 of direct services from the general partner
      during 2000, 1999 and 1998, respectively.

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

      The Partnership did not acquire any new equipment in 2000. The equipment
      purchase in 1999 represented an upgrade to an existing lease

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

      Payables to affiliates for 2000 consists of $5,094 for management fees to
      the general partner and $77,494 for general and administrative expenses.

                                      -28-
<PAGE>
7.    Tax Information, (unaudited)
      ---------------

      The following reconciles net income for financial reporting purposes to
      the income (loss) for federal income tax purposes for the years ended
      December 31,:
<TABLE>
<CAPTION>
                                                                            2000             1999          1998
                                                                            ----             ----          ----

<S>                                                                    <C>             <C>            <C>
      Net income (loss) per financial statements                       $  (100,952)    $   408,915    $ 1,035,755
      Differences due to:
        Direct finance leases                                              754,121         871,084        969,049
        Depreciation                                                      (453,768)        (72,828)      (325,966)
        Provision for losses                                               650,300         710,868        510,000
        Gain/loss on sale of assets                                        207,983          (6,743)     1,242,693
        Other                                                              (40,395)        (64,350)        (9,033)
                                                                       ------------    -----------     ----------
      Partnership income (loss) for federal income tax purposes        $ 1,017,289     $ 1,846,946     $ 3,422,498
                                                                       ============    ===========     ===========
</TABLE>

      The following reconciles partners' capital for financial reporting
      purposes to partners' capital for federal income tax purposes for the
      years ended December 31,:

<TABLE>
<CAPTION>
                                                                            2000            1999            1998
                                                                            ----            ----            ----

<S>                                                                    <C>             <C>             <C>
      Partners' capital per financial statements                       $ 2,022,845     $ 5,084,297     $ 7,782,747
      Differences due to:
         Commissions and offering costs                                  4,868,944       4,868,944       4,868,944
      Direct finance leases                                              7,375,057       6,620,936       5,749,852
         Depreciation                                                  (12,841,505)    (12,387,737)    (12,314,909)
         Provision for losses                                            1,871,168       1,220,868         510,000
        Gain/loss on sale of assets                                        207,983          (6,743)      1,242,693
        Other                                                            1,647,429       1,694,567         516,313
                                                                       -------------   -----------     -----------
      Partners' capital for federal income tax purposes                $ 5,151,421     $ 7,095,132     $ 8,355,640
                                                                       ============    ===========     ===========
</TABLE>

                                      -29-
<PAGE>
8.    Concentration of Credit Risk
      ----------------------------

      Approximately 71% of the Partnership's equipment under lease was leased to
      investment grade lessees. Pursuant to the Partnership Agreement, an
      investment grade lessee is a company (i) with net worth in excess of $100
      million (and no debt issues that are rated), or (ii) with a credit rating
      of not less than Baa as determined by Moody's Investor Service, Inc., or
      comparable credit rating as determined by another recognized credit rating
      service; or (iii) a lessee, all of whose lease payments have been
      unconditionally guaranteed or supported by a letter of credit issued by a
      company meeting one of the above requirements.

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

      The Partnership leased equipment to a significant number of lessees. One
      lessee and its affiliates accounted for 23% ($685,198) of total leasing
      and remarketing revenue of the Partnership during 2000.

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

     Statement of Financial Standards No. 107, Disclosures about Fair Value of
     Financial Instruments specifically excludes certain items from its
     disclosure requirements such as the Partnership's investment in leased
     assets. The carrying amounts at December 31, 2000 for cash and cash
     equivalents, accounts receivable, accounts payable and accrued liabilities,
     payable to affiliates, rents received in advance and distributions payable
     to partners approximate their fair values due to the short maturity of
     these instruments.

      As of December 31, 2000, discounted lease rentals of approximately
      $764,000 had a fair value of $572,000. The fair values were estimated
      utilizing market rates of comparable debt having similar maturities and
      credit quality as of December 31, 2000.

                                      -30-
<PAGE>


                          Independent Auditors' Report
                          ----------------------------



The Partners
Capital Preferred Yield Fund-II, L.P.:

Under date of April 12, 2001, we reported on the balance sheets of Capital
Preferred Yield Fund-II, L.P. as of December 31, 2000 and 1999, and the related
statements of income, partners' capital, and cash flows for each of the years in
the three-year period ended December 31, 2000, as contained in the Partnership's
annual report on Form 10-K for the year 2000. In connection with our audits of
the aforementioned financial statements, we also audited the related financial
statement Schedule II. This financial statement schedule is the responsibility
of the Partnership's management. Our responsibility is to express an opinion on
this financial statement schedule based on our audits.

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

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

Denver, Colorado
April 12, 2001

                                      -31-
<PAGE>
                      CAPITAL PREFERRED YIELD FUND-II, L.P.

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
              for the years ended December 31, 2000, 1999 and 1998
<TABLE>
<CAPTION>

       COLUMN A                    COLUMN B     COLUMN C    COLUMN D      COLUMN E
------------------------          ----------   --------    ----------    ---------
                                  Balance at   Additions                   Balance
                                  Beginning   Charged to                   at End
Classification                     of Year     Expenses   Deductions (1)   of Year
--------------                    ----------  ---------   -------------  ----------

         2000
         ----
<S>                               <C>         <C>          <C>          <C>
Allowance for losses:
  Accounts receivable             $  25,000   $    --      $    --      $  25,000
Equipment on operating leases        64,411     650,300     (600,535)     114,176
                                  ---------   ---------    ---------    ---------

                                  $  89,411   $ 650,300    $(600,535)   $ 139,176
                                  =========   =========    =========    =========
        1999
        ----
Allowance for losses:
  Accounts receivable             $  25,000   $    --      $    --      $  25,000
  Equipment on operating leases     185,787     710,868     (832,244)      64,411
                                  ---------   ---------    ---------    ---------

                                  $ 210,787   $ 710,868    $(832,244)   $  89,411
                                  =========   =========    =========    =========
       1998
       ----
Allowance for losses:
  Accounts receivable             $  25,000   $    --      $    --      $  25,000
  Equipment on operating leases     150,954     510,000     (475,167)     185,787
                                  ---------   ---------    ---------    ---------

                                  $ 175,954   $ 510,000    $(475,167)   $ 210,787
                                  =========   =========    =========    =========
</TABLE>

1) Principally charge-offs of assets against the established allowances.



                  See accompanying independent auditors' report

                                      -32-
<PAGE>
Item 9.  Disagreements on Accounting and Financial Disclosures
         -----------------------------------------------------

None

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

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

                                 CAI Equipment Leasing III Corporation

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

         John F. Olmstead           President and Director

John F. Olmstead, age 57, is President of Mishawaka Leasing Co. since its
formation in September 2000. He was Senior Vice President of CAI from December,
1998 until June, 2000. He has served as Chairman of the Board for Neo-kam
Industries, Inc., Matchless Metal Polish Company, Inc. and ACL, Inc. since 1983.
He has over 30 years of experience holding various positions of responsibility
in the leasing industry. Mr. Olmstead holds a Bachelor of Science degree from
Indiana University and a Juris Doctorate degree from Indiana Law School.

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

No compensation was paid by the Partnership to the officers and directors of the
general partner. See Item 13 of this Report, "Certain Relationships and Related
Transactions", for a description of the compensation and fees paid to the
general partner and its affiliates by the Partnership during 2000.

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

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

          MLC is the Class B limited partner.

                                      -33-
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management,
         --------------------------------------------------------------
         continued

          CAI Equipment Leasing III Corp. is the general partner.

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

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

          CAI Equipment Leasing III Corp.
          2750 South Wadsworth
          C-200
          Denver, Colorado 80227

          Class B Limited Partner

          Mishawaka Leasing Company, Inc.
          2750 South Wadsworth
          C-200
          Denver, Colorado 80227

     (b)  No directors or officers of the general partner or the Class B limited
          partner owned any Class A limited partner units as of December 31,
          2000.

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

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

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

Following is a summary of the amounts paid or payable to the general partner and
its affiliates during 2000:

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

The general partner earns management fees as compensation for services rendered
in connection with managing the Partnership's equipment equal to 2% of gross
rentals received. Such fees totaled approximately $62,000 for 2000.

                                      -34-
<PAGE>
Item 13. Certain Relationships and Related Transactions, continued
         ----------------------------------------------

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

The general partner is entitled to reimbursement of certain expenses paid on
behalf of the Partnership which are incurred in connection with the
Partnership's operations. Such reimbursable expenses amounted to approximately
$52,000 during 2000.

General Partner Distributions
-----------------------------

The general partner is allocated 1% of Partnership cash distributions and net
income relating to its general partner interest in the Partnership.
Distributions and net income allocated to the general partner totaled
approximately $30,000 and $30,000, respectively, for 2000. Net loss allocated to
the Class B limited partner totaled approximately $1,300 for 2000.

                                      -35-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
         ---------------------------------------------------------------

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

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

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

          (b)  The Partnership did not file any reports on Form 8-K during the
               quarter ended December 31, 2000.

          (c)  Exhibits required to be filed.

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

          4.1*  Capital Preferred Yield Fund-II Limited Partnership Agreement

          4.2*  First Amendment to Limited Partnership Agreement dated June 12,
                1992

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

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

                                      -36-
<PAGE>
                                   SIGNATURES

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

Dated:  April 23, 2001            Capital Preferred Yield Fund-II, L.P.

                                   By:   CAI Equipment Leasing III Corporation

                                   By:
                                        ---------------------------------------
                                        Susan M. Landi
                                        Chief Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the general partner
of the Partnership and in the capacities indicated on April 23, 2001.

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

John F. Olmstead                    President and Director


                                      -37-
<PAGE>
                                   SIGNATURES

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

Dated:  April 23, 2001               Capital Preferred Yield Fund-II, L.P.

                                     By:  CAI Equipment Leasing III Corporation

                                     By:  /s/Susan M. Landi
                                          -------------------------------------
                                          Susan M. Landi
                                          Chief Accounting Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the general partner
of the Partnership and in the capacities indicated on April 23, 2001.

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

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