<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                  FORM 10-KA

(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, 1999

[_]  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)

7175 W. Jefferson Avenue, Lakewood, Colorado                    80235
  (Address of principal executive offices)                   (Zip Code)

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

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 and a wholly owned subsidiary of Capital Associates, Inc.
("CAI"), is the general partner of the Partnership.

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 2000 and 2001.

Capital Associates International, Inc. ("CAII"), an affiliate of the general
partner, is the Class B limited partner of the Partnership.  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.

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 1999, 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

                                      -2-
<PAGE>

Item 1.  Business, continued
         --------

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).

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.  Two
lessees and their affiliates accounted for 12% ($726,300) and 11% ($693,153) of
total leasing and remarketing revenue of the Partnership during 1999.

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.

                                      -3-
<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, 1999.


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, 1999, the number of Class A limited partners was 1,719.

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

     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>

                                      -4-
<PAGE>

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

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

     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.

     Distributions to the general partner and Class B limited partner during
     1999 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 2000 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.

                                      -5-
<PAGE>

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

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

     During 1998, the Partnership made twelve (12)  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, 1997          January 1998            $3.74           $  500,000
     January 31, 1998           February 1998            3.74              500,000
     February 28, 1998          March 1998               5.24              700,000
     March 31, 1998             April 1998               5.61              750,000
     April 30, 1998             May 1998                 5.24              700,000
     May 31, 1998               June 1998                5.61              750,000
     June 30, 1998              July 1998                2.25              300,000
     July 31, 1998              August 1998              2.99              400,000
     August 31, 1998            September 1998           3.74              500,000
     September 30, 1998         October 1998             4.49              600,000
     October 31, 1998           November 1998            2.51              335,700
     November 30, 1998          December 1998            2.99              400,000
                                                       ------           ----------
                                                       $48.15           $6,435,700
                                                       ======           ==========
</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.

<TABLE>
<CAPTION>
                     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)
     -----------    ---------------------  ----------------------
     <S>            <C>                    <C>
        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%
                          -------
                          $245.31
                          =======
</TABLE>

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

                                      -6-
<PAGE>

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

The following selected financial data relates to the years ended December 31,
1995 through 1999 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,
                                               ------------------------------------------------------------------
                                                  1999         1998          1997          1996          1995
                                               -----------  -----------  ------------  ------------  ------------
<S>                                            <C>          <C>          <C>           <C>           <C>
Total revenue                                   $4,668,842  $ 7,578,793   $10,309,337   $10,870,083   $12,719,445
Net income                                         408,915    1,035,755     1,456,778       231,258     1,009,230
Net income per weighted average Class A
  limited partner unit outstanding                    2.80         7.19         10.40          1.40          7.09
Total assets                                     8,593,113   14,344,900    25,032,730    33,516,785    31,806,534
Discounted and financed operating
  lease rentals                                  2,321,818    4,612,151    10,218,917    15,559,029    10,009,561
Distributions declared to partners               3,099,217    6,537,374     4,995,930     4,101,808     4,131,126
Distributions declared per monthly weighted
   average Class A limited partner unit              22.97        48.18         36.69         30.00         30.00
</TABLE>

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,
                                        -------------------------------------  ---------------------------------------
                                           1999         1998        Change         1998          1997        Change
                                        ----------  ------------  -----------  ------------  ------------  -----------
<S>                                     <C>         <C>           <C>          <C>           <C>           <C>
Leasing margin                          $ 986,528    $1,311,823    $(325,295)   $1,311,823    $1,662,250    $(350,427)
Equipment sales margin                    480,241       686,049     (205,808)      686,049       572,363      113,686
Interest income                            30,932        73,671      (42,739)       73,671        80,642       (6,971)
Management fees paid to
  general partner                        (103,977)     (156,307)      52,330      (156,307)     (200,538)      44,231
Direct services from general partner      (90,393)     (137,348)      46,955      (137,348)     (107,779)     (29,569)
General and administrative               (183,548)     (232,133)      48,585      (232,133)     (225,160)      (6,973)
Provision for losses                     (710,868)     (510,000)    (200,868)     (510,000)     (325,000)    (185,000)
                                        ---------    ----------    ---------    ----------    ----------    ---------

   Net income                           $ 408,915    $1,035,755    $(626,840)   $1,035,755    $1,456,778    $(421,023)
                                        =========    ==========    =========    ==========    ==========    =========
</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 equipment is  being remarketed (i.e., re-leased, renewed, or
sold),and accordingly, the timing and amount of equipment sales cannot be
projected accurately. As a result, both the size of the Partnership's  leasing
portfolio and the amount of leasing revenue are declining.

                                      -7-
<PAGE>

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

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

Leasing Margin

Leasing margin consists of the following:

<TABLE>
<CAPTION>
                                                                Years Ended December 31,
                                                        ---------------------------------------
                                                            1999          1998          1997
                                                        -----------   -----------   -----------
<S>                                                     <C>           <C>           <C>
Operating lease rentals                                 $ 3,924,612   $ 6,457,667   $ 9,251,501
Direct finance lease income                                 233,057       361,406       404,831
Depreciation                                             (2,919,980)   (4,942,188)   (7,066,062)
Interest expense on discounted lease rentals               (251,161)     (466,086)     (745,295)
Interest expense on financed operating lease rentals              -       (98,976)     (182,725)
                                                        -----------   -----------   -----------

 Leasing margin                                         $   986,528   $ 1,311,823   $ 1,662,250
                                                        ===========   ===========   ===========

 Leasing margin ratio                                            24%           19%           17%
                                                        ===========   ===========   ===========
</TABLE>

All components of leasing margin decreased for the year ended December 31, 1999
compared to the years ended December 31, 1998 and December 31, 1997, and is
expected to decline further 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.  Leasing margin ratio generally varies
due to changes in the portfolio, including, among other things, the mix of
operating leases versus direct finance leases, the average maturity of leases
comprising the portfolio, the average residual value of leases in the portfolio,
and the amount of discounted lease rentals financing the portfolio.

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:

<TABLE>
<CAPTION>
                                   Years Ended December 31,
                           ----------------------------------------
                               1999          1998          1997
                           ------------  ------------  ------------
<S>                        <C>           <C>           <C>
Equipment sales revenue    $ 2,114,523   $ 3,936,815   $ 2,217,177
Cost of equipment sales     (1,634,282)   (3,250,766)   (1,644,814)
                           -----------   -----------   -----------
Equipment sales margin     $   480,241   $   686,049   $   572,363
                           ===========   ===========   ===========
</TABLE>

                                      -8-
<PAGE>

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

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

Equipment Sales Margin, continued

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 and general and administrative expenses paid to General Partner
decreased due to portfolio run-off.

The decrease in direct services from the General Partner from 1998 to 1999 is
due to a change in the methodology used to determine the amount to be reimbursed
to the affiliate for asset management services.  The affiliate now charges the
Partnership a fixed fee for asset management services. This fee is equal to an
estimated cost to refurbish a piece of equipment returned to the affiliates'
warehouse. The fee is charged to the Partnership when the equipment is returned,
and is recorded as an expense for the period. Direct services from the General
Partner were higher in 1998 compared to 1997 due to additional costs associated
with warehousing and selling equipment returned to the Partnership.

Provision for losses

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

Residual values are established equal to the estimated value to be received from
the equipment following termination of the lease.  In estimating such values,
the Partnership considers all relevant facts regarding the equipment and the
lessee, including, for example, the likelihood that the lessee will re-lease the
equipment.  The nature of the Partnership's leasing activities is that it has
credit and residual value exposure and, accordingly, in the ordinary course of
business, it will incur losses from those exposures.  The Partnership performs
ongoing quarterly assessments of its assets to identify other-than-temporary
losses in value.

                                      -9-
<PAGE>

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

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

Provision for losses, continued

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-leased 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.

The provision for losses recorded during 1998 related to the following:

* $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.

The provision for losses recorded during 1997 related to the following:

* $245,000 related to lessees returning equipment to the Partnership.  The
  Partnership had previously expected to realize the carrying value of that
  equipment through lease renewals and proceeds from the sale of the equipment
  to the original lessees.  The fair market value of the equipment re-leased or
  sold to third parties was less than anticipated.

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

                                      -10-
<PAGE>

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

The Partnership is in its liquidation stage, as defined in the Partnership
Agreement and, as expected, 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 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.

The equipment purchased of $3,364 in 1999 represents an upgrade to an existing
lease.  No equipment was purchased during 1998. During 1997, the Partnership
acquired equipment subject to leases with a total equipment purchase price of
approximately $1,085,000.

During 1999, 1998 and 1997, the Partnership declared distributions to the
partners of $3,099,215, $6,537,374, and $4,995,930, 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 2000 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.

As of March 31, 2000, CAII, an affiliate of the general partner, owes the
Partnership $70,547 for rents, remarketing proceeds and other amounts
(collectively, the "Prior Rents") collected by CAII on behalf of the Partnership
during periods prior to February 1, 2000 (the "Prior Periods").  According to
its own records, as of March 31, 2000, CAII owes approximately $3.9 million to
other investors and creditors (who, along with the Partnership, are referred to
herein as the "Payees"), for Prior Rents collected by CAII on their behalf
during the Prior Periods.  CAII, which presently does not have the funds to
repay all of the Prior Rents, is in negotiations with the Payees to develop a
plan for repayment of the Prior Rents owed to all Payees over time.  The
Partnership is withholding acquisition fees and managements fees otherwise
payable to the general partner and crediting such withheld fees (the "Fees")
against the Prior Rents owing from CAII.  The Partnership intends to continue to
withhold future Fees until such time as it recovers all Prior Rents.

The Partnership relies upon the services of CAII for origination of leases,
administrative and accounting services and remarketing of leases and equipment,
among other services. Should CAII be unable to develop a plan for repayment with
it's Payees, the Partnership may be required to contract with another party for
these services. In such event, there is no assurance that another provider of
these services can be identified.

                                      -11-
<PAGE>

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. 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 fiscal years beginning
after June 15, 2000, with earlier application permitted. The Partnership adopted
Statement 133 in the first quarter of 1999. The General Partner does not expect
the adoption of Statement 133 or Statement 137 to have an impact on its
financial reporting.

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; customer credit risk;
competition from other lessors, specialty finance lenders or banks; and the
availability and cost of financing sources.  Certain specific risks associated
with particular aspects of the Partnership's business are discussed in detail
throughout Parts I and II when and where applicable.


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.

                                      -12-
<PAGE>

Item 8.   Financial Statements and Supplementary Data
          -------------------------------------------

          Index to Financial Statements and
          Financial Statement Schedule

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

               Independent Auditors' Report                              14

               Balance Sheets as of December 31, 1999 and 1998           15

               Statements of Income for the years ended
                 December 31, 1999, 1998 and 1997                        16

               Statements of Partners' Capital for the years ended
                 December 31, 1999, 1998 and 1997                        17

               Statements of Cash Flows for the years ended
                 December 31, 1999, 1998 and 1997                        18

               Notes to Financial Statements                          19-29



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

               Independent Auditors' Report                           30

               Schedule II - Valuation and Qualifying Accounts        31

                                      -13-
<PAGE>

                         Independent Auditors' 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, 1999 and 1998, and the related statements of income,
partners' capital, and cash flows for each of the years in the three-year period
ended December 31, 1999. 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 generally accepted auditing
standards. 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, 1999 and 1998, and the results of its operations and
its cash flows for each of the years in the three-year period ended December 31,
1999, in conformity with generally accepted accounting principles.

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



Denver, Colorado
March 31, 2000

                                      -14-
<PAGE>

                     CAPITAL PREFERRED YIELD FUND-II, L.P.

                                BALANCE SHEETS
                          December 31, 1999 and 1998


                                     ASSETS
<TABLE>
<CAPTION>
                                                                     1999          1998
                                                                  -----------   ------------
<S>                                                               <C>           <C>
Cash and cash equivalents                                         $ 1,345,288   $   784,867
Accounts receivable, net                                              332,475       771,076
Receivable from affiliates                                            243,586             -
Equipment held for sale or re-lease                                   566,714       285,299
Net investment in direct finance leases                             1,946,226     2,865,887
Leased equipment, net                                               4,158,824     9,637,771
                                                                  -----------   -----------

     Total assets                                                 $ 8,593,113   $14,344,900
                                                                  ===========   ===========

                       LIABILITIES AND PARTNERS' CAPITAL

Liabilities:

  Accounts payable and accrued liabilities                        $ 1,171,040   $ 1,334,422
  Payables to affiliates                                               12,655         2,142
  Rents received in advance                                             1,303       105,332
  Distributions payable to partners                                     2,000       508,106
  Discounted lease rentals                                          2,321,818     4,612,151
                                                                  -----------   -----------

     Total liabilities                                              3,508,816     6,562,153
                                                                  -----------   -----------

Commitments and contingencies (Note 10)

Partners' capital:
  General partner                                                           -             -
  Limited partners:
     Class A 260,000 units authorized; 133,418 and 133,518 units
     issued and outstanding in 1999 and 1998, respectively          4,901,714     7,601,001
     Class B                                                          182,583       181,746
                                                                  -----------   -----------

  Total partners' capital                                           5,084,297     7,782,747
                                                                  -----------   -----------

  Total liabilities and partners' capital                         $ 8,593,113   $14,344,900
                                                                  ===========   ===========
</TABLE>

                See accompanying notes to financial statements.

                                      -15-
<PAGE>

                     CAPITAL PREFERRED YIELD FUND-II, L.P.

                             STATEMENTS OF INCOME
                 Years ended December 31, 1999, 1998, and 1997

<TABLE>
<CAPTION>
                                                     1999         1998         1997
                                                  -----------  -----------  -----------
<S>                                               <C>          <C>          <C>
Revenue:
  Operating lease rentals                          $3,924,612   $6,457,667  $ 9,251,501
  Direct finance lease income                         233,057      361,406      404,831
  Equipment sales margin                              480,241      686,049      572,363
  Interest income                                      30,932       73,671       80,642
                                                   ----------   ----------  -----------

     Total revenue                                  4,668,842    7,578,793   10,309,337
                                                   ----------   ----------  -----------

Expenses:
  Depreciation                                      2,919,980    4,942,188    7,066,062
  Interest on discounted lease rentals                251,161      466,086      745,295
  Interest on financed operating lease rentals              -       98,976      182,725
  Management fees paid to general partner             103,977      156,307      200,538
  Direct services from general partner                 90,393      137,348      107,779
  General and administrative                          183,548      232,133      225,160
  Provision for losses                                710,868      510,000      325,000
                                                   ----------   ----------  -----------

     Total expenses                                 4,259,927    6,543,038    8,852,559
                                                   ----------   ----------  -----------

Net income                                         $  408,915   $1,035,755  $ 1,456,778
                                                   ==========   ==========  ===========

Net income allocated:
  To the general partner                           $   30,994   $   65,374  $    49,960
  To the Class A limited partners                     374,059      960,533    1,392,588
  To the Class B limited partner                        3,862        9,848       14,230
                                                   ----------   ----------  -----------

                                                   $  408,915   $1,035,755  $ 1,456,778
                                                   ==========   ==========  ===========

Net income per weighted average Class
  A limited partner unit outstanding               $     2.80   $     7.19  $     10.40
                                                   ==========   ==========  ===========

Weighted average Class A limited partner
  units outstanding                                   133,425      133,582      133,886
                                                   ==========   ==========  ===========
</TABLE>

                See accompanying notes to financial statements.

                                      -16-
<PAGE>

                     CAPITAL PREFERRED YIELD FUND-II, L.P.

                        STATEMENTS OF PARTNERS' CAPITAL
                 Years ended December 31, 1999, 1998 and 1996

<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, 1997      $      -   $ 133,978   $ 16,637,978   $ 230,268    $16,868,246

Redemptions                                    -        (260)       (28,732)          -        (28,732)
Net income                                49,960           -      1,392,588      14,230      1,456,778
Distributions declared to partners       (49,960)          -     (4,909,670)    (36,300)    (4,995,930)
                                        --------   ---------   ------------   ---------    -----------

Partners' capital, December 31, 1997           -     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
                                        ========   =========   ============   =========    ===========
</TABLE>

                See accompanying notes to financial statements.

                                      -17-
<PAGE>

                     CAPITAL PREFERRED YIELD FUND-II, L.P.

                            STATEMENTS OF CASH FLOWS
                  Years ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
                                                                      1999          1998           1997
                                                                  ------------  -------------  -------------
<S>                                                               <C>           <C>            <C>
Cash flows from operating activities:
  Net income                                                      $   408,915   $  1,035,755   $  1,456,778
  Adjustments to reconcile net income to net
     cash provided by operating activities:
     Depreciation                                                   2,919,980      4,942,188      7,066,062
     Provision for losses                                             710,868        510,000        325,000
     Cost of equipment sales                                        1,634,282      3,250,766      1,644,814
     Recovery of investment in direct finance leases                  874,706        964,247        943,666
     Changes in assets and liabilities:
       Increase in accounts receivable, net                           419,322        (92,267)      (281,795)
       Increase (decrease) in payables to affiliates                 (233,073)       (18,115)        (5,776)
       Increase (decrease) in accounts payable and accrued
         liabilities                                                 (163,384)       451,744        271,531
       Increase (decrease) in rents received in advance              (104,029)         2,922         (8,536)
                                                                  -----------   ------------   ------------
  Net cash provided by operating activities                         6,467,587     11,047,240     11,411,744
                                                                  -----------   ------------   ------------

Cash flows from investing activities:
  Purchases of equipment on operating leases from affiliate            (3,364)             -     (1,062,284)
  Investment in direct finance leases, acquired from affiliate              -              -        (22,469)
                                                                  -----------   ------------   ------------
  Net cash used in investing activities                                (3,364)             -     (1,084,753)
                                                                  -----------   ------------   ------------

Cash flows from financing activities:
  Principal payments on discounted lease rentals                   (2,290,333)    (3,349,731)    (4,436,008)
  Principal payments on financed operating lease rentals                    -     (2,257,035)      (904,104)
  Proceeds from discounting of lease rentals                                -              -              -
  Distributions to partners                                        (3,605,321)    (6,537,374)    (4,829,208)
  Redemptions of Class A limited partner units                         (8,148)       (15,996)       (28,732)
                                                                  -----------   ------------   ------------
  Net cash used in financing activities                            (5,903,802)   (12,160,136)   (10,198,052)
                                                                  -----------   ------------   ------------

Net increase (decrease) in cash and cash equivalents                  560,421     (1,112,896)       128,939
Cash and cash equivalents at beginning of year                        784,867      1,897,763      1,768,824
                                                                  -----------   ------------   ------------
Cash and cash equivalents at end of year                          $ 1,345,288   $    784,867   $  1,897,763
                                                                  ===========   ============   ============

Supplemental disclosure of cash flow information:
  Interest paid on discounted lease rentals                       $   251,161   $    466,086   $    745,295
  Interest paid on financed lease rentals                                   -         98,976        182,725
</TABLE>

                See accompanying notes to financial statements.

                                      -18-
<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 Capital Associates, Inc. ("CAI").

    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.

    Capital Associates International, Inc. ("CAII"), a wholly owned subsidiary
    of CAI, 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, collectibility of accounts receivable and valuation of
    investing, 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:

                                      -19-
<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:

       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.

                                      -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

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

      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.

      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

                                      -21-
<PAGE>

                     CAPITAL PREFERRED YIELD FUND-II, L.P.
                   NOTES TO FINANCIAL STATEMENTS, Continued


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

    Recently Issued Financial Accounting Standards, continued

    Statement 133 to fiscal years beginning after June 15, 2000, with earlier
    application permitted. The Partnership adopted Statement 133 in the first
    quarter of 1999. The General Partner does not expect the adoption of
    Statement 133 or Statement 137 to have an impact on its financial reporting.

    Long-lived Assets

    The Partnership accounts for long-lived assets under the provisions of
    Statement of Financial Accounting Standards No. 121, Accounting for the
    Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of
    ("SFAS No. 121"). SFAS No. 121 requires that long-lived assets, including
    equipment subject to operating leases and certain identifiable intangibles
    to be held and used by an entity, be reviewed for impairment whenever events
    or changes in circumstances indicate that the carrying amount of an asset
    may not be recoverable. In performing the review for recoverability, the
    entity should estimate the future net cash flows expected to result from the
    use of the asset and its eventual disposition. If the sum of the expected
    future net cash flows (undiscounted and without interest charges) is less
    than the carrying amount of the asset, an impairment loss is recognized.
    Measurement of an impairment loss for long-lived assets, including equipment
    subject to operating leases and identifiable intangibles held by the
    Partnership, is based on the fair value of the asset. The fair value of the
    asset may be calculated by discounting the expected future net cash flows at
    an appropriate interest rate.

                                      -22-
<PAGE>

                     CAPITAL PREFERRED YIELD FUND-II, L.P.
                   NOTES TO FINANCIAL STATEMENTS, Continued


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

    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 nonrecourse
    basis (i.e., "non-recourse debt" or "discounted lease rentals") and/or
    equipment sale transactions to reduce or recover its investment in the
    equipment.

    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 (which in certain circumstances
    includes anticipated re-lease proceeds), 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 (which in
    certain circumstances includes anticipated re-lease proceeds), 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.

                                      -23-
<PAGE>

                     CAPITAL PREFERRED YIELD FUND-II, L.P.
                   NOTES TO FINANCIAL STATEMENTS, Continued


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

    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.

    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.

                                      -24-
<PAGE>

                     CAPITAL PREFERRED YIELD FUND-II, L.P.
                   NOTES TO FINANCIAL STATEMENTS, Continued


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

    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.

    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 $786,000 and $730,000 at December 31, 1999 and
    1998, 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 or Re-lease

    Equipment held for sale or re-lease, 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,
    1999 and 1998 were:

<TABLE>
<CAPTION>
                                             1999          1998
                                         ------------  ------------
    <S>                                  <C>           <C>

    Minimum lease payments receivable     $1,171,361    $2,284,333
    Estimated residual values                961,661       997,342
    Less unearned income                    (186,796)     (415,788)
                                          ----------    ----------

                                          $1,946,226    $2,865,887
                                          ==========    ==========
</TABLE>

                                      -25-
<PAGE>

                     CAPITAL PREFERRED YIELD FUND-II, L.P.
                   NOTES TO FINANCIAL STATEMENTS, Continued

3.  Leased Equipment
    ----------------

    The Partnership's investments in equipment on operating leases by major
    classes as of December 31, 1999 and 1998 were:

<TABLE>
<CAPTION>
                                                  1999             1998
                                                 ------            ------
<S>                                            <C>                 <C>
    Transportation and industrial equipment   $ 8,755,266      $ 16,628,291
    Computers and peripherals                   1,786,631         3,271,704
    Office furniture and equipment              1,481,627         2,918,088
    Other                                              -            264,567
                                              -----------      ------------
                                               12,023,524        23,082,650
    Less:
     Accumulated depreciation                  (7,800,289)      (13,134,092)
     Allowance for losses                         (64,411)         (310,787)
                                              -----------       -----------
                                              $ 4,158,824       $ 9,637,771
                                              ===========       ===========
</TABLE>


    Depreciation expense for 1999, 1998 and 1997 was $2,919,980, $4,942,188 and
    $7,066,062, respectively.

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

    Future minimum lease payments receivable from non-cancelable leases at
    December 31, 1999 are as follows:

     <TABLE>
     <CAPTION>
       Year Ending December 31,              DFLs               OLs
       ------------------------              ----               ---
       <S>                                   <C>            <C>
               2000                      $   778,157        $ 1,451,370
               2001                          393,204            386,337
               2002                                -             16,596
               2003                                -              9,027
                                         -----------       ------------
                    Total                $ 1,171,361        $ 1,863,330
                                         ===========       ============
</TABLE>

5.  Discounted Lease Rentals
    ------------------------

    Discounted lease rentals outstanding at December 31, 1999 bear interest at
    rates primarily ranging between 6% and 9.5%. Aggregate maturities of such
    non-recourse obligations are as follows:

<TABLE>
<CAPTION>

      Year Ending December 31,
      ------------------------
      <S>                            <C>
          2000                        $1,553,522
          2001                           768,296
                                      ----------
               Total                  $2,321,818
                                      ==========
</TABLE>

                                      -26-
<PAGE>

                     CAPITAL PREFERRED YIELD FUND-II, L.P.
                   NOTES TO FINANCIAL STATEMENTS, Continued

6.  Transactions With the General Partner and Affiliates
    ----------------------------------------------------

    Origination Fee and Evaluation Fee
    ----------------------------------

    The general partner received a fee equal to 4% of the sales price of
    equipment sold to the Partnership (up to a maximum cumulative amount as
    specified in the Partnership Agreement), 2%, of which, represented
    compensation for selecting, negotiating and consummating the acquisition of
    the equipment and another 2%, of which, represented reimbursement for
    services rendered in connection with evaluating the suitability of the
    equipment and the creditworthiness of the lessees. Origination and
    evaluation fees totaled approximately $39,000 in 1997, all of which were
    capitalized by the Partnership as part of the cost of equipment on operating
    leases and net investment in direct finance leases. The Partnership did not
    pay any fees during 1999 as the acquisition represented an upgrade to an
    existing lease and there were no equipment purchases for 1998.

    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 $104,000, $156,000 and
    $201,000 of management fees during 1999, 1998 and 1997, 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 $90,000,
    $137,000 and $108,000 of direct services from the general partner during
    1999, 1998 and 1997, respectively.

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

    The equipment purchase in 1999 represents an upgrade to an existing lease
    and the Partnership did not acquire any new equipment in 1998. The
    Partnership purchased equipment from CAII with a total purchase price of
    approximately $1,085,000 during 1997. The Partnership purchased the
    equipment at CAII's historical cost plus reimbursement of other net
    acquisition costs, as provided for in the Partnership Agreement.

                                      -27-
<PAGE>

                     CAPITAL PREFERRED YIELD FUND-II, L.P.
                   NOTES TO FINANCIAL STATEMENTS, Continued


    Payable to Affiliates
    ---------------------

    Payables to affiliates for 1999 consists of $6,116 and $6,539 for direct
    services from general partner and management fees paid to the general
    partner.

    Receivable from Affiliates
    --------------------------

    The General Partner collects rents from lessees and applies there rental
    payments to the lessee's account with the Partnership. The General Partner
    then transfers the collected rental payments to the Partnership, eliminating
    the receivable from affiliate balance.

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>
                                                                    1999          1998          1997
                                                                ------------  ------------  ------------
<S>                                                              <C>           <C>           <C>
    Net income per financial statements                           $  408,915    $1,035,755   $ 1,456,778
    Differences due to:
      Direct finance leases                                          871,084       969,049       947,137
      Depreciation                                                   (72,828)     (325,966)   (1,511,510)
      Provision for losses                                           710,868       510,000       325,000
      Gain/loss on sale of assets                                     (6,743)    1,242,693      (468,349)
      Other                                                          (64,350)       (9,033)   (1,028,690)
                                                                  ----------    ----------   -----------
    Partnership income (loss) for federal income tax purposes     $1,846,946    $3,422,498   $  (279,634)
                                                                  ==========    ==========   ===========
</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>
                                                            1999           1998           1997
                                                        -------------  -------------  -------------
<S>                                                     <C>            <C>            <C>
    Partners' capital per financial statements           $  5,084,297   $  7,782,747   $ 13,300,362
    Differences due to:
      Commissions and offering costs                        4,868,944      4,868,944      4,868,944
      Direct finance leases                                 6,620,936      5,749,852      4,780,803
      Depreciation                                        (12,387,737)   (12,314,909)   (11,988,943)
      Provision for losses                                  1,220,868        510,000        325,000
      Gain/loss on sale of assets                              (6,743)     1,242,693       (468,349)
      Other                                                 1,694,567        516,313        670,811
                                                         ------------   ------------   ------------
   Partners' capital for federal income tax purposes      $ 7,095,132   $  8,355,640   $ 11,488,628
                                                         ============   ============   ============
</TABLE>

                                      -28-
<PAGE>

                     CAPITAL PREFERRED YIELD FUND-II, L.P.
                   NOTES TO FINANCIAL STATEMENTS, Continued


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. Two
    lessees and their affiliates accounted for 12% ($726,300) and 11% ($693,153)
    of total leasing and remarketing revenue of the Partnership during 1999.

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, 1999 for cash and cash
    equivalents, accounts receivable, accounts payable and accrued liabilities,
    payable to affiliates, receivable from affiliates, rents and sale proceeds
    received in advance and distributions payable to partners approximate their
    fair values due to the short maturity of these instruments.

    As of December 31, 1999, discounted lease rentals of approximately
    $2,322,000 had fair values of $2,028,000. The fair values were estimated
    utilizing market rates of comparable debt having similar maturities and
    credit quality as of December 31, 1999.

                                      -29-
<PAGE>

                     CAPITAL PREFERRED YIELD FUND-II, L.P.
                   NOTES TO FINANCIAL STATEMENTS, Continued


10. General Partner Matters (unaudited)

    As of March 31, 2000, CAII, an affiliate of the general partner, owes the
    Partnership $70,547 for rents, remarketing proceeds and other amounts
    (collectively, the "Prior Rents") collected by CAII on behalf of the
    Partnership during periods prior to February 1, 2000 (the "Prior Periods").
    According to its own records, as of March 31, 2000, CAII owes approximately
    $3.9 million to other investors and creditors (who, along with the
    Partnership, are referred to herein as the "Payees"), for Prior Rents
    collected by CAII on their behalf during the Prior Periods. CAII, which
    presently does not have the funds to repay all of the Prior Rents, is in
    negotiations with the Payees to develop a plan for repayment of the Prior
    Rents owed to all Payees over time. The Partnership is withholding
    acquisition fees and managements fees otherwise payable to the general
    partner and crediting such withheld fees (the "Fees") against the Prior
    Rents owing from CAII. The Partnership intends to continue to withhold
    future Fees until such time as it recovers all Prior Rents.

    The Partnership relies upon the services of CAII for origination of leases,
    administrative and accounting services and remarketing of leases and
    equipment, among other services. Should CAII be unable to develop a plan for
    repayment with it's Payees, the Partnership may be required to contract with
    another party for these services. In such event, there is no assurance that
    another provider of these services can be identified.

                                      -30-
<PAGE>

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

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

Under date of March 31, 2000, we reported on the balance sheets of Capital
Preferred Yield Fund-II,  L.P. as of December 31, 1999 and 1998, and the related
statements of income, partners' capital, and cash flows for each of the years in
the three-year period ended December 31, 1999, as contained in the Partnership's
annual report on Form 10-K for the year 1999.  In connection with our audits of
the aforementioned financial statements, we also audited the related financial
statement Schedule II, as listed in the accompanying index.  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
March 31, 2000

                                      -31-
<PAGE>

                     CAPITAL PREFERRED YIELD FUND-II, L.P.

                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
              for the years ended December 31, 1999, 1998 and 1997

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

            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
                                       =========             =========            ===========        =========


            1997
--------------------------------
Allowance for losses:
 Accounts receivable                   $  25,000             $       -            $         -        $  25,000
 Equipment on operating leases           255,956               325,000               (430,002)         150,954
                                       ---------             ---------            -----------        ---------
                                       $ 280,956             $ 325,000            $  (430,002)       $ 175,954
                                       =========             =========            ===========        =========
</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

   Richard H. Abernethy     Vice President and Director

   Joseph F. Bukofski       Chief Accounting Officer, Vice President and
                            Director

   Mick Myers               Director

John F. Olmstead, age 56, joined CAII as Vice President in December, 1988, is a
Senior Vice President of CAI and CAII and is head of CAII's Public Equity
division.  He has served as Chairman of the Board for Neo-kam Industries,  Inc.,
Matchless Metal Polish Company, Inc. and ACL, Inc. for more than 5 years. He has
over 20 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.

Richard H. Abernethy, age 46, joined CAII in April 1992 as Equipment Valuation
Manager and currently serves as Vice President of Portfolio Management. Mr.
Abernethy has fourteen years experience in the leasing industry, including prior
positions with Barclays Leasing Inc., from November 1986 to February 1992, and
Budd Leasing Corporation, from January 1981 to November 1986. Mr. Abernethy
holds a Bachelor of Arts in Business Administration from the University of North
Carolina at Charlotte.

                                      -33-
<PAGE>

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

Joseph F. Bukofski, age 44, joined CAII in June 1990 as a Financial Analyst.
Mr. Bukofski is currently the Vice President and Treasurer. Prior to becoming
Treasurer, Mr. Bukofski was Assistant Vice President and Controller. Prior to
joining the Company, he was a geologist with Barringer Geoservices, Inc. for
eleven years. Mr. Bukofski holds a Bachelor of Science degree in Secondary
Education - Earth Science from Bloomsburg University and a Masters of Science in
Accounting from the University of Colorado.

Mick Myers, age 42, joined CAII in February 1992 as a Senior Portfolio Manager.
Currently he is Vice President of Asset Management. Mr. Myers has nine years
experience in the leasing industry. Previously, he has held the position of
Senior End of Lease Negotiator with ELLCO/GE Capital. Mr. Myers holds a Bachelor
of Science degree from the University of Wyoming.

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 1998.

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.

          CAII, an affiliate of the general partner is the Class B limited
          partner.

          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.
          7175 West Jefferson Avenue
          Suite 4000
          Lakewood, Colorado 80235

                                      -34-
<PAGE>

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

          Class B Limited Partner
          -----------------------

          Capital Associates International, Inc.
          7175 West Jefferson Avenue
          Suite 4000
          Lakewood, Colorado 80235

     (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,
          1999.

     (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 1999:



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 $104,000 for 1999.

                                      -35-
<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
$90,000 during 1999.

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 $31,000 and $31,000, respectively, for 1999.  Distributions and
net income allocated to the Class B limited partner totaled approximately $3,000
and $5,000, respectively, for 1999.

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, 1999.

       (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: ____________, 2000           Capital Preferred Yield Fund-II, L.P.


                                    By:  CAI Equipment Leasing III Corporation

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

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 March 30, 1999.

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

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


/s/ Richard H. Abernethy
------------------------------------
Richard H. Abernethy                      Vice President and Director


/s/ Joseph F. Bukofski
------------------------------------
Joseph F. Bukofski                        Chief Accounting Officer,
                                          Vice President and Director

/s/ Mick Myers
------------------------------------
Mick Myers                                Director

                                      -37-