----

----

**SECURITIES AND EXCHANGE COMMISSION****Washington, DC 20549**

**FORM 10-Q**

**(Mark One)**

| **ý** | **QUARTERLY REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|------------|----------------------------------------------------------------------------------------------|

 

**For the quarterly period ended June 30,2001**

**OR**

| **o** | **TRANSITION REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|-----------------------------------------------------------------------------------------------|

 

**For the transition period from__________ to __________**

**Commission file number 0-22300**

 

**PW Preferred Yield Fund II, L.P.**

----

(Exactname of registrant as specified in its charter)

| **Delaware**              |   | **84–1180783**                  |
|---------------------------|--------|--------------------------------------|
| (State  of organization)  |   | (IRS  Employer   Identification No.) |
|                      |   |                                 |
| **88 Broad Street**       |   |                                 |
| **Boston, Massachusetts** |   | **02110**                            |
| (Address  of principal    |   | (Zip  Code)                          |
| executive  offices)       |   |                                 |
|                      |   |                                 |

 

Registrant’stelephone number, including area code**(617)854–5800**

             Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.     Yes  ý     No   o.

----

----

**PWPreferred Yield Fund II, L.P.****QuarterlyReport on Form 10–Q for the****QuarterEnded June 30, 2001**

**Tableof Contents**
| **Part I.**  | **Financial Information** |
|--------------|---------------------------|
|         |                      |   |
|         | Item 1.                   | Financial Statements |
|         |                      |   |
|         |                      | Balance  Sheets – June 30, 2001 and December 31, 2000 (unaudited) |
|         |                      |   |
|         |                      | Statements  of Income for the three months ended June 30, 2001 and 2000 (unaudited) |
|         |                      |   |
|         |                      | Statements  of Income for the six months ended June 30, 2001 and 2000 (unaudited) |
|         |                      |   |
|         |                      | Statements  of Partners’ Equity for the six months ended June 30, 2001 and 2000  (unaudited) |
|         |                      |   |
|         |                      | Statements  of Cash Flows for the six months ended June 30, 2001 and 2000 (unaudited) |
|         |                      |   |
|         |                      | Notes to Financial  Statements (unaudited) |
|         |                      |   |
|         | Item  2.                  | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |
|         |                      |   |
| **Part II.** | **Other Information**     |
|         |                      |   |
|         | Item 1.                   | Legal Proceedings |
|         |                      |   |
|         | Item 5.                   | Other  Information |
|         |                      |   |
|         | Item  6.                  | Exhibits  and Reports on Form 8–K |
|         |                      |   |
|         |                      | Signatures |

**Part I.FINANCIAL INFORMATION**

**Item 1.**                    **Financial Statements**

**PWPREFERRED YIELD FUND II, L.P.**

**BALANCE SHEETS****JUNE 30,2001 AND DECEMBER 31, 2000****(unaudited)**
|                                                                                                                                              | **June 30,****2001**                   |      | **December 31,****2000** |      |
|---------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------|-----------|--------------------------|-----------|
|                                                                                                                                              | ****                                        |      | ****                     |      |
| **ASSETS**                                                                                                                                        |                                        |      |                     |      |
| Cash and cash equivalents                                                                                                                         | $                                           | 2,560,184 |                     | $         | 1,403,646 |   |
| Rents  and other receivables, net of allowance for doubtful accounts of $18,000 and  $33,000 at June 30, 2001 and December 31, 2000, respectively | 217,264                                     |      | 200,515                  |      |
| Receivable from general partner                                                                                                                   | 204,788                                     |      | 149,843                  |      |
| Equipment  at cost, net of accumulated depreciation of $12,189,832 and $12,589,684 at  June 30, 2001 and December 31, 2000, respectively          | 6,145,063                                   |      | 8,450,576                |      |
|                                                                                                                                              |                                             |      |                          |      |
|                                                                                                                                              |                                        |      |                     |      |
|                                                                                                                                              | Total Assets                                | $         | 9,127,299                |      | $ | 10,204,580 |   |
|                                                                                                                                              |                                        |           |                     |           |   |
|                                                                                                                                              |                                        |      |                     |      |   |
| **LIABILITIES  AND PARTNERS' EQUITY**                                                                                                             |                                        |      |                     |      |   |
| **Liabilities:**                                                                                                                                  |                                        |      |                     |      |   |
|                                                                                                                                              | Accounts payable and accrued liabilities    | $         | 29,500                   |      | $ | 54,000 |   |   |
|                                                                                                                                              | Payable to affiliates                       | 99,258    |                     | 96,505    |   |   |
|                                                                                                                                              | Deferred rental income                      | 143,360   |                     | 51,598    |   |   |
|                                                                                                                                              | Distributions payable to partners           | 318,785   |                     | 318,785   |   |   |
|                                                                                                                                              |                                        |           |                     |           |   |   |
|                                                                                                                                              |                                        |      |                     |      |   |
|                                                                                                                                              | Total Liabilities                           | 590,903   |                     | 520,888   |   |   |
|                                                                                                                                              |                                        |           |                     |           |   |   |
|                                                                                                                                              |                                        |      |                     |      |   |
| **Partners’ Equity:**                                                                                                                        |                                        |      |                     |      |   |
|                                                                                                                                              | General Partners                            | 411,447   |                     | 468,812   |   |   |
|                                                                                                                                              | Limited Partners:                           |      |                     |      |   |   |
|                                                                                                                                              | Class A (54,027 Units outstanding)          | 7,108,575 |                     | 8,062,265 |   |   |
|                                                                                                                                              | Class B                                     | 1,016,374 |                     | 1,152,615 |   |   |
|                                                                                                                                              |                                        |           |                     |           |   |   |
|                                                                                                                                              |                                        |      |                     |      |   |
|                                                                                                                                              | Total Partners' Equity                      | 8,536,396 |                     | 9,683,692 |   |   |
|                                                                                                                                              |                                        |           |                     |           |   |   |
|                                                                                                                                              |                                        |      |                     |      |   |
|                                                                                                                                              | Total Liabilities and Partners’ Equity | $         | 9,127,299                |      | $ | 10,204,580 |   |   |
|                                                                                                                                              |                                        |           |                     |           |   |   |
|                                                                                                                                                   |                                             |           |                          |           |  |  |  |  |  |  |  |  |  |  |  |  |

 

The accompanying notes are an integralpart of these financial statements.

**PWPREFERRED YIELD FUND II, L.P.**

**STATEMENTS OF INCOME**

**FOR THETHREE MONTHS ENDED JUNE 30, 2001 AND 2000****(unaudited)**

|                                                                                                 | **2001**                        |    | **2000** |      |
|------------------------------------------------------------------------------------------------------|---------------------------------|---------|----------|-----------|
|                                                                                                 | ****                            |    | ****     |      |
| **Revenue:**                                                                                         |                            |    |     |      |
|                                                                                                 | Lease revenue                   | $       | 890,997  |      | $ | 1,037,157 |   |
|                                                                                                 | Gain on sale of equipment       | 15,994  |     | 6,427     |   |
|                                                                                                 | Interest income                 | 13,950  |     | 24,041    |   |
|                                                                                                 |                                 |    |          |      |
|                                                                                                 |                            |    |     |      |
|                                                                                                 | Total Revenue                   | 920,941 |     | 1,067,625 |   |
|                                                                                                 |                            |         |     |           |   |
|                                                                                                 |                            |    |     |      |
| **Expenses:**                                                                                        |                            |    |     |      |
|                                                                                                 | Depreciation                    | 571,410 |     | 635,900   |   |
|                                                                                                 | Management fees (Note 2)        | 34,565  |     | 42,364    |   |
|                                                                                                 | General and administrative      | 25,964  |     | 27,180    |   |
|                                                                                                 |                            |         |     |           |   |
|                                                                                                 |                            |    |     |      |
|                                                                                                 | Total Expenses                  | 631,939 |     | 705,444   |   |
|                                                                                                 |                                 |    |          |      |
|                                                                                                 |                            |    |     |      |
| **Net Income**                                                                                       | $                               | 289,002 |     | $         | 362,181 |   |
|                                                                                                 |                                 |    |          |      |
|                                                                                                 |                            |    |     |      |
| **Net Income Allocated:**                                                                            |                            |    |     |      |
|                                                                                                 | To the General Partners         | $       | 14,451   |      | $ | 18,109 |   |
|                                                                                                 | To the Class A Limited Partners | 261,224 |     | 322,054   |   |
|                                                                                                 | To the Class B Limited Partner  | 13,327  |     | 22,018    |   |
|                                                                                                 |                                 |    |          |      |
|                                                                                                 |                            |    |     |      |
|                                                                                                 | $                               | 289,002 |     | $         | 362,181 |   |
|                                                                                                 |                                 |    |          |      |
|                                                                                                 |                            |    |     |      |
| **Net Income per Weighted Average Number of Units of Class A  Limited Partner Interest Outstanding** | $                               | 4.84    |     | $         | 5.96 |   |
|                                                                                                 |                                 |    |          |      |
| **Weighted Average Number  of Units of Class A Limited Partner Interest Outstanding**                | 54,027                          |    | 54,027   |      |
|                                                                                                 |                                 |    |          |      |
|                                                                                                      |                                 |         |          |           |  |  |  |  |

** **

The accompanying notesare an integral part of these financial statements.

**PW PREFERRED YIELD FUND II, L.P.**

**STATEMENTS OF INCOME**

**FOR THESIX MONTHS ENDED JUNE 30, 2001 AND 2000****(unaudited)**

|                                                                                                 | **2001**                         |      | **2000**  |      |
|------------------------------------------------------------------------------------------------------|----------------------------------|-----------|-----------|-----------|
|                                                                                                 | ****                             |      | ****      |      |
| **Revenue:**                                                                                         |                             |      |      |      |
|                                                                                                 | Lease revenue                    | $         | 2,390,103 |      | $ | 2,102,862 |   |
|                                                                                                 | Gain (loss) on sale of equipment | (499,666) |      | 30,000    |   |
|                                                                                                 | Interest income                  | 26,964    |      | 38,249    |   |
|                                                                                                 |                                  |      |           |      |
|                                                                                                 | Total Revenue                    | 1,917,401 |      | 2,171,111 |   |
|                                                                                                 |                                  |      |           |      |
| **Expenses:**                                                                                        |                             |      |      |      |
|                                                                                                 | Depreciation                     | 1,167,429 |      | 1,350,550 |   |
|                                                                                                 | Management fees (Note 2)         | 100,189   |      | 86,232    |   |
|                                                                                                 | General and administrative       | 60,226    |      | 71,498    |   |
|                                                                                                 |                                  |      |           |      |
|                                                                                                 |                             |      |      |      |
|                                                                                                 | Total Expenses                   | 1,327,844 |      | 1,508,280 |   |
|                                                                                                 |                                  |      |           |      |
|                                                                                                 |                             |      |      |      |
| **Net Income**                                                                                       | $                                | 589,557   |      | $         | 662,831 |   |
|                                                                                                 |                                  |      |           |      |
| **Net Income Allocated:**                                                                            |                             |      |      |      |
|                                                                                                 | To the General Partners          | $         | 29,478    |      | $ | 33,142 |   |
|                                                                                                 | To the Class A Limited Partners  | 532,052   |      | 592,961   |   |
|                                                                                                 | To the Class B Limited Partner   | 28,027    |      | 36,728    |   |
|                                                                                                 |                                  |      |           |      |
|                                                                                                 |                             |      |      |      |
|                                                                                                 | $                                | 589,557   |      | $         | 662,831 |   |
|                                                                                                 |                                  |      |           |      |
|                                                                                                 |                             |      |      |      |
| **Net Income per Weighted Average Number of Units of Class A  Limited Partner Interest Outstanding** | $                                | 9.85      |      | $         | 10.98 |   |
|                                                                                                 |                                  |      |           |      |
|                                                                                                 |                             |      |      |      |
| **Weighted Average Number  of Units of Class A Limited Partner Interest Outstanding**                | 54,027                           |      | 54,027    |      |
|                                                                                                 |                                  |      |           |      |
|                                                                                                      |                                  |           |           |           |  |  |  |  |

 

The accompanying notes are an integral partof these financial statements.

**PW PREFERRED YIELD FUND II, L.P.**

**STATEMENTS OF PARTNERS’ EQUITY**

**FOR THESIX MONTHS ENDED JUNE 30, 2001 AND 2000****(unaudited)**

|                               | **General  Partners** |    | **Class  A Limited Partners** |   | **Class  B Limited  Partner** |   | **Total**  |      |
|------------------------------------|-----------------------|---------|-------------------------------|--------|------------------------------------|--------|------------|-----------|
|                               | ****                  |    | ****                          |   | ****                               |   | ****       |      |
|                               |                  |    |                          |   |                               |   |       |      |
| Balance, January 1, 2001           | $                     | 468,812 |                          | $      | 8,062,265                          |   | $          | 1,152,615 |   | $ | 9,683,692 |   |
| Net income                         | 29,478                |    | 532,052                       |   | 28,027                             |   | 589,557    |      |
| Distributions declared to partners | (86,843               | )       | (1,485,742                    | )      | (164,268                           | )      | (1,736,853 | )         |
|                               |                       |    |                               |   |                                    |   |            |      |
|                               |                  |    |                          |   |                               |   |       |      |
| Balance, June 30, 2001             | $                     | 411,447 |                          | $      | 7,108,575                          |   | $          | 1,016,374 |   | $ | 8,536,396 |   |
|                               |                       |    |                               |   |                                    |   |            |      |
|                               |                  |    |                          |   |                               |   |       |      |
| Balance, January 1, 2000           | $                     | 568,137 |                          | $      | 9,713,555                          |   | $          | 1,388,514 |   | $ | 11,670,206 |   |
| Net income                         | 33,142                |    | 592,961                       |   | 36,728                             |   | 662,831    |      |
| Distributions declared to partners | (86,843               | )       | (1,485,742                    | )      | (164,268                           | )      | (1,736,853 | )         |
|                               |                       |    |                               |   |                                    |   |            |      |
|                               |                  |    |                          |   |                               |   |       |      |
| Balance, June 30, 2000             | $                     | 514,436 |                          | $      | 8,820,774                          |   | $          | 1,260,974 |   | $ | 10,596,184 |   |
|                               |                       |    |                               |   |                                    |   |            |      |

 

 

The accompanying notes are an integralpart of these financial statements.

**PW PREFERRED YIELD FUND II, L.P.**

**STATEMENTS OF CASH FLOWS**

**FOR THESIX MONTHS ENDED JUNE 30, 2001 and 2000****(unaudited)**

|                                                     | **2001**                                                                    |       | **2000**  |       |
|----------------------------------------------------------|-----------------------------------------------------------------------------|------------|-----------|------------|
|                                                     | ****                                                                        |       | ****      |       |
| **Cash Flows From Operating Activities:**                |                                                                        |       |      |       |
|                                                     | Net income                                                                  | $          | 589,557   |       | $ | 662,831 |   |
|                                                     |                                                                        |       |      |       |
|                                                     | Adjustments to reconcile net income to net cash from  operating activities: |       |      |       |   |
|                                                     | Depreciation                                                                | 1,167,429  |      | 1,350,550  |   |
|                                                     | Loss (gain) on sale of equipment                                            | 499,666    |      | (30,000    | ) |
|                                                     | Change in assets and liabilities:                                           |       |      |       |   |
|                                                     | Rents and other receivables                                                 | (1,749     | )         | 40,058     |   |
|                                                     | Receivable from general partner                                             | (54,945    | )         | 57,813     |   |
|                                                     | Allowance for doubtful accounts                                             | (15,000    | )         | (14,000    | ) |
|                                                     | Accounts payable and accrued liabilities                                    | (24,500    | )         | 6,400      |   |
|                                                     | Payable to affiliates                                                       | 2,753      |      | (4,850     | ) |
|                                                     | Deferred rental income                                                      | 91,762     |      | 23,616     |   |
|                                                     |                                                                             |       |           |       |
|                                                     |                                                                        |       |      |       |
|                                                     | Net cash from operating activities                                          | 2,254,973  |      | 2,092,418  |   |
|                                                     |                                                                             |       |           |       |
|                                                     |                                                                        |       |      |       |
| **Cash Flows From Investing Activities:**                |                                                                        |       |      |       |
|                                                     | Purchase of equipment                                                       | —     |      | (697,611   | ) |
|                                                     | Proceeds from equipment sales                                               | 638,418    |      | 133,228    |   |
|                                                     |                                                                             |       |           |       |
|                                                     |                                                                        |       |      |       |
|                                                     | Net  cash from (used in) investing activities                               | 638,418    |      | (564,383   | ) |
|                                                     |                                                                             |       |           |       |
|                                                     |                                                                        |       |      |       |
| **Cash Flows From Financing Activities:**                |                                                                        |       |      |       |
|                                                     | Distributions paid to partners                                              | (1,736,853 | )         | (1,736,853 | ) |
|                                                     |                                                                             |       |           |       |
|                                                     |                                                                        |       |      |       |
|                                                     | Net  cash used in financing activities                                      | (1,736,853 | )         | (1,736,853 | ) |
|                                                     |                                                                             |       |           |       |
| **Net Increase (Decrease) in Cash And Cash Equivalents** | 1,156,538                                                                   |       | (208,818  | )          |
|                                                     |                                                                        |       |      |       |
| **Cash and Cash Equivalents at Beginning of Period**     | 1,403,646                                                                   |       | 1,926,081 |       |
|                                                     |                                                                             |       |           |       |
|                                                     |                                                                        |       |      |       |
| **Cash and Cash Equivalents at End of Period**           | $                                                                           | 2,560,184  |      | $          | 1,717,263 |   |
|                                                     |                                                                             |       |           |       |
|                                                          |                                                                             |            |           |            |  |  |  |  |  |

 

The accompanying notes are an integralpart of these financial statements.

**PW PREFERRED YIELD FUND II, L.P.**

**NOTES TO FINANCIAL STATEMENTS**

**JUNE 30, 2001****(unaudited)**

**1.**          **General**

             Thefinancial statements presented herein are prepared in conformity with generallyaccepted accounting principles for interim financial information and theinstructions for preparing Form 10-Q under Rule 10-01 of Regulation S-X of theSecurities and Exchange Commission and are unaudited.  As such, these financial statements do not include allinformation and footnote disclosures required under generally acceptedaccounting principles for complete financial statements and, accordingly, theaccompanying financial statements should be read in conjunction with thefootnotes presented in the 2000 Annual Report.  Except as disclosed herein, there has been no material change tothe information presented in the footnotes to the 2000 Annual Report.

             Inthe opinion of management, all adjustments (consisting of normal and recurringadjustments) considered necessary for a fair presentation have been included.

             Certain2000 amounts have been reclassified to conform to the current yearpresentation.

**2.**          **Transactions with Affiliates**

**Acquisition and Operating Stages**

             *Acquisitionof Equipment* Pursuant to its investment objectives, the Partnershipacquired, on an all–cash basis, certain leased equipment from EquisFinancial Group L.P. (“EFG”) (formerly American Finance Group or AFG), anaffiliate of the Managing General Partner.

             Thepurchase price of the equipment acquired from EFG is equal to the lesser of theadjusted cost of the equipment or the appraised value of the equipment at thetime of its acquisition by the Partnership (“EFG carrying value”).  The adjusted cost of the equipment is equalto the price paid by EFG, plus the cost of an appraisal, EFG’s cost of interimfinancing for the equipment and any taxes paid by EFG, less certain interimrentals received by EFG with respect to the equipment.

             *AcquisitionFee* The Managing General Partner, or its affiliates, received or wasentitled to receive a fee equal to (i) 2.25% of the purchase price of equipmentpurchased with net offering proceeds from the sale of Units, and (ii) 3% of thepurchase price of equipment purchased with reinvested Partnership cash flow ascompensation for evaluating, selecting, negotiating and consummating theacquisition of the equipment.

 

             *ManagementFees* The General Partners are entitled to receive a monthly fee inan amount equal to 2% of gross rentals for Full Payout Leases, as defined inthe Partnership Agreement and 5% of gross rentals for Operating Leases (payable66.67% to the Managing General Partner and 33.33% to the Administrative GeneralPartner) as compensation for services rendered in connection with themanagement of the equipment.  Managementfees of $34,565 and $100,189 were earned by the General Partners during thequarter and six months ended June 30, 2001. Effective July 1, 1998, the Managing General Partner agreed to performcertain administrative functions on behalf of the Partnership that previouslyhad been performed by the Administrative General Partner.  For these services, the AdministrativeGeneral Partner pays the Managing General Partner an amount equivalent to thefees otherwise due the Administrative General Partner.

             *DispositionFees* The General Partners, or their affiliates, were entitled toreceive a subordinated disposition fee in an amount equal to the lesser of (i)50% of the fee that would be charged by an unaffiliated party, or (ii) 3% ofthe gross contract price relating to each sale of equipment (payable 50% to theManaging General Partner or its affiliates and 50% to the AdministrativeGeneral Partner) as compensation for negotiating and consummating sales ofequipment.  During the fourth quarter of1998, the Partnership reversed previously accrued subordinated disposition feesbecause the General Partners concluded that it was no longer probable thatthese subordinated disposition fees would be paid.  The Partnership has not accrued for subordinated disposition feesduring 1999, 2000 or 2001.

 

**Item 2.  Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

        Thefollowing discussion should be read in conjunction with the FinancialStatements of the Partnership and the Notes thereto. This Report contains, inaddition to historical information, forward–looking statements thatinclude risks and other uncertainties. The Partnership's actual results maydiffer materially from those anticipated in these forward–lookingstatements. Factors that might cause such a difference include those discussedbelow, as well as general economic and business conditions, competition andother factors discussed elsewhere in this report. The Partnership undertakes noobligation to release publicly any revisions to these forward–lookingstatements to reflect events or circumstances after the date hereof or toreflect the occurrence of anticipated or unanticipated events.

**Liquidity and Capital Resources**

             The Partnership invests workingcapital and cash flow from operations prior to its distribution to the partnersin short–term highly liquid investments. These investments are primarilyshort–term commercial paper issued by large domestic corporations. AtJune 30, 2001, the Partnership had approximately $1.9 million invested ina money market fund that invests in commercial paper and similar instruments.

             Cash and cash equivalents increased$1,156,538 from $1,403,646 at December 31, 2000 to $2,560,184 at June 30,2001.  This increase primarilyrepresents the amount by which cash generated by operating activities andequipment sales exceeded distributions to partners.

             During the six months ended June30, 2001, the Partnership declared distributions of cash flow received fromoperations in the amount of $1,736,853. All distributions to the Class ALimited Partners represented an annualized distribution rate of 11% of theircontributed capital and all distributions to the Class B Limited Partnerrepresented an annualized distribution rate of 10% of its contributed capital.

             Distributions may be characterizedfor tax, accounting and economic purposes as a return of capital, a return oncapital or both. The portion of each cash distribution by a partnership, whichexceeds its net income for the fiscal period, may be deemed a return ofcapital. Based upon the amount of net income reported by the Partnership foraccounting purposes, approximately 65% of the 11% cash distributions to theClass A Limited Partners for the six months ended June 30, 2001 constituted areturn of capital. Additionally, since inception, approximately 69% of theClass A Limited Partner’s 11% cash distributions constituted a return ofcapital. However, the total actual return on capital over a leasingpartnership’s life can only be determined at the termination of the Partnershipafter all residual cash flows (which include proceeds from the re–leasingand sale of equipment after initial lease terms expire) have been realized.

**Resultsof Operations**

             Forthe three and six months ended June 30, 2001, the Partnership recognized leaserevenue of $890,997 and $2,390,103, respectively, compared to $1,037,157 and$2,102,862 for the same periods in 2000. The overall increase in lease revenue from 2000 to 2001 is due principallyto the receipt of lease termination proceeds in 2001 from a lessee of thePartnership.  In March 2001, the lesseepaid $513,479 as part of an agreement to early terminate its lease.  In the future, lease revenue is expected todecline as a result of primary lease term expirations and the sale ofequipment.  The Partnership also earnsinterest income from temporary investments of rental receipts and equipmentsales proceeds in short-term instruments.             During the three months endedJune 30, 2001, the Partnership sold equipment having a net book value of$17,430 to existing lessees and third parties. These sales resulted in a net gain, for financial statement purposes, of$15,994 compared to a net gain in 2000 of $6,427 on equipment having a net bookvalue of $88,671.
             Duringthe six months ended June 30, 2001, the Partnership sold equipment having a netbook value of $1,138,084 to existing lessees and third parties.  These sales resulted in a net loss, forfinancial statement purposes, of $499,666 compared to a net gain in 2000 of$30,000 on equipment having a net book value of $103,228.

             Itcannot be determined whether future sales of equipment will result in a netgain or a net loss to the Partnership, as such transactions will be dependentupon the condition and type of equipment being sold and its marketability atthe time of sale.  In addition, theamount of gain or loss reported for financial statement purposes is partly afunction of the amount of accumulated depreciation associated with the equipmentbeing sold.

             Theultimate realization of residual value for any type of equipment is dependentupon many factors, including EFG's ability to sell and re-lease equipment.  Changing market conditions, industry trends,technological advances, and many other events can converge to enhance or detractfrom asset values at any given time. EFG attempts to monitor these changes in order to identify opportunitieswhich may be advantageous to the Partnership and which will maximize total cashreturns for each asset.

             Thetotal economic value realized upon final disposition of each asset is comprisedof all primary lease term revenues generated from that asset, together with itsresidual value.  The latter consists ofcash proceeds realized upon the asset's sale in addition to all other cashreceipts obtained from renting the asset on a re-lease, renewal ormonth-to-month basis.  The Partnershipclassifies such residual rental payments as lease revenue. Consequently, theamount of gain or loss reported in the financial statements is not necessarilyindicative of the total residual value the Partnership achieved from leasingthe equipment.

             Depreciationexpense for the three and six months ended June 30, 2001 was $571,410 and$1,167,429, respectively, compared to $635,900 and $1,350,550, for the sameperiods in 2000.  For financialreporting purposes, to the extent that an asset is held on primary lease term,the Partnership depreciates the difference between (i) the cost of the assetand (ii) the estimated residual value of the asset on a straight-line basisover such term.  For purposes of thispolicy, estimated residual values represent estimates of equipment values atthe date of primary lease expiration. To the extent that an asset is held beyond its primary lease term, thePartnership continues to depreciate the remaining net book value of the asseton a straight-line basis over the asset's remaining economic life.

             Managementfees were approximately 3.9% and 4.2% of lease revenue during the three and sixmonths ended June 30, 2001, respectively, compared to 4.1% of lease revenueduring both the three and six months ended June 30, 2000, respectively.  Management fees are based on 5% of grosslease revenue generated by operating leases and 2% of gross lease revenuegenerated by full payout leases.

             The General Partners, or theiraffiliates, were entitled to receive a subordinated disposition fee in anamount equal to the lesser of (i) 50% of the fee that would be charged by anunaffiliated party, or (ii) 3% of the gross contract price relating to each saleof equipment (payable 50% to the Managing General Partner or its affiliates and50% to the Administrative General Partner) as compensation for negotiating andconsummating sales of equipment.  During the fourth quarter of 1998, the Partnershipreversed previously accrued subordinated disposition fees because the GeneralPartners concluded that it was no longer probable that these subordinateddisposition fees would be paid.  ThePartnership has not accrued for subordinated disposition fees during 1999, 2000or 2001.

             Generaland administrative expenses consisted primarily of investor reporting expenses,transfer agent fees, audit and tax fees.

**Part II. OTHER INFORMATION**
**Item 1.****Legal  Proceedings**   None.  **Item 5.****Other Information**   None.  **Item 6.****Exhibits and Reports on Form 8–K**   (a)None.    (b)The Partnership did not  file any Forms 8-K during the second quarter of the fiscal year ending  December 31, 2001.
 

 

**SIGNATURE**

             Pursuant to the requirements of theSecurities Exchange Act of 1934, the Registrant has duly caused this report tobe signed on its behalf by the undersigned, thereunto duly authorized.
 PW Preferred Yield Fund  II, L.P. (Registrant)    By:General Equipment  Management II, Inc.  A General Partner   Date: August 10, 2001By:/s/ Carmine Fusco  Carmine Fusco  *Vice President, Secretary,*  *Treasurer and Chief Financial*  *and Accounting Officer*
 

 

**SIGNATURE**

             Pursuantto the requirements of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.
 PW Preferred Yield Fund  II, L.P. (Registrant)    By:General Equipment  Management II, Inc.  A General Partner   Date: August 10, 2001By:     Carmine Fusco  *Vice President, Secretary,*  *Treasurer and Chief Financial*  *and Accounting Officer*