<PAGE>

                                    FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

(Mark One)

|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended December 31, 1999

                                       OR

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from     to

Commission file number 0-22300

                        PW Preferred Yield Fund II, L.P.
             (Exact name of registrant as specified in its charter)

                Delaware                                     84-1180783
         (State of organization)                          (I.R.S. Employer
                                                         Identification No.)

             88 Broad Street
          Boston, Massachusetts                                 02110
          (Address of principal                              (Zip Code)
           executive offices)

Registrant's telephone number, including area code (617) 854-5800

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

Securities registered pursuant to Section 12(g) of the Act:

                    Units of Class A Limited Partner Interest
                                (Title of Class)

      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
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.
<PAGE>

                        PW Preferred Yield Fund II, L.P.
                           Annual Report on Form 10-K
                       for theYear Ended December 31, 1999

                                Table of Contents

                                                                            Page
                                                                            ----
Part I

Item 1    Business                                                            1

Item 2    Properties                                                          3

Item 3    Legal Proceedings                                                   3

Item 4    Submission of Matters to a Vote of Security Holders                 3


Part II

Item 5    Market for Registrant's Common Equity and Related Stockholder
          Matters                                                             4

Item 6    Selected Financial Data                                             4

Item 7    Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                           5

Item 8    Financial Statements                                                8

Item 9    Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure                                               21


Part III

Item 10   Directors and Executive Officers of the Registrant                 22

Item 11   Executive Compensation                                             23

Item 12   Security Ownership of Certain Beneficial Owners and Management     24

Item 13   Certain Relationships and Related Transactions                     24


Part IV

Item 14   Exhibits, Financial Statement Schedules and Reports on Form 8-K    26
<PAGE>

                                     PART I

ITEM 1. BUSINESS

General

      PW Preferred Yield Fund II, L.P. (the "Partnership" or the "Registrant")
is a limited partnership organized under the laws of the State of Delaware on
October 1, 1991. The general partners of the Partnership are Pembroke Financial
Limited Partnership, the Managing General Partner, a Massachusetts limited
partnership, and General Equipment Management II, Inc., the Administrative
General Partner, a Delaware corporation that is a wholly-owned subsidiary of
Paine Webber Group Inc. The Managing General Partner is owned by Equis Financial
Group Limited Partnership ("EFG") formerly American Finance Group ("AFG"), a
Massachusetts limited partnership, which acts as Equipment Manager for the
Partnership. The Managing General Partner and the Administrative General Partner
are collectively referred to herein as the ("General Partners").

      PYB Limited Partnership, a Massachusetts limited partnership, is the Class
B Limited Partner ("Class B Limited Partner"). EFG acquired all of the equity
ownership interest in PYB Limited Partnership as of November 1, 1993. The Class
B Limited Partner contributed cash to the Partnership in an amount equal to
12.5% of the aggregate purchase price of the equipment purchased with the
offering proceeds received from the sale of the Units of Class A Limited Partner
Interest and the cash contributed by the Class B Limited Partner.

      Upon formation of the Partnership, the General Partners each contributed
$500 to the capital of the Partnership. On September 10, 1992, the Partnership
commenced a "best efforts" offering of 200,000 Units of Class A Limited Partner
Interest ("Units") at $500 per Unit ($100,000,000). The Partnership held its
sixth and final closing on July 26, 1994 and the offering was terminated.
Pursuant to the offering, the Partnership received $27,013,500 of gross offering
proceeds from the sale of 54,027 Units. The Partnership incurred $3,260,594 of
commissions and other offering expenses in connection with the sale of these
Units, thus receiving $23,752,906 of net offering proceeds. The Class B Limited
Partner contributed $231,098, $1,022,543 and $2,031,736 during 1994, 1993 and
1992, respectively, to fulfill its obligation.

      The Partnership acquired, on an all-cash basis, a portfolio of equipment
subject to triple net leases with unaffiliated third parties. The equipment
purchased by the Partnership consisted of industrial equipment, including, but
not limited to, materials-handling, mining, transportation and manufacturing
testing equipment, and business equipment, including, but not limited to,
computers and computer-related and telecommunications equipment. The Partnership
expects that the equipment purchased in the future will be similar equipment.
Business equipment owned by the Partnership is limited to 60% of the value of
the Partnership's total equipment.

      All equipment was acquired from EFG or from third-party sellers. Equipment
cost represents asset base price plus acquisition fees. Asset base price is
equal to the lower of (i) the actual price paid for the equipment by EFG plus
the cost of an appraisal and all costs accrued by EFG while carrying the
equipment less the amount of interim rents received by EFG prior to selling the
equipment or (ii) fair market value of such equipment as determined by an
independent appraiser.

      The Partnership only acquires equipment that is already subject to
short-term leases (generally, 5 years or less). The Partnership's business is
not subject to seasonal variations.

      At least 65% of the Partnership's initial equipment has been leased to
lessees which are investment-grade lessees, or which are operating subsidiaries
of entities which are investment-grade companies. An investment-grade lessee is
a company with a credit rating of not less than Baa, as determined by Moody's
Investor Services, Inc. or comparable credit ratings, as determined by other
recognized credit-rating services. During the acquisition stage, no more than
15% of the equipment was leased to a single lessee or its affiliates.


                                       1
<PAGE>

      The Partnership is required to dissolve and distribute all of its assets
no later than December 31, 2005. However, the General Partners anticipate that
all equipment will be sold and that the Partnership will be liquidated by
approximately 2003.

      During the reinvestment period (which will end in 2000) distributable cash
flows in excess of current distributions to the Class A Limited Partners at an
annualized distribution rate of 11% of their contributed capital, to the Class B
Limited Partner at an annualized distribution rate of 10% of its contributed
capital and to the General Partners, if any, will be reinvested in additional
leased equipment. See Item 7, "Management Discussion and Analysis of Financial
Condition and Results of Operations." Upon the termination of the reinvestment
period, all available cash flows will be distributed to the partners.

      The Partnership's principal investment objectives are:

            (i)   to generate current cash distributions to the Class A Limited
                  Partners from lease revenues (a substantial portion of which
                  will constitute a return of capital);

            (ii)  to preserve and protect Partnership capital; and

            (iii) to generate additional cash distributions after the end of the
                  reinvestment period (which will end in 2000) from sales of
                  equipment.

      In order to achieve these objectives, the General Partners have adopted
the following policies: (a) to achieve investment diversification, reduce the
average age of the Partnership's portfolio of equipment and enhance the overall
return to Class A Limited Partners through reinvestment in additional equipment
during the reinvestment period; and (b) to manage the Partnership's assets to
maximize lease rentals and amounts received from the sale of equipment in order
to protect the Partnership's capital.

      In January 1996, certain assets of AFG relating primarily to the business
of originating new leases, and the name "American Finance Group", and its
acronym, were sold to a third-party. AFG changed its name to Equis Financial
Group Limited Partnership after the sale was concluded. Pursuant to terms of the
sale agreements, EFG specifically reserved the rights to continue using the name
American Finance Group and its acronym in connection with the Partnership and
the Other Investment Programs and to continue managing all assets owned by the
Partnership and the Other Investment Programs.

Equipment Portfolio

      The following table describes the Partnership's equipment portfolio as of
December 31, 1999:

     Equipment Type                                 Original Cost
     --------------                                 -------------

Materials Handling                                   $12,495,215
Construction and Mining                                2,400,680
Retail Store Fixtures                                  1,990,820
Manufacturing                                          1,979,902
Computers & Periphals                                    941,032
Furniture & Fixtures                                     892,602
General Purpose Plant/Warehouse                          658,128
Communications                                           640,532
Research & Test                                          380,296
Trailers and Intermodal Containers                        96,452
Photocopying                                              67,259
                                                     -----------

                                                     $22,542,918
                                                     ===========


                                       2
<PAGE>

      The above summary includes equipment held for sale or re-lease with a cost
of approximately $593,000 at December 31, 1999.

Significant Lessees

      The Partnership leases its equipment to a significant number of lessees.
Revenue from major individual lessees which accounted for 10% or more of lease
revenue during 1999 is as follows:

   Chrysler Corporation                                                18%
   General Motors Corporation                                          11%

      The Partnership is not dependent on any one lessee for future business.
The Managing General Partner believes that alternative lessees are available in
the event current lessees decide no longer to do business with EFG or the
Partnership. As part of its investment objectives, the Partnership intends to
continue to diversify its equipment portfolio.

Competition

      The equipment leasing industry is highly competitive. Among the numerous
existing and potential competitors of the Partnership for leases are equipment
manufacturers, equipment dealers and brokers, leasing companies and financial
institutions, as well as other limited partnerships and/or trusts organized and
managed similarly to the Partnership. Many of these competitors have greater
financial resources than the Partnership and more experience in the industry
than the General Partners and their affiliates. Equipment manufacturers may
present particularly strong competition because they may also provide certain
ancillary services which the Partnership cannot offer directly, such as
maintenance services (including possible equipment substitution rights),
warranty services, purchase rights and trade-in privileges.

Employees

      The Partnership has no employees. The officers, directors and employees of
the General Partners and their affiliates perform services on behalf of the
Partnership. The General Partners are entitled to certain fees and
reimbursements of certain out-of-pocket expenses incurred in connection with the
performance of these management services. See Item 10 of this Report, "Directors
and Executive Officers of the Registrant", and Item 13 of this Report, "Certain
Relationships and Related Transactions", which are incorporated herein by
reference.


ITEM 2. PROPERTIES

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


ITEM 3. LEGAL PROCEEDINGS

      None.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      None.


                                       3
<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      There is no organized trading market for the purchase and sale of the
Units and certain measures have been adopted and implemented to assure that no
organized trading market will develop.

      As of March 1, 2000, the number of Limited Partners was approximately
1,270.

      Total distributions declared to partners for 1999 and 1998 were as
follows:

                                                    1999           1998
                                                ------------   ------------

   Class A Limited Partners                     $  2,971,485   $  2,971,485
   Class B Limited Partner                           328,536        328,536
   General Partners                                  173,685        173,685
                                                ------------   ------------

                                                $  3,473,706   $  3,473,706
                                                ============   ============

      Distributions may be characterized for tax, financial reporting 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. Based upon the amount
of net income reported by the Partnership for financial reporting purposes,
approximately 52% and 77%, respectively, of the cash distributions to the Class
A Limited Partners for the years ended December 31, 1999 and 1998 constituted a
return of capital. Additionally, since inception, approximately 71% of the cash
distributions to the Class A Limited Partners constituted a return of capital.
However, the total actual return on capital over a leasing partnership's life
can only be determined at the termination of the partnership after all residual
cash flows (which include proceeds from the re-leasing and sale of equipment
after initial lease terms expire) have been realized.


ITEM 6. SELECTED FINANCIAL DATA

      The following selected financial data of the Partnership has been derived
from the financial statements for the indicated period. The information set
forth below should be read in conjunction with the Partnership's financial
statements and notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in Items 8 and 7,
respectively, of this Report, which are incorporated herein by reference.

      For each of the five years in the period ended December 31, 1999:

<TABLE>
<CAPTION>
                            1999         1998          1997        1996         1995
                        -----------  -----------   ----------  ----------   --------

<S>                     <C>          <C>           <C>         <C>          <C>
Total Revenue           $ 5,215,238  $ 6,234,782   $7,907,694  $7,536,793   $8,271,776
Net Income                1,606,406      719,430    2,037,965     979,886      683,531
Net income per
  Class A Limited
  Partnership Unit            26.27        12.62        28.65       10.52         3.31
Total Assets             12,235,296   14,052,208   17,072,655  18,597,031   21,067,151
Total Partners' Equity   11,670,206   13,537,506   16,291,782  17,727,523   20,221,343
Distributions Declared
  to Partners             3,473,706    3,473,706    3,473,706   3,473,706    3,473,706
</TABLE>


                                       4
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

      The following discussion should be read in conjunction with the "Selected
Financial Data" and the Consolidated Financial Statements of the Partnership and
the Notes thereto. This Report contains, in addition to historical information,
forward-looking statements that include risks and other uncertainties. The
Partnership's actual results may differ materially from those anticipated in
these forward-looking statements. Factors that might cause such a difference
include those discussed below, as well as general economic and business
conditions, competition and other factors discussed elsewhere in this report.
The Partnership undertakes no obligation to release publicly any revisions to
these forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of anticipated or unanticipated events.

Year 2000 Issue

      The Partnership uses information systems provided by EFG and has no
information systems of its own. EFG completed all Year 2000 readiness work prior
to December 31, 1999 and did not experience any significant problems.
Additionally, EFG is not aware of any outside customer or vendor that
experienced a Year 2000 issue that would have a material effect on the
Partnership's results of operations, liquidity, or financial position. However,
EFG has no means of ensuring that all customers, vendors and third-party
servicers have conformed to Year 2000 standards. The effect of this risk to the
Partnership is not determinable.

Liquidity and Capital Resources

      The Partnership commenced its equipment reinvestment phase during 1993 by
investing excess cash flows available after the payment of the distributions to
the partners in additional equipment. As of December 31, 1999, equipment
purchased pursuant to the reinvestment program, including acquisition fees and
expenses, totaled $27,016,341. Additional equipment will be purchased pursuant
to the reinvestment program which will end in 2000.

      The Partnership invests working capital and cash flow from operations
prior to its distribution to the partners or its reinvestment in additional
equipment in short-term highly liquid investments. These investments are
primarily short-term commercial paper issued by large domestic corporations. At
December 31, 1999, the Partnership had approximately $698,000 invested in
commercial paper and a fund that invests in similar instruments.

      Cash and cash equivalents decreased $1,703,572 from $3,629,653 at December
31, 1998 to $1,926,081 at December 31, 1999. This decrease primarily represents
the amount by which distributions to partners and cash used to purchase
equipment exceeded cash generated by operating activities and equipment sales.

      During the year ended December 31, 1999, the Partnership declared
distributions of cash flow received from operations in the amount of $3,473,706.
All distributions to the Class A Limited Partners represented an annualized
distribution rate of 11% of their contributed capital and all distributions to
the Class B Limited Partner represented an annualized distribution rate of 10%
of its contributed 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. Based upon the amount of net
income reported by the Partnership for accounting purposes, approximately 52% of
the 11% cash distributions to the Class A Limited Partners for the year ended
December 31, 1999 constituted a return of capital. Additionally, since
inception, approximately 71% of the Class A Limited Partner's 11% cash
distributions constituted a return of capital. However, the total actual return
on capital over a leasing partnership's life can only be determined at the
termination of the Partnership after all residual cash flows (which include
proceeds from the re-leasing and sale of equipment after initial lease terms
expire) have been realized.


                                       5
<PAGE>

Results of Operations

      For the year ended December 31, 1999, the Partnership recognized lease
revenue of $4,767,855, compared to $5,991,987 and $7,696,293 for the years ended
December 31, 1998 and 1997, respectively. The overall decrease in lease revenue
from 1997 to 1999 was expected and resulted principally from primary lease term
expirations and the sale of equipment. The Partnership also earns interest
income from temporary investments of rental receipts and equipment sales
proceeds in short-term instruments.

      During 1999, the Partnership sold equipment having a net book value of
$941,987 to existing lessees and third parties. These sales resulted in a net
gain, for financial statement purposes, of $346,023 compared to a net loss in
1998 of $70,529 on equipment having a net book value of $1,057,649 and a net
gain in 1997 of $72,408 on equipment having a net book value of $1,907,412.

      It cannot be determined whether future sales of equipment will result in a
net gain or a net loss to the Partnership, as such transactions will be
dependent upon the condition and type of equipment being sold and its
marketability at the time of sale. In addition, the amount of gain or loss
reported for financial statement purposes is partly a function of the amount of
accumulated depreciation associated with the equipment being sold.

      The ultimate realization of residual value for any type of equipment is
dependent upon 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 detract from asset values at
any given time. EFG attempts to monitor these changes in order to identify
opportunities which may be advantageous to the Partnership and which will
maximize total cash returns for each asset.

      The total economic value realized upon final disposition of each asset is
comprised of all primary lease term revenues generated from that asset, together
with its residual value. The latter consists of cash proceeds realized upon the
asset's sale in addition to all other cash receipts obtained from renting the
asset on a re-lease, renewal or month-to-month basis. The Partnership classifies
such residual rental payments as lease revenue. Consequently, the amount of gain
or loss reported in the financial statements is not necessarily indicative of
the total residual value the Partnership achieved from leasing the equipment.

      Depreciation and amortization expense was $3,257,913, $5,120,090 and
$4,425,716 for the years ended December 31, 1999, 1998 and 1997, respectively.
For financial reporting purposes, to the extent that an asset is held on primary
lease term, the Partnership depreciates the difference between (i) the cost of
the asset and (ii) the estimated residual value of the asset on a straight-line
basis over such term. For purposes of this policy, estimated residual values
represent estimates of equipment values at the date of primary lease expiration.
To the extent that an asset is held beyond its primary lease term, the
Partnership continues to depreciate the remaining net book value of the asset on
a straight-line basis over the asset's remaining economic life.

      In 1998, the Partnership changed its estimates of end-of-lease residual
values to reflect anticipated deterioration in market value for the
Partnership's equipment over the remainder of their primary lease terms. This
change in estimate increased depreciation expense and reduced net income by
$1,300,000 ($20.00 per Class A Limited Partner) in 1998.

      The Partnership recorded a write-down of the carrying value of certain
equipment, representing an impairment, during the year ended December 31, 1997.
The resulting charge, $875,000 was based on a comparison of the estimated net
realizable value and corresponding carrying value for the Partnership's
equipment.

      Management fees were approximately 4.2%, 4.2% and 4.1% of lease revenue
during the years ended December 31, 1999, 1998 and 1997, respectively.
Management fees are based on 5% of gross lease revenue generated by operating
leases and 2% of gross lease revenue generated by full payout leases.


                                       6
<PAGE>

      The General Partners, or their affiliates, were entitled to receive 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% of the gross
contract price relating to each sale of equipment (payable 50% to the Managing
General Partner or its affiliates and 50% to the Administrative General Partner)
as compensation for negotiating and consummating sales of equipment. During the
fourth quarter of 1998, the Partnership reversed previously accrued subordinated
disposition fees because the General Partners concluded that it was no longer
probable that these subordinated disposition fees would be paid. The Partnership
has not accrued for subordinated disposition fees during 1999.

      General and administrative expenses consisted primarily of investor
reporting expenses and transfer agent and audit fees.


                                       7
<PAGE>

ITEM 8. FINANCIAL STATEMENTS

                        PW PREFERRED YIELD FUND II, L.P.

List of Financial Statements

                                                                       Page
                                                                       ----

Reports of Independent Auditors                                           9

Balance Sheets - December 31, 1999 and 1998                              11

Statements of Income
for the Years ended December 31, 1999 and 1998 and 1997                  12

Statements of Partners' Equity
for the Years ended December 31, 1999 and 1998 and 1997                  13

Statements of Cash Flows
for the Years ended December 31, 1999 and 1998 and 1997                  14

Notes to Financial Statements                                            15


All Schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted since;
(1) the information required is disclosed in the financial statements and notes
therein; (2) schedules are not required under the related instructions; or (3)
the schedules are inapplicable.


                                       8
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS
                         ------------------------------

To the Partners of PW Preferred Yield Fund II, L.P.:

      We have audited the accompanying balance sheets of PW Preferred Yield Fund
II, L.P. as of December 31, 1999 and 1998, and the related statements of income,
partners' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

      We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits 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 PW Preferred Yield Fund II,
L.P. at December 31, 1999 and 1998, and the results of its operations and its
cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States.


                                                               ERNST & YOUNG LLP


Boston, Massachusetts
March 13, 2000


                                       9
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS
                         ------------------------------

To the Partners of PW Preferred Yield Fund II, L.P.:

      In our opinion, the statements of income, of cash flows and of changes in
partners' equity for the year ended December 31, 1997 present fairly, in all
material respects, the results of operations and cash flows of PW Preferred
Yield Fund II, L.P. for the year ended December 31, 1997, in conformity with
generally accepted accounting principles. 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 audit. We conducted our
audit of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.

      We have not audited the financial statements of the Partnership for any
period subsequent to December 31, 1997.


                                                      PricewaterhouseCoopers LLP


New York, New York
March 25, 1998


                                       10
<PAGE>

                        PW PREFERRED YIELD FUND II, L.P.

                                 BALANCE SHEETS
                           DECEMBER 31, 1999 and 1998

<TABLE>
<CAPTION>
                                                               1999          1998
                                                           -----------    ----------
ASSETS
------

<S>                                                     <C>            <C>
Cash and cash equivalents                               $  1,926,081   $  3,629,653

Rents and other receivables, net of allowance for
   doubtful accounts of $47,000 at December 31, 1999
   and 1998                                                  503,000        558,579

Equipment at cost, net of accumulated depreciation
  of $12,736,703 and $18,645,275 at December 31, 1999
   and 1998, respectively                                  9,806,215      9,863,976
                                                        ------------   ------------

    Total Assets                                        $ 12,235,296   $ 14,052,208
                                                        ============   ============

LIABILITIES AND PARTNERS' EQUITY

Accounts payable and accrued liabilities                $     54,100   $     32,500
Payable to affiliates                                        103,043        109,562
Deferred rental income                                        89,162         53,855
Distributions payable to partners                            318,785        318,785
                                                        ------------   ------------

    Total Liabilities                                        565,090        514,702
                                                        ------------   ------------

Partners' Equity:
  General Partners                                           568,137        661,502
  Limited Partners:
   Class A (54,027 Units outstanding)                      9,713,555     11,265,748
   Class B                                                 1,388,514      1,610,256
                                                        ------------   ------------

    Total Partners' Equity                                11,670,206     13,537,506
                                                        ------------   ------------

    Total and Liabilities and Partners' Equity          $ 12,235,296   $ 14,052,208
                                                        ============   ============
</TABLE>

              The accompanying notes are an integral part of these
                              financial statements.


                                       11
<PAGE>

                        PW PREFERRED YIELD FUND II, L.P.

                              STATEMENTS OF INCOME

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                            1999            1998           1997
                                       ------------    ------------   ------------
Revenue:

<S>                                    <C>            <C>             <C>
   Lease revenue                       $  4,767,855   $  5,991,987    $  7,696,293
   Gain (loss) on sale of equipment         346,023        (70,529)         72,408
   Interest income                          101,360        158,354         138,993
   Other Income                                  --        154,970              --
                                       ------------   ------------    ------------

    Total Revenue                         5,215,238      6,234,782       7,907,694
                                       ------------   ------------    ------------

Expenses:

   Depreciation and amortization          3,257,913      5,120,090       4,425,716
   Write-down of equipment                       --             --         875,000
   Provision for bad debts                       --             --          75,000
   Management fees                          199,059        251,216         318,172
   Subordinated disposition fees                 --             --          59,395
   General and administrative               151,860        144,046         116,446
                                       ------------   ------------    ------------

    Total Expenses                        3,608,832      5,515,352       5,869,729
                                       ------------   ------------    ------------

Net Income                             $  1,606,406   $    719,430    $  2,037,965
                                       ============   ============    ============

Net Income Allocated:
  To the General Partners              $     80,320   $     35,972    $    319,818
  To the Class A Limited Partners         1,419,292        681,993       1,547,819
  To the Class B Limited Partner            106,794          1,465         170,328
                                       ------------   ------------    ------------

                                       $  1,606,406   $    719,430    $  2,037,965
                                       ============   ============    ============

Net Income per Weighted Average
  Number of Units of Class A Limited
  Partner Interests Outstanding        $      26.27   $      12.62    $      28.65
                                       ============   ============    ============

Weighted Average Number of
  Units of Class A Limited Partner
  Interests Outstanding                      54,027         54,027          54,027
                                       ============   ============    ============
</TABLE>

              The accompanying notes are an integral part of these
                              financial statements.


                                       12
<PAGE>

                        PW PREFERRED YIELD FUND II, L.P.

                         STATEMENTS OF PARTNERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

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

<S>                                   <C>             <C>             <C>             <C>
Balance, December 31, 1996            $    653,082    $ 14,978,906    $  2,095,535    $ 17,727,523

Net income                                 319,818       1,547,819         170,328       2,037,965

Distributions declared to partners        (173,685)     (2,971,485)       (328,536)     (3,473,706)
                                      ------------    ------------    ------------    ------------

Balance, December 31, 1997                 799,215      13,555,240       1,937,327      16,291,782

Net income                                  35,972         681,993           1,465         719,430

Distributions declared to partners        (173,685)     (2,971,485)       (328,536)     (3,473,706)
                                      ------------    ------------    ------------    ------------

Balance, December 31, 1998                 661,502      11,265,748       1,610,256      13,537,506

Net income                                  80,320       1,419,292         106,794       1,606,406

Distributions declared to partners        (173,685)     (2,971,485)       (328,536)     (3,473,706)
                                      ------------    ------------    ------------    ------------

Balance, December 31, 1999            $    568,137    $  9,713,555    $  1,388,514    $ 11,670,206
                                      ============    ============    ============    ============
</TABLE>

              The accompanying notes are an integral part of these
                              financial statements.


                                       13
<PAGE>

                        PW PREFERRED YIELD FUND II, L.P.

                            STATEMENTS OF CASH FLOWS

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                   1999          1998         1997
                                               -----------   -----------  -----------
<S>                                            <C>           <C>          <C>
Cash Flows From Operating Activities:
Net income                                     $ 1,606,406   $   719,430  $ 2,037,965

Adjustments to reconcile net income to net
cash provided by operating activities:
   Depreciation and amortization                 3,257,913     5,120,090    4,425,716
   Write-down of equipment                              --            --      875,000
   (Recovery of) provision for bad debts                --       (53,000)      75,000
   (Gain) loss on sale of equipment               (346,023)       70,529      (72,408)

Change in assets and liabilities:
   Rents and other receivables                      55,579       452,930      154,153
   Accounts payable and accrued liabilities         21,600       (87,877)      (8,904)
   Payable to affiliates                            (6,519)     (159,920)       8,486
   Deferred rental income                           35,307        (9,636)     (62,009)
   Other assets                                         --        17,572           --
                                               -----------   -----------  -----------

        Net cash provided by operating
        activities                               4,624,263     6,070,118    7,432,999
                                               -----------   -----------  -----------

Cash Flows From Investing Activities:
   Purchase of equipment                        (4,142,139)   (4,160,388)  (4,210,206)
   Proceeds from equipment sales                 1,288,010       987,120    1,967,567
                                               -----------   -----------  -----------

        Net cash used in investing activities   (2,854,129)   (3,173,268)  (2,242,639)
                                               -----------   -----------  -----------

Cash Flows From Financing Activities:
   Distributions paid to partners               (3,473,706)   (3,482,444)  (3,499,914)
                                               -----------   -----------  -----------

        Net cash used in financing activities   (3,473,706)   (3,482,444)  (3,499,914)
                                               -----------   -----------  -----------

Net (Decrease) Increase in Cash And Cash
Equivalents                                     (1,703,572)     (585,594)   1,690,446

Cash and Cash Equivalents at Beginning of Year   3,629,653     4,215,247    2,524,801
                                               -----------   -----------  -----------
Cash and Cash Equivalents at End of Year       $ 1,926,081   $ 3,629,653  $ 4,215,247
                                               ===========   ===========  ===========

Distributions Declared but Unpaid              $   318,785   $   318,785  $   327,523
                                               ===========   ===========  ===========
</TABLE>

              The accompanying notes are an integral part of these
                              financial statements.


                                       14
<PAGE>

                        PW PREFERRED YIELD FUND II, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 1999

1. ORGANIZATION OF THE PARTNERSHIP

      PW Preferred Yield Fund II, L.P., a Delaware limited partnership (the
"Partnership"), was formed on October 1, 1991 for the purpose of acquiring and
leasing equipment. The Partnership is acquiring, on an all-cash basis, a
portfolio of equipment subject to triple net leases (i.e. repairs, insurance and
taxes are paid by the lessees) with unaffiliated third parties.

      Pembroke Financial Limited Partnership, a Massachusetts limited
partnership (the "Managing General Partner") and General Equipment Management
II, Inc., a Delaware corporation (the "Administrative General Partner") are the
General Partners of the Partnership. The Managing General Partner is affiliated
with Equis Financial Group Limited Partnership ("EFG"), a Massachusetts limited
partnership, formerly American Finance Group ("AFG"), which acts as Equipment
Manager for the Partnership. The Administrative General Partner is a
wholly-owned subsidiary of Paine Webber Group Inc. PYB Limited Partnership, a
Massachusetts limited partnership, is the Class B Limited Partner ("Class B
Limited Partner"). EFG acquired all of the equity ownership interest in PYB
Limited Partnership as of November 1, 1993.

      Upon formation of the Partnership, the General Partners each contributed
$500 to the capital of the Partnership. On September 10, 1992, the Partnership
commenced a "best efforts" offering of 200,000 Units of Class A Limited Partner
Interest ("Units") at $500 per Unit ($100,000,000). The Partnership held its
sixth and final closing on July 26, 1994 and the offering was terminated.
Pursuant to the offering, the Partnership received $27,013,500 of gross offering
proceeds from the sale of 54,027 Units. The Partnership incurred $3,260,594 of
commissions and other offering expenses in connection with the sale of these
Units, thus receiving $23,752,906 of net offering proceeds.

      The Class B Limited Partner contributed cash to the Partnership in an
amount equal to 12.5% of the aggregate purchase price of the equipment purchased
with the net offering proceeds received from the sale of Units and the cash
contributed by the Class B Limited Partner. The Class B Limited Partner
contributed $231,098, $1,022,543 and $2,031,736 during 1994, 1993 and 1992,
respectively, to fulfill its obligation.

      The Partnership conducted no activities and recognized no profits or
losses prior to the initial closing for the sale of Units on November 16, 1992,
at which time the Partnership commenced operations.

      In January 1996, certain assets of AFG relating primarily to the business
of originating new leases, and the name "American Finance Group", and its
acronym, were sold to a third-party. AFG changed its name to Equis Financial
Group Limited Partnership after the sale was concluded. Pursuant to terms of the
sale agreements, EFG specifically reserved the rights to continue using the name
American Finance Group and its acronym in connection with the Partnership and
Other Investment Programs and to continue managing all assets owned by the
Partnership and Other Investment Programs.

2. SIGNIFICANT ACCOUNTING POLICIES

Statement of Cash Flows

      The Partnership considers liquid investment instruments purchased with a
maturity of three months or less to be cash equivalents. The Partnership invests
working capital and cash flows from operations, prior to distribution to
partners or their reinvestment in additional equipment, in short-term highly
liquid investments. At December 31,


                                       15
<PAGE>

1999, the Partnership had approximately $698,000 invested in commercial paper
and a fund that invests in similar instruments.

Revenue Recognition

      Rents are payable to the Partnership monthly or quarterly and no
significant amounts are calculated on factors other than the passage of time.
The leases are accounted for as operating leases and are noncancellable. Rents
received prior to their due dates are deferred. Future minimum rents of
$8,311,675 are due as follows:

     For the year ending December 31, 2000    $  3,162,745
                                      2001       2,746,524
                                      2002       1,405,709
                                      2003         629,116
                                      2004         343,704
                                 Therafter          23,877
                                              ------------

                                     Total    $  8,311,675
                                              ============

      Revenue from major individual lessees which accounted for 10% or more of
lease revenue during the years ended December 31, 1999, 1998 and 1997 is as
follows:

                                            Percentage of Lease Revenue
                                    -------------------------------------------
                                        1999             1998            1997
                                    ------------     ------------    -----------

Chrysler Corporation                          18%             17%            13%
Collection Services, Inc.                     --              --             13%
American Telephone & Telegraph Co.            --              --             10%
General Motors Corporation                    11%             --             10%

Use of Estimates

      The preparation of the financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.

Equipment on Lease

      All equipment was acquired from EFG or from third-party sellers. Equipment
cost represents asset base price plus acquisition fees. Asset base price is
equal to the lower of (i) the actual price paid for the equipment by EFG plus
the cost of an appraisal and all costs accrued by EFG while carrying the
equipment less the amount of interim rents received by EFG prior to selling the
equipment or (ii) fair market value of such equipment as determined by an
independent appraiser.

Depreciation and Amortization

      The Partnership's depreciation policy is intended to allocate the cost of
equipment over the period during which it produces economic benefit. The
principal period of economic benefit is considered to correspond to each asset's
primary lease term, which term generally represents the period of greatest
revenue potential for each asset. Accordingly, to the extent that an asset is
held on primary lease term, the Partnership depreciates the difference between
(i) the cost of the asset and (ii) the estimated residual value of the asset on
a straight-line basis over such term. For purposes of this policy, estimated
residual values represent estimates of equipment values at the date of primary
lease expiration. To the extent that an asset is held beyond its primary lease
term, the


                                       16
<PAGE>

Partnership continues to depreciate the remaining net book value of the asset on
a straight-line basis over the asset's remaining economic life. Periodically,
the General Partners evaluate the net carrying value of equipment to determine
whether it exceeds estimated net realizable value. Adjustments to reduce the net
carrying value of equipment are recorded in those instances where estimated net
realizable value is considered to be less than net carrying value.

      The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including the General Partners' ability to sell and
re-lease equipment. Changing market conditions, industry trends, technological
advances, and many other events can converge to enhance or detract from asset
values at any given time. The General Partners attempt to monitor these changes
in order to identify opportunities which may be advantageous to the Partnership
and which will maximize total cash returns for each asset.

      Organization costs were amortized using the straight-line method over a
period of five years.

Provision for Income Taxes

      No provision for income taxes is included in the accompanying financial
statements. The Partners are responsible for reporting their proportionate share
of the Partnership's taxable income and other tax attributes on their tax
returns.

Net Income Per Unit of Class A Limited Partner Interest

      The net income per Unit of Class A Limited Partner Interest is computed by
dividing the net income allocated to the Class A Limited Partners by the
weighted average number of Units of Class A Limited Partner Interest outstanding
during the period.

Reclassification

      Certain 1997 balances have been reclassified to conform to the 1999
presentation.

3.    PARTNERSHIP ALLOCATIONS

                               Cash Distributions

      Cash distributions, other than liquidating distributions, will be
distributed 5% to the General Partners and 95% to the Class A Limited Partners
and the Class B Limited Partner (collectively, the "Limited Partners"). The 95%
distributed to the Limited Partners is generally allocated between the Class A
Limited Partners and the Class B Limited Partner in the manner set forth in the
table below.

1.    During the reinvestment period (which will end in 2000):

<TABLE>
<CAPTION>
                                                                   Class A      Class B
                                                                   Limited      Limited
                                                                   Partners     Partner   Reinvested
                                                                   --------     -------   ----------

<S>                                                                 <C>         <C>         <C>
(A)   Until The Class A Limited Partners have received an 11%
         annualized, cumulative distribution on their capital
         contributions                                              100.0%          --          --

(B)   Cash remaining after (A) above and until the Class
         B Limited Partner has received a 10% annualized
         distribution on its capital contributions                      --      100.0%          --
</TABLE>


                                       17
<PAGE>

<TABLE>
<CAPTION>
                                                                   Class A      Class B
                                                                   Limited      Limited
                                                                   Partners     Partner   Reinvested
                                                                   --------     -------   ----------

<S>                                                                 <C>         <C>         <C>
(C)   Cash remaining after (B) above is to be
         reinvested in additional equipment                             --          --      100.0%

2.    After the reinvestment period:

(A)   Until the Class A Limited Partners have received an 11%
         annualized, cumulative distribution on their capital
         contributions                                              100.0%          --          --

(B)   Cash remaining after (A) above and until the Class
         B Limited Partner has received a 10% annualized
         distribution on its capital contributions                      --      100.0%          --

(C)   Cash remaining after (B) above and until the Class A
         Limited Partners receive a return of their capital
         contributions, plus a 9% annual, cumulative distribution
         compounded quarterly on their adjusted capital
         contributions ("Payout")                                    87.5%       12.5%          --

(D)   Cash remaining after (C) above and until the Class
         B Limited Partner has received any previously
         undistributed portion of its 10% annualized
         distribution on its capital contributions                      --      100.0%          --

(E)   Cash remaining after (D) above and until the Class B
         Limited Partner achieves Payout                             12.5%       87.5%          --

(F)   Cash remaining after (E) above                                 75.0%       25.0%          --
</TABLE>

      Upon liquidation of the Partnership, cash available for distribution will
be distributed in accordance with the partners' capital accounts after all
allocations of profits and losses.

                               Profits and Losses

      Profits (not including the special allocations discussed below) are first
allocated to offset current and prior year losses, if any. Remaining profits are
then allocated among the partners in the same manner that cash distributions are
allocated, or would be allocated (as set forth above) if cash distributions were
equal to the allocable profits.

      Losses (not including the special allocations discussed below) are first
allocated to offset current and prior year profits and then 1% to the General
Partners and 99% to the Limited Partners. The 99% allocated to the Limited
Partners will be shared 87.5% to the Class A Limited Partners and 12.5% to the
Class B Limited Partner.

      There are several special allocation provisions included in the
Partnership agreement, of which the two most significant are as follows: First,
commissions and expenses paid in connection with the sale of Units ("Offering
Costs") are allocated 1% to the General Partners and 99% to the Limited
Partners. The 99% allocated to the Limited Partners


                                       18
<PAGE>
will be shared 87.5% to the Class A Limited Partners and 12.5% to the Class B
Limited Partner. Second, depreciation with respect to the equipment and any
losses resulting from the sale of equipment are allocated 1% to the General
Partners and 99% to the Limited Partners, until the cumulative amount of
depreciation and losses so allocated to the Limited Partners equals their
aggregate capital contributions, net of allocated Offering Costs. The 99%
allocated to the Limited Partners will be shared by the Class A Limited Partners
and the Class B Limited Partner in proportion to their respective capital
contributions net of allocated Offering Costs. The General Partners will also be
specially allocated items of income to offset their 1% allocation of these two
items.

4.    EQUIPMENT ON OPERATING LEASES

      The following is a summary of equipment owned by the Partnership at
December 31, 1999 and 1998:

                                                   1999              1998
                                             --------------    --------------

   Industrial equipment                      $   20,894,095    $   24,512,792
   Business equipment                             1,648,823         3,996,459
                                             --------------    --------------
   Total equipment cost                          22,542,918        28,509,251

   Less: Accumulated depreciation               (12,736,703)      (18,645,275)
                                             --------------    --------------
   Equipment, net                            $    9,806,215    $    9,863,976
                                             ==============    ==============

      The above summary includes fully depreciated equipment held for sale or
re-lease with a cost of approximately $593,000 at December 31, 1999 and
equipment with a cost and net book value of approximately $759,000 and $45,000,
respectively, at December 31, 1998. The General Partners are actively seeking
the sale or re-lease of all such equipment not on lease.

      Industrial equipment includes materials handling (approximately 55%),
construction and mining (approximately 11%), retail store fixtures
(approximately 9%), furniture & fixtures (approximately 4%), general purpose
plant/warehouse (approximately 3%), research & test (approximately 2%), trailers
& intermodal containers (less than 1%) and manufacturing (approximately 9%), and
business equipment includes computers and periphals (approximately 4%),
communications (approximately 3%), and photocopying (less than 1%) at December
31, 1999 (all percentages are based upon total original equipment purchase
price). Business equipment owned by the Partnership is limited to approximately
60% of the value of the Partnership's total equipment.

      In 1998, the Partnership changed its estimates of end-of-lease residual
values to reflect anticipated deterioration in market value for the
Partnership's equipment over the remainder of their primary lease terms. This
change in estimate increased depreciation expense and reduced net income by
$1,300,000 ($20.00 per Class A Limited Partner) in 1998.

5.    TRANSACTIONS WITH AFFILIATES

Acquisition of Equipment

      Pursuant to its investment objectives, the Partnership has acquired, on an
all-cash basis, certain leased equipment from EFG, an affiliate of the Managing
General Partner. The Partnership purchased equipment aggregating $4,142,139,
$4,160,388 and $4,210,206 (including acquisition fees) during the 1999, 1998 and
1997, respectively.


                                       19
<PAGE>

Acquisition Fees

      The Managing General Partner, or its affiliates, receives or is entitled
to receive a fee equal to (i) 2.25% of the purchase price of equipment purchased
with net offering proceeds from the sale of Units, and (ii) 3% of the purchase
price of equipment purchased with reinvested Partnership cash flow as
compensation for evaluating, selecting, negotiating and consummating the
acquisition of the equipment. The Managing General Partner, or its affiliates,
earned acquisition fees of $120,645, $121,176 and $122,627 in 1999, 1998 and
1997, respectively.

Management Fees

      The General Partners are entitled to receive a monthly fee in an amount
equal to 2% of gross rentals for Full Payout Leases, as defined in the
Partnership Agreement and 5% of gross rentals for other leases (payable 66.67%
to the Managing General Partner and 33.33% to the Administrative General
Partner) as compensation for services rendered in connection with the management
of the equipment. Management fees of $199,059, $251,216 and $318,172 were earned
by the General Partners during 1999, 1998 and 1997, respectively. Effective July
1, 1998, the Managing General Partner agreed to perform certain administrative
functions on behalf of the Partnership that previously had been performed by the
Administrative General Partner. For these services, the Administrative General
Partner pays the Managing General Partner an amount equivalent to the fees
otherwise due the Administrative General Partner.

Disposition Fees

      The General Partners, or their affiliates, were entitled to receive 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% of the gross
contract price relating to each sale of equipment (payable 50% to the Managing
General Partner or its affiliates and 50% to the Administrative General Partner)
as compensation for negotiating and consummating sales of equipment. At December
31, 1998, the Partnership reversed previously accrued subordinated disposition
fees of $106,962 because the General Partners concluded that it was no longer
probable that these subordinated disposition fees would be paid. The Partnership
has not accrued for subordinated disposition fees during 1999.

Accountable General and Administrative Expenses

      The General Partners are entitled to reimbursement of certain expenses
paid on behalf of the Partnership which are incurred in connection with the
Partnership's operations. There were no such reimbursable expenses during 1999.

Class Action Settlement

      As part of a class action settlement, beginning January 1996, all fees and
distributions paid to the Administrative General Partner and all future fees and
distributions paid to the Administrative General Partner will continue to be
assigned by an affiliate to an escrow account for the benefit of class members.


                                       20
<PAGE>

6.    RECONCILIATION TO INCOME TAX METHOD OF ACCOUNTING

      The following is a reconciliation of the net income as shown in the
accompanying financial statements to the taxable income reported for federal
income tax purposes:

<TABLE>
<CAPTION>
                                                 1999          1998          1997
                                            ------------  ------------  ------------

<S>                                         <C>           <C>           <C>
Net income per financial statements         $  1,606,406  $    719,430  $  2,037,965
Increase (decrease) resulting from:
Writedowns                                            --            --       875,000
Provisions for bad debts                              --      (153,000)       75,000
Depreciation                                    (504,786)    1,085,016      (872,878)
Gain on sale of equipment and other             (153,954)       12,363       320,715
Deferred rental income                            35,307        (9,636)      (62,009)
Subordinated disposition fee payable                  --            --        59,394
Other                                             (4,675)      (20,887)       74,819
                                            ------------  ------------  ------------
Taxable income per federal income
  tax return                                $    978,298  $  1,633,286  $  2,508,006
                                            ============  ============  ============
</TABLE>

      The following is a reconciliation of the Partnership's capital accounts as
shown in the accompanying financial statements to the tax bases capital
accounts:

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

<S>                                                       <C>            <C>
Net assets per financial statements                       $ 11,670,206   $ 13,537,506
Increase (decrease) resulting from:
   Commisions and expenses paid in connection with the
     sale of Class A Limited Partner Units                   3,260,594      3,260,594
   Distributions payable to partners                           318,785        318,785
   Deferred rental income                                       89,162         53,855
   Accumulated depreciation                                   (921,068)    (1,108,040)
   Writedowns and allowance for doubtful accounts               47,000        892,711
   Other                                                            --          4,675
                                                          ------------   ------------
Tax bases of net assets                                   $ 14,464,679   $ 16,960,086
                                                          ============   ============
</TABLE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

None.


                                       21
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      The Partnership has no officers and directors. The General Partners
jointly manage and control the affairs of the Partnership and have general
responsibility and authority in all matters affecting its business. Information
concerning the directors and executive officers of the General Partners is as
follows:

                     Pembroke Financial Limited Partnership
                 (a Massachusetts limited partnership, of which
            AFG Leasing VII Incorporated is the sole general partner)

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

Geoffrey A. MacDonald    Chairman and a member of the Executive Committee of EFG
                         and President and a Director of AFG Leasing VII
                         Incorporated

Gary D. Engle            President and Chief Executive Officer and member of the
                         Executive Committee of EFG and a Director of AFG Leasin
                         VII Incorporated

Gary M. Romano           Executive Vice President and Chief Operating Officer of
                         EFG and Clerk of AFG Leasing VII Incorporated


      Geoffrey A. McDonald, age 51, is a co-founder, member of the Executive
Committee and Chairman of EFG. Mr. MacDonald served as co-founder, Director and
Senior Vice President of EFG's predecessor corporation from 1980 to 1988. Mr.
MacDonald is President and a Director of AFG Leasing VII Incorporated and
President of American Finance Group Securities Corp. Prior to co-founding EFG's
predecessor, Mr. MacDonald held various executive and management positions in
the leasing and pharmaceutical industries. Mr. MacDonald holds an MBA from
Boston College and a BA degree from the University of Massachusetts (Amherst).

      Gary D. Engle, age 51, is President, Chief Executive Officer and a member
of the Executive Committee of EFG and a Director of AFG Leasing VII
Incorporated. Mr. Engle joined EFG in 1990 as Executive Vice President and
acquired control of EFG and its subsidiaries in December 1994. Mr. Engle is Vice
President and a Director of certain of EFG's subsidiaries and affiliates. Mr.
Engle is also Chairman, Chief Executive Officer, and a member of the Board of
Directors of Semele Group, Inc. ("Semele"). From 1987 to 1990, Mr. Engle was a
principal and co-founder of Cobb Partners Development, Inc., a real estate and
mortgage banking company. From 1980 to 1987, Mr. Engle was Senior Vice President
and Chief Financial Officer of Arvida Disney Company, a large-scale community
development company owned by Walt Disney Company. Prior to 1980, Mr. Engle
served in various management consulting and institutional brokerage capacities.
Mr. Engle has an MBA from Harvard University and a BS degree from the University
of Massachusetts (Amherst).

      Gary M. Romano, age 40, became Executive Vice President and Chief
Operating Officer of EFG in April 1996 and is Secretary or Clerk of several of
EFG's subsidiaries and affiliates, including Clerk of AFG Leasing VII
Incorporated. Mr. Romano joined EFG in November 1989, became Vice President and
Controller in April 1993 and Chief Financial Officer in April 1995. Mr. Romano
is also Chief Financial Officer of Semele. Prior to joining EFG, Mr. Romano was
Assistant Controller for a privately held real estate development and mortgage
origination company that he joined in 1987. Previously, Mr. Romano was an Audit
Manager at Ernst & Whinney (now Ernst & Young LLP), where he was employed from
1982 to 1986. Mr. Romano is a Certified Public Accountant and holds a B.S.
degree from Boston College.


                                       22
<PAGE>

                      General Equipment Management II, Inc.

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

Stephen R. Dyer               President and Director
Clifford B. Wattley           Vice President, Assistant Secretary and Director
Carmine Fusco                 Vice President, Secretary, Treasurer, Chief
                              Financial and Accounting Officer

      Stephen R. Dyer, age 40, is President and a Director of the Administrative
General Partner. He joined Paine Webber Incorporated in June 1988 as a
Divisional Vice President and is currently a Senior Vice President and Director
of Private Investments. Prior to joining Paine Webber Incorporated, Mr. Dyer had
been employed, since June 1987, as an Assistant Vice President in the Retail
National Products Group of L.F. Rothschild & Co. Incorporated. Prior to joining
L.F. Rothschild, he was employed, beginning in January 1985, as an Associate in
the Real Estate Department of Thomson McKinnon Securities Inc. From July 1981 to
August 1983, Mr. Dyer was on the audit staff of the accounting firm of Arthur
Young & Company. He received his Bachelor of Science degree in Accounting in
1981 from Boston College and a Masters of Business Administration from Indiana
University in December 1984. Mr. Dyer is a Certified Public Accountant.

      Clifford B. Wattley, age 50, is a Vice President, Assistant Secretary and
Director of the Administrative General Partner. Mr. Wattley is a Corporate Vice
President with Paine Webber Incorporated, having joined the firm in 1986. He
also was employed previously by Paine, Webber, Jackson & Curtis from 1979 to
1980. From 1986 to 1992, Mr. Wattley participated in Paine Webber's Principal
Transactions Group. Mr. Wattley has been a member of the Private Investment
Department since 1992. He holds a Bachelor of Science degree in engineering from
Columbia University and a Masters in Business Administration from Harvard
University.

      Carmine Fusco, age 31, is Vice President, Secretary, Treasurer and Chief
Financial and Accounting Officer of the Administrative General Partner, he also
serves as an Assistant Vice President within the Private Investments Department
of PaineWebber Incorporated. Mr. Fusco was previously employed as a Financial
Valuation Consultant in the Business Valuation Group of Deloitte & Touche, LLP
from January 1997 to August 1998. He was employed as a Commodity Fund Analyst in
the Managed Futures Department of Dean Witter Reynolds Incorporated, from
October 1994 to November 1995. Prior to joining Dean Witter, Mr. Fusco was a
Mutual Fund Accountant with the Bank of New York Company, Incorporated. He
received his Bachelor of Science degree in Accounting and Finance in May 1991
from Rider University and a Master of Business Administration from Seton Hall
University in June 1996.


ITEM 11. EXECUTIVE COMPENSATION

      No compensation was paid by the Partnership to the officers and directors
of the General Partners. See Item 13 of this Report, "Certain Relationships and
Related Transactions", which is incorporated herein by reference, for a
description of the compensation and fees paid to the General Partners and their
affiliates by the Partnership during 1999.


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<PAGE>

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 Units of the
                  Partnership. The Partnership has no directors or officers, and
                  neither the General Partners nor the Class B Limited Partner
                  of the Partnership owns any Units.

                  PYB Limited Partnership owns 100% of the Partnership's Class B
                  Units. EFG acquired all of the equity ownership interest in
                  PYB Limited Partnership as of November 1, 1993.

                  The names and addresses of the General Partners and the Class
                  B Limited Partner are as follows:

                        Managing General Partner:

                              Pembroke Financial Limited Partnership
                              88 Broad Street
                              Boston, MA 02110

                        Administrative General Partner:

                              General Equipment Management II, Inc.
                              1200 Harbor Boulevard, 5th Floor
                              Weehawken, NJ 07087

                        Class B Limited Partner:

                              PYB Limited Partnership
                              88 Broad Street
                              Boston, MA 02110

            (b)   No directors or officers of the Managing General Partner, the
                  Administrative General Partner or the Class B Limited Partner
                  owned any Units as of March 1, 2000.

            (c)   The Partnership knows of no arrangements, the operation of the
                  terms 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 Partners and their affiliates have received or will receive
certain types of compensation, fees, or other distributions in connection with
the operations of the Partnership. The fees and compensation were determined in
accordance with the applicable provisions of the Partnership Agreement.

Acquisition of Equipment

      Pursuant to its investment objectives, the Partnership has acquired, on an
all-cash basis, certain leased equipment from EFG, an affiliate of the Managing
General Partner. The Partnership purchased equipment aggregating $4,142,139,
$4,160,388 and $4,210,206 (including acquisition fees) during the 1999, 1998 and
1997, respectively.


                                       24
<PAGE>

Acquisition Fees

      The Managing General Partner, or its affiliates, receives or is entitled
to receive a fee equal to (i) 2.25% of the purchase price of equipment purchased
with net offering proceeds from the sale of Units, and (ii) 3% of the purchase
price of equipment purchased with reinvested Partnership cash flow as
compensation for evaluating, selecting, negotiating and consummating the
acquisition of the equipment. The Managing General Partner, or its affiliates,
earned acquisition fees of $120,645, $121,176 and $122,627 in 1999, 1998 and
1997, respectively.

Management Fees

      The General Partners are entitled to receive a monthly fee in an amount
equal to 2% of gross rentals for Full Payout Leases, as defined in the
Partnership Agreement and 5% of gross rentals for other leases (payable 66.67%
to the Managing General Partner and 33.33% to the Administrative General
Partner) as compensation for services rendered in connection with the management
of the equipment. Management fees of $199,059, $251,216 and $318,172 were earned
by the General Partners during 1999, 1998 and 1997, respectively. Effective July
1, 1998, the Managing General Partner agreed to perform certain administrative
functions on behalf of the Partnership that previously had been performed by the
Administrative General Partner. For these services, the Administrative General
Partner pays the Managing General Partner an amount equivalent to the fees
otherwise due the Administrative General Partner.

Disposition Fees

      The General Partners, or their affiliates, were entitled to receive 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% of the gross
contract price relating to each sale of equipment (payable 50% to the Managing
General Partner or its affiliates and 50% to the Administrative General Partner)
as compensation for negotiating and consummating sales of equipment. At December
31, 1998, the Partnership reversed previously accrued subordinated disposition
fees of $106,962 because the General Partners concluded that it was no longer
probable that these subordinated disposition fees would be paid. The Partnership
has not accrued for subordinated disposition fees during 1999.

Accountable General and Administrative Expenses

      The General Partners are entitled to reimbursement of certain expenses
paid on behalf of the Partnership which are incurred in connection with the
Partnership's operations. There were no such reimbursable expenses during 1999.

Class Action Settlement

      As part of a class action settlement, beginning January 1996, all fees and
distributions paid to the Administrative General Partner and all future fees and
distributions paid to the Administrative General Partner will continue to be
assigned by an affiliate to an escrow account for the benefit of class members.


                                       25
<PAGE>

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

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

      and

      (d)

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

      (b)   None.

      (c)   Exhibits required to be filed.

        Exhibit No.           Description
        -----------           -----------

            4.1               Amended and Restated Agreement of Limited
                              Partnership of P Preferred Yield Fund II, L.P.,
                              dated as of September 10 1992. Filed as Exhibit
                              4.1 to the Registrant's Annua Report on Form 10-K
                              for the year ended December 31, 1992.*

            10.1              Sales Agency Agreement, dated September 15, 1992,
                              among PW Preferred Yield Fund II, L.P., Pembroke
                              Financial Limited Partnership, General Equipment
                              Management II, Inc., AFG Leasing VII Incorporated,
                              American Finance Group and Paine Webber
                              Incorporated. Filed as Exhibit 10.1 to the
                              Registrant's Annual Report on Form 10-K for the
                              year ended December 31, 1992.*

            10.2              Escrow Agreement, dated as of September 17, 1992,
                              among PW Preferred Yield Fund II, L.P., Paine
                              Webber Incorporated and First National Bank of
                              Omaha. Filed as Exhibit 10.2 to the Registrant's
                              Annual Report on Form 10-K for the year ended
                              December 31, 1992.*

            10.3              Reporting Agent Agreement, dated as of September
                              17, 1992, by and among PW Preferred Yield Fund II,
                              L.P., Paine Webber Incorporated and Service Data
                              Corporation. Filed as Exhibit 10.3 to the
                              Registrant's Annual Report on Form 10-K for the
                              year ended December 31, 1992.*

            11                Partnership's policy regarding requests for
                              partner lists.

      *     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 which is incorporated herein by reference.


                                       26
<PAGE>

                                   SIGNATURES

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

Dated: March 30, 2000

                    PW Preferred Yield Fund II, L.P.

                    By: General Equipment Management II, Inc.
                        Administrative General Partner

                        By: /s/ STEPHEN R. DYER
                            Stephen R. Dyer
                            President and Director

                        By: /s/ CARMINE FUSCO
                            Carmine Fusco
                            Vice President, Secretary,
                            Treasurer, Chief Financial and
                            Accounting Officer

                    By: Pembroke Financial Limited Partnership
                        Managing General Partner

                        By: /s/ GEOFFREY A. MACDONALD
                            Geoffrey A. MacDonald
                            President

      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
Registrant and in the capacities indicated on March 30, 2000.

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

/s/ GEOFFREY A. MACDONALD       President and Director of AFG Leasing VII
Geoffrey A. MacDonald           Incorporated, the sole General Partner of
                                Pembroke Financial Limited Partnership

/s/ GARY D. ENGLE               VICE President and Director of AFG Leasing VII
Gary D. Engle                   Incorporated, the sole General Partner of
                                Pembroke Financial Limited Partnership

/s/ STEPHEN R. DYER             President and Director of General
Stephen R. Dyer                 Equipment Management II, Inc.

/s/ CLIFFORD B. WATTLEY         Vice President, Assistant Secretary
Clifford B. Wattley             and Director of General Equipment
                                Management II, Inc.

/s/ CARMINE FUSCO               Vice President, Secretary, Treasurer,
Carmine Fusco                   Chief Financial and Accounting Officer
                                of General Equipment
                                Management II, Inc.


                                       27