<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, 2000

                                       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 THE YEAR ENDED DECEMBER 31, 2000

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>

                                                                            PAGE
                                                                            ----
PART I
<S>      <C>                                                                  <C>
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                                                 7

Item 9   Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure                                                19


PART III

Item 10  Directors and Executive Officers of the Registrant                  20

Item 11  Executive Compensation                                              21

Item 12  Security Ownership of Certain Beneficial Owners and Management      22

Item 13  Certain Relationships and Related Transactions                      22


PART IV

Item 14  Exhibits, Financial Statement Schedules and Reports on Form 8-K     24
</TABLE>



<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. 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.

     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.



                                        1
<PAGE>


     During the reinvestment period (which ended 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 were reinvested in additional leased
equipment. See Item 7, "Management's 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 ended 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, 2000:

<TABLE>
<CAPTION>

          EQUIPMENT TYPE                                ORIGINAL COST
--------------------------------------                -----------------
<S>                                                       <C>
Materials Handling                                        $ 12,410,564
Manufacturing                                                2,525,464
Construction and Mining                                      2,123,963
Retail Store Fixtures                                        1,990,820
Furniture & Fixtures                                           762,200
General Purpose Plant/Warehouse                                658,128
Research & Test                                                289,720
Computers & Periphals                                          106,192
Trailers and Intermodal Containers                              96,452
Photocopying                                                    67,259
Communications                                                   9,498
                                                          ------------
                                                          $ 21,040,260
                                                          ============
</TABLE>

     The above summary includes equipment held for sale or re-lease with a cost
of approximately $95,000 at December 31, 2000.



                                        2
<PAGE>

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 2000 is as follows:

     Chrysler Corporation                                 23%
     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, 2001, the number of Limited Partners was approximately
1,474.

     Total distributions declared to partners for 2000 and 1999 were as follows:

<TABLE>
<CAPTION>
                                                      2000               1999
                                                   ----------         ----------
<S>                                                <C>                <C>
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
                                                   ==========         ==========
</TABLE>


     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 56% and 52%, respectively, of the cash distributions to the Class
A Limited Partners for the years ended December 31, 2000 and 1999 constituted a
return of capital. Additionally, since inception, approximately 69% 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, 2000:

<TABLE>
<CAPTION>
                                                 2000               1999               1998               1997               1996
                                             -----------        -----------        -----------        -----------        -----------
<S>                                          <C>                <C>                <C>                <C>                <C>
Total Revenue                                $ 4,440,885        $ 5,215,238        $ 6,234,782        $ 7,907,694        $ 7,536,793
Net Income                                     1,487,192          1,606,406            719,430          2,037,965            979,886
Net income per
  Class A Limited
  Partnership Unit                                 24.44              26.27              12.62              28.65              10.52
Total Assets                                  10,204,580         12,235,296         14,052,208         17,072,655         18,597,031
Total Partners' Equity                         9,683,692         11,670,206         13,537,506         16,291,782         17,727,523
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 "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.


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, 2000, equipment
purchased pursuant to the reinvestment program, including acquisition fees and
expenses, totaled $28,462,805.

   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, 2000, the Partnership had approximately $865,000 invested in a money market
fund that invests in commercial paper and similar instruments.

   Cash and cash equivalents decreased $522,435 from $1,926,081 at December 31,
1999 to $1,403,646 at December 31, 2000. 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, 2000, 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 56% of the
11% cash distributions to the Class A Limited Partners for the year ended
December 31, 2000 constituted a return of capital. Additionally, since
inception, approximately 69% 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.

RESULTS OF OPERATIONS

     For the year ended December 31, 2000, the Partnership recognized lease
revenue of $4,161,267, compared to $4,767,855 and $5,991,987 for the years ended
December 31, 1999 and 1998, respectively. The decrease in lease revenue from
1998 to 1999 and from 1999 to 2000 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.


                                        5
<PAGE>

     During 2000, the Partnership sold equipment having a net book value of
$167,066 to existing lessees and third parties. These sales resulted in a net
gain, for financial statement purposes, of $201,234 compared to a net gain in
1999 of $346,023 on equipment having a net book value of $941,987 and a net loss
in 1998 of $70,529 on equipment having a net book value of $1,057,649.

     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 expense was $2,635,037, $3,257,913 and $5,120,090 for the
years ended December 31, 2000, 1999 and 1998, 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.

     Management fees were approximately 4.1%, 4.2% and 4.2% of lease revenue
during the years ended December 31, 2000, 1999 and 1998, 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.

     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 or 2000.

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

                                        6
<PAGE>

ITEM 8. FINANCIAL STATEMENTS

                        PW PREFERRED YIELD FUND II, L.P.

LIST OF FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                            <C>
Report of Independent Auditors                                                 8

Balance Sheets - December 31, 2000 and 1999                                    9

Statements of Income
for the Years ended December 31, 2000 and 1999 and 1998                       10

Statements of Changes in Partners' Equity
for the Years ended December 31, 2000 and 1999 and 1998                       11

Statements of Cash Flows
for the Years ended December 31, 2000 and 1999 and 1998                       12

Notes to Financial Statements                                                 13
</TABLE>


                                        7
<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, 2000 and 1999, and the related statements of income,
changes in partners' equity, and cash flows for each of the three years in the
period ended December 31, 2000. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

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





                                                               ERNST & YOUNG LLP




Boston, Massachusetts
March 9, 2001



                                        8
<PAGE>

                        PW PREFERRED YIELD FUND II, L.P.

                                 BALANCE SHEETS
                           DECEMBER 31, 2000 AND 1999

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

Cash and cash equivalents                                $ 1,403,646   $ 1,926,081

Rents and other receivables, net of allowance for
    Doubtful accounts of $33,000 and $47,000 at
    December 31, 2000 and 1999, respectively                 200,515       215,706

Receivable from general partner                              149,843       287,294

Equipment at cost, net of accumulated depreciation
   of $12,589,684 and $12,736,703 at December 31, 2000
    and 1999, respectively                                 8,450,576     9,806,215
                                                         -----------   -----------

      Total Assets                                       $10,204,580   $12,235,296
                                                         ===========   ===========


LIABILITIES AND PARTNERS' EQUITY

Accounts payable and accrued liabilities                 $    54,000   $    54,100
Payable to affiliates                                         96,505       103,043
Deferred rental income                                        51,598        89,162
Distributions payable to partners                            318,785       318,785
                                                         -----------   -----------

      Total Liabilities                                      520,888       565,090
                                                         -----------   -----------


Partners' Equity:
   General Partners                                          468,812       568,137
   Limited Partners:
     Class A (54,027 Units outstanding)                    8,062,265     9,713,555
     Class B                                               1,152,615     1,388,514
                                                         -----------   -----------

      Total Partners' Equity                               9,683,692    11,670,206
                                                         -----------   -----------

      Total and Liabilities and Partners' Equity         $10,204,580   $12,235,296
                                                         ===========   ===========
</TABLE>

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

                                        9
<PAGE>



                        PW PREFERRED YIELD FUND II, L.P.

                              STATEMENTS OF INCOME

              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


<TABLE>
<CAPTION>
                                                                               2000                  1999                   1998
                                                                            ----------            ----------            -----------
<S>                                                                         <C>                   <C>                   <C>
Revenue:

    Lease revenue                                                           $4,161,267            $4,767,855            $ 5,991,987
    Gain (loss) on sale of equipment                                           201,234               346,023                (70,529)
    Interest income                                                             78,384               101,360                158,354
    Other Income                                                                  --                    --                  154,970
                                                                            ----------            ----------            -----------

      Total Revenue                                                          4,440,885             5,215,238              6,234,782
                                                                            ----------            ----------            -----------

Expenses:

    Depreciation                                                             2,635,037             3,257,913              5,120,090
    Management fees                                                            168,763               199,059                251,216
    General and administrative                                                 149,893               151,860                144,046
                                                                            ----------            ----------            -----------

      Total Expenses                                                         2,953,693             3,608,832              5,515,352
                                                                            ----------            ----------            -----------


Net Income                                                                  $1,487,192            $1,606,406            $   719,430
                                                                            ==========            ==========            ===========

Net Income Allocated:
   To the General Partners                                                  $   74,360            $   80,320            $    35,972
   To the Class A Limited Partners                                           1,320,195             1,419,292                681,993
   To the Class B Limited Partner                                               92,637               106,794                  1,465
                                                                            ----------            ----------            -----------

                                                                            $1,487,192            $1,606,406            $   719,430
                                                                            ==========            ==========            ===========

Net Income per Weighted Average
   Number of Units of Class A Limited
   Partner Interests Outstanding                                            $    24.44            $    26.27            $     12.62
                                                                            ==========            ==========            ===========

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.
                                       10
<PAGE>


                        PW PREFERRED YIELD FUND II, L.P.

                    STATEMENTS OF CHANGES IN PARTNERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


<TABLE>
<CAPTION>

                                                                                CLASS A              CLASS B
                                                             GENERAL            LIMITED              LIMITED
                                                             PARTNERS           PARTNERS             PARTNER              TOTAL
                                                            ---------         ------------         -----------         ------------
<S>                                                         <C>               <C>                  <C>                 <C>
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

Net income                                                     74,360            1,320,195              92,637            1,487,192

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

Balance, December 31, 2000                                  $ 468,812         $  8,062,265         $ 1,152,615         $  9,683,692
                                                            =========         ============         ===========         ============
</TABLE>


              The accompanying notes are an integral part of these
                              financial statements.
                                       11
<PAGE>

                        PW PREFERRED YIELD FUND II, L.P.

                            STATEMENTS OF CASH FLOWS

              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                                        2000              1999              1998
                                                                                    -----------       -----------       -----------
<S>                                                                                 <C>               <C>               <C>
Cash Flows From Operating Activities:
Net income                                                                          $ 1,487,192       $ 1,606,406       $   719,430

Adjustments to reconcile net income to net cash provided by operating
   activities:
     Depreciation                                                                     2,635,037         3,257,913         5,120,090
     Recovery of bad debts                                                              (14,000)             --             (53,000)
     (Gain) loss on sale of equipment                                                  (201,234)         (346,023)           70,529

Change in assets and liabilities:
     Rents and  other receivables                                                        29,191           (29,117)          452,930
     Receivable from general partner                                                    137,451            84,696              --
     Accounts payable and accrued liabilities                                              (100)           21,600           (87,877)
     Payable to affiliates                                                               (6,538)           (6,519)         (159,920)
     Deferred rental income                                                             (37,564)           35,307            (9,636)
     Other assets                                                                          --                --              17,572
                                                                                    -----------       -----------       -----------

           Net cash provided by operating activities                                  4,029,435         4,624,263         6,070,118
                                                                                    -----------       -----------       -----------

Cash Flows From Investing Activities:
     Purchase of equipment                                                           (1,446,464)       (4,142,139)       (4,160,388)
     Proceeds from equipment sales                                                      368,300         1,288,010           987,120
                                                                                    -----------       -----------       -----------

           Net cash used in investing activities                                     (1,078,164)       (2,854,129)       (3,173,268)
                                                                                    -----------       -----------       -----------

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

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

Net Decrease in Cash and Cash Equivalents                                              (522,435)       (1,703,572)         (585,594)

Cash and Cash Equivalents at Beginning of Year                                        1,926,081         3,629,653         4,215,247
                                                                                    -----------       -----------       -----------

Cash and Cash Equivalents at End of Year                                            $ 1,403,646       $ 1,926,081       $ 3,629,653
                                                                                    ===========       ===========       ===========
</TABLE>


              The accompanying notes are an integral part of these
                              financial statements.
                                       12
<PAGE>

                        PW PREFERRED YIELD FUND II, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2000


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 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, 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.


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, 2000 and 1999, the Partnership had
approximately $865,000 and $698,000, respectively, invested in commercial paper
and a money market 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
$5,942,918 are due as follows:

                                       13
<PAGE>

<TABLE>
<CAPTION>

<S>                                                         <C>
        For the year ending December 31, 2001              $  2,877,199
                                         2002                 1,581,226
                                         2003                   947,621
                                         2004                   500,141
                                         2005                    25,878
                                   Thereafter                    10,853
                                                           ------------

                                        Total              $  5,942,918
                                                           ============
</TABLE>


     Revenue from major individual lessees which accounted for 10% or more of
lease revenue during the years ended December 31, 2000, 1999 and 1998 is as
follows:

<TABLE>
<CAPTION>
                                         PERCENTAGE OF LEASE REVENUE
                              --------------------------------------------------
                                  2000               1999               1998
                              ------------       ------------       ------------
<S>                               <C>                <C>                <C>
Chrysler Corporation              23%                18%                17%
General Motors Corporation        11%                11%                --
</TABLE>

USE OF ESTIMATES

     The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States 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

     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 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.


                                       14
<PAGE>

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 1999 balances have been reclassified to conform to the 2000
presentation.

RECEIVABLE FROM GENERAL PARTNER

    Certain rents and proceeds from the sale of equipment are paid directly to
EFG. EFG temporarily deposits collected funds in a separate escrow account and
remits such amounts to the Partnership on a monthly basis.


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 ENDED 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>


                                       15
<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


                                       16
<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, 2000 and 1999:

<TABLE>
<CAPTION>
                             REMAINING LEASE              EQUIPMENT AT COST
                            TERM (MONTHS) AT        ---------------------------
     EQUIPMENT TYPE         DECEMBER 31, 2000            2000           1999
     --------------         -----------------       ------------    -----------
<S>                                <C>               <C>            <C>
Industrial equipment               0-70              $20,857,311    $20,894,095
Business equipment                 0-32                  182,949      1,648,823
                                                    ------------    -----------

Total equipment cost                                  21,040,260     22,542,918

Less: Accumulated depreciation                       (12,589,684)   (12,736,703)
                                                    ------------    -----------

Equipment, net                                       $ 8,450,576    $ 9,806,215
                                                    ============    ===========
</TABLE>

     The above summary includes equipment held for sale or re-lease with a cost
and net book value of approximately $95,000 and $4,000, respectively, at
December 31, 2000. At December 31, 1999, the Partnership had only fully
depreciated equipment with a cost of approximately $593,000 held for sale or
re-lease. The General Partners are actively seeking the sale or re-lease of all
such equipment not on lease.

     At December 31, 2000, industrial equipment includes materials handling
(approximately 59%), construction and mining (approximately 10%), retail store
fixtures (approximately 9%), furniture & fixtures (approximately 4%), general
purpose plant/warehouse (approximately 3%), research & test (approximately 1%),
trailers & intermodal containers (less than 1%) and manufacturing (approximately
12%), and business equipment includes computers and periphals (approximately
1%), communications (less than 1%), and photocopying (less than 1%).

     At December 31, 1999, 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%).

     All percentages are based upon total equipment cost. 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.


                                       17
<PAGE>

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 $1,446,464,
$4,142,139 and $4,160,388 (including acquisition fees) during the 2000, 1999 and
1998, respectively.

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 $42,130, $120,645 and $121,176 in 2000, 1999 and
1998, 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 Operating 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 $168,763, $199,059 and $251,216 were earned
by the General Partners during 2000, 1999 and 1998, 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 or 2000.

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.

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.



                                       18
<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>

                                                                            2000                    1999                    1998
                                                                        -----------             -----------             -----------
<S>                                                                     <C>                     <C>                     <C>
Net income per financial statements                                     $ 1,487,192             $ 1,606,406             $   719,430
Increase (decrease) resulting from:
   Provisions for bad debts                                                 (14,000)                   --                  (153,000)
   Depreciation                                                            (286,536)               (504,786)              1,085,016
   Gain on sale of equipment and other                                     (452,913)               (153,954)                 12,363
   Deferred rental income                                                   (37,564)                 35,307                  (9,636)
   Other                                                                       --                    (4,675)                (20,887)
                                                                        -----------             -----------             -----------
Taxable income per federal income
   Tax return                                                           $   696,179             $   978,298             $ 1,633,286
                                                                        ===========             ===========             ===========
</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>
                                                                                                   2000                    1999
                                                                                               ------------            ------------
<S>                                                                                            <C>                     <C>
Net assets per financial statements                                                            $  9,683,692            $ 11,670,206
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                                                                           51,598                  89,162
    Accumulated depreciation                                                                     (1,660,517)               (921,068)
    Writedowns and allowance for doubtful accounts                                                   33,000                  47,000
                                                                                               ------------            ------------

Tax bases of net assets                                                                        $ 11,687,152            $ 14,464,679
                                                                                               ============            ============
</TABLE>

7.   QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                                             MAR. 31              JUN. 30             SEPT. 30              DEC. 31
                                                           ----------           ----------           ----------           ----------
<S>                                                        <C>                  <C>                  <C>                  <C>
2000:
Total Revenue                                              $1,103,486           $1,067,625           $1,222,702           $1,047,072
Net Income                                                    300,650              362,181              491,362              332,999
Net Income per Class A Limited
  Partner                                                        5.01                 5.96                 7.95                 5.52

1999:
Total Revenue                                              $1,320,435           $  945,769           $1,478,210           $1,470,824
Net Income                                                    376,703              142,355              496,949              590,399
Net Income per Class A Limited
  Partner                                                        6.18                 2.58                 8.03                 9.47
</TABLE>


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

None.


                                       19
<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)

<TABLE>
<CAPTION>
         NAME                               POSITIONS HELD
         ----                               --------------
<S>                           <C>
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 Leasing VII Incorporated

Michael J. Butterfield        Executive Vice President and Chief Operating
                              Officer of EFG and Treasurer and Clerk of AFG
                              Leasing VII Incorporated
</TABLE>

     Geoffrey A. McDonald, age 52, 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 52, 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).

     Mr. Butterfield, age 41, is Executive Vice President and Chief Operating
Officer of EFG and is Treasurer and Clerk of several of EFG's subsidiaries and
affiliates, including AFG Leasing VII Incorporated. Mr. Butterfield joined EFG
in June 1992, became Vice President, Finance and Treasurer of EFG and certain of
it's affiliates in April 1996 and in June 2000, was promoted to Executive Vice
President and Chief Operating Officer of EFG. Prior to joining EFG, Mr.
Butterfield was an Audit Manager with Ernst & Young LLP, which he joined in
1987. Mr. Butterfield was employed in public accounting and industry positions
in New Zealand and London (UK) prior to coming to the United States in 1987. Mr.
Butterfield attained his Associate Chartered Accountant (A.C.A.) professional
qualification in New Zealand and has completed his CPA requirements in the
United States. He holds a Bachelor of Commerce degree from the University of
Otago, Dunedin, New Zealand.


                                       20
<PAGE>

                      GENERAL EQUIPMENT MANAGEMENT II, INC.

<TABLE>
<CAPTION>
         NAME                               POSITIONS HELD
         ----                               --------------
<S>                           <C>
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
</TABLE>

     Stephen R. Dyer, age 41, 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 51, 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 32, 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 2000.


                                       21
<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, 2001.

     (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 $1,446,464,
$4,142,139 and $4,160,388 (including acquisition fees) during the 2000, 1999 and
1998, respectively.


                                       22
<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 $42,130, $120,645 and $121,176 in 2000, 1999 and
1998, 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 Operating 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 $168,763, $199,059 and $251,216 were earned
by the General Partners during 2000, 1999 and 1998, 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 or 2000.

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.

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.



                                       23
<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").

     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.

     (b)  None.

     (c)  Exhibits required to be filed.

<TABLE>
<CAPTION>
       EXHIBIT NO.       DESCRIPTION
       -----------       -----------
          <S>            <C>
          4.1            Amended and Restated Agreement of Limited Partnership
                         of PW Preferred Yield Fund II, L.P., dated as of
                         September 10, 1992. Filed as Exhibit 4.1 to the
                         Registrant's Annual 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.
</TABLE>

*    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.


                                       24
<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: April 2, 2001

                           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 April 2, 2001.

<TABLE>
<CAPTION>
SIGNATURE                       TITLE
---------                       -----
<S>                             <C>
/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.
</TABLE>


                                       25