<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from___________________to__________________
Commission file number 0-19166
PaineWebber Preferred Yield Fund, L.P.
(Exact name of registrant as specified in its charter)
Delaware 84-1130506
(State of organization) (IRS Employer)
(Identification No.)
7175 West Jefferson Avenue
Suite 4000
Lakewood, Colorado 80235
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (303) 980-1000
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_____ .
<PAGE> 2
PaineWebber Preferred Yield Fund, L.P.
Quarterly Report on Form 10-Q for the
Quarter Ended March 31, 1997
Table of Contents
Page
----
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited) 2
Balance Sheets - March 31, 1997 and
December 31, 1996 2
Statements of Income for the three months
ended March 31, 1997 and 1996 3
Statements of Partners' Equity for the three
months ended March 31, 1997 and 1996 4
Statements of Cash Flows for the three months
ended March 31, 1997 and 1996 5
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Part II. OTHER INFORMATION
Item 1.Legal Proceedings 13
Item 6.Exhibits and Reports on Form 8-K 14
<PAGE> 3
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
PAINEWEBBER PREFERRED YIELD FUND, L.P.
BALANCE SHEETS --MARCH 31, 1997 AND DECEMBER 31, 1996
(unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 4,513,835 $ 2,879,451
Rent and other receivables, net 226,350 685,850
Equipment held for sale or lease, net of
accumulated depreciation of
$2,131,840 and $780,011 at 1997 and
1996 and write-downs of
$112,754 and $83,922 at 1997 and 1996 537,950 206,624
Net investment in direct financing leases 2,607,722 2,970,314
Equipment on operating leases, net of
accumulated depreciation of $29,702,576
in 1997 and $30,258,762 in 1996 and
write downs of $399,816 in
1997 and $459,134 in 1996 31,794,027 34,346,204
Other assets, net 9,550 9,688
----------- -----------
Total assets $39,689,434 $41,098,131
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Prepaid rent (Note 4) $ 7,972,233 $ 8,531,925
Accounts payable and accrued liabilities 279,241 370,940
Payable to affiliates (Note 2) 830,697 773,335
Interest payable 10,877 13,081
Deferred rental income and deposits 730,153 730,591
Distributions payable to partners 3,135,994 1,688,938
Discounted lease rentals 2,458,359 2,802,710
----------- -----------
Total liabilities 15,417,554 14,911,520
----------- -----------
Commitments and contingencies (Notes 2,3 and 4)
PARTNERS' EQUITY:
General Partners 1,120,383 1,216,120
Limited Partners:
Class A (142,128 Units outstanding) 20,237,033 21,828,653
Class B 2,914,464 3,141,838
----------- -----------
Total Partners' equity 24,271,880 26,186,611
----------- -----------
Total liabilities and partners' equity $39,689,434 $41,098,131
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 4
PAINEWEBBER PREFERRED YIELD FUND, L.P.
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
REVENUE:
<S> <C> <C>
Rentals from operating leases $3,194,329 $3,695,584
Direct financing lease income 105,361 155,110
Gain on sale of equipment 53,716 333,780
Interest 39,880 103,475
---------- ----------
3,393,286 4,287,949
---------- ----------
EXPENSES:
Depreciation and amortization 2,039,036 2,397,452
Write downs -- 75,000
Management fees (Note 2) 134,707 151,547
Subordinated disposition fees (Note 2) -- 16,905
Interest 215,339 322,382
General and administrative (Note 2) 50,600 61,125
---------- ----------
2,439,682 3,024,411
---------- ----------
NET INCOME $ 953,604 $1,263,538
========== ==========
NET INCOME ALLOCATED:
To the General Partners $ 47,680 $ 63,177
To the Class A Limited Partners 895,620 1,153,253
To the Class B Limited Partner 10,304 47,108
---------- ----------
$ 953,604 $1,263,538
========== ==========
NET INCOME PER WEIGHTED AVERAGE
NUMBER OF UNITS OF CLASS A LIMITED
PARTNER INTEREST OUTSTANDING $ 6.30 $ 8.11
========== ==========
WEIGHTED AVERAGE NUMBER OF
UNITS OF CLASS A LIMITED PARTNER
INTEREST OUTSTANDING 142,128 142,128
========== ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
3
<PAGE> 5
PAINEWEBBER PREFERRED YIELD FUND, L.P.
STATEMENTS OF PARTNERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(unaudited)
<TABLE>
<CAPTION>
Class A Class B
General Limited Limited
Partners Partners Partner Total
-------- -------- ------- -----
<S> <C> <C> <C> <C>
Balance, January 1, 1997 $1,216,120 $21,828,653 $3,141,838 $26,186,611
Net income 47,680 895,620 10,304 953,604
Distributions declared (143,417) (2,487,240) (237,678) (2,868,335)
---------- ----------- ---------- -----------
Balance, March 31, 1997 $1,120,383 $20,237,033 $2,914,464 $24,271,880
========== =========== ========== ===========
Balance, January 1, 1996 $1,612,447 $28,417,629 $4,083,120 $34,113,196
Net income 63,177 1,153,253 47,108 1,263,538
Distributions declared (143,417) (2,487,240) (237,678) (2,868,335)
---------- ----------- ---------- -----------
Balance, March 31, 1996 $1,532,207 $27,083,642 $3,892,550 $32,508,399
========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
4
<PAGE> 6
PAINEWEBBER PREFERRED YIELD FUND, L.P.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 953,604 $ 1,263,538
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,039,036 2,397,452
Write-downs -- 75,000
Gains on sale of equipment, net (53,716) (333,780)
Change in assets and liabilities:
Rent and other receivables 121,873 260,625
Accounts payable and accrued liabilities (91,699) 133,856
Payable to affiliates 57,362 15,827
Interest payable (2,204) (3,528)
Deferred rental income and deposits (438) (78,960)
Prepaid rent (511,439) (513,183)
Other assets 138 1,486
----------- -----------
Net cash provided by operating activities 2,512,517 3,218,333
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Recovery of investment in direct financing leases 369,184 280,932
Proceeds from sale of equipment including application
of prepaid rent 522,242 592,104
Purchase of equipment on operating leases (Note 2) (3,929) (3,721,880)
Investment in direct financing leases (Note 2) -- (90,912)
Accounts payable arising from equipment purchase -- 72,752
Payable to affiliates arising from equipment purchase -- 2,183
----------- -----------
Net cash provided by (used in) investing activities 887,497 (2,864,821)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of discounted lease rentals (344,351) (594,441)
Cash distributions paid to partners (1,421,279) (2,839,652)
----------- -----------
Net cash used in financing activities (1,765,630) (3,434,093)
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 1,634,384 (3,080,581)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 2,879,451 9,235,759
----------- -----------
</TABLE>
The accompanying notes are an integral
part of these financial statements.
5
<PAGE> 7
PAINEWEBBER PREFERRED YIELD FUND, L.P.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $4,513,835 $6,155,178
========== ==========
Supplemental schedule of cash flow information:
Interest paid $ 217,543 $ 325,910
========== ==========
NON CASH TRANSACTIONS
Equipment subject to operating leases
converted to direct financing leases at renewal $ 6,592 $ 157,414
========== ==========
Distributions declared but not paid to partners $3,135,994 $1,239,806
========== ==========
Prepaid rent applied in equipment sale $ 48,253 $ - .
========== ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
6
<PAGE> 8
PAINEWEBBER PREFERRED YIELD FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(unaudited)
1. GENERAL
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and disclosures required
by generally accepted accounting principles for annual financial statements. In
the opinion of the General Partners, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have been
included. The balance sheet at December 31, 1996, has been derived from the
audited financial statements included in the Partnership's Annual Report on Form
10-K. For further information, refer to the financial statements of PaineWebber
Preferred Yield Fund, L.P. (the "Partnership"), and the related notes, included
in the Partnership's Annual Report on Form 10-K for the year ended December 31,
1996, previously filed with the Securities and Exchange Commission.
Certain reclassifications were made to the 1996 financial statements to
conform to the classifications used in 1997.
2. TRANSACTIONS WITH AFFILIATES
Management Fees The General Partners receive a quarterly fee in an
amount equal to 2.0% of gross rentals for Full Payout Leases, as defined in the
Partnership Agreement, and 5.0% of gross rentals for other leases (payable 55%
to the Managing General Partner and 45% to the Administrative General Partner)
as compensation for services rendered in connection with the management of the
equipment. Management fees of $134,707 were earned by the General Partners with
respect to the rental revenues earned by the Partnership during the three months
ended March 31, 1997.
Disposition Fees The Managing General Partner was 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 as compensation for
negotiating and consummating sales of equipment. At December 31, 1996, the
Partnership reversed previously accrued subordinated disposition fees totaling
$422,828 because the Managing General Partner concluded that it is no longer
probable that these subordinated disposition fees will ever be paid. Of such
amount $16,905 was incurred during the quarter ended March 31, 1996. However,
the Partnership will not accrue any future amounts, unless and until the payment
of subordinated disposition fees by the Partnership becomes probable.
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.
Such reimbursable expenses, all of which were paid to the Managing General
Partner, amounted to $6,250 during the three months ended March 31, 1997.
7
<PAGE> 9
3. LITIGATION
In November 1994, a series of purported class actions (the "New York
Limited Partnership Actions") were filed in the United States District Court for
the Southern District of New York concerning PaineWebber Incorporated sale and
sponsorship of various limited partnership investments, including those offered
by the Partnership. The lawsuits were brought against PaineWebber Incorporated
and Paine Webber Group, Inc. (together, "PaineWebber"), among others, by
allegedly dissatisfied partnership investors. In March 1995, after the actions
were consolidated under the title in re: PaineWebber Limited Partnership
Litigation, the plaintiffs amended their complaint to assert claims against a
variety of other defendants, including the Administrative General Partner of the
Partnership.
The amended complaint in the New York Limited Partnership Actions
alleged that, in connection with the sale of interest in the Partnerships,
PaineWebber and the Administrative General Partner (1) failed to provide
adequate disclosure of the risks involved with the Partnerships; (2) made false
and misleading representations about the safety of the investments and the
Partnership's anticipated performance; and (3) marketed the Partnership to
investors for whom such investments were not suitable. The plaintiffs also that
following the sale of the Partnership investments PaineWebber and the
Administrative General Partner misrepresented financial information about the
partnership's value and performance. The amended complaint alleged that
PaineWebber and the Administrative General Partner violated the Racketeer
Influenced and Corrupt Organization Act ("RICO") and the federal securities
laws. The plaintiffs sought unspecified damages, including reimbursement for all
sums invested by them in the partnerships, as well as disgorgement of all fees
and other income derived by PaineWebber from the limited partnerships. In
addition, the plaintiffs also sought treble damages under RICO.
On May 30, 1995, the U.S. District Court certified class action
treatment of the plaintiffs' claims in the class action entitled, in re:
PaineWebber Limited Partnerships Litigation.
In January 1996, PaineWebber signed a memorandum of understanding with
the plaintiffs in the class action outlining the terms under which the parties
agreed to settle the case. A definitive settlement agreement was signed in July
1996 and in March 1997 the District Court approved the settlement as fair and
reasonable. Under the terms of the settlement, PaineWebber agreed to pay $125
million and additional consideration to class members. The investors who had
objected to the settlement have appealed the District Court's approval to the
United States Court of Appeals for the Second Circuit.
In February 1996, approximately 230 plaintiffs filed an action entitled
Abbate v. PaineWebber Inc. in Sacramento, California Superior Court against
PaineWebber Incorporated and various affiliated entities concerning the
plaintiff's purchases of various limited partnership interests. The complaint
alleges, among other things, that PaineWebber and its related entities committed
fraud and misrepresentation and breached fiduciary duties allegedly owed to the
plaintiffs by selling or promoting limited partnership investments that were
unsuitable for the plaintiffs and by overstating the benefits, understanding the
risks and failing to state material facts concerning the investments. The
complaint seeks compensatory
8
<PAGE> 10
damages of $15 million plus punitive damages. In September 1996, the California
Superior Court dismissed many of the plaintiff's claims as barred by the
applicable statutes of limitation. In March 1997, a settlement was reached in
various cases, including the Abbate litigation.
4. PREPAYMENT OF LEASES
On December 11, 1995, the Partnership entered into a lease (Master
Lease) with an unaffiliated third party (Master Lessee) for a term of
approximately 110 months. Under the terms of the Master Lease, the Partnership
assigned to the Master Lessee certain economic rights to certain user leases
(with remaining lease terms ranging from 10 to 55 months) originally acquired by
the Partnership for purchase prices aggregating $13,879,929 (including related
acquisition fees) (Master Lease Equipment) and which represented future minimum
lease rentals under non-cancelable leases totaling $7,563,186. The Master Lessee
prepaid ("Prepayment of Leases"), on a discounted basis at a rate of 8.25%, the
rent due to the Partnership under the Master Lease in the amount of $11,257,741
of which $7,972,233 and $8,531,925 remained outstanding at March 31, 1997 and
December 31, 1996, respectively. The Prepayment of Leases is carried as prepaid
rent on the balance sheets at such dates and is accounted for as a financing.
The Master Lease term exceeds the related original user lease terms.
Additionally, at the inception of the Master Lease the amount of the Prepayment
of Leases approximated the aggregate of the remaining rental payments due under
the user leases and the residual (salvage) value estimates for the equipment
subject to the user leases. The Partnership does not have any economic
obligations relating to the equipment subject to the Master Lease until such
equipment is returned upon the expiration of the Master Lease. Upon expiration
of the Master Lease, the economic benefits of all equipment (Master Lease
equipment) still being leased by third parties as well as a portion of the
residual value of such equipment based upon a formula will revert to the
Partnership.
9
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
LIQUIDITY AND CAPITAL RESOURCES
The Partnership completed its reinvestment phase in 1996 and is
currently distributing all cash generated from operations and sales, less
required reserves. As equipment leases expire, the leases will either be renewed
or the equipment remarketed or sold. Thus, it is anticipated that cash flow and
distributions to partners will decrease over time.
Rent and other receivables, net of the allowance for doubtful accounts,
decreased $459,500, from $685,850 at December 31, 1996 to $226,350 at March 31,
1997. The primary reason for the decrease was the collection during the quarter
ended March 31, 1997 of $337,627 representing accounts receivable at December
31, 1996 relating to equipment sales.
Deferred rental income and deposits decreased slightly from $730,591 at
December 31, 1996 to $730,153 at March 31, 1997.
During the 1997 Quarter, the Partnership declared distributions of cash
flow received from operations and cash from sales in the aggregate amount of $
2,868,335, which were paid in April 1997. The distributions declared for the
1996 Quarter were also at an annualized distribution rate of 14% of contributed
capital to the Class A Limited Partners and an annualized distribution of 11% of
contributed capital to the Class B Limited Partner. A substantial portion of
each distribution constitutes a return of capital. Distributions will be
determined based upon cash flow and obligations.
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 distribution by a partnership, which exceeds its net income for the fiscal
period, may be deemed a return of capital. Based on the amount of net income
reported by the Partnership for accounting purposes, approximately 64% of the
14% annualized cash distributions to the Class A Limited Partners for the three
months ended March 31, 1997 constituted a return of capital. Also, based on the
amount of net income reported by the Partnership for accounting purposes,
approximately 68% of the cash distributions paid to the Class A Limited Partners
from inception of the Partnership through March 31, 1997 constituted a return of
capital. However, the total actual return on capital over the 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 the equipment
after initial lease terms expire) have been realized.
LITIGATION
See Footnote 3, "Litigation", for a discussion of certain litigation to
which the Partnership is a party.
RESULTS OF OPERATIONS
10
<PAGE> 12
Substantially all of the Partnership's revenue and cashflow during the
1997 Quarter was generated from the leasing of the Partnership's equipment to
unaffiliated third parties under triple net leases. The balance of the
Partnership's cashflow consisted of proceeds from the sale of equipment and
interest income from temporary investments.
Under the terms of the triple net leases, substantially all of the
expenses related to the ownership and operation of the equipment are paid for by
the lessees. For equipment subject to operating leases, the Partnership records
depreciation expense pertaining to the equipment and related management fees.
The Partnership also records general and administrative expenses consisting
primarily of warehouse costs, investor reporting expenses and transfer agent and
audit fees as well as interest expense incurred in connection with discounted
transactions.
The Partnership performs ongoing assessments of the likelihood of
lessee defaults on existing leases and the effect that any such defaults may
have on the collectability of the Partnership's recorded accounts receivable,
and the recoverability of recorded equipment residual values based on
independent and internal evaluations of the estimated future value of equipment.
Write downs are recorded when it is determined that it is probable that the
value of a recorded asset has declined on an other than temporary basis.
11
<PAGE> 13
1997 Compared to 1996
The Partnership's net income was $953,604 in the 1997 Quarter as
compared to net income of $1,263,538 for the quarter ended March 31, 1996 ("1996
Quarter"). Net income was lower in 1997 as compared to 1996 principally because
of the reductions in rentals from operating leases, direct finance lease income,
gains on sale of equipment and interest expense partially offset by a decrease
in depreciation and amortization, management fees, and interest expenses.
Rentals from operating leases declined by approximately 14% or $501,255
in the 1997 Quarter as compared to the 1996 Quarter, due to the continued sale
of equipment upon the scheduled expiration of leases subsequent to the 1996
Quarter partially offset by the rentals from leases remarketed (re-leased)
subsequent to the 1996 Quarter.
Interest income decreased by $63,595 or 61% in the 1997 Quarter as
compared to the 1996 Quarter due to the reduction in amounts available
for short-term interest bearing investments. During the 1996 Quarter, a portion
of the proceeds from the Prepayment of Leases (See Footnote 4, "Prepayment of
Leases") were earning interest prior to the utilization of such
proceeds for the purchase of additional equipment during the 1996 Quarter.
As discussed above, the Partnership performs ongoing assessments of
recorded equipment residual values based on actual sales of similar equipment
and other evaluations of estimated future equipment values and provides for
write downs when the value of the equipment has been impaired on an other than
temporary basis. Based upon such assessments, the Partnership recorded write
downs totaling $75,000 in the 1996 Quarter. No such write downs were incurred
during the 1997 Quarter.
Depreciation and amortization expense decreased by approximately 15% or
$358,416 in the 1997 Quarter as compared to the 1996 Quarter, principally due to
continued sale of equipment upon the scheduled expiration of leases which was
consistent with the reduction in rentals from operating leases.
Management fees incurred during the 1997 Quarter decreased by 11% or
$16,840 in comparison to the 1996 Quarter which was consistent with the decline
in rentals (from both operating and direct finance leases) which serve as the
base upon which such fees are calculated. Subordinated disposition fees were
$16,905 in the 1996 Quarter. No such amount was incurred in the 1997 Quarter.
General and administrative expenses incurred during the 1997 Quarter
decreased by approximately 17% or $10,525 in comparison to the 1996 Quarter
primarily due to a decrease in insurance, accounting fees and partnership level
taxes.
Interest expense incurred during the 1997 Quarter decreased by 33% or
$107,043 as compared to the 1996 Quarter. Interest expense is composed of two
components; (i) interest expense incurred in connection with the discounting of
certain leases with unaffiliated lenders and (ii) interest incurred in
connection with the application of the prepaid rent received pursuant to the
Master Lease transaction. For accounting purposes, the prepaid rent is treated
as a financing. Income is recognized ratably over the terms of the leases and
the related interest is charged to operations.
12
<PAGE> 14
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
In November 1994, a series of purported class actions (the "New York
Limited Partnership Actions") were filed in the United States District Court for
the Southern District of New York concerning PaineWebber Incorporated sale and
sponsorship of various limited partnership investments, including those offered
by the Partnership. The lawsuits were brought against PaineWebber Incorporated
and Paine Webber Group, Inc. (together, "PaineWebber"), among others, by
allegedly dissatisfied partnership investors. In March 1995, after the actions
were consolidated under the title in re: PaineWebber Limited Partnership
Litigation, the plaintiffs amended their complaint to assert claims against a
variety of other defendants, including the Administrative General Partner of the
Partnership.
The amended complaint in the New York Limited Partnership Actions
alleged that, in connection with the sale of interest in the Partnerships,
PaineWebber and the Administrative General Partner (1) failed to provide
adequate disclosure of the risks involved with the Partnerships; (2) made false
and misleading representations about the safety of the investments and the
Partnership's anticipated performance; and (3) marketed the Partnership to
investors for whom such investments were not suitable. The plaintiffs also that
following the sale of the Partnership investments PaineWebber and the
Administrative General Partner misrepresented financial information about the
partnership's value and performance. The amended complaint alleged that
PaineWebber and the Administrative General Partner violated the Racketeer
Influenced and Corrupt Organization Act ("RICO") and the federal securities
laws. The plaintiffs sought unspecified damages, including reimbursement for all
sums invested by them in the partnerships, as well as disgorgement of all fees
and other income derived by PaineWebber from the limited partnerships. In
addition, the plaintiffs also sought treble damages under RICO.
On May 30, 1995, the U.S. District Court certified class action
treatment of the plaintiffs' claims in the class action entitled, in re:
PaineWebber Limited Partnerships Litigation.
In January 1996, PaineWebber signed a memorandum of understanding with
the plaintiffs in the class action outlining the terms under which the parties
agreed to settle the case. A definitive settlement agreement was signed in July
1996 and in March 1997 the District Court approved the settlement as fair and
reasonable. Under the terms of the settlement, PaineWebber agreed to pay $125
million and additional consideration to class members. The investors who had
objected to the settlement have appealed the District Court's approval to the
United States Court of Appeals for the Second Circuit.
In February 1996, approximately 230 plaintiffs filed an action entitled
Abbate v. PaineWebber Inc. in Sacramento, California Superior Court against
PaineWebber Incorporated and various affiliated entities concerning the
plaintiff's purchases of various limited partnership interests. The complaint
alleges, among other things, that PaineWebber and its related entities committed
fraud and misrepresentation and breached fiduciary duties allegedly owed to the
plaintiffs by selling or promoting limited partnership investments that were
unsuitable for the plaintiffs and by overstating the benefits, understanding the
risks and failing to state material facts concerning the investments. The
complaint seeks compensatory damages of $15 million plus punitive damages. In
September 1996, the California Superior Court dismissed many of the plaintiff's
claims as barred by the applicable statutes of limitation. In March 1997, a
settlement was reached in various cases, including the Abbate litigation.
Item 6. Exhibits and Reports on Form 8-K
(a) None.
(b) The Partnership did not file any reports on Form 8-K during
the first quarter of the fiscal year ending December 31, 1997.
13
<PAGE> 15
SIGNATURE
Pursuant to the requirements 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.
PaineWebber Preferred Yield Fund, L.P. (Registrant)
By: General Equipment Management, Inc.
A General Partner
Date: May 14, 1997 By: /s/Joseph P. Ciavarella
-----------------------
Joseph P. Ciavarella
Vice President, Treasurer
and Chief Financial
and Accounting Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) PAINE
WEBBER PREFERRED YIELD LP FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,513,835
<SECURITIES> 0
<RECEIVABLES> 226,350
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 64,678,963
<DEPRECIATION> 32,346,986<F2>
<TOTAL-ASSETS> 39,689,434
<CURRENT-LIABILITIES> 0
<BONDS> 2,458,359
0
0
<COMMON> 0
<OTHER-SE> 24,271,880
<TOTAL-LIABILITY-AND-EQUITY> 39,689,434
<SALES> 3,194,329
<TOTAL-REVENUES> 3,393,286
<CGS> 0
<TOTAL-COSTS> 2,173,743
<OTHER-EXPENSES> 50,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 215,339
<INCOME-PRETAX> 953,604
<INCOME-TAX> 0
<INCOME-CONTINUING> 953,604
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 953,604
<EPS-PRIMARY> 6.30<F1>
<EPS-DILUTED> 0
<FN>
<F2>Includes writedowns
<F1>Per Class A limited partnership unit outstanding.
</FN>
</TABLE>
