The evolution of raindrop spectra with altitude through collisional collection/breakup sedimentation and evaporation is presented. Two-moment treatment of sedimentation and evaporation is developed to complement Part I (Feingold et al.) of this series. We have obtained an accurate, stable numerical scheme for evaporation that enables the investigation of the effect of evaporation on spectra subject to entrainment of strongly subsaturated air (including ventilation). The method includes provision for treatment of the variation of the sub/supersaturation within a time step in a dynamical framework. Results confirm that steady-state raindrop spectra are characterized by a bimodal or trimodal structure that becomes evident shortly after evolution commences. After sufficient evolution, peaks become clearly defined at 0.25 mm and 0.8 mm and further evolution with altitude affects only the relative magnitude of these peaks. It is shown that the evaporation process is not only dependent on the subsaturation of ambient air but is also strongly dependent on the shape of the drop spectrum. Evaporation tends to increase the number of the smallest raindrops (≤ 0.1 mm) at the expense of the larger drops but does not modify the position of the peaks. The effect of drop spectral evolution on radar reflectivity (Z) and scavenging (Λ) profiles is studied.