SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K

          (Mark One)
           ( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                  For the Fiscal Year Ended September 30, 1998
                                       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 0-9218

                             SUPER 8 MOTELS II, LTD.
             (Exact name of registrant as specified in its charter)

                   California                             94-2574309
        (State or other jurisdiction of             (I.R.S. Employer iden-
         incorporation or organization)                tification No.)

        2030 J Street, Sacramento, California               95814
      (Address of principal executive offices)            (Zip Code)
  Registrant's telephone number, including area code:   (916) 442-9183

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

                      UNITS OF LIMITED PARTNERSHIP 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 such shorter  period that the registrant
has been  required to file such  reports) and (2) has been subject to the 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 best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements incorporated by reference in Part III of this Form 10-K. [x]

State the aggregate market value of the voting stock held by  non-affiliates  of
the registrant.
                                  Inapplicable.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None






                                       1
<PAGE>

                                     PART I

Item 1.  BUSINESS

General Development of Business

         Super 8 Motels II, Ltd. (the  "Partnership") is a limited  partnership
which was organized  under the  Uniform Limited Partnership Act of  the State of
California on May 7, 1979. The Managing General  Partner of the  Partnership  is
Grotewohl Management Services, Inc., a California corporation which is 50% owned
by Philip B.  Grotewohl.  The  Associate General Partner  of the Partnership  is
Robert  J.  Dana.   The   Associate   General  Partner  does  not  have  general
responsibility in connection  with the management of the business affairs of the
Partnership.  The Managing General Partner and  the  Associate  General  Partner
are sometimes hereinafter referred to as the "General Partners."

         Through  two  intrastate  offerings  of  units of  limited  partnership
interest in the Partnership (the "Units"), the Partnership sold 7,000 Units at a
price of $1,000 per Unit.

         The net proceeds of the two offerings were expended for the acquisition
and  development  of two  properties  located  in Santa  Rosa,  California,  and
Ontario,  California.  A fee interest was acquired in the Ontario property and a
leasehold  interest was acquired in the Santa Rosa  property.  Motel  operations
commenced on November 12, 1980 at the Santa Rosa  property,  and on May 29, 1981
at the Ontario property. The Ontario property was sold on February 14, 1990.

         There is  hereby  incorporated  by  reference  herein  the  information
regarding the Partnership's  motel property  contained in Part I, Item 2 of this
report under the caption "Properties."

Narrative Description of Business

         The  Partnership's  business  is to operate its motel  property  and to
engage in any and all general business activities related or incidental thereto.
The Partnership's motel is operated pursuant to a franchise  originally acquired
from  Super  8  Motels,  Inc.  through  Super  8  Management  Corporation  as  a
subfranchisor, under the name "Super 8 Motel."

         Super 8 Motels,  Inc. is a South Dakota corporation which was organized
in 1972.  Its first  franchised  motel  commenced  operation  in 1974 and, as of
October 16, 1998, it had a total of 1,740 franchised  motels having an aggregate
of 105,222 guest rooms in  operation.  On April 30, 1993,  Super 8 Motels,  Inc.
became a wholly-owned subsidiary of Hospitality Franchise Systems, Inc. ("HFS").
In  addition  to Super 8  Motels,  HFS is also  the  franchisor  of  hospitality
properties  under the  Howard  Johnson,  Ramada,  Voyager  Lodge,  Knights  Inn,
Winngate Inn, Travelodge and Days Inn tradenames.

         Motels  franchised  by Super 8 Motels,  Inc. are budget  motels in that
they  offer room rates near the lower end of the room rate scale in each area in
which they are located. Such lower rates are made possible by the elimination of
certain features present in many higher-priced facilities, such as meeting rooms
and  large  lobbies;  by  not  operating  restaurants  or  cocktail  lounges  in
connection  with the  motels;  and by  utilizing  uniform  construction  methods
(adapted only  slightly to fit specific  locales)  which have been  developed by
Super 8 Motels, Inc. and a standardized design which facilitates maintenance and
minimizes overhead expense.
                                       2
<PAGE>

         Super 8 Motels  offer  accommodations  at the  upper  end,  in terms of
facilities and prices, of the budget segment of the lodging industry. Generally,
Super 8 Motels offer larger rooms and higher quality  furniture and  furnishings
than motels franchised under the tradenames Motel 6, Regal 8 and E-Z 8. Rates in
the Super 8 Motels tend to exceed those offered by the chains mentioned above.

         By terms of the  franchise  agreement  with Super 8 Motels,  Inc.,  the
Partnership  pays monthly  franchise fees equal to 4% of its gross room revenues
and  contributes  an  additional  1%  of  its  gross  room  revenues  to a  fund
administered  by Super 8  Motels,  Inc.  to  finance  the  national  advertising
program. Neither the Partnership nor the Managing General Partner has any equity
or other interest in Super 8 Motels, Inc.

         Brown & Grotewohl (the  "Manager"),  a California  general  partnership
which is an affiliate of the Managing General Partner,  manages and operates the
Partnership's motel. The Manager's management  responsibilities include, but are
not limited to, the supervision and direction of the Partnership's employees who
operate the motel,  the  establishment  of room rates,  and the direction of the
promotional activities of the Partnership's  employees. In addition, the Manager
directs the purchase of replacement equipment and supplies, maintenance activity
and the  engagement  or  selection  of all vendors,  suppliers  and  independent
contractors.  The Partnership's financial accounting activities are performed by
the motel staff and a centralized  accounting staff, all of which work under the
direction of the Managing General Partner or the Manager. Together, these staffs
perform all  bookkeeping  duties in  connection  with the motel,  including  all
collections  and all  disbursements  to be paid out of funds  generated  by such
operations or otherwise supplied by the Partnership.

         As of December 1, 1998, the Partnership employed a total of 14 persons,
either  full-  or  part-time,  at its  motel,  including  six desk  clerks,  six
housekeeping and laundry personnel,  one maintenance  personnel and one manager.
In addition, and as of the same date, the Partnership employed eleven persons in
administrative positions at its central office in Sacramento, California, all of
whom worked for the Partnership on a part-time basis. They included  accounting,
investor  services,  sales and marketing,  motel  supervisory,  secretarial  and
purchasing personnel,  including David Grotewohl, son of Philip Grotewohl,  whom
the  Partnership  employs on as Director of Operations and as an attorney,  and,
until April 30, 1998, Mark Grotewohl, whom the Partnership employed as marketing
and sales director.

         The motel  located in Santa  Rosa,  California,  which  consists of 100
guest rooms,  commenced  operations on November 12, 1980. The average  occupancy
rates and average  room rates for the period from  October 1, 1995 to  September
30, 1998, are as follows:

                              1995 - 1996    1996 - 1997    1997 - 1998
                            -------------- -------------- ---------------
Average Occupancy Rate             53%            60%              51%
Average Room Rate                $44.49         $45.65           $50.31








                                       3
<PAGE>

         The following  existing lodging  facilities  provide direct or indirect
competition to the Partnership's Santa Rosa motel:
                                                           APPROXIMATE
                                                          DISTANCE FROM
                                     NUMBER OF            PARTNERSHIP'S
               FACILITY                ROOMS             MOTEL (IN MILES)
     --------------------------------------------------------------------
     Motel 6                           100                 Adjacent
     Motel 6                           119                   0.5 miles
     Los Robles Inn                     90                   0.5 miles
     Sandman Motel                     112                   0.5 miles
     Ramada Inn                         50                   0.5 miles
     Holiday Inn Express                95                   1.0 mile
     Days Inn                          160                   1.5 miles
     TraveLodge                         60                   2.0 miles
     Best Western Garden Inn           100                   3.0 miles

         The Santa  Rosa motel  draws its  business  from a variety of  sources,
including corporate  travelers,  vacationers and tourists,  convention attendees
and sports teams.  The Santa Rosa motel has no single customer the loss of which
would have a materially adverse effect on the motel's operations.

         During November 1998 the Partnership  submitted to the limited partners
of the Partnership  (the "Limited  Partners") a consent  solicitation  statement
soliciting the consent of the Limited Partners to the sale of the  Partnership's
motel and related assets at a purchase price of $2,200,000. The Limited Partners
have consented to such sale by majority vote. As of December 17, 1998, the buyer
had not yet  obtained  the  necessary  financing  to complete  the sale.  If the
financing  is  obtained  in a  timely  fashion,  the  Managing  General  Partner
anticipates  that the motel will be sold and the Partnership  liquidated  during
the second fiscal  quarter of 1999. If so, the  Partnership  would be terminated
shortly thereafter.  If not, the Managing General Partner would entertain offers
to purchase  the motel and related  assets and would  submit one or more of such
offers to the Limited  Partners for approval,  in the discretion of the Managing
General Partner. Pending any sale of the motel, the Partnership will continue to
operate the motel as usual.

Item  2.  PROPERTIES

         On January 8, 1980,  the  Partnership  acquired  by  long-term  lease a
parcel of  approximately  three  acres of  unimproved  land  located  at 2632 N.
Cleveland  Avenue,  Santa  Rosa,  California,  adjacent  to  U.S.  Highway  101.
Effective  May 1,  1981,  the lease  was  amended  to delete an area  comprising
approximately  32,600  square feet from the lease.  A  restaurant  facility  was
subsequently built on this deleted portion.

         The term of the lease  extends  until August 31, 2015,  with a possible
extension of the term for up to an additional  15 years through  exercise by the
Partnership of three five-year renewal options. Base rental payments are subject
to adjustment at three-year  intervals to reflect  changes in the Consumer Price
Index.  The base rent is $8,398 per month from  September 1, 1997 through August
31,  2000.  Such rent is net to the lessor of  property  taxes and  assessments,
utilities and other expenses relating to the land.

         In April 1980,  construction  of the  Partnership's  100-room motel was
commenced  on the site.  The  motel  opened  for  operations  immediately  after
construction was completed on November 12, 1980.
                                       4
<PAGE>

         The lease provides that the improvements constructed by the Partnership
on the leased  premises will remain the property of the  Partnership  during the
lease  term  but  that,  upon  expiration  of  the  lease,  title  to  any  such
improvements will pass to the lessor.

 Item 3.  LEGAL PROCEEDINGS

         Inapplicable.

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

         Inapplicable.













































                                       5
<PAGE>

                                     PART II


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

Market Information

         The Units are not  freely  transferable  and no public  market  for the
Units has developed or is expected to develop.

Holders

         As of December 1, 1998, a total of 1,009 investors ("Limited Partners")
held Units in the Partnership.

Distributions

         Cash  distributions  are made on a quarterly  basis from Cash Available
for  Distribution,  defined in the  Partnership's  Certificate  and Agreement of
Limited  Partnership (the  "Partnership  Agreement") as Cash Flow, less adequate
cash  reserves  for  obligations  of  the  Partnership  for  which  there  is no
provision.   Cash  Flow  means  cash  funds  provided  from  operations  of  the
Partnership,  without deduction for depreciation, but after deducting cash funds
used to pay or provide for the payment of debt service, capital improvements and
replacements and the operating expenses of the Partnership's property.

         In addition,  the Partnership will promptly  distribute net proceeds of
the sale and refinancing of its motel properties to the General Partners and the
Limited Partners of the Partnership (the "Limited Partners"), to the extent such
proceeds are not reinvested in the acquisition of additional properties.

         The following  distributions  to the Limited  Partners were made during
the last two fiscal years:

                                  Total         Amount
                 Date         Distribution     Per Unit
          -------------------------------------------------
               11-15-96          $21,000         $3.00
                2-15-97          $35,000         $5.00
                 3-3-97         $280,000        $40.00
                5-15-97          $35,000         $5.00
                8-15-97          $52,500         $7.50
               11-15-97          $52,500         $7.50
                2-15-98          $52,500         $7.50
                5-15-98          $52,500         $7.50
                8-15-98          $52,500         $7.50


Item 6.  SELECTED FINANCIAL DATA

         Following are selected financial data of the Partnership for the fiscal
years ended September 30, 1998, 1997, 1996, 1995 and 1994.




                                       6
<PAGE>



                             SUPER 8 MOTELS II, LTD.

Item 6. Selected Financial Data



                                      Years Ended September 30:
                      ---------------------------------------------------------
                        1998        1997        1996        1995        1994
                      ---------   ---------   ---------   ---------   ---------

Total Income           $956,802  $1,032,367    $889,283    $850,781    $827,562

Motel Room Income      $930,658    $995,707    $856,246    $829,326    $808,505

Net Income (Loss)       $23,437    $213,399    $101,430     $31,089    $(31,564)

Per Partnership Unit:
 Cash distributions (1)  $30.00      $60.50       $3.00         -           -
 Net income (loss)        $3.31      $30.18      $14.35       $4.40      $(4.46)



                                            September 30:
                      ---------------------------------------------------------
                        1998        1997        1996        1995        1994
                      ---------   ---------   ---------   ---------   ---------

Total Assets          $ 881,220  $1,067,776  $1,268,224  $1,172,917  $1,122,106
Long-Term Debt             -           -           -           -           -


(1) On an annual  basis,  to the extent  cash  distributions  exceed net income,
Limited  Partners  receive a return of capital  rather than a return on capital.
However,  an annual  analysis will be misleading if the Limited  Partners do not
receive their  investment back upon  liquidation of the  Partnership.  For those
investors who purchased their Units directly from the Partnership,  the original
investment  was  $1,000  per Unit,  cumulative  allocations  of  income  through
September  30,  1998  were   approximately   $703  per  Unit,   and   cumulative
distributions  through  September 30, 1998 were  approximately  $1,455 per Unit.
Investors who did not purchase  their Units directly from the  Partnership  must
consult with their own advisers in this regard.













                                       7
<PAGE>

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

Liquidity

         The Managing General Partner believes that the Partnership's liquidity,
defined as its  ability to  generate  sufficient  amounts of cash to satisfy its
cash needs, is adequate.  Current assets of $350,409 exceed current  liabilities
of $108,813 by $241,596 as of September  30, 1998 as compared  with $377,246 for
the same date in the previous fiscal year.

         The  Managing  General  Partner  has a  reserve  target  equal to 5% of
"Adjusted  Capital  Contributions,"  or $174,716 (5% of  $3,494,317).  "Adjusted
Capital  Contributions"  is computed as the original amount raised  ($7,000,000)
less the  $259,154  returned  to the  Limited  Partners in 1982 from the sale of
excess Ontario land, and less the  $3,246,529  returned to the Limited  Partners
from the 1990 Ontario  motel sale.  The $241,596  excess of current  assets over
current liabilities exceeds the reserve target.

         The  Partnership's  primary  source of liquidity is its gross  revenues
from  operations.  As noted below, the Partnership has a positive cash flow from
motel operations. In addition, the Partnership's equity in its Santa Rosa motel,
which is presently  unencumbered,  would provide a potential source of liquidity
through financing in the event the Partnership's liquidity were impaired.  There
can be no assurance,  however,  that the  Partnership  could borrow against such
equity on favorable terms should additional liquidity be required.

         In August 1996, the Managing General Partner  authorized the resumption
of  distributions  at a  modest  $3  per  Unit  per  quarter.  The  most  recent
distribution was $7.50 per Unit per quarter.  An  extraordinary  distribution of
$40.00 per Unit was made in March 1997 from reserves which the managing  General
Partner deemed no longer necessary.


Capital Resources

         The  Partnership  owns and  operates  one motel  property,  a  100-room
lodging facility located on leased land in Santa Rosa, California.

         The  Partnership  currently  has no  material  commitments  for capital
expenditures.  Its motel property is in full operation,  and no further property
acquisitions or  extraordinary  capital  improvements are  contemplated.  If the
motel is not sold and the  Partnership  is not  terminated,  except as described
below,  the Managing  General  Partner is aware of no material trends or changes
with respect to the mix or relative cost of the Partnership's capital resources.
Working capital is expected to be generated by revenues from operations.

         During the fiscal  year  ended  September  30,  1998,  the  Partnership
capitalized  $25,784 of the $51,896 spent on the  refurbishment of its motel and
furnishings.  Included in the  capitalized  items were  $14,652 for  replacement
carpet,  $6,467  for 24  televisions  and  $4,665  for  replacement  lamps.  The
non-capitalized  renovations  included $8,595 for exterior painting,  $6,200 for
renovation of the courtyard landscaping and $4,100 for parking lot remodeling.




                                       8
<PAGE>

         During the fiscal  year  ended  September  30,  1997,  the  Partnership
expended  $61,087  on  renovations  and  replacements   ($43,159  of  which  was
capitalized).  Included in these amounts was $28,669 for guest room and corridor
carpeting,  $8,024 for a replacement washing machine, $4,459 for six replacement
room air-conditioning units and $3,660 for furniture refurbishment.

Results of Operations

Partnership's Overall Financial Results

         The following is a comparison of combined  results for the twelve-month
periods  ending  September  30,  1996,  1997 and 1998.  Comparative  revenue and
expense data is included in the financial statements found in Item 8.

         During  the  fiscal  year  covered by this  report as  compared  to the
previous fiscal year, the  Partnership  experienced a $75,565 (or 7.3%) decrease
in total income. This decrease was due primarily to a $65,049 (or 6.5%) decrease
in motel room revenue.  The decreased room revenue is discussed  under the Santa
Rosa Motel caption below.

         During the fiscal  year ended  September  30,  1997 as  compared to the
previous fiscal year, the Partnership achieved a $143,084 (or 16.1%) increase in
total income.  This increase was due primarily to a $139,461 (or 16.3%) increase
in motel room revenue.  The increased room revenue is discussed  under the Santa
Rosa Motel caption below.

         During  the  fiscal  year  covered by this  report as  compared  to the
previous fiscal year, the Partnership experienced a $114,397 (or 14.0%) increase
in total expenses.  The increase in motel  operations is discussed below in more
detail.  The $55,048 or 125.9% increase in general and  administrative  expenses
was due primarily to increased legal fees associated with the legal  proceedings
discussed in last year's annual report, which were settled in February 1998, the
negotiations and the drafting of the sale contract  discussed in Item 1, and the
preparation of the consent solicitation statement also discussed in item 1.

         During the fiscal  year ended  September  30,  1997 as  compared to the
previous fiscal year, the  Partnership  experienced a $31,115 (or 3.9%) increase
in total expenses.  This increase is related to increased property occupancy and
is discussed below in more detail.


Santa Rosa Motel

         The following is a comparison of operating results of the Partnership's
Santa Rosa motel for the twelve-month periods ended September 30, 1996, 1997 and
1998.  The income and  expense  numbers in the  following  table are shown on an
accrual basis and other payments on a cash basis.  Total  expenditures  and debt
service include the operating  expenses of the motel,  together with the cost of
capital improvements.
                                           Average             Average
                                          Occupancy             Room
       Twelve months ended:                  Rate               Rate
       -----------------------------------------------------------------
       September 30, 1996                   52.6%              $44.49
       September 30, 1997                   59.8%              $45.65
       September 30, 1998                   50.7%              $50.31

                                       9
<PAGE>
                                                    Total
                                                Expenditures      Partnership
                                  Total           and Debt           Cash
   Twelve months ended:           Revenues          Service         Flow (1)
   ---------------------------------------------------------------------------
   September 30, 1996             $889,283         $733,042         $156,241
   September 30, 1997           $1,032,367         $771,215         $261,152
   September 30, 1998             $956,803         $870,836          $85,967

         (1)  While  Partnership  Cash  Flow as it is used here is not an amount
found in the financial statements, the Managing General Partner believes that it
is the best indicator of the annual change in the amount, if any,  available for
distribution  to the Limited  Partners  because it tracks the  definition of the
term "Cash Flow" as it is used in the Partnership Agreement. This calculation is
reconciled to the financial  statements in the following table. Limited Partners
should not interpret Partnership Cash Flow as an alternative to net income or as
a measure of performance.

         Following is a reconciliation of Total expenditures and debt Service as
used above to Total  expenses as shown on the  Statement of  Operations  (in the
audited financial statements):
                                             1998         1997        1996
                                           -----------------------------------
Total Expenditures and Debt Service         $870,836    $771,215     $733,042
Additions to Fixed Assets                    (25,784)    (43,159)     (36,964)
Depreciation and Amortization                 87,488      90,581       91,815
Other Items                                      825         331          (40)
                                           -----------------------------------
Total Expenses                              $933,365    $818,968     $787,853
                                           ===================================

          Reconciliation  of Partnership Cash Flow (included in the chart above)
to Net  Income  as shown  on the  Statements  of  Operations  (in the  financial
statements) is as follows:

                                             1998         1997        1996
                                           -----------------------------------
Partnership Cash Flow                        $85,967    $261,152     $156,241
Additions to Fixed Assets                     25,784      43,159       36,964
Depreciation and Amortization                (87,488)    (90,581)     (91,815)
Other Items                                     (825)       (331)          40
                                           -----------------------------------
Net Income                                   $23,438    $213,399     $101,430
                                           ===================================

         During  the  fiscal  year  covered by this  report as  compared  to the
previous fiscal year, the  Partnership's  Santa Rosa motel experienced a $75,564
or 7.3% decrease in total revenues due primarily to the $65,049 or 6.5% decrease
in guest room  revenues.  The guest room  occupancy  decreased from 59.8% in the
previous fiscal year to 50.7% during the fiscal year covered by this report. The
occupancy  decrease was  partially  offset by the increase in average room rates
from $45.65 during the previous  fiscal year to $50.31 during the current fiscal
year.  Revenue and room nights generated by the leisure and the corporate market
segments  deceased  during the year covered by this report which  partially (but
not  completely)  offset the gains realized during the previous fiscal year. The
decrease  in room  revenue  during the  fiscal  year  covered by this  report is
attributed to increased competition and to reduced demand by flood victims.

                                       10
<PAGE>

         During the fiscal  year ended  September  30,  1997 as  compared to the
previous fiscal year, the Partnership's Santa Rosa motel achieved an increase in
its guest room revenue  through  increases in both its average room rate and its
occupancy  rate.  The occupancy  rate  increased  from 52.6% during the previous
fiscal year to 59.8% for 1997.  The average room rate  increased  from $44.49 to
$45.65.  These two  increases  resulted  in the  16.3%  increase  in guest  room
revenue.  The Santa Rosa motel achieved its largest  increased  revenue from the
leisure-market  segment  with  the next  largest  increase  from  the  corporate
segment.

         During  the  fiscal  year  covered by this  report as  compared  to the
previous fiscal year, the  Partnership's  Santa Rosa motel experienced a $99,621
or 12.9% increase in total expenditures. Motel operating costs increased $62,442
or 9.1%.  Included in these  increased costs are $19,243 for increased wages and
salaries  associated  with  changes in the general  manager  position  and to an
increase in the minimum wage on March 1, 1997, $19,515 for increased maintenance
and renovation costs required by the franchisor,  $9,864 for increased allocated
costs which  primarily  represented  increased  salaries,  $4,955 for  increased
property  taxes  as  Santa  Rosa  was able to  recapture  some  prior  valuation
reductions after the excellent year experienced  during the previous fiscal year
and $6,984 in rent increases due to the CPI increases.

         During the fiscal  year ended  September  30,  1997 as  compared to the
previous fiscal year, the  Partnership's  Santa Rosa motel experienced a $38,173
or 5.2%  increase  in total  expenditures  which is due  primarily  to the 13.7%
increase in  occupancy.  The  increased  expenditures  included  $14,411 in room
attendant wages,  $6,973 in increased  franchise royalties and advertising costs
and $7,250 in appraisal costs.


Future Trends

         On May 15, 1998, the  Partnership  and four other limited  partnerships
managed by the Managing  General  Partner entered into a contract to sell all of
their motel  assets.  Escrow for the sale opened in June 1998.  By majority vote
the limited  partners of the  Partnership and the four other  partnerships  have
approved the sale pursuant to such contract. The sale of the Partnership's motel
assets and the motel  assets of the other  limited  partnerships  are subject to
certain  contingencies.  Because of these  contingencies the Partnership has not
yet  reclassified  its motel assets as held for sale.  If the sale occurs on the
terms approved by the Limited  Partners,  it is anticipated that the Partnership
would  report a gain in the  amount of  approximately  $1,643,000.  Accordingly,
there has been no adjustment to the carrying  value of the  Partnership's  motel
assets. If the sale is consummated the Partnership would be liquidated.

         The  Managing  General  Partner  expects  the  Partnership's  occupancy
percentages  (and thus  revenues and  profitability)  to benefit from  continued
economic  growth in the local and  California  economies.  The Managing  General
Partner  anticipates  lower  occupancy rates and perhaps lower room rates in the
event of an economic  downturn.  The  Managing  General  Partner  believes  that
competitive  conditions  in the Santa Rosa  market are such as to  restrict  the
Partnership's  ability,  in the  short  run,  to  increase  its  room  rates  to
compensate for inflation.




                                       11
<PAGE>

Other Financial information

         In 1996 the computers used by the  Partnership at the Managing  General
Partner's  offices in Sacramento  were  updated.  In the process of updating its
hardware and software,  the Managing  General  Partner  eliminated any potential
Year 2000  problem  with  respect to such  computers.  Similarly,  the  Managing
General  Partner does not  anticipate  any  material  Year 2000 problem with the
computers at the motel.  The Managing  General Partner has not  investigated and
does not know  whether  any Year 2000  problem  may arise  from its third  party
vendors.  Because  the  motel  is  a  "budget"  motel,  the  Partnership's  most
significant  vendors are its utility  providers and banks. To the extent banking
services,  utility  services and other goods and services are  unavailable  as a
result of Year 2000  problems  with the  computer  systems  of such  vendors  or
otherwise, the ability of the Partnership to conduct business at its motel would
be compromised. No contingency plans have been developed in this regard.


Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES
                ABOUT MARKET RISK

         Inapplicable.


Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         See Financial  Statements  and Notes to Financial  Statements  attached
hereto at pages F-1 through F-14.






























                                       12
<PAGE>
















                           ANNUAL REPORT ON FORM 10-K

                                     ITEM 8

                              FINANCIAL STATEMENTS

                             SUPER 8 MOTELS II, LTD.

                             SACRAMENTO, CALIFORNIA

                               SEPTEMBER 30, 1998






























                                      F-1

<PAGE>




Item 8: Financial Statements



                             SUPER 8 MOTELS II, LTD.

                          INDEX OF FINANCIAL STATEMENTS


                                                                     Pages


Financial Statements:
     Report of Certified Public Accountants                          F-3

     Balance Sheets, September 30, 1998 and 1997                     F-4

     Statements of Operations for the years ended                    F-5
       September 30, 1998, 1997 and 1996

     Statements of Partners' Equity for the years ended              F-6
       September 30, 1998, 1997 and 1996

     Statements of Cash Flows for the years ended                    F-7 to
       September 30, 1998, 1997 and 1996                             F-8

     Notes to Financial Statements                                   F-9 to
                                                                     F-14


Note:  All  schedules  have been omitted since the required  information  is not
present or not  present  in amounts  sufficient  to  require  submission  of the
schedule or because  the  information  required  is  included  in the  financial
statements or notes thereto.



















                                      F-2

<PAGE>









               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS




To the Partners
Super 8 Motels II, Ltd.

We have audited the  accompanying  balance  sheets of Super 8 Motels II, Ltd., a
California  limited  partnership,  as of  September  30,  1998  and 1997 and the
related  statements of operations,  partners'  equity and cash flows for each of
the  three  years in the  period  ended  September  30,  1998.  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  generally   accepted  auditing
standards.  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 Super 8 Motels II, Ltd. as of
September 30, 1998 and 1997 and the results of its operations and its cash flows
for  each of the  three  years  in the  period  ended  September  30,  1998,  in
conformity with generally accepted accounting principles.


VOCKER KRISTOFFERSON AND CO.



December 2, 1998
San Mateo, California


   





                                       F-3

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

<PAGE>
                             SUPER 8 MOTELS II, LTD.
                       (A California Limited Partnership)
                                 BALANCE SHEETS
                           September 30, 1998 and 1997

                                     ASSETS

                                                            1998        1997
                                                         ----------  ----------
Current Assets:
   Cash and temporary investments (Notes 1 and 3)        $  303,843  $  459,098
   Accounts receivable                                        8,161      17,937
   Other receivables (Note 9)                                15,855         -
   Prepaid expenses                                          22,550       9,017
                                                         ----------  ----------
      Total Current Assets                                  350,409     486,052
                                                         ----------  ----------

Property and Equipment (Notes 2 and 7):
   Capital improvements                                      34,947      34,947
   Building    1,845,878                                  1,845,878
   Furniture and equipment                                  538,266     524,159
                                                         ----------  ----------
                                                          2,419,091   2,404,984
   Accumulated depreciation and amortization             (1,910,714) (1,834,078)
                                                         ----------   ---------
      Property and Equipment, Net                           508,377     570,906
                                                         ----------  ----------
Other Assets (Note 2):
   Deposit of federal income tax                             22,434      10,818
                                                         ----------  ----------

         Total Assets                                    $  881,220  $1,067,776
                                                         ==========  ==========

                        LIABILITIES AND PARTNERS' EQUITY

Current Liabilities:
   Accounts payable and accrued liabilities              $  105,353  $  105,071
   Due to related parties (Note 4)                            3,460       3,735
                                                         ----------  ----------
         Total Liabilities                                  108,813     108,806
                                                         ----------  ----------

Contingent Liabilities and Lease Commitment (Notes 4 and 5)     -           -

Partners' Equity:
   Limited Partners; 7,000 units authorized,
      issued and outstanding                                722,680     909,477
   General Partners                                          49,727      49,493
                                                         ----------  ----------
      Total Partners' Equity                                772,407     958,970
                                                         ----------  ----------

         Total Liabilities and Partners' Equity          $  881,220  $1,067,776
                                                         ==========  ==========
    The accompanying notes are an integral part of the financial statements.

                                       F-4
<PAGE>

                             SUPER 8 MOTELS II, LTD.
                       (A California Limited Partnership)
                            STATEMENTS OF OPERATIONS


                                                   Years Ended September 30:
                                              ---------------------------------
                                                 1998        1997        1996
                                              ---------   ---------   --------- 

Income:
 Motel room                                    $930,658    $995,707    $856,246
 Telephone and vending                           11,986      14,913      14,721
 Interest                                        11,617      16,818      17,236
 Other                                            2,541       4,929       1,080
                                              ---------   ---------   ---------
    Total Income                                956,802   1,032,367     889,283
                                              ---------   ---------   ---------

Expenses:
 Motel operations (exclusive of depreciation
  shown separately below) (Notes 4 and 6)       747,119     684,677     662,519
 General and administrative (exclusive of
  depreciation shown separately below) (Note 4)  46,386      43,710      33,519
 Legal settlement and related legal fees         33,685         -           -
 Legal fees related to pending sale (Note 9)     18,687         -           -
 Depreciation and amortization (Note 2)          87,488      90,581      91,815
                                              ---------   ---------   ---------
    Total Expenses                              933,365     818,968     787,853
                                              ---------   ---------   ---------

    Net Income                                $  23,437   $ 213,399   $ 101,430
                                              =========   =========   =========

Net Income Allocable to Limited Partners        $23,203    $211,265    $100,416
                                               ========    ========    ========

Net Income Allocable to General Partners           $234      $2,134      $1,014
                                               ========    ========    ========

Net Income Per Partnership Unit (Note 1)          $3.31      $30.18      $14.35
                                               ========    ========    ========

Distributions to Limited Partners
   Per Partnership Unit (Note 1)                 $30.00      $60.50       $3.00
                                               ========    ========    ========









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

                                       F-5
<PAGE>


                             SUPER 8 MOTELS II, LTD.
                       (A California Limited Partnership)
                         STATEMENTS OF PARTNERS' EQUITY

                                                   Years Ended September 30:
                                              ---------------------------------
                                                 1998        1997        1996
                                              ---------   ---------   --------- 

Limited Partners:
 Balance, beginning of year                     909,477   1,121,712   1,042,296
    Net income                                   23,203     211,265     100,416
Distributions to limited partners              (210,000)   (423,500)    (21,000)
                                              ---------   ---------   ---------
       Balance, End of Year                     722,680     909,477   1,121,712
                                              ---------   ---------   ---------
General Partners:
 Balance, beginning of year                   $  49,493   $  47,359   $  46,345
    Net income                                      234       2,134       1,014
                                              ---------   ---------   ---------
       Balance, End of Year                      49,727      49,493      47,359
                                              ---------   ---------   ---------



       Total Partners' Equity                  $772,407    $958,970  $1,169,071
                                               ========    ========   =========



























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

                                      F-6
<PAGE>


                             SUPER 8 MOTELS II, LTD.
                       (A California Limited Partnership)
                            STATEMENTS OF CASH FLOWS

                                                   Years Ended September 30:
                                              ---------------------------------
                                                 1998        1997        1996
                                              ---------   ----------  --------- 

Cash Flows From Operating Activities:
 Received from motel operations                $939,067   $1,007,202   $880,407
 Expended for motel operations and
  general and administrative expenses          (870,194)    (712,901)  (679,215)
Interest received                                11,656       16,551     17,338
                                              ---------   ----------  --------

  Net Cash Provided by Operating Activities      80,529      310,852    218,530
                                              ---------   ----------  ---------

Cash Flows From Investing Activities:
 Purchases of property and equipment            (25,784)     (43,159)   (36,984)
 Proceeds from sale of equipment                    -            500         20
                                              ---------   ----------  ---------

  Net Cash Used by Investing Activities         (25,784)     (42,659)   (36,964)
                                              ---------   ----------  ---------

Cash Flows From Financing Activities:
 Distributions paid to limited partners        (210,000)    (423,500)   (21,000)
                                              ---------   ----------  ---------

  Net Cash Used by Financing Activities        (210,000)    (423,500)   (21,000)
                                              ---------   ----------  ---------

   Net Increase (Decrease) in Cash and
     Temporary Investments                     (155,255)    (155,307)   160,566

Cash and Temporary Investments:
 Beginning of year                              459,098      614,405    453,839
                                              ---------   ----------  ---------

   End of Year                                 $303,843     $459,098   $614,405
                                              =========   ==========  =========











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

                                       F-7
<PAGE>


                             SUPER 8 MOTELS II, LTD.
                       (A California Limited Partnership)
                      STATEMENTS OF CASH FLOWS (Continued)

                                                   Years Ended September 30:
                                              ---------------------------------
                                                 1998        1997        1996
                                              ---------   ---------   --------- 
 
Reconciliation of Net Income to Net Cash
 Provided by Operating Activities:
  Net income                                    $23,437    $213,399    $101,430
                                              ---------   ---------   ---------
  Adjustments to reconcile net income to net
   cash provided by operating activities:
    Depreciation and amortization                87,488      90,581      91,815
    Loss (gain) on sale of property                 825         331         (20)
(Increase) decrease in accounts receivable       (6,079)     (8,614)      8,462
(Increase) decrease in prepaid expenses         (13,533)     12,645       5,641
 Increase in other assets                       (11,616)     (7,143)     (3,675)
 Increase in accounts payable and accrued
  liabilities                                       282       7,658      14,936
 Increase (decrease) in due to related parties     (275)      1,995         (59)
                                              ---------   ---------   ---------
            Total Adjustments                    57,092      97,453     117,100
                                              ---------   ---------   ---------

            Net Cash Provided by
              Operating Activities:             $80,529    $310,852    $218,530
                                              =========   =========   =========
























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

                                       F-8
<PAGE>

                             SUPER 8 MOTELS II, LTD.
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS


NOTE 1 - THE PARTNERSHIP

Super 8 Motels II, Ltd., is a limited partnership organized under California law
on May 7, 1979,  to  acquire  and  operate  motel  properties  in Santa Rosa and
Ontario,  California. The Santa Rosa Motel was opened in November, 1980, and the
Ontario Motel was opened in May,  1981.  The Ontario Motel  property was sold in
February, 1990. The Partnership grants credit to customers, substantially all of
which are local businesses in Santa Rosa.

The  Managing  General  Partner  of  the  Partnership  is  Grotewohl  Management
Services,  Inc.,  the  sole  shareholder  and  officer  of  which  is  Philip B.
Grotewohl.  The Associate General Partner of the Partnership is Robert J. Dana.

The net income or net loss of the  Partnership  is  allocated  1% to the General
Partners  and 99% to the  Limited  Partners.  Net income and  distributions  per
partnership unit are based upon 7,000 units  outstanding.  All partnership units
are owned by the Limited Partners.

The Partnership  agreement  requires that the Partnership  maintain reserves for
normal repairs, replacements,  working capital and contingencies in an amount of
at least 5% of adjusted capital contributions  ($174,716 at September 30, 1998).
As of September 30, 1998,  the  Partnership  had a combined  balance in cash and
temporary investments of $303,843.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Items of Partnership  income are passed  through to the individual  partners for
income tax purposes, along with any income tax credits. Therefore, no federal or
California  income  taxes are provided for in the  financial  statements  of the
Partnership. Since the Partnership has a fiscal year-end other than the majority
of the partners,  the Partnership is required  annually to make a payment to the
Internal Revenue Service based on the prior year's income.

Property and equipment are recorded at cost.  Depreciation  and amortization are
computed using the following estimated useful lives and methods:


              Description                    Methods            Useful Lives
      -------------------------     -----------------------     ------------
      Capital improvements          200% declining balance        7-20 years
                                      and straight-line

      Buildings                     150% declining balance       10-25 years
                                      and straight-line

      Furniture and equipment       200% declining balance         5-7 years
                                      and straight-line




                                       F-9
<PAGE>
                             SUPER 8 MOTELS II, LTD.
                       (A California Limited Partnership)
                    NOTES TO FINANCIAL STATEMENTS (Continued)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Costs incurred in connection with maintenance and repair are charged to expense.
Major renewals and betterments  that  materially  prolong the life of assets are
capitalized.

Long-lived  assets are reviewed  for  impairment  whenever  events or changes in
circumstances  indicate that the carrying amount may not be recoverable.  If the
sum of the  expected  future  undiscounted  cash flows is less than the carrying
amount of the asset, a loss is recognized  for the  difference  between the fair
value and the carrying value of the asset.

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect certain  reported amounts and  disclosures.  Accordingly,  actual results
could differ from those estimates.

NOTE 3 - CASH AND TEMPORARY INVESTMENTS

Cash and temporary  investments as of September 30, 1998 and 1997 consist of the
following:
                                                             1998        1997
                                                          ---------   ---------
      Cash in bank, non-interest bearing                  $  29,230   $  22,173
      Money market accounts                                 174,613     336,925
      Certificates of deposit                               100,000     100,000
                                                          ---------   ---------
         Total Cash and Temporary Investments             $ 303,843   $ 459,098
                                                          =========   =========

Temporary investments are recorded at cost, which approximates market value. The
Partnership  considers  temporary  investments  with original  maturities of six
months or less to be cash  equivalents  for  purposes of the  statement  of cash
flows.

NOTE 4 - RELATED PARTY TRANSACTIONS

Franchise Fees
Super 8 Motels,  Inc.,  now a wholly-owned  subsidiary of Hospitality  Franchise
Systems,  Inc., is franchisor of all Super 8 Motels. The Partnership pays to the
franchisor  monthly fees equal to 4% of the gross room revenues of the motel and
contributes an additional 1% of its gross room revenues to an  advertising  fund
administered by the franchisor.  In return the franchisor  provides the right to
use the name "Super 8," a national institutional advertising program, an advance
room reservation system, and inspection services.  These costs ($46,547 in 1998,
$49,785 in 1997 and $42,812 in 1996) are included in motel operations expense in
the accompanying  statements of operations.  The Partnership  operates its motel
property  as a  franchisee  of Super 8  Motels,  Inc.  through  a  sub-franchise
agreement with Brown & Grotewohl,  a California  general  partnership,  of which
Grotewohl  Management  Services,  Inc.,  (see Note 1) is a 50% owner.  Under the
sub-franchise  agreement,  Brown & Grotewohl  earned 40% of the above  franchise
fees,  which amounted to $18,619,  $19,914,  and $17,125 in 1998, 1997 and 1996,
respectively.

                                      F-10
<PAGE>

                             SUPER 8 MOTELS II, LTD.
                       (A California Limited Partnership)
                    NOTES TO FINANCIAL STATEMENTS (Continued)

NOTE 4 - RELATED PARTY TRANSACTIONS (Continued)

Property Management Fees
The General  Partners or their  affiliates  handle the  management  of the motel
property  of the  Partnership.  The  fee for  this  service  is 5% of the  gross
revenues from Partnership  operations,  as defined in the Partnership agreement,
not including income from the sale,  exchange or refinancing of such properties.
This fee is  payable  only out of the cash  available  for  distribution  of the
Partnership,  defined as the total cash  receipts  from  Partnership  operations
during a given  period of time less cash used during the same period to pay debt
service, capital improvements and replacements, operating expenses and reserves.
It is subordinated to prior receipt by the Limited  Partners of a cumulative 10%
per annum pre-tax return on their adjusted capital  contributions  for each year
of the Partnership's  existence.  At September 30, 1998 the Limited Partners had
not received the 10% cumulative return,  and as no property  management fees are
payable,  they are not  reflected  in  these  financial  statements.  Management
believes it is not likely that these fees will become payable in the future.

Subordinated Partnership Management Fees
During the Partnership's  operational stage, the General Partners are to receive
9% of cash available for distribution for Partnership management services, along
with an additional 1% of cash  available  for  distribution  on account of their
interest  in the income and  losses,  subordinated,  however,  to receipt by the
Limited  Partners of a cumulative 10% per annum pre-tax return on their adjusted
capital contributions and to payment of the property management fees referred to
above. Since the Limited Partners had not received the 10% cumulative return and
the property  management fees had not been paid, no partnership  management fees
are  presently  payable  and  therefore  are not  reflected  in these  financial
statements.  Management  expects  these  fees  will  never be paid.  This fee is
payable only from cash funds provided from  operations of the  Partnership,  and
may not be paid from the proceeds of sale or refinancing.

Subordinated Incentive Distributions
Under the terms of the  Partnership  agreement,  the net proceeds of the sale of
any of the Partnership's motel properties and of any financing or refinancing of
any of the Partnership's motel properties,  to the extent that such proceeds are
not to be reinvested in the acquisition of additional properties, shall promptly
be distributed to the General Partners and Limited  Partners.  Until the Limited
Partners  have  received  distributions  from all sources equal to their capital
contributions  plus a cumulative  10% per annum pre-tax return on their adjusted
capital contributions,  all of such proceeds shall be distributed to the Limited
Partners. Thereafter, 15% of the remainder of such proceeds shall be distributed
to the General Partners as cash incentive distributions and the balance shall be
distributed to the Limited Partners.









                                      F-11
<PAGE>
                             SUPER 8 MOTELS II, LTD.
                       (A California Limited Partnership)
                    NOTES TO FINANCIAL STATEMENTS (Continued)

Administrative Expenses Shared by the Partnership and its Affiliates
There are certain administrative  expenses allocated between the Partnership and
affiliated  Super 8 partnerships.  These expenses,  which are allocated based on
usage,  are  telephone,  data  processing,  rent of the  administrative  office,
administrative  salaries and duplication expenses.  Management believes that the
methods used to allocate  shared  administrative  expenses are  reasonable.  The
administrative expenses allocated to the Partnership were approximately $123,000
in  1998,  $112,000  in 1997 and  $113,000  in 1996  and are  included  in motel
operations expenses and general and administrative  expenses in the accompanying
statements  of  operations.  Included in  administrative  salaries are allocated
amounts paid to two employees who are related to Philip B.  Grotewohl,  the sole
shareholder of Grotewohl  Management  Services,  Inc., a General  Partner of the
Partnerships.  One of these  employees  terminated his  employment  prior to May
1998.

NOTE 5 - LEASE COMMITMENT

The Partnership  has a long-term  operating  lease  commitment on  approximately
three acres of land in Santa Rosa, California, the site of the Santa Rosa motel.
The term of the lease runs through August 31, 2015, with an option to extend the
lease for three consecutive periods of five years each. The base monthly rent is
subject to adjustment at three year intervals to reflect changes in the Consumer
Price Index.  The  Partnership  will pay all  property  taxes,  assessments  and
utilities.  Rent expenses for the fiscal years ending  September 30, 1998,  1997
and 1996 were $109,017, $102,033 and $101,354, respectively.

The future lease  commitment  at September 30, 1998,  using the minimum  monthly
amounts, is as follows:

                    Years Ending
                    September 30:                Amount
                   ---------------             ----------
                        1999                     $100,778
                        2000                      100,778
                        2001                      100,778
                        2002                      100,778
                        2003                      100,778
                     2004-2008                    503,888
                     2009-2013                    503,888
                     2014-2015                    193,157
                                               ----------
                     Total                     $1,704,823
                                               ==========











                                      F-12
<PAGE>
                             SUPER 8 MOTELS II, LTD.
                       (A California Limited Partnership)
                    NOTES TO FINANCIAL STATEMENTS (Continued)

NOTE 6 - MOTEL OPERATING EXPENSES

The following table summarizes the major components of motel operating  expenses
for the years ended September 30, 1998, 1997 and 1996.

                                              1998         1997         1996
                                            ---------   ----------   ----------
 Salaries and related costs                  $230,458     $211,215     $189,103
 Rent                                         101,009       94,025       93,395
 Franchise and advertising fees                46,547       49,785       42,812
 Utilities                                     72,327       71,893       74,632
 Allocated costs, mainly indirect salaries    100,577       90,713       92,355
 Repairs and minor renovations                 26,112       17,928       20,987
 Maintenance expenses                          50,319       38,988       42,313
 Property taxes                                26,290       21,335       11,413
 Property insurance                            17,706       18,458       18,028
 Other operating expenses                      75,774       70,337       77,481
                                            ---------    ---------    ---------

 Total Motel Operating Expenses              $747,119     $684,677     $662,519
                                            =========    =========    =========

NOTE 7 - PROPERTY AND EQUIPMENT

The following is a summary of the accumulated  depreciation  and amortization of
property and equipment:

                                                1998         1997
                                            -----------   ----------

 Capital improvements                       $   34,947    $   34,947
 Building                                    1,414,389     1,353,486
 Furniture and equipment                       461,378       445,645
                                            ----------    ----------

Accumulated depreciation and amortization   $1,910,714    $1,834,078
                                            ==========    ==========

The  following is a summary of the federal  income tax basis as of September 30,
1998:

Capital improvements                                $   34,947
Building                                             1,740,878
Furniture and equipment                                538,266
                                                    ----------
                                                     2,314,091
 Less accumulated depreciation and amortization      1,834,239
                                                    ----------
                                                    $  479,852
                                                    ==========




                                      F-13
<PAGE>
                             SUPER 8 MOTELS II, LTD.
                       (A California Limited Partnership)
                    NOTES TO FINANCIAL STATEMENTS (Continued)

NOTE 8 - CONCENTRATION OF CREDIT RISK

The Partnership  maintains its cash accounts in six commercial  banks located in
California.  Accounts  at  each  bank  are  guaranteed  by the  Federal  Deposit
Insurance  Corporation  (FDIC) up to $100,000  per bank.  A summary of the total
insured and uninsured  cash balances (not reduced by  outstanding  checks) as of
September 30, 1998 follows:

 Total cash in all California banks                 $  317,307
 Less Portion insured by FDIC                         (291,016)
                                                    ----------
         Uninsured cash balances                    $   26,291
                                                    ==========

NOTE 9 - PENDING SALE OF MOTEL ASSETS

On May 15, 1998  the Partnership and four other limited  partnerships managed by
the general  partner  entered  into a contract  to sell all their motel  assets.
Escrow for the sale opened in June 1998. By majority  vote the limited  partners
of the  Partnership  have  approved the sale of the  Partnership's  motel assets
pursuant to such  contract,  and the limited  partners of the four other limited
partnerships  have also approved by majority  vote the sale of their  respective
limited  partnership's  motel assets. The sale of the Partnership's motel assets
and the motel assets of the other  limited  partnerships  are subject to certain
contingencies.  Because  of  these  contingencies  the  Partnership  has not yet
reclassified  its motel assets as held for sale. If the sale occurs on the terms
approved by the limited  partners,  it is anticipated that the Partnership would
report a gain per books in the amount of approximately $1,690,000.  Accordingly,
there has been no adjustment to the carrying  value of the  Partnership's  motel
assets. If the sale is consummated the Partnership would be liquidated.

In connection with the anticipated sale of the motel assets, the Partnership has
incurred reimbursable costs in the amount of $15,855 which are included as other
receivables in the accompanying balance sheet.


NOTE 10 - FAIR VALUES OF FINANCIAL INSTRUMENTS

The carrying  amount of  cash  and temporary  investments,  accounts receivable,
other receivables,  and accounts payable in  the balance sheet approximates fair
values.













                                      F-14
<PAGE>

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

         Inapplicable.

                                    PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The original general partners of the  Partnership were Dennis A. Brown,
Philip B. Grotewohl  and Robert J. Dana.  Upon Mr. Brown's death on February 25,
1988, Mr.  Grotewohl and  Mr. Dana elected to continue the  Partnership.  During
March 1988, Mr.  Grotewohl  appointed  Grotewohl  Management  Services,  Inc., a
California corporation 50% of which is owned by Mr. Grotewohl,  his successor as
Managing General Partner of the Partnership.  Mr. Dana continues to be a General
Partner of the Partnership.

         The  Managing  General  Partner  was  organized  in 1981 to  serve as a
general  partner  of  limited  partnerships  to be  formed  for the  purpose  of
investing in Super 8 Motels.

         Mr. Grotewohl,  age 80, was an attorney-at-law  and was engaged  in the
private practice of law in San Mateo County,  California, between 1967 and 1978.
Since 1978, Mr.  Grotewohl's  principal  occupation has been  as a promoter  and
general  partner of Super 8 Motel limited partnerships.

         Mr. Dana, age 70, was a  registered  representative  of Brown,  Brosche
Securities,  Inc. between 1982  and 1988.  Between 1976 and 1982 he served  as a
registered representative of  several  stock and  investment brokers.  Mr.  Dana
has also  served  as  marketing  consultant  for  various  real  estate  limited
partnership and other direct participation investment programs.


Item 11. EXECUTIVE COMPENSATION

         The  following   discussion  contains  certain  information   regarding
aggregate  direct or indirect  compensation  paid by the Partnership  during the
fiscal year ended September 30, 1998 or payable to the General  Partners and the
Estate of Dennis A Brown as a group.  Although  Mr. Brown ceased to be a general
partner  of the  Partnership  upon his  death,  his  estate  shares  in  certain
compensation otherwise payable to the General Partners and their affiliates.

Property Management Fees

         The  Manager  is  managing  and will  manage  the  Partnership's  motel
pursuant  to an  agreement  between  the  Partnership  and  Super  8  Management
Corporation,  a corporation which was wholly-owned by Dennis A. Brown and Philip
B. Grotewohl.  In March 1988 the management contract between the Partnership and
Super  8  Management  Corporation  was  assigned  to  the  Manager,  which  is a
California  general  partnership  between  the  Estate of Dennis A Brown and the
Managing General  Partner.  The fee for this service is 5% of the gross proceeds
from  the  operations  of  the  motel.  This  fee  is  payable  only  out of the
operational  cash  flow of the  Partnership,  and is  subordinated  to the prior
receipt by the Limited  Partners of a  cumulative  10% per annum return on their
Adjusted Capital Contributions.  This compensation is in addition to the cost of
goods and services acquired for the Partnership from independent contractors.

                                       13
<PAGE>

         As a result of the sale of the  Ontario  motel in  February  1990,  the
General  Partners  waived their claim to accrued  management fees as the receipt
thereof became extremely remote.  No property  management fees have been accrued
since the  Ontario  motel sale due to the  unlikelihood  that they would ever be
paid to the  General  Partners.  Before the  General  Partners  can  receive any
property  management  fees,  the  Limited  Partners  must  receive  preferential
distributions  of $3,457,214 to meet the  subordination  requirement  calculated
through September 30,1998, plus $349,432 per each year thereafter.

Franchise Fees and Advertising Fees

         Super 8 Motels,  Inc.  is the  franchisor  of all  Super 8 Motels.  The
Partnership  operates its motel as a franchisee of Super 8 Motels, Inc., through
sub-franchises  obtained  from  Super 8  Management  Corporation.  The  original
sub-franchise  agreement  between  Super 8 Motels,  Inc.  and Super 8 Management
Corporation  was transferred to the Manager in March 1988. The  Partnership,  as
franchisee,  pays to the  franchisor  monthly  franchise fees equal to 4% of its
gross  room  revenue  and  contributes  1%  of  its  gross  room  revenue  to an
advertising  fund  administered  by  the  franchisor  to  finance  institutional
advertising. The Manager is entitled to one-half of the franchise fees.

         The total of franchise  fees accrued  during the fiscal year covered by
this report was $37,238 (of which $18,619  accrued to the  Manager).  All of the
above sums have been paid.

General Partners' Interest in Cash Available for Distribution

         At  quarterly  intervals,  the total amount of the  Partnership's  Cash
Available  for  Distribution  is  determined  at the  discretion of the Managing
General  Partner.  (See  Item 5  above.)  Distributions  therefrom  are  made as
follows:  (1) 90% of such distributions is paid to the Limited Partners;  (2) 9%
thereof is paid to the General Partners as Partnership  management fees; and (3)
1% thereof is paid to the General  Partners in accordance with their interest in
the income and losses of the Partnership.

         Notwithstanding the foregoing, however, distributions of Cash Available
for  Distribution  to the  General  Partners  are  deferred  and paid only after
payment  to  the  Limited  Partners  of  distributions  of  Cash  Available  for
Distribution  in an amount equal to 10% per annum  cumulative on their  Adjusted
Capital Contributions. During the fiscal year covered by this report, no amounts
were deferred for the General Partners' share of distributions of Cash Available
for  Distribution.  A total of $742,534 has been deferred since  commencement of
the  Partnership.  As discussed in the section  captioned  "Property  Management
Fees" above, the payment of these fees is unlikely due to the large preferential
distribution unpaid to the Limited Partners.












                                       14
<PAGE>

General Partners' Interest in Net Proceeds of Sales and
Financing of Partnership Properties

         Net proceeds of the sale of the Partnership's motel property and of any
financing  or  refinancing  thereof (to the extent that the proceeds of any such
financing  or  refinancing  are  not  to be  reinvested  in the  acquisition  of
additional properties) will be promptly distributed.  Such distributions will be
paid as follows: (1) until the Limited Partners have received distributions from
all  sources  equal to 100% of their  capital  contributions  plus 10% per annum
cumulative on their Adjusted Capital Contributions, all of such proceeds will be
distributed to the Limited Partners; (2) thereafter,  15% of the balance of such
proceeds  will  be  distributed  to  the  General  Partners  as  cash  incentive
distributions  and the remaining 85% thereof will be  distributed to the Limited
Partners.  No distributions  have been paid to or accrued for the benefit of the
General Partners.

Allocation of Compensation

         Compensation to the General  Partners and their affiliates is allocated
as follows:

      (1)  Mr.  Dana  receives   annual  amounts  from  the  General   Partners'
compensation from the Partnership so that his cumulative additional compensation
from  year to year is  equal  to the  greater  of 25% of the  General  Partners'
cumulative  share of Cash  Available for  Distribution  and sale or  refinancing
proceeds  or 25% of the  cumulative  property  management  fees  received by the
General Partners  (reduced by all  Partnership-related  business expenses of the
General Partners).

     (2) All  compensation to the General Partners which is not allocated to Mr.
Dana is divided  equally between  Grotewohl  Management  Services,  Inc. and the
Estate of Dennis A. Brown.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners


                                               AMOUNT AND
    TITLE                                       NATURE OF
     OF                                         BENEFICIAL       PERCENT
    CLASS    NAME  OF BENEFICIAL OWNER          OWNERSHIPT       OF CLASS
  ---------- -------------------------------- ---------------- -----------
    Units    Everest Lodging Investor, LLC         541  Units      7.73%
    Units    Everest Madison Investors, LLC        343  Units      4.90%
                                              ---------
                                  TOTAL            884  Units     12.63%
                                              =========

        No person is known by the Partnership to be the beneficial owner of more
than 5% of the Units.

Security Ownership of Management

        The General Partners do not beneficially own any Units.


                                       15
<PAGE>



Changes in Control

         With the consent of all other  General  Partners  and Limited  Partners
holding more than 50% of the Units, a General  Partner may designate a successor
or additional  general  partner,  in each case with such  participation  in such
General  Partner's  interest as such General Partner and successor or additional
general  partner  may agree upon,  provided  that the  interests  of the Limited
Partners are not affected thereby.

         A General Partner may withdraw from the Partnership at any time upon 60
days'  prior  written  notice to the  Limited  Partners  and any  other  General
Partners, or may transfer his interest to an entity controlled by him; provided,
however,  that in either such event,  if it is determined  that the  Partnership
business  is to be  continued  rather than  dissolved  and  liquidated  upon the
happening  thereof,  the  withdrawal  or transfer  will be effective  only after
receipt by the  Partnership  of an  opinion  of counsel to the effect  that such
withdrawal  or transfer  will not cause the  Partnership  to be classified as an
association  taxable as a corporation  rather than as a partnership  for federal
income tax purposes.

         The  Limited  Partners  shall  take no part  in the  management  of the
Partnership's business; however, a majority in interest of the Limited Partners,
without the concurrence of the General  Partners,  shall have the right to amend
the Partnership Agreement, dissolve the Partnership, remove a General Partner or
any successor  general partner,  elect a new general partner or general partners
upon the removal,  retirement,  death,  insanity,  insolvency or bankruptcy of a
General  Partner,  and approve or disapprove  the sale,  exchange or pledge in a
single transaction of all or substantially all of the properties acquired by the
Partnership.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Administrative Expenses Shared by the Partnership and its Affiliates

         There  are  certain  administrative   expenses  allocated  between  the
Partnership  and affiliated  Super 8  partnerships.  These  expenses,  which are
allocated based on usage, are telephone, data processing, rent of administrative
offices and administrative  salaries.  The administrative  expenses allocated to
the Partnership were  approximately  $123,000 in the fiscal year ended September
30, 1998 and are included in general and  administrative  expenses and motel and
restaurant  operations  expenses  in  the  Partnership's  financial  statements.
Included in administrative  salaries are allocated amounts paid to two employees
who are  related  to Philip B.  Grotewohl,  a 50%  shareholder  of the  Managing
General Partner.











                                       16
<PAGE>


                                     PART IV

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

    (a)  Documents filed as part of this report

  1. Financial Statements Included in Part II of this Report
      Report of Independent Certified Public Accountants
       Balance Sheets,  September 30, 1998 and 1997 Statements of Operations for
       the Years Ended September 30,
          1998, 1997 and 1996
       Statements of Partners' Equity for the Years Ended September 30,
          1998, 1997 and 1996
       Statements of Cash Flows for the Years Ended September 30,
          1998, 1997 and 1996
       Notes to Financial Statements

  2. Financial Statement Schedules Included in Part IV of the Report
           None

  3. Exhibits
      3. and 4. The Partnership  Agreement is incorporated  herein as an exhibit
      from the annual  report on Form 10-K for the fiscal  year ended  September
      30, 1984 (File No. 0-9218).

      10.1 Ground lease pertaining to the Partnership's  Santa Rosa,  California
      property  filed as Exhibit 10.1 to the annual  report on Form 10-K for the
      fiscal  year  ended  September  30,  1982  (File  No.  0-9218)  is  hereby
      incorporated herein as an exhibit.

   (b) Reports on Form 8-K

           None






















                                       17
<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.

                           (Registrant)      SUPER 8 MOTELS II, LTD.

By (Signature and Title)                     /s/     Philip B. Grotewohl
                                             --------------------------------
                                             Philip B. Grotewohl,
                                             Chairman of Grotewohl Management
                                             Services, Inc.,
                                             Managing General Partner

Date  December 22, 1998



         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 and on the dates indicated.


By (Signature and Title)                     /s/     Philip B. Grotewohl
                                             --------------------------------
                                             Philip    B.    Grotewohl,    Chief
                                             executive officer,  chief financial
                                             officer,  chief accounting  officer
                                             and  sole   director  of  Grotewohl
                                             Management Services, Inc., Managing
                                             General Partner

Date December 22, 1998





















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