TEXTAINER FINANCIAL SERVICES CORPORATION
                        650 California Street, 16th Floor
                             San Francisco, CA 94108


March 26, 1998


Securities and Exchange Commission
Washington, DC  20549

Gentlemen:

Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,  we are
submitting  herewith for filing on behalf of Textainer Equipment Income Fund II,
L.P. (the  "Partnership")  the Partnership's  Annual Report on Form 10-K for the
fiscal year ended December 31, 1997.

The financial  statements  included in the enclosed Annual Report on Form 10K do
not reflect a change from the  preceding  year in any  accounting  principles or
practices, or in the method of applying any such principles or practices.

This filing is being effected by direct  transmission to the Commission's  EDGAR
System.

Sincerely,

Nadine Forsman
Controller







<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                               Washington DC 20549

                                    FORM 10K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1997

                         Commission file number 0-19145

                    TEXTAINER EQUIPMENT INCOME FUND II, L.P.
             (Exact name of Registrant as specified in its charter)

         California                                              94-3097644
(State or other jurisdiction                                 (IRS Employer
of incorporation or organization)                            Identification No.)

650 California Street, 16th Floor, San Francisco, CA               94108
(Address of Principal Executive Offices)                         (ZIP Code)

                                 (415) 434-0551
              (Registrant's telephone number, including area code)

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

                                      NONE

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

               LIMITED PARTNERSHIP DEPOSITARY UNITS (THE "UNITS")
                                (TITLE OF CLASS)

              LIMITED PARTNERSHIP INTERESTS (UNDERLYING THE UNITS)
                                (TITLE OF CLASS)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. [ X ]

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 or any amendment to this
Form 10-K.
[  ]

State the aggregate market value of the voting stock held by  non-affiliates  of
the Registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold,  or the  average  bid and ask  prices of such
stock, as of a specified date within 60 days prior to the date of the filing.

Not Applicable.

Documents Incorporated by Reference

The Registrant's Prospectus as contained in Pre-Effective Amendment No. 2 to the
Registrant's Registration Statement, as filed with the Commission on November 3,
1989 as supplemented by Post-Effective Amendment No. 2 filed with the Commission
under Section 8(c) of the Securities Act of 1933 on December 11, 1990.


<PAGE>



                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

For more detailed information about the Registrant's  business, see "Business of
the Partnership" in the Registrant's Prospectus as supplemented.

(a)      General Development of Business

         The Registrant is a California  Limited  Partnership  formed as of July
         11, 1989  to  purchase, own, operate, lease, and  sell  equipment  (the
         Equipment)  used in the  containerized  cargo  shipping  industry.  The
         Registrant  commenced offering units representing  limited  partnership
         interests  (Units) to the public on November 8, 1989 in accordance with
         its Registration Statement and ceased to offer such Units as of January
         15,  1991.  The  Registrant  raised  a total  of  $75,000,000  from the
         offering.

         See  Item 10  herein  for a  description  of the  Registrant's  General
         Partners.  See  item 7  herein  for a  description  of  current  market
         conditions affecting the Registrant's business.

(b)      Financial Information About Industry Segments

         Inapplicable.

(c)      Narrative Description of Business

(c)(1)(i)         A container leasing  company  generally,  and  the  Registrant
                  specifically, is an operating  business comparable to a rental
                  car business.  A customer can lease a car from a  bank leasing
                  department for a monthly charge which  represents  the cost of
                  the car, plus interest, amortized  over the term of the lease;
                  or the customer can rent  the  same  car  from  a  rental  car
                  company at a much  higher  daily  lease rate.  The customer is
                  willing to pay the higher  daily  rate for the convenience and
                  value-added features  provided by the rental car company,  the
                  most  important  of  which  is  the ability to pick up the car
                  where it is most  convenient,  use it for the  desired  period
                  of time, and then drop it off at a location convenient  to the
                  customer.  Rental car companies  compete  with one  another on
                  the basis of  lease  rates,  availability  of  cars,  and  the
                  provision of additional  services.  They generate  revenues by
                  maintaining   the   highest  lease  rates   and   the  highest
                  utilization  factors that market conditions will allow, and by
                  augmenting this income with proceeds from sales of  insurance,
                  drop-off fees, and other special charges.  A large  percentage
                  of lease revenues earned by car rental companies are generated
                  under corporate rate agreements  wherein,  for a stated period
                  of time, employees of a  participating  corporation  can  rent
                  cars at specific terms,  conditions and rental rates.   Buying
                  the cars at fleet  prices and selling them  in  the  secondary
                  market are also key elements to the successful operation of  a
                  rental car business.

                  Container  leasing  companies and the Registrant  operate in a
                  similar manner by owning and leasing a worldwide  fleet of new
                  and used transportation  containers to international  shipping
                  companies  hauling various types of goods among numerous trade
                  routes. In addition to paying a daily rental rate, all lessees
                  must either provide physical damage and liability insurance or
                  purchase a damage  waiver from the  Registrant,  in which case
                  the  Registrant  agrees  to pay  the  cost  of  repairing  any
                  physical  damage  to  containers  caused by  lessees,  special
                  handling fees and/or  drop-off  charges may also be charged in
                  certain markets.  Container leasing companies compete with one
                  another on the basis of lease rates, availability of equipment
                  and services  provided.  Revenues and profits are generated by
                  maintaining the highest lease rates and the highest  equipment
                  utilization  factors  allowed  by  market  conditions.  Rental
                  revenues from the  Registrant's  containers  result  primarily
                  under master leases which are comparable to the corporate rate
                  agreements  used by rental car  companies.  The master  leases
                  provide  that  container  leasing  customers,  for a specified
                  period  of  time,  may  rent  containers  at  specific  terms,
                  conditions and rental rates.  Although the terms of the master
                  lease  governing  each  container  do not vary,  the number of
                  containers  in use can vary from time to time  within the term
                  of the master  lease.  The terms and  conditions of the master
                  lease provide that the lessee pays a daily rental rate for the
                  entire time the container is in his possession (whether or not
                  he is actively using it), is responsible  for any damage,  and
                  must  insure the  container  against  liabilities.  For a more
                  detailed   discussion  of  the  leases  for  the  Registrant's
                  Equipment,   see  "Leasing  Policy"  under  "Business  of  the
                  Partnership" in the  Registrant's  Prospectus as supplemented.
                  Rental car companies usually purchase only new cars, but since
                  containers  are completely  standardized,  a used container in
                  serviceable condition usually rents for the same rate as a new
                  one although the purchase price is lower. For this reason, the
                  Registrant  occasionally buys used containers.  The Registrant
                  also  sells  containers  in  the  course  of its  business  if
                  opportunities  arise or at the end of the  container's  useful
                  life.  See  "Business  of  the  Partnership"  in  Registrant's
                  Prospectus, as supplemented.

(c)(1)(ii)        Inapplicable.

(c)(1)(iii)       Inapplicable.

(c)(1)(iv)        Inapplicable.

(c)(1)(v)         Inapplicable.

(c)(1)(vi)        Inapplicable.

(c)(1)(vii)       No single  lessee  had  rental  revenue  for  the  year  ended
                  December 31, 1997  which  was  10% or more of the total rental
                  revenue of the Registrant.

(c)(1)(viii)      Inapplicable.

(c)(1)(ix)        Inapplicable.

(c)(1)(x)         There  are   approximately  80  container   leasing  companies
                  of   which   the   top  ten  control approximately  92% of the
                  total equipment held by all container  leasing companies.  The
                  top  two   container   leasing   companies   combined  control
                  approximately 47% of the total equipment held by all container
                  leasing companies.  Textainer  Equipment  Management  Limited,
                  an Associate General Partner of the Registrant and the manager
                  of its  marine  container  Equipment,  is  the  third  largest
                  container  leasing  company  and manages  approximately  8% of
                  the equipment  held by all container  leasing  companies.  The
                  Registrant  alone   is   not a  material  participant  in  the
                  worldwide container leasing market.  The principal methods  of
                  competition  are  price,  availability  and  the  provision of
                  worldwide  service to the  international  shipping  community.
                  Additionally,   shipping   alliances   and  other  operational
                  consolidations  among  shipping  lines  have  recently allowed
                  shipping lines  to  operate  with  fewer  containers,  thereby
                  decreasing the demand for leased  containers.   This  decrease
                  in  demand  along  with  the  entry  of  new  leasing  company
                  competitors  offering low  container  rental rates to shipping
                  lines  has  increased  competition  among  lessors such as the
                  Registrant.

(c)(1)(xi)        Inapplicable.

(c)(1)(xii)       Inapplicable.

(c)(1)(xiii)      The Registrant has no employees.  Textainer Financial Services
                  Corporation   (TFS),  the  Managing  General  Partner  of  the
                  Registrant,  is responsible for the overall  management of the
                  business  of the  Registrant  and has 7  employees.  Textainer
                  Equipment  Management  Limited  (TEM),  an  Associate  General
                  Partner,  is  responsible  for the  management  of the leasing
                  operations of the Registrant and has a total of 149 employees.

(d)      Financial  Information about Foreign and Domestic Operations and Export
         Sales.

         The  Registrant  is involved in the leasing of shipping  containers  to
         international   shipping   companies   for  use  in  world   trade  and
         approximately  14.35%,  13.67%  and 11.93% of the  Registrant's  rental
         revenue  during  the years  ended  December  31,  1997,  1996 and 1995,
         respectively,   was  derived  from  operations  sourced  or  terminated
         domestically.  These  percentages  do not reflect the proportion of the
         Partnership's  income from operations  generated in domestic waterways.
         Substantially  all of  the  Partnership's  income  from  operations  is
         derived from assets  employed in foreign  operations.  See "Business of
         the  Partnership",  and  for a  discussion  of  the  risks  of  leasing
         containers for use in world trade,  "Risk Factors" in the  Registrant's
         Prospectus, as supplemented.

ITEM 2 - PROPERTIES

As of December 31, 1997, the Registrant owned the following types and quantities
of equipment:

   20-foot standard dry freight containers                                 8,682
   20-foot refrigerated containers                                           158
   40-foot standard dry freight containers                                 6,179
   40-foot high cube dry freight containers                                2,678
                                                                         -------
                                                                          17,697
                                                                         =======

During  December 1997,  approximately  81% of these shipping  containers were on
lease to international  shipping  companies and the balance were being stored at
shipping  container  manufacturers'  locations  and at a large number of storage
depots located worldwide.

For further  information about the Registrant's  property,  see "Business of the
Partnership" in the Registrant's Prospectus, as supplemented.

ITEM 3 - LEGAL PROCEEDINGS

The Registrant is not subject to any legal proceedings.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

Inapplicable.

                                     PART II

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

ITEM 201:

a)       Market Information.

(a)(1)(i)         The units of limited  partnership  in the  Registrant  are not
                  publicly traded and there is no established trading market for
                  such  Units.  The  Registrant  has a program  whereby  limited
                  partners  may redeem Units for a specified  redemption  price.
                  The program  operates only when the Managing  General  Partner
                  determines,  among other  matters,  that  payment for redeemed
                  units  will  not  impair  the  capital  or  operations  of the
                  Registrant.

(a)(1)(ii)        Inapplicable.

(a)(1)(iii)       Inapplicable.

(a)(1)(iv)        Inapplicable.

(a)(1)(v )        Inapplicable.

(a)(2)            Inapplicable.

(b)      Holders.

(b)(1)            As of January 1, 1998 there were  4,814  holders of record  of
                  limited  partnership  interests  in the Registrant.

(b)(2)            Inapplicable.

(c)      Dividends.

                  Inapplicable.

For details of the distributions which are made monthly by the Registrant to its
limited partners, see Item 6 "Selected Financial Data."

ITEM 701 - Inapplicable.

ITEM 6 - SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                     (Amounts in thousands except for per unit amounts)
                                                                  Year Ended December 31,
                                       ------------------------------------------------------------------------------
                                                1997           1996             1995           1994           1993
                                                ----           ----             ----           ----           ----
<S>                                        <C>            <C>              <C>             <C>           <C>      
Rental income.....................        $   10,433     $   11,613       $   13,232      $   13,193    $   13,690
Net earnings......................        $    2,715     $    2,806       $    4,579      $    4,166    $    3,173

Net earnings per unit
  of limited partnership
  interest........................        $     0.71     $     0.74       $     1.21      $     1.10    $     0.82

Distributions per unit
  of limited partnership
  interest........................        $     1.60     $     1.60       $     1.60      $     1.60    $     2.13

Distributions per unit
   of limited partnership
   interest representing a
   return of capital..............        $     0.89     $     0.86       $     0.39      $     0.50    $     1.31

Total assets......................        $   42,865     $   46,510       $   49,998      $   51,393    $   55,675
Outstanding balance on
revolving credit line.............        $        -     $        -       $        -      $        -    $    2,400
                                                                                                  


</TABLE>
<PAGE>


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

           (Amounts in thousands except for unit and per unit amounts)

The Financial Statements contain information which will assist in evaluating the
financial  condition of the  Partnership  for the years ended December 31, 1997,
1996,  and 1995.  Please refer to the Financial  Statements and Notes thereto in
connection with the following discussion.

Liquidity and Capital Resources

From November 8, 1989 until January 15, 1991, the  Partnership  offered  limited
partnership  interests  to the  public.  The  Partnership  received  its minimum
subscription  amount of $1,000 on December 19, 1989, and on January 15, 1991 the
Partnership had received its maximum subscription amount of $75,000.

From time to time,  the  Partnership  redeems units from limited  partners for a
specified  redemption  value.  The redemption price is set by formula and varies
depending on length of time units are outstanding. Up to 2% of the Partnership's
outstanding  units  may be  redeemed  each  year,  although  the 2% limit may be
exceeded at the managing  general  partner's  discretion.  All  redemptions  are
subject to the managing general partner's good faith  determination that payment
for the  redeemed  units  will not (i)  cause the  Partnership  to be taxed as a
corporation,  (ii) impair the capital or operations of the Partnership, or (iii)
impair the ability of the  Partnership to pay  distributions  in accordance with
its distribution policy. During the year ended December 31, 1997 the Partnership
redeemed  126 units for a total  dollar  amount of $1,  representing  an average
redemption price of $8.71. The Partnership has used cash flow from operations to
pay for the redeemed units.

The Partnership  invests working capital and cash flow from operations  prior to
its  distribution  to  the  partners  in  short-term,  liquid  investments.  The
Partnership's  cash is  affected  by  cash  provided  by or  used in  operating,
investing and financing  activities.  These  activities  are discussed in detail
below.

During  the  year  ended  December  31,  1997,  the  Partnership  declared  cash
distributions  to limited  partners  pertaining to the period from December 1996
through November 1997, in the amount of $5,963. These distributions  represent a
return of 8% on original capital (measured on an annualized basis) on each unit.
Of these distributions,  on a GAAP basis, $3,311 was a return of capital and the
balance was from net earnings.  On a cash basis, all of these distributions were
from operations.

For the years ended  December 31, 1997 and 1996,  the  Partnership  had net cash
provided  by  operating  activities  of $8,392  and  $8,849,  respectively.  The
decrease  was  primarily  attributable  to a $1,122  decrease  in net  earnings,
adjusted for  non-cash  transactions  of  depreciation,  equipment  write-downs,
changes in the bad debt  allowance  and gain on sale of  Equipment,  offset by a
decrease in due from affiliates, net of $1,586. Net income adjusted for non-cash
transactions  decreased  primarily  due to a  decrease  in rental  income.  This
decrease was  primarily due to decreases in  utilization,  fleet size and rental
rates which are discussed more fully in "Results of Operations". The decrease in
due from  affiliates,  net was due to  timing  differences  in the  accrual  and
payment of  expenses  and fees or in the accrual  and  remittance  of net rental
revenues.

Net cash used in investing  activities  (the purchase and sale of Equipment) for
the year ended  December 31, 1997 was $3,035  compared  with $1,583 for the year
ended December 31, 1996. This difference is primarily due to the fact that, on a
cash basis,  the  Partnership  purchased more Equipment in 1997 than in the same
period in 1996.  The General  Partners  believe that these  differences  reflect
normal  fluctuations  in Equipment sales and purchases.  The  Partnership  sells
Equipment as it reaches the end of its estimated  useful life.  Consistent  with
its investment objectives and the General Partners' determination that Equipment
can be  profitably  sold or bought  at any  time,  the  Partnership  intends  to
reinvest all or a significant  amount of proceeds from future Equipment sales in
additional  Equipment.  Such  additional  units of Equipment  purchased may not,
however, equal the number of units sold.

At December 31, 1997, the Partnership had no commitments to purchase Equipment.
Results of Operations

The  Partnership's  income from operations,  which consists  primarily of rental
income, container depreciation,  direct container expenses, management fees, and
reimbursement of administrative expenses was directly related to the size of the
container fleet ("inventory") during the years ended December 31, 1997, 1996 and
1995.  The following is a summary of the size of the container  fleet (in units)
available for lease during those periods:

                                              1997           1996          1995
                                              ----           ----          ----

    Opening inventory...................     18,016         18,650        18,522
    Closing inventory...................     17,697         18,016        18,650
    Average.............................     17,857         18,333        18,586


The decline in the average  inventory of 3% and 1% from 1996 to 1997 and 1995 to
1996,  respectively,  was due to the Partnership having sold more Equipment than
it  purchased.   Although  sales  proceeds  were  used  to  purchase  additional
Equipment,  fewer containers were bought than sold,  resulting in a net decrease
in the size of the Equipment fleet. When Equipment is sold in the future,  sales
proceeds are not likely to be sufficient  to replace all of the Equipment  sold.
Moreover,  the decline in the container fleet  contributed to an overall decline
in rental income from 1996 to 1997 and 1995 to 1996. These factors resulted in a
slower rate of reinvestment than had been expected by the General Partners. This
trend is currently expected to continue.

Rental  income  and  direct  container  expenses  are  also  affected  by  lease
utilization  percentages  for the  Equipment,  which  were  77%,  81% and 91% on
average during the years ended December 31, 1997,  1996 and 1995,  respectively.
In addition, rental income is affected by daily rental rates.

The  following is a comparative  analysis of the results of  operations  for the
years ended December 31, 1997, 1996 and 1995.

The  Partnership's  income from operations for both the years ended December 31,
1997 and 1996 was  $2,471,  on total  rental  income  of  $10,433  and  $11,613,
respectively.  The  largest  component  of total  rental  income is income  from
container  rentals,  which decreased $1,223, or 12%, from 1996 to 1997. As noted
above  income from  container  rentals is largely  dependent  on three  factors:
Equipment available for lease (average inventory), average on-hire (utilization)
percentage,  and average  daily rental rates.  Average fleet size  decreased 3%,
average  on-hire  utilization  decreased  5%  and  average  daily  rental  rates
decreased 5%.

The  Partnership's  income from operations for the years ended December 31, 1996
and 1995 was $2,471, and $4,210, respectively, on total rental income of $11,613
and $13,232,  respectively.  The largest  component  of total  rental  income is
income from container  rentals,  which  decreased  $1,398,  or 12%, from 1995 to
1996.  This  decrease  was  primarily  due  to a  decrease  in  average  on-hire
utilization  of 11%,  and a decrease in average  fleet size of 1%,  offset by an
increase in average daily rental rates of 1%.

The declines in container utilization during 1996 and part of 1997 and in rental
rates during 1996 and 1997 were  primarily  due to  decreased  demand for leased
containers  and  increased  competition.  The  decrease  in  demand  for  leased
containers  resulted  from  changes in the business of shipping  line  customers
consisting  primarily  of (i)  over-capacity  resulting  from  the 1995 and 1996
additions of new, larger ships to the existing container ship fleet at a rate in
excess of the growth rate in  containerized  cargo  trade;  (ii)  shipping  line
alliances and other operational  consolidations that have allowed shipping lines
to operate with fewer containers;  and (iii) shipping lines reducing their ratio
of leased  versus owned  containers  by purchasing  containers.  This  decreased
demand,  along with the entry of new leasing  company  competitors  offering low
container rental rates to shipping lines,  resulted in the downward  pressure on
rental  rates,  and  also  caused  leasing  companies  to offer  higher  leasing
incentives and other discounts to shipping lines.

Utilization  increased  during the second and third  quarters  of 1997 and began
declining  again  during the fourth  quarter of 1997 and into the  beginning  of
1998. Rental rates continued to decline into the beginning of 1998. For the near
term,  the General  Partners  do not  foresee  any  changes in  existing  market
conditions and caution that both  utilization  and lease rates could continue to
decline, adversely affecting the Partnership's operating results.

Substantially  all of the  Partnership's  rental income was  generated  from the
leasing of the  Partnership's  Equipment under short-term  operating  leases. At
December 31,  1997,  1996 and 1995 there were 98, 334 and 367  containers  under
direct financing leases, respectively.

The balance of rental income consists of other  lease-related  items,  primarily
income  from  charges  to the  lessees  for  pick-up  of  containers  from prime
locations  less  credits  granted to lessees  for leasing  containers  from less
desirable locations (location income),  income from charges to the lessees under
a Damage Protection Plan (DPP) and income for handling and returning containers.
For the year ended  December  31, 1997,  the total of these other rental  income
items was $1,186,  an increase of $43 from the  equivalent  period in 1996.  The
primary  components  of this net  increase  were  increases  in DPP and handling
income of $83 and $80, respectively,  offset by a decrease in location income of
$108.  The increase in DPP income was due to an increased  number of  containers
participating  in the plan,  offset by a lower  average  DPP price  charged  per
container. Handling income increased as a result of increased container movement
during the year ended  December 31, 1997,  compared to 1996.  This  increase was
offset by a lower per container average handling price charged.  Location income
decreased  primarily  due to lower  demand,  which  resulted  in an  increase in
credits to lessees for picking up containers  from less desirable  locations and
due to lower  average  drop-off  charges per container  which  reduced  drop-off
charges to lessees during 1997 compared to 1996.

For the year ended  December  31, 1996,  the total of these other rental  income
items was $1,143,  a decrease of $221 from the  equivalent  period in 1995.  The
primary  component of this net decrease in other rental  revenues was a decrease
in location income of $234, which decreased primarily due to lower demand, which
resulted in an increase  in credits to lessees  for picking up  containers  from
less  desirable  locations  and  due to a  lower  average  drop-off  charge  per
container which reduced drop-off charges to lessees.

Direct container  expenses increased by $146, or 8%, for the year ended December
31,  1997,  compared to the year ended  December  31,  1996.  The  increase  was
primarily  due to increases in  repositioning  and storage  expenses of $182 and
$129,  respectively,  offset  by a  decrease  in  maintenance  expense  of $150.
Repositioning  expense  increased due to a greater  number of  containers  being
transported  from surplus  locations to demand locations during 1997 compared to
1996. The increase in storage expense  resulted from the decrease in utilization
in the year ending  December  31, 1997  compared  to 1996.  Maintenance  expense
decreased  due to the decrease in the average  repair cost per container and due
to a decrease in the number of containers requiring repair.

Direct container  expenses  decreased by $90, or 5%, for the year ended December
31,  1996,  compared to the year ended  December  31,  1995.  The  decrease  was
primarily due to decreases in DPP and  maintenance  expense which decreased $120
and $112, respectively,  between periods. The decrease was offset by an increase
in storage expense of $338.  Accrued  maintenance and DPP expenses decreased due
to the  decrease  in the average  repair cost for units  returned by lessees for
repairs.  The increase in storage expense was primarily due to lower utilization
for the year ended December 31, 1996, compared to the same period in 1995.

Bad debt expense  increased  from a recovery of $97 for the year ended  December
31,  1996,  to an expense  of $92 for the year  ended  December  31,  1997.  The
recovery  recorded  in  1996  was  primarily  due  to  a  reduction  in  reserve
requirements  for a specific  lessee as a result of a resolution of prior period
payment problems with that lessee during 1996.

Bad debt expense  decreased  from an expense of $512 for the year ended December
31,  1995,  to a  recovery  of $97 for the same  period  in 1996.  The  recovery
recorded in 1996 was primarily due to a reduction in reserve  requirements for a
specific lessee as discussed above.

Depreciation  expense decreased $246, or 6%, from December 31, 1996, to the same
period in 1997,  and decreased by $251, or 6%, from the year ended  December 31,
1995, to the same period in 1996.  The decline for both periods is  attributable
to certain Equipment,  acquired used, which has now been fully  depreciated,  as
well as to the smaller average fleet size.

In the fourth quarter of 1996 and the second quarter of 1997,  pretax charges of
$1,421  and $343,  respectively,  were  recorded  to write down the value of the
refrigerated  containers  owned by the  Partnership.  During 1996,  the carrying
value of these  refrigerated  containers  was written down to an amount equal to
the estimated  future  discounted cash flows from these  containers as there had
been no recent sales of this Equipment  type. The Equipment was further  written
down during  1997 based on the sales  prices  received  in recent  sales of this
Equipment.

Management  fees to  affiliates  decreased by $85, or 8%, and $85, or 7% between
the years  ended  December  31,  1997 and 1996 and  December  31, 1996 and 1995,
respectively,   due  to  a  decline  in  Equipment  management  fees.  Equipment
management  fees,  which are based  primarily on gross  revenue,  decreased as a
result of the  decrease  in rental  income  and were  approximately  7% of gross
revenue  for the  periods.  Incentive  management  fees,  which are based on the
Partnership's limited and general partner distribution  percentage and partners'
capital,  remained  constant at $251 for the years ending December 31, 1997, and
1996 and $252 for the year ending December 31, 1995.

General and  administrative  costs to  affiliates  decreased 3%, or $17, for the
year ended  December  31,  1997,  compared to the same period in 1996,  due to a
decrease  in  overhead   costs   allocated   from  TFS  and  TEM.   General  and
administrative  costs to affiliates  decreased  33%, or $329, for the year ended
December  31,  1996,  compared  to the same period in 1995,  primarily  due to a
decrease in overhead costs allocated from TEM.

Other income provided $244 of additional  income for the year ended December 31,
1997,  representing  a decrease of $91, or 27%,  over the  equivalent  period in
1996.  This  decrease was due to a $112  decrease in gain on sale of  Equipment,
offset by a $21 increase in interest income.

Other income provided $335 of additional  income for the year ended December 31,
1996, representing a decrease of $34, or 9%, from the equivalent period in 1995.
This decrease was due to a $52 decrease in gain on sale of Equipment, and an $18
increase in interest income.

Net earnings per limited partnership unit decreased from $0.74 to $0.71 from the
year ended December 31, 1996 to the year ended December 31, 1997, reflecting the
decrease in limited partner net earnings from $2,743 for the year ended December
31, 1996 to $2,652 for the same period in 1997.

Net earnings per limited partnership unit decreased from $1.21 to $0.74 from the
year ended December 31, 1995 to the year ended December 31, 1996, reflecting the
decrease in limited partner net earnings from $4,501 for the year ended December
31, 1995 to $2,743 for the same period in 1996.

Many computer systems may experience difficulty processing dates beyond the year
1999 and, as such, some computer  hardware and software will need to be modified
prior to the year 2000 to  remain  functional.  The  Partnership's  and  General
Partner's  certain core internal systems that have recently been implemented are
year 2000  compliant.  The remaining  core internal  systems are scheduled to be
revised  to be year  2000  compliant  by the end of 1998.  Based on its  initial
evaluation,  the  Partnership  and the General  Partners do not believe that the
cost of remedial  actions relating to these systems will have a material adverse
effect on the  Partnership's  results of  operations  and  financial  condition.
Additionally,  the  Partnership  and the General  Partners are also completing a
preliminary  assessment  of year 2000  issues not  related to its core  systems,
including issues surrounding systems that interface with external third parties.

Although  substantially  all of the  Partnership's  income  from  operations  is
derived from assets employed in foreign operations, virtually all of this income
is  denominated  in United  States  dollars.  The  Partnership's  customers  are
international  shipping  lines  which  transport  goods on  international  trade
routes.  The  domicile  of the lessee is not  indicative  of where the lessee is
transporting  the  Equipment.  The  Partnership's  business  risk in its foreign
operations lies with the  creditworthiness of the lessees, and the Partnership's
ability to keep the Equipment under lease,  rather than the geographic  location
of the  Equipment  or the domicile of the  lessees.  The  Equipment is generally
operated on the international high seas rather than on domestic  waterways.  The
Equipment is subject to the risk of war or other  political,  economic or social
occurrence  where  the  Equipment  is  used,  which  may  result  in the loss of
Equipment,  which,  in turn,  may have a  material  impact on the  Partnership's
results of operations  and  financial  condition.  The General  Partners are not
aware of any  conditions  as of December  31, 1997 which would  result in such a
risk materializing.

Other risks of the Partnership's  leasing  operations include  competition,  the
cost of  repositioning  Equipment  after  it  comes  off-lease,  the  risk of an
uninsured  loss,  increases in maintenance  expenses or other costs of operating
the  Equipment,  and the effect of world trade,  industry  trends and/or general
business and economic cycles on the Partnership's operations. See "Risk Factors"
in the Partnership's  Prospectus as supplemented,  for additional information on
risks of the Partnership's business.

ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Inapplicable

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Attached pages 12 to 24.


<PAGE>




                          Independent Auditors' Report


The Partners
Textainer Equipment Income Fund II, L.P.:

We have audited the  accompanying  balance sheets of Textainer  Equipment Income
Fund II, L.P. (a  California  limited  partnership)  as of December 31, 1997 and
1996, and the related  statements of earnings,  partners' capital and cash flows
for each of the years in the three-year  period ended  December 31, 1997.  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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Textainer Equipment Income Fund
II, L.P. as of December  31, 1997 and 1996,  and the results of its  operations,
its  partners'  capital,  and  its  cash  flows  for  each of the  years  in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles.



                              KPMG Peat Marwick LLP





San Francisco, California
February 18, 1998


<PAGE>



                    TEXTAINER EQUIPMENT INCOME FUND II, L.P.
                       (a California Limited Partnership)

                                 Balance Sheets

                           December 31, 1997 and 1996
                             (Amounts in thousands)
<TABLE>
<CAPTION>

                                                                              1997                    1996
                                                                       -----------------       -----------------

<S>                                                                     <C>                   <C>
Assets
Container rental equipment, net of accumulated
    depreciation of $22,257 (1996:  $21,660)                             $       38,315        $         39,408
Cash                                                                                981                   1,655
Net investment in direct financing leases (note 4)                                  493                     695
Accounts receivable, net of allowance
    for doubtful accounts of $1,024 (1996:  $1,073)                               2,864                   3,126
Due from affiliates, net (note 2)                                                   117                   1,601
Prepaid expenses                                                                     95                      25
                                                                       -----------------       -----------------


                                                                         $       42,865        $         46,510
                                                                       =================       =================
Liabilities and Partners' Capital
Liabilities:
   Accounts payable                                                      $          254        $            314
   Accrued liabilities                                                              229                     168
   Accrued damage protection plan costs (note 1(j))                                 226                     263
   Warranty claims (note 1(k))                                                      599                     812
   Equipment purchases payable                                                      342                     426
                                                                       -----------------       -----------------

      Total liabilities                                                           1,650                   1,983
                                                                       -----------------       -----------------

Partners' capital:
   General partners                                                                 (90)                    (90)
   Limited partners                                                              41,305                  44,617
                                                                       -----------------       -----------------

      Total partners' capital                                                    41,215                  44,527
                                                                       -----------------       -----------------


                                                                         $       42,865        $         46,510
                                                                       =================       =================

See accompanying notes to financial statements

</TABLE>

<PAGE>


                    TEXTAINER EQUIPMENT INCOME FUND II, L.P.
                       (a California Limited Partnership)

                             Statements of Earnings

                  Years ended December 31, 1997, 1996 and 1995
           (Amounts in thousands except for unit and per unit amounts)
<TABLE>
<CAPTION>

                                                                            1997                 1996                   1995
                                                                      -----------------    -----------------      -----------------
<S>                                                                   <C>                  <C>                    <C>             
Rental Income                                                         $         10,433     $         11,613       $         13,232
                                                                      -----------------    -----------------      -----------------

Costs and expenses:
   Direct container expenses                                                     2,003                1,857                  1,947
   Bad debt expense (recovery)                                                      92                  (97)                   512
   Depreciation                                                                  3,733                3,979                  4,230
   Write-down of equipment (note 7)                                                343                1,421                      -
   Professional fees                                                                33                   48                     37
   Management fees to affiliates (note 2)                                          975                1,060                  1,145
   General and administrative costs to affiliates (note 2)                         648                  665                    994
   Other general and administrative costs                                          135                  209                    157
                                                                      -----------------    -----------------      -----------------

                                                                                 7,962                9,142                  9,022
                                                                      -----------------    -----------------      -----------------

   Income from operations                                                        2,471                2,471                  4,210
                                                                      -----------------    -----------------      -----------------

Other income:
   Interest income                                                                  75                   54                     36
   Gain on sale of equipment (note 6)                                              169                  281                    333
                                                                      -----------------    -----------------      -----------------

                                                                                   244                  335                    369
                                                                      -----------------    -----------------      -----------------

   Net earnings                                                       $          2,715     $          2,806       $          4,579
                                                                      =================    =================      =================

Allocation of net earnings (note 1(g)):
   General partners                                                   $             63     $             63       $             78
   Limited partners                                                              2,652                2,743                  4,501
                                                                      -----------------    -----------------      -----------------

                                                                      $          2,715     $          2,806       $          4,579
                                                                      =================    =================      =================

Limited partners' per unit share
   of net earnings                                                    $           0.71     $            0.74      $            1.21
                                                                      =================    =================      =================

Limited partners' per unit share
   of distributions                                                   $           1.60     $            1.60      $            1.60
                                                                      =================    =================      =================

Weighted average number of limited
   partnership units outstanding (note 1(l))                                 3,726,977            3,728,358              3,734,955
                                                                      =================    =================      =================


See accompanying notes to financial statements
</TABLE>


<PAGE>


                    TEXTAINER EQUIPMENT INCOME FUND II, L.P.
                       (a California Limited Partnership)

                         Statements of Partners' Capital

                  Years ended December 31, 1997, 1996 and 1995
                             (Amounts in thousands)
<TABLE>
<CAPTION>

                                                                       Partners' Capital
                                                    ---------------------------------------------------------
                                                       General              Limited                Total
                                                    --------------       ---------------       --------------
<S>                                                <C>                  <C>                   <C>
Balances at December 31, 1994                       $         (90)       $       49,458        $      49,368

Distributions                                                 (78)               (5,975)              (6,053)

Redemptions (note 1(m))                                         -                  (129)                (129)

Net earnings                                                   78                 4,501                4,579
                                                    --------------       ---------------       --------------

Balances at December 31, 1995                                 (90)               47,855               47,765
                                                    --------------       ---------------       --------------

Distributions                                                 (63)               (5,965)              (6,028)

Redemptions (note 1(m))                                         -                   (16)                 (16)

Net earnings                                                   63                 2,743                2,806
                                                    --------------       ---------------       --------------

Balances at December 31, 1996                                 (90)               44,617               44,527
                                                    --------------       ---------------       --------------

Distributions                                                 (63)               (5,963)              (6,026)

Redemptions (note 1(m))                                         -                    (1)                  (1)

Net earnings                                                   63                 2,652                2,715
                                                    --------------       ---------------       --------------

Balances at December 31, 1997                       $         (90)       $       41,305        $      41,215
                                                    ==============       ===============       ==============


See accompanying notes to financial statements

</TABLE>

<PAGE>


                    TEXTAINER EQUIPMENT INCOME FUND II, L.P.
                       (a California Limited Partnership)

                            Statements of Cash Flows

                  Years ended December 31, 1997, 1996 and 1995
                             (Amounts in thousands)
<TABLE>
<CAPTION>

                                                                                           1997             1996              1995
                                                                                     ---------------  ---------------   ------------
<S>                                                                                  <C>              <C>               <C>    <C>
Cash flows from operating activities:
   Net earnings                                                                       $       2,715   $        2,806    $     4,579
   Adjustments to reconcile net earnings to
     net cash provided by operating activities:
        Depreciation and equipment write-down                                                 4,076            5,400          4,230
        (Decrease) increase in allowance for doubtful accounts                                  (49)            (230)           274
        Gain on sale of equipment                                                              (169)            (281)          (333)
        Changes in assets and liabilities:
           Decrease in net investment in direct financing leases                                241              440            356
           Decrease in accounts receivable                                                      311              495            158
           Decrease in due from affiliates, net                                               1,586              492              2
           (Increase) decrease in prepaid expenses                                              (70)               -              2
           Increase (decrease) in accounts payable and accrued liabilities                        1               (1)           (63)
           (Decrease) increase in accrued damage protection plan costs                          (37)             (58)           102
           (Decrease) increase in warranty claims                                              (213)            (214)           371
                                                                                     ---------------  ---------------   ------------

              Net cash provided by operating activities                                       8,392            8,849          9,678
                                                                                     ---------------  ---------------   ------------

Cash flows from investing activities:
   Proceeds from sale of equipment                                                            3,049            2,105          2,157
   Equipment purchases                                                                       (6,084)          (3,688)        (5,842)
                                                                                     ---------------  ---------------   ------------

              Net cash used in investing activities                                          (3,035)          (1,583)        (3,685)
                                                                                     ---------------  ---------------   ------------

Cash flows from financing activities:
   Redemptions of limited partnership units                                                      (1)             (16)          (129)
   Distributions to partners                                                                 (6,030)          (6,084)        (6,010)
                                                                                     ---------------  ---------------   ------------

              Net cash used in financing activities                                          (6,031)          (6,100)        (6,139)
                                                                                     ---------------  ---------------   ------------

Net (decrease) increase in cash                                                                (674)           1,166           (146)

Cash at beginning of period                                                                   1,655              489            635
                                                                                     ---------------  ---------------   ------------

Cash at end of period                                                                 $         981   $        1,655    $       489
                                                                                     ===============  ===============   ============


See accompanying notes to financial statements
</TABLE>



<PAGE>



                    Textainer Equipment Income Fund II, L.P.
                       (a California Limited Partnership)

                       Statements of Cash Flows--Continued
                  Years ended December 31, 1997, 1996 and 1995
                             (Amounts in thousands)

Supplemental Disclosures:

Supplemental schedule of non-cash investing and financing activities:

The following table summarizes the amounts of Equipment purchases, distributions
to  partners,  and proceeds  from sale of  Equipment  which had not been paid or
received  by the  Partnership  as of December  31,  1997,  1996,  1995 and 1994,
resulting in  differences  in amounts  recorded and amounts of cash disbursed or
received by the Partnership, as shown in the Statements of Cash Flows.
<TABLE>
<CAPTION>

                                                                1997            1996           1995           1994
                                                                ----            ----           ----           ----
<S>                                                          <C>             <C>             <C>            <C>
Equipment purchase included in:
     Due to affiliates.............................           $   (3)         $   27         $   85         $   27
     Equipment purchases payable...................              342             426            400            599

Distributions to partners included in:
     Due to affiliates.............................                6              10             63             17
     Accounts payable & accrued liabilities........               77              77             80             83

Proceeds from sale of Equipment included in:
     Due from affiliates...........................              566             498            404            346
     Accounts receivable...........................                -              -              87             54

The following table summarizes the amounts of Equipment purchases, distributions
to partners, and proceeds from sale of Equipment recorded by the Partnership and
the amounts  paid or received as shown in the  Statements  of Cash Flows for the
years ended December 31, 1997, 1996, and 1995.

                                                                              1997            1996           1995
                                                                              ----            ----           ----

Equipment purchases recorded.........................................       $5,970          $3,656         $5,701
Equipment purchases paid.............................................        6,084           3,688          5,842

Distributions to partners declared...................................        6,026           6,028          6,053
Distributions to partners paid.......................................        6,030           6,084          6,010

Proceeds from sale of Equipment recorded.............................        3,117           2,112          2,248
Proceeds from sale of Equipment received.............................        3,049           2,105          2,157


See accompanying notes to financial statements
</TABLE>


<PAGE>




                    Textainer Equipment Income Fund II, L.P.
                       (a California Limited Partnership)

                          Notes to Financial Statements
                  Years ended December 31, 1997, 1996 and 1995
           (Amounts in thousands except for unit and per unit amounts)

Note 1    Summary of Significant Accounting Policies

      (a)  Nature of Operations

      Textainer  Equipment Income Fund II, L.P. (TEIF II or the Partnership),  a
      California  limited  partnership,  with a maximum  life of 20  years,  was
      formed  on July 11,  1989.  The  Partnership  was  formed to engage in the
      business  of  owning,  leasing  and  selling  both new and used  equipment
      related  to  the  international  containerized  cargo  shipping  industry,
      including,   but  not  limited   to,   containers,   trailers   and  other
      container-related   equipment  (the  Equipment).  TEIF  II  offered  units
      representing  limited  partnership  interests  (Units) to the public until
      January  15,  1991,  the  close of the  offering  period,  when a total of
      3,750,000 Units had been purchased for a total of $75,000.

      Textainer  Financial  Services  Corporation  (TFS) is the managing general
      partner of the Partnership  and is a wholly-owned  subsidiary of Textainer
      Capital Corporation (TCC).  Textainer  Equipment  Management Limited (TEM)
      and  Textainer   Limited  (TL)  are  associate  general  partners  of  the
      Partnership.  The  managing  general  partner  and the  associate  general
      partners  are  collectively  referred to as the General  Partners  and are
      commonly  owned by Textainer  Group Holdings  Limited  (TGH).  The General
      Partners  also  act in  this  capacity  for  other  limited  partnerships.
      Textainer  Acquisition  Services  Limited  (TAS)  is an  affiliate  of the
      General  Partners which performs  services  related to the  acquisition of
      Equipment  outside  the United  States on behalf of the  Partnership.  TCC
      Securities  Corporation  (TSC), a licensed broker and dealer in securities
      and an affiliate of the General Partners, was the managing sales agent for
      the offering of Units for sale.
      The General Partners manage and control the affairs of the Partnership.

      (b)  Basis of Accounting

      The  Partnership  utilizes the accrual  method of  accounting.  Revenue is
      recorded  when  earned  according  to the  terms of the  Equipment  rental
      contracts.  These contracts are classified as operating  leases, or direct
      financing   leases  if  they  so  qualify  under  Statement  of  Financial
      Accounting Standards No. 13: "Accounting for Leases". Substantially all of
      the  Partnership's  rental  income was  generated  from the leasing of the
      Partnership's Equipment under short-term operating leases.

      (c)  Use of Estimates

      Certain   estimates  and  assumptions  were  made  by  the   Partnership's
      management that affect the reported amounts of assets and liabilities, and
      disclosures  of  contingent  assets  and  liabilities  at the  date of the
      financial  statements  and the  reported  amounts of revenue and  expenses
      during the  reporting  period.  Actual  results  could  differ  from those
      estimates.

      (d)  Fair Value of Financial Instruments

      In  accordance  with the Statement of Financial  Accounting  Standards No.
      107,  "Disclosures  about  Fair  Value  of  Financial   Instruments,"  the
      Partnership  calculates  the  fair  value  of  financial  instruments  and
      includes  this  additional  information  in the  notes  to  the  financial
      statements  when the fair value is different  than the book value of those
      financial  instruments.  At December 31, 1997 and 1996,  the fair value of
      the Partnership's financial instruments approximate the related book value
      of such instruments.

      (e)  Equipment

      The  Equipment  is  recorded  at the cost of the assets  purchased,  which
      includes acquisition fees, less depreciation charged.  Depreciation of new
      Equipment is computed  using the  straight-line  method over its estimated
      useful  life  of 12  years  to a 28%  salvage  value.  Used  Equipment  is
      depreciated based upon its estimated  remaining useful life at the date of
      acquisition  (from 2 to 11 years).  When assets are  retired or  otherwise
      disposed  of, the cost and related  accumulated  depreciation  are removed
      from the accounts and any  resulting  gain or loss is recognized in income
      for the period.

      In  accordance  with the Statement of Financial  Accounting  Standards No.
      121,  "Accounting  for the Impairment of Long-Lived  Assets and Long-Lived
      Assets  to be  Disposed  of"  (SFAS  121),  the  Partnership  periodically
      compares the carrying value of the Equipment to expected future cash flows
      for the purpose of assessing the  recoverability  of the recorded amounts.
      If the carrying value exceeds  expected future cash flows,  the assets are
      written  down to fair  value.  Reductions  to the  carrying  value  of the
      Equipment, are described in note 7.

      (f)  Nature of Income from Operations

      Although  substantially all of the Partnership's income from operations is
      derived from assets employed in foreign operations,  virtually all of this
      income  is  denominated  in  United  States  dollars.   The  Partnership's
      customers  are  international  shipping  lines  that  transport  goods  on
      international  trade routes.  The domicile of the lessee is not indicative
      of where the  lessee is  transporting  the  Equipment.  The  Partnership's
      business risk in its foreign operations lies with the  creditworthiness of
      the lessees  rather than the  geographic  location of the Equipment or the
      domicile of the lessees.

      For the years ended  December 31, 1997,  1996 and 1995, no  single  lessee
      accounted for more than 10% of the Partnership's revenues.

      (g)  Allocation of Net Earnings and Partnership Distributions

      In accordance with the Partnership  Agreement,  net earnings or losses and
      partnership distributions are allocated 1% to the General Partners and 99%
      to the Limited Partners with the exception of gross income,  as defined in
      the  Partnership  agreement.  Gross  income is  allocated  to the  General
      Partners  to the extent that their  partners'  capital  accounts  deficits
      exceed the portion of syndication and offering costs allocated to them. On
      termination of the  Partnership,  the General  Partners shall be allocated
      gross income equal to their allocations of syndication and offering costs.

      Actual  cash  distributions  to  the  Limited  Partners  differ  from  the
      allocated net earnings as presented in these financial  statements because
      cash  distributions  are based on cash  available for  distribution.  Cash
      distributions  are paid to the general  and Limited  Partners on a monthly
      basis in accordance with the provisions of the Partnership Agreement. Some
      limited partners have elected to have their  distributions paid quarterly.
      The Partnership has recorded these  distributions as an accrued  liability
      at December 31, 1997 and 1996.

      (h)  Income Taxes

      The Partnership is not subject to income taxes. Accordingly,  no provision
      for income taxes has been made.  The  Partnership  files federal and state
      information  returns  only.  Taxable  income or loss is  reportable by the
      individual partners.

      (i)  Acquisition Fees

      In accordance with the Partnership Agreement, acquisition fees equal to 5%
      of the Equipment  purchase  price are paid to TAS (see note 2). These fees
      are capitalized as part of the cost of the Equipment.

      (j)  Damage Protection Plan

      The  Partnership  offers a Damage  Protection Plan (DPP) to lessees of its
      Equipment.  Under  the  terms of DPP,  the  Partnership  earns  additional
      revenues  on a daily  basis  and,  in return,  has agreed to bear  certain
      repair costs.  It is the  Partnership's  policy to recognize  revenue when
      earned  and to  provide a reserve  sufficient  to cover the  Partnership's
      obligation for estimated future repair costs. DPP expenses are included in
      direct  container  expenses in the  Statements of Earnings and the related
      reserve at December 31, 1997 and 1996, was $226 and $263, respectively.

      (k) Warranty Claims

      During  1992,  1993 and 1995,  the  Partnership  settled  warranty  claims
      against an equipment  manufacturer.  The  Partnership  is  amortizing  the
      settlement  amounts  over  the  remaining  estimated  useful  lives of the
      applicable  Equipment (between six and seven years),  reducing maintenance
      and repair  costs over that  time.  At  December  31,  1997 and 1996,  the
      unamortized  portion of the settlement amounts was equal to $599 and $812,
      respectively.

      (l)  Limited Partners' Per Unit Share of Net Earnings and Distributions

      Limited  partners per unit share of both net  earnings  and  distributions
      were  computed  using the  weighted  average  number of units  outstanding
      during  the years  ended  December  31,  1997,  1996 and  1995,  which was
      3,726,977, 3,728,358, and 3,734,955, respectively.

      (m)  Redemptions

      The following  redemption  offerings were  consummated by the  Partnership
      during the years ended December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>

                                                            Units           Average
                                                          Redeemed     Redemption Price    Amount Paid
<S>                                                       <C>             <C>                <C>  
        Balance at December 31, 1994:                        9,582           $ 12.55            $ 120
                                                             =====                              =====
        Year ended December 31, 1995:
              1st quarter.................                   4,287           $  12.09          $   52
              2nd quarter................                    3,215           $  10.76              35
              3rd quarter.................                   4,042           $  10.40              42
                                                           -------                            -------
                                                            11,544           $  11.13           $ 129
                                                            ======                              =====

        Year ended December 31, 1996:
              1st quarter.................                     250          $    9.44         $     2
              3rd quarter.................                     771          $    9.12               7
              4th quarter.................                     750          $    9.17               7
                                                            ------                           --------
                                                             1,771          $    9.19          $   16
                                                             =====                             ======
        Year ended December 31, 1997:
              1st quarter.................                     126          $    8.71         $     1
                                                           =======                            =======

         Partnership to date...................             23,023           $ 11.54            $ 266
                                                            ======                              =====
</TABLE>

      The  redemption  price is fixed by formula,  and varies  depending  on the
      length of time the units have been outstanding.

      (n)  Reclassifications

      Certain  reclassifications,  not affecting net earnings, have been made to
      prior years' amounts in order to conform with the 1997 financial statement
      presentation.

Note 2.  Transactions with Affiliates

      As part of the operation of the Partnership,  the Partnership is to pay to
      the General  Partners or TAS an incentive  management  fee, an acquisition
      fee, an equipment  management fee and an equipment  liquidation fee. These
      fees  are  for  various   services   provided  in   connection   with  the
      administration and management of the Partnership. The Partnership incurred
      $251,  $251, and $252 of incentive  management fees during the years ended
      December  31,  1997,  1996  and  1995,  respectively,   and  incurred  and
      capitalized $288, $173, and $281 of equipment  acquisition fees as part of
      Equipment  costs during the same periods.  No equipment  liquidation  fees
      were incurred in 1997, 1996 or 1995.

      The  Equipment  of the  Partnership  is  managed  by TEM.  In its  role as
      manager,  TEM has  authority to acquire,  hold,  manage,  lease,  sell and
      dispose of the Equipment.  TEM holds,  for the payment of direct operating
      expenses,  a  reserve  of  cash  that  has  been  collected  from  leasing
      operations; such cash is included in due from affiliates, net, at December
      31, 1997 and 1996. Prior to the Partnership's sale of its storage fleet in
      1995 (note 6),  TEM had  entered  into an  agreement  with its  100%-owned
      subsidiary  Textainer  Storage  Services  (TSS) to  manage  these  storage
      containers.

      Subject to certain reductions, TEM receives a monthly equipment management
      fee equal to 7% of gross lease revenues  attributable to operating  leases
      and 2% of gross  lease  revenues  attributable  to full payout net leases.
      Such fee is either  retained  by TEM or,  prior to the sale of its storage
      fleet,  such fees allocable to TSS were passed through by TEM for services
      rendered.  In 1997, 1996 and 1995, equipment management fees totaled $724,
      $809,  and  $893,  respectively.  The  Equipment  is leased by TEM and was
      leased by TSS to third party  lessees on  operating  master  leases,  spot
      leases,  term  leases and full  payout net  leases.  The  majority  of the
      Partnership's  leases  are  operating  leases  with  limited  terms and no
      purchase option.

      Certain  indirect  general  and  administrative  costs  such as  salaries,
      employee  benefits,   taxes  and  insurance  are  incurred  in  performing
      administrative  services  necessary to the  operation of the  Partnership.
      These costs are incurred and paid by TFS, TEM,  and,  prior to the sale of
      the   Partnership's   storage  fleet  in  1995,  TSS.  Total  general  and
      administrative costs allocated to the Partnership were $648, $665 and $994
      for the years ended  December 31, 1997,  1996 and 1995,  respectively,  of
      which $352, $348, and $524 were for salaries.

      TEM and TSS allocate these general and  administrative  costs based on the
      ratio of the Partnership's  interest in the managed Equipment to the total
      Equipment  managed by TEM and TSS during the period.  TFS allocates  these
      costs  based on the  ratio of the  Partnership's  Equipment  to the  total
      Equipment  of  all  limited  partnerships  managed  by  TFS.  General  and
      administrative  costs  allocated  to the  Partnership  by TEM and TSS were
      $572, $577, and $850 for the years ended December 31, 1997, 1996 and 1995,
      respectively.   TFS   allocated   $76,   $88,  and  $144  of  general  and
      administrative costs to the Partnership during the same periods.

      The General  Partners or TAS may acquire  Equipment  in their own name and
      hold  title on a  temporary  basis for the  purpose  of  facilitating  the
      acquisition of such Equipment for the Partnership.  The Equipment may then
      be resold to the  Partnership on an all-cash basis at a price equal to the
      actual cost, as defined in the  Partnership  Agreement.  In addition,  the
      General  Partners  or TAS  are  entitled  to an  acquisition  fee  for any
      Equipment resold to the Partnership.

      At December 31, 1997 and 1996, due from affiliates, net is comprised of:

                                                            1997           1996
                                                            ----           ----
      Due from affiliates:
        Due from TEM...........................            $  152        $ 1,665
                                                           ------        -------

      Due to affiliates:
        Due to TL..............................                 1              1
        Due to TCC.............................                 9              9
        Due to TAS.............................                 -             27
        Due to TFS.............................                25             27
                                                         --------     ----------
                                                               35             64
                                                         ---------    ----------

      Due from affiliates, net                             $  117        $ 1,601
                                                           ======        =======

      These amounts  receivable  from and payable to affiliates were incurred in
      the ordinary course of business between the Partnership and its affiliates
      and represent  timing  differences  in the accrual and payment of expenses
      and fees  described  above or in the accrual and  remittance of net rental
      revenues from TEM and TSS.

      It is the policy of the  Partnership  and the  General  Partners to charge
      interest on intercompany  balances outstanding for more than one month, to
      the extent such balances relate to loans for Equipment purchases. Interest
      is charged at a rate not greater than the General Partners' or affiliates'
      own cost of funds. There was no interest charged on intercompany  balances
      for the years ended 1997, 1996, or 1995.

Note 3.  Rentals Under Operating Leases

      The following are the future  minimum rent  receivables  under  cancelable
      long-term operating  leases at December 31, 1997.  Although the leases are
      generally cancelable at  the  end  of  each  twelve-month  period  with  a
      penalty,  the following schedule assumes  that  the  leases  will  not  be
      terminated.

      Year ending December 31,

       1998..............................................................  $ 343
       1999..............................................................     86
       2000..............................................................     43
                                                                         -------

       Total minimum future rentals receivable...........................  $ 472
                                                                           =====

Note 4.  Direct Financing Leases

      The  Partnership  has leased  containers  under direct finance leases with
      terms  ranging from six months to five years.  The  components  of the net
      investment in direct financing leases as of December 31, 1997 and 1996 are
      as follows:
<TABLE>
<CAPTION>
                                                                                  1997             1996
                                                                                  ----            -----

<S>                                                                              <C>              <C>  
                 Future minimum lease payments receivable....................    $ 650           $ 967
                  Residual value..............................................       -               4
                 Less: unearned income.......................................     (157)           (276)
                                                                               --------         -------

                 Net investment in direct financing leases...................    $ 493           $ 695
                                                                                 =====           =====
</TABLE>

      The following is a schedule by year of minimum lease  payments  receivable
      under the direct financing leases at December 31, 1997:

                 Year ending December 31:

                 1998...................................................$    262
                 1999...................................................     229
                 2000...................................................     159
                                                                             ---

                 Total minimum lease payments receivable................$    650
                                                                             ===

      Rental  income  for the  years  ended  December  31,  1997,  1996 and 1995
      includes $110, $238, and $165, respectively, of income from direct finance
      leases.

Note 5.  Income Taxes

      At December 31, 1997, 1996 and 1995,  there were temporary  differences of
      $23,653,  $26,844,  and  $26,902,  respectively,   between  the  financial
      statement carrying value of certain assets and liabilities and the federal
      income tax basis of such assets and liabilities. The reconciliation of net
      income for financial  statement  purposes to net income for federal income
      tax  purposes for the years ended  December 31, 1997,  1996 and 1995 is as
      follows:
<TABLE>
<CAPTION>

                                                                                  1997          1996          1995
                                                                                  ----          ----          ----
<S>                                                                           <C>           <C>           <C>     
        Net income per financial statements..............................     $  2,715      $  2,806      $  4,579

        (Decrease) increase in provision for bad debt....................          (49)         (230)          274
        Depreciation for income tax purposes less than (in excess of)
          depreciation for financial statement purposes..................          521        (1,631)       (6,007)
        Gain on sale of fixed assets for federal income tax
          purposes in excess of gain recognized for
          financial statement purposes...................................        2,969         1,679         2,270
        (Decrease) increase in damage protection plan costs                        (37)          (58)          102
        Warranty reserve income for tax purposes in excess of
          financial statement purposes...................................         (213)          298          (141)
                                                                               --------    ----------    ----------

        Net income for federal income tax purposes.......................    $   5,906      $  2,864      $  1,077
                                                                             ==========     ========      ========
</TABLE>

Note 6.  Sale of Storage Fleet

      In August 1995, the Partnership sold its container storage fleet,  managed
      by TSS, to an unrelated  purchaser.  The proceeds  from the sale were $603
      compared  to the  Partnership's  cost  basis  in the  equipment  of  $540,
      resulting in a gain of $63.  The  Partnership  invested the proceeds  from
      this sale in additional marine container rental equipment.

Note 7.  Equipment Write-down

      In the fourth  quarter of 1996, a pretax  charge of $1,421 was recorded to
      write down the value of certain equipment. The write-down is the result of
      an evaluation of the  Partnership's  ability to recover the net book value
      of this equipment given the changes in market conditions for this specific
      container type. The estimated  undiscounted  cash flows  anticipated  from
      these refrigerated  containers  indicated that a write-down to fair market
      value  was  required   under  SFAS  121.  The  carrying   value  of  these
      refrigerated  containers  was  written  down  to an  amount  equal  to the
      estimated future discounted cash flows from these refrigerated containers,
      as there had been no recent sales of this  Equipment type to indicate fair
      value.

      During 1997, it was determined  that an additional  write-down of $343 was
      required  based on 1997  sales of this  Equipment.  The  write-downs  were
      recorded as additional depreciation expense during 1997 and 1996.




<PAGE>




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

There have been none.

                                    PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Registrant has no officers or directors.

As described in the Prospectus, the Registrant's three original general partners
were TCC, TEM and TI which comprised the Textainer Group.  Effective  October 1,
1993, the Textainer Group  streamlined its organization by forming a new holding
company,  Textainer Group Holdings  Limited (TGH),  and the  shareholders of the
underlying  companies which include the General Partners  accepted shares in TGH
in exchange for their shares in the individual  companies.  Textainer  Financial
Services  Corporation  (TFS) is the Managing  General Partner of the Partnership
(prior to its name change on April 4, 1994,  TFS was known as Textainer  Capital
Corporation).  TFS is a wholly-owned subsidiary of Textainer Capital Corporation
(TCC)  (prior to its name  change on April  4,1994,  TCC was known as  Textainer
(Delaware) Inc.).  Textainer Equipment  Management Limited (TEM) is an Associate
General Partner of the Partnership. Textainer Inc. (TI) was an Associate General
Partner of the  Partnership  through  September 30, 1993 when it was replaced in
that capacity by Textainer Limited (TL), pursuant to a corporate  reorganization
effective October 1, 1993, which caused TFS, TEM and TL to fall under the common
ownership of TGH. (The Managing  General Partner and Associate  General Partners
are  collectively  referred  to as  the  General  Partners).  Pursuant  to  this
restructuring,  TI has transferred substantially all of its assets including all
of its rights and duties as associate  general  partner to TL. This transfer was
effective  from  October  1, 1993.  The end result was that TFS,  TEM and TL now
serve  as  General   Partners  for  the  Registrant  and  are   wholly-owned  or
substantially-owned  subsidiaries of TGH. The General  Partners also act in this
capacity for other limited partnerships.  Textainer Acquisition Services Limited
(TAS) is an affiliate of the General Partners,  which performs services relative
to the  acquisition  of  Equipment  outside  the United  States on behalf of the
Partnership.  TCC Securities  Corporation (TSC), a licensed broker and dealer in
securities  and an affiliate  of the General  Partners,  was the managing  sales
agent for the offering of Units for sale.

TFS,  as  the  Managing  General  Partner,   is  responsible  for  managing  the
administration  and operation of the  Registrant,  and for the  formulation  and
administration of investment policies.

TEM, an Associate  General Partner,  manages all aspects of the operation of the
Registrant's Equipment.

TL, an Associate  General  Partner,  owns a fleet of container  rental Equipment
which is  managed  by TEM.  TL  provides  advice  to the  Partnership  regarding
negotiations  with financial  institutions,  manufacturers and Equipment owners,
and regarding the terms upon which particular items of Equipment are acquired.

Section 16(a) Beneficial Ownership Reporting Compliance.

      Section  16(a)  of the  Securities  Exchange  Act  of  1934  requires  the
      Partnership's  General Partners,  policy-making  officials and persons who
      beneficially  own more than ten  percent  of the Units to file  reports of
      ownership  and  changes in  ownership  with the  Securities  and  Exchange
      Commission.  Copies  of  these  reports  must  also  be  furnished  to the
      Partnership.

      Based  solely on a review of the  copies of such  forms  furnished  to the
      Partnership or on written  representations  that no forms were required to
      be filed,  the  Partnership  believes that with respect to its most recent
      fiscal year ended December 31, 1997, all Section 16(a) filing requirements
      were  complied  with (except that Robert D.  Pedersen,  a newly  appointed
      director of TEM,  filed his initial  statement of  beneficial  interest on
      Form 3 late, which Form was filed on Form 5). No member of management,  or
      beneficial  owner  owned  more  than 10  percent  of any  interest  in the
      Partnership.  None of the individuals subject to section 16(a),  including
      Mr. Pedersen,  failed to file or filed late any reports of transactions in
      the Units.

The directors and executive officers of the General Partners are as follows:
<TABLE>
<CAPTION>

Name                             Age    Position

<S>                             <C>     <C>
Neil I. Jowell                    64    Director and Chairman of TGH, TEM, TL, TCC and TFS
James E. Hoelter                  58    President and CEO of TGH and TL, Director of TGH, TEM, TL, TCC, TFS and TSC
John A. Maccarone                 53    President  and CEO of TEM and TSC, Vice  President of TGH,  Director of TGH,
                                        TEM, TL, TCC, TFS and TSC
John R. Rhodes                    48    Executive  Vice  President,  CFO, and Secretary of TGH, TEM, TL, TCC and TFS
                                        and Director of  TEM, TCC and TFS
Alex M. Brown                     59    Director of TGH, TEM, TL, TCC, TFS and TSC
Harold J. Samson                  76    Director of TGH, TL and TSC
Philip K. Brewer                  41    President of TCC and TFS,  Senior Vice  President - Capital  Markets
                                        for TGH and TL
Robert D. Pedersen                39    Senior Vice President - Marketing for TEM, Director of TEM
Anthony C. Sowry                  45    Vice President - Operations and Acquisitions for TEM
Jens W. Palludan                  47    Regional Vice President - Americas/Africa/Australia for TEM
Wolfgang Geyer                    44    Regional Vice President - Europe/Middle East/Persian Gulf for TEM
Mak Wing Sing                     40    Regional Vice President - South Asia for TEM
Masanori Sagara                   42    Regional Vice President - North Asia for TEM
Stefan Mackula                    45    Vice President - Equipment Resale for TEM
Ernest J. Furtado                 42    Vice  President,  Finance and  Assistant  Secretary of TGH, TL, TEM, TCC and
                                        TFS, Director of TCC and TFS
Richard G. Murphy                 45    Vice President - Risk Management for TEM
Janet S. Ruggero                  49    Vice President - Administration and Marketing Services for TEM
Adnan Z. Abou Ayyash              53    Director of TGH and TL
Isam K. Kabbani                   63    Director of TGH and TL
S. Arthur Morris                  64    Director of TGH, TEM and TL
Dudley R. Cottingham              46    Assistant Secretary, Vice President and Director of TGH, TEM and TL
Cara D. Smith                     35    Member of Investment Advisory Committee
Nadine Forsman                    30    Controller of TCC, TFS and TSC
</TABLE>

          Neil I. Jowell is Director and  Chairman of TGH,  TEM, TL, TCC and TFS
and a member of the Investment  Advisory Committee (see "Committees"  below). He
has served on the Board of Trencor Ltd.  since 1966 and as Chairman  since 1973.
He is also a director of Mobile Industries, Ltd. (1969 to present), an Affiliate
of Trencor,  and a non-executive  director of Forward  Corporation Ltd. (1993 to
present).  Trencor is a publicly traded  diversified  industrial group listed on
the Johannesburg Stock Exchange. Its business is the leasing,  owning,  managing
and  financing of marine cargo  containers  worldwide  and the  manufacture  and
export of containers for international  markets.  In South Africa, it is engaged
in manufacturing, transport, trading and exports of general commodities. Trencor
also has an interest in Forward  Corporation  Ltd.,  a publicly  traded  holding
company  listed  on  the  Johannesburg  Stock  Exchange.  It  has  interests  in
industrial  and consumer  businesses  operating in South Africa and abroad.  Mr.
Jowell  became  affiliated  with the General  Partners and its  affiliates  when
Trencor became,  through its beneficial ownership in two controlled companies, a
major  shareholder of the Textainer Group in 1992. Mr. Jowell has over 36 years'
experience  in the  transportation  industry.  He holds an  M.B.A.  degree  from
Columbia University and a B.Com.L.L.B. from the University of Cape Town.

          James E. Hoelter is President and Chief  Executive  Officer of TGH and
TL, and a director of TGH,  TEM, TL, TCC,  TFS and TSC. As  President  and Chief
Executive  Officer  of TGH,  Mr.  Hoelter  is  responsible  for  overseeing  the
management  of, and  coordinating  the  activities  of, TEM, TL, TCC and TFS. In
addition,  Mr.  Hoelter is  Chairman  of the Credit  Committee,  the  Investment
Advisory  Committee and the Equipment  Investment  Committee (see  "Committees",
below).  Prior to joining the Textainer Group in 1987, Mr. Hoelter was president
of Intermodal  Equipment  Associates ("IEA"), a marine container leasing company
based in San  Francisco.  Mr.  Hoelter  co-founded IEA in 1978 and was president
from inception until 1987. From 1976 to 1978, Mr. Hoelter was vice president for
Trans Ocean Ltd., San Francisco,  a marine container  leasing company,  where he
was  responsible  for  North  America.  From 1971 to 1976,  he  worked  for Itel
Corporation,  San Francisco,  where he was director of financial leasing for the
container  division.  Mr.  Hoelter  received  his  B.B.A.  in  finance  from the
University of Wisconsin,  where he currently  serves as a member of its Business
School's Dean's Advisory Board, and his M.B.A.  from the Harvard Graduate School
of Business Administration.

          John A.  Maccarone is President and CEO of TEM and TSC, Vice President
of TGH and a director of TGH,  TEM, TL, TCC, TFS and TSC. In this capacity he is
responsible  for the  performance  of  TEM's  worldwide  fleet of  marine  cargo
containers.  Additionally, he is a member of the Equipment Investment Committee,
the Credit Committee and the Investment  Advisory  Committee (see  "Committees",
below).  Mr.  Maccarone was instrumental in co-founding IEA with Mr. Hoelter and
held a variety of  executive  positions  with IEA from 1979 until 1987,  when he
joined the Textainer Group. Mr. Maccarone was previously a Director of Marketing
for Trans Ocean Leasing  Corporation  in Hong Kong with  responsibility  for all
leasing  activities in Southeast  Asia.  From 1969 to 1977, Mr.  Maccarone was a
marketing  representative  for  IBM  Corporation.  He  holds  a B.S.  degree  in
Engineering  Management  from  Boston  University  and  an  M.B.A.  from  Loyola
University of Chicago.

          John R. Rhodes is Executive Vice President,  Chief  Financial  Officer
and  Secretary of TGH,  TEM, TL, TCC and TFS and a director of TEM, TCC and TFS.
In this capacity he is responsible for all accounting, financial management, and
reporting  functions for the Textainer  Group. He is also a member of the Credit
Committee,  the Equipment Investment Committee and Investment Advisory Committee
(see  "Committees",  below).  Prior to joining  Textainer in November  1987, Mr.
Rhodes was Vice President of Finance for Greenbrier  Capital  Corporation in San
Francisco,  a trailer  leasing and management  company,  from 1986 to 1987; from
1981 to 1985, he was employed by Gelco Rail Services, an intermodal refrigerated
trailer  company in San  Francisco,  first in the capacity of Vice President and
Controller  and then as Senior Vice President and General  Manager.  Mr. Rhodes'
earlier  business  affiliations  include  serving as Vice  President and General
Manager  of Itel  Capital  Corporation  and as  senior  accountant  with  Arthur
Andersen & Co., both in San Francisco.  He is a Certified Public  Accountant and
holds a B.A. in economics from Stanford  University and an M.B.A.  in accounting
from Golden Gate University.

          Alex M. Brown is a director  of  TGH,  TEM,  TL,  TCC,  TFS  and  TSC.
Additionally,  he is a member  of the  Equipment  Investment  Committee  and the
Investment  Advisory  Committee (see  "Committees",  below). Mr. Brown is also a
director of Trencor  Ltd.  (1996 to present)  and Forward  Corporation  (1997 to
present).  Both companies are publicly traded and are listed on the Johannesburg
Stock  Exchange.  Mr. Brown became  affiliated with the Textainer Group in April
1986.  From 1987 until 1993,  he was President  and Chief  Executive  Officer of
Textainer,  Inc.  and the  Chairman of the  Textainer  Group.  Mr. Brown was the
managing  director  of Cross  County  Leasing in England  from 1984 until it was
acquired by Textainer in 1986.  From 1993 to 1997, Mr. Brown was Chief Executive
Officer  of AAF, a company  affiliated  with  Trencor  Ltd.  Mr.  Brown was also
Chairman of WACO International Corporation, based in Cleveland, Ohio until 1997.

          Harold J. Samson is a director of TGH, TL and TSC and is a  member  of
the Investment  Advisory Committee (see "Committees",  below). Mr. Samson served
as a consultant  to various  securities  firms since 1981 to 1989.  From 1974 to
1981 he was  Executive  Vice  President  of Foster & Marshall,  Inc., a New York
Stock  Exchange  member firm based in Seattle.  Mr. Samson was a director of IEA
from 1979 to 1981.  From 1957 to 1984 he served as Chief  Financial  Officer  in
several  New York Stock  Exchange  member  firms.  Mr.  Samson  holds a B.S.  in
Business  Administration  from the University of  California,  Berkeley and is a
California Certified Public Accountant.

          Philip K. Brewer is President of  TCC  and  TFS  and  is  Senior  Vice
President  Capital  Markets for TGH and TL. As President  of TCC, Mr.  Brewer is
responsible for overseeing the management of, and coordinating the activities of
TCC and TFS. As Senior Vice  President,  he is  responsible  for  optimizing the
capital  structure of and identifying new sources of finance for Textainer.  Mr.
Brewer is a member of the Credit Committee,  the Investment  Advisory  Committee
and the  Equipment  Investment  Committee  (see  "Committees"  below).  Prior to
joining Textainer in 1996, Mr. Brewer worked at Bankers Trust from 1990 to 1996,
starting  as a Vice  President  in  Corporate  Finance  and  ending as  Managing
Director  and Country  Manager  for  Indonesia;  from 1989 to 1990,  he was Vice
President in Corporate  Finance at Jarding  Fleming;  from 1987 to 1989,  he was
Capital  Markets   Advisor  to  the  United  States  Agency  for   International
Development;  and from  1984 to 1987 he was an  Associate  with  Drexel  Burnham
Lambert in New York.  Mr.  Brewer  holds an M.B.A.  in Finance from the Graduate
School of Business at Columbia University, and a B.A. in Economics and Political
Science from Colgate University.

          Robert D. Pedersen is Senior Vice  President - Marketing for TEM and a
Director  of  TEM,   responsible  for  worldwide  sales  and  marketing  related
activities.  Mr. Pedersen is a member of the Equipment  Investment Committee and
the Credit Committee (see "Committees" below). He joined TEM in 1991 as Regional
Vice President for the Americas Region. Mr. Pedersen has extensive experience in
the industry  having held a variety of  positions  with Maersk Line, a container
shipping line (from 1978 to 1984),  XTRA, a container  lessor (1985 to 1988) and
Klinge Cool, a manufacturer  of  refrigerated  container  cooling units (1989 to
1991),  where he was worldwide sales and marketing  director.  Mr. Pedersen is a
graduate of the A.P.  Moller  shipping and  transportation  program and Merkonom
Business School in Copenhagen, majoring in Company Organization.

          Anthony C. Sowry is Vice President - Operations and  Acquisitions  for
TEM. He is also a member of the Credit  Committee and the  Equipment  Investment
Committee (see  "Committees",  below).  Mr. Sowry  supervises all  international
container  operations  and  maintenance  and technical  functions for the fleets
under management.  In addition, he is responsible for the acquisition of all new
and used containers for the Textainer  Group. He began his affiliation  with TEM
in 1988 and  previously  served as Fleet Quality  Control  Manager for Textainer
Inc. from 1982 through March 1988. From 1980 to 1982, he was operations  manager
for  Trans  Container  Services  in  London;  and from  1978 to  1982,  he was a
technical  representative  for Trans Ocean Leasing,  also in London. He received
his B.A. degree in business  management from the London School of Business.  Mr.
Sowry is a member of the Technical  Committee of the International  Institute of
Container Lessors and a certified container inspector.

          Jens W.  Palludan is based in  Hackensack,  New Jersey and is Regional
Vice President - Americas/Africa/Australia for TEM, responsible for coordinating
all leasing  activities  in North and South  America,  Africa and  Australia/New
Zealand.  Mr.  Palludan spent his career from 1969 through 1992 with Maersk Line
of Copenhagen,  Denmark in a variety of key management positions in both Denmark
and  overseas.  Prior to joining TEM in 1993 Mr.  Palludan was General  Manager,
Equipment and Terminals,  where he was  responsible  for a fleet of over 200,000
TEUs.  Mr.  Palludan  holds an  M.B.A.  from  the  Centre  European  D'Education
Permanente, Fontainebleau, France.

         Wolfgang  Geyer is based  in  Hamburg,  Germany  and is  Regional  Vice
President  -  Europe/  Middle  East/  Persian  Gulf  for  TEM,  responsible  for
coordinating  all leasing  activities  in these areas of  operation.  Mr.  Geyer
joined Textainer in 1993 and was the Marketing  Director in Hamburg through July
1997. Mr. Geyer most recently was the Senior Vice President,  for Clou Container
Leasing,  responsible for Clou's leasing  activities on a worldwide  basis.  Mr.
Geyer work for Clou from 1991 to 1993.  Mr.  Geyer  spent the  remainder  of his
leasing career,  1975 through 1991,  with Itel  Container,  during which time he
held numerous positions in both operations and marketing within the company.

          Mak Wing Sing is based in Singapore and is the Regional Vice President
-  South  Asia  for  TEM,   responsible  for  container  leasing  activities  in
North/Central  People's  Republic of China, Hong Kong and South China (PRC), and
Southeast Asia. Mr. Mak most recently was the Regional Manager,  Southeast Asia,
for Trans Ocean Leasing, working there from 1994 to 1996. From 1987 to 1994, Mr.
Mak worked with Tiphook as their Regional  General  Manager,  and with OOCL from
1976 to 1987 in a  variety  of  positions,  most  recently  as  their  Logistics
Operations Manager.

          Masanori  Sagara is based in Yokohama,  Japan and is the Regional Vice
President - North Asia for TEM, responsible for Textainer's marketing activities
in Japan,  Korea,  and Taiwan.  Mr. Sagara joined  Textainer in 1990 and was the
company's  Marketing  Director in Japan through 1996.  From 1987 to 1990, he was
the Marketing  Manager with IEA. Mr. Sagara's other  experience in the container
leasing business includes marketing  management at Genstar from 1984 to 1987 and
various  container  operations  positions  with  Thoresen & Company from 1979 to
1984.  Mr.  Sagara holds a Bachelor of Science  degree in Economics  from Aoyama
Bakuin University.

          Stefan Mackula is Vice President - Equipment  Resale for TEM, in which
capacity he coordinates the worldwide sale of Equipment into secondary  markets.
Mr. Mackula also served as Vice President - Marketing for TEM, in which capacity
he was responsible for  coordinating all leasing  activities in Europe,  Africa,
and the Middle  East.  He joined TEM in 1983 as Leasing  Manager  for the United
Kingdom. Prior to joining TEM, Mr. Mackula held, beginning in 1972, a variety of
positions in the international container shipping industry.

          Ernest J. Furtado is Vice President,  Finance and Assistant  Secretary
of TGH, TL, TEM, TCC and TFS and a Director of TCC and TFS, in which capacity he
is responsible for all accounting, financial management, and reporting functions
for TGH, TL, TEM,  TCC and TFS.  Additionally,  he is a member of the  Equipment
Investment  Committee and the Investment  Advisory  Committee (see "Committees",
below).  Prior to joining  Textainer in May 1991, Mr. Furtado was Controller for
Itel Instant Space and manager of accounting for Itel  Containers  International
Corporation,  both in San Francisco,  from 1984 to 1991. Mr.  Furtado's  earlier
business  affiliations include serving as audit manager for Wells Fargo Bank and
as senior  accountant with John F. Forbes & Co., both in San Francisco.  He is a
Certified Public Accountant and holds a B.S. in business administration from the
University of California at Berkeley and an M.B.A.  in information  systems from
Golden Gate University.

          Richard G. Murphy is Vice  President,  Risk  Management  for TEM.  Mr.
Murphy is responsible for all credit and risk  management  functions for TEM and
supervises the administrative aspects of Equipment acquisitions.  He is a member
of and acts as secretary to the Credit and Equipment Investment  Committees (see
"Committees",  below). He previously served as TEM's Director of Credit and Risk
Management from 1989 to 1991 and as Controller  from 1988 to 1989.  Prior to the
takeover of the management of the Interocean  Leasing Ltd. fleet by TEM in 1988,
Mr. Murphy held various  positions in the  accounting  and financial  areas with
that company  from 1980,  acting as Chief  Financial  Officer from 1984 to 1988.
Prior to 1980, he held various positions with firms of public accountants in the
U.K. Mr.  Murphy is an Associate of the  Institute of Chartered  Accountants  in
England  and Wales and holds a Bachelor of  Commerce  degree  from the  National
University of Ireland.

          Janet S.  Ruggero  is Vice  President,  Administration  and  Marketing
Services for TEM.  Ms.  Ruggero is  responsible  for the tracking and billing of
fleets under TEM management,  including direct  responsibility for ensuring that
all data is input in an accurate and timely  fashion.  She assists the marketing
and  operations  departments by providing  statistical  reports and analyses and
serves on the  Credit  Committee  (see  "Committees",  below).  Prior to joining
Textainer in 1986,  Ms.  Ruggero held various  positions with Gelco CTI over the
course of 15 years, the last one as Director of Marketing and Administration for
the North American Regional office in New York City. She has a B.A. in education
from Cumberland College.

          Dr.  Adnan Z. Abou  Ayyash is a director of TGH and TL.  Since 1974 he
has been General Manager and Chief Executive Officer of one of the largest firms
of consulting  engineers in Saudi  Arabia,  Rashid  Engineering.  Dr. Adnan Abou
Ayyash holds a B.S. degree in Civil Engineering from the American  University of
Beirut,  as well as M.S.  and  Ph.D.  degrees  in  Civil  Engineering  from  the
University of Texas.

          Sheikh Isam K. Kabbani is a director of TGH and TL. He is Chairman and
principal  stockholder of the IKK Group,  Jeddah,  Saudi Arabia, a manufacturing
and trading group which is active both in Saudi Arabia and  internationally.  In
1959 Sheikh Isam Kabbani joined the Saudi Arabian  Ministry of Foreign  Affairs,
and in 1960 moved to the Ministry of Petroleum for a period of ten years. During
this time he was seconded to the Organization of Petroleum  Exporting  Countries
(OPEC).  After a period as Chief  Economist of OPEC, in 1967 he became the Saudi
Arabian  member of OPEC's  Board of  Governors.  In 1970 he left the ministry of
Petroleum to establish his own business, the National Marketing Group, which has
been his principal business activity for the past 18 years. Sheikh Kabbani holds
a B.A.  degree from  Swarthmore  College,  Pennsylvania,  and an M.A.  degree in
Economics and International Relations from Columbia University.

          S. Arthur  Morris is a director  of TGH,  TEM and TL. He is a founding
partner in the firm of Morris and Kempe,  Chartered Accountants  (1962-1977) and
currently  functions  as a  correspondent  member of a number  of  international
accounting  firms through his firm Arthur Morris and Company (1978 to date).  He
is also President and director of Continental Management Limited (1977 to date).
Continental  Management Limited is a Bermuda corporation that provides corporate
representation,   administration  and  management  services  and  corporate  and
individual  trust  administration   services.  Mr.  Morris  has  over  30  years
experience in public  accounting and serves on numerous  business and charitable
organizations in the Cayman Islands and Turks and Caicos Islands. Mr.
Morris became a director of TL and TGH in 1993, and TEM in 1994.

          Dudley R.  Cottingham  is Assistant  Secretary,  Vice  President and a
director  of TGH,  TEM and TL. He is a partner  with  Arthur  Morris and Company
(1977 to date) and a Vice  President  and  director  of  Continental  Management
Limited (1978 to date), both in the Cayman Islands and Turks and Caicos Islands.
Continental  Management Limited is a Bermuda corporation that provides corporate
representation,   administration  and  management  services  and  corporate  and
individual  trust  administration  services.  Mr.  Cottingham  has over 20 years
experience  in  public   accounting  with   responsibility   for  a  variety  of
international and local clients.  Mr. Cottingham became a director of TL and TGH
in 1993, and TEM in 1994.

          Cara  D.  Smith  is  a  member  of  the  Investment Advisory Committee
(see  "Committees",  below).  Ms. Smith was the  President  and Chief  Executive
Officer of TSC through  June 1997 and a director  of TCC and TFS through  August
1997. Ms. Smith joined  Textainer in 1992, and prior to 1996, was Vice President
of Marketing.  Ms. Smith has worked in the  securities  industry for the past 13
years.  Ms. Smith's  extensive  experience  ranges from  compliance and investor
relations to  administration  and marketing of equipment  leasing,  multi-family
housing and tax credit investment  programs.  She holds five securities licenses
and is a registered  principal.  Ms. Smith is also a member of the International
Association of Financial Planners.

         Nadine  Forsman is the Controller of TCC, TFS and TSC. In this capacity
she is responsible for accounting,  financial management and reporting functions
for TCC, TFS and TSC as well as overseeing all  communications  with the Limited
Partners and as such, supervises personnel in performing this function. She is a
member  of the  Equipment  Investment  Committee  and  the  Investment  Advisory
Committee (See "Committees"  below).  Prior to joining Textainer in August 1996,
Ms. Forsman was employed by KPMG Peat Marwick LLP,  holding  various  positions,
the most recent of which was manager, from 1990 to 1996. Ms Forsman holds a B.S.
in  Accounting  and Finance  from San  Francisco  State  University  and holds a
financial and operations principal securities license.

Committees

          The Managing  General  Partner has  established  the  following  three
committees to facilitate decisions involving credit and organizational  matters,
negotiations,  documentation,  management and final disposition of Equipment for
the Partnership and for other programs organized by the Textainer Group:

          Equipment Investment  Committee.  The Equipment  Investment  Committee
will review the Equipment leasing programs of the Partnership on a regular basis
with emphasis on matters involving Equipment purchases, the Equipment mix in the
Partnership's  portfolio,  Equipment remarketing issues, and decisions regarding
ultimate  disposition  of  Equipment.  The members of the committee are James E.
Hoelter (Chairman), John A. Maccarone, John R. Rhodes, Anthony C. Sowry, Richard
G. Murphy  (Secretary),  Alex M. Brown,  Philip K. Brewer,  Robert D.  Pedersen,
Ernest J. Furtado and Nadine Forsman.

          Credit  Committee.  The Credit Committee will establish credit  limits
for every lessee and potential lessee of Equipment and periodically review these
limits. In setting such limits,  the Credit Committee will consider such factors
as customer trade routes,  country,  political risk, operational history, credit
references, credit agency analyses, financial statements, and other information.
The members of the Credit  Committee  are James E. Hoelter  (Chairman),  John A.
Maccarone,  Richard G. Murphy  (Secretary),  Janet S.  Ruggero,  John R. Rhodes,
Anthony C. Sowry, Philip K. Brewer and Robert D. Pedersen.

          Investment  Advisory   Committee.   The Investment Advisory  Committee
will  review  investor  program  operations  on  at  least  a  quarterly  basis,
emphasizing  matters  related  to cash  distributions  to  investors,  cash flow
management,  portfolio  management,  and  liquidation.  The Investment  Advisory
Committee is organized  with a view to applying an  interdisciplinary  approach,
involving management,  financial, legal and marketing expertise, to the analysis
of investor program operations. The members of the Investment Advisory Committee
are James E. Hoelter  (Chairman),  John A. Maccarone,  Cara D. Smith,  Ernest J.
Furtado (Secretary), Philip K. Brewer, John R. Rhodes, Nadine Forsman, Harold J.
Samson, Alex M. Brown and Neil I. Jowell.


ITEM 11 - EXECUTIVE COMPENSATION

The Registrant  has no executive  officers and does not reimburse TFS, TEM or TL
for the  remuneration  payable  to their  executive  officers.  For  information
regarding  reimbursements  made by the Registrant to the General  Partners,  see
Note 2 of the Financial Statements.


ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

a)      Security Ownership of Certain Beneficial Owners

        There is no person or "Group" who is known to the  Registrant  to be the
        beneficial  owner of more than five percent of the outstanding  units of
        limited partnership interest in the Registrant.

b)      Security Ownership of Management

        As of January 1, 1998:
                                                        Number
        Name of Beneficial Owner                       Of Units      % All Units

         James E. Hoelter......................          438            0.012%
         John A. Maccarone.....................          500            0.013%
         Harold J. Samson......................        2,500            0.067%
                                                       -----            -----

         Officers and Management as a Group....        3,438            0.092%
                                                       =====            =====

c)      Changes in control

        Inapplicable

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                                           (Dollar amounts in thousands)

(a)     Transactions with Management and Others.

      At December 31, 1997 and 1996, net due from affiliates is comprised of:

                                                            1997           1996
                                                            ----           ----
      Due from affiliates:
        Due from TEM...........................             $ 152        $ 1,665
                                                            -----        -------

      Due to affiliates:
        Due to TL..............................                 1              1
        Due to TCC.............................                 9              9
        Due to TAS.............................                 -             27
        Due to TFS. ...........................                25             27
                                                          -------     ----------
                                                               35             64
                                                          -------     ----------

      Due from affiliates, net:                             $ 117        $ 1,601
                                                            =====        =======

       These amounts  receivable from and payable to affiliates were incurred in
       the  ordinary  course  of  business   between  the  Partnership  and  its
       affiliates and represent timing differences in the accrual and payment of
       expenses and fees or in the accrual and remittance of net rental revenues
       from TEM.

       In addition,  the Registrant  paid or will pay the following  amounts  to
       the General Partners and TAS:

       Acquisition  fees in connection with the purchase of Equipment on  behalf
       of the Registrant:

                                           1997            1996             1995
                                           ----            ----             ----

       TAS.....................           $ 288         $   173          $   281
                                           ----             ---              ---

       Management fees in connection with the operations of the Registrant:

                                           1997            1996             1995
                                           ----            ----             ----

       TFS..........................      $ 196         $   196          $   197
       TEM and TSS..................        779             864              948
                                          -----           -----            -----
       Total........................      $ 975         $ 1,060          $ 1,145
                                          =====           =====            =====

       Reimbursement  for   administrative  costs  in  connection  with  of  the
       operations of the Registrant:

                                           1997            1996             1995
                                           ----            ----             ----

       TFS...........................     $  76         $    88          $   144
       TEM and TSS...................       572             577              850
                                            ---             ---              ---
       Total.........................     $ 648         $   665          $   994
                                            ===             ===              ===

(b)     Certain Business Relationships

        Inapplicable.

(c)     Indebtedness of Management

        Inapplicable.

(d)     Transactions with Promoters

        Inapplicable.

       See the  "Management"  and  "Compensation  of Affiliates"  section of the
       Registrant's Prospectus, as supplemented,  and the Notes to the Financial
       Statements in Item 8.


                                     PART IV


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


a)      1.   Audited  financial  statements of the Registrant for the year ended
             December 31, 1997 are contained in Item 8 of this Report.

        2.   Financial Statement Schedules.

             (i)  Independent  Auditors'  Report  on   Supplementary   Financial
                  Schedule.

             (ii) Schedule II - Valuation and Qualifying Accounts.

        3.   Exhibits Incorporated by reference.

             (i)  The  Registrant's  Prospectus  as contained  in  Pre-Effective
                  Amendment  No. 2 to the  Registrant's  Registration  Statement
                  (No.  33-29990),  as filed with the  Commission on November 3,
                  1989 as supplemented by  Post-Effective  Amendment No. 2 filed
                  with the Commission  under Section 8 (c) of the Securities Act
                  of 1933 on December 11, 1990.

             (ii) The Registrant's limited partnership  agreement,  Exhibit A to
                  the Prospectus.

b) During  the year  ended  1997,  no reports on Form 8-K have been filed by the
   Registrant.



<PAGE>









             Independent Auditors' Report on Supplementary Schedule







The Partners
Textainer Equipment Income Fund II, L.P.:

Under the date of February  18,  1998,  we  reported  on the  balance  sheets of
Textainer  Equipment  Income Fund II, L.P. (the  Partnership) as of December 31,
1997 and 1996,  and the related  statements of earnings,  partners'  capital and
cash flows for each of the years in the  three-year  period  ended  December 31,
1997 which are included in the 1997 annual  report on Form 10-K.  In  connection
with our audits of the aforementioned financial statements,  we also audited the
related  financial  statement  schedule  as  listed in Item 14.  This  financial
statement  schedule is the responsibility of the Partnership's  management.  Our
responsibility  is to express an opinion on this  financial  statement  schedule
based on our audits.

In our  opinion,  such  schedule,  when  considered  in  relation  to the  basic
financial  statements  taken  as a  whole,  presents  fairly,  in  all  material
respects, the information set forth therein.








San Francisco, California
February 18, 1998

<PAGE>


                    TEXTAINER EQUIPMENT INCOME FUND II, L.P.
                       (A California Limited Partnership)

                 Schedule II - Valuation and Qualifying Accounts

                             (Amounts in thousands)
<TABLE>
<CAPTION>

                                                           Charged                                       Balance
                                          Balance at      to Costs        Charged                         at End
                                          Beginning            and       to Other                             of
                                          of Period       Expenses       Accounts      Deduction          Period
<S>                                       <C>              <C>         <C>               <C>             <C>      
For the year ended December 31, 1997:

Allowance for
 doubtful accounts                        $    1,073      $     92       $      -      $   (141)        $  1,024
                                              ------         -----         ------         ------          ------

Damage protection
 plan reserve                             $      263           239       $      -      $   (276)        $    226
                                               -----         -----         ------         ------         -------



For the year ended December 31, 1996:

Allowance for
 doubtful accounts                        $    1,303      $    (97)      $      -      $   (133)        $  1,073
                                               -----        ------         ------         ------          ------

Damage protection
 plan reserve                             $      321      $    218       $      -      $   (276)        $    263
                                               -----          ----         ------         ------         -------


For the year ended December 31, 1995:

Allowance for
 doubtful accounts                        $    1,029      $    512       $      -      $   (238)        $  1,303
                                               -----          ----         ------         ------          ------

Damage protection
 plan reserve                             $      219      $    338       $      -      $   (236)        $    321
                                               -----          ----         ------         ------         -------

</TABLE>






<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.

                                     TEXTAINER EQUIPMENT INCOME FUND II, L.P.
                                     A California Limited Partnership

                                     By Textainer Financial Services Corporation
                                     The Managing General Partner

                                     By________________________________
                                        John R. Rhodes
                                        Executive Vice President

Date:  March 26,  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 Textainer  Financial
Services  Corporation,  the Managing  General Partner of the Registrant,  in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>

Signature                                        Title                                        Date


<S>                                              <C>                                         <C> 
________________________________                 Executive Vice President                     March 26,  1998
John R. Rhodes                                   (Principal Financial and
                                                 Accounting Officer), and
                                                 Secretary



________________________________                 President (Principal Executive               March 26,  1998
Philip K. Brewer                                 Officer)



________________________________                 Vice President, Finance,                     March 26,  1998
Ernest J. Furtado                                Assistant Secretary and Director



________________________________                 Director                                     March 26,  1998
James E. Hoelter



________________________________                 Director                                     March 26,  1998
John A. Maccarone

</TABLE>


<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.


                                     TEXTAINER EQUIPMENT INCOME FUND II, L.P.
                                     (A California Limited Partnership)

                                     By Textainer Financial Services Corporation
                                     The Managing General Partner

                                     By /s/John R. Rhodes
                                       ________________________________
                                        John R. Rhodes
                                        Executive Vice President

Date:  March 26, 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 Textainer  Financial
Services  Corporation,  the Managing  General Partner of the Registrant,  in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>

Signature                                        Title                                        Date


<S>                                              <C>                                         <C> 
/s/John R. Rhodes                                Executive Vice President                     March 26, 1998
________________________________                 (Principal Financial and
John R. Rhodes                                   Accounting Officer), and
                                                 Secretary                                                 
                                                 

/s/Philip K. Brewer                              President(PrincipalExecutive                 March 26, 1998
________________________________                 Officer)
Philip K. Brewer                                 



/s/Ernest J. Furtado                             Vice President, Finance                      March 26, 1998
________________________________                 Assistant Secretary and Director
Ernest J. Furtado                                



/s/James E. Hoelter                              Director                                     March 26, 1998
________________________________
James E. Hoelter



/s/John A. Maccarone                             Director                                     March 26, 1998
________________________________
John A. Maccarone

</TABLE>