Form 10-KSB

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

           |X|  Annual report pursuant to section 13 or 15(d) of the
                Securities Exchange Act of 1934 (no fee required)

                For the Year Ended December 31, 1997

                                               OR

           |_|  Transition report pursuant to section 13 or 15(d) of the
                Securities Exchange Act of 1934 (no fee required)

                For the transition period from ____ to ____

                         Commission File number 0-17631

        ATEL Cash Distribution Fund II, a California Limited Partnership

   California                                                        94-3051991
(State or other jurisdiction of                               (I. R. S. Employer
 incorporation or organization)                              Identification No.)

           235 Pine Street, 6th Floor, San Francisco, California 94104
                    (Address of principal executive offices)

        Registrant's telephone number, including area code (415) 989-8800

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

Securities  registered pursuant to section 12(g) of the Act: Limited Partnership
Units

Indicate  by a check  mark  whether  the  registrant  (1) has filed all  reports
required to be filed by section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

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


                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of  Regulation  S-K  (ss.229.405)  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. |X|

<PAGE>

                                     PART I

Item 1:  BUSINESS

General Development of Business

ATEL  Cash  Distribution  Fund  II,  a  California   limited   partnership  (the
Partnership),  was formed under the laws of the State of California on September
30, 1987. The Partnership  was formed for the purpose of acquiring  equipment to
engage in equipment leasing and sales activities.

In a public  offering of 50,000 units of Limited  Partnership  interest  (Units)
(which was increased to 70,000 Units at the option of the General Partners),  at
a price of $500 per Unit, the Partnership  sold an aggregate of 70,000 Units for
a total capitalization of $35,000,000. Of the proceeds received,  $3,325,000 was
paid to ATEL Securities Corporation, a wholly owned subsidiary of ATEL Financial
Corporation  (ATEL),  the  corporate  general  partner,  as  sales  commissions,
$1,751,426  was  paid  to ATEL  as  reimbursements  of  organization  and  other
syndication  costs  and  $29,398,574  was  used  to  acquire  leased  equipment,
including  acquisition  fees paid to ATEL. An  additional  $525,000 was held for
reserves for repurchases of Units and for working capital.

At December 31, 1997, cash balances  consisted of amounts to be distributed from
1997 operations and sales proceeds ($272,772) and working capital reserves.

The Partnership's  principal objectives are to invest in a diversified portfolio
of  equipment  which will (i)  preserve,  protect  and return the  Partnership's
invested  capital;  (ii) generate  substantial  distributions to the partners of
cash  from  operations  and cash from  sales or  refinancing,  with any  balance
remaining after certain minimum  distributions to be used to purchase additional
equipment  during the  reinvestment  period,  ending December 31, 1995 and (iii)
provide  significant  distributions  following the reinvestment period and until
all  equipment  has been  sold.  The  Partnership  is  governed  by its  Limited
Partnership Agreement.

Narrative Description of Business

The  Partnership  has acquired and intends to acquire various types of equipment
and to lease such  equipment  pursuant to  "Operating"  leases and "Full Payout"
leases,  where  "Operating"  leases  are  defined  as being  leases in which the
minimum  lease  payments  during the initial  lease term do not recover the full
cost of the equipment and "Full Payout" leases recover such cost.

The  Partnership  would only purchase  equipment for which a lease exists or for
which  a  lease  will  be  entered  into  at  the  time  of  the  purchase.  The
Partnership's  reinvestment  period ended December 31, 1995. The Partnership may
acquire  additional assets without the use of any cash or exposure of any of its
other  assets  by using  100%  financing  on a  non-recourse  basis.  There  are
currently no commitments to acquire such assets.

The  Partnership's  objective  was to lease a  minimum  of 75% of the  equipment
acquired  with the net  proceeds of the  offering  to lessees  which (i) have an
aggregate credit rating by Moody's Investor  Service,  Inc. of Baa or better, or
the credit equivalent as determined by the General Partners,  with the aggregate
rating weighted to account for the original equipment cost for each item leased;
or  (ii)  are  established   hospitals  with  histories  of   profitability   or
municipalities.  The balance of the original  equipment  portfolio could include
equipment leased to lessees which,  although deemed  creditworthy by the General
Partners,  would  not  satisfy  the  general  credit  rating  criteria  for  the
portfolio.  At December 31, 1997, in excess of 75% of the equipment acquired had
been leased to lessees  with an aggregate  credit  rating of Baa or better or to
such hospitals or municipalities.
<PAGE>

One lessee in the health care industry  accounted  for 26% of the  Partnership's
lease revenues during 1997. One lessee in the health care industry accounted for
15% of the Partnership's lease revenues during 1996.

The equipment leasing industry is highly competitive.  Equipment  manufacturers,
corporations, partnerships and others offer users an alternative to the purchase
of most types of equipment with payment terms which vary widely depending on the
lease term and type of  equipment.  The ability of the  Partnership  to keep the
equipment leased and/or operating and the terms of the acquisitions,  leases and
dispositions  of equipment  depend on various  factors (many of which are not in
the  control  of the  General  Partners  or the  Partnership),  such as  general
economic  conditions,  including  the effects of  inflation  or  recession,  and
fluctuations in supply and demand for various types of equipment resulting from,
among other things, technological and economic obsolescence.

The business of the Partnership is not seasonal.

The Partnership has no full time employees.

Equipment Dispositions:

Through  December 31, 1997, the Partnership has disposed of certain lease assets
as set forth below:

                                                                   Excess of
                                  Acquisition        Sales         Rents Over
Asset Type                           Cost            Price         Expenses *

Transportation                      $8,427,016       $3,599,098      $7,925,818
Mining                               7,825,584        2,630,912       8,081,140
Material handling                    5,835,647        1,664,934       6,442,820
Aircraft                             4,450,572        3,444,589         463,076
Furniture, fixtures and equipment    3,056,807          744,777       3,384,157
Food processing                      2,991,923          917,573       3,410,327
Medical                              2,830,512          514,255       3,286,651
Manufacturing                        1,889,006          215,361       2,322,858
Printing                             1,463,647          119,000       1,787,698
Communications                       1,248,736          701,545         803,151
Data processing                        957,821           81,192       1,026,747
                                 -------------- ---------------- ---------------
                                   $40,977,271      $14,633,236     $38,934,443
                                 ============== ================ ===============

* Includes only those expenses directly related to the production of the related
rents.



<PAGE>

Equipment Leasing Activities:

The Partnership has acquired a diversified portfolio of equipment. The equipment
has been leased to lessees in various industries. The following tables set forth
the types of equipment acquired by the Partnership through December 31, 1997 and
the industries to which the assets have been leased.

                                  Purchase price excluding   Percentage of total
Asset types                          acquisition fees          acquisitions
-----------                          ----------------          ------------
Material handling                        $10,469,425                   20.03%
Aircraft                                   9,799,805                   18.75%
Food processing                            5,531,182                   10.58%
Mining                                     5,395,983                   10.32%
Medical                                    4,633,726                    8.86%
Transportation                             4,280,728                    8.19%
Manufacturing                              3,045,461                    5.83%
Furniture, fixtures and equipment          3,474,306                    6.65%
Printing                                   2,524,690                    4.83%
Communication                              1,239,467                    2.37%
Data processing                            1,126,472                    2.16%
Motor vehicles                               749,291                    1.43%
                                     ----------------         ---------------
                                         $52,270,536                  100.00%
                                     ================         ===============

                                  Purchase price excluding   Percentage of total
  Industry of lessee                 acquisition fees          acquisitions
  ------------------                 ----------------          ------------
Manufacturing, other                      $7,696,525                   14.72%
Medical                                    7,480,492                   14.31%
Transportation                             6,247,981                   11.95%
Mining                                     6,157,112                   11.78%
Food processing                            5,881,954                   11.25%
Commercial airline                         4,592,040                    8.79%
Other                                      4,358,700                    8.34%
Primary metals                             3,933,919                    7.53%
Printing                                   2,558,495                    4.89%
Manufacturing, auto/truck                  1,831,257                    3.50%
Chemicals                                  1,532,061                    2.94%
                                     ----------------         ---------------
                                         $52,270,536                  100.00%
                                     ================         ===============

For further information regarding the Partnership's equipment lease portfolio as
of December 31, 1997,  see Note 3 to the financial  statements,  Investments  in
equipment  and  leases,   set  forth  in  Item  8,   Financial   Statements  and
Supplementary Data.


Item 2.  PROPERTIES

The  Partnership  does not own or lease any real  property,  plant or materially
important  physical  properties  other than the equipment  held for lease as set
forth in Item 1.



<PAGE>

Item 3.  LEGAL PROCEEDINGS

No material legal  proceedings are currently  pending against the Partnership or
against any of its assets.

The  Partnership  has undertaken  legal action in pursuit of its unsecured claim
relating to the  bankruptcy of Rocky Mountain  Helicopters,  Inc. noted below in
Part II, Item 7 under the caption "Results of Operations".

The  Partnership  has undertaken  legal action to recover  amounts due under the
exercise of a purchase  option from The Budd Company,  one of the  Partnership's
lessees, in the amount of $103,000.

The  Partnership has taken legal action to void the purported sale of certain of
the   Partnership's   equipment  by  a  non-recourse   lender  to   CMS/Sherwood
Rehabilitation Hospital, one of the Partnership's lessees.


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

Inapplicable.


                                     PART II

Item 5.  MARKET FOR REGISTRANT'S LIMITED PARTNERSHIP UNITS AND
           RELATED MATTERS

Market Information

The Units are transferable  subject to restrictions on transfers which have been
imposed  under  the  securities  laws of  certain  states  and  the  Partnership
Agreement.  However,  as  a  result  of  such  restrictions,  the  size  of  the
Partnership and its investment  objectives,  to the General Partners' knowledge,
no established  public secondary trading market has developed and it is unlikely
that a public trading market will develop in the future.

Holders

As of December 31, 1997, a total of 2,948 investors were record holders of Units
in the Partnership.

Dividends

The Limited Partners of the Partnership are entitled to certain distributions as
provided under the Limited Partnership Agreement.

The  General  Partners  have  sole  discretion  in  determining  the  amount  of
distributions.  However,  since the reinvestment period ended December 31, 1995,
the  General  Partners  are  required to  distribute,  subject to payment of any
obligations of the  Partnership,  such  available cash from  operations and cash
from sales or refinancing.

The rates for  distributions to Limited Partners in April, July and October 1997
and in  January  1998  were  $3.75 per Unit (a total of $15.00  per  Unit).  All
distributions were from cash flows from operations and sales proceeds in 1997.

The rates for  distributions to Limited Partners in April, July and October 1996
and in  January  1997  were  $6.50 per Unit (a total of $26.00  per  Unit).  All
distributions were from cash flows from operations and sales proceeds in 1996.


<PAGE>

The following table presents summarized  information regarding  distributions to
Limited Partners:

<TABLE>
<CAPTION>
                                                     1997            1996             1995            1994           1993
                                                     ----            ----             ----            ----           ----
<S>                                                    <C>              <C>             <C>             <C>            <C>
Distributions of net income                             $7.26            $8.98          $18.49          $21.00         $15.54
Return of investment                                    11.19            20.07           49.07           66.05          66.26
                                                -------------- ---------------- --------------- --------------- --------------
Distributions per unit                                  18.45            29.69           67.56           87.05          81.80
Differences due to timing of
   distributions and due to distribution
   reinvestments                                        (3.45)           (3.69)         (14.76)          (2.05)         (1.80)
                                                 -------------- ---------------- --------------- --------------- --------------
Nominal distribution rates from above                  $15.00           $26.00          $52.80          $85.00         $80.00
                                                 ============== ================ =============== =============== ==============
</TABLE>


Item 6.  SELECTED FINANCIAL DATA

The following table presents selected  financial data of the Partnership for the
years ended December 31, 1997,  1996,  1995,  1994 and 1993. This financial data
should be read in  conjunction  with the financial  statements and related notes
included under Item 8 of this report.


<TABLE>
<CAPTION>
                                                 1997            1996             1995            1994           1993
                                                 ----            ----             ----            ----           ----
<S>                                             <C>              <C>             <C>            <C>            <C>
Gross Revenues                                  $1,313,735       $2,163,088      $3,645,794      $5,624,499     $7,083,181

Net Income                                        $513,216         $634,555      $1,307,185      $1,484,900     $1,099,015

Weighted average Limited Partnership
   Units (Units) outstanding                        69,979           69,979          69,979          69,990         70,001

Net income per Unit, based on
   weighted average Units outstanding                $7.26            $8.98          $18.49          $21.00         $15.54

Distributions per Unit, based on
   weighted average Units outstanding               $18.45           $29.69          $67.56          $87.05         $81.80

Total Assets                                    $3,668,297       $5,584,504      $8,404,252     $13,123,098    $20,421,000

Non-recourse Debt                                 $656,712       $1,693,865      $2,965,946      $4,255,444     $6,807,471

Total Partners' Capital                         $2,910,078       $3,687,982      $5,130,875      $8,551,736    $13,161,644
</TABLE>

In 1995, cash flows and distributions to Limited Partners were not sufficient to
allow the Partnership to reinvest in additional equipment.



<PAGE>

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


Capital Resources and Liquidity

During  the year,  the  Partnership's  primary  sources of  liquidity  were cash
balances and cash flows from leasing  operations and sales of lease assets.  The
liquidity of the Partnership  will vary in the future,  increasing to the extent
cash flows from  operations and proceeds from asset sales exceed  expenses,  and
decreasing as  distributions  are made to the Limited Partners and to the extent
expenses exceed cash flows from leases and proceeds from asset sales.


As another source of liquidity, the Partnership has contractual obligations with
a diversified group of lessees for fixed lease terms at fixed rental amounts. As
the  initial  lease  terms  expire the  Partnership  will  re-lease  or sell the
equipment.  The future  liquidity  beyond the  contractual  minimum rentals will
depend on the General  Partner's  success in re-leasing or selling the equipment
as it comes off lease.

The Partnership  currently has available adequate reserves to meet its immediate
cash requirements,  but in the event those reserves were found to be inadequate,
the  Partnership  would  likely be in a position  to borrow  against its current
portfolio  to meet such  requirements.  The  General  Partners  envision no such
requirements  for  operating  purposes,  nor have they explored with lenders the
possibility of obtaining loans. There can be no assurance as to the terms of any
such financing or that the Partnership will be able to obtain such loans.

All of the Partnership's non-recourse debt is paid by lease payments assigned to
the lenders. The assigned lease payments match the required payments on the debt
and such payments fully amortize the debt.

As of December 31, 1997,  cash  balances  were  reserved  for  distributions  in
January 1998 ($272,772) and working capital reserves.

As of December 31, 1997, the Partnership had borrowed approximately $21,700,000.
The remaining  unpaid balance on those  borrowings was  approximately  $657,000.
There were no additional  borrowings from December 31, 1997 through February 28,
1998. The  borrowings are  non-recourse  to the  Partnership,  that is, the only
recourse of the lender will be to the equipment or corresponding  lease acquired
with the loan proceeds. The Limited Partnership Agreement limits such borrowings
to 40% of the total cost of equipment, in aggregate.

If  inflation  in the general  economy  becomes  significant,  it may affect the
Partnership  inasmuch as the residual  (resale) values and rates on re-leases of
the  Partnership's  leased  assets may  increase as the costs of similar  assets
increase.  However,  the  Partnership's  revenues from existing leases would not
increase,  as such rates are generally fixed for the terms of the leases without
adjustment for inflation.

If interest rates increase  significantly,  the lease rates that the Partnership
can obtain on future  leases will be expected to increase as the cost of capital
is a significant  factor in the pricing of lease  financing.  Leases  already in
place, for the most part, would not be affected by changes in interest rates.

The  Partnership  commenced  regular  distributions,  based on cash  flows  from
operations,  beginning  with the second quarter of 1988.  Distributions  of cash
from 1997  operations  and sales  proceeds were made in April,  July and October
1997 and in  January  1998.  See  Items 5 and 6 of this  report  for  additional
information regarding the distributions.


<PAGE>

The General  Partner plans that the Partnership  will sell its remaining  assets
during 1998 and that it will cease  operations by December 31, 1998. These plans
will only be carried out to the extent that economic conditions are favorable to
the  Partnership  and  only if the  General  Partners  deem it to be in the best
interest of the Limited Partners to do so.

Cash Flows:

Cash flows from  operations  decreased  to $635,243 in 1997 from  $1,288,526  in
1996. Of this decrease, $759,678 is due to decreases in lease revenues. In 1997,
the  Partnership  received  $116,481 as partial  settlement  of its claim in the
bankruptcy of Rocky  Mountain  Helicopters,  Inc.  (RMH).  In 1996,  $77,654 was
received. This partially offset the decline in lease revenues.

In 1997, investing sources of cash consisted of the proceeds from sales of lease
assets and from rents on direct financing  leases.  Proceeds from sales of lease
assets  declined  by  $519,188  compared  to  1996.  This was  primarily  due to
decreased sales of operating lease assets. In 1996,  operating lease assets with
an original cost of about  $3,124,000 were sold compared to about  $2,107,000 in
1997.

There were no sources of cash from financing sources in either 1997 or 1996.


Results of Operations

Operations  resulted in net income of $634,555 in 1996 and $513,216 in 1997. The
results of operations  in future  periods may vary  significantly  from those of
1997 as the Partnership's lease portfolio of capital equipment matures. Revenues
from leases are expected to continue to decline as leased  assets come off lease
and are sold or  re-leased  at lower lease  rents.  The  ultimate  effect on net
income is not  determinable  as it will depend to a large  degree on the amounts
received  from the sales of assets  and/or from  re-leases to either the same or
new lessees once the initial lease terms expire.


A number of the Partnership's leases are scheduled to terminate in 1998. If they
are  terminated  as  scheduled,  gross  lease  rents from  operating  and direct
financing  leases are expected to decrease by $986,000 (from  $1,833,000 in 1997
to $847,000 in 1998).  Depreciation  expense related to operating leases is also
expected to decrease.  The ultimate effect on net income will also depend on the
amounts,  if any, of re-lease  rentals  and/or the amounts of proceeds  received
upon sales of the assets.

As of December 31, 1997, 64% (28% in 1996) of total equipment cost was leased to
lessees in the health care industry. Leases are subject to the General Partners'
credit committee review. The leases provide for the return of the equipment upon
default.  The concentration of the Partnership's  assets in this industry is not
known to have had any effect on the  Partnership's  results of operations nor is
there any known trend  regarding  this industry that would effect its operations
in future periods.

The  Partnership  continues  to have an  unsecured  claim  against RMH, a former
lessee of the Partnership.  RMH filed for reorganization under Chapter 11 of the
U. S.  Bankruptcy Code in 1993. In addition to the amounts  previously  received
from the RMH bankruptcy, the Partnership received $77,654 in March 1996, $62,123
in April 1997 and $54,358 in December 1997 and may receive an additional minimal
amount of its unsecured claim of $776,654.

<PAGE>
Operating  leases have  continued to mature in 1997. As the leases reached their
scheduled  terminations,  most of the assets were sold.  As a result,  operating
lease revenues have declined from $1,478,191 in 1996 to $862,129 in 1997. Direct
financing  leases  have also  continued  to  mature  in 1997 and  their  related
revenues have also  declined by $148,609  ($154,229 in 1997 compared to $302,838
in 1996).

Gains and losses on sales of assets are not expected to be  consistent  from one
year to another.  Such gains declined from $168,927 in 1996 to $124,594 in 1997,
a decrease of $44,333.

Depreciation  expense is related to  operating  lease  assets and as such leases
have  matured (and the majority of the assets  sold),  depreciation  expense has
declined.  Interest expense has declined as a result of scheduled debt payments.
Management  fees are related to lease rents and to the amounts of  distributions
to the limited partners.  Both lease rents and distributions decreased from 1996
to 1997 and this resulted in the decline in management fees.


Impact of the Year 2000

The year 2000 issue is the result of computer  programs  being written using two
digits rather than four to define the  applicable  year.  Any computer  programs
that have time  sensitive  software may  recognize a date using "00" as the year
1900  rather  than the year  2000.  This  could  result in a system  failure  or
miscalculation causing disruptions of operations, including, among other things,
a  temporary  inability  to process  transactions  or engage in  similar  normal
business activities.

The  Partnership  believes  that it will not be  required  to modify or  replace
significant  portions of its software and that the year 2000 issue will not pose
significant  operational problems for its computer systems. The Partnership does
not expect  that the costs  related to the year 2000 issue will be  significant.
Ultimately,  the potential impact of the year 2000 issue will depend not only on
the corrective measures the Partnership undertakes, but also on the way in which
the year  2000  issue is  addressed  by  businesses  and  other  entities  whose
financial  condition or operational  capability is important to the Partnership.
Therefore,  the Partnership is communicating to these parties to ensure they are
aware of the year  2000  issue,  to learn  how they are  addressing  it,  and to
evaluate any likely impact on the Partnership.


Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Financial  Statements and Notes to Financial  Statements  attached hereto at
pages 11 through 22.

<PAGE>

                         REPORT OF INDEPENDENT AUDITORS






The Partners
ATEL Cash Distribution Fund II


We have audited the accompanying balance sheet of ATEL Cash Distribution Fund II
(a  California  limited  partnership)  as of December 31, 1997,  and the related
statements  of income,  changes in partners'  capital and cash flows for each of
the two years in the 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of ATEL Cash Distribution Fund II
(a California  limited  partnership) at December 31, 1997 and the results of its
operations  and its cash  flows  for each of the two years in the  period  ended
December 31, 1997, in conformity with generally accepted accounting principles.





                                                           ERNST & YOUNG LLP
San Francisco, California
January 27, 1998

<PAGE>

                         ATEL CASH DISTRIBUTION FUND II
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                                  BALANCE SHEET

                                DECEMBER 31, 1997


                                     ASSETS


<TABLE>
<CAPTION>

<S>                                                                      <C>
Cash and cash equivalents                                                  $892,157

Accounts receivable, net of allowance for doubtful accounts of $32,623       35,711

Investments in equipment and leases                                       2,740,429
                                                                      --------------
Total assets                                                             $3,668,297
                                                                      ==============


                        LIABILITIES AND PARTNERS' CAPITAL


Non-recourse debt                                                          $656,712

Accrued interest                                                              6,617

Accounts payable and accrued liabilities:
     General Partners                                                        10,892
     Trade and other                                                         74,286

Unearned operating lease income                                               9,712
                                                                      --------------
Total liabilities                                                           758,219

Partners' capital:
     General Partners                                                        85,017
     Limited Partners                                                     2,825,061
                                                                      --------------
Total partners' capital                                                   2,910,078
                                                                      --------------
Total liabilities and partners' capital                                  $3,668,297
                                                                      ==============
</TABLE>

                             See accompanying notes.

<PAGE>

                         ATEL CASH DISTRIBUTION FUND II
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                              STATEMENTS OF INCOME

                     YEARS ENDED DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>

                                                                 1997           1996
                                                                 ----           ----
Revenues:
Leasing activities:
<S>                                                              <C>           <C>
     Operating                                                    $862,129     $1,478,191
     Direct financing                                              154,229        302,838
     Leveraged                                                      24,283         19,290
     Gain on sale of lease assets                                  124,594        168,927

Proceeds from bankruptcy settlements                               116,481         77,654
Interest income                                                     28,232         15,264
Other                                                                3,787        100,924
                                                            --------------- --------------
                                                                 1,313,735      2,163,088
                                                            --------------- --------------

Expenses:
Depreciation and amortization                                      364,425        885,426
Administrative cost reimbursements to General Partner              127,992        132,994
Interest expense                                                   115,320        237,226
Equipment and partnership management fees to General Partner        84,156        157,355
Other                                                               54,154         72,138
Professional fees                                                   24,303         21,173
Provision for doubtful accounts                                     17,072              -
Provision for losses and impairments                                13,097         22,221
                                                            --------------- --------------
                                                                   800,519      1,528,533
                                                            --------------- --------------
Net Income                                                        $513,216       $634,555
                                                            =============== ==============

Net income:
     General Partners                                               $5,132         $6,346
     Limited Partners                                              508,084        628,209
                                                            --------------- --------------
                                                                  $513,216       $634,555
                                                            =============== ==============

Net income per Limited Partnership unit                              $7.26          $8.98

Weighted average number of units outstanding                        69,979         69,979
</TABLE>

                             See accompanying notes.


<PAGE>

                         ATEL CASH DISTRIBUTION FUND II
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL

                     YEARS ENDED DECEMBER 31, 1997 AND 1996



<TABLE>
<CAPTION>
                                                Limited Partners    General
                                     Units           Amount         Partners         Total

<S>                                      <C>         <C>                <C>         <C>
Balance, January 1, 1996                 69,979      $5,057,336         $73,539     $5,130,875

Distributions ($29.69 per unit)                      (2,077,448)              -     (2,077,448)
Net income                                              628,209           6,346        634,555
                                ---------------- --------------- --------------- --------------
Balance, December 31, 1996               69,979       3,608,097          79,885      3,687,982

Distributions ($18.45 per unit)                      (1,291,120)              -     (1,291,120)
Net income                                              508,084           5,132        513,216
                                ---------------- --------------- --------------- --------------
Balance, December 31, 1996               69,979      $2,825,061         $85,017     $2,910,078
                                ================ =============== =============== ==============
</TABLE>
                             See accompanying notes.

<PAGE>

                         ATEL CASH DISTRIBUTION FUND II
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                            STATEMENTS OF CASH FLOWS

                     YEARS ENDED DECEMBER 31, 1997 AND 1996


<TABLE>
<CAPTION>
                                                                        1997           1996
                                                                        ----           ----
<S>                                                                    <C>            <C>
Operating activities:
Net income                                                               $513,216       $634,555
   Adjustments to reconcile net income to net cash provided by
      operating activities:
      Depreciation and amortization expense                               364,425        885,426
      Gain on sale of lease assets                                       (124,594)      (168,927)
      Leveraged lease income                                              (24,283)       (19,290)
      Provision for doubtful accounts                                      17,072              -
      Provision for losses and impairments                                 13,097         22,221
      Changes in operating assets and liabilities:
         Accounts receivable                                              (22,540)        39,315
         Accounts payable, general partner                                (10,390)       (39,910)
         Accounts payable, other                                            7,502        (12,614)
         Accrued interest                                                 (22,475)       (23,955)
         Customer deposits                                                (69,000)        (8,409)
         Unearned operating lease income                                   (6,787)       (19,886)
                                                                   --------------- --------------
Net cash provided by operating activities                                 635,243      1,288,526
                                                                   --------------- --------------

Investing activities:
Reductions of net investment in direct financing leases                   816,922        877,510
Proceeds from sales of lease assets                                       778,928      1,298,116
                                                                   --------------- --------------
Net cash provided by investing activities                               1,595,850      2,175,626
                                                                   --------------- --------------

Financing activities:
Distributions to limited partners                                      (1,291,120)    (2,077,448)
Repayments of non-recourse debt                                        (1,037,153)    (1,272,081)
                                                                   --------------- --------------
Net cash used in financing activities                                  (2,328,273)    (3,349,529)
                                                                   --------------- --------------
Net (decrease) increase in cash and cash equivalents                      (97,180)       114,623
Cash and cash equivalents at beginning of year                            989,337        874,714
                                                                   --------------- --------------

Cash and cash equivalents at end of year                                 $892,157       $989,337
                                                                   =============== ==============

Supplemental disclosures of cash flow information:

Cash paid during the year for interest                                   $137,795       $261,181
                                                                   =============== ==============

Supplemental schedule of non-cash transactions:

Direct financing lease assets reclassified to operating lease asset                      $12,000
                                                                                   ==============
</TABLE>
                             See accompanying notes.

<PAGE>

                         ATEL CASH DISTRIBUTION FUND II
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 1997


1.  Organization and partnership matters:

ATEL  Cash  Distribution  Fund  II,  a  California   limited   partnership  (the
Partnership),  was formed under the laws of the State of California on September
30, 1987, for the purpose of acquiring  equipment to engage in equipment leasing
and sales  activities.  Contributions  in the amount of $600 were received as of
September 30, 1987, $100 of which represented the General  Partners'  continuing
interest,  and $500 of which  represented the Initial Limited  Partner's capital
investment.

Upon the sale of the  minimum  amount of Units of Limited  Partnership  interest
(Units) of $1,200,000 and the receipt of the proceeds thereof on March 23, 1988,
the Partnership commenced operations.

On January 3, 1990, the Partnership's  offering of Limited Partnership units was
completed. Total contributed capital from the offering was $35,000,000.

The Partnership's business consists of leasing various types of equipment. As of
December 31, 1997,  the original  terms of the leases  ranged from six months to
twelve years.

Pursuant to the Limited  Partnership  Agreement,  the General  Partners  receive
compensation  and   reimbursement   for  services  rendered  on  behalf  of  the
Partnership  (Note 5). The  General  Partners  are  required  to maintain in the
Partnership  reasonable  cash reserves for working  capital,  the  repurchase of
Units and contingencies.

The General  Partner plans that the Partnership  will sell its remaining  assets
during 1998 and that it will cease  operations by December 31, 1998. These plans
will only be carried out to the extent that economic conditions are favorable to
the  Partnership  and  only if the  General  Partners  deem it to be in the best
interest of the Limited Partners to do so.


2. Summary of significant accounting policies:

Equipment on operating leases:

Equipment on operating leases is stated at cost.  Depreciation is being provided
by use of the  straight-line  method over the terms of the related leases to the
equipment's estimated residual values at the end of the leases.

Revenues  from  operating  leases  are  recognized  evenly  over the life of the
related leases.

Direct financing leases:

Income from direct  financing  lease  transactions  is reported on the financing
method  of  accounting,  in which the  Partnership's  investment  in the  leased
property is reported as a  receivable  from the lessee to be  recovered  through
future rentals and  realization of residual  values.  The income portion of each
rental  payment is calculated so as to generate a constant rate of return on the
net receivable outstanding.

<PAGE>

                         ATEL CASH DISTRIBUTION FUND II
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 1997


2. Summary of significant accounting policies (continued):

Investment in leveraged leases:

Leases which are financed  principally with non-recourse debt at lease inception
and which meet certain other  criteria are  accounted  for as leveraged  leases.
Leveraged lease contracts  receivable are stated net of the related non-recourse
debt service (which  includes  unpaid  principal and aggregate  interest on such
debt) plus estimated  residual values.  Unearned income represents the excess of
anticipated  cash flows (after  taking into account the related debt service and
residual  values)  over the  investment  in the lease and is  amortized  using a
constant rate of return  applied to the net investment  when such  investment is
positive.

Statements of cash flows:

For purposes of the Statement of Cash Flows, cash and cash equivalents  includes
cash in banks and cash equivalent investments with original maturities of ninety
days or less.

Income taxes:

The  Partnership  does not provide for income  taxes since all income and losses
are the liability of the  individual  partners and are allocated to the partners
for inclusion in their individual tax returns.

The tax basis of the  Partnership's  net assets and liabilities  varies from the
amounts presented in these financial statements (unaudited):

   Financial statement basis of net assets                      $2,910,078
   Tax basis of net assets                                       4,819,533
                                                             --------------
   Difference                                                   $1,909,455
                                                             ==============

The  primary  differences  between  the tax basis of net assets and the  amounts
recorded in the financial  statements are the accounting for  syndication  costs
and  differences  between  the  depreciation   methods  used  in  the  financial
statements and the Partnership's tax returns.

The following  reconciles the net income reported in these financial  statements
to the net income reported on the Partnership's federal tax return (unaudited):

                                                      1997           1996
                                                      ----           ----
     Net income per financial statements               $513,216       $634,555
     Adjustment to depreciation expense                  (5,161)         7,997
     Adjustments to revenues                            832,269      1,415,151
     Adjustments to other expenses                      (13,421)             -
     Provision for doubtful accounts                     17,072              -
     Provision for losses and impairments                13,097         22,221
                                                 --------------- --------------
     Net income per federal tax return               $1,357,072     $2,079,924
                                                 =============== ==============

Credit Risk:

Financial   instruments   which   potentially   subject   the   Partnership   to
concentrations  of credit risk  include cash and cash  equivalents  and accounts
receivable.  The  Partnership  places  its  cash  deposits  and  temporary  cash
investments  with  creditworthy,   high  quality  financial  institutions.   The
concentration  of such deposits and temporary cash  investments is not deemed to
create a significant  risk to the  Partnership.  Accounts  receivable  represent
amounts  due from  lessees  in  various  industries,  related  to  equipment  on
operating and direct financing  leases.  See Note 7 for a description of lessees
by industry as of December 31, 1997.


<PAGE>

                         ATEL CASH DISTRIBUTION FUND II
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 1997


2. Summary of significant accounting policies (continued):

Use of estimates:

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

Per unit data:

Net income and distributions per unit are based upon the weighted average number
of units  outstanding  during the period,  without  giving  effect to changes in
capital interests as a result of reinvestment of distributions.

Reclassification:

Certain 1996 amounts have been reclassified to conform to the 1997 presentation.


3. Investments in equipment and leases:

The Partnership's investments in equipment and leases consist of the following:

<TABLE>
<CAPTION>
                                                                              Depreciation
                                                                               Expense or       Reclass-
                                                                              Amortization    ifications &
                                                 1996          Additions       of Leases      Dispositions       1997
                                                 ----          ---------       ---------      ------------       ----
<S>                                             <C>                <C>          <C>               <C>           <C>
Net investment in operating leases              $2,756,220                        ($364,425)      ($642,220)    $1,749,575
Net investment in direct financing leases        1,774,588                         (816,922)        (13,402)       944,264
Net investment in leveraged leases                  93,925                           24,283               -        118,208
Equipment held for lease                                 -                                -             388            388
Reserves for losses                                (59,809)        ($13,097)              -             900        (72,006)
                                             -------------- ---------------- --------------- --------------- --------------
                                                $4,564,924         ($13,097)    ($1,157,064)      ($654,334)    $2,740,429
                                             ============== ================ =============== =============== ==============
</TABLE>


<PAGE>

                         ATEL CASH DISTRIBUTION FUND II
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 1997


3. Investments in equipment and leases (continued):

Operating leases:

Property on operating  lease  consists of the following as of December 31, 1996,
additions and dispositions during 1997 and as of December 31, 1997:

<TABLE>
<CAPTION>
                                  Balance                         Reclass-        Balance
                               December 31,                     ifications &   December 31,
                                   1996          Additions      Dispositions       1997
                                   ----          ---------      ------------       ----
<S>                                <C>              <C>            <C>            <C>
Aircraft                           $3,164,533                       ($810,000)    $2,354,533
Mining                              1,546,341                               -      1,546,341
Communications                        504,703                         (58,826)       445,877
Materials handling                    728,247                        (296,108)       432,139
Other                                 349,590                        (165,991)       183,599
Manufacturing                         775,756                        (775,756)             -
                              ---------------- --------------- --------------- --------------
                                    7,069,170                      (2,106,681)     4,962,489
Less accumulated depreciation      (4,312,950)      ($364,425)      1,464,461     (3,212,914)
                              ---------------- --------------- --------------- --------------
                                   $2,756,220       ($364,425)      ($642,220)    $1,749,575
                              ================ =============== =============== ==============
</TABLE>

Direct financing leases:

Equipment under direct financing  leases includes wine barrels,  a wine bottling
line,  various medical  furniture,  fixtures and equipment and color  separation
equipment. The following lists the components of the Partnership's investment in
direct financing leases as of December 31, 1997 and 1996:


<TABLE>
<CAPTION>
                                                                 1997            1996
                                                                 ----            ----
<S>                                                             <C>             <C>
Total minimum lease payments receivable                         $1,249,072      $1,086,935
Estimated residual values of leased equipment (unguaranteed)       618,172         857,859
                                                            --------------- ---------------
Investment in direct financing leases                            1,867,244       1,944,794
Less unearned income                                              (922,980)       (170,206)
                                                            --------------- ---------------
Net investment in direct financing leases                         $944,264      $1,774,588
                                                            =============== ===============
</TABLE>


<PAGE>

                         ATEL CASH DISTRIBUTION FUND II
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 1997


3. Investments in equipment and leases (continued):

At December 31, 1997,  the aggregate  amounts of future  minimum lease  payments
from direct financing leases and operating leases are as follows:

      Year ending                     Direct
    December 31,     Operating       Financing         Total
             1998       $497,931         $348,824        $846,755
             1999        411,332          228,248         639,580
             2000        239,499          224,000         463,499
             2001         37,200          224,000         261,200
             2002         18,600          224,000         242,600
                   -------------- ---------------- ---------------
                      $1,204,562       $1,249,072      $2,453,634
                   ============== ================ ===============

Leveraged leases:

The Partnership  participates in leveraged lease transactions in which the costs
of assets  leased  to  others is  financed  primarily  by loans  from  financial
institutions,  but the  ownership of the assets is retained by the  Partnership.
The lessees' rental  obligations are assigned to the financial  institutions and
the  leased  property  is pledged as  collateral  for the loans and are  without
recourse to the general credit of the  Partnership.  Leases have been structured
so that lease  rental  payments and debt  service  amounts are equal.  Equipment
under leveraged leases consists of coal processing equipment. The net investment
in leveraged leases at December 31, 1997 and 1996 is as follows:

<TABLE>
<CAPTION>
                                                                  1997            1996
                                                                  ----            ----
<S>                                                                <C>             <C>
Aggregate rentals receivable                                        $50,898        $254,490
Aggregate principal and interest payable on non-recourse loans      (50,898)       (254,490)
Estimated residual value of leased assets                           148,750         148,750
Less unearned income                                                (30,542)        (54,825)
                                                              -------------- ---------------
Net investment in leveraged leases                                 $118,208         $93,925
                                                              ============== ===============
</TABLE>




<PAGE>

                         ATEL CASH DISTRIBUTION FUND II
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 1997


4. Non-recourse debt:


At December 31, 1997,  non-recourse  debt,  other than that related to leveraged
leases which is accounted for debt as a part of the net  investment in leveraged
leases,  consists of notes payable to financial  institutions  of $656,712.  The
notes are due in varying monthly,  quarterly and semi-annual payments.  Interest
on the notes is at rates  from  11.25% to  12.58%.  The  notes  are  secured  by
assignments of lease  payments and pledges of assets.  At December 31, 1997, the
carrying  value of the pledged  assets is  approximately  $1,295,842.  The notes
mature from 1998 through 2000.

Future  minimum  principal  and  interest  payments of  non-recourse  debt as of
December 31, 1997 are as follows:

             Year ending
           December 31,     Principal       Interest          Total
                    1998       $230,049          $61,609        $291,658
                    1999        233,530           36,202         269,732
                    2000        193,133            9,166         202,299
                          -------------- ---------------- ---------------
                               $656,712         $106,977        $763,689
                          ============== ================ ===============


5. Related party transactions:

The terms of the Limited Partnership Agreement provide that the General Partners
and/or  their  Affiliates  are entitled to receive  certain  fees for  equipment
acquisition, management and resale and for management of the Partnership.

The General  Partners  earned  partnership  management  fees equal to 5% of cash
distributed  from  operations and equipment  management fees equal to 2% of full
payout lease rentals and 5% of operating  lease rentals  pursuant to the Limited
Partnership  Agreement.  The  amounts  earned in 1997 and 1996 were  $84,156 and
$157,355, respectively.

The Limited Partnership Agreement allows for the reimbursement of costs incurred
by ATEL in providing administrative services to the Partnership.  Administrative
services provided include  partnership  accounting,  investor  relations,  legal
counsel  and lease  and  equipment  documentation.  ATEL is not  reimbursed  for
services where it is entitled to receive a separate fee as compensation for such
services,  such as acquisition and disposition of equipment.  Reimbursable costs
incurred  by ATEL are  allocated  to the  Partnership  based  upon  actual  time
incurred by employees working on partnership  business and an allocation of rent
and other costs based on utilization studies.

<PAGE>

                         ATEL CASH DISTRIBUTION FUND II
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 1997


5. Related party transactions (continued):

In 1997 and 1996, the Partnership reimbursed ATEL Financial Corporation $127,992
and  $132,994,  respectively,  for  costs  incurred  in  the  administration  of
Partnership business.

Substantially  all  employees  of the General  Partner  record time  incurred in
performing administrative services on behalf of all of the Partnerships serviced
by the General  Partner.  The General Partner believes that the costs reimbursed
are the lower of (i) actual costs incurred on behalf of the  Partnership or (ii)
the amount the  Partnership  would be  required to pay  independent  parties for
comparable  administrative  services  in the same  geographic  location  and are
reimbursable in accordance with the Limited Partnership Agreement.


 6. Partners' capital:

The  Partnership  is  authorized to issue up to 70,000 Units (in addition to the
Unit issued to the Initial  Limited  Partner).  As of December 31, 1997,  69,979
Units were issued and  outstanding.  Limited  Partners could elect to accumulate
their  share  of  distributions   for  reinvestment   during  the  Partnership's
reinvestment  period.  Effective April 1, 1993, the General Partners  terminated
this capital accumulation period.  Reinvested distributions do not result in the
issuance of additional  Units.  Each Limited  Partner's  capital interest in the
Partnership  is based upon his original  invested  capital  plus any  reinvested
distributions.

The  Partnership's  net  profits and net losses are to be  allocated  99% to the
Limited Partners and 1% to the General Partners.

Available Cash from Operations and Cash from Sales and  Refinancing,  as defined
in the Limited Partnership Agreement, shall be distributed as follows:

   First, 5% of Distributions of Cash from Operations to the General Partners as
the Partnership Management Fee.

   Second,  the balance to the Limited  Partners until the Limited Partners have
   received  Aggregate  Distributions  in an  amount  equal  to  their  Original
   Invested Capital plus a 10% per annum cumulative (compounded daily) return on
   their Adjusted Invested Capital.

   Third, the General Partners will receive as a Subordinated  Incentive Fee, as
follows:

       A) 10% of remaining Cash from Operations

       B) 15% of remaining Cash from Sales and Refinancing

   Fourth, the remainder to the Limited Partners.
<PAGE>

                         ATEL CASH DISTRIBUTION FUND II
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 1997


7. Concentration of credit risk and major customers:

The Partnership  leases  equipment to lessees in diversified  industries.  As of
December  31,  1997,  64% (28% in 1996) of total  equipment  cost was  leased to
lessees in the health care industry. Leases are subject to the general partners'
credit committee review. The leases provide for the return of the equipment upon
default.

During 1997, rentals from one customer in the health care industry comprised 26%
of the Partnership's revenues from leases.

During 1996, rentals from one customer in the health care industry comprised 15%
of the Partnership's revenues from leases.


8. Fair value of financial instruments:

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial  instrument for which it is practicable to estimate that
value.

Cash and cash equivalents:

The carrying amount of cash and cash equivalents approximates fair value because
of the short maturity of these instruments.

Non-recourse debt:

The  fair  value  of the  Partnership's  non-recourse  debt is  estimated  using
discounted cash flow analyses,  based on the Partnership's  current  incremental
borrowing rates for similar types of borrowing arrangements.  The estimated fair
value of the Partnership's non-recourse debt at December 31, 1997 is $672,175.





<PAGE>

Item 9.  CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON
              ACCOUNTING AND FINANCIAL DISCLOSURES

Inapplicable.


                                    PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS

The  registrant  is a Limited  Partnership  and,  therefore,  has no officers or
directors.

All  of the  outstanding  capital  stock  of  ATEL  Financial  Corporation  (the
corporate  General  Partner) is held by ATEL Capital  Group  ("ACG"),  a holding
company formed to control the General Partner and affiliated  companies pursuant
to a corporate  restructuring  completed in July 1994. The  outstanding  capital
stock of ATEL Capital Group is owned 75% by A. J. Batt and 25% by Dean Cash (the
individual General Partners),  and was obtained in the restructuring in exchange
for their capital interests in ATEL Financial Corporation.

Each of ATEL Leasing Corporation  ("ALC"),  ATEL Equipment  Corporation ("AEC"),
ATEL  Investor  Services  ("AIS") and ATEL  Financial  Corporation  ("AFC") is a
wholly-owned  subsidiary  of ATEL Capital  Group and  performs  services for the
Partnership.  Acquisition  services are  performed for the  Partnership  by ALC,
equipment  management,  lease  administration and asset disposition services are
performed by AEC, investor relations and  communications  services are performed
by AIS and general administrative  services for the Partnership are performed by
AFC. ATEL Securities  Corporation ("ASC"), is a wholly-owned  subsidiary of ATEL
Financial Corporation.

The officers and directors of ATEL Capital Group, ATEL Financial Corporation and
their affiliates are as follows:

A. J. Batt                 Chairman of the Board of Directors of ACG, AFC, ALC,
                           AEC, AIS and ASC; President and Chief Executive
                           Officer of ACG, AFC and AEC

Dean L. Cash               Director, Executive Vice President and Chief
                           Operating Officer of ACG, AFC, and AEC; Director,
                           President and Chief Executive Officer of ALC, AIS
                           and ASC

F. Randall Bigony          Senior Vice President and Chief Financial Officer of
                           ACG, AFC, ALC, AIS and AEC

Donald E. Carpenter        Vice President and Controller of ACG, AFC, ALC, AEC
                           and AIS; Chief Financial Officer of ASC

Vasco H. Morais            General Counsel for ACG, AFC, ALC, AIS and AEC

William J. Bullock         Director of Asset Management of AEC

Russell H. Wilder          Vice President - Credit of AEC

John P. Scarcella          Vice President of ASC


<PAGE>

A. J. Batt, age 61, founded ATEL in 1977 and has been its president and chairman
of the  board of  directors  since  its  inception.  From  1973 to 1977,  he was
employed by GATX  Leasing  Corporation  as  manager-data  processing  and equity
placement for the lease underwriting department, which was involved in equipment
financing  for  major  corporations.  From  1967 to 1973  Mr.  Batt was a senior
technical representative for General Electric Corporation, involved in sales and
support  services for computer  time-sharing  applications  for corporations and
financial  institutions.  Prior to that time, he was employed by North  American
Aviation as an  engineer  involved in the Apollo  project.  Mr. Batt  received a
B.Sc.  degree with honors in  mathematics  and physics  from the  University  of
British Columbia in 1961.

Dean L. Cash,  age 47, joined ATEL as director of marketing in 1980 and has been
a vice president since 1981,  executive vice president since 1983 and a director
since  1984.   Prior  to  joining  ATEL,   Mr.  Cash  was  a  senior   marketing
representative for Martin Marietta Corporation, data systems division, from 1979
to 1980.  From 1977 to 1979,  he was employed by General  Electric  Corporation,
where he was an applications  specialist in the medical  systems  division and a
marketing  representative in the information  services division.  Mr. Cash was a
systems  engineer  with  Electronic  Data  Systems  from  1975 to 1977,  and was
involved in maintaining and developing software for commercial applications. Mr.
Cash received a B.S.  degree in psychology and mathematics in 1972 and an M.B.A.
degree with a concentration in finance in 1975 from Florida State University.
Mr. Cash is an arbitrator with the American Arbitration Association.

F.  Randall  Bigony,  age 40,  joined  ATEL in  1992  to  review  administrative
operations  within  ATEL  Financial  Corporation  and to develop  and  implement
functional  plans to  support  company  growth.  He  currently  oversees  ATEL's
accounting, MIS and treasury functions. From 1987 until joining ATEL, Mr. Bigony
was  president  of F.  Randall  Bigony & Co., a  consulting  firm that  provided
financial and strategic  planning  services to emerging growth  companies.  From
1983 to 1987,  he was a manager  with the  accounting  firm of Ernst &  Whinney,
serving  clients in its management  consulting  practice.  Mr. Bigony received a
B.A.  degree in business  from the  University  of  Massachusetts  and an M.B.A.
degree in finance from the University of California,  Berkeley. He is a founding
board member and acting  treasurer  of the I Have a Dream  Foundation - Bay Area
Chapter.

Donald E. Carpenter, age 49, joined ATEL in 1986 as controller. Prior to joining
ATEL, Mr. Carpenter was an audit supervisor with Laventhol & Horwath,  certified
public accountants in San Francisco, California, from 1983 to 1986. From 1979 to
1983,  Mr.  Carpenter  was an  audit  senior  with  Deloitte,  Haskins  & Sells,
certified public accountants,  in San Jose,  California.  From 1971 to 1975, Mr.
Carpenter was a Supply Corp officer in the U. S. Navy. Mr. Carpenter  received a
B.S. degree in mathematics  (magna cum laude) from California State  University,
Fresno in 1971 and completed a second major in accounting in 1978. Mr. Carpenter
has been a California certified public accountant since 1981.

Vasco H. Morais, age 39, joined ATEL in 1989 as general counsel to provide legal
support in the  drafting  and  reviewing  of lease  documentation,  advising  on
general corporate law matters, and assisting on securities law issues. From 1986
to 1989,  Mr.  Morais was  employed  by the  BankAmeriLease  Companies,  Bank of
America's  equipment leasing  subsidiaries,  providing in-house legal support on
the  documentation  of  tax-oriented  and non-tax  oriented direct and leveraged
lease transactions, vendor leasing programs and general corporate matters. Prior
to the BankAmeriLease  Companies,  Mr. Morais was with the Consolidated  Capital
Companies in the Corporate and Securities Legal Department  involved in drafting
and reviewing  contracts,  advising on corporate law matters and  securities law
issues.  Mr.  Morais  received  a B.A.  degree  in 1982 from the  University  of
California in Berkeley and a J.D. degree in 1986 from Golden Gate University Law
School.  Mr.  Morais  has been an active  member of the State Bar of  California
since 1986.
<PAGE>

William J.  Bullock,  age 34,  joined  ATEL in 1991,  as the  director  of asset
management. He assumed responsibility for the disposition of off-lease equipment
and  residual  valuation  analysis on new lease  transactions.  Prior to joining
ATEL,  Mr.  Bullock  was a senior  member of the  equipment  group at  McDonnell
Douglas  Finance  Corporation  ("MDFC")  responsible for managing its $4 billion
portfolio of leases.  Mr. Bullock was involved in negotiating sales and renewals
as well as preparing and  inspecting  equipment.  Prior to joining MDFC in 1989,
Mr. Bullock was the Senior  Negotiator at Equitable  Leasing (a subsidiary of GE
Capital Equipment Corp.) in San Diego. At Equitable, he handled the end-of-lease
negotiations  and equipment  dispositions of a portfolio  comprised of equipment
leased primarily to Fortune 200 companies.  Mr. Bullock has been a member of the
Equipment Lessors  Association  ("ELA") since 1987 and has authored ELA industry
articles.  He  received a B.S.  degree in  Finance in 1987 from San Diego  State
University and is pursuing his M.B.A.

Russell  H.  Wilder,  age 43,  joined  ATEL in  1992 as Vice  President  of ATEL
Business Credit, a wholly-owned  subsidiary of ACG. Immediately prior to joining
ATEL,  Mr.  Wilder was a personal  property  broker  specializing  in  equipment
leasing  and  financing  and an  outside  contractor  in the areas of credit and
collections.  From 1985 to 1990 he was Vice President and Manager of Leasing for
Fireside Thrift Co., a Teledyne subsidiary,  and was responsible for all aspects
of setting up and  managing  the  department,  which  operated as a small ticket
lease  funding  source.  From  1983 to  1985 he was  with  Wells  Fargo  Leasing
Corporation  as  Assistant  Vice  President  in the credit  department  where he
oversaw all credit analysis on  transactions in excess of $2 million.  From 1978
to 1983 he was District Credit Manager with  Westinghouse  Credit  Corporation's
Industrial Group and was responsible for all non-marketing operations of various
district offices. Mr. Wilder holds a B.S. with Honors in Agricultural  Economics
and Business  Management from the University of California at Davis. He has been
awarded the Certified Lease Professional  designation by the Western Association
of Equipment Lessors.

John P. Scarcella,  age 36, joined ATEL Securities as vice president in 1992. He
is involved in the marketing of securities offered by ASC. Prior to joining ASC,
from 1987 to 1991,  he was  employed  by Lansing  Pacific  Fund,  a real  estate
investment  trust in San Mateo,  California  and acted as  director  of investor
relations.   From  1984  to  1987,   Mr.   Scarcella   acted  as  broker  dealer
representative  for Lansing  Capital  Corporation,  where he was involved in the
marketing of direct  participation  programs and REITs. Mr. Scarcella received a
B.S.C.  degree with emphasis in investment finance in 1983 and an M.B.A.  degree
with a concentration in marketing in 1991 from Santa Clara University.


Item 11.  EXECUTIVE COMPENSATION

The  registrant  is a limited  partnership  and,  therefore,  has no officers or
directors.

Set forth hereinafter is a description of the nature of remuneration paid and to
be paid to the  general  partners  and  their  affiliates.  The  amount  of such
remuneration paid for the years ended December 31, 1997 and 1996 is set forth in
Item 8 of this report under the caption "Financial  Statements and Supplementary
Data - Notes to the Financial  Statements - Related party transactions," at Note
5 thereof which information is hereby incorporated by reference.

Selling Commissions

Through January 1990, the Partnership paid selling  commissions in the amount of
$3,325,000 to ATEL Securities Corporation, a wholly owned subsidiary of ATEL. No
further commissions are to be paid. Of this amount,  $3,094,015 was reallowed to
other broker/dealers.
<PAGE>

Acquisition Fees

Acquisition  fees were paid to the General  Partners  for  services  rendered in
finding,  reviewing and evaluating  equipment to be purchased by the Partnership
and rejecting equipment not to be purchased by the Partnership. Acquisition fees
paid to the General Partners or their  affiliates were  $1,662,500,  the maximum
allowable amount.

Equipment Management Fees

As compensation for its services  rendered  generally in managing or supervising
the management of the  Partnership's  equipment and in supervising other ongoing
services  and  activities  including,  among  others,  broker  assistance,  cash
management,   product  development,   property  and  sales  tax  monitoring  and
preparation  of financial  data,  the General  Partners or their  affiliates are
entitled to receive  management  fees which are payable for each fiscal  quarter
and  are  to be in an  amount  equal  to  (i)  5% of  the  gross  revenues  from
"operating" leases and (ii) 2% of gross revenues from "full payout" leases which
contain net lease provisions. See Note 5 to the financial statements included at
Item 8 of this report for amounts paid.

Partnership Management Fees

As compensation  for its services  rendered in connection with the management of
the  Partnership,  including but not limited to employment  and  supervision  of
supervisory  managing  agents,  insurance  brokers,   equipment  lease  brokers,
accountants and other professional advisors, and for supervising the preparation
of reports and  maintenance of financial and operating data of the  Partnership,
Securities and Exchange Commission and Internal Revenue Service filings, returns
and reports,  the General  Partners shall be entitled to receive the partnership
management  fee which shall be payable  for each fiscal  quarter and shall be an
amount equal to 5% of distributions  of cash from operations.  See Note 5 to the
financial statements included at Item 8 of this report for amounts paid.

Equipment Resale Fees

As compensation for services  rendered in connection with the sale of equipment,
the General  Partners shall be entitled to receive an amount equal to the lesser
of (i) 3% of the sales  price of the  equipment,  or (ii)  one-half  the  normal
competitive  equipment sales commission charged by unaffiliated parties for such
services.  Such fee is payable only after the Limited  Partners  have received a
return of their adjusted invested capital (as defined in the Limited Partnership
Agreement) plus 10% of their adjusted invested capital per annum calculated on a
cumulative basis,  compounded  daily,  commencing the last day of the quarter in
which the limited  partner was admitted to the  Partnership.  To date, none have
been accrued or paid.

Subordinated Incentive Fees

As compensation for the services rendered in evaluating and selecting  equipment
for  the  Partnership,  making  decisions  as to the  nature  and  terms  of the
acquisition,   leasing,   releasing  and  disposition  of  such  equipment,  and
selecting,  retaining and supervising consultants,  lessees, engineers, lenders,
borrowers  and  others,  the  General  Partners  shall be  entitled to receive a
subordinated  incentive fee equal to a percentage of all  distributions  of cash
from  operations  and cash from  sales or  refinancing  payable  quarterly,  but
commencing  immediately  after the Limited  Partners have received the return on
their adjusted capital described under "Equipment Resale Fees" above. The amount
of the  subordinated  incentive fee shall be 10% of  distributions  of cash from
operations and 15% of distributions of cash from sales or refinancing.  To date,
none have been accrued or paid.
<PAGE>

General Partners' Interest in Operating Proceeds

Net income, net loss and investment tax credits are allocated 99% to the Limited
Partners and 1% to the General  Partners.  See the statements of income included
in Item 8 of this  report for the amounts  allocated  to the General and Limited
Partners in 1996 and 1997.


Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
            MANAGEMENT

Security Ownership of Certain Beneficial Owners

At  December  31,  1997  no  investor  is  known  to  the  Partnership  to  hold
beneficially more than 5% of the issued and outstanding Units.

Security Ownership of Management

The General  Partners  are  beneficial  owners of Limited  Partnership  Units as
follows:

<TABLE>
<CAPTION>
           (1)                  (2)                             (3)                        (4)
                           Name and Address of            Amount and Nature of           Percent
Title of Class             Beneficial Owner              Beneficial Ownershipof           Class

<S>                        <C>                            <C>                             <C>
Limited Partnership Units  Dean L. Cash                   Individual Retirement           0.0057%
                           235 Pine Street, 6th Floor     Account - 4 Units ($2,000)
                           San Francisco, CA 94104

Limited Partnership Units  Dean L. Cash                   Initial Limited Partner Unit    0.0014%
                           235 Pine Street, 6th Floor     1 Unit ($500)
                           San Francisco, CA 94104        (owned by spouse)
</TABLE>

Changes in Control

The Limited Partners have the right, by vote of the Limited Partners owning more
than 50% of the  outstanding  Limited  Partnership  Units,  to  remove a General
Partner.

The General Partners may at any time call a meeting of the Limited Partners or a
vote of the  limited  partners  without a meeting,  on matters on which they are
entitled  to vote,  and shall call such  meeting  or for vote  without a meeting
following  receipt of a written request therefor of Limited Partners holding 10%
or more of the total outstanding Limited Partnership Units.


Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The responses to Item 8 of this report under the caption  "Financial  Statements
and  Supplemental  Data - Notes to the  Financial  Statements  -  Related  party
transactions"  at Note 5 thereof,  and Item 11 of this report  under the caption
"Executive Compensation," are hereby incorporated herein by reference.

The Partnership also owned a 30% undivided  interest in the Boeing 727 executive
aircraft on lease to DJ Aerospace (Bermuda) Ltd. The Partnership's  interest was
purchased  from an  unrelated  third  party  on the  same  terms  as that of the
affiliated partnership, ATEL Cash Distribution Fund IV which owned the remaining
70%. The aircraft was sold on January 2, 1997 to the lessee.



<PAGE>

                                     PART IV

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

                   (a)  Financial Statements and Schedules

                          1. Financial Statements

                             Included in Part II of this report:

                             Report of Independent Auditors

                             Balance Sheet at December 31, 1997

                             Statements of Income for the years ended December
                              31, 1997 and 1996

                             Statements of Changes in Partners' Capital for the
                              years ended December 31, 1997 and 1996

                             Statements of Cash Flows for the years ended
                              December 31, 1997 and 1996

                             Notes to Financial Statements

                          2. Financial Statement Schedules

                             All  schedules  for which  provision is made in the
                             applicable accounting regulations of the Securities
                             and Exchange  Commission are not required under the
                             related  instructions  or  are  inapplicable,   and
                             therefore have been omitted.

                   (b)  Reports on Form 8-K for the fourth quarter of 1997

                             None

                   (c)  Exhibits

                             (3)   and   (4)   Limited   Partnership   Agreement
                             incorporated  by  reference to Exhibits (3) and (4)
                             to the Partnership's Annual Report on Form 10-K for
                             the year ended  December  31,  1988 filed March 31,
                             1989 (File No. 33-17663)

<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.



                        Date:             3/27/1998

                         ATEL Cash Distribution Fund II,
                        a California Limited Partnership
                                  (Registrant)


       By:  ATEL Financial Corporation,
            General Partner of Registrant



                       By:  /s/  A. J. Batt
                            -----------------------------------------------
                            A. J. Batt,
                            President and Chief Executive Officer



       By:  /s/  A. J. Batt
            -----------------------------------------------
            A. J. Batt,
            General Partner of Registrant,
            President and Chief Executive Officer of
            ATEL Financial Corporation (General
            Partner)



       By:   /s/ Dean Cash
            -----------------------------------------------
            Dean Cash,
            General Partner of Registrant,
            Executive Vice President of ATEL
            Financial Corporation (General Partner)





<PAGE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has  been  signed  below  by the  persons  in the  capacities  and on the  dates
indicated.


         SIGNATURE           CAPACITIES                                  DATE



/s/  A. J. Batt              General Partner of registrant;           3/27/1998
---------------------------- president, chairman and chief
      A. J. Batt             executive officer of ATEL
                             Financial Corporation




 /s/ Dean Cash               General Partner of registrant;           3/27/1998
---------------------------- executive vice president and
      Dean Cash              director of ATEL Financial
                             Corporation




/s/ F. Randall Bigony        Principal financial officer              3/27/1998
---------------------------- of registrant; principal
  F. Randall Bigony          financial officer of ATEL
                             Financial Corporation




/s/ Donald E. Carpenter      Principal accounting officer             3/27/1998
---------------------------- of registrant; principal
 Donald E. Carpenter         accounting officer of ATEL
                             Financial Corporation