UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                               -------------------

                                    FORM 10-K

[X]  Annual Report  Pursuant to Section 13 or 15(d) of the  Securities  Exchange
     Act of 1934 
     For the fiscal year ended December 31, 1998.

[ ]  Transition  Report  Pursuant  to  Section  13 or  15(d)  of the  Securities
     Exchange Act of 1934
     For the transition period from              to

                         Commission file number 1-10553
                             -----------------------

                          PLM EQUIPMENT GROWTH FUND II
             (Exact name of registrant as specified in its charter)

        California                                        94-3041013
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                         Identification No.)

One Market, Steuart Street Tower
   Suite 800, San Francisco, CA                            94105-1301
(Address of principal executive offices)                    (Zip code)

        Registrant's telephone number, including area code (415) 974-1399
                             -----------------------

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

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

Aggregate market value of voting stock:  N/A

Indicate  the number of units  outstanding  of each of the  issuer's  classes of
depositary units, as of the latest practicable date:

         Class                              Outstanding at March 17, 1999
         -----                              -----------------------------
Limited partnership depositary units:                7,381,805
General Partnership units:                                   1

     An index of exhibits filed with this Form 10-K is located at page 24.
     Total number of pages in this report:  45.


<PAGE>


                                     PART I

ITEM 1.       BUSINESS

(A)  Background

On April 2, 1987, PLM Financial Services,  Inc. (FSI or the General Partner),  a
wholly-owned  subsidiary of PLM International,  Inc. (PLM International or PLM),
filed a  Registration  Statement  on Form S-1 with the  Securities  and Exchange
Commission  with respect to a proposed  offering of 7,500,000  depositary  units
(the units) in PLM Equipment  Growth Fund II, a California  limited  partnership
(the Partnership,  the Registrant, or EGF II). The Partnership's offering became
effective on June 5, 1987.  FSI, as General  Partner,  owns a 5% interest in the
Partnership.  The  Partnership  engages  in  the  business  of  investing  in  a
diversified  equipment  portfolio  consisting  primarily  of  used,  long-lived,
low-obsolescence  capital  equipment that is easily  transportable  by and among
prospective users.

The Partnership's primary objectives are:

     (1) to maintain a diversified  portfolio of  long-lived,  low-obsolescence,
high  residual-value  equipment which was purchased with the net proceeds of the
initial  partnership  offering,  supplemented  by debt  financing,  and  surplus
operating cash during the investment phase of the Partnership.  All transactions
of over $1.0 million  must be approved by the PLM  International  Credit  Review
Committee  (the  Committee),  which is made up of members  of PLM  International
Senior  Management.  In determining a lessee's  creditworthiness,  the Committee
will  consider,  among other  factors,  its financial  statements,  internal and
external credit ratings, and letters of credit;

     (2) to generate sufficient net operating cash flow from lease operations to
meet liquidity  requirements  and to generate cash  distributions to the limited
partners  until  such  time  as  the  General  Partner   commences  the  orderly
liquidation of the  Partnership  assets or unless the  Partnership is terminated
earlier upon sale of all Partnership property or by certain other events;

     (3) to selectively  sell equipment when the General Partner  believes that,
due to market conditions,  market prices for equipment exceed inherent equipment
values or that expected future benefits from continued ownership of a particular
asset will have an adverse affect on the  Partnership.  As the Partnership is in
the  liquidation  phase,  proceeds  from these sales,  together  with excess net
operating cash flow from operations  (net cash provided by operating  activities
plus distributions from unconsolidated  special-purpose  entities (USPEs)), less
reasonable reserves to pay distributions to the partners;

     (4) to  preserve  and protect the value of the  portfolio  through  quality
management,  maintaining  the  portfolio's  diversity and constantly  monitoring
equipment markets.

The  offering  of the Units of the  Partnership  closed on March 18,  1988.  The
General  Partner  contributed  $100 for its 5% general  partner  interest in the
Partnership. On November 20, 1990, the units of the Partnership began trading on
the  American  Stock  Exchange  (AMEX).  Thereupon  each  unitholder  received a
depositary receipt  representing  ownership of the number of units owned by such
unitholder.  The General Partner delisted the Partnership's  units from the AMEX
on April 8, 1996. The last day for trading on the AMEX was March 22, 1996.

As of December 31, 1998, there were 7,381,805 depositary units outstanding.

On  January  1, 1999,  the  Partnership  entered  its  liquidation  phase and in
accordance with the limited partnership  agreement,  the General Partner intends
to commence an orderly liquidation of the Partnership's  assets. The liquidation
phase will end on  December  31,  2006,  unless the  Partnership  is  terminated
earlier upon sale of all of the equipment or by certain other events.



<PAGE>


Table  1,  below,  lists  the  equipment  and  the  cost  of  equipment  in  the
Partnership's   portfolio,   and  the  cost  of  investments  in  unconsolidated
special-purpose entities, as of December 31, 1998 (in thousands of dollars):

                                     TABLE 1
<TABLE>
<CAPTION>

 Units                    Type                                       Manufacturer                           Cost
----------------------------------------------------------------------------------------------------------------------

Owned equipment held for operating leases:

    <S>      <C>                                                  <C>                                     <C>          
    458      Box railcars                                         Various                                 $    7,777 
    193      Mill gondolas railcars                               Various                                      4,459
    148      Pressurized tank railcars                            Various                                      4,165
     28      Non-Pressurized tank railcars                        Various                                        495
     27      Covered hopper railcars                              ACF Industries                                 424
    622      Dry piggyback trailers                               Various                                      9,572
     41      Refrigerated trailers                                Various                                      1,362
     77      Dry trailers                                         Fruehauf                                       950
    337      Refrigerated marine containers                       Various                                      7,008
                                                                                                          -------------

                Total owned equipment held for operating lease                                            $   36,212<F1>
                                                                                                          =============

Investment in unconsolidated special-purpose entity:

    50%      737-200 Stage II commercial aircraft                 Boeing                                  $    8,046<F1><F2>
                                                                                                          ==============
<FN>

<F1> Includes equipment and investments purchased with the proceeds from capital
     contributions,  undistributed  cash flow from  operations,  and Partnership
     borrowings.  Includes costs capitalized and equipment acquisition fees paid
     to  PLM   Transportation   Equipment   Corporation  (TEC),  a  wholly-owned
     subsidiary of FSI, subsequent to the date of acquisition. All equipment was
     used equipment at the time of purchase.

<F2> Jointly owned:  EGF II (50%) and an affiliated program.

</FN>

</TABLE>



The equipment is generally  leased under  operating  leases with terms of one to
six years.  The  Partnership's  marine  containers  are leased to  operators  of
utilization-type  leasing  pools that include  equipment  owned by  unaffiliated
parties.  In such instances,  revenues received by the Partnership  consist of a
specified  percentage of revenues  generated by leasing the pooled  equipment to
sublessees,  after  deducting  certain direct  operating  expenses of the pooled
equipment.  Rents for  railcars  are based on mileage  traveled or a fixed rate;
rents for all other equipment are based on fixed rates.

As of December 31, 1998,  approximately 16% of the of the Partnership's  trailer
equipment was in rental facilities operated by PLM Rental, Inc., an affiliate of
the  General  Partner,  doing  business as PLM Trailer  Leasing.  The  remaining
trailer fleet operated in the short-line  railroad  system.  Revenues  collected
under short-term rental agreements with the rental yards' customers are credited
to the owners of the related equipment as received.  Direct expenses  associated
with the equipment  are charged  directly to the  Partnership.  An allocation of
other  indirect  expenses  of the  rental  yard  operations  is  charged  to the
Partnership monthly.

The  lessees of the  equipment  include  but are not  limited  to:  Transamerica
Leasing,  Union Pacific Railroad Company,  Canadian Pacific Railway Company, and
Elgin, Jolieit & Eastern Railway.



<PAGE>


(B)  Management of Partnership Equipment

The  Partnership  has entered into an equipment  management  agreement  with PLM
Investment  Management,  Inc.  (IMI), a wholly-owned  subsidiary of FSI, for the
management  of  the  Partnership's   equipment.   The  Partnership's  management
agreement with IMI is to co-terminate  with the dissolution of the  Partnership,
unless the limited  partners vote to terminate the agreement  prior to that date
or at the  discretion  of the  General  Partner.  IMI has agreed to perform  all
services  necessary to manage the equipment on behalf of the  Partnership and to
perform or contract for the  performance of all obligations of the lessors under
the Partnership's  leases. In consideration for its services and pursuant to the
partnership agreement,  IMI is entitled to a monthly management fee (see Notes 1
and 2 to the financial statements).

(C)  Competition

(1)  Operating Leases versus Full Payout Leases

Generally,  the equipment  owned or invested in by the Partnership is leased out
on an  operating  lease  basis  wherein  the rents  received  during the initial
noncancelable  term of the lease are  insufficient to recover the  Partnership's
purchase  price of the  equipment.  The short- to mid-term  nature of  operating
leases  generally  commands a higher rental rate than  longer-term,  full payout
leases and offers lessees relative flexibility in their equipment commitment. In
addition, the rental obligation under an operating lease need not be capitalized
on the lessee's balance sheet.

The Partnership  encounters  considerable  competition from lessors that utilize
full payout leases on new  equipment,  i.e.  leases that have terms equal to the
expected  economic  life  of  the  equipment.  While  some  lessees  prefer  the
flexibility offered by a shorter-term  operating lease, other lessees prefer the
rate  advantages  possible with a full payout lease.  Competitors may write full
payout  leases  at  considerably  lower  rates  and for  longer  terms  than the
Partnership offers, or larger competitors with a lower cost of capital may offer
operating leases at lower rates,  which may put the Partnership at a competitive
disadvantage.

(2)  Manufacturers and Equipment Lessors

The Partnership competes with equipment manufacturers who offer operating leases
and full payout leases.  Manufacturers may provide  ancillary  services that the
Partnership cannot offer, such as specialized  maintenance  services  (including
possible substitution of equipment),  training,  warranty services, and trade-in
privileges.

The  Partnership  also  competes  with many  equipment  lessors,  including  ACF
Industries,  Inc.  (Shippers Car Line Division),  GATX, General Electric Railcar
Services  Corporation,  General Electric Capital Aviation Services  Corporation,
and other investment programs that lease the same types of equipment.

(D)  Demand

The Partnership  operates in four primary operating  segments:  trailer leasing,
railcar leasing,  aircraft leasing, and marine container leasing. Each equipment
leasing segment engages in short-term to mid-term  operating leases to a variety
of  customers.  Except for the aircraft  which may be leased to a passenger  air
carrier,  the  Partnership's  equipment  is  used  to  transport  materials  and
commodities, rather than people.

The following  section describes the international and national markets in which
the Partnership's capital equipment operates:



<PAGE>


(1)  Railcars

(a)  Box Railcars

Box  railcars  are  used  primarily  to  transport  paper  and  paper  products.
Carloadings of paper and paper products fell slightly in 1998, compared to 1997,
decreasing  by 2% both in the United  States and Canada.  Prices moved  modestly
higher  for most  grades of paper  during the year,  and a variety  of  positive
industry  factors  indicates  that the  upturn  could  continue  for some  time.
However,  the financial  difficulties now being experienced in parts of Asia may
have a negative effect on future paper industry trends.

All of the  Partnership's  box cars  continued  to operate on  long-term  leases
during 1998.

(b)  Mill Gondolas Railcars

Mill gondolas railcars are railcars that are typically used to carry scrap steel
from steel  processors to small steel mills called  minimills for recycling.  In
1997, minimills were responsible for 43% of the total steel output in the United
States,  relatively  unchanged  from the 42% level of 1996.  North  American car
loadings of scrap steel fell slightly in 1998, down 4% over 1997 levels.

All  of the  Partnership's  mill  gondolas  railcars  continued  to  operate  on
long-term leases during 1998.

(c)  Pressurized Tank Railcars

Pressurized tank railcars transport primarily two chemicals: liquefied petroleum
gas (natural gas) and anhydrous ammonia  (fertilizer).  Natural gas is used in a
variety of ways in businesses,  electric plants, factories,  homes, and now even
cars.  The demand for  fertilizer  is driven by a number of  factors,  including
grain prices,  the status of  government  farm subsidy  programs,  the amount of
farming acreage and mix of crops planted,  weather patterns,  farming practices,
and the value of the U.S. dollar.

In North  America,  1998 carload  originations  of both  chemicals and petroleum
products  remained  relatively  constant,  compared to 1997. The 98% utilization
rate of the  Partnership's  pressurized  tank railcars was consistent  with this
statistic.

(d)  General Purpose (Nonpressurized) Tank Railcars

Tank cars that do not require  pressurization are used to transport a variety of
bulk liquid  commodities and chemicals,  including  certain  petroleum fuels and
products,  liquefied asphalt, lubricating and vegetable oils, molten sulfur, and
corn syrup. The largest  consumers of chemical  products are the  manufacturing,
automobile, and housing sectors. Because the bulk liquid industry is so diverse,
its overall  health is reflected by such  general  indicators  as changes in the
Gross  Domestic  Product,  personal  consumption  expenditures,   retail  sales,
currency exchange rates, and national and international economic forecasts.

In North  America,  railcar  loadings  for the  commodity  group  that  includes
chemicals and petroleum  products remained  essentially  unchanged,  compared to
1997. The Partnership's general purpose cars continue to be in high demand, with
utilization over 98% in 1998.

(e)  Covered Hopper (Grain) Railcars

Covered hopper railcars are used to transport grain to domestic food processors,
poultry  breeders,  cattle feed lots, and for export.  Demand for covered hopper
cars  softened In 1998, as total North  American  grain  shipments  declined 8%,
compared to 1997,  with grain  shipments  within Canada  contributing to most of
this  decrease.  This has put downward  pressure on lease rates,  which has been
exacerbated by a significant increase in the number of covered hopper cars built
in the last few years.  Since 1988, there has been a nearly 20% increase in rail
transportation  capacity  assigned to agricultural  service.  In 1996, just over
one-half of all new railcars  built were  covered  hopper  cars;  in 1997,  this
percentage dropped somewhat, to 38% of all cars built.

The Partnership's covered hopper cars were not impacted by the decrease in lease
rates during 1998, as all of the cars continued to operate on long-term leases.

(2)  Trailers

(a)  Intermodal (Piggyback) Trailers

Intermodal  (piggyback)  trailers  are used to ship goods  either by truck or by
rail.  Activity  within the North American  intermodal  trailer market  declined
slightly in 1998, with trailer shipments down 4% from 1997 levels, due primarily
to rail service problems  associated with the mergers in this area.  Utilization
of the intermodal  per diem rental fleet,  consisting of  approximately  170,000
units, was 73%. Intermodal utilization in 1999 is expected to decline another 2%
from 1998 levels,  due to a slight leveling off of overall economic  activity in
1999, after a robust year in 1998.

The General  Partner  has  initiated  expanded  marketing  and asset  management
efforts for its intermodal  trailers,  from which it expects to achieve improved
trailer  utilization and operating  results.  During 1998,  average  utilization
rates for the Partnership's intermodal trailer fleet approached 80%.

(b)      Over-the Road Refrigerated Trailers

The temperature-controlled  over-the-road trailer market remained strong in 1998
as  freight  levels  improved  and  equipment   oversupply  was  reduced.   Many
refrigerated  equipment  users retired  older  trailers and  consolidated  their
fleets, making way for new,  technologically  improved units.  Production of new
equipment is backlogged  into the third quarter of 1999. In light of the current
tight  supply of  trailers  available  on the  market,  it is  anticipated  that
trucking companies and other refrigerated  trailer users will look outside their
own fleets more  frequently  by leasing  trailers on a short-term  basis to meet
their equipment needs.

This  leasing  trend  should  benefit the  Partnership,  which makes most of its
trailers  available for short-term  leasing from rental yards owned and operated
by a PLM International subsidiary. The Partnership's utilization of refrigerated
trailers showed  improvement in 1998, with  utilization  rates  approaching 70%,
compared to 60% in 1997.

(c)  Over-the-Road Dry Trailers

The U.S. over-the-road (dry) trailer market continued to recover in 1998, with a
strong domestic economy resulting in heavy freight volumes.  The leasing outlook
continues  to be  positive,  as  equipment  surpluses  of recent years are being
absorbed by a buoyant  market.  In addition to high freight  volumes,  declining
fuel  prices  have led to a strong  trucking  industry  and  improved  equipment
demand.

The Partnership's dry van fleet experienced strong utilization  throughout 1998,
with utilization rates remaining well above 70% throughout the year.

(3)      Marine Containers

The marine container market began 1998 with industrywide  utilization in the low
80% range.  This  percentage  eroded  somewhat  during the year,  while per diem
rental  rates  remained  steady.   One  factor  affecting  the  market  was  the
availability   of   historically   low-priced   marine   containers  from  Asian
manufacturers.  This trend is expected to remain in 1999,  and will  continue to
put pressure on economic results fleetwide.

The trend  toward  industrywide  consolidation  continued  in 1998,  as the U.S.
parent company of one of the industry's top ten container lessors announced that
it would be outsourcing  the management of its container  fleet to a competitor.
While  this  announcement  has yet to be  finalized,  over the long  term,  such
industrywide  consolidation  should bring more  rationalization to the container
leasing  market and result in both  higher  fleetwide  utilization  and per diem
rates.



<PAGE>


(4)  Commercial Aircraft

The world's major  airlines  experienced a fourth  consecutive  year of profits,
showing a combined  marginal net income (net income  measured as a percentage of
revenue)  of 6%,  compared  to the  industry's  historical  annual  rate  of 1%.
Airlines recorded positive marginal net annual income of 2% in 1995, 4% in 1996,
6% in 1997,  and 6% in 1998.  The two factors that have led to this  increase in
profitability are improvements in yield management systems and reduced operating
costs,  particularly  lowered fuel costs.  These higher levels of  profitability
have allowed many airlines to re-equip their fleets with new aircraft, resulting
in a record number of orders for manufacturers.


Major  airlines  increased  their fleets from 7,181 aircraft in 1997 to 7,323 in
1998,  which has  resulted  in more used  aircraft  available  on the  secondary
market. Despite these increases, the number of Stage II aircraft in these fleets
(similar to those owned by the Partnership)  decreased by 26% from 1997 to 1998,
and  sharper  decreases  are  expected  in 1999.  This  trend is due to  Federal
Aviation  Regulation  section C36.5,  which requires airlines to convert 100% of
their fleets to Stage III aircraft,  which have lower noise levels than Stage II
aircraft,  by the year 2000 in the United States and the year 2002 in Canada and
Europe.  Stage II aircraft can be modified to Stage III with the installation of
a  hushkit  that  significantly  reduces  engine  noise.  The  cost  of  hushkit
installation ranges from $1.0 to $2.0 million for the types of aircraft owned by
the Partnership.


Orders for new aircraft  have risen rapidly  worldwide in recent  years:  691 in
1995,  1,182 in 1996, 1,328 in 1997, and an estimated 1,500 in 1998. As a result
of this increase in orders,  manufacturers  have expanded their production,  and
new aircraft deliveries have increased from 482 in 1995, 493 in 1996, and 674 in
1997, to an estimated 825 in 1998.


The industry now has in place two of the three  conditions that led to financial
problems in the early 1990s: potential excess orders and record deliveries.  The
missing element is a worldwide recession. Should a recession occur, the industry
will experience  another period of excess aircraft capacity and surplus aircraft
on the ground.

The Partnership has a 50% investment in a 1981 Boeing 737-200  aircraft that has
not had a hushkit installed. This aircraft is scheduled to be sold in 1999.

(E)  Government Regulations

The use,  maintenance,  and  ownership  of equipment  are  regulated by federal,
state,  local, or foreign  government  authorities.  Such regulations may impose
restrictions and financial burdens on the Partnership's  ownership and operation
of  equipment.  Changes  in  government  regulations,   industry  standards,  or
deregulation  may also  affect  the  ownership,  operation,  and  resale  of the
equipment.  Substantial  portions of the Partnership's  equipment  portfolio are
either registered or operated internationally.  Such equipment may be subject to
adverse  political,   government,  or  legal  actions,  including  the  risk  of
expropriation  or loss arising from  hostilities.  Certain of the  Partnership's
equipment is subject to extensive  safety and operating  regulations,  which may
require  its  removal  from  service or  extensive  modifications  to meet these
regulations,  at considerable cost to the Partnership.  Such regulations include
but are not limited to:

       (1)the U.S. Department of Transportation's Aircraft Capacity Act of 1990,
   which limits or eliminates the operation of commercial aircraft in the United
   States that do not meet certain  noise,  aging,  and corrosion  criteria.  In
   addition,  under U.S. Federal Aviation Regulations,  after December 31, 1999,
   no person shall operate an aircraft to or from any airport in the  contiguous
   United  States  unless that  airplane has been shown to comply with Stage III
   noise levels.  The  Partnership's  remaining  aircraft is a Stage II aircraft
   that does not meet Stage III  requirements.  The  Partnership is scheduled to
   sell its remaining Stage II aircraft by the year 1999;

       (2) the Montreal  Protocol on Substances that Deplete the Ozone Layer and
   the U.S.  Clean Air Act  Amendments of 1990,  (which call for the control and
   eventual  replacement  of  substances  that  have  been  found  to  cause  or
   contribute  significantly to harmful effects to the stratospheric ozone layer
   and that are used  extensively as refrigerants  in refrigerated  marine cargo
   containers and over-the-road refrigerated trailers);

       (3)  the  U.S.   Department  of   Transportation's   Hazardous  Materials
   Regulations (which regulate the classification and packaging  requirements of
   hazardous  materials and which apply  particularly to the Partnership's  tank
   railcars).

As of December  31,  1998,  the  Partnership  was in  compliance  with the above
government  regulations.   Typically,   costs  related  to  extensive  equipment
modifications to meet government regulations are passed on to the lessee of that
equipment.

ITEM 2.  PROPERTIES

The Partnership  neither owns nor leases any properties other than the equipment
it has either  purchased  or interests in entities  which own  equipment.  As of
December 31, 1998,  the  Partnership  owned a portfolio  of  transportation  and
related   equipment  and  investments  in  equipment  owned  by   unconsolidated
special-purpose  entities  as  described  in Item I,  Table 1.  The  Partnership
acquired  equipment  with the  proceeds  of the  Partnership  offering of $150.0
million,  proceeds from the debt financing of $35.0 million and by reinvesting a
portion of its operating cash flow in additional equipment.

The  Partnership  maintains its principal  office at One Market,  Steuart Street
Tower, Suite 800, San Francisco,  California  94105-1301.  All office facilities
are provided by FSI without reimbursement by the Partnership.

ITEM 3.  LEGAL PROCEEDINGS

The Partnership,  together with affiliates,  has initiated litigation in various
official forums in India against a defaulting Indian airline lessee to repossess
Partnership  property and to recover damages for failure to pay rent and failure
to maintain such  property in accordance  with  relevant  lease  contracts.  The
Partnership  has  repossessed  all of its  property  previously  leased  to such
airline, and the airline has ceased operations. In response to the Partnership's
collection efforts, the airline filed counter-claims  against the Partnership in
excess of the  Partnership's  claims  against the airline.  The General  Partner
believes that the airline's  counterclaims are completely without merit, and the
General Partner will vigorously defend against such counterclaims.

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

No matters were submitted to a vote of the Partnership's limited partners during
the fourth quarter of its fiscal year ended December 31, 1998.

                                     PART II

ITEM 5.  MARKET FOR THE PARTNERSHIP'S EQUITY AND RELATED DEPOSITARY UNIT MATTERS

As of March 17, 1999, there were 7,381,805  depositary units outstanding.  There
are approximately 6,290 depositary  unitholders of record as of the date of this
report.

There are several  secondary markets that will facilitate sales and purchases of
limited  partnership  units.  Secondary  markets are characterized as having few
buyers for limited partnership interests and, therefore, are generally viewed as
inefficient vehicles for the sale of limited partnership units.

To prevent the units from being considered  publicly traded and thereby to avoid
taxation of the Partnership as an association treated as a corporation under the
Internal  Revenue Code, the limited  partnership  units will not be transferable
without  the  consent  of the  General  Partner,  which may be  withheld  in its
absolute discretion. The General Partner intends to monitor transfers of limited
partnership  units in an effort to ensure that they do not exceed the percentage
or number permitted by certain safe harbors  promulgated by the Internal Revenue
Service. A transfer may be prohibited if the intended  transferee is not an U.S.
citizen or if the transfer  would cause any portion of the units of a "Qualified
Plan" as defined by the  Employee  Retirement  Income  Security  Act of 1974 and
Individual Retirement Accounts to exceed the allowable limit.

On January 14, 1999, the General Partner for the  Partnership  announced that it
has  begun  recognizing  transfers  involving  trading  of units  in  1999.  The
Partnership is listed on the OTC Bulletin Board under the symbols GFYPZ.

In making the  announcement,  the General  Partner  noted  that,  as in previous
years,  it will continue to monitor the volume of such trades to ensure that the
Partnership  remain in  compliance  with Internal  Revenue  Service (IRS) Notice
88-75 and IRS Code  Section  7704.  These IRS  regulations  contain  safe harbor
provisions  stipulating  the  maximum  number of  partnership  units that can be
traded  during a  calendar  year in order for a  partnership  not to be deemed a
publicly traded partnership for income tax purposes.

Should the Partnership  approach the annual safe harbor  limitation  later on in
1999,  the General  Partner will,  at that time,  cease to recognize any further
transfers  involving  trading  of  Partnership  units.   Transfers  specifically
excluded from the safe harbor  limitations,  referred to in the  regulations  as
"transfers not involving  trading," which include transfers at death,  transfers
between family members,  and transfers involving  distributions from a qualified
retirement  plan,  will  continue  to  be  recognized  by  the  General  Partner
throughout the year.

Pursuant to the terms of the amended limited partnership agreement,  the General
Partner is  generally  entitled  to a 5%  interest in the profits and losses and
cash distributions of the Partnership. Special allocations of income are made to
the General Partner to the extent  necessary to cause the Investment  Account of
the General Partner to be zero. Such allocation may not cumulatively exceed five
ninety-fifths of the aggregate of the capital  contributions made by the Limited
Partners and the  reinvestment  cash  available  for  distribution.  The General
Partner is the sole holder of such interests.

The Partnership engaged in a plan to repurchase up to 250,000 of the outstanding
depositary  units.  During 1996, the Partnership  repurchased  44,500 depositary
units at a total cost of $0.2 million.  There were no  repurchases of depositary
units in 1997 or 1998. As of December 31, 1998,  the  Partnership  had purchased
and canceled a cumulative  total of 117,800  depositary  units at a cost of $0.8
million.  The General Partner does not plan any future  repurchase of depositary
units on behalf of the Partnership.











                     (this space intentionally left blank.)


<PAGE>


ITEM 6.       SELECTED FINANCIAL DATA

Table 2, below, lists selected financial data for the Partnership:

                                     TABLE 2

                        For the Years Ended December 31,
   (In thousands of dollars, except weighted-average depositary unit amounts)

<TABLE>
<CAPTION>

                                                  1998           1997            1996            1995            1994
                                               ---------------------------------------------------------------------------

  <S>                                          <C>            <C>             <C>             <C>            <C>       
  Operating results:
    Total revenues                             $  13,567      $  12,748       $  14,819       $  18,983      $   26,326
    Net gain on disposition of equipment           5,990          1,922           2,085           1,485           2,347
    Loss on revaluation of equipment                  --             --              --            (667 )          (887 )
    Equity in net income (loss) of
      unconsolidated special-purpose
      Entities                                    (1,484 )         (519 )         6,267              --              --
    Net income                                     6,031          2,695           8,186             937              67

  At year-end:
    Total assets                               $  12,474      $  18,631       $  33,595       $  48,957      $   69,485
    Total liabilities                              1,207          4,906          16,349          30,761          39,332
    Notes payable                                     --          2,500          13,000          27,000          35,000

  Cash distribution                            $   8,489      $   6,216       $   8,957       $  12,549      $   12,620

  Cash distribution representing a
      return of capital to the limited         $   2,458      $   3,709       $   1,045       $  11,847      $   11,989
  partners

  Per weighted-average depositary unit:

  Net income (loss)                            $    0.76<F1>  $    0.30<F1>   $    1.01<F1>   $    0.01<F1>  $    (0.12 )<F1>

  Cash distribution                            $    1.09      $    0.80       $    1.15       $    1.60      $     1.60

  Cash distribution representing a
      return of capital                        $    0.33      $    0.50       $    0.14       $    1.59      $     1.60

<FN>

<F1> After  reduction of income of $124 ($0.02 per  weighted-average  depositary
     unit) in 1998, $364 ($0.05 per  weighted-average  depositary unit) in 1997,
     $313 ($0.04 per weighted-average  depositary unit) in 1996, $815 ($0.11 per
     weighted-average   depositary   unit)  in  1995,   and  $963   ($0.13   per
     weighted-average depositary unit) in 1994, representing special allocations
     to the General  Partner  resulting  from an  amendment  to the  partnership
     agreement (see Note 1 to the financial statements).

</FN>

</TABLE>



<PAGE>


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

(A)  Introduction

Management's  discussion  and  analysis of  financial  condition  and results of
operations  relates to the financial  statements of PLM Equipment Growth Fund II
(the Partnership).  The following  discussion and analysis of operations focuses
on the  performance of the  Partnership's  equipment in the various  segments in
which  it  operates  and  its  effect  on the  Partnership's  overall  financial
condition.

(B)  Results of Operations -- Factors Affecting Performance

(1)  Re-leasing Activity and Repricing Exposure to Current Economic Conditions

The exposure of the Partnership's  equipment  portfolio to repricing risk occurs
whenever the leases for the equipment expire or are otherwise terminated and the
equipment must be remarketed.  Major factors influencing the current market rate
for the  Partnership's  equipment  include,  but are not limited to,  supply and
demand for similar or comparable  types of transport  capacity,  desirability of
the  equipment  in the leasing  market,  market  conditions  for the  particular
industry  segment  in which the  equipment  is to be  leased,  overall  economic
conditions,  and  various  regulations  concerning  the  use of  the  equipment.
Equipment that is idle or out of service between the expiration of one lease and
the assumption of a subsequent  lease can result in a reduction of  contribution
to the Partnership. The Partnership experienced re-leasing or repricing activity
in 1998  primarily  in its  aircraft,  railcar,  trailer,  and marine  container
portfolios.

     (a) Aircraft: The Partnership's 50% investment in a commercial aircraft was
off-lease  throughout  1997 and 1998.  This aircraft is currently being marketed
for sale or re-lease.

     (b) Trailers:  The Partnership's  trailer portfolio  operates in short-term
rental  facilities or with short-line  railroad  systems.  The relatively  short
duration of most leases in these operations exposes the trailers to considerable
re-leasing activity.  The Partnership's trailer contributions declined from 1997
to 1998 due to the sale and disposition of trailers during 1997 and 1998,  which
was partially offset by higher utilization for the remaining fleet.

         (c)  Marine  containers:  All of  the  Partnership's  marine  container
portfolio operates in  utilization-based  leasing pools and, as such, is exposed
to  considerable   repricing  activity.   The  Partnership's   marine  container
contributions  declined  from  1997 to 1998  due to the  disposition  of  marine
containers and lower utilization for the remaining fleet during 1997 and 1998.

     (d) Railcars:  The majority of the Partnership's railcar equipment remained
on-lease  throughout the year, and thus was not adversely affected by re-leasing
and repricing exposure.

(2)  Equipment Liquidations and Nonperforming Lessees

Liquidation of Partnership  equipment and investment in  unconsolidated  special
purpose  entities  (USPEs)  represents a reduction in the size of the  equipment
portfolio  and may  result in  reduction  of  contribution  to the  Partnership.
Lessees not  performing  under the terms of their  leases,  either by not paying
rent,  not  maintaining  or  operating  the  equipment  in  accordance  with the
conditions of the leases,  or other  possible  departures  from the leases,  can
result  not  only in  reductions  in  contribution,  but also  may  require  the
Partnership  to assume  additional  costs to  protect  its  interests  under the
leases,  such as  repossession  or legal fees. The  Partnership  experienced the
following in 1998:

     (a) Liquidations: During 1998, the Partnership disposed of aircraft, marine
containers, railcars, and trailers for total proceeds of $7.9 million.

     (b)  Nonperforming  Lessees:  In 1996, the General  Partner  repossessed an
aircraft owned by a trust in which the  Partnership  has a 50% interest,  due to
the  lessee's  inability  to pay  for  outstanding  receivables.  This  aircraft
remained off lease  throughout 1997 and 1998 and is currently being marketed for
sale.  In  addition,  in 1997,  another  aircraft  lessee was unable to continue
paying its  obligations  to the  Partnership,  and as  payment  for the past due
receivables,  the  Partnership  received a 23%  interest  in a trust that owns a
Boeing 727 aircraft. The fair market value of the Partnership's interest in this
aircraft approximated its outstanding receivable from the lessee. This plane was
sold at its  approximate  net book value in January 1998.  In addition,  another
aircraft lessee filed for bankruptcy in 1998. The General Partner fully reserved
the accounts  receivable  outstanding  from this lessee as of December 31, 1997.
This  plane was sold for a net gain of $1.1  million  in the  second  quarter of
1998.  Other  equipment,  such as  railcars,  trailers,  and some of the  marine
containers,  experienced  minor  nonperforming  issues  that had no  significant
impact on the Partnership.

(3)  Equipment Valuation and Write-downs

In accordance with Financial  Accounting  Standards  Board's  Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be  Disposed  Of".  The  General  Partner  reviews  the  carrying  value  of the
Partnership's  equipment  portfolio  at least  quarterly in relation to expected
future market conditions for the purpose of assessing the  recoverability of the
recorded amounts. If projected  undiscounted future lease revenues plus residual
values are less than the carrying value of the equipment,  a loss on revaluation
is recorded.  No reductions to the equipment  carrying  values were required for
the years ended December 31, 1998, 1997, or 1996.

As of December 31, 1998, the General  Partner  estimated the current fair market
value of the Partnership's equipment portfolio,  including interest in equipment
owned by USPEs,  to be $24.5  million.  This  estimate is based on recent market
transactions for equipment similar to the Partnership's  equipment portfolio and
the Partnership's  interest in equipment owned by USPEs. Ultimate realization of
fair market value by the Partnership may differ  substantially from the estimate
due to specific market conditions,  technological  obsolescence,  and government
regulations,  among other  factors that the General  Partner  cannot  accurately
predict.

(C)  Financial Condition -- Capital Resources and Liquidity

The General Partner purchased the Partnership's initial equipment portfolio with
capital raised from its initial equity offering and permanent debt financing. No
further  capital  contributions  from original  partners are permitted under the
terms of the  limited  partnership  agreement.  As of  December  31,  1998,  the
Partnership had no outstanding indebtedness. The Partnership relies on operating
cash flow to meet its operating  obligations and make cash  distributions to the
limited partners.

In 1998, the  Partnership  used $2.5 million in proceeds from the sale of assets
to prepay the Partnership's remaining outstanding debt.

For the year ended December 31, 1998, the Partnership  generated $3.1 million in
operating cash (net cash provided by operating  activities plus  non-liquidating
cash distributions from USPEs) to meet its operating obligations,  but also used
undistributed available cash from prior periods to maintain the current level of
distributions (total in 1998 of $8.5 million) to the partners.

The General  Partner has not  planned any  expenditures,  nor is it aware of any
contingencies  that would  cause it to require  any  additional  capital to that
mentioned above.



<PAGE>


(D)  Results of Operations -- Year-to-Year Detailed Comparison

(1)  Comparison  of the  Partnership's  Operating  Results  for the Years  Ended
     December 31, 1998 and 1997

(a)  Owned Equipment Operations

Lease  revenues  less direct  expenses  (defined as repair and  maintenance  and
asset-specific  insurance expenses) on owned equipment decreased during the year
ended  December 31,  1998,  when  compared to the same period of 1997.  Gains or
losses from the sale of equipment and certain  expenses such as depreciation and
amortization and general and  administrative  expenses relating to the operating
segments (see Note 5 to the audited financial  statements),  are not included in
the owned  equipment  operation  discussion  because  they are more  indirect in
nature,  not a result of operations but more the result of owning a portfolio of
equipment.  The following  table presents lease revenues less direct expenses by
segment (in thousands of dollars):

<TABLE>
<CAPTION>

                                                                             For the Years Ended
                                                                                December 31,
                                                                            1998             1997
                                                                         ----------------------------
  <S>                                                                    <C>              <C>        
  Rail equipment                                                         $  2,991         $  3,251   
  Trailers                                                                  2,074            2,787
  Marine containers                                                           246              666
  Aircraft                                                                     47            1,848

</TABLE>

Rail equipment: Railcar lease revenues and direct expenses were $4.2 million and
$1.2 million, respectively, for 1998, compared to $4.5 million and $1.2 million,
respectively,  during 1997. Lease revenues decreased due to the sale of railcars
in 1998 and 1997.

Trailers:  Trailer lease revenues and direct expenses were $2.8 million and $0.7
million,  respectively,  for 1998,  compared to $3.5  million and $0.7  million,
respectively, during 1997. The decrease in net contribution was primarily due to
the sale of trailers in 1998 and 1997.  Although the number of trailers has been
declining,  the Partnership  incurred higher expenses for trailers  operating in
the short-line railroad system in 1998 compared to 1997.

Marine  containers:  Marine  container lease revenues were $0.2 million and $0.7
million for 1998 and 1997,  respectively.  The number of marine containers owned
by the  Partnership  has been declining over the past two years due to sales and
dispositions.  The result of the  declining  fleet has been a decrease in marine
container revenue.

Aircraft:  Aircraft  lease  revenues and direct  expenses  were $0.1 million and
$36,000,  respectively,  for 1998,  compared to $1.9  million and $0.1  million,
respectively,  for 1997.  Aircraft  contribution  decreased in 1998, compared to
1997, due to the sale of the remaining aircraft fleet in 1998 and 1997.

(b)  Indirect Expenses Related to Owned Equipment Operations

Total  indirect  expenses of $4.0 million for the year ended  December 31, 1998,
decreased from $7.5 million for the same period of 1997.  Significant  variances
are explained as follows:

  (i) A $2.0 million  decrease in depreciation  and  amortization  expenses from
1997 levels reflects the effect of asset sales in 1997 and 1998.

 (ii) A $0.6 million  decrease in interest  expense was due to the  repayment of
the Partnership's outstanding debt during 1998.

     (iii) A $0.4 million decrease in bad debt expense was due to a $0.1 million
decrease in reserves for a certain  lessee,  resulting  from the  application of
security  deposits  against  uncollected  outstanding  receivables,  and a  $0.3
million decrease in bad debt expense due to the General Partner's  evaluation of
the collectibility of receivables due from certain lessees.

 (iv) A $0.3 million  decrease in  administrative  expenses from 1997 levels was
due to  reduced  office  expenses  and  professional  services  required  by the
Partnership, resulting from the reduced equipment portfolio.

     (v) A $0.2 million  decrease in management fees to affiliates  reflects the
lower levels of lease revenues in the year ended December 31, 1998,  compared to
the same period in 1997.

(c)  Net Gain on Disposition of Owned Equipment

Net gain on  disposition  of  equipment  for the year ended  December  31,  1998
totaled  $6.0  million,  which  resulted  from the sale or disposal of aircraft,
marine containers,  trailers, and railcars,  with an aggregate net book value of
$1.9  million,  for  aggregate  proceeds  of $7.9  million.  For the year  ended
December  31,  1997,  the $1.9  million  net gain on  disposition  of  equipment
resulted from the sale or disposal of aircraft, marine containers, trailers, and
railcars,  with an  aggregate  net book  value of $3.2  million,  for  aggregate
proceeds of $5.1 million.

(d)  Equity in Net Loss of USPEs

Net loss  generated  from the operation of  jointly-owned  assets  accounted for
under  the  equity  method is shown in the  following  table  (in  thousands  of
dollars):

<TABLE>
<CAPTION>

                                                                             For the Years Ended
                                                                                 December 31,
                                                                            1998              1997
  ----------------------------------------------------------------------------------------------------
  <S>                                                                    <C>                <C>      
  Aircraft                                                               $  (1,484 )        $  (519 )

</TABLE>

Aircraft:  As of December 31, 1998, the Partnership owned a 50% investment in an
entity that owns a  commercial  aircraft.  Expenses  were $1.5 million for 1998,
compared  to  revenues  and   expenses  of  $0.2   million  and  $0.7   million,
respectively,  for 1997. The Partnership's  share of revenues  decreased in 1998
due to the sale of its 50% investment in an entity that owned an aircraft engine
in the third quarter of 1997. The Partnership's  share of expenses increased due
to repairs  required during 1998, which were not required for the same period in
1997.   During  the  first  quarter  of  1998,  the  General  Partner  sold  for
approximately  its book value the Partnership's 23% investment in an entity that
owned an aircraft.  The aircraft in the Partnership's  remaining  interest in an
entity which owns an aircraft was off-lease during 1997 and 1998.

(e)  Net Income

As a result of the foregoing,  the Partnership's net income for the period ended
December  31,  1998 was $6.0  million,  compared  to net income of $2.7  million
during  the same  period in 1997.  The  Partnership's  ability  to  operate  and
liquidate assets,  secure leases,  and re-lease those assets whose leases expire
during  the  life  of the  Partnership  is  subject  to  many  factors,  and the
Partnership's performance in the year ended December 31, 1998 is not necessarily
indicative  of  future  periods.  In the  year  ended  December  31,  1998,  the
Partnership  distributed  $8.1  million to the  limited  partners,  or $1.09 per
weighted-average depositary unit.



<PAGE>


(2)  Comparison  of the  Partnership's  Operating  Results  for the Years  Ended
     December 31, 1997 and 1996

(a)  Owned Equipment Operations

Lease  revenues  less  direct  expenses  (defined  as  repair  and  maintenance,
equipment  operating and asset-specific  insurance  expenses) on owned equipment
decreased  during the year ended December 31, 1997, when compared to 1996. Gains
or losses from the sale of equipment and certain  expenses such as  depreciation
and  amortization  and  general  and  administrative  expenses  relating  to the
operating  segments (see Note 5 to the audited  financial  statements),  are not
included  in the owned  equipment  operation  discussion  because  they are more
indirect in nature,  not a result of operations  but more the result of owning a
portfolio of equipment.  The following table presents lease revenues less direct
expenses by segment (in thousands of dollars):




<PAGE>

<TABLE>
<CAPTION>


                                                                             For the Years Ended
                                                                                December 31,
                                                                            1997             1996
                                                                         ----------------------------
  <S>                                                                    <C>          <C>          
  Rail equipment                                                         $  3,251     $      3,111 
  Trailers                                                                  2,787            3,382
  Aircraft                                                                  1,848            2,390
  Marine containers                                                           666            1,255

</TABLE>

Rail equipment: Railcar lease revenues and direct expenses were $4.5 million and
$1.2 million, respectively, for 1997, compared to $4.6 million and $1.5 million,
respectively,  during 1996. Lease revenues decreased due to the sale of railcars
in 1997 and 1996.  Railcar  expenses  decreased due to railcar  dispositions and
lower running repairs  required on certain of the railcars during 1996 that were
not needed during 1997.

Trailers:  Trailer lease revenues and direct expenses were $3.5 million and $0.7
million,  respectively,  for 1997,  compared to $4.1  million and $0.7  million,
respectively,  during 1996. The decrease in net contribution was due to the sale
of trailers in 1997 and 1996 and to increased refurbishments made to trailers in
1997.

Aircraft: Aircraft lease revenues and direct expenses were $1.9 million and $0.1
million,   respectively,  for  1997,  compared  to  $2.4  million  and  $47,000,
respectively,  for 1996.  Aircraft  contribution  decreased in 1997, compared to
1996, due to the sale of aircraft in the second and third quarters of 1997.

Marine  containers:  Marine  container lease revenues were $0.7 million and $1.3
million for 1997 and 1996,  respectively.  The number of marine containers owned
by the  Partnership  has been declining over the past two years due to sales and
dispositions. The result of the declining fleet and lower utilization has been a
decrease in marine container revenue.

(b)  Indirect Expenses Related to Owned Equipment Operations

Total  indirect  expenses of $7.5 million for the year ended  December 31, 1997,
decreased  from $10.6  million in 1996.  Significant  variances are explained as
follows:

  (i) A $1.3 million decrease in depreciation and amortization expense from 1996
levels reflects the effect of asset sales in 1996 and 1997.

 (ii) A $1.2 million  decrease in interest  expense  resulted from a decrease in
the level of  outstanding  debt during 1997 and 1996. In 1997,  the  Partnership
prepaid $10.5 million of the outstanding notes payable. In 1996, the Partnership
prepaid $14.0 million of the outstanding notes payable.

     (iii) A $0.3  million  decrease  in bad debt  expense  is the  result  of a
decrease in uncollectible amounts owing from certain lessees.

 (iv) A $0.3 million decrease in administrative  expenses reflects the effect of
asset  sales in 1996 and 1997 that  resulted in lower  license and  registration
costs, lower taxes on leased property, lower professional services expenses, and
reduced data processing and administrative  charges for services provided to the
Partnership.

(c)  Interest and Other Income

Interest  and other  income  decreased  $0.1  million  during  1997 due to lower
average cash balances in 1997, compared to 1996.

(d)  Net Gain on Disposition of Owned Equipment

Net gain on  disposition of equipment for 1997 totaled $1.9 million and resulted
from  the  sale or  disposal  of  aircraft,  marine  containers,  trailers,  and
railcars,  with an  aggregate  net book  value of $3.2  million,  for  aggregate
proceeds of $5.1 million.  For 1996, the $2.1 million net gain on disposition of
equipment  resulted  from the sale or disposal of aircraft,  marine  containers,
trailers,  and railcars,  with an aggregate net book value of $2.7 million,  for
aggregate proceeds of $4.8 million.

(e)  Equity in Net Income (Loss) of USPEs

Equity  in  net  income  (loss)  of  unconsolidated   special-purpose   entities
represents  net income  (loss)  generated  from the  operation of  jointly-owned
assets  accounted  for  under the  equity  method  (see Note 4 to the  financial
statements) (in thousands of dollars).

<TABLE>
<CAPTION>

                                                                             For the Years Ended
                                                                                December 31,
                                                                            1997             1996
                                                                         ----------------------------
  <S>                                                                    <C>             <C> 
  Aircraft                                                               $   (519 )      $    (712 ) 
  Mobile offshore drilling unit                                                --            6,979

</TABLE>

Aircraft:  During 1997 and 1996,  the  Partnership  owned a 50% investment in an
entity that owns a commercial aircraft.  Revenues and expenses were $0.2 million
and $0.7  million,  respectively,  for 1997,  compared to $0.4  million and $1.1
million,  respectively,  for 1996. The Partnership's share of revenues decreased
$0.2 million due to the off-lease status of this aircraft during 1997, which was
on lease for the first six months of 1996. The  Partnership's  share of expenses
decreased  due to a  decrease  in bad debt and  repair  expenses.  In 1996,  the
General Partner fully reserved the  uncollectible  accounts  receivable from the
aircraft's lessee that encountered financial  difficulties,  and made repairs to
the aircraft to meet airworthiness conditions.

Mobile  offshore  drilling  unit:  During  1996,  the General  Partner  sold the
Partnership's  55% investment in an entity that owned a mobile offshore drilling
unit,  resulting  in a $7.1  million  net gain,  which was offset by a loss from
operations of $0.1 million.

(f)  Net Income or Loss

As a result of the foregoing,  the  Partnership's net income of $2.7 million for
the year ended  December  31,  1997,  decreased  from net income of $8.2 million
during  the same  period for 1996.  The  Partnership's  ability  to operate  and
liquidate assets,  secure leases,  and re-lease those assets whose leases expire
is subject to many factors, and the Partnership's  performance in the year ended
December 31, 1997 is not necessarily  indicative of future periods.  In the year
ended December 31, 1997, the Partnership distributed $5.9 million to the limited
partners, or $0.80 per weighted-average limited partner depositary unit.

(E)  Geographic Information

Certain  of the  Partnership's  equipment  operates  in  international  markets.
Although these operations expose the Partnership to certain currency, political,
credit, and economic risks, the General Partner believes these risks are minimal
or has  implemented  strategies  to control the risks.  Currency  risks are at a
minimum because all invoicing,  with the exception of a small number of railcars
operating in Canada, is conducted in U.S. dollars. Political risks are minimized
generally  through the avoidance of  operations in countries  that do not have a
stable judicial system and established  commercial business laws. Credit support
strategies  for lessees range from letters of credit  supported by U.S. banks to
cash  deposits.  Although these credit support  mechanisms  generally  allow the
Partnership  to  maintain  its lease  yield,  there are  risks  associated  with
slow-to-respond  judicial  systems  when legal  remedies  are required to secure
payment or repossess equipment. Economic risks are inherent in all international
markets  and the  General  Partner  strives to  minimize  this risk with  market
analysis prior to committing equipment to a particular geographic area. Refer to
Note 6 to the financial statements for information on the revenues,  net income,
and net book value of equipment in various geographic regions.

Revenues and net operating income by geographic  region are impacted by the time
period  the  asset is owned  and the  useful  life  ascribed  to the  asset  for
depreciation  purposes.  Net  income  (loss)  from  equipment  is  significantly
impacted  by  depreciation  charges,  which are  greatest  in the early years of
ownership due to the use of the double-declining balance method of depreciation.
The relationships of geographic revenues,  net income (loss), and net book value
of equipment are expected to  significantly  change in the future as assets come
off  lease and  decisions  are made to either  redeploy  the  assets in the most
advantageous geographic location, or sell the assets.

The Partnership's owned equipment on lease to U.S.-domiciled lessees consists of
trailers and  railcars.  During  1998,  lease  revenues  generated by wholly and
partially  owned  equipment in the United States  accounted for 77% of the lease
revenues,  while net  operating  income  accounted  for $3.3 million of the $6.0
million aggregate net income for the Partnership.  This is primarily a result of
the fact that the Partnership sold trailers,  railcars, and aircraft during 1998
that were operated in the United  States,  which resulted in $1.8 million in net
gains.

The  Partnership's  equipment leased to  Canadian-domiciled  lessees consists of
railcars. During 1998, lease revenues in Canada accounted for 19% of total lease
revenues,  while the operations  accounted for $1.2 million of the aggregate net
income generated by wholly and partially owned equipment. The primary reason for
this  relationship  is that the  Partnership  sold railcars  during 1998,  which
resulted in $0.6 million in net gains.

The  Partnership's  investment  in  equipment  owned  by a USPE  in  South  Asia
accounted for none of the Partnership's  lease revenue from wholly and partially
owned  equipment.  This  equipment  resulted in a $1.5 million of operating  net
loss, due to the aircraft being off lease in 1998.

In 1998, marine containers,  which were leased in various regions throughout the
year,  accounted for 3% of the lease  revenues  from wholly and partially  owned
equipment.  This  equipment  resulted  in  $0.2  million  of the  aggregate  net
operating loss in 1998, due to low utilization of the Partnership's aging fleet.

European  operations  consisted of an aircraft  that  accounted  for none of the
lease  revenues  from wholly and  partially  owned  equipment,  while net income
generated by this  equipment  accounted  for $3.7 million of the  aggregate  net
income  generated  by the  Partnership  in 1998.  The  primary  reason  for this
relationship is that the Partnership sold the remaining equipment in this region
during 1998, which resulted in $3.7 million in net gains.

(F) Effects of Year 2000

It is possible that the General Partner's  currently installed computer systems,
software  products,  and other business systems,  or the Partnership's  vendors,
service  providers,  and customers,  working either alone or in conjunction with
other  software or systems,  may not accept  input of,  store,  manipulate,  and
output  dates on or after  January  1, 2000  without  error or  interruption  (a
problem commonly known as the "Year 2000" problem). Since the Partnership relies
substantially  on the General  Partner's  software  systems,  applications,  and
control devices in operating and monitoring significant aspects of its business,
any Year 2000  problem  suffered  by the General  Partner  could have a material
adverse effect on the Partnership's business,  financial condition,  and results
of operations.

The General Partner has  established a special Year 2000 oversight  committee to
review  the  impact  of Year  2000  issues on its  software  products  and other
business  systems  in  order to  determine  whether  such  systems  will  retain
functionality  after  December  31, 1999.  The General  Partner (a) is currently
integrating Year  2000-compliant  programming code into its existing  internally
customized and internally developed transaction  processing software systems and
(b) the General Partner's  accounting and asset management software systems have
either already been made Year 2000-compliant or Year 2000-compliant  upgrades of
such systems are planned to be implemented by the General Partner before the end
of  fiscal  1999.  Although  the  General  Partner  believes  that its Year 2000
compliance  program can be completed by the  beginning of 1999,  there can be no
assurance that the  compliance  program will be completed by that date. To date,
the  costs  incurred  and  allocated  to the  Partnership  to  become  Year 2000
compliant have not been material.  Also, the General Partner believes the future
cost  allocable to the  Partnership  to become Year 2000  compliant  will not be
material.

It is possible that certain of the  Partnership's  equipment lease portfolio may
not be  Year  2000  compliant.  The  General  Partner  is  currently  contacting
equipment  manufacturers  of the  Partnership's  leased  equipment  portfolio to
assure Year 2000 compliance or to develop  remediation  strategies.  The General
Partner  does not expect that  non-Year  2000  compliance  of the  Partnership's
leased equipment portfolio will have an adverse material impact on its financial
statements.  Some risks  associated  with the Year 2000  problem  are beyond the
ability of the General  Partner or Partnership to control,  including the extent
to which third parties can address the Year 2000 problem. The General Partner is
communicating with vendors, services providers, and customers in order to assess
the Year 2000  compliance  readiness of such parties and the extent to which the
Partnership is vulnerable to any third-party  Year 2000 issues.  There can be no
assurance  that the  software  systems of such parties will be converted or made
Year 2000  compliant in a timely manner.  Any failure by the General  Partner or
such other parties to make their  respective  systems Year 2000 compliant  could
have a material adverse effect on the business,  financial position, and results
of operations  from the  Partnership.  The General  Partner will make an ongoing
effort to recognize and evaluate potential exposure relating to third-party Year
2000 non-compliance,  and will develop a contingency plan if the General Partner
determines that third-party  non-compliance  will have a material adverse effect
on the Partnership's business, financial position, or results of operation.

The General  Partner is currently  developing a contingency  plan to address the
possible  failure of any  systems  due to the Year 2000  problems.  The  General
Partner anticipates these plans will be completed by September 30, 1999.

(G)  Accounting Pronouncements

In June 1998, the Financial  Accounting  Standards Board issued  "Accounting for
Derivative   Instruments  and  Hedging   Activities,"   (SFAS  No.  133),  which
standardizes  the  accounting  for  derivative  instruments,  including  certain
derivative instruments embedded in other contracts,  by requiring that an entity
recognize  those items as assets or  liabilities  in the  statement of financial
position and measure  them at fair value.  This  statement is effective  for all
quarters of fiscal years beginning after June 15, 1999. As of December 31, 1998,
the  General  Partner is  reviewing  the effect this  standard  will have on the
Partnership's consolidated financial statements.

(H)  Inflation

Inflation had no significant impact on the Partnership's operations during 1998,
1997, or 1996.

(I)  Forward-Looking Information

Except for historical  information contained herein, the discussion in this Form
10-K contains  forward-looking  statements that involve risks and uncertainties,
such as statements of the Partnership's  plans,  objectives,  expectations,  and
intentions.  The cautionary  statements made in this Form 10-K should be read as
being applicable to all related forward-looking  statements wherever they appear
in this Form 10-K. The Partnership's actual results could differ materially from
those discussed here.

(J)  Outlook for the Future

Since the  Partnership  entered its  liquidation  phase in January of 1999,  the
General  Partner will be seeking to  selectively  re-lease or sell assets as the
existing leases expire.  Sale decisions will cause the operating  performance of
the Partnership to decline over the remainder of its life.

Several factors may affect the Partnership's  operating  performance in 1999 and
beyond,  including  changes in the markets for the  Partnership's  equipment and
changes in the regulatory environment in which that equipment operates.

The Partnership's operation of a diversified equipment portfolio in a broad base
of markets is  intended  to reduce its  exposure  to  volatility  in  individual
equipment sectors.

The  ability  of the  Partnership  to  realize  acceptable  lease  rates  on its
equipment in the different equipment markets is contingent on many factors, such
as specific market conditions and economic activity, technological obsolescence,
and government or other regulations.  The  unpredictability of these factors, or
of their  occurrence,  makes it  difficult  for the  General  Partner to clearly
define trends or influences that may impact the performance of the Partnership's
equipment.  The General Partner continually  monitors both the equipment markets
and the performance of the Partnership's equipment in these markets. The General
Partner  may  decide to reduce the  Partnership's  exposure  to those  equipment
markets in which it  determines  that it cannot  operate  equipment  and achieve
acceptable rates of return.

The  Partnership  intends to use excess cash flow from operations to satisfy its
operating requirements, and to pay cash distributions to the investors.

(1)  Repricing Risk

Certain of the Partnership's  trailers,  railcars, and marine containers will be
remarketed in 1999 as existing  leases expire,  exposing the Partnership to some
repricing risk/opportunity.  Additionally, the General Partner may elect to sell
certain  underperforming  equipment or equipment whose  continued  operation may
become prohibitively  expensive.  In either case, the General Partner intends to
re-lease or sell  equipment at  prevailing  market rates;  however,  the General
Partner  cannot  predict these future rates with any certainty at this time, and
cannot  accurately  assess the  effect of such  activity  on future  Partnership
performance.

(2)  Impact of Government Regulations on Future Operations

The General  Partner  operates the  Partnership's  equipment in accordance  with
current applicable regulations (see Item 1, Section E, Government  Regulations).
However, the continuing implementation of new or modified regulations by some of
the  authorities  mentioned  previously,  or others,  may  adversely  affect the
Partnership's  ability to continue to own or operate equipment in its portfolio.
Additionally,  regulatory  systems  vary  from  country  to  country,  which may
increase the burden to the Partnership of meeting regulatory  compliance for the
same equipment  operated  between  countries.  Ongoing changes in the regulatory
environment, both in the United States and internationally,  cannot be predicted
with any accuracy and preclude the General  Partner from  determining the impact
of such changes on  Partnership  operations,  or sale of  equipment.  Under U.S.
Federal Aviation  Regulations,  after December 31, 1999, no person shall operate
an aircraft to or from any airport in the  contiguous  United States unless that
aircraft has been shown to comply with Stage III noise levels.  The  Partnership
is scheduled to sell its remaining Stage II aircraft by the year 1999.

(3)  Distributions

During the active  liquidation  phase,  the Partnership  will use operating cash
flow and proceeds from the sale of equipment to meet its  operating  obligations
and make distributions to the partners.  Although the General Partner intends to
maintain a sustainable level of distributions  prior to final liquidation of the
Partnership, actual Partnership performance and other considerations may require
adjustments to existing  distribution  levels. In the long term, changing market
conditions  and  used  equipment  values  precludes  the  General  Partner  from
accurately  determining the impact of future  re-leasing  activity and equipment
sales on Partnership performance and liquidity.

Since the Partnership has entered the active  liquidation phase, the size of the
Partnership's remaining equipment portfolio and, in turn, the amount of net cash
flows from  operations will continue to become  progressively  smaller as assets
are sold. Although distribution levels may be reduced in the future, significant
asset sales may result in potential special distributions to unitholders.

ITEM 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Partnership's  primary market risk exposure is that of currency  devaluation
risk.  During 1998, 23% of the  Partnership's  total lease revenues from wholly-
and  partially-owned  equipment came from non-United  States domiciled  lessees.
Most of the leases require  payment in United States (U.S.)  currency.  If these
lessees currency devalues against the U.S. dollar, the lessees could potentially
encounter difficulty in making the U.S.
dollar denominated lease payments.

ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The  financial  statements  for the  Partnership  are  listed  in the  Index  to
Financial Statements included in Item 14(a) of this Annual Report on Form 10-K.

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

None.
























                     (This space intentionally left blank.)


<PAGE>


                                    PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF PLM INTERNATIONAL 
           AND PLM FINANCIAL SERVICES, INC.

As of the date of this annual  report,  the directors and executive  officers of
PLM  International  and of PLM  Financial  Services,  Inc.  (and  key  executive
officers of its subsidiaries) are as follows:

<TABLE>
<CAPTION>

Name                                     Age     Position
---------------------------------------- ------- ------------------------------------------------------------------

<S>                                      <C>     <C>                                                               
Robert N. Tidball                        60      Chairman of the Board, Director, President, and Chief Executive
                                                 Officer, PLM International, Inc.;
                                                 Director, PLM Financial Services, Inc.;
                                                 Vice President, PLM Railcar Management Services, Inc.;
                                                 President, PLM Worldwide Management Services Ltd.

Randall L.-W. Caudill                    51      Director, PLM International, Inc.

Douglas P. Goodrich                      52      Director and Senior Vice President, PLM International, Inc.;
                                                 Director and President, PLM Financial Services, Inc.; President,
                                                 PLM Transportation Equipment Corporation; President, PLM Railcar
                                                 Management Services, Inc.

Warren G. Lichtenstein                   33      Director, PLM International, Inc.

Howard M. Lorber                         50      Director, PLM International, Inc.

Harold R. Somerset                       63      Director, PLM International, Inc.

Robert L. Witt                           58      Director, PLM International, Inc.

J. Michael Allgood                       50      Vice President and Chief Financial Officer, PLM International,
                                                 Inc. and PLM Financial Services, Inc.

Robin L. Austin                          52      Vice President, Human Resources, PLM International, Inc. and PLM
                                                 Financial Services, Inc.

Stephen M. Bess                          52      President, PLM Investment Management, Inc.; Vice President and
                                                 Director, PLM Financial Services, Inc.

Richard K Brock                          36      Vice President and Corporate Controller, PLM International, Inc.
                                                 and PLM Financial Services, Inc.

James C. Chandler                        50      Vice President, Planning and Development, PLM International,
                                                 Inc. and PLM Financial Services, Inc.

Susan C. Santo                           36      Vice President, Secretary, and General Counsel, PLM
                                                 International, Inc. and PLM Financial Services, Inc.

Janet M. Turner                          42      Vice President, Investor Relations and Corporate Communications,
                                                 PLM International, Inc. and PLM Investment Management, Inc.
</TABLE>


Robert N.  Tidball  was  appointed  Chairman  of the  Board in  August  1997 and
President and Chief Executive Officer of PLM International in March 1989. At the
time of his  appointment  as  President  and  Chief  Executive  Officer,  he was
Executive Vice President of PLM International.  Mr. Tidball became a director of
PLM  International  in April 1989.  Mr.  Tidball was appointed a Director of PLM
Financial Services, Inc. in July 1997 and was elected President of PLM Worldwide
Management Services Limited in February 1998. He has served as an officer of PLM
Railcar  Management  Services,  Inc.  since June 1987. Mr. Tidball was Executive
Vice President of Hunter Keith,  Inc., a  Minneapolis-based  investment  banking
firm,  from March  1984 to  January  1986.  Prior to Hunter  Keith,  he was Vice
President, General Manager, and Director of North American Car Corporation and a
director of the American Railcar Institute and the Railway Supply Association.

Randall L.-W.  Caudill was elected to the Board of Directors in September  1997.
He is  President  of  Dunsford  Hill  Capital  Partners,  a San  Francisco-based
financial  consulting firm serving emerging growth companies.  Prior to founding
Dunsford  Hill Capital  Partners,  Mr.  Caudill held senior  investment  banking
positions at Prudential  Securities,  Morgan Grenfell Inc., and The First Boston
Corporation. Mr. Caudill also serves as a director of Northwest Biotherapeutics,
Inc., VaxGen, Inc., SBE, Inc., and RamGen, Inc.

Douglas  P.  Goodrich  was  elected  to the  Board of  Directors  in July  1996,
appointed  Senior  Vice  President  of PLM  International  in  March  1994,  and
appointed Director and President of PLM Financial  Services,  Inc. in June 1996.
Mr.  Goodrich  has also served as Senior Vice  President  of PLM  Transportation
Equipment Corporation since July 1989 and as President of PLM Railcar Management
Services,  Inc. since September 1992,  having been a Senior Vice President since
June 1987.  Mr.  Goodrich was an executive  vice  president of G.I.C.  Financial
Services  Corporation of Chicago,  Illinois, a subsidiary of Guardian Industries
Corporation, from December 1980 to September 1985.

Warren G.  Lichtenstein  was elected to the Board of Directors in December 1998.
Mr.  Lichtenstein  is the Chief  Executive  Officer of Steel  Partners II, L.P.,
which is PLM International's  largest  shareholder,  currently owning 16% of the
Company's common stock. Additionally,  Mr. Lichtenstein is Chairman of the Board
of Aydin Corporation,  a NYSE-listed defense  electronics  concern, as well as a
director of Gateway  Industries,  Rose's Holdings,  Inc., and Saratoga  Beverage
Group,  Inc. Mr.  Lichtenstein is a graduate of the University of  Pennsylvania,
where he received a Bachelor of Arts degree in economics.

Howard M.  Lorber was elected to the Board of  Directors  in January  1999.  Mr.
Lorber is President and Chief Operating  Officer of New Valley  Corporation,  an
investment banking and real estate concern. He is also Chairman of the Board and
Chief  Executive  Officer  of  Nathan's  Famous,  Inc.,  a  fast  food  company.
Additionally,  Mr. Lorber is a director of United Capital  Corporation and Prime
Hospitality  Corporation and serves on the boards of several  community  service
organizations.  He is a graduate of Long Island University,  where he received a
Bachelor  of Arts  degree and a Masters  degree in  taxation.  Mr.  Lorber  also
received charter life  underwriter and chartered  financial  consultant  degrees
from the American  College in Bryn Mawr,  Pennsylvania.  He is a trustee of Long
Island University and a member of the Corporation of Babson College.

Harold R. Somerset was elected to the Board of Directors of PLM International in
July 1994.  From February 1988 to December 1993, Mr.  Somerset was President and
Chief Executive  Officer of California & Hawaiian Sugar Corporation (C&H Sugar),
a subsidiary of Alexander & Baldwin,  Inc. Mr. Somerset joined C&H Sugar in 1984
as Executive Vice President and Chief  Operating  Officer,  having served on its
Board of Directors  since 1978.  Between 1972 and 1984, Mr.  Somerset  served in
various  capacities  with  Alexander & Baldwin,  Inc., a publicly  held land and
agriculture company headquartered in Honolulu,  Hawaii, including Executive Vice
President of Agriculture  and Vice President and General  Counsel.  Mr. Somerset
holds a law  degree  from  Harvard  Law  School  as well as a  degree  in  civil
engineering  from the  Rensselaer  Polytechnic  Institute and a degree in marine
engineering from the U.S. Naval Academy.  Mr. Somerset also serves on the boards
of directors for various other companies and organizations, including Longs Drug
Stores, Inc., a publicly held company.

Robert L. Witt was elected to the Board of Directors  in June 1997.  Since 1993,
Mr. Witt has been a principal with WWS  Associates,  a consulting and investment
group specializing in start-up situations and private  organizations about to go
public.  Prior to that, he was Chief Executive Officer and Chairman of the Board
of Hexcel  Corporation,  an international  advanced materials company with sales
primarily in the aerospace,  transportation, and general industrial markets. Mr.
Witt also serves on the boards of  directors  for various  other  companies  and
organizations.

J. Michael Allgood was appointed Vice President and Chief  Financial  Officer of
PLM International in October 1992 and Vice President and Chief Financial Officer
of PLM Financial Services,  Inc. in December 1992. Between July 1991 and October
1992,  Mr.  Allgood  was a  consultant  to  various  private  and  public-sector
companies  and  institutions   specializing  in  financial   operations  systems
development.  In October 1987, Mr. Allgood  co-founded  Electra Aviation Limited
and its holding  company,  Aviation  Holdings Plc of London,  where he served as
Chief Financial Officer until July 1991. Between June 1981 and October 1987, Mr.
Allgood  served as a first vice  president  with  American  Express Bank Ltd. In
February 1978,  Mr. Allgood  founded and until June 1981 served as a director of
Trade Projects  International/Philadelphia  Overseas  Finance  Company,  a joint
venture with  Philadelphia  National Bank. From March 1975 to February 1978, Mr.
Allgood served in various capacities with Citibank, N.A.

Robin  L.  Austin  became  Vice  President,  Human  Resources  of PLM  Financial
Services,  Inc. in 1984, having served in various capacities with PLM Investment
Management,  Inc., including Director of Operations, from February 1980 to March
1984.  From June 1970 to September 1978, Ms. Austin served on active duty in the
United  States Marine Corps and served in the United States Marine Corp Reserves
from 1978 to 1998.  She retired as a Colonel of the United  States  Marine Corps
Reserves  in 1998.  Ms.  Austin  has  served  on the Board of  Directors  of the
Marines'  Memorial  Club  and is  currently  on the  Board of  Directors  of the
International Diplomacy Council.

Stephen M. Bess was appointed a Director of PLM Financial Services, Inc. in July
1997.  Mr. Bess was appointed  President of PLM Investment  Management,  Inc. in
August  1989,   having  served  as  Senior  Vice  President  of  PLM  Investment
Management,  Inc. beginning in February 1984 and as Corporate  Controller of PLM
Financial Services, Inc. beginning in October 1983. Mr. Bess served as Corporate
Controller  of  PLM,  Inc.  beginning  in  December  1982.  Mr.  Bess  was  Vice
President-Controller  of Trans Ocean Leasing  Corporation,  a container  leasing
company, from November 1978 to November 1982, and Group Finance Manager with the
Field  Operations  Group of Memorex  Corporation,  a  manufacturer  of  computer
peripheral equipment, from October 1975 to November 1978.

Richard K Brock was appointed  Vice  President  and Corporate  Controller of PLM
International and PLM Financial Services, Inc. in June 1997, having served as an
accounting  manager  beginning in September 1991 and as Director of Planning and
General  Accounting  beginning  in  February  1994.  Mr.  Brock  was a  division
controller of Learning Tree International,  a technical education company,  from
February 1988 through July 1991.

James C.  Chandler  became  Vice  President,  Planning  and  Development  of PLM
International  in  April  1996.  From  1994 to 1996  Mr.  Chandler  worked  as a
consultant to public  companies,  including PLM, in the  formulation of business
growth  strategies.  Mr.  Chandler was Director of Business  Development at Itel
Corporation from 1987 to 1994, serving with both the Itel  Transportation  Group
and Itel Rail.

Susan C. Santo  became Vice  President,  Secretary,  and General  Counsel of PLM
International and PLM Financial Services,  Inc. in November 1997. She has worked
as an  attorney  for PLM  International  since  1990 and  served  as its  Senior
Attorney since 1994.  Previously,  Ms. Santo was engaged in the private practice
of law in San  Francisco.  Ms. Santo  received her J.D.  from the  University of
California, Hastings College of the Law.

Janet M. Turner became Vice President of Investor  Services of PLM International
in  1994,   having  previously  served  as  Vice  President  of  PLM  Investment
Management,  Inc.  since 1990.  Before 1990,  Ms.  Turner held the  positions of
manager of systems development and manager of investor relations at the Company.
Prior  to  joining  PLM  in  1984,   she  was  a  financial   analyst  with  The
Toronto-Dominion Bank in Toronto, Canada.

The directors of PLM  International,  Inc. are elected for a three-year term and
the directors of PLM Financial Services, Inc. are elected for a one-year term or
until their successors are elected and qualified.  No family relationships exist
between  any  director or  executive  officer of PLM  International  Inc. or PLM
Financial Services,  Inc., PLM Transportation Equipment Corp., or PLM Investment
Management, Inc.

ITEM 11. EXECUTIVE COMPENSATION

The Partnership has no directors, officers, or employees. The Partnership has no
pension,  profit  sharing,  retirement,  or similar benefit plan in effect as of
December 31, 1998.



<PAGE>


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     (A) Security Ownership of Certain Beneficial Owners

         The  General  Partner is  generally  entitled  to a 5%  interest in the
         profits and losses and  distributions  of the  Partnership,  subject to
         certain  special  allocations  of income.  As of December 31, 1998,  no
         investor was known by the General Partner to beneficially own more than
         5% of the depositary units of the Partnership.

     (B) Security Ownership of Management

         Table 3, below,  sets forth, as of the date of this report,  the amount
         and the  percent  of the  Partnership's  outstanding  depositary  units
         beneficially  owned by each  director  and  executive  officer  and all
         directors and executive  officers as a group of the General Partner and
         its affiliates:

                                     TABLE 3


         Name                           Depositary Units       Percent of Units

         Robert N. Tidball                   400                     *

         All directors and officers
         as a group (1 person)               400                     *


         * Less than 1% of the depositary units outstanding.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Transactions with Management and Others

         During 1998, management fees to IMI were $0.4 million. During 1998, the
         Partnership   reimbursed  FSI  and  its  affiliates  $0.4  million  for
         administrative  services  and data  processing  expenses  performed  on
         behalf of the Partnership.

         During 1998, the USPEs paid or accrued $12,000 to FSI or its affiliates
         (based  on the  Partnership's  proportional  share  of  ownership)  for
         administrative services and data processing expenses.



<PAGE>


                                     PART IV

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

     (A) 1.   Financial Statements

              The  financial  statements  listed  in the  accompanying  Index to
              Financial  Statements  are filed as part of this Annual  Report on
              Form 10-K.

     (B) Reports on Form 8-K

              None.

     (C) Exhibits

         4.   Limited  Partnership  Agreement  of  Registrant,  incorporated  by
              reference to the Partnership's  Registration Statement on Form S-1
              (Reg. No.  33-13113),  which became  effective with the Securities
              and Exchange Commission on June 5, 1987.

         4.1  Amendment,   dated  November  18,  1991,  to  Limited  Partnership
              Agreement of the Partnership.

        10.1  Management   Agreement  between   Registrant  and  PLM  Investment
              Management,  Inc.,  incorporated by reference to the Partnership's
              Registration  Statement  on Form S-1 (Reg.  No.  33-13113),  which
              became  effective with the  Securities and Exchange  Commission on
              June 5, 1987.

        10.2  $35,000,000 Note Agreement dated as of March 1, 1994.

        24.   Powers of Attorney. 


<PAGE>


                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Partnership  has duly  caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.

The Partnership has no directors or officers.  The General Partner has signed on
behalf of the Partnership by duly authorized officers.


Date:  March 17, 1999               PLM EQUIPMENT GROWTH FUND II
                                    PARTNERSHIP

                                    By: PLM Financial Services, Inc.
                                        General Partner



                                    By: /s/ Douglas P. Goodrich
                                        ------------------------------
                                        Douglas P. Goodrich
                                        President and Director



                                    By: /s/ Richard K Brock
                                        ------------------------------
                                        Richard K Brock
                                        Vice President and
                                        Corporate Controller

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  directors of the  Partnership's  General
Partner on the dates indicated.


Name                            Capacity                    Date


*_____________________
Robert N. Tidball             Director, FSI             March 17, 1999


*_____________________
Douglas P. Goodrich           Director, FSI             March 17, 1999


*_____________________
Stephen M. Bess               Director, FSI             March 17, 1999



* Susan C. Santo,  by signing her name hereto does sign this  document on behalf
of the persons  indicated  above pursuant to powers of attorney duly executed by
such persons and filed with the Securities and Exchange Commission.




/s/ Susan C. Santo
-----------------------
Susan C. Santo
Attorney-in-Fact


<PAGE>


                          PLM EQUIPMENT GROWTH FUND II
                              A Limited Partnership
                          INDEX TO FINANCIAL STATEMENTS

                                  (Item 14(a))


                                                                     Page

Independent auditors' report                                          27

Balance sheets as of December 31, 1998 and 1997                       28

Statements of income for the years ended
     December 31, 1998, 1997, and 1996                                29

Statements of changes in partners' capital for the years
     ended December 31, 1998, 1997, and 1996                          30

Statements of cash flows for the years ended
     December 31, 1998, 1997, and 1996                                31

Notes to financial statements                                         32-41


All other  financial  statement  schedules  have been  omitted,  as the required
information  is not pertinent to the  registrant or is not material,  or because
the  information  required  is included in the  financial  statements  and notes
thereto.


<PAGE>



                          INDEPENDENT AUDITORS' REPORT




The Partners
PLM Equipment Growth Fund II:

We have audited the  accompanying  financial  statements of PLM Equipment Growth
Fund II (the  Partnership) as listed in the accompanying  index to the financial
statements.   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 have  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.

As described in Note 1 to the financial  statements,  PLM Equipment  Growth Fund
II, in accordance with the limited  partnership  agreement,  entered its passive
phase on January 1, 1996 and as a result,  the  Partnership  is not permitted to
reinvest  in  equipment.   On  January  1,  1999  the  Partnership  entered  its
liquidation  phase and has commenced an orderly  liquidation of the  Partnership
assets.  The Partnership will terminate on December 31, 2006,  unless terminated
earlier upon sale of all equipment or by certain other events.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of PLM Equipment Growth Fund II as
of December 31, 1998 and 1997,  and the results of its  operations  and its cash
flows for each of the years in the three-year period ended December 31, 1998, in
conformity with generally accepted accounting principles.


/S/ KPMG LLP
-----------------------------

SAN FRANCISCO, CALIFORNIA
March 12, 1999



<PAGE>



                          PLM EQUIPMENT GROWTH FUND II
                             (A Limited Partnership)
                                 BALANCE SHEETS
                                  December 31,
                 (in thousands of dollars, except unit amounts)

<TABLE>
<CAPTION>



                                                                                      1998                 1997
                                                                                  ---------------------------------
  <S>                                                                             <C>                  <C>       
  Assets

  Equipment held for operating lease, at cost                                     $   36,212           $   50,707
  Less accumulated depreciation                                                      (27,223 )            (38,170 )
                                                                                  ---------------------------------
                                                                                       8,989               12,537
  Equipment held for sale                                                                 --                  788
  -----------------------------------------------------------------------------------------------------------------
      Net equipment                                                                    8,989               13,325

  Cash and cash equivalents                                                            1,986                  556
  Restricted cash                                                                         --                  395
  Accounts receivable, less allowance for doubtful
      accounts of $91 in 1998 and $1,146 in 1997                                         975                1,626
  Investments in unconsolidated special-purpose entities                                 494                2,680
  Prepaid expenses and other assets                                                       30                   49
  -----------------------------------------------------------------------------------------------------------------

        Total assets                                                              $   12,474           $   18,631
                                                                                  =================================

  Liabilities and partners' capital

  Liabilities

  Accounts payable and accrued expenses                                           $      352           $      365
  Due to affiliates                                                                       83                  195
  Lessee deposits and reserve for repairs                                                772                1,846
  Notes payable                                                                           --                2,500
                                                                                  ---------------------------------
     Total liabilities                                                                 1,207                4,906
                                                                                  ---------------------------------

  Partners' capital
  Limited partners (7,381,805 depositary units as of
     December 31, 1998 and 1997)                                                      11,267               13,725
  General Partner                                                                         --                   --
                                                                                  ---------------------------------
      Total partners' capital                                                         11,267               13,725
                                                                                  ---------------------------------

        Total liabilities and partners' capital                                   $   12,474           $   18,631
                                                                                  =================================

</TABLE>











                       See accompanying notes to financial
                                  statements.


<PAGE>



                          PLM EQUIPMENT GROWTH FUND II
                             (A Limited Partnership)
                              STATEMENTS OF INCOME
                        For the Years Ended December 31,
         (in thousands of dollars, except weighted-average unit amounts)

<TABLE>
<CAPTION>



                                                                             1998            1997           1996
                                                                         --------------------------------------------
  <S>                                                                    <C>             <C>             <C>      
  Revenues

  Lease revenue                                                          $    7,355      $   10,583      $  12,379
  Interest and other income                                                     222             243            355
  Net gain on disposition of equipment                                        5,990           1,922          2,085
                                                                         --------------------------------------------
     Total revenues                                                          13,567          12,748         14,819

  Expenses

  Depreciation and amortization                                               2,413           4,407          5,698
  Repairs and maintenance                                                     1,890           1,959          2,172
  Equipment operating expenses                                                   65              --             --
  Insurance expense to affiliate                                                 16              (5 )           --
  Other insurance expenses                                                       66             120            112
  Management fees to affiliate                                                  369             518            583
  Interest expense                                                               47             650          1,815
  General and administrative expenses to affiliate                              428             575            727
  Other general and administrative expenses                                     807             934          1,078
  (Recovery of) provision for bad debt                                          (49 )           376            715
  -------------------------------------------------------------------------------------------------------------------
                                                                         --------------------------------------------
     Total expenses                                                           6,052           9,534         12,900

  Equity in net income (loss) of unconsolidated
      special-purpose entities                                               (1,484 )          (519 )        6,267
                                                                         --------------------------------------------

        Net income                                                       $    6,031      $    2,695      $   8,186
                                                                         ============================================

  Partners' share of net income

  Limited partners                                                       $    5,606      $    2,196      $   7,464
  General Partner                                                               425             499            722
  -------------------------------------------------------------------------------------------------------------------

        Total                                                            $    6,031      $    2,695      $   8,186
                                                                         ============================================

  Net income per weighted-average depositary unit                        $     0.76      $     0.30      $    1.01
  ===================================================================================================================

  Cash distribution                                                      $    4,604      $    6,216      $   8,957
  Special cash distribution                                                   3,885              --             --
  ===================================================================================================================
  Total distribution                                                     $    8,489      $    6,216      $   8,957
  ===================================================================================================================

  Per weighted-average depositary unit:
  Cash distribution                                                      $     0.59      $     0.80      $    1.15
  Special cash distribution                                                    0.50              --             --
  -------------------------------------------------------------------------------------------------------------------
  Total distribution                                                     $     1.09      $     0.80      $    1.15
                                                                         ============================================
</TABLE>



                       See accompanying notes to financial
                                  statements.


<PAGE>




                          PLM EQUIPMENT GROWTH FUND II
                             (A Limited Partnership)
                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
              For the Years Ended December 31, 1998, 1997, and 1996
                            (in thousands of dollars)

<TABLE>
<CAPTION>

                                                                  Limited            General
                                                                 Partners            Partner            Total
                                                                --------------------------------------------------

  <S>                                                           <C>                  <C>              <C>       
  Partners' capital (deficit) as of December 31, 1995           $   18,658           $  (462 )        $   18,196

  Net income                                                         7,464               722               8,186

  Repurchase of depositary units                                      (179 )              --                (179 )

  Cash distribution                                                 (8,509 )            (448 )            (8,957 )
                                                                --------------------------------------------------

    Partners' capital (deficit) as of December 31, 1996             17,434              (188 )            17,246

  Net income                                                         2,196               499               2,695

  Cash distribution                                                 (5,905 )            (311 )            (6,216 )
  ----------------------------------------------------------------------------------------------------------------

    Partners' capital as of December 31, 1997                       13,725                --              13,725

  Net income                                                         5,606               425               6,031

  Cash distribution                                                 (4,373 )            (231 )            (4,604 )

  Special cash distribution                                         (3,691 )            (194 )            (3,885 )
  ----------------------------------------------------------------------------------------------------------------

    Partners' capital as of December 31, 1998                   $   11,267           $    --          $   11,267 
                                                                ==================================================


</TABLE>




















                       See accompanying notes to financial
                                  statements.


<PAGE>



                          PLM EQUIPMENT GROWTH FUND II
                             (A Limited Partnership)
                            STATEMENTS OF CASH FLOWS
                        For the Years Ended December 31,
                            (in thousands of dollars)

<TABLE>
<CAPTION>



  Operating activities                                                       1998            1997            1996
                                                                         --------------------------------------------
  <S>                                                                    <C>             <C>             <C>       
  Net income                                                             $    6,031      $    2,695      $    8,186
  Adjustments to reconcile net income to net cash
      provided by (used in) operating activities:
    Depreciation and amortization                                             2,413           4,407           5,698
    Net gain on disposition of equipment                                     (5,990 )        (1,922 )        (2,085 )
    Equity in net (income) loss of unconsolidated
        special-purpose entities                                              1,484             519          (6,267 )
    Changes in operating assets and liabilities:
      Restricted cash                                                           395            (100 )           253
      Accounts receivable, net                                                  684            (277 )           385
      Prepaid expenses and other assets                                          19             960            (957 )
      Accounts payable and accrued expenses                                     (13 )           (47 )             3
      Due to affiliates                                                        (112 )            85            (288 )
      Lessee deposits and reserve for repairs                                (1,074 )          (954 )          (127 )
                                                                         --------------------------------------------
        Net cash provided by operating activities                             3,837           5,366           4,801
                                                                         --------------------------------------------

  Investing activities
  Proceeds from disposition of equipment                                      7,880           5,089           4,761
  Distribution from liquidation of unconsolidated
      special-purpose entities                                                1,425              --          14,272
  (Additional investments in) distributions from
      unconsolidated special-purpose entities                                  (723 )        (1,145 )           845
  Payments for capital improvements and other                                    --              --              (8 )
  -------------------------------------------------------------------------------------------------------------------
        Net cash provided by investing activities                             8,582           3,944          19,870
                                                                         --------------------------------------------

  Financing activities
  Principal payments on notes payable                                        (2,500 )       (10,500 )       (14,000 )
  Cash distribution paid to limited partners                                 (8,064 )        (5,905 )        (8,509 )
  Cash distribution paid to General Partner                                    (425 )          (311 )          (448 )
  Repurchase of depositary units                                                 --              --            (179 )
                                                                         --------------------------------------------
        Net cash used in financing activities                               (10,989 )       (16,716 )       (23,136 )
                                                                         --------------------------------------------

  Net increase (decrease) in cash and cash equivalents                        1,430          (7,406 )         1,535
  Cash and cash equivalents at beginning of year                                556           7,962           6,427
                                                                         --------------------------------------------
  Cash and cash equivalents at end of year                               $    1,986      $      556      $    7,962
                                                                         ============================================

  Supplemental information
  Interest paid                                                          $       47      $      653      $    1,815
  ===================================================================================================================


</TABLE>







                       See accompanying notes to financial
                                  statements.


<PAGE>


                          PLM EQUIPMENT GROWTH FUND II
                              A Limited Partnership
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1998

1.   Basis of Presentation

     Organization

     PLM  Equipment  Growth  Fund  II, a  California  limited  partnership  (the
     Partnership),  was  formed  on March  30,  1987.  The  Partnership  engages
     primarily in the  business of owning,  leasing,  or otherwise  investing in
     predominately used  transportation  and related equipment.  The Partnership
     commenced significant operations in June 1987. PLM Financial Services, Inc.
     (FSI) is the  General  Partner of the  Partnership.  FSI is a  wholly-owned
     subsidiary of PLM International, Inc. (PLM International).

     The  Partnership  will  terminate on December 31, 2006,  unless  terminated
     earlier upon sale of all equipment or by certain  other  events.  Since the
     end of 1995,  in accordance  with the  Partnership  Agreement,  the General
     Partner may no longer  reinvest  cash flows and surplus funds in equipment.
     All  future  cash  flows  and  surplus  funds  if any,  are to be used  for
     distributions to partners, except to the extent used to maintain reasonable
     reserves.  Beginning  January 1, 1999,  the General  Partner will begin the
     liquidation phase of the Partnership with the intent to commence an orderly
     liquidation of the Partnership  assets.  During the liquidation  phase, the
     Partnership's  assets will continue to be recorded at the lower of carrying
     amount or fair value less cost to sell.

     FSI manages the affairs of the Partnership.  The net income (loss) and cash
     distributions of the Partnership are generally allocated 95% to the limited
     partners  and 5% to  the  General  Partner,  (see  Net  Income  (Loss)  and
     Distributions  per Depositary  Unit,  below).  The General  Partner is also
     entitled  to  a  subordinated  incentive  fee  equal  to  7.5%  of  surplus
     distributions,  as defined in the limited partnership agreement,  remaining
     after the limited partners have received a certain minimum rate of return.

     The  accompanying  financial  statements  have been prepared on the accrual
     basis of  accounting  in  accordance  with  generally  accepted  accounting
     principles. This requires management to make estimates and assumptions that
     affect  the  reported  amounts of assets and  liabilities,  disclosures  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.

     Operations

     The equipment of the  Partnership is managed under a continuing  management
     agreement  by  PLM  Investment  Management,   Inc.  (IMI),  a  wholly-owned
     subsidiary  of  FSI.  IMI  receives  a  monthly  management  fee  from  the
     Partnership  for managing the equipment  (see Note 2). FSI, in  conjunction
     with its  subsidiaries,  sells  equipment  to investor  programs  and third
     parties,  manages  pools of equipment  under  agreements  with the investor
     programs, and is a general partner of other programs.

     Accounting for Leases

     The Partnership's leasing operations generally consist of operating leases.
     Under  the  operating  lease  method of  accounting,  the  leased  asset is
     recorded at cost and  depreciated  over its estimated  useful life.  Rental
     payments  are recorded as revenue  over the lease term.  Lease  origination
     costs are capitalized and amortized over the term of the lease.

     Depreciation and Amortization

     Depreciation  of  transportation  equipment  held for  operating  leases is
     computed on the  double-declining  balance  method,  taking a full  month's
     depreciation in the month of acquisition, based upon estimated useful lives
     of 15 years for  railcars  and  typically  12 years for most other types of
     equipment.

<PAGE>



                          PLM EQUIPMENT GROWTH FUND II
                              A Limited Partnership
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1998

1.   Basis of Presentation (continued)

     Depreciation and Amortization (continued)

     The depreciation  method changes to straight line when annual  depreciation
     expense  using the  straight-line  method  exceeds that  calculated  by the
     double-declining balance method.  Acquisition fees have been capitalized as
     part of the cost of the equipment.  Lease  negotiation  fees were amortized
     over the initial  equipment  lease term. Debt issuance costs were amortized
     over the term of the loan for which they are paid. Major  expenditures that
     are expected to extend the useful lives or reduce future operating expenses
     of equipment are  capitalized  and amortized  over the estimated  remaining
     life of the equipment.

     Transportation Equipment

     In  accordance  with  the  Financial   Accounting  Standards  Board  issued
     Statement No. 121,  "Accounting for the Impairment of Long-Lived Assets and
     for Long-Lived  Assets to Be Disposed Of", the General  Partner reviews the
     carrying  value  of the  Partnership's  equipment  at  least  quarterly  in
     relation to expected future market  conditions for the purpose of assessing
     recoverability of the recorded amounts.  If projected  undiscounted  future
     lease revenue plus residual  values are less than the carrying value of the
     equipment, a loss on revaluation is recorded. No reductions to the carrying
     value of equipment were required during 1998, 1997 or 1996.

     Equipment held for operating  leases is stated at cost.  Equipment held for
     sale is  stated at the lower of the  equipment's  depreciated  cost or fair
     value, less cost to sell, and is subject to a pending contract for sale.

     Investments in Unconsolidated Special-Purpose Entities

     The Partnership has an interest in an unconsolidated special-purpose entity
     (USPE) that owns an  aircraft.  This  interest is  accounted  for using the
     equity method.

     The  Partnership's  investment  in USPEs  includes  acquisition  and  lease
     negotiation  fees paid by the Partnership to PLM  Transportation  Equipment
     Corporation  (TEC),  a  wholly-owned  subsidiary of FSI. The  Partnership's
     interests in USPEs are managed by IMI. The Partnership's equity interest in
     the net income (loss) of USPEs is reflected net of management  fees paid or
     payable to IMI and the  amortization of acquisition  and lease  negotiation
     fees paid to TEC.

     Repairs and Maintenance

     Repair and maintenance cost to railcars and the trailer equipment  operated
     in rental yards owned and  maintained by PLM Rental,  Inc.,  the short-term
     trailer  rental  subsidiary  of PLM  International  doing  business  as PLM
     Trailer Leasing, are usually the obligation of the Partnership. Maintenance
     costs of most of the other  equipment are the obligation of the lessee.  If
     they are not  covered by the lessee,  they are  generally  charged  against
     operations  as incurred.  The reserve  accounts are included in the balance
     sheet as lessee deposits and reserve for repairs.



<PAGE>


                          PLM EQUIPMENT GROWTH FUND II
                              A Limited Partnership
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1998

1.   Basis of Presentation (continued)

     Net Income (Loss) and Distributions per Depositary Unit

     The net income (loss) of the Partnership is generally  allocated 95% to the
     limited  partners and 5% to the General  Partner.  Special  allocations  of
     income are made to the General Partner to the extent necessary to cause the
     Investment  Account of the General  Partner to be zero. Such allocation may
     not cumulatively  exceed five ninety-fifths of the aggregate of the capital
     contributions  made  by the  Limited  Partners  and the  reinvestment  cash
     available for  distribution.  Cash  distributions  of the  Partnership  are
     generally  allocated  95% to the  limited  partners  and 5% to the  General
     Partner  and may  include  amounts  in excess of net  income.  The  limited
     partners' net income (loss) is allocated  among the limited  partners based
     on the number of limited  partnership  units owned by each limited  partner
     and on the  number  of days of the  year  each  limited  partner  is in the
     Partnership. During 1998, the General Partner received a special allocation
     of income of $0.1 million ($0.4 million in 1997 and $0.3 million in 1996).

     Cash distributions are recorded when paid. Cash  distributions  relating to
     the  fourth  quarter of 1998,  1997,  and 1996 of $1.1  million  ($0.15 per
     weighted-average depositary unit), $1.2 million ($0.16 per weighted-average
     depositary unit), and $1.9 million ($0.25 per  weighted-average  depositary
     unit), respectively,  were paid during the first quarter of 1999, 1998, and
     1997.

     Cash  distributions  to investors in excess of net income are  considered a
     return of  capital.  Cash  distributions  to the  limited  partners of $2.5
     million,   $3.7  million,  and  $1.0  million  in  1998,  1997,  and  1996,
     respectively, were deemed to be a return of capital.

     Net Income Per Weighted-Average Depositary Unit

     Net income per  weighted-average  depositary  unit was computed by dividing
     net income attributable to limited partners by the weighted-average  number
     of   depositary   units   deemed   outstanding   during  the  period.   The
     weighted-average  number of depositary units deemed  outstanding during the
     years ended December 31, 1998,  1997, and 1996 were  7,381,805,  7,381,805,
     and 7,384,738, respectively.

     Cash and Cash Equivalents

     The  Partnership  considers  highly  liquid  investments  that are  readily
     convertible  to known  amounts of cash with  original  maturities  of three
     months or less as cash  equivalents.  The carrying  amount of cash and cash
     equivalents  approximates fair market value due to the short-term nature of
     the investments.

     Comprehensive Income

     During 1998, the Partnership adopted Financial Accounting Standards Board's
     Statement  No.  130,  "Reporting   Comprehensive  Income,"  which  requires
     enterprises  to report,  by major  component  and in total,  all changes in
     equity from nonowner sources.  The Partnership's net income (loss) is equal
     to  comprehensive  income for the years ended December 31, 1998,  1997, and
     1996.

     Restricted Cash

     Lessee security deposits held by the Partnership are considered  restricted
     cash.



<PAGE>


                          PLM EQUIPMENT GROWTH FUND II
                              A Limited Partnership
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1998

2.   Transactions with General Partner and Affiliates

     An officer of FSI contributed  $100 of the  Partnership's  initial capital.
     Under the equipment management agreement, IMI receives a monthly management
     fee  attributable to either owned equipment or interests in equipment owned
     by the USPEs equal to the greater of (i) 5% of Gross  Revenues  (as defined
     in the  agreement)  prior to the  payment  of any  principal  and  interest
     incurred in connection with any  indebtedness,  or (ii) 1/12 of 1/2% of the
     net book value of the equipment  portfolio subject to certain  adjustments.
     Partnership  management fees of $0.1 million and $0.2 million, were payable
     as  of  December  31,  1998  and  1997,  respectively.   The  Partnership's
     proportional  share of the USPE's  management fee expenses were $0, $0, and
     $44,000,   respectively  during  1998,  1997,  and  1996.  The  Partnership
     reimbursed  FSI and its  affiliates  $0.4 million,  $0.6 million,  and $0.7
     million in 1998, 1997, and 1996, respectively, for data processing expenses
     and  administrative  services  performed on behalf of the Partnership.  The
     Partnership's  proportional  share of the  USPE's  administrative  and data
     processing  expenses  reimbursed  to FSI were  $12,000,  $9,000 and $23,000
     during 1998, 1997 and 1996, respectively.

     As of December  31,  1998,  approximately  16% of the of the  Partnership's
     trailer equipment was in rental facilities operated by PLM Rental, Inc., an
     affiliate of the General  Partner,  doing business as PLM Trailer  Leasing.
     Revenues  collected  under  short-term  rental  agreements  with the rental
     yards'  customers  are  credited to the owners of the related  equipment as
     received.  Direct  expenses  associated  with  the  equipment  are  charged
     directly to the  Partnership.  An  allocation  of indirect  expenses of the
     rental yard operations is charged to the Partnership monthly.

  3. Equipment

    The components of owned equipment as of December 31, were as follows (in
thousands of dollars):

<TABLE>
<CAPTION>

Equipment held for operating leases                         1998                1997
-----------------------------------
                                                        ----------------------------------

<S>                                                     <C>                 <C>        
Rail equipment                                          $   17,320          $    17,401
Trailers                                                    11,884               17,144
Marine containers                                            7,008                8,308
Aircraft                                                        --                7,854
                                                        ----------------------------------
                                                            36,212               50,707
Less accumulated depreciation                              (27,223 )            (38,170 )
                                                        --------------------------------
                                                             8,989               12,537
Equipment held for sale                                         --                  788
                                                        ----------------------------------
    Net equipment                                       $    8,989          $    13,325 
                                                        ==================================
</TABLE>

     Revenues are earned by placing the  equipment  under  operating  leases.  A
     portion of the  Partnership's  marine containers are leased to operators of
     utilization-type leasing pools that include equipment owned by unaffiliated
     parties. In such instances, revenues received by the Partnership consist of
     a specified  percentage  of revenues  generated by leasing the equipment to
     sublessees, after deducting certain direct operating expenses of the pooled
     equipment.  Rents for  railcars  are based on mileage  traveled  or a fixed
     rate; rents for all other equipment are based on fixed rates.

     As of December 31, 1998, all owned equipment in the  Partnership  portfolio
     was  either on lease or  operating  in  PLM-affiliated  short-term  trailer
     rental facilities,  except for 6 railcars and 115 marine containers with an
     aggregate  net book value of $0.2  million.  As of December 31,  1997,  all
     owned  equipment  in the  Partnership  portfolio  was  either  on  lease or
     operating in PLM-affiliated  short-term trailer rental  facilities,  except
     for 3 railcars and 168 marine  containers  with an aggregate net book value
     of $0.4 million.



<PAGE>


                          PLM EQUIPMENT GROWTH FUND II
                              A Limited Partnership
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1998

3.   Equipment (continued)

     During  1998,  the General  Partner  sold or disposed of  aircraft,  marine
     containers,  trailers,  and  railcars  owned  by the  Partnership,  with an
     aggregate  net book value of $1.9  million,  for proceeds of $7.9  million.
     During 1997,  the General  Partner  sold or disposed of marine  containers,
     trailers,  railcars,  and an  aircraft  owned by the  Partnership,  with an
     aggregate net book value of $3.2 million, for proceeds of $5.1 million.

     No equipment  was held for sale as of December 31, 1998. As of December 31,
     1997,  equipment  held for sale  included a commercial  aircraft with a net
     book value of $0.6 million and 44 covered  hopper  railcars with a net book
     value of $0.2 million.

     There were no reductions to the carrying values of equipment in 1998, 1997,
     or 1996.

     All owned  equipment on lease is being  accounted for as operating  leases.
     Future minimum rents under  noncancelable  operating  leases as of December
     31, 1998 during each of the next five years are approximately  $3.3 million
     in 1999,  $2.5 million in 2000, $0.9 million in 2001, $0.3 million in 2002,
     and $0.3 million in 2003.  Contingent  rentals based upon  utilization were
     approximately $0.9 million,  $1.3 million,  and $1.3 million in 1998, 1997,
     and 1996, respectively.

4.   Investments in Unconsolidated Special-Purpose Entities

     The following summarizes the financial  information for the special-purpose
     entities  and the  Partnership's  interests  therein as of and for the year
     ended December 31 (in thousands of dollars):

<TABLE>
<CAPTION>

                                            1998                          1997                          1996
                                           --------                      --------                      --------
                                                  Net                           Net                           Net
                                  Total       Interest of         Total     Interest of         Total     Interest of
                                   USPEs      Partnership         USPEs     Partnership         USPEs     Partnership
                                 ----------------------------  ----------------------------  ---------------------------

           <S>                    <C>            <C>           <C>             <C>           <C>        <C>             
           Net investments        $    992       $     494     $   8,891       $   2,680     $   3,354  $        1,665  
           Lease revenues               --              --            --              --         2,418           1,284
           Net income (loss)        (3,028 )        (1,484 )      (1,039 )          (519 )      11,295           6,267

</TABLE>

     The net investments in USPEs include the following  jointly-owned equipment
     as of December 31 (and related  assets and  liabilities)  (in  thousands of
     dollars):

<TABLE>
<CAPTION>

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

<S>                                                           <C>                 <C>      
23% interest in a Boeing 727-200 aircraft                     $      --           $   1,445
50% interest in a Boeing 737-200 aircraft                           494               1,235
--------------------------------------------------------------------------------------------

    Net investments                                           $     494           $   2,680
============================================================================================

</TABLE>

     During the year ended December 31, 1998, the General  Partner sold a Boeing
     727-200  aircraft  in  which  the  Partnership  owned  a 23%  interest,  at
     approximately  its net book value.  The  Partnership  received  liquidating
     distributions  of $1.4 million  from this USPE during the first  quarter of
     1998.

     During the year ended December 31, 1996, the General  Partner sold a mobile
     offshore drilling unit in which the Partnership owned a 55% interest,  with
     a net book  value of $7.2  million,  for  proceeds  of $14.3  million.  The
     Partnership received liquidating distributions from the USPE that owned the
     asset during the third quarter of 1996.


<PAGE>


                          PLM EQUIPMENT GROWTH FUND II
                              A Limited Partnership
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1998

4.   Investments in Unconsolidated Special-Purpose Entities (continued)

     The  Partnership's  50% interest in a commercial  aircraft,  included as an
     investment in an unconsolidated special-purpose entity, was off lease as of
     December 31, 1998.

5.   Operating Segments

     The  Partnership  operates in four  primary  operating  segments:  aircraft
     leasing,  marine container leasing,  trailer leasing,  and railcar leasing.
     Each equipment leasing segment engages in short-term to mid-term  operating
     leases to a variety of customers.

     The General  Partner  evaluates  the  performance  of each segment based on
     profit  or  loss  from   operations   before   allocation  of  general  and
     administrative expenses,  interest expense, and certain other expenses. The
     segments are managed  separately due to different  business  strategies for
     each operation.

     The  following  tables  present a summary  of the  operating  segments  (in
     thousands of dollars):

<TABLE>
<CAPTION>

                                                     Marine
                                          Aircraft  Container   Trailer   Railcar    All
    For the Year Ended December 31, 1998  Leasing    Leasing    Leasing   Leasing    Other<F1>   Total
    ------------------------------------  -------    -------    -------   -------    ----        -----

    <S>                                    <C>       <C>        <C>       <C>        <C>       <C>     
    Revenues
      Lease revenue                        $    83   $    251   $  2,801  $  4,220   $     --  $  7,355
      Interest income and other                 --          3         --         6        213       222
      Net gain (loss) on disposition
        of equipment                         4,835        (21 )      775       401         --     5,990
                                          --------------------------------------------------------------
        Total revenues                       4,918        233      3,576     4,627        213    13,567

    Expenses
      Operations support                        36          5        727     1,229         40     2,037
      Depreciation and amortization             74        379      1,143       817         --     2,413
      Interest expense                          --         --         --        --         47        47
      General and administrative expenses       48         31        590       372        563     1,604
      Provision for bad debts                  (72 )       --         11        12         --       (49 )
                                          --------------------------------------------------------------
        Total costs and expenses                86        415      2,471     2,430        650     6,052
                                          --------------------------------------------------------------
    Equity in net income (loss) of USPEs     (1,484)       --         --        --         --    (1,484 )
                                          --------------------------------------------------------------
                                          ==============================================================
    Net income (loss)                      $ 3,348   $   (182 ) $  1,105  $  2,197   $   (437 )$  6,031
                                          ==============================================================

    As of December 31, 1998
    Total assets                           $   494   $  1,166   $  4,677  $  3,146   $  2,991  $ 12,474
                                          ==============================================================

<FN>

<F1> Includes costs not  identifiable  to a particular  segment such as interest
     expenses and certan interest income and other,  operations  suport expenses
     and general and administrative expenses.

</FN>

</TABLE>







                     (this space intentionally left blank.)





<PAGE>


                          PLM EQUIPMENT GROWTH FUND II
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1998

5.       Operating Segments (continued)

<TABLE>
<CAPTION>

                                                     Marine
                                          Aircraft  Container   Trailer   Railcar    All
    For the Year Ended December 31, 1997  Leasing    Leasing    Leasing   Leasing    Other<F2>   Total
    ------------------------------------  -------    -------    -------   -------    ----        -----
 
    <S>                                    <C>       <C>        <C>       <C>        <C>       <C>     
    Revenues
      Lease revenue                        $ 1,903   $    673   $  3,479  $  4,528   $     --  $ 10,583
      Interest income and other                 --          8         --        12        223       243
      Net gain (loss) on disposition
        of equipment                         1,349        245        310        18         --     1,922
                                          ----------------------------------------------------------------
        Total revenues                       3,252        926      3,789     4,558        223    12,748

    Expenses
      Operations support                        55         10        694     1,277         38     2,074
      Depreciation and amortization          1,252        521      1,618       859        157     4,407
      Interest expense                          --         --         --        --        650       650
      General and administrative expenses      132         59        769       420        647     2,027
      Provision for bad debts                  260        113         (5 )       8         --       376
                                          ----------------------------------------------------------------
        Total costs and expenses             1,699        703      3,076     2,564      1,492     9,534
                                          ----------------------------------------------------------------
    Equity in net income (loss) of USPEs      (519 )       --         --        --         --      (519 )
                                          ----------------------------------------------------------------
                                          ================================================================
    Net income (loss)                      $ 1,034   $    223   $    713  $  1,994   $ (1,269 )$  2,695
                                          ================================================================

    As of December 31, 1997
    Total assets                           $ 3,757   $  1,760   $  6,359  $  4,129   $  2,626  $ 18,631
                                          ================================================================
<FN>

<F2> Includes costs not  identifiable  to a particular  segment such as interest
     expenses,  and amortization expense, and certain interest income and other,
     operations support expenses and general and administrative expenses.

</FN>

</TABLE>


<TABLE>
<CAPTION>

                                                     Marine
                                          Aircraft  Container   Trailer   Railcar    All
    For the Year Ended December 31, 1996  Leasing    Leasing    Leasing   Leasing    Other<F3>   Total
    ------------------------------------  -------    -------    -------   -------    ----        -----

    <S>                                    <C>       <C>        <C>       <C>        <C>       <C>     
    Revenues
      Lease revenue                        $ 2,437   $  1,254   $  4,089  $  4,599   $     --  $ 12,379
      Interest income and other                 --         --          8         3        344       355
      Net gain (loss) on disposition
        of equipment                         1,188        345        (26 )     578         --     2,085
                                          --------------------------------------------------------------
        Total revenues                       3,625      1,599      4,071     5,180        344    14,819

    Expenses
      Operations support                        47          3        706     1,486         42     2,284
      Depreciation and amortization          1,998        651      2,042       927         80     5,698
      Interest expense                          --         --         --        --      1,815     1,815
      General and administrative expenses      202         81        905       465        735     2,388
      Provision for bad debts                   44        524        204       (57 )       --       715
                                          --------------------------------------------------------------
        Total costs and expenses             2,291      1,259      3,857     2,821      2,672    12,900
                                          --------------------------------------------------------------
    Equity in net income (loss) of USPEs      (713 )       --         --        --      6,980     6,267
                                          --------------------------------------------------------------
                                          ==============================================================
    Net income (loss)                      $   621   $    340   $    214  $  2,359   $  4,652  $  8,186
                                          ==============================================================

    As of December 31, 1996
    Total assets                           $ 5,990   $  2,748   $  8,662  $  5,007   $ 10,277  $ 32,684
                                          ==============================================================

<FN>

<F3> Includes costs not  identifiable  to a particular  segment such as interest
     expenses,  and amortization expense, and certain interest income and other,
     operations support expenses and general and administrative  expenses.  Also
     includes  income from an investment  in an entity owning a mobile  offshore
     drilling unit.

</FN>

</TABLE>

<PAGE>


                          PLM EQUIPMENT GROWTH FUND II
                              A Limited Partnership
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1998

6.   Geographic Information

     The  Partnership  owns  certain  equipment  that  is  leased  and  operated
     internationally.  A limited number of the  Partnership's  transactions  are
     denominated in a foreign  currency.  Gains or losses resulting from foreign
     currency transactions are included in the results of operations and are not
     material.

     The Partnership  leases or leased its aircraft,  railcars,  and trailers to
     lessees  domiciled in five  geographic  regions:  South Asia,  Canada,  the
     United States,  Asia, and Europe.  Marine containers are leased to multiple
     lessees in different regions that operate  worldwide.  The tables below set
     forth geographic  information about the  Partnership's  owned equipment and
     investments  in USPEs grouped by domiciles of the lessees as of and for the
     years ended December 31, 1998, 1997, and 1996 (in thousands of dollars):

     The following table sets forth lease revenue  information by region for the
     years ended December 31, are as follows (in thousands of dollars):

<TABLE>
<CAPTION>

                                             Owned Equipment                        Investments In USPEs
   Region                           1998          1997          1996          1998          1997         1996
   ----------------------------  ----------------------------------------  ---------------------------------------

   <S>                           <C>           <C>           <C>           <C>             <C>        <C>             
   United States                 $   5,680     $   7,762     $   8,516     $      --       $    --    $      --       
   Canada                            1,424         1,208         1,765            --            --           --
   Europe                               --           940           840            --            --           --
   South Asia                           --            --            --            --            --        1,284
   Rest of the world                   251           673         1,258            --            --           --
                                 ========================================  =======================================
       Lease revenues            $   7,355     $  10,583     $ 12,379      $      --       $    --    $   1,284       
                                 ========================================  =======================================
</TABLE>

     The following table sets forth net income (loss)  information by region for
     the years ended December 31, are as follows (in thousands of dollars):

<TABLE>
<CAPTION>

                                                     Owned Equipment                     Investments in USPEs
                                          --------------------------------------- ------------------------------------
    Region                                   1998          1997         1996         1998         1997        1996
    ------------------------------------  --------------------------------------- ------------------------------------

    <S>                                   <C>           <C>          <C>          <C>           <C>        <C>               
    United States                         $   3,270     $  3,533     $   2,075    $      --     $    --    $     --          
    Canada                                    1,162          470           927           --          --          --
    Europe                                    3,702          260           162           --          --          --
    South Asia                                   --           --            --       (1,484 )      (519 )     6,267
    Asia                                         --           --           763           --          --          --
    Rest of the world                          (182 )        218           320           --          --          --
                                          --------------------------------------- ------------------------------------
    Regional income (loss)                    7,952        4,481         4,247       (1,484 )      (519 )     6,267
    Administrative and other                   (437 )     (1,267 )      (2,328 )         --          --          --
                                          ======================================= ====================================
        Net income (loss)                 $   7,515     $  3,214     $   1,919    $  (1,484 )   $  (519 )  $  6,267          
                                          ======================================= ====================================

</TABLE>



<PAGE>


                          PLM EQUIPMENT GROWTH FUND II
                              A Limited Partnership
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1998

6.   Geographic Information (continued)

     The net book value of these  assets as of  December  31, are as follows (in
thousands of dollars):

<TABLE>
<CAPTION>

                                             Owned Equipment                      Investments in USPEs
                                   ------------------------------------   -------------------------------------
       Region                         1998        1997        1996            1998        1997         1996
       --------------------------  ------------------------------------   -------------------------------------

       <S>                         <C>         <C>         <C>            <C>          <C>         <C>       
       United States               $   7,014   $   9,760   $  14,538      $       --   $      --   $       --
       Canada                            809       1,016       2,215              --          --           --
       Europe                             --          --       1,241              --          --           --
       South Asia                         --          --          --             494       1,235        1,665
       Rest of the world               1,166       1,761       2,748              --          --           --
                                   ----------------------------------     -------------------------------------
                                       8,989      12,537      20,742             494       1,235        1,665
       Equipment held for sale            --         788          --              --       1,445           --
                                   ==================================     =====================================
           Net book value          $   8,989   $  13,325   $  20,742      $      494   $   2,680   $    1,665
                                   ==================================     =====================================
</TABLE>

7.   Debt

     During the first quarter of 1998, the General Partner used a portion of the
     Partnership's  equipment  sales  proceeds  to pay  off the  remaining  $2.5
     million secured note payable.  The balance on this note was $2.5 million on
     December 31, 1997. This note required quarterly interest payments. Interest
     was charged at LIBOR plus 1.55% per annum.

8.   Concentrations of Credit Risk

     No single lessee accounted for more than 10% of the  consolidated  revenues
     for the year ended  December 31,  1998,  1997 and 1996.  In 1998,  however,
     Sabre Airways purchased a commercial  aircraft from the Partnership and the
     gain from the sale accounted for 27.3% of total consolidated  revenues from
     wholly and partially owned equipment during 1998.

     As of  December  31,  1998 and  1997,  the  General  Partner  believes  the
     Partnership  had no other  significant  concentrations  of credit risk that
     could have a material adverse effect on the Partnership.

9.   Income Taxes

     The  Partnership  is not subject to income taxes,  as any income or loss is
     included in the tax returns of the  individual  partners.  Accordingly,  no
     provision for income taxes has been made in the financial statements of the
     Partnership.

     As of December 31, 1998,  there were temporary  differences of $8.6 million
     between  the  financial  statement  carrying  values of certain  assets and
     liabilities   and  the  federal   income  tax  basis  of  such  assets  and
     liabilities,  primarily  due to  differences  in  depreciation  methods and
     equipment  reserves and the tax treatment of  underwriting  commissions and
     syndication costs.




<PAGE>


                          PLM EQUIPMENT GROWTH FUND II
                              A Limited Partnership
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1998

10.      Contingencies

     The  Partnership,  together with  affiliates,  has initiated  litigation in
     various official forums in India against a defaulting Indian airline lessee
     to repossess Partnership property and to recover damages for failure to pay
     rent and failure to maintain  such  property in  accordance  with  relevant
     lease  contracts.  The  Partnership  has  repossessed  all of its  property
     previously leased to such airline,  and the airline has ceased  operations.
     In response to the  Partnership's  collection  efforts,  the airline  filed
     counter-claims  against  the  Partnership  in excess  of the  Partnership's
     claims against the airline. The General Partner believes that the airline's
     counterclaims  are completely  without merit,  and the General Partner will
     vigorously defend against such counterclaims.

11.  Subsequent Events

     On January 14, 1999, the General Partner for the Partnership announced that
     it has begun recognizing  transfers involving trading of units in 1999. The
     Partnership is listed on the OTC Bulletin Board under the symbols GFYPZ.

     In making the announcement,  the General Partner noted that, as in previous
     years, it will continue to monitor the volume of such trades to ensure that
     the Partnership  remain in compliance  with Internal  Revenue Service (IRS)
     Notice 88-75 and IRS Code Section 7704. These IRS regulations  contain safe
     harbor provisions  stipulating the maximum number of partnership units that
     can be traded during a calendar  year in order for a partnership  not to be
     deemed a publicly traded partnership for income tax purposes.

     Should the Partnership  approach the annual safe harbor limitation later on
     in 1999,  the General  Partner will,  at that time,  cease to recognize any
     further  transfers  involving  trading  of  Partnership  units.   Transfers
     specifically excluded from the safe harbor limitations,  referred to in the
     regulations as "transfers not involving  trading," which include  transfers
     at  death,  transfers  between  family  members,  and  transfers  involving
     distributions  from  a  qualified  retirement  plan,  will  continue  to be
     recognized by the General Partner throughout the year.













                         (This space intentionally left
                                    blank.)


<PAGE>


                          PLM EQUIPMENT GROWTH FUND II

                                INDEX OF EXHIBITS


  Exhibit                                                                Page

    4.      Limited Partnership Agreement of Partnership                   *

    4. 1    Amendment to Limited Partnership Agreement of Registrant       *

   10. 1    Management Agreement between Partnership and PLM Investment    *
            Management, Inc.

   10. 2    $35,000,000 Note Agreement dated as of March 1, 1994           *

   24.      Powers of Attorney                                         43-45



* Incorporated by reference.  See page 24 of this report.