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, 1996.

     [  ]         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

         An index of  exhibits  filed with this Form 10-K is located at page 41.
         Total number of pages in this report: 44


<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),  filed a
Registration  Statement on Form S-1 with the Securities and Exchange  Commission
with respect to a proposed offering of 7,500,000 limited  partnership 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 owning and  leasing
transportation equipment to be operated by and/or leased to various shippers and
transportation companies.

     The Partnership was formed to engage in the business of owning and managing
a diversified pool of used and new transportation-related  equipment and certain
other items of equipment. The Partnership's primary objectives are:

     (i) to maintain a diversified  portfolio of long-lived,  low  obsolescence,
high residual value  equipment with the net proceeds of the initial  partnership
offering, supplemented by debt financing;

     (ii)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;

     (iii) to selectively sell equipment when the General Partner believes that,
due to market conditions,  market prices for equipment exceed inherent equipment
values or expected  future  benefits  from  continual  ownership of a particular
asset  will not  equal  or  exceed  other  equipment  investment  opportunities.
Proceeds from these sales,  together  with excess net cash flow from  operations
are used for distributions to the partners or for repayment of outstanding debt;

     (iv)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. On
November 20, 1990,  the Units of the  Partnership  began trading on the American
Stock  Exchange.   Thereupon  each  Unitholder  received  a  depositary  receipt
representing  ownership of the number of Units owned by such  Unitholder.  As of
December 31, 1996,  there were 7,381,805  depositary  units  (Depositary  Units)
outstanding (including 1,150 Depositary Units held in the Treasury). The General
Partner contributed $100 for its 5% general partner interest in the Partnership.
The  General  Partner  delisted  the  Partnership's  Depositary  Units  from the
American Stock Exchange (AMEX) on April 8, 1996. The last day for trading on the
AMEX was March 22, 1996.

      It is anticipated  that the Partnership  will be completely  liquidated by
the end of 2000.  Since the beginning of 1996, 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,  used to
repay  Partnership's  debt, or held as Partnership working capital except to the
extent used to maintain reasonable reserves.




<PAGE>


     Table 1, below, the cost of equipment in the Partnership's  portfolio,  and
the cost of investments in unconsolidated  special purpose entities, at December
31, 1996 (thousands of dollars):
<TABLE>
<CAPTION>

                                                      TABLE 1

 Units                    Type                                       Manufacturer                           Cost
----------------------------------------------------------------------------------------------------------------------
Equipment held for operating leases:

    <S>      <C>                                                <C>                                     <C>        
      1      727-100C commercial aircraft                       Boeing                                  $     6,986
      2      727-200 commercial aircraft                        Boeing                                       18,020
      1      737-200 commercial aircraft                        Boeing                                        7,854
    514      Refrigerated marine containers                     Various                                      10,137
     28      Dry marine containers                              Various                                          73
    164      Open top marine containers                         Various                                         430
    202      Refrigerated trailers                              Trailmobile                                   6,565
    210      Dry trailers                                       Various                                       2,765
    780      Dry piggyback trailers                             Various                                      11,702
     25      Refrigerated piggyback trailers                    Various                                         141
    460      Box cars                                           Various                                       7,804
    182      Tank cars                                          Various                                       4,776
     73      Covered hopper cars                                Various                                       1,144
    193      Mill gondolas                                      Various                                       4,459
                                                                                                        --------------

             Total equipment                                                                            $    82,856<F1>
                                                                                                        ==============


Investments in unconsolidated special purpose entities:

   0.50      737-200 commercial aircraft                        Boeing                                  $     8,046<F1>
                                                                                                        ==============

<FN>

<F1> Includes  proceeds from capital  contributions,  operations and Partnership
     borrowings invested in equipment. Includes costs capitalized, subsequent to
     the  date  of  acquisition  and  equipment  acquisition  fees  paid  to PLM
     Transportation Equipment Corporation, a wholly-owned subsidiary of FSI. All
     equipment was used equipment at the time of purchase
</FN>

</TABLE>


     The equipment is generally  leased under operating leases with terms of one
to six  years.  Some  of the  Partnership's  marine  containers  are  leased  to
operators of  utilization-type  leasing pools which 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 sub-lessees,  after deducting certain direct operating expenses of the pooled
equipment.

     At December 31, 1996, 37% of the Partnership's  trailer equipment  operated
in rental yards owned and maintained by PLM Rental, Inc., the short-term trailer
rental  subsidiary of PLM  International.  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 direct expenses
of the rental yard operations, are billed to the Partnership monthly.

     The lessees of the  equipment  include,  but are not  limited to:  Carnival
Airlines,  Inc., DHL Airways, Inc., Transamerica Leasing, Union Pacific Railroad
Company,  Burlington  Northern,  and Cargill  International.  As of December 31,
1996, all of the equipment was either operating in short-term rental facilities,
on lease,  or under other  contractual  agreements  except three railcars and 71
containers.



<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  equipment.  IMI agreed to perform all services  necessary to
manage the transportation  equipment on behalf of the Partnership and to perform
or contract  for the  performance  of all  obligations  of the lessor  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
Financial Statements, footnotes 1 and 2).

(C)  Competition

(1)  Operating Leases vs. Full Payout Leases

Generally,  the equipment owned by the Partnership is leased out on an operating
lease basis wherein the rents owed 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 the operating  lease need not be  capitalized  on the lessee's
balance sheet.

     The Partnership encounters considerable  competition from lessors utilizing
full payout leases on new equipment,  i.e., leases which have terms equal to the
expected  economic  life of the  equipment.  Full payout  leases are written for
longer terms and for lower rates than the Partnership offers. 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 of the
Partnership may write full payout leases at considerably  lower rates, or larger
competitors  with a lower cost of capital  may offer  operating  leases at lower
rates, and as a result, the Partnership may be at a competitive disadvantage.

(2)  Manufacturers and Equipment Lessors

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

     The  Partnership  competes  with  many  equipment  lessors,  including  ACF
Industries, Inc. (Shippers Car Line Division), General Electric Railcar Services
Corporation,  Greenbrier  Leasing  Company,  General  Electric  Capital Aviation
Services Corporation,  and other limited partnerships which lease the same types
of equipment.

(D)  Demand

The Partnership invests in  transportation-related  capital equipment. A general
distinction  can be drawn  between  equipment  used for the  transport of either
materials and  commodities or people.  With the exception of aircraft  leased to
passenger air carriers,  the  Partnership's  equipment is used primarily for the
transport of materials.

     The following describes the markets for the Partnership's equipment:

(1) Aircraft

Commercial Aircraft

The market for commercial  aircraft  continued to improve in 1996,  representing
two consecutive  years of growth and profits in the airline  industry.  The $5.7
billion in net profits  recorded by the world's top 100 airlines in 1995 grew to
over $6 billion in 1996.  The profits are a result of the  continued  management
emphasis on costs.  The demand for ever lower unit costs by airline  managements
has  caused a  significant  reduction  of  surplus  used  Stage II and Stage III
commercial aircraft. The result is a return to supply/demand equilibrium. On the
demand  side,  passenger  traffic is  improving,  cargo  movement is up and load
factors are generally higher across the major markets.

     These  changes are  reflected  in the  performance  of the world's 62 major
airlines  that  operate 60% of the world  airline  fleet but handle 78% of world
passenger traffic. Focusing on the supply/demand for Partnership-type narrowbody
commercial  aircraft,  there were 213 used narrowbody aircraft available at year
end 1995.  In the first ten  months of 1996,  this  supply  was  reduced  to 119
narrowbody  aircraft  available  for  sale or  lease.  Forecasts  for 1997 see a
continuing  supply/demand  equilibrium  due to air travel  growth  and  balanced
aircraft supply.

     There are a total of 939 Boeing 737-200 aircraft in service, with 219 built
prior to 1974.  Independent  forecasts estimate that 250 of the 737-200s will be
retired, leaving approximately 700 aircraft in service after 2003. The forecasts
regarding  hushkits estimate that half of the 700 Boeing 737-200s will be hushed
to meet Stage III noise levels.

     Independent projections for the Boeing 727 aircraft indicate that there are
1,050 in service,  with 299 built prior to 1974. The Partnership's  aircraft are
all 1974 or earlier-model 727-100/200s,  and are expected to be retired prior to
2003.  The current  strategy is to optimize their  remaining  value based on the
present value of lease cash flows and projected residuals.

 (2) Marine Containers

At the end of 1995,  the  consensus of industry  sources was that 1996 would see
both higher  container  utilization and  strengthening  of per diem lease rates.
Such was not the case, as there was no appreciable  cyclical  improvement in the
container market following the traditional winter slowdown. Industry utilization
continues to be under pressure, with per diem rates being impacted as well.

     A  substantial  portion of the  Partnership's  containers  are on long-term
utilization  leases which were entered into with Trans Ocean  Leasing as lessee.
The industry has seen a major consolidation as Transamerica  Leasing late in the
fourth quarter of 1996,  acquired Trans Ocean Leasing.  Transamerica  Leasing is
the second largest container leasing company in the world.  Transamerica Leasing
is the  substitute  lessee for Trans Ocean  Leasing.  Long term,  such  industry
consolidation  should  bring  more  rationalization  to the market and result in
higher utilization and per diem rates.

(3)  Railcars

Pressurized Tank Cars

These cars are used primarily in the  petrochemical  and fertilizer  industries.
They  transport  liquefied  petroleum  gas  (LPG)  and  anhydrous  ammonia.  The
utilization  rate on the  Partnership's  fleet of pressurized tank cars was over
98% during 1996.  Independent  forecasts show the demand for natural gas growing
during 1997 to 1999, as the developing world,  former Communist  countries,  and
the  industrialized  world all increase their demand for energy.  The fertilizer
industry  was  undergoing a rapid  restructuring  toward the end of 1996 after a
string of major mergers, which began in 1995. These mergers reduce the number of
companies that use pressurized tank cars for fertilizer service.  Whether or not
the economies of the mergers allow the total fleet size to be reduced remains to
be seen.

General Purpose Tank Cars

General  purpose,  or  nonpressurized,  tank cars are used to  transport  a wide
variety of bulk liquid commodities,  such as petroleum fuels,  lubricating oils,
vegetable oils, molten sulfur,  corn syrup,  asphalt,  and specialty  chemicals.
Demand for  general  purpose  tank cars in the  Partnership  fleet has  remained
healthy  over  the  last  two  years,  with  utilization  remaining  above  98%.
Independent  projections  show the demand for petroleum  growing  during 1997 to
1999, as the developing world, former Communist countries and the industrialized
world all increase their demand for energy.  Chemical  carloadings for the first
40 weeks of 1996 were up one-tenth of one percent (0.1%) as compared to the same
period in 1995.

Covered Hopper (Grain) Cars

Through  October 5, 1996,  grain car loadings were down 13% compared to the same
period for 1995.  Even with the greatly  reduced  loadings,  the  on-lease  rate
during 1996 for the Partnership grain cars remained at 100%.  Industrywide,  the
covered  hopper is one car type that has  increased  in number  over the last 10
years, going from a total of 299,172 cars in 1985 to 325,882 cars in 1995. It is
possible that another poor crop year,  combined with more available cars,  could
place downward pressure on grain car rental rates during 1997.

Box Cars

The lease covering 174 of the box cars was renewed during 1996 for an additional
five (5) years. The remaining 289 box cars are on lease with another lessee. Two
hundred  and two (202) of these  cars are up for  renewal  during  1997 with two
separate  lessees.  These cars are presently in paper service.  Car loadings for
paper  service  during  the first 40 weeks of 1996 were  down 1.2%  compared  to
loadings  for the same 1995  period.  The General  Partner  has had  preliminary
discussions  with the lessee regarding the possible lease renewal of these cars,
but it is too early for them to make a decision.  With the economy settling into
a period of 2.0 to 2.5% growth, it is anticipated by independent  forecasts that
paper and paperboard production will follow a similar pattern, resulting in a 2%
increase in car loadings for 1997.

Mill Gondolas

The  Partnership's  net per diem rental income remained high during 1996, as the
demand for mill gondolas remained strong. Quoting from the December,  1996 issue
of Railway Age magazine:  "Significant building programs have lessened shortages
somewhat,  as have  changes  in rules  on  railroad  cars  and car  assignments.
However,  gondolas are still in short supply in many  places." The November 1996
WEFA Group  report  indicates  anticipation  for scrap metal  demands to grow as
electric furnace process gain share. Also, they anticipate demand for steel mill
products to expand by 2.5 to 3%, on average, from 1997 to 2000.

(6) Trailers

Intermodal Trailers

The robust  intermodal  trailer market that began four years ago began to soften
in 1995, and reduced demand continued in 1996.  Intermodal trailer loadings were
flat in 1996 from  1995's  depressed  levels.  This lack of growth  has been the
result of many factors,  ranging from truckload firms  aggressively  recapturing
market share from the railroads  through  aggressive  pricing to the  continuing
consolidation  activities and asset  efficiency  improvements  of the major U.S.
railroads.

     All of these factors helped make 1996 a year of equalizing equipment supply
as  railroads  and lessors were  pressured  to retire  older and less  efficient
trailers.  The two largest  suppliers of railroad trailers reduced the available
fleet  in  1996  by over  15%.  Overall  utilization  for  intermodal  trailers,
including the Partnership's fleet, was lower in 1996 than in previous years.

Over-The-Road Dry Trailers

The  over-the-road  dry trailer market was weak in 1996, with  utilization  down
15%. The trailer industry  experienced a record year in 1994 for new production,
and 1995 production levels were similar to 1994's.  However,  in 1996, the truck
freight recession,  along with an overbuilding situation,  contributed to 1996's
poor  performance.  The year 1996 had too little  freight and too much equipment
industrywide.

Over-The-Road Refrigerated Trailers

PLM  experienced  fairly  strong  demand  levels  in 1996  for its  refrigerated
trailers.  With  over 15% of the  fleet in  refrigerated  trailers,  PLM and the
Partnerships are the largest supplier of short-term rental refrigerated trailers
in the U.S.

(E)  Government Regulations

The use, maintenance, and ownership of equipment is regulated by federal, state,
local,  and/or foreign  governmental  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 the removal from service or extensive  modification of such equipment 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 U.S.
that do not meet certain noise, aging, and corrosion criteria);

     (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 on the stratospheric  ozone layer and which are
used  extensively  as  refrigerants  in  refrigerated  marine cargo  containers,
over-the-road trailers, etc.);

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

ITEM 2. PROPERTIES

The Partnership  neither owns nor leases any properties other than the equipment
it has purchased for leasing  purposes.  At December 31, 1996,  the  partnership
owned a portfolio of transportation equipment as described in Part I, Table 1.

     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

None.

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, 1996.


<PAGE>


                                     Part II

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

The  General  Partner  delisted  the  Partnership's  depositary  units  from the
American Stock  Exchange  (AMEX) under the symbol GFY on April 8, 1996. The last
day for trading on the AMEX was March 22, 1996.  Under the Internal Revenue Code
(the Code), the Partnership was classified as a Publicly Traded Partnership.  As
of March 3, 1997 there were 7,385,605  Depositary Units  outstanding  (including
1,150  Depositary  Units held in the Treasury).  There are  approximately  9,900
Depositary  Unitholders of record as of the date of this report. The Code treats
all Publicly Traded  Partnerships as corporations if they remain publicly traded
after December 31, 1997.  Treating the  Partnership as a corporation  would mean
the  Partnership  itself  would become a taxable,  rather than a "flow  through"
entity.  As a taxable entity,  the income of the  Partnership  would have become
subject to federal  taxation at both the  partnership  level and at the investor
level to the extent that income would have become distributed to an investor. In
addition,  the General Partner believed that the trading price of the Depositary
Units would have been distorted when the Partnership began the final liquidation
of the  underlying  equipment  portfolio.  In  order to  avoid  taxation  of the
Partnership  as a  corporation  and to prevent  unfairness to  Unitholders,  the
General Partner delisted the Partnership's Depositary Units from the AMEX. While
the  Partnership's  Depositary Units are no longer publicly traded on a national
stock  exchange,  the General  Partner  continues to manage the equipment of the
Partnership  and prepare and  distribute  quarterly and annual reports and Forms
10-Q  and  10-K in  accordance  with  the  Securities  and  Exchange  Commission
requirements.  In addition,  the General Partner  continues to provide pertinent
tax  reporting  forms  and  information  to  Unitholders.  The  General  Partner
anticipates an informal  market for the  Partnership's  units may develop in the
secondary  marketplace  similar to that which currently  exists for non-publicly
traded partnerships.

      Pursuant to the terms of the Partnership Agreement, the General Partner is
generally  entitled to a 5% interest in the profits and losses and distributions
of the Partnership. The General Partner also is entitled to a special allocation
of any gains from sale of the Partnership's  assets during the liquidation phase
in an amount  sufficient  to  eliminate  any  negative  balance  in the  General
Partner's capital account.



<PAGE>


     Table  2,  below,  sets  forth  the  high and low  reported  prices  of the
Partnership's  Depositary Units for 1995 as reported by the AMEX as well as cash
distributions paid per Depositary Unit.

                                     TABLE 2
<TABLE>
<CAPTION>
                                                                                 Cash
                                                                            Distributions
                                                                               Paid Per
                                                    Reported Trade            Depositary
                                                        Prices                   Unit
                                               ------------------------------------------

   Calendar Period                                High             Low

   <S>                                         <C>             <C>                <C>     
   1996

   1st Quarter<F1>                             $  5.000        $   3.750          $ 0.40  
   2nd Quarter                                 $     --        $      --          $ 0.25 
   3rd Quarter                                 $     --        $      --          $ 0.25 
   4th Quarter                                 $     --        $      --          $ 0.25 

   1995

   1st Quarter                                 $  8.500        $   7.000          $ 0.40 
   2nd Quarter                                 $  8.563        $   7.250          $ 0.40 
   3rd Quarter                                 $  8.000        $   6.250          $ 0.40 
   4th Quarter                                 $  6.625        $   4.563          $ 0.40 

<FN>

<F1> The General Partner  delisted the  Partnership's  depositary units from the
     American Stock  Exchange  (AMEX) under the symbol GFY on April 8, 1996. The
     last day for trading on the AMEX was March 22, 1996.

</FN>

</TABLE>


     The  Partnership  has engaged in a plan to  repurchase up to 250,000 of the
outstanding  Depositary  Units.  During 1996, the  Partnership  repurchased  and
canceled 44,500  Depositary Units at a total cost of $179,000.  During 1995, the
Partnership  repurchased and canceled 46,400 Depositary Units at a total cost of
$345,000.  During the fourth quarter of 1994, the Partnership repurchased 20,200
Depositary Units at a total cost of $156,000.  During the first quarter of 1993,
the Partnership  repurchased  6,700 Depositary Units at a total cost of $70,000.
As of December 31, 1996, the Partnership had purchased and canceled a cumulative
total of 117,800 Depositary units at a cost of $750,000.



<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA

     Table 3, below, lists selected financial data for the Partnership:

                                     TABLE 3

                               For the years ended
                  December 31, 1996, 1995, 1994, 1993, and 1992
                    (in thousands of dollars except per unit
                                    amounts)
<TABLE>
<CAPTION>

                                                  1996          1995            1994            1993            1992
                                               --------------------------------------------------------------------------

   <S>                                         <C>            <C>            <C>             <C>            <C>          
   Operating results:
     Total revenues                            $ 14,819       $ 18,983       $  26,326       $  36,901      $   34,508   
     Net gain (loss) on
       disposition of equipment                   2,085          1,485           2,347           6,704            (329 )
     Loss on revaluation of
       equipment                                     --           (667 )          (887 )          (161 )        (6,876 )
     Equity in net income of
       unconsolidated special purpose
       entities                                   6,267             --              --              --              --
     Net income (loss)                            8,186            937              67           5,596         (10,489 )

   At year-end:
     Total assets                              $ 33,595       $ 48,957       $  69,485       $  84,206      $   92,928  
     Total liabilities                           16,349         30,761          39,332          41,344          42,928
     Notes payable                               13,000         27,000          35,000          35,000          38,218

   Cash distributions                          $  8,957       $ 12,549       $  12,620       $  12,665      $   17,371   

   Cash distributions which represent a                                                                       
   return of capital to Limited Partners       $  1,045       $ 11,847       $ 11,989        $   7,563      $   16,502

   Per Weighted Average Depositary Unit:

   Net income (loss)                           $   1.01<F1>   $   0.01<F1>   $   (0.12)<F1>  $    0.60<F1>  $    (1.53 )<F1>  

   Cash distributions                          $   1.15       $   1.60       $    1.60       $    1.60      $     2.20     

   Cash distributions which represent a                                                                               
   return of capital to Limited Partners       $   0.14       $   1.59       $    1.60       $    1.01      $     2.20

<FN>

<F1> After  reduction of income of $313 ($0.04 per Weighted  Average  Depositary
     Unit) in 1996, $815 ($0.11 per Weighted  Average  Depositary Unit) in 1995,
     $963 ($0.13 per Weighted Average  Depositary Unit) in 1994, $845 ($0.11 per
     Weighted  Average  Depositary Unit) in 1993, and $1,495 ($0.20 per Weighted
     Average  Depositary Unit) in 1992 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

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 and risks
focuses on the performance of the Partnership's  equipment in various sectors of
the  transportation  industry  and  its  effect  on  the  Partnership's  overall
financial condition.

Results of Operations - Factors Affecting Performance

(A)  Re-leasing and Repricing Activity

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 transportation equipment include supply and demand for similar or comparable
types or kinds of transport capacity, desirability of the equipment in the lease
market,  market  conditions  for the  particular  industry  segment in which the
equipment is to be leased,  overall  economic  conditions,  various  regulations
concerning the use of the equipment,  and others.  Equipment that is idle or out
of  service  between  the  expiration  of one  lease  and  the  assumption  of a
subsequent one can result in a reduction of contribution to the Partnership. The
Partnership  experienced  re-leasing or re-pricing exposure in 1996 primarily in
its aircraft, trailer, marine container and railcar portfolios.

     (1) Aircraft:  Aircraft contribution decreased from 1995 to 1996 due to the
off-lease status of a Boeing 737-200 aircraft that is being remarketed, owned by
a trust  in  which  the  Partnership  has a 50%  interest.  All  other  aircraft
investments were on lease for the entire year.

     (2) Trailers:  The majority of the Partnership's trailer portfolio operates
in short-term rental facilities or short-line  railroad systems.  The relatively
short  duration  of most  leases in these  operations  exposes  the  trailers to
considerable re-leasing activity.  Contributions from the Partnership's trailers
operated in short-term  rental  facilities  and the short-line  railroad  system
declined from 1995 to 1996, due to soft market  conditions that caused a decline
in re-leasing activity.

     (3) Marine Containers:  The majority of the Partnership's  marine container
portfolio  operates in  utilization-based  leasing  pools and as such was highly
exposed to repricing activity. The Partnership's marine container  contributions
declined from 1995 to 1996, due to soft market  conditions that caused a decline
in re-leasing activity.

     (4) 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.

(B)  Equipment Liquidations and  Nonperforming Lessees

Liquidation of Partnership  equipment  represents a reduction in the size of the
equipment  portfolio,  and will  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,  legal fees, etc. The Partnership  experienced the
following in 1996:

      (1) Liquidations: During 1996, the Partnership sold its remaining interest
in an entity which owns a mobile offshore drilling unit, 303 marine  containers,
one aircraft, 47 railcars,  and 154 trailers.  The proceeds from the liquidation
of the investment in the entity which owns a mobile  offshore  drilling unit was
used to prepay the third and a portion of the fourth annual  installments of the
Partnership's  outstanding  debt,  totaling $14  million.  The net result of all
sales  and  liquidations  has  been  a  reduction  in  the  cost  basis  of  the
Partnership's equipment portfolio of approximately $23.8 million.

      (2) Nonperforming  Lessees: In the beginning of the third quarter of 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. In addition, a marine container lessee also encountered
financial  difficulties in 1996. The Partnership  established  reserves  against
these  receivables  due to the General  Partner's  determination  that  ultimate
collection  of these  rents is  uncertain.  Other  equipment  such as  railcars,
trailers  and some of the marine  containers  experienced  minor  non-performing
issues that have no significant impact on the Partnership.

(C)  Reinvestment Risk

During the first seven years of operations,  the  Partnership  invested  surplus
cash in additional equipment after fulfilling operating  requirements and paying
distributions  to the  partners.  Pursuant  to the  Partnership  agreement,  the
Partnership is no longer reinvesting in additional equipment since the beginning
of 1996.  Subsequent to the end of the  reinvestment  period which  concluded on
December 31, 1995,  the  Partnership  will continue to operate for an additional
three years,  then begin an orderly  liquidation  over an  anticipated  two-year
period.

     During the year, the Partnership  received  proceeds of approximately  $4.8
million from the liquidation or sale of equipment and liquidating  proceeds from
unconsolidated  special purpose  entities of $14.3 million.  These proceeds were
used  to pay  down  $14  million  of the  Partnership's  outstanding  debt.  The
Partnership reinvested  approximately $0.2 million in aircraft modifications for
an existing aircraft.

(D)  Equipment Valuation and Write-downs

In March 1995, the Financial  Accounting Standards Board (FASB) issued statement
No. 121,  "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed  Of" (SFAS 121).  This  standard  is  effective  for years
beginning after December 15, 1995. The Partnership adopted SFAS 121 during 1995,
the effect of which was not  material as the method  previously  employed by the
Partnership  was  consistent  with SFAS 121. In  accordance  with SFAS 121,  the
Partnership  reviews the carrying  value of its  equipment at least  annually in
relation to expected  future market  conditions for the purpose of assessing the
recoverability of the recorded  amounts.  If projected future lease revenue plus
residual  values are less than the carrying  value of the  equipment,  a loss on
revaluation  is  recorded.  The  carrying  value of an  aircraft  was reduced by
approximately $0.7 million in 1995. There were no write downs required in 1996.

     As of December 31, 1996,  the General  Partner  estimated  the current fair
market value of the Partnership's equipment portfolio, including equipment owned
by unconsolidated special purpose entities, to be approximately $43.3 million.

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   Partnership's   Limited   Partnership   Agreement,   while  the
Partnership's total outstanding indebtedness,  currently $13.0 million, has been
reduced from its  original  balance of $35 million.  The  Partnership  relies on
operating   cash  flow  to  meet  its  operating   obligations   and  make  cash
distributions to Limited Partners

     For the year ended December 31, 1996, the Partnership  generated sufficient
operating  cash  to meet  its  operating  obligations,  but  used  undistributed
available cash from prior periods of approximately  $3.3 million to maintain the
current level of distributions  (total of $8.9 million in 1996) to the partners.
During the year, the General  Partner sold its  investment in a mobile  offshore
drilling unit for approximately  $14.3 million and used these proceeds to prepay
$14.0 million in principal payments on its outstanding debt.

     In the first quarter of 1994, the General Partner completed the refinancing
of a bank  loan  which  was due to  mature  September  30,  1995.  The new  debt
comprised notes payable of $35.0 million,  and the corresponding loan agreements
require the  Partnership  to maintain a minimum debt coverage ratio based on the
fair market value of  equipment,  a minimum  fixed charge  coverage  ratio,  and
limits  the  concentration  of any one type of  equipment  in the  Partnership's
equipment  portfolio.  The  refinanced  debt began to mature in March 1996.  The
General Partner  prepaid the first four annual  installments of principal due on
the debt in the first  and  third  quarters  of 1995,  and the third and  fourth
quarters of 1996. The maturities of the remaining principal  installments on the
debt coincide with the  liquidation  phase of the Partnership and will be repaid
with proceeds from sales of equipment during that phase.

     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.

Results of Operations - Year to Year Detail Comparison

Comparison of the Partnership's Operating Results for the Years Ended December 
31, 1996 and 1995

(A)  Owned equipment operations

Lease revenues less direct expenses (defined as repairs and maintenance,  marine
equipment  operating,  and asset specific insurance expenses) on owned equipment
decreased  during the year ended  December  31,  1996 when  compared to the same
period of 1995. The following table presents lease revenues less direct expenses
by owned equipment type (in thousands):

<TABLE>
<CAPTION>

                                                                                For the year
                                                                             ended December 31,
                                                                            1996             1995
                                                                         ----------------------------
   <S>                                                                   <C>              <C>       
   Aircraft                                                              $  2,390         $  2,160  
   Trailers                                                                 3,382            4,301
   Rail equipment                                                           3,111            3,336
   Marine containers                                                        1,255            1,487

</TABLE>

Aircraft:  Aircraft  lease  revenues and direct  expenses  were $2.4 million and
$47,000,  respectively,  for the year ended December 31, 1996,  compared to $2.8
million and $0.6 million,  respectively,  during the same period of 1995.  Lease
revenues  decreased due to the off-lease status of an aircraft in 1996 which was
eventually sold at the end of the year,  offset by another  aircraft,  which was
off-lease in the first  quarter of 1995.  Direct  expenses  decreased due to the
costs incurred in the year ended December 31, 1995 to refurbish another aircraft
prior to being re-leased in 1995;

Trailers:  Trailer lease revenues and direct expenses were $4.1 million and $0.7
million,  respectively,  for the year ended December 31, 1996,  compared to $5.0
million and $0.7  million,  respectively,  during the same  period of 1995.  The
decrease in net  contribution  was due to the sale of 154  trailers in 1996.  In
addition,  the  trailer  fleet  is  experiencing  lower  utilization  in the PLM
affiliated short-term rental yards;

Rail equipment: Railcar lease revenues and direct expenses were $4.6 million and
$1.5 million,  respectively,  for the year ended December 31, 1996,  compared to
$4.8 million and $1.5 million,  respectively during the same period of 1995. The
decrease in railcar contribution  resulted from the sale of 47 railcars in 1996.
In addition,  expenses  increased due to running repairs  required on certain of
the railcars during 1996 which were not needed during 1995;

Marine  containers:  Marine  container lease revenues were $1.3 million and $1.5
million for the year ended December 31, 1996 and 1995, respectively.  The number
of marine  containers  owned by the Partnership has been declining over the past
twelve months 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 $10.6 million for the year ended December 31, 1996,
decreased  from $11.5  million for the same period in 1995.  The  variances  are
explained as follows:

     (1) A $0.5 million decrease in depreciation  and amortization  expense from
1995 levels, reflecting the effect of asset sales in 1995 and 1996;

     (2) A $0.5 million decrease in interest expense due to a lower base rate of
interest charged on the  Partnership's  floating rate debt during the year ended
December  31,  1996,  as  compared  to the same  period  in 1995.  In 1996,  the
Partnership  also  prepaid  $14 million  ($9  million in  September  1996 and $5
million in December  1996) of the $35 million  outstanding  note  payable.  This
payment was applied to the third and a portion of the fourth annual installments
due March 31, 1998 and 1999, respectively. In 1995, the Partnership prepaid $8.0
million of the outstanding note payable  representing the principal payments due
March 31, 1996 and 1997;

     (3) A $0.1 million decrease in management fee to affiliates, reflecting the
lower levels of lease revenues in 1996 as compared to 1995;

     (4) A $0.2  million  increase  in bad debt  expense to reflect  the General
Partner's  evaluation of the  collectibility of receivables due from a container
lessee that encountered financial difficulties.

(C)  Loss on revaluation of equipment

Loss on  revaluation  of  equipment of $0.7  million in 1995  resulted  from the
reduction of the net book value of an aircraft to its estimated  net  realizable
value.  There was no loss on revaluation of equipment in the year ended December
31, 1996.

(D)  Net gain on disposition of owned equipment

Net gain on  disposition  of  equipment  for the year ended  December  31,  1996
totaled $2.1 million  which  resulted from the sale or disposal of one aircraft,
303 marine containers, 154 trailers, and 47 railcars, with an aggregate net book
value of $2.7 million for aggregate proceeds of $4.8 million. For the year ended
December  31,  1995,  the $0.9  million  net gain on  disposition  of  equipment
resulted from the sale or disposal of 2,278 marine  containers,  11 trailers,  1
tractor,  and 1 railcar with an aggregate  net book value of $2.6  million,  for
aggregate proceeds of $3.5 million.

(E)  Interest and other income

Interest and other income  decreased $0.3 million during the year ended December
31, 1996 due primarily to lower interest rates earned on cash  equivalents  when
compared to the same period of 1995.

(F)  Equity in net income of unconsolidated special purpose entities

Equity in net income of unconsolidated  special purpose entities  represents net
income generated from the operation of jointly-owned  assets accounted for under
the equity method (see Note 2 to the financial statements).
<TABLE>
<CAPTION>

                                                                                For the year
                                                                             ended December 31,
                                                                            1996             1995
                                                                         ----------------------------
   <S>                                                                   <C>               <C>      
   Aircraft                                                              $   (712 )        $   254  
   Mobile offshore drilling unit                                            6,979             (367 )
   Marine vessel                                                               --              398
</TABLE>

Aircraft:  As of  December  31,  1996  and  1995,  the  Partnership  owned a 50%
investment in an entity which owns a commercial aircraft.  Revenues and expenses
were $0.4 million and $1.1 million,  respectively,  for the year ended  December
31, 1996, compared to $0.7 million and $0.5 million,  respectively, for the same
period in 1995. The Partnership's share of revenue decreased $0.3 million due to
the off-lease  status of this aircraft during the last six months of 1996, which
was on-lease for the entire year of 1995.  The  Partnership's  share of expenses
increased  $0.6  million due to the  increase in bad debt expense to reflect the
General Partner's  evaluation of the  collectibility of receivables due from the
aircraft's  lessee that encountered  financial  difficulties and repairs to meet
airworthiness conditions.

     During 1995, the General Partner sold the  Partnership's  50% investment in
an entity which owns a DC-9 aircraft resulting in a $47,000 net gain.

Mobile offshore  drilling unit: As of December 31, 1995, the Partnership owned a
55%  investment in an entity which owns a mobile  offshore  drilling unit (rig).
The rig was sold resulting in a $7.1 million net gain to the Partnership, offset
by a net loss from operations of $0.1 million.

Marine  vessel:  In the second  quarter of 1995,  the General  Partner  sold the
Partnership's  50% investment in an entity which owns a marine vessel  resulting
in a $0.6 million gain, offset by a net loss from operations of $0.2 million.



<PAGE>


(G)  Net Income

As a result of the foregoing,  the  Partnership's net income of $8.2 million for
the year ended  December  31,  1996,  increased  from net income of $0.9 million
during  the same  period in 1995.  The  Partnership's  ability  to  operate  and
liquidate assets,  secure leases,  and re-lease those assets whose leases expire
during the  duration  of the  Partnership  is subject  to many  factors  and the
Partnership's performance in the year ended December 31, 1996 is not necessarily
indicative  of  future  periods.  In the  year  ended  December  31,  1996,  the
Partnership  distributed  $8.5  million to the  Limited  Partners,  or $1.15 per
Weighted Average Depositary Unit.

Comparison of the Partnership's Operating Results for the Years Ended December 
31, 1995 and 1994

(A)  Revenues

Total  revenues  for the years  ended  December  31,  1995 and 1994,  were $19.0
million and $26.3  million,  respectively.  The  decrease in 1995  revenues  was
primarily  attributable  to lower lease revenue and reduced gains on disposition
of equipment.  Lower lease revenue resulted from the  Partnership's  sales of an
interest in a marine vessel, and an aircraft,  a railcar,  trailers,  and marine
containers  during 1995 and 1994 sales. The  Partnership's  ability to liquidate
assets,  secure leases, and re-lease those assets whose leases expire during the
duration of the  Partnership  is subject to many  factors and the  Partnership's
performance in 1995 is not necessarily indicative of future periods.

     (1) Lease  revenue  declined to $16.8 million in 1995 from $23.3 million in
1994.  The  following  table lists lease  revenue  earned by equipment  type (in
thousands):
<TABLE>
<CAPTION>

                                                         For the year ended December
                                                                     31,
                                                          1995               1994
                                                        ------------------------------
   <S>                                                  <C>               <C>       
   Trailers and tractors                                $  4,972          $   3,885 
   Rail equipment                                          4,785              4,823
   Aircraft                                                3,666              4,935
   Marine containers                                       1,580              1,826
   Mobile offshore drilling units                          1,436              2,488
   Marine vessels                                            391              5,294
                                                        ==============================
                                                        $ 16,830          $  23,251  
                                                        ==============================
</TABLE>

     Significant revenue component changes resulted primarily from:

     (a) Declines of $4.9 million in marine  vessel  revenues due to the sale of
two marine  vessels during the third quarter of 1994 and the  Partnership's  50%
interest in another marine vessel in the second quarter of 1995;

     (b)  Declines of $1.3  million in  aircraft  revenue due to the sale of the
Partnership's  50% interest in a DC-9 aircraft during the second quarter of 1995
and another aircraft being off-lease during part of the fourth quarter of 1995;

     (c) A decrease  of $1.1  million  in mobile  offshore  drilling  unit (rig)
revenue  due to the sale of one rig in the fourth  quarter of 1994,  and a lower
re-lease rate on another rig;

     (d) A decrease of $0.2 million in marine container  revenue due to the sale
of 2,278 marine containers during 1995;

     (e) An increase of $1.1  million in trailer and tractor  revenue due to the
purchase of 649 trailers in the third and fourth quarters of 1994.

     (2) Interest and other income  decreased by $0.1 million due  primarily due
to lower cash balances available for investment,  offset slightly by an increase
in the interest rate earned on cash investments.

     (3) Net gain on disposition  of equipment  during 1995 totaled $1.5 million
from the sale or disposal of the  Partnership's 50% interest in a DC-9 aircraft,
11  trailers,   1  tractor,   2,278  marine  containers,   1  railcar,  and  the
Partnership's  50% interest in a marine  vessel with an aggregate net book value
of $5.8 million and unused  drydock  reserves of $0.3  million,  for proceeds of
$7.0 million.  Net gains on  disposition  of equipment  during 1994 totaled $2.3
million from the sale or disposal of 2 marine vessels, 2 railcars, 267 trailers,
423 marine  containers,  and a 12% interest in a mobile offshore  drilling unit.
The equipment  sold had an aggregate net book value of $13.5 million and accrued
drydock reserves of $2.2 million for proceeds of $13.6 million.

(B)  Expenses

Total  expenses  for the years  ended  December  31,  1995 and 1994,  were $18.0
million and $26.3  million,  respectively.  The  decrease in 1995  expenses  was
primarily   attributable  to  decreased  marine  equipment  operating  expenses,
depreciation expense,  repairs and maintenance,  insurance, and management fees,
offset by a slight increase in bad debt expense.

     (1)  Direct  operating   expenses  (defined  as  repairs  and  maintenance,
insurance, and marine equipment operating expenses) decreased to $3.3 million in
1995 from $8.3 million in 1994. This change resulted from:

     (a)  Decreases  of $2.9  million  in  marine  equipment  operating  expense
resulted  from the sale of two marine  vessels in the third  quarter of 1994 and
the Partnership's 50% interest in another marine vessel in the second quarter of
1995;

     (b)  Decreases of $1.4 million in repairs and  maintenance  costs from 1994
levels resulted from the sale of two marine vessels in the third quarter of 1994
and a 50% interest in another marine vessel in the second quarter of 1995. These
declines were offset slightly by increases in aircraft  expenses  resulting from
the refurbishment of an aircraft prior to being re-leased;

     (c) Decreases of $0.7 million in insurance  expenses resulted from the sale
of two marine  vessels in the second  quarter of 1994.  The 1994  expenses  were
offset  by  a  $0.2  million   refund  from  an  insurance  pool  in  which  the
Partnership's marine vessels  participate,  due to lower than expected insurance
claims in the pool. A similar refund was not received in 1995.

     (2) Indirect  operating  expenses (defined as depreciation and amortization
expense, management fees, interest expense, general and administrative expenses,
and bad debt  expense)  decreased to $14.1 million in 1995 from $17.1 million in
1994. This change resulted from:

     (a)  Decreases  of $2.6 million in  depreciation  expense from 1994 levels,
reflecting the Partnership's  double-declining  balance  depreciation method and
the effect of asset sales in 1994 and 1995,  partially offset by the purchase of
equipment during the later part of 1994;

     (b) Decreases of $0.3 million in management fees to affiliates,  reflecting
the lower levels of lease revenues in 1995 as compared to 1994;

     (c)  Decreases  of $0.2  million in interest  expense  from a $0.3  million
write-off in 1994 of unamortized loan  origination  costs due to the refinancing
of the  Partnership's  debt in 1994,  offset by a $0.1 million increase due to a
higher base rate of interest  charged on the  Partnership's  floating  rate debt
during 1995;

     (d) Decreases of $0.1 million in general and  administrative  expenses from
1994 levels,  resulting from the write-off of accrued legal and other  expenses,
offset by increased  administrative  costs associated with the short-term rental
facilities  due to an additional 636 trailers now operating in the facilities in
1995 when compared to the same period in 1994;

     (e)  Increases  of $0.2  million in bad debt  expense  reflect  the General
Partner's  evaluation of the  collectibility of receivables due from an aircraft
lessee that encountered financial difficulties.

     (3) Loss on  revaluation of equipment of $0.7 million in 1995 resulted from
the Partnership  reducing the net book value of an aircraft to its estimated net
realizable  value.  There was no loss on  revaluation  of  equipment in the year
ended December 31, 1994.



<PAGE>


(C)  Net Income

The  Partnership's  net income of $937,000 for the year ended December 31, 1995,
increased  from net income of $67,000 for 1994.  During  1995,  the  Partnership
distributed $11.9 million to the Limited Partners, or $1.60 per Weighted Average
Depositary Unit.

Geographic Information

The Partnership operates its equipment 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 as follows:  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
the Financial  Statements,  Note 3 for information on the revenues,  income, and
assets 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 due to
the General  Partner's  decision  to use the 200%  declining  balance  method of
depreciation.  The relationships of geographic  revenues,  net income (loss) and
net book value are expected to significantly  change in the future as additional
equipment  is sold or disposed of in various  equipment  markets and  geographic
areas. An explanation of the current relationships is presented below:

     The Partnership's  equipment on lease to U.S. domiciled lessees consists of
trailers,  railcars  and  aircraft.  During  1996,  lease  revenues  in the U.S.
accounted for 62% of the lease revenues while net operating income accounted for
$2.1  million of the $8.2  million in profit  for the  entire  Partnership.  The
primary  reason  for  this   relationship  is  the  fact  that  the  Partnership
depreciates  its rail  equipment  over a fifteen year period versus twelve years
for other equipment types owned and leased in other geographic regions.

     The Partnership's  equipment leased to Canadian  domiciled lessees consists
of railcars. During 1996, revenues for these railcars accounted for 13% of lease
revenues and $0.9 million of the $8.2  million of the net  operating  profit for
the entire Partnership.

     The  Partnership's  equipment  on  lease to South  Asia  domiciled  lessees
accounted for 9% of the lease revenues while net operating  income accounted for
$6.3  million of the $8.2  million in profit  for the  entire  Partnership.  The
primary reason for this  relationship is that during 1996, the Partnership  sold
its 55% investment in a mobile offshore drilling unit for a gain of $7.1 million
offset by net operating loss of $0.1 million. The Partnership's  remaining asset
in South Asia, a 50% investment in an aircraft,  generated lease revenue of $0.4
million  and a net  operating  loss of 0.7  million  due mainly to the  lessee's
inability to pay the Partnership for  outstanding  receivables.  The Partnership
established  reserves  against these  receivables  due to the General  Partner's
determination that ultimate  collection of this rent is uncertain.  In addition,
this aircraft  underwent repairs to meet  airworthiness  conditions and incurred
costs of approximately $0.2 million.

     In 1996, marine containers, which were leased in various regions throughout
the period,  accounted for 9% of the lease  revenues and $0.3 million of the net
operating profit for the period.

     European operations consisted of an aircraft that accounted for 6% of lease
revenues while net income generated by this equipment accounted for $0.2 million
in profits for the period.

     Asian operations  consisted of an aircraft which was sold during 1996 for a
gain of $1.2 million offset by an operating net loss of $0.4 million.

Inflation

There was no significant  impact on the Partnership's  operations as a result of
inflation during 1996, 1995, or 1994.

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.

Outlook for the Future

Since the  Partnership  is in its  holding or  passive  liquidation  phase,  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. The General  Partner
anticipates  the  liquidation  of  Partnership  assets will be  completed by the
scheduled termination of the Partnership at the end of the year 2000.

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

(A)  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 U.S. and internationally,  cannot be predicted with any
accuracy and preclude the General  Partner from  determining  the impact of such
changes on Partnership operations, purchases, or sale of equipment.

(B) Distributions

Pursuant  to the  Limited  Partnership  Agreement,  the  Partnership  ceased  to
reinvest in additional equipment.  The General Partner will pursue a strategy of
selectively  re-leasing  equipment to achieve  competitive  returns,  or selling
equipment  that is  underperforming  or whose  operation  becomes  prohibitively
expensive,  in the period  prior to the final  liquidation  of the  Partnership.
During this time, 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
then-existing  distribution levels. In the long term, changing market conditions
and  used-equipment  values may  preclude the General  Partner  from  accurately
determining  the impact of future  re-leasing  activity and  equipment  sales on
Partnership performance and liquidity.

     As of the first quarter of 1996, the cash  distribution rate was reduced to
more  closely  reflect  current  and  expected  net cash flows from  operations.
Continued  weak market  conditions  in certain  equipment  sectors and equipment
sales have reduced  overall lease revenues in the Partnership to the point where
reductions  in  distribution  levels  were  necessary.  In  addition,  with  the
Partnership  expected to enter the active  liquidation phase in the near future,
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  will be  reduced,
significant  asset  sales  may  result in  potential  special  distributions  to
Unitholders.



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The  financial  statements  for the  Partnership  are  listed  in the  Index  to
Financial Statements and Financial Statement Schedules included in Item 14(a) of
this Annual Report.

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

         None.







                     (This space intentionally left blank.)


<PAGE>


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP

As of the date of this Annual  Report,  the directors and executive  officers of
PLM  International  (and key  executive  officers  of its  subsidiaries)  are as
follows:
<TABLE>
<CAPTION>

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

<S>                                    <C>                 <C>                                                   
J. Alec Merriam                        61                  Director, Chairman of the Board, PLM International,
                                                           Inc.; Director, PLM Financial Services, Inc.

Douglas P. Goodrich                    50                  Director and Senior Vice President, PLM
                                                           International; Director and President, PLM Financial
                                                           Services, Inc.; Senior Vice President, PLM
                                                           Transportation Equipment Corporation; President, PLM
                                                           Railcar Management Services, Inc.

Walter E. Hoadley                      80                  Director, PLM International, Inc.

Robert L. Pagel                        60                  Director, Chairman of the Executive Committee, PLM
                                                           International, Inc.; Director, PLM Financial
                                                           Services, Inc.

Harold R. Somerset                     62                  Director, PLM International, Inc.

Robert N. Tidball                      58                  Director, President and Chief Executive Officer, PLM
                                                           International, Inc.

J. Michael Allgood                     48                  Vice President and Chief Financial Officer, PLM
                                                           International, Inc. and PLM Financial Services, Inc.

Stephen M. Bess                        50                  President, PLM Investment Management, Inc.;
                                                           President, PLM Securities, Inc.; Vice President, PLM
                                                           Financial Services, Inc.;

David J. Davis                         40                  Vice President and Corporate Controller, PLM
                                                           International and PLM Financial Services, Inc.

Frank Diodati                          42                  President, PLM Railcar Management Services Canada
                                                           Limited.

Steven O. Layne                        42                  Vice President, PLM Transportation Equipment
                                                           Corporation.; Vice President and Director, PLM
                                                           Worldwide Management Services, Ltd.

Stephen Peary                          48                  Senior Vice President, General Counsel and Secretary,
                                                           PLM International, Inc.; Vice President, General
                                                           Counsel and Secretary, PLM Financial Services, Inc.,
                                                           PLM Investment Management, Inc., PLM Transportation
                                                           Equipment Corporation; Vice President, PLM
                                                           Securities, Corp.

Thomas L. Wilmore                      54                  Vice President, PLM Transportation Equipment
                                                           Corporation; Vice President, PLM Railcar Management
                                                           Services, Inc.
</TABLE>

     J. Alec  Merriam was  appointed  Chairman of the Board of  Directors of PLM
International  in September  1990,  having served as a director  since  February
1988. In October 1988 he became a member of the Executive Committee of the Board
of Directors of PLM International.  From 1972 to 1988, Mr. Merriam was Executive
Vice President and Chief Financial  Officer of Crowley Maritime  Corporation,  a
San Francisco area-based company engaged in maritime shipping and transportation
services.  Previously,  he  was  Chairman  of the  Board  and  Treasurer  of LOA
Corporation of Omaha,  Nebraska and served in various  financial  positions with
Northern Natural Gas Company, also of Omaha.

     Douglas P.  Goodrich was elected to the Board of Directors in July 1996 and
appointed  Director  and  President of PLM  Financial  Services in June 1996 and
Senior Vice President of PLM  International in March 1994. 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, a subsidiary of Guardian Industries Corp. of Chicago, Illinois from
December 1980 to September 1985.

     Dr. Hoadley joined PLM International's Board of Directors and its Executive
Committee in September  1989. He served as a Director of PLM, Inc. from November
1982 to June 1984 and PLM  Companies,  Inc. from October 1985 to February  1988.
Dr.  Hoadley has been a Senior  Research  Fellow at the Hoover  Institute  since
1981.  He was  Executive  Vice  President  and Chief  Economist  for the Bank of
America  from  1968  to  1981  and  Chairman  of the  Federal  Reserve  Bank  of
Philadelphia  from  1962 to 1966.  Dr.  Hoadley  had  served  as a  Director  of
Transcisco Industries, Inc. from February 1988 through August 1995.

     Robert L. Pagel was appointed  Chairman of the  Executive  Committee of the
Board of Directors of PLM  International  in September 1990,  having served as a
director  since  February  1988.  In  October  1988,  he  became a member of the
Executive  Committee of the Board of Directors of PLM  International.  From June
1990 to April 1991,  Mr. Pagel was President and Co-Chief  Executive  Officer of
The Diana Corporation,  a holding company traded on the New York Stock Exchange.
He is the former  President and Chief Executive  Officer of FanFair  Corporation
which  specializes in sports fans' gift shops. He previously served as President
and Chief Executive Officer of Super Sky International,  Inc., a publicly traded
company,  located in Mequon,  Wisconsin,  engaged in the manufacture of skylight
systems.  He was formerly Chairman and Chief Executive Officer of Blunt, Ellis &
Loewi,  Inc., a  Milwaukee-based  investment firm. Mr. Pagel retired from Blunt,
Ellis & Loewi in 1985  after a career  spanning  20 years in all  phases  of the
brokerage  and financial  industries.  Mr. Pagel has also served on the Board of
Governors of the Midwest Stock Exchange.

     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), a recently-acquired  subsidiary of Alexander & Baldwin,  Inc.
Mr.  Somerset joined C&H in 1984 as Executive Vice President and Chief Operating
Officer, having served on its Board of Directors since 1978, a position in which
he continues to serve.  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 -
Agricultures,  Vice President,  General Counsel and Secretary.  In addition to a
law degree from Harvard Law School,  Mr.  Somerset  also holds  degrees in civil
engineering from the Rensselaer  Polytechnic Institute and 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 headquartered in Maryland.

     Robert N. Tidball was appointed  President and Chief  Executive  Officer of
PLM  International  in  March  1989.  At the  time  of his  appointment,  he was
Executive Vice President of PLM International.  Mr. Tidball became a director of
PLM  International in April 1989 and a member of the Executive  Committee of the
Board of  Directors of PLM  International  in September  1990.  Mr.  Tidball was
elected President of PLM Railcar Management Services,  Inc. in January 1986. 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,
Inc., he was Vice President,  a General Manager and a Director of North American
Car  Corporation,  and a Director  of the  American  Railcar  Institute  and the
Railway Supply Association.

     J. Michael Allgood was appointed Vice President and Chief Financial Officer
of PLM  International  in October 1992.  Between July 1991 and October 1992, Mr.
Allgood was a consultant  to various  private and public  sector  companies  and
institutions  specializing  in financial  operational  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.

     Stephen M. Bess was  appointed  President of PLM  Securities,  Inc. in June
1996 and 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 Corp., a manufacturer  of computer  peripheral  equipment,  from October
1975 to November 1978.

     David  J.  Davis  was  appointed  Vice  President  and  Controller  of  PLM
International  in January 1994.  From March 1993 through January 1994, Mr. Davis
was engaged as a consultant for various firms,  including PLM. Prior to that Mr.
Davis was Chief Financial Officer of LB Credit Corporation in San Francisco from
July  1991 to March  1993.  From  April  1989 to May  1991,  Mr.  Davis was Vice
President and Controller for ITEL Containers International Corporation which was
located  in San  Francisco.  Between  May 1978 and April  1989,  Mr.  Davis held
various positions with Transamerica Leasing Inc., in New York, including that of
Assistant Controller for their rail leasing division.

     Frank Diodati was appointed  President of PLM Railcar  Management  Services
Canada  Limited in 1986.  Previously,  Mr.  Diodati was Manager of Marketing and
Sales for G.E. Railcar Services Canada Limited.

     Steven O. Layne was appointed Vice President,  PLM Transportation Equipment
Corporation's  Air Group in November  1992, and was appointed Vice President and
Director of PLM Worldwide  Management  Services,  Ltd. in September,  1995.  Mr.
Layne was PLM Transportation  Equipment  Corporation's Vice President,  Commuter
and Corporate  Aircraft  beginning in July 1990. Prior to joining PLM, Mr. Layne
was the Director,  Commercial Marketing for Bromon Aircraft Corporation, a joint
venture of General Electric  Corporation and the Government  Development Bank of
Puerto Rico.  Mr. Layne is a Major in the United  States Air Force  Reserves and
senior pilot with 13 years of accumulated service.

     Stephen Peary became Vice President,  Secretary, and General Counsel of PLM
International  in February  1988 and Senior Vice  President  in March 1994.  Mr.
Peary was Assistant General Counsel of PLM Financial Services,  Inc. from August
1987  through  January  1988.  Previously,  Mr. Peary was engaged in the private
practice of law in San  Francisco.  Mr. Peary is a graduate of the University of
Illinois,  Georgetown  University Law Center, and Boston University  (Masters of
Taxation Program).

     Thomas L. Wilmore was appointed Vice  President - Rail, PLM  Transportation
Equipment Corporation in March 1994 and has served as Vice President,  Marketing
for PLM Railcar Management Services,  Inc. since May 1988. Prior to joining PLM,
Mr. Wilmore was Assistant Vice President  Regional Manager for MNC Leasing Corp.
in Towson, Maryland from February 1987 to April 1988. From July 1985 to February
1987,  he was  President  and Co-Owner of Guardian  Industries  Corp.,  Chicago,
Illinois and between  December 1980 and July 1985,  Mr. Wilmore was an Executive
Vice President for its subsidiary,  G.I.C.  Financial Services Corporation.  Mr.
Wilmore  also served as Vice  President  of Sales for Gould  Financial  Services
located in Rolling Meadows, Illinois from June 1978 to December 1980.

     The  directors  of the General  Partner are elected for a one-year  term or
until  their  successors  are  elected  and  qualified.   There  are  no  family
relationships  between  any  director  or any  executive  officer of the General
Partner.






                     (This space intentionally left blank.)


<PAGE>


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, 1996.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a)      Security Ownership of Certain Beneficial Owners
         The General Partner is generally entitled to 5% interest in the profits
         and losses and distributions of the Partnership.  At December 31, 1996,
         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 5, 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 5

<TABLE>
<CAPTION>

Name                                                 Depositary Units                 Percent of Units

<S>                                                       <C>                                 <C> 
J. Alec Merriam                                           1,000                               *
Robert N. Tidball                                           400                               *

All directors and officers
as a group (2 people)                                     1,400                               *

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

* Represents less than 1 percent of the Depositary Units outstanding.

</TABLE>


<PAGE>


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

(a)  Transactions with Management and Others

During 1996,  management fees to IMI were $583,000.  The General Partner and its
affiliates  were  reimbursed  $727,000 for  administrative  and data  processing
services performed on behalf of the Partnership in 1996.

     During 1996, the  Unconsolidated  Special Purpose  Entities paid or accrued
the  following  fees  to FSI  or  its  affiliates  (based  on the  Partnership's
proportional share of ownership):  management fees - $44,000; and administrative
and data  processing  services - $23,000.  

(b)  Certain Business Relationships

None.

(c)  Indebtedness of Management

None.

(d)  Transactions with Promoters

None.


<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.

     (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 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.

         25.      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:  February 28, 1997                   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/ David J. Davis
                                                    ------------------------
                                                    David J. Davis
                                                    Vice President and
                                                    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




*_____________________
J. Alec Merriam                  Director - FSI             February 28, 1997


*_____________________
Robert L. Pagel                  Director - FSI             February 28, 1997



* Stephen Peary, by signing his 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/ Stephen Peary
---------------------
Stephen Peary
Attorney-in-Fact



<PAGE>


                          PLM EQUIPMENT GROWTH FUND II
                             (A Limited Partnership)

                          INDEX TO FINANCIAL STATEMENTS

                                  (Item 14(a))


                                                                      Page

Report of Independent Auditors                                          27

Balance sheets as of December 31, 1996 and 1995                         28

Statements of income for the years ended December 31, 1996,
1995, and 1994                                                          29

Statements of changes in partners' capital for the years
ended December 31, 1996, 1995, and 1994                                 30

Statements of cash flows for the years ended December 31,
1996, 1995, and 1994                                                    31

Notes to financial statements                                      32 - 40


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>


                         REPORT OF INDEPENDENT AUDITORS



The Partners
PLM Equipment Growth Fund II:

We have audited the accompanying  balance sheets of PLM Equipment Growth Fund II
as of December 31, 1996 and 1995, and the related statements of income,  changes
in  partners'  capital,  and cash flows for each of the years in the  three-year
period  ended   December  31,  1996.   These   financial   statements   are  the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of PLM Equipment Growth Fund II as
of December 31, 1996 and 1995,  and the results of its  operations  and its cash
flows for each of the years in the three-year period ended December 31, 1996, in
conformity with generally accepted accounting principles.



/s/ KPMG PEAT MARWICK LLP
--------------------------
SAN FRANCISCO, CALIFORNIA
February 28, 1997



<PAGE>



                          PLM EQUIPMENT GROWTH FUND II
                             (A Limited Partnership)

                                 BALANCE SHEETS
                                  December 31,
                (in thousands of dollars except per unit amounts)



                                     ASSETS

<TABLE>
<CAPTION>

                                                                                      1996                 1995
                                                                                  ---------------------------------

   <S>                                                                            <C>                  <C>       
   Equipment held for operating leases, at cost                                   $   82,856           $   93,980
   Less accumulated depreciation                                                     (62,114 )            (65,000 )
                                                                                  ---------------------------------
       Net equipment                                                                  20,742               28,980

   Cash and cash equivalents                                                           7,962                6,427
   Restricted cash                                                                       295                  548
   Investment in unconsolidated special purpose entities                               1,665               10,515
   Accounts receivable, less allowance for doubtful
     accounts of $882 in 1996 and $19 in 1995                                          1,765                2,198
   Lease negotiation fees to affiliate, net of accumulated
     amortization of $89 in 1996 and $1,305 in 1995                                       29                   70
   Debt issuance costs, net of accumulated amortization
     of $108 in 1996 and $69 in 1995                                                     128                  167
   Prepaid expenses and other assets                                                   1,009                   52
                                                                                  ---------------------------------
       Total assets                                                               $   33,595           $   48,957
                                                                                  =================================

                        LIABILITIES AND PARTNERS' CAPITAL

   Liabilities:

     Accounts payable and accrued expenses                                        $      412           $      409
     Due to affiliates                                                                   110                  398
     Notes payable                                                                    13,000               27,000
     Lessee deposits and reserve for repairs                                           2,827                2,954
                                                                                  ---------------------------------
       Total liabilities                                                              16,349               30,761
                                                                                  ---------------------------------

   Partners' capital (deficit):

     Limited Partners (7,381,805 and 7,426,305  Depositary Units including 1,150
      Depositary Units held in the Treasury at
      December 31, 1996 and 1995 respectively)                                        17,434               18,658
     General Partner                                                                    (188 )               (462 )
                                                                                  ---------------------------------
       Total partners' capital                                                        17,246               18,196
                                                                                  ---------------------------------
       Total liabilities and partners' capital                                    $   33,595           $   48,957
                                                                                  =================================
</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 per unit amounts)
<TABLE>
<CAPTION>



                                                                            1996           1995           1994
                                                                         -----------------------------------------
   <S>                                                                   <C>            <C>            <C>     
   Revenues:

     Lease revenue                                                       $  12,379      $ 16,830       $ 23,251
     Interest and other income                                                 355           668            728
     Net gain on disposition of equipment                                    2,085         1,485          2,347
                                                                         -----------------------------------------
       Total revenues                                                       14,819        18,983         26,326

   Expenses:

     Depreciation and amortization                                           5,698         8,552         11,141
     Management fees to affiliate                                              583           818          1,150
     Interest expense                                                        1,815         2,349          2,550
     Insurance expense to affiliate                                             --            87            299
     Other insurance expense                                                   112           171            618
     Repairs and maintenance                                                 2,172         2,867          4,307
     Marine equipment operating expenses                                        --           152          3,033
     General and administrative expenses
       to affiliates                                                           727         1,026            732
     Other general and administrative expenses                               1,078           895          1,298
     Bad debt expense                                                          715           462            244
     Loss on revaluation of equipment                                           --           667            887
                                                                         -----------------------------------------
       Total expenses                                                       12,900        18,046         26,259

                                                                         -----------------------------------------
   Equity in net income of unconsolidated special purpose entities           6,267            --             --
                                                                         -----------------------------------------

       Net income                                                        $   8,186      $    937       $     67
                                                                         =========================================

   Partners' share of net income (loss):

     Limited Partners                                                    $   7,464      $     75       $   (899 )
     General Partner                                                           722           862            966
                                                                         =========================================
       Total                                                             $   8,186      $    937       $     67
                                                                         =========================================

   Net income (loss) per weighted average Depositary Unit (7,384,738,  
     7,443,910 and 7,490,254 Depositary Units
     at December 31, 1996, 1995, and 1994                                $    1.01      $   0.01       $  (0.12 )
                                                                         =========================================

   Cash distributions                                                    $   8,957      $ 12,549       $ 12,620
                                                                         =========================================

   Cash distribution per weighted average Depositary Unit                $    1.15      $   1.60       $   1.60
                                                                         =========================================
</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, 1996, 1995, and 1994
                             (thousands of dollars)

<TABLE>
<CAPTION>

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

   <S>                                                          <C>                <C>                <C>      
   Partners' capital (deficit) at December 31, 1993             $   43,894         $  (1,032 )        $  42,862

   Net income (loss)                                                  (899 )             966                 67

   Cash distributions                                              (11,989 )            (631 )          (12,620 )

   Repurchase of Depositary Units                                     (156 )              --               (156 )
                                                                --------------------------------------------------

   Partners' capital (deficit) at December 31, 1994                 30,850             (697)             30,153

   Net income                                                           75               862                937

   Cash distributions                                              (11,922 )            (627 )          (12,549 )

   Repurchase of Depositary Units                                     (345 )              --               (345 )
                                                                --------------------------------------------------

   Partners' capital (deficit) at December 31, 1995                 18,658              (462 )           18,196

   Net income                                                        7,464               722              8,186

   Cash distributions                                               (8,509 )            (448 )           (8,957 )

   Repurchase of Depositary Units                                     (179 )              --               (179 )
                                                                --------------------------------------------------

   Partners' capital (deficit) at December 31, 1996             $   17,434         $    (188 )        $  17,246
                                                                ==================================================

</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,
                             (thousands of dollars)
<TABLE>
<CAPTION>

                                                                             1996            1995           1994
                                                                         --------------------------------------------
   <S>                                                                   <C>             <C>             <C>      
   Operating activities:
     Net income                                                          $    8,186      $      937      $      67
     Adjustments to reconcile net income (loss)
         to net cash provided by operating activities:
       Net gain on disposition of equipment                                  (2,085 )        (1,485 )       (2,347 )
       Write-off of unamortized loan origination
         cost and debt placement fees                                            --              --            305
       Loss on revaluation of equipment                                          --             667            887
       Depreciation and amortization                                          5,698           8,552         11,141
       Equity in net income of unconsolidated special purpose
         entities                                                            (6,267 )            --             --
       Changes in operating assets and liabilities:
         Restricted cash                                                        253            (252 )          150
         Accounts receivable, net                                               385            (166 )          644
         Prepaid expenses and other assets                                     (957 )            34            234
         Accounts payable and accrued expenses                                    3            (473 )         (863 )
         Due to affiliates                                                     (288 )           308           (121 )
         Accrued drydock expenses                                                --             271          2,201
         Lease deposits and reserves for repairs                               (127 )          (217 )         (988 )
                                                                         --------------------------------------------
   Net cash provided by operating activities                                  4,801           8,176         11,310
                                                                         --------------------------------------------

   Investing activities:
     Proceeds from disposition of equipment                                   4,761           7,005         13,558
     Liquidation distributions from unconsolidated special purpose
         entities                                                            14,272              --             --
     Distributions from unconsolidated special purpose entities                 845              --             --
     Payments of acquisition-related fees to affiliate                           --              --           (534 )
     Payments for purchase of equipment                                          --              --        (11,856 )
     Payment for capital improvements                                            (8 )           (11 )         (727 )
     Decrease in restricted cash                                                 --                          7,378
     Payments of lease negotiation fees to affiliate                             --              --           (119 )
                                                                         --------------------------------------------
   Net cash provided by investing activities                                 19,870           6,994          7,700
                                                                         --------------------------------------------

   Financing activities:
     Proceeds from notes payable                                                 --              --         35,000
     Principal payments on notes payable                                    (14,000 )        (8,000 )      (35,000 )
     Payments of debt issuance costs                                             --              --           (236 )
     Cash distributions paid to Limited Partners                             (8,509 )       (11,922 )      (11,989 )
     Cash distributions paid to General Partner                                (448 )          (627 )         (631 )
     Repurchase of Depositary Units                                            (179 )          (345 )         (156 )
                                                                         --------------------------------------------
   Net cash used in financing activities                                    (23,136 )       (20,894 )      (13,012 )
                                                                         --------------------------------------------

   Cash and cash equivalents:
   Net increase (decrease) in cash and cash
       equivalents                                                            1,535          (5,724 )        5,998

   Cash and cash equivalents at beginning of year (See Note 4)                6,427          12,348          6,350
                                                                         --------------------------------------------
   Cash and cash equivalents at end of year                              $    7,962      $    6,624      $  12,348
                                                                         ============================================
   Supplemental information:
       Interest paid                                                     $    1,815      $    2,302      $   2,246
                                                                         ============================================
</TABLE>

                       See accompanying notes to financial
                                  statements.


<PAGE>


                          PLM EQUIPMENT GROWTH FUND II
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1996

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 in
         the  business  of owning  and  leasing  primarily  used  transportation
         equipment.  The Partnership commenced  significant  operations in June,
         1987. PLM Financial Services, Inc. (FSI) is the General Partner. 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, and in accordance  with the Partnership
         Agreement, the General Partner stopped reinvesting excess cash and will
         start  distributing  any  funds  remaining  to  the  Partners.   It  is
         anticipated that the Partnership  will be completely  liquidated by the
         end of 2000.

              FSI manages the affairs of the Partnership.  The net income (loss)
         and 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
         entitled to an 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.

              These 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  and
         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,  syndicates investor programs, sells
         transportation  equipment  to  investor  programs  and  third  parties,
         manages pools of  transportation  equipment  under  agreements with the
         investor   programs,   and  is  a  General  Partner  of  other  Limited
         Partnerships.

         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 equipment held for operating  leases is computed on the
         200% 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  12  years  for  all  other  types  of   equipment.   The
         depreciation  method changes to straight line when annual  depreciation
         expense using the straight line method  exceeds that  calculated by the
         200% declining  balance method.  Acquisition fees have been capitalized
         as part of the cost of the  equipment.  Major  expenditures  which  are
         expected to extend the useful lives or reduce future operating expenses
         of equipment are



<PAGE>


                          PLM EQUIPMENT GROWTH FUND II
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1996

1.       Basis of Presentation (continued)

         Depreciation and Amortization (continued)

         capitalized.  Lease  negotiation  fees are  amortized  over the initial
         equipment  lease term.  Debt issuance costs are amortized over the term
         of the loan for which they are paid.

         Transportation Equipment

         In March 1995, the Financial  Accounting  Standards Board (FASB) issued
         statement No. 121,  "Accounting for the Impairment of Long-Lived Assets
         and for Long-Lived  Assets to be Disposed Of" (SFAS 121). This standard
         is  effective  for  years   beginning  after  December  15,  1995.  The
         Partnership  adopted SFAS 121 during 1995,  the effect of which was not
         material  as the method  previously  employed  by the  Partnership  was
         consistent  with SFAS 121. In accordance with SFAS 121, the Partnership
         reviews  the  carrying  value of its  equipment  at least  annually  in
         relation  to  expected  future  market  conditions  for the  purpose of
         assessing  the  recoverability  of the recorded  amounts.  If projected
         future lease  revenue plus  residual  values are less than the carrying
         value of the equipment, a loss on revaluation is recorded.

         Investments in Unconsolidated Special Purpose Entities

         The  Partnership  has  interests  in  unconsolidated   special  purpose
         entities  which  own  transportation  equipment.  These  interests  are
         accounted for using the equity method.

              The  Partnership's  investment in  unconsolidated  special purpose
         entities  includes  acquisition and lease  negotiation fees paid by the
         Partnership to TEC. The Partnership's  equity interest in net income of
         unconsolidated  special purpose entities 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

         Maintenance costs are usually the obligation of the lessee. If they are
         not  covered by the  lessee,  they are charged  against  operations  as
         incurred.  To meet the  maintenance  obligations  of  certain  aircraft
         airframes  and engines,  escrow  accounts are prefunded by the lessees.
         Estimated costs  associated with marine vessel  drydockings,  which are
         included in repairs and maintenance expense, are accrued and charged to
         income  ratably over the period prior to such  drydocking.  The reserve
         accounts  are  included in the  balance  sheet as lessee  deposits  and
         reserve for repairs.

         Net Income (Loss) and Distributions per Depositary Unit

         The  net  income  (loss)  and  distributions  of  the  Partnership  are
         generally  allocated 95% to the Limited  Partners and 5% to the General
         Partner. During 1996, the General Partner received a special allocation
         of income of $313,000  ($815,000  in 1995 and  $963,000  in 1994).  The
         Limited  Partners' net income or loss and  distributions  are allocated
         among the  Limited  Partners  based on the number of  Depository  Units
         owned by each Limited  Partner.  Cash  distributions  are recorded when
         paid.  Cash  distributions  of $1,942,000  ($0.25 per Weighted  Average
         Depositary  Unit),  $3,127,000,  and  $3,146,000  ($0.40  per  Weighted
         Average Depositary Unit in 1995 and 1994) were declared on December 31,
         1996,  1995,  and 1994 and paid on February 15, 1997,  1996,  and 1995,
         respectively,  to the  unitholders  of record as of December  31, 1996,
         1995, and 1994, respectively. Cash distributions to investors in excess
         of net income are  considered  to  represent a return of capital.  Cash
         distributions  to Limited  Partners  of  $1,045,000,  $11,847,000,  and
         $11,989,000 in 1996, 1995, and 1994, respectively,  were deemed to be a
         return of capital.


<PAGE>


                          PLM EQUIPMENT GROWTH FUND II
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1996

1.       Basis of Presentation (continued)

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

         Reclassifications

         Certain  amounts in the 1995 and 1994  financial  statements  have been
         reclassified to conform with the 1996 presentation.

2.       General Partner and Transactions with 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  Unconsolidated  Special  Purpose
         Entities  (USPE)  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  $116,000  and
         $542,000,  were payable at December 31, 1996,  and 1995,  respectively.
         The  Partnership's  proportional  share of the USPE's  management  fees
         expenses during 1996 was $44,000.  The  Partnership  reimbursed FSI and
         its affiliates  $727,000,  $1,026,000,  and $732,000 for administrative
         and data processing  services performed on behalf of the Partnership in
         1996,  1995, and 1994,  respectively.  The  Partnership's  proportional
         share of the USPE's  administrative  and data  processing  expenses was
         $23,000  during 1996.  Debt  placement  fees are charged by the General
         Partner in an amount equal to 1% of the  Partnership's  borrowings less
         amounts  paid to third  parties in relation to the debt  placement.  No
         debt placement fees were paid or payable to FSI during 1996,  1995, and
         1994.

              The  Partnership  and USPE's paid lease  negotiation and equipment
         acquisition fees of $653,000 in 1994, and none in 1995 and 1996, to PLM
         Transportation  Equipment  Corporation  (TEC).  TEC is a  wholly  owned
         subsidiary of FSI.

              The  Partnership  paid  $87,000  and  $299,000  in 1995 and  1994,
         respectively, to Transportation Equipment Indemnity Company Ltd. (TEI),
         which provides marine insurance coverage and other insurance  brokerage
         services.  TEI is an affiliate of the General  Partner.  A  substantial
         portion  of  these   amounts  was  paid  to  third  party   reinsurance
         underwriters  or  placed  in risk  pools  managed  by TEI on  behalf of
         affiliated  partnerships and PLM International  which provide threshold
         coverages on marine vessel loss of hire and hull and machinery  damage.
         All pooling  arrangement  funds are either paid out to cover applicable
         losses or refunded pro rata by TEI.

              At  December  31,  1996,  approximately  37% of the  Partnership's
         trailer  equipment was held in rental yards operated by an affiliate of
         the  General  Partner.   Revenues  collected  under  short-term  rental
         agreements with the rental yards' customers are distributed  monthly to
         the owners of the related  equipment.  Direct expenses  associated with
         the equipment and an allocation of other direct  expenses of the rental
         yard operations are billed to the Partnership.

              The Partnership has an interest in certain  equipment for lease in
         conjunction   with  affiliated   partnerships   which  is  included  in
         investment in Unconsolidated  Special Purpose  Entities.  In 1996, this
         equipment included one commercial aircraft (50% owned).


<PAGE>


                          PLM EQUIPMENT GROWTH FUND II
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1996

3.       Equipment

         Owned  equipment  held for  operating  leases is  stated  at cost.  The
         components  of equipment at December 31, 1996 and 1995,  are as follows
         (in thousands):
<TABLE>
<CAPTION>

   Equipment held for operating leases                     1996               1995
                                                        -------------------------------

   <S>                                                   <C>              <C>        
   Rail equipment                                        $  18,183        $   19,747 
   Marine containers                                        10,640            13,399
   Aircraft                                                 32,860            37,902
   Trailers                                                 21,173            22,932
                                                        -------------------------------
                                                            82,856            93,980
   Less accumulated depreciation                           (62,114 )         (65,000 )
                                                        -------------------------------
   Net equipment                                         $  20,742        $   28,980 
                                                        ===============================
</TABLE>

              Revenues  are  earned by placing  the  equipment  under  operating
         leases which are generally  billed  monthly or  quarterly.  Some of the
         Partnership's   marine   containers   are   leased  to   operators   of
         utilization-type   leasing  pools  which  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,  1996,  all  equipment  in  the  Partnership
         portfolio was either  operating in short-term  rental  facilities or on
         lease,  except 3 railcars  and 71 marine  containers.  At December  31,
         1995, all equipment in the Partnership portfolio was either on lease or
         operating in PLM-affiliated short-term trailer rental facilities,  with
         the exception of an aircraft, a railcar and 115 marine containers.  The
         aggregate  carrying  value of equipment  off-lease was $0.2 million and
         $2.0 million at December 31, 1996 and 1995, respectively.

              During  1996,  the  Partnership  sold or  disposed  of 303  marine
         containers,  154  trailers,  47  railcars  and  one  aircraft,  with an
         aggregate net book value of $2.7 million, for proceeds of $4.8 million.
         During  1995,  the  Partnership   sold  or  disposed  of  2,278  marine
         containers,  11 trailers, 1 tractor,  and 1 railcar,  with an aggregate
         net book value of $2.6 million for proceeds of $3.5 million.

              The  Partnership  reduced the  carrying  value of one  aircraft by
         $667,000 during 1995 to its estimated net realizable value.

              All leases are being  accounted  for as operating  leases.  Future
         minimum rentals receivable under  noncancelable  leases at December 31,
         1996, during each of the next five years are approximately $5,352,000 -
         1997;  $3,810,000  - 1998;  $3,174,000 - 1999;  $1,216,000 - 2000;  and
         $515,000  -  2001  and  thereafter.   Contingent   rentals  based  upon
         utilization were approximately $1,293,000,  $2,047,000,  and $2,821,000
         in 1996, 1995 and 1994, respectively.



<PAGE>


                          PLM EQUIPMENT GROWTH FUND II
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1996

3.       Equipment (continued)

              The  Partnership  owns  certain  equipment  which  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 its  aircraft,  railcars  and trailers to
         lessees domiciled in six geographic  regions:  South Asia, Middle East,
         Canada,  United  States,  Asia,  and Europe.  Marine vessels and marine
         containers  are leased to  multiple  lessees in  different  regions who
         operate the marine  vessels and marine  containers  worldwide.  For the
         year ended December 31, 1996, the Partnership accounts for proportional
         interest  in  equipment   using  the  equity  method.   The  geographic
         information is grouped by domicile of the lessee as of and for the year
         ended December 31, 1996, 1995, and 1994 (in thousands):
<TABLE>
<CAPTION>

                                            Investments in
                                        Unconsolidated Special       Owned            Total Equipment
                                           Purpose Entities
                                     --------------------------------------------------------------------------
                                                 1996                 1996            1995            1994
                                     --------------------------------------------------------------------------
        <S>                          <C>                           <C>             <C>             <C>       
        Revenues:
        Various                      $            --               $   1,258       $   1,971       $   7,120 
        South Asia                              1,284                     --           2,192           2,660
        Middle East                               --                      --              --             584
        Canada                                    --                   1,765           1,760           1,800
        United States                             --                   8,516           9,591           8,635
        Asia                                      --                      --             630             756
        Europe                                    --                     840             686           1,696

                                     ==========================================================================
        Total revenues               $          1,284              $  12,379       $  16,830       $  23,251 
                                     ==========================================================================
</TABLE>

         The  following  table  sets  forth   identifiable   net  income  (loss)
         information by region for the year ended  December 31, 1996,  1995, and
         1994 (in thousands):
<TABLE>
<CAPTION>

                                     Investments in Unconsolidated
                                       Special Purpose Entities       Owned          Total Equipment
                                    ------------------------------------------------------------------------
                                                1996                   1996           1995          1994
                                    ------------------------------------------------------------------------
      <S>                           <C>                             <C>           <C>             <C>        
      Income (loss):
      Various                       $            --                 $    320      $    1,445      $ (1,639 ) 
      South Asia                               6,267                      --             (10)           18 
      Middle East                                --                       --              --         1,447
      Canada                                     --                      927             897           911
      United States                              --                    2,075           2,876         2,982
      Asia                                       --                      763             173           217
      Europe                                     --                      162            (728)         (468 )

                                    ------------------------------------------------------------------------
      Total identifiable net                   6,267                   4,247           4,653         3,468
         income
        Administrative and other                 --                   (2,328 )        (3,716)       (3,401 )
                                    ========================================================================
      Total net income              $          6,267                $  1,919      $      937      $     67  
                                    ========================================================================
</TABLE>



<PAGE>


                          PLM EQUIPMENT GROWTH FUND II
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1996

3.       Equipment (continued)

         The net book value of owned assets at December 31, 1996,  and 1995, and
         the net investment in the  unconsolidated  special purpose  entities at
         December 31, 1996 and 1995, are as follows (in thousands):
<TABLE>
<CAPTION>

                                  Investment in                                    Total
                              Unconsolidated Special             Owned           Equipment
                                 Purpose Entities
                            -----------------------------------------------------------------
                              1996         1995          1996        1995          1994
                          -----------------------------------------------------------------

     <S>                  <C>          <C>           <C>         <C>           <C>       
     Various              $        --  $        --   $    2,748  $     3,951   $    9,706
     Canada                        --           --        2,215        1,912        2,215
     United States                 --           --       14,538       19,632       23,378
     Asia                          --           --           --        1,641        2,046
     South Asia                 1,665       10,515           --           --        2,665
     Middle East                   --           --           --           --        9,669
     Europe                        --           --        1,241        1,844        4,433
                           =================================================================
     Total Equipment      $     1,665  $    10,515   $   20,742  $    28,980   $   54,112   
                           =================================================================
</TABLE>

         There were no lessees that  accounted for 10% or more of total revenues
for 1996, 1995, and 1994.

4.       Investment in Unconsolidated Special Purpose Entities

         Prior to 1996,  the  Partnership  accounted  for  operating  activities
         associated  with  joint  ownership  of   transportation   equipment  as
         undivided  interests,  including its proportionate  share of each asset
         with similar  wholly-owned  assets in its financial  statements.  Under
         generally  accepted   accounting   principles,   the  effects  of  such
         activities,  if material, should be reported using the equity method of
         accounting.  Therefore,  effective  January  1, 1996,  the  Partnership
         adopted  the  equity  method  to  account  for its  investment  in such
         jointly-held assets.

              The principle  differences  between the previous accounting method
         and the equity method relate to the presentation of activities relating
         to these  assets in the  statement  of  operations.  Under the previous
         method, the Partnership's  income statement reflected its proportionate
         share of each individual item of revenue and expense.  Under the equity
         method  of  accounting,   the  Partnership's   proportionate  share  is
         presented  as a single  net  amount,  equity  in net  income  (loss) of
         unconsolidated  special purpose  entities.  Accordingly,  the effect of
         adopting the equity  method of accounting  has no cumulative  effect on
         previously  reported  partner's  capital  or on the  Partnership's  net
         income  (loss)  for the  period of  adoption.  Because  the  effects on
         previously issued financial statements of applying the equity method of
         accounting to investments in jointly-owned assets are not considered to
         be material to such financial  statements taken as a whole,  previously
         issued financial  statements have not been restated.  However,  certain
         items have been  reclassified in the previously issued balance sheet to
         conform to the current period presentation. The beginning cash and cash
         equivalents  for  1996 is  different  from  the  ending  cash  and cash
         equivalents   for  1995  on   statements  of  cash  flows  due  to  the
         reclassification.



<PAGE>



                          PLM EQUIPMENT GROWTH FUND II
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1996

4.       Investment in Unconsolidated Special Purpose Entities (continued)

         The net investment in unconsolidated  special purpose entities includes
         the  following   jointly-owned   equipment   (and  related  assets  and
         liabilities) (in thousands):
<TABLE>
<CAPTION>

                                                          December 31,        December 31,
                                                              1996                1995
                                                        -------------------------------------

<S>                                                        <C>                 <C>      
50% interest in a trust owning Boeing 737-200A
   aircraft                                                $   1,665           $   2,365
55% interest in a an entity owning mobile offshore
   drilling unit                                                  --               8,150
                                                         ------------------------------------
Investment in unconsolidated special purpose
   entities                                                $   1,665           $  10,515
                                                         ====================================
</TABLE>

              During the year ended December 31, 1996, the General  Partner sold
         the asset related to the  Partnership's 55% interest in an entity which
         owns a mobile  offshore  drilling  unit,  included  in  "Investment  in
         Unconsolidated Special Purpose Entities," with a net book value of $7.2
         million  for  proceeds  of $14.3  million.  For the same  period  ended
         December 31, 1995,  the General  Partner sold the assets related to the
         Partnership's  50% owned DC-9  aircraft  and 50% owned  marine  vessel,
         included in "Investment in  Unconsolidated  Special Purpose  Entities,"
         with an  aggregate  net book value of $3.2  million and unused  drydock
         reserves of $0.3 million, for proceeds of $3.5 million.

              The Partnership's 50% investment in a commercial aircraft included
         in  "Investments  in  unconsolidated   special  purpose  entities"  was
         off-lease at December 31, 1996.

              The  Partnership  received  liquidating   distributions  from  the
         Unconsolidated Special Purpose Entities during the third quarter.

              The following summarizes the financial information for the special
         purpose entities and the Company's  interests therein as of and for the
         year ended December 31, 1996 (in thousands):
<TABLE>
<CAPTION>

                                                            Net Interest of
                                           Total Numbers      Partnership
                                        --------------------------------------

<S>                                               <C>                 <C>   
Net Assets                                        $3,354              $1,665
Lease Revenues                                     2,418               1,284
Net Income                                        11,295               6,267
</TABLE>

5.      Other Assets

         Included in other assets is a spare engine which was purchased in 1996.
         This engine will replace an existing  engine in need of overhaul on one
         of the Partnership's  Boeing 737-200  commercial  aircraft in 1997. The
         old engine will be sold when removed from service.




<PAGE>


                          PLM EQUIPMENT GROWTH FUND II
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1996

6.      Notes Payable
<TABLE>
<CAPTION>

                                                                                         1996            1995
                                                                                    --------------------------------

          <S>                                                                           <C>             <C>        
          Notes  payable  to  insurance  companies  under  a  $35  million  Loan
          facility,  bearing  interest  at LIBOR + 1.55%  per  annum  (7.12%  at
          December 31, 1996, and 7.24% at December 31,
          1995) payable quarterly in arrears                                            $13,000,000     $27,000,000
                                                                                    --------------------------------

          Total notes payable                                                           $13,000,000     $27,000,000
                                                                                    ================================
</TABLE>

              On March 31, 1994, the Partnership  completed a refinancing of its
         $35 million bank loan which was  originally  due on September 30, 1995.
         The new loan facility is unsecured and nonrecourse,  limits  additional
         borrowings,  and specifies  covenants  related to collateral  coverage,
         fixed charge coverage,  ratios for market value, and composition of the
         equipment owned by the Partnership. The loan facility bears interest at
         LIBOR + 1.55%  per annum  (7.12% at  December  31,  1996,  and 7.24% at
         December  31, 1995) and is payable  quarterly in arrears.  Principal is
         payable in annual  installments of $4 million due on March 31, 1996 and
         1997, $9 million on March 31, 1998 and 1999,  and a final payment of $9
         million on March 31,  2000.  The  Partnership  paid a  facility  fee of
         $236,000 to the lender in connection with this credit  facility.  As of
         December  31,  1996,  the  Partnership   prepaid   $22,000,000  of  the
         outstanding note payable  representing the principal payments due March
         31, 1996, 1997, 1998 and a portion of 1999.

              The  General  Partner  believes  that the book  value of the notes
         payable approximates fair value due to its variable interest rate.

              In May 1996,  the  General  Partner  revised  its short  term loan
         facility (the  "Committed  Bridge  Facility") and PLM Equipment  Growth
         Fund II is no longer included as a borrower.

7.       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,  1996,  there were  temporary  differences  of
         approximately  $12,870,000  between the  financial  statement  carrying
         values of certain  assets and  liabilities  and the income tax basis of
         such  assets  and  liabilities,  primarily  due to the  differences  in
         depreciation  methods  and in the  method  of  providing  reserves  for
         repairs.

8.       Repurchase of Depositary Units

         On  December  28,  1992,  the  Partnership  engaged  in  a  program  to
         repurchase up to 200,000 Depositary Units. In 1996, the Partnership had
         purchased  and  canceled  44,500  Depositary  Units  at a cost  of $0.2
         million.  As of December 31, 1996,  the  Partnership  had  cumulatively
         repurchased 117,800 Depositary Units at a cost of $0.8 million.




<PAGE>


                          PLM EQUIPMENT GROWTH FUND II
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1996

9.       Delisting of Partnership Units

         The General Partner  delisted the  Partnership's  depositary units from
         the  American  Stock  Exchange  (AMEX) under the symbol GFY on April 8,
         1996.  The last day for trading on the AMEX was March 22,  1996.  Under
         the Internal Revenue Code (the Code), the Partnership was classified as
         a Publicly  Traded  Partnership.  The Code treats all  Publicly  Traded
         Partnerships  as  corporations  if they remain  publicly  traded  after
         December 31, 1997. Treating the Partnership as a corporation would mean
         the  Partnership  itself  would  become a taxable,  rather than a "flow
         through"  entity.  As a taxable  entity,  the income of the Partnership
         would have become subject to federal  taxation at both the  partnership
         level and at the  investor  level to the extent that income  would have
         become  distributed to an investor.  In addition,  the General  Partner
         believed that the trading price of the Depositary Units would have been
         distorted  when the  Partnership  began  the final  liquidation  of the
         underlying  equipment  portfolio.  In order to  avoid  taxation  of the
         Partnership as a corporation and to prevent  unfairness to Unitholders,
         the General Partner  delisted the  Partnership's  Depositary Units from
         the  AMEX.  While  the  Partnership's  Depositary  Units  are no longer
         publicly  traded on a national  stock  exchange,  the  General  Partner
         continues to manage the  equipment of the  Partnership  and prepare and
         distribute  quarterly  and  annual  reports  and Forms 10-Q and 10-K in
         accordance with the Securities and Exchange Commission requirements. In
         addition,  the  General  Partner  continues  to provide  pertinent  tax
         reporting  forms and  information to  Unitholders.  The General Partner
         anticipates an informal market for the Partnership's  units may develop
         in the secondary marketplace similar to that which currently exists for
         non-publicly traded partnerships.


<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.                                      42 - 44





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