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, 1997.

[ ]       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]

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

       Class                                 Outstanding at March 24, 1998
       -----                                 -----------------------------
Limited Partnership Depositary Units:                  7,381,805
General Partnership Units:                                     1

     Aggregate market value of voting stock:  N/A

     An index of exhibits filed with this Form 10-K is located at page 40.
     Total number of pages in this report:  43.


<PAGE>



                                                      PART I

ITEM 1.           BUSINESS

(A)      Background

On April 2, 1987, PLM Financial Services,  Inc. (FSI or the General Partner),  a
wholly-owned  subsidiary of PLM International,  Inc. (PLM International or PLM),
filed a  Registration  Statement  on Form S-1 with the  Securities  and Exchange
Commission  with respect to a proposed  offering of 7,500,000  depositary  units
(the units) in PLM Equipment  Growth Fund II, a California  limited  partnership
(the Partnership,  the registrant, or EGF II). The Partnership's offering became
effective on June 5, 1987.  FSI, as General  Partner,  owns a 5% interest in the
Partnership.  The Partnership 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:

     (1) 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;

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

     (3) to selectively  sell equipment when the General Partner  believes that,
due to market conditions,  market prices for equipment exceed inherent equipment
values or that expected future benefits from 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
(net  cash   provided  by   operating   activities   plus   distributions   from
unconsolidated  special-purpose  entities),  are used for  distributions  to the
partners or for repayment of outstanding debt;

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

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

As of December 31, 1997, there were 7,381,805 depositary units outstanding.

     It is anticipated that the Partnership will be completely liquidated by the
end of the year 2000.  Since the beginning of 1996, the  Partnership has been in
its holding phase with the limited partnership agreement prohibiting the General
Partner from reinvesting  cash flows and surplus funds in equipment.  All future
cash  flows  and  surplus  funds,  if any,  are to be  used  to  meet  operating
requirements,  for repayment of the Partnership's debt, and for distributions to
partners.



                                                      


<PAGE>



Table 1, below, lists the equipment and the cost of equipment in the Partnership
portfolio and the investments in unconsolidated  special-purpose  entities as of
December 31, 1997 (in thousands of dollars):

                                     TABLE 1
<TABLE>
<CAPTION>

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

Equipment held for operating leases:



    <S>      <C>                                                  <C>                                      <C>        
      1      737-200 Stage II commercial aircraft                 Boeing                                   $     7,854
    407      Refrigerated marine containers                       Various                                        8,308
    116      Refrigerated trailers                                Various                                        3,682
    162      Dry trailers                                         Fruehauf                                       2,072
    751      Dry piggyback trailers                               Various                                       11,372
      2      Refrigerated piggyback trailers                      Great Dane                                        18
    458      Box cars                                             Various                                        7,777
    180      Tank cars                                            Various                                        4,741
     27      Covered hopper cars                                  ACF Industries                                   424
    193      Mill gondolas                                        Various                                        4,459
                                                                                                         ----------------

                 Total equipment                                                                           $    50,707<F1>
                                                                                                         ================


Equipment held for sale:


      1      727-200 Stage II commercial aircraft                 Boeing                                   $    10,973
     44      Covered hopper cars                                  ACF Industries                                   689


                 Total equipment held for sale                                                             $    11,662<F1>
                                                                                                         ================

Investments in
unconsolidated special-purpose entities:



    50%      737-200 Stage II commercial aircraft                 Boeing                                   $     8,046<F2>
    23%      727-200 Stage III commercial aircraft                Boeing                                         1,439<F3>

                 Total investments                                                                         $     9,485<F1>
<FN>

<F1> Includes proceeds from capital contributions,  undistributed cash flow from
     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 (TEC), a
     wholly-owned  subsidiary of FSI. All  equipment  was used  equipment at the
     time of purchase. 

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

<F3> Jointly owned:  EGF II (23%) and two affiliated programs.

</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 that include equipment owned by unaffiliated
parties.  In such instances,  revenues received by the Partnership  consist of a
specified   percentage  of  revenues  generated  by  leasing  the  equipment  to
sublessees,  after  deducting  certain direct  operating  expenses of the pooled
equipment.  Rents for  railcars  are based on mileage  traveled or a fixed rate;
rents for all other equipment are based on fixed rates.

As of December 31, 1997, 27% 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  doing business as PLM Trailer Leasing.
Revenues  collected under  short-term  rental  agreements with the rental yards'
customers  are  credited to the owners of the  related  equipment  as  received.
Direct  expenses  associated  with the  equipment  are  charged  directly to the
Partnership. An allocation of indirect expenses of the rental yard operations is
charged to the Partnership  monthly.  


<PAGE>



The lessees of the  equipment  include but are not  limited  to:  Sabre  Airways
Limited,  Transamerica Leasing, Union Pacific Railroad Company, Canadian Pacific
Railway Company,  and Elgin, Jolieit & Eastern Railway. As of December 31, 1997,
all of the equipment was either operating in short-term  rental  facilities,  on
lease, or under other contractual agreements,  except for 3 railcars, 168 marine
containers,  and the  Partnership's 50% and 23% investments in entities that own
commercial aircraft, which had a total net book value of $3.1 million.

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

(C)     Competition

(1)     Operating Leases versus Full Payout Leases

Generally,  the equipment owned 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 an  operating  lease  need not be  capitalized  on a  lessee's
balance sheet.

The Partnership encounters considerable  competition from lessors utilizing full
payout  leases on new  equipment.  Full payout leases are leases that 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,  which may put the Partnership 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 that
the  Partnership  cannot  offer,  such  as  specialized   maintenance   services
(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,  General Electric Capital Aviation Services Corporation,  and other
limited partnerships that lease the same types of equipment.

(D)     Demand

The Partnership has investments in transportation-related  capital equipment and
relocatable  environments.  Types  of  transportation  equipment  owned  by  the
Partnership include aircraft,  railcars, and trailers.  Relocatable environments
are  functionally   self-contained   transportable  equipment,  such  as  marine
containers.  Except for those  aircraft  leased to passenger air  carriers,  the
Partnership's  equipment is used to transport materials and commodities,  rather
than people.


                                                      


<PAGE>



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

(1)      Commercial Aircraft

The commercial  aircraft  market  experienced  another good year in 1997, with a
third consecutive year of profits by the world's airlines.  Airline  managements
have continued to emphasize cost reductions and a moderate increase in capacity.
However,  even the  limited  volume of new  aircraft  deliveries  has caused the
market to change from being in  equilibrium  at the end of 1996 to having excess
supply.  This  market  imbalance  is expected  to  continue,  with the number of
surplus aircraft  increasing from  approximately 350 aircraft at the end of 1996
to an estimated 600 aircraft by the end of the decade.

The changes  taking  place in the  commercial  aircraft  market also reflect the
impact of noise  legislation  enacted in the United  States and Europe.  Between
1997 and the end of  2002,  approximately  1,400  Stage II  aircraft  (Stage  II
aircraft are aircraft  that have been shown to comply with Stage II noise levels
prescribed  in Federal  Aviation  Regulation  section  C36.5) are forecast to be
retired, primarily due to noncompliance with Stage III noise requirements (Stage
III aircraft  are  aircraft  that have been shown to comply with Stage III noise
levels prescribed in Federal Aviation Regulation section C36.5). This represents
about 41% of the Stage II aircraft now in commercial service worldwide. By 2002,
about  2,000  (59%) of the  current  fleet of Stage II  aircraft  will remain in
operational service outside of Stage III-legislated  regions or as aircraft that
have had hushkits  installed so that engine noise levels meet the quieter  Stage
III requirements.  The cost to install a hushkit is approximately  $1.5 million,
depending on the type of  aircraft.  All aircraft  currently  manufactured  meet
Stage III requirements.

The  Partnership  owns or holds  investments  in three Stage II aircraft and one
Stage III aircraft.  The Partnership  does not intend to install hushkits on its
Stage  II  aircraft,   but  rather  intends  to  lease  them  outside  of  Stage
III-legislated regions or sell them by the end of the year 2000.

Marine Containers

The marine  container  market began 1997 with a continuation  of the weakness in
industrywide  container utilization and rate pressures that had been experienced
in 1996. A reversal of this trend began in early spring and continued throughout
the remainder of 1997, as utilization  returned to the 80% range. Per diem rates
did not  strengthen,  however,  as  customers  resisted  attempts to raise daily
rental rates.

Industrywide  consolidation continued in 1997. Late in the year, Genstar, one of
the world's largest container leasing  companies,  announced that it had reached
an agreement  with  SeaContainers,  another  large  container  leasing  company,
whereby  SeaContainers  will take over the management of Genstar's  fleet.  Long
term, such industrywide  consolidation  should bring more rationalization to the
container leasing market and result in both higher fleetwide utilization and per
diem rates.

(3)      Railcars

(a)      Pressurized Tank Cars

Pressurized  tank cars are used  primarily in the  petrochemical  and fertilizer
industries  to transport  liquefied  petroleum gas and  anhydrous  ammonia.  The
demand for natural gas is  anticipated  to grow through 1999, as the  developing
world,  former Communist  countries,  and the industrialized  world all increase
their energy  consumption.  World demand for fertilizer is expected to increase,
based on an awareness of the necessity of fertilizing crops and improving diets,
the shortage of farmland, and population growth in developing nations.

The utilization  rate on the  Partnership's  fleet of pressurized  tank cars was
over 98% during 1997. Based on ongoing renewals with current lessees, demand for
these cars continues to be strong and is projected to remain so during 1998.

                                                      


<PAGE>



(b)      General Purpose (Nonpressurized) 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.  Chemical
carloadings  for the  first 45 weeks of 1997  were up 4%,  compared  to the same
period  in 1996.  The  demand  for  petroleum  is  anticipated  to grow,  as the
developing  world,  former Communist  countries,  and the  industrialized  world
increase energy consumption.

The demand for general purpose tank cars in the Partnership's fleet has remained
strong over the last three years, with utilization remaining above 98%.

(c)      Covered Hopper (Grain) Cars

Industrywide,  the size of the covered  hopper car fleet has  increased  only 9%
over the last 10 years,  from a total of 299,172 cars in 1985 to 325,882 cars in
1995.  Covered  hopper cars  accounted for 30% of all new railcar  deliveries in
1995 and 50% of new  deliveries  in 1996.  During 1997,  there was some downward
pressure on rental rates,  as demand for covered hopper cars softened  somewhat.
Grain carloadings decreased 2% compared to the same period in 1996.

All 71 of the Partnership's covered hopper cars were on lease as of December 31,
1997.

(d)      Box Cars

Box cars,  such as the  Partnership  owns, are primarily used to transport paper
and paper products.  Carloadings  for paper and paper products were  essentially
flat during the first 45 weeks of 1997, compared to loadings for the same period
in 1996.

All 458 of the  Partnership's  box cars transport paper and paper goods, and are
currently on lease.

(e)      Mill Gondolas

Mill  gondolas are typically  used to haul scrap steel from  processors to steel
mills throughout the United States.  Recycled scrap steel constitutes nearly all
of the raw material used by small steel mills, called minimills. For example, in
1960 minimills  produced only 8% of the total steel output in the United States,
but by 1996 that figure had reached  42%.  The overall  stability  of the United
States  economy  and  relatively   steady  levels  of  steel   production   have
strengthened  demand for mill gondolas over the last year. In 1997, the national
gondola fleet increased from 90,583 to 91,351 cars, a change consistent with the
anticipated continuing expansion of demand for steel mill products through 2000,
averaging 2.5% to 3% a year.

All 193 of the Partnership's gondolas are operating on net lease or full-service
leases until 1999.

(4)      Trailers

(a)      Intermodal (Piggyback) Trailers

In all intermodal equipment areas, 1997 was a remarkably strong year. The United
States  inventory of  intermodal  equipment was  approximately  163,900 units in
1997, divided between about 55% intermodal trailers and 45% domestic containers.
Trailer loadings increased  approximately 4% in 1997 due to a robust economy and
a continuing  shortage of drivers in over-the-road  markets.  The expectation is
for flat to slightly  declining  utilization of intermodal trailer fleets in the
near future,  with 1998 trailer loadings  predicted not to exceed 1997 levels by
more than 2%.

(b)      Over-the-Road Dry Trailers

The United States over-the-road dry trailer market began to recover in mid-1997,
as an oversupply of equipment from 1996 subsided. The strong domestic economy, a
continuing focus on integrated  logistics  planning by American  companies,  and
numerous  service  problems on Class I railroads  contributed to the recovery in
the dry van market. In addition,  federal  regulations  requiring antilock brake
systems on all new trailers,  effective in March 1998, has helped  stimulate new
trailer production, and the

                                                      


<PAGE>



market is anticipated to remain strong in the near future. There continues to be
much consolidation of the trailer leasing industry in North America,  as the two
largest  lessors of dry vans now  control  over 60% of the  market.  The reduced
level of competition, coupled with anticipated continued strong utilization, may
lead to an increase in rates.

(c)      Over-the-Road Refrigerated Trailers

The  temperature-controlled  over-the-road  trailer  market  recovered  in 1997;
freight levels improved and equipment oversupply was reduced as industry players
actively  retired older  trailers and  consolidated  fleets.  Most  refrigerated
carriers posted revenue growth of between 2% and 5% in 1997, and accordingly are
planning  fleet  upgrades.   In  addition,   with   refrigeration   and  trailer
technologies   changing  rapidly  and  industry  regulations  becoming  tighter,
trucking companies are managing their refrigerated fleets more effectively.

As a  result  of  these  changes  in  the  refrigerated  trailer  market,  it is
anticipated that trucking  companies will utilize short-term trailer leases more
frequently  to  supplement  their  fleets.  Such  a  trend  should  benefit  the
Partnership, which generally leases equipment of this type on a short-term basis
from rental yards owned and operated by a PLM International subsidiary.

(E)     Government Regulations

The use,  maintenance,  and  ownership  of equipment  are  regulated by federal,
state, local, 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  that 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 United
States  that do not meet  certain  noise,  aging,  and  corrosion  criteria.  In
addition,  under U.S. Federal Aviation Regulations,  after December 31, 1999, no
person shall operate an aircraft to or from any airport in the contiguous United
States  unless  that  airplane  has been  shown to comply  with  Stage III noise
levels.  The  Partnership  has  Stage II  aircraft  that do not meet  Stage  III
requirements. The Partnership intends to sell its Stage II aircraft before 2000.

     (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 and
over-the-road refrigerated trailers.

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

As of December  31,  1997,  the  Partnership  was in  compliance  with the above
governmental  regulations.  Typically,  costs  related  to  extensive  equipment
modifications to meet government regulations are passed on to the lessee of that
equipment.


                                                      


<PAGE>



ITEM 2.           PROPERTIES

The Partnership  neither owns nor leases any properties other than the equipment
it has purchased for leasing purposes.  As of December 31, 1997, the Partnership
owned a portfolio of transportation equipment and investments in equipment owned
by USPEs, 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

On February  26,  1998,  Pan  American  Airways  Corporation  (Pan Am) filed for
protection under Chapter 11 of the United States Bankruptcy Code in the District
Court of the Southern  District of Florida (Case No.  98-11618-BKC-AJC).  Pan Am
was the lessee of a 727-200 owned by the  Partnership.  According to its amended
terms,  the aircraft  lease was  scheduled to  terminate in December  1999.  The
Bankruptcy Court granted the lessee motion to reject the lease,  effective March
20, 1998.  The General  Partner has  reposessed the aircraft and intends to sell
it. The General Partner will continue to pursue  remedies  against the debtor in
the bankruptcy proceedings.

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, 1997.


                                     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) on April 8, 1996. The last day for trading on the
AMEX was March 22,  1996.  Under the  Internal  Revenue  Code (the Code) then in
effect,  the Partnership was classified as a publicly  traded  partnership.  The
Code treated all publicly  traded  partnerships as corporations if they remained
publicly  traded  after  December  31,  1997.  Treating  the  Partnership  as  a
corporation  would have meant that the  Partnership  itself  would have 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.

As of March 11, 1998, there were 7,381,805  depositary units outstanding.  There
are approximately 8,800 depositary  unitholders of record as of the date of this
report.


                                                      


<PAGE>



Several   secondary   exchanges   facilitate  sales  and  purchases  of  limited
partnership units.  Secondary markets are characterized as having few buyers for
limited  partnership  interests  and  therefore  are  generally  viewed as being
inefficient  vehicles for the sale of partnership  units.  There is presently no
public market for the units and none is likely to develop.  To prevent the units
from being  considered  publicly  traded and  thereby to avoid  taxation  of the
Partnership as an association treated as a corporation under the Code, the units
will not be transferred without the consent of the General Partner, which may be
withheld in its  absolute  discretion.  The General  Partner  intends to monitor
transfers  of units in an effort to ensure  that they do not  exceed  the number
permitted by certain safe harbor provisions  promulgated by the Internal Revenue
Service.  A transfer may be prohibited if the intended  transferee is not a U.S.
citizen or if the transfer would cause any portion of the units to be treated as
plan assets.

Pursuant to the terms of the limited 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 the 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. The General Partner is the sole holder
of such interests.

Table 2, below, sets forth the high and low reported prices of the Partnership's
depositary   units  for  1996,  as  reported  by  the  AMEX,  as  well  as  cash
distributions paid per depositary unit.

                                     TABLE 2
<TABLE>
<CAPTION>

                                                                        Cash Distributions Paid Per
                                                                              Depositary
                                                                                 Unit
                                                     Reported Trade
                                                        Prices
                                            ---------------------------------------------

Calendar Period                                  High             Low

1996


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


</TABLE>

The  General  Partner  delisted  the  Partnership's  depositary  units  from the
American Stock Exchange (AMEX),  which had traded under the symbol GFY. The last
day for trading on the AMEX was March 22, 1996.

The Partnership engaged in a plan to repurchase up to 250,000 of the outstanding
depositary  units.  During 1995, the Partnership  repurchased  46,400 depositary
units at a total cost of $0.3 million.  During 1996, the Partnership repurchased
44,500  depositary  units  at a  total  cost  of  $0.2  million.  There  were no
repurchases  of  depositary  units  in  1997.  As  of  December  31,  1997,  the
Partnership had purchased and canceled a cumulative total of 117,800  depositary
units at a cost of $0.8  million.  The General  Partner does not plan any future
repurchase of depositary units on behalf of the Partnership.



                                                      


<PAGE>



ITEM 6.               SELECTED FINANCIAL DATA

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

                                                      TABLE 3

                        For the years ended December 31,
   (in thousands of dollars, except weighted-average depositary unit amounts)
<TABLE>
<CAPTION>

                                                 1997            1996             1995              1994            1993
                                            -----------------------------------------------------------------------------------

<S>                                           <C>            <C>              <C>               <C>             <C>        
Operating results:
  Total revenues                              $  12,748      $   14,819       $    18,983       $   26,326      $    36,901
  Net gain on disposition of equipment            1,922           2,085             1,485            2,347            6,704
  Loss on revaluation of equipment                   --              --              (667)            (887 )           (161)
  Equity in net income (loss) of
    unconsolidated special-purpose
    entities                                       (519)          6,267                --               --               --
  Net income                                      2,695           8,186               937               67            5,596

At year-end:
  Total assets                                $  18,631      $   33,595       $    48,957       $   69,485      $    84,206
  Total liabilities                               4,906          16,349            30,761           39,332           41,344
  Notes payable                                   2,500          13,000            27,000           35,000           35,000

Cash distribution                             $   6,216      $    8,957       $    12,549       $   12,620      $    12,665

Cash distribution representing a
    return of capital                         $   3,709      $    1,045       $    11,847       $   11,989      $     7,563

Per weighted-average depositary unit:

Net income (loss)                             $    0.301     $     1.01<F1>   $      0.01<F1>   $    (0.12)<F1> $      0.60<F1>

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

Cash distribution representing a
    return of capital                         $    0.50      $     0.14       $      1.59       $     1.60      $      1.01


<FN>


<F1> After  reduction of income of $364 ($0.05 per  weighted-average  depositary
     unit) in 1997, $313 ($0.04 per  weighted-average  depositary unit) in 1996,
     $815 ($0.11 per weighted-average  depositary unit) in 1995, $963 ($0.13 per
     weighted-average   depositary   unit)  in  1994,   and  $845   ($0.11   per
     weighted-average  depositary unit) in 1993 representing special allocations
     to the General Partner resulting from an amendment to the 1 1

</FN>

</TABLE>
                                                      


<PAGE>



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

(A)     Introduction

Management's  discussion  and  analysis of  financial  condition  and results of
operations  relates to the financial  statements of PLM Equipment Growth Fund II
(the Partnership). The following discussion and analysis of operations 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.

(B)      Results of Operations -- Factors Affecting Performance

(1)      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 1997 primarily in
its aircraft, trailer, and marine container portfolios.

     (a) Aircraft:  Aircraft contribution  decreased from 1996 to 1997 due to an
aircraft in which the  Partnership  owns a 50% interest  remaining off lease for
all of 1997. This aircraft was on lease until the third quarter of 1996.

     (b) Trailers:  The majority of the Partnership's trailer portfolio operates
in  short-term  rental  facilities  or with  short-line  railroad  systems.  The
relatively  short  duration  of most  leases  in these  operations  exposes  the
trailers to considerable re-leasing activity.

     (c) Marine Containers:  The majority of the Partnership's  marine container
portfolio  is  operated in  utilization-based  leasing  pools and,  as such,  is
exposed to considerable  repricing activity.  The Partnership's marine container
contributions  declined  from 1996 to 1997 due to the  disposition  of equipment
during 1997.

 (2)     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  or legal fees. The  Partnership  experienced the
following in 1997:

     (a)  Liquidations:  During 1997, the General Partner  received  proceeds of
$5.1  million  from the  liquidation  or sale of  marine  containers,  aircraft,
railcars,  and trailers  owned by the  Partnership.  These proceeds and proceeds
from  1996  sales  were  used  to  prepay  $10.5  million  of the  Partnership's
outstanding  debt in  1997.  The net  result  of 1997  dispositions  has  been a
reduction  in  the  cost  basis  of the  Partnership's  equipment  portfolio  of
approximately  $20.5  million.  Since the  Partnership  may no  longer  purchase
additional  equipment,  these disposals  represent a permanent  reduction in the
Partnership's equipment portfolio.

     (b)  Nonperforming  Lessees:  In 1996, the General  Partner  repossessed an
aircraft owned by a trust in which the  Partnership  has a 50% interest,  due to
the  lessee's  inability  to pay  for  outstanding  receivables.  This  aircraft
remained off lease  throughout 1997 and is currently being marketed for sale. In
addition,  another aircraft lessee was unable to continue paying its obligations
to the Partnership, and as payment for the past due receivables, the Partnership
received a 23%  interest  in a trust that owns a Boeing 727  aircraft.  The fair
market value of the Partnership's interest in this aircraft approximated its

                                                      


<PAGE>



outstanding  receivable from the lessee.  This plane was sold at its approximate
net book value in January 1998. In addition,  another  aircraft lessee filed for
bankruptcy in 1998. The General  Partner fully reserved the accounts  receivable
outstanding  from this lessee as of December  31, 1997.  The General  Partner is
taking action to regain  possession of this aircraft.  Other equipment,  such as
railcars,  trailers,  and  some  of the  marine  containers,  experienced  minor
nonperforming issues that had no significant impact on the Partnership.

(3)      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, since the
beginning  of 1996 the  Partnership  may no longer  reinvest in  equipment.  The
Partnership  will  continue to operate for an additional  three years,  and then
begin an orderly liquidation over an anticipated two-year period.

 (4)     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. No reductions were required to the carrying
values of equipment in 1996 or 1997.

As of December 31, 1997, the General  Partner  estimated the current fair market
value of the Partnership's equipment portfolio, including equipment owned by the
unconsolidated special-purpose entities, to be approximately $38.1 million.

(C)      Financial Condition -- Capital Resources and Liquidity

The General Partner purchased the Partnership's initial equipment portfolio with
capital raised from its initial equity offering and permanent debt financing. No
further  capital  contributions  from original  partners are permitted under the
terms of the limited partnership agreement.  The Partnership's total outstanding
indebtedness  has been reduced from its original balance of $35.0 million to its
current level of $2.5 million.  The  Partnership  intends to repay the remaining
balance  outstanding  on its notes  payable in the first  quarter  of 1998.  The
Partnership relies on operating cash flow to meet its operating  obligations and
make cash distributions to the limited partners.

For the year ended  December  31, 1997,  the  Partnership  generated  sufficient
operating   cash  (net  cash   provided  by  operating   activities   plus  cash
distributions  from  unconsolidated   special-purpose   entities)  to  meet  its
operating obligations,  but used undistributed available cash from prior periods
of approximately  $2.0 million to maintain the level of distributions  (total of
$6.2 million in 1997) to the partners.

As of  the  third  quarter  of  1997,  the  General  Partner  reduced  the  cash
distribution  rate  from an annual  rate of 5% to an  annual  rate of 3% to more
closely reflect current and expected net cash flows from  operations.  Equipment
sales have reduced  overall lease revenues in the Partnership to the point where
reductions in distribution  levels were necessary.  During the year, the General
Partner sold aircraft,  marine containers,  railcars,  and trailers owned by the
Partnership  and used these proceeds and proceeds from 1996  equipment  sales to
prepay $10.5 million in principal payments on its outstanding debt.


                                                      


<PAGE>



The  General  Partner  has  remaining  notes  payable of $2.5  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  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
either prior to or 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.

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

(1)      Comparison of the Partnership's Operating Results for the Years 
         Ended 1997 and 1996

(a)      Owned Equipment Operations

Lease  revenues  less direct  expenses  (defined as repair and  maintenance  and
asset-specific  insurance expenses) on owned equipment decreased during the year
ended 1997 when compared to 1996.  The following  table  presents lease revenues
less direct expenses by owned equipment type (in thousands of dollars):

<TABLE>
<CAPTION>

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

</TABLE>


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

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

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

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

(b)  Indirect Expenses Related to Owned Equipment Operations

Total  indirect  expenses of $7.5 million for 1997  decreased from $10.6 million
for 1996. Significant variances are explained as follows:

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

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

                                                      


<PAGE>



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

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

(c)      Net Gain on Disposition of Owned Equipment

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

(d)      Interest and Other Income

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

(e)      Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities

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

<TABLE>
<CAPTION>

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

</TABLE>

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

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

(f)      Net Income

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



                                                      


<PAGE>



(2)      Comparison of the Partnership's Operating Results 
         for the Years Ended 1996 and 1995

(a)      Owned Equipment Operations

Lease  revenues  less  direct  expenses  (defined  as  repair  and  maintenance,
equipment operating,  and asset-specific  insurance expenses) on owned equipment
decreased  for the year ended 1996 when compared to 1995.  The  following  table
presents  lease  revenues  less  direct  expenses  by owned  equipment  type (in
thousands of dollars):

<TABLE>
<CAPTION>

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

</TABLE>

Trailers:  Trailer lease revenues and direct expenses were $4.1 million and $0.7
million,  respectively,  for 1996,  compared to $5.0  million and $0.7  million,
respectively,  for 1995. The decrease in net contribution was due to the sale of
trailers in 1996 and 1995.  In addition,  the trailer  fleet  experienced  lower
utilization in the PLM affiliated short-term rental yards in 1996.

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

Aircraft:  Aircraft  lease  revenues and direct  expenses  were $2.4 million and
$47,000,  respectively,  for 1996,  compared to $2.8  million and $0.6  million,
respectively,  for 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 1995 to  refurbish  another
aircraft prior to being re-leased in 1995.

Marine  containers:  Marine  container lease revenues were $1.3 million and $1.5
million for 1996 and 1995,  respectively.  The number of marine containers owned
by the  Partnership  has been declining over the past 12 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 1996 decreased from $11.5 million
for 1995. Significant variances are explained as follows:

     (i) A $0.5 million decrease in depreciation  and amortization  expense from
1995 levels reflects the effect of asset sales in 1995 and 1996.

     (ii) A $0.5 million decrease in interest expense resulted from a lower base
rate of interest charged on the Partnership's floating rate debt during 1996, as
compared to 1995.  In 1996,  the  Partnership  also prepaid $14.0 million of the
notes payable.

     (iii) A $0.1 million decrease in management fees to affiliates reflects the
lower levels of lease revenues in 1996, as compared to 1995.

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


                                                      


<PAGE>



(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 1996.

(d)      Net Gain on Disposition of Owned Equipment

Net gain on  disposition  of  equipment  for 1996 totaled  $2.1  million,  which
resulted from the sale or disposal of aircraft, marine containers, trailers, and
railcars,  with an  aggregate  net book  value of $2.7  million,  for  aggregate
proceeds of $4.8 million.  For 1995, the $0.9 million net gain on disposition of
equipment resulted from the sale or disposal of marine containers,  trailers,  a
tractor,  and a 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 1996, due primarily to
lower interest rates earned on cash equivalents when compared to 1995.

(f)      Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities

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

<TABLE>
<CAPTION>

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

</TABLE>

Mobile offshore drilling unit: As of December 31, 1995, the Partnership owned an
investment in an entity that owned a mobile  offshore  drilling unit (rig).  The
rig was sold in 1996,  resulting in a $7.1 million net gain to the  Partnership,
which was offset by a net loss from operations of $0.1 million.

Aircraft:  As of December 31, 1996 and 1995, the Partnership owned an investment
in an entity that owns a commercial  aircraft.  Revenues and expenses  were $0.4
million and $1.1 million,  respectively,  for 1996, compared to $0.7 million and
$0.5  million,  respectively,  for  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 all of 1995. The  Partnership's
share  of  expenses  increased  $0.6  million  due to the  increase  in bad debt
expense,  reflecting the General Partner's  evaluation of the  collectibility of
receivables  due  from  the  aircraft's   lessee  that   encountered   financial
difficulties,  along with repairs to meet airworthiness conditions. During 1995,
the General Partner sold the Partnership's  investment in an entity that owned a
DC-9 aircraft, resulting in a $47,000 net gain.

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

(g)      Net Income

As a result of the foregoing,  the  Partnership's net income of $8.2 million for
1996  increased  from a net  income  of $0.9  million  for  1995.  In 1996,  the
Partnership  distributed  $8.5  million to the  limited  partners,  or $1.15 per
weighted-average depositary unit.


                                                      


<PAGE>



(E)      Geographic Information

Certain  of the  Partnership's  equipment  operates  in  international  markets.
Although these operations expose the Partnership to certain currency, political,
credit and economic  risks,  the General  Partner  believes that these risks are
minimal or has implemented  strategies to control the risks.  Currency risks are
at a minimum  because all  invoicing,  with the  exception  of a small number of
railcars operating in Canada, is conducted in U.S. dollars.  Political risks are
minimized by avoiding operations in countries that do not have a stable judicial
system and established  commercial  business laws. Credit support strategies for
lessees range from letters of credit  supported by U.S.  banks to cash deposits.
Although  these credit support  mechanisms  generally  allow the  Partnership to
maintain  its  lease  yield,  there are risks  associated  with  slow-to-respond
judicial systems when legal remedies are required to secure payment or repossess
equipment.  Economic  risks are  inherent in all  international  markets and the
General  Partner  strives to minimize  this risk with market  analysis  prior to
committing  equipment to a particular  geographic  area.  Refer to Note 3 to the
financial statements for information on the revenues, income, and net book value
of equipment in various geographic regions.

Revenues and net operating income by geographic  region are impacted by the time
period  the  asset is owned  and the  useful  life  ascribed  to the  asset  for
depreciation  purposes.  Net  income  (loss)  from  equipment  is  significantly
impacted  by  depreciation  charges,  which are  greatest  in the early years of
ownership due to the use the  double-declining  balance method of  depreciation.
The relationships of geographic revenues,  net income (loss), and net book value
of equipment are expected to significantly  change in the future as 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 United States-domiciled lessees consists
of trailers,  railcars,  and aircraft.  During 1997, lease revenues generated by
wholly and partially owned  equipment in the United States  accounted for 73% of
the lease revenues, while net operating income accounted for $3.5 million of the
$2.7 million  aggregate net income for the  Partnership.  The primary reason for
this relationship is that the Partnership sold trailers,  railcars, and aircraft
during 1997 that were  operated  in the United  States,  which  resulted in $1.7
million in net gains.

The  Partnership's  equipment leased to  Canadian-domiciled  lessees consists of
railcars. During 1997, lease revenues in Canada accounted for 11% of total lease
revenues,  while the operations  accounted for $0.5 million of the aggregate net
income generated by wholly and partially owned equipment.

The  Partnership's  investment  in  equipment  owned  by a USPE  in  South  Asia
accounted for none of the lease revenues and $0.5 million of operating net loss,
due to the aircraft being off lease in 1997.

In 1997, marine containers,  which were leased in various regions throughout the
year,  accounted for 6% of the lease  revenues and $0.2 million of the aggregate
net operating  profit  generated by wholly and partially owned equipment for the
Partnership.

European  operations  consisted of an aircraft  that  accounted  for 9% of lease
revenues,  while net  income  generated  by this  equipment  accounted  for $0.3
million of the  aggregate  net income  generated by wholly and  partially  owned
equipment for the Partnership in 1997.

Year 2000 Compliance

The General  Partner is currently  addressing  the Year 2000  computer  software
issue.  The General Partner is creating a timetable for carrying out any program
modifications that may be required. The General Partner does not anticipate that
the cost of these modifications allocable to the Partnership will be material.

(G)      Accounting Pronouncements

In  June  1997,  the  Financial   Accounting  Standards  Board  issued  two  new
statements:  SFAS No. 130,  "Reporting  Comprehensive  Income,"  which  requires
enterprises to report,  by major  component and in total,  all changes in equity
from  nonowner  sources;  and SFAS No. 131,  "Disclosures  about  Segments of an
Enterprise  and  Related  Information,"  which  establishes  annual and  interim
reporting  standards  for a public  entities's  operating  segments  and related
disclosures about its products, services, geographic areas, and major customers.
Both statements are effective for the Partnership's fiscal year ended

                                                      


<PAGE>



December 31, 1998, with earlier application permitted. The effect of adoption of
these  statements  will be limited to the form and content of the  Partnership's
disclosures and will not impact the  Partnership's  results of operations,  cash
flow, or financial position.

(H)      Inflation

Inflation had no significant impact on the Partnership's operations during 1997,
1996, or 1995.

(I)      Forward-Looking Information

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

(J)      Outlook for the Future

Since the  Partnership  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 that 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.

(1)      Impact of Government Regulations on Future Operations

The General  Partner  operates the  Partnership's  equipment in accordance  with
current applicable regulations (see Item 1, Section E, Government  Regulations).
However, the continuing implementation of new or modified regulations by some of
the  authorities  mentioned  previously,  or others,  may  adversely  affect the
Partnership's  ability to continue to own or operate equipment in its portfolio.
Additionally,  regulatory  systems  vary  from  country  to  country,  which may
increase the burden to the Partnership of meeting regulatory  compliance for the
same equipment  operated  between  countries.  Ongoing changes in the regulatory
environment, both in the United States and internationally,  cannot be predicted
with any accuracy and preclude the General  Partner from  determining the impact
of such changes on  Partnership  operations,  purchases,  or sale of  equipment.
Under U.S.  Federal  Aviation  Regulations,  after  December 31, 1999, no person
shall operate an aircraft to or from any airport in the contiguous United States
unless that airplane has been shown to comply with Stage III noise  levels.  The
Partnership  is  scheduled to sell its  remaining  Stage II aircraft by the year
2000.

(2)      Distributions

During the passive  liquidation  phase,  the Partnership will use operating cash
flow and proceeds from the sale of equipment to meet its operating  obligations,
make loan principal  payments on debt, 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 third  quarter of 1997,  the cash  distribution  rate was reduced from
$1.00 per depositary  unit to $0.60 per depositary  unit to more closely reflect
current  and  expected  net cash flows  from  operations.  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 have been reduced,  significant
asset sales may result in potential special distributions to unitholders.

                                                      


<PAGE>



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 on Form 10-K.

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

None.
















                     (This space intentionally left blank.)

                                                     


<PAGE>



                                    PART III

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

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

<TABLE>
<CAPTION>

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

<S>                                      <C>                   <C> 
Robert N. Tidball                        59                    Chairman of the Board, Director, President, 
                                                               and Chief Executive Officer, PLM International, Inc.; 
                                                               Director, PLM Financial Services, Inc.; 
                                                               Vice President, PLM Railcar Management Services, Inc.; 
                                                               President, PLM Worldwide Management Services Ltd.

Randall L.-W. Caudill                    50                    Director, PLM International, Inc.

Douglas P. Goodrich                      51                    Director and Senior Vice President, PLM International; 
                                                               Director and President, PLM Financial Services, Inc.; 
                                                               President, PLM Transportation Equipment Corporation; 
                                                               President, PLM Railcar Management Services, Inc.

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

Robert L. Witt                           57                    Director, PLM International, Inc.

J. Michael Allgood                       49                    Vice President and Chief Financial Officer, 
                                                               PLM International, Inc. and PLM Financial Services, Inc.

Stephen M. Bess                          51                    President, PLM Investment Management, Inc. 
                                                               and PLM Securities Corp.; Vice President and Director, 
                                                               PLM Financial Services, Inc.

Richard K Brock                          35                    Vice President and Corporate Controller, 
                                                               PLM International, Inc. and PLM Financial Services, Inc.

Frank Diodati                            43                    President, PLM Railcar Management Services Canada Limited

Steven O. Layne                          43                    Vice President, PLM Transportation Equipment Corporation; 
                                                               Vice President, PLM Worldwide Management Services Ltd.

Susan C. Santo                           35                    Vice President, Secretary, and General Counsel, 
                                                               PLM International, Inc. and PLM Financial Services, Inc.

Thomas L. Wilmore                        55                    Vice President, PLM Transportation Equipment Corporation; 
                                                               Vice President, PLM Railcar Management Services, Inc.

</TABLE>

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

Randall L.-W.  Caudill was elected to the Board of Directors in September  1997.
He is  President  of  Dunsford  Hill  Capital  Partners,  a San  Francisco-based
financial consulting firm serving emerging growth companies in the United States
and  abroad,  as well as a senior  advisor  to the  investment  banking  firm of
Prudential  Securities,  where he has been employed since 1987. Mr. Caudill also
serves as a director of VaxGen, Inc. and SBE, Inc.

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

Harold R. Somerset was elected to the Board of Directors of PLM International in
July 1994.  From February 1988 to December 1993, Mr.  Somerset was President and
Chief Executive  Officer of California & Hawaiian Sugar Corporation (C&H Sugar),
a recently acquired subsidiary of Alexander & Baldwin,  Inc. Mr. Somerset joined
C&H Sugar in 1984 as  Executive  Vice  President  and Chief  Operating  Officer,
having  served on its Board of  Directors  since  1978,  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 of
Agriculture and 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 US Naval Academy.  Mr.  Somerset also serves on the boards of directors
for various other  companies  and  organizations,  including  Longs Drug Stores,
Inc., a publicly held company.

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

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

Stephen M. Bess was appointed Director of PLM Financial  Services,  Inc. in July
1997.  Mr. Bess was appointed  President of PLM  Securities  Corporation 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  Corporation,  a manufacturer  of computer  peripheral  equipment,  from
October 1975 to November 1978.

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

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 of PLM  Transportation  Equipment
Corporation's  Air Group in November  1992, and was appointed Vice President and
Director of PLM Worldwide  Management  Services  Limited in September  1995. Mr.
Layne was its Vice President,  Commuter and Corporate Aircraft beginning in July
1990.  Prior to joining PLM, Mr. Layne was Director of 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 a senior pilot with 13 years of accumulated
service.

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

Thomas L.  Wilmore was  appointed  Vice  President,  Rail of PLM  Transportation
Equipment  Corporation  in March  1994,  and has  served  as Vice  President  of
Marketing for PLM Railcar  Management  Services,  Inc. since May 1988.  Prior to
joining PLM, Mr. Wilmore was Assistant  Vice President and Regional  Manager for
MNC Leasing  Corporation  in Towson,  Maryland from February 1987 to April 1988.
From July 1985 to  February  1987,  he was  President  and  co-owner of Guardian
Industries  Corporation,  Chicago,  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 PLM  International  are elected for a  three-year  term.  The
directors of PLM  Financial  Services,  Inc. are elected for a one-year  term or
until their successors are elected and qualified.  No family relationships exist
between any director or executive  officer of PLM International or PLM Financial
Services, Inc.

ITEM 11.          EXECUTIVE COMPENSATION

The Partnership has no directors, officers, or employees. The Partnership has no
pension,  profit-sharing,  retirement,  or similar  benefit plan in effect as of
December 31, 1997.


                                                      


<PAGE>



ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

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.  As of  December  31,  1997,  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 4, 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 4


Name                          Depositary Units         Percent of Units


Robert N. Tidball                      400                       *

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



* Less than 1% of the depositary units outstanding.


ITEM 13.            CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

(A)      Transactions with Management and Others

During  1997,  management  fees to IMI  were  $0.5  million.  During  1997,  the
Partnership  reimbursed FSI and its affiliates  $0.6 million for  administrative
services and data processing expenses performed on behalf of the Partnership.

During 1997, the USPEs paid or accrued $9,000 to FSI or its affiliates (based on
the Partnership's  proportional share of ownership) for administrative  services
and data processing expenses.

(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 on Form 10-K.

(B)      Reports on Form 8-K

         None.

(C)      Exhibits

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

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

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

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

24.      Powers of Attorney.

                                                      


<PAGE>



                                   SIGNATURES

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

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


Date:  March 24, 1998               PLM EQUIPMENT GROWTH FUND II
                                    Partnership

                                    By:      PLM Financial Services, Inc.
                                             General Partner



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



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

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


Name                            Capacity                  Date


*_____________________
Robert N. Tidball             Director, FSI            March 24, 1998


*_____________________
Douglas P. Goodrich           Director, FSI            March 24, 1998


*_____________________
Stephen M. Bess               Director, FSI            March 24, 1998




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




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


                                                      


<PAGE>



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

                                  (Item 14(a))


                                                                   Page

Report of independent auditors                                      26

Balance sheets as of December 31, 1997 and 1996                     27

Statements of income for the years ended
     December 31, 1997, 1996, and 1995                              28

Statements of changes in partners' capital for the years
     ended December 31, 1997, 1996, and 1995                        29

Statements of cash flows for the years ended
     December 31, 1997, 1996, and 1995                              30

Notes to financial statements                                    31-39


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  financial  statements  of PLM  Equipment  Growth Fund II as
listed  in  the  accompanying   index.   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, 1997 and 1996,  and the results of its  operations  and its cash
flows for each of the years in the three-year period ended December 31, 1997, in
conformity with generally accepted accounting principles.


/S/ KPMG PEAT MARWICK LLP
-------------------------------

SAN FRANCISCO, CALIFORNIA
March 12, 1998


                                                      


<PAGE>




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



<TABLE>
<CAPTION>



                                                                                    1997                 1996
                                                                               ------------------------------------
<S>                                                                             <C>                   <C>       
Assets

Equipment held for operating lease, at cost                                     $    50,707           $   82,856
Less accumulated depreciation                                                       (38,170)             (62,114)
                                                                               ------------------------------------
                                                                                     12,537               20,742
Equipment held for sale                                                                 788                   --
    Net equipment                                                                    13,325               20,742

Cash and cash equivalents                                                               556                7,962
Restricted cash                                                                         395                  295
Accounts receivable, less allowance for doubtful
    accounts of $1,146 in 1997 and $882 in 1996                                       1,626                1,765
Investments in unconsolidated special-purpose entities                                2,680                1,665
Deferred charges, net of accumulated amortization
    of $197 in 1996                                                                      --                  157
Prepaid expenses and other assets                                                        49                1,009

      Total assets                                                              $    18,631           $   33,595
                                                                               ====================================

Liabilities and partners' capital

Liabilities:

Accounts payable and accrued expenses                                           $       365           $      412
Due to affiliates                                                                       195                  110
Lessee deposits and reserve for repairs                                               1,846                2,827
Notes payable                                                                         2,500               13,000
                                                                               ------------------------------------
   Total liabilities                                                                  4,906               16,349
                                                                               ------------------------------------

Partners' capital (deficit):
Limited partners (7,381,805 depositary units as of
   December 31, 1997 and 1996)                                                       13,725               17,434
General Partner                                                                          --                 (188)
                                                                               ------------------------------------
    Total partners' capital                                                          13,725               17,246
                                                                               ------------------------------------

      Total liabilities and partners' capital                                   $    18,631           $   33,595
                                                                               ====================================

</TABLE>








                       See accompanying notes to financial
                                  statements.

                                                      


<PAGE>




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

<TABLE>
<CAPTION>



                                                                           1997             1996              1995
                                                                      -------------------------------------------------
<S>                                                                    <C>               <C>              <C>       
Revenues

Lease revenue                                                          $    10,583       $   12,379       $   16,830
Interest and other income                                                      243              355              668
Net gain on disposition of equipment                                         1,922            2,085            1,485
                                                                      -------------------------------------------------
   Total revenues                                                           12,748           14,819           18,983

Expenses

Depreciation and amortization                                                4,407            5,698            8,552
Repairs and maintenance                                                      1,959            2,172            2,867
Equipment operating expenses                                                    --               --              152
Interest expense                                                               650            1,815            2,349
Insurance expense to affiliate                                                  (5 )             --               87
Other insurance expenses                                                       120              112              171
Management fees to affiliate                                                   518              583              818
General and administrative expenses to affiliate                               575              727            1,026
Other general and administrative expenses                                      934            1,078              895
Provision for bad debt                                                         376              715              462
Loss on revaluation of equipment                                                --               --              667
                                                                      -------------------------------------------------
   Total expenses                                                            9,534           12,900           18,046

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

      Net income                                                       $     2,695       $    8,186       $      937
                                                                      =================================================

Partners' share of net income

Limited partners                                                       $     2,196       $    7,464       $       75
General Partner                                                                499              722              862

      Total                                                            $     2,695       $    8,186       $      937
                                                                      =================================================

Net income per weighted-average depositary unit
    (7,381,805 in 1997, 7,384,738 in 1996, and
    7,443,910 in 1995)                                                 $      0.30       $     1.01       $     0.01
                                                                      =================================================

Cash distribution                                                      $     6,216       $    8,957       $   12,549
                                                                      =================================================
Cash distribution per weighted-average depositary unit                 $      0.80       $     1.15       $     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,
                 1997, 1996, and 1995 (in thousands of dollars)

<TABLE>
<CAPTION>



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

<S>                                                            <C>                  <C>                <C>       
Partners' capital (deficit) as of December 31, 1994            $   30,850           $   (697)          $   30,153

Net income                                                             75                 862                 937

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

Repurchase of depositary units                                       (345 )                --                (345 )
                                                              ------------------------------------------------------

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

Net income                                                          7,464                 722               8,186

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

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

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

Net income                                                          2,196                 499               2,695

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

Partners' capital (deficit) as of December 31, 1997            $   13,725           $      --          $   13,725
                                                              ======================================================

</TABLE>
























                       See accompanying notes to financial
                                  statements.

                                                      


<PAGE>




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

<TABLE>
<CAPTION>



Operating activities                                                        1997             1996             1995
                                                                      --------------------------------------------------
<S>                                                                    <C>                <C>              <C>       
Net income                                                             $      2,695       $    8,186       $      937
Adjustments to reconcile net income to net cash
    provided by operating activities:
  Depreciation and amortization                                               4,407            5,698            8,552
  Net gain on disposition of equipment                                       (1,922)          (2,085)          (1,485)
  Loss on revaluation of equipment                                               --               --              667
  Equity in net (income) loss of unconsolidated
      special-purpose entities                                                  519           (6,267)              --
  Changes in operating assets and liabilities:
    Restricted cash                                                            (100)             253             (252)
    Accounts receivable, net                                                   (277)             385             (166)
    Prepaid expenses and other assets                                           960             (957)              34
    Accounts payable and accrued expenses                                       (47)               3             (473)
    Due to affiliates                                                            85             (288)             308
    Accrued drydock expenses                                                     --               --              271
    Lessee deposits and reserve for repairs                                    (954)            (127)            (217)
                                                                      --------------------------------------------------
      Net cash provided by operating activities                               5,366            4,801            8,176
                                                                      --------------------------------------------------

Investing activities
Proceeds from disposition of equipment                                        5,076            4,761            7,005
Liquidation distributions from unconsolidated
    special-purpose entities                                                     --           14,272               --
(Additional investments in) distributions from
    unconsolidated special-purpose entities                                  (1,145)             845               --
Payments for capital improvements and other                                      13               (8)             (11)
      Net cash provided by investing activities                               3,944           19,870            6,994
                                                                      --------------------------------------------------

Financing activities
Principal payments on notes payable                                         (10,500)         (14,000)          (8,000)
Cash distribution paid to limited partners                                   (5,905)          (8,509)         (11,922)
Cash distribution paid to General Partner                                      (311)            (448)            (627)
Repurchase of depositary units                                                   --             (179)            (345)
                                                                      --------------------------------------------------
      Net cash used in financing activities                                 (16,716)         (23,136)         (20,894)
                                                                      --------------------------------------------------

Net (decrease) increase in cash and cash equivalents                         (7,406)           1,535           (5,724)
Cash and cash equivalents at beginning of year (see Note 4)                   7,962            6,427           12,348
                                                                      --------------------------------------------------
Cash and cash equivalents at end of year                               $        556       $    7,962       $    6,624
                                                                      ==================================================

Supplemental information
Interest paid                                                          $        653       $    1,815       $    2,302
                                   =====================================================================================
Receipt of interest in unconsolidated special-purpose
  entity in settlement of receivables                                  $        389       $       --       $       --
                                   =====================================================================================

</TABLE>




                       See accompanying notes to financial
                                  statements.

                                                      


<PAGE>



                          PLM EQUIPMENT GROWTH FUND II
                              A Limited Partnership
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1997

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 and
     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 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 or repayment of debt,  except to the extent used
     to maintain reasonable reserves.

     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 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,  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
     programs

     Accounting for Leases

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

     Depreciation and Amortization

     Depreciation of 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. Certain aircraft are depreciated
     under the double-declining balance depreciation method over the lease term.
     .

                                                      


<PAGE>



                          PLM EQUIPMENT GROWTH FUND II
                              A Limited Partnership
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1997

1.   Basis of Presentation (continued)

     Depreciation and Amortization (continued)

     The depreciation  method changes to straight line when annual  depreciation
     expense using the straight line method exceeds that  calculated by the 200%
     declining balance method. Acquisition fees have been capitalized as part of
     the cost of the equipment.  Lease  negotiation fees were amortized over the
     initial  equipment  lease term. Debt issuance costs were amortized over the
     term of the loan for  which  they are  paid.  Major  expenditures  that are
     expected to extend the useful lives or reduce future operating  expenses of
     equipment are capitalized  and amortized over the estimated  remaining life
     of the equipment.

     Transportation Equipment

     In 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). In  accordance  with
     SFAS  121,  the  General   Partner   reviews  the  carrying  value  of  the
     Partnership's  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.  No reductions to the carrying  value of equipment  were required
     during 1997 or 1996. A $0.7 million  reduction to the carrying value of one
     aircraft was recorded in 1995.

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

     Investments in Unconsolidated Special-Purpose Entities

     The Partnership has interests in  unconsolidated  special-purpose  entities
     (USPEs) that own  transportation  equipment.  These interests are accounted
     for using the equity method.

     The  Partnership's  investment  in USPEs  includes  acquisition  and  lease
     negotiation  fees paid by the Partnership to PLM  Transportation  Equipment
     Corporation  (TEC),  a  wholly-owned  subsidiary of FSI. The  Partnership's
     equity interest in net income (loss) of the 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.


                                                      


<PAGE>



                          PLM EQUIPMENT GROWTH FUND II
                              A Limited Partnership
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1997

1.   Basis of Presentation (continued)

     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.  The
     limited  partners' net income (loss) and  distributions are allocated among
     the limited  partners based on the number of depository units owned by each
     limited  partner.  During  1997,  the  General  Partner  received a special
     allocation of income of $0.4 million ($0.3 million in 1996 and $0.8 million
     in 1995).

     Cash  distributions  are recorded  when paid.  Cash  distributions  of $1.2
     million ($0.16 per weighted-average  depositary unit in 1997), $1.9 million
     ($0.25 per  weighted-average  depositary  unit in 1996),  and $3.1  million
     ($0.40  per  weighted-average  depositary  unit in 1995) were  declared  on
     December 31, 1997, 1996, and 1995,  respectively.  These distributions were
     paid on February 15, 1998, 1997, and 1996, respectively, to the unitholders
     of record as of December 31, 1997, 1996, and 1995, respectively.

     Cash  distributions  to investors in excess of net income are considered to
     represent a return of capital.  Cash  distributions to the limited partners
     of $3.7 million,  $1.0 million,  and $11.8 million in 1997, 1996, and 1995,
     respectively, were deemed to be a return of capital.

     Cash and Cash Equivalents

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

     Restricted Cash

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

     Reclassifications

     Certain  amounts  in the 1996  and  1995  financial  statements  have  been
reclassified to conform to the 1997 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 USPEs equal to the greater of (i) 5% of Gross  Revenues  (as defined
     in the  agreement)  prior to the  payment  of any  principal  and  interest
     incurred in connection with any  indebtedness,  or (ii) 1/12 of 1/2% of the
     net book value of the equipment  portfolio subject to certain  adjustments.
     Partnership  management fees of $0.2 million and $0.1 million, were payable
     as  of  December  31,  1997  and  1996,  respectively.   The  Partnership's
     proportional  share of the USPE's  management fee expenses  during 1997 and
     1996 were $0 and $44,000,  respectively. The Partnership reimbursed FSI and
     its  affiliates   $0.6  million,   $0.7  million,   and  $1.0  million  for
     administrative  and data  processing  services  performed  on behalf of the
     Partnership  in 1997,  1996,  and  1995,  respectively.  The  Partnershi  s
     proportional  share  of  the  USPE's  administrative  and  data  processing
     expenses were $9,000 and $23,000 during 1997 and 1996, respectively.


                                                     


<PAGE>



                          PLM EQUIPMENT GROWTH FUND II
                              A Limited Partnership
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1997

2.   General Partner and Transactions with Affiliates (continued)

     The  Partnership  paid $0.1  million  in 1995 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. No amounts  were paid to TEI in 1996 or 1997 for
     owned equipment.

     As of December 31, 1997,  approximately  27% of the  Partnership's  trailer
     equipment was in rental facilities  operated by an affiliate of the General
     Partner.  Revenues  collected under short-term  rental  agreements with the
     rental yards' customers are credited to the owners of the related equipment
     as received.  Direct  expenses  associated  with the  equipment are charged
     directly to the  Partnership.  An  allocation  of indirect  expenses of the
     rental yard operations is charged to the Partnership monthly.

3.   Equipment

     The components of owned equipment as of December 31, 1997 and 1996, were as
follows (in thousands of dollars):

<TABLE>
<CAPTION>

Equipment Held for Operating Leases                         1997                 1996
-----------------------------------
                                                       -------------------------------------

<S>                                                     <C>                   <C>       
Rail equipment                                          $    17,401           $   18,183
Trailers                                                     17,144               21,173
Marine containers                                             8,308               10,640
Aircraft                                                      7,854               32,860
                                                       -------------------------------------
                                                             50,707               82,856
Less accumulated depreciation                               (38,170)             (62,114 )
                                                       ----------------------------------
                                                             12,537               20,742
Equipment held for sale                                         788                   --
                                                       -------------------------------------
    Net equipment                                       $    13,325           $   20,742
                                                       =====================================

</TABLE>

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

     As of December 31, 1997, all owned equipment in the Partnership's portfolio
     was operating in  short-term  rental  facilities or on lease,  except for 3
     railcars and 168 marine containers with an aggregate net book value of $0.4
     million.  As of December 31, 1996, all owned  equipment in the  Partnership
     portfolio  was either on lease or  operating in  PLM-affiliated  short-term
     trailer rental  facilities,  except for 3 railcars and 71 marine containers
     with an aggregate net book value of $0.2 million.

     During  1997,  the General  Partner  sold or disposed of  aircraft,  marine
     containers,  trailers,  and  railcars  owned  by the  Partnership,  with an
     aggregate  net book value of $3.2  million,  for proceeds of $5.1  million.
     During 1996,  the General  Partner  sold or disposed of marine  containers,
     trailers,  railcars,  and an  aircraft  owned by the  Partnership,  with an
     aggregate net book value of $2.7 million, for proceeds of $4.8 million.

                                                      


<PAGE>



                          PLM EQUIPMENT GROWTH FUND II
                              A Limited Partnership
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1997

3.   Equipment (continued)

     As of December  31,  1997,  equipment  held for sale  included a commercial
     aircraft  with a net  book  value of $0.6  million  and 44  covered  hopper
     railcars with a net book value of $0.2  million.  No equipment was held for
     sale as of December 31, 1996.

     The Partnership  reduced the carrying value of one aircraft by $0.7 million
     during 1995 to its estimated net realizable value. There were no reductions
     to the carrying values of equipment in 1996 or 1997.

     All leases for owned and partially-owned  equipment are being accounted for
     as operating  leases.  Future minimum rents under  noncancelable  operating
     leases as of  December  31,  1997  during  each of the next five  years are
     approximately  $5.5 million in 1998,  $4.3 million in 1999, $2.2 million in
     2000,  $0.6 million in 2001, and $8,000 in 2002.  Contingent  rentals based
     upon utilization were  approximately $1.3 million,  $1.3 million,  and $2.0
     million in 1997, 1996, and 1995, respectively.

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

     The Partnership  leases or leased its aircraft,  railcars,  and trailers to
     lessees  domiciled in five  geographic  regions:  South Asia,  Canada,  the
     United States,  Asia, and Europe.  Marine vessels and marine containers are
     leased to multiple  lessees in  different  regions  that operate the marine
     vessels  and  marine  containers  worldwide.  The  tables  below  set forth
     geographic   information  about  the  Partnership's   owned  equipment  and
     investments  in USPEs grouped by domiciles of the lessees as of and for the
     years ended December 31, 1997, 1996, and 1995 (in thousands of dollars):

<TABLE>
<CAPTION>

        Lease Revenues               Investments in USPEs                     Owned Equipment
                               -----------------------------   -------------------------------------------
              Region                 1997            1996             1997            1996            1995
 ------------------------------------------------------------   --------------------------------------------


   <S>                             <C>             <C>             <C>             <C>              <C>                   
   United States                   $     --        $      --       $    7,762      $    8,516       $    9,591            
   Canada                                --               --            1,208           1,765            1,760
   Europe                                --               --              940             840              686
   South Asia                            --            1,284               --              --            2,192
   Asia                                  --               --               --              --              630
   Rest of the world                     --               --              673           1,258            1,971
                                -------------------------------  ------------------------------------------------
       Total lease revenues        $     --        $   1,284       $   10,583      $   12,379       $   16,830          
                                ===============================  ================================================
</TABLE>

     The following table sets forth  identifiable net income (loss)  information
by region for the years ended December 31, 1997, 1996, and 1995 (in thousands of
dollars):

<TABLE>
<CAPTION>

            Net Income (Loss)        Investments in USPEs                       Owned Equipment
                                    ---------------------------   --------------------------------------------
                 Region                   1997          1996             1997            1996            1995
  ---------------------------------------------------------------   ----------------------------------------------

   <S>                                <C>            <C>              <C>             <C>             <C>                  
   United States                      $       --     $      --        $   3,533       $   2,075       $    2,876           
   Canada                                     --            --              470             927              897
   Europe                                     --            --              260             162             (728)
   South Asia                                (519)       6,267               --              --              (10)
   Asia                                       --            --               --             763              173
   Rest of the world                          --            --              218             320            1,445
   Total identifiable income (loss)          (519)       6,267            4,481           4,247            4,653
   Administrative and other                   --            --           (1,267)         (2,328)          (3,716)
                                     ----------------------------   ----------------------------------------------
       Total net income (loss)        $      (519)   $   6,267        $   3,214       $   1,919       $      937             
                                     ============================   ==============================================
</TABLE>


                                                     


<PAGE>



                          PLM EQUIPMENT GROWTH FUND II
                              A Limited Partnership
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1997

3.   Equipment (continued)

     The net book value of these assets as of December 31, 1997,  1996, and 1995
are as follows (in thousands of dollars):

<TABLE>
<CAPTION>

           Net Book Value                Investments in USPEs                         Owned Equipment
                               -----------------------------------------  ---------------------------------------
             Region              1997          1996         1995             1997         1996          1995
  --------------------------------------------------------------------  ---------------------------------------

   <S>                         <C>           <C>         <C>              <C>          <C>           <C>                  
   United States               $      --     $     --    $      --        $   9,760    $  14,538     $  19,632            
   Canada                             --           --           --            1,016        2,215         1,912
   Europe                             --           --           --               --        1,241         1,844
   Asia                               --           --           --               --           --         1,641
   South Asia                      1,235        1,665       10,515               --           --            --
   Rest of the world                  --           --           --            1,761        2,748         3,951
                                   1,235        1,665       10,515           12,537       20,742        28,980
   Equipment held for sale         1,445           --           --              788           --            --
                            ------------------------------------------  -----------------------------------------
       Total net book value    $   2,680     $  1,665    $  10,515        $   13,325   $   20,742    $  28,980            
                            ==========================================  =========================================
</TABLE>

     No lessees  accounted  for more than 10% of total  lease  revenues in 1997,
     1996, and 1995.

4.   Investments 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 principal  differences  between the previous  accounting method and the
     equity method  concern the  presentation  of  activities  relating to these
     assets in the statement of  operations.  Whereas under the equity method of
     accounting the Partnership's  proportionate  share is presented as a single
     net amount, equity in net income (loss) of USPEs, under the previous method
     the Partnership's statement of operations reflected its proportionate share
     of each individual item of revenue and expense.  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 the
     statement of cash flows due to the reclassification.

                                                      


<PAGE>



                          PLM EQUIPMENT GROWTH FUND II
                              A Limited Partnership
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1997

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

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

<TABLE>
<CAPTION>

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

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

</TABLE>

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

<TABLE>
<CAPTION>

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

<S>                                                           <C>                  <C>      
23% interest in a Boeing 727-200 aircraft                     $   1,445            $      --
50% interest in a Boeing 737-200 aircraft                         1,235                1,665

    Net investments                                           $   2,680            $   1,665
                             ================================================================

</TABLE>

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

     The Partnership's 50% and 23% investments in commercial aircraft,  included
     in investments in unconsolidated  special-purpose  entities, were off lease
     as of December 31, 1997.

     An aircraft lessee encountered financial  difficulties in 1996. The General
     Partner   established   reserves   against  these   receivables  due  to  a
     determination  that ultimate  collection of these rents was  uncertain.  As
     payment  for these past due  receivables,  the  Partnership  received a 23%
     interest in a trust that owns a Boeing 727 aircraft.  The fair market value
     of the Partnership's interest in this aircraft approximated its outstanding
     receivable  from the lessee.  This plane was sold at its  approximate  book
     value in the first quarter of 1998.

5.   Notes Payable

     The Partnership has notes payable that are unsecured and nonrecourse, limit
     additional   borrowings,   and  specify  covenants  related  to  collateral
     coverage,  fixed-charge coverage,  ratios for market value, and composition
     of the equipment owned by the Partnership.  The notes payable bear interest
     at LIBOR plus 1.55% per annum  (7.27% as of December  31, 1997 and 7.12% as
     of December 31, 1996) and are payable quarterly in arrears. During 1997 and
     1996,   the   Partnership   prepaid  $10.5   million  and  $14.0   million,
     respectively,  of the principal  outstanding on the notes.  The outstanding
     notes payable balance was $2.5 million and $13.0 million as of December 31,
     1997 and 1996, respectively. The remaining principal of $2.5 million is due
     on March 31, 2000, but may be prepaid by the Partnership.

     As of December 31, 1997, the General  Partner  believes that the book value
     of the notes  payable  approximates  fair market  value due to its variable
     interest rate.

                                                      


<PAGE>



                          PLM EQUIPMENT GROWTH FUND II
                              A Limited Partnership
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1997

6.   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, 1997, there were temporary  differences of approximately
     $8.7 million  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
     equipment reserves.

7.   Depositary Unit Repurchase Plan

     The  Partnership  had  engaged  in a program  to  repurchase  up to 250,000
     depositary units. No repurchases of depositary units were made during 1997.
     During the year ended December 31, 1996, the Partnership repurchased 44,500
     depositary  units at a cost of $0.2 million.  As of December 31, 1997,  the
     Partnership had cumulatively repurchased 117,800 depositary units at a cost
     of $0.8 million.  The General Partner does not plan any future  repurchases
     of depositary units.

8.   Delisting of Partnership Units

     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.  Under the Internal Revenue Code (the Code)
     then in  effect,  the  Partnership  was  classified  as a  publicly  traded
     partnership.   The  Code  treated  all  publicly  traded   partnerships  as
     corporations  if they  remained  publicly  traded after  December 31, 1997.
     Treating the  Partnership  as a corporation  meant the  Partnership  itself
     would have 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.

     As of March 11, 1998, there were 7,381,805  depositary  units  outstanding.
     There are  approximately  8,800 depositary  unitholders of record as of the
     date of this report.

     Several  secondary  exchanges  facilitate  sales and  purchases  of limited
     partnership units. Secondary markets are characterized as having few buyers
     for limited  partnership  interests and  therefore are generally  viewed as
     being  inefficient  vehicles for the sale of  partnership  units.  There is
     presently no public market for the units and none is likely to develop.  To
     prevent  the units from being  considered  publicly  traded and  thereby to
     avoid  taxation  of  the  Partnership  as  an  association   treated  as  a
     corporation  under the Code, the units will not be transferred  without the
     consent of the  General  Partner,  which may be  withheld  in its  absolute
     discretion. The General Partner intends to monitor transfers of units in an
     effort to ensure  that they do not exceed the number  permitted  by certain
     safe harbor  provisions  promulgated  by the Internal  Revenue  Service.  A
     transfer may be prohibited if the intended transferee is not a U.S. citizen
     or if the  transfer  would  cause any portion of the units to be treated as
     plan assets.


                                                      


<PAGE>



                          PLM EQUIPMENT GROWTH FUND II
                              A Limited Partnership
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1997

9.   Subsequent Events

     In January 1998,  the  Partnership's  23%  investment of $1.4 million in an
     entity that owned a commercial  aircraft was sold to an unaffiliated  third
     party at approximately its net book value.

     In January 1998, 44 of the  Partnership's  covered hopper railcars,  with a
     net book value of $0.2 million,  were sold to an  unaffiliated  third party
     for a gain of $0.4 million.  These railcars were included in equipment held
     for sale as of December 31, 1997.

     In January 1998, the Partnership's 727-200 commercial aircraft,  with a net
     book value of $0.6 million,  was sold to an unaffiliated  third party for a
     gain $3.7 million. This aircraft was included in equipment held for sale as
     of December 31, 1997.

     On February 26, 1998, Pan American  Airways  Corporation (Pan Am) filed for
     protection  under  Chapter 11 of the United States  Bankruptcy  Code in the
     District   Court  of  the   Southern   District   of   Florida   (Case  No.
     98-11618-BKC-AJC).  Pan  Am  was  the  lessee  of a  727-200  owned  by the
     Partnership.  According  to its  amended  terms,  the  aircraft  lease  was
     scheduled to terminate in December 1999.  The Bankruptcy  Court granted the
     lessee motion to reject the lease,  effective  March 20, 1998.  The General
     Partner has  reposessed  the  aircraft  and intends to sell it. The General
     Partner  will  continue  to  pursue  remedies  against  the  debtor  in the
     bankruptcy proceedings.

                                                      


<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                                        41-43










































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

*Incorporated by reference. See page 23 of this report.

                                                      


<PAGE>