<PAGE>
                          ----------------------------------

                          SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C. 20549
                          ----------------------------------

                                      FORM 10-K
                    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934

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


For Fiscal Year ended:                                 Commission File Number:
 December 31, 1995                                            0-13292

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

                                   MCGRATH RENTCORP
                (Exact name of registrant as specified in its Charter)


       California                                          94-2579843
(State or other jurisdiction                           (I.R.S. Employer
of incorporation or organization)                      Identification No.)


                                  2500 GRANT AVENUE
                          SAN LORENZO, CALIFORNIA 94580-1810
                       (Address of principal executive offices)


Registrant's telephone number:                         (510) 276-2626

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

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


                                                       Name of each exchange on
Title of each class                                       which registered
- -------------------                                    ------------------------
      NONE                                                      NONE

                                    TITLE OF CLASS
                                    --------------
                                     COMMON STOCK

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

                                 (Cover page 1 of 2)


<PAGE>

    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 is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

    State the aggregate market value of voting stock, held by nonaffiliates of
the registrant: $120,981,380 as of March 6, 1996.

    At March 6, 1996, 7,793,715 shares of Registrant's Common Stock were
outstanding.

                         DOCUMENTS INCORPORATED BY REFERENCE

    McGrath RentCorp's Annual Report to Shareholders for the year ended
December 31, 1995 (hereinafter referred to as the "Annual Report"), is filed
herewith as Exhibit 13 and incorporated by reference into:


                        Part I - Items 1 and 2

                        Part II - Items 5, 6, 7 and 8

    McGrath RentCorp's definitive Proxy Statement with respect to its Annual
Shareholders' Meeting to be held June 13, 1996, which will be filed with the
Securities and Exchange Commission within 120 days after the end of its fiscal
year, is incorporated by reference into Part III, Items 10, 11, 12 and 13.


                         See page 4 for an index of Exhibits
                              (Cover page 2 of 2 pages)


<PAGE>

                                                                McGrath RentCorp
                                                                  1995 Form 10-K


                                        PART I
                                        ------




ITEM 1. BUSINESS.
- -----------------

    The information required by this Item is contained in the Annual Report
under the headings "Company Profile" (pages 2 and 3), "Our Products" (pages 3
through 6). Such information is incorporated by reference and filed herewith.



ITEM 2. PROPERTIES.
- -------------------

    The information required by this Item is contained in the Annual Report
under the heading "Properties" (page 11). Such information is incorporated by
reference and filed herewith.



ITEM 3. LEGAL PROCEEDINGS.
- --------------------------

    The Company is not a party to any material pending legal proceedings.



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS.
- --------------------------------------------------------

    There were no matters submitted to a vote of shareholders during the fourth
quarter of 1995.

                                          1

<PAGE>

                                                                McGrath RentCorp
                                                                  1995 Form 10-K


                                       PART II


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

    The information required by this Item is contained in the Annual Report
under the headings "Shareholder Matters - Stock Activity", "Shareholder Matters
- - Number of Shareholders", and "Shareholders Matters - Dividend Policy" on the
inside back cover. Such information is hereby incorporated by reference and
filed herewith.



ITEM 6. SELECTED FINANCIAL DATA.
- --------------------------------

    The unaudited information required by this Item is contained in the Annual
Report under the heading "Consolidated Quarterly (Unaudited) and Five Year
Selected Financial Data" (page 7). Such information is hereby incorporated by
reference and filed herewith.



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

    The information required by this Item is contained in the Annual Report
under the headings "Management Discussion and Analysis" (page 8), "Fiscal Years
1995 and 1994" (page 8), "Fiscal Years 1994 and 1993" (page 9), "Liquidity and
Capital Resources" and "Impact of Inflation" (page 10). Such information is
hereby incorporated by reference and filed herewith.



I
TEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ----------------------------------------------------

    The information required by this Item is contained in the Annual Report
(pages 12 through 20). Such information is hereby incorporated by reference and
filed herewith.



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

        None.
                                          2


<PAGE>

                                                                McGrath RentCorp
                                                                  1995 Form 10-K


                                       PART III
                                       --------


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- ------------------------------------------------------------

    The information required by this Item is incorporated by reference to
McGrath RentCorp's definitive Proxy Statement with respect to its Annual
Shareholders' Meeting to be held June 13, 1996, which will be filed with the
Securities and Exchange Commission by not later than May 1, 1996.



ITEM 11. EXECUTIVE COMPENSATION.
- --------------------------------

    The information required by this Item is incorporated by reference to
McGrath RentCorp's definitive Proxy Statement with respect to its Annual
Shareholders' Meeting to be held June 13, 1996, which will be filed with the
Securities and Exchange Commission by not later than May 1, 1996.



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- -----------------------------------------------------------------------

    The information required by this Item is incorporated by reference to
McGrath RentCorp's definitive Proxy Statement with respect to its Annual
Shareholders' Meeting to be held June 13, 1996, which will be filed with the
Securities and Exchange Commission by not later than May 1, 1996.



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- --------------------------------------------------------

    The information required by this Item is incorporated by reference to
McGrath RentCorp's definitive Proxy Statement with respect to its Annual
Shareholders' Meeting to be held June 13, 1996, which will be filed with the
Securities and Exchange Commission by not later than May 1, 1996.

                                          3


<PAGE>

                                                                McGrath RentCorp
                                                                  1995 Form 10-K


                                       PART IV
                                       -------


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

(a) (1)  FINANCIAL STATEMENTS.
         ---------------------

    The following financial statements and independent auditors report
appearing in the Annual Report, on pages 12 through 20, are incorporated herein
by reference:


    Report of Independent Public Accountants
    Consolidated Statements of Income for the Years Ended December 31, 1995,
        1994 and 1993
    Consolidated Balance Sheets as of December 31, 1995 and 1994
    Consolidated Statements of Shareholders' Equity for the Years Ended
        December 31, 1995, 1994 and 1993
    Consolidated Statements of Cash Flows for the Years Ended December 31,
        1995, 1994 and 1993

    Notes to Consolidated Financial Statements

(a) (2)  FINANCIAL STATEMENT SCHEDULES.
         ------------------------------

    None.

(a) (3)  EXHIBITS.
         ---------

    Index to exhibits filed herewith as part of this report:

EXHIBIT
NUMBER                           TITLE                                      PAGE
- -------                          -----                                      ----
  4.1    First Amendment to Amended and Restated Credit Agreement         
         dated June 16, 1995 between the Company and The Bank of    
         California, N.A., National Westminster Bank, USA and Bank        
         of America National Trust and Savings Association                    7
 11      Weighted Average Shares Composition                                 10
 13      1995 Annual Report to Shareholders                                  11
 27      Financial Data Schedule (filed electronically)                      

    Exhibit Number 4.1 (Amended and Restated Credit Agreement dated June 14,
1994) to the Company's Quarterly Report Under Section 13 or 15 (d) of the
Securities Exchange Act of 1934 for the quarter ended June 30, 1994 (filed
August 13, 1994) is hereby incorporated by reference herein.


    Exhibit Number 10.4 (Real Property Lease Extension-Grant Avenue, San
Lorenzo, California) to the Company's Annual Report pursuant to Section 13 or 15
(d) of the Securities Exchange Act of 1934 for the year ended December 31, 1991
(filed March 28, 1992) is hereby incorporated by reference herein.


    Exhibit Number 3.1 (Amendment to the Company's Articles of Incorporation)
to the Company's Registration Statement under the Securities Act of 1933 (filed
March 28, 1991, Registration No. 33-39633), is hereby incorporated by
reference herein.

                                          4


<PAGE>

                                                                McGrath RentCorp
                                                                  1995 Form 10-K

    The following exhibits to the Company's Annual Report Pursuant to Section
13 or 15 (d) of the Securities Exchange Act of 1934 for the year ended December
31, 1990 (filed March 28, 1991) are incorporated by reference herein:

  3.1    Amended Bylaws of the Company
 10.3    Long-Term Bonus Plan, together with attached exemplar Long-Term Stock
         Bonus Agreement

    Exhibit Number 19.3 (Real Property Lease-8.8 Acres, Cota Street, Corona,
California) to the Company's Quarterly Report Under Section 13 or 15 (d) of 
the Securities Exchange Act of 1934 for the quarter ended September 30, 1989
(filed November 14, 1989) is hereby incorporated by reference herein.

    The following exhibits to the Company's Quarterly Report Under Section 13
and 15 (d) of the Securities Exchange Act of 1934 for the quarter ended June 30,
1988 (filed August 14, 1988) are hereby incorporated by reference herein:

 19.1    The Amended and Restated Articles of Incorporation of the Company,
         filed with the California Secretary of State's Office on June 6, 1988.
 19.3    The McGrath RentCorp 1987 Incentive Stock Option Plan.
 19.4    Exemplar of the form of Incentive Stock Option Agreement entered into
         by the Company with participants in the McGrath RentCorp 1987
         Incentive Stock Option Plan.
 19.5    Exemplar of the form of Indemnification Agreement entered into by the
         Company with Directors, Officers and other agents of the Company
         approved by the Company's Board of Directors.

    Exhibit Number 10.3 (Real Property Lease - 2500 Grant Avenue, San Lorenzo,
California) to the Company's Annual Report pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934 for the year ended December 31, 1986 (filed
March 31, 1987) is hereby incorporated by reference herein.

(b) REPORTS ON FORM 8-K.

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

         No report on Form 8-K has been filed during the last quarter of the
period covered by this report.

                                          5


<PAGE>

                                                                McGrath RentCorp
                                                                  1995 Form 10-K


 
                                     SIGNATURES
                                      ----------

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

Date: March 29, 1996                        MCGRATH RENTCORP


                                       By:  /s/ Robert P. McGrath
                                            ---------------------
                                            Robert P. McGrath,
                                            Chief Executive Officer

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


SIGNATURE                              TITLE                          DATE
- ---------                              -----                          ----

/s/ Robert P. McGrath        Chairman of the Board, and Chief     March 29, 1996
- ------------------------     Executive Officer
Robert P. McGrath


/s/ Delight Saxton           Vice President, Chief Financial      March 29, 1996
- ------------------------     Officer, Secretary, and Director
Delight Saxton


/s/ Joan M. McGrath           Director                            March 29, 1996
- ------------------------
Joan M. McGrath

                                          6





<PAGE>



                                   EXHIBIT 4.1



<PAGE>

               FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
               --------------------------------------------------------

This FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT ("First
Amendment") is made this 16th day of June, 1995, among McGRATH RENTCORP., a
California corporation (the "Borrower"), and THE BANK OF CALIFORNIA, NATIONAL
ASSOCIATION, NATIONAL WESTMINSTER BANK, USA and BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION (each a "Bank" and collectively the "Banks") and THE
BANK OF CALIFORNIA, NATIONAL ASSOCIATION, as agent (the "Agent") for the Banks.


                                       RECITALS
                                       --------

A.  The Borrower is currently indebted to Banks pursuant to the terms and
conditions of that certain Amended and Restated Credit Agreement dated June 14,
1994 (the "Agreement"), pursuant to which Banks extended to the Borrower certain
Loans (as defined in the Agreement).

B.  The Borrower and the Banks have agreed to amend the Agreement to reflect
certain changes in the terms and conditions set forth in the Agreement.


                                      AGREEMENT
                                      ---------

NOW, THEREFORE, the Borrower, the Banks and the Agent hereby agree as follows:

1.  DEFINITIONS.  Unless otherwise expressly provided herein, each capitalized
    -----------
term used in this First Amendment shall have the same meaning as set forth in
the Agreement.

2.  AMENDMENT OF SECTION
 8.4.  Section 8.4 of the Agreement is hereby amended
    ------------------------
in its entirety to read as follows:

         "8.4.  GUARANTIES.  Except guaranties in existence as of the date of
                ----------
    this agreement in connection with Borrower's Investor-Owner Sales Program,
    Borrower shall not become liable, directly or indirectly, as guarantor or
    otherwise, for any obligation of any other person or entity in excess of
    One Million Five Hundred Thousand Dollars ($1,500,000) in the aggregate, at
    any time."

3.  FULL FORCE AND EFFECT.   Except as specifically provided herein, all terms
    ---------------------
and conditions of the Agreement and each Loan Document remain in full force and
effect, without waiver or modification.  This First Amendment shall not be
construed as a waiver of or a consent to any default under or breach of the
Agreement.  This First Amendment and the Agreement shall be read together as one
document.


                                         -7-


<PAGE>

4.  REPRESENTATIONS AND WARRANTIES  As part of the consideration for the Banks
    ------------------------------
and Agent to enter into this First Amendment, the Borrower represents and
warrants to the Banks and Agent as follows:

    (a)  The execution, delivery and performance by the Borrower of this First
Amendment are within the Borrower's corporate powers, have been duly authorized
by all necessary corporate action, and require no action by or in respect of, or
filing with, any governmental body, agency or official, and the execution,
delivery and performance by the Borrower of this First Amendment do not
contravene, or constitute a default under, any provision of applicable law or
requirements or of the certificate or articles of incorporation or the by-laws
of the Borrower or of any material agreement, judgment, injunction, order,
decree or other instrument binding upon the Borrower or any assets of the
Borrower, or result in the creation or imposition of any Lien on any asset of
the Borrower.

    (b)  This First Amendment constitutes the valid and binding obligation of
the Borrower, enforceable against it in accordance with its terms, except as
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, equity of redemption, moratorium or other laws now or hereafter
in effect relating to creditors rights, and to general principles of equity 
(regardless of whether enforcement is sought in a proceeding in equity or at
law).

    (c)  No Event of Default has occurred and is continuing, and the
representations and warranties of the Borrower in the Agreement and other Loan
Documents delivered pursuant thereto are true and correct in all material
respects as of the date hereof as if made on the date hereof.

    (d)  The officer of the Borrower executing and delivering this First
Amendment on behalf of the Borrower has been duly authorized by appropriate
corporate resolutions to so execute and deliver this First Amendment.


                                         -8-


<PAGE>

5.  COUNTERPARTS.  This First Amendment may be executed by the parties hereto
    ------------
in one or more counterparts and all such counterparts, when taken together,
shall constitute one and the same First Amendment.

IN WITNESS WHEREOF, the Borrower, the Banks and the Agent have executed this
First Amendment as of the date first set forth above.


                   BORROWER:      McGRATH RENTCORP.,
                                  A California corporation

                                  By: /s/ Delight Saxton
                                     ----------------------

                                  Its: Vice President of Admin. CFO
                                     -------------------------------

                   BANKS:         THE BANK OF CALIFORNIA, NATIONAL ASSOCIATION


                                  By: /s/ Robert J. Vernagallo
                                     ----------------------------

                                  Its: Vice President

                                  NATIONAL WESTMINSTER BANK, USA

                                  By:
                                      --------------------------

                                  Its:
                                      --------------------------


                                  BANK OF AMERICA NATIONAL TRUST 
                                  AND SAVINGS ASSOCIATION

                                  By:
                                     ---------------------------

                                  Its:
                                      ---------------------------

                   AGENT:         THE BANK OF CALIFORNIA, NATIONAL ASSOCIATION,
                                  as Agent


                                  By:  /s/ Robert J. Vernagallo
                                     ---------------------------

                                  Its: Vice President


                                         -9-





<PAGE>
  
                                              EXHIBIT 11


<PAGE>
   
                                             EXHIBIT 11
                                          McGrath RentCorp
                                 Weighted Average Shares Composition
 

<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
                                                                       ------------------------
                                                                 1995              1994              1993
                                                                 ----              ----              ----
                        Primary
                        -------
<S>                                                          <C>               <C>              <C> 
Weighted common shares issued and outstanding                 7,974,362         8,279,350        8,306,641

Common stock equivalents                                        109,885           135,920          101,349
                                                              ---------         ---------        ---------
  Shares used for EPS calculation                             8,084,247         8,415,270        8,407,990
                                                              ---------         ---------        ---------
                                                              ---------         ---------        ---------

                        Fully Diluted
                        -------------
Weighted common shares issued and outstanding                 7,974,362         8,279,350        8,306,641

Common stock equivalents                                        125,017           147,409          119,579
                                                              ---------         ---------        ---------
  Computed fully diluted shares                               8,099,379         8,426,759        8,426,220
                                                              ---------         ---------        ---------
                                                              ---------         ---------        ---------

</TABLE>

                                    -10-






<PAGE>

THE CORPORATION
- -------------------------------------------------------------------------------
2500 Grant Avenue, San Lorenzo, CA 94580  (510) 276-2626

     McGrath RentCorp is engaged in the business of renting and selling 
relocatable modular offices and classrooms, and electronic test and 
measurement instruments with related accessories. Although the Company's 
primary emphasis is on rentals, both modulars and instruments are also sold 
to direct-use customers. The Company uses the tradenames "Mobile Modular" and 
"Rentelco". The Company manufactures portable classrooms through its 
subsidiary, Enviroplex, Inc., which sells directly to school districts.

[PHOTO OF SIGNS]


CONSOLIDATED FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Operations Data:
- ------------------------------
                                                          Percent
Year ended December 31,             1995        1994      Change
                                  --------    --------    -------
Rental Revenues                   $ 46,063    $ 46,149         -%
Total Revenues                      71,273      68,295         4
Net Income                          13,843      13,004         6
Net Income Per Share                  1.71        1.55        10
Cash Dividends Per Share              0.48(1)     0.44(1)      9

Balance Sheet Data (YEAR-END):
- ------------------------------
Rental Equipment, net             $127,608    $127,244         -%
Total Assets                       175,130     169,923         3
Notes Payable                       37,080      35,950         3
Shareholders' Equity                85,893      83,839         2

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

Footnote
- -------------------------------------------------------------------------------

1.  DIVIDEND OF $0.11 PER SHARE DECLARED IN JANUARY 1995 IS EXCLUDED FROM
THE 1995 AMOUNT AND INCLUDED IN THE 1994 AMOUNT.


<PAGE>

A MESSAGE 
TO OUR 
SHAREHOLDERS
- ------------

Robert
 P. McGrath
Dennis C. Kakures

     Over the last several years we have talked about the real inner strength 
of the Company.  In 1995 we instituted a program we call Exemplary Customer 
Service (ECS).  Our Credo, developed and pledged by our staff reads:

          I will, as a team member of McGrath, embrace our customers'
          needs, and deliver exemplary service to earn customer loyalty.

          I will do this by:

            - focusing on doing things right the first time
            - providing the utmost attention to detail, and
            - always doing what I say I am going to do, with integrity.

     Each of our offices conducts series of short meetings wherein our staff
acknowledges those peers who have performed beyond the call of duty, either in
the service of our customers or in the improvement of our product.  This program
has become much more than lip service; it is becoming an integral part of the
McGrath way of doing business.

     A year ago we cautioned that our record results were impacted positively by
the 1994 Northridge earthquake, and that it would be difficult to make up those
earnings in 1995.  We are pleased that total revenues for 1995 increased 4% over
1994 to $71,273,000, net income increased 6% to $13,843,000, and net income per
share increased 10% to $1.71 per share.  Once again this was the best year in
our history.

     Cash flow continues strong.  Rental assets increased by $7,713,000,
improvements increased by $5,796,000, dividends paid were $3,768,000 and stock
repurchased was $7,374,000 while our debt increased by only $1,130,000.

     Last year we discussed our purchase of Rentelco three years earlier, and
how that fits in with our philosophy--good people in a good working environment
produce the best results.  1995 was again an excellent year for Rentelco.

     This year we want to discuss Enviroplex.  Several years ago we funded this
startup company which wanted to make a contribution as a manufacturer of
portable classrooms.  In January 1995, we converted our note to a 73% ownership
interest and the results are now part of our consolidated financial statements. 
President Joe Sublett has done an excellent job and brings a wealth of
manufacturing know-how to Enviroplex.  We like to think that Joe produces the
best portable classrooms in the industry and his repeat customers tend to
confirm this position.  The head of the General Services Administration singled
out a "School Project of the Future" produced by a private contractor.  That
award-winning project had classrooms provided by Enviroplex.  This same
philosophy of good people and a good working environment has again produced good
results.

     Our business strategy calls for creating facility capabilities that our
competitors cannot duplicate.  This will enable us to quickly and efficiently
modify buildings to meet our customer's needs.  Our goal is to be more
responsive at less expense.  There is solid progress. Our new Houston facility
came on line in June 1995; we plan to move into our new Southern California
facility by the time you receive this report; the move to our new Northern
California facility is scheduled for the end of 1996.  Our new computer based
relational database programs that control our internal operations are about 70%
operational.

     Executing these operational plans requires dedication, a willingness to
embrace change and painstaking work.  As we said last year, shareholders like to
hear about pizzazz and we are serving up bricks, mortar and computers.  However,
we continue to emphasize that our long-term success lies in our ability to
provide a better service to our customers with our per transaction cost less
than that of our competitors. We continue to look for investment opportunities
in related areas.

     After the California school bond issue failed to pass in 1994, the money
for classroom modernization programs slowed down. On March 26, 1996, California
voters passed a 3 billion dollar bond measure.  A certain amount will be spent
on modernization programs and we are looking forward to participating in this
business.

     Given our strong balance sheet and cash flow and our prospects for 1996, we
are increasing our next quarterly dividend to $0.14 per share.

Sincerely,



  /s/ Robert P. McGrath                   /s/ Dennis C. Kakures
- -----------------------------------     -------------------------------------
Robert P. McGrath                       Dennis C. Kakures
Chairman and Chief Executive Officer    President and Chief Operating Officer

     P.S.  In his first year as President, Dennis Kakures has more than met our
expectations.  His thirteen years with the Company have prepared him well.  He
brings energy and persistence to the development and marketing of our products,
to the streamlining of our operations and the development of our management. 
The results are already visible.

                                        RPM
1




[PHOTO OF CHAIRMAN
PHOTO OF PRESIDENT]


<PAGE>

COMPANY
PROFILE
- -------


     Since its founding and incorporation in 1979, McGrath RentCorp has 
rented and sold relocatable modular offices designed to fill customers' 
temporary space needs.  These units are used as temporary offices adjacent to 
existing facilities, and as classrooms, sales offices, construction field 
offices and for a variety of other purposes.  Under the trade name "Mobile 
Modular Management Corporation", the Company conducts its rental and sales 
operations of relocatable modular offices from branch offices, two in 
California and one in Texas.

     In 1985, the Company expanded its operations into the rental of 
electronic test and measurement instruments.  Engineers, scientists and 
technicians use these instruments in evaluating the performance of their own 
electrical and electronic equipment, developing products, controlling 
manufacturing processes and in field service applications.  These instruments 
are rented primarily to electronics, industrial, research and aerospace 
companies.  The majority of the Company's inventory consists of instruments 
manufactured by Hewlett-Packard and Tektronix.  The Company conducts rental 
and sales operations of electronic instruments from its Northern California 
branch office and telecommunications test equipment from its Dallas, Texas 
branch office.

     In January 1995, the Company converted a $300,000 note receivable to a 
73.2% ownership interest in Enviroplex, Inc.  Enviroplex, Inc. manufactures 
portable classrooms built to the requirements of the California Division of 
the State Architect ("DSA") and sells primarily to school districts.

     The following table shows the revenue components, percentage of total 
revenues, original cost and net book value of equipment, and average 
utilization by product line for the past five years.

PRODUCT HIGHLIGHTS
- -------------------------------------------------------------------------------
(DOLLAR AMOUNTS IN THOUSANDS)


<TABLE>
<CAPTION>

Year ended December 31,                1995        1994         1993        1992        1991
                                     --------    --------     --------   ---------   ---------
<S>                                  <C>         <C>         <C>         <C>          <C>
RELOCATABLE MODULAR OFFICES
- ---------------------------
     Rental Operations:
          Rental                     $ 31,577    $ 33,386     $ 30,565    $ 31,103    $ 30,523
          Rental Related Services       9,103       9,181        7,429       6,755       6,822
                                     --------    --------     --------    --------    --------
                                       40,680      42,567       37,994      37,858      37,345
     Sales and Related Services(1)     11,347       9,039        6,153       5,799      10,356
                                     --------    --------     --------    --------    --------
            Total Revenues           $ 52,027    $ 51,606     $ 44,147    $ 43,657    $ 47,701
                                     --------    --------     --------    --------    --------
                                     --------    --------     --------    --------    --------
     Percentage of Total Revenues       73.0%       75.6%        77.3%       80.0%       85.6%
                                     --------    --------     --------    --------    --------
                                     --------    --------     --------    --------    --------
     Original Cost (YEAR-END)        $146,868    $144,674     $136,729    $130,075    $118,671
                                     --------    --------     --------    --------    --------
                                     --------    --------     --------    --------    --------
     Net Book Value (YEAR-END)       $104,069    $107,341     $104,830    $103,802    $ 97,885
                                     --------    --------     --------    --------    --------
                                     --------    --------     --------    --------    --------
     Average Utilization Rate(2)        73.9%       79.3%        77.0%       78.8%       81.9%
                                     --------    --------     --------    --------    --------
                                     --------    --------     --------    --------    --------
ELECTRONIC TEST AND
 MEASUREMENT INSTRUMENTS
- ---------------------------
     Rental Operations:
          Rental                     $ 14,486    $ 12,763     $ 10,128    $  7,654    $  6,418
          Rental Related Services         268         265          245         189         114
                                     --------    --------     --------    --------    --------
                                       14,754      13,028       10,373       7,843       6,532
     Sales and Related Services         4,492       3,661        2,615       3,072       1,531
                                     --------    --------     --------    --------    --------
          Total Revenues             $ 19,246    $ 16,689     $ 12,988    $ 10,915    $  8,063
                                     --------    --------     --------    --------    --------
                                     --------    --------     --------    --------    --------
     Percentage of Total Revenues       27.0%       24.4%        22.7%       20.0%       14.4%
                                     --------    --------     --------    --------    --------
                                     --------    --------     --------    --------    --------
     Original Cost (YEAR-END)        $ 34,933    $ 29,542     $ 26,692    $ 21,218    $ 20,585
                                     --------    --------     --------    --------    --------
                                     --------    --------     --------    --------    --------
     Net Book Value (YEAR-END)       $ 21,208    $ 17,735     $ 16,524    $ 13,550    $ 14,498
                                     --------    --------     --------    --------    --------
                                     --------    --------     --------    --------    --------
     Average Utilization Rate(2)        55.2%       56.0%        52.3%       46.7%       47.5%

- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>


Footnote
- -------------------------------------------------------------------------------

1.  INCLUDES REVENUES OF THE COMPANY'S MAJORITY OWNED SUBSIDIARY.

2.  UTILIZATION IS CALCULATED AS OF THE END OF EACH MONTH BY DIVIDING THE 
ORIGINAL COST OF EQUIPMENT ON RENT BY THE TOTAL ORIGINAL COST OF ALL 
EQUIPMENT IN THE RENTAL INVENTORY; AND THE FIGURES SHOWN ARE THE AVERAGE OF 
SUCH MONTHLY FIGURES FOR EACH YEAR.                          

2

<PAGE>

     The Company has 252 employees.  The operational compatibility between 
the two rental product lines results in the efficient use of overhead.

     No single customer of either product line has accounted for more than 10%
of the Company's total revenues generated in any given year.  Our business is
not seasonal, except for the rental of classrooms, which is heaviest in the
several months prior to the opening of school each fall.

     We are a company with a marketing sense throughout.  We are constantly
searching for ways both to streamline our service and to raise the quality of
each relocatable office or instrument we rent.  We are not only renting
products, we are selling an old-fashioned idea:  Paying attention to our
customers pays off.

OUR
PRODUCTS
- --------

RELOCATABLE MODULAR OFFICES
- -------------------------------------------------------------------------------

     Relocatable modular offices are designed for use as temporary office 
space and may be towed from one location to another.  Offices vary from 
simple single-unit construction site offices to attractive multi-module 
facilities, complete with wood exteriors and mansard roofs. The rental fleet 
includes a full range of styles and sizes.  We consider our relocatable 
offices to be among the most attractive and well designed available.  The 
units are constructed with wood siding which are sturdily built and 
physically capable of a useful life often exceeding 18 years.  Units are 
provided with installed heat, air conditioning, lighting, electricity and 
floor covering, and may have customized interiors including partitioning, 
carpeting, cabinetwork and plumbing facilities.

     The market for relocatable modular offices is broad.  Businesses which 
have a need for additional space and have adjacent land or a parking lot are 
potential customers.  Our largest single demand is for temporary classrooms.  
We believe the demand for classrooms is caused by shifting and fluctuating 
school populations, the lack of state funds for new construction, and the 
need for temporary classroom space during reconstruction of older schools.  
Other applications include sales offices, administrative offices for health 
care facilities, universities and museums.  Large multi-modular complexes are 
used by the aerospace, energy and utility industries, and governmental 
agencies.  Our branch offices, as well as our corporate office, are housed in 
various sizes of relocatable buildings.

     The Company purchases new relocatable modular offices from various 
manufacturers who build to the Company's design specifications.  None of the 
principal suppliers are affiliated with the Company.  The Company believes 
that the loss of any one of these suppliers would not have a material adverse 
effect on its operations.

     Since most of our customer requirements are to fill temporary space 
needs, the Company's marketing emphasis is on rentals rather than sales.  The 
Company solicits customers through extensive yellow-page advertising, 
telemarketing and direct mail.  Customers are encouraged to visit an 
inventory center to view different models on display and to see the branch 
office, which itself is a working example of a relocatable modular office.

     Rental periods range from one month to five years, with a typical rental 
period of one year.  Most rental agreements provide no purchase options, and 
when a rental agreement does provide the customer with a purchase option, it 
is generally on terms attractive to the Company.  

3

[PHOTO OF BUILDING]


<PAGE>

OUR
PRODUCTS
- --------

     The customer is responsible for the cost of transporting the unit to the 
site, preparation of the site, installation of the unit, dismantle and return 
of the unit to one of the Company's three inventory centers, and certain 
costs for customization.  We maintain the units in good working order while 
on rent.  Upon return, the units are refurbished for subsequent use including 
floor tile repairs, roof maintenance, cleaning, painting and cosmetic work.

     In addition to operating its rental fleet, the Company sells relocatable 
offices to customers who have a direct and permanent use for such units.  
These sales arise out of our marketing efforts for the rental fleet and 
manufactured classrooms.  Such sales can be of either new units or used units 
from the rental fleet or new manufactured classrooms.  Of 1995 sales to 
direct-use customers, 58% arose from the Company's rental operations (20% 
were new equipment and 80% were used) and 42% were newly manufactured 
classrooms from Enviroplex, Inc.

     Competition in the rental and sale of relocatable modular offices is 
intense.  Many firms are engaged in the rental of relocatable modular 
offices, and some have substantially greater financial resources than the 
Company. Significant competitive factors in the rental business include 
availability, price, services, reliability and the quality and attractiveness 
of the units. McGrath RentCorp markets high-quality, well constructed and 
attractive offices. We believe that this strategy, together with our emphasis 
on prompt and efficient customer service, gives us a competitive advantage.  
We are determined to offer quick response to requests for information, 
experienced assistance for the first-time user, rapid delivery and timely 
maintenance of our units.  The Company has a sales and maintenance staff 
trained in the Company's tradition of excellence in service.

     We are eager to be accountable for the quality of the product we rent 
and for the excellence of our response to customer requests.  In fact, we 
enjoy the satisfaction of a job well done, and we take pains to see that we 
never lose this company ethic.

CLASSROOM RENTALS
- -------------------------------------------------------------------------------

     The rental of relocatable modular offices to school districts for use as 
portable classrooms, restroom buildings and administrative offices for 
kindergarten through grade twelve (K-12) accounted for approximately 34% of 
the Company's relocatable modular rental revenues during 1995 compared to 38% 
in 1994.  The Company believes the decline in rental revenues derived from 
school districts is the result of a lack of available modernization and 
reconstruction funds due to the failed 1994 school bond measure.

     In California (where most of the Company's rentals to school districts 
have occurred), school districts are permitted to purchase only portable 
classrooms which have been built to the requirements of the California 
Division of the State Architect ("DSA").  However, school districts may rent 
classrooms that meet either the Department of Housing ("DOH") or DSA 
requirements.  Prior to 1988, the majority of the classrooms in the Company's 
rental fleet were built to the DOH requirements, and since 1988 the majority 
of new classrooms have been built to the DSA requirements.  In 1988, 
California adopted a law which limits the term for which school districts may 
rent portable classrooms built to DOH standards to three years (under a 
waiver process), and which also requires the school board to indemnify the 
State against any claims arising out of the use of such classrooms.  As a 
consequence, the tendency is for the Company to rent the DOH classrooms for 
shorter periods and to rent the DSA classrooms for longer periods.  In 1993, 
a new law went into effect that allowed school districts that already had DOH 
classrooms to continue to rent them for an additional three years (i.e. up to 
six years in total).  New orders for DOH classrooms placed after 1992 are 
restricted to the three year limitation as before.

     New legislation has been adopted that eliminates the waiver process 
after September 30, 1997 or the expiration of the waiver in effect, whichever 
is longer.  New regulations are in place that allow the use of the DOH 
classrooms for periods up to 24 months anytime after September 30, 1997, 
provided they receive a "Temporary Certification" from DSA.

4


<PAGE>
 
     All of the Company's DOH classrooms, with the exception of the 24'x40' 
standard classrooms, are also suitable for rent to non-school customers for 
commercial uses.  Generally, the 24'x40' standard classrooms are not popular 
for commercial use.  The Company has continued to rent returned DOH 24'x40' 
standard classrooms to school districts since 1988 and there is no reason to 
believe that it will not continue to do so in the future. However, there can 
be no assurance that this law or new laws may not adversely affect the 
Company's future classroom rental business.

     The following table shows the relationship of 24'x40' standard DOH 
classrooms to DSA equipment marketed to school districts as of December 31, 
1995, 1994 and 1993. 

EQUIPMENT COMPARISON 
- -------------------------------------------------------------------------------
(DOLLAR AMOUNTS IN THOUSANDS)

Balance At December 31,                    1995      1994      1993
                                          -------   -------   -------
24'x40' Standard DOH Classrooms:
     Original Cost On Rent                $10,449   $13,114   $15,014
     Original Cost Off Rent                 5,015     3,258     1,928
                                          -------   -------   -------
Total Original Cost                       $15,464   $16,372   $16,942
                                          -------   -------   -------
                                          -------   -------   -------
Net Book Value                            $ 9,324   $10,650   $11,986
                                          -------   -------   -------
                                          -------   -------   -------
Utilization(1)                              67.6%     80.1%     88.6%
                                          -------   -------   -------
                                          -------   -------   -------
DSA Equipment:
     Original Cost On Rent                $17,454   $18,644   $17,281
     Original Cost Off Rent                 3,653     1,829     1,236
                                          -------   -------   -------
Total Original Cost                       $21,107   $20,473   $18,517
                                          -------   -------   -------
                                          -------   -------   -------
Net Book Value                            $17,115   $17,304   $16,026
                                          -------   -------   -------
                                          -------   -------   -------
Utilization(1)                              82.7%     91.1%     93.3%

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

Footnote
- -------------------------------------------------------------------------------

1. UTILIZATION IS CALCULATED AS OF DECEMBER 31 BY DIVIDING THE ORIGINAL COST 
OF EQUIPMENT ON RENT BY THE TOTAL ORIGINAL COST OF ALL EQUIPMENT IN THE 
RENTAL INVENTORY CATEGORY.

5


<PAGE>

ELECTRONIC TEST AND MEASUREMENT INSTRUMENTS
- -------------------------------------------------------------------------------


OUR
PRODUCTS
- --------


     McGrath RentCorp commenced its electronic test and measurement  
instrument rental business in 1985, carrying primarily general purpose 
equipment.  In 1991, the Company expanded its rental equipment base through 
the purchase of a telecommunication test equipment rental business conducted 
under the name "Rentelco" in Richardson, Texas (Dallas Area).

     The Company's rental inventory includes electronic instruments such as 
oscilloscopes, spectrum analyzers, logic analyzers, signal generators, 
frequency counters, protocol analyzers, cable locaters, fiber optic and sonet 
equipment. A typical rental period is from one to six months.  The Company 
also rents electronic instruments from other rental companies and re-rents 
the instruments to customers.  The Company endeavors to keep its equipment 
fresh and attempts to sell equipment so that the majority of the inventory is 
less than five years old.

     The business of renting electronic test and measurement instruments is 
an industry which emerged approximately 30 years ago, and which today has 
equipment on rent or available for rent in the United States with an 
aggregate original cost of several hundred million dollars.  While there is a 
broad customer base for the rental of such instruments, most rentals are to 
electronics, industrial, research and aerospace companies.  Although the 
Company has targeted the rental market in California and Texas, test 
equipment is shipped to other states.

     The industry is dominated by four major companies. Two of these 
companies are much larger than the Company, have substantially greater 
financial resources and are well established in the industry with large 
inventories of equipment, several branch offices and experienced staffs.

     We believe that customers rent electronic test and measurement 
instruments for many reasons.  Customers frequently need equipment for 
short-term projects, for back-up to avoid costly down-time and to evaluate 
new products.  Delivery times for the purchase of such equipment can be 
lengthy; thus, renting allows the customer to obtain the equipment 
expeditiously.  We also believe that a substantial portion of electronic test 
and measurement instruments are used for research and development projects 
where the relative certainty of rental costs can facilitate cost control and 
be useful in bidding for government contracts. Finally, as is true with the 
rental of any equipment, renting rather than purchasing may better satisfy 
the customer's budgetary constraints.

     The electronic test and measurement and the relocatable modular office 
product lines share common facilities, financing, senior management, and 
operating and accounting systems.  Each product line has its own sales and 
technical personnel.

6



[PHOTO OF TWO EMPLOYEES
PHOTO OF PIECE OF TEST EQUIPMENT]

<PAGE>

CONSOLIDATED QUARTERLY (UNAUDITED)
AND FIVE YEAR SELECTED FINANCIAL DATA
- -------------------------------------


<TABLE>
<CAPTION>

- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

                               Operations Data                                    Balance Sheet Data
             ---------------------------------------------------    -----------------------------------------------
                         Income               Net                    Rental
               Total      From       Net     Income    Dividends    Equipment,     Total     Notes    Shareholders'
             Revenues  Operations  Income   Per Share  Per Share       Net         Assets   Payable      Equity
             --------  ----------  -------  ---------  ---------    ----------    --------  -------   -------------
<S>          <C>       <C>         <C>      <C>        <C>          <C>           <C>       <C>       <C>
Total 1991    $55,764     $21,371  $11,366      $1.38     $0.32       $114,695    $137,024  $36,850         $63,157
             --------  ----------  -------  ---------  ---------    ----------    --------  -------   -------------
Total 1992     54,572      18,404   10,145       1.18      0.36        119,681     144,223   35,000          68,700
             --------  ----------  -------  ---------  ---------    ----------    --------  -------   -------------
Total 1993     57,135      19,083   10,637       1.27      0.40        123,431     161,427   40,100          76,071
             --------  ----------  -------  ---------  ---------    ----------    --------  -------   -------------
Quarter
     1st       16,351       5,581    3,138       0.37      0.11        124,052     162,772   36,700          78,302
     2nd       16,251       5,888    3,303       0.39      0.11        127,708     166,716   37,275          80,695
     3rd       20,091       6,787    3,800       0.45      0.11        127,150     169,565   37,025          82,127
     4th       15,602       6,290    2,763       0.33      0.11(1)     127,244     169,923   35,950          83,839
             --------  ----------  -------  ---------  ---------    ----------    --------  -------   -------------
Total 1994     68,295      24,546   13,004       1.55      0.44        127,244     169,923   35,950          83,839
             --------  ----------  -------  ---------  ---------    ----------    --------  -------   -------------
Quarter
     1st       16,649       5,935    3,177       0.38      0.12        126,761     170,510   34,050          84,451
     2nd       17,121       6,157    3,264       0.39      0.12        127,901     174,540   37,315          85,270
     3rd       19,067       6,627    3,506       0.44      0.12        128,308     177,065   39,925          82,801
     4th       18,436       7,118    3,896       0.49      0.12        127,608     175,130   37,080          85,893
             --------  ----------  -------  ---------  ---------    ----------    --------  -------   -------------
Total 1995     71,273      25,837   13,843       1.71      0.48        127,608     175,130   37,080          85,893
             --------  ----------  -------  ---------  ---------    ----------    --------  -------   -------------

- -------------------------------------------------------------------------------------------------------------------
</TABLE>


1.  DECLARED JANUARY 1995.


7


<PAGE>

MANAGEMENT'S
DISCUSSION
AND ANALYSIS
- ------------


     Revenues are derived primarily from the rental of relocatable modular 
offices and electronic test and measurement instruments.  The Company has 
expanded the rental inventory of relocatable modular offices and electronic 
instruments. This expansion has been funded through internal cash flow and 
conventional bank financing.

     The major portion of the Company's revenue is derived from rentals and 
rental related services, comprising approximately 78% of total revenues in 
1995. Over the past three years relocatable modular offices comprised 76% of 
the cumulative rental revenues, and test and measurement instruments 
comprised 24% of the cumulative rental revenues.  Classrooms are a 
significant part of the Company's business (see "Our Products" - "Classroom 
Rentals").

     The Company sells both previously rented and new relocatable modular 
offices to customers who have a direct and permanent use for such units, and 
through its majority owned subsidiary Enviroplex, Inc., sells DSA classrooms 
directly to school districts.  The Company also acts as a dealer of new 
relocatable modular offices and is licensed as a dealer by governmental 
agencies in California and Texas.  The Company also sells units from its 
rental inventory of test and measurement equipment.  Revenues from sales of 
both modular and electronic equipment have comprised approximately 19% of 
total revenues over the last three years.

FISCAL YEARS
1995 AND
1994
- ------------

     Rental revenues for 1995 decreased $86,000 from 1994. The rental revenue 
increase from electronics of $1,723,000 was offset by a $1,809,000 decrease 
in rental revenues from  relocatable modular offices.  The rental revenue 
decline for modulars was primarily due to the return of a significant amount 
of equipment (220 unit complex) from a single customer which had generated 
rental billings of $1,290,000 per year.  Average utilization declined for 
both modular equipment, from 79.3% to 73.9%, and for electronics equipment, 
from 56.0% to 55.2%, as compared to 1994.  Rental related services for 1995 
decreased $75,000 from 1994 with gross margin increasing from 34% in 1994 to 
41% in 1995.  The increase in gross margin was due to additional incentive 
fees earned by the Company for equipment management.

     Sales and related services in 1995 increased $3,139,000 (25%) over 1994. 
The sales volume increase is due to the contribution of the Company's 
majority owned subsidiary, Enviroplex, Inc., which had sales of $4,775,000. 
Gross margin on sales and related services remained the same at 32% for 1995 
and 1994.  Sales and related services fluctuate from quarter to quarter and 
from year to year depending on customer demands and requirements.

     Interest expense in 1995 increased $664,000 (31%) over 1994 as a result of
slightly higher borrowing levels combined with a higher average interest rate of
7.3% in 1995 versus 5.6% in 1994.

     Income before provision for taxes increased $627,000 (3%) in 1995 over 1994
while net income increased $839,000 (6%) due to a lower effective tax rate in
1995 of 39.8% compared to 41.9% in 1994.  Earnings per share increased 10%, from
$1.55 in 1994 to $1.71 in 1995, primarily as a result of fewer outstanding
shares.


8


<PAGE>

FISCAL YEARS
1994 AND
1993
- ------------

     Rental revenues for 1994 increased $5,456,000 (13%) over 1993.  Rentals 
from both modular and electronic equipment contributed to the increase in 
rental revenues, with 52% ($2,821,000) derived from modulars due in part to 
the requirements caused by the January 1994 earthquake in Northridge, 
California and 48% ($2,635,000) derived from electronics.  Generally, rates 
on new leases in 1994 were higher than in 1993.  Average utilization improved 
for both modular equipment, from 77.0% to 79.3%, and electronics equipment, 
from 52.3% to 56.0%, as compared to 1993.

     Rental related services increased $1,772,000 (23%) over 1993.  The 
increase in rental related services resulted from significant requirements 
for site work on five projects (one earthquake related) of $1,063,000, 
coupled with increased shipments of modular equipment in part related to the 
Northridge earthquake. Gross margin for rental related services increased 
from 29% in 1993 to 34% in 1994.

     Sales and related services in 1994 increased $3,932,000, a 45% increase 
over 1993.  During 1994, ten significant sales of rental equipment accounted 
for $4,653,000 (37%) of the sales volume.  The largest sale for the year 
occurred to a school district in the amount of $1,183,000 and consisted of 
modular classrooms which had been on rent to the school district.  Sales and 
related services from year to year have fluctuated depending on customer 
requirements. Gross margin on sales and related services increased from 28% 
in 1993 to 32% in 1994.

     Depreciation on rental equipment in 1994 increased $576,000, a 6% 
increase over 1993 due to the increase in rental equipment.

     Selling and administrative expenses increased $1,763,000, a 15% increase 
over 1993 primarily due to increased personnel costs which includes bonuses, 
additional support staff, modular repair and maintenance labor and temporary 
labor costs.

     Interest expense in 1994 increased $406,000, a 23% increase over 1993, 
as a result of an increase in the average interest rate from 4.5% in 1993 to 
5.6% in 1994 while average borrowing levels remained approximately the same 
during 1994.

     Income before provision for income taxes increased 29% in 1994 over 1993 
and represented 33% of the total revenues compared with 30% in 1993.  Net 
income increased only 22% due to a higher effective tax rate of 41.9% in 1994 
as compared to 38.6% in 1993.


9


<PAGE>

LIQUIDITY
AND
CAPITAL
RESOURCES
- ---------

     The Company requires substantial capital in order to maintain an 
available inventory of relocatable modular offices and electronic test and 
measurement instruments necessary to satisfy customer requirements in a 
timely manner.  In 1995, as in prior years, the primary use of cash was for 
the purchase of rental equipment.  During the last three years, the growth of 
the rental inventory has been financed primarily by cash flow from operations 
and bank borrowings. During 1995, the Company demonstrated its strong cash 
flow by purchasing $17,252,000 of rental equipment, purchasing $6,340,000 of 
land improvements, furniture and equipment, repurchasing $7,374,000 of common 
stock, paying dividends of $3,768,000, and paying income taxes of $7,457,000, 
while increasing its debt by only $1,130,000 during the year.

     The Company believes that bank borrowings will continue to be a source 
of funds for the purchase of rental equipment.  As the Company's assets have 
grown, it has been able to negotiate increases in the borrowing limit under 
its general bank line of credit to its current $50,000,000 limit consistent 
with its increased asset base.  Although no assurance can be given, the 
Company believes it will continue to be able to negotiate higher limits on 
its general bank line of credit adequate to meet capital requirements not 
otherwise met by operational cash flows.  Additionally, the Company 
guarantees a $1,000,000 line of credit for its majority owned subsidiary.  
The Company had a total liabilities to equity ratio of 1.04 to 1 and 1.03 to 
1 as of December 31, 1995 and 1994, respectively.  The debt (notes payable) 
to equity ratio was 0.43 to 1 at December 31, 1995 and 1994.

     During 1994, the Company repurchased 158,354 shares of its outstanding 
common stock for an aggregate purchase price of $2,533,000 (or an average 
price of $15.99 per share).  During 1995, the Company repurchased 436,066 
shares of its outstanding common stock for an aggregate purchase price of 
$7,374,000 (or an average price of $16.91 per share).  These repurchases were 
made in the over-the-counter market (NASDAQ) and through privately 
negotiated, large block transactions.

      The Company believes that its needs for working capital and capital 
expenditures through 1996 and beyond will adequately be met by cash flow and 
bank borrowings.

IMPACT OF
INFLATION
- ---------

     Although the Company cannot precisely determine the effect of inflation, 
from time to time it has experienced increases in the cost of rental 
equipment, as well as operating and interest expenses.  Because most of its 
rentals are relatively short term, the Company has generally been able to 
pass on such increased costs through increases in rental rates and selling 
prices.


10


<PAGE>

PROPERTIES
- ----------

     The Company currently conducts its operations from five locations.  
Inventory centers, at  which relocatable modular offices are displayed, 
refurbished and stored are located in San Lorenzo, California (San Francisco 
Bay Area), Mira Loma, California (Los Angeles Area), and Pasadena, Texas 
(Houston Area).  These three branches conduct rental and sales operations 
from multi-unit, relocatable modular offices, serving as working models of 
the Company's product.  Electronic test and measurement instrument rental and 
sales operations are conducted from the San Lorenzo facility and from the 
Rentelco facility in Richardson, Texas (Dallas Area).  The Company's majority 
owned subsidiary, Enviroplex, Inc., manufactures portable classrooms from its 
facility in Stockton, California (San Francisco Bay Area).

     The Company has purchased land at three of the branch locations during 
the last few years; 137.7 acres in Livermore, California (San Francisco Bay 
Area) in 1991, 50 acres in Pasadena, Texas (Houston Area) in 1992 and 78.5 
acres in Mira Loma, California (Los Angeles Area) in 1993.  These land 
purchases will allow the Company to consolidate its relocatable modular 
office storage lots and operations into one location in each of Northern 
California, Southern California and Texas.  The Company has completed the 
Pasadena, Texas facility and anticipates completion of the development of the 
remaining land and the relocation of branch office operations during 1996 and 
1997.

     The following table sets forth for each branch the acres leased, the 
acres owned, and the total acres at December 31, 1995.

FACILITIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                                        Acres
                            -----------------------------
                            Leased      Owned       Total
                            ------      -----       -----
San Francisco Bay Area        23.2(1)   137.7(2)    160.9
Los Angeles Area               8.8       98.5(3)    107.3
Houston Area                     -       50.0(4)     50.0
Dallas Area(5)                   -          -           -
                            ------      -----       -----
                              32.0      286.2       318.2

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

Footnotes
- --------------------------------------------------------------------------------

1.  INCLUDES AN 8.9 ACRE PARCEL WITH A 74,000 SQUARE FOOT MANUFACTURING
    FACILITY.

2.  45 ACRES  OF A 137.7 ACRE PARCEL HAVE BEEN DEVELOPED AND ARE BEING USED 
FOR STORAGE.

3.  80 ACRES ARE BEING USED FOR STORAGE.   THE ADDITIONAL 18.5 ACRES 
DEDICATED TO OFFICE SPACE, MAINTENANCE SHOP AND STORAGE ARE SCHEDULED FOR 
COMPLETION IN MARCH 1996.

4.  34 ACRES ARE BEING USED.  THE REMAINING 16 ACRES WILL BE DEVELOPED FOR 
STORAGE.

5.  LEASED OFFICE SPACE AND WAREHOUSE FACILITY OF APPROXIMATELY 6,611 SQUARE 
FEET.


11


<PAGE>


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- ------------------------------------------------------------------------------


To the Shareholders and Board of Directors of McGrath RentCorp:

     We have audited the accompanying consolidated balance sheets of McGrath 
RentCorp (a California corporation) and subsidiary as of December 31, 1995 
and 1994, and the related consolidated statements of income, shareholders' 
equity and cash flows for each of the three years in the period ended 
December 31, 1995.  These financial statements are the responsibility of the 
Company'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 misstatements.  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 McGrath RentCorp 
as of December 31, 1995 and 1994, and the results of its operations and its 
cash flows for each of the three years in the period ended December 31, 
1995, in conformity with generally accepted accounting principles.

San Francisco, California
February 16, 1996                                   ARTHUR ANDERSEN LLP


<TABLE>

<CAPTION>


CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------------------

                      Year ended December 31,       1995            1994            1993
                                                 -----------     -----------     -----------
<S>                                              <C>             <C>             <C>
REVENUES
- ---------------------------------------------
Rental Operations:
  Rental                                         $46,062,913     $46,148,783     $40,693,085
  Rental Related Services                          9,371,098       9,445,843       7,673,707
                                                 -----------     -----------     -----------
                                                  55,434,011      55,594,626      48,366,792
Sales and Related Services                        15,838,800      12,700,114       8,768,313
                                                 -----------     -----------     -----------
      Total Revenues                              71,272,811      68,294,740      57,135,105
                                                 -----------     -----------     -----------

COSTS & EXPENSES
- ---------------------------------------------
Direct Costs of Rental Operations:
  Depreciation                                    11,538,628      11,017,574      10,441,180
  Rental Related Services                          5,543,173       6,279,402       5,447,563
  Other                                            4,190,313       4,471,245       4,294,031
                                                 -----------     -----------     -----------
                                                  21,272,114      21,768,221      20,182,774
Cost of Sales and Related Services                10,734,775       8,634,057       6,285,459
                                                 -----------     -----------     -----------
                                                  32,006,889      30,402,278      26,468,233
                                                 -----------     -----------     -----------
      Gross Margin                                39,265,922      37,892,462      30,666,872
Selling and Administrative                        13,429,083      13,346,728      11,583,900
                                                 -----------     -----------     -----------
      Income from Operations                      25,836,839      24,545,734      19,082,972
Interest                                           2,830,863       2,166,541       1,760,887
                                                 -----------     -----------     -----------
      Income Before Provision
        for Income Taxes                          23,005,976      22,379,193      17,322,085

Provision for Income Taxes                         9,162,831       9,375,172       6,684,880
                                                 -----------     -----------     -----------
Net Income                                       $13,843,145     $13,004,021     $10,637,205
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Net Income Per Common and Common
   Equivalent Share                              $      1.71     $      1.55     $      1.27
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Weighted Average Number of Common and
   Common Equivalent Shares Outstanding            8,084,247       8,415,270       8,407,990
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL 
STATEMENTS.

                   12


<PAGE>


<TABLE>
<CAPTION>

CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------------------------

                                     Balance at December 31,             1995             1994
                                                                     ------------     ------------
<S>                                                                  <C>              <C>

ASSETS
- ------------------------------------------------------------
Cash                                                                 $    221,075     $  1,151,648
Accounts Receivable, less allowance for doubtful accounts
 of $605,000 in 1995 and $1,400,000 in 1994                            13,201,196       12,662,213

Rental Equipment, at cost:
  Relocatable Modular Offices                                         146,867,850      144,674,027
  Electronic Test Instruments                                          34,932,807       29,541,687
  Accessory Equipment                                                   3,755,754        3,627,776
                                                                     ------------     ------------
                                                                      185,556,411      177,843,490
  Less - Accumulated Depreciation                                     (57,948,456)     (50,599,702)
                                                                     ------------     ------------
                                                                      127,607,955      127,243,788

Land, at cost                                                          19,489,300       19,484,550
Land Improvements, Furniture and Equipment, at cost, less
  accumulated depreciation of $2,708,404 in 1995 and
 $2,348,664 in 1994                                                    12,713,095        7,276,411
Prepaid Expenses and Other Assets                                       1,897,700        2,103,913
                                                                     ------------     ------------

                                                                     $175,130,321     $169,922,523

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

LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------------------------------
Liabilities:
  Notes Payable                                                      $ 37,080,000     $ 35,950,000

  Accounts Payable and Accrued Liabilities                             11,701,417        9,603,107
  Deferred Income                                                       5,967,063        7,247,647
  Deferred Income Taxes                                                34,488,695       33,282,281
                                                                     ------------     ------------
    Total Liabilities                                                  89,237,175       86,083,035
                                                                     ------------     ------------
Shareholders' Equity:
  Common Stock, no par value -
    Authorized - 20,000,000 shares
    Outstanding - 7,769,813 shares in 1995
                  and 8,158,687 in 1994                                 8,913,311       15,999,633
  Retained Earnings                                                    76,979,835       67,839,855
                                                                     ------------     ------------
    Total Shareholders' Equity                                         85,893,146       83,839,488
                                                                     ------------     ------------
                                                                     $175,130,321     $169,922,523
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL 
STATEMENTS.


                   13


<PAGE>


<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- ---------------------------------------------------------------------------------------------

                                         Common Stock                              Total
                                         ------------             Retained      Shareholders'
                                    Shares         Amount         Earnings         Equity
                                  ---------     -----------     -----------     -------------
<S>                               <C>           <C>             <C>             <C>
Balance, December 31, 1992        8,304,641     $18,445,346     $50,254,379     $68,699,725

 Net Income                               -               -      10,637,205      10,637,205
 Exercise of Stock Options            8,000          56,750               -          56,750
 Dividends Declared of
   $0.40 per share                        -               -      (3,322,656)     (3,322,656)
- ---------------------------------------------------------------------------------------------

Balance, December 31, 1993        8,312,641      18,502,096      57,568,928      76,071,024

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

 Net Income                               -               -      13,004,021       13,004,021
 Repurchase of Common Stock        (158,354)     (2,532,591)              -       (2,532,591)
 Exercise of Stock Options            4,400          30,128               -           30,128
 Dividends Declared of
   $0.33 per share (Note 6)               -               -      (2,733,094)      (2,733,094)
- ---------------------------------------------------------------------------------------------

Balance, December 31, 1994        8,158,687      15,999,633      67,839,855       83,839,488

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

  Net Income                              -              -       13,843,145       13,843,145
  Repurchase of Common Stock       (436,066)    (7,374,279)               -       (7,374,279)
  Common Stock Issued or
    Reserved Under Long-Term
    Stock Bonus Plan                  6,786        221,609                -          221,609
  Repurchase of Common Stock
    in Connection with the
    Exercise of Stock Options       (19,313)      (336,941)               -         (336,941)
  Exercise of Stock Options          59,719        403,289                -          403,289
  Dividends Declared of
    $0.59 per share (Note 6)              -              -       (4,703,165)      (4,703,165)
- ---------------------------------------------------------------------------------------------

Balance, December 31, 1995        7,769,813    $ 8,913,311      $76,979,835       $85,893,146

- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL 
STATEMENTS.


                   14


<PAGE>


<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------------------------------

Increase (Decrease) in cash
                      Year ended December 31,                 1995            1994           1993
                                                           -----------     -----------    -----------
<S>                                                        <C>             <C>            <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Income                                               $13,843,145     $13,004,021    $10,637,205
  Adjustments to Reconcile Net Income to Net Cash
    Provided by Operating Activities:
    Depreciation                                            12,441,786      11,443,965     10,915,984
    Gain on Sale of Rental Equipment                        (3,281,144)     (3,474,741)    (1,513,626)
    Change in:
      Accounts Receivable                                     (538,983)     (1,651,786)    (2,843,326)
      Prepaid Expenses and Other Assets                        206,213        (279,635)      (319,846)
      Accounts Payable and Accrued Liabilities               1,384,566       2,287,032      1,300,434
      Deferred Income                                       (1,280,584)        539,568       (814,717)
      Deferred Income Taxes                                  1,206,414       2,881,288      4,163,389
                                                           -----------     -----------    -----------
        Net Cash Provided by Operating Activities           23,981,413      24,749,712     21,525,497
                                                           -----------     -----------    -----------
CASH FLOW FROM INVESTING ACTIVITIES:
  Purchase of Rental Equipment                             (17,251,729)    (21,172,069)   (17,040,369)
  Purchase of Land                                              (4,750)              -     (9,695,966)
  Purchase of Land Improvements, Furniture
    and Equipment                                           (6,339,843)     (2,457,641)    (1,491,550)
  Proceeds from Sale of Rental Equipment                     8,630,079       9,816,458      4,363,198
                                                           -----------     -----------    -----------
        Net Cash Used in Investing Activities              (14,966,243)    (13,813,252)   (23,864,687)
                                                           -----------     -----------    -----------
CASH FLOW FROM FINANCING ACTIVITIES:
  Net Borrowings (Payments) Under Line of Credit             1,130,000      (4,150,000)     5,100,000
  Net Proceeds from the Exercise of Stock Options               66,348          30,128         56,750
  Repurchase of Common Stock                                (7,374,279)     (2,532,591)             -
  Payment of Dividends                                      (3,767,812)     (3,564,358)    (3,238,810)
                                                           -----------     -----------    -----------
        Net Cash Provided (Used) by Financing Activities    (9,945,743)    (10,216,821)     1,917,940
                                                           -----------     -----------    -----------
        Net Increase (Decrease) in Cash                       (930,573)       (719,639)      (421,250)
Cash Balance, Beginning of Period                            1,151,648         432,009        853,259
                                                           -----------     -----------    -----------
Cash Balance, End of Period                                $   221,075     $ 1,151,648    $   432,009
                                                           -----------     -----------    -----------
                                                           -----------     -----------    -----------

Interest Paid During the Period                            $ 2,835,280     $ 2,138,725    $ 1,742,028
                                                           -----------     -----------    -----------
                                                           -----------     -----------    -----------
Income Taxes Paid During the Period                        $ 7,456,575     $ 6,537,003    $ 2,459,942
                                                           -----------     -----------    -----------
                                                           -----------     -----------    -----------
Dividends Declared but not yet Paid                        $   935,353     $         -    $   831,264
                                                           -----------     -----------    -----------
                                                           -----------     -----------    -----------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL 
STATEMENTS.


                   15


<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------

NOTE 1 - ORGANIZATION AND BUSINESS

     McGrath RentCorp (the "Company"), also doing business as "Mobile Modular 
Management Corporation" and "Rentelco", is engaged in the business of renting 
and selling relocatable modular offices and electronic test and measurement 
instruments with related accessories primarily in California and Texas. 
Although the Company's primary emphasis is on rentals, both modulars and 
instruments are also sold to direct-use customers.   The rental of 
relocatable modular offices to school districts for use as portable 
classrooms, restroom buildings and administrative offices for kindergarten 
through grade twelve (K-12) accounted for approximately 34% in 1995 and 38% 
in 1994 and 1993 of the Company's modular rental revenues.

     In January 1995, McGrath RentCorp converted a $300,000 note receivable 
to a 73.2% ownership interest in Enviroplex, Inc.  Enviroplex, Inc. 
manufactures portable classrooms built to the requirements of the California 
Division of the State Architect ("DSA") and sells primarily to school 
districts.  During 1995, Enviroplex sales were $4,867,064 which included 
$92,388 of sales to the Company.

NOTE 2 -  SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of the 
Company and its majority owned subsidiary.  All  significant intercompany 
accounts and transactions have been eliminated.

RENTAL, RENTAL RELATED SERVICES AND SALES AND RELATED SERVICES REVENUE

     Rental revenue is recognized under the "operating method" of accounting 
for the majority of leases.  Revenue is recognized on a straight-line basis 
in those cases where equipment is leased with uneven payment terms.  Rental 
billings for more than one month are recorded as deferred income and 
recognized as rental revenue when earned.

     Rental related services revenue is primarily associated with relocatable 
modular office leases and consists of billings to customers for delivery, 
installation, modifications, skirting, additional site related work, return 
delivery and dismantle.  These services are recognized in the period the 
services are performed and accepted.

     Sales and related services revenue is recognized upon delivery and 
acceptance of the equipment by the customer.

SALES TYPE LEASES

     Certain leases meeting the requirements of Statement of Financial 
Accounting Standards ("SFAS") No. 13, "Accounting for Leases", are accounted 
for as sales type leases.  For these leases, sales revenue and the related 
accounts receivable are recognized upon execution of the leases and unearned 
interest is recognized over the lease term on a basis which results in a 
constant rate of return on the unrecovered lease investment (See Note 3). 

DEPRECIATION AND MAINTENANCE

     Rental equipment, land improvements, furniture and equipment are 
depreciated on a straight-line basis for financial reporting purposes and on 
an accelerated basis for income tax purposes.  The costs of major 
refurbishment of relocatable modular offices are capitalized to the extent 
the refurbishment significantly improves the quality and adds value to the 
equipment.  Land improvements consist of development costs incurred to build 
storage and maintenance facilities at each of the relocatable modular branch 
offices.  The following estimated useful lives and residual values are used 
for financial reporting purposes:


       Rental equipment:
         Relocatable modular offices     18 years, 18% residual value
         Electronic test instruments     5 to 8 years, no residual value
         Accessory equipment             7 to 18 years, 0% to 18% residual value
       Land improvements, furniture 
        and equipment                    3 to 50 years, no residual value
  
     Maintenance and repairs are expensed as incurred.
  
WARRANTY SERVICE COSTS

     Sales of new relocatable modular offices, electronic test equipment and 
related accessories are typically covered by warranties provided by the 
manufacturer of the products sold.  The Company provides limited 90-day 
warranties for certain sales of used rental equipment.  Although the 
Company's policy is to provide reserves for warranties when required for 
specific circumstances, the Company has not found it necessary to establish 
such reserves to date.
  
INCOME TAXES

     Provision has been made for deferred income taxes based upon the amount 
of taxes payable in future years, after considering changes in tax rates and 
other statutory provisions that will be in effect in those years (See Note 5).


           16


<PAGE>

FAIR VALUE OF FINANCIAL INSTRUMENTS

     The Company believes that its financial instruments (cash and notes 
payable) carrying amounts approximate fair value.
  
USE OF ESTIMATES

     The preparation of financial statements in conformity with generally 
accepted accounting principles requires management to make estimates and 
assumptions in determining reported amounts of assets, liabilities, revenues 
and expenses.

NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE

     Net income per common and common equivalent share is computed by 
dividing net income by the weighted average number of shares of common stock 
and dilutive common equivalent shares outstanding during each period.  Common 
stock equivalents result from dilutive stock options computed using the 
treasury stock method.  The difference between primary and fully diluted 
earnings per share was not significant in any period presented.


NOTE 3 -  SALES TYPE LEASE RECEIVABLES
  
     The Company has entered into several sales type leases.  The minimum 
lease payments receivable and the net investment included in accounts 
receivable for such leases at December 31, 1995 and 1994 are as follows:


<TABLE>
<CAPTION>

       ---------------------------------------------------------------
                                                1995          1994 
                                           ------------  -------------
       <S>                                 <C>            <C>
       Gross minimum lease receivable      $ 4,127,199    $ 4,226,079
       Less - Unearned interest               (875,735)      (919,602)
                                           -----------    -----------
       Net investment in sales            
         type lease receivables            $ 3,251,464    $ 3,306,477 
       ---------------------------------------------------------------
       ---------------------------------------------------------------

</TABLE>



The future minimum lease payments as of December 31, 1995 are as follows:



<TABLE>
<CAPTION>

                    ------------------------------------------
                    Year ended December 31,  
                    <S>                            <C>
                    1996                           $ 2,222,428
                    1997                             1,003,370
                    1998                               574,971
                    1999                               223,664
                    2000                                67,805
                    2001 and thereafter                 34,961
                                                  ------------
                                                   $ 4,127,199
                    ------------------------------------------
                    ------------------------------------------

</TABLE>



NOTE 4 - NOTES PAYABLE 
     
     The Company's unsecured line of credit agreement (the "Agreement") with 
its banks expires June 30, 1996 and permits it to borrow up to $50,000,000 of 
which $37,075,000 was outstanding as of December 31, 1995.  The Agreement 
requires the Company to pay interest at prime or, at the Company's election, 
other rate options available under the Agreement.  In addition, the Company 
pays a commitment fee on the daily average unused portion of the available 
line.  Among other restrictions, the Agreement requires (i) the Company to 
maintain shareholders' equity of not less than $68,752,000 plus 50% of all 
net income generated subsequent to December 31, 1993 plus 90% of any new 
stock issuance proceeds (restricted equity at December 31, 1995 is 
$82,176,000), (ii) a debt-to-equity ratio (excluding deferred income taxes) 
of not more than 3 to 1, (iii) interest coverage (income from operations 
compared to interest expense) of not less than 2 to 1 and (iv) no payment of 
cash dividends in excess of 50% of one year's earnings without the bank's 
consent.  If the Company does not amend or renegotiate the present Agreement 
for an additional time period prior to its expiration date, the principal 
amount outstanding at that time will be converted to a five-year term loan 
with principal due and payable in twenty (20) consecutive quarterly 
installments.  Additionally, the Company guarantees a $1,000,000 line of 
credit at the prime rate for its majority owned subsidiary of which $5,000 
was outstanding as of December 31, 1995.

     The following information relates to the lines of credit for each of the 
following periods:


<TABLE>
<CAPTION>

      -----------------------------------------------------------------------
      Year ended December 31,                        1995            1994
                                                -------------   -------------
      <S>                                       <C>             <C>
      Maximum amount outstanding                $ 41,035,000    $ 40,100,000
      Average amount outstanding                $ 36,838,000    $ 36,340,000
      Weighted average interest rate                    7.33%           5.59%
      Effective interest rate at end of period          7.04%           7.20%
      Prime interest rate at end of period              8.50%           8.50%
      -----------------------------------------------------------------------
      -----------------------------------------------------------------------

</TABLE>


     17


<PAGE>

NOTE 5 - INCOME TAXES

     The provision for income taxes is comprised of the following:


<TABLE>
<CAPTION>

                               Current             Deferred             Total
                             ------------        ------------        ------------
    <S>                      <C>                  <C>                 <C>
    Year ended December 31,                           
    1995:                         
         FEDERAL            $  6,785,118        $  1,177,522        $  7,962,640
         STATE                 1,171,299              28,892           1,200,191
                            ------------        ------------        ------------
                            $  7,956,417        $  1,206,414        $  9,162,831
                            ------------        ------------        ------------
                            ------------        ------------        ------------
    1994:                         
         Federal             $ 5,500,987        $  2,795,237        $  8,296,224
         State                   992,897              86,051           1,078,948
                            ------------        ------------        ------------
                            $  6,493,884        $  2,881,288        $  9,375,172
                            ------------        ------------        ------------
                            ------------        ------------        ------------
    1993:                         
         Federal            $  1,910,248        $  3,542,288        $  5,452,536
         State                   611,243             621,101           1,232,344
                            ------------        ------------        ------------
                            $  2,521,491        $  4,163,389        $  6,684,880

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

</TABLE>


     The components of the deferred provision are as follows:


<TABLE>
<CAPTION>


        Year ended December 31,                   1995            1994           1993
                                              -----------     ------------   ------------
        <S>                                   <C>             <C>            <C>
        Excess of tax over book depreciation  $ 1,281,460      $ 2,349,543    $ 2,849,600
        Alternative minimum credit carryover      131,690        1,186,803      1,123,718
        State income taxes                         (8,191)        (346,340)      (212,734)
        Nondeductible accruals                    (48,396)        (191,649)       (69,930)
        Revenue deferred for financial                              
          reporting purposes                      264,532          (86,449)       251,060
        Other, net                               (414,681)         (30,620)       221,675
                                              -----------     ------------   ------------
                                              $ 1,206,414      $ 2,881,288    $ 4,163,389
                                   
        ---------------------------------------------------------------------------------
        ---------------------------------------------------------------------------------


</TABLE>



     18


<PAGE>

     The reconciliation of the federal statutory tax rate to the Company's
effective tax rate is as follows:


<TABLE>
<CAPTION>

         Year ended December 31,              1995          1994         1993
                                            --------      --------     -------
         <S>                                  <C>           <C>          <C>
         Federal statutory rate               35.00%        35.00%      34.00%
         State taxes, net of federal
          income tax benefit                   3.41          4.33        4.70
         Other                                 1.42          2.56       (0.11)
                                            --------      --------     -------
                                              39.83%        41.89%      38.59%

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

</TABLE>



     The following table shows the tax effect of the Company's cumulative
temporary differences included in deferred income taxes on the Company's Balance
Sheets as of December 31, 1995 and 1994:



<TABLE>
<CAPTION>

         Year ended December 31,                      1995                1994
                                                 ------------         -------------
         <S>                                     <C>                  <C>
         Excess of tax over book depreciation    $ 40,644,594         $ 39,363,134
         State income taxes                        (2,421,043)          (2,412,852)
         Nondeductible accruals                    (1,040,426)            (992,030)
         Revenue deferred for financial                    
          reporting purposes                       (2,272,315)          (2,536,847)
         Other, net                                  (422,115)            (139,124)
                                                 ------------         -------------
                                                 $ 34,488,695         $ 33,282,281 

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

</TABLE>



     19


<PAGE>

NOTE 6 - COMMON STOCK AND STOCK OPTIONS

     In 1985, the Company established an Employee Stock Ownership Plan, as
amended.  Under the terms of the plan, the Company makes annual contributions in
the form of cash or common stock of the Company to a trust for the benefit of
eligible employees.  The amount of the contribution is determined annually by
the Board of Directors.  A contribution of $550,000 was approved for 1995 and
1994 and $525,000 for 1993.

     The Company adopted a 1987 Incentive Stock Option Plan (the "1987 Plan"),
effective December 14, 1987, under which options to purchase common stock may be
granted to officers and key employees  of the Company.  The plan provides for
the award of options at a price not less than the fair market value of the stock
as determined by the Board of Directors on the date the options are granted. 
Under the 1987 Plan, options have been granted with an exercise price of $6.125
and $13.875 per share.  The options become exercisable over the term of the
related option agreements.  Option activity and options exercisable for the
three years ended December 31, 1995, 1994 and 1993 were as follows:


<TABLE>
<CAPTION>

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

                                              1995        1994        1993
                                            --------     --------    --------
     <S>                                    <C>          <C>         <C>
     Options outstanding at January 1        322,292      326,692     339,382
     Options granted during the year            -            -           -
     Options exercised during the year       (59,719)      (4,400)     (8,000)
     Options terminated during the year       (6,150)        -         (4,690)
     -------------------------------------------------------------------------

     Options outstanding at December 31      256,423      322,292     326,692
     -------------------------------------------------------------------------
     -------------------------------------------------------------------------

     Options exercisable at December 31      163,328      186,827     153,717
     -------------------------------------------------------------------------
     -------------------------------------------------------------------------

</TABLE>




     As of December 31, 1995, 664,840 options remain available for future grant
under the 1987 Plan.

     In 1991, the Board of Directors adopted a Long-Term Stock Bonus Plan (the
"LTB Plan") under which 200,000 shares of common stock are reserved for grant to
officers and other key employees.  The stock bonuses granted under the LTB Plan
are evidenced by written Stock Bonus Agreements covering specified performance
periods.  The LTB Plan provides for the grant of stock bonuses upon achievement
of certain levels of return on equity during a specified period.  Stock bonuses
earned under the LTB Plan vest over 5 years from the grant date contingent on
the employee's continued employment with the Company.  As of December 31, 1995,
37,041 shares of common stock have been granted, of which 24,242 shares of
common stock are vested.  Future grants of 36,798 shares of common stock are
authorized by the Board of Directors to be issued under the LTB Plan in the
event the Company reaches the highest level of achievement.  Compensation
expense for 1995, 1994 and 1993 under these plans was $76,318, $53,726 and
$31,742, respectively, and is based on a combination of the anticipated shares
to be granted, the amount of vested shares previously issued and fluctuations in
market price of the Company's common stock.

     The Board of Directors has authorized the repurchase of shares of the 
Company's outstanding common stock. These purchases are to be made in the 
over-the-counter market and/or through large block transactions at such 
repurchase price as the officers shall deem appropriate and desirable on 
behalf of the Company.  All shares repurchased by the Company are to be 
canceled and returned to the status of authorized but unissued shares of 
common stock.  In 1994, the Company repurchased 158,354 shares of common 
stock for an aggregate repurchase price of $2,532,591 or an average price of 
$15.99 per share.  In 1995, the Company repurchased  436,066 shares of common 
stock for an aggregate repurchase price of $7,374,279 or an average price of 
$16.91 per share.  As of December 31, 1995, 495,000 shares remain authorized 
for repurchase.

     In January 1995, the Board of Directors declared a quarterly dividend on 
its common stock of $0.11 per share related to fourth quarter 1994.  The 
dividend was paid on January 31, 1995.

     20


<PAGE>

SHAREHOLDER MATTERS
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------

STOCK ACTIVITY
- -------------------------------------------------------------------------

     The Company's common stock is traded in the NASDAQ National Market 
System under the symbol "MGRC".  The range of reported high and low bid 
quotations for each quarter in 1994 and 1995, according to the automated 
quotation system of the NASDAQ, was as follows:


<TABLE>
<CAPTION>

- ---------------------------------------------
1994               High Bid       Low Bid
- ---------------------------------------------
<S>                <C>             <C>
First Quarter     $ 17 3/4         $ 14 1/4
Second Quarter      17 1/4           15
Third Quarter       17               15
Fourth Quarter      17 1/4           15 1/4
- ---------------------------------------------

<CAPTION>
1995               High Bid         Low Bid
- ---------------------------------------------
<S>                <C>               <C>
First Quarter       17               14 1/2
Second Quarter      17 1/2           15 1/4
Third Quarter       19               16 1/2
Fourth Quarter      19 1/2           17 1/2
- ---------------------------------------------

</TABLE>


     Such over-the-counter market quotations reflect inter-dealer prices,
without retail markup, markdown, or commission, and may not necessarily
represent actual transactions.


NUMBER OF SHAREHOLDERS
- -------------------------------------------------------------------------

     On February 28, 1996, the Company's Common Stock was held by 
approximately 142 shareholders of record, which does not include shareholders 
whose shares are held in street or nominee name.  The Company believes that 
when holders in street or nominee name are added, the number of holders of 
the Company's Common Stock exceeds 500.

DIVIDEND POLICY
- -------------------------------------------------------------------------

     The Company has declared a quarterly dividend on its common stock every 
quarter since 1990. (See Consolidated Quarterly (Unaudited) and Five Year 
Selected Financial Data on page 7).  Subject to its continued profitability 
and favorable cash flow, the Company intends to continue the payment of 
quarterly dividends.  The Company has agreed with its lending banks that it 
will not pay dividends or make other distributions to shareholders in excess 
of 50% of its net income in any year.  The Company's current dividend policy 
is in compliance with this restriction.

STOCK TRANSFER AGENT
- -------------------------------------------------------------------------

U.S. Stock Transfer
     1745 Gardena Avenue - Second Floor
     Glendale, CA 91204
     (818) 502-1404


AUDITORS
- -------------------------------------------------------------------------

Arthur Andersen LLP
     Spear Street Tower
     One Market Plaza
     San Francisco, CA 94105


GENERAL COUNSEL
- -------------------------------------------------------------------------

Christopher Ream, Esq.
     1717 Embarcadero Road
     Palo Alto, CA 94303


ANNUAL MEETING
- -------------------------------------------------------------------------

     The Annual Meeting of the Shareholders of McGrath RentCorp will be held 
at 2:00 p.m. on Thursday, June 13, 1996 at our San Lorenzo Corporate Office.


MCGRATH RENTCORP
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------

OFFICERS
- -------------------------------------------------------------------------

Robert P. McGrath
     Chairman of the Board 
     and Chief Executive Officer
Dennis C. Kakures
     President and Chief Operating Officer
Delight Saxton
     Vice-President of Administration,
     Chief Financial Officer and Secretary
Thomas J. Sauer
     Vice-President and Treasurer


DIRECTORS
- -------------------------------------------------------------------------

Bryant J. Brooks
     Independent Financial Consultant
Joan M. McGrath
     McGrath RentCorp
Robert P. McGrath
     Chairman of the Board
     and Chief Executive Officer
     McGrath RentCorp
Delight Saxton
     Vice-President of Administration,
     Chief Financial Officer and Secretary
     McGrath RentCorp
Ronald H. Zech
     President and Chief Executive Officer
     GATX Corporation

SPECIAL CONSULTANT
TO THE BOARD OF DIRECTORS
- -------------------------------------------------------------------------

Claude N. Rosenberg, Jr.
     Senior Partner
     Rosenberg Capital Management
     Chairman, RREEF Corporation


OFFICES
- -------------------------------------------------------------------------

San Francisco (Corporate Office)
     Modular and Electronic Inventory Centers
     2500 Grant Avenue
     San Lorenzo, CA 94580
     (510) 276-2626
     Modular Manager - Scott Alexander
     Electronic Manager - Nanci Clifton


Los Angeles
     Modular Inventory Center
     11450 Mission Boulevard
     Mira Loma, CA 91752
     (909) 360-6600
     Modular Manager - Tom Sanders


Houston
     Modular Inventory Center
     4445 East Sam Houston Parkway South
     Pasadena, TX 77505
     (713) 487-9222
     Modular Manager - Doylton Davis


Dallas
     Rentelco - Electronic Inventory Center
     1901 North Glenville Drive
     Richardson, TX 75081
     (214) 234-2422
     Electronic Manager - Bill Chapman


Enviroplex, Inc. (Majority Owned Subsidiary)
     Manufacturer of Classrooms
     4777 E. Carpenter Road
     Stockton, CA 95215
     (209) 466-8000
     President - Joe Sublett



<PAGE>

P.S.  "HERE ARE OUR GREAT PEOPLE!"
- -------------------------------------------------------------------------------


<TABLE>


<S>                       <C>                     <C>                           <C>                    <C>
JOANNE ACEVES             MICHAEL COOPER          ROBERT HERRERA                SHARON MORRISON        SUSAN ROSEBERRY   
MARK ACEVES               ISMAEL CORONA           FREDRICK HOWE                 SANTOS MORROW          TIM SALKEN        
ROBERTO AGUILAR           JENNIFER COUCH          CATHERINE HUNT                MICHAEL MOSS           ALFONSO SANCHEZ   
SCOTT ALEXANDER           STEVEN COWLES           JILL IAMESI                   TONY MOTON             SARA SANCHEZ      
NORMA ALLEN               KEVIN COX               NANCY ISRAELS                 MARK MURRELL           MARTIN SANDE      
DAVID ALVAREZ             MARIA CRAIG             JESSICA JALLORINA             DANIEL NAVA            JERI SANDERS      
CARL ANDERS               DANA CRAMER             EVARARDO JARAMILLO            TIMOTHY NEEL           TOM SANDERS       
MAX ANDREWS               RANDY CROOKS            BRIAN JENSEN                  BOB NICHOLSON          TOM SAUER         
ARTHUR ARREDONDO          RHONDA CROUSE           RONALD JENSEN                 SALLY NUNES            DELIGHT SAXTON    
DEBORAH ATHERTON          DONALD CURTIS           BEVERLY JOHNSON               ELADIO OLVERA          WILLIAM SEABROOK  
JOSE AVALOS-CALZADA       GRACE DAQUINAG          LINDA JONES                   MICHAEL ORONA          KEVIN SEYMOUR     
JOSE AVALOS-GAMEZ         DOYLTON DAVIS           CHAD JORGENSEN                JUAN OROZCO            JOHN SKENESKY     
SUZANNE AZEVEDO           JUANITA DEFOREST        DIANA KAKOS                   RAFAEL ORTIZ           JAVIER SOLIS      
RICARDO AVILA             DAVID DELEON            DENNIS KAKURES                DELORISE OWENS         ALVARO SOSA       
JACKIE BANKS              MATTHEW DERRING         LYDIA KATEN                   BARRY OXENRIDER        KEN SPINK         
JOHN BARNETT              ED DIAZ                 THERESA KERR                  IVETTE PACHECO         JASON STAYSA      
RICARDO BARRON            ALLEN DIXON             JOYCE KETRON                  JAMES PALTJON          STACI STREETER    
DONALD BEEBE              MICHAEL DOWD            MATTHEW KILLINGSWORTH         TONI PANIAGUA          JOE SUBLETT       
SABRINA BEER              JAMES DUNN              CYNTHIA LAWIN                 JOE PASSANISI          PHILLIP SUBLETT   
ROBERT BENNETT            ROBERT ESQUIVEL         MATTHEW LAZARZ                EMILIANO PATINO        RITA SUBLETT      
KAREN BICKERSTAFF         LUIS ESTRADA            LAURIE LEAHY                  JOSE PATINO            DAVID THOMPSON    
BRANDI BOATRIGHT          IONATONA FAAULI         JAIME LEON                    DEBBIE PEEBLES         BONNY THROWER     
JOHN BOEHM                JAIME FABIAN            ROGELIO LEON                  DONNA PEGUERO          CARMELO TORRES    
JEFFREY BOOGAARD          MIGUEL FAVIAN           WILLIAM LIGHTFOOT             ALFREDO PENAFOLOR      GENARO TORRES     
JERRY BRANCH              LYNNETTE FLANAGAN       MOISES LLANOS                 GLORIA PEREZ           MATILDE TORREZ    
MIKE BREMERTHON           DAVID FLIN              RUDY LOPEZ                    TIMOTHY PETRIN         TAMMY TRICKEL     
DINA BROWN                DAVID FRUECHTING        ROSEMARY MACEDO               RICHARD PINEDA         BRETT TURLEY      
RICHARD BROWN             VICTOR GAMEZ            MARIA MACIAS                  STEVEN PINGEL          LAURA UHE         
MARIO BUENROSTRO          FRANCISCO GARCIA        SERGIO MAGANA-GUTIERREZ       ANNETTE POWELL         KRISSY VANTREASE  
DIANA BURTON              JULIAN GARCIA           JOSE MALDONADO                CONRADO PULGO          DAVID VANZANDT    
ROSEMARY CAMPOS           STEVEN GARNER           KIM MANTEUFEL                 SHARON QURAISHI        JIM VARIAN        
ERNESTINA CANTU           JUAN GARZA              TOMMY MARTINEZ                BRENDA RALSTON         JORGE VASQUEZ     
AIDA CARMONA              MICHAEL GASTON          JOSEPH MASSAH                 GILBERT RAMIREZ        ISIDORE VIGIL     
JON CARR                  DENNIS GEORGE           MARTIN MAYERS                 RICARDO RAMIREZ        EDUARDO VILLEGAS  
URBANO CARRILLO           LUCIUS GETWOOD          PAMELA MCGINTY                RALPH RAMON            SANDY WAGGONER    
LYNN CATLEY               GARY GIBSON             JOAN MCGRATH                  CARLEEN RANTZOW        KARLA WALKER      
MANUEL CEBREROS           ROBERT GONZALES         ROBERT MCGRATH                RYAN RANTZOW           DENNIS WHEELAND   
CLAUDIA CELOTTI           ROGELIO GRANADOS        JACKIE MCKENZIE               JACK RAY               KIMBERLY WHITE    
RAMON CERDA               CYNTHIA GRAVES          EFREN MEDINA                  ENRIQUE RECIO          TIFFANY WHITE     
JUAN CERNA-VERDUSCO       VENA GROSS              RICHARD MEDINA                DONALD REED            PATSY WILLIAMS    
BENITO CERVANTES          JANICE GUERRERO         CATE MESMER                   GUSTAVO REYES          CRAIG WILSON      
WILLIAM CHAPMAN           JAVIER GUZMAN           DORIE METTLER                 KRISTY REYES           FRANCES WILSON    
JAIME CHAVEZ              JIM HALL                ANTONIO MEZA-ARMENDARIS       PABLO REYES            VANESSA WILSON    
EDUARDO CHIN-HERNANDEZ    BETH HAMILTON           MICHAEL MISEMER               RAMIRO RIVAS           BRADLEY WOON      
LAURA CISSELL             ALBERT HAMMONS          LUCIANO MONTES-ARIZMENDIZ     SERGIO RIVAS           ANTHONY WREN      
NANCI CLIFTON             LORI HANRAHAN           JAMES MONTOYA                 CHRISTINA RIZZO        BILL YANDELL      
CHRIS CONARD              DANA HANSON             BONNIE MOODY                  CHERIE RODERICK        DEBRA YOCUM       
URIEL CONTRERAS           JOHN HARTUNG            DARREN MOORE                  LEO RODRIGUEZ          FRANK ZARATE      
ROBERT COOK               HUGO HERNANDEZ          CLAUDIO MORENO                NASARIO RODRIGUEZ      
JEFFREY COOPER            JAIME HERNANDEZ         JEANNE MORFORD                GUSTAVO ROSALES        
                          SANTIAGO HERNANDEZ                                    JESUS ROSALES          


</TABLE>


               OUR CREDO

I will, as a team member of McGrath,
embrace our customers' needs,
and deliver exemplary service to earn
customer loyalty.

I will do this by:

- - focusing on doing things right the first time,
- - providing the utmost attention to detail, and
- - always doing what I say I am going to do, with integrity.

CUSTOMER SATISFACTION IS MY JOB!

2500 Grant Avenue
San Lorenzo, CA 94580
(510) 276-2626


[LOGO]






<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from McGrath
Rentcorp Annual Report (10K) for the year ending December 31, 1995 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1995
<PERIOD-START>                             JAN-01-1995
<PERIOD-END>                               DEC-31-1995
<CASH>                                             221
<SECURITIES>                                         0
<RECEIVABLES>                                   13,806
<ALLOWANCES>                                     (605)
<INVENTORY>                                          0
<CURRENT-ASSETS>                                     0
<PP&E>                                         220,467<F1>
<DEPRECIATION>                                (60,657)<F2>
<TOTAL-ASSETS>                                 175,130
<CURRENT-LIABILITIES>                                0
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                         8,913
<OTHER-SE>                                      76,980
<TOTAL-LIABILITY-AND-EQUITY>                   175,130
<SALES>                                         71,273
<TOTAL-REVENUES>                                71,273
<CGS>                                           32,007
<TOTAL-COSTS>                                   32,007
<OTHER-EXPENSES>                                13,429
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                               2,831
<INCOME-PRETAX>                                 23,006
<INCOME-TAX>                                     9,163
<INCOME-CONTINUING>                             13,843
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    13,843
<EPS-PRIMARY>                                     1.71
<EPS-DILUTED>                                        0
<FN>
<F1>Includes Rental Equipment, Land, Land Improvements, Furniture and Equipment.
<F2>Accumulated Depreciation related to footnote 16 above
</FN>
        

</TABLE>