For pt.I see ibid. Vol.4, p782 (1971). The application of transfer theory to image formation by the inelastic component of the transmitted electron beam is discussed. The analysis includes the effects of chromatic aberration of the final image. In particular, it is shown that the chromatic aberration effect due to the inelastic component may be effectively cancelled by underfocus of the objective lens. In relation to the formation of image by the inelastically scattered electrons the coherence and the localization of the inelastically scattered wave is discussed.