UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                               -------------------
                                    FORM 10-Q




     [X]          Quarterly Report Pursuant to Section 13 or 15(d) of the 
                  Securities Exchange Act of 1934
                  For the fiscal quarter ended September 30, 1998

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


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


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


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

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



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


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



<PAGE>




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

<TABLE>
<CAPTION>



                                                                            September 30,         December 31,
                                                                                1998                  1997
                                                                          ---------------------------------------
<S>                                                                        <C>                    <C>         
Assets

Equipment held for operating lease, at cost                                $      36,705          $     50,707
Less accumulated depreciation                                                    (27,134)              (38,170 )
                                                                          ---------------------------------------
                                                                                   9,571                12,537
Equipment held for sale                                                               --                   788
     Net equipment                                                                 9,571                13,325

Cash and cash equivalents                                                          3,235                   556
Restricted cash                                                                       --                   395
Accounts receivable, less allowance for doubtful
      accounts of $85 in 1998 and $1,146 in 1997                                   1,014                 1,626
Investments in unconsolidated special-purpose entities                               464                 2,680
Prepaid expenses and other assets                                                      3                    49

      Total assets                                                         $      14,287          $     18,631
                                                                          =======================================


Liabilities and partners' capital


Liabilities:
Accounts payable and accrued expenses                                      $         372          $        365
Due to affiliates                                                                     75                   195
Lessee deposits and reserve for repairs                                              782                 1,846
Notes payable                                                                         --                 2,500
                                                                          ---------------------------------------
    Total liabilities                                                              1,229                 4,906
                                                                          ---------------------------------------

Partners' capital:
Limited partners (7,381,805 depositary units as of September 30,
      1998 and December 31, 1997, respectively)                                   13,058                13,725
General Partner                                                                       --                    --
                                                                          ---------------------------------------
    Total partners' capital                                                       13,058                13,725
                                                                          ---------------------------------------

      Total liabilities and partners' capital                              $      14,287          $     18,631
                                                                          =======================================

</TABLE>











                       See accompanying notes to financial
                                  statements.


<PAGE>



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

<TABLE>
<CAPTION>


                                                       For the Three Months                  For the Nine Months
                                                        Ended September 30,                  Ended September 30,

                                                        1998           1997                  1998            1997
                                                   -------------------------------------------------------------------
<S>                                                  <C>            <C>                  <C>              <C>      
Revenues
Lease revenue                                        $   1,872      $   2,606            $    5,569       $   8,112
Interest and other income                                   49             51                   175             195
Net gain on disposition of equipment                       313            336                 5,921           1,363
                                                   -------------------------------------------------------------------
    Total revenues                                       2,234          2,993                11,665           9,670
                                                   -------------------------------------------------------------------

Expenses
Depreciation and amortization                              573          1,014                 1,899           3,387
Repairs and maintenance                                    420            483                 1,416           1,288
Interest expense                                            --            140                    47             566
Insurance expense to affiliate                              --             --                    24              --
Other insurance expense                                     16             25                    56              98
Management fees to affiliate                               103            119                   291             375
General and administrative expenses
      to affiliates                                         92            157                   336             529
Other general and administrative expenses                  152            248                   607             740
Provision for (recovery of) bad debt                         5            310                   (68)            538
                                                   -------------------------------------------------------------------
    Total expenses                                       1,361          2,496                 4,608           7,521
                                                   -------------------------------------------------------------------

Equity in net income (loss) of unconsolidated
      special-purpose entities                            (119)            12                  (371)         (1,029)
                                                   -------------------------------------------------------------------

      Net income                                     $     754      $     509            $    6,686       $   1,120
                                                   ===================================================================

Partners' share of net income
Limited partners                                     $     697      $     388            $    6,318       $     722
General Partner                                             57            121                   368             398
                                                   -------------------------------------------------------------------

Total                                                $     754      $     509            $    6,686       $   1,120
                                                   ===================================================================

Net income per weighted-average
      depositary unit                                $    0.09      $    0.05            $     0.86       $    0.10
                                                   ===================================================================

Cash distributions                                   $   1,137      $   1,166            $    3,468       $   5,051
                                                   ===================================================================
Cash distributions per weighted-average
      depositary unit                                $    0.15      $    0.15            $     0.45       $    0.65
                                                   ===================================================================

Special cash distributions                           $      --      $      --            $    3,885       $      --
                                                   ===================================================================

Special cash distributions per weighted-
     average depositary unit                         $      --      $      --            $     0.50       $      --
                                                   ===================================================================

Total cash distributions per weighted-
     average depositary unit                         $    0.15      $    0.15            $     0.95       $    0.65
                                                   ===================================================================
</TABLE>

                       See accompanying notes to financial
                                  statements.

 

<PAGE>




                          PLM EQUIPMENT GROWTH FUND II
                             A Limited Partnership
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL For the period from December 31, 1996
                to September 30, 1998 (in thousands of dollars)

<TABLE>
<CAPTION>


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

<S>                                                            <C>                  <C>                 <C>       
Partners' capital (deficit) as of December 31, 1996            $   17,434           $    (188 )         $   17,246

Net income                                                          2,196                 499                2,695

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

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

Net income                                                          6,318                 368                6,686

Cash distributions                                                 (3,294 )              (174 )             (3,468)

Special cash distributions                                         (3,691 )              (194 )             (3,885)

  Partners' capital as of September 30, 1998                   $   13,058           $      --           $   13,058
                                                             ========================================================

</TABLE>





















                       See accompanying notes to financial
                                  statements.


<PAGE>




                          PLM EQUIPMENT GROWTH FUND II
                             A Limited Partnership
 STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, (in thousands
                                  of dollars)

<TABLE>
<CAPTION>



                                                                                      1998                  1997
                                                                                ---------------------------------------
<S>                                                                               <C>                    <C>       
Operating activities
Net income                                                                        $    6,686             $    1,120
Adjustments to reconcile net income to net cash provided
     by (used in) operating activities:
  Net gain on disposition of equipment                                                (5,921 )               (1,363 )
  Depreciation and amortization                                                        1,899                  3,387
  Equity in net loss from unconsolidated special-purpose entities                        371                  1,029
  Changes in operating assets and liabilities:
    Restricted cash                                                                      395                     --
    Accounts receivable, net                                                             629                   (856 )
    Prepaid expenses and other assets                                                     46                  1,003
    Accounts payable and accrued expenses                                                  7                     84
    Due to affiliates                                                                   (120 )                   66
    Lessee deposits and reserve for repairs                                           (1,064 )               (1,070 )
                                                                                ---------------------------------------
      Net cash provided by operating activities                                        2,928                  3,400
                                                                                ---------------------------------------

Investing activities
Proceeds from disposition of equipment                                                 7,759                  4,185
Liquidation distributions from unconsolidated special-purpose entities                 1,425                     --
Reimbursements of capital improvements                                                    --                    (23 )
Distributions from (additional investments in) unconsolidated
      special-purpose entities                                                           420                     16
                                                                                ---------------------------------------
     Net cash provided by investing activities                                         9,604                  4,178
                                                                                ---------------------------------------

Financing activities
Principal payments on notes payable                                                   (2,500 )               (7,217 )
Cash distributions paid to limited partners                                           (6,985 )               (4,798 )
Cash distributions paid to General Partner                                              (368 )                 (253 )
                                                                                ---------------------------------------
     Net cash used in financing activities                                            (9,853 )              (12,268 )
                                                                                ---------------------------------------

Net increase (decrease) in cash and cash equivalents                                   2,679                 (4,690 )

Cash and cash equivalents at beginning of period                                         556                  7,962
                                                                                ---------------------------------------
     Cash and cash equivalents at end of period                                   $    3,235             $    3,272
                                                                                =======================================

Supplemental information
Interest paid                                                                     $       47             $      508
                                                                                =======================================
Sale proceeds included in accounts receivable                                     $       17             $       55
                                                                                =======================================


</TABLE>








                       See accompanying notes to financial
                                  statements.


<PAGE>




                          PLM EQUIPMENT GROWTH FUND II
                              A Limited Partnership
                          NOTES TO FINANCIAL STATEMENTS
                               September 30, 1998

1.   Opinion of Management

     In the opinion of the  management  of PLM  Financial  Services,  Inc.  (the
     General Partner),  the accompanying  unaudited financial statements contain
     all  adjustments  necessary,   consisting  primarily  of  normal  recurring
     accruals,  to present fairly the financial position of PLM Equipment Growth
     Fund II (the  Partnership)  as of September 30, 1998 and December 31, 1997,
     the statements of income for the three and nine months ended  September 30,
     1998 and 1997,  the  statements  of changes in  partners'  capital  for the
     period from December 31, 1996 to September 30, 1998,  and the statements of
     cash flows for the nine months ended  September 30, 1998 and 1997.  Certain
     information  and  footnote   disclosures  normally  included  in  financial
     statements  prepared  in  accordance  with  generally  accepted  accounting
     principles have been condensed or omitted from the  accompanying  financial
     statements.  For  further  information,  reference  should  be  made to the
     financial statements and notes thereto included in the Partnership's Annual
     Report on Form 10-K for the year ended  December 31,  1997,  on file at the
     Securities and Exchange Commission.

2.   Cash Distributions

     Cash distributions are recorded when paid and totaled $3.5 million and $5.1
     million  for  the  nine  months   ended   September   30,  1998  and  1997,
     respectively,  and $1.1 million and $1.2 million for the three months ended
     September  30, 1998 and 1997,  respectively.  In  addition,  a $3.9 million
     special  distribution was paid to the partners during the nine months ended
     September  30, 1998 from the proceeds  realized on the sale of equipment in
     1998 and 1997.  Cash  distributions  to limited  partners  in excess of net
     income are considered to represent a return of capital.  Cash distributions
     to limited  partners of $0.7  million and $4.1  million for the nine months
     ended September 30, 1998 and 1997, respectively, were deemed to be a return
     of  capital.  Cash  distributions  related  to the  results  from the third
     quarter of 1998, of $1.1 million, are payable during November 1998.

3.   Transactions with General Partner and Affiliates

     Partnership  management  fees of $0.1 million and $0.2 million were payable
as of September 30, 1998 and December 31, 1997, respectively.

     The   Partnership's   proportional   share  of  the  data   processing  and
administrative expenses incurred by the unconsolidated  special-purpose entities
(USPEs) was $10,000 and $5,000 for the nine months ended  September 30, 1998 and
1997,  respectively,  and $0 and $1,000 for the three months ended September 30,
1998 and 1997, respectively.

4.   Equipment

     Owned  equipment held for operating lease is stated at cost. The components
of owned  equipment  held for  operating  lease are as follows (in  thousands of
dollars):

<TABLE>
<CAPTION>

                                             September 30,         December 31,
                                                 1998                1997
                                           -------------------------------------
<S>                                           <C>                   <C>       
Rail equipment                                $   17,345            $   17,401
Trailers                                          12,135                17,144
Marine containers                                  7,225                 8,308
Aircraft                                              --                 7,854
                                           ----------------------------------------
                                                  36,705                50,707
Less accumulated depreciation                    (27,134 )             (38,170)
                                                   9,571                12,537
Equipment held for sale                               --                   788
      Net equipment                           $    9,571            $   13,325
                                           ========================================
</TABLE>

<PAGE>


                          PLM EQUIPMENT GROWTH FUND II
                              A Limited Partnership
                          NOTES TO FINANCIAL STATEMENTS
                               September 30, 1998

4.   Equipment (continued)

     As of September 30, 1998, all equipment was either on lease or operating in
PLM-affiliated  short-term  trailer  rental  facilities,  except  for 120 marine
containers  and 3 rail  equipment  with an  aggregate  net  book  value  of $0.2
million. As of December 31, 1997, all equipment was either on lease or operating
in PLM-affiliated  short-term trailer rental  facilities,  except for 168 marine
containers  and 3 rail  equipment  with an  aggregate  net  book  value  of $0.4
million.

     During the nine months ended  September 30, 1998, the  Partnership  sold or
disposed of an aircraft,  marine containers,  trailers, and rail equipment, with
an aggregate net book value of $1.9 million,  for proceeds of $7.8 million.  For
the nine months ended September 30, 1997, the Partnership sold or disposed of an
aircraft, marine containers, trailers, and rail equipment, with an aggregate net
book value of $2.9 million, for proceeds of $4.3 million.

5.   Investments in Unconsolidated Special-Purpose Entities

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

<TABLE>
<CAPTION>

                                                                      September 30,      December 31,
                                                                          1998              1997
                                                                   ---------------------------------------

<S>                                                                     <C>                <C>     
50% interest in a Boeing 727-200 aircraft                               $    464           $  1,235
23% interest in a Boeing 727-200 aircraft                                     --              1,445
      Net investments                                                   $    464           $  2,680
                                                                    =======================================
</TABLE>

     During the nine months ended September 30, 1998, the General Partner sold a
Boeing  727-200  aircraft  in which the  Partnership  owned a 23%  interest,  at
approximately  its  net  book  value.  The  Partnership   received   liquidating
distributions  of $1.4 million from this USPE during the first  quarter of 1998.
The  Partnership's  50% investment in a commercial  aircraft was off-lease as of
September 30, 1998 and December 31, 1997.

6.   Notes Payable

     During the nine months ended  September 30, 1998, the  Partnership  prepaid
the $2.5 million remaining outstanding notes payable.

7.   Net Income Per Weighted-Average Depositary Unit

     Net income per  weighted-average  depositary  unit was computed by dividing
net income  attributable to limited partners by the  weighted-average  number of
depositary  units deemed  outstanding  during the period.  The  weighted-average
number of depositary units deemed  outstanding  during the three and nine months
ended  September 30, 1998 and 1997 was 7,381,805,  including 1,150 units held in
the Treasury.



<PAGE>



ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

(I)      RESULTS OF OPERATIONS

Comparison of the PLM Equipment Growth Fund II's (the  Partnership's)  Operating
Results for the Three Months Ended September 30, 1998 and 1997

(a)      Owned Equipment Operations

Lease  revenues  less direct  expenses  (defined as repair and  maintenance  and
asset-specific insurance expenses) on owned equipment decreased during the third
quarter of 1998 when compared to the same quarter of 1997.  The following  table
presents  lease  revenues  less  direct  expenses  by owned  equipment  type (in
thousands of dollars):

<TABLE>
<CAPTION>


                                                                           For the Three Months
                                                                            Ended September 30,
                                                                          1998               1997
                                                                      -------------------------------
<S>                                                                     <C>               <C>      
Rail equipment                                                          $    856          $     795
Trailers                                                                     547                697
Marine containers                                                             42                154
Aircraft                                                                      (2)               459

</TABLE>

Rail  equipment:  Rail equipment  lease  revenues and direct  expenses were $1.1
million and $0.3 million,  respectively, for the third quarter of 1998 and 1997.
Railcar  contribution  increased  during the third  quarter of 1998 due to lower
repairs required during 1998 when compared to the same period of 1997.

Trailers:  Trailer lease revenues and direct expenses were $0.7 million and $0.2
million,  respectively,  for the third quarter of 1998, compared to $0.9 million
and $0.2 million,  respectively,  during the same quarter of 1997. The number of
trailers owned by the Partnership has been declining over the past twelve months
due to sales and dispositions. The result of this declining fleet was a decrease
in trailer contribution.

Marine  containers:  Marine  container  lease revenues and direct  expenses were
$43,000 and $1,000,  respectively,  for the third  quarter of 1998,  compared to
$0.2  million and $3,000,  respectively,  during the same  quarter of 1997.  The
number of marine containers owned by the Partnership has been declining over the
past twelve months due to sales and  dispositions.  The result of this declining
fleet has been a decrease in marine container revenues.

Aircraft:  Aircraft  lease  revenues  and direct  expenses  were $0 and  $2,000,
respectively,  for the third  quarter  of 1998,  compared  to $0.5  million  and
$10,000,  respectively,  during the same quarter of 1997. Aircraft  contribution
decreased  in the third  quarter of 1998,  compared to the same quarter of 1997,
due to the sale of the remaining aircraft fleet in 1998 and 1997.

(b) Indirect Expenses Related to Owned Equipment Operations

Total indirect  expenses of $0.9 million for the third quarter of 1998 decreased
from $2.0 million for the same quarter in 1997.  The  variances are explained as
follows:

     (i) A $0.4 million decrease in depreciation  and amortization  expense from
1997 levels reflects the effect of asset sales in 1998 and 1997.

     (ii) The $0.3 million decrease in bad debt expense was due to a decrease in
the General Partner's  evaluation of the  collectibility of receivables due from
certain lessees.

     (iii) A $0.2 million decrease in  administrative  expenses from 1997 levels
was due to reduced office  expenses and  professional  services  required by the
Partnership, resulting primarily from the reduced equipment portfolio.

     (iv) A $0.1 million  decrease in interest  expense was due to the repayment
of the Partnership's outstanding debt.

(c) Net Gain on Disposition of Owned Equipment

The net gain on  disposition  of equipment for the third quarter of 1998 totaled
$0.3  million,  and  resulted  from the  disposal or sale of trailers and marine
containers,  with an aggregate  net book value of $0.1  million,  for  aggregate
proceeds of $0.4  million.  For the same  quarter in 1997,  the $0.3 million net
gain on  disposition  of  equipment  resulted  from the sale or  disposal  of an
aircraft, trailers, marine containers, and rail equipment, with an aggregate net
book value of $1.2 million, for aggregate proceeds of $1.5 million.

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

Equity in net income (loss) of USPEs represents net income (loss) generated from
the operation of jointly-owned assets accounted for under the equity method (see
Note 5 to the financial statements).

As of September 30, 1998 and 1997,  the  Partnership  owned a 50% interest in an
entity  which owns a  commercial  aircraft  that was off lease  during the third
quarter  of 1998 and 1997.  Expenses  were $0.1 for the third  quarter  of 1998,
compared  to  revenues  and   expenses  of  $0.1   million  and  $0.1   million,
respectively, for the same period in 1997.

(e)      Net Income

As a result of the foregoing,  the Partnership's net income was $0.8 million for
the third  quarter of 1998,  compared to net income of $0.5  million  during the
third quarter of 1997. The Partnership's ability to operate and liquidate assets
and to re-lease those assets whose leases expire is subject to many factors, and
the  Partnership's  performance in the third quarter of 1998 is not  necessarily
indicative of future periods. In the third quarter of 1998, the Partnership made
regular cash distributions of $1.1 million to the limited partners, or $0.15 per
weighted-average depositary unit.

Comparison  of the  Partnership's  Operating  Results for the Nine Months  Ended
September 30, 1998 and 1997

(a)      Owned Equipment Operations

Lease  revenues less direct  expenses  (defined as repair and  maintenance,  and
asset-specific  insurance expenses) on owned equipment decreased during the nine
months  ended  September  30,  1998,  compared to the same  period of 1997.  The
following  table presents lease revenues less direct expenses by owned equipment
type (in thousands of dollars):

<TABLE>
<CAPTION>

                                                                            For the Nine Months
                                                                            Ended September 30,
                                                                          1998               1997
                                                                      -------------------------------
<S>                                                                     <C>               <C>     
Rail equipment                                                          $  2,317          $  2,596
Trailers                                                                   1,581             1,973
Marine containers                                                            172               538
Aircraft                                                                      47             1,656

</TABLE>

Rail  equipment:  Rail equipment  lease  revenues and direct  expenses were $3.2
million and $0.9 million,  respectively, for the nine months ended September 30,
1998, compared to $3.4 million and $0.8 million,  respectively,  during the same
period of 1997.  Lease  revenues  decreased due to the sale of rail equipment in
1998 and 1997. Rail equipment expenses increased due to running repairs required
on certain of the rail  equipment  during the nine months  ended  September  30,
1998, which were not needed during 1997.

Trailers:  Trailer lease revenues and direct expenses were $2.1 million and $0.5
million, respectively, for the nine months ended September 30, 1998, compared to
$2.5 million and $0.5 million, respectively, during the same period of 1997. The
decrease in net  contribution  was primarily due to the sale of trailers in 1998
and 1997.

Marine  containers:  Marine  container lease revenues were $0.2 million and $0.5
million for the nine months ended September 30, 1998 and 1997, respectively. The
number of marine containers owned by the Partnership has been declining over the
past twelve months due to sales and  dispositions.  The result of this declining
fleet has been a decrease in marine container revenue.

Aircraft:  Aircraft  lease  revenues and direct  expenses  were $0.1 million and
$36,000, respectively, for the nine months ended September 30, 1998, compared to
$1.7 million and $30,000, respectively, during the same period of 1997. Aircraft
contribution  decreased in the nine months ended September 30, 1998, compared to
the same period in 1997, due to the sale of the remaining aircraft fleet in 1998
and 1997.

(b) Indirect Expenses Related to Owned Equipment Operations

Total indirect  expenses of $3.1 million for the nine months ended September 30,
1998  decreased from $6.1 million for the same period of 1997. The variances are
explained as follows:

     (i) A $1.5 million decrease in depreciation  and amortization  expense from
1997 levels reflects the effect of asset sales in 1998 and 1997.

     (ii) A $0.6 million  decrease in bad debt expense was due to a $0.1 million
decrease in reserve  for a certain  lessee  resulting  from the  application  of
security deposits against uncollected outstanding receivables, the collection of
$0.2 million in 1998 of outstanding  receivables  from certain lessees that were
previously reserved for as bad debts in 1997, and a $0.3 million decrease in bad
debt  expense  from  a  decrease  in the  General  Partner's  evaluation  of the
collectibility of receivables due from certain lessees.

     (iii) A $0.5 million  decrease in interest expense was due to the repayment
of the Partnership's outstanding debt.

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

     (v) A $0.1 million  decrease in management fees to affiliates  reflects the
lower  levels of lease  revenues in the nine months  ended  September  30, 1998,
compared to the same period in 1997.

(c) Net Gain on Disposition of Owned Equipment

The net gain on disposition of equipment for the nine months ended September 30,
1998  totaled  $5.9  million,  and  resulted  from  the sale or  disposal  of an
aircraft, marine containers, trailers, and rail equipment, with an aggregate net
book value of $1.9 million, for aggregate proceeds of $7.8 million. For the nine
months ended  September 30, 1997,  the $1.4 million net gain on  disposition  of
equipment  resulted  from the sale or disposal of aircraft,  marine  containers,
trailers, and rail equipment,  with an aggregate net book value of $2.9 million,
for aggregate proceeds of $4.3 million.

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

Equity in net loss of  unconsolidated  special-purpose  entities  represents net
loss generated from the operation of  jointly-owned  assets  accounted for under
the equity method.

As of September 30, 1998 and 1997,  the  Partnership  owned a 50% interest in an
entity  which  owns a  commercial  aircraft  that was off lease  during the nine
months  ended  September  30,  1998  and  1997.   Expenses  were  $0.4  million,
respectively, for the nine months ended September 30, 1998, compared to revenues
and expenses of $0.2 million and $1.2 million, respectively, for the same period
in 1997. The Partnership's  share of revenues decreased in the nine months ended
September 30, 1998 due to the sale of its 50% investment in an entity that owned
an aircraft  engine in the third  quarter of 1997.  The  Partnership's  share of
expenses  decreased due to repairs required during 1997, which were not required
for the same  period in 1998.  During  the first  quarter of 1998,  the  General
Partner sold for  approximately  its book value the Partnership's 23% investment
in an entity that owned an aircraft.



<PAGE>



(e)      Net Income

As a result of the foregoing,  the Partnership's net income was $6.7 million for
the nine months ended September 30, 1998, compared to net income of $1.1 million
during  the same  period of 1997.  The  Partnership's  ability  to  operate  and
liquidate  assets and to re-lease those assets whose leases expire is subject to
many  factors,  and the  Partnership's  performance  in the  nine  months  ended
September 30, 1998 is not necessarily  indicative of future periods. In the nine
months  ended  September  30, 1998,  the  Partnership  distributed  regular cash
distributions   of  $3.3  million  to  the  limited   partners,   or  $0.45  per
weighted-average  depositary  unit. In addition,  the Partnership made a special
distribution   of  $3.7   million  to  the  limited   partners,   or  $0.50  per
weighted-average depositary unit.

(II)     FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY

The General Partner purchased the Partnership's initial equipment portfolio with
capital raised from its initial equity offering and permanent debt financing. No
further  capital  contributions  from original  partners are permitted under the
terms of the limited  partnership  agreement.  As of  September  30,  1998,  the
Partnership had no outstanding indebtedness. The Partnership relies on operating
cash flow to meet its operating  obligations and make cash  distributions to the
limited partners.

In the nine months ended September 30, 1998, the  Partnership  used $2.5 million
in proceeds from the sale of assets to prepay the outstanding debt.

For the nine months ended  September 30, 1998,  the  Partnership  generated $3.3
million in  operating  cash (net cash  provided  by  operating  activities  plus
non-liquidating  distributions from unconsolidated  special-purpose entities) to
meet its operating obligations, but used undistributed available cash from prior
periods of  approximately  $0.2  million to maintain  the level of regular  cash
distributions  (total of $3.5 million or $0.45 per weighted  average  depositary
unit) in the nine months ended  September 30, 1998) to the partners.  During the
nine months ended  September 30, 1998, the General  Partner sold owned equipment
on behalf  of the  Partnership  and  realized  proceeds  of  approximately  $7.8
million.  A special  distribution  of $3.9 million  ($0.50 per  weighted-average
depositary unit) was paid on May 21, 1998.

During the nine  months  ended  September  30,  1998,  the  Partnership  sold or
disposed of aircraft,  marine containers,  trailers, and rail equipment, with an
aggregate  net book  value  of $1.9  million,  for  aggregate  proceeds  of $7.8
million.

(III) EFFECTS OF YEAR 2000

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

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

Some risks  associated  with the Year 2000 problem are beyond the ability of the
Partnership to control,  including the extent to which third parties can address
the Year  2000  problem.  The  General  Partner  has begun to  communicate  with
vendors,  services  providers,  and  customers  in order to assess the Year 2000
compliance  readiness of such parties and the extent to which the Partnership is
vulnerable to any third-party  Year 2000 issues.  There can be no assurance that
the   software   systems  of  such  parties  will  be  converted  or  made  Year
2000-compliant  in a timely manner.  Any failure by the General  Partner or such
other parties to make their respective systems Year 2000-compliant  could have a
material  adverse  effect on the  business,  financial  position  and results of
operations of the  Partnership.  The General Partner will make an ongoing effort
to recognize and evaluate  potential  exposure relating to third-party Year 2000
non-compliance  and will  develop  a  contingency  plan if the  General  Partner
determines, or is unable to determine, that third-party non-compliance will have
a material adverse effect on the Partnership's business,  financial position, or
results of operation.

(IV) ACCOUNTING PRONOUNCEMENTS

In  June  1997,  the  Financial   Accounting  Standards  Board  issued  two  new
statements:  SFAS No. 130,  "Reporting  Comprehensive  Income,"  which  requires
enterprises to report,  by major  component and in total,  all changes in equity
from  nonowner  sources;  and SFAS No. 131,  "Disclosures  about  Segments of an
Enterprise  and  Related  Information,"  which  establishes  annual and  interim
reporting  standards  for a public  company's  operating  segments  and  related
disclosures about its products, services, geographic areas, and major customers.
Both statements are effective for the  Partnership's  fiscal year ended December
31, 1998, with earlier  application  permitted.  The effect of adoption of these
statements  will  be  limited  to the  form  and  content  of the  Partnership's
disclosures and will not impact the  Partnership's  results of operations,  cash
flow, or financial position.

In June 1998,  the  Financial  Accounting  Standards  Board issued SFAS No. 133,
"Accounting   for  Derivative   Instruments  and  Hedging   Activities,"   which
standardizes  the  accounting  for  derivative  instruments,  including  certain
derivative instruments embedded in other contracts,  by requiring that an entity
recognize  those items as assets or  liabilities  in the  statement of financial
position and measure  them at fair value.  This  statement is effective  for all
quarters of fiscal  years  beginning  after June 15, 1999.  As of September  30,
1998, the General Partner is reviewing the effect this standard will have on the
Partnership's consolidated financial statements.

(V)      OUTLOOK FOR THE FUTURE

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

Several factors may affect the Partnership's  operating  performance in 1998 and
beyond,  including  changes in the markets for the  Partnership's  equipment and
changes in the regulatory environment in which that equipment operates.

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

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

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

(VI)     FORWARD-LOOKING INFORMATION

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
















                     (This space intentionally left blank.)


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                          PART II -- OTHER INFORMATION



Item 6.       Exhibits and Reports on Form 8-K

              (a)     Exhibits

                  None.

              (b)     Reports on Form 8-K

                  None.

 



<PAGE>


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned there unto duly authorized.



                                       PLM EQUIPMENT GROWTH FUND II
                                       By: PLM Financial Services, Inc.
                                           General Partner




Date:  November 4, 1998                By: /s/ Richard Brock
                                           -----------------
                                           Richard Brock
                                           Vice President and
                                           Corporate Controller

 
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