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 
         and Exchange Act of 1934
         For the fiscal quarter ended September 30, 1998

                                                        or

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


                          Commission file number 1-9670
                         -------------------------------

                             PLM INTERNATIONAL, INC.
             (Exact name of registrant as specified in its charter)


Delaware                                                      94-3041257
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                             Identification No.)

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




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


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



     Indicate the number of shares  outstanding of each of the issuer's  classes
of common  stock,  as of the latest  practicable  date:  common stock - $.01 par
value; outstanding as of October 27, 1998 - 8,223,219 shares.


<PAGE>





                             PLM INTERNATIONAL, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
               (in thousands of dollars, except per share 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
Operating lease income                                         $    5,390       $   4,429          $    14,734       $  12,087
Finance lease income                                                3,535           2,638                9,229           6,436
Management fees                                                     2,550           2,792                7,649           8,450
Partnership interests and other fees                                   61             162                  742           1,155
Acquisition and lease negotiation fees                                872             986                3,083           1,749
Aircraft brokerage and services                                       204             479                1,090           1,814
Gain on the sale or disposition of assets, net                      1,308             649                3,603           3,250
Other                                                               1,003             794                2,645           2,329
                                                              --------------------------------------------------------------------
  Total revenues                                                   14,923          12,929               42,775          37,270
                                                              --------------------------------------------------------------------

Costs and expenses
Operations support                                                  4,559           3,901               13,313          12,123
Depreciation and amortization                                       2,844           2,315                8,891           6,661
General and administrative                                          1,895           2,709                5,778           7,435
                                                              --------------------------------------------------------------------
  Total costs and expenses                                          9,298           8,925               27,982          26,219
                                                              --------------------------------------------------------------------

Operating income                                                    5,625           4,004               14,793          11,051

Interest expense                                                   (3,989)         (2,466)             (10,663)         (7,460 )
Interest income                                                       518             390                1,212           1,228
Other income (expense), net                                            15              15                  478              (9 )
                                                              ----------------------------------------------------------------------
  Income before income taxes                                        2,169           1,943                5,820           4,810

Provision for income taxes                                            807             624                2,274           1,562
                                                              --------------------------------------------------------------------

  Net income to common shares                                  $    1,362       $   1,319          $     3,546       $   3,248
                                                              ======================================================================

Basic earnings per weighted-average common
  share outstanding                                            $     0.16       $    0.14          $      0.42       $    0.35
                                                              ====================================================================

Diluted earnings per weighted-average common
  share outstanding                                            $     0.16       $    0.14          $      0.41       $    0.34
                                                              ====================================================================

</TABLE>










             See accompanying notes to these consolidated financial
                                  statements.



<PAGE>





                             PLM INTERNATIONAL, INC.
                           CONSOLIDATED BALANCE SHEETS
                 (in thousands of dollars, except share amounts)


                                     ASSETS
<TABLE>
<CAPTION>


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

 <S>                                                                       <C>                       <C>        
 Cash and cash equivalents                                                 $      6,377              $     5,224
 Receivables                                                                      5,939                    4,969
 Receivables from affiliates                                                      2,700                    5,007
 Investment in direct finance leases, net                                       173,387                  119,613
 Loans receivable                                                                22,009                    5,861
 Equity interest in affiliates                                                   23,323                   26,442
 Transportation equipment held for operating leases                              49,318                   50,252

     Less accumulated depreciation                                              (14,555)                 (26,981 )
                                                                      -----------------------------------------------
                                                                                 34,763                   23,271

Commercial and industrial equipment held for operating leases                    21,742                   23,268
Less accumulated depreciation                                                    (8,187)                  (4,816 )
                                                                      -----------------------------------------------
                                                                                 13,555                   18,452

Restricted cash and cash equivalents                                             10,095                   18,278
Other, net                                                                        6,965                    9,166
                                                                      -----------------------------------------------
Total assets                                                               $    299,113              $   236,283
                                                                      ===============================================



            LIABILITIES, MINORITY INTEREST, AND SHAREHOLDERS' EQUITY


Liabilities
Warehouse credit facility                                                  $     44,500              $    23,040
Senior secured loan                                                              16,176                   20,588
Senior secured notes                                                             25,078                   23,843
Other secured debt                                                                   --                      413
Nonrecourse securitized debt                                                    124,097                   81,302
Payables and other liabilities                                                   21,825                   25,366
Deferred income taxes                                                            17,527                   14,860
                                                                      -----------------------------------------------
  Total liabilities                                                             249,203                  189,412

Minority interest                                                                    --                      323

Shareholders' equity
Common stock ($.01 par value, 50.0 million shares
  authorized, 8,329,881 issued and outstanding as of
  September 30, 1998 and 8,393,362 as of December 31, 1997)                         112                      112
Paid-in capital, in excess of par                                                74,929                   74,650
Treasury stock (3,705,874 and 3,641,485 shares at
  respective dates)                                                             (14,030)                 (13,435 )
Accumulated deficit                                                             (11,101)                 (14,647 )
Accumulated other comprehensive loss                                                 --                     (132 )
  Total shareholders' equity                                                     49,910                   46,548
                                                                      -----------------------------------------------
      Total liabilities, minority interest, and shareholders' equity       $    299,113              $   236,283
                                                                      ===============================================

</TABLE>



             See accompanying notes to these consolidated financial
                                  statements.




<PAGE>



                             PLM INTERNATIONAL, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                         For the Year Ended December 31,
                         1997 and the Nine Months Ended
                             September 30, 1998 (in
                              thousands of dollars)


<TABLE>
<CAPTION>



                                                                                     

                                                   Common Stock                       Accumulated                 
                                   ---------------------------------------------       Deficit &
                                                    Paid-in                          Accumulated
                                                    Capital in                           Other                            Total
                                         At          Excess           Treasury        Comprehensive     Comprehensive  Shareholders'
                                         Par           of Par           Stock            Loss              Income         Equity
                                   ------------------------------------------------------------------------------------------------


<S>                                      <C>          <C>              <C>             <C>                <C>              <C>   
  Balances, December 31, 1996            $  117       $  77,778        $   (12,382)    $  (19,193 )                        $ 46,320
Comprehensive income:
  Net income                                                                                4,667         $    4,667          4,667
  Other comprehensive loss:
    Foreign currency translation loss                                                        (123 )             (123)          (123)
Total comprehensive income                                                                                     4,544
                                                                                                       ==================
Common stock repurchases                     (5 )        (3,128)            (1,268)                                          (4,401)
Reissuance of treasury stock, net                                              215            (38 )                             177
Redemption of shareholder rights                                                              (92 )                             (92)
  Balances, December 31, 1997               112          74,650            (13,435)       (14,779 )                          46,548

Comprehensive income:
  Net income                                                                                3,546              3,546          3,546
  Other comprehensive income:
  Foreign currency translation
     income                                                                                   132                132            132
Total comprehensive income                                                                                $    3,678
                                                                                                       ==================
Exercise of stock options                                   200                211                                              411
Common stock repurchases                                                    (1,017)                                          (1,017)
Reissuance of treasury stock                                 79                211                                              290
                                        -----------------------------------------------------------------               ------------
  Balances, September 30, 1998           $  112       $  74,929        $   (14,030)    $  (11,101 )                    $     49,910
                                        =================================================================               ============



</TABLE>















             See accompanying notes to these consolidated financial
                                  statements.



<PAGE>





                             PLM INTERNATIONAL, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (in thousands of dollars)

<TABLE>
<CAPTION>

                                                                                                        For the Nine Months
                                                                                                        Ended September 30,
                                                                                                     1998                1997
                                                                                                -----------------------------------
<S>                                                                                           <C>                   <C>         
Operating activities
Net income                                                                                    $      3,546          $      3,248
Adjustments to reconcile net income to net cash
  provided by operating activities:
    Depreciation and amortization                                                                    8,891                 6,661
    Foreign currency translation                                                                       (80)                  (23 )
    Deferred income tax expense                                                                      2,576                 1,401
    Gain on sale or disposition of assets, net                                                      (3,603)               (3,250 )
    Loss on sale of investment in subsidiary                                                           245                    --
    Undistributed residual value interests                                                           1,032                   508
    Minority interest in net loss of subsidiaries                                                     (100)                  (13 )
    Decrease in payables and other liabilities                                                      (3,351)                 (662 )
    Decrease in receivables and receivables from affiliates                                          1,555                   391
    Amortization of organization and offering costs                                                  2,129                 2,183
    Decrease in other assets                                                                           438                   757
                                                                                             ---------------------------------------
      Net cash provided by operating activities                                                     13,278                11,201
                                                                                             ---------------------------------------

Investing activities
Principal payments received on finance leases                                                       23,115                12,627
Principal payments received on loans                                                                 3,511                 1,493
Investment in direct finance leases                                                               (108,522)              (60,996 )
Investment in loans receivable                                                                     (19,659)                 (777 )
Purchase of property, plant, and equipment                                                            (199)                 (760 )
Purchase of transportation equipment and capital improvements                                      (41,849)              (30,834 )
Purchase of commercial and industrial equipment held for operating lease                           (22,543)               (8,865 )
Proceeds from  the sale of transportation equipment for lease                                        6,150                10,761
Proceeds from the sale of assets held for sale                                                      22,366                24,710
Proceeds from the sale of commercial and industrial equipment on finance lease                      30,756                37,504
Proceeds from the sale of commercial and industrial equipment on operating lease                    25,859                 7,484
Sale of investment in subsidiary                                                                       176                    --
Decrease (increase) in restricted cash and cash equivalents                                          8,183                  (336 )
                                                                                            ---------------------------------------
      Net cash used in investing activities                                                        (72,656)               (7,989 )


</TABLE>


                                               (continued)












             See accompanying notes to these consolidated financial
                                  statements.



<PAGE>





                             PLM INTERNATIONAL, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (in thousands of dollars)
<TABLE>
<CAPTION>


                                                                                                        For the Nine Months
                                                                                                        Ended September 30,
                                                                                                     1998                1997
                                                                                                -----------------------------------


<S>                                                                                            <C>                   <C>         
Financing activities
Borrowings of warehouse credit facility                                                        $     122,945         $     76,427
Repayment of warehouse credit facility                                                             (101,485)             (107,393 )
Repayment of senior secured loan                                                                     (4,412)               (2,941 )
Borrowings of senior secured notes                                                                    5,000                 9,000
Repayment of senior secured notes                                                                    (3,765)               (1,902 )
Borrowings of other secured debt                                                                        173                    --
Repayment of other secured debt                                                                        (114)                 (144 )
Borrowings of nonrecourse securitized debt                                                           64,578                36,055
Repayment of nonrecourse securitized debt                                                           (21,783)              (12,940 )
Redemption of shareholder rights                                                                         --                   (92 )
Exercise of stock options                                                                               411                    --
Purchase of stock                                                                                    (1,017)                 (775 )
                                                                                             ---------------------------------------
      Net cash provided by (used in) financing activities                                            60,531                (4,705 )
                                                                                             ---------------------------------------

Net increase (decrease) in cash and cash equivalents                                                  1,153                (1,493 )
Cash and cash equivalents at beginning of period                                                      5,224                 7,638

                                                                                             ---------------------------------------
Cash and cash equivalents at end of period                                                     $      6,377          $      6,145
                                                                                             =======================================

Supplemental information
Net cash paid for interest                                                                     $     10,171          $      7,088
                                                                                             =======================================
Net cash paid for income taxes                                                                 $      1,529          $        759
                                                                                             =======================================
Reissuance of treasury stock                                                                   $        290          $        201
                                                                                             =======================================
Commercial and industrial purchases included in accounts payable                               $     10,711          $      1,967
                                                                                             =======================================


</TABLE>
























             See accompanying notes to these consolidated financial
                                  statements.




<PAGE>



                             PLM INTERNATIONAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1998



1.   GENERAL

In the opinion of management,  the accompanying unaudited consolidated financial
statements  contain all adjustments  necessary,  consisting  primarily of normal
recurring  accruals,  to present fairly PLM International,  Inc. and its wholly-
and  majority-owned  subsidiaries  (the  Company's)  financial  position  as  of
September 30, 1998 and December 31, 1997, statements of income for the three and
nine  months  ended  September  30,  1998 and 1997,  statements  of  changes  in
shareholders'  equity for the year ended  December  31, 1997 and the nine months
ended September 30, 1998, and statements of cash flows for the nine months ended
September 30, 1998 and 1997. Certain  information and note disclosures  normally
included in financial  statements prepared in accordance with generally accepted
accounting  principles  have been  condensed  or omitted  from the  accompanying
consolidated financial statements. For further information,  reference should be
made to the financial  statements  and notes  thereto  included in the Company's
Annual  Report on Form 10-K for the year ended  December 31, 1997,  on file with
the Securities and Exchange Commission.

2.  ACCOUNTING PRONOUNCEMENTS

In June 1997,  the  Financial  Accounting  Standards  Board issued 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
Company'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 Company's  disclosures and will not affect the Company's
results of operations, cash flow, or financial position. As of the first quarter
of 1998,  the Company  adopted  SFAS No. 130,  disclosing  the foreign  currency
translation gain (loss) as a component of comprehensive income on a gross basis,
because it relates to a foreign investment permanently reinvested outside of the
United States.

In February 1998, the Financial  Accounting Standards Board issued SFAS No. 132,
"Employers'  Disclosures  about  Pensions and Other  Post-retirement  Benefits,"
which  revises  employers'  disclosure   obligations  about  pension  and  other
post-retirement  benefit  plans.  The  statement is  effective  for fiscal years
beginning after December 15, 1997, with earlier application permitted. Since the
Company  currently has no pension or other  post-retirement  benefit plans,  the
statement has no impact on the Company.

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  Company is  reviewing  the  effect  this  standard  will have on the
Company's consolidated financial statements.

In April 1998, the American  Institute of Certified  Public  Accountants  issued
Statement  of Position  98-5,  "Reporting  on the Costs of Start-Up  Activities"
which  requires  start-up  activities and  organization  costs to be expensed as
incurred.  The  statement  requires  that initial  application  be reported as a
cumulative  effect  of a change  in  accounting  principle.  This  statement  is
effective for the Company's  fiscal year ended  December 31, 1999,  with earlier
application permitted.  Upon adoption of this statement, the Company will take a
pre-tax  charge  related  to  start-up  costs  of  one of  its  subsidiary's  of
approximately  $0.4 million.  The Company is continuing to review this statement
for any  other  impact  it may  have  on the  Company's  consolidated  financial
statements.




<PAGE>



                             PLM INTERNATIONAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1998



3.  RECLASSIFICATIONS

Certain  prior-period  amounts have been  reclassified to conform to the current
period's presentation.

 4. FINANCING TRANSACTION ACTIVITIES

The Company's  wholly-owned  subsidiary,  American  Finance Group,  Inc.  (AFG),
originates and manages lease and loan  transactions  on primarily new commercial
and industrial  equipment that is financed by nonrecourse  securitized debt, for
the Company's own account or for sale to  institutional  investment  programs or
other  unaffiliated  investors.  The Company generally uses its warehouse credit
facility to finance the  acquisition  of the  assets,  subject to these  leases,
prior to sale or  permanent  financing  by  nonrecourse  securitized  debt.  The
majority of these  transactions are accounted for as finance leases,  while some
qualify as operating leases or loans.

Prior to 1998,  the Company  expensed  initial direct lease  origination  costs,
which were not  material,  as  incurred.  Under  generally  accepted  accounting
principles,  the effects of such activities, if material, should be capitalized.
Because the Company  anticipates its portfolio of equipment on lease to continue
to grow during the next few years,  and for the resulting  initial  direct lease
origination costs to become material, effective January 1, 1998, the Company now
capitalizes  these costs,  which  totaled $0.5 million for the nine months ended
September 30, 1998.  Initial direct lease  origination  costs are amortized over
the life of the related lease.

During the nine months ended  September 30, 1998, the Company  purchased  $108.5
million in  equipment  that was placed on finance  lease.  Also  during the nine
months ended  September  30, 1998,  the Company sold  equipment on finance lease
with an original  equipment  cost of $30.2  million,  resulting in a net gain of
$0.9 million.

5.   EQUIPMENT

Equipment held for operating lease includes transportation  equipment,  which is
depreciated  over its  estimated  useful life,  and  commercial  and  industrial
equipment, which is depreciated over the lease term.

During the nine months ended  September 30, 1998,  the Company  purchased  $22.5
million in commercial  and industrial  equipment,  which was placed on operating
lease.  During the nine months  ended  September  30,  1998,  the  Company  sold
commercial and industrial equipment that was on operating lease, with a net book
value of $24.7 million, for a net gain of $1.2 million.

During the first nine months of 1998, the Company  purchased  trailers for $19.9
million  and sold  trailers  with a net  book  value  of $4.7  million  for $5.0
million.  In addition,  the Company sold an aircraft engine and its 20% interest
in a commuter aircraft, with a combined net book value of $0.4 million, for $1.1
million.

The Company  classifies  equipment as held for sale if the  particular  asset is
subject  to a  pending  contract  for sale or is held for sale to an  affiliated
program.  Equipment held for sale is valued at the lower of the depreciated cost
or the fair value less the costs to sell.  During the first nine months of 1998,
the Company  purchased  railcars  for $1.9  million,  portable  heaters for $3.0
million, and an entity that owns a marine vessel for $17.0 million. The railcars
were sold during the first quarter to an unaffiliated third party for a net gain
of $0.5 million.  The portable  heaters and the entity that owns a marine vessel
were sold during the nine months ended September 30, 1998 to affiliated programs
at cost.  As of September  30, 1998 and  December  31, 1997,  the Company had no
equipment held for sale.




<PAGE>



                             PLM INTERNATIONAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1998



6.   DEBT

Assets  acquired  and held on an interim  basis for  placement  with  affiliated
programs, for placement in the Company's nonrecourse securitization facility, or
for sale to  unaffiliated  third parties have, from time to time, been partially
funded by a $50.0 million  warehouse  credit  facility that expires  November 2,
1998.  This  facility  was amended on June 1, 1998 to  temporarily  increase the
Company's AFG subsidiary's borrowing capacity on the facility from $50.0 million
to $55.0  million until  September 1, 1998.  On June 8, 1998,  this facility was
amended again to temporarily  increase the Company's AFG subsidiary's  borrowing
capacity on the facility from $55.0 million to $60.0 million until July 8, 1998.
The facility,  which is shared with PLM Equipment  Growth Funds (EGFs) V and VI,
PLM  Equipment  Growth &  Income  Fund VII (EGF  VII),  and  Professional  Lease
Management Income Fund I, LLC (Fund I), allows the Company to purchase equipment
prior to its designation to a specific  program.  Borrowings under this facility
by the other eligible  borrowers  reduce the amount  available to be borrowed by
the  Company.  As of  September  30,  1998,  the  Company  had $44.5  million in
borrowings  under  this  facility.  There  were no other  borrowings  under this
facility as of  September  30,  1998.  All  borrowings  under this  facility are
guaranteed by the Company. The Company is currently in negotiations to extend or
replace  this  facility.  Management  believes  it will be able to  extend  this
facility prior to its expiration on similar terms.

The Company has available a securitization facility to be used to acquire assets
on a nonrecourse  basis,  which is secured by direct finance  leases,  operating
leases,  and loans on commercial  and  industrial  equipment that generally have
terms from one to seven years.  This facility allows the Company to borrow up to
$125.0 million.  In October 1998, the Company received a commitment  letter from
First Union  National Bank  extending the  availability  of borrowing  under the
facility  through October 12, 1999. As of September 30, 1998,  borrowings  under
this  facility  were $105.0  million.  The  Company  believes it will be able to
extend this facility on similar terms prior to its  expiration  and increase its
borrowing capacity as needed.

In addition,  during the first nine months of 1998,  the Company  assumed  $12.4
million in additional nonrecourse notes payable,  resulting in total nonrecourse
notes  payable,  net of  principal  payments  received,  of $19.1  million as of
September  30,  1998.  Principal  and  interest  on these  notes are due monthly
beginning  November 1997 and ending May 2005. The notes bear interest from 8.32%
to 9.5% per annum and are secured by direct  finance  leases for  commercial and
industrial  equipment  that have terms  corresponding  to the  repayment  of the
notes.

On September 22, 1998,  the Company's  senior secured note agreement was amended
allowing the Company to borrow an  additional  $10.0  million under the facility
during the period from September 22, 1998 through  October 15, 1998.  During the
nine months ended  September  30, 1998,  the Company  borrowed  $5.0 million and
repaid $3.8 million on the senior  secured  notes,  in accordance  with the debt
repayment schedule. As of September 30,1998, the Company had $25.1 in borrowings
on these notes.  Principal payments are payable quarterly through termination of
the loan on August 15, 2002.

During the nine months ended September 30, 1998, the Company repaid $4.4 million
of the senior secured loan, in accordance with the debt repayment schedule.

On July 15, 1998, the Company entered into a revolving line of credit  agreement
in the form of a  promissory  note that allowed the Company to borrow up to $5.0
million  until  October 13,  1998,  bearing  interest  at the prime  rate,  with
interest due monthly in arrears.  As of September  30, 1998,  the Company had no
borrowings under this note.

7.   SHAREHOLDERS' EQUITY

During the first quarter of 1998, the Company  completed the $5.0 million common
stock repurchase plan authorized by the Company's Board of Directors in February
1997 and amended in July 1997. The Company repurchased 921,940 shares under this
plan, for a total of $5.0 million.



<PAGE>



                             PLM INTERNATIONAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1998



7.  SHAREHOLDERS' EQUITY (continued)

On August 31,  1998,  the  Company  announced  that its Board of  Directors  had
authorized the  repurchase of up to $1.0 million of the Company's  common stock.
As of September 30, 1998,  64,300  shares,  for a total of $0.4 million had been
repurchased  under this plan.  The Company  repurchased  an  additional  106,000
shares for $0.6 million in October 1998, completing the repurchase plan.

During the nine months ended  September 30, 1998,  56,588 shares of common stock
were issued from treasury stock as part of the senior  management bonus program,
and 56,500 shares were issued under a stock option plan.  During the nine months
ended  September  30,  1998,  176,569  shares were  repurchased  by the Company.
Consequently,  the total common shares outstanding  decreased to 8,329,881 as of
September 30, 1998 from the 8,393,362 outstanding as of December 31, 1997.

In May 1998, the Company's Board of Directors  adopted the 1998 Management Stock
Compensation  Plan (the Plan),  which  reserves  800,000 shares of the Company's
common stock for issuance to certain management and key employees of the Company
upon exercise of stock  options.  Vesting of these options occurs in three equal
installments of 33 1/3% per year,  initiating from the date of grant. During the
nine months ended September 30, 1998, 500,000  nonqualified options were granted
under this plan at $6.81 per share,  which  equaled  110% of the  average  daily
closing price of such shares on the American  Stock  Exchange for the 10 trading
days immediately preceding the grant (as required by the Plan).

Net income per basic  weighted-average  common share outstanding was computed by
dividing net income to common  shares by the  weighted-average  number of shares
deemed  outstanding  during the period.  The  weighted-average  number of shares
deemed outstanding for the basic earnings per share calculation during the three
months  ended   September  30,  1998  and  1997  was  8,385,549  and  9,148,483,
respectively.  The weighted-average  number of shares deemed outstanding for the
basic earnings per share calculation  during the nine months ended September 30,
1998 and 1997 was 8,367,907 and 9,173,779,  respectively.  The  weighted-average
number of shares  deemed  outstanding,  including  potentially  dilutive  common
shares, for the diluted earnings per  weighted-average  share calculation during
the three months ended  September 30, 1998 and 1997 was 8,579,197 and 9,331,260,
respectively.   The  weighted-average   number  of  shares  deemed  outstanding,
including  potentially  dilutive  common  shares,  for the diluted  earnings per
weighted-average  share  calculation  during the nine months ended September 30,
1998 and 1997 was 8,578,209 and 9,415,434, respectively.

8.  LEGAL MATTERS

In November  1995,  a former  employee of PLM  International  filed and served a
first amended  complaint (the complaint) in the United States District Court for
the  Northern  District  of  California  (Case No.  C-95-2957  MMC)  against the
Company,  the PLM International,  Inc. Employee Stock Ownership Plan (ESOP), the
ESOP's trustee, and certain individual employees, officers, and directors of the
Company. The complaint contains claims for relief alleging breaches of fiduciary
duties and various violations of the Employee  Retirement Income Security Act of
1974  (ERISA)  arising  principally  from  purported  defects in the  structure,
financing,  and termination of the ESOP, and for defendants'  allegedly engaging
in prohibited  transactions and interfering with plaintiff's rights under ERISA.
Plaintiff seeks monetary damages, rescission of the preferred stock transactions
with the ESOP and/or  restitution of ESOP assets,  and attorneys' fees and costs
under ERISA. In January 1996, the Company and other defendants filed a motion to
dismiss  the  complaint  for lack of subject  matter  jurisdiction,  arguing the
plaintiff  lacked standing under ERISA.  The motion was granted and in May 1996,
the district  court  entered a judgment  dismissing  the  complaint  for lack of
subject matter jurisdiction. Plaintiff appealed to the U.S. Court of Appeals for
the Ninth Circuit  seeking a reversal of the district  court's  dismissal of his
ERISA  claims,  and in an  opinion  filed in  October  1997,  the Ninth  Circuit
reversed  the  decision  of the  district  court  and  remanded  the case to the
district  court for  further  proceedings.  The  Company  filed a  petition  for
rehearing,  which was denied in November  1997.  The Ninth  Circuit  mandate was
filed in the district court in December 1997.




<PAGE>



                             PLM INTERNATIONAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1998



8.  LEGAL MATTERS (continued)

In February 1998, plaintiff was permitted by the district court to file a second
amended  complaint  in order to bring the fourth,  fifth,  and sixth  claims for
relief as a class action on behalf of himself and all similarly situated people.
These claims  allege that the Company and the other  defendants  breached  their
fiduciary duties and entered into prohibited transactions in connection with the
termination  of the  ESOP  and by  causing  the  ESOP to sell  or  exchange  the
preferred  shares  held for the benefit of the ESOP  participants  for less than
their fair market value. Also in February 1998, the defendants filed a motion to
dismiss the fourth,  fifth,  and sixth claims relating to the termination of the
ESOP, and the seventh claim relating to defendants'  alleged  interference  with
plaintiff's  rights under ERISA, all for failure to state claims for relief. The
district  court,  in an order  dated  July 14,  1998,  granted  this  motion and
dismissed the fourth through seventh claims for relief.

In June 1998 the defendants filed a motion for summary judgment seeking a ruling
that the first two claims for relief,  which allege breaches  arising out of the
purchase  and sale of stock at the  inception  of the  ESOP,  are  barred by the
applicable statute of limitations. In an order dated July 14, 1998, the district
court granted in part and denied in part this motion and ruled that these claims
for relief are barred by the statute of limitations to the extent that they rely
on a theory that the automatic conversion feature and other terms and conditions
of the purchase and sale of the preferred stock violated  ERISA,  but are not so
barred to the extent  that they rely on a theory that the  purchase  and sale of
the  preferred  stock at the  inception  of the ESOP was for more than  adequate
consideration.

On September 30, 1998  plaintiff  filed a motion to certify as final,  and enter
judgment  on,  the two July 14,  1998  orders.  If  granted,  plaintiff  will be
permitted  to file with the Ninth  Circuit an  immediate  appeal of the district
court's  dismissal of the fourth through seventh claims for relief and the grant
of summary  judgment as to  portions of the first and second  claims for relief.
Defendants have opposed this motion,  and a hearing is scheduled for November 6,
1998. Defendants filed their answer to the second amended complaint on September
18,  1998,  denying the  allegations  contained  in the first,  second and third
claims for relief.  The trial regarding these remaining claims is set for May 3,
1999.  The  Company  does not believe  these  claims have any merit and plans to
continue to defend this matter vigorously.

The Company and various of its  affiliates  are named as defendants in a lawsuit
filed as a class  action on  January  22,  1997 in the  Circuit  Court of Mobile
County,  Mobile,  Alabama, Case No. CV-97-251 (the Koch action). The plaintiffs,
who  filed  the  complaint  on their  own and on  behalf  of all  class  members
similarly  situated,  are six  individuals  who  allegedly  invested  in certain
California  limited  partnerships  (the  Partnerships)  for which the  Company's
wholly-owned subsidiary, PLM Financial Services, Inc. (FSI), acts as the general
partner,  including PLM Equipment  Growth Funds IV, V, and VI, and PLM Equipment
Growth & Income Fund VII. The complaint  asserts eight causes of action  against
all  defendants,   as  follows:   fraud  and  deceit,   suppression,   negligent
misrepresentation  and  suppression,   intentional  breach  of  fiduciary  duty,
negligent  breach  of  fiduciary  duty,  unjust  enrichment,   conversion,   and
conspiracy.  Additionally,  plaintiffs  allege a cause  of  action  against  PLM
Securities Corp. for breach of third party beneficiary contracts in violation of
the  National   Association  of  Securities  Dealers  rules  of  fair  practice.
Plaintiffs  allege that each  defendant  owed  plaintiffs  and the class certain
duties due to their  status as  fiduciaries,  financial  advisors,  agents,  and
control persons. Based on these duties,  plaintiffs assert liability against the
defendants  for improper  sales and marketing  practices,  mismanagement  of the
Partnerships,   and  concealing  such   mismanagement   from  investors  in  the
Partnerships. Plaintiffs seek unspecified compensatory and recissory damages, as
well as punitive damages,  and have offered to tender their limited  partnership
units back to the defendants.

In March 1997,  the  defendants  removed the Koch action from the state court to
the United States District Court for the Southern District of Alabama,  Southern
Division (Civil Action No. 97-0177-BH-C) based on the district court's diversity
jurisdiction,  following which plaintiffs filed a motion to remand the action to
the state court. In September 1997, the district court denied plaintiffs' motion
and dismissed  without  prejudice the individual  claims of the California class
representative,  reasoning that he had been fraudulently  joined as a plaintiff.
In October 1997, defendants filed a motion to compel arbitration of



<PAGE>



                             PLM INTERNATIONAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1998



8.  LEGAL MATTERS (continued)

plaintiffs' claims,  based on an agreement to arbitrate contained in the limited
partnership  agreement  of each  Partnership,  and to stay  further  proceedings
pending the outcome of such arbitration. Notwithstanding plaintiffs' opposition,
the district court granted the motion in December 1997.

Following  various  unsuccessful  requests  that the district  court  reverse or
otherwise amend its decisions,  plaintiffs  filed with the U.S. Court of Appeals
for the  Eleventh  Circuit a notice of appeal from the  district  court's  order
granting  defendants'  motion to compel arbitration and to stay the proceedings,
and of the  district  court's  order  denying  plaintiffs'  motion to remand and
dismissing the claims of the California  plaintiff.  This appeal was voluntarily
dismissed by plaintiffs in June 1998 pending  settlement of the Koch action,  as
discussed below.

On June 5, 1997, the Company and the  affiliates who are also  defendants in the
Koch action were named as defendants in another  purported class action filed in
the San Francisco  Superior Court,  San Francisco,  California,  Case No. 987062
(the Romei action). The plaintiff is an investor in PLM Equipment Growth Fund V,
and filed the  complaint  on her own behalf  and on behalf of all class  members
similarly situated who invested in certain  California limited  partnerships for
which FSI acts as the general partner, including the Partnerships. The complaint
alleges the same facts and the same nine causes of action as in the Koch action,
plus five additional causes of action against all of the defendants, as follows:
violations of California  Business and Professions  Code Sections 17200, et seq.
for  alleged  unfair  and  deceptive   practices,   constructive  fraud,  unjust
enrichment, violations of California Corporations Code Section 1507, and a claim
for treble damages under California Civil Code Section 3345.

On July 31, 1997, the defendants  filed with the district court for the Northern
District of California  (Case No. C-97-2847 WHO) a petition (the petition) under
the Federal  Arbitration Act seeking to compel arbitration of plaintiff's claims
and for an order staying the state court proceedings  pending the outcome of the
arbitration.  In connection with this motion,  plaintiff agreed to a stay of the
state court  action  pending the  district  court's  decision on the petition to
compel  arbitration.  In October 1997,  the district  court denied the Company's
petition  to  compel  arbitration  and in  November  1997,  agreed  to hear  the
Company's motion for  reconsideration  of this order. The hearing on this motion
has been taken off calendar and the district  court has  dismissed  the petition
pending  settlement of the Romei  action,  as discussed  below.  The state court
action  continues to be stayed pending such  resolution.  In connection with her
opposition to the petition to compel arbitration, the plaintiff filed an amended
complaint  with the state court in August 1997 alleging two new causes of action
for violations of the California Securities Law of 1968 (California Corporations
Code  Sections  25400 and  25500) and for  violation  of  California  Civil Code
Sections 1709 and 1710.  Plaintiff  also served  certain  discovery  requests on
defendants.  Because of the stay, no response to the amended complaint or to the
discovery is currently required.

In May 1998, all parties to the Koch and Romei actions entered into a memorandum
of  understanding  (MOU)  related to the  settlement of those  actions.  The MOU
contemplates  a settlement  and release of all claims in exchange for payment of
up to $6.0  million.  The final  settlement  amount will depend on the number of
authorized   claims   filed  by   authorized   claimants,   the  amount  of  the
administrative costs incurred in connection with the settlement,  and the amount
of attorneys' fees awarded by the Alabama  district court.  The Company will pay
up to $0.3  million of the  settlement,  with the  remainder  being funded by an
insurance  policy.  The defendants  will continue to deny each of the claims and
contentions and admit no liability in connection  with the proposed  settlement.
The settlement remains subject to numerous conditions, including but not limited
to (a)  agreement and  execution by the parties of a settlement  agreement,  (b)
notice  to and  certification  of the  class  for  settlement  purposes  and (c)
preliminary and final approval of the settlement by the Alabama  district court.
The Company  continues  to believe  that the  allegations  of the Koch and Romei
actions  are  completely  without  merit and  intends to continue to defend this
matter vigorously if the settlement is not consummated.

The Company is involved as plaintiff or defendant in various other legal actions
incident to its business.  Management does not believe that any of these actions
will be material to the financial condition of the Company.

9.   PURCHASE COMMITMENTS

As of September 30, 1998, the Company, through its AFG subsidiary, had committed
to purchase $81.6 million of equipment for its  commercial and industrial  lease
and finance receivables portfolio.

From  October  1,  1998 to  October  27,  1998,  the  Company,  through  its AFG
subsidiary,  funded $2.3 million of the commitments  outstanding as of September
30,  1998 for its  commercial  and  industrial  lease  and  finance  receivables
portfolio.

As of October 27, 1998,  the Company had committed to purchase  $73.8 million of
equipment  for its  commercial  and  industrial  lease and  finance  receivables
portfolio.

10.      INITIAL PUBLIC OFFERING

In March 1998, the Company  announced that its Board of Directors had authorized
management  to engage  investment  bankers  for the  purpose of  undertaking  an
initial  public  offering of common  stock for AFG. On May 7, 1998,  AFG filed a
registration statement with the Securities and Exchange Commission (SEC) for the
initial public offering.  On October 15, 1998, AFG filed an amended registration
statement with the SEC for the initial public offering. The actual timing of the
offering is subject to market  conditions  and other  factors.  The Company will
continue to own a majority interest in AFG after the initial public offering.

11.      SALE OF INVESTMENT IN SUBSIDIARY

In August 1998, the Company sold its aircraft  leasing and spare parts brokerage
subsidiary  located in  Australia  for a loss of $0.2  million.  The Company had
written-down  the spare parts inventory of the subsidiary by $0.5 million in the
second quarter of 1998.

12.      SUBSEQUENT EVENT

On October 15, 1998, the Company  borrowed an additional  $5.0 million under the
senior secured notes agreement.





<PAGE>





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

COMMERCIAL AND INDUSTRIAL EQUIPMENT LEASING

A major  activity  of the Company is the funding  and  management  of  long-term
direct finance leases,  operating leases, and loans through its American Finance
Group,  Inc.  (AFG)  subsidiary.  Master lease  agreements are entered into with
predominantly  investment-grade  lessees  and serve as the  basis for  marketing
efforts.  The  underlying  assets  represent  a broad  range of  commercial  and
industrial  equipment,  such  as  materials-handling,  computer,  point-of-sale,
general  plant  and  warehouse,  mining  and  construction,  and  communications
equipment.   Through  AFG,  the  Company  also  engages  in  the   servicing  of
institutional  investment  programs for which it originates  leases and receives
acquisition  and management  fees. The Company also earns  syndication  fees for
arranging purchases and sales of equipment to other unaffiliated third parties.

In March 1998, the Company  announced that its Board of Directors had authorized
management  to engage  investment  bankers  for the  purpose of  undertaking  an
initial  public  offering of common  stock for AFG. On May 7, 1998,  AFG filed a
registration statement with the Securities and Exchange Commission (SEC) for the
initial public offering.  On October 15, 1998, AFG filed an amended registration
statement with the SEC for the initial public offering. The actual timing of the
offering is subject to market  conditions  and other  factors.  The Company will
continue to own a majority interest in AFG after the initial public offering.

TRAILER LEASING

The Company operates 16 trailer rental  facilities that engage in short-term and
mid-term operating leases.  Equipment  operated in these facilities  consists of
refrigerated trailers used to transport  temperature-sensitive food products and
dry van trailers leased to a variety of customers. The Company opened 6 of these
rental  yards in the nine months  ended  September  30, 1998 and intends to open
additional rental yard facilities in the future.  The Company is selling certain
of its older trailers and is replacing them with new or late-model  refrigerated
trailers.  The new trailers will be placed in existing  rental  facilities or in
new yards.

MANAGEMENT OF INVESTMENT PROGRAMS

The Company syndicated  investment programs from which it earns various fees and
equity interests.  Professional Lease Management Income Fund I, LLC (Fund I) was
structured as a limited liability company with a no front-end fee structure. The
previously  syndicated limited partnership programs allow the Company to receive
fees for the  acquisition  and  initial  leasing  of the  equipment.  The Fund I
program does not provide for acquisition and lease negotiation fees. The Company
invested the equity raised through  syndication in transportation  equipment and
related assets, which it then manages on behalf of the investors.  The equipment
management  activities for these types of programs generate equipment management
fees for the  Company  over  the  life of a  program.  The  limited  partnership
agreements  generally  entitle the Company to receive a 1% or 5% interest in the
cash  distributions  and  earnings of a program,  subject to certain  allocation
provisions.  The Fund I agreement  entitles the Company to a 15% interest in the
cash  distributions and earnings of the program,  subject to certain  allocation
provisions,  which  will  increase  to 25% after  the  investors  have  received
distributions equal to their original invested capital.

In 1996, the Company announced the suspension of public syndication of equipment
leasing  programs  with  the  close  of Fund I. As a  result  of this  decision,
revenues  earned  from  managed   programs,   which  include   management  fees,
partnership  interests and other fees,  and  acquisition  and lease  negotiation
fees, will be reduced in the future as the older programs begin  liquidation and
the managed equipment portfolio for these programs becomes permanently reduced.




<PAGE>




COMPARISON  OF THE  COMPANY'S  OPERATING  RESULTS  FOR THE  THREE  MONTHS  ENDED
SEPTEMBER 30, 1998 AND 1997

The following analysis reviews the operating results of the Company:

REVENUES

<TABLE>
<CAPTION>

                                                                               For the Three Months
                                                                               Ended September 30,
                                                                            1998                          1997
                                                                    --------------------------------------------
                                                                              (in thousands of dollars)

<S>                                                                     <C>                             <C>                     
Operating lease income                                                  $      5,390                    $    4,429              
Finance lease income                                                           3,535                         2,638
Management fees                                                                2,550                         2,792
Partnership interests and other fees                                              61                           162
Acquisition and lease negotiation fees                                           872                           986
Aircraft brokerage and services                                                  204                           479
Gain on the sale or disposition of assets, net                                 1,308                           649
Other                                                                          1,003                           794
                                                                    ---------------------------------------------------
  Total revenues                                                        $      14,923                   $   12,929              

</TABLE>

The  fluctuations  in revenues for the three months  ended  September  30, 1998,
compared to the same quarter in 1997, are summarized and explained below.

OPERATING LEASE INCOME BY EQUIPMENT TYPE:

<TABLE>
<CAPTION>

                                                                                 For the Three Months
                                                                                  Ended September 30,
                                                                           1998                     1997
                                                                    -----------------------------------------
                                                                             (in thousands of dollars)


<S>                                                                     <C>                     <C>                      
Refrigerated and dry van over-the-road trailers                         $   2,721               $    1,425               
Commercial and industrial equipment                                         2,094                    1,510
Intermodal trailers                                                           451                      762
Marine vessels                                                                128                      501
Other                                                                          (4)                     231
                                                                    -----------------------------------------
  Total operating lease income                                          $   5,390               $    4,429           

</TABLE>

Operating  lease  income  includes  revenues  generated  from  assets  held  for
operating  lease and  assets  held for sale that are on lease.  Operating  lease
income increased $1.0 million during the third quarter of 1998,  compared to the
same quarter of 1997. Operating lease income increased due to the following:

(a) A $1.3  million  increase  in  operating  lease  income was  generated  from
refrigerated and dry van trailer equipment,  due to an increase in the amount of
these types of equipment owned and on operating lease.

(b) A $0.6  million  increase  in  operating  lease  income was  generated  from
commercial  and  industrial  equipment.  During the quarter ended  September 30,
1998,  the average  original  cost of  commercial  and  industrial  equipment on
operating lease was $23.0 million,  compared to $15.9 million during the quarter
ended September 30, 1997.




<PAGE>





These  increases  in  operating  lease  income  were  partially  offset  by  the
following:

(a) A $0.5  million  decrease  in  intermodal  trailer,  marine  container,  and
aircraft  operating  lease income,  due to the Company's  strategic  decision to
dispose  certain  transportation  assets  and exit  certain  equipment  markets.
Intermodal  trailer  lease  revenues also  decreased  due to lower  utilization,
compared to the same quarter of the prior year.

(b) A $0.4 million  decrease in marine vessel lease  revenue.  During the second
quarter of 1998,  the Company  purchased an entity  owning a marine  vessel that
generated $0.1 million in lease  revenues  during the third quarter of 1998. The
Company sold the entity that owned a marine vessel, at the Company's cost, to an
affiliated program during the third quarter of 1998. During the third quarter of
1997,  the Company owned a 47.5%  interest in an entity owning a marine  vessel,
which  generated $0.5 million in lease revenue during that quarter.  The Company
sold the 47.5%  interest  in the entity  that owned the  marine  vessel,  at the
Company's cost, to an affiliated program during the third quarter of 1997.

FINANCE LEASE INCOME:

The Company earns finance lease income for certain leases originated by AFG that
are either retained for long-term  investment or sold to third parties.  Finance
lease income  increased  $0.9 million in the three  months ended  September  30,
1998, compared to the same quarter in 1997, reflecting an increase in commercial
and industrial assets that were on finance lease.

MANAGEMENT FEES:

Management fees are, for the most part, based on the gross revenues generated by
equipment  under  management.  Management  fees  decreased  $0.2 million for the
quarter  ended  September  30,  1998,  compared to the same quarter of the prior
year.  The decrease in  management  fees resulted from a net decrease in managed
equipment  from  the  PLM  Equipment  Growth  Fund  (EGF)  programs.   With  the
termination of syndication  activities in 1996,  management  fees from the older
programs are decreasing as the programs liquidate their equipment portfolios.

PARTNERSHIP INTEREST AND OTHER FEES:

The Company  records as  revenues  its equity  interest  in the  earnings of the
Company's affiliated programs. The net earnings and distribution levels from the
affiliated  programs were $0.5 million for both the quarters ended September 30,
1998 and 1997.  In addition,  a decrease of $0.4 million and $0.3 million in the
Company's  residual  interests in the programs was recorded  during the quarters
ended  September  30,  1998 and 1997,  respectively.  The  decrease  in residual
interests in the quarter ended September 30, 1998,  compared to the same quarter
of 1997, resulted mainly from the disposition of equipment in certain of the EGF
programs. Residual income is based on the general partner's share of the present
value of the estimated  disposition  proceeds of the equipment portfolios of the
affiliated  programs  when the  equipment  is  purchased.  Net  decreases in the
recorded  residual  values  result  when  partnership  assets  are  sold and the
reinvestment  proceeds  are  less  than  the  original  investment  in the  sold
equipment.

ACQUISITION AND LEASE NEGOTIATION FEES:

During the quarter ended  September 30, 1998, the Company,  on behalf of the EGF
programs,  purchased  a  beneficial  interest  in an  entity  that  owns  marine
containers for $10.0 million, compared to $12.7 million of trailer equipment and
an entity that owned a 47.5% interest in a marine vessel  purchased on behalf of
the EGFs during the same quarter of 1997,  resulting in a $0.1 million  decrease
in  acquisition  and lease  negotiation  fees.  Also  during the  quarter  ended
September 30, 1998, equipment purchased by AFG for the institutional  investment
programs  was $11.9  million,  compared to $10.2  million for the same period in
1997.  These  purchases  resulted  in $0.2  million  in  acquisition  and  lease
negotiation  fees during both the quarters  ended  September  30, 1998 and 1997.
Because of the  Company's  decision to halt  syndication  of  equipment  leasing
programs with the close of Fund I in 1996, and because Fund I has a no front-end
fee structure,  acquisition  and lease  negotiation  fees will be  substantially
reduced in the future.




<PAGE>





AIRCRAFT BROKERAGE AND SERVICES:

Aircraft  brokerage and services  revenue,  which  represents  revenue earned by
Aeromil Holdings, Inc., the Company's spare part sales and brokerage subsidiary,
decreased $0.3 million during the quarter ended September 30, 1998,  compared to
the same quarter in 1997, due to the sale of the Company's  aircraft leasing and
spare parts brokerage subsidiary located in Australia in August 1998.

GAIN ON THE SALE OF DISPOSITION OF ASSETS, NET:

During the quarter ended  September 30, 1998, the Company  recorded $1.3 million
in gain on the  sale or  disposition  of  assets.  Of this  gain,  $0.3  million
resulted from the sale or disposition of trailers,  and $1.0 million  related to
the sale of  commercial  and  industrial  equipment.  During the  quarter  ended
September 30, 1997, the Company  recorded a $0.6 million net gain on the sale of
commercial and industrial equipment.

OTHER:

Other revenues  increased $0.2 million for the quarter ended September 30, 1998,
compared to the quarter ended September 30, 1997, due to a $0.2 million increase
in financing income earned on loans at AFG.

COSTS AND EXPENSES

<TABLE>
<CAPTION>

                                                                                 For the Three Months
                                                                                  Ended September 30,
                                                                             1998                          1997
                                                                    --------------------------------------------
                                                                                (in thousands of dollars)

<S>                                                                      <C>                          <C>                       
Operations support                                                       $     4,559                  $      3,901              
Depreciation and amortization                                                  2,844                         2,315
General and administrative                                                     1,895                         2,709
                                                                    ---------------------------------------------------
  Total costs and expenses                                               $     9,298                  $      8,925   

</TABLE>

OPERATIONS SUPPORT:

Operations  support expense,  including salary and  office-related  expenses for
operational  activities,  equipment  insurance,  repair and  maintenance  costs,
equipment  remarketing  costs,  costs of goods sold,  and provision for doubtful
accounts, increased $0.7 million (17%) for the quarter ended September 30, 1998,
compared to the same quarter in 1997. The increase  resulted from a $0.6 million
increase  in costs  primarily  due to the  expansion  of PLM  Rental  due to the
addition of six rental yards and the addition of new trailers to existing yards,
and a $0.2 million loss related to the sale of the  Company's  aircraft  leasing
and spare parts brokerage  subsidiary located in Australia in August 1998. These
increases  were  partially  offset by a $0.1 million  decrease in costs of goods
sold associated mainly with the sale of the Company's aircraft leasing and spare
parts brokerage subsidiary.

DEPRECIATION AND AMORTIZATION:

Depreciation  and  amortization  expenses  increased  $0.5 million (23%) for the
quarter ended  September 30, 1998,  compared to the quarter ended  September 30,
1997.  The  increase  resulted  from an increase in  commercial  and  industrial
equipment and refrigerated trailer equipment owned and on operating lease, which
was  partially  offset by the  reduction in  aircraft,  marine  containers,  and
intermodal trailers (discussed in the operating lease income section).

GENERAL AND ADMINISTRATIVE:

General and  administrative  expenses  decreased  $0.8 million  (30%) during the
quarter  ended  September  30,  1998,  compared  to the  same  quarter  in 1997,
primarily due to a $0.3 million  decrease in expenses  related to the redemption
of stock options,  a $0.3 million decrease in legal expenses related to the Koch
and  Romei  actions  (refer  to  Note  8),  and  a  $0.2  million   decrease  in
office-related  expenses  due  to  a  decrease  in  staffing  and  office  space
requirements.



<PAGE>





OTHER INCOME AND EXPENSES

<TABLE>
<CAPTION>

                                                                                         For the Three Months
                                                                                         Ended September 30,
                                                                                     1998                         1997
                                                                   -------------------------------------------
                                                                                      (in thousands of dollars)

<S>                                                                   <C>                   <C>         
Interest expense                                                      $     (3,989)         $   (2,466) 
Interest income                                                                518                 390
Other income, net                                                               15                  15

</TABLE>

INTEREST EXPENSE:

Interest expense increased $1.5 million (62%) during the quarter ended September
30, 1998, compared to the same quarter in 1997, due to an increase in borrowings
of  nonrecourse  securitized  debt and due to an increase in  borrowings  on the
warehouse  credit  facility.  The increase in interest  expense  caused by these
increased  borrowings was partially offset by lower interest  expense  resulting
from  reductions in the amounts  outstanding  on the senior secured loan and the
senior secured notes.

INTEREST INCOME:

Interest income  increased $0.1 million (33%) during the quarter ended September
30,  1998,  compared  to the same  quarter  in 1997.  During the  quarter  ended
September 30, 1998, the Company  recorded $0.3 million in interest  income for a
tax refund receivable which had not previously been recognized. This increase in
interest  was  partially  offset by a $0.2 million  decrease in interest  income
related to a decrease in average cash balances.

PROVISION FOR INCOME TAXES:

For the three months ended  September  30, 1998,  the provision for income taxes
was $0.8 million,  representing  an effective  rate of 37%. For the three months
ended  September  30,1997,  the  provision  for income  taxes was $0.6  million,
representing  an effective rate of 32%. In 1997,  the Company's  income tax rate
included the benefit of certain income earned from foreign  activities  that has
been permanently  invested  outside the United States.  The Company did not earn
any income of this type in the third quarter of 1998.

NET INCOME

As a result of the foregoing, for the three months ended September 30, 1998, net
income  was  $1.4  million,   resulting  in  basic  and  diluted   earnings  per
weighted-average  common  share  outstanding  of $0.16.  For the same quarter in
1997, net income was $1.3 million,  resulting in basic and diluted  earnings per
weighted-average common share outstanding of $0.14.





<PAGE>




COMPARISON  OF THE  COMPANY'S  OPERATING  RESULTS  FOR  THE  NINE  MONTHS  ENDED
SEPTEMBER 30, 1998 AND 1997

The following analysis reviews the operating results of the Company:

REVENUES

<TABLE>
<CAPTION>

                                                                                 For the Nine Months
                                                                                 Ended September 30,
                                                                         1998                          1997
                                                                    --------------------------------------------
                                                                              (in thousands of dollars)

<S>                                                                       <C>                             <C>      
Operating lease income                                                    $   14,734                      $ 12,087 
Finance lease income                                                           9,229                         6,436
Management fees                                                                7,649                         8,450
Partnership interests and other fees                                             742                         1,155
Acquisition and lease negotiation fees                                         3,083                         1,749
Aircraft brokerage and services                                                1,090                         1,814
Gain on the sale or disposition of assets, net                                 3,603                         3,250
Other                                                                          2,645                         2,329
                                                                    ---------------------------------------------------
  Total revenues                                                          $   42,775                      $ 37,270

</TABLE>

The  fluctuations  in revenues  for the nine months  ended  September  30, 1998,
compared to the same period in 1997, are summarized and explained below.

OPERATING LEASE INCOME BY EQUIPMENT TYPE:

<TABLE>
<CAPTION>

                                                                                  For the Nine Months
                                                                                  Ended September 30,
                                                                           1998                           1997
                                                                    --------------------------------------------
                                                                              (in thousands of dollars)

<S>                                                                     <C>                            <C>         
Commercial and industrial equipment                                     $      6,393                   $     3,933 
Refrigerated and dry van over-the-road trailers                                6,153                         3,832
Intermodal trailers                                                            1,630                         2,215
Marine vessels                                                                   412                           501
Aircraft                                                                          74                           521
Mobile offshore drilling units                                                    --                           603
Other                                                                             72                           482
                                                                    ---------------------------------------------------
  Total operating lease income                                          $     14,734                   $    12,087 

</TABLE>

Operating  lease  income  includes  revenues  generated  from  assets  held  for
operating  lease and  assets  held for sale that are on lease.  Operating  lease
income  increased $2.6 million during the nine months ended  September 30, 1998,
compared to the same period in 1997. Operating lease income increased due to the
following:

(a) A $2.5  million  increase  in  operating  lease  income was  generated  from
commercial  and  industrial  equipment  due to an increase in the amount of this
type of equipment on operating lease.

(b) A $2.3  million  increase  in  operating  lease  income was  generated  from
refrigerated and dry van trailer equipment,  due to an increase in the amount of
these types of equipment owned and on operating lease.




<PAGE>





These  increases  in  operating  lease  income  were  partially  offset  by  the
following:

(a) During the nine months ended  September 30, 1998,  the Company  purchased an
entity  owning a marine  vessel that  generated  $0.4 million in lease  revenues
during that period. The Company sold the entity that owned the marine vessel, at
the Company's  cost, to an affiliated  program during the third quarter of 1998.
During the nine months  ended  September  30,  1997,  the Company  owned a 47.5%
interest in an entity that owned a marine vessel,  which  generated $0.5 million
in lease revenue during that period.  The Company sold the 47.5% interest in the
entity that owned the marine  vessel,  at the  Company's  cost, to an affiliated
program during the third quarter of 1997.

(b) During the nine months  ended  September  30,  1997,  the Company  owned one
mobile  offshore  drilling  unit, as well as a 25.5%  interest in an entity that
owned another mobile  offshore  drilling unit,  which  generated $0.6 million in
lease revenues.  Both of these drilling units were sold at the Company's cost to
an  affiliated  program  during the first  quarter of 1997. No similar asset was
owned by the Company during the nine months ended September 30, 1998.

(c) A $1.4 million decrease in marine container, aircraft and intermodal trailer
operating  lease income was due to the Company's  strategic  decision to dispose
certain  transportation  assets and exit certain equipment  markets.  Intermodal
trailer lease revenues also decreased due to lower utilization,  compared to the
same period of the prior year.

FINANCE LEASE INCOME:

The Company earns finance lease income for certain leases originated by AFG that
are either retained for long-term  investment or sold to third parties.  Finance
lease income increased $2.8 million in the nine months ended September 30, 1998,
compared to the same period in 1997,  reflecting an increase in  commercial  and
industrial assets that were on finance lease.

MANAGEMENT FEES:

Management fees are, for the most part, based on the gross revenues generated by
equipment under management.  Management fees decreased $0.8 million for the nine
months ended September 30, 1998,  compared to the same period of the prior year.
The  decrease  in  management  fees  resulted  from a net  decrease  in  managed
equipment from the EGF programs.  With the termination of syndication activities
in 1996,  management fees from the older programs are decreasing as the programs
liquidate their equipment portfolios.

PARTNERSHIP INTERESTS AND OTHER FEES:

The Company  records as  revenues  its equity  interest  in the  earnings of the
Company's affiliated programs. The net earnings and distribution levels from the
affiliated programs were $1.5 million and $1.7 million for the nine months ended
September  30,  1998 and 1997,  respectively.  In  addition,  a decrease of $0.8
million and $0.5 million in the Company's residual interests in the programs was
recorded during the nine months ended September 30, 1998 and 1997, respectively.
The decrease in net earnings and distribution  levels and residual  interests in
the nine months ended  September 30, 1998,  compared to the same period of 1997,
resulted  mainly  from  the  disposition  of  equipment  in  certain  of the EGF
programs. Residual income is based on the general partner's share of the present
value of the estimated  disposition  proceeds of the equipment portfolios of the
affiliated  programs  when the  equipment  is  purchased.  Net  decreases in the
recorded  residual  values  result  when  partnership  assets  are  sold and the
reinvestment  proceeds  are  less  than  the  original  investment  in the  sold
equipment.




<PAGE>





ACQUISITION AND LEASE NEGOTIATION FEES:

During the nine months ended  September 30, 1998, the Company,  on behalf of the
EGF programs, purchased transportation and other equipment for $25.6 million and
beneficial  interests in entities  that own marine  containers  and a commercial
aircraft for $17.3 million,  compared to $22.7 million in trailer  equipment and
an entity that owned a marine vessel  purchased on behalf of the EGFs during the
same period of 1997,  resulting in a $1.1 million  increase in  acquisition  and
lease  negotiation  fees.  Also during the nine months ended September 30, 1998,
equipment  purchased by AFG for the institutional  investment programs was $26.0
million,  compared to $17.9 million for the same period in 1997,  resulting in a
$0.2 million  increase in acquisition  and lease  negotiation  fees for the nine
months ended September 30, 1998,  compared to the same period of the prior year.
Because of the  Company's  decision to halt  syndication  of  equipment  leasing
programs with the close of Fund I in 1996, and because Fund I has a no front-end
fee structure,  acquisition  and lease  negotiation  fees will be  substantially
reduced in the future.

AIRCRAFT BROKERAGE AND SERVICES:

Aircraft  brokerage and services  revenue,  which  represents  revenue earned by
Aeromil Holdings, Inc., the Company's spare part sales and brokerage subsidiary,
decreased $0.7 million during the nine months ended September 30, 1998, compared
to the same  period in 1997,  due to a decrease  in spare parts sales and due to
the sale of the Company's aircraft leasing and spare parts brokerage  subsidiary
located in Australia in August 1998.

GAIN ON THE SALE OR DISPOSITION OF ASSETS, NET:

During the nine months ended  September  30,  1998,  the Company  recorded  $3.6
million in gain on the sale or disposition of assets. Of this gain, $1.0 million
resulted from the sale or disposition of an aircraft engine, a 20% interest in a
commuter  aircraft,  and  trailers,  and  $2.1  million  related  to the sale of
commercial and industrial equipment. Also during the nine months ended September
30,  1998,  the  Company   purchased  and  subsequently   sold  railcars  to  an
unaffiliated third party for a net gain of $0.5 million.  During the nine months
ended September 30, 1997, the Company  recorded $3.3 million in net gains on the
sale or disposition of assets. Of this gain, $0.6 million resulted from the sale
or disposition of trailers, marine containers, commuter aircraft, storage units,
and railcars,  and $1.9 million related to the sale of commercial and industrial
equipment.  Also during the nine months ended  September  30, 1997,  the Company
purchased and subsequently sold two commercial aircraft to an unaffiliated third
party for a net gain of $0.8 million.

COSTS AND EXPENSES

<TABLE>
<CAPTION>
                                                                                 For the Nine Months
                                                                                   Ended September 30,
                                                                           1998                          1997
                                                                    --------------------------------------------
                                                                              (in thousands of dollars)

<S>                                                                   <C>                              <C>        
Operations support                                                    $       13,313                   $   12,123 
Depreciation and amortization                                                  8,891                        6,661
General and administrative                                                     5,778                        7,435
                                                                    ---------------------------------------------------
  Total costs and expenses                                            $       27,982                   $   26,219 

</TABLE>





<PAGE>





OPERATIONS SUPPORT:

Operations  support expense,  including salary and  office-related  expenses for
operational  activities,  equipment  insurance,  repair and  maintenance  costs,
equipment  remarketing  costs,  costs of goods sold,  and provision for doubtful
accounts,  increased $1.2 million (10%) for the nine months ended  September 30,
1998,  compared to the same period of 1997.  The increase  resulted  from a $1.1
million increase in costs due to the expansion of PLM Rental due to the addition
of six rental yards and the addition of new trailers to existing  yards,  a $0.2
million loss  related to the sale of the  Company's  aircraft  leasing and spare
parts  brokerage  subsidiary  located in Australia  in August  1998,  and a $0.5
million write-down of its spare parts inventory.  These increases were partially
offset by a $0.4  million  decrease in costs of goods sold  associated  with the
decrease in aircraft  spare parts cost of sales due to reduced spare parts sales
and the sale of the  Company's  spare  parts  brokerage  subsidiary,  and a $0.3
million decrease in bad debt expense.

DEPRECIATION AND AMORTIZATION:

Depreciation and amortization expenses increased $2.2 million (33%) for the nine
months ended September 30, 1998, compared to the nine months ended September 30,
1997.  The  increase  resulted  from an increase in  commercial  and  industrial
equipment and refrigerated trailer equipment owned and on operating lease, which
was  partially  offset by the  reduction in  aircraft,  marine  containers,  and
intermodal trailers (discussed in the operating lease income section).

GENERAL AND ADMINISTRATIVE:

General and administrative expenses decreased $1.7 million (22%) during the nine
months ended September 30, 1998,  compared to the same period of the prior year,
primarily  due to a $0.5 million  decrease in expenses  related to the Company's
response to shareholder-sponsored initiatives in the nine months ended September
30, 1997,  a $0.5  million  decrease in legal fees related to the Koch and Romei
actions,  a $0.3 million decrease in expenses related to the redemption of stock
options, a $0.3 million decrease in rent expense, and a $0.1 million decrease in
compensation and benefits expenses, (after allocations to the managed programs),
as a result of a decrease in staffing requirements.

OTHER INCOME AND EXPENSES

<TABLE>
<CAPTION>

                                                                                For the Nine Months
                                                                                Ended September 30,
                                                                          1998                     1997
                                                                   -------------------------------------------
                                                                              (in thousands of dollars)

<S>                                                                   <C>                      <C>                  
Interest expense                                                      $   (10,663)             $    (7,460)         
Interest income                                                             1,212                    1,228
Other income (expense), net                                                   478                       (9)

</TABLE>

INTEREST EXPENSE:

Interest  expense  increased  $3.2  million  (43%)  during the nine months ended
September 30, 1998,  compared to the same period in 1997,  due to an increase in
borrowings of nonrecourse  securitized debt and due to an increase in borrowings
on the warehouse  credit  facility.  The increase in interest  expense caused by
these  increased  borrowings  was  partially  offset by lower  interest  expense
resulting from reductions in the amounts outstanding on the senior secured loan.

INTEREST INCOME:

Interest  income  remained  at $1.2  million  for  both the  nine  months  ended
September  30, 1998 and 1997.  Although  the Company  recorded  $0.3  million in
interest  income  for a tax  refund  receivable  which had not  previously  been
recognized  during the nine months ended  September 30, 1998,  this increase was
offset by a $0.3 million  decrease in interest  income  related to a decrease in
average cash balances.





<PAGE>





OTHER INCOME (EXPENSE), NET:

Other income (expense), net increased $0.5 million. During the nine months ended
September 30, 1998, the Company  recorded  income of $0.7 million related to the
settlement of a lawsuit against Tera Power Corporation and others,  and recorded
expense of $0.3  million  related to a legal  settlement  for the Koch and Romei
actions (refer to Note 8).

PROVISION FOR INCOME TAXES:

For the nine months ended September 30, 1998, the provision for income taxes was
$2.3 million,  representing  an effective rate of 39%. For the nine months ended
September 30,1997, the provision for income taxes was $1.6 million, representing
an effective  rate of 32%. In 1997,  the Company's  income tax rate included the
benefit  of  certain  income  earned  from  foreign  activities  that  has  been
permanently  invested  outside the United  States.  The Company did not earn any
income of this type in the nine months ended September 30, 1998.

NET INCOME

As a result of the foregoing,  for the nine months ended September 30, 1998, net
income  was  $3.5  million,   resulting  in  basic  and  diluted   earnings  per
weighted-average common share outstanding of $0.42 and $0.41, respectively.  For
the same period in 1997,  net income was $3.2  million,  resulting  in basic and
diluted  earnings per  weighted-average  common share  outstanding  of $0.35 and
$0.34, respectively.


LIQUIDITY AND CAPITAL RESOURCES

Cash  requirements  have  historically  been  satisfied  through  cash flow from
operations, borrowings, and the sale of equipment.

Liquidity in 1998 and beyond will depend, in part, on the continued  remarketing
of the equipment  portfolio at similar lease rates,  the  management of existing
sponsored programs, the effectiveness of cost control programs, the purchase and
sale of equipment,  the volume of commercial  and industrial  equipment  leasing
transactions  for  which  the  Company  earns  fees  and  a  spread,  additional
borrowings,  and the potential proceeds from the initial public offering of AFG.
Management  believes that the Company can  accomplish  the preceding and that it
will have  sufficient  liquidity and capital  resources  for the future.  Future
liquidity is influenced by the factors summarized below.

DEBT FINANCING:

SENIOR  SECURED LOAN:  The  Company's  senior loan with a syndicate of insurance
companies, which had an outstanding balance of $16.2 million as of September 30,
1998 and October 27, 1998,  provides that  equipment  sale proceeds from pledged
equipment  or cash  deposits  be  placed  into  collateral  accounts  or used to
purchase  additional  equipment  to the extent  required  to meet  certain  debt
covenants.  As of September 30, 1998, the cash collateral  balance for this loan
was $1.4 million and is included in restricted cash and cash  equivalents on the
Company's  balance sheet.  During the nine months ended  September 30, 1998, the
Company repaid $4.4 million on this facility.  The facility  required  quarterly
interest  payments through June 30, 1997, with quarterly  principal  payments of
$1.5 million plus interest charges  beginning June 30, 1997 through  termination
of the loan in June 2001.

SENIOR  SECURED  NOTES:  On June 28, 1996,  the Company  closed a  floating-rate
senior  secured  note  agreement  that allowed the Company to borrow up to $27.0
million within a one-year period. On September 22, 1998, the Company amended the
note agreement to allow the Company to borrow an additional  $10.0 million under
the facility during the period from September 22, 1998 through October 15, 1998.
During the nine months ended  September  30,  1998,  the Company  borrowed  $5.0
million, and repaid $3.8 million on this facility. As of September 30, 1998, the
Company had $25.1 million  outstanding  under this agreement.  As of October 27,
1998, the Company had $30.1 million outstanding under this agreement.  Principal
payments of $1.9 million are payable quarterly  through  termination of the loan
on August 15, 2002.




<PAGE>





PROMISSORY  NOTE:  On July 15,  1998,  the Company  entered  into a $5.0 million
revolving line of credit agreement in the form of a promissory note that allowed
the  Company  to borrow up to $5.0  million  until  October  13,  1998,  bearing
interest  at the prime  rate,  with  interest  due  monthly  in  arrears.  As of
September 30, 1998, the Company had no borrowings on this note.

WAREHOUSE  CREDIT  FACILITY:  Assets  acquired and held on an interim  basis for
placement  with  affiliated  programs or sale to third  parties or purchased for
placement in the Company's nonrecourse  securitization  facility have, from time
to time, been partially funded by a $50.0 million warehouse credit facility that
expires November 2, 1998.

This facility,  which is shared with PLM Equipment Growth Funds (EGFs) V and VI,
PLM  Equipment  Growth &  Income  Fund VII (EGF  VII),  and  Professional  Lease
Management Fund I, LLC (Fund I), allows the Company to purchase  equipment prior
to its designation to a specific program.  Borrowings under this facility by the
other  eligible  borrowers  reduce the amount  available  to be  borrowed by the
Company.  As of September 30, 1998,  the Company had $44.5 million in borrowings
under this facility.  There were no other  borrowings  under this facility as of
September  30, 1998.  As of October 27, 1998,  the Company had $40.7  million in
borrowings  under  this  facility.  There  were no other  borrowings  under this
facility as of October 27, 1998.  The Company is currently  in  negotiations  to
extend or replace this facility.  Management  believes it will be able to extend
this facility prior to its expiration on similar terms.

NONRECOURSE   SECURITIZED   DEBT:   The  Company  has  available  a  nonrecourse
securitization  facility  for up to $125.0  million,  secured by direct  finance
leases,  operating leases, and loans on commercial and industrial equipment that
generally  have  terms of one to seven  years.  In  October  1998,  the  Company
received a  commitment  letter  from First Union  National  Bank  extending  the
availability  of  borrowings  under  the  facility  through  October  12,  1999.
Repayment  of the  facility  matches  the terms of the  underlying  leases.  The
Company  believes that it will be able to renew this  facility on  substantially
the same terms upon its  expiration  and  increase  its  borrowing  capacity  as
needed.  As of September 30, 1998,  $105.0 million in borrowings was outstanding
under this  facility.  As of October 27, 1998,  $105.3 million in borrowings was
outstanding under this facility.

   In  addition  to  the  $125.0  million  nonrecourse  securitization  facility
discussed  above, as of September 30, 1998 and October 27, 1998, the Company had
$19.1 million in nonrecourse  notes payable  secured by direct finance leases on
commercial and industrial  equipment that have terms  corresponding  to the note
repayment  schedules beginning November 1997 and ending May 2005. The notes bear
interest from 8.32% to 9.5% per annum.

INTEREST-RATE  SWAP CONTRACTS:  The Company has entered into  interest-rate swap
agreements in order to manage the  interest-rate  exposure  associated  with its
nonrecourse  securitized debt. As of September 30, 1998, the swap agreements had
a  weighted-average  duration of 1.41 years,  corresponding  to the terms of the
related debt. As of September 30, 1998, a notional  amount of $104.5  million of
interest-rate swap agreements  effectively fixed interest rates at an average of
6.61% on such  obligations.  For the  nine  months  ended  September  30,  1998,
interest expense increased by $0.3 million due to these arrangements.

COMMERCIAL AND INDUSTRIAL EQUIPMENT LEASING:

The Company earns finance lease or operating lease income for leases  originated
and  retained by AFG.  The funding of leases  requires  the Company to retain an
equity  interest in all leases financed  through the nonrecourse  securitization
facility. AFG also originates loans in which it takes a security interest in the
assets.  From  January 1, 1998  through  October 27,  1998,  the Company  funded
commercial  and  industrial  leases and  finance  receivables  with an  original
equipment cost of $150.5 million.  A portion of these transactions was financed,
on an interim  basis,  through the  Company's  warehouse  credit  facility.  The
Company believes that this lease origination  operation is a growth area for the
future.

Some equipment  subject to leases is sold to institutional  investment  programs
for which the  Company is the  servicer.  Acquisition  and  management  fees are
received for the sale and subsequent servicing of these leases.

In March 1998, the Company  announced that its Board of Directors had authorized
management  to engage  investment  bankers  for the  purpose of  undertaking  an
initial  public  offering of common  stock for AFG. On May 7, 1998,  AFG filed a
registration  statement with the SEC for the initial public offering. On October
15,  1998,  AFG filed an  amended  registration  statement  with the SEC for the
initial public offering.  The actual timing of the offering is subject to market
conditions  and other  factors.  The  Company  will  continue  to own a majority
interest in AFG after the initial public offering.

As of September 30, 1998, the Company had committed to purchase $81.6 million of
equipment  for its  commercial  and  industrial  lease and  finance  receivables
portfolio,  to be held by the  Company or sold to the  institutional  investment
programs or to other third parties.

From October 1, 1998 through  October 27, 1998,  the Company funded $2.3 million
of  commitments  outstanding  as of September  30, 1998 for its  commercial  and
industrial lease and finance receivables portfolio.

As of October 27, 1998,  the Company had committed to purchase  $73.8 million of
equipment  for its  commercial  and  industrial  lease and  finance  receivables
portfolio.

TRAILER LEASING:

The Company operates 16 trailer rental  facilities that engage in short-term and
mid-term operating leases.  Equipment  operated in these facilities  consists of
refrigerated trailers used to transport  temperature-sensitive food products and
dry van trailers leased to a variety of customers. The Company opened 6 of these
rental  yards in the nine months  ended  September  30, 1998 and intends to open
additional rental yard facilities in the future.  The Company is selling certain
of its older trailers and is replacing them with new or late-model  refrigerated
trailers.  The new trailers will be placed in existing  rental  facilities or in
new yards.

OTHER TRANSPORTATION EQUIPMENT LEASING AND OTHER:

During the nine months ended September 30, 1998, the Company generated  proceeds
of $28.5 million from the sale of  transportation  and other related  equipment.
The net proceeds from the sale of assets that were collateralized as part of the
senior secured loan facility were placed in a collateral account.

The  Company  also had an 80%  interest  in a company  owning  100% of a company
located in Australia  involved in aircraft  brokerage  and aircraft  spare parts
sales.  This company was sold during August 1998 at a loss of $0.2 million.  The
Company had  written-down  the spare parts  inventory of the  subsidiary by $0.5
million in the second quarter of 1998.

Management  believes that, through debt and equity financing,  possible sales of
equipment, proceeds from the initial public offering of AFG, and cash flows from
operations,  the Company will have sufficient liquidity and capital resources to
meet its projected future operating needs.

EFFECTS OF YEAR 2000:

It is possible that the Company's currently installed computer systems, software
products and other business systems, or those of the Company'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).

The Company 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 Company (a) is  currently  integrating  Year 2000
compliant   programming  code  into  its  existing  internally   customized  and
internally  developed  transaction  processing  software  systems  and  (b)  the
Company'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 PLMI before the end of fiscal 1999.  Although
the Company  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. As of September 30, 1998,  the Company has spent
approximately  $35,000 to become Year 2000  compliant.  The  Company  expects to
spend an additional $0.2 million in order to become Year 2000 compliant.

Some risks  associated  with the Year 2000 problem are beyond the ability of the
Company to control,  including the extent to which third parties can address the
Year 2000 problem.  The Company 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  Company  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 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  Company.  The
Company 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 Company  determines,  or is unable to  determine,  that  third-party
non-compliance  would have a material adverse effect on the Company's  business,
financial position or results of operation.

FORWARD-LOOKING INFORMATION:

Except for historical  information contained herein, the discussion in this Form
10-Q contains  forward-looking  statements that contain risks and uncertainties,
such  as  statements  of the  Company'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 Company's  actual results could differ  materially  from
those discussed here.





<PAGE>





                          PART II -- OTHER INFORMATION


Item 1.           Legal Proceedings

See Note 8 to the consolidated financial statements.


Item 6.           Exhibits and Reports on Form 8-K

(A)      Exhibits

10.1 Amendment No. 4 to Pooling and Servicing  Agreement and Indenture of Trust,
dated April 14, 1998.

10.2 Master  Amendment to Floating Rate Senior  Secured Notes  Agreement,  dated
September 22, 1998.

10.3  Commitment  letter from First Union  National  Bank  extending  the $125.0
million  nonrecourse  securitization  facility  through October 12, 1999,  dated
October 13, 1998.

(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 thereunto duly authorized.


                                          PLM INTERNATIONAL, INC.



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






          Date: October 27, 1998