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 June 30, 1997

                                       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 July 23, 1997 - 9,184,884 shares


<PAGE>



                             PLM INTERNATIONAL, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>

                                                                      For the Three Months               For the Six Months
                                                                         Ended June 30,                    Ended June 30,
                                                                       1997           1996              1997           1996
                                                                    ------------------------------------------------------------

       <S>                                                          <C>            <C>               <C>            <C>      
       Revenues:
         Operating leases                                           $   3,429      $  4,111          $   7,658      $   9,157
         Finance lease income                                           1,984           724              3,798          1,046
         Management fees                                                2,797         2,893              5,658          5,446
         Partnership interests and other fees                             507           300                993          1,292
         Acquisition and lease negotiation fees                           585         1,109                763          2,664
         Aircraft brokerage and services                                  661           729              1,335          1,416
         Gain on the sale or disposition of assets, net                 1,233           993              2,601          1,793
         Other                                                            694           697              1,535          1,143
                                                                    ------------------------------------------------------------
            Total revenues                                             11,890        11,556             24,341         23,957
                                                                    ------------------------------------------------------------

       Costs and expenses:
         Operations support                                             4,058         6,108              8,222         11,221
         Depreciation and amortization                                  2,141         2,907              4,346          5,616
         General and administrative                                     2,810         1,664              4,726          3,759
                                                                    ------------------------------------------------------------
            Total costs and expenses                                    9,009        10,679             17,294         20,596
                                                                    ------------------------------------------------------------

       Operating income                                                 2,881           877              7,047          3,361

         Interest expense                                              (2,352 )      (1,541 )           (4,994 )       (2,983 )
         Interest income                                                  452           286                838            523
         Other (expense) income, net                                       (3 )         416                (24 )          390
                                                                    ------------------------------------------------------------
                                                                    
            Income before income taxes                                    978            38              2,867          1,291

         Provision for (benefit from) income taxes                        330          (223 )              938            238
                                                                    ------------------------------------------------------------

       Net income to common shares                                  $     648      $    261          $   1,929      $   1,053
                                                                    ============================================================
                                                                    

       Earnings per weighted-average common share
              outstanding                                           $    0.07      $   0.02          $    0.21      $    0.10
                                                                    ============================================================
</TABLE>

















       See accompanying notes to these consolidated financial statements.

<PAGE>

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

<TABLE>
<CAPTION>
                                                                              June 30,              December 31,
                                                                                1997                    1996
                                                                         ------------------------------------------

                                     ASSETS

   <S>                                                                     <C>                     <C>       
   Cash and cash equivalents                                               $    7,951              $    7,638
   Receivables                                                                  3,461                   5,286
   Receivables from affiliates                                                  6,309                   6,019
   Investment in direct finance leases, net                                    68,213                  69,994
   Loans receivable                                                             5,516                   5,718
   Equity interest in affiliates                                               28,756                  30,407
   Assets held for sale                                                             -                   6,222
   Transportation equipment held for operating leases                          61,467                  66,546
     Less accumulated depreciation                                            (38,028 )               (41,750 )
                                                                         ----------------------------------------
                                                                               23,439                  24,796
   Commercial and industrial equipment held for
         operating leases                                                      15,982                  15,930
     Less accumulated depreciation                                             (4,038 )                (2,302 )
                                                                         ----------------------------------------
                                                                               11,944                  13,628
   Restricted cash and cash equivalents                                        21,946                  17,828
   Other, net                                                                  11,261                  11,213
                                                                         ----------------------------------------
       Total assets                                                        $  188,796              $  198,749
                                                                         ========================================

            LIABILITIES, MINORITY INTEREST, AND SHAREHOLDERS' EQUITY

   Liabilities:
     Short-term secured debt                                               $    7,141              $   30,966
     Senior secured loan                                                       23,529                  25,000
     Senior secured notes                                                      27,000                  18,000
     Other secured debt                                                           521                     618
     Nonrecourse securitization facility                                       52,343                  45,392
     Payables and other liabilities                                            13,332                  16,757
     Deferred income taxes                                                     16,217                  15,334
                                                                         ----------------------------------------
        Total liabilities                                                     140,083                 152,067

   Minority interest                                                              370                     362

   Shareholders' equity:
     Common stock ($0.01 par value, 50,000,000 shares
          authorized, 9,191,864 issued and outstanding at
          June 30, 1997 and 9,142,761 at December 31, 1996)                       117                     117
     Paid-in capital, in excess of par                                         77,778                  77,778
     Treasury stock (3,404,527 and 3,453,630 shares at
          respective dates)                                                   (12,189 )               (12,382 )
                                                                         ----------------------------------------
                                                                               65,706                  65,513
     Accumulated deficit                                                      (17,363 )               (19,193 )
                                                                         ----------------------------------------
        Total shareholders' equity                                             48,343                  46,320
                                                                         ----------------------------------------
   Total liabilities, minority interest, and shareholders' equity          $  188,796              $  198,749
                                                                         ========================================

</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,
                   1996 and the Six Months Ended June 30, 1997
                                 (in thousands)

<TABLE>
<CAPTION>




                                                 Common Stock
                                   -----------------------------------------

                                               Paid-in
                                              Capital in                                             Total
                                     At         Excess          Treasury       Accumulated       Shareholders'
                                     Par        of Par           Stock           Deficit             Equity
                                   -------------------------------------------------------------------------------

<S>                                <C>        <C>             <C>              <C>                      <C>    
Balances, December 31, 1995        $ 117      $  77,743       $   (5,931 )     $  (23,309 )             $48,620
Net income                                                                          4,095                 4,095
Common stock repurchases                                          (6,451 )                               (6,451 )
Exercise of stock options                            35                                                      35
Translation gain                                                                       21                    21
                                   -------------------------------------------------------------------------------
   Balances, December 31, 1996       117         77,778          (12,382 )        (19,193 )              46,320

Net income                                                                          1,929                 1,929
Common stock repurchases                                             (46 )                                  (46 )
Reissuance of treasury stock                                         239              (38 )                 201
Translation loss                                                                      (61 )                 (61 )
                                   ===============================================================================
   Balances, June 30, 1997         $ 117      $  77,778       $  (12,189 )     $  (17,363 )             $48,343
                                   ===============================================================================


</TABLE>













             See accompanying notes to these consolidated financial
                                  statements.

<PAGE>


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

                                                                                                 For the Six Months
                                                                                                   Ended June 30,
                                                                                              1997               1996
                                                                                           -------------------------------
   <S>                                                                                      <C>               <C>           
   Operating activities:
     Net income                                                                             $  1,929          $   1,053     
     Adjustments to reconcile net income to net cash
              provided by operating activities:
        Depreciation and amortization                                                          4,346              5,616
        Foreign currency translation                                                             (61 )               52
        Increase in deferred income taxes                                                        883                222
        Gain on sale or disposition of assets, net                                            (2,601 )           (1,793 )
        Undistributed residual value interests                                                   208                294
        Minority interest in net income of subsidiaries                                            8                  7
        Increase (decrease) in payables and other liabilities                                    962             (2,723 )
        Decrease in receivables and receivables from affiliates                                1,535              2,252
        Cash distributions from affiliates in excess of income accrued                         1,443              1,342
        Increase in other assets                                                                (323 )             (478 )
                                                                                           -------------------------------
           Net cash provided by operating activities                                           8,329              5,844
                                                                                           -------------------------------

   Investing activities:
     Additional investment in affiliates                                                           -             (4,956 )
     Principal payments received on finance leases                                             8,589              1,510
     Principal payments received on loans                                                        979                  -
     Investment in direct finance leases                                                     (30,528 )          (36,170 )
     Investment in loans receivable                                                             (777 )                -
     Purchase of equipment                                                                   (22,930 )          (33,287 )
     Proceeds from  the sale of transportation equipment for lease                             9,958              6,254
     Proceeds from the sale of assets held for sale                                           15,600              1,431
     Proceeds from the sale of commercial and industrial equipment                            24,699             24,160
     Sale of investment in subsidiary                                                              -                372
     Increase in restricted cash and restricted cash equivalents                              (4,118 )           (5,184 )
                                                                                           -------------------------------
        Net cash provided by (used in) investing activities                                    1,472            (45,870 )
                                                                                           -------------------------------

</TABLE>

                                                                 (continued)















             See accompanying notes to these consolidated financial
                                  statements.


<PAGE>


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

                                                                                                 For the Six Months
                                                                                                   Ended June 30,
                                                                                              1997               1996
                                                                                           -------------------------------

   <S>                                                                                      <C>               <C>   
   Financing activities:
     Borrowings of short-term secured debt                                                  $ 31,910          $  33,444
     Repayment of short-term secured debt                                                    (55,735 )           (8,595 )
     Repayment of senior secured loan                                                         (1,471 )                -
     Repayment of other secured debt                                                             (97 )              (39 )
     Borrowings under senior secured notes                                                     9,000                  -
     Borrowings under securitization facility                                                 14,394             15,866
     Repayment of securitization facility                                                     (7,443 )           (7,681 )
     Repayment of subordinated debt                                                                -             (2,875 )
     Purchase of treasury stock                                                                  (46 )             (348 )
     Proceeds from exercise of stock options                                                       -                 35
                                                                                           -------------------------------
         Net cash (used in) provided by financing activities                                  (9,488 )           29,807
                                                                                           -------------------------------

   Net increase (decrease) in cash and cash equivalents                                          313            (10,219 )
   Cash and cash equivalents at beginning of period                                            7,638             13,764
                                                                                           ===============================
   Cash and cash equivalents at end of period                                               $  7,951          $   3,545   
                                                                                           ===============================

   Supplemental information - net cash paid for:

     Interest                                                                               $  4,786          $   2,688 
                                                                                           ===============================

     Income taxes                                                                           $     43          $   1,283 
                                                                                           ===============================

</TABLE>









             See accompanying notes to these consolidated financial
                                  statements.


<PAGE>


                             PLM INTERNATIONAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 1997


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.'s (the Company's)
financial  position as of June 30, 1997 and December 31, 1996; the statements of
income for the three and six months ended June 30, 1997 and 1996; the statements
of cash  flows  for the six  months  ended  June  30,  1997  and  1996;  and the
statements of changes in  shareholders'  equity for the year ended  December 31,
1996 and the six months ended June 30, 1997.  Certain  information  and footnote
disclosures  normally  included in financial  statements  prepared in accordance
with generally  accepted  accounting  principles  have been condensed or omitted
from  the   accompanying   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, 1996, on file with the Securities and Exchange Commission.

2.   Reclassifications

Certain  amounts in the 1996  financial  statements  have been  reclassified  to
conform to the 1997 presentation.

3.   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.  While the majority of these leases are accounted for
as finance leases,  some are accounted for as loans or operating leases.  During
the six  months  ended  June 30,  1997,  the  Company  funded  $30.5  million in
equipment  that was placed on finance  lease.  Also during the six months  ended
June 30,  1997,  the Company sold  equipment  on finance  lease with an original
equipment cost of $22.7 million, resulting in a net gain of $1.2 million. During
the six months  ended June 30,  1997,  the Company  funded loans of $0.8 million
that were secured by commercial and industrial equipment.

4.   Equipment

Equipment  held  for  operating  lease  includes  transportation  equipment  and
commercial and industrial  equipment,  which is depreciated over their estimated
useful lives.

During the six months  ended June 30, 1997,  the Company  funded $4.0 million in
commercial and industrial equipment, which was placed on operating lease. During
the six months ended June 30, 1997,  the Company sold  commercial and industrial
equipment that was on operating  lease with an original cost of $3.2 million for
a net gain of $16,000.

The  Company  classifies  assets  as held  for sale if the  particular  asset is
subject  to a  pending  contract  for sale or is held for sale to an  affiliated
partnership.  Equipment held for sale is valued at the lower of the  depreciated
cost or the fair value less costs to sell. As of December 31, 1996,  the Company
had a 25.5%  interest in a mobile  offshore  drilling unit (rig) with a net book
value of $5.1 million that was held for sale to an affiliated  program.  Also as
of December 31, 1996,  two commuter  aircraft  with a combined net book value of
$1.1 million were held for sale.  The rig was sold to an  affiliated  program at
its original cost in March 1997. The two commuter aircraft were sold in February
1997 for their approximate net book value to an unaffiliated third party. During
the first quarter of 1997, the Company  purchased an additional  mobile offshore
drilling  unit for $10.5  million,  which was  subsequently  resold  during  the
quarter to an affiliated  program at cost. Also during the six months ended June
30, 1997,  the Company  purchased two  commercial  aircraft for $5.0 million and
trailers  for  $2.8  million.   The  aircraft  were   subsequently  sold  to  an
unaffiliated  third party for a gain of $0.8 million.  As of June 30, 1997,  the
Company had no assets held for sale.

Periodically,  the Company will purchase groups of assets whose ownership may be
allocated among affiliated  programs and the Company.  Generally in these cases,
only assets that are on lease will be  purchased  by  affiliated  programs.  The
Company will generally  assume the ownership and  remarketing  risks  associated
with off-lease equipment. Allocation of the purchase price will be determined by
a

<PAGE>


4.   Equipment (continued)

combination of third-party industry sources, recent transactions,  and published
fair market value  references.  During the six months  ended June 30, 1996,  the
Company realized $0.7 million of gains from the sale of 64 railcars purchased as
part of a group of assets by the Company in 1995.

5.   Debt

Assets  acquired  and held on an interim  basis for  placement  with  affiliated
partnerships or purchased for placement in the Company's securitization facility
have,  from time to time,  been partially  funded by a $50.0 million  short-term
equipment acquisition loan facility.  This facility expires on October 31, 1997.
The facility, which is shared with PLM Equipment Growth Funds IV, V, and VI, PLM
Equipment  Growth & Income Fund VII, and Professional  Lease  Management  Income
Fund I, LLC,  allows the Company to purchase  equipment  prior to the designated
program or partnership being identified.  As of June 30, 1997, the Company's AFG
subsidiary had borrowed $7.1 million from this loan  facility.  No other amounts
were  outstanding  under this facility as of June 30, 1997. All borrowings under
this facility are guaranteed by the Company.

The Company has available a securitization facility for up to $80.0 million on a
nonrecourse  basis that is secured by direct finance leases,  operating  leases,
and loans on commercial and industrial  equipment that generally have terms from
two to seven years.  The facility is available  for a one-year  period  expiring
June 1998.  As of June 30, 1997,  outstanding  borrowings  totaled $52.3 million
under this facility, payable through 2003.

6.   Shareholders' Equity

On March  3,  1997,  the  Company  announced  that the  Board of  Directors  had
authorized the  repurchase of up to $5.0 million of the Company's  common stock.
As of June 30, 1997, 10,900 shares, for a total of $46,000, had been repurchased
under this plan.

During the six months  ended June 30,  1997,  60,003  shares  (net of  forfeited
shares) were issued from treasury stock as part of the senior  management  bonus
program.  During  the six  months  ended  June  30,  1997,  10,900  shares  were
repurchased.  Consequently,  the total common  shares  outstanding  increased to
9,191,864 as of June 30, 1997, from the 9,142,761 outstanding as of December 31,
1996. Net income per  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  earnings  per share  calculation  during the three
months ended June 30, 1997 and 1996 was 9,439,973 and 10,947,381,  respectively.
The  weighted-average  number of shares deemed  outstanding for the earnings per
share  calculation  during  the six  months  ended  June  30,  1997 and 1996 was
9,378,256 and 10,996,981, respectively.

On March  12,  1989,  the  Company  distributed  rights  as a  dividend  on each
outstanding  share of common  stock.  Upon the  occurrence  of  certain  events,
characterized  as  unsolicited  or abusive  attempts  to acquire  control of the
Company, the rights would have become exercisable. On June 10, 1997, the Company
announced the  redemption of these rights for $0.01 per right.  Shareholders  of
record  as of  June  24,  1997  will be paid a  total  of $0.1  million  for the
redemption of the rights on July 24, 1997.

7.   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

<PAGE>


7.   Legal Matters  (continued)

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  out  of  purported  defects  in  the  structure,
financing,  and termination of the ESOP and interference 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, PLMI and other  defendants  filed a
motion to dismiss the Complaint for lack of subject matter jurisdiction, arguing
the plaintiff lacked  standing.  The motion was granted and on May 30, 1996, the
Court entered a judgment  dismissing  the  Complaint for lack of subject  matter
jurisdiction.  Plaintiff has appealed to the U.S. Court of Appeals for the Ninth
Circuit,  seeking a reversal of the District Court's  judgment.  This matter was
fully  briefed  by the  parties  as of  February  1997.  The Ninth  Circuit  has
scheduled oral argument on this matter for September 17, 1997 at 9:00 am.

As more  fully  described  by the  Company  in its Form 10-K for the year  ended
December  31,1996,  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).  On  February 3, 1997,  the state  court  filed an order  conditionally
certifying  the class pursuant to the provisions of Rule 23 of the Alabama Rules
of Civil  Procedure  (ARCP),  as requested by  plaintiffs  in an ex parte motion
filed on January 22, 1997.  Defendants were not given notice of the motion,  nor
were they given an  opportunity  to be heard  regarding the issue of conditional
class  certification.  The order specifies that the class shall consist of (with
certain narrow  exceptions) all purchasers of limited  partnership  units in PLM
Equipment  Growth  Funds IV, V, and VI, and PLM  Equipment  Growth & Income Fund
VII.  In issuing  the order,  the court  emphasized  that the  certification  is
conditional  in accordance  with Rule 23(d) of the ARCP, and that the plaintiffs
will bear the burden of proving each requisite element of Rule 23 at the time of
the evidentiary  hearing on the issue of class  certification.  To date, no such
hearing date has been set. The defendants  filed a notice of removal of 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) on March
6,  1997,  arguing  that the  parties  are fully  diverse  for the  purposes  of
diversity  jurisdiction pursuant to 28 U.S.C. Section 1441. The plaintiffs filed
a motion  to remand  the Koch  action to the  state  court and  defendants  have
responded  to this motion.  The federal  court has not yet ruled on this motion,
and  defendants do not need to respond to the complaint  until after such motion
is decided.  The Company  believes that the  allegations  of the Koch action are
completely without merit and intends to defend this matter vigorously.

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 named plaintiff has alleged the same facts and the same
nine causes of action as is in the Koch action (as  described  in the  Company's
Form 10-K for the year ended December 31, 1996),  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,  a  claim  for  constructive  fraud,  a claim  for  unjust
enrichment, a claim for violations of California Corporations Code Section 1507,
and a claim for treble  damages under  California  Civil Code Section 3345.  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 sponsored by PLM Securities,
for which PLM Financial  Services,  Inc. acts as the general partner,  including
PLM Equipment Growth Funds IV, V, and VI, and PLM Equipment Growth & Income Fund
VII.

The Company  and the other  defendants  removed  the Romei  action to the United
States  District  Court  for the  Northern  District  of  California  (Case  No.
C-97-2450  SC) on  June  30,  1997,  based  on  the  federal  court's  diversity
jurisdiction.  The defendants  then filed a motion to compel  arbitration of the
plaintiffs'  claims,  based on an agreement  to  arbitrate  contained in the PLM
Equipment Growth Fund V limited partnership  agreement,  to which plaintiff is a
party.  A hearing on this motion to compel  arbitration  has been  scheduled for
August 22, 1997,  although the district court may decide the motion without such
argument.  The Company  believes  that the  allegations  of the Romei action are
completely without merit and intends to defend this matter vigorously.

<PAGE>

7.  Legal Matters  (continued)

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.

8.   Purchase Commitments

As of June 30, 1997, the Company,  through its AFG subsidiary,  had committed to
purchase $120.5 million of equipment for its commercial and industrial equipment
lease  portfolio,   to  be  held  by  the  Company  or  sold  to  the  Company's
institutional leasing investment program or to third parties.

From July 1, 1997 to July 23,  1997,  the Company,  through its AFG  subsidiary,
funded $10.0 million of the commitments  outstanding as of June 30, 1997 for its
commercial and industrial equipment lease portfolio.

As of July 23, 1997,  the Company had  committed to purchase  $110.5  million of
equipment for its commercial and industrial equipment lease portfolio.

9.   Subsequent Event

During July 1997, the Company  purchased for $9.0 million a 47.5% interest in an
entity that owns a marine vessel. The remaining 52.5% interest in the entity was
purchased by an affiliated program.  The Company intends to sell its interest in
the entity to an affiliated program.



<PAGE>


Item 2.  Management's Discussion and Analysis of Financial Condition and 
         Results of Operations

A major  activity of the Company is the funding and  management  of  longer-term
direct finance leases,  operating leases, and loans through its American Finance
Group,  Inc.  (AFG)  subsidiary.  Master lease  agreements are entered into with
predominately  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  data  processing,  communications,   materials
handling, and construction  equipment.  Through AFG, the Company is also engaged
in the management of an institutional  leasing  investment  program for which it
originates leases and receives acquisition and management fees.

The Company operates 10 trailer rental  facilities that engage in short-term and
mid-term operating leases.  Equipment  operated in these facilities  consists of
dry van trailers leased to a variety of customers and refrigerated trailers used
primarily in the food distribution  industry.  The Company is selling certain of
its older trailers and is replacing them with new or late-model used trailers.

The Company has syndicated  investment programs from which it earns various fees
and equity interests. The 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 allowed the
Company to receive fees for the  acquisition and initial lease of the equipment.
The Fund I program does not provide for acquisition and lease  negotiation fees.
The Company  invests the equity raised  through  syndication  in  transportation
equipment,  which it then  manages  on behalf of the  investors.  The  equipment
management activities for these types of programs generates equipment management
fees for the Company over the life of a program,  typically 10 to 12 years.  The
limited partnership  agreements generally entitle the Company to receive a 1% or
5% interest in the cash distributions and earnings of a partnership,  subject to
certain  allocation  provisions.  The Fund I agreement entitles the Company to a
15% interest in the cash  distributions  and  earnings of a program,  subject to
certain  allocation  provisions,  which will increase to 25% after the investors
have received distributions equal to their original invested capital.

         On May 14,  1996,  the  Company  announced  the  suspension  of  public
syndication of equipment leasing programs with the May 13, 1996 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  becomes  permanently
reduced.

The Company also owns a diversified  portfolio of transportation  equipment from
which it earns  operating  lease  revenue  and incurs  operating  expenses.  The
Company's  transportation  equipment held for operating lease, which consists of
aircraft,  marine containers,  intermodal trailers,  and storage equipment as of
June 30, 1997, is equipment  mainly built prior to 1988. As equipment  ages, the
Company  continues  to monitor  the  performance  of its assets on lease and the
current  market  conditions  for  leasing  equipment  in  order to seek the best
opportunities for investment. Failure to replace equipment may result in shorter
lease terms and higher costs of maintaining and operating aged  equipment,  and,
in certain instances, limited remarketability.



<PAGE>


For the Three Months Ended June 30, 1997 versus June 30, 1996

The following analysis reviews the operating results of the Company:

Revenues
<TABLE>
<CAPTION>

                                                                                For the Three Months
                                                                                   Ended June 30,
                                                                               1997              1996
                                                                            ------------------------------
                                                                                   (in thousands)
        <S>                                                                 <C>               <C>        
        Operating leases                                                    $  3,429          $   4,111  
        Finance lease income                                                   1,984                724
        Management fees                                                        2,797              2,893
        Partnership interests and other fees                                     507                300
        Acquisition and lease negotiation fees                                   585              1,109
        Aircraft brokerage and services                                          661                729
        Gain on the sale or disposition of assets, net                         1,233                993
        Other                                                                    694                697
                                                                            ------------------------------
            Total revenues                                                  $ 11,890          $  11,556 

</TABLE>

The fluctuations in revenues for the three months ended June 30, 1997,  compared
to the same period in 1996, are summarized and explained below.

Operating lease revenues by equipment type:

<TABLE>
<CAPTION>

                                                                 For the Three Months
                                                                    Ended June 30,
                                                                1997              1996
                                                              ---------------------------
                                                                    (in thousands)

   <S>                                                        <C>              <C>     
   Trailers                                                   $ 1,912          $  1,802
   Commercial and industrial equipment                          1,261               778
   Aircraft                                                       102             1,139
   Storage equipment                                               95               282
   Marine containers                                               51                92
   Railcars                                                         8                18
                                                              ---------------------------
                                                              $ 3,429          $  4,111

</TABLE>

Operating  lease  revenues  include  revenues  generated  from  assets  held for
operating  leases  and  assets  held for sale that are on lease.  As of June 30,
1997, the Company owned  transportation  equipment held for operating lease with
an  original  cost of $61.5  million,  which  was  $35.3  million  less than the
original cost of transportation  equipment owned and held for operating lease or
held for sale as of June 30, 1996.  The reduction in  equipment,  on an original
cost basis, is a consequence of the Company's  strategic  decision to dispose of
certain  underperforming  transportation  assets,  and  resulted  in a  72%  net
reduction  in its  aircraft  portfolio  and a 33% net  reduction  in its  marine
container  portfolio,  compared to these  portfolios  as of June 30,  1996.  The
reduction in transportation  equipment available for lease is the primary reason
aircraft and marine container revenues were reduced, compared to the prior year.
The $0.2  million  decrease  in  storage  equipment  lease  revenue is due to an
agreement  the Company  entered into in January 1997 to lease all of its storage
equipment assets to a third party on a triple-net operating lease, as opposed to
short-term operating leases, resulting in both lower storage equipment operating
lease revenues and operating expenses.

The  decrease  in  operating  lease  revenues  as a result of the  reduction  in
transportation equipment available for lease and the storage equipment agreement
was  partially  offset by a $0.5 million  increase in operating  lease  revenues
generated by commercial and industrial  equipment and by a $0.1 million increase
in trailer  lease  revenues as a result of higher  lease  rates  received on new
trailer additions.



<PAGE>


         Finance lease income:

The Company earns finance lease income for certain leases  originated by its AFG
subsidiary  that are either  retained for long-term  investment or sold to third
parties or to an institutional leasing investment program.  Finance lease income
increased  $1.3  million in the second  quarter  of 1997,  compared  to the same
period in 1996, reflecting an increase in commercial and industrial assets owned
and on operating finance lease. For the quarter ended June 30, 1997, the average
investment in direct finance leases was $67.8 million, compared to $23.1 million
for the second quarter of 1996.

Management fees:

         Management  fees are,  for the most part,  based on the gross  revenues
generated by equipment under management. The $0.1 million decrease in management
fees during the quarter ended June 30, 1997,  compared to the  comparable  prior
year's  quarter,  resulted  from a decrease  in  management  fees  caused by the
disposition of equipment in the Company's older  programs.  With the termination
of syndication  activities in 1996,  management fees are expected to decrease in
the future as the older programs  begin  liquidation  and the managed  equipment
portfolio becomes permanently reduced. This decrease has been and is expected to
continue to be offset, in part, by management fees earned from the institutional
leasing investment program managed by the Company's AFG subsidiary.

         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 $0.6 million and $0.7 million for the quarters  ended
June 30, 1997 and 1996, respectively. In addition, a decrease of $0.1 million in
the Company's residual interests in the programs was recorded during the quarter
ended June 30, 1997. A net  decrease of $0.4 million in the  Company's  residual
interests in the programs was recorded  during the quarter  ended June 30, 1996.
Residual income is based on the general  partner's share of the present value of
the  estimated  disposition  proceeds of the  equipment  portfolio of affiliated
partnerships  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 June 30, 1997, on behalf of the equipment growth funds,
the Company  signed a memorandum of agreement to purchase a 52.5% interest in an
entity that owns a marine  vessel (the  purchase was completed in July 1997) for
$10.0 million, compared to $17.4 million of equipment purchased on behalf of the
equipment growth funds during the same quarter of the prior year, resulting in a
$0.4 million decrease in acquisition and lease negotiation fees. Also during the
quarter ended June 30, 1997,  equipment purchased for the institutional  leasing
investment program managed by AFG was $1.3 million, compared to $7.6 million for
the same period in 1996,  resulting in an additional decrease in acquisition and
lease  negotiation  fees of $0.1 million.  Because of the Company's  decision to
suspend  syndication of equipment  leasing  programs with the close of Fund I on
May 13, 1996, and because Fund I has a no front-end fee  structure,  acquisition
and lease negotiation fees will be substantially reduced in the future.

         Gain on the sale or disposition of assets, net:

         During the quarter  ended June 30,  1997,  the Company  recorded a $1.2
million  net gain on the sale or  disposition  of  assets.  Of this  gain,  $0.4
million  resulted  from the  sale or  disposition  of 323  trailers,  78  marine
containers,  4 storage units, 2 railcars, and 2 commuter aircraft.  Also, during
the second  quarter of 1997,  the Company  purchased and  subsequently  resold a
commercial  aircraft  to an  unaffiliated  third  party  for a net  gain of $0.4
million.  The Company also earned $0.4 million from the sale of  commercial  and
industrial equipment during the second quarter of 1997. During the quarter ended
June 30,  1996,  the  Company  recorded a $1.0  million  net gain on the sale or
disposition  of assets.  Of this gain,  $0.6 million  resulted  from the sale or
disposition  of 138  trailers,  50 marine  containers,  5 commuter  aircraft,  2
railcars, and 1 storage unit, and $0.4 million related to the sale of commercial
and industrial equipment.

         Costs and Expenses
<TABLE>
<CAPTION>
                                                                         For the Three Months
                                                                            Ended June 30,
                                                                        1997                1996
                                                                     -------------------------------
                                                                            (in thousands)

   <S>                                                               <C>                 <C>      
   Operations support                                                $   4,058           $   6,108
   Depreciation and amortization                                         2,141               2,907
   General and administrative                                            2,810               1,664
                                                                     --------------------------------
      Total costs and expenses                                       $   9,009           $  10,679
</TABLE>

         Operations support:

Operations  support expense  (including salary and  office-related  expenses for
operational  activities,  provision for doubtful accounts,  equipment insurance,
repair and maintenance  costs,  equipment  remarketing  costs, and cost of goods
sold) decreased $2.1 million (34%) for the quarter ended June 30, 1997, compared
to the same quarter in 1996.  The decrease  resulted from a $1.4 million  charge
related to the  termination  of  syndication  activities  recorded in the second
quarter of 1996, a $0.5 million  decrease in  compensation  expense due to staff
reductions,  and a $0.2  million  decrease in equipment  operating  costs due to
sales of the Company's transportation equipment.

         Depreciation and amortization:

         Depreciation and amortization expenses decreased $0.8 million (26%) for
the quarter  ended June 30, 1997,  compared to the quarter  ended June 30, 1996.
The decrease resulted from the reduction in depreciable transportation equipment
(discussed in the operating lease revenue section),  and was partially offset by
increased depreciation of commercial and industrial equipment.

         General and administrative:

General and  administrative  expenses  increased  $1.1 million  (69%) during the
quarter  ended June 30, 1997,  compared to the same  quarter in 1996,  which was
primarily due to a $0.2 million increase in compensation and benefits  expenses,
a $0.2 million  increase in legal fees related to the Koch action (refer to Note
7 to the consolidated  financial  statements),  a $0.5 million increase in costs
related to a  submission  of matters to a vote of security  holders,  and a $0.3
million  credit  recorded in the second  quarter of 1996 related to the Employee
Stock  Ownership  Plan  (ESOP),  which were  partially  offset by a $0.1 million
decrease in rent expense.

         Other Income and Expenses
<TABLE>
<CAPTION>

                                                                         For the Three Months
                                                                            Ended June 30,
                                                                        1997              1996
                                                                     ------------------------------
                                                                            (in thousands)

     <S>                                                             <C>               <C>            
     Interest expense                                                $  (2,352 )       $  (1,541 )    
     Interest income                                                       452               286
     Other (expense) income, net                                            (3 )             416
     Provision for (benefit from) income taxes                             330              (223 )

</TABLE>

         Interest expense:

         Interest expense  increased $0.8 million (53%) during the quarter ended
June 30,  1997,  compared  to the same  period in 1996,  due to an  increase  in
borrowings on the nonrecourse  securitization facility, the senior secured notes
facility,  and the short-term equipment acquisition loan facility.  The increase
in interest expense caused by these increased borrowings was partially offset by
lower interest expense  resulting from the retirement of the  subordinated  debt
and the reduction in the amount outstanding on the senior secured loan.

Interest income:

Interest income increased $0.2 million (58%) in the quarter ended June 30, 1997,
compared  to the same  quarter  of 1996,  as a result  of  higher  average  cash
balances in the second quarter of 1997, compared to the same period in 1996.

Other (expense) income, net:

Other income was $0.4 million during the quarter ended June 30, 1996, due to the
sale of 32 wind turbines that had previously been written off. No similar income
was recorded during the quarter ended June 30, 1997.

         Income taxes:

For the three  months ended June 30, 1997,  the  provision  for income taxes was
$0.3 million, which represented an effective rate of 34%. For the same period in
1996,  the benefit  from  income  taxes was $0.2  million,  which  reflected  an
adjustment for taxes related to the ESOP.

Net Income

As a result of the  foregoing,  for the three months  ended June 30,  1997,  net
income was $0.6  million,  resulting in net income per  weighted-average  common
share  outstanding  of $0.07.  For the same period in 1996,  net income was $0.3
million,  resulting in net income per weighted-average  common share outstanding
of $0.02.


For the Six Months Ended June 30, 1997 versus June 30, 1996

The following analysis reviews the operating results of the Company:

Revenues
<TABLE>
<CAPTION>

                                                                                 For the Six Months
                                                                                   Ended June 30,
                                                                               1997              1996
                                                                            ------------------------------
                                                                                   (in thousands)
        <S>                                                                 <C>               <C>        
        Operating leases                                                    $  7,658          $   9,157  
        Finance lease income                                                   3,798              1,046
        Management fees                                                        5,658              5,446
        Partnership interests and other fees                                     993              1,292
        Acquisition and lease negotiation fees                                   763              2,664
        Aircraft brokerage and services                                        1,335              1,416
        Gain on the sale or disposition of assets, net                         2,601              1,793
        Other                                                                  1,535              1,143
                                                                            ------------------------------
            Total revenues                                                  $ 24,341          $  23,957  

</TABLE>

The fluctuations in revenues for the six months ended June 30, 1997, compared to
the same period in 1996, are summarized and explained below.



<PAGE>


Operating lease revenues by equipment type:
<TABLE>
<CAPTION>

                                                                For the Six Months
                                                                  Ended June 30,
                                                               1997              1996
                                                            ----------------------------
                                                                  (in thousands)

    <S>                                                     <C>               <C>     
    Trailers                                                $  3,860          $  3,958
    Commercial and industrial                                  2,504             1,798
    Mobile offshore drilling units                               604                 -
    Aircraft                                                     370             2,565
    Storage equipment                                            199               544
    Marine containers                                            104               219
    Railcars                                                      17                73
                                                            ----------------------------
                                                            $  7,658          $  9,157

</TABLE>

Operating  lease  revenues  include  revenues  generated  from  assets  held for
operating  leases  and  assets  held for sale that are on lease.  As of June 30,
1997, the Company owned transportation  equipment held for operating leases with
an  original  cost of $61.5  million,  which  was  $35.3  million  less than the
original cost of transportation equipment owned and held for operating leases or
held for sale as of June 30, 1996.  The reduction in  equipment,  on an original
cost basis, is a consequence of the Company's  strategic  decision to dispose of
certain  underperforming  transportation  assets,  and  resulted  in a  72%  net
reduction in its aircraft portfolio, a 33% net reduction in its marine container
portfolio, and a 100% net reduction in its railcar portfolio,  compared to these
portfolios  as of June 30,  1996.  The  reduction  in  transportation  equipment
available  for lease is the  primary  reason  aircraft,  marine  container,  and
railcar  revenue  were all  reduced,  compared  to the prior  year's  comparable
period.  The $0.3 million decrease in storage  equipment lease revenue is due to
an  agreement  the  Company  entered  into in  January  1997 to lease all of its
storage  equipment  assets to a third party on a triple-net  operating lease, as
opposed  to  short-term  operating  leases,  resulting  in  both  lower  storage
equipment operating lease revenues and operating expenses. Trailer lease revenue
decreased due to reduced  utilization for the six months ended June 30, 1997, as
compared to the same period in the prior year.

The  decrease  in  operating  lease  revenues  as a result of the  reduction  in
transportation equipment available for lease and the storage equipment agreement
was  partially  offset by a $0.7 million  increase in operating  lease  revenues
generated by commercial and industrial equipment leases. In addition, during the
six months ended June 30, 1997, the Company owned one mobile  offshore  drilling
unit as well as a 25.5% interest in another mobile offshore drilling unit, which
together  generated $0.6 million in lease revenue.  Both of these drilling units
were  sold at the  Company's  cost to an  affiliated  program  during  the first
quarter of 1997.

         Finance lease income:

The Company earns finance lease income for certain leases  originated by its AFG
subsidiary  that are either  retained for long-term  investment or sold to third
parties or to an institutional leasing investment program.  Finance lease income
increased  $2.8 million  during the six months ended June 30, 1997,  compared to
the same period in 1996, due to an increase in commercial and industrial  assets
owned and on finance lease.  For the six months ended June 30, 1997, the average
investment in direct finance leases was $69.1 million, compared to $15.4 million
for the same period of 1996.

Management fees:

         Management  fees are,  for the most part,  based on the gross  revenues
generated by equipment under management.  Management fees increased $0.2 million
during the six months  ended June 30,  1997,  compared to the same period of the
prior year.  Although  management  fees related to Fund I and the  institutional
leasing investment program managed by the Company's AFG subsidiary increased,

<PAGE>


management fees from the remaining older programs declined due to a net decrease
in managed  equipment.  With the termination of syndication  activities in 1996,
management  fees are expected to decrease in the future as older  programs begin
liquidation and the managed  equipment  portfolio becomes  permanently  reduced.
This  decrease  has been and is expected to continue to be offset,  in part,  by
management fees earned from the institutional leasing investment program managed
by the Company's AFG subsidiary.

         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 $1.2 million and $1.5 million for the six months ended
June 30, 1997 and 1996, respectively. In addition, a decrease of $0.2 million in
the Company's  residual  interests in the programs was recorded  during both the
six months ended June 30, 1997 and 1996. Residual income is based on the general
partner's  share of the present value of the estimated  disposition  proceeds of
the  equipment  portfolio of the  affiliated  partnership  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 six months ended June 30,  1997,  on behalf of the  equipment  growth
funds, the Company signed a memorandum of agreement to purchase a 52.5% interest
in an entity that owns a marine vessel (the purchase was completed in July 1997)
for $10.0 million, compared to $41.2 million of equipment purchased on behalf of
the equipment  growth funds during the same period of the prior year,  resulting
in a $1.7 million  decrease in  acquisition  and lease  negotiation  fees.  Also
during  the  six  months  ended  June  30,  1997,  equipment  purchased  for the
institutional  leasing  investment  program  managed  by AFG was  $7.6  million,
compared  to  $18.5  million  for the  same  period  in  1996,  resulting  in an
additional  decrease in acquisition and lease  negotiation fees of $0.2 million.
Because of the  Company's  decision to halt  syndication  of  equipment  leasing
programs  with the close of Fund I on May 13, 1996,  and because Fund I has a no
front-end  fee  structure,  acquisition  and  lease  negotiation  fees  will  be
substantially reduced in the future.

         Gain on the sale or disposition of assets, net:

         During the six months ended June 30, 1997,  the Company  recorded  $2.6
million in net gains on the sale or  disposition of assets.  Of this gain,  $0.6
million  resulted  from the sale or  disposition  of 486  trailers,  130 storage
units, 100 marine containers,  4 commuter aircraft, and 2 railcars.  Also during
the six months  ended June 30,  1997,  the Company  purchased  and  subsequently
resold two commercial  aircraft to an unaffiliated third party for a net gain of
$0.8 million and earned $1.2 million from the sale of commercial  and industrial
equipment.  During the six months  ended June 30, 1996,  the Company  recorded a
$1.8 million net gain on the sale or disposition of assets.  Of this gain,  $1.4
million  resulted  from the sale or  disposition  of 205  trailers,  124  marine
containers,  69 railcars,  6 storage units,  and 5 commuter  aircraft,  and $0.4
million related to the sale of commercial and industrial equipment.

         Other:

         Other revenues  increased $0.4 million during the six months ended June
30,  1997,  compared to the  comparable  prior year's  period,  due to increased
revenue earned from financing income and brokerage fees.




<PAGE>


         Costs and Expenses
<TABLE>
<CAPTION>

                                                                          For the Six Months
                                                                            Ended June 30,
                                                                        1997              1996
                                                                     ------------------------------
                                                                            (in thousands)

   <S>                                                               <C>              <C>       
   Operations support                                                $   8,222        $   11,221
   Depreciation and amortization                                         4,346             5,616
   General and administrative                                            4,726             3,759
                                                                     ------------------------------
     Total costs and expenses                                        $  17,294        $   20,596  

</TABLE>

         Operations support:

Operations  support expense  (including salary and  office-related  expenses for
operational  activities,  provision for doubtful accounts,  equipment insurance,
repair and maintenance  costs,  equipment  remarketing costs, and costs of goods
sold)  decreased  $3.0  million  (27%) for the six months  ended June 30,  1997,
compared to the same period in 1996.  The decrease  resulted from a $1.4 million
charge related to the termination of syndication  activities recorded during the
six months ended June 30, 1996, a $0.9 million decrease in compensation  expense
due to staff  reductions,  a $0.5 million decrease in equipment  operating costs
due to sales of the Company's transportation  equipment, a $0.1 million decrease
in rent  expense,  and a $0.1  million  decrease  in  travel  and  entertainment
expense.

         Depreciation and amortization:

         Depreciation and amortization expenses decreased $1.3 million (23%) for
the six months  ended June 30,  1997,  compared to the six months ended June 30,
1996.  The decrease  resulted from the reduction in  depreciable  transportation
equipment (discussed in the operating lease revenue section),  and was partially
offset by increased depreciation of commercial and industrial equipment.

         General and administrative:

General and administrative  expenses increased $1.0 million (26%) during the six
months ended June 30, 1997,  compared to the same period in 1996,  due to a $0.4
million increase in compensation and benefits expenses,  a $0.2 million increase
in legal fees  related to the Koch action  (refer to Note 7 to the  consolidated
financial statements),  a $0.5 million increase in costs related to a submission
of matters to a vote of security holders,  and a $0.3 million credit recorded in
the second quarter of 1996 related to the ESOP, which were partially offset by a
$0.2 million decrease in consulting expense, a $0.1 million decrease in computer
services expense, and a $0.1 million decrease in rent expense.

Other Income and Expenses
<TABLE>
<CAPTION>

                                                                          For the Six Months
                                                                            Ended June 30,
                                                                        1997              1996
                                                                     ------------------------------
                                                                            (in thousands)

     <S>                                                             <C>              <C>           
     Interest expense                                                $  (4,994 )      $   (2,983 )  
     Interest income                                                       838               523
     Other (expense) income, net                                           (24 )             390
     Provision for (benefit from) income taxes                             938               238

</TABLE>


<PAGE>


         Interest expense:

         Interest  expense  increased  $2.0 million  (67%) during the six months
ended June 30, 1997,  compared to the same period in 1996, due to an increase in
borrowings on the nonrecourse  securitization facility, the senior secured notes
facility, and the short-term acquisition loan facility. The increase in interest
expense  caused by these  increased  borrowings  was  partially  offset by lower
interest expense  resulting from the retirement of the subordinated debt and the
reduction in the amount outstanding on the senior secured loan.

         Interest income:

         Interest  income  increased  $0.3 million (60%) in the six months ended
June 30,  1997,  compared  to the same  period  in 1996,  as a result  of higher
average cash  balances  for the six months ended June 30, 1997,  compared to the
same period in 1996.

Other (expense) income, net:

Other income was $0.4 million  during the six months ended June 30, 1996, due to
the  sale of 32 wind  turbines  during  the  second  quarter  of 1996  that  had
previously  been  written  off. No similar  income was  recorded  during the six
months ended June 30, 1997.

         Income taxes:

For the six months ended June 30, 1997,  the provision for income taxes was $0.9
million,  which  represented  an  effective  rate of 33%. For the same period in
1996,  the  provision for income taxes was $0.2 million,  which  represented  an
effective rate of 18% and reflected an adjustment for taxes related to the ESOP.

         Net Income

         As a result of the  foregoing,  for the six months ended June 30, 1997,
net income was $1.9 million, resulting in net income per weighted-average common
share  outstanding  of $0.21.  For the same period in 1996,  net income was $1.1
million,  resulting in net income per weighted-average  common share outstanding
of $0.10.

         Liquidity and Capital Resources

         Cash  requirements  historically  have been satisfied through cash flow
from operations, borrowings, or sales of equipment.

         Liquidity in 1997 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,
possible additional equipment sales, and the volume of commercial and industrial
equipment  leasing  transactions  for which the Company earns fees and a spread.
Management  believes  the Company can  accomplish  the  preceding  and will have
sufficient  liquidity and capital resources for the future.  Future liquidity is
influenced by the following:

     Debt financing:

Senior  Debt:  The  Company's  $23.5  million  senior loan with a  syndicate  of
insurance companies 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 June 30, 1997, the cash  collateral  balance was $16.2 million.  The facility
required  quarterly  interest  payments  through March 31, 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  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 June 27, 1997, the Company drew down an additional
$9.0 million on this  facility and the  outstanding  balance as of July 23, 1997
was $27.0  million.  Beginning in November 1997, the Company will be required to
make quarterly principal payments of $1.35 million.

        Bridge  Financing:  Assets  acquired  and held on an  interim  basis for
placement  with  affiliated  partnerships  or  purchased  for  placement  in the
Company's securitization facility have, from time to time, been partially funded
by a $50.0 million short-term equipment acquisition loan facility. This facility
expires on October 31, 1997.  The  facility,  which is shared with PLM Equipment
Growth Funds (EGFs) IV, V, and VI, PLM  Equipment  Growth & Income Fund VII, and
Professional  Lease  Management  Fund I, LLC,  allows the  Company  to  purchase
equipment prior to the designated program or partnership being identified. As of
July 23, 1997, the Company had $19.1 million in borrowings, and EGF VI had $10.6
million in outstanding  borrowings under this facility.  The Company believes it
can renew this facility on substantially the same terms.

        Securitized  Debt: The Company has available a  securitization  facility
for up to $80.0  million  on a  nonrecourse  basis,  secured  by direct  finance
leases,  operating leases, and loans on commercial and industrial equipment that
generally  have terms from two to seven years.  The facility is available  for a
one-year  period  expiring  June  1998.  As of July 23,  1997,  there were $52.9
million in borrowings outstanding under this facility.

Interest  Rate Swap  Contracts:  The Company has entered into interest rate swap
agreements  in order to manage the interest rate  exposure  associated  with its
securitized  debt. As of June 30, 1997, the swap  agreements had remaining terms
averaging 2.9 years, corresponding to the terms of the related debt. At June 30,
1997,  a notional  amount of $52.3  million  of  interest  rate swap  agreements
effectively fixed interest rates at an average of 7.36% on such obligations. For
the six months  ended June 30,  1997,  interest  expense was  increased  by $0.2
million due to these arrangements.

     Commercial and industrial equipment activities:

The Company earns finance lease or operating lease income for leases  originated
and retained by its AFG  subsidiary.  The funding of leases requires the Company
to retain an equity interest in all leases financed  through the  securitization
facility. AFG also originated loans in which it takes a security interest in the
assets.  From  January 1, 1997  through  July 23,  1997,  the Company  purchased
commercial  and industrial  equipment  with an original  equipment cost of $45.3
million. A portion of these transactions has been financed, on an interim basis,
through the Company's  bridge  financing  facility.  Some  equipment  subject to
leases is sold to an  institutional  leasing  investment  program  for which the
Company serves as the manager.  Acquisition and management fees are received for
the sale and subsequent  management of these leases.  The Company  believes this
lease origination operation is a growth area for the future.

     As of June 30, 1997, the Company, through its AFG subsidiary, had committed
to purchase  $120.5  million of  equipment  for its  commercial  and  industrial
equipment  lease  portfolio,  to be held by the Company or sold to the Company's
institutional leasing investment program or to third parties.

From  July  1,  1997  through  July  23,  1997,  the  Company,  through  its AFG
subsidiary,  funded $10.0 million of commitments outstanding as of June 30, 1997
for its commercial and industrial equipment lease portfolio.

     Transportation equipment activities:

During the six months ended June 30,  1997,  the Company  generated  proceeds of
$10.0 million from the sale of owned transportation  equipment. The net proceeds
on the sale of  assets  that  were  collateralized  as part of the  senior  loan
facility were placed in a collateral account.

         Over the last four years, the Company has downsized its  transportation
equipment portfolio through the sale or disposal of underperforming  assets. The
Company will  continue to analyze its  transportation  equipment  portfolio  for
underperforming assets to sell or dispose of as necessary.

During July 1997, the Company  purchased for $9.0 million a 47.5% interest in an
entity that owns a marine vessel. The remaining 52.5% interest in the entity was
purchased by an affiliated program.  The Company intends to sell its interest in
the entity to an affiliated program.



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

     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 7 of Notes to Consolidated Financial Statements.

Item 4.  Submission of Matters to a Vote of Security Holders

At the Annual  Meeting of  Stockholders,  held June 10, 1997, six proposals were
submitted to a vote of the Company's security holders.

1. Robert N.  Tidball was  re-elected  to the Board of Directors of the Company.
Robert L. Witt was elected to the Board of Directors  of the Company.  The votes
cast in the election were as follows:


                                       Votes
-------------------------------------------------------------------------------
                      Nominee                      For            Withheld

Robert N. Tidball                               3,632,044          650,617
Robert L. Witt                                  3,246,699        1,035,962
Hans P. Jebsen                                  2,817,307           58,120
Malcolm G. Witter                               2,831,742           43,685

Directors whose terms continued after the Annual Meeting of  Stockholders,  held
June 10, 1997 are as follows:

                                    Class II (Terms Expire in 1998)
                                    J. Alec Merriam
                                    Robert L. Pagel

                                    Class III (Terms Expire in 1999)
                                    Douglas P. Goodrich
                                    Harold R. Somerset

2.   The proposal to eliminate the Shareholder Rights Plan was approved.

                                    Votes
-------------------------------------------------------------------------------
           For                      Against                 Abstentions
        5,009,556                  2,020,855                  117,121


3. The recommendation to repeal Article Eleventh of the Company's Certificate of
Incorporation was approved.

                                    Votes
-------------------------------------------------------------------------------
           For                      Against                 Abstentions
        4,468,459                  2,544,898                  134,175





<PAGE>


4. The  recommendation  to amend the Company's  Certificate of  Incorporation so
that the  Company  would not be  governed  by Section  203 of  Delaware  General
Corporation Law was approved.

                                    Votes
-------------------------------------------------------------------------------
           For                      Against                 Abstentions
        3,682,823                  3,336,870                  127,839


5. The proposal to amend Section 11 to the Company's Bylaws to add a new section
concerning  stockholder  meetings in the event of certain cash tender offers was
not approved.

                                    Votes
-------------------------------------------------------------------------------
           For                      Against                 Abstentions
        4,073,148                  2,954,642                  119,742


6. The  recommendation  to  create a special  committee  dedicated  to  increase
shareholder value was not approved.

                                    Votes
-------------------------------------------------------------------------------
           For                      Against                 Abstentions
        3,375,674                  3,309,825                  462,033



Item 6.  Exhibits and Reports on Form 8-K

(A)  Exhibits

None.

(B)  Reports on Form 8-K

None.




<PAGE>




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


                                          PLM INTERNATIONAL, INC.



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






          Date: July 23, 1997