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, 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 July 22, 1998 - 8,339,103 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 Six Months
                                                                      Ended June 30,                        Ended June 30,

                                                                  1998           1997               1998            1997
                                                             ----------------------------------------------------------------

<S>                                                            <C>              <C>                <C>              <C>       
Revenues
Operating lease income                                         $    5,452       $   3,429          $    9,344       $    7,658
Finance lease income                                                3,042           1,984               5,694            3,798
Management fees                                                     2,535           2,797               5,099            5,658
Partnership interests and other fees                                  357             507                 681              993
Acquisition and lease negotiation fees                              1,184             585               2,211              763
Aircraft brokerage and services                                       362             661                 886            1,335
Gain on the sale or disposition of assets, net                      1,533           1,233               2,295            2,601
Other                                                                 843             694               1,642            1,535
                                                              -------------------------------------------------------------------
  Total revenues                                                   15,308          11,890              27,852           24,341
                                                              -------------------------------------------------------------------

Costs and expenses
Operations support                                                  4,829           4,158               8,754            8,222
Depreciation and amortization                                       3,497           2,141               6,047            4,346
General and administrative                                          2,085           2,710               3,883            4,726
                                                              -------------------------------------------------------------------
  Total costs and expenses                                         10,411           9,009              18,684           17,294
                                                              -------------------------------------------------------------------

Operating income                                                    4,897           2,881               9,168            7,047

Interest expense                                                   (3,604)         (2,352)             (6,674)          (4,994)
Interest income                                                       299             452                 694              838
Other income (expenses), net                                          469              (3)                463              (24)
                                                                                                  -------------------------------
                                                              --------------------------------------
  Income before income taxes                                        2,061             978               3,651            2,867

Provision for income taxes                                            860             330               1,467              938
                                                              -------------------------------------------------------------------

  Net income to common shares                                  $    1,201       $     648          $    2,184       $    1,929
                                                                                                  ===============================
                                                              ======================================

Basic earnings per weighted-average common
  share outstanding                                            $     0.14       $    0.07          $     0.26       $     0.21
                                                              ===================================================================

Diluted earnings per weighted-average common
  share outstanding                                            $     0.14       $    0.07          $     0.25       $     0.20
                                                              ===================================================================

</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>


                                                                           June 30,               December 31,
                                                                             1998                     1997
                                                                      -------------------------------------------

<S>                                                                            <C>                       <C>        
Cash and cash equivalents                                                      $      3,293              $     5,224
Receivables                                                                           4,299                    4,969
Receivables from affiliates                                                           2,764                    5,007
Investment in direct finance leases, net                                            160,482                  119,613
Loans receivable                                                                     22,634                    5,861
Equity interest in affiliates                                                        24,457                   26,442

Asset held for sale                                                                   2,500                       --
Transportation equipment held for operating leases                                   54,383                   50,252

Less accumulated depreciation                                                       (24,256)                 (26,981 )
                                                                      -----------------------------------------------
                                                                                     30,127                   23,271

Commercial and industrial equipment held for operating leases                        28,258                   23,268
Less accumulated depreciation                                                        (7,800)                  (4,816 )
                                                                      -----------------------------------------------
                                                                                     20,458                   18,452

Restricted cash and cash equivalents                                                 11,772                   18,278
Other, net                                                                            8,049                    9,166
                                                                      -----------------------------------------------
Total assets                                                                   $    290,835              $   236,283
                                                                      ===============================================



            LIABILITIES, MINORITY INTEREST, AND SHAREHOLDERS' EQUITY


Liabilities
Warehouse credit facility                                                  $     46,803              $    23,040
Senior secured loan                                                              17,647                   20,588
Senior secured notes                                                             21,333                   23,843
Other secured debt                                                                  487                      413
Nonrecourse securitized debt                                                    123,491                   81,302
Payables and other liabilities                                                   15,967                   25,366
Deferred income taxes                                                            16,501                   14,860
                                                                      -----------------------------------------------
  Total liabilities                                                             242,229                  189,412

Minority interest                                                                   239                      323

Shareholders' equity
Common stock ($.01 par value, 50.0 million shares
  authorized, 8,339,103 issued and outstanding as of
  June 30, 1998 and 8,400,964 as of December 31, 1997)                              112                      112
Paid-in capital, in excess of par                                                74,729                   74,650
Treasury stock (3,698,074 and 3,633,883 shares at
  respective dates)                                                             (13,850)                 (13,435 )
Accumulated deficit                                                             (12,463)                 (14,647 )
Accumulated other comprehensive loss                                               (161)                    (132 )
  Total shareholders' equity                                                     48,367                   46,548
                                                                      -----------------------------------------------
      Total liabilities, minority interest, and shareholders' equity       $    290,835              $   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 Six Months Ended
                         June 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>                     
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                                                                                2,184              2,184         2,184
  Other comprehensive loss:
    Foreign currency translation loss                                                         (29 )              (29)          (29 )
Total comprehensive income                                                                                $    2,155
                                                                                                         ==============
Common stock repurchases                                                      (626)                                           (626 )
Reissuance of treasury stock                                 79                211                                             290
                                        -----------------------------------------------------------------                ----------
  Balances, June 30, 1998                $  112       $  74,729        $   (13,850)    $  (12,624 )                     $   48,367
                                        =================================================================                ==========


</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 Six Months
                                                                                                          Ended June 30,
                                                                                                     1998                1997
                                                                                                -----------------------------------
<S>                                                                                               <C>                  <C>       
Operating activities
Net income                                                                                        $     2,184          $    1,929
Adjustments to reconcile net income to net cash
  provided by operating activities:
    Depreciation and amortization                                                                       6,047               4,346
    Foreign currency translation                                                                          (29)                (61 )
    Deferred income tax expense                                                                         1,641                 883
    Gain on sale or disposition of assets, net                                                         (2,295)             (2,601 )
    Undistributed residual value interests                                                                546                 208
    Minority interest in net (loss) income of subsidiaries                                                (84)                  8
    (Decrease) increase in payables and other liabilities                                              (1,669)                962
    Decrease in receivables and receivables from affiliates                                             2,913               1,535
    Amortization of organization and offering costs                                                     1,481               1,443
    Decrease (increase) in other assets                                                                   521                (323 )
                                                                                                 -----------------------------------
      Net cash provided by operating activities                                                        11,256               8,329
                                                                                                 -----------------------------------

Investing activities
Principal payments received on finance leases                                                          14,441               8,589
Principal payments received on loans                                                                    1,878                 979
Investment in direct finance leases                                                                   (82,047)            (30,528 )
Investment in loans receivable                                                                        (18,651)               (777 )
Purchase of property, plant, and equipment                                                               (110)               (483 )
Purchase of transportation equipment and capital improvements                                         (32,919)            (18,471 )
Purchase of commercial and industrial equipment held for operating lease                              (14,938)             (3,976 )
Proceeds from  the sale of transportation equipment for lease                                           3,081               9,958
Proceeds from the sale of assets held for sale                                                         19,866              15,600
Proceeds from the sale of commercial and industrial equipment on finance lease                         18,842              21,512
Proceeds from the sale of commercial and industrial equipment on operating lease                       10,915               3,187
Decrease (increase) in restricted cash and cash equivalents                                             6,506              (4,118 )
                                                                                                 -----------------------------------
      Net cash (used in) provided by investing activities                                             (73,136)              1,472

Financing activities
Borrowings of warehouse credit facility                                                                88,065              31,910
Repayment of warehouse credit facility                                                                (64,302)            (55,735 )
Repayment of senior secured loan                                                                       (2,941)             (1,471 )
Repayment of senior secured notes                                                                      (2,510)                 --
Borrowings of senior secured notes                                                                         --               9,000
Borrowings of other secured debt                                                                          173                  --
Repayment of other secured debt                                                                           (99)                (97 )
Borrowings of nonrecourse securitized debt                                                             54,512              14,394
Repayment of nonrecourse securitized debt                                                             (12,323)             (7,443 )
Purchase of stock                                                                                        (626)                (46 )
                                                                                                 -----------------------------------
      Net cash provided by (used in) financing activities                                              59,949              (9,488 )
                                                                                                 -----------------------------------

Net (decrease) increase in cash and cash equivalents                                                   (1,931)                313
Cash and cash equivalents at beginning of period                                                        5,224               7,638

                                                                                                 -----------------------------------
Cash and cash equivalents at end of period                                                        $     3,293          $    7,951
                                                                                                 ===================================

Supplemental information
Net cash paid for interest                                                                        $     5,754          $    4,786
                                                                                                 ===================================
Net cash paid for income taxes                                                                    $     1,704          $       43
                                                                                                 ===================================
Reissuance of treasury stock                                                                      $       290          $      201
                                                                                                 ===================================
Commercial and industrial purchases included in accounts payable                                  $     2,805          $      600
                                                                                                 ===================================

</TABLE>

             See accompanying notes to these consolidated financial
                                  statements.




<PAGE>



                             PLM INTERNATIONAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 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 June
30,  1998 and  December  31,  1997,  statements  of income for the three and six
months  ended June 30,  1998 and 1997,  statements  of changes in  shareholders'
equity for the year ended  December  31, 1997 and the six months  ended June 30,
1998,  and  statements  of cash flows for the six months ended June 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.

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 June 30, 1998, the
Company  is  reviewing  the  effect  this  standard  will have on the  Company's
consolidated financial statements.

Reclassifications

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




<PAGE>



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



 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.  Periodically,  the Company  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 leases are  accounted  for as finance  leases,  while some
transactions 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 six months ended
June 30, 1998.  Initial  direct lease  origination  costs are amortized over the
life of the related lease.

During the six months ended June 30, 1998, the Company  purchased  $82.0 million
in equipment that was placed on finance lease.  Also during the six months ended
June 30,  1998,  the Company sold  equipment  on finance  lease with an original
equipment cost of $18.5 million, resulting in a net gain of $0.6 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 six months ended June 30, 1998, the Company  purchased  $14.9 million
in commercial and  industrial  equipment,  which was placed on operating  lease.
During the six months  ended June 30,  1998,  the Company  sold  commercial  and
industrial equipment that was on operating lease, with a net book value of $10.5
million, for a net gain of $0.4 million.

During the first six months of 1998,  the Company  purchased  trailers for $11.0
million  and sold  trailers  with a net  book  value  of $1.9  million  for $2.0
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 six months of 1998,
the Company  purchased  railcars  for $1.9  million,  portable  heaters for $3.0
million,  and a 100%  interest in 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 85.3% of
the  Company's  interest in an entity that owns a marine vessel were sold during
the six months ended June 30, 1998 to  affiliated  programs at cost.  As of June
30, 1998, the Company held for sale to an affiliated program a 14.7% interest in
an entity that owns a marine vessel with a cost of $2.5 million.  As of December
31, 1997, the Company held no equipment for sale.




<PAGE>



                             PLM INTERNATIONAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 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 June 30, 1998,  the Company had $46.8  million in borrowings
under  this  facility,  and EGF V had $1.6  million  in  borrowings  under  this
facility.  All borrowings under this facility are guaranteed by the Company. The
Company  believes it will be able to extend the 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 until October 13, 1998.  As of June 30, 1998,  borrowings  under
this  facility  were $105.9  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 six months of 1998,  the  Company  assumed  $9.5
million in additional nonrecourse notes payable,  bearing interest from 8.32% to
9.5% per annum,  resulting in total nonrecourse notes payable,  net of principal
payments received,  of $17.6 million as of June 30, 1998. Principal and interest
on these notes are due monthly beginning  November 1997 and ending May 2005. The
notes are  secured  by direct  finance  leases  for  commercial  and  industrial
equipment that have terms corresponding to the repayment of the notes.

During the six months  ended June 30, 1998,  the Company  repaid $2.9 million of
the  senior  secured  loan and $2.5  million  of the senior  secured  notes,  in
accordance with the debt repayment schedules.

7.   Shareholders' Equity

During the first quarter of 1998, the Company  completed the $5.0 million common
stock  repurchase  program  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.

During the six months  ended June 30,  1998,  56,588  shares  were  issued  from
treasury stock as part of the senior  management  bonus program.  During the six
months ended June 30, 1998, 118,449 shares were repurchased.  Consequently,  the
total common shares outstanding  decreased to 8,339,103 as of June 30, 1998 from
the 8,400,964 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
six months ended June 30, 1998, 500,000  nonqualified options were granted under
this plan at $6.81 per share,  which  equals 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).




<PAGE>



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



7.   Shareholders' Equity (continued)

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 June 30, 1998 and 1997 was 8,337,963 and  9,204,167,  respectively.
The weighted-average  number of shares deemed outstanding for the basic earnings
per share  calculation  during the six months  ended June 30,  1998 and 1997 was
8,399,098 and 9,186,428,  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 June 30, 1998 and 1997 was  8,520,188  and  9,473,719,  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 six months ended June 30, 1998 and 1997 was 8,596,458 and
9,457,520, respectively.

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<0- 45>95<0- 45>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.

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. Trial in this matter is set for May 3, 1999. The Company does not
believe the remaining claims have any merit and plans to continue to defend this
matter vigorously.

8.   Legal Matters (continued)

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 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



<PAGE>



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



8.   Legal Matters (continued)

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 June 30, 1998, the Company,  through its AFG subsidiary,  had committed to
purchase $99.7 million of equipment for its commercial and industrial  lease and
finance receivables portfolio.

From July 1, 1998 to July 22,  1998,  the Company,  through its AFG  subsidiary,
funded $4.5 million of the  commitments  outstanding as of June 30, 1998 for its
commercial and industrial lease and finance receivables portfolio.

As of July 22,  1998,  the Company had  committed to purchase  $98.1  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  for the
initial  public  offering.  The offering is expected to commence in the third or
fourth quarter of 1998; however, the 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.

Subsequent Event

On July 15, 1998, the Company entered into a revolving line of credit  agreement
in the form of a  promissory  note that  allows the Company to borrow up to $5.0
million until October 13, 1998. The promissory  note bears interest at the prime
rate,  with  interest  due monthly in  arrears.  On July 21,  1998,  the Company
borrowed $1.6 million on this note.






<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  for the
initial  public  offering.  The offering is expected to commence in the third or
fourth quarter of 1998; however, the 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 14 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 four of
these  rental  yards in the six months  ended June 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,  Management of Investment Programs, and
Other

The Company also owns intermodal  trailers,  in addition to the refrigerated and
dry van  over-the-road  trailers  mentioned above, from which it earns operating
lease income and incurs operating  expenses.  The Company's  intermodal trailers
were mainly built prior to 1988. As the equipment ages, the Company continues to
monitor the  performance  of these  assets and  current  market  conditions  for
leasing this equipment in order to seek the best  opportunities  for investment.
As the Company  does not intend to replace its  intermodal  equipment,  this may
result in higher costs of  maintaining  and operating  aged  equipment,  and, in
certain instances, limited remarketability.

The  Company  also has an 80%  interest  in a company  owning  100% of a company
located in Australia  involved in aircraft  brokerage  and aircraft  spare parts
sales.

The Company has 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,  which is
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 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.




<PAGE>





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.

Comparison  of the Company's  Operating  Results for the Three Months Ended June
30, 1998 and 1997

The following analysis reviews the operating results of the Company:

Revenues

<TABLE>
<CAPTION>

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


<S>                                                                     <C>                           <C>                       
Operating lease income                                                  $      5,452                  $      3,429              
Finance lease income                                                           3,042                         1,984
Management fees                                                                2,535                         2,797
Partnership interests and other fees                                             357                           507
Acquisition and lease negotiation fees                                         1,184                           585
Aircraft brokerage and services                                                  362                           661
Gain on the sale or disposition of assets, net                                 1,533                         1,233
Other                                                                            843                           694
                                                                    ---------------------------------------------------
  Total revenues                                                        $      15,308                 $     11,890               

</TABLE>

The fluctuations in revenues for the three months ended June 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 June 30,
                                                                                  1998                           1997
                                                                    --------------------------------------------
                                                                                      (in thousands of dollars)


<S>                                                                     <C>                           <C>                       
Commercial and industrial equipment                                     $      2,686                  $      1,220              
Refrigerated and dry van over-the-road trailers                                1,854                         1,197
Intermodal trailers                                                              590                           715
Marine vessel                                                                    284                            --
Aircraft                                                                          16                           143
Other                                                                             22                           154
                                                                    ---------------------------------------------------
  Total operating lease income                                          $      5,452                  $      3,429              

</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 $2.0 million during the second quarter of 1998, compared to the
same quarter of 1997. Operating lease income increased due to the following:

     (a) A $1.5 million  increase in operating  lease income was generated  from
commercial and industrial equipment. During the quarter ended June 30, 1998, the
average original cost of commercial and industrial  equipment on operating lease
was $24.3  million,  compared to $15.8 million during the quarter ended June 30,
1997.

     (b) A $0.7 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.


     (c)  During  the  second  quarter of 1998,  the  Company  purchased  a 100%
interest in an entity  owning a marine  vessel that  generated  $0.3  million in
lease revenues. The Company sold 85.3% of its interest in the entity that owns a
marine vessel,  for the amount of the Company's  cost, to an affiliated  program
during the second quarter of 1998. During the second quarter of 1997, no similar
revenue was earned by the Company.

These  increases  in  operating  lease  income were  partially  offset by a $0.4
million decrease in marine container, aircraft, and intermodal trailer operating
lease income,  due to the Company's  strategic decision to dispose of certain of
these  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.

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 or to
institutional  investment programs.  Finance lease income increased $1.1 million
in the three months  ended June 30, 1998,  compared to the same quarter in 1997,
reflecting an increase in commercial and industrial  assets that were on finance
lease.  For the quarter  ended June 30, 1998,  the average  investment in direct
finance  leases was  $150.1  million,  compared  to $68.0  million  for the same
quarter of 1997.

Management fees:

Management fees are, for the most part, based on the gross revenues generated by
equipment  under  management.  Management  fees  decreased  $0.3 million for the
quarter ended June 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
expected to decrease in the future as they begin  liquidation and the associated
equipment portfolios become permanently reduced.

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 $0.5 million and $0.6 million for the quarters  ended
June 30, 1998 and 1997, respectively. In addition, a decrease of $0.1 million in
the Company's  residual  interests in the programs was recorded  during both the
quarters  ended  June 30,  1998 and  1997.  The  decrease  in net  earnings  and
distribution  levels and residual  interests in the quarter ended June 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 June 30,  1998,  the  Company,  on behalf of the EGF
programs,  purchased a  commercial  aircraft  for $7.8  million and a beneficial
interest in an entity that owns a marine  vessel for $9.6  million,  compared to
$10.0  million  of  equipment  purchased  on behalf of the EGFs  during the same
quarter of 1997,  resulting in a $0.4 million  increase in acquisition and lease
negotiation  fees.  Also  during  the  quarter  ended June 30,  1998,  equipment
purchased by AFG for the  institutional  investment  programs was $8.1  million,
compared to $1.3 million for the same quarter in 1997,  resulting in an increase
of $0.2 million in acquisition and lease  negotiation fees for the quarter ended
June  30,  1998.  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 $0.3 million  during the quarter ended June 30, 1998,  compared to the
same quarter in 1997, due to a decrease in spare parts sales.

Gain on the sale or disposition of assets, net:

During the quarter  ended June 30, 1998,  the Company  recorded  $1.5 million in
gain on the sale or disposition of assets.  Of this gain, $0.6 million  resulted
from the sale or disposition of an aircraft engine, a 20% interest in a commuter
aircraft,  and trailers,  and $0.9 million related to the sale of commercial and
industrial  equipment.  During the  quarter  ended June 30,  1997,  the  Company
recorded $1.2 million in net gain on the sale or disposition of assets.  Of this
gain,  $0.4 million  resulted from the sale or disposition  of trailers,  marine
containers,  commuter  aircraft,  storage units, and railcars,  and $0.4 million
related to the sale of  commercial  and  industrial  equipment.  Also during the
second quarter of 1997, the Company purchased and subsequently sold a commercial
aircraft to an unaffiliated third party for a net gain of $0.4 million.

Other:

Other  revenues  increased  $0.1  million for the quarter  ended June 30,  1998,
compared to the quarter ended June 30, 1997, due to an increase in brokerage and
consulting fees.

Costs and Expenses

<TABLE>
<CAPTION>

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


<S>                                                                     <C>                           <C>                       
Operations support                                                      $      4,829                  $      4,158              
Depreciation and amortization                                                  3,497                         2,141
General and administrative                                                     2,085                         2,710
                                                                    ---------------------------------------------------
  Total costs and expenses                                              $      10,411                 $      9,009              

</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  (16%) for the quarter  ended June 30, 1998,
compared to the same quarter in 1997. The increase  resulted from a $0.5 million
write-down of the Company's spare parts aircraft  inventory located in Australia
and a $0.4 million increase in compensation  and benefits expense  primarily due
to the expansion of PLM Rental,  partially  offset by a $0.2 million decrease in
costs of goods sold associated with the decrease in aircraft spare parts sales.

Depreciation and amortization:

Depreciation  and  amortization  expenses  increased  $1.4 million (63%) for the
quarter ended June 30, 1998,  compared to the quarter  ended June 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  depreciable  aircraft,  marine  containers,  and
intermodal trailers (discussed in the operating lease income section).

General and administrative:

General and  administrative  expenses  decreased  $0.6 million  (23%) during the
quarter ended June 30, 1998, compared to the same quarter in 1997, primarily due
to a $0.5  million  decrease in expenses  related to the  Company's  response to
shareholder-sponsored  initiatives  in the quarter  ended June 30, 1997 and to a
$0.1 million  decrease in legal  expenses  related to the Koch action  (refer to
Note 8).

Other Income and Expenses


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


<S>                                                                    <C>                   <C>                 
Interest expense                                                       $    (3,604)          $   (2,352)         
Interest income                                                                299                  452
Other income (expenses), net                                                   469                   (3)

</TABLE>

Interest expense:

Interest expense  increased $1.3 million (53%) during the quarter ended June 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  decreased $0.2 million (34%) during the quarter ended June 30,
1998,  compared to the same  quarter in 1997,  due to a decrease in average cash
balances.

Other income (expenses), net:

Other income (expenses),  net increased $0.5 million.  During the second quarter
of 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 three  months ended June 30, 1998,  the  provision  for income taxes was
$0.9 million,  representing an effective rate of 42%. For the three months ended
June 30,1997,  the provision for income taxes was $0.3 million,  representing an
effective  rate of 34%. 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.

Net Income

As a result of the  foregoing,  for the three months  ended June 30,  1998,  net
income  was  $1.2  million,   resulting  in  basic  and  diluted   earnings  per
weighted-average  common  share  outstanding  of $0.14.  For the same quarter in
1997, net income was $0.6 million,  resulting in basic and diluted  earnings per
weighted-average common share outstanding of $0.07.



<PAGE>





Comparison of the Company's  Operating Results for the Six Months Ended June 30,
1998 and 1997

The following analysis reviews the operating results of the Company:

Revenues

<TABLE>
<CAPTION>

                                                                                 For the Six Months
                                                                                   Ended June 30,
                                                                            1998                          1997
                                                                    --------------------------------------------
                                                                                (in thousands of dollars)


<S>                                                                      <C>                         <C>                        
Operating lease income                                                   $     9,344                 $       7,658              
Finance lease income                                                           5,694                         3,798
Management fees                                                                5,099                         5,658
Partnership interests and other fees                                             681                           993
Acquisition and lease negotiation fees                                         2,211                           763
Aircraft brokerage and services                                                  886                         1,335
Gain on the sale or disposition of assets, net                                 2,295                         2,601
Other                                                                          1,642                         1,535
                                                                    ---------------------------------------------------
  Total revenues                                                         $     27,852                $      24,341              

</TABLE>

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

Operating lease income by equipment type:

<TABLE>
<CAPTION>

                                                                                 For the Six Months
                                                                                    Ended June 30,
                                                                             1998                       1997
                                                                    --------------------------------------------
                                                                               (in thousands of dollars)


<S>                                                                     <C>                            <C>                      
Commercial and industrial equipment                                     $      4,299                   $     2,423              
Refrigerated and dry van over-the-road trailers                                3,432                         2,407
Intermodal trailers                                                            1,179                         1,453
Marine vessel                                                                    284                            --
Aircraft                                                                          74                           451
Mobile offshore drilling units                                                    --                           604
Other                                                                             76                           320
                                                                    ---------------------------------------------------
  Total operating lease income                                          $      9,344                   $     7,658  

</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  $1.7  million  during  the six months  ended  June 30,  1998,
compared to the same period in 1997. Operating lease income increased due to the
following:

     (a) A $1.9 million  increase in operating  lease income was generated  from
commercial and industrial equipment.  During the six months ended June 30, 1998,
the average  original cost of commercial and  industrial  equipment on operating
lease was $24.2  million,  compared to $16.3 million during the six months ended
June 30, 1997.

     (b) A $1.0 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.

     (c)  During  the  second  quarter of 1998,  the  Company  purchased  a 100%
interest in an entity  owning a marine  vessel that  generated  $0.3  million in
lease  revenues.  The Company sold 85.3% of its interest in the entity that owns
the  marine  vessel,  for the amount of the  Company's  cost,  to an  affiliated
program during the second quarter of 1998.

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

     (a) During the six months ended June 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 six months ended June 30, 1998.

     (b) A $0.8 million  decrease in marine  container,  aircraft and intermodal
trailer  operating lease income was due to the Company's  strategic  decision to
dispose of certain of these  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 or to
institutional  investment programs.  Finance lease income increased $1.9 million
in the six months  ended June 30,  1998,  compared  to the same  period in 1997,
reflecting an increase in commercial and industrial  assets that were on finance
lease. For the six months ended June 30, 1998, the average  investment in direct
finance leases was $134.4 million, compared to $68.8 million for the same period
of 1997.

Management fees:

Management fees are, for the most part, based on the gross revenues generated by
equipment under  management.  Management fees decreased $0.6 million for the six
months ended June 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  remaining  older  programs.   With  the  termination  of  syndication
activities  in 1996,  management  fees from the EGF  programs  are  expected  to
decrease in the future as they begin  liquidation  and the associated  equipment
portfolios become permanently reduced.

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 $1.0 million and $1.2 million for the six months ended
June 30, 1998 and 1997,  respectively.  In addition,  a decrease of $0.3 million
and $0.2  million  in the  Company's  residual  interests  in the  programs  was
recorded during the six months ended June 30, 1998 and 1997,  respectively.  The
decrease in net earnings and distribution  levels and residual  interests in the
six months  ended June 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.

Acquisition and lease negotiation fees:

During the six months  ended June 30, 1998,  the  Company,  on behalf of the EGF
programs,  purchased  transportation  and other  equipment for $14.1 million and
beneficial  interests  in entities  that own marine  vessels for $18.8  million,
compared to $10.0  million in  equipment  purchased on behalf of the EGFs during
the same period of 1997, resulting in a $1.2 million increase in acquisition and
lease  negotiation  fees.  Also  during  the six  months  ended  June 30,  1998,
equipment  purchased by AFG for the institutional  investment programs was $14.1
million,  compared to $7.6  million for the same period in 1997,  resulting in a
$0.2 million  increase in  acquisition  and lease  negotiation  fees for the six
months  ended June 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  $0.4 million  during the six months ended June 30, 1998,  compared to
the same period in 1997, due to a decrease in spare parts sales.

Gain on the sale or disposition of assets, net:

During the six months ended June 30, 1998, the Company  recorded $2.3 million in
gain on the sale or disposition of assets.  Of this gain, $0.8 million  resulted
from the sale or disposition of an aircraft engine, a 20% interest in a commuter
aircraft,  and trailers,  and $1.0 million related to the sale of commercial and
industrial  equipment.  Also  during the six months  ended  June 30,  1998,  the
Company purchased and subsequently sold railcars to an unaffiliated  third party
for a net gain of $0.5 million.  During the six months ended June 30, 1997,  the
Company  recorded $2.6 million in gain 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 $1.2
million related to the sale of commercial and industrial equipment.  Also during
the six months ended June 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 Six Months
                                                                                 Ended June 30,
                                                                          1998                      1997
                                                                    --------------------------------------------
                                                                              (in thousands of dollars)


<S>                                                                      <C>                     <C>                    
Operations support                                                       $     8,754             $   8,222              
Depreciation and amortization                                                  6,047                 4,346
General and administrative                                                     3,883                 4,726
                                                                    ---------------------------------------------------
  Total costs and expenses                                               $     18,684            $  17,294              

</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  $0.5  million (6%) for the six months ended June 30, 1998,
compared to the same period of 1997.  The increase  resulted from a $0.5 million
write-down of the Company's spare parts aircraft inventory located in Australia,
and a $0.2 million  increase in  compensation  and  benefits  expense due to the
expansion of PLM Rental. These increases were partially offset by a $0.2 million
decrease in costs of goods sold  associated  with the decrease in aircraft spare
parts sales.

Depreciation and amortization:

Depreciation and amortization  expenses increased $1.7 million (39%) for the six
months ended June 30, 1998,  compared to the six months ended June 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  depreciable  aircraft,  marine  containers,  and
intermodal trailers (discussed in the operating lease income section).

General and administrative:

General and administrative  expenses decreased $0.8 million (18%) during the six
months  ended June 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 six months ended June 30,
1997,  a $0.2  million  decrease  in legal  expenses  related to the Koch action
(refer to Note 8), 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 Six Months
                                                                              Ended June 30,
                                                                       1998                   1997
                                                                   -------------------------------------------
                                                                            (in thousands of dollars)


<S>                                                                   <C>                   <C>                      
Interest expense                                                      $     (6,674)         $    (4,994)             
Interest income                                                                694                  838
Other income (expenses), net                                                   463                  (24)

</TABLE>

Interest expense:

Interest  expense  increased $1.7 million (34%) during the six months ended June
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 and the
senior secured notes.

Interest income:

Interest  income  decreased  $0.1 million (17%) during the six months ended June
30, 1998,  compared to the six months ended June 30, 1997,  due to a decrease in
average cash balances.

Other income (expenses), net:

Other income (expenses),  net increased $0.5 million.  During the second quarter
of 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 six months ended June 30, 1998,  the provision for income taxes was $1.5
million,  representing  an effective  rate of 40%. For the six months ended June
30,1997,  the  provision  for income  taxes was $0.9  million,  representing  an
effective  rate of 33%. 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.

Net Income

As a result of the foregoing, for the six months ended June 30, 1998, net income
was $2.2 million,  resulting in basic and diluted earnings per  weighted-average
common share outstanding of $0.26 and $0.25,  respectively.  For the same period
in 1997,  net income was $1.9 million,  resulting in basic and diluted  earnings
per weighted-average common share outstanding of $0.21 and $0.20, respectively.




<PAGE>





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 $17.6 million as of June 30, 1998
and July 22, 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 June 30, 1998, the cash collateral balance for this loan was $2.4 million and
is included in restricted  cash and cash  equivalents  on the Company's  balance
sheet.  During the six months  ended June 30,  1998,  the  Company  repaid  $2.9
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. During the six months ended June 30, 1998, the
Company repaid $2.5 million on this  facility.  As of June 30, 1998 and July 22,
1998, the Company had $21.3 million outstanding under this agreement.  Principal
payments of $1.3 million are payable quarterly  through  termination of the loan
on August 15, 2002.

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 allows
the Company to borrow up to $5.0 million until October 13, 1998.  The promissory
note bears interest at the prime rate, with interest due monthly in arrears.  On
July 21, 1998, the Company borrowed $1.6 million 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  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 Company  believes that it will be able to extend
this facility on similar terms prior to its expiration.

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 June 30, 1998, the Company had $46.8 million in borrowings under
this facility,  and EGF V had $1.6 million in borrowings under this facility. As
of July 22,  1998,  the  Company  had $46.1  million  in  borrowings  under this
facility.  There were no other  borrowings  under this  facility  as of July 22,
1998.




<PAGE>





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.  This  facility is available  for a
one-year period expiring October 13, 1998. 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 June 30, 1998, $105.9 million
in borrowings was outstanding  under this facility.  As of July 22, 1998, $107.1
million in borrowings was outstanding under this facility.

   In  addition  to  the  $125.0  million  nonrecourse  securitization  facility
discussed  above,  as of June 30, 1998 and July 22, 1998,  the Company had $17.6
million and $17.5 million, respectively, 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 June 30, 1998,  the swap  agreements had a
weighted-average  duration  of 1.41  years,  corresponding  to the  terms of the
related  debt.  As of June 30,  1998,  a  notional  amount of $108.4  million of
interest-rate swap agreements  effectively fixed interest rates at an average of
6.66% on such  obligations.  For the six months  ended June 30,  1998,  interest
expense increased by $0.2 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  July 22,  1998,  the  Company  funded
commercial  and  industrial  leases and  finance  receivables  with an  original
equipment cost of $120.1 million.  A portion of these transactions was financed,
on an interim  basis,  through the Company's  warehouse  credit  facility.  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. The Company believes that
this lease origination operation is a growth area for the future.

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  for the
initial  public  offering.  The offering is expected to commence in the third or
fourth quarter of 1998; however, the 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 June 30,  1998,  the Company had  committed to purchase  $99.7  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 July 1, 1998  through  July 22,  1998,  the Company  funded $4.5 million of
commitments  outstanding  as of June 30, 1998 for its  commercial and industrial
lease and finance receivables portfolio.

As of July 22,  1998,  the Company had  committed to purchase  $98.1  million of
equipment  for its  commercial  and  industrial  lease and  finance  receivables
portfolio.





<PAGE>





Trailer leasing:

The Company operates 14 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 four of
these  rental  yards in the six months  ended June 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,  management of investment programs, and
other:

During the six months ended June 30,  1998,  the Company  generated  proceeds of
$22.9 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.

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.

The  Company  also has 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 is being marketed for sale.

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.

Year 2000 compliance:

The Company is currently  addressing the year 2000 computer  software issues and
is creating a timetable for carrying out any program  modifications  that may be
required.  The Company  anticipates that all such program  modifications will be
completed  by the end of 1998,  and does not  anticipate  that the cost of these
modifications will be material.

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 4. Submission of Matters to a Vote of Security Holders

At the  Annual  Meeting  of  Stockholders,  held June 8,  1998,  four items were
submitted to a vote of the Company's security holders.

1.  Randall L. -W.  Caudill  was  re-elected  to the Board of  Directors  of the
Company.  The votes cast in the election were 5,433,448 votes for, and 1,705,326
votes withheld.

Directors whose terms continued after the Annual Meeting of  Stockholders,  held
June 8, 1998 are as follows:

                        Class I (Terms Expire in 2000)
                        Robert N. Tidball
                        Robert L. Witt

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

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

                                     Votes

  For            Against            Abstentions               Broker Non Votes
3,333,937        2,412,236          137,419                    1,255,182



3. 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          Broker Non Votes
3,154,309        2,590,770              138,513                1,255,182



4. The  recommendation  to amend Article Sixth of the Company's  Certificate  of
Incorporation  to eliminate the division of the  directors  into classes so that
all directors are elected annually was approved.

                                      Votes

    For               Against            Abstentions      Broker Non Votes
 4,447,626            1,308,454            127,512           1,255,182






<PAGE>






Item 6. Exhibits and Reports on Form 8-K

(A)      Exhibits

10.1 First  Amendment to Restated  Warehousing  Credit  Agreement among American
Finance Group,  Inc.,  First Union National Bank of North Carolina,  and Bank of
Montreal, dated as of June 1, 1998.

10.2 Second  Amendment to Restated  Warehousing  Credit Agreement among American
Finance Group,  Inc., First Union National Bank, and Bank of Montreal,  dated as
of June 8, 1998.

10.3 1998 Management Stock Compensation Plan, dated May 12, 1998.

10.4  $5.0  million  Promissory  Note,  dated  July 15,  1998,  executed  by PLM
International, Inc. in favor of First Union National Bank.

(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: July 22, 1998



<PAGE>