UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


___________________


FORM 10-QSB














[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


For the fiscal quarter ended September 30, 2003








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


For the transition period from to








Commission file number 0-26594


_______________________














PLM EQUIPMENT GROWTH & INCOME FUND VII


(Exact name of registrant as specified in its charter)








California

94-3168838(State or other jurisdiction of

(I.R.S. Employerincorporation or organization)

Identification No.)235 3 RD Street South, Suite 200St. Petersburg, FL

33701(Address of principal

(Zip code)executive offices)








Registrant's telephone number, including area code: (727) 803-1800


_______________________








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 ____









PLM EQUIPMENT GROWTH & INCOME FUND VII(A Limited Partnership)CONDENSED BALANCE SHEETS(in thousands of dollars, except unit amounts)


(unaudited)








September 30,

December 31,2003



2002AssetsEquipment held for operating leases, at cost
$
85,159


$
79,849Less accumulated depreciation

(54,491
)


(49,918
)Net equipment

30,668



29,931Cash and cash equivalents

10,062



9,339Restricted cash

60



60Accounts and note receivable, less allowance for doubtfulaccounts of $958 in 2003 and $1,133 in 2002

2,214



1,769Investments in unconsolidated special-purpose entities

5,166



6,757Deferred charges, net of accumulated amortizationof $481 in 2003 and $454 in 2002

129



98Prepaid expenses and other assets

228



370Total assets
$
48,527


$
48,324Liabilities and partners capitalLiabilities:Accounts payable and accrued expenses
$
1,453


$
221Due to affiliates

1,075



847Lessee deposits and reserve for repairs

1,111



1,249Notes payable

11,000



11,000Total liabilities

14,639



13,317Commitments and contingenciesPartners' capital:Limited partners (4,981,450 limited partnership units)

33,888



35,007General Partner

--



--Total partners' capital

33,888



35,007Total liabilities and partners capital
$
48,527


$
48,324















































See accompanying notes to unaudited condensed financial statements.







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


(unaudited)





For the Three Months
Ended September 30,

For the Nine Months
Ended September 30,2003



2002



2003



2002RevenuesLease revenue
$
3,445


$
3,820


$
10,045


$
11,520Interest and other income

29



32



112



74Gain on disposition of equipment

14



44



28



46Loss on disposition of equipment

(11
)


--



(5
)


--Total revenues

3,477



3,896



10,180



11,640ExpensesDepreciation and amortization

1,620



1,631



4,719



4,898Repairs and maintenance

478



500



1,908



1,303Equipment operating expense

602



435



1,595



1,301Insurance expense

185



120



564



374Management fees to affiliate

189



188



552



571Interest expense

212



261



631



782General and administrative expensesto affiliates

49



22



106



186Other general and administrative expenses

349



380



973



722Loss on impairment of equipment

286



--



405



--(Recovery of) provision for bad debts

(114
)


235



(379
)


764Total expenses

3,856



3,772



11,074



10,901Equity in net income (loss) of unconsolidatedspecial-purpose entities

102



84



(225
)


119Net (loss) income
$
(277
)

$
208


$
(1,119
)

$
858Partners' share of net (loss) incomeLimited partners
$
(277
)

$
208


$
(1,119
)

$
858General Partner

--



--



--



--Total
$
(277
)

$
208


$
(1,119
)

$
858Limited partners net (loss) income perweighted-average limited partnership unit
$
(0.06
)

$
0.04


$
(0.22
)

$
0.17






































See accompanying notes to unaudited condensed financial statements.





PLM EQUIPMENT GROWTH & INCOME FUND VII(A Limited Partnership)CONDENSED STATEMENTS OF CHANGES IN PARTNERS' CAPITALFor the period from December 31, 2002 to September 30, 2003(in thousands of dollars)


(unaudited)








Limited
Partners

General
Partner

TotalPartners' capital as of December 31, 2002
$
35,007


$
--


$
35,007Net loss

(1,119
)


--



(1,119
)Partners' capital as of September 30, 2003
$
33,888


$
--


$
33,888



































































































































See accompanying notes to unaudited condensed financial statements.







PLM EQUIPMENT GROWTH & INCOME FUND VII(A Limited Partnership)CONDENSED STATEMENTS OF CASH FLOWS(in thousands of dollars)(unaudited)For the Nine Months
Ended September 30,2003



2002Operating activitiesNet (loss) income
$
(1,119
)

$
858Adjustments to reconcile net (loss) income to net cashprovided by (used in) operating activities:Depreciation and amortization

4,719



4,898Amortization of debt placement fees

19



19(Recovery of) provision for bad debts

(379
)


764Loss on impairment of equipment

405



--Net gain on disposition of equipment

(23
)


(46
)Equity in net loss (income) of unconsolidated special-purpose entities

225



(119
)Changes in operating assets and liabilities:Accounts and note receivable

(66
)


(663
)Prepaid expenses and other assets

142



(60
)Accounts payable and accrued expenses

1,232



307Due to affiliates

228



173Lessee deposits and reserve for repairs

(138
)


291Net cash provided by operating activities

5,245



6,422Investing activitiesPayments for purchase of equipment and capitalized improvements

(5,760
)


(13
)Distribution from unconsolidated special-purpose entities

1,366



1,341Payments for acquisition fees to affiliate

(259
)


--Payments for lease negotiation fees to affiliate

(57
)


--Proceeds from disposition of equipment

188



112Net cash (used in) provided by investing activities

(4,522)



1,440Financing activitiesIncrease in restricted cash

--



(183
)Canceled purchase of limited partnership units

--



84Payment for limited partnership units

--



(778
)Net cash used in financing activities

--



(877)Net increase in cash and cash equivalents

723



6,985Cash and cash equivalents at beginning of period

9,339



3,129Cash and cash equivalents at end of period
$
10,062


$
10,114Supplemental informationInterest paid
$
428


$
509























See accompanying notes to unaudited condensed financial statements.




PLM EQUIPMENT GROWTH & INCOME FUND VII


(A Limited Partnership)


NOTES TO CONDENSED FINANCIAL STATEMENTS


(unaudited)





1.  Basis of Presentation





The accompanying unaudited condensed financial statements contain all adjustments necessary, consisting primarily of normal recurring accruals, to present fairly the unaudited condensed financial position of PLM Equipment Growth & Income Fund VII (the Partnership) as of September 30, 2003 and December 31, 2002, the unaudited condensed statements of operations for the three and nine months ended September 30, 2003 and 2002, the unaudited condensed statements of changes in partners capital for the period from December 31, 2002 to September 30, 2003 and the unaudited condensed statements of cash flows for the nine months ended September 30, 2003 and 2002. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from the accompanying condensed financial statements. For further information, reference should be made to the financial statements and notes thereto included in the Partnerships Annual Report on Form 10-K for the year ended December 31, 2002, on file at the Securities and Exchange Commission.





2.  Schedule of Partnership Phases





The Partnership is currently in its investment phase during which the Partnership uses cash generated from operations and proceeds from asset dispositions to purchase additional equipment. The General Partner believes these acquisitions may cause the Partnership to generate additional earnings and cash flow for the Partnership.





The Partnership may commit its cash flow, surplus cash and equipment disposition proceeds to purchase additional equipment, consistent with the objectives of the Partnership, until December 31, 2004. The Partnership will terminate on December 31, 2013, unless terminated earlier upon sale of all equipment and by certain other events.





3.  Reclassifications





Certain amounts in the 2002 financial statements have been reclassified to conform to the 2003 presentations. These reclassifications did not have any effect on total assets, total liabilities, partners capital, or net (loss) income.





4.  Transactions with General Partner and Affiliates





The balance due to affiliates as of September 30, 2003 and December 31, 2002, included $0.2 million due to PLM Financial Services, Inc. (FSI or the General Partner) and its affiliates for management fees and $0.9 million and $0.7 million due to affiliated unconsolidated special-purpose entities (USPEs), respectively.





The Partnerships proportional share of the affiliate expenses incurred by USPEs during 2003 and 2002 is listed in the following table (in thousands of dollars):





For the Three Months
Ended September 30,

For the Nine Months
Ended September 30,2003



2002



2003



2002Management fees
$
11


$
28


$
83


$
86Data processing and administrativeexpenses

1



1



4



19





These affiliate expenses reduced the Partnership's proportional share of the equity interest in the income of USPEs.





During the nine months ended September 30, 2003, the Partnership purchased railcars and paid FSI or its affiliates $0.3 million for acquisition fees and $0.1 million for lease negotiation fees. No similar fees were paid during the same period of 2002.









PLM EQUIPMENT GROWTH & INCOME FUND VII


(A Limited Partnership)


NOTES TO CONDENSED FINANCIAL STATEMENTS


(unaudited)





5.  Equipment





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





September 30,
December 31,2003



2002Marine containers
$
38,717


$
38,811Marine vessels

22,212



22,212Rail equipment

15,035



9,615Aircraft

5,483



5,483Trailers

3,712



3,72885,159



79,849Less accumulated depreciation

(54,491
)


(49,918
)Net equipment
$
30,668


$
29,931





As of September 30, 2003, all owned equipment in the Partnerships portfolio was on lease except for 144 railcars with a net book value of $2.1 million. As of December 31, 2002, all owned equipment was on lease except for a commercial aircraft and 110 railcars with a net book value of $0.5 million.





During the nine months ended September 30, 2003, the Partnership purchased railcars for $6.0 million including acquisition fees of $0.3 million. During the nine months ended September 30, 2002, the Partnership made capitalized repairs of $13,000.





During the nine months ended September 30, 2003, the Partnership disposed of marine containers, railcars and a trailer with a net book value of $0.2 million for proceeds of $0.2 million. During the nine months ended September 30, 2002, the Partnership disposed of marine containers with a net book value of $0.1 million for proceeds of $0.1 million.





Equipment held for operating leases is stated at cost less any reductions to the carrying value as required by Financial Accounting Standards Board (FASB) No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" (FASB 144). In the nine months ended September 30, 2003, the Partnership recorded an impairment of $0.1 million to 26 owned railcars with corrosion damage and $0.3 million to 75 owned railcars with cracks in the seal weld. The General Partner determined that these railcars should be scrapped. This indicated that an impairment to these railcars may exist. The fair value of the railcars with these defects were determined by using industry expertise. No reductions were required to the carrying value of the owned equipment during the nine months ended September 30, 2002.






PLM EQUIPMENT GROWTH & INCOME FUND VII


(A Limited Partnership)


NOTES TO CONDENSED FINANCIAL STATEMENTS


(unaudited)





6.  Investments in Unconsolidated Special-Purpose Entities





The Partnership owns equipment jointly with affiliated programs. These are single purpose entities that do not have any debt or other financial encumbrances. Ownership interest is based on the Partnerships contribution towards the cost of the equipment in the USPEs. The Partnerships proportional share of equity and income (loss) in each entity is not necessarily the same as its ownership interest. The primary reason for this difference has to do with certain fees such as management and acquisition and lease negotiation fees varying among the owners of the USPEs.





The tables below set forth 100% of the assets, liabilities, and equity of the entities in which the Partnership has an interest and the Partnerships proportional share of equity in each entity as of September 30, 2003 and December 31, 2002 (in thousands of dollars):





TWA

TWA

BoeingS/N 49183

MD-82

737-300As of September 30, 2003

Trust 1

Trust 2

Trust 3

Total





AssetsEquipment less accumulated depreciation
$
--

$
3,249

$
9,485Due from affiliates

--


--


2,312Other assets

--


--


1Total assets
$
--

$
3,249

$
11,798LiabilitiesAccounts payable
$
--

$
--

$
1Due to affiliates

4


5


14Lessee deposits and reserve for repairs

5


--


2,312Total liabilities

9


5


2,327Equity

(9
)

3,244


9,471Total liabilities and equity
$
--

$
3,249

$
11,798Partnerships share of equity
$
--

$
1,653

$
3,513

$
5,166





TWA

TWA

BoeingS/N 49183

MD-82

737-300As of December 31, 2002

Trust 1

Trust 2

Trust 3

Total





AssetsEquipment less accumulated depreciation
$
--

$
4,192

$
12,355Due from affiliates

--


--


1,825Other assets

--


--


3Total assets
$
--

$
4,192

$
14,183LiabilitiesAccounts payable
$
1

$
1

$
--Due to affiliates

5


5


7Lessee deposits and reserve for repairs

--


--


1,825Total liabilities

6


6


1,832Equity

(6
)

4,186


12,351Total liabilities and equity
$
--

$
4,192

$
14,183Partnerships share of equity
$
--

$
2,139

$
4,618

$
6,757





The tables below set forth 100% of the revenues, direct and indirect expenses, loss on impairment of equipment and net income (loss) of the entities in which the Partnership has an interest, and the Partnerships proportional share of income (loss) in each entity for the three and nine months ended





1   The Partnership owns a 50% interest in the TWA S/N 49183 Trust that owns a MD-82 stage III commercial aircraft.


2   The Partnership owns a 50% interest in the TWA MD-82 Trust that owns a MD-82 stage III commercial aircraft.


3   The Partnership owns a 38% interest in the Boeing 737-300 Trust that owns a Boeing stage III commercial aircraft.






PLM EQUIPMENT GROWTH & INCOME FUND VII


(A Limited Partnership)


NOTES TO CONDENSED FINANCIAL STATEMENTS


(unaudited)





6.  Investments in Unconsolidated Special-Purpose Entities (continued)





September 30, 2003 and 2002 (in thousands of dollars):





TWA

TWA

BoeingFor the three months ended

S/N 49183

MD-82

737-300September 30, 2003

Trust 1

Trust 2

Trust 3

Total





Revenues
$
300

$
300

$
465Less: Direct expenses

--


--


4Indirect expenses

22


332


534Net income (loss)
$
278

$
(32)

$
(73)Partnerships share of net income (loss)
$
139

$
(19
)
$
(18
)

$
102





TWA

TWA

BoeingFor the three months ended

S/N 49183

MD-82

737-300September 30, 2002

Trust 1

Trust 2

Trust 3

Other

Total





Revenues
$
315

$
315

$
465

$
--Less: Direct expenses

--


--


12


(18
)Indirect expenses

18


368


651


--Net income (loss)
$
297

$
(53
)
$
(198
)
$
18Partnerships share of net income (loss)
$
187

$
(32
)
$
(85
)
$
14

$
84





TWA

TWA

BoeingFor the nine months ended

S/N 49183

MD-82

737-300September 30, 2003

Trust 1

Trust 2

Trust 3

Total





Revenues
$
925

$
925

$
1,395Less: Direct expenses

(1
)

(1
)

11Indirect expenses

65


1,003


1,632Loss on impairment of equipment

--


--


1,321Net income (loss)
$
861

$
(77
)
$
(1,569
)Partnerships share of net income (loss)
$
430

$
(49
)
$
(606
)

$
(225
)





TWA

TWA

BoeingFor the nine months ended

S/N 49183

MD-82

737-300September 30, 2002

Trust 1

Trust 2

Trust 3

Other

Total





Revenues
$
945

$
945

$
1,395

$
73Less: Direct expenses

(1
)

--


28


(18
)Indirect expenses

60


1,111


2,103


2Net income (loss)
$
886

$
(166
)
$
(736
)
$
89Partnerships share of net income (loss)
$
481

$
(98
)
$
(309
)
$
45

$
119





In accordance with FASB No. 144, during 2003 the General Partner recorded an impairment of $1.3 million to a Boeing 727-300 commercial aircraft in a Partnership USPE. During 2003, the oversupply of off-lease aircraft together with the deteriorating market conditions of aircraft similar to the one jointly-owned by the USPE, indicated to the General Partner that an impairment may exist. The General Partner determined the fair value of the aircraft based on the valuation given by its independent third party aircraft equipment manager that considered, among other factors, expected income to be earned from the asset, condition of the aircraft, estimated sales proceeds and holding costs excluding interest. No reductions were required to the carrying value of the remaining jointly-owned equipment during the nine months ended September 30, 2002.





As of September 30, 2003 and December 31, 2002, all jointly-owned equipment in the Partnerships USPE portfolio was on lease.


1   The Partnership owns a 50% interest in the TWA S/N 49183 Trust that owns a MD-82 stage III commercial aircraft.


2  The Partnership owns a 50% interest in the TWA MD-82 Trust that owns a MD-82 stage III commercial aircraft.


3   The Partnership owns a 38% interest in the Boeing 737-300 Trust that owns a Boeing stage III commercial aircraft.








PLM EQUIPMENT GROWTH & INCOME FUND VII


(A Limited Partnership)


NOTES TO CONDENSED FINANCIAL STATEMENTS


(unaudited)





7.  Operating Segments





The Partnership operates in five primary operating segments: marine vessel leasing, trailer leasing, aircraft leasing, railcar leasing, and marine container leasing. Each equipment leasing segment engages in short-term to mid-term operating leases to a variety of customers.





The following tables present a summary of the operating segments (in thousands of dollars):





Marine



MarineFor the three months ended


Vessel
Trailer
Aircraft
Railcar
ContainerSeptember 30, 2003


Leasing
Leasing
Leasing
Leasing
Leasing
Other 1
Total





RevenuesLease revenue

$1,290
$114
$--
$507
$1,534
$--
$3,445Interest income and other income

--
--
10
--
--
19
29(Loss) gain on disposition of equipment

--
--
--
(11)
14
--
3Total revenues

1,290
114
10
496
1,548
19
3,477ExpensesOperations support

977
53
1
198
16
20
1,265Depreciation and amortization

310
52
--
322
936
--
1,620Interest expense

--
--
--
--
--
212
212Management fees to affiliate

64
6
11
31
77
--
189General and administrative expenses

27
31
122
63
--
155
398Loss on impairment of equipment

--
--
--
286
--
--
286(Recovery of) provision for bad debts

--
--
(164)
50
--
--
(114)Total expenses

1,378
142
(30)
950
1,029
387
3,856Equity in net income of USPEs

--
--
102
--
--
--
102Net (loss) income

$(88)
$(28)
$142
$(454)
$519
$(368)
$(277)Equipment purchases andcapitalized improvements

$--
$--
$--
$1,670
$--
$--
$1,670Acquisition fees to affiliate

$--
$--
$--
$75
$--
$--
$75Total assets as of September 30, 2003

$3,888
$596
$5,244
$7,338
$20,987
$10,474
$48,527








Marine



MarineFor the three months ended


Vessel
Trailer
Aircraft
Railcar
ContainerSeptember 30, 2002


Leasing
Leasing
Leasing
Leasing
Leasing
Other 2
Total





RevenuesLease revenue

$1,335
$133
$271
$506
$1,575
$--
$3,820Interest income and other income

--
--
--
--
--
32
32Gain on disposition of equipment

--
--
--
--
44
--
44Total revenues

1,335
133
271
506
1,619
32
3,896ExpensesOperations support

720
124
2
176
17
16
1,055Depreciation and amortization

310
53
--
118
1,150
--
1,631Interest expense

--
--
--
--
--
261
261Management fees to affiliate

67
8
--
36
77
--
188General and administrative expenses

19
29
7
33
--
314
402Provision for (recovery of) bad debts

--
--
238
(3)
--
--
235Total expenses

1,116
214
247
360
1,244
591
3,772Equity in net income of USPEs

14
--
70
--
--
--
84Net income (loss)

$233
$(81)
$94
$146
$375
$(559)
$208














1  Includes certain assets not identifiable to a specific segment such as cash, restricted cash, deferred charges and certain prepaid expenses and other assets . Also includes certain interest income and costs not identifiable to a particular segment, such as interest expense, and certain amortization, general and administrative and operations support expenses.


2  Includes interest income and costs not identifiable to a particular segment, such as interest expense, and certain amortization, general and administrative and operations support expenses.








PLM EQUIPMENT GROWTH & INCOME FUND VII


(A Limited Partnership)


NOTES TO CONDENSED FINANCIAL STATEMENTS


(unaudited)





7.  Operating Segments (continued)





Marine



MarineFor the nine months ended


Vessel
Trailer
Aircraft
Railcar
ContainerSeptember 30, 2003


Leasing
Leasing
Leasing
Leasing
Leasing
Other 1
Total





RevenuesLease revenue

$3,590
$341
$--
$1,455
$4,659
$--
$10,045Interest income and other income

--
--
38
--
--
74
112(Loss) gain on disposition of equipment

--
--
--
(5)
28
--
23Total revenues

3,590
341
38
1,450
4,687
74
10,180ExpensesOperations support

3,226
177
30
535
42
57
4,067Depreciation and amortization

930
156
--
820
2,811
2
4,719Interest expense

--
--
--
--
--
631
631Management fees to affiliate

179
18
28
94
233
--
552General and administrative expenses

78
84
212
135
--
570
1,079Loss on impairment of equipment

--
--
--
405
--
--
405(Recovery of) provision for bad debts

--
--
(434)
55
--
--
(379)Total expenses

4,413
435
(164)
2,044
3,086
1,260
11,074Equity in net loss of USPEs

--
--
(225)
--
--
--
(225)Net (loss) income

$(823)
$(94)
$(23)
$(594)
$1,601
$(1,186)
$(1,119)Equipment purchases andcapitalized improvements

$--
$--
$--
$5,760
$--
$--
$5,760Acquisition fees to affiliate

$--
$--
$--
$259
$--
$--
$259








Marine



MarineFor the nine months ended


Vessel
Trailer
Aircraft
Railcar
ContainerSeptember 30, 2002


Leasing
Leasing
Leasing
Leasing
Leasing
Other 1
Total





RevenuesLease revenue

$3,959
$452
$814
$1,650
$4,645
$--
$11,520Interest income and other income

--
--
--
--
--
74
74Gain on disposition of equipment

--
--
--
--
46
--
46Total revenues

3,959
452
814
1,650
4,691
74
11,640ExpensesOperations support

2,117
309
6
447
52
47
2,978Depreciation and amortization

930
157
--
355
3,454
2
4,898Interest expense

--
--
--
--
--
782
782Management fees to affiliate

198
24
--
118
231
--
571General and administrative expenses

50
83
14
75
--
686
908Provision for (recovery of) bad debts

--
10
781
(27)
--
--
764Total expenses

3,295
583
801
968
3,737
1,517
10,901Equity in net income of USPEs

45
--
74
--
--
--
119Net income (loss)

$709
$(131)
$87
$682
$954
$(1,443)
$858Equipment capitalized improvements

$--
$--
$--
$13
$--
$--
$13





8.  Net (Loss) Income Per Weighted-Average Limited Partnership Unit





Net (loss) income per weighted-average limited partnership unit was computed by dividing net income or loss attributable to limited partners by the weighted-average number of limited partnership units deemed outstanding during the period. The weighted-average number of limited partnership units deemed outstanding during the three and nine months ended September 30, 2003 was 4,981,450. The weighted-average number of limited partnership units deemed outstanding during the three and nine months ended September 30, 2002 was 4,981,450 and 4,988,318, respectively.




















1  Includes certain interest income and costs not identifiable to a particular segment, such as interest expense, and certain amortization, general and administrative and operations support expenses.








PLM EQUIPMENT GROWTH & INCOME FUND VII


(A Limited Partnership)


NOTES TO CONDENSED FINANCIAL STATEMENTS


(unaudited)





9.  Debt





The Partnership is a participant in a $10.0 million warehouse facility. The warehouse facility, which was scheduled to expire on September 30, 2003, was extended until December 31, 2003 during September 2003. As of September 30, 2003 and December 31, 2002, the Partnership had no borrowings outstanding under this facility.





10.  Commitments and Contingencies





FSI arranged for the lease or purchase of up to 1,050 railcars with a delivery date between 2002 and 2004. FSI anticipates that 735 of these railcars will be leased by an entity other than the Partnership. The remaining 315 railcars costing approximately $23 million, will be purchased by FSI, the Partnership or an affiliated program. As of September 30, 2003, approximately 66% of these railcars have been purchased by FSI or an affiliated program for approximately $15 million. The remaining 34% of these railcars will be purchased in 2004. While FSI has not determined if the Partnership will purchase either the railcars originally purchased by FSI or any of the railcars remaining to be purchased under the agreement, it is possible the Partnership may purchase some railcars.





At September 30, 2003, railcars with an original equipment cost of $16.2 million were owned by FSI, some of which were purchased under the above described commitment. While FSI has neither determined if a Program Affiliate will purchase these railcars nor the timing of any purchases, it is possible the Partnership may purchase some of the railcars.





Commitments and contingencies as of September 30, 2003 are as follows (in thousands of dollars):





Less than
1-3
4-5
After 5Current Obligations

Total

1 Year

Years

Years

YearsCommitment to purchase railcars


$23,539
1
$16,159

$7,380


$--

$--Notes payable


11,000

3,000

8,000


--

--Line of credit


--

--

--


--

--$34,539

$19,159

$15,380


--

$--





11.  Recent Accounting Pronouncements





In January 2003, FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46). This interpretation clarifies existing accounting principles related to the preparation of consolidated financial statements when the owners of an USPE do not have the characteristics of a controlling financial interest or when the equity at risk is not sufficient for the entity to finance its activities without additional subordinated financial support from others. FIN 46 requires the Partnership to evaluate all existing arrangements to identify situations where the Partnership has a "variable interest," commonly evidenced by a guarantee arrangement or other commitment to provide financial support, in a "variable interest entity," commonly a thinly capitalized entity, and further determine when such variable interest requires the Partnership to consolidate the variable interest entities financial statements with its own. The Partnership is required to perform this assessment by December 31, 2003 and consolidate any variable interest entities for which the Partnership will absorb a majority of the entities expected losses or receive a majority of the expected residual gains. The General Partner has not completed its analysis and has not concluded on the impact that FIN 46 will have.




















1  While FSI has neither determined if a Program Affiliate will purchase these railcars nor the timing of any purchases, it is possible the Partnership may purchase some of the railcars.










PLM EQUIPMENT GROWTH & INCOME FUND VII


(A Limited Partnership)


NOTES TO CONDENSED FINANCIAL STATEMENTS


(unaudited)





11.  Recent Accounting Pronouncements (continued)





In May 2003, FASB issued Statement of Financial Accounting Standard No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity" (SFAS No. 150) which establishes standards for how the Partnership classifies and measures certain financial instruments with characteristics of both liabilities and equity. This standard was to be effective for the Partnerships quarter ending September 30, 2003. In October 2003, however, the FASB deferred the application of SFAS No. 150 indefinitely.





In September 2001, the Accounting Standards Executive Committee (AcSEC) issued an Exposure Draft on a Statement of Position, "Accounting for Certain Costs and Activities Related to Property, Plant and Equipment" (the "Proposed Statement"). On September 9, 2003, AcSEC voted to approve the Proposed Statement and is expected to present it to the FASB in the first quarter of 2004. At this time, it is unclear whether the Proposed Statement will be issued or in what form. If the existing Proposed Statement is issued, it would require the Partnership to modify its accounting policy for maintenance and repairs. Such costs would no longer be accrued in advance of performing the related maintenance and repairs; rather, the Proposed Statement requires these costs to be capitalized and amortized over their estimated useful life.





12.  Subsequent Events





During October 2003, a jointly owned Boeing 737-300 commercial aircraft, in which the Partnership has a 38% interest, required an engine overhaul totaling approximately $0.9 million. The General Partner believes that there are adequate engine reserves collected from the lessee to cover the cost of the overhaul and there will be no impact to the Partnerships statement of operations. The Partnership will reduce its balance in due to affiliates to fund its proportional share of the engine overhaul.





In addition, during October 2003, an owned marine vessel had a collision with another marine vessel. The Partnerships marine vessel was out-of-service for 7 days undergoing repairs resulting from the collision. Repairs to the Partnerships marine vessel were approximately $0.1 million. Pending an investigation to determine fault, the Partnership may be liable for the damage to the other marine vessel. To date, there has been no determination of fault in the collision. Should the Partnerships marine vessel be at fault, any costs would be covered under its liability insurance policy.










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





(I)  RESULTS OF OPERATIONS





Comparison of the PLM Equipment Growth & Income Fund VIIs (the Partnerships) Operating Results for the Three Months Ended September 30, 2003 and 2002





(A)  Owned Equipment Operations





Lease revenues less direct expenses (defined as repairs and maintenance, equipment operating, and asset-specific insurance expenses) on owned equipment decreased during the three months ended September 30, 2003 compared to the same period of 2002. Gains or losses from the disposition of equipment, interest and other income, and certain expenses such as management fees to affiliate, depreciation and amortization, loss on impairment of equipment, general and administrative expenses, and (recovery of) provision for bad debts relating to the operating segments (see Note 7 to the unaudited condensed financial statements), are not included in the owned equipment operation discussion because they are indirect in nature and not a result of operations, but the result of owning a portfolio of equipment. The following table presents lease revenues less direct expenses by segment (in thousands of dollars):





For the Three MonthsEnded September 30,2003

2002Marine containers
$
1,518


$
1,558Marine vessels

313



615Railcars

309



330Trailers

61



9Aircraft

(1
)


269





Marine containers:  Lease revenues and direct expenses for marine containers were $1.5 million and $16,000 respectively, for the three months ended September 30, 2003, compared to $1.6 million and $17,000, respectively, during the same period of 2002. The decrease in lease revenues of $41,000 during the third quarter of 2003 compared to the same period of 2002 was due to some of the marine containers owned by the Partnership switching from a fixed lease rate to utilization based rate resulting in lower lease revenues. Additional marine containers owned by the Partnership will be converting from a fixed term lease to one based on utilization over the next 24 months. This is expected to cause lease revenues to decline further.





Marine vessels:  Marine vessel lease revenues and direct expenses were $1.3 million and $1.0 million, respectively, for the three months ended September 30, 2003, compared to $1.3 million and $0.7 million, respectively, during the same period of 2002. Lease revenues decreased $45,000 during the third quarter of 2003 due to lower lease rates earned compared to the same period of 2002. Direct expenses increased $0.3 million during the third quarter of 2003 resulting from higher operating cost of $0.2 million, higher repairs of $0.1 million and higher insurance premiums of $34,000 and compared to 2002.





Railcars:  Railcar lease revenues and direct expenses were $0.5 million and $0.2 million, respectively, for the three months ended September 30, 2003 and 2002. Although lease revenues remained relatively the same, lease revenues increased $0.3 million resulting from the purchase and lease of railcars during 2003 offset by a decrease of $0.3 million caused by an increase in the number of railcars off-lease compared to the same period of 2002.





Trailers:  Trailer lease revenues and direct expenses remained relatively the same at $0.1 million and $0.1 million, respectively, for the three months ended September 30, 2003 and 2002. The increase in trailer contributions of $0.1 million was due to lower repairs and maintenance compared to the same period of 2002.





Aircraft:  Aircraft lease revenues and direct expenses were $-0- and $1,000, respectively, for the three months ended September 30, 2003, compared to $0.3 million and $2,000, respectively, during the same period of 2002. The decrease on lease revenues of $0.3 million was due to the Partnerships owned aircraft being off-lease during the third quarter of 2003 compared to the same period of 2002, during which this aircraft was on-lease.





(B)  Indirect Expenses Related to Owned Equipment Operations





Total indirect expenses of $2.6 million for the three months ended September 30, 2003 decreased from $2.7 million for the same period in 2002. Significant variances are explained as follows:





(i)  (Recovery of) provision for bad debts decreased $0.3 million compared to 2002. A provision for bad debts of $0.2 million recorded in the third quarter of 2002 was primarily based on PLM Financial Services, Inc.s (FSI or the General Partners) evaluation of the collectability of receivables related to one aircraft lessee. During 2003, the Partnership recorded a recovery of bad debts of $0.2 million due to the collection of bad debts that had been previously written off partially offset by an increase in the provision for bad debts of $0.1 million based on the General Partners evaluation of the collectability of receivables;





(ii)  A $49,000 decrease in interest expense was due to a lower average outstanding debt balance in the third quarter of 2003 compared to the same period of 2002;





(iii)  Depreciation and amortization expenses remained relatively the same for both periods however a decrease of approximately $0.2 million caused by the double-declining balance method of depreciation which results in greater depreciation in the first years an asset is owned, was offset in part, by an increase of $0.2 million resulting from the purchase of railcars during 2003; and





(iv)  Loss on impairment of equipment increased $0.3 million during 2003 and resulted from the Partnership reducing the carrying value of owned tank railcars to their estimated fair value. No impairment of equipment was required during the same period in 2002.





(C)  Net Gain on Disposition of Owned Equipment





The net gain on disposition of owned equipment for the third quarter of 2003 totaled $3,000, and resulted from the sale of marine containers, railcars and a trailer with a net book value of $0.1 million for proceeds of $0.1 million. The net gain on disposition of owned equipment for the third quarter of 2002 totaled $44,000, and resulted from the sale of marine containers with a net book value of $0.1 million for proceeds of $0.1 million.





(D)  Equity in Net Income of Unconsolidated Special-Purpose Entities (USPEs)





Equity in net income of USPEs represents the Partnership's share of the net income generated from the operation of jointly owned assets accounted for under the equity method of accounting. These entities are single purpose and have no debt or other financial encumbrances. The following table presents equity in net income by equipment type (in thousands of dollars):





For the Three MonthsEnded September 30,2003

2002Aircraft
$
102


$
70Marine vessel

--



14Equity in net income of USPEs
$
102


$
84





The following USPE discussion by equipment type is based on the Partnership's proportional share of revenues, depreciation expense, direct expenses, administrative expenses and loss on impairment of equipment in the USPEs:





Aircraft: As of September 30, 2003 and 2002, the Partnership owns an interest in three trusts that each own a commercial aircraft. During the three months ended September 30, 2003 and 2002, lease revenues of $0.5 million were offset by depreciation expense, direct expenses, and administrative expenses of $0.4 million.





The increase in contribution of $32,000 during the third quarter of 2003 was caused by the lower depreciation expense caused by the double-declining balance method of depreciation which results in greater depreciation in the first years an asset is owned.





Marine vessel: As of September 30, 2002 the Partnership had sold its interest in an entity that owned a marine vessel.





(E)  Net (Loss) Income





As a result of the foregoing, the Partnership had net loss of $0.3 million for the three months ended September 30, 2003, compared to net income of $0.2 million during the same period of 2002. The Partnership's ability to acquire, operate, and liquidate assets, secure leases and re-lease those assets whose leases expire is subject to many factors. Therefore, the Partnership's performance in the third quarter of 2003 is not necessarily indicative of future periods.





Comparison of the Partnerships Operating Results for the Nine Months Ended September 30, 2003 and 2002





(A)  Owned Equipment Operations





Lease revenues less direct expenses on owned equipment decreased during the nine months ended September 30, 2003 compared to the same period of 2002. The following table presents lease revenues less direct expenses by segment (in thousands of dollars):





For the Nine MonthsEnded September 30,2003

2002Marine containers
$
4,617


$
4,593Railcars

920



1,203Marine vessels

364



1,842Trailers

164



143Aircraft

(30
)


808





Marine containers:  Lease revenues and direct expenses for marine containers were relatively the same at $4.7 million and $42,000 respectively, for the nine months ended September 30, 2003, compared to $4.6 million and $0.1 million, respectively, during the same period of 2002. A significant number of the Partnerships marine containers currently on a fixed rate lease will switch to a lease based on utilization over the next 24 months . The General Partner anticipates that this will result in a significant decrease in lease revenues.





Railcars:  Railcar lease revenues and direct expenses were $1.5 million and $0.5 million, respectively, for the nine months ended September 30, 2003, compared to $1.7 million and $0.4 million, respectively, during the same period of 2002. During the nine months ended September 30, 2003, a decrease in lease revenues of $0.4 million caused by an increase in the number of off-lease railcars was partially offset, by an increase of $0.2 million resulting from the purchase and lease of railcars during 2003.





Marine vessels:  Marine vessel lease revenues and direct expenses were $3.6 million and $3.2 million, respectively, for the nine months ended September 30, 2003, compared to $4.0 million and $2.1 million, respectively, during the same period of 2002. Lease revenues decreased $0.4 million during the nine months ended September 30, 2003 due to lower lease rates earned on the Partnerships two marine vessels compared to the same period of 2002. Direct expenses increased $1.1 million during the nine months ended September 30, 2003 resulting from higher repairs of $0.7 million, higher operating cost of $0.3 million and higher insurance premiums of $0.1 million compared to 2002.





Trailers:  Trailer lease revenues and direct expenses were $0.3 million and $0.2 million, respectively, for the nine months ended September 30, 2003, compared to $0.5 million and $0.3 million, respectively, during the same period of 2002. The decrease in trailer lease revenues of $0.1 million was due to a decrease in utilization compared to the same period of 2002. The decrease of $0.1 million in trailer direct expenses was due to a decrease in the repairs and maintenance resulting from reduced utilization.





Aircraft:  Aircraft lease revenues and direct expenses were $-0- and $30,000, respectively, for the nine months ended September 30, 2003, compared to $0.8 million and $6,000, respectively, during the same period of 2002. The decrease on lease revenues of $0.8 million was due to the Partnerships owned aircraft being off-lease during the nine months ended September 30, 2003 compared to the same period of 2002, during which this aircraft was on-lease.





(B)  Indirect Expenses Related to Owned Equipment Operations





Total indirect expenses of $7.1 million for the nine months ended September 30, 2003 decreased from $7.9 million for the same period in 2002. Significant variances are explained as follows:





(i)  (Recovery of) provision for bad debts decreased $1.1 million compared to 2002. A provision for bad debts of $0.8 million was recorded in the nine months ended September 30, 2002 primarily based on the General Partners evaluation of the collectability of receivables related to one aircraft lessee. During 2003, the Partnership recorded a recovery of bad debts of $0.4 million due to the collection of bad debts that had been previously written off partially offset by an increase in the provision for bad debts of $0.1 million based on the General Partners evaluation of the collectability of receivables;





(ii)  A $0.2 million decrease in depreciation and amortization expenses from 2002 levels reflects the decrease of approximately $0.6 million caused by the double-declining balance method of depreciation which results in greater depreciation in the first years an asset is owned offset, in part, by an increase of $0.5 million resulting from the purchase of railcars during 2003;





(iii)  A $0.2 million decrease in interest expense was due to a lower average outstanding debt balance in the nine months ended September 30, 2003 compared to the same period of 2002;





(iv)  A $0.4 million increase in the loss on impairment of equipment resulted from the Partnership reducing the carrying value of certain railcars to their estimated fair value during the nine months ended September 30, 2003. No impairment of equipment was required during the nine months ended September 30, 2002; and





(v)  A $0.2 million increase in general and administrative expenses due to an increase of $0.1 million in administrative services costs and an increase of $0.1 million in professional services during 2003.





(C)  Interest and Other Income





Interest and other income increased $38,000 primarily due to earnings from a note receivable in the nine months ended September 30, 2003 compared to the same period of 2002.





(D)  Net Gain on Disposition of Owned Equipment





Net gain on disposition of owned equipment for the nine months ended September 30, 2003 totaled $23,000, and resulted from the sale of marine containers, railcars and a trailer with a net book value of $0.2 million for proceeds of $0.2 million. The gain on disposition of owned equipment for the nine months ended September 30, 2002 totaled $46,000 and resulted from the sale of marine containers with a net book value of $0.1 million for $0.1 million.





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





Equity in net (loss) income of USPEs represents the Partnership's share of the net loss or income generated from the operation of jointly owned assets accounted for under the equity method of accounting. These entities are single purpose and have no debt or other financial encumbrances. The following table presents equity in net (loss) income by equipment type (in thousands of dollars):





For the Nine MonthsEnded September 30,2003

2002Aircraft
$
(225
)

$
74Marine vessel

--



45Equity in net (loss) income of USPEs
$
(225)


$
119





The following USPE discussion by equipment type is based on the Partnership's proportional share of revenues, depreciation expense, direct expenses, administrative expenses and loss on impairment of equipment in the USPEs:





Aircraft: As of September 30, 2003 and 2002, the Partnership owns an interest in three trusts that each own a commercial aircraft. During the nine months ended September 30, 2003, lease revenues of $1.5 million were offset by depreciation expense, direct expenses, and administrative expenses of $1.2 million and a loss on impairment of equipment of $0.5 million. During the same period of 2002, lease revenues of $1.5 million were offset by depreciation expense, direct expenses, and administrative expenses of $1.4 million.





A decrease in depreciation expense, direct expenses, and administrative expenses during the nine months ended September 30, 2003 was caused by lower administrative expenses of $0.1 million and lower depreciation expense of $0.2 million caused by the double declining-balance method of depreciation which results in greater depreciation in the first years an asset is owned compared to 2002. This decrease was offset by an $0.5 million increase in the loss on impairment of equipment resulting from the reduction of the carrying value of a Boeing 737-300 commercial aircraft to its estimated fair value. No impairment of equipment was required during the nine months ended September 30, 2002.





Marine vessel: As of September 30, 2002 the Partnership had sold its interest in an entity that owned a marine vessel.





(F)  Net (Loss) Income





As a result of the foregoing, the Partnership had net loss of $1.1 million for the nine months ended September 30, 2003, compared to net income of $0.9 million during the same period of 2002. The Partnership's ability to acquire, operate, and liquidate assets, secure leases and re-lease those assets whose leases expire is subject to many factors. Therefore, the Partnership's performance in the nine months ended September 30, 2003 is not necessarily indicative of future periods.





(II)  CRITICAL ACCOUNTING POLICIES AND ESTIMATES





The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires PLM Financial Services, Inc. (FSI or the General Partner) to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On a regular basis, the General Partner reviews these estimates including those related to asset lives and depreciation methods, impairment of long-lived assets, allowance for doubtful accounts, reserves related to legally mandated equipment repairs  and contingencies and litigation. These estimates are based on the General Partner's historical experience and on various other assumptions believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The General Partner believes, however, that the estimates, including those for the above-listed items, are reasonable and that actual results will not vary significantly from the estimated amounts.





The General Partner believes the following critical accounting policies affect the more significant judgments and estimates used in the preparation of the Partnership's financial statements:





Revenue recognition: Lease revenues are earned by the Partnership monthly and no significant amounts are calculated on factors other than the passage of time. The Partnerships leases are accounted for as operating leases and are noncancellable. Rents received prior to their due dates are deferred.





Asset lives and depreciation methods: The Partnerships primary business involves the purchase and subsequent lease of long-lived transportation and related equipment. The General Partner has chosen asset lives that it believes correspond to the economic life of the related asset. The General Partner has chosen a depreciation method that it believes matches the benefit to the Partnership from the asset with the associated costs. These judgments have been made based on the General Partners expertise in each equipment segment that the Partnership operates. If the asset life and depreciation method chosen does not reduce the book value of the asset to at least the potential future cash flows from the asset to the Partnership, the Partnership would be required to record an impairment loss. Likewise, if the net book value of the asset was less than the economic value, the Partnership may record a gain on sale upon final disposition of the asset.





Impairment of long-lived assets: Whenever circumstances indicate that an impairment may exist, the General Partner reviews the carrying value of its equipment and investments in USPEs to determine if the carrying value of the assets may not be recoverable due to current economic conditions. This requires the General Partner to make estimates related to future cash flows from each asset as well as the determination if the deterioration is temporary or permanent. If these estimates or the related assumptions change in the future, the Partnership may be required to record additional impairment charges.





Allowance for doubtful accounts: The Partnership maintains allowances for doubtful accounts for estimated losses resulting from the inability of the lessees to make the lease payments. These estimates are primarily based on the amount of time that has lapsed since the related payments were due as well as specific knowledge related to the ability of the lessees to make the required payments. If the financial condition of the Partnerships lessees were to deteriorate, additional allowances could be required that would reduce income. Conversely, if the financial condition of the lessees were to improve or if legal remedies to collect past due amounts were successful, the allowance for doubtful accounts may need to be reduced and income would be increased.





Reserves for repairs: The Partnership accrues for legally required repairs to equipment such as dry docking for marine vessels and engine overhauls to aircraft engines over the period prior to the required repairs. The amount that is reserved is based on the General Partners expertise in each equipment segment, the past history of such costs for that specific piece of equipment and discussions with independent, third party equipment brokers. If the amount reserved for is not adequate to cover the cost of such repairs or if the repairs must be performed earlier than the General Partner estimated, the Partnership would incur additional repair and maintenance or equipment operating expenses.





Contingencies and litigation: The Partnership is subject to legal proceedings involving ordinary and routine claims related to its business. The ultimate legal and financial liability with respect to such matters cannot be estimated with certainty and requires the use of estimates in recording liabilities for potential litigation settlements. Estimates for losses from litigation are disclosed if considered possible and accrued if considered probable after consultation with outside counsel. If estimates of potential losses increase or the related facts and circumstances change in the future, the Partnership may be required to record additional litigation expense.





(III)  FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY





For the nine months ended September 30, 2003, the Partnership generated cash from operations of $5.3 million to meet its operating obligations, purchase additional equipment, pay debt and interest payments and maintain working capital reserves.





During the nine months ended September 30, 2003, the Partnership purchased railcars for $5.8 million and paid FSI $0.3 million for acquisition fees and $0.1 million for lease negotiation fees. The Partnership disposed of owned equipment for proceeds of $0.2 million during the nine months ended September 30, 2003.





Accounts and note receivable increased $0.4 million in the nine months ended September 30, 2003. An increase of $0.1 million was due to the timing of lease receipts, an increase of $0.3 million was due to repairs to a marine vessel that are reimbursable from an insurance company and by a net decrease in the allowance for bad debts of $0.4 million resulting from the collection of bad debts previously written-off. These increases were partially offset by the collection of $0.4 million on note receivable.





Investments in USPEs decreased $1.6 million during the nine months ended September 30, 2003 due to cash distributions of $1.4 million from the USPEs to the Partnership and by the loss of $0.2 million that was recorded by the Partnership for its equity interests in the USPEs.





Prepaid expenses decreased $0.1 million during 2003 due to the expense of insurance premiums during 2003 that were paid during 2002.





Deferred charges increased $31,000 due to the payment of $0.1 million in lease negotiation fees to FSI partially offset by $26,000 in amortization.





Accounts payable increased $1.2 million during the nine months ended September 30, 2003. An increase of $0.8 million was due to the over payment from a customer that was reimbursed during October, an increase of $0.2 million was due to the accrual of the interest payment due semi-annually on notes payable and a $0.2 million increase is due to the marine vessel ship manager for incurred expenses.





Lessee deposits and reserve for repairs decreased $0.1 million during the nine months ended September 30, 2003 due to payment for the dry docking for the marine vessel of $1.1 million partially offset by an increase of $0.8 million in dry dock accruals and an increase of $0.1 million in lessee security deposits.





The Partnership is scheduled to make an annual debt payment of $3.0 million to the lenders of the notes payable on December 31, 2003. The cash for this payment will come from operations and proceeds from equipment dispositions.





The Partnership is a participant in a $10.0 million warehouse facility. The warehouse facility is shared by the Partnership, PLM Equipment Growth Fund V, PLM Equipment Growth Fund VI, Professional Lease Management Income Fund I, LLC and Acquisub LLC, a wholly owned subsidiary of PLM International Inc. (PLMI). The facility provides for financing up to 100% of the cost of the equipment and expires on December 31, 2003. Any borrowings by the Partnership are collateralized by equipment purchased with the proceeds of the loan. Outstanding borrowings by one borrower reduce the amount available to each of the other borrowers under the facility. Individual borrowings may be outstanding for no more than 270 days, with all advances due no later than December 31, 2003. Interest accrues either at the prime rate or LIBOR plus 2.0% at the borrowers option and is set at the time of an advance of funds. Borrowings by the Partnership are guaranteed by PLMI. The Partnership is not liable for the advances made to other borrowers.





As of August 12, November 13 , 2003, Acquisub LLC had outstanding borrowings on the warehouse facility of $10.0 million. There were no other outstanding borrowings on this facility by the Partnership or any of the other eligible borrowers.





FSI arranged for the lease or purchase of up to 1,050 railcars with a delivery date between 2002 and 2004. FSI anticipates that 735 of these railcars will be leased by an entity other than the Partnership. The remaining 315 railcars costing approximately $23 million, will be purchased by FSI, the Partnership or an affiliated program. As of September 30, 2003, approximately 66% of these railcars have been purchased by FSI or an affiliated program for approximately $15 million. The remaining 34% of these railcars will be purchased in 2004. While FSI has not determined if the Partnership will purchase either the railcars originally purchased by FSI or any of the railcars remaining to be purchased under the agreement, it is possible the Partnership may purchase some railcars.





At September 30, 2003, railcars with an original equipment cost of $16.2 million were owned by FSI, some of which were purchased from the above transaction. While FSI has neither determined if a Program Affiliate will purchase these railcars nor the timing of any purchases, it is possible the Partnership may purchase some of the railcars.





Commitments and contingencies as of September 30, 2003 are as follows (in thousands of dollars):





Less than
1-3
4-5
After 5Current Obligations

Total

1 Year

Years

Years

YearsCommitment to purchase railcars


$23,539
1
$16,159

$7,380


$--

$--Notes payable


11,000

3,000

8,000


--

--Line of credit


--

--

--


--

--$37,880

$21,438

$16,442


--

$--Notes payable


11,000

3,000

8,000


--

--Line of credit


--

--

--


--

--$34,539

$19,159

$15,380


--

$--











1  While FSI has neither determined if a Program Affiliate will purchase these railcars nor the timing of any purchases, it is possible the Partnership may purchase some of the railcars.







(IV) RECENT ACCOUNTING PRONOUNCEMENT S





In January 2003, Financial Accounting Standards Board (FASB) issued Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46). This interpretation clarifies existing accounting principles related to the preparation of consolidated financial statements when the owners of an USPE do not have the characteristics of a controlling financial interest or when the equity at risk is not sufficient for the entity to finance its activities without additional subordinated financial support from others. FIN 46 requires the Partnership to evaluate all existing arrangements to identify situations where the Partnership has a "variable interest," commonly evidenced by a guarantee arrangement or other commitment to provide financial support, in a "variable interest entity," commonly a thinly capitalized entity, and further determine when such variable interest requires the Partnership to consolidate the variable interest entities financial statements with its own. The Partnership is required to perform this assessment by December 31, 2003 and consolidate any variable interest entities for which the Partnership will absorb a majority of the entities expected losses or receive a majority of the expected residual gains. The General Partner has not completed its analysis and has not concluded on the impact that FIN 46 will have.





In May 2003, FASB issued Statement of Financial Accounting Standard No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity" (SFAS No. 150) which establishes standards for how the Partnership classifies and measures certain financial instruments with characteristics of both liabilities and equity. This standard was to be effective for the Partnerships quarter ending September 30, 2003. In October 2003, however, the FASB deferred the application of SFAS No. 150 indefinitely.





In September 2001, the Accounting Standards Executive Committee (AcSEC) issued an Exposure Draft on a Statement of Position, "Accounting for Certain Costs and Activities Related to Property, Plant and Equipment" (the "Proposed Statement"). On September 9, 2003, AcSEC voted to approve the Proposed Statement and is expected to present it to the FASB in the fourth quarter of 2003. At this time, it is unclear whether the Proposed Statement will be issued or in what form. If the existing Proposed Statement is issued, it would require the Partnership to modify its accounting policy for maintenance and repairs. Such costs would no longer be accrued in advance of performing the related maintenance and repairs; rather, the Proposed Statement requires these costs to be capitalized and amortized over their estimated useful life.







(V)  OUTLOOK FOR THE FUTURE





Several factors may affect the Partnership's operating performance during the remainder of 2003 and beyond, including changes in the markets for the Partnership's equipment and changes in the regulatory environment in which that equipment operates.





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





Other factors affecting the Partnerships contribution operations during the remainder of 2003 and beyond include:





(1)  Starting in 2003 and continuing through 2005, a significant number of the Partnerships marine containers currently on a fixed rate lease will be switching to a lease based on utilization. The General Partner anticipates that this will result in a significant decrease in lease revenues;





(2)  Signs of economic recovery in the railcar segment continue to be mixed with some indicators showing less strength than previously forecasted. Total industrial production, the general driver of demand for railcars, is now projected to be unchanged in 2003. Chemical railcar loadings, the most important driver for the majority of the Partnerships fleet, are now flat versus 2002 as reported by the American Association of Railroads. If manufacturing recovers, chemical and allied products carloadings are generally forecasted to grow in the fourth quarter of 2003 but not to rebound strongly until 2004. On the positive side, North American railcar manufacturing capacity utilization, as reported informally by the manufacturers themselves, continues to demonstrate the increase noted at the end of the second quarter, and lead times have extended into the second quarter of next year. The speed of recovery in lease rates continues to be dependent on the number of idle railcars in fleets owned by various shippers and leasing competitors who have been very aggressive in quoted rates compared to historical norms;





(3)  Utilization of intermodal trailers owned by the Partnership was 58% in the three months ended September 30, 2003 which was approximately 2% below the three months ended September 30, 2002. Industry-wide utilization of intermodal trailers was 50% in the three months ended September 30, 2003 compared to 52% in the same period of 2002. As the Partnership's 45' trailers are smaller than the 48' trailers that many shippers prefer, the General Partner expects utilization to have little opportunity to increase over the next few years;





(4)  Market demand for new and used aircraft has been severely impacted by the poor financial condition of the airline industry. The General Partner believes that there is a significant oversupply of commercial aircraft available, that has caused a decrease in aircraft fair market values and that this oversupply will continue for some time. The General Partner does not expect these aircraft to return to their pre-September 11, 2001 values.





During 2001, the lessee of a Stage II Boeing 737-200 commercial aircraft notified the General Partner of its intention to return this aircraft and stopped making lease payments. During October 2002, the General Partner reached an agreement with the lessee of this aircraft for the past due lease payments. The lessee made an initial payment during October 2002, to be followed by 23 equal monthly installments beginning in November 2002. Unpaid outstanding amounts will accrue interest at a rate of 5%. The balance outstanding at September 30, 2003 was $0.7 million. Due to the uncertainty of ultimate collection, the General Partner will continue to fully reserve the unpaid outstanding balance less the security deposit from this lessee. As of November 13, 2003, the lessee was current with all the installment payments due to the Partnership except for the installment payment due during November.





The General Partner considers the lessee of the Partnerships two partially owned MD-82 commercial aircraft a significant credit risk. The lessee has restructured leases (including a $5,000 a month reduction in the lease payment for the Partnerships aircraft) and renegotiated labor contracts. If this aircraft were to be returned prior to its lease expiration in 2008, the aircraft could be off-lease for a significant period of time or re-leased at a significantly lower lease rate; and





(5)  As a result of the increase in off-lease equipment, the General Partner expects the Partnership will incur higher remarketing and storage costs during the remainder of 2003.





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





The Partnership may commit its cash flow, surplus cash, and equipment sale proceeds to purchase additional equipment, consistent with the objectives of the Partnership, until December 31, 2004. The General Partner believes that these acquisitions may cause the Partnership to generate additional earnings and cash flow for the Partnership. Surplus funds, if any, less reasonable reserves, may be distributed to the partners. The Partnership will terminate on December 31, 2013, unless terminated earlier upon sale of all equipment and by certain other events.





The Partnership intends to use cash flow from operations to satisfy its operating requirements, purchase additional equipment, pay loan principal and interest on debt, and pay cash distributions to the partners.





The General Partner does not anticipate declaring any cash distributions to the partners until at least the end of the investment phase of the Partnership. Cash distributions when paid to the partners generally consist of both a return of and a return on capital. Cash distributions do not represent and are not indicative of yield on investment. Actual yield on investment cannot be determined with any certainty until conclusion of the Partnership and will be dependent upon the collection of all future contracted rent, the generation of renewal and/or re-lease rents and the residual value realized for each asset at its disposal.







(VI)  FORWARD-LOOKING INFORMATION





Except for the historical information contained herein, this Form 10-QSB contains forward-looking statements that involve risks and uncertainties, such as statements of the Partnerships plans, objectives, expectations, and intentions. The cautionary statements made in this Form 10-QSB should be read as being applicable to all related forward-looking statements wherever they appear in this Form 10-QSB. There are a number of important factors that could cause actual results to differ materially from those expressed in any forward-looking statements made herein. These factors include, but are not limited to, the collection of the Partnerships contracted rents, the realization of residual proceeds, and future economic conditions. The Partnerships actual results could differ materially from those discussed here.





ITEM 3.  CONTROLS AND PROCEDURES





Limitations on the Effectiveness of Controls





The General Partners management, including its President and Chief Financial Officer (C F O), does not expect that our internal controls or disclosure control will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.





Because of the inherent limitations in all control systems, no evaluation of control can provide absolute assurance that all control issues and instances of fraud, if any, within the Partnership have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, collusion of two or more people, or by management override of the control. The design of any system of controls also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.





Notwithstanding the forgoing limitations, we believe that our internal controls and disclosure control provide reasonable assurances that the objectives of our control system are met.





Quarterly Evaluation of the Partnership s Disclosure Controls and Internal Controls





(1)  Within the 90-day period prior to the filing of this report, the General Partner carried out an evaluation, under the supervision and with the participation of the General Partners management, including its President and C F O, of the effectiveness of the design and operation of the Partnership s disclosure controls and procedures pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 (the "Exchange Act"). Based upon that evaluation, the President and C F O concluded that the Partnerships disclosure controls and procedures are effective in timely alerting them to material information relating to the Partnerships required to be included in the Partnership s exchange act filings.





(2)  There have been no significant changes in the Partnerships internal controls or in other factors which could significantly affect internal controls subsequent to the date of the General Partner carried out its evaluations.





CONTROLS AND PROCEDURES





Within the 90-day period prior to the filing of this report, evaluations were carried out under the supervision and with the participation of the General Partner's management, including its President and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934). Based upon those evaluations, the President and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. No significant changes have been made in the Partnerships internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluations.






PART II -- OTHER INFORMATION








ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K





(a)  Exhibits





10.10  Sixth amendment to the Warehouse Credit Agreement, dated September 30, 2003.





99.1  Certificate of President pursuant to Section 906 of Sarbanes - Oxley Act.





99.2  Certificate of Chief Financial Officer pursuant to Section 906 of Sarbanes - Oxley Act.





(b)  Reports on Form 8-K





None.







CONTROL CERTIFICATION











I, James A. Coyne, certify that:





1.  I have reviewed this quarterly report on Form 10-QSB of PLM Equipment Growth & Income Fund VII.





2.  Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;





3.  Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;





4.  The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:





a)  designed such disclosure controls and procedures to ensure that material information relating to the registrant is made known to us by others, particularly during the period in which this quarterly report is prepared;





b)  evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and





c)  presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;





5.  The registrants other certifying officer and I have disclosed, based on our most recent evaluation, to the registrants auditors and board of Managers:





a)  all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and





b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and





6.  The registrants other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

















Date: N ovember 13 , 2003 By:


/s/ James A. Coyne


James A. Coyne


President



















CONTROL CERTIFICATION











I, Richard K Brock, certify that:





1.  I have reviewed this quarterly report on Form 10-QSB of PLM Equipment Growth & Income Fund VII.





2.  Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;





3.  Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;





4.  The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:





a)  designed such disclosure controls and procedures to ensure that material information relating to the registrant is made known to us by others, particularly during the period in which this quarterly report is prepared;





b)  evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and





c)  presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;





5.  The registrants other certifying officer and I have disclosed, based on our most recent evaluation, to the registrants auditors and board of Managers:





a)  all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and





b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and





6.  The registrants other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.














Date: November 13 , 2003 B y:


/s/ Richard K Brock


Richard K Brock


Chief Financial Officer


(Principal Financial Officer)