**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 June 30, 2005.****[ ] 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.)******200 Nyala Farms Road****.********Westport, CT 06880**(Address of principal (Zip code)executive offices) .Registrant's telephone number, including area code: (203)
      341-0555**_______________________**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
      ____Transitional Small Business Disclosure Format: Yes 
      No XAggregate market value of voting stock:
N/A

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

June 30,
    
    December 31,2005
    
    2004(unaudited)**Assets**Equipment held for operating leases, at cost
    
    $
    68,771
    
    $
    66,960Less accumulated depreciation
    
    
    (51,280
    )
    
    (49,421
    )Net equipment
    
    
    17,491
    
    
    17,539Cash and cash equivalents
    
    
    8,185
    
    
    4,635Restricted cash
    
    
    379
    
    
    1,998Accounts and other receivables, less allowance for
      doubtfulaccounts of $7 in 2005 and $45 in 2004
    
    
    1,712
    
    
    2,358Equity investments in affiliated entities
    
    
    13,624
    
    
    15,576Other assets, net of accumulated amortization of$277 in 2005 and $256 in 2004
    
    
    461
    
    
    493Total assets
    
    $
    41,852
    
    $
    42,599**Liabilities and partners’ capital**Liabilities:Accounts payable and accrued expenses
    
    $
    130
    
    $
    250Due to affiliates
    
    
    784
    
    
    952Reserve for repairs
    
    
    1,951
    
    
    1,888Lessee deposits and prepaid revenues
    
    
    679
    
    
    383Notes payable
    
    
    4,000
    
    
    4,000Total liabilities
    
    
    7,544
    
    
    7,473Commitments and contingenciesPartners' capital:Limited partners (4,981,450 limited partnership units
      outstanding)
    
    
    34,308
    
    
    35,126General Partner
    
    
    --
    
    
    --Total partners' capital
    
    
    34,308
    
    
    35,126Total liabilities and partners’ capital
    
    $
    41,852
    
    $
    42,599










See accompanying notes to unaudited condensed financial
statements.
**PLM EQUIPMENT GROWTH & INCOME FUND
      VII****(A Limited Partnership)****CONDENSED STATEMENTS OF INCOME**(in thousands of dollars, except weighted-average limited
      partnership unit amounts)
(unaudited)

For the Three Months
    
    For the Six MonthsEnded June 30,
    
    Ended June 30,2005
    
    2004
    
    2005
    
    2004**Revenues**Lease revenue
    
    $
    4,498
    
    $
    3,551
    
    $
    8,547
    
    $
    7,029Interest and other income
    
    
    71
    
    
    15
    
    
    107
    
    
    36Gain on disposition of equipment
    
    
    51
    
    
    312
    
    
    85
    
    
    472Total revenues
    
    
    4,620
    
    
    3,878
    
    
    8,739
    
    
    7,537**Expenses**Depreciation and amortization
    
    
    994
    
    
    1,513
    
    
    1,967
    
    
    2,983Operations support
    
    
    1,915
    
    
    1,230
    
    
    2,874
    
    
    2,353Management fees to affiliate
    
    
    178
    
    
    204
    
    
    339
    
    
    399Interest expense
    
    
    80
    
    
    153
    
    
    158
    
    
    306General and administrative expensesto affiliates
    
    
    49
    
    
    93
    
    
    85
    
    
    187Other general and administrative expenses
    
    
    182
    
    
    237
    
    
    327
    
    
    487Recovery of bad debts
    
    
    (30
    )
    
    (162
    )
    
    (39
    )
    
    (253
    )Total expenses
    
    
    3,368
    
    
    3,268
    
    
    5,711
    
    
    6,462Equity in net (loss) income of equityinvestments
    
    
    (851
    )
    
    167
    
    
    (1,224
    )
    
    300Net income
    
    $
    401
    
    $
    777
    
    $
    1,804
    
    $
    1,375**Partners’ share of net income**Limited partners
    
    $
    270
    
    $
    777
    
    $
    1,673
    
    $
    1,375General Partner
    
    
    131
    
    
    -
    
    
    131
    
    
    -Total
    
    $
    401
    
    $
    777
    
    $
    1,804
    
    $
    1,375Limited partners' net income per weighted-average limited partnership unit
    
    $
    0.05
    
    $
    0.16
    
    $
    0.34
    
    $
    0.28











See accompanying notes to unaudited condensed financial
statements.

**PLM EQUIPMENT GROWTH & INCOME FUND
      VII****(A Limited Partnership)****CONDENSED STATEMENTS OF CHANGES IN PARTNERS'
      CAPITAL****For the Period from December 31, 2004 to June 30,
      2005**(in thousands of dollars)
(unaudited)


Limited
    
    GeneralPartners
    
    Partner
    
    TotalPartners' capital as of December 31, 2004
    
    $
    35,126
    
    $
    -
    
    $
    35,126Net income
    
    
    1,673
    
    
    131
    
    
    1,804Cash distribution
    
    
    (2,491
    )
    
    (131
    )
    
    (2,622
    )Partners' capital as of June 30, 2005
    
    $
    34,308
    
    $
    -
    
    $
    34,308





































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 Six MonthsEnded June 30,2005
    
    2004**Operating activities**Net income
    
    $
    1,804
    
    $
    1,375Adjustments to reconcile net incometo net cash provided by (used in) operating
activities:Depreciation and amortization
    
    
    1,967
    
    
    2,983Amortization of debt placement costs
    
    
    13
    
    
    13Recovery of bad debts
    
    
    (39
    )
    
    (253
    )Gain on disposition of equipment
    
    
    (85
    )
    
    (472
    )Equity in net loss (income) from equity investments
    
    
    1,224
    
    
    (300
    )Distributions from equity investments
    
    
    728
    
    
    844Changes in operating assets and liabilities:Accounts and other receivables
    
    
    685
    
    
    99Other assets
    
    
    (39
    )
    
    (23
    )Accounts payable and accrued expenses
    
    
    (120
    )
    
    (136
    )Due to affiliates
    
    
    (168
    )
    
    (141
    )Reserve for repairs
    
    
    63
    
    
    179Lessee deposits and prepaid revenues
    
    
    296
    
    
    7Net cash provided by operating activities
    
    
    6,329
    
    
    4,175**Investing activities**Payments for purchase of equipment and capitalized
    repairs
    
    
    (1,881
    )
    
    (4,000
    )Decrease in restricted cash
    
    
    1,619
    
    
    60Payments of acquisition fees to affiliate
    
    
    (85
    )
    
    (180
    )Payments of lease negotiation fees to affiliate
    
    
    (19
    )
    
    (40
    )Payments on finance lease receivable
    
    
    69
    
    
    --Proceeds from disposition of equipment
    
    
    140
    
    
    770Net cash used in investing activities
    
    
    (157
    )
    
    (3,390
    )**Financing activities**Cash distribution paid to limited partners
    
    
    (2,491
    )
    
    --Cash distribution paid to General Partner
    
    
    (131
    )
    
    --Net cash used in financing activities
    
    
    (2,622
    )
    
    --Net increase in cash and cash equivalents
    
    
    3,550
    
    
    785Cash and cash equivalents at beginning of period
    
    
    4,635
    
    
    8,635Cash and cash equivalents at end of period
    
    $
    8,185
    
    $
    9,420**Supplemental information**Interest paid
    
    $
    145
    
    $
    293

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 unaudited financial statements presented herein are prepared
in conformity with generally accepted accounting principles in the United States
of America and the instructions for preparing Form 10-QSB under Rule 310 of
Regulation S-B of the Securities and Exchange Commission. Rule 310 provides that
disclosures that would substantially duplicate those contained in the most
recent annual report may be omitted from interim financial statements. The
accompanying unaudited condensed financial statements have been prepared on that
basis and, therefore, should be read in conjunction with the financial
statements and notes presented in the 2004 Annual Report (Form 10-KSB) of PLM
Equipment Growth Fund & Income VII (the Partnership) on file with the United
States Securities and Exchange Commission. Except as disclosed herein, there
have been no material changes to the information presented in the notes to the
2004 Annual Report in Form 10-KSB.

In the opinion of the management of PLM Financial Services, Inc.
(FSI or the General Partner) all adjustments necessary, consisting primarily of
normal recurring accruals, to present fairly the Partnership’s unaudited
condensed balance sheets at June 30, 2005 and December 31, 2004, condensed
statements of income for the three and six months ended June 30, 2005 and 2004,
condensed statements of changes in partners’ capital for the period from
December 31, 2004 to June 30, 2005, and the condensed statements of cash flows
for the six months ended June 30, 2005 and 2004 have been made and are
reflected.

2. Schedule of Partnership Phases

The Partnership may not reinvest cash flow generated from
operations after January 1, 2005 into additional equipment. The Partnership will
terminate on December 31, 2013, unless terminated earlier upon the sale of all
of the equipment or by certain other events. Although the Partnership is
scheduled to terminate on December 31, 2013, the General Partner is managing the
Partnership with the objective of having all owned and partially owned equipment
disposed of by December 31, 2006.

3. Reclassifications

Certain amounts previously reported have been reclassified to
conform to the 2005 presentation. These reclassifications did not have any
effect on total assets, total liabilities, partners’ capital, or net
income.

4. Cash Distributions

Cash distributions are recorded when declared.

For the three and six months ended June 30, 2005, cash
distributions declared and paid totaled $2.5 million ($0.50 per limited
partnership unit) to the limited partners and $0.1 million to the General
Partner. No cash distributions were paid to the limited partners or General
Partner during the three and six months ended June 30, 2004.

5. Transactions with General Partner and
Affiliates

The balance due to affiliates as of June 30, 2005 included $0.2
million due to FSI or its affiliates for management fees and $0.6 million due to
affiliates in which the Partnership has an equity investment. The balance due to
affiliates as of December 31, 2004 included $0.2 million due to FSI and its
affiliates for management fees and $0.7 million due to affiliates in which the
Partnership has an equity investment.
**PLM EQUIPMENT GROWTH & INCOME FUND VII**
**(A Limited Partnership)**
**NOTES TO CONDENSED FINANCIAL STATEMENTS**
**(unaudited)**

5. Transactions with General Partner and Affiliates
(continued)

During the three and six months ended June 30, 2005 and 2004, the
Partnership incurred acquisition, lease negotiation, management fees and data
processing and administrative expenses to FSI or its affiliates. The components
of these fees and expenses incurred to FSI or its affiliates were as follows (in
thousands of dollars):

Owned Equipment
    
    Equity InvestmentsFor the three months ended June 30,
    
    2005
    
    2004
    
    2005
    
    2004Acquisition fees
    
    $
    85
    
    $
    --
    
    $
    --
    
    $
    --Lease negotiation fees
    
    
    19
    
    
    --
    
    
    --
    
    
    --Management fees
    
    
    178
    
    
    204
    
    
    69
    
    
    26Data processing and administrativeexpenses
    
    
    49
    
    
    93
    
    
    49
    
    
    2

Owned Equipment
    
    Equity InvestmentsFor the six months ended June 30,
    
    2005
    
    2004
    
    2005
    
    2004Acquisition fees
    
    $
    85
    
    $
    180
    
    $
    --
    
    $
    --Lease negotiation fees
    
    
    19
    
    
    40
    
    
    --
    
    
    --Management fees
    
    
    339
    
    
    399
    
    
    141
    
    
    53Data processing and administrativeexpenses
    
    
    85
    
    
    187
    
    
    93
    
    
    5

During the six months ended June 30, 2005, the Partnership
purchased $1.9 million in railcars from an unaffiliated third party and paid FSI
or its affiliates $0.1 million for acquisition fees and $19,000 for lease
negotiation fees. During the six months ended June 30, 2004, the Partnership
purchased $4.0 million in railcars from FSI or its affiliates and paid FSI or
its affiliates $0.2 million for acquisition fees and $40,000 for lease
negotiation fees. The Partnership's cost for the railcars purchased from FSI was
the lower of FSI's or its affiliates cost or the fair market value at the time
of purchase.

6. Restricted Cash

In December 2004, the General Partner entered into an escrow
agreement on behalf of the Partnership. The General Partner placed $2.0 million
with the escrow agent, an unaffiliated third party, during 2004.

In the second quarter of 2005, $1.6 million in escrowed funds were
released and used to purchase a portfolio of railcars and pay FSI or its
affiliates the associated acquisition and lease negotiation fees. The remaining
escrowed funds of $0.4 million will be released to the Partnership during the
third quarter of 2005 to reimburse the Partnership for railcars purchased during
the first half of 2005.
**PLM EQUIPMENT GROWTH & INCOME FUND VII**
**(A Limited Partnership)**
**NOTES TO CONDENSED FINANCIAL STATEMENTS**
**(unaudited)**

7. Equipment

The components of owned equipment were as follows (in thousands of
dollars):

June 30,
    
    December 31,2005
    
    2004Marine containers
    
    $
    38,279
    
    $
    38,401Marine vessels
    
    
    22,212
    
    
    22,212Aircraft
    
    
    5,483
    
    
    5,483Rail equipment
    
    
    2,797
    
    
    86468,771
    
    
    66,960Less accumulated depreciation
    
    
    (51,280
    )
    
    (49,421
    )Net equipment
    
    $
    17,491
    
    $
    17,539

Equipment held for operating leases is stated at cost less
depreciation and any impairments to the carrying value.

As of June 30, 2005, all owned equipment in the Partnership’s
portfolio was on lease except for 16 railcars with a net book value of $1.0
million. As of December 31, 2004 all owned equipment was on lease except for six
railcars with a net book value of $39,000.

During the six months ended June 30, 2005, the Partnership
purchased railcars for $2.0 million including acquisition fees of $0.1 million.
During the six months ended June 30, 2004, the Partnership purchased railcars
for $4.2 million including acquisition fees of $0.2 million.

During the three and six months ended June 30, 2005, the
Partnership disposed of marine containers and a railcar with a net book value of
$25,000 and $0.1 million, respectively, for proceeds of $0.1 million which
resulted in a gain on disposition of $0.1 million.

During the three months ended June 30, 2004, the Partnership
disposed of marine containers and railcars with a net book value of $0.2 million
for proceeds of $0.5 million which resulted in a gain on disposition of $0.3
million. During the six months ended June 30, 2004, the Partnership disposed of
marine containers, railcars and trailers with a net book value of $0.3 million
for proceeds of $0.8 million which resulted in a gain on disposition of $0.5
million.

8. Equity Investments in Affiliated Entities

The Partnership owns equipment jointly with affiliated programs
and non-affiliated entities.

Ownership interest is based on the Partnership’s contribution
towards the cost of the assets in the equity investments. 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 is that certain
fees such as management fees, acquisition fees, lease and re-lease fees vary
among the owners of the equity investments. The Partnership’s investment in
equity investments includes acquisition fees, lease negotiation fees, and debt
placement fees paid by the Partnership to the General Partner or its affiliates.
The Partnership’s equity interest in the net income (loss) of equity investments
is reflected net of management fees incurred and the amortization of acquisition
fees, lease negotiation fees and debt placement fees.**PLM EQUIPMENT GROWTH & INCOME FUND VII**
**(A Limited Partnership)**
**NOTES TO CONDENSED FINANCIAL STATEMENTS**
**(unaudited)**

8. Equity Investments in Affiliated Entities
(continued)

The tables below set forth 100% of the lease revenues and interest
and other income, gain on disposition of equipment, depreciation and
amortization expense, interest expense, operations support and indirect
expenses, 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 six months ended June 30, 2005 and 2004 (in thousands
of dollars):

TWA
    
    TWA
    
    Boeing
    
    PLMFor the three months ended
    
    S/N 49183
    
    MD-82
    
    737-300
    
    WorldwideJune 30, 2005
    
    Trust1
    
    Trust2
    
    Trust3
    
    Leasing4

Lease revenues and interest and other income
    $
    308
    
    $
    308
    
    $
    390
    
    $
    212Less: Depreciation and amortization expense
    
    --
    
    
    314
    
    
    320
    
    
    --Operations support
    
    --
    
    
    --
    
    
    6
    
    
    --Indirect expenses
    
    19
    
    
    19
    
    
    28
    
    
    378Net income (loss)
    $
    289
    
    $
    (25
    )
    $
    36
    
    $
    (166
    )Partnership’s share of net income (loss)
    $
    145
    
    $
    (16
    )
    $
    12
    
    $
    (42
    )

For the three months ended
    
    PLM Rail
    
    PLM CAL I
    
    PLM CAL IIJune 30, 2005 (continued)
    
    Partners LLC5
    
    LLC6
    
    LLC7
    
    CFHS 8
    
    Total

Lease revenues and interest and other income
    $
    1,735
    
    $
    984
    
    $
    975
    
    $
    571Gain on disposition of equipment
    
    124
    
    
    --
    
    
    --
    
    
    --Less: Depreciation and amortization expense
    
    920
    
    
    1,235
    
    
    1,233
    
    
    1,388Interest expense
    
    841
    
    
    457
    
    
    456
    
    
    --Operations support
    
    554
    
    
    --
    
    
    --
    
    
    --Indirect expenses
    
    342
    
    
    26
    
    
    27
    
    
    24Net loss
    $
    (798
    )
    $
    (734
    )
    $
    (741
    )
    $
    (841
    )Partnership’s share of net loss
    $
    (270
    )
    $
    (188
    )
    $
    (190
    )
    $
    (302
    )
    
    $
    (851
    )

TWA
    
    TWA
    
    Boeing
    
    PLMFor the three months ended
    
    S/N 49183
    
    MD-82
    
    737-300
    
    WorldwideJune 30, 2004
    
    Trust1
    
    Trust2
    
    Trust3
    
    Leasing4
    
    Total

Lease revenues and interest and other income
    $
    308
    
    $
    308
    
    $
    390Less: Depreciation and amortization expense
    
    --
    
    
    314
    
    
    384Operations support
    
    --
    
    
    --
    
    
    5Indirect expenses
    
    17
    
    
    18
    
    
    23Net income (loss)
    $
    291
    
    $
    (24
    )
    $
    (22
    )Partnership’s share of net income (loss)
    $
    145
    
    $
    (15
    )
    $
    (11
    )
    $
    48
    
    
    $
    167





1
    The Partnership owns a 50% interest in the TWA S/N 49183
      Trust that was formed in 1998 that owns a MD-82 stage III commercial
      aircraft.
2  The Partnership owns a 50% interest in the TWA MD-82
Trust that was formed in 1998 that owns a MD-82 stage III commercial
aircraft.
3
    The Partnership owns a 38% interest in the Boeing 737-300
      Trust that was formed in 1999 that owns a Boeing stage III commercial
      aircraft.
4
    The Partnership owns a 25% interest in PLM Worldwide Leasing
      Corp. that was formed in 1995 that owns aircraft related
  assets.
5
    The Partnership owns a 34% interest in PLM Rail Partners,
      LLC that was formed in the third quarter of 2004 that owns various types
      of railcars.
6
    The Partnership owns a 26% interest in the PLM CAL I LLC
      that was formed in the third quarter of 2004 that owns two Boeing 737-500
      stage III commercial aircraft.
7
    The Partnership owns a 26% interest in the PLM CAL II LLC
      that was formed in the third quarter of 2004 that owns two Boeing 737-500
      stage III commercial aircraft.
8
    The Partnership owns a 36% interest in CFHS that was formed
      in the fourth quarter of 2004 that owns various types of machinery and
      equipment.**PLM EQUIPMENT GROWTH & INCOME FUND VII**
**(A Limited Partnership)**
**NOTES TO CONDENSED FINANCIAL STATEMENTS**
**(unaudited)**

8. Equity Investments in Affiliated Entities
(continued)

TWA
    
    TWA
    
    Boeing
    
    PLMFor the six months ended
    
    S/N 49183
    
    MD-82
    
    737-300
    
    WorldwideJune 30, 2005
    
    Trust1
    
    Trust2
    
    Trust3
    
    Leasing4

Lease revenues and interest and other income
    $
    617
    
    $
    616
    
    $
    780
    
    $
    528Less: Depreciation and amortization expense
    
    --
    
    
    629
    
    
    640
    
    
    --Operations support
    
    --
    
    
    --
    
    
    12
    
    
    --Indirect expenses
    
    39
    
    
    38
    
    
    51
    
    
    685Net income (loss)
    $
    578
    
    $
    (51
    )
    $
    77
    
    $
    (157
    )Partnership’s share of net income (loss)
    $
    289
    
    $
    (32
    )
    $
    26
    
    $
    (39
    )

For the six months ended
    
    PLM Rail
    
    PLM CAL I
    
    PLM CAL IIJune 30, 2005 (continued)
    
    Partners LLC5
    
    LLC6
    
    LLC7
    
    CFHS 8
    
    Total

Lease revenues and interest and other income
    $
    3,632
    
    $
    1,951
    
    $
    1,933
    
    $
    1,141Gain on disposition of equipment
    
    368
    
    
    --
    
    
    --
    
    
    --Less: Depreciation and amortization expense
    
    1,851
    
    
    2,470
    
    
    2,467
    
    
    2,767Interest expense
    
    832
    
    
    946
    
    
    945
    
    
    --Operations support
    
    1,017
    
    
    --
    
    
    --
    
    
    --Indirect expenses
    
    545
    
    
    54
    
    
    54
    
    
    48Net loss
    $
    (245
    )
    $
    (1,519
    )
    $
    (1,533
    )
    $
    (1,674
    )Partnership’s share of net loss
    $
    (83
    )
    $
    (390
    )
    $
    (394
    )
    $
    (601
    )
    
    $
    (1,224
    )

TWA
    
    TWA
    
    Boeing
    
    PLMFor the six months ended
    
    S/N 49183
    
    MD-82
    
    737-300
    
    WorldwideJune 30, 2004
    
    Trust1
    
    Trust2
    
    Trust3
    
    Leasing4
    
    Total

Lease revenues and interest and other income
    $
    634
    
    $
    634
    
    $
    780Less: Depreciation and amortization expense
    
    --
    
    
    629
    
    
    768Operations support
    
    --
    
    
    --
    
    
    12Indirect expenses
    
    37
    
    
    37
    
    
    48Net income (loss)
    $
    597
    
    $
    (32
    )
    $
    (48
    )Partnership’s share of net income (loss)
    $
    299
    
    $
    (23
    )
    $
    (24
    )
    $
    48
    
    
    $
    300

As of June 30, 2005, all jointly-owned assets in the Partnership’s
equity investment portfolio were on lease except for 105 railcars with a net
book value of $0.4 million. As of December 31, 2004, all jointly owned assets in
the Partnership’s equity investment portfolio were on lease except for 101
railcars with a net book value of $0.6 million.




1
    The Partnership owns a 50% interest in the TWA S/N 49183
      Trust that was formed in 1998 that owns a MD-82 stage III commercial
      aircraft.
2  The Partnership owns a 50% interest in the TWA MD-82
Trust that was formed in 1998 that owns a MD-82 stage III commercial
aircraft.
3
    The Partnership owns a 38% interest in the Boeing 737-300
      Trust that was formed in 1999 that owns a Boeing stage III commercial
      aircraft.
4
    The Partnership owns a 25% interest in PLM Worldwide Leasing
      Corp. that was formed in 1995 that owns aircraft related
  assets.
5
    The Partnership owns a 34% interest in PLM Rail Partners,
      LLC that was formed in the third quarter of 2004 that owns various types
      of railcars.
6
    The Partnership owns a 26% interest in the PLM CAL I LLC
      that was formed in the third quarter of 2004 that owns two Boeing 737-500
      stage III commercial aircraft.
7
    The Partnership owns a 26% interest in the PLM CAL II LLC
      that was formed in the third quarter of 2004 that owns two Boeing 737-500
      stage III commercial aircraft.
8
    The Partnership owns a 36% interest in CFHS that was formed
      in the fourth quarter of 2004 that owns various types of machinery and
      equipment.**PLM EQUIPMENT GROWTH & INCOME FUND VII**
**(A Limited Partnership)**
**NOTES TO CONDENSED FINANCIAL STATEMENTS**
**(unaudited)**

8. Equity Investments in Affiliated Entities
(continued)

During the three and six months ended June 30, 2005, PLM Railcar
Partners LLC disposed of railcars with a net book value of $0.1 million and $0.2
million, respectively, for proceeds of $0.2 million and $0.6 million,
respectively, which resulted in a gain on disposition of $0.1 million and $0.4
million, respectively.

During the three and six months ended June 30, 2004, there were no
equipment dispositions in entities in which the Partnership had an investment
interest.

9. Operating Segments

The Partnership operates in six primary operating segments: marine
vessel leasing, aircraft leasing, railcar leasing, trailer leasing, machinery
and other equipment leasing, and marine container leasing. Each equipment
leasing segment engages in short-term to mid-term operating leases to a variety
of customers. There were no intersegment revenues for the three and six months
ended June 30, 2005 and 2004. The following tables present a summary of the
operating segments (in thousands of dollars):

Marine
    
    
    
    
    
    
    
    Machinery
    
    MarineFor the three months ended
    
    Vessel
    
    Aircraft
    
    Railcar
    
    Trailer
    
    And Other
    
    ContainerJune 30, 2005
    
    Leasing
    
    Leasing
    
    Leasing
    
    Leasing
    
    Equipment
    
    Leasing
    
    Other1
    
    Total**Revenues**Lease revenue
    
    $
    2,955
    
    $
    97
    
    $
    31
    
    $
    --
    
    $
    --
    
    $
    1,415
    
    $
    --
    
    $
    4,498Interest income and other income
    
    
    --
    
    
    --
    
    
    9
    
    
    3
    
    
    --
    
    
    --
    
    
    59
    
    
    71Gain on disposition of equipment
    
    
    --
    
    
    --
    
    
    23
    
    
    --
    
    
    --
    
    
    28
    
    
    --
    
    
    51Total revenues
    
    
    2,955
    
    
    97
    
    
    63
    
    
    3
    
    
    --
    
    
    1,443
    
    
    59
    
    
    4,620**Expenses**Depreciation and amortization
    
    
    310
    
    
    --
    
    
    36
    
    
    --
    
    
    --
    
    
    648
    
    
    --
    
    
    994Operations support
    
    
    1,881
    
    
    2
    
    
    17
    
    
    --
    
    
    --
    
    
    15
    
    
    --
    
    
    1,915Management fees to affiliate
    
    
    110
    
    
    6
    
    
    3
    
    
    6
    
    
    --
    
    
    53
    
    
    --
    
    
    178Interest expense
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    80
    
    
    80General and administrative expenses
    
    
    33
    
    
    1
    
    
    10
    
    
    --
    
    
    --
    
    
    --
    
    
    187
    
    
    231Recovery of bad debts
    
    
    --
    
    
    --
    
    
    (30
    )
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    (30
    )Total expenses
    
    
    2,334
    
    
    9
    
    
    36
    
    
    6
    
    
    --
    
    
    716
    
    
    267
    
    
    3,368Equity in net loss of equityinvestments
    
    
    --
    
    
    (279
    )
    
    (270
    )
    
    --
    
    
    (302
    )
    
    --
    
    
    --
    
    
    (851
    )Net income (loss)
    
    $
    621
    
    $
    (191
    )
    $
    (243
    )
    $
    (3
    )
    $
    (302
    )
    $
    727
    
    $
    (208
    )
    $
    401Equipment purchases andcapitalized repairs
    
    $
    --
    
    $
    --
    
    $
    1,881
    
    $
    --
    
    $
    --
    
    $
    --
    
    $
    --
    
    $
    1,881Acquisition fees to affiliate
    
    $
    --
    
    $
    --
    
    $
    85
    
    $
    --
    
    $
    --
    
    $
    --
    
    $
    --
    
    $
    85Total assets as of June 30, 2005
    
    $
    1,710
    
    $
    5,349
    
    $
    4,517
    
    $
    250
    
    $
    6,404
    
    $
    15,249
    
    $
    8,373
    
    $
    41,852


Marine
    
    
    
    
    
    
    
    MarineFor the three months ended
    
    Vessel
    
    Aircraft
    
    Railcar
    
    Trailer
    
    ContainerJune 30, 2004
    
    Leasing
    
    Leasing
    
    Leasing
    
    Leasing
    
    Leasing
    
    Other2
    
    Total**Revenues**Lease revenue
    
    $
    1,224
    
    $
    97
    
    $
    582
    
    $
    149
    
    $
    1,499
    
    $
    --
    
    $
    3,551Interest income and other income
    
    
    --
    
    
    4
    
    
    --
    
    
    --
    
    
    --
    
    
    11
    
    
    15Gain on disposition of equipment
    
    
    --
    
    
    --
    
    
    284
    
    
    --
    
    
    28
    
    
    --
    
    
    312Total revenues
    
    
    1,224
    
    
    101
    
    
    866
    
    
    149
    
    
    1,527
    
    
    11
    
    
    3,878**Expenses**Depreciation and amortization
    
    
    310
    
    
    --
    
    
    376
    
    
    51
    
    
    775
    
    
    1
    
    
    1,513Operations support
    
    
    846
    
    
    3
    
    
    245
    
    
    112
    
    
    24
    
    
    --
    
    
    1,230Management fees to affiliate
    
    
    61
    
    
    28
    
    
    32
    
    
    8
    
    
    75
    
    
    --
    
    
    204Interest expense
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    153
    
    
    153General and administrative expenses
    
    
    28
    
    
    13
    
    
    70
    
    
    --
    
    
    --
    
    
    219
    
    
    330(Recovery of) provision for bad debts
    
    
    --
    
    
    (172
    )
    
    11
    
    
    (1
    )
    
    --
    
    
    --
    
    
    (162
    )Total expenses
    
    
    1,245
    
    
    (128
    )
    
    734
    
    
    170
    
    
    874
    
    
    373
    
    
    3,268Equity in net income of equityinvestments
    
    
    --
    
    
    167
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    167Net (loss) income
    
    $
    (21
    )
    $
    396
    
    $
    132
    
    $
    (21
    )
    $
    653
    
    $
    (362
    )
    $
    777




1
    Includes certain assets not identifiable to a specific
      segment such as cash and certain other assets. Also includes certain
      interest income and costs not identifiable to a particular segment, such
      as interest expense, and certain general and administrative
    expenses.
2
    Includes certain interest income and costs not identifiable
      to a particular segment, such as interest expense, and certain
      amortization, and certain general and administrative
expenses.**PLM EQUIPMENT GROWTH & INCOME FUND VII**
**(A Limited Partnership)**
**NOTES TO CONDENSED FINANCIAL STATEMENTS**
**(unaudited)**

9. Operating Segments (continued)

Marine
    
    
    
    
    
    
    
    Machinery
    
    MarineFor the six months ended
    
    Vessel
    
    Aircraft
    
    Railcar
    
    Trailer
    
    And Other
    
    ContainerJune 30, 2005
    
    Leasing
    
    Leasing
    
    Leasing
    
    Leasing
    
    Equipment
    
    Leasing
    
    Other1
    
    Total**Revenues**Lease revenue
    
    $
    5,319
    
    $
    194
    
    $
    74
    
    $
    --
    
    $
    --
    
    $
    2,960
    
    $
    --
    
    $
    8,547Interest income and other income
    
    
    --
    
    
    3
    
    
    16
    
    
    7
    
    
    --
    
    
    --
    
    
    81
    
    
    107Gain on disposition of equipment
    
    
    --
    
    
    --
    
    
    23
    
    
    --
    
    
    --
    
    
    62
    
    
    --
    
    
    85Total revenues
    
    
    5,319
    
    
    197
    
    
    113
    
    
    7
    
    
    --
    
    
    3,022
    
    
    81
    
    
    8,739**Expenses**Depreciation and amortization
    
    
    620
    
    
    --
    
    
    49
    
    
    --
    
    
    --
    
    
    1,298
    
    
    --
    
    
    1,967Operations support
    
    
    2,807
    
    
    4
    
    
    33
    
    
    --
    
    
    --
    
    
    30
    
    
    --
    
    
    2,874Management fees to affiliate
    
    
    199
    
    
    11
    
    
    6
    
    
    12
    
    
    --
    
    
    111
    
    
    --
    
    
    339Interest expense
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    158
    
    
    158General and administrative expenses
    
    
    59
    
    
    5
    
    
    20
    
    
    --
    
    
    --
    
    
    --
    
    
    328
    
    
    412Recovery of bad debts
    
    
    --
    
    
    --
    
    
    (39
    )
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    (39
    )Total expenses
    
    
    3,685
    
    
    20
    
    
    69
    
    
    12
    
    
    --
    
    
    1,439
    
    
    486
    
    
    5,711Equity in net loss of equityinvestments
    
    
    --
    
    
    (540
    )
    
    (83
    )
    
    --
    
    
    (601
    )
    
    --
    
    
    --
    
    
    (1,224
    )Net income (loss)
    
    $
    1,634
    
    $
    (363
    )
    $
    (39
    )
    $
    (5
    )
    $
    (601
    )
    $
    1,583
    
    $
    (405
    )
    $
    1,804Equipment purchases andcapitalized repairs
    
    $
    --
    
    $
    --
    
    $
    1,881
    
    $
    --
    
    $
    --
    
    $
    --
    
    $
    --
    
    $
    1,881Acquisition fees to affiliate
    
    $
    --
    
    $
    --
    
    $
    85
    
    $
    --
    
    $
    --
    
    $
    --
    
    $
    --
    
    $
    85


Marine
    
    
    
    
    
    
    
    MarineFor the six months ended
    
    Vessel
    
    Aircraft
    
    Railcar
    
    Trailer
    
    ContainerJune 30, 2004
    
    Leasing
    
    Leasing
    
    Leasing
    
    Leasing
    
    Leasing
    
    Other1
    
    Total**Revenues**Lease revenue
    
    $
    2,454
    
    $
    194
    
    $
    1,102
    
    $
    295
    
    $
    2,984
    
    $
    --
    
    $
    7,029Interest income and other income
    
    
    --
    
    
    11
    
    
    --
    
    
    --
    
    
    --
    
    
    25
    
    
    36Gain on disposition of equipment
    
    
    --
    
    
    --
    
    
    414
    
    
    8
    
    
    50
    
    
    --
    
    
    472Total revenues
    
    
    2,454
    
    
    205
    
    
    1,516
    
    
    303
    
    
    3,034
    
    
    25
    
    
    7,537**Expenses**Depreciation and amortization
    
    
    620
    
    
    --
    
    
    705
    
    
    103
    
    
    1,553
    
    
    2
    
    
    2,983Operations support
    
    
    1,753
    
    
    6
    
    
    347
    
    
    204
    
    
    43
    
    
    --
    
    
    2,353Management fees to affiliate
    
    
    123
    
    
    36
    
    
    76
    
    
    15
    
    
    149
    
    
    --
    
    
    399Interest expense
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    306
    
    
    306General and administrative expenses
    
    
    58
    
    
    14
    
    
    139
    
    
    19
    
    
    --
    
    
    444
    
    
    674(Recovery of) provision for bad debts
    
    
    --
    
    
    (286
    )
    
    35
    
    
    (2
    )
    
    --
    
    
    --
    
    
    (253
    )Total expenses
    
    
    2,554
    
    
    (230
    )
    
    1,302
    
    
    339
    
    
    1,745
    
    
    752
    
    
    6,462Equity in net income of equityinvestments
    
    
    --
    
    
    300
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    300Net (loss) income
    
    $
    (100
    )
    $
    735
    
    $
    214
    
    $
    (36
    )
    $
    1,289
    
    $
    (727
    )
    $
    1,375Equipment purchases andcapitalized repairs
    
    $
    --
    
    $
    --
    
    $
    4,000
    
    $
    --
    
    $
    --
    
    $
    --
    
    $
    4,000Acquisition fees to affiliate
    
    $
    --
    
    $
    --
    
    $
    180
    
    $
    --
    
    $
    --
    
    $
    --
    
    $
    180

10. Net Income Per Weighted-Average Limited Partnership
Unit

Net income per weighted-average limited partnership unit was
computed by dividing net income 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 six months ended June 30, 2005 and 2004 was
4,981,450.










1
    Includes certain interest income and costs not identifiable
      to a particular segment, such as interest expense, and certain
      amortization, and certain general and administrative
expenses.**PLM EQUIPMENT GROWTH & INCOME FUND VII**
**(A Limited Partnership)**
**NOTES TO CONDENSED FINANCIAL STATEMENTS**
**(unaudited)**

11. Accounts and Other Receivables

Accounts and other receivables represent balances due from current
or former lessees for unpaid balances incurred from leasing Partnership owned
equipment and uncollected receivables from insurance claims. The components of
accounts and other receivables were as follows (in thousands of dollars):

June 30,
    
    December 31,2005
    
    2004Trade accounts receivable
    
    $
    1,532
    
    $
    1,579Insurance receivables
    
    
    187
    
    
    576Other receivable
    
    
    --
    
    
    248Allowance for doubtful accounts
    
    
    (7
    )
    
    (45
    )$
    1,712
    
    $
    2,358

Insurance receivables of $0.2 million and $0.6 million at June 30,
2005 and December 31, 2004, respectively, is the result of two insurance claims
submitted by the Partnership for an owned marine vessel. As of June 30, 2005,
$0.1 million of the insurance receivable relates to a crack in the bottom hull
of a marine vessel and the remaining balance of $0.1 million relates to lost
revenues and damage resulting from a collision with another vessel. During the
six months ended June 30, 2005, the Partnership received $0.3 million from the
insurance carriers and the Partnership reduced the insurance receivable by $0.1
million to reflect the current collectabilty of the remaining outstanding
receivable. The balance of the insurance receivable is expected to be paid
within the next six months.

At December 31, 2004, the balance in other receivable was due from
a former aircraft lessee for past due lease payments and in settlement for
returning an aircraft in a condition not in accordance with the lease agreement.
The other receivable was paid in full during 2005.

12. Other Assets

The components of the other assets, net, were as follows (in
thousands of dollars):

June 30,
    
    December 31,2005
    
    2004Finance lease receivable
    
    $
    213
    
    $
    282Prepaid expenses
    
    
    176
    
    
    137Lease negotiation fees to affiliate, net
    
    
    56
    
    
    45Debt placement fees, net
    
    
    11
    
    
    24Other assets
    
    
    5
    
    
    5$
    461
    
    $
    493

**PLM EQUIPMENT GROWTH & INCOME FUND VII**
**(A Limited Partnership)**
**NOTES TO CONDENSED FINANCIAL STATEMENTS**
**(unaudited)**

13. Debt

The Partnership is a participant in a $10.0 million warehouse
facility. The warehouse facility is scheduled to expire on May 1, 2006 with all
advances due no later than May 1, 2006. As of June 30, 2005 and December 31,
2004, the Partnership had no borrowings outstanding under this facility.

14. Concentrations of Credit Risk

For the six months ended June 30, 2005 and 2004, the Partnership’s
customers that accounted for 10% or more of the total revenues for the owned
equipment and jointly owned equipment were Alcoa Steamships Company, Inc. (42%
in 2005 and 29% in 2004), Capital Leasing (14% in 2005 and 21% in 2004) and
Cronos Group (10% in 2005 and 15% in 2004).

As of June 30, 2005 and December 31, 2004, the Partnership’s
customers and an insurance underwriter that accounted for 10% or more of the
total accounts receivable for the owned equipment and jointly owned equipment
were Capital Leasing (21% in 2005 and 24% in 2004), Cronos Group (24% in 2005
and 23% in 2004), CFHS Leasing (20% in 2005), and Cambiaso Risso, an insurance
underwriter, (20% in 2004).

As of June 30, 2005 and December 31, 2004, the General Partner
believed the Partnership had no other significant concentrations of credit risk
that could have a material adverse effect on the Partnership.

15. Recent Accounting Pronouncements

In March 2004, Financial Accounting Standards Board's (FASB's)
Emerging Issues Task Force (EITF) released Issue No. 03-1, “The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments"
(EITF 03-1).”  EITF 03-1 provides guidance for determining whether
impairment for certain debt and equity investments is other-than-temporary and
the measurement of an impaired loss. Certain disclosure requirements of EITF
03-1 were adopted in 2003 and the Partnership has complied with the new
disclosure requirements in its consolidated financial statements. The
recognition and measurement requirements of EITF 03-1 were initially effective
for reporting periods beginning after June 15, 2004. In September 2004, the FASB
Staff issued FASB Staff Position (FSP) EITF 03-1-1 that delayed the effective
date for certain measurement and recognition guidance contained in EITF
03-1.  The FSP requires that entities continue to apply previously existing
“other-than-temporary” guidance until a final consensus is reached. The General
Partner does not anticipate that issuance of a final consensus will materially
impact the Partnership’s financial condition or results of operations.

In December 2004, FASB issued Statement 153, "Exchanges of
Non-monetary Assets" (Statement 153), an amendment of Accounting Principles
Board Opinion No. 29. Statement 153 is effective for non-monetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005. Statement
153 eliminates the exception to fair value for exchanges of similar productive
assets and replaces it with a general exception for exchange transactions that
do not have commercial substance - that is, transactions that are not expected
to result in significant changes in the cash flows of the reporting
entity.  The General Partner does not believe that the adoption of
Statement 153 will have a significant effect on its financial statements.

16. Subsequent Event

On August 4, 2005, the Partnership and several affiliated entities
(collectively, the  Sellers), including PLM Rail Partners (Rail Partners),
an entity in which the Partnership has a 34% ownership interest, entered into an
Asset Purchase Agreement (the Purchase Agreement). Pursuant to the Purchase
Agreement, the purchaser will acquire the railcar business of the Sellers, which
includes railcars owned and leased by the Sellers as well as management
contracts pursuant to which the Sellers manage the railcars of third parties.
The aggregate purchase price that the purchaser will pay for the railcar
business of the Sellers**PLM EQUIPMENT GROWTH & INCOME FUND VII**
**(A Limited Partnership)**
**NOTES TO CONDENSED FINANCIAL STATEMENTS**
**(unaudited)**

16. Subsequent Event

will be $119.8 million, adjusted to reflect the actual number of
railcars and management contracts delivered to the purchaser at the
closing.  The portion of the aggregate purchase price to be received by the
Partnership and Rail Partners will be based on the appraised value of the
railcars delivered by the Partnership and Rail Partners, as determined by an
independent third party appraiser.  The General Partner expects the closing
of the transactions contemplated by the Purchase Agreement to occur within
thirty (30) days. The closing is subject to numerous conditions and there can be
no assurance that the closing will occur in that time frame, if at all. If the
sale is completed, lease revenues and cash flows will decrease
significantly.

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 June 30, 2005
and 2004

(A) Owned Equipment Operations

Lease revenues less operations support on owned equipment
increased during the three months ended June 30, 2005 compared to the same
period of 2004. Gains from the disposition of equipment, interest and other
income, and certain expenses such as management fees to affiliate, depreciation
and amortization, general and administrative expenses, and recovery of bad debts
relating to the operating segments (see Note 9 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 operations support by segment (in thousands of
dollars):

For the Three Months
      Ended June 30,2005
    
    2004Marine containers
    
    $
    1,400
    
    $
    1,475Marine vessels
    
    
    1,074
    
    
    378Aircraft
    
    
    95
    
    
    94Railcars
    
    
    14
    
    
    337Trailers
    
    
    --
    
    
    37

Marine containers: Lease revenues and operations support for
marine containers were $1.4 million and $15,000 respectively, for the three
months ended June 30, 2005, compared to $1.5 million and $24,000, respectively,
during the same period of 2004. The decrease in lease revenues of $0.1 million
during the three months ended June 30, 2005 compared to the same period of 2004
was due to lower lease rates earned on the Partnership's marine containers due
to the conversion of a portion of the Partnership's marine containers from a
fixed term lease to one based on utilization. Additional marine containers owned
by the Partnership will be converting from a fixed term lease to one based on
utilization over the next six months. This is expected to cause lease revenues
to decline further.

Marine vessels: Marine vessel lease revenues and operations
support were $3.0 million and $1.9 million, respectively, for the three months
ended June 30, 2005, compared to $1.2 million and $0.8 million, respectively,
during the same period of 2004. Lease revenues increased $1.7 million during the
three months ended June 30, 2005 compared to the same period of 2004 due to both
of the Partnership's marine vessels renewing their lease at a higher lease rate.
Operations support increased $1.0 million due to an increase of $0.7 million in
dry dock costs and an increase of $0.2 million due to higher repairs and
maintenance.

Railcars: Railcar lease revenues and operations support were
$31,000 and $17,000, respectively, for the three months ended June 30, 2005,
compared to $0.6 million and $0.2 million, respectively, during the same period
of 2004. Railcar lease revenues decreased $0.6 million and operations support
decreased $0.2 million due to the transfer of most of the Partnership's owned
railcar portfolio into an equity investment during the third quarter of
2004.

Trailers: Trailer lease revenues and operations support were
$-0- and $-0-, respectively, for the three months ended June 30, 2005, compared
to $0.1 million and $0.1 million, respectively, during the same period of 2004.
Trailer lease revenues and operations support decreased due to all of the
Partnership's trailers being placed on a direct finance lease in 2004.

(B) Indirect expenses Related to Owned Equipment
Operations

Total indirect expenses of $1.5 million for the three months ended
June 30, 2005 decreased from $2.0 million for the same period in 2004.
Significant variances are explained as follows:

(i) A $0.5
million decrease in depreciation and amortization expenses from 2004 levels
reflecting the decrease of $0.3 million caused by the transfer of most of the
Partnership's owned railcar portfolio into an equity investment in the third
quarter of 2004, a decrease of $0.1 million caused by the double-declining
balance method of depreciation which results in greater depreciation in the
first years an asset is owned and a decrease of $0.1 million caused by the
Partnership's trailer portfolio being placed in a direct finance lease in
2004;

(ii) General
and administrative expenses decreased $0.1 million during the second quarter of
2005 compared to the same period 2004 due to lower administrative costs due to
the transfer of most of the Partnership's owned railcar portfolio into an equity
investment during the third quarter of 2004;

(iii) A $0.1
million decrease in interest expense resulted from lower average borrowings
outstanding in the three months ended June 30, 2005 compared to the same period
of 2004. Interest expense is expected to decline further as the Partnership's
debt is scheduled to be repaid in full in December 2005; and

(iv) A $0.1
million decrease in the recovery of bad debts during the three months ended June
30, 2005 was primarily due to lower collections of receivables that had been
previously reserved for as a bad debt compared to the same period of 2004.

(C) Gain on Disposition of Owned Equipment

The gain on disposition of owned equipment for the three months
ended June 30, 2005 totaled $0.1 million, and resulted from the disposal of
marine containers and a railcar with a net book value of $25,000 for proceeds of
$0.1 million. Gain on disposition of owned equipment for the three months ended
June 30, 2004 totaled $0.3 million, and resulted from the sale of marine
containers and railcars with a net book value of $0.2 million for proceeds of
$0.5 million.

(D) Equity in Net (Loss) Income of Equity investments

Equity in net (loss) income of equity investments 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. The
following table presents equity in net (loss) income by equipment type (in
thousands of dollars):

For the Three Months
      Ended June 30,2005
    
    2004Railcars
    
    $
    (270
    )
    $
    --Aircraft
    
    
    (279
    )
    
    167Machinery and other equipment
    
    
    (302
    )
    
    --Equity in net (loss) income of equity investments
    
    $
    (851
    )
    $
    167

The following equity investment discussion by equipment type is
based on the Partnership's proportional share of revenues, gain on the
disposition of equipment, depreciation and amortization expenses, operations
support, interest expenses, administrative expenses, and provision for bad debts
in the equity investments:

Railcars: As of June 30, 2005, the Partnership owned an interest
in an entity that owned railcars. These railcars were transferred into this
entity on July 1, 2004 from the Partnership's owned equipment portfolio. During
the three months ended June 30, 2005, lease revenues of $0.6 million and the
gain on the disposition of railcars of $42,000 were offset by depreciation and
amortization expense, operations support, interest expense and administrative
expenses of $0.9 million. The Partnership did not have any equity investments
that owned railcars in the same period of 2004.

Aircraft: As of June 30, 2005, the Partnership owned an interest
in three trusts that each own a Boeing 737-300 commercial aircraft, an interest
in two entities that were formed in the third quarter of 2004 each owning two
Boeing 737-500 commercial aircraft, and an interest in an entity owning other
aircraft related assets. As of June 30, 2004, the Partnership owned interests in
three trusts that each own a Boeing 737-300 commercial aircraft and an interest
in an entity owning other aircraft related assets. During the three months ended
June 30, 2005, lease revenues of $1.0 million were offset by depreciation and
amortization expense, operations support, interest expense and administrative
expenses of $1.3 million. During the same period of 2004, lease revenues of $0.5
million were partially offset by depreciation expense, operations support, and
administrative expenses of $0.3 million.

Aircraft revenues increased $0.5 million due to the Partnership's
investment into two entities during the third quarter of 2004 that each own two
Boeing 737-500 commercial aircraft.

Depreciation and amortization expense, operations support,
interest expense and administrative expenses increased $1.0 million during the
three months ended June 30, 2005 resulting from an increase in depreciation and
amortization expense of $0.6 million, an increase in administrative expenses of
$0.1 million caused by the Partnership's investment during the third quarter of
2004 into two entities each owning two Boeing 737-500 commercial aircraft and an
increase of $0.2 million in interest expense from the non-recourse debt
financing of two Boeing 737-500 commercial aircraft in each of the entities the
Partnership invested in during the third quarter of 2004. Equity investments
during the same period of 2004 did not have any debt or interest expense.

Machinery and other equipment: As of June 30, 2005, the
Partnership owned an interest in an entity that owned machinery and other
equipment that was formed in the fourth quarter of 2004. During the three months
ended June 30, 2005, lease revenues of $0.2 million were offset by depreciation
and amortization expense, operations support, and administrative expenses of
$0.5 million. The Partnership did not have any equity investments that owned
machinery and other equipment in the same period of 2004.

(E) Net Income

As a result of the foregoing, the Partnership had net income of
$0.4 million for the three months ended June 30, 2005, compared to net income of
$0.8 million during the same period of 2004. The Partnership's ability to
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 three months ended June 30, 2005 is not necessarily
indicative of future periods.

Comparison of the Partnership’s Operating Results for the Six
Months Ended June 30, 2005 and 2004

(A) Owned Equipment Operations

Lease revenues less operations support on owned equipment
increased during the six months ended June 30, 2005, compared to the same period
of 2004. The following table presents lease revenues less operating support by
segment (in thousands of dollars):

For the Six Months
      Ended June 30,2005
    
    2004Marine containers
    
    $
    2,930
    
    $
    2,941Marine vessels
    
    
    2,512
    
    
    701Aircraft
    
    
    190
    
    
    188Railcars
    
    
    41
    
    
    755Trailers
    
    
    --
    
    
    91

Marine containers: Lease revenues and operations support for
marine containers were $3.0 million and $30,000 respectively, for the six months
ended June 30, 2005, compared to $3.0 million and $43,000, respectively, during
the same period of 2004. Certain of the marine containers owned by the
Partnership will be converting from a fixed term lease to one based on
utilization over the next six months. This is expected to cause lease revenues
to decline.

Marine vessels: Marine vessel lease revenues and operations
support were $5.3 million and $2.8 million, respectively, for the six months
ended June 30, 2005, compared to $2.5 million and $1.8 million, respectively,
during the same period of 2004. Lease revenues increased $2.9 million during the
six months ended June 30, 2005 compared to the same period of 2004 due to both
of the Partnership's marine vessels renewing their lease at a higher lease rate.
Operations support increased $0.8 million due to higher expected dry dock costs
and increased $0.2 million due to higher repairs and maintenance.

Railcars: Railcar lease revenues and operations support were
$0.1 million and $33,000, respectively, for the six months ended June 30, 2005,
compared to $1.1 million and $0.3 million, respectively, during the same period
of 2004. Railcar lease revenues decreased $1.0 million and operations support
decreased $0.3 million due to the transfer of most of the Partnership's owned
railcar portfolio into an equity investment during the third quarter of
2004.

Trailers: Trailer lease revenues and operations support were
$-0- and $-0-, respectively, for the six months ended June 30, 2005, compared to
$0.3 million and $0.2 million, respectively, during the same period of 2004.
Trailer lease revenues and operations support decreased due to all of the
Partnership's trailers being placed on a direct finance lease in 2004.

(B) Indirect expenses Related to Owned Equipment
Operations

Total indirect expenses of $2.8 million for the six months ended
June 30, 2005 decreased from $4.1 million for the same period in 2004.
Significant variances are explained as follows:

(i) A $1.0
million decrease in depreciation and amortization expenses from 2004 levels
reflecting the decrease of $0.7 million caused by the transfer of most of the
Partnership's owned railcar portfolio into an equity investment in the third
quarter of 2004, a decrease of $0.3 million caused by the double-declining
balance method of depreciation which results in greater depreciation in the
first years an asset is owned and a decrease of $0.1 million caused by the
Partnership's trailer portfolio being placed in a direct finance lease in
2004;

(ii) General
and administrative expenses decreased $0.3 million during the first six months
of 2005 compared to the same period 2004. A decrease of $0.1 million was due to
lower administrative costs due to the transfer of most of the Partnership's
owned railcar portfolio into an equity investment during the third quarter of
2004 and a decrease of $0.1 million resulted from lower costs being charged to
the Partnership for certain professional services associated with the search for
potential equipment acquisitions;

(iii) A $0.1
million decrease in interest expense resulted from lower average borrowings
outstanding in the six months ended June 30, 2005 compared to the same period of
2004. Interest expense is expected to decline further as the Partnership's debt
is scheduled to be repaid in full in December 2005; and

(iv) A $0.2
million decrease in the recovery of bad debts during the six months ended June
30, 2005 was due to lower collections of receivables that had been previously
reserved for as a bad debt compared to the same period of 2004.

(C) Gain on Disposition of Owned Equipment

The gain on disposition of owned equipment for the six months
ended June 30, 2005 totaled $0.1 million, and resulted from the disposal of
marine containers and a railcar with a net book value of $0.1 million for
proceeds of $0.1 million. Gain on disposition of owned equipment for the six
months ended June 30, 2004 totaled $0.5 million, and resulted from the sale of
marine containers, railcars and trailers with a net book value of $0.3 million
for proceeds of $0.8 million.

(D) Equity in Net (Loss) Income of Equity investments

Equity in net (loss) income of equity investments 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. The
following table presents equity in net (loss) income by equipment type (in
thousands of dollars):

For the Six Months
      Ended June 30,2005
    
    2004Railcars
    
    $
    (83
    )
    $
    --Aircraft
    
    
    (540
    )
    
    300Machinery and other equipment
    
    
    (601
    )
    
    --Equity in net (loss) income of equity investments
    
    $
    (1,224
    )
    $
    300

The following equity investment discussion by equipment type is
based on the Partnership's proportional share of revenues, gain on the
disposition of equipment, depreciation and amortization expenses, operations
support, interest expenses, administrative expenses, and provision for bad debts
in the equity investments:

Railcars: As of June 30, 2005, the Partnership owned an interest
in an entity that owned railcars. These railcars were transferred into this
entity on July 1, 2004 from the Partnership's owned equipment portfolio. During
the six months ended June 30, 2005, lease revenues of $1.2 million and the gain
on the disposition of equipment of $0.1 million were offset by depreciation and
amortization expense, operations support, interest expense and administrative
expenses of $1.4 million. The Partnership did not have any equity investments
that owned railcars in the same period of 2004.

Aircraft: As of June 30, 2005, the Partnership owned an interest
in three trusts that each own a commercial aircraft, an interest in two entities
that were formed in the third quarter of 2004 each owning two Boeing 737-500
commercial aircraft, and an interest in an entity owning other aircraft related
assets. As of June 30, 2004, the Partnership owned interests in three trusts
that each own a commercial aircraft and an interest in an entity owning other
aircraft related assets. During the six months ended June 30, 2005, lease
revenues of $2.0 million were offset by depreciation and amortization expense,
operations support, interest expense and administrative expenses of $2.6
million. During the same period of 2004, lease revenues of $0.9 million were
partially offset by depreciation expense, operations support, and administrative
expenses of $0.7 million.

Aircraft revenues increased $1.0 million due to the Partnership's
investment into two entities during the third quarter of 2004 that each own two
Boeing 737-500 commercial aircraft.

Depreciation and amortization expense, operations support,
interest expense and administrative expenses increased $1.9 million during the
six months ended June 30, 2005 resulting from an increase in depreciation and
amortization expense of $1.2 million, an increase in administrative expenses of
$0.1 million caused by the Partnership's investment during the third quarter of
2004 into two entities each owning two Boeing 737-500 commercial aircraft and an
increase of $0.5 million in interest expense from the non-recourse debt
financing of two Boeing 737-500 commercial aircraft in each of the entities the
Partnership invested in during the third quarter of 2004. Equity investments
during the same period of 2004 did not have any debt or interest expense.

Machinery and other equipment: As of June 30, 2005, the
Partnership owned an interest in an entity that owned machinery and other
equipment that was formed in the fourth quarter of 2004. During the six months
ended June 30, 2005, lease revenues of $0.4 million were offset by depreciation
and amortization expense, operations support, and administrative expenses of
$1.0 million. The Partnership did not have any equity investments that owned
machinery and other equipment in the same period of 2004.

(E) Net Income

As a result of the foregoing, the Partnership had net income of
$1.8 million for the six months ended June 30, 2005, compared to net income of
$1.4 million during the same period of 2004. The Partnership's ability to
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 six months ended June 30, 2005 is not necessarily indicative
of future periods.

(II) FINANCIAL CONDITION -- CAPITAL RESOURCES AND
LIQUIDITY

At June 30, 2005, the Partnership had unrestricted cash of $8.2
million.

For the six months ended June 30, 2005, the Partnership generated
cash from operations of $6.3 million to meet its operating obligations, pay debt
and interest, maintain working capital reserves and make cash distributions of
$2.5 million ($0.50 per limited partnership unit) to the limited partners and
$0.1 million to PLM Financial Services, Inc. (FSI or the General Partner).

During the six months ended June 30, 2005, the Partnership
purchased railcars for $1.9 million and paid FSI or its affiliates $0.1 million
for acquisition fees and $19,000 for lease negotiation fees. During the six
months ended June 30, 2005, the Partnership disposed of owned equipment and
received aggregate proceeds of $0.1 million. The Partnership's share of disposal
proceeds from railcars owned by the entity in which the Partnership has an
investment during the six months ended June 30, 2005 was $0.2 million. The
proceeds from these railcar disposals will be used to pay down outstanding debt
in 2005.

Restricted cash decreased $1.6 million resulting from cash being
released from the escrow account to fund the purchase of railcars.
.

Accounts and other receivable decreased $0.6 million in the six
months ended June 30, 2005 caused by the collection of $0.3 million from an
insurance claim and the collection of $0.2 million in other receivables.

Equity investments in affiliated entities decreased $2.0 million
during the six months ended June 30, 2005 due to cash distributions of $0.7
million from the equity investments to the Partnership and by the loss of $1.2
million that was recorded by the Partnership for its interests in the equity
investments.

Accounts payable decreased $0.1 million during the six months
ended June 30, 2005 due to the timing of cash payments to vendors.

Due to affiliates decreased $0.2 million during the six months
ended June 30, 2005 due to the payment of engine reserves due to an equity
investment. The equity investment used these funds to repair the engines on an
aircraft.

Reserve for repairs increased $0.1 million during the six months
ended June 30, 2005 due to an increase in the dry dock accruals for the
Partnership's marine vessels.

Lessee deposits and prepaid revenues increased $0.3 million during
2005. An increase of $0.4 million was due to a lessee prepaying rent due in the
third quarter of 2005 during the second quarter of 2005 being partially offset
by a decrease of $0.1 million due to the security deposit from an aircraft
lessee being offset against other receivables.

The Partnership is scheduled to make its annual debt payment of
$4.0 million to the lenders of the notes payable on December 31, 2005. The
Partnership currently has sufficient cash to make this debt payment.

The Partnership is a participant in a $10.0 million warehouse
credit facility. The warehouse credit facility is shared by the Partnership, PLM
Equipment Growth Fund VI, MILPI Holdings LLC (MILPI) and it's subsidiaries, and
Railcar Investors II all of which are related parties and controlled by Gary
Engle, Chairman of the Board of the General Partner. The facility provides for
financing up to 100% of the cost of the equipment and expires on May 1, 2006.
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 360 days, with all advances due
no later than May 1, 2006. 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 FSI, PLM International,
Inc. and MILPI, the parent companies of the General Partner. The Partnership is
not liable for the advances made to the other borrowers.

As of August 10, 2005, there were no other outstanding borrowings
on this facility by the Partnership. Other borrowers had loans outstanding
totaling $9.2 million.

Commitments and contingencies as of June 30, 2005 are as follows
(in thousands of dollars):

Less than
    
    1-3Partnership Obligations:
    
    Total
    
    1 Year
    
    YearsNotes payable
    
    $
    4,000
    
    $
    4,000
    
    $
    --

(III) RECENT ACCOUNTING PRONOUNCEMENTS

In March 2004, Financial Accounting Standards Board's (FASB's)
Emerging Issues Task Force (EITF) released Issue No. 03-1, “The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments"
(EITF 03-1).”  EITF 03-1 provides guidance for determining whether
impairment for certain debt and equity investments is other-than-temporary and
the measurement of an impaired loss. Certain disclosure requirements of EITF
03-1 were adopted in 2003 and the Partnership has complied with the new
disclosure requirements in its consolidated financial statements. The
recognition and measurement requirements of EITF 03-1 were initially effective
for reporting periods beginning after June 15, 2004. In September 2004, the FASB
Staff issued FASB Staff Position (FSP) EITF 03-1-1 that delayed the effective
date for certain measurement and recognition guidance contained in EITF
03-1.  The FSP requires that entities continue to apply previously existing
“other-than-temporary” guidance until a final consensus is reached. The General
Partner does not anticipate that issuance of a final consensus will materially
impact the Partnership’s financial condition or results of operations.

In December 2004, FASB issued Statement 153, "Exchanges of
Non-monetary Assets" (Statement 153), an amendment of Accounting Principles
Board Opinion No. 29. Statement 153 is effective for non-monetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005. Statement
153 eliminates the exception to fair value for exchanges of similar productive
assets and replaces it with a general exception for exchange transactions that
do not have commercial substance - that is, transactions that are not expected
to result in significant changes in the cash flows of the reporting
entity.  The General Partner does not believe that the adoption of
Statement 153 will have a significant effect on its financial statements.

(IV) OUTLOOK FOR THE FUTURE

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

The ability of the Partnership to realize acceptable lease rates
on its equipment in the different equipment markets is contingent upon many
factors, such as specific market conditions and economic activity, technological
obsolescence, and government or other regulations. The unpredictability of these
factors 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 continuously monitors both the equipment markets and the
performance of the Partnership's equipment in these markets. The General Partner
may make an evaluation to reduce the Partnership's exposure to those equipment
markets in which it determines that it cannot operate equipment and achieve
acceptable rates of return.

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

The Partnership may not reinvest cash flows generated from
operations after January 1, 2005 into additional equipment. The Partnership will
terminate on December 31, 2013, unless terminated earlier upon sale of all
equipment and by certain other events. Although the Partnership is scheduled to
terminate on December 31, 2013, the General Partner is managing the Partnership
with the objective of having all owned and partially owned equipment disposed of
by December 31, 2006.

Factors affecting the Partnership’s operations in the remainder of
2005 and beyond include:

(1) Demand for marine containers is closely tied to worldwide
economic conditions. Utilization of the Partnership's marine containers is
expected to be in the 90 - 95% range in 2005. Marine container manufacturers
have recently seen an increase in their inventory of marine containers. This
increase may result in a decrease in utilization and lease rates earned on the
Partnership's marine containers.

Approximately 5,900, or 42% of the Partnership's marine
containers, are currently on a fixed lease that will convert to a utilization
based lease between June 30, 2005 and December 31, 2005. As the market for
marine containers is softer than the period during which they were placed on the
fixed rate lease and the marine containers are several years older, lease
revenues on these marine containers is expected to decrease up to 20% when the
fixed rate lease expires;

(2) While freight growth for railcars has showed some signs
of slowing in the last quarter, utilization remains high, above 90%. Overall
railcar loadings are now forecast to grow approximately 4% in 2005, down
slightly from the previous forecast but still strong. Railcar manufacturers have
full production schedules until the mid-2006 for tank railcars similar to the
tank railcars that the Partnership owns and the tank railcars in PLM Rail
Partners, LLC (Rail Partners) in which the Partnership has an equity
interest.

The Partnership's railcar fleet is largely used by a broadly
defined chemical sector. Chemical and petroleum railcar loadings are projected
to grow at a higher rate in the second half of 2005 as chemical business is in
an upturn. Chemical carloadings may exceed a 3% growth in 2005 but are projected
to grow at a slower rate in 2006. At present, the Partnership's tank railcar
fleet is highly utilized and appears to be in a position to remain so for the
foreseeable future.

Offsetting the generally favorable outlook is the continuation of
high steel prices with the resulting increases in the price of new tank railcars
and related lease rates. While this improves returns for railcar lessors in the
short run, reduced railcar availability and higher lease costs along with
railroad operating inefficiencies may cause the chemical industry growth to slow
and perhaps cause chemical producers to shift to other forms of transportation.
Also, there are a number of potential new railroad operating requirements and
regulations which, if adopted, could increase the cost of railcar ownership.

In August 2005, the Partnership and Rail Partners agreed to sell
their railcars. The General Partner expects this transaction to close within 30
days. If the sale is completed, lease revenues and cash flows from operations
are expected to decrease significantly;

(3) 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 the commercial aviation industry
is recovering from several years of reduced travel; however, the General Partner
views the recovery with caution as major increases in the cost of fuel has added
another factor to further weakening yields. The General Partner believes that
stabilization of fuel prices will be critical for the recovery in the airline
industry to continue.

The General Partner also believes that there is a significant
oversupply of commercial aircraft available that has caused a decrease in
aircraft fair market values.

The Partnership owns an interest in a trust that owns a Boeing
737-300 Stage III commercial aircraft that is on lease to a South American
carrier through April 2008. During the second quarter of 2005, the lessee of
this aircraft notified the General Partner that it was having financial
difficulties and that it would be unable to stay current with its lease
payments. The trust has agreed to defer a portion of the rent payments due
through August 2005. The deferred lease payments are scheduled to be repaid in
full by February 2006. As of August 10, 2005, the trust has a security deposit
from this lessee that approximates the unpaid outstanding lease receivable. If
the financial condition of the airline does not improve, it is possible that in
the future there will be additional collections problems related to this
lease.

The Partnership has another Boeing 737 on lease to another South
American carrier. The lessee of this aircraft is expected to exercise its option
to purchase this aircraft during the second half of 2005. This will cause a
decrease in quarterly lease revenues of approximately $0.1 million;

(4) The Partnership's two owned marine vessels are on
fixed-rate leases through the January 2006 and December 2006, respectively. One
of these marine vessels is scheduled to undergo major maintenance starting
September 2005. The General Partner expects that this marine vessel will be
off-lease for approximately 30 days while in dry dock;

(5) The management fee rate paid by the Partnership will be
reduced by 25% for the period from January 1, 2005 through June 30, 2006;

(6) The Partnership is expected to have increased general and
administrative costs as the General Partner liquidates other investments
programs that currently share certain general and administrative expenses;

(7) While the Partnership is scheduled to terminate on
December 31, 2013, the General Partner is managing the Partnership with the
objective of having all owned and partially owned equipment disposed of by
December 31, 2006;

(8) The timing and amount of future cash distributions to the
limited partners and the General Partner will be based on the cash position of
the Partnership and operational requirements. The General Partner does not
expect to make a cash distribution until at least the fourth quarter of 2005;
and

(9) Beginning in 2005, in order to prevent the Partnership
from being considered publicly traded and to avoid taxation of the Partnership
as an association treated as a corporation under the Internal Revenue Code, the
General Partner is limiting the number of limited partnership units to be traded
to 2% per year of the total outstanding units.

Several other factors may affect the Partnership's operating
performance in the year 2005 and beyond, including changes in the markets for
the Partnership's equipment and changes in the regulatory environment in which
that equipment operates.

The General Partner may elect to sell certain underperforming
equipment, equipment whose continued operation may become prohibitively
expensive, or has a greater strategic value to others. The General Partner
intends to re-lease or sell equipment at prevailing market rates; however, the
General Partner cannot predict these future rates with any certainty at this
time and cannot accurately assess the effect of such activity on future
Partnership performance. The proceeds from the sold or liquidated equipment will
be used to fund operations and make cash distributions to the partners.

Cash flow and disposition proceeds generated from operations after
January 1, 2005 cannot be used to purchase additional equipment. The Partnership
will terminate on December 31, 2013, unless terminated earlier upon sale of all
equipment or by certain other events.

Cash distributions when paid to the limited 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.

(V) 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.

ITEM 3. CONTROLS AND PROCEDURES

Limitations on the Effectiveness of Controls

The General Partner’s management, including it’s President and
Chief Financial Officer (CFO), 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 CFO, 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 CFO 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 the General Partner carried out
its evaluations.
**PART II -- OTHER INFORMATION**

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

10.1
    Fifth Amendment to Amended and Restated Warehouse Credit
      Agreement dated July 26, 2005.

31.1
    Certificate of President of the General Partner pursuant to
      Section 302 of Sarbanes - Oxley Act.

31.2
    Certificate of Chief Financial Officer of the General
      Partner pursuant to Section 302 of Sarbanes - Oxley
Act.

32.1
    Certificate of President of the General Partner pursuant to
      Section 906 of Sarbanes - Oxley Act.

32.2
    Certificate of Chief Financial Officer of the General
      Partner pursuant to Section 906 of Sarbanes - Oxley
Act.

(b) Reports
on Form 8-K

None.



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 EQUIPMENT
GROWTH & INCOME FUND VII

By:  PLM
Financial Services, Inc.
General
Partner



Date: August 10, 2005    By: /s/
Richard K Brock
Richard K
Brock
Chief Financial Officer