**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, 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. YesXNo
      ____Transitional
      Small Business Disclosure Format: YesNoXAggregate
      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)
 (unaudited)
 September
      30,
    
    December
      31,**Assets**
    
    2005
    
    2004Equipment
      held for operating leases, at cost
    
    $
    65,794
    
    $
    66,096Less
      accumulated depreciation
    
    
    (51,458
    )
    
    (48,770
    )Net equipment
    
    
    14,336
    
    
    17,326Cash
      and cash equivalents
    
    
    19,501
    
    
    4,635Accounts
      and other receivables
    
    
    2,021
    
    
    2,303Equity
      investments in affiliated entities
    
    
    10,805
    
    
    13,552Other
      assets, net of accumulated amortization of$18 in 2005 and $231 in 2004
    
    
    338
    
    
    401Assets
      held for sale
    
    
    7
    
    
    4,382Total
      assets
    
    $
    47,008
    
    $
    42,599**Liabilities
      and partners’ capital**LiabilitiesAccounts
      payable and accrued expenses
    
    $
    195
    
    $
    210Due
      to affiliates
    
    
    814
    
    
    924Notes
      payable
    
    
    4,000
    
    
    4,000Reserve
      for repairs
    
    
    2,079
    
    
    1,888Lessee
      deposits and prepaid revenues
    
    
    540
    
    
    383Liabilities
      held for sale
    
    
    100
    
    
    68Total
      liabilities
    
    
    7,728
    
    
    7,473Commitments
      and contingenciesPartners'
      capitalLimited
      partners (4,981,450 limited partnership units outstanding)
    
    
    39,280
    
    
    35,126General
      Partner
    
    
    --
    
    
    --Total partners'
      capital
    
    
    39,280
    
    
    35,126Total
      liabilities and partners' capital
    
    $
    47,008
    
    $
    42,599
 
 
 
 
 
 
 
 
 
 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 limited partnership unit
      amounts)
 (unaudited)
 
 For
      the Three Months
    
    For
      the Nine MonthsEnded
      September 30,
    
    Ended
      September 30,2005
    
    2004
    
    2005
    
    2004**Revenues**Lease
      revenue
    
    $
    4,871
    
    $
    2,886
    
    $
    13,344
    
    $
    8,813Interest
      and other income
    
    
    119
    
    
    137
    
    
    210
    
    
    173Gain
      on disposition of equipment
    
    
    67
    
    
    29
    
    
    129
    
    
    87Total revenues
    
    
    5,057
    
    
    3,052
    
    
    13,683
    
    
    9,073**Expenses**Depreciation
      and amortization
    
    
    956
    
    
    1,136
    
    
    2,874
    
    
    3,414Operations
      support
    
    
    1,011
    
    
    1,361
    
    
    3,852
    
    
    3,367Management
      fees to affiliate
    
    
    189
    
    
    157
    
    
    522
    
    
    480Interest
      expense
    
    
    87
    
    
    157
    
    
    245
    
    
    463General
      and administrative expensesto affiliates
    
    
    43
    
    
    129
    
    
    116
    
    
    227Other
      general and administrative expenses
    
    
    163
    
    
    154
    
    
    482
    
    
    591Recovery
      of bad debts
    
    
    --
    
    
    (270
    )
    
    --
    
    
    (558
    )Total expenses
    
    
    2,449
    
    
    2,824
    
    
    8,091
    
    
    7,984Equity
      in net (loss) income of equity investments
    
    
    (493
    )
    
    (261
    )
    
    (1,634
    )
    
    39Income
      (loss) from continuing operations
    
    
    2,115
    
    
    (33
    )
    
    3,958
    
    
    1,128(Loss)
      income from operation of discontinuedoperations
    
    
    (115
    )
    
    (30
    )
    
    (154
    )
    
    184Gain
      on disposition of discontinued operations
    
    
    2,972
    
    
    --
    
    
    2,972
    
    
    --Net income (loss)
    
    $
    4,972
    
    $
    (63
    )
    $
    6,776
    
    $
    1,312**Partners’
      share of net income (loss)**Limited
      partners
    
    $
    4,972
    
    $
    (63
    )
    $
    6,645
    
    $
    1,312General
      Partner
    
    
    --
    
    
    --
    
    
    131
    
    
    --Total
    
    $
    4,972
    
    $
    (63
    )
    $
    6,776
    
    $
    1,312Limited
      partners' basic earnings (loss) perweighted-average
      limited partnership unit:Income
      (loss) from continuing operations
    
    $
    0.42
    
    $
    (0.01
    )
    $
    0.76
    
    $
    0.23(Loss)
      income from operation ofdiscontinued operations
    
    
    (0.02
    )
    
    --
    
    
    (0.03
    )
    
    0.03Gain
      on disposition of discontinued operations
    
    
    0.60
    
    
    --
    
    
    0.60
    
    
    --$
    1.00
    
    $
    (0.01
    )
    $
    1.33
    
    $
    0.26
 
 
 
 
 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 September 30,
      2005**(in
      thousands of dollars)
 (unaudited)
 
 
 Limited
    
    GeneralPartners
    
    Partner
    
    TotalPartners'
      capital as of December 31, 2004
    
    $
    35,126
    
    $
    -
    
    $
    35,126Net income
    
    
    6,645
    
    
    131
    
    
    6,776Cash
      distribution
    
    
    (2,491
    )
    
    (131
    )
    
    (2,622
    )Partners'
      capital as of September 30, 2005
    
    $
    39,280
    
    $
    -
    
    $
    39,280
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 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 MonthsEnded
      September 30,2005
    
    2004**Operating
      activities**Income
      from continuing operations
    
    $
    3,958
    
    $
    1,128Adjustments
      to reconcile income from continuing operationsto net cash provided by (used in) operating activities:Depreciation an.d amortization
    
    
    2,874
    
    
    3,414Amortization of debt placement costs
    
    
    24
    
    
    19Recovery of bad debts
    
    
    --
    
    
    (558
    )Gain on disposition of equipment
    
    
    (129
    )
    
    (87
    )Equity in net loss (income) from equity investments
    
    
    1,634
    
    
    (39
    )Distributions from equity investments
    
    
    1,113
    
    
    1,260Changes in operating assets and liabilities:Accounts and other receivables
    
    
    282
    
    
    614Other assets
    
    
    (67
    )
    
    190Accounts payable and accrued expenses
    
    
    (15
    )
    
    (77
    )Due to affiliates
    
    
    (110
    )
    
    (139
    )Reserve for repairs
    
    
    191
    
    
    889Lessee deposits and prepaid revenues
    
    
    157
    
    
    53Cash
      provided by operating activities of continuing operations
    
    
    9,912
    
    
    6,667Cash
      provided by operating activities of discontinued
operations
    
    
    1,121
    
    
    120Net cash provided by operating activities
    
    
    11,033
    
    
    6,787**Investing
      activities**Investments
      in equity investments
    
    
    --
    
    
    (14,803
    )Non-operating
      distributions from equity investments
    
    
    --
    
    
    11,196Decrease
      in restricted cash
    
    
    --
    
    
    60Payments
      on finance lease receivable
    
    
    104
    
    
    --Proceeds
      from disposition of equipment
    
    
    247
    
    
    157Cash
      provided by (used in) investing activities of continuingoperations
    
    
    351
    
    
    (3,390
    )Cash
      provided by investing activities of discontinuedoperations
    
    
    6,104
    
    
    4,220Net cash provided by investing activities
    
    
    6,455
    
    
    830**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
    
    
    14,866
    
    
    7,617Cash
      and cash equivalents at beginning of period
    
    
    4,635
    
    
    8,635Cash
      and cash equivalents at end of period
    
    $
    19,501
    
    $
    16,252**Supplemental
      information**Interest
      paid
    
    $
    221
    
    $
    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 September 30, 2005 and December 31, 2004, condensed statements of operations
for the three and nine months ended September 30, 2005 and 2004, condensed
statements of changes in partners’ capital for the period from December 31, 2004
to September 30, 2005, and the condensed statements of cash flows for the nine
months ended September 30, 2005 and 2004 have been made and are reflected.
 
 During
the third quarter of 2005, the Partnership and an investment entity in which the
Partnership has an interest, sold all of their remaining railcars. Consequently,
the results from this operation have been classified as discontinued operations
and prior periods have been restated. (See Note 5 to the unaudited condensed
financial statements)
 
 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 net income.
 
 4.  Cash
Distributions
 
 Cash
distributions are recorded when declared.
 
 For the
nine months ended September 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
declared or paid to the limited partners or General Partner during the nine
months ended September 30, 2004 or the three months ended September 30, 2005 and
2004. (See Note 16 to the unaudited condensed financial statements)
 
 5.  Discontinued
Operations
 
 In the
third quarter of 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 to sell 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 sale of the railcar business was completed on August 18, 2005.
  
  **PLM
EQUIPMENT GROWTH & INCOME FUND VII**
 (A
Limited Partnership)
 **NOTES
TO CONDENSED FINANCIAL STATEMENTS**
 **(unaudited)**
 
 5.  Discontinued
Operations (continued)
 
 The
Partnership received net proceeds of $6.0 million from the disposition of its
railcar assets including its interest in Rail Partners resulting in a gain on
disposition of discontinued operations of $3.0 million. The amount received by
the Partnership and Rail Partners was based on the appraised value of the
railcars sold by the Partnership and Rail Partners to the purchaser, as
determined by an independent third party appraiser or, for railcars manufactured
in 2005, the greater of the appraised value or the actual cost. The proceeds
received from Rail Partners by the Partnership was net of Rail Partner's
repayment of its debt.
 
 Accordingly,
the Partnership's railcar leasing operations including its equity investment in
Rail Partners are accounted for as discontinued operations.
 
 Net
income (loss) from discontinued operations for the three and nine months ended
September 30, 2005 and 2004 are as follows (in thousands of
dollars):
 
 For
      the Three Months Ended
    
    For
      the Nine Months EndedSeptember
      30,
    
    September
      30,2005
    
    2004
    
    2005
    
    2004RevenuesLease revenue
    
    $
    44
    
    $
    11
    
    $
    118
    
    $
    1,113Interest and
      other income
    
    
    2
    
    
    16
    
    
    18
    
    
    16Gain on disposition of equipment
    
    
    62
    
    
    109
    
    
    85
    
    
    523Total
      revenues
    
    
    108
    
    
    136
    
    
    221
    
    
    1,652ExpensesDepreciation and amortization
    
    
    65
    
    
    15
    
    
    114
    
    
    720Operations support
    
    
    8
    
    
    14
    
    
    41
    
    
    361Management fees to affiliate
    
    
    2
    
    
    15
    
    
    8
    
    
    91General and administrative expensesto affiliates
    
    
    6
    
    
    15
    
    
    18
    
    
    104General and administrative expenses
    
    
    14
    
    
    79
    
    
    22
    
    
    129Recovery
      of bad debts
    
    
    (5
    )
    
    (40
    )
    
    (44
    )
    
    (5
    )Total
      expenses
    
    
    90
    
    
    98
    
    
    159
    
    
    1,400Equity
      in net loss of equityinvestments
    
    
    (133
    )
    
    (68
    )
    
    (216
    )
    
    (68
    )(Loss)
      income from operations ofdiscontinued operations
    
    $
    (115
    )
    $
    (30
    )
    $
    (154
    )
    $
    184Gain
      on disposition of discontinued operations
    
    $
    2,972
    
    $
    --
    
    $
    2,972
    
    $
    --
 
 Assets
and liabilities held for sale as of September 30, 2005 and December 31, 2004 are
as follows (in thousands of dollars):
 
 September
      30,
    
    
    December
      31,Assets
    
    
    2005
    
    
    2004Equipment
      held for operating leases, net
    
    $
    --
    
    $
    213Restricted
      cash
    
    
    --
    
    
    1,998Accounts
      receivable, net
    
    
    7
    
    
    55Equity
      investment in affiliated entity
    
    
    --
    
    
    2,024Other
      assets, net
    
    
    --
    
    
    92Total assets held for sale
    
    $
    7
    
    $
    4,382**Liabilities**Account
      payable and other liabilities
    
    $
    4
    
    $
    40Due
      to affiliates
    
    
    5
    
    
    28Equity
      investment in affiliated entity
    
    
    91
    
    
    --Total liabilities held for sale
    
    $
    100
    
    $
    68
  
  **PLM
EQUIPMENT GROWTH & INCOME FUND VII**
 (A
Limited Partnership)
 **NOTES
TO CONDENSED FINANCIAL STATEMENTS**
 **(unaudited)**
 
 5.  Discontinued
Operations (continued)
 
 Transactions
with General Partner and Affiliates - Discontinued Operations
 
 During
the three and nine months ended September 30, 2005 and 2004, the Partnership's
discontinued operations incurred these types of costs to FSI or its affiliates;
acquisition, lease negotiation and management fees and data processing and
administrative expenses. 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 September 30,
    
    2005
    
    2004
    
    2005
    
    2004Acquisition
      fees
    
    $
    (63
    )
    $
    --
    
    $
    --
    
    $
    --Management
      fees
    
    
    2
    
    
    15
    
    
    15
    
    
    35Data
      processing and administrativeexpenses
    
    
    6
    
    
    15
    
    
    51
    
    
    32
 
 Owned
      Equipment
    
    Equity
      InvestmentsFor
      the nine months ended September 30,
    
    2005
    
    2004
    
    2005
    
    2004Acquisition
      fees
    
    $
    22
    
    $
    180
    
    $
    --
    
    $
    --Lease
      negotiation fees
    
    
    19
    
    
    40
    
    
    --
    
    
    --Management
      fees
    
    
    8
    
    
    91
    
    
    79
    
    
    35Data
      processing and administrativeexpenses
    
    
    18
    
    
    104
    
    
    129
    
    
    32
 
 During
the nine months ended September 30, 2004, the Partnership purchased $4.0 million
in railcars from FSI or its affiliates. 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. In addition, the Partnership transferred
406 owned railcars with a net book value of $9.8 million into Rail Partners.
Rail Partners was owned with two affiliated partnerships that also transferred
owned railcars into this entity.
 
 6.  Transactions
with General Partner and Affiliates
 
 The
balance due to affiliates as of September 30, 2005 included $0.1 million due to
FSI or its affiliates for management fees and $0.7 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 nine months ended September 30, 2005 and 2004, the Partnership
incurred acquisition, lease negotiation, debt placement, and 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 September 30,
    
    2005
    
    2004
    
    2005
    
    2004Acquisition
      fees
    
    $
    --
    
    $
    --
    
    $
    --
    
    $
    688Lease
      negotiation fees
    
    
    --
    
    
    --
    
    
    --
    
    
    153Debt
      placement fees
    
    
    --
    
    
    --
    
    
    --
    
    
    136Management
      fees
    
    
    189
    
    
    157
    
    
    39
    
    
    30Data
      processing and administrativeexpenses
    
    
    43
    
    
    129
    
    
    8
    
    
    2
 
 Owned
      Equipment
    
    Equity
      InvestmentsFor
      the nine months ended September 30,
    
    2005
    
    2004
    
    2005
    
    2004Acquisition
      fees
    
    $
    --
    
    $
    --
    
    $
    --
    
    $
    688Lease
      negotiation fees
    
    
    --
    
    
    --
    
    
    --
    
    
    153Debt
      placement fees
    
    
    --
    
    
    --
    
    
    --
    
    
    136Management
      fees
    
    
    522
    
    
    480
    
    
    117
    
    
    82Data
      processing and administrativeexpenses
    
    
    116
    
    
    227
    
    
    23
    
    
    6
 
 During
the nine months ended September 30, 2004, the Partnership, and three affiliated
entities, formed two investment entities which each purchased two commercial
aircraft. The Partnership's net investment in these entities was $3.6 million.
(See Note 8 to the unaudited condensed financial statements)
 
 7.  Equipment
 
 The
components of owned equipment were as follows (in thousands of
dollars):
 
 September
      30,
    
    December
      31,2005
    
    2004Marine
      containers
    
    $
    38,099
    
    $
    38,401Marine
      vessels
    
    
    22,212
    
    
    22,212Aircraft
    
    
    5,483
    
    
    5,48365,794
    
    
    66,096Less
      accumulated depreciation
    
    
    (51,458
    )
    
    (48,770
    )Net equipment
    
    $
    14,336
    
    $
    17,326
 
 Equipment
held for operating leases is stated at cost less depreciation and any
impairments to the carrying value.
 
 As of
September 30, 2005 and December 31, 2004, all owned equipment in the
Partnership’s equipment portfolio was on lease.
  
  
 **PLM
EQUIPMENT GROWTH & INCOME FUND VII**
 **(A
Limited Partnership)**
 **NOTES
TO CONDENSED FINANCIAL STATEMENTS**
 **(unaudited)**
 
 7.  Equipment (continued)
 
 During
the three and nine months ended September 30, 2005, the Partnership disposed of
marine containers with a net book value of $0.1 million and $0.1 million,
respectively, for proceeds of $0.1 million and $0.2 million, respectively, which
resulted in a gain on disposition of $0.1 million and $0.1 million respectively.
 
 During
the three months ended September 30, 2004, the Partnership disposed of marine
containers and a trailer with a net book value of $9,000 for proceeds of $38,000
which resulted in a gain on disposition of $29,000. During the nine months ended
September 30, 2004, the Partnership disposed of marine containers and trailers
with a net book value of $0.1 million for proceeds of $0.2 million which
resulted in a gain on disposition of $0.1 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.
 
 The
tables below set forth 100% of the lease revenues and interest and other income,
depreciation and amortization expense, interest expense, operations support and
administrative 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 nine months ended September 30, 2005 and
2004 (in thousands of dollars):
 
 TWA
    
    TWA
    
    Boeing
    
    PLMFor
      the three months ended
    
    S/N
      49183
    
    MD-82
    
    737-300
    
    WorldwideSeptember 30, 2005
    
    Trust1
    
    Trust2
    
    Trust3
    
    Leasing4Lease
      revenues and interest and other income
    $
    308
    $
    308
    $
    392
    $
    71Less:
      Depreciation and amortization expense
    
    --
    
    314
    
    319
    
    --Operations support
    
    --
    
    --
    
    6
    
    --General and administrative expenses
    
    19
    
    19
    
    38
    
    (96)Net income (loss)
    $
    289
    $
    (25)
    $
    29
    $
    167Partnership’s
      share of net income (loss)
    $
    145
    $
    (16)
    $
    10
    $
    42
 
 
 
 
 
 
 
 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 that was formed
      in 1995 that owns aircraft related
assets.
  
  **PLM
EQUIPMENT GROWTH & INCOME FUND VII**
 **(A
Limited Partnership)**
 **NOTES
TO CONDENSED FINANCIAL STATEMENTS**
 **(unaudited)**
 
 8.  Equity
Investments in Affiliated Entities (continued)
 
 For
      the three months ended
    
    PLM
      CAL I
    
    PLM
      CAL IISeptember 30, 2005 (continued)
    
    LLC5
    
    LLC6
    
    CFHS7
    
    TotalLease
      revenues and interest and other income
    $
    999
    $
    989
    $
    571Less: 
      Depreciation and amortization expense
    
    1,235
    
    1,233
    
    1,387Interest expense
    
    456
    
    455
    
    --General and administrative expenses
    
    28
    
    28
    
    29Net loss
    $
    (720)
    $
    (727)
    $
    (845)Partnership’s
      share of net loss
    $
    (185)
    $
    (186)
    $
    (303)
    $
    (493)
 
 
 TWA
    
    TWA
    
    Boeing
    
    PLMFor
      the three months ended
    
    S/N
      49183
    
    MD-82
    
    737-300
    
    WorldwideSeptember 30, 2004
    
    Trust1
    
    Trust2
    
    Trust3
    
    Leasing4Lease
      revenues and interest and other income
    $
    308
    $
    308
    $
    391Less: 
      Depreciation and amortization expense
    
    --
    
    314
    
    383Operations
      support
    
    --
    
    --
    
    5General
      and administrative expenses
    
    18
    
    19
    
    26Net income (loss)
    $
    290
    $
    (25)
    $
    (23)Partnership’s
      share of net income (loss)
    $
    145
    $
    (16)
    $
    (12)
    $
    (11)
 
 
 For
      the three months ended
    
    PLM
      CAL I
    
    PLM
      CAL IISeptember 30, 2004 (continued)
    
    LLC5
    
    LLC6
    
    TotalLease
      revenues and interest and other income
    $
    380
    $
    371Less: 
      Depreciation and amortization expense
    
    865
    
    864Interest
      expense
    
    202
    
    202General
      and administrative expenses
    
    21
    
    21Net loss
    $
    (708)
    $
    (716)Partnership’s
      share of net loss
    $
    (183)
    $
    (184)
    $
    (261)
 
 
 TWA
    
    TWA
    
    Boeing
    
    PLMFor
      the nine months ended
    
    S/N
      49183
    
    MD-82
    
    737-300
    
    WorldwideSeptember 30, 2005
    
    Trust1
    
    Trust2
    
    Trust3
    
    Leasing4Lease
      revenues and interest and other income
    $
    925
    $
    924
    $
    1,172
    $
    600Less:
      Depreciation and amortization expense
    
    --
    
    --
    
    958
    
    --Operations
      support
    
    --
    
    943
    
    17
    
    --General
      and administrative expenses
    
    57
    
    57
    
    91
    
    590Net income (loss)
    $
    868
    $
    (76)
    $
    106
    $
    10Partnership’s
      share of net income (loss)
    $
    434
    $
    (48)
    $
    36
    $
    2
 
 
 
 
 
 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 that was formed
      in 1995 that owns aircraft related assets.
 5
    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.
 6
    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.
 7
    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)
 
 For
      the nine months ended
    
    PLM
      CAL I
    
    PLM
      CAL IISeptember 30, 2005 (continued)
    
    LLC5
    
    LLC6
    
    CFHS7
    
    TotalLease
      revenues and interest and other income
    $
    2,950
    $
    2,922
    $
    1,712Less: 
      Depreciation and amortization expense
    
    3,706
    
    3,700
    
    4,154Interest
      expense
    
    1,402
    
    1,401
    
    --General
      and administrative expenses
    
    81
    
    80
    
    77Net loss
    $
    (2,239)
    $
    (2,259)
    $
    (2,519)Partnership’s
      share of net loss
    $
    (574)
    $
    (580)
    $
    (904)
    $
    (1,634)
 
 
 TWA
    
    TWA
    
    Boeing
    
    PLMFor
      the nine months ended
    
    S/N
      49183
    
    MD-82
    
    737-300
    
    WorldwideSeptember 30, 2004
    
    Trust1
    
    Trust2
    
    Trust3
    
    Leasing4Lease
      revenues and interest and other income
    $
    942
    $
    942
    $
    1,171Less:
       Depreciation and amortization expense
    
    --
    
    943
    
    1,151Operations
      support
    
    --
    
    --
    
    17General
      and administrative expenses
    
    55
    
    56
    
    73Net income (loss)
    $
    887
    $
    (57)
    $
    (70)Partnership’s
      share of net income (loss)
    $
    443
    $
    (39)
    $
    (36)
    $
    38
 
 
 For
      the nine months ended
    
    PLM
      CAL I
    
    PLM
      CAL IISeptember 30, 2004 (continued)
    
    LLC5
    
    LLC6
    
    TotalLease
      revenues and interest and other income
    
    $
    380
    
    $
    371Less: 
      Depreciation and amortization expense
    
    
    865
    
    
    864Interest
      expense
    
    
    202
    
    
    202General
      and administrative expenses
    
    
    21
    
    
    21Net loss
    
    $
    (708
    )
    $
    (716
    )Partnership’s
      share of net (loss) income
    
    $
    (183
    )
    $
    (184
    )
    $
    39
 
 
 As of
September 30, 2005 and December 31, 2004, all jointly-owned assets in the
Partnership’s equity investment portfolio were on lease.
 
 
 
 
 
 
 
 
 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 that was formed
      in 1995 that owns aircraft related assets.
 5
    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.
 6
    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.
 7
    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 nine months ended September 30, 2004, the Partnership, with three affiliated
entities, formed two new entities, PLM CAL I LLC (CAL I) and PLM CAL II LLC (CAL
II). The Partnership contributed a total of $14.8 million to these entities and
owns a 25.7% interest in CAL I and CAL II. CAL I and CAL II each own two Boeing
737-500 stage III commercial aircraft. CAL I and CAL II each assumed two loans
totaling $25.7 million that bear an interest rate of 7.46% and 7.42%. The loans
are non-recourse to the Partnership. The loans are collateralized by the
aircraft and future lease payments. CAL I and CAL II distributed a total of
$11.2 million as a non-operating cash distribution to the Partnership during the
third quarter of 2004.
 
 The
Partnership did not make any equity investments in the nine months ended
September 30, 2005.
 
 9.  Operating
Segments
 
 The
Partnership operates in five primary operating segments: marine vessel leasing,
aircraft 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 nine months ended September 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
    
    Trailer
    
    And
      Other
    
    ContainerSeptember 30, 2005
    
    Leasing
    
    Leasing
    
    Leasing
    
    Equipment
    
    Leasing
    
    Other1
    
    TotalRevenuesLease
      revenue
    
    $
    3,312
    
    $
    202
    
    $
    --
    
    $
    --
    
    $
    1,357
    
    $
    --
    
    $
    4,871Interest and other income
    
    
    --
    
    
    1
    
    
    3
    
    
    --
    
    
    --
    
    
    115
    
    
    119Gain on disposition of equipment
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    67
    
    
    --
    
    
    67Total
      revenues
    
    
    3,312
    
    
    203
    
    
    3
    
    
    --
    
    
    1,424
    
    
    115
    
    
    5,057ExpensesDepreciation and amortization
    
    
    310
    
    
    --
    
    
    --
    
    
    --
    
    
    646
    
    
    --
    
    
    956Operations support
    
    
    993
    
    
    2
    
    
    1
    
    
    --
    
    
    15
    
    
    --
    
    
    1,011Management fees to affiliate
    
    
    125
    
    
    8
    
    
    5
    
    
    --
    
    
    51
    
    
    --
    
    
    189Interest expense
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    87
    
    
    87General and administrative expenses
    
    
    30
    
    
    4
    
    
    --
    
    
    --
    
    
    --
    
    
    172
    
    
    206Total
      expenses
    
    
    1,458
    
    
    14
    
    
    6
    
    
    --
    
    
    712
    
    
    259
    
    
    2,449Equity
      in net loss of equity investments
    
    
    --
    
    
    (190
    )
    
    --
    
    
    (303
    )
    
    --
    
    
    --
    
    
    (493
    )Income
      (loss) from continuing operations
    
    $
    1,854
    
    $
    (1
    )
    $
    (3
    )
    $
    (303
    )
    $
    712
    
    $
    (144
    )
    $
    2,115Total
      assets as ofSeptember 30, 2005
    
    $
    1,729
    
    $
    4,724
    
    $
    216
    
    $
    6,101
    
    $
    14,591
    
    $
    19,647
    
    $
    47,008
 
 
 
 
 
 
 
 
 
 
 
 1
    Includes
      certain assets not identifiable to a specific segment such as cash and
      certain other assets and assets held for sale. Also includes certain
      interest income and costs not identifiable to a particular segment, such
      as interest expense 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
    
    
    
    
    
    MarineFor
      the three months ended
    
    Vessel
    
    Aircraft
    
    Trailer
    
    ContainerSeptember 30, 2004
    
    Leasing
    
    Leasing
    
    Leasing
    
    Leasing
    
    Other1
    
    TotalRevenuesLease revenue
    
    $
    1,108
    
    $
    97
    
    $
    148
    
    $
    1,533
    
    $
    --
    
    $
    2,886Interest and other income
    
    
    --
    
    
    112
    
    
    --
    
    
    --
    
    
    25
    
    
    137Gain on disposition of equipment
    
    
    --
    
    
    --
    
    
    --
    
    
    29
    
    
    --
    
    
    29Total
      revenues
    
    
    1,108
    
    
    209
    
    
    148
    
    
    1,562
    
    
    25
    
    
    3,052ExpensesDepreciation and
      amortization
    
    
    310
    
    
    --
    
    
    51
    
    
    775
    
    
    --
    
    
    1,136Operations
      support
    
    
    1,222
    
    
    2
    
    
    116
    
    
    21
    
    
    --
    
    
    1,361Management fees to affiliate
    
    
    55
    
    
    18
    
    
    7
    
    
    77
    
    
    --
    
    
    157Interest
      expense
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    157
    
    
    157General and administrative expenses
    
    
    25
    
    
    3
    
    
    --
    
    
    --
    
    
    255
    
    
    283(Recovery of) provision for bad debts
    
    
    --
    
    
    (271
    )
    
    1
    
    
    --
    
    
    --
    
    
    (270
    )Total
      expenses
    
    
    1,612
    
    
    (248
    )
    
    175
    
    
    873
    
    
    412
    
    
    2,824Equity
      in net loss of equityinvestments
    
    
    --
    
    
    (261
    )
    
    --
    
    
    --
    
    
    --
    
    
    (261
    )(Loss)
      income from continuing operations
    
    $
    (504
    )
    $
    196
    
    $
    (27
    )
    $
    689
    
    $
    (387
    )
    $
    (33
    )Investments
      in equity investments
    
    $
    --
    
    $
    14,803
    
    $
    --
    
    $
    --
    
    $
    --
    
    $
    14,803
 
 
 Marine
    
    
    
    
    
    Machinery
    
    MarineFor
      the nine months ended
    
    Vessel
    
    Aircraft
    
    Trailer
    
    And
      Other
    
    ContainerSeptember 30, 2005
    
    Leasing
    
    Leasing
    
    Leasing
    
    Equipment
    
    Leasing
    
    Other1
    
    TotalRevenuesLease revenue
    
    $
    8,631
    
    $
    396
    
    $
    --
    
    $
    --
    
    $
    4,317
    
    $
    --
    
    $
    13,344Interest and other income
    
    
    --
    
    
    4
    
    
    10
    
    
    --
    
    
    --
    
    
    196
    
    
    210Gain on disposition of equipment
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    129
    
    
    --
    
    
    129Total
      revenues
    
    
    8,631
    
    
    400
    
    
    10
    
    
    --
    
    
    4,446
    
    
    196
    
    
    13,683ExpensesDepreciation and amortization
    
    
    930
    
    
    --
    
    
    --
    
    
    --
    
    
    1,944
    
    
    --
    
    
    2,874Operations support
    
    
    3,800
    
    
    6
    
    
    1
    
    
    --
    
    
    45
    
    
    --
    
    
    3,852Management fees to affiliate
    
    
    324
    
    
    19
    
    
    17
    
    
    --
    
    
    162
    
    
    --
    
    
    522Interest expense
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    245
    
    
    245General and administrative expenses
    
    
    89
    
    
    9
    
    
    --
    
    
    --
    
    
    --
    
    
    500
    
    
    598Total
      expenses
    
    
    5,143
    
    
    34
    
    
    18
    
    
    --
    
    
    2,151
    
    
    745
    
    
    8,091Equity
      in net loss of equity investments
    
    
    --
    
    
    (730
    )
    
    --
    
    
    (904
    )
    
    --
    
    
    --
    
    
    (1,634
    )Income
      (loss) from continuing operations
    
    $
    3,488
    
    $
    (364
    )
    $
    (8
    )
    $
    (904
    )
    $
    2,295
    
    $
    (549
    )
    $
    3,958
 
  
  
 
 1
    Includes
      certain interest income and costs not identifiable to a particular
      segment, such as interest expense, 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
    
    
    
    
    
    MarineFor
      the nine months ended
    
    Vessel
    
    Aircraft
    
    Trailer
    
    ContainerSeptember 30, 2004
    
    Leasing
    
    Leasing
    
    Leasing
    
    Leasing
    
    Other1
    
    TotalRevenuesLease revenue
    
    $
    3,562
    
    $
    291
    
    $
    443
    
    $
    4,517
    
    $
    --
    
    $
    8,813Interest and other income
    
    
    --
    
    
    123
    
    
    --
    
    
    --
    
    
    50
    
    
    173Gain on disposition of equipment
    
    
    --
    
    
    --
    
    
    8
    
    
    79
    
    
    --
    
    
    87Total
      revenues
    
    
    3,562
    
    
    414
    
    
    451
    
    
    4,596
    
    
    50
    
    
    9,073ExpensesDepreciation and amortization
    
    
    930
    
    
    --
    
    
    154
    
    
    2,328
    
    
    2
    
    
    3,414Operations support
    
    
    2,975
    
    
    8
    
    
    320
    
    
    64
    
    
    --
    
    
    3,367Management fees to affiliate
    
    
    178
    
    
    54
    
    
    22
    
    
    226
    
    
    --
    
    
    480Interest expense
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    463
    
    
    463General and administrative expenses
    
    
    83
    
    
    17
    
    
    19
    
    
    --
    
    
    699
    
    
    818Recovery of bad debts
    
    
    --
    
    
    (557
    )
    
    (1
    )
    
    --
    
    
    --
    
    
    (558
    )Total
      expenses
    
    
    4,166
    
    
    (478
    )
    
    514
    
    
    2,618
    
    
    1,164
    
    
    7,984Equity
      in net income of equityinvestments
    
    
    --
    
    
    39
    
    
    --
    
    
    --
    
    
    --
    
    
    39(Loss)
      income from continuing operations
    
    $
    (604
    )
    $
    931
    
    $
    (63
    )
    $
    1,978
    
    $
    (1,114
    )
    $
    1,128Investments
      in equity investments
    
    $
    --
    
    $
    14,803
    
    $
    --
    
    $
    --
    
    $
    --
    
    $
    14,803
 
 10.  Basic
Earnings (Loss) Per Weighted-Average Limited Partnership Unit
 
 Basic
earnings (loss) per weighted-average limited partnership unit was computed by
dividing earnings 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, 2005 and 2004
was 4,981,450.
 
 All
special allocations of income to the General Partner are included in the
calculation of basic earnings (loss) from continuing operations.
 
 
  
 
 
 
 
 
 
 
 1
    Includes
      certain interest income and costs not identifiable to a particular
      segment, such as interest expense and certain amortization and general and
      administrative expenses.
  
  **PLM
EQUIPMENT GROWTH & INCOME FUND VII**
 **(A
Limited Partnership)**
 **NOTES
TO CONDENSED FINANCIAL STATEMENTS**
 **(unaudited)**
 
 10.  Basic
Earnings (Loss) Per Weighted-Average Limited Partnership Unit (continued)
 
 Basic
earning or loss per weighted average limited partnership unit from continuing
operations, operations of discontinued operations, gain on disposition of
discontinued operations and any special allocations to the limited partners are
based on the following (in thousands of dollars, except weighted-average limited
partnership unit amounts):
 
 For
      the Three Months
    
    For
      the Nine MonthsEnded
      September 30,
    
    Ended
      September 30,2005
    
    2004
    
    2005
    
    2004Attributable
      to limited partners:Basic
      income (loss) from continuing operations
    
    $
    2,115
    
    $
    (33
    )
    $
    3,958
    
    $
    1,128Special
      allocation of loss
    
    
    --
    
    
    --
    
    
    (131
    )
    
    --Income
      (loss) from continuing operations
    
    
    2,115
    
    
    (33
    )
    
    3,827
    
    
    1,128(Loss)
      income from operations ofdiscontinued
      operations
    
    
    (115
    )
    
    (30
    )
    
    (154
    )
    
    184Gain
      on disposition of discontinued operations
    
    
    2,972
    
    
    --
    
    
    2,972
    
    
    --Net
      income (loss)
    
    $
    4,972
    
    $
    (63
    )
    $
    6,645
    
    $
    1,312Weighted
      average limited partnership unitsoutstanding
    
    
    4,981,450
    
    
    4,981,450
    
    
    4,981,450
    
    
    4,981,450Basic
      earnings:Income
      (loss) from continuing operations
    
    $
    0.42
    
    $
    (0.01
    )
    $
    0.76
    
    $
    0.23(Loss)
      income from operations ofdiscontinued
      operations
    
    
    (0.02
    )
    
    --
    
    
    (0.03
    )
    
    0.03Gain
      on disposition of discontinued operations
    
    
    0.60
    
    
    --
    
    
    0.60
    
    
    --Net
      income (loss) per weighted average limitedpartnership
      unit
    
    $
    1.00
    
    $
    (0.01
    )
    $
    1.33
    
    $
    0.26
 
 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
outstanding receivables from insurance claims. The components of accounts and
other receivables were as follows (in thousands of dollars):
 
 September
      30,
    
    December
      31,2005
    
    2004Trade
      accounts receivables
    
    $
    1,834
    
    $
    1,479Insurance
      receivables
    
    
    187
    
    
    576Other
      receivables
    
    
    --
    
    
    248$
    2,021
    
    $
    2,303
 
 Insurance
receivables of $0.2 million and $0.6 million at September 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 September 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 nine months
ended September 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 three months.
  
  **PLM
EQUIPMENT GROWTH & INCOME FUND VII**
 **(A
Limited Partnership)**
 **NOTES
TO CONDENSED FINANCIAL STATEMENTS**
 **(unaudited)**
 
 11.  Accounts
and Other Receivables (continued)
 
 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. During 2005,
$0.1 million of the other receivable was paid with the remaining balance of $0.1
million being offset against a security deposit from the lessee.
 
 12.  Other
Assets
 
 The
components of the other assets were as follows (in thousands of
dollars):
 
 September
      30,
    
    December
      31,2005
    
    2004Finance
      lease receivable
    
    $
    179
    
    $
    282Prepaid
      expenses and other assets
    
    
    144
    
    
    95Lease
      negotiation fees to affiliate, net
    
    
    15
    
    
    --Debt
      placement fees, net
    
    
    --
    
    
    24$
    338
    
    $
    401
 
 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 September 30, 2005 and December 31, 2004, the
Partnership had no borrowings outstanding under this facility. (see Note 16 to
the unaudited condensed financial statements)
 
 14.  Concentrations
of Credit Risk
 
 For the
nine months ended September 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. (50% in 2005 and 32%
in 2004), Capital Leasing (15% in 2005 and 24% in 2004) and Cronos Group (11% in
2005 and 18% in 2004).
 
 As of
September 30, 2005 and December 31, 2004, the Partnership’s customers and an
insurance underwriter that accounted for 10% or more of the total accounts and
other receivables for the owned equipment and jointly owned equipment were
Capital Leasing (21% in 2005 and 24% in 2004), Cronos Group (20% in 2005 and 23%
in 2004), CFHS Leasing (24% in 2005), Manhattan Shipping (21% in 2005) and
Cambiaso Risso, an insurance underwriter, (20% in 2004).
 
 As of
September 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.
  
  **PLM
EQUIPMENT GROWTH & INCOME FUND VII**
 **(A
Limited Partnership)**
 **NOTES
TO CONDENSED FINANCIAL STATEMENTS**
 **(unaudited)**
 
 15.  Recent
Accounting Pronouncement
 
 In
December 2004, Financial Accounting Standards Board 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. Adoption of Statement 153 did not have a significant effect on
the Partnership's financial statements.
 
 16.  Subsequent
Events
 
 In
October 2005, the Partnership prepaid in full the outstanding notes payable
balance of $4.0 million and accrued interest of $0.1 million. The Partnership
paid a penalty of $23,000 related to this prepayment and expensed the
unamortized portion of debt placement fees of $7,000. The cash for the payment
came from operations and equipment dispositions.
 
 During
October 2005, the General Partner declared a cash distribution of $2.31 per
limited partnership unit that was paid on November 11, 2005 to the holders of
record as of November 1, 2005. The total cash distributed to the limited
partners and the General Partner was $11.5 million and $0.6 million,
respectively.
  ITEM
2.  MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 
 During
the third quarter of 2005, the Partnership and an investment entity in which the
Partnership has an interest, sold all of their remaining railcars. Consequently,
the results from this operation have been classified as discontinued operations
and prior periods have been restated. (See Note 5 to the unaudited condensed
financial statements)
 
 (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, 2005 and
2004
 
 (A)  Owned
Equipment Operations
 
 Lease
revenues less operations support on owned equipment increased during the three
months ended September 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
      September 30,2005
    
    2004Marine
      vessels
    
    $
    2,319
    
    $
    (114
    )Marine
      containers
    
    
    1,342
    
    
    1,512Aircraft
    
    
    200
    
    
    95Trailers
    
    
    (1
    )
    
    32
 
 Marine
vessels:  Marine
vessel lease revenues and operations support were $3.3 million and $1.0 million,
respectively, for the three months ended September 30, 2005, compared to $1.1
million and $1.2 million, respectively, during the same period of 2004. Lease
revenues increased $2.2 million during the three months ended September 30, 2005
compared to the same period of 2004 due to both of the Partnership's marine
vessels earning a higher lease rate. Operations support decreased $0.2 million
due to lower repairs and maintenance.
 
 Marine
containers:  Lease
revenues and operations support for marine containers were $1.4 million and
$15,000 respectively, for the three months ended September 30, 2005, compared to
$1.5 million and $21,000, respectively, during the same period of 2004. The
decrease in lease revenues of $0.2 million during the three months ended
September 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.
 
 Aircraft:
Lease revenues and operations support for aircraft were $0.2 million and $2,000
respectively, for the three months ended September 30, 2005, compared to $0.1
million and $2,000, respectively, during the same period of 2004.
 
 Trailers:  Trailer
lease revenues and operations support were $-0- and $1,000, respectively, for
the three months ended September 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 $1.4 million for the three months ended September 30, 2005
decreased from $1.5 million for the same period in 2004. Significant variances
are explained as follows:
 
 (i)  A $0.2
million decrease in depreciation and amortization expenses from 2004 levels
reflecting the 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 2004 and a decrease of
$0.1 million caused by the Partnership's trailer portfolio being placed on a
direct finance lease in 2004;
 
 (ii)  General
and administrative expenses decreased $0.1 million during the third quarter of
2005 compared to the same period 2004 due to lower professional costs 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 three months ended September 30, 2005 compared to the same
period of 2004; and
 
 (iv)  (Recovery
of) provision for bad debts decreased $0.3 million in the three months ended
September 30, 2005 compared to the same period of 2004. During the third quarter
of 2004, recovery of bad debts of $0.3 million was due to the collection of a
receivable primarily from one former aircraft lessee that had been previously
reserved for as a bad debt. A similar event did not occur during the same period
of 2005.
 
 (C)  Gain on
Disposition of Owned Equipment
 
 The gain
on disposition of owned equipment for the three months ended September 30, 2005
totaled $0.1 million, and resulted from the disposal of marine containers with a
net book value of $0.1 million for proceeds of $0.1 million. Gain on disposition
of owned equipment for the three months ended September 30, 2004 totaled
$29,000, and resulted from the sale of marine containers and a trailer with a
net book value of $9,000 for proceeds of $38,000.
 
 (D)  Equity in
Net Loss of Equity Investments
 
 Equity in
net loss of equity investments represents the Partnership's share of the net
loss generated from the operation of jointly owned assets accounted for under
the equity method of accounting. The following table presents equity in net loss
by equipment type (in thousands of dollars):
 
 For
      the Three Months
      Ended
      September 30,2005
    
    2004Aircraft
    
    $
    (190
    )
    $
    (261
    )Machinery
      and other equipment
    
    
    (303
    )
    
    --Equity
      in net loss of equity investments
    
    $
    (493
    )
    $
    (261
    )
 
 The
following equity investment discussion by equipment type is based on the
Partnership's proportional share of revenues, depreciation and amortization
expenses, operations support, interest expense and administrative
expenses:
 
 Aircraft:
As of September 30, 2005 and 2004, 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. During the three months ended September 30, 2005, lease revenues of $1.0
million were offset by depreciation and amortization expense, operations
support, interest expense and administrative expenses of $1.2 million. During
the same period of 2004, lease revenues of $0.6 million were partially offset by
depreciation and amortization expense, operations support, interest expense, and
administrative expenses of $0.9 million.
 
 Aircraft
lease revenues increased $0.4 million due to the Partnership's investment during
the third quarter of 2004 into two entities that each own two Boeing 737-500
commercial aircraft being owned and on lease the entire quarter compared to
being owned and on lease for one month of the same period of 2004.
 
 Depreciation
and amortization expense, operations support, interest expense and
administrative expenses increased $0.3 million during the three months ended
September 30, 2005 resulting from an increase in depreciation expense of $0.2
million caused by the Partnership's investment into two entities each owning two
Boeing 737-500 commercial aircraft during the third quarter of 2004 and an
increase of $0.1 million caused by interest expense from the non-recourse debt
financing the two Boeing 737-500 commercial aircraft in each of the entities the
Partnership invested in during the third quarter of 2004. Equity investments
results for these two entities during the same period of 2004 is the result of
one month of operation compared to a full quarter of operations during the three
months ended September 30, 2005.
 
 Machinery
and other equipment: As of September 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 September 30, 2005, lease
revenues of $0.2 million were offset by depreciation and amortization expense
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)  Loss from
Operation of Discontinued Operations
 
 During
the three months ended September 30, 2005, the Partnership's railcar operations,
which are being accounted for as a discontinued operation, generated a loss from
operations of $0.1 million compared to a loss of $30,000 during the same period
of 2004.
 
 (F)  Gain from
Disposition of Discontinued Operations
 
 The
Partnership had a gain on disposition of discontinued operations from the sale
of its railcar assets of $3.0 million in the three months ended September 30,
2005 compared to $-0- during the same period of 2004.
 
 (G)  Net
Income (Loss)
 
 As a
result of the foregoing, the Partnership had net income of $5.0 million for the
three months ended September 30, 2005, compared to net loss of $0.1 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 September 30, 2005 is not necessarily indicative of future periods.
 
 Comparison
of the Partnership’s Operating Results for the Nine Months Ended September 30,
2005 and 2004
 
 (A)  Owned
Equipment Operations
 
 Lease
revenues less operations support on owned equipment increased during the nine
months ended September 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 Nine Months
      Ended
      September 30,2005
    
    2004Marine
      vessels
    
    $
    4,831
    
    $
    587Marine
      containers
    
    
    4,272
    
    
    4,453Aircraft
    
    
    390
    
    
    283Trailers
    
    
    (1
    )
    
    123
 
 Marine
vessels:  Marine
vessel lease revenues and operations support were $8.6 million and $3.8 million,
respectively, for the nine months ended September 30, 2005, compared to $3.6
million and $3.0 million, respectively, during the same period of 2004. Lease
revenues increased $5.1 million during the nine months ended September 30, 2005
compared to the same period of 2004 due to both of the Partnership's marine
vessels earning a higher lease rate. Operations support increased $0.4 million
due to increased dry dock costs and increased $0.3 million due to higher repairs
and maintenance.
 
 Marine
containers:  Lease
revenues and operations support for marine containers were $4.3 million and
$45,000 respectively, for the nine months ended September 30, 2005, compared to
$4.5 million and $0.1 million, respectively, during the same period of 2004. The
decrease in lease revenues of $0.2 million during the nine months ended
September 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.
 
 Aircraft:
Lease revenues and operations support for aircraft were $0.4 million and $6,000
respectively, for the nine months ended September 30, 2005, compared to $0.3
million and $8,000, respectively, during the same period of 2004. During the
nine months ended September 30, 2005, lease revenues increased $0.1 million due
to a security deposit of $0.1 million from a former aircraft lessee being
recognized as lease revenues. A similar event did not occur during
2004.
 
 Trailers:  Trailer
lease revenues and operations support were $-0- and $1,000, respectively, for
the nine months ended September 30, 2005, compared to $0.4 million and $0.3
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 $4.2 million for the nine months ended September 30, 2005
decreased from $4.6 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 $0.4 million caused by the double-declining balance
method of depreciation which results in greater depreciation in the first years
an asset is owned and 2004 and a decrease of $0.2 million caused by the
Partnership's trailer portfolio being placed on a direct finance lease in
2004;
 
 (ii)  General
and administrative expenses decreased $0.2 million during the nine months ended
September 30, 2005 compared to the same period 2004 due to lower professional
costs associated with the search for potential equipment
acquisitions;
 
 (iii)  A $0.2
million decrease in interest expense resulted from lower average borrowings
outstanding in the nine months ended September 30, 2005 compared to the same
period of 2004; and
 
 (iv)  Recovery
of bad debts decreased $0.6 million in the nine months ended September 30, 2005
compared to the same period of 2004. During the nine months ended September 30,
2004, recovery of bad debts of $0.6 million was due to the collection of a
receivable from one former aircraft lessee that had been previously reserved for
as a bad debt. A similar event did not occur during the same period of
2005.
 
 (C)  Gain on
Disposition of Owned Equipment
 
 The gain
on disposition of owned equipment for the nine months ended September 30, 2005
totaled $0.1 million, and resulted from the disposal of marine containers with a
net book value of $0.1 million for proceeds of $0.2 million. Gain on disposition
of owned equipment for the nine months ended September 30, 2004 totaled $0.1
million, and resulted from the sale of marine containers and trailers with a net
book value of $0.1 million for proceeds of $0.2 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 Nine Months
      Ended
      September 30,2005
    
    2004Aircraft
    
    $
    (730
    )
    $
    39Machinery
      and other equipment
    
    
    (904
    )
    
    --Equity
      in net (loss) income of equity investments
    
    $
    (1,634
    )
    $
    39
 
 The
following equity investment discussion by equipment type is based on the
Partnership's proportional share of revenues, depreciation and amortization
expenses, operations support, interest expense, and administrative
expenses:
 
 Aircraft:
As of September 30, 2005 and 2004, 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. During the nine months ended September 30, 2005, lease revenues of $3.0
million were offset by depreciation and amortization expense, operations
support, interest expense and administrative expenses of $3.8 million. During
the same period of 2004, lease revenues of $1.6 million were partially offset by
depreciation expense, operations support, and administrative expenses of $1.6
million.
 
 Aircraft
revenues increased $1.4 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. These aircraft were owned and on-lease for nine months of
2005 compared to being owned and on lease for one month of the same period of
2004.
 
 Depreciation
and amortization expense, operations support, interest expense and
administrative expenses increased $2.2 million during the nine months ended
September 30, 2005 compared to the same period of 2004 resulting from an
increase in depreciation and amortization expense of $1.5 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 $0.6 million
caused by interest expense from the non-recourse debt financing the two Boeing
737-500 commercial aircraft in each of the entities the Partnership invested in
during the third quarter of 2004. The Partnership had an interest in these two
entities owning commercial aircraft for nine months of 2005 compared to one
month of the same period of 2004.
 
 Machinery
and other equipment: As of September 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 nine months ended September 30, 2005, lease
revenues of $0.6 million were offset by depreciation and amortization expense
and administrative expenses of $1.5 million. The Partnership did not have any
equity investments that owned machinery and other equipment in the same period
of 2004.
 
 (E)  Income
(Loss) from Operation of Discontinued Operations
 
 During
the nine months ended September 30, 2005, the Partnership's railcar operations,
which are being accounted for as a discontinued operation, generated a loss from
operations of $0.2 million compared to income of 0.2 million during the same
period of 2004.
 
 (F)  Gain from
Disposition of Discontinued Operations
 
 The
Partnership had a gain on disposition of discontinued operations from the sale
of its railcar assets of $3.0 million in the nine months ended September 30,
2005 compared to $-0- during the same period of 2004.
 
 (G)  Net
Income
 
 As a
result of the foregoing, the Partnership had net income of $6.8 million for the
nine months ended September 30, 2005, compared to net income of $1.3 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 nine
months ended September 30, 2005 is not necessarily indicative of future periods.
 
 (II)  FINANCIAL
CONDITION -- CAPITAL RESOURCES AND LIQUIDITY
 
 DISCONTINUED
OPERATIONS
 
 In the
third quarter of 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 to sell 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 sale of the railcar business was completed on August 18, 2005.
 
 The
Partnership received net proceeds of $6.0 million from the disposition of its
railcar assets including its interest in Rail Partners resulting in a gain on
disposition of discontinued operations of $3.0 million. The amount received by
the Partnership and Rail Partners was based on the appraised value of the
railcars sold by the Partnership and Rail Partners to the purchaser, as
determined by an independent third party appraiser or, for railcars manufactured
in 2005, the greater of the appraised value or the actual cost. The proceeds
received from Rail Partners by the Partnership was net of Rail Partner's
repayment of its debt.
 
 Accordingly,
the Partnership's railcar leasing operations including its equity investment in
Rail Partners are accounted for as discontinued operations and prior periods
have been restated.
  CONTINUING
OPERATIONS
 
 At
September 30, 2005, the Partnership had unrestricted cash of $19.5
million.
 
 For the
nine months ended September 30, 2005, the Partnership generated cash from
operations of $11.0 million which included cash provided by discontinued
operations of $1.1 million, to meet its operating obligations, maintain working
capital reserves, make interest payments, 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 nine months ended September 30, 2005, the Partnership disposed of owned
equipment and received aggregate proceeds of $0.2 million.
 
 Accounts
and other receivable decreased $0.3 million in the nine months ended September
30, 2005 caused by the collection of $0.3 million from an insurance claim, a
reduction of the insurance claim of $0.1 million, the collection of $0.1 million
of other receivable, and a security deposit of $0.1 million being used to offset
the remaining balance in other receivable. These decreases were partially offset
by an increase of $0.3 million due to the timing of lessee
payments.
 
 Equity
investments in affiliated entities decreased $2.7 million during the nine months
ended September 30, 2005 due to cash distributions of $1.1 million from the
equity investments to the Partnership and by the loss of $1.6 million that was
recorded by the Partnership for its interests in the equity
investments.
 
 Due to
affiliates decreased $0.1 million during the nine months ended September 30,
2005. A decrease of $0.3 million was due to the payment of engine reserves due
to an equity investment. The equity investment used these funds to repair the
aircraft. This decrease was partially offset by an increase of $0.2 million
caused by additional engine reserve deposits being received from the equity
investment.
 
 Reserve
for repairs increased $0.2 million during the nine months ended September 30,
2005 due to an increase in the dry dock accruals for the Partnership's marine
vessels.
 
 Lessee
deposits and prepaid revenues increased $0.2 million during 2005. An increase of
$0.4 million was due to a lessee prepaying rent due in the fourth quarter of
2005 during the third 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 and decreased $0.1 million due to another security
deposit being recognized as lease revenues.
 
 In
October 2005, the Partnership prepaid in full the outstanding notes payable
balance of $4.0 million and accrued interest thereon. The Partnership paid a
penalty of $23,000 related to this prepayment. The cash for this payment came
from operations and equipment dispositions.
 
 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
November 11, 2005, there were no other outstanding borrowings on this facility
by the Partnership or other eligible borrowers.
 
 CASH
DISTRIBUTIONS
 
 In
November 2005, the Partnership paid a cash distribution of $11.5 million to the
limited partners ($2.31 per limited partnership unit) and $0.6 million to the
General Partner.
 
 (III)
RECENT ACCOUNTING PRONOUNCEMENT
 
 In
December 2004, Financial Accounting Standards Board 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 adoption of Statement 153 did not have a significant
effect on the Partnership's 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 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.
 
 Disposition
of the Partnership's equipment and investments in entities owning equipment may
result in a reduction of cash flows from operations to the
Partnership.
 
 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 the remainder of 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
2,550, representing 17% of the Partnership's marine containers, are currently on
a fixed lease that will convert to a utilization based lease on 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.
 
 The
lessee of 3,544 of the Partnership's marine containers, representing 25% of the
Partnership's marine containers, has an option to purchase these marine
containers in the first quarter of 2006. As the purchase option is less than the
current fair market value of these marine containers, the General Partner
expects that the option will be exercised. This will cause a decline of lease
revenues earned by the Partnership;
 
 (2)  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 of the airlines. The
General Partner believes that stabilization of fuel prices will be critical for
the recovery in the airline industry to continue.
 
 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 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 November 11,
2005, the trust has a security deposit from this lessee that exceeds 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 owns a Boeing 737 that is on lease to another South American
carrier. The lessee of this aircraft is expected to exercise its option to
purchase this aircraft for a nominal amount during the fourth quarter of 2005.
Quarterly lease revenues are expected to decrease approximately $0.1 million as
a result of this sale.
 
 The
Partnership has an interest in six aircraft on lease to two major United States
(US) airlines. While the General Partner is not aware of any specific liquidity
problems in regards to these lessees, the poor financial condition of the US
airline industry, which has included several bankruptcies this year, indicate
there could be collection issues related to these lessees in the
future;
 
 (3)  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
currently undergoing major maintenance. The General Partner expects that this
marine vessel will be off-lease for approximately 30 days in the fourth quarter
due to this maintenance.
 
 The
Partnership's marine vessel whose lease expires in January 2006, is expected to
be renewed at current market rates which are currently lower than the existing
lease rate;
 
 (4)  The
management fee rate paid by the Partnership is being reduced by 25% during the
period from January 1, 2005 through September 30, 2006;
 
 (5)  The
Partnership's debt was prepaid in the fourth quarter of 2005 and, accordingly,
interest expense will decrease in the future;
 
 (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 anticipate any future
cash distributions to the limited partners and the General Partner until the
Partnership has additional significant asset dispositions; 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
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)  As of the
end of the 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
1.  LEGAL
PROCEEDINGS
 
 None.
 
 ITEM
2.  UNREGISTERED
SALE OF EQUITY SECURITIES AND USE OF PROCEEDS
 
 None.
 
 ITEM
3.  DEFAULTS
UPON SENIOR SECURITIES
 
 None.
 
 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
  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
 
 Report
8-K dated August 10, 2005 announcing that the Partnership has entered into a
definitive agreement to sell the Partnership's railcar assets to the CIT Group
Inc.
 
 Report
8-K dated August 18, 2005, announcing the completion of the sale of the
Partnership's railcar assets to the CIT Group Inc.
 
 Report
8-K dated October 31, 2005, announcing a cash distribution to the
partners.
  
 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:  November
11, 2005 By:  /s/
Richard K Brock
 Richard K Brock
 Chief Financial Officer