PLM Equipment Growth Fund II 10QSB 2003 Q2 Quarterly report (small business)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________

FORM 10-QSB

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

Exchange Act of 1934

For the fiscal quarter ended June 30, 2003

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

Exchange Act of 1934

For the transition period from to

Commission file number 1-10553

_______________________

PLM EQUIPMENT GROWTH FUND II

(Exact name of registrant as specified in its charter)

California	94-3041013
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
235 3rdStreet South, Suite 200
St. Petersburg, FL	33701
(Address of principal	(Zip code)
executive offices)

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

_______________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YesXNo ______

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PLM EQUIPMENT GROWTH FUND II

(A Limited Partnership)

CONDENSED BALANCE SHEETS

(in thousands of dollars, except unit amounts)

(unaudited)

	June 30,			December 31,
		2003			2002
Assets
Equipment held for operating lease, at cost	$	16,252		$	16,501
Less accumulated depreciation		(14,520	)		(14,500	)
Net equipment		1,732			2,001
Cash and cash equivalents		4,189			4,025
Accounts receivable, less allowance for doubtful accounts
of $11 in 2003 and $47 in 2002		283			412
Prepaid expenses and other assets		82			54
Total assets	$	6,286		$	6,492
Liabilities and partners’ capital
Liabilities:
Accounts payable and accrued expenses	$	269		$	307
Due to affiliates		12			33
Total liabilities		281			340
Commitments and contingencies
Partners' capital:
Limited partners (7,381,265 depositary units)		6,005			6,152
General Partner		--			--
Total partners' capital		6,005			6,152
Total liabilities and partners' capital	$	6,286		$	6,492

See accompanying notes to unaudited condensed financial statements.

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PLM EQUIPMENT GROWTH FUND II

(A Limited Partnership)

CONDENSED STATEMENTS OF OPERATIONS

(in thousands of dollars, except weighted-average unit amounts)

(unaudited)

	For the Three Months Ended June 30,							For the Six Months Ended June 30,
			2003			2002				2003			2002
Revenues
Lease revenue		$	395		$	565			$	972		$	1,206
Interest and other income			9			14				20			21
Gain on disposition of equipment			56			--				56			1,220
Loss on disposition of equipment			--			(11	)			(1	)		(4	)
Total revenues			460			568				1,047			2,443
Expenses
Depreciation			135			217				271			458
Repairs and maintenance			168			234				454			476
Equipment operating expenses			41			59				69			108
Management fees to affiliate			20			28				49			61
General and administrative expenses
to affiliates			9			14				29			37
Other general and administrative expenses			174			184				334			292
(Recovery of) provision for bad debts			(15	)		1				(12	)		(20	)
Total expenses			532			737				1,194			1,412
Net income (loss)		$	(72	)	$	(169	)		$	(147	)	$	1,031
Partners' share of net income (loss):
Limited partners		$	(72	)	$	(169	)		$	(147	)	$	1,031
General Partner			--			--				--			--
Total		$	(72	)	$	(169	)		$	(147	)	$	1,031
Limited partners’ net income (loss) per
weighted-average depositary unit		$	(0.01	)	$	(0.02	)		$	(0.02	)	$	0.14

See accompanying notes to unaudited condensed financial statements.

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PLM EQUIPMENT GROWTH FUND II

(A Limited Partnership)

CONDENSED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL

For the period from December 31, 2002 to June 30, 2003

(in thousands of dollars)

(unaudited)

	Limited			General
	Partners			Partner			Total
Partners' capital as of December 31, 2002	$	6,152		$	--	$	6,152
Net loss		(147	)		--		(147	)
Partners' capital as of June 30, 2003	$	(6,005	)	$	--	$	(6,005	)

See accompanying notes to unaudited condensed financial statements.

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PLM EQUIPMENT GROWTH FUND II

(A Limited Partnership)

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands of dollars)

(unaudited)

	For the Six Months
	Ended June 30,
		2003			2002
Operating activities
Net (loss) income	$	(147	)	$	1,031
Adjustments to reconcile net (loss) income to net cash provided
by (used in) operating activities:
Depreciation		271			458
Recovery of bad debts		(12	)		(20	)
Gain on disposition of equipment		(55	)		(1,216	)
Changes in operating assets and liabilities:
Accounts receivable		141			181
Prepaid expenses and other assets		(28	)		(23	)
Accounts payable and accrued expenses		(38	)		(38	)
Due to affiliates		(21	)		(9	)
Net cash provided by operating activities		111			364
Investing activities
Payments for capitalized improvements		(2	)		--
Proceeds from disposition of equipment		55			1,319
Net cash provided by investing activities		53			1,319
Net increase in cash and cash equivalents		164			1,683
Cash and cash equivalents at beginning of period		4,025			1,958
Cash and cash equivalents at end of period	$	4,189		$	3,641

See accompanying notes to unaudited condensed financial statements.

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PLM EQUIPMENT GROWTH FUND II

(A Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

1.Basis of Presentation

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

2.Reclassifications

Certain amounts in the 2002 financial statements have been reclassified to conform to the 2003 presentations.

3.Transactions with General Partner and Affiliates

The balance due to affiliates as of June 30, 2003 and December 31, 2002 of $12,000 and $33,000, respectively, is a payable due to PLM Financial Services, Inc. (FSI or the General Partner) and its affiliate for management fees.

4.Equipment

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

		June 30,					December 31,
				2003					2002
Trailers	$		9,404			$		9,404
Railcars			6,848					7,097
			16,252					16,501
Less accumulated depreciation			(14,520		)			(14,500		)
Net equipment	$		1,732			$		2,001

As of June 30, 2003, all equipment was on lease, except for 45 railcars with an aggregate net book value of $-0-. As of December 31, 2002, all owned equipment in the Partnership’s portfolio was on lease, except for 64 railcars with an aggregate net book value of $-0-.

For the six months ended June 30, 2003, the Partnership disposed of equipment with an aggregate net book value of $0 for proceeds of $0.1 million. For the six months ended June 30, 2002, the Partnership disposed of marine containers, railcars and trailers with an aggregate net book value of $0.1 million for proceeds of $1.3 million.

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PLM EQUIPMENT GROWTH FUND II

(A Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

5.Operating Segments

The Partnership operates or operated in three different segments: marine container leasing, trailer leasing and railcar leasing. Each equipment leasing segment engages in short-term to mid-term operating leases to a variety of customers. The following tables present a summary of the operating segments (in thousands of dollars):

For the three months ended	Trailer	Railcar	All
June 30, 2003	Leasing	Leasing	Other	1	Total

Revenues
Lease revenue	$	174		$	221		$	--		$	395
Interest income and other income		--			--			9			9
Gain on disposition of equipment		--			56			--			56
Total revenues		174			277			9			460
Expenses
Operations support		139			48			22			209
Depreciation		131			4			--			135
Management fees to affiliate		9			11			--			20
General and administrative expenses		66			19			98			183
Provision for (recovery of) bad debts		1			(17	)		1			(15	)
Total expenses		346			65			121			532
Net income (loss)	$	(172	)	$	212		$	(112	)	$	(72	)
Total assets as of June 30, 2003	$	1,959		$	56		$	4,271		$	6,286

	Marine
For the three months ended	Container	Trailer	Railcar	All
June 30, 2002	Leasing	Leasing	Leasing	Other	2	Total

Revenues
Lease revenue	$	--		$	294		$	271	$	--		$	565
Interest income and other income		--			--			--		14			14
Loss on disposition of equipment		--			(11	)		--		--			(11	)
Total revenues		--			283			271		14			568
Expenses
Operations support		--			206			72		15			293
Depreciation		1			131			85		--			217
Management fees to affiliates		---			15			13		--			28
General and administrative expenses		--			73			29		96			198
Provision for bad debts		--			--			1		--			1
Total expenses		1			425			200		111			737
Net income (loss)	$	(1	)	$	(142	)	$	71	$	(97	)	$	(169	)

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PLM EQUIPMENT GROWTH FUND II

(A Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

5.Operating Segments(continued)

For the six months ended	Trailer	Railcar	All
June 30, 2003	Leasing	Leasing	Other	1	Total

Revenues
Lease revenue	$	560		$	412		$	--		$	972
Interest income and other income		--			--			20			20
Gain (loss) on disposition of equipment		--			56			(1	)		55
Total revenues		560			468			19			1,047
Expenses													`
Operations support		333			148			42			523
Depreciation		262			9			--			271
Management fees to affiliate		28			21			--			49
General and administrative expenses		132			49			182			363
Provision for (recovery of) bad debts		1			(13	)		--			(12	)
Total expenses		756			214			224			1,194
Net income (loss)	$	(196	)	$	254		$	(205	)	$	(147	)

	Marine
For the six months ended	Container	Trailer	Railcar	All
June 30, 2002	Leasing	Leasing	Leasing	Other	1	Total

Revenues
Lease revenue	$	--	$	724		$	482		$	--		$	1,206
Interest income and other income		--		--			--			21			21
Gain (loss) on disposition of equipment		8		(4	)		1,212			--			1,216
Total revenues		8		720			1,694			21			2,443
Expenses
Operations support		--		456			97			31			584
Depreciation		2		262			194			--			458
Management fees to affiliates		--		35			26			--			61
General and administrative expenses		--		140			54			135			329
Provision for (recovery of) bad debts		--		25			(45	)		--			(20	)
Total expenses		2		918			326			166			1,412
Net income (loss)	$	6	$	(198	)	$	1,368		$	(145	)	$	1,031

6.Net Income (Loss) Per Weighted-Average Depositary Unit

Net income (loss) per weighted-average depositary unit was computed by dividing net income (loss) attributable to the limited partners by the weighted-average number of depositary units deemed outstanding during the period. The weighted-average number of depositary units deemed outstanding during the three and six months ended June 30, 2003 and 2002 was 7,381,265.

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PLM EQUIPMENT GROWTH FUND II

(A Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

7.Liquidation

On January 1, 1999, the General Partner began the liquidation phase of the Partnership and commenced an orderly liquidation of the Partnership assets. The General Partner is actively marketing the remaining equipment portfolio with the intent of maximizing sale proceeds. During the liquidation phase of the Partnership the equipment will continue to be leased under operating leases until sold. The amounts reflected for assets and liabilities of the Partnership have not been adjusted to reflect liquidation values. The equipment portfolio continues to be carried at the lower of depreciated cost or fair value less cost to dispose. Although the General Partner estimates that there will be distributions after liquidation of assets and liabilities, the amounts cannot be accurately determined prior to actual liquidation of the equipment. Upon final liquidation, the Partnership will be dissolved.

8.Recent Accounting Pronouncements

In May 2003, FASB issued Statement of Financial Accounting Standard No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (SFAS No. 150)establishes standards for how the Partnership classifies and measures certain financial instruments with characteristics of both liabilities and equity. In addition, SFAS No. 150 requires the Partnership to classify certain instruments with specific characteristics described in it as liabilities. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The General Pa rtner does not expect that the adoption of SFAS No. 150 will have a significant impact on either its financial position or results of operations.

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ITEM  2.      M ANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS

(I)RESULTS OF OPERATIONS

Comparison of PLM Equipment Growth Fund II’s (the Partnership's) Operating Results for the Three Months Ended June 30, 2003 and 2002

(A)Owned Equipment Operations

Lease revenues less direct expenses (defined as repairs and maintenance and equipment operating expenses) on owned equipment decreased during the second quarter of 2003 compared to the same quarter of 2002. Gains or losses from the sale of equipment, interest and other income and certain expenses such as depreciation and general and administrative expenses relating to the operating segments (see Note 5 to the unaudited condensed financial statements), are not included in the owned equipment operation discussion because they are indirect in nature and not a result of operations but the result of owning a portfolio of equipment. The following table presents lease revenues less direct expenses by segment (in thousands of dollars):

	For the Three Months
	Ended June 30,
	2003		2002
Railcars	$	173	$	199
Trailers		35		88

Railcars: Railcar lease revenues and direct expenses were $0.2 million and $48,000, respectively, for the second quarter of 2003, compared to $0.3 million and $0.1 million, respectively, during the same quarter of 2002. Revenues decreased $0.1 million and direct expenses decreased $24,000 due to the disposition of railcars in 2003 and 2002.

Trailers: Trailer lease revenues and direct expenses were $0.2 million and $0.1 million, respectively, for the second quarter of 2003, compared to $0.3 million and $0.2 million, respectively, during the same quarter of 2002. Trailer lease revenue decreased $0.1 million in the three months ended June 30, 2003 compared to the same period of 2002 due to lower utilization on the Partnership’s trailer fleet. Direct expenses decreased $0.1 million due to decreased repairs to the trailer portfolio.

(B)Indirect Expenses Related to Owned Equipment Operations

Total indirect expenses were $0.3 million for the second quarter of 2003 compared to $0.4 million in the second quarter of 2002. The decrease in indirect expenses was due to lower depreciation expense of $0.1 million resulting from asset dispositions in 2003 and 2002.

(C)Gain (Loss) on Disposition of Owned Equipment

Gain on disposition of equipment in the second quarter of 2003 totaled $0.1 million, and resulted from the disposition of railcars with a net book value of $0 for proceeds of $0.1 million. Loss on disposition of equipment in the second quarter of 2002 totaled $11,000, and resulted from the disposition of trailers.

(D)Net Loss

As a result of the foregoing, the Partnership's net loss was $0.1 million for the second quarter of 2003, compared to net loss of $0.2 million during the second quarter of 2002. The Partnership's ability to operate and liquidate assets, secure leases, and re-lease those assets whose leases expire is subject to many factors, and the Partnership's performance in the second quarter of 2003 is not necessarily indicative of future periods.

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Comparison of the Partnership's Operating Results for the Six Months Ended June 30, 2003 and 2002

(A)Owned Equipment Operations

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

	For the Six Months
	Ended June 30,
	2003		2002
Railcars	$	264	$	385
Trailers		227		268

Railcars: Railcar lease revenues and direct expenses were $0.4 million and $0.1 million, respectively, for the six months ended June 30, 2003, compared to $0.5 million and $0.1 million, respectively, during the same period of 2002. Revenues decreased $0.1 million due the disposition of railcars in 2003 and 2002.

Trailers:Trailer lease revenues and direct expenses were $0.6 million and $0.3 million, respectively, for the six months ended June 30, 2003, compared to $0.7 million and $0.5 million, respectively, during the same period of 2002. Trailer lease revenue decreased $0.2 million in the six months ended June 30, 2003 compared to the same period of 2002 due to lower utilization on the Partnership’s trailer fleet. Direct expenses decreased $0.1 million due to decreased repairs to the trailer portfolio.

(B)Indirect Expenses Related to Owned Equipment Operations

Total indirect expenses were $0.7 million for the six months ended June 30, 2003 compared to $0.8 million in the six months ended June 30, 2002. Significant variances among the types of indirect expenses are explained as follows:

1. A $0.2 million decrease in depreciation expense from 2002 levels reflects the effect of asset dispositions in 2003 and 2002.

(ii) A $34,000 increase in general and administrative expenses was due to increased professional services costs.

(C)Gain on Disposition of Owned Equipment

Gain on disposition of equipment in the six months ended June 30, 2003 totaled $0.1 million and resulted from the disposition of railcars with an aggregate net book value of $0 for $0.1 million... Net gain on disposition of equipment in the six months ended June 30, 2002 totaled $1.2 million, and resulted from the disposition of marine containers, railcars and trailers with an aggregate net book value of $0.1 million for proceeds of $1.3 million.

(D)Net Income (Loss)

As a result of the foregoing, the Partnership's net loss was $0.1 million for the six months ended June 30, 2003, compared to net income of $1.0 million during the six months ended June 30, 2002. The Partnership's ability to operate and liquidate assets, secure leases, and re-lease those assets whose leases expire is subject to many factors, and the Partnership's performance in the six months ended June 30, 2003 is not necessarily indicative of future periods.

(II) CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

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

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

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

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

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

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

(III)FINANCIAL CONDITION - CAPITAL RESOURCES AND LIQUIDITY

For the six months ended June 30, 2003, the Partnership generated $0.1 million in operating cash to meets its obligations.

During the six months ended June 30, 2003, the Partnership disposed of equipment and received proceeds of $0.1 million.

Accounts receivable decreased $0.1 million in the six months ended June 30, 2003 due to the reduced lease revenue.

The General Partner has not planned any expenditures, nor is it aware of any contingencies that would cause the Partnership to require any additional capital.

The Partnership is in its active liquidation phase. As a result, the size of the Partnership's remaining equipment portfolio and, in turn, the amount of net cash flows from operations will continue to become progressively smaller as assets are sold. Significant asset sales may result in special distributions to the partners.

(IV)RECENT ACCOUNTING PRONOUNCEMENTS

In May 2003, FASB issued Statement of Financial Accounting Standard No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (SFAS No. 150)establishes standards for how the Partnership classifies and measures certain financial instruments with characteristics of both liabilities and equity. In addition, SFAS No. 150 requires the Partnership to classify certain instruments with specific characteristics described in it as liabilities. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The General Par tner does not expect that the adoption of SFAS No. 150 will have a significant impact on either its financial position or results of operations.

(V) OUTLOOK FOR THE FUTURE

The Partnership is in its liquidation phase. Since the Partnership is in its active liquidation phase, the General Partner is seeking to selectively re-lease or sell assets as the existing leases expire. Sale decisions may cause the operating performance of the Partnership to decline over the remainder of its life. Although the General Partner estimates that there will be distributions to the partners after final disposal of assets and settlement of liabilities, the amounts cannot be accurately determined prior to actual disposal of the equipment.

The liquidation phase will end on December 31, 2006, unless the Partnership is terminated earlier upon sale of all of the equipment or by certain other events.

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

Liquidation of the Partnership’s equipment represents a reduction in the size of the equipment portfolio and may result in a reduction of contribution to the Partnership. Other factors affecting the Partnership’s contribution in 2003 and beyond include:

1. General signs of economic recovery that translate into rail transportation demand continue to be mixed. Total industrial production rose in May for the first time in three months and Leading Economic Indicators remain positive. However, factor cost prices in the fertilizer industry have remained high, putting pressure on the profitability of ammonia producers, a key market segment for the demand of the types of railcars which are the core of Partnership's fleet. All in all, as manufacturing recovers, chemical and allied products carloadings are generally forecast to grow between 1 and 3% in the third and fourth quarters of 2003. North American railcar manufacturing capacity utilization, as reported informally by the manufacturers themselves, continues to increase and lead times are extending. As in t he last quarter, full service leasing held its share of the overall leasing market; and overall industry-wide railcar utilization has been on a slightly positive trend since the third quarter of 2002. The speed of recovery in lease rates has been retarded by the continued workout of idle railcar inventories.

2. Utilization of intermodal trailers owned by the Partnership was 52% in the three months ended June 30, 2003 which was approximately 3% below the three months ended June 30, 2002.  Industry-wide utilization of intermodal trailers was 46% in the three months ended June 30, 2003 compared to 51% in the same period of 2002.  As the Partnership's trailers are smaller than many shippers prefer, the General Partner expects utilization to have little opportunity to increase over the next few years.

3. The General Partner has seen an increase in insurance premiums on its equipment portfolio and is finding it more difficult to place the coverage. Premiums for the equipment types owned by the Partnership have increased over 25%. The increase in premiums caused by the increase in rate will be partially mitigated by the reduction in the value of the Partnership equipment portfolio caused by the events of September 11, 2001 and other economic factors. The General Partner has also experienced an increase in the deductible required to obtain coverage. This may have a negative impact on the Partnership in the event of an insurance claim.

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

The Partnership intends to use cash flow from operations and proceeds from disposition of equipment to satisfy its operating requirements, maintain working capital reserves, and pay cash distributions to the unitholders.

(VI)FORWARD-LOOKING INFORMATION

Except for 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 its President and Chief Accounting Officer (CAO), does not expect that our internal controls or disclosure control will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

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

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

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

(1)Within the 90-day period prior to the filing of this report, the General Partner carried out an evaluation, under the supervision and with the participation of the General Partner’s management, including it’s President and CAO, 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 Chief Executive Officer and CAO concluded that the Partnership’s disclosure controls and procedures are effective in timely alerting them to material information relating t o the Partnership’s required to be included in the Partnership’s exchange act filings.

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

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PART II¾OTHER INFORMATION

ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K

(a)Exhibits

None.

(b)Reports on Form 8-K

Report dated June 5, 2003 announcing the engagement of Ernst & Young LLP as the Partnership’s auditors and the dismissal of Deloitte & Touche LLP.

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CONTROL CERTIFICATION

I, James A. Coyne, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: August 13, 2003By:/s/ James A. Coyne

James A. Coyne

President

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CONTROL CERTIFICATION

I, Richard K Brock, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: August 13, 2003By:/s/ Richard K Brock

Richard K Brock

Chief Financial Officer

(Principal Financial Officer)

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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 there unto duly authorized.

                                 PLM EQUIPMENT GROWTH FUND II

                                        By:PLM Financial Services, Inc.

General Partner

Date: August 13, 2003By:/s/ Richard K Brock

Richard K Brock

Chief Financial Officer

CERTIFICATION

The undersigned hereby certifies, in their capacity as an officer of the General Partner of PLM Equipment Growth Fund II (the Partnership), that the Quarterly Report of the Partnership on Form 10-QSB for the period ended June 30, 2003, fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition of the Partnership at the end of such period and the results of operations of the Partnership for such period.

PLM EQUIPMENT GROWTH FUND II

By:PLM Financial Services, Inc.

General Partner

       Date: August 13, 2003By:/s/ James A. Coyne

James A. Coyne

President

Date: August 13, 2003By:/s/ Richard K Brock

Richard K Brock

Chief Financial Officer