UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                               -------------------
                                    FORM 10-Q




       [X]    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
              Exchange Act of 1934 For the fiscal quarter ended March 31, 1997.


       [  ]   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 33-55796
                             -----------------------



                     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. Employer
 incorporation or organization)                         Identification No.)

One Market, Steuart Street Tower
  Suite 800, San Francisco, CA                              94105-1301
   (Address of principal                                    (Zip code)
    executive offices)


        Registrant's telephone number, including area code (415) 974-1399
                             -----------------------


       Indicate by check mark whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____



<PAGE>



                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                             (A Limited Partnership)

                                 BALANCE SHEETS
                       (in thousands, except unit amounts)

                                     ASSETS
<TABLE>
<CAPTION>


                                                                           March 31,         December 31,
                                                                             1997                 1996
                                                                         -----------------------------------

   <S>                                                                   <C>                  <C>        
   Equipment held for operating leases                                   $    67,398          $    67,441
   Less accumulated depreciation                                             (23,720 )            (21,494 )
                                                                         -----------------------------------
     Net equipment                                                            43,678               45,947

   Cash and cash equivalents                                                   4,382                2,468
   Restricted cash                                                               158                  158
   Investments in unconsolidated special purpose entities                     33,434               37,141
   Accounts receivable, net of allowance for doubtful accounts
     of $522 in 1997 and $330 in 1996                                            960                1,214
   Prepaid expenses and other assets                                              36                   58
   Deferred charges, net of accumulated amortization of
     $387 in 1997 and $493 in 1996                                               359                  412
                                                                         -----------------------------------

   Total assets                                                          $    83,007          $    87,398
                                                                         ===================================


                    LIABILITIES AND PARTNERS' CAPITAL


   Liabilities:

     Accounts payable and accrued expenses                               $       572          $       296 
     Due to affiliates                                                           616                  605
     Lessee deposits and reserve for repairs                                   1,494                1,360
     Short-term note payable                                                      --                2,000
     Note payable                                                             23,000               23,000
                                                                         -----------------------------------
           Total liabilities                                                  25,682               27,261

   Partners' capital:

   Limited partners (5,370,297 depositary units at March 31,
     1997 and at December 31, 1996)                                           57,325               60,137
   General Partner                                                                --                   --
                                                                         -----------------------------------
       Total partners' capital                                                57,325               60,137
                                                                         -----------------------------------

   Total liabilities and partners' capital                               $    83,007          $    87,398  
                                                                         ===================================

</TABLE>


                       See accompanying notes to financial
                                  statements.



<PAGE>



                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                             (A Limited Partnership)

                            STATEMENTS OF OPERATIONS
                     (in thousands, except per unit amounts)
<TABLE>
<CAPTION>


                                                                             For the Three Months
                                                                                Ended March 31,
                                                                             1997             1996
                                                                         ------------------------------

   <S>                                                                   <C>              <C>       
   Revenues:

     Lease revenue                                                       $     3,146      $    3,044
     Interest and other income                                                    49             189
     Net gain on disposition of equipment                                          9              16
                                                                         ------------------------------
         Total revenues                                                        3,204           3,249

   Expenses:

     Depreciation and amortization                                             2,294           2,016
     Management fees to affiliate                                                176             158
     Repairs and maintenance                                                     241             238
     Interest expense                                                            437             423
     Equipment operating expenses                                                 10              18
     Insurance expense                                                            19              10
     General and administrative expenses
       to affiliates                                                             169             140
     Other general and administrative expenses                                    99             219
     Bad debt expense                                                            204              77
                                                                         ------------------------------
                                                                         ------------------------------
         Total expenses                                                        3,649           3,299
                                                                         ------------------------------

   Equity in net income of unconsolidated
     special purpose entities                                                    178              13
                                                                         ------------------------------

   Net loss                                                              $      (267 )    $      (37 )
                                                                         ==============================

   Partners' share of net income (loss):

     Limited partners                                                    $      (394 )    $     (164 )
     General Partner                                                             127             127
                                                                         ------------------------------

   Total                                                                 $      (267 )    $      (37 )
                                                                         ==============================

   Net loss per weighted-average depositary unit:
     (5,370,297 units at March 31, 1997,
      and at March 31, 1996)                                             $     (0.07 )    $    (0.03 )
                                                                         ==============================

   Cash distributions                                                    $     2,545      $    2,545
                                                                         ==============================

   Cash distributions per weighted-average depositary unit               $      0.45      $     0.45
                                                                         ==============================

</TABLE>

                       See accompanying notes to financial
                                  statements.


<PAGE>



                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                            ( A Limited Partnership)

                 STATEMENTS OF CHANGES IN PARTNERS' CAPITAL For
               the period from December 31, 1995 to March 31, 1997
                                 (in thousands)
<TABLE>
<CAPTION>



                                                             Limited              General
                                                             Partners             Partner               Total
                                                           -------------------------------------------------------

   <S>                                                     <C>                   <C>                 <C>       
   Partners' capital at December 31, 1995                  $    73,291           $    --             $   73,291

   Net income (loss)                                            (3,485 )             509                 (2,976 )

   Cash distributions                                           (9,669 )            (509 )              (10,178 )
                                                           -------------------------------------------------------

   Partners' capital at December 31, 1996                       60,137                --                 60,137

   Net income (loss)                                              (394 )             127                   (267 )

   Cash distributions                                           (2,418 )            (127 )               (2,545 )
                                                           -------------------------------------------------------

   Partners' capital at March 31, 1997                     $    57,325           $    --             $   57,325
                                                           =======================================================

</TABLE>































                       See accompanying notes to financial
                                  statements.



<PAGE>




                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                             (A Limited Partnership)
                            STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                  For the Three Months
                                                                                     Ended March 31,
                                                                                   1997          1996
                                                                               ------------------------------
  <S>                                                                           <C>           <C>         
  Operating activities:
  Net loss                                                                      $    (267 )   $      (37 )
    Adjustments to reconcile net loss
        to net cash provided by operating activities:
      Net gain on disposition of equipment                                             (9 )          (16 )
      Equity in net income from
        unconsolidated special purpose entities                                      (178 )          (13 )
      Depreciation and amortization                                                 2,294          2,016
      Changes in operating assets and liabilities:
        Restricted cash                                                                --              5
        Accounts receivable                                                           254            (32 )
        Prepaid expenses                                                               22             15
        Accounts payable and accrued expenses                                         276            317
        Due to affiliates                                                              11            (88 )
        Lessee deposits and reserve for repairs                                       134            (72 )
                                                                                -----------------------------
  Net cash provided by operating activities                                         2,537          2,095
                                                                                -----------------------------

  Investing activities:
    Payments for purchase of equipment and capitalized repairs                         (1 )       (1,367 )
    Investment in and equipment purchased and placed in
       unconsolidated special purpose entities                                         --         (5,610 )
    Distributions from unconsolidated special purpose entities                      3,885          3,398
    Payments of acquisition fees to affiliate                                          --            (60 )
    Payments of lease negotiation fees to affiliate                                    --            (13 )
    Proceeds from disposition of equipment                                             38            388
                                                                                -----------------------------
  Net cash provided by (used in) investing activities                               3,922         (3,264 )
                                                                                -----------------------------

  Financing activities:
    Payments of short-term note payable                                            (2,000 )           --
    Cash distributions paid to General Partner                                       (127 )         (127 )
    Cash distributions paid to Limited partners                                    (2,418 )       (2,418 )
    Payments of debt issuance costs                                                    --            (25 )
                                                                                -----------------------------
  Net cash used in financing activities                                            (4.545 )       (2,570 )
                                                                                -----------------------------

  Net increase (decrease) in cash and cash equivalents                              1,914         (3,739 )
  Cash and cash equivalents at beginning of year                                    2,468         11,965
                                                                                =============================
  Cash and cash equivalents at end of year                                      $   4,382     $    8,226
                                                                                =============================

  Supplemental information:
    Interest paid                                                               $      28     $       33
                                                                                =============================
  Supplemental disclosure of noncash investing and financing activities:
    Sales proceeds included in accounts receivable                              $      49     $       98
                                                                                =============================
</TABLE>

                       See accompanying notes to financial
                                  statements.


<PAGE>


                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                 March 31, 1997

1.   Opinion of Management

     In the opinion of the management of PLM Financial  Services,  Inc., (FSI or
the General Partner),  the accompanying  unaudited financial  statements contain
all adjustments necessary, consisting primarily of normal recurring accruals, to
present fairly, the financial position of PLM Equipment Growth & Income Fund VII
(the  Partnership) as of March 31, 1997 and December 31, 1996, the statements of
operations for the three months ended March 31, 1997 and 1996, the statements of
cash  flows  for the  three  months  ended  March  31,  1997 and  1996,  and the
statements of changes in partners'  capital for the period  December 31, 1995 to
March 31, 1997. Certain information and footnote  disclosures  normally included
in  financial   statements   prepared  in  accordance  with  generally  accepted
accounting  principles  have been  condensed  or omitted  from the  accompanying
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,  1996,  on file at the
Securities and Exchange Commission.

2.   Reclassification

Certain  amounts in the 1996  financial  statements  have been  reclassified  to
conform to the 1997 presentation.

3.   Cash Distributions

Cash distributions are recorded when paid and totaled $2.5 million for the three
months ended March 31, 1997. Cash distributions to Limited Partners in excess of
net  income  are  considered  to  represent  a  return  of  capital.   All  cash
distributions  paid to the limited partners for the three months ended March 31,
1997 and 1996, were deemed to be a return of capital. Cash distributions related
to the results from the first quarter of 1997, of $1.2 million, were paid or are
payable during April and May 1997,  depending on whether the individual  limited
partner elected to receive a monthly or quarterly distribution check.

4.   Investments in Unconsolidated Special Purpose Entities

The net investments in  unconsolidated  special purpose entities (USPEs) include
the following  jointly-owned  equipment (and related assets and liabilities) (in
thousands):
<TABLE>
<CAPTION>

                                                                                    March 31,       December 31,
                                                                                       1997             1996
    ---------------------------------------------------------------------------------------------------------------
     <S>                                                                            <C>               <C>       
     80% interest in an entity owning a bulk carrier marine vessel                  $    7,105        $    7,362
     44% interest in an entity owning a bulk carrier marine vessel                       2,951             3,142
     10% interest in an equity owning a mobile offshore drilling unit                    2,031             2,100
     24% in a trust owning a 767-200ER commercial aircraft                               5,524             5,798
     33% interest in two trusts that own three 737-200A commercial aircraft,
               two aircraft engines, and a portfolio of aircraft rotables                6,827             9,126
     33% interest in a trust that owns six 737-200A commercial aircraft                  5,059             5,407
     25% interest in a trust that owns four 737-200A commercial aircraft                 3,937             4,206
                                                                                    -----------       -----------
       Net investments                                                              $   33,434        $   37,141
                                                                                    ===========       ===========
</TABLE>

5.   General Partner and Transactions with Affiliates

Partnership  management fees payable to an affiliate of the General Partner were
$120,000 and $119,000 at March 31, 1997 and December 31, 1996, respectively. The
Partnership's  proportional  share of USPE affiliate  management fees of $62,000
and  $55,000  were  payable  as  of  March  31,  1997  and  December  31,  1996,
respectively. The Partnership's proportional share of USPE affiliated management
fees expense  during the three months ended March 31, 1997 and 1996 was $121,000
and $128,000,  respectively.  The Partnership's  proportional  share of the USPE
data processing and administrative

<PAGE>

                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                 March 31, 1997

5.   General Partner and Transactions with Affiliates (continued)

expenses to  affiliates  was $78,000 and $17,000  during the three  months ended
March 31, 1997 and1996,  respectively.  The Partnership's  proportional share of
USPE affiliated insurance expense of $58,000 and $53,000 during the three months
ended  March 31, 1997 and 1996,  respectively,  was  incurred to  Transportation
Equipment  Indemnity  Company,  Ltd.  (TEI),  which  provides  marine  insurance
coverage for Partnership  equipment and other insurance brokerage services.  TEI
is an affiliate of the General Partner.

     During the three  months  ended March 31, 1996,  the  Partnership  incurred
lease   negotiation   and   equipment   acquisition   fees  of  $73,000  to  PLM
Transportation  Equipment  Corporation,  a wholly owned  subsidiary  of FSI. The
Partnership's  proportional share of lease negotiation and equipment acquisition
fees incurred by USPE's to PLM Worldwide  Management  Services  (WMS) during the
three  months  ended March 31,  1996,  was $0.3  million.  No similar  fees were
incurred during the same period of 1997. WMS is a wholly-owned subsidiary of PLM
International, Inc.

     The  balance due to  affiliates  at March 31,  1997 and  December  31, 1996
includes $0.1 million due to FSI and its  affiliates  and $.05 million due to an
affiliated USPE.

6.   Equipment

Owned  equipment held for operating  leases is stated at cost. The components of
equipment are as follows (in thousands):
<TABLE>
<CAPTION>

                                                  March 31,         December 31,
       Equipment held for operating leases         1997                1996
   ------------------------------------------------------------------------------
   <S>                                         <C>                 <C>        
   Aircraft                                    $   15,933          $    15,933
   Marine vessels                                  22,212               22,212
   Trailers                                        14,503               14,547
   Modular buildings                                4,696                4,696
   Rail equipment                                  10,054               10,053
                                               -----------         ------------
                                                   67,398               67,441
   Less accumulated depreciation                  (23,720 )            (21,494 )
                                               -----------         ------------
     Net equipment                             $   43,678          $    45,947
                                               ===========         ============
</TABLE>

     As of March 31,  1997,  all of the  equipment  was on lease or operating in
PLM-affiliated  short-term  trailer rental  facilities,  except for two commuter
aircraft and four  railcars.  At December 31, 1996,  all of the equipment was on
lease or operating  in  PLM-affiliated  short-term  trailer  rental  facilities,
except for five railcars. The net book value of the equipment off lease was $5.0
million and $0.1 million at March 31, 1997 and December 31, 1996, respectively.

     During the three months ended March 31, 1997, the  Partnership  disposed of
or sold trailers with a net book value of $29,000 for $38,000.

     During the three months ended March 31, 1996, the  Partnership  disposed of
or sold modular  buildings  and a trailer  with an  aggregate  net book value of
$102,000, and received proceeds of $124,000.

7.   Debt

As of March 31, 1997,  the  Partnership  had repaid its $2.0  million  borrowing
under the  short-term  joint $50 million  credit  facility.  Among the  eligible
borrowers,  PLM  Equipment  Growth Fund V had $1.1 million and American  Finance
Group,   Inc.  had  $22.5  million  in  outstanding   borrowings.   Neither  the
Partnership,


<PAGE>

                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                 March 31, 1997
7.   Debt (continued)

PLM Equipment Growth Fund IV, PLM Equipment Growth Fund VI,  Professional  Lease
Management  Income Fund I, L.L.C.,  nor TEC Acquisub,  Inc. had any  outstanding
borrowings.

8.   Contingencies

As more fully  described by the  Partnership in its Form 10-K for the year ended
December 31, 1996,  PLM  International,  Inc. and various of its  affiliates are
named as defendants in a lawsuit filed as a class action on January 22, 1997, in
the Circuit Court of Mobile County,  Mobile,  Alabama,  Case No.  CV-97-251.  On
February 3, 1997,  the state court filed an Order  conditionally  certifying the
class  pursuant  to the  provisions  of Rule 23 of the  Alabama  Rules  of Civil
Procedure  (ARCP),  as  requested by  plaintiffs  in an ex parte motion filed on
January 22, 1997.  Defendants were not given notice of the motion, nor were they
given an  opportunity  to be heard  regarding  the  issue of  conditional  class
certification. The Order specifies that the class shall consist of (with certain
narrow   exceptions)  all  purchasers  of  limited   partnership  units  in  the
Partnership,  PLM Equipment Growth Fund IV, PLM Equipment Growth Fund V, and PLM
Equipment  Growth Fund VI. In issuing the Order,  the court  emphasized that the
certification is conditional in accordance with Rule 23(d) of the ARCP, and that
the plaintiffs will bear the burden of proving each requisite element of Rule 23
at the time of the evidentiary hearing on the issue of class  certification.  To
date,  no such  hearing  date has been  set.  The  defendants  filed a Notice of
Removal of the lawsuit from the state court to the United States  District Court
for the  Southern  District  of Alabama,  Southern  Division  (Civil  Action No.
97-0177-BH-C)  on March 6, 1997,  arguing that the parties are fully diverse for
the purposes of diversity  jurisdiction  pursuant to 28 U.S.C. Section 1441. The
plaintiffs  filed a motion to remand the class  action to the state  court,  and
defendants  have responded to this motion.  Defendants do not need to respond to
the complaint  until after the federal  court decides the motion to remand.  PLM
International,  Inc. believes the allegations to be completely without merit and
intends to defend this matter vigorously.
















                      (this space intentionally left blank)









<PAGE>


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

(I)  RESULTS OF OPERATIONS

Comparison of the Partnership's Operating Results for the Three Months Ended
March 31, 1997 and 1996

(A)  Owned Equipment Operations

Lease  revenues  less  direct  expenses  (defined  as repairs  and  maintenance,
equipment operation,  and asset-specific  insurance expenses) on owned equipment
increased  during the first quarter of 1997 when compared to the same quarter of
1996.  The  following  table  presents  revenues  less direct  expenses by owned
equipment type (in thousands):
<TABLE>
<CAPTION>

                                                                            For the Three Months
                                                                               Ended March 31,
                                                                            1997             1996
                                                                         ----------------------------
   <S>                                                                   <C>             <C>        
   Aircraft                                                              $    501        $     554  
   Marine vessels                                                             899              901
   Trailers                                                                   722              501
   Rail equipment                                                             610              504
   Modular buildings                                                          152              326

</TABLE>

Aircraft:  Aircraft  lease  revenues and direct  expenses  were $0.5 million and
$5,000,  respectively,  for the three months  ended March 31, 1997,  compared to
$0.6  million and  $10,000,  respectively  during the same  period of 1996.  The
decrease  in  aircraft  contribution  was  due to the  off-lease  status  of two
commuter  aircraft that were on lease during the same period of 1996,  which was
offset,  in part by the  purchase  of a  commercial  aircraft  during  the third
quarter of 1996.

Marine  vessels:  Marine  vessel lease  revenues and direct  expenses  were $1.0
million and $0.1  million,  respectively,  for the three  months ended March 31,
1997 and 1996. The small decrease in marine vessel  contribution  was due to one
additional day of lease revenues earned during 1996.

Trailers:  Trailer lease revenues and direct expenses were $0.8 million and $0.1
million,  respectively,  for the three months ended March 31, 1997,  compared to
$0.6 million and $0.1 million, respectively, during the same period of 1996. The
increase in trailer contribution was due to the purchase of additional equipment
during 1996.

Rail  equipment:  Rail equipment  lease  revenues and direct  expenses were $0.7
million and $0.1  million,  respectively,  for the three  months ended March 31,
1997, compared to $0.6 million and $0.1 million,  respectively,  during the same
period of 1996. The increase in railcar  contribution was due to the purchase of
additional equipment during 1996.

Modular buildings: Modular building lease revenues and direct expenses were $0.2
million and $1,000,  respectively,  for the three  months  ended March 31, 1997,
compared to $0.3 million and $12,000,  respectively,  during the same quarter of
1996.  The primary  reason for the decrease in lease  revenues is due to a lower
net lease rate earned on the leased  equipment  when compared to the same period
of 1996.

(B)  Indirect Expenses Related to Owned Equipment Operations

Total  indirect  expenses of $3.4  million for the quarter  ended March 31, 1997
increased  from  $3.0  million  for the same  period  in 1996.  The  significant
variances are explained as follows:

     (a) A $0.3 million increase in depreciation and amortization  expenses from
1996 levels  reflecting  the  purchase of a  commercial  aircraft,  trailers and
railcars during 1996, which was offset in part, by the double  declining-balance
method of depreciation.

     (b) A $0.1  million  decrease in  administrative  expenses was due to costs
associated with the  transportation  and inspections of certain equipment during
1996 which was not required during 1997.

     (c) A $0.1 million  increase in the  allowance  for bad debts was due to an
increase in unpaid invoices over 90 days.

(C)  Net Gain on Disposition of Owned Equipment

The net gain on  disposition  of equipment for the first quarter of 1997 totaled
$9,000 which resulted from the sale of trailers with an aggregate net book value
of $29,000,  for $38,000. For the first quarter of 1996, the $16,000 net gain on
disposition of equipment resulted from the sale or disposal of modular buildings
and trailers, with an aggregate net book value of $258,000, for $274,000.

(D)  Interest and Other Income

Interest and other income  decreased  $141,000 during the first quarter of 1997,
due primarily to lower cash balances available for investment throughout most of
the quarter when compared to the same period of 1996.

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

Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity  method is shown in the following  table by equipment  type
(in thousands):
<TABLE>
<CAPTION>

                                                                            For the Three Months
                                                                               Ended March 31,
                                                                            1997             1996
                                                                         ----------------------------
   <S>                                                                   <C>              <C>        
   Aircraft                                                              $    435         $   (109 ) 
   Marine vessels                                                            (253 )            122
   Mobile offshore drilling unit                                               (4 )             --

</TABLE>

Aircraft: During the first quarter of 1997, revenues of $2.0 million were offset
by depreciation  and  administrative  expenses of $1.6 million.  During the same
period of 1996,  lease revenues of $1.8 million were offset by depreciation  and
administrative expenses of $1.9 million.  Revenues increased during 1997 by $0.2
million  because the interest in a trust  owning  aircraft  was  purchased  late
during  the first  quarter  of 1996.  This  equipment  was on lease for the full
quarter of 1997 compared to only part of the first quarter of 1996.  The decline
in expenses of $0.1  million is due to the double  declining  balance  method of
depreciation.

Marine vessels:  During the first quarter of 1997, revenues of $0.8 million were
offset by depreciation and administrative  expenses of $1.1 million.  During the
same period of 1996,  revenues of $1.2 million were offset by  depreciation  and
administrative  expenses of $1.1 million.  The primary reason revenues decreased
was due to lower day rates earned while on lease.

Mobile offshore  drilling unit: As of March 31, 1997, the  Partnership  owned an
interest in a mobile offshore drilling unit (rig) which was purchased during the
fourth  quarter of 1996.  Revenues of $90,000  were offset by  depreciation  and
administrative expenses of $94,000.

(F)  Net Loss

As a result of the foregoing,  the  Partnership's  net loss for the period ended
March 31, 1997 was $267,000,  compared to a net loss of $37,000  during the same
period in 1996.  The  Partnership's  ability to operate  and  liquidate  assets,
secure leases, and re-lease those assets whose leases expire during the duration
of the Partnership is subject to many factors and the Partnership's  performance
in the first quarter of 1997 is not necessarily indicative of future periods. In
the first  quarter of 1997,  the  Partnership  distributed  $2.4  million to the
limited partners, or $0.45 per weighted-average depositary unit.




(II) FINANCIAL CONDITION - CAPITAL RESOURCES, LIQUIDITY, AND DISTRIBUTIONS

For the three months ended March 31, 1997, the Partnership  generated sufficient
operating cash (net cash provided by operating  activities,  plus  distributions
from unconsolidated  special purpose entities) to meet its operating obligations
and maintain the current  level of  distributions  (total for three months ended
March 31, 1997 of approximately $2.5 million) to the partners.  During the three
months  ended  March 31,  1997,  the General  Partner  sold  equipment  for $0.2
million.

     The General Partner had entered into a short-term  joint $50 million credit
facility.  As of May 13, 1997, the  Partnership did not have any borrowings with
the credit  facility,  having repaid its $2.0 million  borrowing  during January
1997; PLM Equipment  Growth Fund V had $1.1 million and American  Finance Group,
Inc. had $22.5 million in outstanding  borrowings.  Neither PLM Equipment Growth
Fund IV, PLM Equipment Growth Fund VI, Professional Lease Management Income Fund
I, L.L.C., nor TEC Acquisub, Inc. had any outstanding borrowings.

(III)    Outlook for the Future

Several factors may affect the Partnership's  operating  performance in 1997 and
beyond,  including  changes in the markets for the  Partnership's  equipment and
changes in the regulatory environment in which that equipment operates.

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

     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 governmental or other  regulations.  The  unpredictability  of some of these
factors,  or of their occurrence,  makes it difficult for the General Partner to
clearly  define  trends or  influences  that may impact the  performance  of the
Partnership's  equipment.  The General  Partner  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  equipment  markets in which it  determines  that it cannot  operate
equipment and achieve  acceptable  rates of return.  Alternatively,  the General
Partner  may  make a  determination  to  enter  equipment  markets  in  which it
perceives  opportunities  to profit from  supply/demand  instabilities  or other
market imperfections.

     The  Partnership  intends to use excess cash flow, if any, after payment of
expenses,  loan  principal,  and  cash  distributions,   to  acquire  additional
equipment  during the first seven years of Partnership  operations.  The General
Partner  believes that these  acquisitions may cause the Partnership to generate
additional earnings and cash flow for the Partnership.







<PAGE>



                           PART II - OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  None.

         (b)      Reports on Form 8-K

                  None.





<PAGE>




Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



                                  PLM EQUIPMENT GROWTH & INCOME FUND VII
                                  By:      PLM Financial Services, Inc.
                                           General Partner



Date:  May 13, 1997               By:      /s/ David J. Davis
                                           ------------------
                                           David J. Davis
                                           Vice President and
                                           Corporate Controller