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 June 30, 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 of dollars, except unit amounts)

<TABLE>
<CAPTION>


                                                                             June 30,          December 31,
                                                                             1997                 1996
   <S>                                                                   <C>                  <C>        
   Assets:

   Equipment held for operating lease, at cost                           $    62,919          $    67,441
   Less accumulated depreciation                                             (23,867 )            (21,494 )
       Net equipment                                                          39,052               45,947

   Cash and cash equivalents                                                   8,702                2,468
   Restricted cash                                                               158                  158
   Investments in unconsolidated special-purpose entities                     33,238               37,141
   Accounts receivable, net of allowance for doubtful accounts
         of $358 in 1997 and $330 in 1996                                      1,028                1,214
   Prepaid expenses and other assets                                              16                   58
   Deferred charges, net of accumulated amortization
         of $323 in 1997 and $493 in 1996                                        317                  412

   Total assets                                                          $    82,511          $    87,398

   Liabilities and partners' capital:

   Liabilities:
   Accounts payable and accrued expenses                                 $       193          $       296
   Due to affiliates                                                             866                  605
   Lessee deposits and reserve for repairs                                     1,514                1,360
   Short-term note payable                                                         -                2,000
   Note payable                                                               23,000               23,000
       Total liabilities                                                      25,573               27,261

   Partners' capital:
   Limited partners (5,370,297 depositary units as of
         June 30, 1997 and as of December 31, 1996)                           56,938               60,137
   General Partner                                                                 -                    -
       Total partners' capital                                                56,938               60,137

   Total liabilities and partners' capital                               $    82,511          $     87,398
</TABLE>













                See accompanying notes to financial statements.


<PAGE>



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

                                                       For the Three Months               For the Six Months
                                                          Ended June 30,                    Ended June 30,
                                                         1997         1996               1997            1996
   <S>                                              <C>            <C>                <C>             <C>     
   Revenues:

   Lease revenue                                    $   3,310      $   2,965          $  6,456        $  6,009
   Interest and other income                               56            109               105             298
   Net gain on disposition of equipment                 1,790              7             1,800              23
       Total revenues                                   5,156          3,081             8,361           6,330

   Expenses:

   Depreciation and amortization                        2,265          2,047             4,559           4,062
   Marine equipment operating expense                      18             38                28              56
   Repairs and maintenance                                386            303               627             542
   Interest expense                                       418            413               855             836
   Insurance expense                                       17             21                37              32
   Management fees to affiliate                           185             59               361             217
   General and administrative expenses
         to affiliates                                    138            115               305             203
   Other general and administrative expenses               61            133               162             404
   Provision for (recovery of) bad debts                 (149 )          135                55             213
       Total expenses                                   3,339          3,264             6,989           6,565

   Equity in net income (loss) of unconsol-
         idated special-purpose entities                  339           (176 )             518            (162 )

   Net income (loss)                                $   2,156      $    (359 )        $  1,890        $   (397 )

   Partners' share of net income (loss):

   Limited partners                                 $   2,029      $    (486 )        $  1,635        $   (651 )
   General Partner                                        127            127               255             254

   Total                                            $   2,156      $    (359 )        $  1,890        $   (397 )

   Net income (loss) per weighted-average
         depositary unit: (5,370,297 units as of
         June 30, 1997 and 1996)                    $    0.38      $   (0.09 )        $   0.30        $  (0.12 )

   Cash distributions                               $   2,544      $   2,543          $  5,089        $  5,087
   Cash distributions per weighted-average
         depositary unit                            $    0.45      $    0.45          $   0.90        $   0.90
</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 June 30, 1997
                           (in thousands of dollars)
<TABLE>
<CAPTION>


                                                             Limited              General
                                                             Partners             Partner               Total

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

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

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

   Partners' capital as of December 31, 1996                    60,137                 -                 60,137

   Net income                                                    1,635               255                  1,890

   Cash distributions                                           (4,834 )            (255 )               (5,089 )

   Partners' capital as of June 30, 1997                   $    56,938           $     -             $   56,938
</TABLE>

































                      See accompanying notes to financial
                                  statements.



<PAGE>







                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                            (A Limited Partnership)
                            STATEMENTS OF CASH FLOWS
                           (in thousands of dollars)
<TABLE>
<CAPTION>
                                                                                       For the Six Months
                                                                                         Ended June 30,
                                                                                   1997          1996
  
  <S>                                                                           <C>           <C>         
  Operating activities:

  Net income (loss)                                                             $   1,890     $     (397 )
  Adjustments to reconcile net income (loss) to net cash
        provided by operating activities:
    Net gain on disposition of equipment                                           (1,800 )          (23 )
    Equity in net (income) loss from unconsolidated
          special-purpose entities                                                   (518 )          162
    Depreciation and amortization                                                   4,559          4,062
    Changes in operating assets and liabilities:
      Restricted cash                                                                   -             22
      Accounts receivable                                                             141            109
      Prepaid expenses                                                                 42            (25 )
      Accounts payable and accrued expenses                                          (103 )         (164 )
      Due to affiliates                                                               261           (240 )
      Lessee deposits and reserve for repairs                                         154              -
          Net cash provided by operating activities                                 4,626          3,506

  Investing activities:

  Payments for purchase of equipment and capitalized repairs                          (87 )       (2,301 )
  Payments for equipment acquisition deposits                                           -           (105 )
  Investment in and equipment purchased and placed in
        unconsolidated special-purpose entities                                         -         (5,919 )
  Distributions from unconsolidated special purpose entities                        4,421          5,090
  Payments of acquisition fees to affiliate                                             -           (151 )
  Payments of lease negotiation fees to affiliate                                       -            (23 )
  Proceeds from disposition of equipment                                            4,363            405
          Net cash provided by (used in) investing activities                       8,697         (3,004 )

  Financing activities:

  Payments of short-term note payable                                              (2,000 )            -
  Cash distributions paid to limited partners                                      (4,834 )       (4,833 )
  Cash distributions paid to General Partner                                         (255 )         (254 )
  Payments of debt issuance costs                                                       -            (25 )
          Net cash used in financing activities                                    (7,089 )       (5,112 )

  Net increase (decrease) in cash and cash equivalents                              6,234         (4,610 )
  Cash and cash equivalents at beginning of year                                    2,468         11,965
  Cash and cash equivalents at end of year                                      $   8,702     $    7,355

  Supplemental information:

  Interest paid                                                                 $     822     $      906
  Supplemental disclosure of noncash investing and financing activities:
    Sales proceeds included in accounts receivable                              $       5     $      103
</TABLE>

                      See accompanying notes to financial
                                  statements.



<PAGE>


                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                            (A Limited Partnership)
                         NOTES TO FINANCIAL STATEMENTS
                                 June 30, 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 June 30, 1997 and December 31, 1996, the statements of
operations  for the three  and six  months  ended  June 30,  1997 and 1996,  the
statements of changes in partners'  capital for the period  December 31, 1995 to
June 30, 1997,  and the  statements  of cash flows for the six months ended June
30,  1997 and  1996.  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.   Reclassifications

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 and $5.1
million for the three and six months  ended June 30,  1997,  respectively.  Cash
distributions  to limited  partners  in excess of net income are  considered  to
represent a return of capital.  Cash  distributions  to the limited  partners of
$3.2  million for the six months  ended June 30, 1997 were deemed to be a return
of capital.  All cash  distributions  paid to the limited  partners  for the six
months  ended  June 30,  1996  were  deemed  to be a  return  of  capital.  Cash
distributions  related to the results from the second  quarter of 1997,  of $1.2
million,  were paid or are payable  during July and August  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>

                                                                                       June 30         December 31
                                                                                         1997             1996
     <S>                                                                            <C>               <C>
     33% interest in two trusts that own three 737-200A commercial aircraft
               two aircraft engines, and a portfolio of aircraft rotables           $    7,236        $    9,126
     80% interest in an entity owning a bulk carrier marine vessel                       7,022             7,362
     24% in a trust owning a 767-200ER commercial aircraft                               5,264             5,798
     33% interest in a trust that owns six 737-200A commercial aircraft                  5,124             5,407
     25% interest in a trust that owns four 737-200A commercial aircraft                 3,927             4,206
     44% interest in an entity owning a bulk carrier marine vessel                       2,820             3,142
     10% interest in an equity owning a mobile offshore drilling unit                    1,845             2,100
       Net investments                                                              $   33,238        $   37,141
</TABLE>

5.   Transactions with General Partner and Affiliates

Partnership  management fees payable to an affiliate of the General Partner were
$0.1  million as of June 30,  1997 and  December  31,  1996.  The  Partnership's
proportional  share of  USPE-affiliate  management  fees of $130,000 and $55,000
were payable as of June 30, 1997 and December 31, 1996, respectively.

                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                            (A Limited Partnership)
                         NOTES TO FINANCIAL STATEMENTS
                                 June 30, 1997

5.   Transactions with General Partner and Affiliates (continued)

The Partnership's  proportional share of the affiliated expenses incurred by the
USPEs during 1997 and 1996, are listed in the following table (in thousands):
<TABLE>
<CAPTION>

                                                       For the Three Months               For the Six Months
                                                          Ended June 30,                    Ended June 30,
                                                         1997         1996               1997            1996

   <S>                                              <C>            <C>                <C>             <C>     
   Management fees                                  $     125      $     193          $    247        $    321
   Insurance expense                                       48             92               106             144
   Data processing and administrative
      expenses                                             34             18                67              35
</TABLE>

Transportation Equipment Indemnity Company, Ltd. (TEI) provides marine insurance
coverage for Partnership  equipment and other insurance brokerage services.  TEI
is an affiliate of the General Partner.

The  Partnership's   proportional  share  of  lease  negotiation  and  equipment
acquisition fees paid by USPEs to PLM Worldwide Management Services (WMS) during
the six months ended June 30, 1996 was $0.3  million.  No similar fees were paid
during  the  same  period  of  1997.  WMS is a  wholly-owned  subsidiary  of PLM
International, Inc.

The balance due to  affiliates  as of June 30, 1997 includes $0.1 million due to
FSI and its affiliates  and $0.7 million due to an affiliated  USPE. The balance
due to  affiliates  as of December 31, 1996 includes $0.1 million due to FSI and
its affiliates and $0.5 million due to an affiliated USPE.

6.   Equipment

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

                                                   June 30,        December 31,
                                                   1997                1996

   Equipment held for operating lease:
     Marine vessels                            $   22,212          $    22,212
     Aircraft                                      15,933               15,933
     Trailers                                      14,567               14,547
     Rail equipment                                10,054               10,053
     Modular buildings                                153                4,696
                                                   62,919               67,441
   Less accumulated depreciation                  (23,867 )            (21,494 )
     Net equipment                             $   39,052          $    45,947

As of  June  30,  1997,  all of the  equipment  was on  lease  or  operating  in
PLM-affiliated  short-term  trailer rental  facilities,  except for two commuter
aircraft and a railcar.  As of 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 $4.7
million  and  $0.1   million  as  of  June  30,  1997  and  December  31,  1996,
respectively.

During the six months ended June 30, 1996, the  Partnership  disposed of or sold
modular  buildings and trailers with an aggregate net book value of $0.3 million
for $0.3 million.




<PAGE>


                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                            (A Limited Partnership)
                         NOTES TO FINANCIAL STATEMENTS
                                 June 30, 1997

6.  Equipment (continued)

During the six months ended June 30, 1997, the  Partnership  disposed of or sold
trailers  and modular  buildings  with a net book value of $2.5 million for $4.3
million.

7.   Debt

As of June 30, 1997, the Partnership had repaid its $2.0 million borrowing under
the short-term  joint $50.0 million credit facility that had been outstanding as
of December 31, 1996.  Among the eligible  borrowers,  American  Finance  Group,
Inc., a wholly-owned subsidiary of PLM International,  Inc., had $7.1 million in
outstanding borrowings.  Neither the Partnership,  PLM Equipment Growth Fund IV,
PLM Equipment  Growth Fund V, PLM Equipment Growth Fund VI,  Professional  Lease
Management  Income Fund I, L.L.C.,  nor TEC Acquisub,  Inc. had any  outstanding
borrowings.

8.   Contingencies

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  (the Koch  action).  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 Koch action 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 Koch  action  to the state  court and
defendants have responded to this motion. The federal court has not yet ruled on
this motion,  and defendants do not need to respond to the complaint until after
such motion is decided. PLM International, Inc. believes that the allegations of
the Koch action are  completely  without merit and intends to defend this matter
vigorously.

On June 5,  1997,  PLM  International,  Inc.  and the  affiliates  who are  also
defendants  in the Koch action  were named as  defendants  in another  purported
class  action  filed  in  the  San  Francisco  Superior  Court,  San  Francisco,
California,  Case No. 987062 (the Romei action). The named plaintiff has alleged
the same facts and the same nine  causes of action as is in the Koch  action (as
described in the Partnership's  Form 10-K for the year ended December 31, 1996),
plus five additional causes of action against all of the defendants, as follows:
violations of California  Business and Professions  Code Sections 17200, et seq.
for alleged unfair and deceptive  practices,  a claim for constructive  fraud, a
claim for unjust enrichment,  a claim for violations of California  Corporations
Code Section 1507,  and a claim for treble damages under  California  Civil Code
Section 3345.  The plaintiff is an investor in the PLM Equipment  Growth Fund V,
and filed the  complaint  on her own behalf  and on behalf of all class  members
similarly  situated  who  invested in certain  California  limited  partnerships
sponsored by PLM Securities,  for which PLM Financial Services, Inc. acts as the
general partner,  including the  Partnership,  PLM Equipment Growth Fund IV, PLM
Equipment Growth Fund V and PLM Equipment Growth Fund VI.





<PAGE>


                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                            (A Limited Partnership)
                         NOTES TO FINANCIAL STATEMENTS
                                 June 30, 1997

8.  Contingencies (continued)

PLM International, Inc. and the other defendants removed the Romei action to the
United States District Court for the Northern  District of California  (Case No.
C-97-2450  SC) on  June  30,  1997,  based  on  the  federal  court's  diversity
jurisdiction.  The defendants  then filed a motion to compel  arbitration of the
plaintiffs'  claims,  based on an agreement  to  arbitrate  contained in the PLM
Equipment Growth Fund V limited partnership  agreement,  to which plaintiff is a
party.  A hearing on this motion to compel  arbitration  has been  scheduled for
August 22, 1997,  although the district court may decide the motion without such
argument.  PLM  International,  Inc.  believes that the allegations of the Romei
action  are  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 
June 30, 1997 and 1996

(A)  Owned Equipment Operations

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

                                                                            For the Three Months
                                                                               Ended June 30,
                                                                            1997             1996
   <S>                                                                   <C>               <C>
   Marine vessels                                                        $    902          $   895
   Trailers                                                                   746              560
   Aircraft                                                                   501              538
   Rail equipment                                                             492              488
   Modular buildings                                                          256              131
</TABLE>

Marine  vessels:  Marine  vessel lease  revenues and direct  expenses  were $1.0
million and $0.1 million, respectively, for the three months ended June 30, 1997
and 1996.  The small  increase in marine  vessel  contribution  was due to lower
estimated drydock repairs during 1997 when compared to 1996.

Trailers:  Trailer lease revenues and direct expenses were $0.9 million and $0.1
million,  respectively,  for the three months  ended June 30, 1997,  compared to
$0.7 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.

Aircraft:  Aircraft  lease  revenues and direct  expenses  were $0.5 million and
$5,000, respectively, for the three months ended June 30, 1997, compared to $0.5
million and $8,000,  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.

Rail  equipment:  Rail equipment  lease  revenues and direct  expenses were $0.7
million and $0.2  million,  respectively,  for the three  months  ended June 30,
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,  which was offset in part by higher  repair
costs during 1997.

Modular buildings: Modular building lease revenues and direct expenses were $0.3
million and  $11,000,  respectively,  for the three  months ended June 30, 1997,
compared to $0.2 million and $38,000,  respectively,  during the same quarter of
1996.  The primary  reason for the  increase in lease  revenues was because of a
higher net lease rate earned on the leased  equipment  when compared to the same
period of 1996,  which was  offset in part by the sale of the  majority  of this
equipment during the second quarter of 1997.

(B)  Indirect Expenses Related to Owned Equipment Operations

Total  indirect  expenses  were $2.9 million for the quarter ended June 30, 1997
and 1996.  Although  indirect  expenses  remained  relatively  the same for both
periods, significant variances are explained as follows:

     (1) A $0.2 million increase in depreciation and amortization  expenses from
1996 levels  reflects  the  purchase of a  commercial  aircraft,  trailers,  and
railcars during 1996, which was offset in part by the  double-declining  balance
method of depreciation.

     (2) A $0.1 million  increase in  management  fees was due to an increase in
lease revenues earned during 1997 when compared to the same period of 1996.

     (3) A $0.3 million  decrease in the  allowance for bad debts was due to the
collection of unpaid invoices that had previously been reserved for bad debt.

(C)  Net Gain on Disposition of Owned Equipment

The net gain on  disposition of equipment for the second quarter of 1997 totaled
$1.8 million,  and resulted from the sale of trailers and modular buildings with
an  aggregate  net book  value of $2.5  million  for $4.3  million.  Net gain on
disposition  of  equipment  for the second  quarter  1996  totaled  $7,000,  and
resulted from the sale of trailers with a net book value of $21,000 for proceeds
of $28,000.

(D)  Interest and Other Income

Interest and other income  decreased  $0.1 million  during the second 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 June 30,
                                                                            1997             1996

   <S>                                                                   <C>              <C>       
   Aircraft, rotable components, and aircraft engines                    $    432         $   (104 )
   Marine vessels                                                             (53 )            (72 )
   Mobile offshore drilling unit                                              (40 )              -
</TABLE>

Aircraft, rotable components, and aircraft engines: During the second quarter of
1997,   lease  revenues  of  $2.1  million  were  offset  by  depreciation   and
administrative  expenses of $1.6 million.  During the same period of 1996, lease
revenues of $2.1 million were offset by depreciation and administrative expenses
of $2.2 million.  Revenues remained relatively the same for both periods,  while
the   decline  in  expenses  of  $0.6   million   was  due   primarily   to  the
double-declining balance method of depreciation.

Marine vessels: During the first quarter of 1997, lease revenues of $0.9 million
were offset by depreciation and administrative  expenses of $1.0 million. During
the same  period  of  1996,  lease  revenues  of $1.2  million  were  offset  by
depreciation  and  administrative  expenses of $1.3 million.  The primary reason
lease revenues decreased was due to lower day rates earned while on lease; lower
earnings  were offset in part by a decrease  in expenses of $0.1  million due to
the  double-declining  balance method of depreciation and lower marine operating
expenses.

Mobile  offshore  drilling unit: As of June 30, 1997, the  Partnership  owned an
interest in a mobile offshore drilling unit that was purchased during the fourth
quarter  of  1996.   Revenues  of  $91,000  were  offset  by  depreciation   and
administrative expenses of $131,000.

(F)  Net Income (Loss)

As a result of the foregoing,  the Partnership's net income for the period ended
June 30, 1997 was $2.2  million,  compared to a net loss of $0.4 million  during
the same period of 1996.  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 1997
is not necessarily  indicative of future periods. In the second quarter of 1997,
the Partnership  distributed $2.4 million to the limited partners,  or $0.45 per
weighted-average depositary unit.


<PAGE>


Comparison of the Partnership's Operating Results for the Six Months Ended 
June 30, 1997 and 1996

(A)  Owned Equipment Operations

Lease revenues less direct expenses  (defined as repair and maintenance,  marine
equipment operation,  and asset-specific  insurance expenses) on owned equipment
increased  during the six months  ended June 30, 1997 when  compared to the same
period of 1996. The following table presents lease revenues less direct expenses
by owned equipment type (in thousands):
<TABLE>
<CAPTION>

                                                                             For the Six Months
                                                                               Ended June 30,
                                                                            1997             1996

   <S>                                                                   <C>              <C>     
   Marine vessels                                                        $  1,801         $  1,795
   Trailers                                                                 1,468            1,061
   Rail equipment                                                           1,103              992
   Aircraft                                                                 1,002            1,092
   Modular buildings                                                          408              455
</TABLE>

Marine  vessels:  Marine  vessel lease  revenues and direct  expenses  were $1.9
million and $0.1 million,  respectively,  for the six months ended June 30, 1997
and 1996.  The small  increase in marine  vessel  contribution  was due to lower
estimated drydock repairs during 1997 when compared to 1996.

Trailers:  Trailer lease revenues and direct expenses were $1.7 million and $0.2
million,  respectively, for the six months ended June 30, 1997, compared to $1.2
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 $1.4
million and $0.3 million,  respectively, for the six months ended June 30, 1997,
compared to $1.3 million and $0.3 million, respectively,  during the same period
of 1996.  The  increase  in  railcar  contribution  was due to the  purchase  of
additional equipment during 1996.

Aircraft:  Aircraft  lease  revenues and direct  expenses  were $1.0 million and
$9,000,  respectively,  for the six months ended June 30, 1997, compared to $1.1
million and $18,000, 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.

Modular buildings: Modular building lease revenues and direct expenses were $0.4
million  and  $12,000,  respectively,  for the six months  ended June 30,  1997,
compared to $0.5 million and $50,000,  respectively,  during the same quarter of
1996.  The primary  reason for the decrease in lease  revenues was because of an
overall  lower net lease rate earned on the leased  equipment,  when compared to
the same period of 1996, and the sale of the majority of this  equipment  during
the second quarter of 1997.

(B)  Indirect Expenses Related to Owned Equipment Operations

Total  indirect  expenses of $6.3  million  for the quarter  ended June 30, 1997
increased  from  $5.9  million  for the same  period  of 1996.  The  significant
variances are explained as follows:

     (1) A $0.5 million increase in depreciation and amortization  expenses from
1996 levels  reflects  the  purchase of a  commercial  aircraft,  trailers,  and
railcars during 1996, which was offset in part by the  double-declining  balance
method of depreciation.

     (2) A $0.1  million  increase in  management  fees was due to higher  lease
revenues during 1997 when compared to the same period of 1996.

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

     (4) A $0.1 million  decrease in the  allowance for bad debts was due to the
collection of unpaid invoices that had previously been reserved for bad debt.

(C)  Net Gain on Disposition of Owned Equipment

The net gain on  disposition of equipment for the six months ended June 30, 1997
totaled  $1.8  million,  and  resulted  from the sale of  trailers  and  modular
buildings with an aggregate net book value of $2.5 million for $4.3 million. Net
gain on  disposition of equipment for the six months ended June 30, 1996 totaled
$23,000,  and resulted  from the sale of modular  buildings and trailers with an
aggregate net book value of $0.3 million for proceeds of $0.3 million

(D)  Interest and Other Income

Interest and other  income  decreased  $0.2 million  during the six months ended
June 30, 1997,  due  primarily to lower cash balances  available for  investment
throughout most of the period 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 Six Months
                                                                               Ended June 30,
                                                                            1997             1996

   <S>                                                                   <C>              <C>       
   Aircraft, rotable components, and aircraft engines                    $    868         $   (213 )
   Marine vessels                                                            (306 )             51
   Mobile offshore drilling unit                                              (44 )              -
</TABLE>

Aircraft,  rotable components, and aircraft engines: During the six months ended
June 30,  1997,  revenues  of $4.1  million  were  offset  by  depreciation  and
administrative  expenses of $3.2 million.  During the same period of 1996, lease
revenues of $3.8 million were offset by depreciation and administrative expenses
of $4.0  million.  Revenues  increased  during 1997 by $0.3 million  because the
interest in a trust owning  aircraft was purchased  late in the first quarter of
1996.  This equipment was on lease for the full six months of 1997,  compared to
only three  months  during the same  period of 1996.  The decline in expenses of
$0.8 million was due to the double-declining balance method of depreciation.

Marine  vessels:  During the six months  ended June 30,  1997,  revenues of $1.8
million were offset by depreciation and administrative expenses of $2.1 million.
During  the same  period  of 1996,  revenues  of $2.4  million  were  offset  by
depreciation  and  administrative  expenses of $2.3 million.  The primary reason
revenues decreased was because of the lower day rates earned while on lease. The
decline in expenses  of $0.2  million  was due to the  double-declining  balance
method of depreciation.

Mobile  offshore  drilling unit: As of June 30, 1997, the  Partnership  owned an
interest in a mobile offshore drilling unit that was purchased during the fourth
quarter of 1996.  Revenues  of $0.2  million  were  offset by  depreciation  and
administrative expenses of $0.2 million.

(F)  Net Income (Loss)

As a result of the foregoing,  the Partnership's net income for the period ended
June 30, 1997 was $1.9  million,  compared to a net loss of $0.4 million  during
the same period of 1996.  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, 1997 is not  necessarily  indicative  of future  periods.  In the six months
ended June 30, 1997,  the  Partnership  distributed  $4.8 million to the limited
partners, or $0.90 per weighted-average depositary unit.


<PAGE>


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

For the six months ended June 30, 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 six months ended June
30, 1997 of approximately  $5.1 million) to the partners.  During the six months
ended June 30, 1997, the General Partner sold equipment for $4.3 million.

The General  Partner had entered into a short-term  joint $50.0  million  credit
facility,  and as of August 12, 1997, the Partnership had no borrowings with the
credit  facility.  PLM  Equipment  Growth  Fund VI had $10.0  million;  American
Finance Group, Inc., a wholly-owned  subsidiary of PLM International,  Inc., had
$13.9  million;  and  TEC  Acquisub,   Inc.  had  $7.2  million  in  outstanding
borrowings. Neither the Partnership, PLM Equipment Growth Fund IV, PLM Equipment
Growth Fund V, nor Professional  Lease Management  Income Fund I, L.L.C. 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  government  or other  regulations.  The  unpredictability  of some of these
factors,  or of their occurrence,  makes it difficult for the General Partner to
clearly  define  trends or  influences  that may impact the  performance  of the
Partnership's  equipment.  The General  Partner  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  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.

(IV)  FORWARD-LOOKING INFORMATION

Except for the historical  information contained herein, this Form 10-Q 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-Q  should  be read as  being
applicable  to all related  forward-looking  statements  wherever they appear in
this Form 10-Q. The  Partnership's  actual results could differ  materially from
those discussed here.





<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



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



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


Date:  August 12, 1997                 By:      /s/ Richard Brock
                                                --------------------------
                                                Richard Brock
                                                Vice President and
                                                Corporate Controller