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, 1998


       [  ]   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>



                                                                           March 31,              December 31,
                                                                             1998                 1997
                                                                      --------------------------------------
<S>                                                                     <C>                   <C>        
Assets

Equipment held for operating lease, at cost                             $       69,133        $    58,844
Less accumulated depreciation                                                  (29,711)           (24,650 )
                                                                      ---------------------------------------
                                                                                39,422             34,194
Equipment held for sale                                                             --              4,148
                                                                      ---------------------------------------
  Net equipment                                                                 39,422             38,342

Cash and cash equivalents                                                       10,851              9,327
Restricted cash                                                                    393                191
Accounts receivable, less allowance for doubtful accounts
    of $486 in 1998 and $522 in 1997                                               744                887
Investments in unconsolidated special-purpose entities                          28,133             31,377
Deferred charges, net of accumulated amortization
    of $237 in 1998 and $274 in 1997                                               283                296
Prepaid expenses and other assets                                                   34                 49
                                                                      ---------------------------------------

      Total assets                                                      $       79,860        $    80,469
                                                                      =======================================


Liabilities and partners' capital

Liabilities:
Accounts payable and accrued expenses                                   $          674        $       367
Due to affiliates                                                                  995              4,563
Lessee deposits and reserve for repairs                                          1,444              1,477
Notes payable                                                                   23,000             23,000
                                                                      ---------------------------------------
  Total liabilities                                                             26,113             29,407

Partners' capital:
Limited partners (5,340,967 limited partnership units as of
    March 31, 1998 and 5,370,297 as of December 31, 1997)                       53,747             51,062
General Partner                                                                     --                 --
                                                                      ---------------------------------------
  Total partners' capital                                                       53,747             51,062
                                                                      ---------------------------------------

      Total liabilities and partners' capital                           $       79,860        $    80,469
                                                                      =======================================



</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
                                                                                      Ended March 31,

                                                                                   1998             1997
                                                                             ---------------------------------

<S>                                                                            <C>               <C>        
Revenues


Lease revenue                                                                  $     3,221       $     3,146
Interest and other income                                                               53                49
Net gain on disposition of equipment                                                    33                 9
                                                                             ----------------------------------
  Total revenues                                                                     3,307             3,204

Expenses

Depreciation and amortization                                                        1,939             2,294
Repairs and maintenance                                                                452               241
Interest expense                                                                       410               437
Management fees to affiliate                                                           183               176
Equipment operating expense                                                              9                10
Other insurance expense                                                                 21                19
General and administrative expenses to affiliates                                      171               169
Other general and administrative expenses                                              121                99
Bad debt expense                                                                        19               204
                                                                             ----------------------------------
  Total expenses                                                                     3,325             3,649
                                                                             ----------------------------------

Equity in net income of unconsolidated special-purpose entities                      5,660               178
                                                                             ----------------------------------
      Net income (loss)                                                        $     5,642       $      (267)
                                                                             ==================================

Partners' share of net income (loss)

Limited partners                                                               $     5,515       $      (394)
General Partner                                                                        127               127
                                                                             ----------------------------------

      Total                                                                    $     5,642       $      (267)
                                                                             ==================================

Netincome (loss) per weighted-average  limited partnership unit 
  (5,359,061 units and 5,370,297 units as of March 31, 1998
    and 1997, respectively)                                                    $      1.03       $     (0.07)
                                                                             ==================================

Cash distribution                                                              $     2,542       $     2,545
                                                                             ==================================

Cash distribution per weighted-average limited partnership 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, 1996
                  to March 31, 1998 (in thousands of dollars)

<TABLE>
<CAPTION>


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

<S>                                                     <C>                      <C>                  <C>        
Partners' capital as of December 31, 1996               $      60,137            $     --             $    60,137

Net income                                                        593                 508                   1,101

Cash distribution                                              (9,668)               (508)                (10,176)
                                                        ------------------------------------------------------------

  Partners' capital as of December 31, 1997                    51,062                  --                  51,062

Net income                                                      5,515                 127                   5,642

Repurchase of limited partnership units                          (415)                 --                    (415)

Cash distribution                                              (2,415)               (127)                 (2,542)
                                                        ------------------------------------------------------------

  Partners' capital as of March 31, 1998                  $    53,747            $     --             $    53,747
                                                        ============================================================



</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 Three Months
                                                                                        Ended March 31,

                                                                                   1998            1997
                                                                                ----------------------------

<S>                                                                              <C>              <C>        
Operating activities


Net income (loss)                                                                $    5,642       $     (267)
Adjustments to reconcile net income (loss) to net cash
      provided by (used in) operating activities:
  Depreciation and amortization                                                       1,939            2,294
  Net gain on disposition of equipment                                                  (33)              (9)
  Equity in net income from unconsolidated
      special-purpose entities                                                       (5,660)            (178)
  Changes in operating assets and liabilities:
    Restricted cash                                                                    (202)              --
    Accounts receivable, net                                                            131              254
    Prepaid expenses and other assets                                                    15               22
    Accounts payable and accrued expenses                                               307              276
    Due to affiliates                                                                    14               11
    Lessee deposits and reserve for repairs                                             (33)             134
                                                                               ---------------------------------
      Net cash provided by operating activities                                       2,120            2,537
                                                                               ---------------------------------

Investing activities

Payments for equipment and capitalized repairs                                       (3,013)              (1)
Investment in and equipment purchased and placed in
    unconsolidated special-purpose entities                                          (6,518)              --
Distributions from unconsolidated special purpose entities                            4,979            3,885
Distributions from liquidation of unconsolidated special purpose entities            10,443               --
Payments of acquisition fees to affiliate                                              (135)              --
Payments of lease negotiation fees to affiliate                                         (30)              --
Proceeds from disposition of equipment                                                  217               38
                                                                               ---------------------------------
      Net cash provided by investing activities                                       5,943            3,922
                                                                               ---------------------------------

Financing activities

Payments of short-term note payable                                                      --           (2,000)
Payments due to affiliates                                                           (3,582)              --
Cash distribution paid to limited partners                                           (2,415)          (2,418)
Cash distribution paid to General Partner                                              (127)            (127)
Repurchase of limited partnership units                                                (415)              --
                                                                               ---------------------------------
      Net cash used in financing activities                                          (6,539)          (4,545)
                                                                               ---------------------------------

Net increase in cash and cash equivalents                                             1,524            1,914
Cash and cash equivalents at beginning of period                                      9,327            2,468
                                                                               ---------------------------------
Cash and cash equivalents at end of period                                       $   10,851       $    4,382
                                                                               =================================

Supplemental information

Interest paid                                                                    $       29       $       28
                                                                               =================================
Supplemental disclosure of noncash investing and financing activities:
  Sale proceeds included in accounts receivable                                  $       35       $       49
                                                                               =================================
</TABLE>


                       See accompanying notes to financial
                                  statements.

<PAGE>

                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                 March 31, 1998

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, 1998 and December 31, 1997, the statements of
operations  and  statements  of cash flows for the three  months ended March 31,
1998 and 1997, and the statements of changes in partners' capital for the period
from  December  31,  1996 to  March  31,  1998.  Certain  information  and  note
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, 1997,
on file with the Securities and Exchange Commission.

2.   Repurchase of Limited Partnership Units

In 1997, the Partnership  agreed to repurchase up to 46,000 limited  partnership
units for an aggregate purchase price of up to a maximum of $0.7 million.  As of
March 31, 1998, the Partnership had repurchased 29,330 limited partnership units
for $0.4 million. The General Partner may repurchase the additional units in the
future.

3.   Cash Distributions

Cash distributions are recorded when paid and totaled $2.5 million for the three
months ended March 31, 1998 and 1997. Cash  distributions to limited partners in
excess of net income are  considered  to represent a return of capital.  None of
the cash  distributions to the limited partners for the three months ended March
31, 1998 were deemed to be a return of capital.  All cash  distributions  to the
limited  partners  for the three months ended March 31, 1997 were deemed to be a
return of capital.  Cash  distributions  related to the  results  from the first
quarter of 1998, of $1.2 million, were paid during the second quarter of 1998.

4.   Transactions with General Partner and Affiliates

The Partnership's  proportional share of the affiliated expenses incurred by the
unconsolidated  special-purpose entities (USPEs) during 1998 and 1997 are listed
in the following table (in thousands of dollars):


<TABLE>
<CAPTION>

                                                         For the Three Months
                                                            Ended March 31,
                                                           1998           1997
                                                    -------------------------------

<S>                                                   <C>              <C>      
Management fees                                       $     109        $     121
Data processing and administrative expenses                  40               78
Insurance expense                                            12               58

</TABLE>

The Partnership's  proportional share of USPE-affiliated management fees of $0.1
million and $0.2  million  were  payable as of March 31, 1998 and  December  31,
1997, respectively.

Transportation  Equipment  Indemnity  Company,  Ltd.  (TEI), an affiliate of the
General Partner,  provides marine insurance  coverage for Partnership  equipment
and other insurance brokerage  services.  TEI did not provide the same insurance
coverage during 1998, as had been provided for during 1997.  These services were
provided by an unaffiliated third party.

The  Partnership  paid FSI $0.2  million  for  equipment  acquisition  and lease
negotiation  fees during the three months ended March 31, 1998.  No similar fees
were paid to FSI during the same period of 1997.

<PAGE>

                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                 March 31, 1998

4.   Transactions with General Partner and Affiliates (continued)

The  Partnership's   proportional  share  of  equipment  acquisition  and  lease
negotiation  fees paid by USPEs to FSI during the three  months  ended March 31,
1998 was $0.4 million. No similar fees were paid during the same period of 1997.

The balance due to  affiliates as of March 31, 1998 includes $0.1 million due to
FSI and its affiliates  for  management  fees and $0.9 million due to affiliated
USPEs.  The balance due to  affiliates  as of December  31, 1997  includes  $0.1
million due to FSI and its affiliates  for management  fees and $4.5 million due
to an affiliated  USPE.  During the first quarter of 1998, the Partnership  paid
$3.6 million due to affiliated USPEs.

5.   Equipment

Owned equipment held for operating leases is stated at cost.  Equipment held for
sale is stated at the lower of the equipment's  depreciated  cost or fair value,
less cost to sell, and is subject to a pending contract for sale. The components
of owned equipment are as follows (in thousands of dollars):

                                                 March 31,       December 31,

                                                 1998                 1997
                                            ----------------------------------

  Marine vessels                             $    22,212          $    22,212
  Trailers                                        17,625               18,111
  Aircraft                                        15,933                8,305
  Rail equipment                                  10,075               10,063
  Portable heaters                                 3,135                   --
  Modular buildings                                  153                  153
                                            -------------       --------------
                                                  69,133               58,844
Less accumulated depreciation                    (29,711)             (24,650)
                                            -------------       --------------
                                                  39,422               34,194
Equipment held for sale                               --                4,148
                                            -------------       --------------
    Net equipment                            $    39,422          $    38,342
                                            =============       ==============

As of  March  31,  1998,  all of the  equipment  was on lease  or  operating  in
PLM-affiliated  short-term  trailer rental  facilities,  except for two commuter
aircraft.  As of  December  31,  1997,  all of the  equipment  was on  lease  or
operating in PLM-affiliated short-term trailer rental facilities, except for two
commuter  aircraft that were held for sale and a railcar.  The net book value of
the  equipment  off lease was $3.9 million and $4.1 million as of March 31, 1998
and December 31, 1997, respectively.

The  Partnership  purchased a portfolio  of  portable  heaters  during the three
months  ended  March  31,  1998 for  $3.1  million  including  $0.1  million  in
acquisition fees paid to FSI.

During the three  months ended March 31, 1998,  the  Partnership  disposed of or
sold trailers with a net book value of $0.2 million for $0.2 million.

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.


<PAGE>






                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                 March 31, 1998

6.   Investments in Unconsolidated Special-Purpose Entities

The net investments in USPEs include the following  jointly-owned equipment (and
related assets and liabilities) (in thousands of dollars):

<TABLE>
<CAPTION>

                                                                                     March 31,     December 31,
                                                                                       1998            1997
                                                                                 -------------     -------------



  <S>                                                                             <C>                <C>       
  50% interest in a trust owning an MD-82 commercial aircraft                     $     6,229        $      682
  80% interest in an entity owning a bulk-carrier marine vessel                         5,926             6,014

  33% interest in two trusts owning three 737-200A commercial aircraft,
            two aircraft engines, and a portfolio of aircraft rotables                  5,089             8,036

  24% interest in a trust owning a 767-200ER commercial aircraft                        4,621             4,824
  50% interest in a trust owning two 737-200A commercial aircraft
            at March 31, 1998 and four 737-200A commercial aircraft
            at December 31, 1997                                                        2,061             4,362
  44% interest in an entity owning a bulk-carrier marine vessel                         2,359             2,439
  10% interest in an entity owning a mobile offshore drilling unit                      1,671             1,712
  25% interest in a trust that owned four 737-200A commercial aircraft                    177             3,308
      Net investments                                                             $    28,133        $   31,377
                                                                                 =============     =============
</TABLE>

As of March 31, 1998 and December 31, 1997, the  Partnership  had an interest in
trusts that own multiple  aircraft  (the Trusts).  At December 31, 1997,  two of
these Trusts contained provisions,  under certain circumstances,  for allocating
specific aircraft to the beneficial owners.  During the three months ended March
31, 1998, in one of these Trusts,  the Partnership sold the commercial  aircraft
assigned  to it with a net  book  value of $1.8  million  for  proceeds  of $4.5
million. During the same period, in another trust, the Partnership also sold one
commercial  aircraft  assigned  to it with a net book value of $2.7  million for
proceeds of $6.0 million. In addition,  in these same two Trusts, two affiliated
programs sold the aircraft designated to them.

During the three months  ended March 31, 1998,  the  Partnership  completed  its
commitment  to  purchase  an  interest  in a trust  owning  an MD-82  Stage  III
commercial aircraft for $6.8 million including acquisition and lease negotiation
fees of $0.4 million  that was paid to FSI for the  purchase of this  equipment.
The Partnership made a deposit of $0.7 million toward this purchase in 1997.

7.   Debt

The General  Partner  entered  into a  short-term,  joint $50.0  million  credit
facility.  As of March 31, 1998,  the  Partnership  had no  borrowing  under the
short-term  joint $50.0 million credit facility.  Among the eligible  borrowers,
American  Finance  Group,  Inc., a subsidiary of PLM  International,  Inc.,  had
borrowings of $38.7 million under the  short-term  joint,  $50.0 million  credit
facility as of March 31, 1998. No other  eligible  borrower had any  outstanding
borrowings.

8.   Contingencies

PLM International, Inc. (the Company) 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).  The plaintiffs,  who filed the complaint on their own and on behalf of
all class members similarly situated, are six individuals who allegedly invested
in certain  California  limited  partnerships  for which FSI acts as the General
Partner, including the Partnership,  PLM Equipment Growth Fund IV, PLM Equipment
Growth  Fund V,  and PLM  Equipment  Growth  Fund VI  (the  Growth  Funds).  The
complaint  asserts eight causes of action  against all  defendants,  as follows:
fraud and deceit,  suppression,  negligent  misrepresentation  and  suppression,
intentional breach of fiduciary duty, negligent breach of fiduciary duty, unjust
enrichment, conversion, and conspiracy. Additionally,  plaintiffs allege a cause
of action against PLM Securities Corp. for breach of third-party beneficiary

<PAGE>

                          PLM EQUIPMENT GROWTH FUND VII
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                 March 31, 1998

8.   Contingencies (continued)

contracts in violation of the National  Association of Securities  Dealers rules
of fair practice.  Plaintiffs allege that each defendant owed plaintiffs and the
class certain  duties due to their status as  fiduciaries,  financial  advisors,
agents, general partner, and control persons. Based on these duties,  plaintiffs
assert  liability  against  the  defendants  for  improper  sales and  marketing
practices,  mismanagement of the Growth Funds, and concealing such mismanagement
from investors in the Growth Funds. Plaintiffs seek unspecified compensatory and
recissory damages, as well as punitive damages, and have offered to tender their
limited partnership units back to the defendants.

On March 6, 1997, the defendants removed 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) based on the district court's diversity
jurisdiction,  following which plaintiffs filed a motion to remand the action to
the state court.  On September 24, 1997, the district  court denied  plaintiffs'
motion and dismissed  without  prejudice the individual claims of the California
class  representative,  reasoning  that he had  been  fraudulently  joined  as a
plaintiff.  On October 3, 1997,  plaintiffs  filed a motion  requesting that the
district  court  reconsider  its ruling or, in the  alternative,  that the court
modify its order  dismissing the California  plaintiff's  claims so that it is a
final  appealable  order,  as well as  certify  for an  immediate  appeal to the
Eleventh  Circuit  Court of Appeals that part of its order  denying  plaintiffs'
motion to remand.  On October 7, 1997,  the district  court denied each of these
motions.  In responses to such denial,  plaintiffs  filed a petition for writ of
mandamus  with the Eleventh  Circuit,  which was denied on November 18, 1997. On
November 24,  1997,  plaintiffs  filed with the Eleventh  Circuit a petition for
rehearing and  consideration by the full court of the order denying the petition
for a writ of mandamus, which petition was supplemented by plaintiffs on January
27, 1998.

On  October  10,  1997,  defendants  filed a motion  to  compel  arbitration  of
plaintiffs' claims,  based on an agreement to arbitrate contained in the limited
partnership  agreement  of each Growth  Fund,  and to stay  further  proceedings
pending the outcome of such arbitration. Notwithstanding plaintiffs' opposition,
the district court granted the motion on December 8, 1997. On December 15, 1997,
plaintiffs  filed with the Eleventh Circuit a notice of appeal from the district
court's order granting  defendants' motion to compel arbitration and to stay the
proceedings,  and of the  district  court's  September  24,  1997 order  denying
plaintiffs'  motion to  remand  and  dismissing  the  claims  of the  California
plaintiff.  Plaintiffs  filed an amended  notice of appeal on December 31, 1997.
Appellate  briefs have not yet been filed in this matter.  The Company  believes
that the allegations of the Koch action are completely without merit and intends
to continue to defend this matter vigorously.

On June 5, 1997, the Company 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 plaintiff is an investor in 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 for
which FSI acts as the General Partner, including the Growth Funds. The complaint
alleges the same facts and the same nine causes of action as in the Koch action,
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,   constructive  fraud,  unjust
enrichment, violations of California Corporations Code Section 1507, and a claim
for treble damages under California Civil Code Section 3345.

On July 31, 1997, the defendants  filed with the district court for the Northern
District of California  (Case No.  C-97-2847  WHO) a petition  under the Federal
Arbitration Act seeking to compel  arbitration of plaintiff's  claims and for an
order  staying  the  state  court   proceedings   pending  the  outcome  of  the
arbitration.  In connection with this motion,  plaintiff agreed to a stay of the
state court  action  pending the  district  court's  decision on the petition to
compel arbitration. By memorandum and order dated October 23, 1997, the district
court denied the Company's petition to compel arbitration.  On November 5, 1997,
the  Company  filed  an  expedited  motion  for  leave  to  file  a  motion  for
reconsideration  of this order,  which  motion was granted on November 14, 1997.
The parties have agreed to have oral argument on the

<PAGE>

                          PLM EQUIPMENT GROWTH FUND VII
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                 March 31, 1998

8.   Contingencies (continued)

reconsideration  motion set for July 22,  1998.  The state court action has been
stayed pending the district court's decision on this motion.

In  connection  with  her  opposition  to  the  Company's   petition  to  compel
arbitration,  on August 22, 1997 the plaintiff  filed an amended  complaint with
the  state  court  alleging  two new  causes  of action  for  violations  of the
California  Securities Law of 1968 (California  Corporations Code Sections 25400
and 25500),  and for violation of California  Civil Code Sections 1709 and 1710.
Plaintiff has also served certain discovery  requests on defendants.  Because of
the stay, no response to the amended  complaint or to the discovery is currently
required.  The Company believes that the allegations of the amended complaint in
the Romei action are completely  without merit and intends to defend this matter
vigorously.

9.   Subsequent Event

During May 1998,  the  Partnership  purchased  an interest in an trust owning an
MD-82 commercial aircraft for $7.4 million, the remaining interest in this trust
was  purchased  by  an  affiliated  program.  FSI  was  paid  $0.4  million  for
acquisition and lease negotiation fees for the purchase of this interest.













                      (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, 1998 and 1997

(A)      Owned Equipment Operations

Lease  revenues  less  direct  expenses  (defined  as  repair  and  maintenance,
equipment operation,  and asset-specific  insurance expenses) on owned equipment
decreased  during the first quarter of 1998 when compared to the same quarter of
1997. The following  table presents lease revenues less direct expenses by owned
equipment type (in thousands of dollars):

<TABLE>
<CAPTION>

                                                                           For the Three Months
                                                                             Ended March 31,
                                                                          1998              1997
                                                                      ------------------------------

<S>                                                                     <C>               <C>    
Trailers                                                                $ 1,007           $   722
Marine vessels                                                              783               899
Rail equipment                                                              534               610
Aircraft                                                                    392               501
Portable heaters                                                             18                --
Modular buildings                                                            15               152

</TABLE>

Trailers:  Trailer lease revenues and direct expenses were $1.2 million and $0.2
million,  respectively,  for the three months ended March 31, 1998,  compared to
$0.8 million and $0.1 million, respectively, during the same period of 1997. The
increase in trailer contribution was due to the purchase of additional equipment
during the fourth quarter of 1997.

Marine  vessels:  Marine  vessel lease  revenues and direct  expenses  were $0.8
million and $9,000,  respectively,  for the three  months  ended March 31, 1998,
compared to $1.0 million and $0.1 million, respectively,  during the same period
of 1997.  The decrease in marine  vessel  contribution  was due to a lower lease
rate earned on one marine vessel during the first quarter of 1998, when compared
to the same  period of 1997,  which was  partially  offset by lower  repairs and
maintenance.

Rail  equipment:  Rail equipment  lease  revenues and direct  expenses were $0.7
million and $0.2  million,  respectively,  for the three  months ended March 31,
1998, compared to $0.7 million and $0.1 million,  respectively,  during the same
period of 1997. The decrease in railcar  contribution  during 1998 was due to an
increase in repairs  that were  required  during  1998 but were not  required in
1997.

Aircraft: Aircraft lease revenues and direct expenses were $0.5 million and $0.1
million,  respectively,  for the three months ended March 31, 1998,  compared to
$0.5  million and  $5,000,  respectively,  during the same  period of 1997.  The
decrease  in aircraft  contribution  was due to repairs  needed to the  commuter
aircraft and to their off-lease status in 1998.

Portable  Heaters:  Portable  heaters  lease  revenues and direct  expenses were
$18,000 and $0,  respectively,  for the three months  ended March 31, 1998.  The
Partnership purchased this equipment during the first quarter of 1998.

Modular  buildings:  Modular  building lease  revenues and direct  expenses were
$15,000  and $0,  respectively,  for the three  months  ended  March  31,  1998,
compared to $0.2  million and $1,000,  respectively,  during the same quarter of
1997. The primary reason for the decrease in lease revenues and direct  expenses
was 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 $2.8 million for the three months ended March 31,
1998,  decreased  from $3.4  million  for the same  period in 1997.  Significant
variances are explained as follows:

(1) A $0.4 million decrease in depreciation and amortization  expenses from 1997
levels reflects the double-declining balance method of depreciation.

(2) A $0.2 million decrease in the allowance for bad debts was due to a decrease
in uncollectable amounts due from certain lessees.

(C) Net Gain on Disposition of Owned Equipment

The net gain on  disposition  of equipment for the first quarter of 1998 totaled
$33,000, and resulted from the sale of trailers with an aggregate net book value
of $0.2  million  for  proceeds  of $0.2  million.  Net gain on  disposition  of
equipment  for the first quarter of 1997 totaled  $9,000,  and resulted from the
sale of trailers with a net book value of $29,000 for proceeds of $38,000.

(D)  Equity in Net  Income  (Loss) of  Unconsolidated  Special-Purpose  Entities
(USPEs)

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 of dollars):

<TABLE>
<CAPTION>

                                                                             For the Three Months
                                                                               Ended March 31,
                                                                            1998             1997
                                                                        ------------------------------

<S>                                                                       <C>              <C>     
Aircraft, rotable components, and aircraft engines                        $ 5,752          $    435
Mobile offshore drilling unit                                                  22                (4)
Marine vessels                                                               (114)             (253)
                                                                         ----------        ---------
  Equity in net income of unconsolidated special-purpose entities         $ 5,660          $    178
                                                                         ==========        =========
</TABLE>

Aircraft,  rotable components, and aircraft engines: During the first quarter of
1998,  lease  revenues  of  $1.9  million  and the  gain  from  the  sale of the
Partnerships  interest in two trusts of $5.9 million were offset by depreciation
and  administrative  expenses of $2.0  million.  During the same period of 1997,
lease revenues of $2.0 million were offset by  depreciation  and  administrative
expenses of $1.6 million.  Revenues  decreased $0.1 million due to a lower lease
rate earned on certain  equipment during the first quarter of 1998 when compared
to the same  period  of 1997,  which  was  offset  in part by the  Partnership's
investment in an additional  trust during 1997.  The decline in expenses of $0.4
million  was  due   primarily  to  the   double-declining   balance   method  of
depreciation.

Mobile offshore  drilling unit:  During the three months ended March 31 1998 and
1997,  revenues of $0.1 million were offset by depreciation  and  administrative
expenses of $0.1 million.

Marine vessels: During the first quarter of 1998, lease revenues of $0.8 million
were offset by depreciation and administrative  expenses of $0.9 million. During
the same  period  of  1997,  lease  revenues  of $0.8  million  were  offset  by
depreciation  and  administrative  expenses  of $1.1  million.  The  decrease in
depreciation   and   administrative   expenses   was   due   primarily   to  the
double-declining balance method of depreciation.

(E)      Net Income (Loss)

As a result of the foregoing,  the Partnership's net income for the period ended
March 31, 1998 was $5.6 million,  compared to a net loss of $0.3 million  during
the same period of 1997.  The  Partnership's  ability to acquire,  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 first
quarter of 1998 is not necessarily  indicative of future  periods.  In the first
quarter  of 1998,  the  Partnership  distributed  $2.4  million  to the  limited
partners, or $0.45 per weighted-average limited partnership unit.

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

For the three months ended March 31, 1998, the Partnership  generated  operating
cash  of  $7.1  million  (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,  1998 of  approximately  $2.5  million)  to the
partners.

During the three  months ended March 31,  1998,  the General  Partner sold owned
equipment and two investments in USPEs and received  aggregate proceeds of $10.7
million.  The  Partnership  purchased a portfolio  of portable  heaters for $3.2
million,  including  acquisition and lease negotiation fees of $0.2 million that
was  paid  to FSI  for  this  equipment.  The  Partnership  also  completed  its
commitment  to  purchase  an  interest  in a trust  owning  an MD-82  Stage  III
commercial aircraft for $6.8 million including acquisition and lease negotiation
fees of $0.4 million  that was paid to FSI for the  purchase of this  equipment.
The Partnership made a deposit of $0.7 million toward this interest in 1997.

The General  Partner has entered into a short-term  joint $50.0  million  credit
facility.  As of May 13, 1998,  PLM Equipment  Growth Fund V had $1.6 million in
outstanding  borrowings  and  American  Finance  Group,  Inc.,  a  wholly  owned
subsidiary  of  PLM  International,  Inc.,  had  $37.6  million  in  outstanding
borrowings. No other eligible borrower had any outstanding borrowings.

(III) YEAR 2000 COMPLIANCE

The General  Partner is currently  addressing  the year 2000  computer  software
issue and is creating a timetable  for  carrying  out any program  modifications
that may be required.  The General  Partner does not anticipate that the cost of
those modifications allocatable to the Partnership will be material.

(IV)  ACCOUNTING PRONOUNCEMENTS

In  June  1997,  the  Financial   Accounting  Standards  Board  issued  two  new
statements:  SFAS No. 130,  "Reporting  Comprehensive  Income,"  which  requires
enterprises to report,  by major  component and in total,  all changes in equity
from  nonowner  sources;  and SFAS No. 131,  "Disclosures  about  Segments of an
Enterprise  and  Related  Information,"  which  establishes  annual and  interim
reporting  standards  for a public  company's  operating  segments  and  related
disclosures about its products, services, geographic areas, and major customers.
Both statements are effective for the  Partnership's  fiscal year ended December
31, 1998. The effect of adoption of these statements will be limited to the form
and  content  of  the   Partnership's   disclosures  and  will  not  impact  the
Partnership's results of operations, cash flow, or financial position.

(V) OUTLOOK FOR THE FUTURE

Several factors may affect the Partnership's  operating  performance in 1998 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  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 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,  which
concludes   December  31,  2001.  The  General   Partner   believes  that  these
acquisitions may cause the Partnership to generate  additional earnings and cash
flow for the Partnership.

(VI)      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.























                      (this space intentionally left blank)

                                                     


<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 14, 1998                By:   /s/ Richard K Brock
                                        -------------------
                                        Richard K Brock
                                        Vice President and
                                        Corporate Controller

























<PAGE>