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, 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>



                                                                           June 30,           December 31,
                                                                             1998                 1997
                                                                      --------------------------------------
<S>                                                                     <C>                   <C>        
Assets

Equipment held for operating lease, at cost                             $       61,428        $    58,844
Less accumulated depreciation                                                  (27,646)           (24,650 )
                                                                      ---------------------------------------
                                                                                33,782             34,194
Equipment held for sale                                                          3,721              4,148
                                                                      ---------------------------------------
  Net equipment                                                                 37,503             38,342

Cash and cash equivalents                                                        8,956              9,327
Restricted cash                                                                    193                191
Accounts receivable, less allowance for doubtful accounts
    of $508 in 1998 and $522 in 1997                                             1,053                887
Investments in unconsolidated special-purpose entities                          32,314             31,377
Deferred charges, net of accumulated amortization
    of $164 in 1998 and $274 in 1997                                               257                296
Prepaid expenses and other assets                                                   79                 49
                                                                      ---------------------------------------

      Total assets                                                      $       80,355        $    80,469
                                                                      =======================================


Liabilities and partners' capital

Liabilities:
Accounts payable and accrued expenses                                   $          304        $       367
Due to affiliates                                                                2,549              4,563
Lessee deposits and reserve for repairs                                          1,172              1,477
Notes payable                                                                   23,000             23,000
                                                                      ---------------------------------------
  Total liabilities                                                             27,025             29,407

Partners' capital:
Limited partners (5,334,211 limited partnership units as of
    June 30, 1998 and 5,370,297 as of December 31, 1997)                        53,330             51,062
General Partner                                                                     --                 --
                                                                      ---------------------------------------
  Total partners' capital                                                       53,330             51,062
                                                                      ---------------------------------------

      Total liabilities and partners' capital                           $       80,355        $    80,469
                                                                      =======================================

</TABLE>












                       See accompanying notes to financial
                                  statements.


<PAGE>




                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                            (A Limited Partnership)
                              STATEMENTS OF INCOME
        (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,
                                                        1998         1997                1998            1997
                                                 ------------------------------------------------------------------
<S>                                                <C>             <C>                 <C>              <C>      
Revenues


Lease revenue                                      $   3,403       $   3,310           $   6,624        $   6,456
Interest and other income                                 87              56                 139              105
Net gain (loss) on disposition of equipment               (1)          1,790                  33            1,800
                                                 --------------------------------------------------------------------
    Total revenues                                     3,489           5,156               6,796            8,361
                                                 --------------------------------------------------------------------

Expenses

Depreciation and amortization                          1,905           2,265               3,844            4,559
Repairs and maintenance                                  383             386                 835              627
Interest expense                                         422             418                 832              855
Management fees to affiliate                             193             185                 376              361
Equipment operating expense                               97              18                 106               28
Insurance expense                                         39              17                  61               37
General and administrative expenses
      to affiliates                                      180             138                 351              305
Other general and administrative expenses                146              61                 267              162
Provision for (recovery of) bad debts                     24            (149 )                42               55
                                                 --------------------------------------------------------------------
    Total expenses                                     3,389           3,339               6,714            6,989
                                                 --------------------------------------------------------------------

Equity in net income of unconsolidated
      special-purpose entities                         2,110             339               7,770              518
                                                 --------------------------------------------------------------------

Net income                                         $   2,210       $   2,156           $   7,852        $   1,890
                                                 ====================================================================

Partners' share of net income

Limited partners                                   $   2,083       $   2,029           $   7,598        $   1,635
General Partner                                          127             127                 254              255
                                                 --------------------------------------------------------------------

Total                                              $   2,210       $   2,156           $   7,852        $   1,890
                                                 ====================================================================

Net income per weighted-average
      limited partnership unit: (5,348,627
      units and 5,370,297 units as of
      June 30, 1998 and 1997)                      $    0.39       $    0.38           $    1.42        $    0.30
                                                 ====================================================================

Cash distributions                                 $   2,529       $   2,544           $   5,071        $   5,089
                                                 ====================================================================
Cash distributions per weighted-average
      limited partnership 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, 1996 to June 30, 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                                                      7,598                 254                   7,852

Repurchase of limited partnership units                          (513)                 --                    (513)

Cash distribution                                              (4,817)               (254)                 (5,071)
                                                        ------------------------------------------------------------

  Partners' capital as of June 30, 1998                   $    53,330            $     --             $    53,330
                                                        ============================================================

</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,

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

<S>                                                                              <C>              <C>       
Operating activities


Net income                                                                       $    7,852       $    1,890
Adjustments to reconcile net income to net cash
      provided by (used in) operating activities:
  Depreciation and amortization                                                       3,844            4,559
  Net gain on disposition of equipment                                                  (33)          (1,800)
  Equity in net income from unconsolidated
      special-purpose entities                                                       (7,770)            (518)
  Changes in operating assets and liabilities:
    Restricted cash                                                                      (2)              --
    Accounts receivable, net                                                           (182)             141
    Prepaid expenses and other assets                                                   (30)              42
    Accounts payable and accrued expenses                                               (63)            (103)
    Due to affiliates                                                                    57              261
    Lessee deposits and reserve for repairs                                            (305)             154
                                                                               ---------------------------------
      Net cash provided by operating activities                                       3,368            4,626
                                                                               ---------------------------------

Investing activities

Payments for equipment and capitalized repairs                                       (3,020)             (87)
Investment in and equipment purchased and placed in
    unconsolidated special-purpose entities                                         (14,720)              --
Distributions from unconsolidated special-purpose entities                            6,751            4,421
Distributions from liquidation of unconsolidated special-purpose entities            14,802               --
Payments of acquisition fees to affiliate                                              (135)              --
Payments of lease negotiation fees to affiliate                                         (30)              --
Proceeds from disposition of equipment                                                  268            4,363
                                                                               ---------------------------------
      Net cash provided by investing activities                                       3,916            8,697
                                                                               ---------------------------------

Financing activities

Payments of short-term note payable                                                      --           (2,000)
Payments of due to affiliates                                                        (3,582)              --
Increase in due to affiliates                                                         1,511               --
Cash distribution paid to limited partners                                           (4,817)          (4,834)
Cash distribution paid to General Partner                                              (254)            (255)
Repurchase of limited partnership units                                                (513)              --
                                                                               ---------------------------------
      Net cash used in financing activities                                          (7,655)          (7,089)
                                                                               ---------------------------------

Net (decrease) increase in cash and cash equivalents                                   (371)           6,234
Cash and cash equivalents at beginning of period                                      9,327            2,468
                                                                                                ----------------
                                                                               -------------------
Cash and cash equivalents at end of period                                       $    8,956       $    8,702
                                                                               =================================

Supplemental information

Interest paid                                                                    $      869       $      822
                                                                               =================================
Supplemental disclosure of noncash investing and financing activities:
  Sale proceeds included in accounts receivable                                  $       31       $        5
                                                                               =================================

</TABLE>

                       See accompanying notes to financial
                                  statements.

<PAGE>

                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                  June 30, 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 June 30, 1998 and December 31, 1997, the statements of
income for the three and six months ended June 30, 1998 and 1997, the statements
of cash  flows  for the six  months  ended  June  30,  1998  and  1997,  and the
statements of changes in partners' capital for the period from December 31, 1996
to June 30, 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- 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
June 30, 1998, the Partnership had repurchased 36,086 limited  partnership units
for $0.5 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 and $5.1
million for the three and six months ended June 30, 1998 and 1997, respectively.
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 six months  ended June 30,  1998 were deemed to be 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.  Cash
distributions  related to the results from the second  quarter of 1998,  of $1.2
million, were paid during the third 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                 For the Six Months
                                                        Ended June 30,                      Ended June 30,

                                                      1998            1997                1998             1997
                                                 --------------------------------------------------------------------
<S>                                                <C>             <C>                 <C>              <C>      
Management fees                                    $     112       $     125           $     221        $     247
Data processing and administrative
   expenses                                               33              34                  73               67
Insurance expense                                         16              48                  29              106

</TABLE>

The Partnership's proportional share of USPE-affiliated management fees, of $0.1
million and $0.2 million, was payable as of June 30, 1998 and December 31, 1997,
respectively.

Transportation  Equipment  Indemnity  Company,  Ltd.  (TEI), an affiliate of the
General  Partner,  provides  marine  insurance  coverage  for the  Partnership's
investment in USPEs and other insurance brokerage services.  TEI did not provide
the same insurance  coverage during 1998 as had been provided 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 six months ended June 30, 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
                                  June 30, 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 six months ended June 30, 1998
was $0.8 million. No similar fees were paid during the same period of 1997.

The balance due to  affiliates  as of June 30, 1998 includes $0.1 million due to
FSI and its affiliates  for  management  fees and $2.4 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 six months ended June 30, 1998, the Partnership  paid $3.6 million to
affiliated  USPEs.  The Partnership  also paid $1.5 million to affiliated  USPEs
during July 1998.

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):

<TABLE>
<CAPTION>

                                               June 30,          December 31,
                                                 1998                 1997
                                            -------------------------------------

<S>                                          <C>                  <C>        
Marine vessels                               $    22,212          $    22,212
Trailers                                          17,554               18,111
Aircraft                                           8,305                8,305
Rail equipment                                    10,069               10,063
Portable heaters                                   3,135                   --
Modular buildings                                    153                  153
                                            -------------       --------------
                                                  61,428               58,844
Less accumulated depreciation                    (27,646)             (24,650)
                                            -------------       --------------
                                                  33,782               34,194
Equipment held for sale                            3,721                4,148
                                            -------------       --------------
    Net equipment                            $    37,503          $    38,342
                                            =============       ==============
</TABLE>

As of  June  30,  1998,  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. 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 $3.7 million and $4.1
million as of June 30, 1998 and December 31, 1997, respectively.

The Partnership  purchased a portfolio of portable heaters during the six months
ended June 30, 1998 for $3.1 million, including $0.1 million in acquisition fees
paid to FSI.

During the six months ended June 30, 1998, the  Partnership  disposed of or sold
trailers and a railcar with a net book value of $0.2 million for $0.3 million.

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


<PAGE>



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

                                                                                     June 30,     December 31,
                                                                                       1998            1997
                                                                                ------------------------------------




  <S>                                                                             <C>                <C>       
  50% interest in a trust owning an MD-82 commercial aircraft                     $     7,796        $       --
  80% interest in an entity owning a bulk-carrier marine vessel                         5,687             6,014
  50% interest in a trust owning an MD-82 commercial aircraft                           5,437               682

  33% interest in two trusts owning three 737-200A commercial aircraft,
            two aircraft engines, and a portfolio of aircraft rotables                  4,590             8,036

  24% interest in a trust owning a 767-200ER commercial aircraft                        4,413             4,824
  44% interest in an entity owning a bulk-carrier marine vessel                         2,397             2,439
  10% interest in an entity owning a mobile offshore drilling unit                      1,595             1,712
  50% interest in a trust that owned four 737-200A commercial aircraft                    245             4,362
  25% interest in a trust that owned four 737-200A commercial aircraft                    154             3,308
      Net investments                                                             $    32,314        $   31,377
                                                                                 =============     =============
</TABLE>

As of June 30, 1998 and December 31, 1997,  the  Partnership  had an interest in
trusts that owned multiple  aircraft (the Trusts).  As of December 31, 1997, two
of  these  Trusts  contained  provisions,   under  certain  circumstances,   for
allocating  specific  aircraft to the beneficial  owners.  During the six months
ended June 30, 1998, in one of these Trusts, the Partnership sold two commercial
aircraft assigned to it, with a net book value of $3.4 million,  for proceeds of
$8.8 million.  During the same period,  in another trust,  the Partnership  also
sold the  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.  The remaining
designated  commercial  aircraft in one of the Trusts was transferred out of the
Trust and to PLM Equipment Growth Fund III, an affiliated program.

During the six  months  ended  June 30,  1998,  the  Partnership  completed  its
commitment  to  purchase  an  interest  in a trust  owning  an MD-82  Stage  III
commercial   aircraft  for  $7.2  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. The Partnership  also purchased  another  interest in a trust owning an
MD-82 Stage III commercial aircraft for $8.2 million,  including acquisition and
lease  negotiation fees of $0.4 million that was paid to FSI for the purchase of
this  equipment.  The  remaining  interest  in this  trust was  purchased  by an
affiliated program.

7.   Debt

The General  Partner  entered  into a  short-term,  joint $50.0  million  credit
facility.  This facility was amended on June 1, 1998 to temporarily increase the
borrowing  capacity of American  Finance Group,  Inc. (AFG), a subsidiary of PLM
International,  Inc.,  from $50.0 million to $55.0  million  until  September 1,
1998. On June 8, 1998,  this facility was amended again to temporarily  increase
AFG's borrowing capacity from $55.0 million to $60.0 million until July 8, 1998.
As of June 30, 1998, the Partnership had no borrowing under the short-term joint
$60.0 million credit facility. Among the other eligible borrowers, PLM Equipment
Growth  Fund V had  borrowings  of $1.6  million,  AFG had  borrowings  of $44.8
million,  and TEC  Acquisub,  Inc., an indirect  wholly-owned  subsidiary of PLM
International,  Inc., had borrowings of $2.0 million under the short-term joint,
$60.0 million credit  facility as of June 30, 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

<PAGE>

                          PLM EQUIPMENT GROWTH FUND VII
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                  June 30, 1998

Contingencies (continued)

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
(the  Funds) for which the  Company's  wholly-owned  subsidiary,  PLM  Financial
Services,  Inc. (FSI),  acts as the general partner,  including the Partnership,
PLM Equipment  Growth Funds IV, V and VI. 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 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,  and
control persons. Based on these duties,  plaintiffs assert liability against the
defendants  for improper  sales and marketing  practices,  mismanagement  of the
Funds, and concealing such mismanagement from investors in the 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.

In March 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. In September 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.
In October 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 Fund, and to stay further  proceedings  pending the outcome of
such arbitration.  Notwithstanding  plaintiffs'  opposition,  the district court
granted the motion in December 1997.

Following  various  unsuccessful  requests  that the district  court  reverse or
otherwise amend its decisions,  plaintiffs  filed with the U.S. Court of Appeals
for 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  order  denying  plaintiffs'  motion to remand and
dismissing the claims of the California  plaintiff.  This appeal was voluntarily
dismissed by plaintiffs in June 1998 pending  settlement of the Koch action,  as
discussed below.

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  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 (the 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.  In October 1997,  the district  court denied the Company's
petition  to  compel  arbitration  and in  November  1997,  agreed  to hear  the
Company's motion for  reconsideration  of this order. The hearing on this motion
has been taken off calendar and the district  court has  dismissed  the petition
pending  settlement of the Romei  action,  as discussed  below.  The state court
action continues to be stayed pending such resolution. In connection

<PAGE>

                          PLM EQUIPMENT GROWTH FUND VII
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                  June 30, 1998

8.   Contingencies (continued)

with her opposition to the petition to compel  arbitration,  the plaintiff filed
an amended complaint with the state court in August 1997 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  also served  certain  discovery
requests  on  defendants.  Because  of the  stay,  no  response  to the  amended
complaint or to the discovery is currently required.

In May 1998, all parties to the Koch and Romei actions entered into a memorandum
of  understanding  (MOU)  related to the  settlement of those  actions.  The MOU
contemplates  a settlement  and release of all claims in exchange for payment of
up to $6.0  million.  The final  settlement  amount will depend on the number of
authorized   claims   filed  by   authorized   claimants,   the  amount  of  the
administrative costs incurred in connection with the settlement,  and the amount
of attorneys' fees awarded by the Alabama  district court.  The Company will pay
up to $0.3  million of the  settlement,  with the  remainder  being funded by an
insurance  policy.  The defendants  will continue to deny each of the claims and
contentions and admit no liability in connection  with the proposed  settlement.
The settlement remains subject to numerous conditions, including but not limited
to (a)  agreement and  execution by the parties of a settlement  agreement,  (b)
notice  to and  certification  of the  class  for  settlement  purposes  and (c)
preliminary and final approval of the settlement by the Alabama  district court.
The Company  continues  to believe  that the  allegations  of the Koch and Romei
actions  are  completely  without  merit and  intends to continue to defend this
matter vigorously if the settlement is not consummated.














                      (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 PLM  Equipment  Growth  & Income  Fund  VII's  (the  Partnership)
Operating Results for the Three Months Ended June 30, 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 second 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 June 30,
                                                                          1998              1997
                                                                      ------------------------------

<S>                                                                     <C>               <C>    
Trailers                                                                $   959           $   746
Marine vessels                                                              665               902
Rail equipment                                                              529               492
Aircraft                                                                    499               501
Portable heaters                                                            231                --
Modular buildings                                                            11               256

</TABLE>

Trailers:  Trailer lease revenues and direct expenses were $1.2 million and $0.2
million,  respectively,  for the three months  ended June 30, 1998,  compared to
$0.9 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 $0.1  million,  respectively,  for the three  months  ended June 30,
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 second  quarter of 1998,  when
compared to the same period of 1997.

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, 1998
and 1997. The increase in railcar contribution during 1998 was due to a decrease
in required repairs during 1998 when compared to the same period of 1997.

Aircraft:  Aircraft  lease  revenues and direct  expenses  were $0.5 million and
$6,000, respectively, for the three months ended June 30, 1998, compared to $0.5
million and $5,000, respectively, during the same period of 1997.

Portable  heaters:  Lease revenues and direct expenses for portable heaters were
$0.2 million and $0, respectively, for the three months ended June 30, 1998. The
Partnership purchased this equipment during the first quarter of 1998.

Modular  buildings:  Modular  building lease  revenues and direct  expenses were
$11,000 and $0, respectively, for the three months ended June 30, 1998, compared
to $0.3 million and $11,000,  respectively,  during the same period of 1997. The
primary  reason for the decrease in lease  revenues and direct  expenses was the
sale of the majority of this equipment during 1997.

(B) Indirect Expenses Related to Owned Equipment Operations

Total  indirect  expenses  were $2.9 million for the three months ended June 30,
1998 and 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 $0.1  million  increase  in  administrative  expenses  was  due to  higher
professional  services  during 1998,  which were not needed during 1997,  and to
higher data processing costs.

(3) A $0.2  million  increase  in the  allowance  for  bad  debt  was due to the
collection of unpaid invoices in 1997 that had previously been reserved for as a
bad debt. A similar collection did not occur during 1998.

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

The net loss on  disposition of equipment for the second quarter of 1998 totaled
$1,000,  and resulted  from the sale of trailers and a railcar with an aggregate
net book value of $47,000 for proceeds of $46,000.  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 a net book value of $2.5
million for proceeds of $4.3 million.

(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 June 30,
                                                                            1998             1997
                                                                        ------------------------------

<S>                                                                       <C>              <C>     
Aircraft, rotable components, and aircraft engines                        $ 2,228          $    432
Mobile offshore drilling unit                                                  14               (40)
Marine vessels                                                               (132)              (53)
                                    ------------------------------------------------     -------------
  Equity in net income of USPEs                                           $ 2,110          $    339
                                    ================================================     =============
</TABLE>

Aircraft, rotable components, and aircraft engines: During the second quarter of
1998,  lease  revenues  of  $1.4  million  and the  gain  from  the  sale of the
Partnerships interest in a trust of $2.8 million were offset by depreciation and
administrative  expenses of $2.0 million.  During the same period of 1997, lease
revenues of $2.1 million were offset by depreciation and administrative expenses
of  $1.6  million.  Revenues  decreased  $0.7  million  due to the  sale  of the
Partnership's  investment in two trusts containing ten commercial aircraft and a
lower lease rate earned on certain equipment. The decrease in lease revenues was
offset in part by the  Partnership's  investment in two additional trusts owning
an MD-82  commercial  aircraft in each during 1998.  The increase in expenses of
$0.4  million  was  primarily  due  to  depreciation  of the  investment  in two
additional  trusts during 1998  partially  offset by the sale the  Partnership's
interest in two trusts.

Mobile offshore  drilling unit:  During the three months ended June 30, 1998 and
1997,  revenues of $0.1 million were offset by depreciation  and  administrative
expenses of $0.1 million.

Marine  vessels:  During the  second  quarter of 1998,  lease  revenues  of $0.9
million were offset by depreciation and administrative expenses of $1.1 million.
During the same period of 1997,  lease  revenues of $0.9  million were offset by
depreciation  and  administrative  expenses  of $1.0  million.  The  increase in
depreciation  and  administrative  expenses was due  primarily to an increase in
marine operating expenses.

(E)      Net Income

As a result of the foregoing,  the Partnership's net income was $2.2 million for
the period ended June 30, 1998 and 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 second quarter of 1998 is not necessarily  indicative of future periods.  In
the second  quarter of 1998,  the  Partnership  distributed  $2.4 million to the
limited partners, or $0.45 per weighted-average limited partnership unit.

Comparison of the Partnership's  Operating Results for the Six Months Ended June
30, 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 six months  ended June 30, 1998 when  compared to the same
period of 1997. The following table presents lease revenues less direct expenses
by owned equipment type (in thousands of dollars):

<TABLE>
<CAPTION>

                                                                            For the Six Months
                                                                              Ended June 30,
                                                                          1998              1997
                                                                      ------------------------------

<S>                                                                     <C>               <C>    
Trailers                                                                $ 1,966           $ 1,468
Marine vessels                                                            1,448             1,801
Rail equipment                                                            1,063             1,103
Aircraft                                                                    892             1,002
Portable heaters                                                            249                --
Modular buildings                                                            26               408

</TABLE>

Trailers:  Trailer lease revenues and direct expenses were $2.4 million and $0.4
million,  respectively, for the six months ended June 30, 1998, compared to $1.7
million and $0.2  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 $1.6
million and $0.1 million,  respectively, for the six months ended June 30, 1998,
compared to $1.9 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 1998,  when compared to the same period
of 1997.

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, 1998
and 1997.

Aircraft: Aircraft lease revenues and direct expenses were $1.0 million and $0.1
million,  respectively, for the six months ended June 30, 1998, compared to $1.0
million and $9,000,  respectively,  during the same period of 1997. The decrease
in aircraft  contribution  was due to repairs  needed to the  commuter  aircraft
during 1998. Similiar repairs were not needed during 1997.

Portable heaters:  Portable heaters lease revenues and direct expenses were $0.2
million  and $0,  respectively,  for the six  months  ended June 30,  1998.  The
Partnership purchased this equipment during the first quarter of 1998.

Modular  buildings:  Modular  building lease  revenues and direct  expenses were
$26,000 and $0,  respectively,  for the six months ended June 30, 1998, compared
to $0.4 million and $12,000, 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 $5.7  million for the six months  ended June 30,
1998,  decreased  from $6.3  million  for the same  period in 1997.  Significant
variances are explained as follows:

(1) A $0.7 million decrease in depreciation and amortization  expenses from 1997
levels reflects the double-declining balance method of depreciation.

(2) A $0.2  million  increase in the  administrative  expenses was due to higher
professional services during 1998, which were not needed during 1997, and higher
data processing costs.




(C)                   Net Gain on Disposition of Owned Equipment

The net gain on  disposition of equipment for the six months ended June 30, 1998
totaled  $33,000,  and resulted  from the sale of trailers and a railcar with an
aggregate net book value of $0.2 million for proceeds of $0.3  million.  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 modular buildings and trailers with
a net book value of $2.5 million for proceeds of $4.3 million.

(D)      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 of dollars):

<TABLE>
<CAPTION>

                                                                              For the Six Months
                                                                                Ended June 30,
                                                                            1998             1997
                                                                        ------------------------------

<S>                                                                       <C>              <C>     
Aircraft, rotable components, and aircraft engines                        $ 7,980          $    868
Mobile offshore drilling unit                                                  37               (44)
Marine vessels                                                               (247)             (306)
                                    ------------------------------------------------     -------------
  Equity in net income of USPEs                                           $ 7,770          $    518
                                    ================================================     =============
</TABLE>

Aircraft,  rotable components, and aircraft engines: During the six months ended
June 30, 1998,  lease revenues of $3.3 million and the gain from the sale of the
Partnership's interest in two trusts of $8.8 million were offset by depreciation
and  administrative  expenses of $4.1  million.  During the same period of 1997,
lease revenues of $4.1 million were offset by  depreciation  and  administrative
expenses of $3.2 million.  Lease revenues decreased $0.8 million due to the sale
of the Partnership's investment in two trusts containing ten commercial aircraft
and a lower lease rate earned on certain  equipment during 1998 when compared to
the same period of 1997.  The decrease in lease  revenues  caused by these sales
was partially offset by the  Partnership's  investment in two additional  trusts
during 1998.  The increase in expenses of $0.9 million was due  primarily to the
double-declining  balance  method  of  depreciation  of  the  investment  in two
additional  trusts during 1998  partially  offset by the sale the  Partnership's
interest in two other trusts.

Mobile  offshore  drilling  unit:  During the six months ended June 30, 1998 and
1997,  revenues of $0.2 million were offset by depreciation  and  administrative
expenses of $0.2 million.  The increase in the contribution  from this equipment
was due to a lower depreciation expense caused by the  double-declining  balance
method of depreciation.

Marine  vessels:  During the six months ended June 30, 1998,  lease  revenues of
$1.7 million were offset by  depreciation  and  administrative  expenses of $2.0
million.  During the same period of 1997,  lease  revenues of $1.8  million were
offset by  depreciation  and  administrative  expenses of $2.1  million.  Marine
vessel lease revenues  decreased during the six months ended June 30 1998 due to
a slightly lower lease rate earned on one of the marine vessels. The decrease in
depreciation   and   administrative   expenses   was   due   primarily   to  the
double-declining balance method of depreciation.

(E)      Net Income

As a result of the foregoing,  the  Partnership's  net income for the six months
ended June 30, 1998 was $7.9  million,  compared to a net income of $1.9 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 six
months ended June 30, 1998 is not necessarily  indicative of future periods.  In
the six months ended June 30, 1998, the Partnership  distributed $4.8 million to
the limited partners, or $0.90 per weighted-average limited partnership unit.


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

For the six months ended June 30, 1998, the Partnership generated operating cash
of $10.1 million (net cash provided by operating activities,  plus distributions
from USPEs) to meet its operating  obligations and maintain the current level of
distributions  (total for six months ended June 30, 1998 of  approximately  $5.1
million) to the partners.

During the six months ended June 30, 1998, PLM Financial Services,  Inc. (FSI or
the General Partner), a wholly-owned subsidiary of PLM International, Inc., sold
owned equipment and two investments in USPEs and received  aggregate proceeds of
$15.1 million.  The  Partnership  purchased a portfolio of portable  heaters for
$3.0 million and paid FSI acquisition and lease negotiation fees of $0.2 million
for this  equipment.  The  Partnership  completed its  commitment to purchase an
interest  in a trust  owning an MD- 82 Stage III  commercial  aircraft  for $7.2
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  Partnership  also
purchased  another  interest  in a trust  owning an MD-82  Stage III  commercial
aircraft for $8.2 million,  including  acquisition and lease negotiation fees of
$0.4  million,  that was paid to FSI for the  purchase  of this  equipment,  the
remaining interest in this trust was purchased by an affiliated program.

During the six months ended June 30, 1998, the Partnership paid $3.6 million due
to  affiliated  USPEs.  As of June 30 1998.  $2.4 million was due to  affiliated
USPEs. The Partnership subsequently paid $1.5 million to affiliated USPEs during
July 1998.

The General  Partner has entered into a short-term  joint $50.0  million  credit
facility.  This facility was amended on June 1, 1998 to temporarily increase the
borrowing  capacity of American Finance Group,  Inc. (AFG),  a.subsidiary of PLM
International,  Inc.,  from $50.0 million to $55.0  million  until  September 1,
1998.  As of August 3,  1998,  TEC  Acquisub,  Inc.,  an  indirect  wholly-owned
subsidiary of PLM  International,  Inc.,  had borrowings of $2.0 million and AFG
had  borrowings of $42.6 million under the shor term joint $55.0 million  credit
facility. 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 allocable 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 the 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.

In June 1998,  the  Financial  Accounting  Standards  Board issued SFAS No. 133,
"Accounting   for  Derivative   Instruments  and  Hedging   Activities",   which
standardizes  the  accounting  for  derivative  instruments,  including  certain
derivative instruments embedded in other contracts,  by requiring that an entity
recognize  those items as assets or  liabilities  in the  statement of financial
position and measure  them at fair value.  This  statement is effective  for all
quarters of fiscal years beginning after June 15, 1999. As of June 30, 1998, the
General  Partner  is  reviewing  the  effect  this  standard  will  have  on the
Partnership's consolidated financial statements.

(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

10.1 First  Amendment to Restated  Warehousing  Credit  Agreement among American
     Finance Group, Inc., First Union National Bank of North Carolina,  and Bank
     of Montreal, dated as of June 1, 1998.

10.2 Second  Amendment to Restated  Warehousing  Credit Agreement among American
     Finance Group, Inc., First Union National Bank, and Bank of Montreal, dated
     as of June 8, 1998.

(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: August 3, 1998             By: /s/ Richard K Brock
                                     -------------------
                                     Richard K Brock
                                     Vice President and
                                     Corporate Controller

























<PAGE>