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 September 30, 1997


       [  ]   Transition Report Pursuant to Section 13 or 15(d) of the 
              Securities Exchange Act of 1934
              For the transition period from              to


                         Commission file number 33-55796
                             -----------------------



                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                  (Exact name of registrant as specified in its
                                    charter)


      California                                         94-3168838
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                        Identification No.)

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


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


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







<PAGE>



                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                             (A Limited Partnership)
                                 BALANCE SHEETS
                 (in thousands of dollars, except unit amounts)

<TABLE>
<CAPTION>


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

   Equipment held for operating lease, at cost                           $    62,849          $    67,441
   Less accumulated depreciation                                             (25,951 )            (21,494 )
                                                                         -----------------------------------
       Net equipment                                                          36,898               45,947

   Cash and cash equivalents                                                  10,338                2,468
   Restricted cash                                                               189                  158
   Investments in unconsolidated special-purpose entities                     32,022               37,141
   Accounts receivable, net of allowance for doubtful accounts
         of $522 in 1997 and $330 in 1996                                        776                1,214
   Prepaid expenses and other assets                                               3                   58
   Deferred charges, net of accumulated amortization
         of $247 in 1997 and $493 in 1996                                        287                  412
                                                                         -----------------------------------

   Total assets                                                          $    80,513          $    87,398
                                                                         ===================================

   Liabilities and partners' capital:

   Liabilities:
   Accounts payable and accrued expenses                                 $       680          $       296   
   Due to affiliates                                                             948                  605
   Lessee deposits and reserve for repairs                                     1,850                1,360
   Short-term note payable                                                         -                2,000
   Note payable                                                               23,000               23,000
                                                                         -----------------------------------
       Total liabilities                                                      26,478               27,261

   Partners' capital:
   Limited partners (5,370,297 depositary units as of
         September 30, 1997 and as of December 31, 1996)                      54,035               60,137
   General Partner                                                                 -                    -
                                                                         -----------------------------------
       Total partners' capital                                                54,035               60,137
                                                                         -----------------------------------

   Total liabilities and partners' capital                               $    80,513          $    87,398   
                                                                         ===================================


</TABLE>











                       See accompanying notes to financial
                                  statements.


<PAGE>



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


                                                       For the Three Months               For the Nine Months
                                                       Ended September 30,                Ended September 30,
                                                         1997         1996               1997            1996
                                                    --------------------------------------------------------------

   <S>                                              <C>            <C>                <C>             <C>     
   Revenues:

   Lease revenue                                    $   2,958      $   3,135          $  9,413        $  9,144
   Interest and other income                              121             68               226             366
   Net gain on disposition of equipment                     2              2             1,802              25
                                                    --------------------------------------------------------------
       Total revenues                                   3,081          3,205            11,441           9,535
                                                    --------------------------------------------------------------

   Expenses:

   Depreciation and amortization                        2,143          2,296             6,701           6,358
   Marine equipment operating expense                      15             36                43              92
   Repairs and maintenance                                365            422               992             964
   Interest expense                                       418            427             1,273           1,263
   Insurance expense                                       28             23                65              55
   Management fees to affiliate                           163            230               524             447
   General and administrative expenses
         to affiliates                                    207             30               510             233
   Other general and administrative expenses               98            245               262             649
   Provision for (recovery of) bad debts                  171           (120 )             226              93
                                                    --------------------------------------------------------------
                                                    --------------------------------------------------------------
       Total expenses                                   3,608          3,589            10,596          10,154
                                                    --------------------------------------------------------------

   Equity in net income (loss) of unconsol-
         idated special-purpose entities                  168           (645 )             686            (807 )
                                                    --------------------------------------------------------------

   Net income (loss)                                $    (359 )    $  (1,029 )        $  1,531        $ (1,426 )
                                                    ==============================================================

   Partners' share of net income (loss):

   Limited partners                                 $    (486 )    $  (1,156 )        $  1,149        $ (1,807 )
   General Partner                                        127            127               382             381
                                                    --------------------------------------------------------------

   Total                                            $    (359 )    $  (1,029 )        $  1,531        $ (1,426 )
                                                    ==============================================================

   Net income (loss) per weighted-average
         depositary unit (5,370,297 units as of
         September 30, 1997 and 1996)               $   (0.09 )    $   (0.22 )        $   0.21        $  (0.34 )
                                                    ==============================================================

   Cash distributions                               $   2,544      $   2,545          $  7,633        $  7,632
                                                    ==============================================================
   Cash distributions per weighted-average
         depositary unit                            $    0.45      $    0.45          $   1.35        $   1.35
                                                    ==============================================================


</TABLE>




                       See accompanying notes to financial
                                  statements.



<PAGE>



                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                            ( A Limited Partnership)
                 STATEMENTS OF CHANGES IN PARTNERS' CAPITAL For
             the period from December 31, 1995 to September 30, 1997
                            (in thousands of dollars)

<TABLE>
<CAPTION>

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

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

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

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

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

   Net income                                                    1,149               382                  1,531

   Cash distributions                                           (7,251 )            (382 )               (7,633 )
                                                           -------------------------------------------------------

   Partners' capital as of September 30, 1997              $    54,035           $     -             $   54,035
                                                           =======================================================


</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 Nine Months
                                                                                    Ended September 30,
                                                                                   1997          1996
                                                                               ------------------------------

  <S>                                                                           <C>           <C>         
  Operating activities:

  Net income (loss)                                                             $   1,531     $   (1,426 )
  Adjustments to reconcile net income (loss) to net cash
          provided by operating activities:
    Net gain on disposition of equipment                                           (1,802 )          (25 )
    Equity in net (income) loss from unconsolidated
          special-purpose entities                                                   (686 )          807
    Depreciation and amortization                                                   6,701          6,358
    Changes in operating assets and liabilities:
      Restricted cash                                                                 (31 )          212
      Accounts receivable                                                             393           (234 )
      Prepaid expenses                                                                 55             18
      Accounts payable and accrued expenses                                           384            282
      Due to affiliates                                                               343            (10 )
      Lessee deposits and reserve for repairs                                         490           (259 )
                                                                                -----------------------------
          Net cash provided by operating activities                                 7,378          5,723
                                                                                -----------------------------

  Investing activities:

  Payments for purchase of equipment and capitalized repairs                          (91 )       (8,998 )
  Payments for equipment acquisition deposits                                           -            (19 )
  Investment in and equipment purchased and placed in
          unconsolidated special-purpose entities                                       -         (5,838 )
  Distributions from unconsolidated special purpose entities                        5,805          6,673
  Payments of acquisition fees to affiliate                                             -           (402 )
  Payments of lease negotiation fees to affiliate                                       -            (90 )
  Proceeds from disposition of equipment                                            4,411            436
                                                                                -----------------------------
          Net cash provided by (used in) investing activities                      10,125         (8,238 )
                                                                                -----------------------------

  Financing activities:

  Payments of short-term note payable                                              (2,000 )            -
  Cash distributions paid to limited partners                                      (7,251 )       (7,251 )
  Cash distributions paid to General Partner                                         (382 )         (381 )
  Payments of debt issuance costs                                                       -            (25 )
                                                                                -----------------------------
          Net cash used in financing activities                                    (9,633 )       (7,657 )
                                                                                -----------------------------

  Net increase (decrease) in cash and cash equivalents                              7,870        (10,172 )
  Cash and cash equivalents at beginning of year                                    2,468         11,965
                                                                                -----------------------------
  Cash and cash equivalents at end of year                                      $  10,338     $    1,793
                                                                                =============================

  Supplemental information:

  Interest paid                                                                 $     864     $      938
                                                                                =============================
  Supplemental disclosure of noncash investing and financing activities:
    Sale proceeds included in accounts receivable                               $       5     $      118
                                                                                =============================

</TABLE>

                       See accompanying notes to financial
                                  statements.

<PAGE>

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

1.   Opinion of Management

In the opinion of the  management  of PLM Financial  Services,  Inc. (FSI or the
General Partner),  the accompanying  unaudited financial  statements contain all
adjustments  necessary,  consisting  primarily of normal recurring accruals,  to
present fairly the financial  position of PLM Equipment Growth & Income Fund VII
(the Partnership) as of September 30, 1997 and December 31, 1996, the statements
of operations  for the three and nine months ended  September 30, 1997 and 1996,
the statements of changes in partners'  capital for the period December 31, 1995
to September  30,  1997,  and the  statements  of cash flows for the nine months
ended September 30, 1997 and 1996. Certain information and footnote  disclosures
normally included in financial  statements prepared in accordance with generally
accepted  accounting   principles  have  been  condensed  or  omitted  from  the
accompanying financial statements. For further information,  reference should be
made to the financial statements and notes thereto included in the Partnership's
Annual Report on Form 10-K for the year ended  December 31, 1996, on file at the
Securities and Exchange Commission.

2.   Reclassifications

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

3.   Cash Distributions

Cash  distributions  are  recorded  when paid and totaled  $2.5 million and $7.6
million for the three and nine months ended  September  30, 1997,  respectively.
Cash distributions to limited partners in excess of net income are considered to
represent a return of capital.  Cash  distributions  to the limited  partners of
$6.1  million for the nine months ended  September  30, 1997 were deemed to be a
return of capital.  All cash  distributions paid to the limited partners for the
nine months ended September 30, 1996 were deemed to be a return of capital. Cash
distributions  related to the results  from the third  quarter of 1997,  of $1.2
million, were paid or are payable during October and November 1997, depending on
whether the individual limited partner elected to receive a monthly or quarterly
distribution check.

4.   Investments in Unconsolidated Special-Purpose Entities

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

<TABLE>
<CAPTION>

                                                                                     September 30,      December 31,
                                                                                         1997             1996
                                                                                    --------------------------------

     <S>                                                                            <C>               <C>       
     33% interest in two trusts that own three 737-200A commercial aircraft,
               two aircraft engines, and a portfolio of aircraft rotables           $    7,636        $    9,126
     80% interest in an entity owning a bulk carrier marine vessel                       6,678             7,362
     24% in a trust owning a 767-200ER commercial aircraft                               5,062             5,798
     33% interest in a trust that owns six 737-200A commercial aircraft                  4,582             5,407
     25% interest in a trust that owns four 737-200A commercial aircraft                 3,621             4,206
     44% interest in an entity owning a bulk carrier marine vessel                       2,683             3,142
     10% interest in an equity owning a mobile offshore drilling unit                    1,760             2,100
                                                                                    -----------       -----------
         Net investments                                                            $   32,022        $   37,141
                                                                                    ===========       ===========

</TABLE>





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

5.   Equipment

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

<TABLE>
<CAPTION>

                                                September 30,      December 31,
                                                   1997                1996
                                               ----------------------------------

   <S>                                         <C>                 <C>        
   Equipment held for operating lease:
     Marine vessels                            $   22,212          $    22,212
     Aircraft                                      15,933               15,933
     Trailers                                      14,495               14,547
     Rail equipment                                10,056               10,053
     Modular buildings                                153                4,696
                                               -----------         ------------
                                                   62,849               67,441
   Less accumulated depreciation                  (25,951 )            (21,494 )
                                               -----------         ------------
       Net equipment                           $   36,898          $    45,947
                                               ===========         ============

</TABLE>

As of September  30,  1997,  all of the  equipment  was on lease or operating in
PLM-affiliated  short-term  trailer rental  facilities,  except for two commuter
aircraft and five railcars. As of December 31, 1996, all of the equipment was on
lease or operating  in  PLM-affiliated  short-term  trailer  rental  facilities,
except for five railcars. The net book value of the equipment off lease was $4.5
million  and $0.1  million as of  September  30,  1997 and  December  31,  1996,
respectively.

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

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

6.   Transactions with General Partner and Affiliates

Partnership  management fees payable to an affiliate of the General Partner were
$0.1 million as of September 30, 1997 and December 31, 1996.  The  Partnership's
proportional  share of  USPE-affiliate  management  fees of $155,000 and $55,000
were payable as of September 30, 1997 and December 31, 1996, respectively.

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

<TABLE>
<CAPTION>

                                                       For the Three Months               For the Nine Months
                                                       Ended September 30,                Ended September 30,
                                                         1997         1996               1997            1996
                                                    --------------------------------------------------------------

   <S>                                              <C>            <C>                <C>             <C>     
   Management fees                                  $     127      $      90          $    374        $    411
   Insurance expense                                       35             51               141             196
   Data processing and administrative                      34             66               101             102
        expenses

</TABLE>

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

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


<PAGE>


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

6.   Transactions with General Partner and Affiliates (continued)

subsidiary of PLM International, Inc.

The balance due to affiliates as of September 30, 1997 includes $0.1 million due
to FSI and its  affiliates  for  management  fees  and  $0.8  million  due to an
affiliated  USPE. The balance due to affiliates as of December 31, 1996 includes
$0.1 million due to FSI and its affiliates for management  fees and $0.5 million
due to an affiliated USPE.

7.   Debt

The General  Partner  entered  into a  short-term,  joint $50.0  million  credit
facility.  As of September 30, 1997, the Partnership had repaid its $2.0 million
borrowing under the short-term joint $50.0 million credit facility that had been
outstanding as of December 31, 1996. Among the eligible borrowers, PLM Equipment
Growth Fund V had  borrowings of $9.1 million and PLM  Equipment  Growth Fund VI
had borrowings of $10.0 million as of September 30, 1997.

8.   Contingencies

As more fully  described by the  Partnership in its Form 10-K for the year ended
December 31,1996,  PLM International,  Inc. (PLMI) and various of its affiliates
are named as defendants in a lawsuit filed as a class action on January 22, 1997
in the Circuit Court of Mobile County, Mobile,  Alabama, Case No. CV-97-251 (the
Koch action).  On 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),  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. On October 10, 1997, defendants
filed a motion to compel  arbitration of plaintiffs'  claims and to stay further
proceedings  pending the outcome of such  arbitration.  PLMI  believes  that the
allegations  of the Koch  action are  completely  without  merit and  intends to
defend this matter vigorously.

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

PLMI and the other  defendants  removed  the Romei  action to the United  States
District Court for the Northern  District of California  (Case No. C-97-2450 SC)
on June 30,  1997,  based on the federal  court's  diversity  jurisdiction.  The
defendants then filed a motion to compel arbitration of the plaintiffs'  claims,
based on an agreement to arbitrate  contained in the PLM Equipment Growth Fund V
limited  partnership  agreement,  to which plaintiff is a party.  Pursuant to an
agreement with plaintiff,  PLMI and the other defendants withdrew their petition
for removal of the Romei action and their motion to compel arbitration,


<PAGE>


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

8.  Contingencies (continued)

and on July 31, 1997, 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  agreement,  plaintiff  agreed to a stay of the  state  court  action
pending the district court's decision on the petition to compel arbitration.  On
October 7,  1997,  the  district  court  denied  PLMI's  petition  to compel and
indicated  that a memorandum  decision  would follow.  On October 22, 1997,  the
district  court filed its memorandum  decision and order,  explaining the reason
for its denial of PLMI's  petition to compel.  The district  court reasoned that
the plaintiff's  claims are grounded in securities law, and therefore,  excluded
from  arbitration  under the terms of the Partnership  agreement.  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  Section  1709 and 1710.  PLMI will soon be  required  to
respond  to the  amended  complaint,  and a status  conference  has been set for
December 5, 1997. PLMI 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  October 1997 the  Partnership  purchased  248 trailers for $3.8 million,
including $0.2 million in acquisition and lease negotiation fees paid to FSI.

During October 1997, the short-term  credit facility was amended and restated to
decrease the available  borrowings  for American  Finance Group,  Inc.  (AFG), a
subsidiary of PLMI, to $35.0 million and to extend the  termination  date of the
credit  facility to December 2, 1997.  The General  Partner  believes it will be
able to extend the credit  facility prior to its expiration on similar terms and
increase the amount of available borrowings for AFG to $50.0 million.




<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 
September 30, 1997 and 1996

(A)  Owned Equipment Operations

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

<TABLE>
<CAPTION>
                                                                            For the Three Months
                                                                             Ended September 30,
                                                                            1997             1996
                                                                         ----------------------------

   <S>                                                                   <C>             <C>       
   Trailers                                                              $    815        $     591 
   Marine vessels                                                             739              891
   Aircraft                                                                   501              578
   Rail equipment                                                             486              524
   Modular buildings                                                           16               87

</TABLE>

Trailers:  Trailer lease revenues and direct expenses were $0.9 million and $0.1
million,  respectively,  for the three months ended September 30, 1997, compared
to $0.8 million and $0.2 million, respectively,  during the same period of 1996.
The  increase in trailer  contribution  was due to the  purchase  of  additional
equipment  during 1996 and lower  repairs  required on the  existing  fleet when
compared to the same period of 1996.

Marine  vessels:  Marine  vessel lease  revenues and direct  expenses  were $0.8
million and $0.1 million, respectively, for the three months ended September 30,
1997, compared to $1.0 million and $0.1 million,  respectively,  during the same
period of 1996.  The decrease in marine vessel  contribution  was due to a lower
lease rate  earned on one marine  vessel  during the third  quarter of 1997 when
compared to the same period of 1996.

Aircraft:  Aircraft  lease  revenues and direct  expenses  were $0.5 million and
$5,000, respectively, for the three months ended September 30, 1997, compared to
$0.6  million and  $7,000,  respectively,  during the same  period of 1996.  The
decrease  in  aircraft  contribution  was  due to the  off-lease  status  of two
commuter aircraft that were on lease during the same period of 1996.

Rail  equipment:  Rail equipment  lease  revenues and direct  expenses were $0.7
million and $0.2 million, respectively, for the three months ended September 30,
1997 and 1996. The railcar fleet remained  relatively the same for both periods.
The  decrease  in railcar  contribution  during  1997 was due to an  increase in
repairs required during 1997 when compared to 1996.

Modular  buildings:  Modular  building lease  revenues and direct  expenses were
$16,000 and $0,  respectively,  for the three months ended  September  30, 1997,
compared to $0.1 million and $28,000,  respectively,  during the same quarter of
1996. The primary reason for the decrease in lease revenues and direct  expenses
was due to 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 $3.2 million for the quarter ended  September 30,
1997, increased from $3.1 million for the same period in 1996. Indirect expenses
increased  $0.1 million  during the third  quarter of 1997 when  compared to the
same period of 1996. Significant variances are explained as follows:

     (1) A $0.3 million  increase in the allowance for bad debts,  when compared
to the same period of 1996,  was due to the  collection of unpaid  invoices that
had  previously  been  reserved  for  bad  debt in 1996  and to an  increase  in
uncollectible amounts due from certain lessees during 1997.

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

     (3) A $0.1  million  decrease  in  management  fees was due to lower  lease
revenues earned during 1997.

(C)  Net Gain on Disposition of Owned Equipment

The net gain on  disposition  of equipment for the third quarter of 1997 totaled
$2,000,  and resulted from the sale of trailers with an aggregate net book value
of $29,000 for proceeds of $31,000. Net gain on disposition of equipment for the
third  quarter of 1996 totaled  $2,000,  and resulted  from the sale of trailers
with a net book value of $37,000 for proceeds of $39,000.

(D)  Interest and Other Income

Interest and other income  increased  $0.1 million  during the third  quarter of
1997,  due primarily to higher  average cash balances  available for  investment
throughout most of the quarter when compared to the same period of 1996.

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

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

<TABLE>
<CAPTION>
                                                                            For the Three Months
                                                                             Ended September 30,
                                                                            1997             1996
                                                                         ----------------------------

   <S>                                                                   <C>             <C>         
   Aircraft, rotable components, and aircraft engines                    $    302        $    (150 ) 
   Marine vessels                                                            (133 )           (495 )
   Mobile offshore drilling unit                                               (1 )              -

</TABLE>

Aircraft,  rotable components, and aircraft engines: During the third quarter of
1997,   lease  revenues  of  $1.9  million  were  offset  by  depreciation   and
administrative  expenses of $1.6 million.  During the same period of 1996, lease
revenues of $2.0 million were offset by depreciation and administrative expenses
of $2.2  million.  Revenues  decreased  $0.1  million  due to a lower lease rate
earned  during the fourth  quarter of 1997 when  compared  to the same period of
1996.  The decline in direct  expenses of $0.4 million was due  primarily to the
double-declining balance method of depreciation.

Marine vessels: During the third quarter of 1997, lease revenues of $0.9 million
were offset by depreciation and administrative  expenses of $1.1 million. During
the same  period  of  1996,  lease  revenues  of $0.6  million  were  offset  by
depreciation  and  administrative  expenses of $1.1 million.  The primary reason
lease  revenues  increased  was due to higher day rates  earned  while on lease.
Although expenses remained  relatively the same for both periods,  a decrease in
depreciation  expense, due primarily to the  double-declining  balance method of
depreciation, was offset by an increase in marine operating expenses.

Mobile offshore  drilling unit: As of September 30, 1997, the Partnership  owned
an interest in a mobile  offshore  drilling unit that was  purchased  during the
fourth quarter of 1996. Revenues of $0.1 million were offset by depreciation and
administrative expenses of $0.1 million.

(F)  Net Loss

As a result of the foregoing,  the  Partnership's  net loss for the period ended
September  30, 1997 was $0.4  million,  compared  to a net loss of $1.0  million
during  the same  period of 1996.  The  Partnership's  ability  to  operate  and
liquidate assets,  secure leases,  and re-lease those assets whose leases expire
is subject  to many  factors,  and the  Partnership's  performance  in the third
quarter of 1997 is not necessarily  indicative of future  periods.  In the third
quarter  of 1997,  the  Partnership  distributed  $2.4  million  to the  limited
partners, or $0.45 per weighted-average depositary unit.

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

(A)  Owned Equipment Operations

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

<TABLE>
<CAPTION>
                                                                             For the Nine Months
                                                                             Ended September 30,
                                                                            1997             1996
                                                                         ----------------------------

   <S>                                                                   <C>             <C>       
   Marine vessels                                                        $  2,539        $   2,686 
   Trailers                                                                 2,283            1,653
   Rail equipment                                                           1,589            1,516
   Aircraft                                                                 1,502            1,670
   Modular buildings                                                          424              543

</TABLE>

Marine  vessels:  Marine  vessel lease  revenues and direct  expenses  were $2.7
million and $0.2 million,  respectively, for the nine months ended September 30,
1997, compared to $2.9 million and $0.2 million,  respectively,  during the same
period of 1996.  The decrease in marine vessel  contribution  was due to a lower
lease rate earned on one marine vessel during 1997 when compared to 1996.

Trailers:  Trailer lease revenues and direct expenses were $2.7 million and $0.4
million, respectively, for the nine months ended September 30, 1997, compared to
$2.0 million and $0.3 million, respectively, during the same period of 1996. The
increase in trailer contribution was due to the purchase of additional equipment
during 1996.

Rail  equipment:  Rail equipment  lease  revenues and direct  expenses were $2.1
million and $0.5 million,  respectively, for the nine months ended September 30,
1997, compared to $2.0 million and $0.4 million,  respectively,  during the same
period of 1996. The increase in railcar  contribution was due to the purchase of
additional equipment during 1996.

Aircraft:  Aircraft  lease  revenues and direct  expenses  were $1.5 million and
$13,000, respectively, for the nine months ended September 30, 1997, compared to
$1.7  million and  $25,000,  respectively,  during the same period of 1996.  The
decrease  in  aircraft  contribution  was  due to the  off-lease  status  of two
commuter  aircraft that were on lease during the same period of 1996,  which was
offset  in part  by the  revenues  earned  on a  commercial  aircraft  that  was
purchased during the third quarter of 1996.

Modular buildings: Modular building lease revenues and direct expenses were $0.4
million and $12,000, respectively, for the nine months ended September 30, 1997,
compared to $0.6  million and $78,000,  respectively,  during the same period of
1996. The primary reason for the decrease in modular  building  contribution  is
due to the sale of the majority of this  equipment  during the second quarter of
1997.

(B)  Indirect Expenses Related to Owned Equipment Operations

Total indirect  expenses of $9.5 million for the nine months ended September 30,
1997 increased  from $9.0 million for the same period of 1996.  The  significant
variances are explained as follows:

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

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

     (3) A $0.1 million  increase in the  allowance  for bad debts was due to an
increase in  uncollectable  amounts due from certain  lessees  during  1997;  in
addition,  during 1996, the  Partnership  was able to collect some of the unpaid
invoices that had previously been reserved for as a bad debt.

     (4) A $0.1  million  decrease in  administrative  expenses was due to lower
costs  associated with the  transportation  and inspection of certain  equipment
that was  purchased  during 1996.  Similar  costs and expenses were not required
during  1997.  This  decrease  was offset in part by an  increase in rental yard
costs incurred during 1997, due to the increase in the number of trailers in the
PLM-affiliated short-term rental yards when compared to the same period of 1996.

(C)  Net Gain on Disposition of Owned Equipment

The net gain on disposition of equipment for the nine months ended September 30,
1997 totaled $1.8  million,  and resulted  from the sale of trailers and modular
buildings with an aggregate net book value of $2.5 million for $4.3 million. Net
gain on  disposition  of equipment for the nine months ended  September 30, 1996
totaled  $25,000,  and resulted from the sale of modular  buildings and trailers
with an aggregate net book value of $0.3 million for proceeds of $0.3 million.

(D)  Interest and Other Income

Interest and other income  decreased  $0.1 million  during the nine months ended
September  30,  1997,  due  primarily  to  lower  cash  balances  available  for
investment  throughout  most of the period  when  compared to the same period of
1996.

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

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

<TABLE>
<CAPTION>
                                                                             For the Nine Months
                                                                             Ended September 30,
                                                                            1997             1996
                                                                         ----------------------------

   <S>                                                                   <C>               <C>       
   Aircraft, rotable components, and aircraft engines                    $  1,170          $  (363 ) 
   Marine vessels                                                            (439 )           (444 )
   Mobile offshore drilling unit                                              (45 )              -

</TABLE>

Aircraft, rotable components, and aircraft engines: During the nine months ended
September  30, 1997,  revenues of $6.1 million were offset by  depreciation  and
administrative  expenses of $4.9 million.  During the same period of 1996, lease
revenues of $5.8 million were offset by depreciation and administrative expenses
of $6.2  million.  Revenues  increased  during 1997 by $0.3 million  because the
interest in a trust owning  aircraft was purchased  late in the first quarter of
1996. This equipment was on lease for the full nine months of 1997,  compared to
only six months during the same period of 1996.  The decline in expenses of $1.3
million was due to the double-declining balance method of depreciation.

Marine  vessels:  During the nine months ended  September 30, 1997,  revenues of
$2.7 million were offset by  depreciation  and  administrative  expenses of $3.1
million. During the same period of 1996, revenues of $3.0 million were offset by
depreciation  and  administrative  expenses of $3.4 million.  The primary reason
revenues decreased was because of the lower day rates earned while on lease. The
decline in expenses  of $0.3  million  was due to the  double-declining  balance
method of depreciation.

Mobile offshore  drilling unit: As of September 30, 1997, the Partnership  owned
an interest in a mobile  offshore  drilling unit that was  purchased  during the
fourth quarter of 1996. Revenues of $0.3 million were offset by depreciation and
administrative expenses of $0.3 million.

(F)  Net Income (Loss)

As a result of the foregoing,  the Partnership's net income for the period ended
September  30, 1997 was $1.5  million,  compared  to a net loss of $1.4  million
during  the same  period of 1996.  The  Partnership's  ability  to  operate  and
liquidate assets,  secure leases,  and re-lease those assets whose leases expire
is subject to many factors, and the Partnership's performance in the nine months
ended September 30, 1997 is not necessarily indicative of future periods. In the
nine months ended September 30, 1997, the Partnership  distributed  $7.3 million
to the limited partners, or $1.35 per weighted-average depositary unit.

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

For the  nine  months  ended  September  30,  1997,  the  Partnership  generated
sufficient  operating  cash (net cash  provided by  operating  activities,  plus
distributions  from  unconsolidated   special-purpose   entities)  to  meet  its
operating obligations and maintain the current level of distributions (total for
nine months  ended  September  30, 1997 of  approximately  $7.6  million) to the
partners.  During the nine months ended  September 30, 1997, the General Partner
sold equipment for $4.3 million.

The General  Partner has entered into a short-term  joint $50.0  million  credit
facility.  As of November 10,  1997,  the PLM  Equipment  Growth Fund V had $3.6
million in  outstanding  borrowings  and PLM  Equipment  Growth Fund VI had $2.0
million in outstanding borrowings. Neither the Partnership, PLM Equipment Growth
Fund IV, American  Finance Group,  Inc. (AFG), a wholly-owned  subsidiary of PLM
International,  Inc., TEC Aquisub, Inc., an indirect wholly-owned  subsidiary of
FSI, nor Professional  Lease  Management  Income Fund I, LLC had any outstanding
borrowings.

During October 1997, the short-term  credit facility was amended and restated to
decrease the  available  borrowings  for AFG to $35.0  million and to extend the
termination date of the credit facility to December 2, 1997. The General Partner
believes it will be able to extend the credit  facility  prior to its expiration
on similar  terms and  increase the amount of  available  borrowings  for AFG to
$50.0 million.

(III)     OUTLOOK FOR THE FUTURE

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

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

The  ability  of the  Partnership  to  realize  acceptable  lease  rates  on its
equipment in the different equipment markets is contingent on many factors, such
as specific market conditions and economic activity, technological obsolescence,
and  government  or other  regulations.  The  unpredictability  of some of these
factors,  or of their occurrence,  makes it difficult for the General Partner to
clearly  define  trends or  influences  that may impact the  performance  of the
Partnership's  equipment.  The General  Partner  continuously  monitors both the
equipment  markets and the performance of the  Partnership's  equipment in these
markets.  The General Partner may make an evaluation to reduce the Partnership's
exposure to those  equipment  markets in which it determines  it cannot  operate
equipment and achieve  acceptable  rates of return.  Alternatively,  the General
Partner  may  make a  determination  to  enter  equipment  markets  in  which it
perceives  opportunities  to profit from  supply/demand  instabilities  or other
market imperfections.

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

(IV)  FORWARD-LOOKING INFORMATION

Except for the historical  information contained herein, this Form 10-Q contains
forward-looking  statements  that  involve  risks  and  uncertainties,  such  as
statements of the Partnership's plans, objectives, expectations, and intentions.
The  cautionary  statements  made in this  Form  10-Q  should  be read as  being
applicable  to all related  forward-looking  statements  wherever they appear in
this Form 10-Q. The  Partnership's  actual results could differ  materially from
those discussed here.



<PAGE>


                          PART II -- OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  None.

         (b)      Reports on Form 8-K

                  None.








<PAGE>


ursuant  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: November 10, 1997            By:      /s/ Richard Brock
                                            --------------------------
                                            Richard Brock
                                            Vice President and
                                            Corporate Controller