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,
              1996.


       [  ]   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 33-40093
                             -----------------------




                     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 GROWTH & INCOME FUND VII
                             (A Limited Partnership)

                                 BALANCE SHEETS
                            (in thousands of dollars)

                                     ASSETS
<TABLE>
<CAPTION>


                                                                           September 30,       December 31,
                                                                             1996                 1995
                                                                         ----------------------------------

   <S>                                                                   <C>                  <C>       
   Equipment held for operating leases                                   $   67,493           $   58,333
   Less accumulated depreciation                                            (18,905 )            (12,796 )
                                                                         ----------------------------------
                                                                             48,588               45,537
   Equipment held for sale                                                       --                  156
                                                                         ----------------------------------
     Net equipment                                                           48,588               45,693

   Cash and cash equivalents                                                  1,793               11,965
   Restricted cash                                                              189                  401
   Investments in unconsolidated special purpose entities                    37,047               38,689
   Accounts receivable, net of allowance for
     doubtful accounts of $331 in 1996 and $238 in 1995                       1,010                  872
   Prepaid expenses                                                              22                   40
   Deferred charges, net of accumulated amortization
     of $438 in 1996 and $268 in 1995                                           479                  534
   Equipment acquisition deposits                                                19                   --
                                                                         ----------------------------------

   Total assets                                                          $   89,147           $   98,194
                                                                         ==================================


                    LIABILITIES AND PARTNERS' CAPITAL


  Liabilities:

   Accounts payable and accrued expenses                                 $      550           $      270
   Due to affiliates                                                            503                  513
   Note payable                                                              23,000               23,000
   Prepaid deposits and reserve for repairs                                     861                1,120
                                                                         ----------------------------------
         Total liabilities                                                   24,914               24,903

   Partners' capital:

   Limited Partners (5,370,297 Depositary Units at March 31,
     1996 and at December 31, 1995)                                          64,233               73,291
   General Partner                                                               --                   --
                                                                         ----------------------------------
         Total partners' capital                                             64,233               73,291
                                                                         ----------------------------------

   Total liabilities and partners' capital                               $   89,147           $   98,194
                                                                         ==================================

</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 per unit amounts)
<TABLE>
<CAPTION>


                                                       For the three months               For the nine months
                                                       ended September 30,                ended September 30,
                                                         1996         1995               1996            1995
                                                    --------------------------------------------------------------

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

     Lease revenue                                  $   3,135      $   4,815          $  9,144        $ 12,140
     Interest and other income                             68             66               366             314
     Net gain (loss) on disposition of equipment            2            (21 )              25             151
                                                    --------------------------------------------------------------
         Total revenues                                 3,205          4,860             9,535          12,605

   Expenses:

     Depreciation and amortization                      2,296          3,877             6,358           9,902
     Management fees to affiliate                         230            259               447             663
     Repairs and maintenance                              422            369               964           1,026
     Interest expense                                     427             40             1,263              40
     Marine equipment operating expenses                   36            391                92             612
     Insurance expense to affiliate                        --             56                --             101
     Other insurance expense                               23             38                55             123
     General and administrative
       expenses to affiliates                              30            135               233             448
     Other general and administrative expenses            245            160               649             393
     Bad debt expense                                    (120 )           46                93              61
                                                    --------------------------------------------------------------
                                                    --------------------------------------------------------------
         Total expenses                                 3,589          5,371            10,154          13,369
                                                    --------------------------------------------------------------

   Equity in net loss of unconsolidated
     special purpose entities                            (645 )           --              (807 )            --
                                                    --------------------------------------------------------------

   Net loss                                         $  (1,029 )    $    (511 )        $ (1,426 )      $   (764 )
                                                    ==============================================================

   Partners' share of net income (loss):

     Limited Partners                               $  (1,156 )    $    (637 )        $ (1,807 )      $ (1,104 )
     General Partner                                      127            126               381             340
                                                    --------------------------------------------------------------

   Total                                            $  (1,029 )    $    (511 )        $ (1,426 )      $   (764 )
                                                    ==============================================================

   Net loss per Depositary Unit
     (5,370,297 Units in 1996 and 1995)             $   (0.22 )    $     N/A          $  (0.34 )      $    N/A
                                                    ==============================================================

   Cash distributions                               $   2,545      $   2,538          $  7,632        $  7,081
                                                    ==============================================================

   Cash distributions per Depositary Unit           $    0.45      $    0.45          $   1.35        $    N/A
                                                    ==============================================================

</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, 1994 to September
                                    30, 1996
                                 (in thousands)
<TABLE>
<CAPTION>


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

   <S>                                            <C>                       <C>                 <C>                
   Partners' capital at December 31, 1994         $      66,996             $       --          $        66,996    

   Partners' capital contributions                       18,873                     --                   18,873

   Underwriting commissions to affiliates                (1,320 )                   --                   (1,320 )

   Syndication costs to affiliates                         (440 )                   --                     (440 )
                                                 -----------------------------------------------------------------

   Partners' capital contributions, net                  17,113                     --                   17,113

   Net income (loss)                                     (1,661 )                  470                   (1,191 )

   Cash distributions                                    (9,157 )                 (470 )                 (9,627 )
                                                 -----------------------------------------------------------------

   Partners' capital at December 31, 1995                73,291                     --                   73,291

   Net income (loss)                                     (1,807 )                  381                   (1,426 )

   Cash distributions                                    (7,251 )                 (381 )                 (7,632 )
                                                 -----------------------------------------------------------------

   Partners' capital at September 30, 1996        $      64,233             $       --          $        64,233     
                                                 =================================================================

</TABLE>








                       See accompanying notes to financial
                                  statements.

<PAGE>

                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                             (A Limited Partnership)
                            STATEMENTS OF CASH FLOWS
                                 (in thousands) 
<TABLE>
<CAPTION>

                                                                                                 For the nine months
                                                                                                  ended September 30,
                                                                                             1996                1995
                                                                                        -----------------------------------
   <S>                                                                                  <C>                  <C>             
   Operating activities:
     Net loss                                                                           $   (1,426 )         $     (764 )    
     Adjustments to reconcile net loss to net cash
       provided by operating activities
         Gain on disposition of equipment                                                      (25 )               (151 )
         Depreciation and amortization                                                       6,358                9,902
         Cash distributions from unconsolidated special purpose
            entities in excess of loss                                                       7,480                   --
         Changes in operating assets and liabilities:
           Restricted cash                                                                     212                   --
           Accounts receivable, net                                                           (234 )               (297 )
           Prepaid expenses                                                                     18                   30
           Accounts payable and accrued expenses                                               282                  115
           Due to affiliates                                                                   (10 )                (13 )
           Prepaid deposits and reserve for repairs                                           (259 )                702
                                                                                        -----------------------------------
   Cash provided by operating activities                                                    12,396                9,524
                                                                                        -----------------------------------

   Investing activities:
     Payments for purchase of equipment and capitalized repairs                             (8,998 )            (25,140 )
     Investment in equipment purchased and placed in
        unconsolidated special purpose entities                                             (5,838 )                 --
     Payments of acquisition-related fees to affiliate                                        (402 )             (1,291 )
     Payments for equipment acquisition deposits                                               (19 )                 --
     Payments of lease negotiation fees to affiliate                                           (90 )               (287 )
     Proceeds from disposition of equipment                                                    436                1,160
                                                                                        -----------------------------------
   Cash used in investing activities                                                       (14,911 )            (25,558 )
                                                                                        -----------------------------------

   Financing activities:
     Partner's capital contributions, net of syndication and
       underwriting costs                                                                       --               17,113
     Proceeds from note payable                                                                 --                9,569
     Decrease in due to affiliates relating to syndication activities                           --                 (262 )
     Cash distributions paid to affiliate                                                     (381 )               (340 )
     Cash distributions paid to Limited Partners                                            (7,251 )             (6,741 )
     Payments of debt issuance costs                                                           (25 )                 --
     Decrease in subscriptions in escrow, net                                                   --               (4,239 )
     Decrease in restricted cash                                                                --                4,010
                                                                                        -----------------------------------
   Cash (used in) provided by financing activities                                          (7,657 )             19,110
                                                                                        -----------------------------------

   Net (decrease) increase in cash and cash equivalents                                    (10,172 )              3,076

   Cash and cash equivalents at beginning of period                                         11,965                  200
                                                                                        -----------------------------------

   Cash and cash equivalents at end of period                                           $    1,793           $    3,276   
                                                                                        ===================================

   Supplemental information:
     Interest paid                                                                      $      938           $       --   
                                                                                        ===================================
   Supplemental disclosure of noncash investing and financing activities:
     Sales proceeds included in accounts receivable                                     $      118           $       --    
                                                                                        ===================================
</TABLE>

                       See accompanying notes to financial
                                  statements.

<PAGE>



                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                               September 30, 1996

1.   Opinion of Management

In the opinion of the management of PLM Financial  Services,  Inc. ("FSI"),  the
General Partner,  the accompanying  unaudited  financial  statements contain all
adjustments  necessary,  consisting  primarily of normal recurring accruals,  to
present fairly the  Partnership's  financial  position as of September 30, 1996,
the statements of operations  for the three and nine months ended  September 30,
1996 and 1995, the statements of cash flows for the nine months ended  September
30, 1996 and 1995,  and the  statements of changes in partners'  capital for the
period from December 31, 1994 to September  30, 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,
1995, on file at the Securities and Exchange Commission.

2.   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, 1996,  respectively.
Cash  distributions  to  investors  in excess of net  income are  considered  to
represent  a return of capital on a  Generally  Accepted  Accounting  Principles
(GAAP) basis. All cash distributions to the Limited Partners for the nine months
ended September 30, 1996 and 1995,  were deemed to be a return of capital.  Cash
distributions  related to third quarter results of $1.3 million were paid or are
payable during  October and November  1996,  depending on whether the individual
unit holder elected to receive a monthly or quarterly distribution check.

3.   Investments in Unconsolidated Special Purpose Entities

During the second half of 1995, the  Partnership  began to increase the level of
its participation in the ownership of large-ticket  transportation  assets to be
owned and operated  jointly with affiliated  programs.  This trend has continued
during 1996.

Prior to 1996, the  Partnership  accounted for operating  activities  associated
with  joint  ownership  of  transportation  equipment  as  undivided  interests,
including its proportionate share of each asset with similar wholly-owned assets
in its financial statements. Under generally accepted accounting principles, the
effects of such  activities,  if material,  should be reported  using the equity
method of accounting.  Therefore,  effective  January 1, 1996,  the  Partnership
adopted the equity  method to account for its  investment  in such  jointly-held
assets.

The principle  differences between the previous accounting method and the equity
method relate to the presentation of activities  relating to these assets in the
statement of  operations.  Whereas,  under the equity method of  accounting  the
Partnership's  proportionate share is presented as a single net amount,  "equity
in net income (loss) of  unconsolidated  special  purpose  entities,"  under the
previous  method,  the  Partnership's  statement  of  operations  reflected  its
proportionate share of each individual item of revenue and expense. Accordingly,
the effect of adopting the equity method of accounting has no cumulative  effect
on previously  reported  partner's  capital or on the  Partnership's  net income
(loss) for the period of  adoption.  Because  the effects on  previously  issued
financial  statements of applying the equity method of accounting to investments
in  jointly-owned  assets are not  considered  to be material to such  financial
statements taken as a whole,  previously  issued  financial  statements have not
been restated.  However,  certain items have been reclassified in the previously
issued balance sheet to conform to the current period presentation.

During the nine months ended  September 30, 1996,  the  Partnership  purchased a
partial beneficial  interest in a trust owning five commercial aircraft for $5.6
million and incurred  acquisition and lease  negotiation fees of $0.3 million to
PLM Transportation Equipment Corporation, an affiliate of the General Partner.

<PAGE>

                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                               September 30, 1996

3.   Investments in Unconsolidated Special Purpose Entities (continued)

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

                                                                                           September 30,       December 31,
     Ownership                                  Equipment                                   1996             1995
   -------------------------------------------------------------------------------------------------------------------
        <S>       <C>                                                                   <C>              <C>       
        80%       Bulk carrier marine vessel                                            $    7,754       $    8,903
        44%       Bulk carrier marine vessel                                                 3,175            3,836
        24%       767-200ER Commercial aircraft                                              6,058            7,001
        33%       Two trusts that own three commercial aircraft, two aircraft engines,
                  and portfolio of aircraft rotables                                         8,821           10,664
        29%       Trust that owns seven commercial aircraft (see note below)                    --            8,285
        33%       Trust that owns six commercial aircraft (see note below)                   6,376               --
        25%       Trust that owns four commercial aircraft (see note below)                  4,863               --
                                                                                        ------------------------------

                    Investments in unconsolidated special purpose entities              $   37,047       $   38,689
                                                                                        ==============================
</TABLE>

The Partnership has beneficial interests in two certain  unconsolidated  special
purpose entities that own multiple aircraft (the "Trusts"). These Trusts contain
provisions, under certain circumstances, for allocating specific aircraft to the
beneficial  owners.  During  September  1996,  PLM  Equipment  Growth Fund V, an
affiliated  partnership  which  also has a  beneficial  interest  in the  Trust,
renegotiated  its senior loan  agreement and was required,  for loan  collateral
purposes,  to withdraw the aircraft  designated to it from the Trust. The result
was to restate the percentage  ownership of the remaining  beneficial  owners of
the Trusts beginning September 30, 1996. This change has no effect on the income
or loss recognized during 1996.

4.   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 equipment are as follows (in thousands):
<TABLE>
<CAPTION>

                                                September 30,      December 31,
                                                   1996                1995
                                               ----------------------------------

   <S>                                         <C>                 <C>        
   Aircraft                                    $   15,933          $    10,450
   Marine vessels                                  22,212               22,211
   Trailers                                        14,585               11,343
   Rail equipment                                  10,045                9,479
   Modular buildings                                4,718                4,850
                                               ----------------------------------
                                                   67,493               58,333
   Less accumulated depreciation                  (18,905 )            (12,796 )
                                               ----------------------------------
                                                   48,588               45,537
   Equipment held for sale                             --                  156
                                               ----------------------------------
   Net equipment                               $   48,588          $    45,693
                                               ==================================
</TABLE>

Revenues are earned by placing the equipment in service under operating  leases.
As of September 30, 1996,  all equipment in the  Partnership's  portfolio was on
lease or operating in PLM-affiliated  short-term trailer rental yards except for
9 railcars and 51 trailers with an aggregate net book value of $0.8 million.  As
of December 31, 1995, all equipment in the Partnership's  portfolio was on lease
or operating in PLM-affiliated short-term trailer rental yards.

<PAGE>


                     PLM EQUIPMENT GROWTH & INCOME FUND VII
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                               September 30, 1996

4.   Equipment (continued)

During the nine months ended  September 30, 1996,  the  Partnership  purchased a
commercial aircraft,  209 trailers and 35 railcars for $9.0 million and incurred
acquisition  and  lease  negotiation  fees  of  $0.5  million  to TEC  for  this
equipment.

During the nine months ended September 30, 1996, six modular buildings and eight
trailers  with an aggregate  net book value of $160,000  were sold for $191,000.
The Partnership  also sold 58 trailers,  which were held for sale as of December
31, 1995,  with a net book value of $156,000 at the date of sale for proceeds of
$150,000

During the nine months ended September 30, 1995, the Partnership sold 47 modular
buildings and 26 trailers  with an aggregate  net book value of  $1,009,000  for
proceeds of $1,160,000.

Periodically,  PLM  International.  Inc.,  (the Company) will purchase groups of
assets whose ownership may be allocated among  affiliated  partnerships  and the
Company.  Generally  in these  cases,  only  assets  that  are on lease  will be
purchased by the affiliated partnerships.  The Company will generally assume the
ownership and remarketing risks associated with off-lease equipment.  Allocation
of the  purchase  price  will be  determined  by a  combination  of third  party
industry  sources,  and recent  transactions  or  published  fair  market  value
references.  During the nine  months  ended  September  30,  1996,  the  Company
realized $0.7 million of gains on the sale of 69 off-lease railcars purchased by
the Company as part of a group of assets in 1994 which had been allocated to the
Partnership,  PLM Equipment Growth Funds IV, VI,  Professional  Lease Management
Income Fund I, L.L.C. and the Company.

5.   Debt

The General  Partner has entered into a joint $35 million  credit  facility (the
"Committed Bridge Facility") on behalf of the Partnership,  PLM Equipment Growth
Fund III,  PLM  Equipment  Growth  Fund IV,  PLM  Equipment  Growth  Fund V, PLM
Equipment Growth Fund VI and Professional  Lease Management Income Fund I ("Fund
I"), all  affiliated  investment  programs,  TEC Acquisub,  Inc.  ("TECAI"),  an
indirect  wholly-owned  subsidiary of the General Partner,  and American Finance
Group, Inc. (AFG), a subsidiary of PLM International, Inc., which may be used to
provide interim financing of up to (i) 70% of the aggregate book value or 50% of
the  aggregate  net  fair  market  value  of  eligible  equipment  owned  by the
Partnership or Fund I, plus (ii) 50% of unrestricted  cash held by the borrower.
The Committed  Bridge  Facility  became  available on December 20, 1993, and was
amended and restated on May 31, 1996,  to expire on May 23, 1997.  The Committed
Bridge Facility also provides for a $5 million Letter of Credit Facility for the
eligible  borrowers.  Outstanding  borrowings  by  Fund  I,  TECAI,  AFG  or PLM
Equipment Growth Funds III through VII reduce the amount available to each other
under the Committed  Bridge Facility.  Individual  borrowings may be outstanding
for no more than 179 days, with all advances due no later than May 23, 1997. The
Committed   Bridge  Facility   prohibits  the  Partnership  from  incurring  any
additional  indebtedness.  Interest accrues at either the prime rate or adjusted
LIBOR plus 2.5% at the borrowers  option and is set at the time of an advance of
funds.  Borrowings by the Partnership are guaranteed by the General Partner.  As
of September 30, 1996, AFG had  $27,791,000 in outstanding  borrowings.  Neither
the Partnership, Fund I, TECAI nor any of the other programs had any outstanding
borrowings.

On October 31, 1996,  the General  Partner  amended this  agreement (for details
refer to "Liquidity and Capital Resources").






<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, 1996 and 1995

(A)  Owned equipment operations

Lease revenues less direct expenses (defined as repairs and maintenance,  marine
equipment  operating,  and asset specific insurance expenses) on owned equipment
decreased  during the third quarter of 1996 when compared to the same quarter of
1995. The following  table presents lease revenues less direct expenses by owned
equipment type (in thousands):
<TABLE>
<CAPTION>

                                                                            For the three months
                                                                             ended September 30,
                                                                            1996             1995
                                                                         ----------------------------
   <S>                                                                   <C>             <C>       
   Aircraft                                                              $    578        $     613 
   Marine vessels                                                             891              895
   Trailers                                                                   591              612
   Rail equipment                                                             524              472
   Modular buildings                                                           87              199
</TABLE>

Aircraft:  Aircraft lease revenues and direct expenses were $585,000 and $7,000,
respectively,  for the three months ended 1996, compared to $618,000 and $5,000,
respectively  during  the  same  quarter  of  1995.  The  decrease  in  aircraft
contribution  was due to additional  rents  received  during 1995 which were not
earned during 1996;

Marine  vessels:  Marine  vessel lease  revenues and direct  expenses  were $1.0
million and $85,000,  respectively, for the three months ended 1996, compared to
$1.0 million and  $80,000,  respectively  during the same  quarter of 1995.  The
decrease in the marine  vessel  contribution  was due to slightly  higher marine
operating expenses when compared to the same period of 1995;

Trailers: Trailer lease revenues and direct expenses were $761,000 and $170,000,
respectively, for the three months ended 1996, compared to $665,000 and $53,000,
respectively  during the same  quarter of 1995.  The  increase in trailer  lease
revenues is due to a larger fleet in service.  Trailer repairs  increased due to
repairs incurred which were not needed during the same period of 1995;

Rail equipment: Railcar lease revenues and direct expenses were $0.7 million and
$175,000,  respectively,  for the three  months  ended  1996,  compared  to $0.6
million and $159,000, respectively during the same quarter of 1995. Although the
railcar fleet remained relatively the same size for both quarters,  the increase
in railcar lease revenues is due to the purchase of additional  railcars  during
1996.  Direct  expenses  increased due to a larger fleet which required  running
repairs during 1996;

Modular  buildings:  Modular  building lease  revenues and direct  expenses were
$115,000 and $28,000, respectively, for the three months ended 1996, compared to
$199,000 and $-0-,  respectively  during the same quarter of 1995. The number of
modular  buildings  owned by the  Partnership  has been  declining over the past
twelve months due to sales and dispositions, however, the Partnership is earning
a higher  lease  rate on the  remaining  buildings.  Direct  expenses  increased
$28,000  during the third  quarter  1996,  the  increase  was due to repairs and
commission  expenses  incurred during 1996 which were not needed during the same
period of 1995.
(B)  Indirect expenses related to owned equipment operations

Total  indirect  expenses of $3.1 million for the quarter  ended  September  30,
1996, increased from $2.9 million for the same period in 1995. The variances are
explained as follows:

(a) The $0.4 million  increase in interest  expense  during the third quarter of
1996 is due to the  long-term  debt of $23 million in place for the full quarter
when compared to the same period of 1995,  the  Partnership  had $5.3 million in
short-term  debt  in  place  for 30  days  and an  additional  $4.3  million  in
short-term debt in place for 2 days;

(b) Bad debt  expense  decreased  $0.2  million due to an decrease in  estimated
uncollectable receivables from certain leases.

(C)  Net gain on disposition of owned equipment

Net gain on  disposition  of equipment for the third quarter 1996 totaled $2,000
which  resulted from the sale of four trailers with a net book value of $37,000,
for proceeds of $39,000.  During the third quarter of 1995, the $21,000 net loss
on disposition of equipment  resulted from the sale or disposal of three modular
buildings a net book value of $60,000, for proceeds of $39,000.

 (D) Equity in net loss of  unconsolidated  special purpose entities  represents
net loss  generated  from the operation of  jointly-owned  assets  accounted for
under the equity method (see Note 3 to the financial statements).
<TABLE>
<CAPTION>

                                                                            For the three months
                                                                             ended September 30,
                                                                            1996             1995
                                                                         ----------------------------
   <S>                                                                   <C>             <C>          
   Aircraft, rotable components, and aircraft engines                    $   (150 )      $    (377 )  
   Marine vessels                                                            (495 )           (153 )
</TABLE>

Aircraft,  rotable  components,  and aircraft engines: As of September 30, 1996,
the  Partnership  had a 24%  interest  in a  commercial  aircraft  and a partial
beneficial interest in four trusts which own 13 commercial  aircraft, 2 aircraft
engines and a portfolio of rotable  components.  During the same period of 1995,
the  Partnership  owned the 24% interest in a  commercial  aircraft and had just
purchased  a  partial  beneficial  interest  in three  additional  trusts  which
contained 10 commercial  aircraft, 2 aircraft engines and a portfolio of rotable
components.  The  Partnership's  share of  lease  revenues  for  this  equipment
increased to $2.0 million during the third quarter 1996 compared to $0.6 million
during the same period of 1995. Operating expenses which are comprised primarily
of depreciation  expense,  increased to $2.1 million during the third quarter of
1996 from $0.9 million during the same period of 1995.

Marine vessels:  As of September 30, 1996 and 1995, the Partnership owned an 80%
interest in a dry bulk carrier marine vessel and a 44% interest in a another dry
bulk carrier marine vessel. The Partnership's  share of lease revenues decreased
to $0.6 million for the third  quarter  1996 from $1.1  million  during the same
period of 1995.  This  decrease  was due to a lower per diem rate earned on both
marine vessels during the third quarter 1996 when compared to the same period of
1995. Direct operating  expenses remained  relatively the same for both periods.
Indirect  operating  expenses  decreased  $0.2  million due  primarily  to lower
depreciation expenses due to the double declining method of depreciation.

(E)  Net Loss

As a result of the foregoing, the Partnership's net loss of $1.0 million for the
third quarter of 1996,  increased  from net loss of $0.5 million during the same
period in 1995.  The  Partnership's  ability to operate  and  liquidate  assets,
secure leases, and re-lease those assets whose leases expire during the duration
of the Partnership is subject to many factors and the Partnership's  performance
in the third quarter of 1996 is not necessarily indicative of future periods. In
the third  quarter of 1996,  the  Partnership  distributed  $2.4  million to the
Limited Partners, or $0.45 per Depositary Unit.




<PAGE>


Comparison of the Partnership's Operating Results for the Nine Months Ended 
September 30, 1996 and 1995

(A)  Owned equipment operations

Lease revenues less direct expenses (defined as repairs and maintenance,  marine
equipment  operating,  and asset specific insurance expenses) on owned equipment
decreased  during the nine months ended  September 30, 1996 when compared to the
same period of 1995.  The following  table  presents  lease revenues less direct
expenses by owned equipment type (in thousands):
<TABLE>
<CAPTION>

                                                                             For the nine months
                                                                             ended September 30,
                                                                            1996             1995
                                                                         ----------------------------
   <S>                                                                   <C>            <C>          
   Aircraft                                                              $  1,670       $      902   
   Marine vessels                                                           2,686            2,608
   Trailers                                                                 1,653            1,815
   Rail equipment                                                           1,516            1,514
   Modular buildings                                                          543              576

</TABLE>

Aircraft:  Aircraft  lease  revenues and direct  expenses  were $1.7 million and
$25,000,  respectively, for the nine months ended 1996, compared to $0.9 million
and $21,000,  respectively  during the same period of 1995. The increase was due
to the purchase of three DC-9  aircraft and two Dash 8-100  aircraft  during the
later half of the second quarter of 1995, resulting in nine full months of lease
revenues  compared  to four months of lease  revenues  during the same period of
1995;

Marine  vessels:  Marine  vessel lease  revenues and direct  expenses  were $2.9
million and $0.2 million, respectively, for the nine months ended 1996, compared
to $2.9 million and $0.3 million,  respectively  during the same period of 1995.
The decrease in direct expenses was due to the lower marine  operating  expenses
and a small insurance refund due to an overpayment in a prior year;

Trailers: Trailer lease revenues and direct expenses were $2.0 million and $0.3,
respectively,  for the nine months ended 1996, compared to $2.0 million and $0.2
million,  respectively  during the same period of 1995. Although revenues appear
to  be  relatively  consistent  for  both  periods,  the  Partnership  purchased
additional  trailers during 1996 which increased  lease revenues,  however,  the
increase was offset by the trailer fleet in the PLM affiliated short-term rental
yards;  which is experiencing lower utilization of its equipment The increase of
$0.1 million in direct  expenses is due to repairs needed to the trailers in the
above mentioned rental yard to maintain rental ready status;

Rail equipment: Railcar lease revenues and direct expenses were $2.0 million and
$442,000, respectively, for the nine months ended 1996, compared to $1.9 million
and $359,000, respectively during the same period of 1995. The increase in lease
revenues during the nine months ended 1996 was due to the purchase of additional
railcars during 1996. This increase was offset by the increase in repairs needed
during 1996 which were not needed during the same period of 1995;

Modular  buildings:  Modular  buildings  lease revenues and direct expenses were
$0.6 million and $78,000, respectively, for the nine months ended 1996, compared
to $0.6  million and $1,000,  respectively  during the same period of 1995.  The
number of modular buildings owned by the Partnership has been declining over the
past twelve months due to sales and  dispositions,  however,  the Partnership is
earning a higher lease rate on the remaining fleet.

(B)  Indirect expenses related to owned equipment operations

Total indirect  expenses of $9.0 million for the nine months ended September 30,
1996, increased from $7.7 million for the same period in 1995. The variances are
explained as follows:

(a) A $1.2 million increase in interest expense from 1995 levels  reflecting the
increase in long-term  debt of $23 million for the nine months  ended  September
30, 1996,  compared to the same period of 1995, the Partnership had $5.3 million
in  short-term  debt in place  for 30 days and an  additional  $4.3  million  in
short-term debt in place for 2 days;

(b) A $0.1 million increase in  administrative  expenses from 1995 levels due to
repositioning and storage cost of equipment for $0.2 million which wasn't needed
during the same period of 1995 offset, in part, by a decrease of $0.1 million in
other  administrative  expenses  due to lower cost  associated  with  purchasing
equipment.

 (C) Net gain on disposition of owned equipment

Net gain on  disposition  of equipment  for the nine months ended  September 30,
1996 totaled  $25,000 which resulted from the sale of nine modular  building and
eight  trailers  with an  aggregate  net book value of $160,000  for proceeds of
$191,000. The Partnership also sold 58 trailers,  which were held for sale as of
December  31,  1995,  with a net book value of  $156,000 at the date of sale for
proceeds of $150,000. For the nine months ended September 30, 1995, the $151,000
net gain on  disposition  of  equipment  resulted  from  the sale of 47  modular
buildings and 26 trailers with an aggregate net book value of $1.0 million,  for
proceeds of $1.2 million.

(D)  Interest and other income

Interest  and other  income  increased  $52,000  during  the nine  months  ended
September  30,  1996  due  primarily  to  higher  cash  balances  available  for
investments during the first quarter of 1996 when compared to the same period of
1995.  The  Partnership's  cash balances for  investments  decreased  during the
second quarter of 1996.

(E) Equity in net loss of unconsolidated special purpose entities represents net
loss generated from the operation of  jointly-owned  assets  accounted for under
the equity method (see Note 2 to the financial statements).
<TABLE>
<CAPTION>

                                                                             For the nine months
                                                                             ended September 30,
                                                                            1996             1995
                                                                         ----------------------------
   <S>                                                                   <C>              <C>          
   Aircraft, rotable components, and aircraft engines                    $   (363 )       $   (478 )   
   Marine vessels                                                            (444 )           (452 )
</TABLE>

Aircraft,  rotable  components,  and aircraft engines: As of September 30, 1996,
the  Partnership  had a 24%  interest  in a  commercial  aircraft  and a partial
beneficial interest in four trusts which own 13 commercial  aircraft, 2 aircraft
engines and a portfolio of rotable  components.  During the same period of 1995,
the  Partnership  owned the 24% interest in a  commercial  aircraft and had just
purchased  a  partial  beneficial  interest  in three  additional  trusts  which
contained 10 commercial  aircraft, 2 aircraft engines and a portfolio of rotable
components.  The  Partnership's  share of  lease  revenues  for  this  equipment
increased  to $5.8  million  during the nine  months  ended  September  30, 1996
compared  to $1.2  million  during the same period of 1995.  Operating  expenses
which is  comprised  primarily  of  depreciation  and  administrative  expenses,
increased to $6.2 million  during the nine months ended  September 30, 1996 from
$1.6 million during the same period of 1995 due to the  Partnership's  increased
investment.

Marine  vessels:  As of September 30, 1996 and 1995, the  Partnership had an 80%
interest in a dry bulk carrier marine vessel and a 44% interest in a another dry
bulk carrier marine vessel. The Partnership's  share of lease revenues increased
to $3.0  million  during the nine  months  ended  September  30,  1996 from $2.7
million  during the same period of 1995.  This increase was due to the change in
the lease of one marine vessel from bareboat charter to time charter which earns
higher revenues. As a result of this change, direct operating expenses increased
to $1.5  million  during the nine  months  ended  September  30,  1996 from $1.0
million  for the same  period  of 1995.  Indirect  operating  expenses  which is
comprised  primarily of depreciation and administrative  expenses,  decreased to
$2.0 million  duiring the nine months ended September 30, 1996 from $2.2 million
during the same  period of 1995.  The  decrease  of $0.2  million was due to the
double declining balance method of depreciation.

F)   Net loss

As a result of the foregoing, the Partnership's net loss of $1.4 million for the
nine months ended September 30, 1996,  increased from a net loss of $0.8 million
during  the same  period in 1995.  The  Partnership's  ability  to  operate  and
liquidate assets,  secure leases,  and re-lease those assets whose leases expire
during the  duration  of the  Partnership  is subject  to many  factors  and the
Partnership's  performance  in the nine months ended  September  30, 1996 is not
necessarily indicative of future periods. In the nine months ended September 30,
1996, the Partnership distributed $7.3 million to the Limited Partners, or $1.35
per Depositary Unit.

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

The General Partner purchased the Partnership's initial equipment portfolio with
capital raised from its initial equity  offering and permanent debt financing of
$23  million.  No further  capital  contributions  from  original  partners  are
permitted under the terms of the Partnership's  Limited  Partnership  Agreement.
The Partnership relies on operating cash flow to meet its operating obligations,
make cash  distributions  to partners and increase the  Partnership's  equipment
portfolio with any remaining  available  surplus cash. For the nine months ended
September 30, 1996, the Partnership  generated sufficient operating cash to meet
its operating obligations and pay distributions.

The General  Partner has entered into a joint $50 million  credit  facility (the
"Committed Bridge Facility") on behalf of the Partnership,  PLM Equipment Growth
Fund  IV,  PLM  Equipment  Growth  Fund  V,  PLM  Equipment  Growth  Fund VI and
Professional   Lease  Management  Income  Fund  I  ("Fund  I"),  all  affiliated
investment  programs,  TEC Acquisub,  Inc. ("TECAI"),  an indirect  wholly-owned
subsidiary  of  the  General  Partner,  and  American  Finance  Group  (AFG),  a
subsidiary  of PLM  International,  Inc.,  which may be used to provide  interim
financing of up to (i) 70% of the  aggregate  book value or 50% of the aggregate
net fair market value of eligible  equipment owned by the Partnership or Fund I,
plus (ii) 50% of unrestricted  cash held by the borrower.  The Committed  Bridge
Facility became  available on December 20, 1993, and was amended and restated on
October 31,  1996,  to expire on October 31, 1997 and  increased  the  available
borrowings for AFG to $50 million. The Partnership,  TECAI, Fund I and the other
partnerships  collectively  may borrow up to $35 million of the Committed Bridge
Facility. The Committed Bridge Facility also provides for a $5 million Letter of
Credit Facility for the eligible  borrowers.  Outstanding  borrowings by Fund I,
TECAI,  AFG or PLM  Equipment  Growth  Funds IV  through  VII  reduce the amount
available  to  each  other  under  the  Committed  Bridge  Facility.  Individual
borrowings may be outstanding  for no more than 179 days,  with all advances due
no later than October 31, 1997.  The  Committed  Bridge  Facility  prohibits the
Partnership  from incurring any  additional  indebtedness.  Interest  accrues at
either the prime rate or adjusted LIBOR plus 2.5% at the borrowers option and is
set at the time of an  advance  of  funds.  Borrowings  by the  Partnership  are
guaranteed by the General Partner.  As of November 11, 1996, AFG had $39,033,000
in outstanding borrowings and neither the Partnership,  Fund I, TECAI nor any of
the other programs had any outstanding borrowings.

(III)    TRENDS

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.   Throughout  1995  and  the  first  part  of  1996,  market
conditions,  supply and demand equilibrium,  and other factors varied in several
markets.  In  the  refrigerated   over-the-road   trailer  markets,   oversupply
conditions, industry consolidations, and other factors resulted in falling rates
and lower returns. In the dry over-the-road trailer markets, strong demand and a
backlog of new equipment  deliveries produced high utilization and returns.  The
marine  vessel and rail markets  could be generally  categorized  by  increasing
rates as the demand for equipment is increasing faster than new additions net of
retirements.  Finally,  demand for narrowbody  stage II aircraft,  such as those
owned  by  the  Partnership,  has  increased  as  expected  savings  from  newer
narrowbody  aircraft have not  materialized and deliveries of the newer aircraft
have slowed down. These trends are expected to continue for the near term. These
different markets have had individual  effects on the performance of Partnership
equipment - in some cases resulting in declining performance,  and in others, in
improved performance.

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

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




                      (this space intentionally left blank)




<PAGE>



                           PART II - OTHER INFORMATION


         Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  None.

         (b)      Reports on Form 8-K

                  None.





<PAGE>




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



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



Dated:  November 11, 1996         By:      /s/ David J. Davis
                                           ------------------
                                           David J. Davis
                                           Vice President and
                                           Corporate Controller












































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