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 QUARTERLY PERIOD ENDED MARCH 31, 1997

                                       OR

            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
              SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

                     For the transition period from to .


                        Commission File Number : 0-15037


            PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP
             (Exact name of registrant as specified in its charter)


             Delaware                                            04-2870345
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                              Identification No.)



265 Franklin Street, Boston, Massachusetts                           02110
(Address of principal executive offices)                             (Zip Code)


Registrant's telephone number, including area code  (617) 439-8118


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>


           PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP

                         CONSOLIDATED BALANCE SHEETS
              March 31, 1997 and September 30, 1996 (Unaudited)
                                 (In thousands)

                                     ASSETS

                                                   March 31     September 30
                                                   --------     ------------

Operating investment property:
   Land                                            $     698     $     698
   Buildings and improvements                          4,294         4,294
   Equipment and fixtures                                107           107
                                                   ---------     ---------
                                                       5,099         5,099
   Less accumulated depreciation                      (1,717)       (1,651)
                                                   ---------     ---------
                                                       3,382         3,448

Cash and cash equivalents                              4,072         5,067
Escrowed funds                                            35            74
Accounts receivable                                       95           107
Accounts receivable - affiliates                           3             2
Deferred expenses, net                                   112           122
Other assets                                              30            32
                                                   ---------     ---------
                                                   $   7,729     $   8,852
                                                   =========     =========

                      LIABILITIES AND PARTNERS' DEFICIT

Equity in losses from  unconsolidated 
   joint ventures in excess of investments 
   and advances                                   $    9,243     $   8,413
Mortgage note payable                                  1,643         1,671
Accounts payable and accrued expenses                     49            61
Accrued interest payable                                  15            15
Accrued real estate taxes                                 20            59
Other liabilities                                          9            10
Partners' deficit                                     (3,250)       (1,377)
                                                   ---------     ---------
                                                   $   7,729     $   8,852
                                                   =========     =========














                           See accompanying notes.


<PAGE>


            PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP

                      CONSOLIDATED STATEMENTS OF OPERATIONS
     For the three and six months ended March 31, 1997 and 1996 (Unaudited)
                      (In thousands, except per Unit data)

                                   Three Months Ended       Six Months Ended
                                        March 31,                March 31,
                                   ------------------      ------------------
                                    1997        1996         1997       1996
                                    ----        ----         ----       ----

Revenues:
   Rental income and expense
     recoveries                    $  123     $  119        $  242     $  262
   Interest and other income           70         58           150        114
                                   ------     ------        ------     ------
                                      193         177         392         376
Expenses:
   Mortgage interest                   47          50          95         100
   Property operating expenses         25          49          63          78
   Depreciation and amortization       37          39          73          77
   Real estate taxes                   19          18          41          37
   General and administrative          77          66         116         178
                                   ------      ------      ------      ------
                                      205         222         388         470
                                   ------      ------      ------      ------
       
Operating income (loss)               (12)        (45)          4         (94)

Partnership's share of 
  unconsolidated ventures' 
  losses                               (8)        (71)       (118)       (125)
                                   ------      ------      ------      ------

Net loss                           $  (20)     $ (116)     $ (114)     $ (219)
                                   ======      ======      ======      ======

Net loss per Limited 
  Partnership Unit                 $(0.52)     $(3.02)     $(2.99)     $(5.71)
                                   ======      ======      ======      ======


Cash distributions per 
  Limited Partnership Unit        $ 46.25     $    -      $ 46.25      $    -
                                  =======     ======      ======       ======


   The above net loss and cash  distributions  per Limited  Partnership Unit are
based upon the 37,969 Limited Partnership Units outstanding during each period.

















                           See accompanying notes.


<PAGE>


            PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP

             CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
          For the six months ended March 31, 1997 and 1996 (Unaudited)
                                 (In thousands)


                                                   General       Limited
                                                   Partners      Partners
                                                   --------      --------

Balance at September 30, 1995                      $    (752)    $    (221)
Net loss                                                  (2)         (217)
                                                   ---------     ---------
Balance at March 31, 1996                          $    (754)    $    (438)
                                                   =========     =========

Balance at September 30, 1996                      $    (756)    $    (621)
Cash distributions                                        (3)       (1,756)
Net loss                                                  (1)         (113)
                                                   ---------     ---------
Balance at March 31, 1997                          $    (760)    $  (2,490)
                                                   =========     =========


































                             See accompanying notes.


<PAGE>


            PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
          For the six months ended March 31, 1997 and 1996 (Unaudited)
                Increase (Decrease) in Cash and Cash Equivalents
                                 (In thousands)


                                                             1997        1996
                                                             ----        ----
Cash flows from operating activities:
  Net loss                                                 $  (114)    $ (219)
  Adjustments to reconcile net loss to
   net cash provided by (used in) operating activities:
    Depreciation and amortization                              73          77
    Amortization of deferred financing costs                    3           5
    Partnership's share of unconsolidated ventures' losses    118         125
    Changes in assets and liabilities:
      Escrow deposits                                          39          35
      Accounts receivable                                       9         (18)
      Accounts receivable - affiliate                           2          (1)
      Other assets                                              2           3
      Accounts payable and accrued expenses                   (12)        (10)
      Accrued real estate taxes                               (39)        (40)
      Other liabilities                                        (1)          -
                                                           ------      ------
 
        Total adjustments                                     194         176
                                                           ------      ------
        Net cash provided by (used in) operating
          activities                                           80        (43)

Cash flows from investing activities:
   Distributions from unconsolidated joint ventures           712       1,226

Cash flows from financing activities:
   Principal payments on long-term debt                       (28)        (25)
   Distributions to partners                               (1,759)          -
                                                           ------      ------
        Net cash used in financing activities              (1,787)        (25)
                                                           ------      ------

Net (decrease) increase in cash and cash equivalents         (995)      1,158

Cash and cash equivalents, beginning of period              5,067       3,252
                                                           ------      ------
                                           
Cash and cash equivalents, end of period                   $4,072      $4,410
                                                           ======      ======

Cash paid during the period for interest                   $   92      $   95
                                                           ======      ======











                           See accompanying notes.


<PAGE>


                         PAINE WEBBER INCOME PROPERTIES
                          SEVEN LIMITED PARTNERSHIP
                  Notes to Consolidated Financial Statements
                                 (Unaudited)


1. General

      The accompanying financial statements,  footnotes and discussion should be
   read in conjunction with the financial  statements and footnotes contained in
   the Partnership's Annual Report for the year ended September 30, 1996. In the
   opinion of management,  the accompanying  consolidated  financial statements,
   which have not been  audited,  reflect all  adjustments  necessary to present
   fairly the results for the interim period. All of the accounting  adjustments
   reflected in the accompanying  interim  financial  statements are of a normal
   recurring nature.

      The  accompanying  financial  statements have been prepared on the accrual
   basis  of  accounting  in  accordance  with  generally  accepted   accounting
   principles  which require  management to make estimates and assumptions  that
   affect the reported  amounts of assets and  liabilities  and  disclosures  of
   contingent assets and liabilities as of March 31, 1997 and September 30, 1996
   and  revenues  and expenses for the three and six months ended March 31, 1997
   and 1996.  Actual  results could differ from the  estimates  and  assumptions
   used.

2. Related Party Transactions

      Accounts  receivable - affiliates at March 31, 1997 and September 30, 1996
   consist of investor  service fees due from the Daniel Meadows  Partnership of
   $3,000 and $2,000, respectively.

      Included in general and  administrative  expenses  for both the six months
   ended March 31, 1997 and 1996 is $43,000,  representing  reimbursements to an
   affiliate of the Managing  General Partner for providing  certain  financial,
   accounting and investor communication services to the Partnership.

      Also  included in general  and  administrative  expenses  for both the six
   months ended March 31, 1997 and 1996 is $6,000,  representing  fees earned by
   an affiliate,  Mitchell Hutchins Institutional Investors,  Inc., for managing
   the Partnership's cash assets.

3. Investments in Unconsolidated Joint Venture Partnerships

      The  Partnership  has  investments in four  unconsolidated  joint ventures
   which  own  six  operating  properties,   as  more  fully  described  in  the
   Partnership's Annual Report. The unconsolidated joint venture investments are
   accounted for using the equity method because the Partnership does not have a
   voting control interest in the ventures. Under the equity method, the assets,
   liabilities, revenues and expenses of the joint ventures do not appear in the
   Partnership's  financial statements.  Instead, the investments are carried at
   cost  adjusted  for the  Partnership's  share of the  ventures'  earnings and
   losses and distributions.


<PAGE>


      Summarized  operations of the four  unconsolidated  joint ventures for the
   three months and six months ended March 31, 1997 and 1996 are as follows:

                    Condensed Combined Summary of Operations
               For the three months ended March 31, 1997 and 1996
                                 (in thousands)

                                    Three Months Ended       Six Months Ended
                                        March 31,                March 31,
                                   -------------------      ------------------
                                    1997        1996        1997        1996
                                    ----        ----        ----        ----

   Rental revenues and expense
     recoveries                    $2,705      $2,581      $5,349     $ 5,203
   Interest and other income          126          84         226         187
                                   ------      ------      ------     -------
                                    2,831       2,665       5,575       5,390

   Property operating expenses        982         887       1,933       1,772
   Interest expense                   983         967       1,982       1,936
   Real estate taxes                  463         462         939         946
   Depreciation and amortization      412         397         842         815
                                   ------      ------      ------     -------
                                    2,840       2,713       5,696       5,469
                                   ------      ------      ------     -------
   Net loss                        $   (9)     $  (48)     $ (121)    $   (79)
                                   ======      ======      ======     =======

   Net loss:
     Partnership's share of
      combined income (losses)    $   (7)     $  (70)     $ (115)     $ (122)
     Co-venturers' share of 
      combined income (losses)        (2)          22         (6)         43
                                  ------      -------     -------     ------
                                  $   (9)     $  (48)     $ (121)     $  (79)
                                  ======      ======      ======      ======

               Reconciliation of Partnership's Share of Operations
           For the three and six months ended March 31, 1997 and 1996
                                 (in thousands)

                                   Three Months Ended       Six Months Ended
                                         March 31,               March 31,
                                    -----------------      -------------------
                                    1997        1996        1997        1996
                                    ----        ----        ----        ----

   Partnership's share of combined
     losses, as shown above        $   (7)     $  (70)     $ (115)     $ (122)
   Amortization of excess basis        (1)         (1)         (3)         (3)
                                   ------      ------      ------      ------
          
   Partnership's share of
     unconsolidated ventures'
     losses                        $   (8)     $  (71)     $ (118)     $ (125)
                                   ======      ======      ======      ======


      As  discussed  further in the Annual  Report,  HMF  Associates  is a joint
   venture  in which  the  Partnership  has an  interest  and which  owns  three
   multi-family  apartment  properties  in the  Seattle,  Washington  area:  the
   Enchanted  Woods  Apartments,  the Hunt Club  Apartments  and the Marina Club
   Apartments.  The  maturity  date of the loan secured by the  Enchanted  Woods
   Apartments  is June 1, 1997,  while the maturity date of the loans secured by
   the Hunt Club and Marina Club  properties  is July 1, 1997, at which time all
   unpaid  principal,  interest and advances are due. At the present  time,  the
   venture's  net  operating  income level is not  sufficient to fully cover the
   interest accruing on the outstanding debt obligations. As a result, the total
   obligation due to the mortgage  lender will continue to increase  through the
   scheduled maturity dates.  Furthermore,  the current aggregate estimated fair
   value of the operating investment  properties is substantially lower than the
   outstanding   obligations   to  the  first   mortgage   holder   which  total
   approximately $23.5 million as of March 31, 1997. Management has had numerous
   discussions  with  the  mortgage  holder  for  the  properties  owned  by HMF
   Associates  regarding a possible loan  modification  aimed at preventing  the
   further  accumulation  of deferred  interest  and  reducing  the overall debt
   obligations. Such a plan would have required a sizable equity infusion by the
   venture.  During fiscal 1996, management of the Partnership evaluated whether
   an  additional  investment in the venture  would be  economically  prudent in
   light of the future  appreciation  potential of the  properties and concluded
   that it would be unwise to commit the additional equity  investment  required
   to  effect  the  proposed  debt   restructuring.   During  fiscal  1997,  the
   Partnership  and its co-venture  partner have  continued to have  discussions
   with the lender,  and  subsequent to March 31, 1997,  the lender agreed to an
   additional loan  modification  which provides the venture with an opportunity
   to complete a sale transaction  prior to the loan maturity dates. Any sale of
   the  properties  is  expected  to be for an  amount  significantly  below the
   outstanding debt balance.  However, under the terms of the agreement with the
   lender,  the Partnership and the co-venture  partner can qualify to receive a
   nominal  payment  from the sales  proceeds at a specified  level if a sale is
   completed by June 30, 1997 and certain other  conditions are met.  During the
   quarter ended March 31, 1997, the  Partnership  received an offer to purchase
   the Hunt Club,  Marina Club and Enchanted Woods  properties from an unrelated
   third  party  for an  amount  less than the  total  debt  obligation.  If the
   transaction were to close and the conditions  referred to above were met, the
   Partnership  could end up receiving a nominal amount from the proceeds of the
   sale  transaction.  Subsequent  to the end of the  quarter,  the  Partnership
   negotiated and finalized a purchase and sale agreement with this  prospective
   buyer,  and the buyer commenced its 30-day due diligence  period on April 25,
   1997. However, the sale remains contingent upon the buyer's due diligence and
   the receipt of a financing commitment.  Accordingly,  there are no assurances
   that  the  transaction  will  be  consummated.  The  Partnership  has a large
   negative  carrying value for its investment in HMF Associates as of March 31,
   1997 because prior year equity method losses and distributions  have exceeded
   the Partnership's investments in the venture.  Consequently,  the Partnership
   would  recognize  a gain  upon  the  sale  or  foreclosure  of the  operating
   investment properties.

4. Operating Investment Property

      The Partnership has a controlling interest in one joint venture, West Palm
   Beach Concourse Associates, which owns the Concourse Retail Plaza. The Retail
   Plaza consists of 30,473 net rentable  square feet located in West Palm Beach
   Florida.  Subsequent to a settlement  and  assignment  agreement  executed in
   fiscal  1990,  the  Partnership's   co-venture   partner  is  Seventh  Income
   Properties Fund,  Inc., the Managing General Partner of the Partnership.  The
   amended and  restated  terms of the joint  venture  agreement  are more fully
   described in the  Partnership's  Annual Report.  The Partnership  employs the
   services of a local  unaffiliated  property  management company to administer
   the day-to-day operations of the investment property.

      The  following is a summary of property  operating  expenses for the three
   and six-month periods ended March 31, 1997 and 1996 (in thousands):

                                      Three Months Ended      Six Months Ended
                                           March 31,              March 31,
                                      ------------------    ------------------
                                      1997      1996          1997      1996
                                      ----      ----          ----      ----

     Repairs and maintenance        $   7    $    2         $  14     $   6
     Utilities                          1         1             2         2
     Insurance                          1         2             3         3
     Administrative and other          12        17            36        36
     Bad debt                           -        24             -        24
     Management fees                    4         3             8         7
                                   ------    ------        ------     -----
                                   $   25    $   49        $   63     $  78
                                   ======    ======        ======     =====
<PAGE>
5.    Mortgage Note Payable

      Mortgage note payable on the  consolidated  balance  sheets relates to the
   Partnership's   consolidated   joint  venture,   West  Palm  Beach  Concourse
   Associates, and is secured by the venture's operating investment property. At
   March 31, 1997 and September 30, 1996, mortgage note payable
   consists of the following (in thousands):

                                                      March 31   September 30
                                                      --------   ------------

     11.12% first  mortgage,  payable in
     installments   of  $20  per  month,
     including interest, through January
     1, 2005. All outstanding  principal
     and  accrued  interest  is  due  on
     January 10, 2005. The fair value of
     this note payable  approximated its
     carrying  value  as  of  March  31,
     1997.                                            $ 1,643     $ 1,671
                                                      =======     =======

     In  accordance  with  the  Concourse  mortgage  loan  agreements,   certain
insurance  premiums and real estate taxes are required to be held in escrow. The
balance of escrow deposits on the accompanying  balance sheets at March 31, 1997
and September 30, 1996  consists of such  escrowed  insurance  premiums and real
estate taxes in the aggregate amounts of $35,000 and $74,000, respectively.



<PAGE>



           PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources
-------------------------------

    As discussed in the Special  Report  mailed to the  Unitholders  in December
1996, due to  improvements  in the  Partnership's  cash flow and the expectation
that it will continue in the future,  the Partnership  reinstated the payment of
regular quarterly distributions at the annual rate of 2.5% on remaining invested
capital  effective  with the payment  made on February  14, 1997 for the quarter
ended December 31, 1996. The payment of quarterly distributions was discontinued
in  early  1990  primarily  due to the lack of cash  flow  from  several  of the
Partnership's  investments.  The plan to reinstate  quarterly  distributions  is
attributable  to the  improvement  in  property  operations  and the lower  debt
service costs at the Colony  Apartments and The Meadows on the Lake  Apartments,
which  represent  a  combined  48%  of  the  Partnership's  original  investment
portfolio.  The Partnership also made a special distribution of $40 per original
$1,000  investment on February 14, 1997 to Unitholders of record on December 31,
1996.  This amount  represented a  distribution  of  Partnership  reserves which
exceeded expected future requirements.

    The  Partnership  retains  an  interest  in all five of its  original  joint
ventures,  although  the  office  portion  of the  investment  in the  mixed-use
Concourse  property  was  lost  through  foreclosure  proceedings  by the  first
mortgage lender on December 17, 1992. The loss of the Concourse Office Towers to
foreclosure in fiscal 1993 and the loss of all or a  significant  portion of the
Partnership's  equity interest in the three  properties owned by HMF Associates,
as discussed further below,  means that the Partnership will be unable to return
the full amount of the original  invested capital to the Limited  Partners.  The
two office  towers  represented  28% of the  Partnership's  original  investment
portfolio.  The  three  apartment  complexes  owned by HMF  Associates  comprise
another 13% of the original investment portfolio.  Of the four remaining assets,
the  two  multi-family   properties  both  have  significant  equity  above  the
outstanding debt obligations based on current estimated  property values,  while
the two  retail  properties  would  not be  expected  to yield  substantial  net
proceeds after the mortgage debt if sold under current market conditions.

    As  previously  reported,  under  the  terms  of  the  HMF  Associates  loan
modification   executed  in  fiscal  1992,  all  accrued  and  unpaid   interest
outstanding  as of June 30, 1992 was converted to  principal.  Subject to lender
approval,  the  Partnership  was  entitled to obtain  additional  advances up to
$9,100,000 to fund certain  operating  expenses of the joint venture and to cure
the construction defects in the operating investment  properties.  The loans and
any additional advances bear interest at a rate of 9% per annum. As of March 31,
1997, additional lender advances totalling  approximately $4.8 million have been
made, and the total debt obligation of the joint venture totalled $23.5 million.
Monthly payments are made in an amount equal to the "net operating  income",  as
defined,  for the prior month. Unpaid interest is added to the principal balance
of the indebtedness on a monthly basis. The maturity date of the loan secured by
the Enchanted Woods  Apartments is June 1, 1997,  while the maturity date of the
loans  secured by the Hunt Club and Marina Club  properties  is July 1, 1997, at
which time all unpaid  principal,  interest and  advances  are due.  Despite the
successful   remediation  of  the  properties'   construction  defects  and  the
subsequent  lease-up of the apartment  units, the venture's net operating income
level is not sufficient to fully cover the interest  accruing on the outstanding
debt obligations.  As a result,  the total obligation due to the mortgage lender
will continue to increase through the scheduled maturity dates. Furthermore, the
current aggregate estimated fair value of the operating investment properties is
substantially  lower  than the  outstanding  obligations  to the first  mortgage
holder which total approximately $23.5 million as of March 31, 1997.  Management
has had numerous  discussions  with the mortgage holder for the properties owned
by HMF Associates regarding a possible loan modification aimed at preventing the
further  accumulation  of  deferred  interest  and  reducing  the  overall  debt
obligations.  Such a plan would have required a sizable  equity  infusion by the
venture.  During fiscal 1996, management of the Partnership evaluated whether an
additional  investment in the venture would be economically  prudent in light of
the future appreciation  potential of the properties and concluded that it would
be unwise to commit the  additional  equity  investment  required  to effect the
proposed  debt  restructuring.  During  fiscal  1997,  the  Partnership  and its
co-venture  partner have  continued  to have  discussions  with the lender,  and
subsequent  to  March  31,  1997,  the  lender  agreed  to  an  additional  loan
modification  which  provides the venture with an opportunity to complete a sale
transaction  prior to the loan  maturity  dates.  Any sale of the  properties is
expected to be for an amount  significantly  below the outstanding debt balance.
However,  under the terms of the agreement with the lender,  the Partnership and
the co-venture  partner can qualify to receive a nominal  payment from the sales
proceeds  at a  specified  level if a sale is  completed  by June  30,  1997 and
certain other  conditions are met.  During the quarter ended March 31, 1997, the
Partnership  received  an  offer to  purchase  the Hunt  Club,  Marina  Club and
Enchanted Woods properties from an unrelated third party for an amount less than
the total debt  obligation.  If the transaction were to close and the conditions
referred to above were met,  the  Partnership  could end up  receiving a nominal
amount from the proceeds of the sale  transaction.  Subsequent to the end of the
quarter, the Partnership  negotiated and finalized a purchase and sale agreement
with this  prospective  buyer,  and the buyer commenced its 30-day due diligence
period on April 25, 1997. However,  the sale remains contingent upon the buyer's
due diligence and the receipt of a financing commitment.  Accordingly, there are
no assurances  that the  transaction  will be  consummated.  In any event, it is
likely  that  ownership  titles to the three  properties  owned by the HMF joint
venture  will be  transferred  either  by a sale or by a  foreclosure  action in
fiscal  1997.  The  Partnership  has a large  negative  carrying  value  for its
investment  in HMF  Associates  as of March 31, 1997  because  prior year equity
method losses and distributions  have exceeded the Partnership's  investments in
the venture.  Consequently, the Partnership would recognize a gain for both book
and tax purposes upon either a sale or foreclosure  of the operating  investment
properties.

    Through the first six months of fiscal 1997, the  Partnership  received cash
flow  distributions  of $275,000  from the Colony  Apartments  joint venture and
$437,000  from the Meadows  joint  venture.  During the third  quarter of fiscal
1996, the Meadows joint venture  completed the final phase of the repair work on
the  construction  defects at the property using the proceeds from the insurance
settlement  originally  escrowed  with the  lender  plus  excess  cash flow from
property operations.  With the repair work at The Meadows on the Lake Apartments
completed, the venture has begun generating regular distributions of excess cash
flow to the Partnership.  Future  distributions  from the Colony  Apartments and
Meadows joint  ventures are expected to be sufficient to fund the  Partnership's
operating  costs,  allow  for the  payment  of  quarterly  distributions  to the
Unitholders and provide  adequate  liquidity to fund the capital needs which may
exist at the other joint venture investment properties. During the quarter ended
March 31, 1997, the Partnership and its co-venture  partners  received  interest
from some prospective purchasers regarding a possible sale of The Meadows on the
Lake Apartments. Management is currently reviewing the potential for selling the
property.  In addition,  the  Partnership  is focusing on potential  disposition
strategies  for  the  remaining  investments  in  its  portfolio.   Although  no
assurances  can  be  given,  it is  currently  contemplated  that  sales  of the
Partnership's remaining assets could be completed within the next 2-to-3 years.

     Leasing levels at the Concourse Retail Plaza and the Colony Square Shopping
Center were 90% and 100%,  respectively,  as of March 31,  1997.  At the present
time,  real estate  values for retail  shopping  centers in certain  markets are
being adversely impacted by the effects of overbuilding and consolidations among
retailers  which have  resulted in an  oversupply  of space and by the generally
flat rate of  growth  in retail  sales.  It  remains  unclear  at this time what
impact,  if any,  this general trend will have on the  operations  and/or market
values of the  Partnership's  retail  properties  in the near  term.  Management
continues to closely monitor the operating  performance of the three  restaurant
tenants at the  Concourse  Retail  Plaza.  Two of these  tenants,  which  occupy
approximately  40% of the property's  leasable space,  reported  declining sales
during  fiscal  1996  and  fell  behind  on their  rental  payments.  Management
negotiated  agreements with both tenants to cure the rental delinquencies which,
in one of the cases,  involved the  forgiveness of a portion of the  delinquency
and a reduction in the future  monthly rent payment in return for an increase in
the term of the lease obligation.  One of these tenants is currently meeting the
modified  terms of its rental  obligations.  However,  the other  tenant,  which
occupies 28% of the center, has continued to report operational difficulties and
has  fallen  behind  on its  new  rental  payment  arrangement.  The  property's
management team is pursuing legal action against this restaurant  tenant,  and a
court  judgment is expected  during the summer months.  At Colony Square,  a new
one-year  lease was  executed  during the second  quarter of fiscal 1997 for the
remaining 1,200 square feet of vacant space at the Center. In addition, a 10,688
square foot  restaurant  tenant renewed its lease for an additional  five years.
Despite the positive leasing developments, the Colony Square joint venture still
does not produce  any  significant  excess net cash flow after its debt  service
payments.

    At March 31, 1997 the Partnership and its consolidated  venture had cash and
cash  equivalents of  approximately  $4,072,000.  Such cash and cash equivalents
will be utilized as needed for Partnership  requirements  such as the payment of
operating expenses, the funding of operating deficits or capital improvements of
the joint ventures in accordance with the terms of the respective  joint venture
agreements,  to the extent  economically  justified,  and for  distributions  to
partners.  The source of future  liquidity and  distributions to the partners is
expected to be from  available net cash flow  generated by the operations of the
Partnership's  investment  properties  and  from net  proceeds  from the sale or
refinancing  of such  properties.  Such sources of liquidity  are expected to be
sufficient to meet the Partnership's  needs on both a short-term and a long-term
basis.

Results of Operations
Three Months Ended March 31, 1997
---------------------------------

    The  Partnership  reported a net loss of $20,000 for the three  months ended
March 31, 1997, as compared to a net loss of $116,000 for the same period in the
prior year. This $96,000 decrease in the  Partnership's  net loss for the second
quarter was caused by a decrease in the  Partnership's  share of  unconsolidated
ventures'  losses  and a  decrease  in the  Partnership's  operating  loss.  The
Partnership's  share of unconsolidated  ventures' losses decreased by $63,000 in
the second quarter of fiscal 1997, when compared to the same period in the prior
year,  primarily due to increases in rental revenues from the Colony Apartments,
Colony Square and HMF Associates  joint  ventures.  Rental  revenues from Colony
Square and the  apartment  complexes  owned by the HMF joint  venture  increased
mainly due to  increases  in  occupancy  when  compared to the same  three-month
period in the prior  year  while the  increase  at Colony  Apartments  is mostly
attributable  to the  increases  in rental  rates  experienced  over the past 15
months.  These increases in rental revenues were partially offset by an increase
in combined property operating  expenses of the  unconsolidated  joint ventures,
most notably repairs and maintenance costs at HMF Associates and The Meadows and
utilities expenses at Colony Apartments.

    The  Partnership's  operating loss decreased by $33,000 for the three months
ended March 31, 1997, when compared to the same period in the prior year, mainly
due to an  increase  in total  revenues  and a decrease  in  property  operating
expenses.  Property  operating  expenses for the  consolidated  Concourse Retail
Plaza  decreased by $24,000,  primarily  due to the  inclusion of $24,000 of bad
debt expense during the three-month period ended March 31, 1996.

Six Months Ended March 31, 1997
-------------------------------

    The  Partnership  reported a net loss of $114,000  for the six months  ended
March 31,  1997,  as compared to net loss of $219,000 for the same period in the
prior year. This $105,000 decrease in the Partnership's net loss is attributable
to a favorable  change in the  Partnership's  operating income (loss) of $98,000
and a $7,000 decrease in the  Partnership's  share of  unconsolidated  ventures'
losses.   The  favorable   change  in  operating   income  (loss)  is  primarily
attributable  to a decrease  in the  Partnership's  general  and  administrative
expenses of $62,000 and a decline in property  operating expense of $15,000,  as
well as an increase in revenues of $16,000.  General and administrative expenses
decreased  mainly due to a reduction in certain required  professional  services
during  the  current  six-month  period.  Property  operating  expenses  for the
consolidated  Concourse Retail Plaza decreased by $24,000,  primarily due to the
inclusion of $24,000 of bad debt expense during the six-month period ended March
31, 1996.  Revenues  increased due to an increase in interest  income  resulting
from higher average invested cash reserve balances during the current  six-month
period  which was  partially  offset by a  decrease  in rental  income  from the
consolidated  Concourse Retail Plaza. The Partnership's  share of unconsolidated
ventures' losses decreased by $7,000,  remaining  materially  consistent for the
six months ended March 31, 1997   when  compared to the same period in the prior
year.  Increases in rental revenues at the Colony Apartments,  Colony Square and
HMF  Associates  joint  ventures were almost  entirely  offset by an increase in
combined property operating expenses, most notably repairs and maintenance costs
at HMF Associates and The Meadows and utilities expenses at Colony Apartments.



<PAGE>


                                   PART II
                              Other Information

Item 1. Legal Proceedings

     As previously  disclosed,  the Partnership's General Partners were named as
defendants  in  a  class  action  lawsuit   against   PaineWebber   Incorporated
("PaineWebber") and a number of its affiliates relating to PaineWebber's sale of
70 direct  investment  offerings,  including  the  offering of  interests in the
various limited partnership investments and REIT stocks, including those offered
by the  Partnership.  In  January  1996,  PaineWebber  signed  a  memorandum  of
understanding  with the plaintiffs in the class action outlining the terms under
which the parties have agreed to settle the case. Pursuant to that memorandum of
understanding,  PaineWebber  irrevocably  deposited  $125 million into an escrow
fund under the  supervision of the United States District Court for the Southern
District of New York to be used to resolve the  litigation in accordance  with a
definitive  settlement  agreement  and a plan of  allocation.  On July 17, 1996,
PaineWebber and the class plaintiffs submitted a definitive settlement agreement
which  provides for the  complete  resolution  of the class  action  litigation,
including  releases in favor of the  Partnership and PWPI, and the allocation of
the $125 million settlement fund among investors in the various partnerships and
REITs at issue in the case. As part of the settlement,  PaineWebber  also agreed
to provide class members with certain financial  guarantees  relating to some of
the  partnerships  and REITs.  The details of the  settlement are described in a
notice mailed  directly to class members at the direction of the court.  A final
hearing on the fairness of the proposed  settlement  was held in December  1996,
and in March 1997 the court announced its final approval of the  settlement.  As
part  of  the  settlement   agreement,   PaineWebber  has  agreed  not  to  seek
indemnification  from the related partnerships and real estate investment trusts
at issue in the litigation  (including the  Partnership) for any amounts that it
is  required  to pay  under  the  settlement.  In  addition,  in  December  1996
PaineWebber  agreed to settle the  Bandrowski  action  discussed  further in the
Annual Report.  Final  releases and  dismissals  with regard to this action were
received subsequent to the quarter ended March 31, 1997. Based on the settlement
agreements   discussed  above   covering  all   of  the  outstanding  unitholder
litigation, management does not expect that the resolution of these matters will
have a material impact on the  Partnership's  financial  statements,  taken as a
whole.

Item 2. through 5.  NONE

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits:      NONE

(b)  Reports on Form 8-K:

     No reports on Form 8-K have been filed by the registrant during the quarter
for which this report is filed.


<PAGE>





           PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP


                                   SIGNATURES

      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the  Partnership  has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.


                              PAINE WEBBER INCOME PROPERTIES SEVEN
                                    LIMITED PARTNERSHIP


                              By:  SEVENTH INCOME PROPERTIES FUND, INC.
                                   Managing General Partner




                              By:  /s/ Walter V. Arnold
                                   --------------------
                                   Walter V. Arnold
                                   Senior Vice President and
                                   Chief Financial Officer


Dated:  May 12, 1997