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 DECEMBER 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
           December 31, 1997 and September 30, 1997 (Unaudited)
                              (In thousands)

                                  ASSETS

                                                  December 31   September 30
                                                  -----------   ------------

Operating investment property:
   Land                                            $     486    $      486
   Buildings and improvements                          2,990         2,990
   Equipment and fixtures                                 75            75
                                                   ---------    ----------
                                                       3,551         3,551
Less accumulated depreciation                         (1,275)       (1,257)
                                                   ---------    ----------
                                                       2,276         2,294

Investments in unconsolidated ventures,
   at equity                                           1,229         1,406
Cash and cash equivalents                              7,769         2,856
Escrowed funds                                            13            72
Accounts receivable, net                                  41            26
Deferred expenses, net                                    95           103
Other assets                                              23            32
                                                   ---------    ----------
                                                   $  11,446    $    6,789
                                                   =========    ==========

                     LIABILITIES AND PARTNERS' CAPITAL

Mortgage note payable                              $   1,599    $    1,614
Accounts payable and accrued expenses                    348            84
Accounts payable - affiliates                              7             7
Accrued interest payable                                  15            15
Accrued real estate taxes                                  -            58
Other liabilities                                          9             9
Partners' capital                                      9,468         5,002
                                                   ---------    ----------
                                                   $  11,446    $    6,789
                                                   =========    ==========




                          See accompanying notes.


<PAGE>


            PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP

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


                                                     1997         1996
                                                     ----         ----

Revenues:
   Rental income and expense recoveries           $   125       $   119
   Interest and other income                           62            80
                                                  -------       -------
                                                      187           199
Expenses:
   Mortgage interest                                   46            48
   Property operating expenses                         36            38
   Depreciation and amortization                       21            36
   Real estate taxes                                   21            22
   Management fees                                     17             -
   General and administrative                          74            39
                                                  -------       -------
                                                      215           183
                                                  -------       -------
Operating income (loss)                               (28)           16

Partnership's share of unconsolidated
  ventures' income (losses)                           251          (110)

Partnership's share of gain on sale
  of operating investment property                  4,474             -
                                                  -------       -------

Net income (loss)                                 $ 4,697       $   (94)
                                                  =======       =======


Net income (loss) per Limited 
  Partnership Unit                                $122.39       $ (2.44)
                                                  =======       =======

Cash distributions per Limited
  Partnership Unit                                $  6.03       $     -
                                                  =======       =======

   The above net income (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' CAPITAL (DEFICIT)
       For the three months ended December 31, 1997 and 1996 (Unaudited)
                                 (In thousands)


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

Balance at September 30, 1996                      $   (756)    $   (621)
Net loss                                                 (1)         (93)
                                                   --------     --------
Balance at December 31, 1996                       $   (757)    $   (714)
                                                   ========     ========

Balance at September 30, 1997                      $   (653)    $  5,655
Cash distributions                                       (2)        (229)
Net income                                               49        4,648
                                                   --------     --------
Balance at December 31, 1997                       $   (606)    $ 10,074
                                                   ========     ========






















                          See accompanying notes.


<PAGE>


            PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP

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

                                                         1997         1996
                                                         ----         ----
Cash flows from operating activities:
  Net income (loss)                                    $  4,697     $   (94)
  Adjustments to reconcile net income (loss) to
   net cash provided by operating activities:
    Depreciation and amortization                            21          36
    Amortization of deferred financing costs                  2           2
    Partnership's share of unconsolidated ventures'
      income (losses)                                      (251)        110
    Partnership's share of gain on sale of 
      operating investment property                      (4,474)          -
    Changes in assets and liabilities:
      Escrow deposits                                        59          60
      Accounts receivable                                   (15)          6
      Deferred expenses                                       3           -
      Other assets                                            9          (2)
      Accounts payable and accrued expenses                 264         (12)
      Accrued real estate taxes                             (58)        (59)
      Other liabilities                                       -          (1)
                                                       --------     -------
        Total adjustments                                (4,440)        140
                                                       --------     -------
        Net cash provided by operating activities           257          46

Cash flows from investing activities:
   Distributions from unconsolidated joint ventures       4,902         542

Cash flows from financing activities:
   Distributions to partners                               (231)          -
   Principal payments on long-term debt                     (15)        (13)
                                                       --------     -------
        Net cash used in financing activities              (246)        (13)
                                                       --------     -------

Net increase in cash and cash equivalents                 4,913         575

Cash and cash equivalents, beginning of period            2,856       5,067
                                                       --------     -------
Cash and cash equivalents, end of period               $  7,769     $ 5,642
                                                       ========     =======

Cash paid during the period for interest               $     44     $    46
                                                       ========     =======
                          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,  1997.  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 December 31, 1997 and September 30, 1997 and revenues and
expenses for the three months ended  December 31, 1997 and 1996.  Actual results
could differ from the estimates and assumptions used.

2.  Related Party Transactions
    --------------------------

      Included in general and administrative expenses for the three months ended
December  31, 1997 and 1996 is $22,000 and $21,000,  respectively,  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 the three months
ended   December  31,  1997  and  1996  is  $1,000  and  $6,000,   respectively,
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
    --------------------------------------------------------

      As  of  December  31,  1997,  the   Partnership  had  investments  in  two
unconsolidated  joint  ventures  (four  at  December  31,  1996)  which  own two
operating  properties (six at December 31, 1996), as more fully described in the
Partnership's  Annual Report. On June 27, 1997, HMF Associates,  a joint venture
in which the Partnership had an interest,  sold the properties known as The Hunt
Club  Apartments and The Marina Club  Apartments to an unrelated third party for
approximately  $5.3  million and $3.1  million,  respectively.  The  Partnership
received net proceeds of  approximately  $288,000 in connection with the sale of
these two assets in accordance with a discounted  mortgage loan payoff agreement
reached  with  the  lender  in  April  1997.  The  third  property  owned by HMF
Associates, the Enchanted Woods Apartments,  located in Federal Way, Washington,
had been under  contract for sale to the same buyer that purchased The Hunt Club
and Marina Club properties,  however, the buyer subsequently  withdrew the offer
to purchase Enchanted Woods. The Partnership made a special capital distribution
of  $1,898,450,  or $50 per original  $1,000  investment,  on August 15, 1997 to
unitholders  of record as of June 27, 1997.  Of this amount,  $7.60 per original
$1,000 investment represented net sale proceeds from the disposition of The Hunt
Club  Apartments  and The Marina Club  Apartments,  $41.48 per  original  $1,000
investment  represented  proceeds from the  settlements  of litigation  covering
construction-related  defects at the Hunt Club,  Marina Club and Enchanted Woods
properties  as discussed  further in the Annual  Report,  and $0.92 per original
$1,000 investment represented Partnership reserves that exceeded expected future
requirements.  On September 9, 1997,  HMF  Associates  sold The Enchanted  Woods
Apartments  to an unrelated  third party for  approximately  $9.2  million.  The
Partnership  received net proceeds of approximately  $261,000 in connection with
the sale in  accordance  with the  discounted  mortgage  loan  payoff  agreement
referred to above.

      On December 18, 1997, Daniel Meadows Partnership, a joint venture in which
the Partnership had an interest,  sold its operating  investment  property,  The
Meadows on the Lakes Apartments, located in Birmingham, Alabama, to an unrelated
third party for $9.525 million. The sale generated net proceeds of approximately
$4.4  million,  after  repayment  of the  outstanding  first  mortgage  loan  of
approximately  $4.7 million and closing  costs of  approximately  $400,000.  The
Partnership  received 100% of the net proceeds in  accordance  with the terms of
the joint venture agreement. The Partnership will make a special distribution to
the Limited Partners totalling  approximately  $6,265,000,  or $165 per original
$1,000  investment,  on February 13, 1998. Of this amount,  $116.39 per original
$1,000  investment  represents  the net proceeds from the sale of The Meadows on
the Lake  Apartments,  $13.52 per  original  $1,000  investment  represents  net
proceeds from the disposition of the Enchanted Woods Apartments,  and $35.09 per
original $1,000 investment represents  Partnership reserves that exceed expected
future requirements.

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

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

                                                       1997       1996
                                                       ----       ----


   Rental revenues and expense recoveries          $   1,999   $   2,644
   Interest and other income                              95         100
                                                   ---------   ---------
                                                       2,094       2,744

   Property operating expenses                           660         951
   Interest expense                                      439         999
   Real estate taxes                                     424         476
   Depreciation and amortization                         318         430
                                                   ---------   ---------
                                                       1,841       2,856
   Operating income (loss)                               253        (112)

   Gain on sale of operating investment property       4,869           -
                                                   ---------   ---------

   Net income (loss)                               $   5,122   $    (112)
                                                   =========   =========

   Net income (loss):
     Partnership's share of combined 
       income (loss)                               $   4,854   $    (108)
     Co-venturers' share of combined
       income (loss)                                     268          (4)
                                                   ---------   ---------
                                                   $   5,122   $    (112)
                                                   =========   =========

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

                                                       1997       1996
                                                       ----       ----
   Partnership's share of combined income
     (losses), as shown above                      $   4,854   $    (108)
   Amortization of excess basis                         (129)         (2)
                                                   ---------   ----------
   Partnership's share of unconsolidated
      ventures' net income (loss)                  $   4,725   $    (110)
                                                   =========   ==========

      The Partnership's share of the unconsolidated  ventures' net income (loss)
is  presented  as follows  in the  consolidated  statements  of  operations  (in
thousands):
                                                       1997       1996
                                                       ----       ----
   Partnership's share of unconsolidated
     ventures' income (losses)                     $     251  $     (110)
   Partnership's share of gain on
     sale of operating investment property             4,474           -
                                                   ---------  ----------
   Partnership's share of unconsolidated
      ventures' net income (loss)                  $   4,725  $     (110)
                                                   =========  ===========

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.
<PAGE>

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

                                     1997      1996
                                     ----      ----

     Repairs and maintenance       $    4    $    7
     Utilities                          1         1
     Insurance                          2         2
     Administrative and other          25        24
     Management fees                    4         4
                                   ------    ------
                                   $   36    $   38
                                   ======    ======

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 December 31,
1997 and September 30, 1997, mortgage note payable consists of the following (in
thousands):

                                                   December 30    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 December  31,
1997  and  September  30,  1997.                   $ 1,599         $ 1,614 
                                                   =======         =======

      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 December 31,
1997 and September 30, 1997  consists of such  escrowed  insurance  premiums and
real estate taxes in the aggregate amounts of $13,000 and $72,000, respectively.


<PAGE>



            PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP

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

Information Relating to Forward-Looking Statements
--------------------------------------------------

      The following  discussion of financial condition includes  forward-looking
statements  which  reflect  management's  current  views with  respect to future
events and  financial  performance  of the  Partnership.  These  forward-looking
statements  are  subject to certain  risks and  uncertainties,  including  those
identified  in Item 7 of the  Partnership's  Annual  Report on Form 10-K for the
year ended  September  30, 1997 under the  heading  "Certain  Factors  Affecting
Future Operating Results", which could cause actual results to differ materially
from historical  results or those  anticipated.  The words "believe",  "expect",
"anticipate,"  and  similar  expressions  identify  forward-looking  statements.
Readers  are  cautioned  not to place undue  reliance  on these  forward-looking
statements,  which were made based on facts and conditions as they existed as of
the date of this report.  The  Partnership  undertakes no obligation to publicly
update or revise  any  forward-looking  statements,  whether  as a result of new
information, future events or otherwise.

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

      As discussed further in the Annual Report, on June 27, 1997 HMF Associates
sold the  properties  known as The Hunt  Club  Apartments  and The  Marina  Club
Apartments to an unrelated third party for  approximately  $5.3 million and $3.1
million,  respectively.  The Partnership  received net proceeds of approximately
$288,000 in connection  with the sale of these two assets in  accordance  with a
discounted mortgage loan payoff agreement reached with the lender in April 1997.
The third property owned by the joint venture,  the Enchanted Woods  Apartments,
located in Federal Way, Washington, had been under contract for sale to the same
buyer that  purchased  The Hunt Club and Marina Club  properties,  however,  the
buyer  subsequently   withdrew  the  offer  to  purchase  Enchanted  Woods.  The
Partnership  made a  special  capital  distribution  of  $1,898,450,  or $50 per
original  $1,000  investment,  on August 15, 1997 to unitholders of record as of
June 27, 1997. Of this amount, $7.60 per original $1,000 investment  represented
net sale  proceeds  from the  disposition  of The Hunt Club  Apartments  and The
Marina  Club  Apartments,  $41.48 per  original  $1,000  investment  represented
proceeds  from  the  settlements  of  litigation  covering  construction-related
defects  at the  Hunt  Club,  Marina  Club and  Enchanted  Woods  properties  as
discussed further in the Annual Report, and $0.92 per original $1,000 investment
represented Partnership reserves that exceeded expected future requirements.  On
September 9, 1997,  HMF  Associates  sold The Enchanted  Woods  Apartments to an
unrelated third party for approximately $9.2 million.  The Partnership  received
net proceeds of approximately $261,000 in connection with the sale in accordance
with the discounted mortgage loan payoff agreement referred to above.

      As  previously  reported,  in early  fiscal 1997 the  Partnership  and its
co-venture partner had received  unsolicited offers from prospective  purchasers
to acquire The Meadows on the Lake Apartments,  located in Birmingham,  Alabama.
After  carefully  reviewing  the offers,  the  Partnership  determined  that the
property  should sell at a higher price and directed the  co-venture  partner to
market the property for sale. During the fourth quarter of fiscal 1997,  several
offers were received. One of these offers was from a qualified buyer and met the
Partnership's sale criteria.  This offer was accepted by the Partnership and its
co-venture  partner;  however, a sale agreement could not be finalized with this
prospective  buyer.  Negotiations  were  then  undertaken  with one of the other
potential buyers, resulting in a purchase and sale agreement which was signed on
November 12, 1997. On December 18, 1997, The Meadows on the Lakes Apartments was
sold to an unrelated  third party for $9.525  million.  The sale  generated  net
proceeds of approximately $4.4 million, after repayment of the outstanding first
mortgage loan of  approximately  $4.7 million and closing costs of approximately
$400,000.  The Partnership  received 100% of the net proceeds in accordance with
the terms of the joint venture  agreement.  The Partnership  will make a special
distribution to the Limited Partners totalling approximately $6,265,000, or $165
per original $1,000  investment,  on February 13, 1998. Of this amount,  $116.39
per original $1,000 investment  represents the net proceeds from the sale of The
Meadows on the Lake Apartments, $13.52 per original $1,000 investment represents
net proceeds from the disposition of the Enchanted Woods Apartments,  and $35.09
per original  $1,000  investment  represents  Partnership  reserves  that exceed
expected future requirements.

      The  Partnership is focusing on potential  disposition  strategies for the
remaining  investments in its portfolio,  which consist of two retail properties
and one multi-family apartment complex. The sale of the Partnership's  remaining
assets would be followed by a liquidation  of the  Partnership.  It is currently
contemplated  that sales of the  Partnership's  assets could be completed within
the next one to two years. There are no assurances however that the sales of the
remaining assets and the liquidation of the Partnership will be completed within
this time frame. Of the three assets  remaining after the sale of the Meadows on
the Lake Apartments, the Colony Apartments property has significant equity above
the outstanding debt obligation  based on the estimated  current property value,
while the two retail  properties would not be expected to yield  substantial net
proceeds after the mortgage debt if sold under current market conditions.

      At Colony  Apartments  the  occupancy  level  averaged 97% for the quarter
ended December 31, 1997,  unchanged from the previous quarter.  During the first
quarter of fiscal 1998, the property management team focused its leasing efforts
on the two-bedroom  units at Colony  Apartments.  The improving local economy is
enabling  tenants who normally share  two-bedroom  apartments  with roommates to
afford  one-bedroom  apartments  on their  own.  Asking  rental  rates on vacant
two-bedroom  units were  closely  monitored  by the leasing team and adjusted as
needed in order to maintain an overall occupancy level above 95%. As a result of
the marketing  program  targeting the two-bedroom  units, the property ended the
first quarter with only four unleased two-bedroom apartments.  Assuming that the
overall  market  for  multi-family  apartment  properties  remains  strong,  the
Partnership may have favorable  opportunities to sell its interest in the Colony
Apartments in the near term. The potential to sell this asset,  which represents
the  Partnership's  sole source of liquidity,  on favorable terms may prompt the
accelerated dispositions of the two remaining retail properties.

      Occupancy  levels at the  Concourse  Retail  Plaza and the  Colony  Square
Shopping  Center  were 90% and 100%,  respectively,  as of  December  31,  1997.
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.  The  Partnership  had pursued legal
action for  eviction  against the other  tenant,  a locally  owned  southwestern
restaurant  which  occupies  28% of the  Plaza,  because of a failure to pay the
modified rent. Subsequently,  a court judgement for eviction was entered against
this restaurant  tenant.  This tenant is now experiencing  improved sales and is
paying its rent as modified under the court judgement.  However, the Partnership
is pursuing  additional legal action to obtain a summary  judgement on the total
rental  arrearage owed. The  Partnership  will continue to collect this tenant's
rent while also looking for a replacement  tenant in the event of a default.  In
addition,  a locally owned and operated far eastern  restaurant,  which occupies
12% of the leasable area, experienced a slow down in sales due to the decline in
tourism during the off-season and fell behind in its rental  obligations  during
the  fourth  quarter  of  fiscal  1997.  This  tenant is  attempting  to pay its
arrearage as its seasonal tourist  business  increases during the winter months.
During the fourth  quarter of fiscal  1997,  the  property's  leasing team began
discussions with a popular south Florida  Caribbean  restaurant chain on a lease
for a 3,953 square foot vacant restaurant  space. The Partnership  believes that
the potential  addition of this new restaurant would add stability to the tenant
base and make the  Plaza  more  appealing  to  prospective  future  buyers.  The
property's  leasing team is also in discussion with a 1,200 square foot mortgage
company tenant  regarding its lease renewal.  Two other tenants,  a 3,200 square
foot health care provider and a 1,200 square foot print shop, have leases coming
up for renewal over the next 12 months.  The leasing team expects  these tenants
to renew their leases.

      As noted above,  the  Partnership is currently  reviewing its  disposition
options for the  Concourse  Retail  Plaza.  For the past four years,  80% of the
Plaza's 30,473 square feet has been leased to four restaurant  operators  which,
for the most part, have performed poorly. One of the options under review is the
development of a leasing plan that would put an emphasis on a greater mixture of
office and retail uses.  This could involve the  conversion of one of the larger
restaurant out parcel buildings into professional/service  office space. Another
option would be to market the property  for sale after  attempting  to stabilize
the current  tenant base.  However,  the  prospects for  stabilizing  the tenant
roster  are  uncertain  at the  present  time in  light  of the  bleak  economic
conditions which currently exist in the local sub-market. Management is aware of
several  restaurant  tenants in the local market whose businesses have failed in
recent months, and, despite diligent efforts, the Partnership has been unable to
identify  and secure  viable  tenants to  replace  any of the three  financially
troubled  restaurant  tenants  referred  to above.  Another  factor  impacting a
possible near term sale of the Concourse  Retail Plaza is the  property's  first
mortgage loan. The mortgage loan, which is assumable,  contains a prohibition on
prepayment through January 10, 2000. As a result, any sale transaction completed
prior to such date would have to involve an  assumption  of this  mortgage  loan
which  carries  an  interest  rate of 11.12% per  annum.  Management  expects to
formalize its strategy for  positioning  the Concourse  property for sale during
fiscal 1998.  In light of the potential for an  accelerated  disposition  of the
Concourse Retail Plaza and the continued financial difficulties of a substantial
portion of the property's tenant base,  management  concluded during fiscal 1997
that the  carrying  value of the  Concourse  operating  investment  property was
impaired in accordance  with Statement of Financial  Accounting  Standards (SFAS
121),  "Accounting  for the  Impairment of Long-Lived  Assets and for Long-Lived
Assets to Be Disposed Of."  Accordingly,  an impairment  loss of $1,000,000  was
recognized  in the fourth  quarter of fiscal 1997 to write down the net carrying
value of the Concourse  property to its current  estimated  fair market value of
approximately $2.3 million, as determined by an independent appraisal.

      During the first  quarter of fiscal  1998,  the leasing team at the Colony
Square  Shopping  Center  signed a renewal  and  expansion  lease with a jewelry
repair store that  relocated  from its 600 square foot space into a 1,200 square
foot space.  Also during the first quarter,  the Center's grocery store expanded
into the recently vacated jewelry store,  which brought the Center leasing level
to 100%.  There are seven  tenants  leasing a total of 10,170 square feet of the
Center's 39,572 square foot leasable area that have leases coming up for renewal
over the next 12 months.  The property's leasing team expects that most of these
leases will be renewed. Asking rental rates at the Colony Square are up slightly
from one year ago which  may  provide  an  opportunity  to renew  the  leases at
slightly higher rental rates.  With an occupancy level of 100% and a stable base
of locally  owned and operated  tenants,  the  Partnership  believes it would be
appropriate to explore a possible sale of the property. Accordingly,  management
has initiated  discussions with a prominent local retail real estate  consulting
firm for the purpose of determining various options for the property.

      At December 31, 1997, the  Partnership  and its  consolidated  venture had
cash  and cash  equivalents  of  approximately  $7,769,000.  Such  cash and cash
equivalents  include  the  proceeds  from the sales of the  Enchanted  Woods and
Meadows properties. Such proceeds, along with certain excess cash reserves, will
be  distributed  to the Limited  Partners on February  13,  1998,  as  discussed
further above.  The remainder of the 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 December 30, 1997
------------------------------------

      The  Partnership  reported net income of  $4,697,000  for the three months
ended  December  31,  1997,  as  compared  to a net loss of $94,000 for the same
period  in the prior  year.  This  favorable  change  in the  Partnership's  net
operating results is mainly  attributable to a $4,474,000 gain recognized in the
current  three-month  period  on the  sale  of the  Meadows  property  and to an
improvement  in the  Partnership's  share  of  unconsolidated  ventures'  income
(losses).  The Partnership  recognized  income of $251,000 from its share of the
operating results of its unconsolidated  joint ventures for the first quarter of
fiscal  1998,  as compared to a net loss of $110,000  for the same period in the
prior year. The favorable change in the  Partnership's  share of  unconsolidated
ventures'  income  (losses)  is  primarily  attributable  to  the  sale  of  the
properties  owned by the HMF joint  venture in fiscal  year 1997,  as  discussed
further  above.  The HMF joint  venture had been  generating  sizable  operating
losses  prior to the sales of its assets.  Increases in net income at the Colony
Apartments  and Colony  Square joint  ventures,  which were mainly the result of
higher revenues,  also contributed to the improvement in the Partnership's share
of unconsolidated  ventures' income (losses) for the current three-month period.
The impact of the gain on the sale of The Meadows on the Lake Apartments and the
favorable change in the Partnership's  share of unconsolidated  ventures' income
(losses) was  partially  offset by an  unfavorable  change in the  Partnership's
operating income (loss) of $45,000.  The unfavorable change in the Partnership's
operating income (loss) is primarily  attributable to an increase in general and
administrative   expenses  for  the  current  three-month  period.  General  and
administrative expenses increased by $52,000 primarily due to certain additional
legal and audit fees incurred in the first quarter of fiscal 1998 and due to the
timing of certain recurring professional services compared to the same period in
the prior year.



<PAGE>



                                  PART II
                             Other Information


Item 1. Legal Proceedings NONE

Item 2. through 5.        NONE

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits:           NONE

(b)   A Current  Report on Form 8-K dated December 18, 1997 was filed during the
      current  quarter of fiscal  1998 to report the sale of The  Meadows on the
      Lake Apartments and is hereby incorporated by reference.



<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:  February 12, 1998