FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

              (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT of 1934

                  For the quarterly period ended June 30, 2002
   --------------------------------------------------------------------------

                                       OR

             ( ) 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
                                     0-19140
                     ---------------------------------------


                            CNL Income Fund VII, Ltd.
-----------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


            Florida                                        59-2963871
----------------------------------              -----------------------------
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                        Identification No.)


450 South Orange Avenue
Orlando, Florida                                            32801
----------------------------------              -----------------------------
(Address of principal executive offices)                 (Zip Code)


Registrant's telephone number
(including area code)                                   (407) 540-2000
                                                -----------------------------


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by  Sections  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>


                                    CONTENTS



                                                                         Page

Part I.

     Item 1.   Financial Statements:

                   Condensed Balance Sheets                               1

                   Condensed Statements of Income                         2

                   Condensed Statements of Partners' Capital              3

                   Condensed Statements of Cash Flows                     4

                   Notes to Condensed Financial Statements                5-7

     Item 2.   Management's Discussion and Analysis of Financial
                   Condition and Results of Operations                    8-10

     Item 3.   Quantitative and Qualitative Disclosures About
                   Market Risk                                            11

Part II.

         Other Information                                                12




<PAGE>

                            CNL INCOME FUND VII, LTD.
                         (A Florida Limited Partnership)
                            CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                             June 30,              December 31,
                                                                               2002                    2001
                                                                         ------------------     -------------------

 <c>
                               ASSETS

   Land and buildings on operating leases, net                               $  11,221,504           $  11,333,419
   Net investment in direct financing leases                                     2,400,298               2,452,964
   Investment in joint ventures                                                  8,904,674               8,212,208
   Mortgage and other notes receivable                                             104,646                 104,717
   Cash and cash equivalents                                                       895,212               1,747,363
   Receivables                                                                         569                  74,097
   Due from related parties                                                          1,968                  12,968
   Accrued rental income                                                         1,051,854               1,058,589
   Other assets                                                                     86,376                  76,895
                                                                         ------------------     -------------------

                                                                             $  24,667,101           $  25,073,220
                                                                         ==================     ===================

                  LIABILITIES AND PARTNERS' CAPITAL

   Accounts payable                                                            $     4,328            $     12,306
   Distributions payable                                                           675,000                 675,000
   Due to related parties                                                           15,822                  21,837
   Rents paid in advance and deposits                                                   --                  25,716
                                                                         ------------------     -------------------
       Total liabilities                                                           695,150                 734,859

   Minority interest                                                               140,442                 141,790

   Partners' capital                                                            23,831,509              24,196,571
                                                                         ------------------     -------------------

                                                                             $  24,667,101           $  25,073,220
                                                                         ==================     ===================

</TABLE>
           See accompanying notes to condensed financial statements.

<PAGE>


                            CNL INCOME FUND VII, LTD.
                         (A Florida Limited Partnership)
                         CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>


                                                                       Quarter Ended                   Six Months Ended
                                                                          June 30,                         June 30,
                                                                   2002              2001           2002             2001
                                                               -------------     -------------  --------------  ---------------

 <c>
Revenues:
    Rental income from operating leases                           $ 338,000         $ 389,023      $  710,389       $  793,013
    Earned income from direct financing leases                       73,851            76,879         148,505          154,467
    Interest and other income                                        14,762            30,257          23,145           88,766
                                                               -------------     -------------  --------------  ---------------
                                                                    426,613           496,159         882,039        1,036,246
                                                               -------------     -------------  --------------  ---------------

Expenses:
    General operating and administrative                             60,508            73,190         133,397          185,143
    Property expenses                                                 8,795            27,989          13,963           32,243
    State and other taxes                                             6,970               479          29,446           31,888
    Depreciation                                                     55,957            62,715         111,915          126,093
    Provision for write-down of assets                                   --           279,862              --          279,862
                                                               -------------     -------------  --------------  ---------------
                                                                    132,230           444,235         288,721          655,229
                                                               -------------     -------------  --------------  ---------------

Income Before Gain on Sale of Assets, Minority
    Interest in Income of Consolidated Joint Venture
    and Equity in Earnings of Unconsolidated Joint
    Ventures                                                        294,383            51,924         593,318          381,017

Gain on Sale of Assets                                                   --                --              --          122,996

Minority Interest in Income of Consolidated
    Joint Venture                                                    (4,682 )          (4,485 )        (9,245 )         (9,171 )

Equity in Earnings of Unconsolidated Joint Ventures                 244,877           176,240         400,865          338,877
                                                               -------------     -------------  --------------  ---------------

Net Income                                                        $ 534,578         $ 223,679      $  984,938       $  833,719
                                                               =============     =============  ==============  ===============

Net Income Per Limited Partner Unit                               $   0.018         $   0.008       $   0.033        $   0.028
                                                               =============     =============  ==============  ===============

Weighted Average Number of Limited Partner
    Units Outstanding                                            30,000,000        30,000,000      30,000,000       30,000,000
                                                               =============     =============  ==============  ===============
</TABLE>
           See accompanying notes to condensed financial statements.

<PAGE>


                            CNL INCOME FUND VII, LTD.
                         (A Florida Limited Partnership)
                    CONDENSED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
                                                                        Six Months Ended          Year Ended
                                                                            June 30,             December 31,
                                                                              2002                   2001
                                                                       --------------------    ------------------

 <c>
General partners:
    Beginning balance                                                        $     230,931          $    230,931
    Net income                                                                          --                    --
                                                                       --------------------    ------------------
                                                                                   230,931               230,931
                                                                       --------------------    ------------------

Limited partners:
    Beginning balance                                                           23,965,640            24,450,070
    Net income                                                                     984,938             2,215,570
    Distributions ($0.045 and $0.090 per
       limited partner unit, respectively)                                      (1,350,000 )          (2,700,000 )
                                                                       --------------------    ------------------
                                                                                23,600,578            23,965,640
                                                                       --------------------    ------------------

Total partners' capital                                                     $   23,831,509         $  24,196,571
                                                                       ====================    ==================
</TABLE>

           See accompanying notes to condensed financial statements.



<PAGE>


                            CNL INCOME FUND VII, LTD.
                         (A Florida Limited Partnership)
                       CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                       Six Months Ended
                                                                                           June 30,
                                                                                   2002               2001
                                                                               --------------    ---------------

 <c>
Increase (Decrease) in Cash and Cash Equivalents

    Net Cash Provided by Operating Activities                                    $ 1,312,001        $ 1,320,260
                                                                               --------------    ---------------

    Cash Flows from Investing Activities:
       Investment in joint venture                                                  (933,447 )         (743,670 )
       Return of capital from joint venture                                          129,888                 --
       Decrease in restricted cash                                                        --          1,503,682
       Additions to land and buildings on operating
          leases                                                                          --         (1,495,699 )
       Collections on mortgage note receivable                                            --          1,101,865
                                                                               --------------    ---------------
          Net cash (used in) provided by investing activities                       (803,559 )          366,178
                                                                               --------------    ---------------

    Cash Flows from Financing Activities:
       Distributions to limited partners                                          (1,350,000 )       (1,350,000 )
       Distributions to holder of minority interest                                  (10,593 )          (10,204 )
                                                                               --------------    ---------------
          Net cash used in financing activities                                   (1,360,593 )       (1,360,204 )
                                                                               --------------    ---------------

Net (Decrease) Increase in Cash and Cash Equivalents                                (852,151 )          326,234

Cash and Cash Equivalents at Beginning of Period                                   1,747,363          1,454,025
                                                                               --------------    ---------------

Cash and Cash Equivalents at End of Period                                        $  895,212        $ 1,780,259
                                                                               ==============    ===============

Supplemental Schedule of Non-Cash Financing
    Activities:

       Distributions declared and unpaid at end of
          period                                                                  $  675,000         $  675,000
                                                                               ==============    ===============
</TABLE>
           See accompanying notes to condensed financial statements.



<PAGE>

                            CNL INCOME FUND VII, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
              Quarters and Six Months Ended June 30, 2002 and 2001


1.       Basis of Presentation:

         The accompanying  unaudited  condensed  financial  statements have been
         prepared in accordance  with the  instructions  to Form 10-Q and do not
         include  all  of the  information  and  note  disclosures  required  by
         generally  accepted  accounting  principles.  The financial  statements
         reflect all adjustments,  consisting of normal  recurring  adjustments,
         which are, in the opinion of management,  necessary to a fair statement
         of the results for the interim periods presented. Operating results for
         the quarter and six months ended June 30, 2002,  may not be  indicative
         of the results  that may be expected  for the year ending  December 31,
         2002.  Amounts as of  December  31,  2001,  included  in the  financial
         statements,  have been derived from audited financial  statements as of
         that date.

         These unaudited financial statements should be read in conjunction with
         the financial statements and notes thereto included in Form 10-K of CNL
         Income Fund VII, Ltd. (the  "Partnership")  for the year ended December
         31, 2001.

         The Partnership accounts for its 83% interest in San Antonio #849 Joint
         Venture using the consolidation  method.  Minority interest  represents
         the minority joint venture partners'  proportionate share of the equity
         in  the  Partnership's  consolidated  joint  venture.  All  significant
         intercompany accounts and transactions have been eliminated.

         Effective  January  1,  2002,  the  Partnership  adopted  Statement  of
         Financial  Accounting  Standards No. 144 "Accounting for the Impairment
         or Disposal of  Long-Lived  Assets."  This  statement  requires  that a
         long-lived  asset be  tested  for  recoverability  whenever  events  or
         changes in  circumstances  indicate that its carrying amount may not be
         recoverable.   The  carrying  amount  of  a  long-lived  asset  is  not
         recoverable  if it  exceeds  the  sum of the  undiscounted  cash  flows
         expected to result from the use and eventual  disposition of the asset.
         The assessment is based on the carrying amount of the asset at the date
         it is tested for recoverability.  An impairment loss is recognized when
         the carrying amount of a long-lived asset exceeds its fair value. If an
         impairment is recognized,  the adjusted carrying amount of a long-lived
         asset is its new cost  basis.  The  statement  also  requires  that the
         results of  operations of a component of an entity that either has been
         disposed  of or is  classified  as  held  for  sale  be  reported  as a
         discontinued   operation  if  the  disposal   activity  was   initiated
         subsequent to the adoption of the Standard.

2.       Reclassification:

         Certain  items in the  prior  years'  financial  statements  have  been
         reclassified to conform to 2002 presentation.  These  reclassifications
         had no effect on total partners' capital or net income.

3.       Investment in Joint Ventures:

         In May 2002,  Mansfield Joint Venture,  in which the Partnership owns a
         79% interest,  entered into  negotiations with an unrelated third party
         to sell the  property  in  Mansfield,  Texas.  As a  result,  the joint
         venture reclassified the assets relating to this property from land and
         building on operating  leases and accrued  rental income to real estate
         held for sale.  The  property was recorded at the lower of its carrying
         amount or fair value less cost to sell. In addition,  the joint venture
         stopped   recording   depreciation   and  accrued  rental  income  upon
         identifying  the  property  for sale.  The  financial  results for this
         property are  reflected as  Discontinued  Operations  in the  condensed
         financial information presented below.


<PAGE>


                            CNL INCOME FUND VII, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
              Quarters and Six Months Ended June 30, 2002 and 2001


3.       Investment in Joint Ventures - Continued:

         In June 2002, CNL Restaurant  Investments  II, in which the Partnership
         owns an 18% interest, sold its property in Columbus, Ohio to the tenant
         for a sales price of  approximately  $1,219,600  and received net sales
         proceeds of approximately  $1,215,700  resulting in a gain of $448,300.
         In  addition,  in June 2002,  CNL  Restaurant  Investments  II sold its
         property  in  Pontiac,  Michigan  to the  tenant  for a sales  price of
         $725,000  and  received net sales  proceeds of  approximately  $722,600
         resulting in a loss of $189,800. The Partnership received $129,888 as a
         return of capital from the net sales  proceeds.  The joint venture used
         the proceeds from the sale of the property in Columbus, Ohio to acquire
         a property in Dallas,  Texas at an approximate cost of $1,147,400.  The
         joint venture  acquired this property from CNL Funding  2001-A,  LP, an
         affiliate of the general  partners (see Note 4). The financial  results
         for these  properties are reflected as  Discontinued  Operations in the
         condensed financial information presented below.

         In addition,  in June 2002, the  Partnership  used a portion of the net
         sales  proceeds from the 2001 sale of its  properties  in  Saddlebrook,
         Gainesville  and Daytona  Beach,  Florida to enter into a joint venture
         arrangement,  Arlington Joint Venture,  with CNL Income Fund XVI, Ltd.,
         an affiliate of the general partners,  to hold one restaurant property.
         The joint venture  acquired this property from CNL Funding 2001-A,  LP,
         an affiliate of the general partners (see Note 4). As of June 30, 2002,
         the  Partnership  had  contributed  approximately  $792,900  for  a 79%
         interest in the profits and losses of the joint venture.

         As of June 30, 2002, CNL Restaurant Investments II owns and leases five
         properties   to  operators  of  national   fast-food   restaurants   or
         family-style restaurants. Des Moines Joint Venture, CNL Mansfield Joint
         Venture, Duluth Joint Venture, Pittsburgh Joint Venture, CNL VII & XVII
         Joint Venture,  CNL VII & XV Joint Venture and Arlington  Joint Venture
         each own and lease one  property to  operators  of  national  fast-food
         restaurants or family-style  restaurants.  In addition, the Partnership
         and affiliates,  in four separate tenancy in common arrangements,  each
         own and  lease one  property  to  national  fast-food  or  family-style
         restaurants.

         The following presents the combined,  condensed  financial  information
         for  all  of  the  Partnership's  investments  in  joint  ventures  and
         properties held as tenants-in-common with affiliates at:
<TABLE>
<CAPTION>

                                                            June 30,             December 31,
                                                              2002                  2001
                                                         -----------------     ----------------

 <c>
           Land and buildings on operating leases, net     $  18,393,758         $  16,405,484
           Net investment in direct financing lease            1,755,113             1,765,740
           Real estate held for sale                             742,130             2,443,638
           Cash                                                   35,183                62,669
           Restricted cash                                        60,265                    --
           Receivables                                             4,500               241,628
           Accrued rental income                                 431,412               355,752
           Other assets                                              124                 1,471
           Liabilities                                           146,745               256,902
           Partners' capital                                  21,275,740            21,019,480
</TABLE>



<PAGE>


                            CNL INCOME FUND VII, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
              Quarters and Six Months Ended June 30, 2002 and 2001


3.       Investment in Joint Ventures - Continued:
<TABLE>
<CAPTION>

                                                            Quarter Ended June 30,         Six Months Ended June 30,
                                                             2002            2001          2002             2001
                                                          ------------  ------------    ------------    -------------

 <c>
           Revenues                                         $ 476,335       $ 435,050     $ 957,823        $ 883,029
           Expenses                                           (41,531 )       (30,665 )    (164,908 )       (112,913 )
                                                         -------------    ------------  ------------    -------------
               Income from continuing operations              434,804         404,385       792,915          770,116
                                                         -------------    ------------  ------------    -------------
           Discontinued operations:
               Revenues                                        65,626          92,121       143,105          170,305
               Expenses                                        (6,993 )       (18,312 )     (26,560 )        (36,257 )
               Gain on disposal of assets                     258,505              --       258,505               --
                                                         -------------    ------------  ------------    -------------
                                                              317,138          73,809       375,050          134,048
                                                         -------------    ------------  ------------    -------------

           Net Income                                       $ 751,942       $ 478,194    $1,167,965        $ 904,164
                                                         =============    ============  ============    =============
</TABLE>

         The Partnership recognized income totaling $400,865 and $338,877 during
         the six months ended June 30, 2002 and 2001,  respectively,  from these
         joint  ventures  and  the  properties  held as  tenants-in-common  with
         affiliates,  of which  $244,877  and  $176,240  was  earned  during the
         quarters ended June 30, 2002 and 2001, respectively.

4.       Related Party Transactions:

         In June 2002, the Partnership  and CNL Income Fund XVI, Ltd.  through a
         joint venture  arrangement,  CNL Arlington  Joint  Venture,  acquired a
         property,  in  Arlington,  Texas,  from CNL Funding  2001-A,  LP, for a
         purchase price of  approximately  $1,003,600 (see Note 3). In addition,
         in June 2002,  CNL  Restaurant  Investments  II  acquired a property in
         Dallas,  Texas from CNL  Funding  2001-A,  LP for a  purchase  price of
         approximately  $1,147,400  (see Note 3). CNL Funding  2001-A,  LP is an
         affiliate of the general partners. CNL Funding 2001-A, LP had purchased
         and temporarily held title to the properties in order to facilitate the
         acquisition of the properties by the joint ventures. The purchase price
         paid by the  joint  ventures  represented  the  costs  incurred  by CNL
         Funding  2001-A,  LP to  acquire  and carry the  properties,  including
         closing costs.


<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         CNL Income Fund VII,  Ltd.  (the  "Partnership")  is a Florida  limited
partnership  that was organized on August 18, 1989, to acquire for cash,  either
directly or through joint venture and tenancy in common arrangements, both newly
constructed  and existing  restaurants,  as well as land upon which  restaurants
were to be  constructed  (the  "Properties"),  which  are  leased  primarily  to
operators of national and regional fast-food and family-style restaurant chains.
The leases generally are triple-net leases, with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities. As of June 30,
2001,  the  Partnership  owned 21  Properties  directly and owned 16  Properties
indirectly through joint venture or tenancy in common  arrangements.  As of June
30, 2002, the Partnership  owned 19 Properties  directly and owned 16 Properties
indirectly through joint venture or tenancy in common arrangements.

Capital Resources

         The  Partnership   generated  cash  from  operating  activities  (which
includes  cash received from tenants,  distributions  from joint  ventures,  and
interest and other income  received,  less cash paid for expenses) of $1,312,001
and  $1,320,260  for the six months ended June 30, 2002 and 2001,  respectively.
The decrease in cash from operating activities for the six months ended June 30,
2002, as compared to the six months ended June 30, 2001,  was primarily a result
of changes in the Partnership's working capital.

         Other sources and uses of capital included the following during the six
months ended June 30, 2002.

         In  August  2001,  the   Partnership   entered  into  a  joint  venture
arrangement, CNL VII & XV Columbus Joint Venture, with CNL Income Fund XV, Ltd.,
a Florida  limited  partnership  and an  affiliate of the general  partners,  to
construct and hold one restaurant Property. During the six months ended June 30,
2002, the Partnership contributed  approximately $76,700 to the joint venture to
pay for  construction  costs.  Construction  of the  restaurant was completed in
February 2002 and, as of June 30, 2002 the  Partnership  owned a 68.75% interest
in the profits and losses of the joint venture.

         During the six months ended June 30,  2002,  the  Partnership  used the
proceeds  from the sale of  several  of its  Properties  in 2001 to enter into a
joint venture  arrangement,  CNL Arlington  Joint Venture,  with CNL Income Fund
XVI,  Ltd.,  a Florida  limited  partnership  and an  affiliate  of the  general
partners.  The joint  venture  acquired a  Property  in  Arlington,  Texas at an
approximate  cost of  $1,003,600.  In addition,  in June 2002,  CNL  Restaurants
Investments II, in which the Partnership owns an 18% interest, sold its Property
in Columbus,  Ohio to the tenant for a sales price of  approximately  $1,219,600
and received net sales proceeds of approximately  $1,215,700 resulting in a gain
of $448,300.  The joint  venture  used the proceeds  from this sale to acquire a
Property  in  Dallas,  Texas at an  approximate  cost of  $1,147,400.  The joint
ventures  acquired  these  Properties  from CNL Funding  2001-A,  LP, a Delaware
limited partnership and an affiliate of the general partners. The purchase price
paid by the joint ventures represented the costs incurred by CNL Funding 2001-A,
LP to acquire the Properties  including closing costs. The transaction  relating
to the sale of the Property in Columbus,  Ohio and the  reinvestment  of the net
sales proceeds was structured to qualify as a like-kind exchange transaction for
federal  income tax purposes.  However,  the  Partnership  anticipates  that its
distributions  will be sufficient to enable the limited  partners to pay federal
and state income  taxes,  if any (at a level  reasonably  assumed by the general
partners), resulting from the sale.

         In June 2002, CNL  Restaurant  Investments II also sold its Property in
Pontiac,  Michigan to the tenant for a sales price of $725,000  and received net
sales  proceeds of  approximately  $772,600.  The sale resulted in a loss to the
joint venture of  approximately  $129,800.  As of June 30, 2002 the  Partnership
received $129,888,  representing its pro rata share of the net sales proceeds as
a return of capital.

         Currently,  rental income from the  Partnership's  Properties,  any net
sales  proceeds  held by the  Partnership  and any  amounts  collected  from the
promissory  note are  invested in money  market  accounts  or other  short-term,
highly liquid  investments such as demand deposit accounts at commercial  banks,
money  market  accounts  and  certificates  of  deposit  with less than a 90-day
maturity date, pending the Partnership's use of such funds to acquire additional
Properties,  pay Partnership  expenses or to make distributions to the partners.
At June 30,  2002,  the  Partnership  had $895,212  invested in such  short-term
investments,  as compared to  $1,747,363  at December 31, 2001.  The decrease in
cash and  cash  equivalents  at June 30,  2002  was  primarily  a result  of the
Partnership investing the proceeds from Properties sold in 2001 in CNL Arlington
Joint Venture and contributing  amounts to pay construction costs related to CNL
VII & XV Columbus Joint  Venture.  The funds  remaining at June 30, 2002,  after
payment  of  distributions  and  other  liabilities,  will be  used to meet  the
Partnership's working capital needs.

Short-Term Liquidity

         The Partnership's  short-term liquidity  requirements consist primarily
of the operating expenses of the Partnership.

         The Partnership's  investment strategy of acquiring Properties for cash
and  leasing  them under  triple-net  leases to  operators  who  generally  meet
specified financial  standards  minimizes the Partnership's  operating expenses.
The general partners believe that the leases will continue to generate cash flow
in excess of operating expenses.

         The general  partners have the right,  but not the obligation,  to make
additional capital  contributions if they deem it appropriate in connection with
the operations of the Partnership.

         The Partnership  generally  distributes cash from operations  remaining
after the payment of operating  expenses of the Partnership,  to the extent that
the general partners  determine that such funds are available for  distribution.
Based on current and anticipated  future cash from  operations,  the Partnership
declared distributions to the limited partners of $1,350,000 for each of the six
months ended June 30, 2002 and 2001 ($675,000 for each applicable quarter). This
represents  distributions  for each of the  applicable  six months of $0.045 per
unit ($0.023 per unit for each applicable  quarter).  No distributions were made
to the general  partners for the quarters and six months ended June 30, 2002 and
2001. No amounts  distributed  to the limited  partners for the six months ended
June  30,  2002  and  2001  are  required  to be or  have  been  treated  by the
Partnership  as a return of capital  for  purposes  of  calculating  the limited
partners'  return  on their  adjusted  capital  contributions.  The  Partnership
intends to continue to make  distributions of cash available for distribution to
the limited partners on a quarterly basis.

         Total liabilities of the Partnership,  including distributions payable,
were  $695,150 at June 30,  2002,  as compared to $734,859 at December 31, 2001.
The  decrease in  liabilities  was  primarily a result of a decrease in accounts
payable,  amounts due to related  parties and rents paid in advance and deposits
at June 30, 2002, as compared to December 31, 2001. The general partners believe
that the  Partnership  has sufficient  cash on hand to meet its current  working
capital needs.

Long-Term Liquidity

         The  Partnership  has no long-term  debt or other  long-term  liquidity
requirements.

Results of Operations

         Total rental  revenues for the  Partnership  and San Antonio #849 Joint
Venture were  $858,894  for the six months  ended June 30, 2002,  as compared to
$947,480 in the  comparable  period of 2001, of which $411,851 and $465,902 were
earned during the second quarter of 2002 and 2001, respectively. The decrease in
rental  revenues for the quarter and six months ended June 30, 2002, as compared
to the same periods of 2001,  was  primarily  due to the sales of several of the
Partnership's Properties during 2001. The decrease in rental revenues during the
quarter and six months ended June 30, 2002 was partially offset by the fact that
in  January  2001,  the  Partnership  reinvested  a  portion  of these net sales
proceeds in a Property in Baton Rouge, Louisiana.

         During the six months  ended June 30,  2002 and 2001,  the  Partnership
also earned $23,145 and $88,766,  respectively,  in interest and other income of
which  $14,762 and $30,257 were earned  during the quarters  ended June 30, 2002
and 2001,  respectively.  The decrease in interest  and other income  during the
quarter and six months  ended June 30, 2002 was  primarily  due to a decrease in
the average cash balance as a result of the  reinvestment  of sales  proceeds in
additional  Properties through joint venture arrangements during 2002 and due to
a decline in interest rates.

         During the six months  ended June 30,  2002 and 2001,  the  Partnership
earned $400,865 and $338,877, respectively, attributable to net income earned by
unconsolidated joint ventures,  $244,877 and $176,240 of which was earned during
the  quarters  ended June 30, 2002 and 2001,  respectively.  The increase in net
income earned by joint ventures during the quarter and six months ended June 30,
2002,  as compared to the same periods of 2001,  was  primarily  due to the fact
that in June 2002, CNL Restaurant  Investments II, in which the Partnership owns
an 18% interest, sold its Properties in Columbus, Ohio and Pontiac,  Michigan to
the tenant.  The Partnership  recorded its pro-rata share of the gains resulting
from the  sales of these  Properties.  The  increase  was also  attributable  to
earnings received from the new joint venture arrangements with affiliates of the
general partners,  CNL VII & XVII Lincoln Joint Venture and CNL VII, XV Columbus
Joint  Venture  acquired in April and August 2001,  respectively,  and Arlington
Joint Venture  acquired in June 2002. The increase in net income earned by joint
ventures  during the  quarter and six months  ended June 30, 2002 was  partially
offset  by the fact  that the  tenant  of the  Property  owned by  Duluth  Joint
Venture,  in which the Partnership  owns a 56% interest,  experienced  financial
difficulties  and ceased  making  rental  payments  to the joint  venture.  As a
result,  Duluth Joint  Venture  stopped  recording  rental  revenues  during the
quarter and six months ended June 30, 2002.

         In May 2002,  Mansfield Joint Venture,  in which the Partnership owns a
79% interest,  entered into  negotiations  with an unrelated third party to sell
the Property in Mansfield, Texas, as described below.

         Operating expenses,  including  depreciation  expense and provision for
write-down  of assets,  were $288,721 and $655,229 for the six months ended June
30, 2002 and 2001,  respectively,  of which  $132,230  and $444,235 was incurred
during  the  quarters  ended  June 30,  2002 and 2001,  respectively.  Operating
expenses  were higher  during the six months ended 2001, as compared to the same
period of 2002,  due to the fact that the  Partnership  recorded a provision for
write-down  of assets of $279,862  for the Property in  Saddlebrook,  Florida in
June 2001. The tenant ceased restaurant operations and vacated the Property. The
provision  represented the difference between the carrying value of the Property
and its fair value at June 30,  2001.  In  addition,  the  Partnership  incurred
expenses  such as repairs and  maintenance  and real estate taxes during 2001 in
connection with this Property.  The  Partnership  sold this Property in December
2001.

         The decrease in operating expenses during the six months ended June 30,
2002, as compared to the same period of 2001, was partially due to a decrease in
the costs incurred for administrative expenses for servicing the Partnership and
its Properties and due to the Partnership  incurring less  depreciation  expense
during 2002 as a result of the sale of several Properties in 2001.

         In  connection  with  the  sale  of its  Property  in  Florence,  South
Carolina,  in August 1995, the Partnership  recognized a gain of $122,996 during
the six months ended June 30,  2001.  The  Partnership  recorded the sale of the
Property using the installment  sales method.  As such, the gain on the sale was
deferred,  and was  recognized as income  proportionally  as payments  under the
mortgage note were collected.  The gain  recognized,  during 2001 was due to the
fact that during the six months ended June 30, 2001, the  Partnership  collected
the outstanding balance of the mortgage note collaterized by this Property.

         Effective  January  1,  2002,  the  Partnership  adopted  Statement  of
Financial  Accounting  Standards  No.  144  "Accounting  for the  Impairment  or
Disposal of Long-Lived  Assets." This statement requires that a long-lived asset
be tested  for  recoverability  whenever  events  or  changes  in  circumstances
indicate that its carrying amount may not be recoverable. The carrying amount of
a long-lived  asset is not recoverable if it exceeds the sum of the undiscounted
cash flows  expected  to result  from the use and  eventual  disposition  of the
asset.  The assessment is based on the carrying  amount of the asset at the date
it is tested for  recoverability.  An  impairment  loss is  recognized  when the
carrying  amount of a long-lived  asset exceeds its fair value. If an impairment
is recognized,  the adjusted  carrying  amount of a long-lived  asset is its new
cost basis.  The  statement  also  requires  that the results of operations of a
component of an entity that either has been disposed of or is classified as held
for sale be reported as a  discontinued  operation if the disposal  activity was
initiated subsequent to the adoption of the Standard.

         In May 2002,  Mansfield Joint Venture,  in which the Partnership owns a
79% interest,  entered into  negotiations  with an unrelated third party to sell
the Property in Mansfield,  Texas. The joint venture expects to use the proceeds
from  the  sale to  reinvest  in an  additional  Property.  In  accordance  with
Statement  of  Financial  Accounting  Standards  No.  144,  "Accounting  for the
Impairment or Disposal of Long-Lived  Assets",  the joint venture classified the
assets relating to this Property from land and building on operating  leases and
accrued  rental income to real estate held for sale.  The Property in Mansfield,
Texas was recorded at the lower of its  carrying  amount or fair value less cost
to sell.  During the  quarter  and six months  ended  June 30,  2002,  the joint
venture  suspended the recording of depreciation  and accrued rental income upon
identifying the Property for sale.

         In June 2002, CNL Restaurant  Investments  II, in which the Partnership
owns an 18%  interest  sold its  Property  in  Columbus,  Ohio to the tenant for
approximately  $1,219,600  and  received  net sales  proceeds  of  approximately
$1,215,700 resulting in a gain of approximately  $448,300.  In addition, in June
2002, CNL Restaurant Investments II also sold its Property in Pontiac,  Michigan
to the tenant for  $725,000 and  received  net sales  proceeds of  approximately
$722,600  resulting  in a loss of  approximately  $189,800.  The joint  ventures
recognized  rental income (rental  revenues less Property  related  expenses) of
$116,545  and  $134,048  during  the six months  ended  June 30,  2002 and 2001,
respectively,  of which $58,633 and $73,809 was earned during the quarters ended
June 30, 2002 and 2001, respectively.  The Partnership's pro-rata share of these
amounts are included as equity in earnings of joint ventures in the accompanying
financial statements.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         No material  changes in the  Partnership's  market risk  occurred  from
December 31, 2001 through June 30, 2002. Information regarding the Partnership's
market risk at December  31, 2001 is included in its Annual  Report on Form 10-K
for the year ended December 31, 2001.





<PAGE>


                           PART II. OTHER INFORMATION


Item 1.     Legal Proceedings.   Inapplicable.
            ------------------

Item 2.     Changes in Securities.   Inapplicable.
            ----------------------

Item 3.     Default upon Senior Securities.   Inapplicable.
            -------------------------------

Item 4.     Submission of Matters to a Vote of Security Holders.   Inapplicable.
            ----------------------------------------------------

Item 5.     Other Information.   Inapplicable.
            ------------------

Item 6.     Exhibits and Reports on Form 8-K.
            ---------------------------------

            (a)  Exhibits

                   3.1     Affidavit and  Certificate of Limited  Partnership of
                           CNL Income Fund VII, Ltd. (Included as Exhibit 4.1 to
                           Registration  Statement No. 33-31482 on Form S-11 and
                           incorporated herein by reference.)

                   4.1     Affidavit and  Certificate of Limited  Partnership of
                           CNL Income Fund VII, Ltd. (Included as Exhibit 4.1 to
                           Registration  Statement No. 33-31482 on Form S-11 and
                           incorporated herein by reference.)

                   4.2     Amended and Restated Agreement of Limited Partnership
                           of CNL Income Fund VII, Ltd. (Included as Exhibit 4.2
                           to Form 10-K filed with the  Securities  and Exchange
                           Commission on April 1, 1996, and incorporated  herein
                           by reference.)

                   10.1    Management  Agreement  between  CNL Income  Fund VII,
                           Ltd. and CNL Investment  Company (Included as Exhibit
                           10.1 to Form  10-K  filed  with  the  Securities  and
                           Exchange   Commission   on   April   1,   1996,   and
                           incorporated herein by reference.)

                   10.2    Assignment   of   Management   Agreement   from   CNL
                           Investment Company to CNL Income Fund Advisors,  Inc.
                           (Included as Exhibit 10.2 to Form 10-K filed with the
                           Securities and Exchange Commission on March 30, 1995,
                           and incorporated herein by reference.)

                   10.3    Assignment  of Management  Agreement  from CNL Income
                           Fund  Advisors,  Inc.  to  CNL  Fund  Advisors,  Inc.
                           (Included as Exhibit 10.3 to Form 10-K filed with the
                           Securities and Exchange  Commission on April 1, 1996,
                           and incorporated herein by reference.)

                   10.4    Assignment  of  Management  Agreement  from  CNL Fund
                           Advisors,  Inc. to CNL APF Partners, LP. (Included as
                           Exhibit  10.4 to Form 10-Q filed with the  Securities
                           and  Exchange  Commission  on August  10,  2001,  and
                           incorporated herein by reference.)

                   10.5    Assignment  of  Management  Agreement  from  CNL  APF
                           Partners,  LP to CNL Restaurants  XVIII,  Inc. (Filed
                           herewith.)

                   (b)     Reports on Form 8-K

                           No reports on Form 8-K were filed  during the quarter
                           ended June 30, 2002.


<PAGE>






                                   SIGNATURES


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

         DATED this 9th day of June, 2002


                                            CNL INCOME FUND VII, LTD.

                                            By:CNL REALTY CORPORATION
                                               General Partner


                                               By:/s/ James M. Seneff, Jr.
                                                  ---------------------------
                                                  JAMES M. SENEFF, JR.
                                                  Chief Executive Officer
                                                  (Principal Executive Officer)


                                               By:/s/ Robert A. Bourne
                                                  ---------------------------
                                                  ROBERT A. BOURNE
                                                  President and Treasurer
                                                  (Principal Financial and
                                                  Accounting Officer)



<PAGE>



                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
                          OF CORPORATE GENERAL PARTNER

            PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, James M. Seneff, Jr., the Chief Executive Officer of CNL Realty
Corporation,  the  corporate  general  partner of CNL Income Fund VII, Ltd. (the
"Partnership"),  has executed this  certification  in connection with the filing
with the  Securities  and Exchange  Commission  of the  Partnership's  Quarterly
Report on Form 10-Q for the period  ending  June 30,  2002 (the  "Report").  The
undersigned hereby certifies that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and

(2) the  information  contained in the Report fairly  presents,  in all material
respects, the financial condition and results of operations of the Partnership.


Date:  August 9, 2002                      /s/ James M. Seneff, Jr.
      ---------------------                -----------------------------
                                           Name:  James M. Seneff, Jr.
                                           Title:   Chief Executive Officer



<PAGE>


                    CERTIFICATION OF CHIEF FINANCIAL OFFICER
                          OF CORPORATE GENERAL PARTNER

            PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The  undersigned,  Robert A. Bourne,  the  President and Treasurer of CNL Realty
Corporation,  the  corporate  general  partner of CNL Income Fund VII, Ltd. (the
"Partnership"),  has executed this  certification  in connection with the filing
with the  Securities  and Exchange  Commission  of the  Partnership's  Quarterly
Report on Form 10-Q for the period  ending  June 30,  2002 (the  "Report").  The
undersigned hereby certifies that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and

(2) the  information  contained in the Report fairly  presents,  in all material
respects, the financial condition and results of operations of the Partnership.


Date:   August 9, 2002                   /s/ Robert A. Bourne
      ---------------------              ----------------------------------
                                         Name:  Robert A. Bourne
                                         Title: President and Treasurer


<PAGE>


                                  EXHIBIT INDEX


         Exhibit Number


           3.1     Affidavit  and  Certificate  of  Limited  Partnership  of CNL
                   Income   Fund  VII,   Ltd.   (Included   as  Exhibit  4.1  to
                   Registration   Statement  No.   33-31482  on  Form  S-11  and
                   incorporated herein by reference.)

           4.1     Affidavit  and  Certificate  of  Limited  Partnership  of CNL
                   Income   Fund  VII,   Ltd.   (Included   as  Exhibit  4.1  to
                   Registration   Statement  No.   33-31482  on  Form  S-11  and
                   incorporated herein by reference.)

           4.2     Amended and Restated Agreement of Limited  Partnership of CNL
                   Income Fund VII,  Ltd.  (Included as Exhibit 4.2 to Form 10-K
                   filed with the Securities and Exchange Commission on April 1,
                   1996, and incorporated herein by reference.)

           10.1    Management  Agreement  between CNL Income Fund VII,  Ltd. and
                   CNL Investment Company (Included as Exhibit 10.1 to Form 10-K
                   filed with the Securities and Exchange Commission on April 1,
                   1996, and incorporated herein by reference.)

           10.2    Assignment  of  Management   Agreement  from  CNL  Investment
                   Company  to CNL  Income  Fund  Advisors,  Inc.  (Included  as
                   Exhibit  10.2 to Form  10-K  filed  with the  Securities  and
                   Exchange  Commission  on March  30,  1995,  and  incorporated
                   herein by reference.)

           10.3    Assignment  of  Management  Agreement  from CNL  Income  Fund
                   Advisors,  Inc.  to CNL  Fund  Advisors,  Inc.  (Included  as
                   Exhibit  10.3 to Form  10-K  filed  with the  Securities  and
                   Exchange Commission on April 1, 1996, and incorporated herein
                   by reference.)

           10.4    Assignment of Management  Agreement  from CNL Fund  Advisors,
                   Inc. to CNL APF  Partners,  LP.  (Included as Exhibit 10.4 to
                   Form 10-Q filed with the Securities  and Exchange  Commission
                   on August 10, 2001, and incorporated herein by reference.)

           10.5    Assignment of Management Agreement from CNL APF Partners,  LP
                   to CNL Restaurants XVIII, Inc. (Filed herewith.)