UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                    FORM 10-Q

(Mark one)

[x]       QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
          OF THE SECURITIES EXCHANGE ACT OF 1934

          For the quarterly period ended      June 30, 1998

                                       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               0-17589

                            NTS-PROPERTIES VII, LTD.
             (Exact name of registrant as specified in its charter)

            Florida                                    61-1119232
(State or other jurisdiction of           (I.R.S. Employer Identification No.)
incorporation or organization)

   10172 Linn Station Road
   Louisville, Kentucky                                  40223
(Address of principal executive                       (Zip Code)
offices)

Registrant's telephone number, including area code  (502) 426-4800

                                 Not Applicable
               Former name, former address and former fiscal year,
                          if changed since last report

Indicate by check mark whether the registrant (l) 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,  and (2) has been subject to such filing  requirements
for the past 90 days.

                                          YES  X         NO  ______
Exhibit Index: See page 13
Total Pages: 14


<PAGE>



                                TABLE OF CONTENTS

                                                                   Pages

                                     PART I

Item 1.     Financial Statements

            Balance Sheets and Statement of Partners' Equity
              as of June 30, 1998 and December 31, 1997                3

            Statements of Operations
              For the three months and six months ended
              June 30, 1998 and 1997                                   4

            Statements of Cash Flows
              For the three months and six months ended
              June 30, 1998 and 1997                          

            Notes To Financial Statements                            6-7

Item 2.     Management's Discussion and Analysis of Financial
              Condition and Results of Operations                   8-12


                                     PART II

Item 3.     Defaults Upon Senior Securities                           13

Item 6.     Exhibits and Reports on Form 8-K                          13

Signatures                                                            14



                                      - 2 -

<PAGE>



PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements
<TABLE>

                            NTS-PROPERTIES VII, LTD.

                BALANCE SHEETS AND STATEMENT OF PARTNERS' EQUITY

<CAPTION>

                                         As of             As of
                                     June 30, 1998   December 31, 1997*
                                     -------------   ------------------
ASSETS

<S>                                   <C>               <C>        
Cash and equivalents                  $   492,221       $   164,714
Cash and equivalents - restricted          55,493           176,636
Investment securities                        --             338,129
Accounts receivable                         3,460               858
Land, buildings and amenities, net     10,202,762        10,361,786
Other assets                              139,759           137,022
                                      -----------       -----------

                                      $10,893,695       $11,179,145
                                      ===========       ===========

LIABILITIES AND PARTNERS' EQUITY

Mortgages payable                     $ 5,197,810       $ 5,303,947
Accounts payable                           75,027            38,815
Distributions payable                      29,078            60,426
Security deposits                          32,150            36,325
Other liabilities                          57,440             6,787
                                      -----------       -----------

                                        5,391,505         5,446,300

Partners' equity                        5,502,190         5,732,845
                                      -----------       -----------

                                      $10,893,695       $11,179,145
                                      ===========       ===========
</TABLE>
<TABLE>
<CAPTION>       
                                      Limited         General
                                      Partners        Partner          Total
                                      --------        -------          -----

<S>                                <C>             <C>             <C>    
PARTNERS' EQUITY
Capital contributions, net of
 offering costs                    $ 10,935,700    $        100    $ 10,935,800
Net income (loss) - prior years      (2,615,475)        (26,418)     (2,641,893)
Net loss - current year                  (8,080)            (82)         (8,162)
Cash distributions declared to
 date                                (2,463,590)        (24,885)     (2,488,475)
Repurchase of limited
 partnership Units                     (295,080)           --          (295,080)
                                   ------------    ------------    ------------

Balances at June 30, 1998          $  5,553,475    $    (51,285)   $  5,502,190
                                   ============    ============    ============

</TABLE>
*   Reference is made to the audited  financial  statements  in the Form 10-K as
    filed with the Commission on March 30, 1998.

                                      - 3 -

<PAGE>
<TABLE>


                            NTS-PROPERTIES VII, LTD.

                            STATEMENTS OF OPERATIONS

<CAPTION>

                                                                   Three Months Ended                      Six Months Ended
                                                                        June 30,                                June 30,
                                                                   ------------------                      ----------------

                                                                 1998                1997               1998                 1997
                                                               ---------           ---------          ---------            --------

<S>                                                            <C>                 <C>                <C>                 <C>    
REVENUES:
  Rental income                                                $ 493,870           $ 502,542          $ 956,060           $ 986,773
 Interest and other income                                         6,418               5,474             13,201               9,427
                                                               ---------           ---------          ---------           ---------

                                                                 500,288             508,016            969,261             996,200

EXPENSES:
Operating expenses                                               141,709             118,135            225,897             230,173
Operating expenses - affiliated                                   63,949              52,823            125,162             114,381
Write-off of unamortized
 land improvements and amenities                                  10,743                --               10,743                --
Interest expense                                                  99,364             111,472            198,242             223,373
Management fees                                                   25,792              25,995             49,992              51,047
Real estate taxes                                                 25,150              24,894             50,928              49,788
Professional and administrative
 expenses                                                         19,851              15,083             31,386              28,917
Professional and administrative
 expenses - affiliated                                            21,098              20,549             43,380              40,863
Depreciation and amortization                                    119,788             128,828            241,693             257,977
                                                               ---------           ---------          ---------           ---------

                                                                 527,444             497,779            977,423             996,519
                                                               ---------           ---------          ---------           ---------

Net income (loss)                                              $ (27,156)          $  10,237          $  (8,162)          $    (319)
                                                               =========           =========          =========           =========

Net income (loss) allocated to
 the limited partners                                          $ (26,884)          $  10,135          $  (8,080)          $    (316)
                                                               =========           =========          =========           =========

Net income (loss) per limited
 partnership unit                                              $   (0.05)          $    0.02          $   (0.01)          $    0.00
                                                               =========           =========          =========           =========

Weighted average number of units                                 576,483             598,221            586,433             598,840
                                                               =========           =========          =========           =========
</TABLE>



                                      - 4 -

<PAGE>
<TABLE>


                            NTS-PROPERTIES VII, LTD.

                            STATEMENTS OF CASH FLOWS

<CAPTION>
                                                                      Three Months Ended                     Six Months Ended
                                                                            June 30,                             June 30,
                                                                      ------------------                     ----------------

                                                                   1998               1997               1998                1997
                                                                 ---------          ---------          ---------          ---------
<S>                                                              <C>                <C>                <C>                <C>    
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                                                $ (27,156)         $  10,237          $  (8,162)         $    (319)
Adjustments to reconcile net income
 (loss) to net cash provided by
 operating activities:
   Accrued interest on investment
      securities                                                       388               --                1,737               --
  Write-off of unamortized land
    improvements and amenities                                      10,743               --               10,743               --
   Depreciation and amortization                                   119,788            128,828            241,693            257,977
   Changes in assets and liabilities
    Cash and equivalents - restricted                               (4,941)           (22,226)            (6,507)           (44,441)
    Accounts receivable                                             (2,161)             8,654             (2,602)            11,811
    Other assets                                                     9,370              9,299               (480)            (8,079)
    Accounts payable                                                34,049            (16,389)            36,212            (16,053)
    Security deposits                                                 (400)               825             (4,175)             1,640
    Other liabilities                                               24,875             24,894             50,653             49,788
                                                                 ---------          ---------          ---------          ---------

   Net cash provided by operating
      activities                                                   164,555            144,122            319,112            252,324
                                                                 ---------          ---------          ---------          ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and
   amenities                                                       (63,024)            (3,708)           (90,496)            (5,588)
Purchase of investment securities                                     --                 --             (200,000)              --
Maturity of investment securities                                  100,000               --              536,392               --
                                                                 ---------          ---------          ---------          ---------

   Net cash provided by (used in)
      investing activities                                          36,976             (3,708)           245,896             (5,588)
                                                                 ---------          ---------          ---------          ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Cash and equivalents - restricted                                  102,480                 40            127,650              8,688
Principal payments on mortgages
   payable                                                         (52,784)           (40,697)          (106,137)           (80,547)
Cash distributions                                                 (58,524)                                               (121,072))
Repurchase of limited partnership
   Units                                                          (109,722)               (40)          (134,892)            (8,688)
Payment of loan costs                                                 --                 --               (5,172)              --
                                                                 ---------          ---------          ---------          ---------

   Net cash used in financing
      activities                                                  (118,550)          (101,124)          (237,501)          (201,619)
                                                                 ---------          ---------          ---------          ---------

   Net increase in cash and equivalents                             82,981             39,290            327,507             45,117

CASH AND EQUIVALENTS, beginning of
   period                                                          409,240            284,447            164,714            278,620
                                                                 ---------          ---------          ---------          ---------

CASH AND EQUIVALENTS, end of period                              $ 492,221          $ 323,737          $ 492,221          $ 323,737
                                                                 =========          =========          =========          =========

Interest paid on a cash basis                                    $ 100,356          $ 111,472          $ 200,145          $ 223,791
                                                                 =========          =========          =========          =========

</TABLE>



                                      - 5 -

<PAGE>



                            NTS-PROPERTIES VII, LTD.

                          NOTES TO FINANCIAL STATEMENTS

The financial  statements included herein should be read in conjunction with the
Partnership's  1997 Annual Report.  In the opinion of the General  Partner,  all
adjustments (only consisting of normal recurring  accruals) necessary for a fair
presentation  have been made to the  accompanying  financial  statements for the
three months and six months ended June 30, 1998 and 1997.

1.   Use of Estimates in the Preparation of Financial Statements
     -----------------------------------------------------------

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the reported amounts of assets and liabilities and
     disclosure  of  contingent  assets  and  liabilities  at  the  date  of the
     financial  statements  and the  reported  amounts of revenues  and expenses
     during the reporting period.
     Actual results could differ from those estimates.

2.   Concentration of Credit Risk
     ----------------------------

     NTS-Properties  VII, Ltd.,  owns and operates,  through a joint venture,  a
     commercial property in Louisville, Kentucky. The sole tenant which occupies
     100% of the property is a business  which has  operations in the Louisville
     area.  The  Partnership  also owns and operates  residential  properties in
     Louisville  and  Lexington,  Kentucky.  The apartment unit is generally the
     principal residence of the tenant.

3.   Cash and Equivalents - Restricted
     ---------------------------------

     Cash and equivalents - restricted represents funds received for residential
     security  deposits,  funds which have been escrowed with mortgage companies
     for  property  taxes in  accordance  with the loan  agreements,  and  funds
     reserved  by the  partnership  for the  repurchase  of limited  partnership
     Units.

4.   Investment Securities
     ---------------------

     Investment  securities represent  investments in Certificates of Deposit or
     securities issued by the U.S. Government with initial maturities of greater
     than three months.  The  Partnership  intends to hold the securities  until
     maturity.  During  1997  and  1998,  the  Partnership  sold  no  investment
     securities.  At June 30, 1998 the Partnership held no investment securities
     with initial maturities greater than three months.

     The following  provides details  regarding the investments held at December
     31, 1997:


                               Amortized       Maturity      Value at
              Type               Cost            Date        Maturity
             ------            ----------      --------      --------
     Certificate of Deposit   $   112,348      02/04/98    $  112,908
     
     Certificate of Deposit       100,543      03/05/98       101,492
     
     Certificate of Deposit       125,238      03/30/98       127,336
                               ----------                   ---------
                              $   338,129                  $  341,736
                               ==========                   =========


                                      - 6 -

<PAGE>



5.   Mortgages Payable
     -----------------

     Mortgages payable consist of the following:


                                                 June 30,        December 31,
                                                  1998               1997
                                                 --------        ------------
     Mortgage  payable to an insurance  
     company,  bearing interest at a fixed 
     rate of 7.37%, due October 15, 2012,
     secured by land and buildings             $ 4,040,142       $ 4,091,369

     Mortgage payable to an insurance
     company, bearing interest at a fixed
     rate of 8.5%, due November 15, 2005,
     secured by land and building                1,157,668         1,212,578
                                                ----------        ----------
                                               $ 5,197,810       $ 5,303,947
                                                ==========        ==========


     Based on the borrowing  rates  currently  available to the  Partnership for
     mortgages  with  similar  terms and average  maturities,  the fair value of
     long-term debt is approximately $6,200,000.

6.   Interest Repurchase Reserve
     ---------------------------

     Pursuant  to  Section  16.4  of  the  Partnership's  Amended  and  Restated
     Agreement  of Limited  Partnership,  the  Partnership  has  established  an
     Interest  Repurchase  Reserve.  On May 26, 1998, the Partnership elected to
     fund $6,000 to its  Interest  Repurchase  Reserve and on June 2, 1998,  the
     Partnership  funded  an  additional  $1,242  to  the  reserve.  With  these
     fundings,  the  Partnership  repurchased  1,207  Units at a price of $6 per
     Unit.  From  December  31,  1995 to  June  30,  1998  the  Partnership  has
     repurchased a total of 62,529 Units for $295,080.  The above offering price
     per Unit was  established by the General Partner in its sole discretion and
     does not purport to represent the fair market value or liquidation value of
     the Units.  Repurchased  Units will be  retired  by the  Partnership,  thus
     increasing the percentage of ownership of each  remaining  limited  partner
     investor.  The Interest  Repurchase  Reserve was funded from cash reserves.
     The balance in the reserve at June 30, 1998 was $3.

7.   Related Party Transactions
     --------------------------

     Property   management  fees  of  $49,992  and  $51,047  were  paid  to  NTS
     Development  Company,  an affiliate of the General Partner,  during the six
     months ended June 30, 1998 and 1997, respectively.  The fee is paid monthly
     in an  amount  equal  to 5% of the  gross  revenues  from  the  residential
     properties  and 6% of the  gross  revenues  from  the  commercial  property
     pursuant to an agreement with the  Partnership.  The  Partnership  also was
     charged the  following  amounts  from NTS  Development  Company for the six
     months ended June 30, 1998 and 1997. These charges include items which have
     been  expensed  as  operating  expenses   affiliated  or  professional  and
     administrative  expenses - affiliated and items which have been capitalized
     as other assets or as land, buildings and amenities.


                                       1998                  1997
                                     ---------            ---------

          Leasing                    $  17,023            $  20,273
          Administrative                55,243               54,332
          Property manager              95,677               80,525     
          Other                          1,568                  113
                                     ---------            ---------

                                     $ 169,511            $ 155,243
                                     =========            =========




                                      - 7 -

<PAGE>

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

The management's  discussion and analysis of financial  condition and results of
operations  included herein should be read in conjunction with the Partnership's
1997 Annual Report.

Results of Operations
---------------------

The  occupancy  levels  at the  Partnership's  properties  as of June 30 were as
follows:


                                             1998                 1997
                                             ----                 ----

Wholly-owned Properties
-----------------------

The Park at the Willows                       90%                  94%

Park Place Apartments Phase II                84%                  94%

Property Owned in Joint Venture with
NTS-Properties IV and NTS-Properties
Plus Ltd. (Ownership % at June 30,
1998)
-------------------------------------

Blankenbaker Business Center 1A (31%)        100%                 100%

Rental and other income generated by the Partnership's  properties for the three
months and six months ended June 30, 1998 and 1997 was as follows:


                                    Three Months Ended       Six Months Ended
                                         June 30,                June 30,
                                    ------------------       ----------------

                                     1998       1997         1998        1997
                                    ------     ------       ------      -------
Wholly-owned Properties
-----------------------

The Park at the Willows           $  97,990  $  79,945    $ 183,023   $ 154,995

Park Place Apartments Phase II    $ 328,519  $ 350,648    $ 632,098   $ 687,106

Property owned in Joint Venture
with NTS-Properties IV and NTS-
Properties Plus Ltd. (Ownership %
at June 30, 1998)
---------------------------------

Blankenbaker Business Center 1A    $ 69,093  $  73,506    $ 143,529   $ 146,984
(31%)(1)

(1)    Revenues  shown  in this  table  represent  the  Partnership's  share  of
       revenues generated by Blankenbaker  Business Center 1A. The Partnership's
       percentage  interest  in the joint  venture was 31% during the six months
       ended June 30, 1998 and 1997.

The Park at the Willows' occupancy decreased from 94% at June 30, 1997 to 90% at
June  30,  1998.  Average  occupancy  for the six  month  period  ended  June 30
increased from 88% in 1997 to 92% in 1998. Average occupancy for the three month
period  ended June 30  increased  from 90% in 1997 to 91% in 1998.  Occupancy at
residential properties fluctuates on a continuous basis. Period ending occupancy
percentages represent occupancy only on a specific date;  therefore,  it is more
meaningful   to  look  at   average   occupancy   percentages   which  are  more
representative of the entire period's results. Large changes in occupancy at The
Park at the Willows are due to the fact that the complex has only 48 units.  One
vacant  apartment  in  this  complex  equates  to a 2%  decrease  in  occupancy;
therefore,  occupancy  percentage  changes may appear  distorted on a percentage
basis when compared to other residential  properties.  In residential properties
it is not
                                      - 8 -

<PAGE>



Results of Operations - Continued
---------------------------------

uncommon for multiple residents to vacate at month-end with new residents taking
occupancy  within a few days.  When this occurs at The Park at the Willows,  the
change in occupancy  will be much greater than at other  residential  properties
because of its small size.  The  increase in rental and other income at The Park
at the  Willows for the three  months and the six months  ended June 30, 1998 as
compared  to the  same  periods  in  1997  is due to  the  increase  in  average
occupancy,  an  increase  in rental  rates and an  increase in income from fully
furnished  units.  Fully  furnished  units  are  apartments  which  rent  at  an
additional premium above base rent.

Park Place Apartments  Phase II's occupancy  decreased from 94% at June 30, 1997
to 84% at June 30, 1998.  Average  occupancy for the six month period ended June
30 at Park Place  Apartments Phase II decreased from 89% in 1997 to 84% in 1998.
Average occupancy for the three month period ended June 30 decreased from 90% in
1997 to 85% in 1998. In the opinion of the General  Partner of the  Partnership,
the decrease in occupancy at Park Place  Apartments Phase II is only a temporary
fluctuation and does not represent a downward occupancy trend.  Rental and other
income at Park Place  Apartments Phase II decreased for the three months and the
six months  ended June 30,  1998 as  compared  to the same  periods in 1997 as a
result of the decrease in average occupancy.

A  wholly-owned  subsidiary  of The  Prudential  Insurance  Company  of  America
(Prudential  Service  Bureau,  Inc.) has leased  100% of  Blankenbaker  Business
Center 1A through July 2005.  In addition to monthly rent  payments,  Prudential
Service  Bureau,  Inc. is obligated to pay  substantially  all of the  operating
expenses attributable to its space. Blankenbaker Business Center 1A's rental and
other income  remained fairly constant for the three months and six months ended
June 30, 1998 as compared to the same periods in 1997.

If present  trends  continue,  the  Partnership  will be able to continue at its
current  level  of  operations  without  the need of any  additional  financing.
Current  occupancy  levels are considered  adequate to continue the operation of
the Partnership's properties. See the Liquidity and Capital Resources section of
Item 2 for a discussion  regarding the cash  requirements  of the  Partnership's
current debt financings.

Interest and other income includes  interest income from short-term  investments
made by the Partnership with cash reserves.  The increase in interest income for
the three  months and six months  ended June 30,  1998 as  compared  to the same
periods in 1997 is a result of  increased  cash  reserves  being  available  for
investment.

Operating  expenses  for the six months  ended June 30,  1998 as compared to the
same period in 1997 overall remained fairly constant. Operating expenses for the
three month period  increased as a result of  increased  repair and  maintenance
costs at Park Place  Apartments  Phase II and  increased  expenses in connection
with  fully  furnished  units  at The  Park at the  Willows.  The  increases  in
operating  expenses for the three month period are partially offset by decreased
exterior renovation costs at Blankenbaker Business Center 1A.

Operating  expenses  -  affiliated  increased  for the three  months and the six
months  ended June 30, 1998 as compared to the same  periods in 1997 as a result
of increased  property  management  costs.  Operating  expenses - affiliated are
expenses  incurred  for  services  performed  by  employees  of NTS  Development
Company, an affiliate of the General Partner.

The write-off of unamortized  land  improvements and amenities can be attributed
to Park Place  Apartments  Phase II.  The  write-off  is the result of  property
renovations.  The write-off represents the cost of unamortized assets which were
replaced as a result of the renovations.

The  decrease in interest  expense for the three months and the six months ended
June 30, 1998 as  compared to the same  periods in 1997 is the result of a lower
interest  rate on the new debt  obligation  obtained  October 1997 (7.37% versus
8.375%) and a result of the  Partnership's  decreasing debt level as a result of
principal payments made. See the Liquidity and Capital Resources section of this
item for details regarding the Partnership's debt.

                                      - 9 -

<PAGE>



Results of Operations - Continued
---------------------------------

Management  fees are  calculated as a percentage of cash  collections;  however,
revenue  for  reporting  purposes  is on the  accrual  basis.  As a result,  the
fluctuations of revenues  between  periods will differ from the  fluctuations of
management fee expense.

Real estate taxes, professional and administrative expenses and professional and
administrative  expenses -  affiliated  remained  fairly  constant for the three
month and six month  periods ended June 30, 1998 as compared to the same periods
in 1997.  Professional and administrative  expenses - affiliated remained fairly
constant for the three months ended June 30, 1998 as compared to the same period
in 1997.

Depreciation  and  amortization  decreased  for the three  months and six months
ended June 30,  1998 as  compared  to the same  periods in 1997 as a result of a
portion of the assets with shorter lives at Park Place  Apartments  Phase II and
Blankenbaker  Business  Center 1A becoming fully  depreciated.  Depreciation  is
computed using the  straight-line  method over the estimated useful lives of the
assets which are 10 - 30 years for land improvements,  30 years for buildings, 5
- 30 years  for  building  improvements  and 5 - 30  years  for  amenities.  The
aggregate  cost of the  Partnership's  properties  for Federal  tax  purposes is
approximately $13,700,000.

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

Cash provided by  operations  was $319,112 and $252,324 for the six months ended
June 30, 1998 and 1997,  respectively.  These funds in conjunction  with cash on
hand were used to pay a 1.5%  (annualized)  cash  distribution of $87,602 (1998)
and a 2%  (annualized)  cash  distribution  of $120,853  (1997).  The annualized
distribution   rate  is  calculated  as  a  percent  of  the  original   capital
contribution. The limited partners received 99% and the General Partner received
1%  of  these  distributions.   The  primary  source  of  future  liquidity  and
distributions is expected to be derived from cash generated by the Partnership's
properties  after adequate cash reserves are  established for future leasing and
tenant finish costs.  It is anticipated  that the cash flow from  operations and
cash  reserves will be  sufficient  to meet the needs of the  Partnership.  Cash
reserves  (which  are  unrestricted   cash  and  equivalents  as  shown  on  the
Partnership's  balance  sheet as of June 30) were  $492,221 and $323,737 at June
30, 1998 and 1997, respectively.

As of June 30, 1998, the  Partnership  had a mortgage  payable with an insurance
company in the amount of $4,040,142. The mortgage bears interest at a fixed rate
of 7.37%,  matures  October 15, 2012 and is secured by the land,  buildings  and
amenities of Park Place  Apartments Phase II. Current monthly payments are based
upon a 19-year amortization. The outstanding principal balance at maturity based
on the current rate of amortization will be $1,414,978.

As of June 30, 1998,  Blankenbaker  Business Center Joint Venture,  in which the
Partnership  has a  joint  venture  interest,  had a  mortgage  payable  with an
insurance  company in the amount of  $3,693,900.  The  mortgage is recorded as a
liability  of the  Joint  Venture  and is  secured  by the  assets  of the Joint
Venture.  The Partnership's  proportionate  interest in the mortgage at June 30,
1998 is  $1,157,668.  The mortgage bears interest at a fixed rate of 8.5% and is
due November  15, 2005.  Current  monthly  principal  payments are based upon an
11-year amortization  schedule. At maturity,  the mortgage will have been repaid
based on the current rate of amortization.









                                     - 10 -

<PAGE>



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

Pursuant to Section 16.4 of the Partnership's  Amended and Restated Agreement of
Limited  Partnership,  the Partnership  has  established an Interest  Repurchase
Reserve. On May 26, 1998, the Partnership elected to fund $6,000 to its Interest
Repurchase  Reserve and on June 2, 1998,  the  Partnership  funded an additional
$1,242 to the reserve.  With these fundings,  the Partnership  repurchased 1,207
Units at a price of $6 per  Unit.  From  December  31,  1995  June 30,  1998 the
Partnership  has  repurchased  a total of 62,529 Units for  $295,080.  The above
offering  price per Unit was  established  by the  General  Partner  in its sole
discretion  and  does  not  purport  to  represent  the  fair  market  value  or
liquidation  value  of the  Units.  Repurchased  Units  will be  retired  by the
Partnership,  thus  increasing  the  percentage  of ownership of each  remaining
limited partner investor.  The Interest  Repurchase Reserve was funded from cash
reserves. The balance in the reserve at June 30, 1998 was $3.

The  majority  of  the  Partnership's   cash  flow  is  derived  from  operating
activities. Cash flows used in investing activities are for capital improvements
at the Partnership's properties. These improvements are funded by cash flow from
operations. Cash flows used in investing activities are also for the purchase of
investment  securities.   As  part  of  its  cash  management  activities,   the
Partnership has purchased  Certificates  of Deposit or securities  issued by the
U.S.  Government with initial maturities of greater than three months to improve
the return on its cash  reserves.  The  Partnership  held the  securities  until
maturity.  Cash  flows  provided  by  investing  activities  are a result of the
maturity of these investment securities. Cash flows used in financing activities
are for cash distributions,  principal payments on mortgages payable loan costs,
and repurchases of limited  partnership  Units. Cash flows provided by financing
activities  represents  the  utilization  of cash which has been reserved by the
Partnership  for the repurchase of limited  partnership  Units.  The Partnership
does not expect any  material  changes in the mix and  relative  cost of capital
resources from those in 1997.

During the next twelve months,  the  Partnership  anticipates a demand on future
liquidity  as a result  of a planned  renovation  to the  apartment  community's
clubhouse.  At this  time,  the cost and extent of the  renovation  has not been
determined.  The clubhouse is shared with Phase I of the Park Place  development
which was developed and  constructed by  NTS-Properties  VI, an affiliate of the
General  Partner.  The cost to  construct  and operate the common  clubhouse  is
shared proportionately by each phase.

The Partnership has conducted a comprehensive  review of its computer systems to
identify  the  systems  that  could be  affected  by the Year 2000  Issue and is
developing an  implementation  plan to resolve the issue. The Year 2000 Issue, a
worldwide  problem,  is the result of computer  programs being written using two
digits rather than four to define the applicable year. Any of the  Partnership's
programs  that have  time-sensitive  software may recognize a date using "00" as
the year 1900  rather  than the year 2000.  This could  result in major  systems
failures or  miscalculations.  The  Partnership  presently  believes that,  with
modifications  to existing  software and  conversions to new software,  the Year
2000  problem   will  not  pose   significant   operational   problems  for  the
Partnership's   computer   systems.   The  Partnership   continues  to  evaluate
appropriate  courses of  corrective  action,  including  replacement  of certain
systems whose  associated  costs would be recorded as assets and amortized.  The
Partnership does not expect the costs associated with the resolution of the Year
2000 Issue to have a material  effect on its  financial  position  or results of
operations.  The associated costs will be funded by cash flow from operations or
cash reserves. The amount expensed in 1998 was immaterial.








                                     - 11 -

<PAGE>



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

The table below  presents  that portion of the  distributions  that  represent a
return of capital on a Generally Accepted Accounting Principle basis for the six
months ended June 30, 1998 and 1997.


                     Net Income               Cash
                       (Loss)             Distributions        Return of
                     Allocated               Declared           Capital
                     ---------               --------           -------

Limited Partners:
       1998           $ (8,080)            $   86,726          $  86,726
       1997               (316)               119,644            119,644

General Partner:
       1998           $    (82)            $      876          $     876
       1997                 (3)                 1,209              1,209


In an effort to continue to improve occupancy at the  Partnership's  residential
properties,  the  Partnership  has an on-site  leasing  staff,  employees of NTS
Development Company, at each of the apartment communities. The staff handles all
on-site visits from potential  tenants,  coordinates  local advertising with NTS
Development  Company's  marketing  staff,  makes  visits to local  companies  to
promote  fully  furnished  units  and  works  with  current  residents  on lease
renewals.

The  lease at  Blankenbaker  Business  Center  1A  provides  for the  tenant  to
contribute toward the payment of common area expenses, insurance and real estate
taxes.  This lease provision,  along with the fact that  residential  leases are
generally for a period of one year, should protect the Partnership's  operations
from the impact of inflation and changing prices.

Some of the statements included in Item 2, Management's  Discussion and Analysis
of  Financial  Condition  and Results of  Operations,  may be  considered  to be
"forward-looking  statements" since such statements relate to matters which have
not yet occurred.  For example,  phrases such as "the Partnership  anticipates",
"believes" or "expects" indicate that it is possible that the event anticipated,
believed or expected may not occur. Should such event not occur, then the result
which  the  Partnership  expected  also may not  occur  or occur in a  different
manner, which may be more or less favorable to the Partnership.  The Partnership
does not  undertake  any  obligations  to  publicly  release  the  result of any
revisions to these  forward-looking  statements  that may be made to reflect any
future events or circumstances.

Any forward-looking  statements included in Management's Discussion and Analysis
of Financial  Condition and Results of Operations,  or elsewhere in this report,
which reflect  management's best judgement based on factors known, involve risks
and uncertainties. Actual results could differ materially from those anticipated
in any forward-looking  statements as a result of a number of factors, including
but not  limited  to those  discussed  below.  Any  forward-looking  information
provided by the  Partnership  pursuant to the safe harbor  established by recent
securities legislation should be evaluated in the context of these factors.

The  Partnership's  principal  activity  is  the  leasing  and  management  of a
commercial business center and apartment  complexes.  If Prudential,  the tenant
that  occupies  100% of the  business  center,  or a large  number of  apartment
lessees default on their lease, the  Partnership's  ability to make payments due
under its debt  agreements,  payment of  operating  costs and other  partnership
expenses  would be directly  impacted.  A lessee's  ability to make payments are
subject to risks generally associated with real estate, many of which are beyond
the control of the Partnership,  including general or local economic conditions,
competition, interest rates, real estate tax rates, other operating expenses and
acts of God.

                                     - 12 -

<PAGE>



PART II.  OTHER INFORMATION

3.     Defaults Upon Senior Securities
       -------------------------------

       None.

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

       (a)    Exhibits:

              Exhibit 27. Financial Data Schedule

       (b)    Reports on Form 8-K:

              Form 8-K dated May 26, 1998 was filed to report in Item 5 that the
              Partnership has elected to fund an additional  amount of $6,000 to
              its Interest Repurchase Reserve.

              Form 8-K dated June 2, 1998 was filed to report in Item 5 that the
              Partnership has elected to fund an additional  amount of $1,242 to
              its Interest Repurchase Reserve.

Items 1,2,4, and 5 are not applicable and have been omitted.


                                     - 13 -

<PAGE>



                                   SIGNATURES
                                   ----------

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


                                         NTS-PROPERTIES VII, LTD.
                                         ------------------------
                                              (Registrant)

                                         By:    NTS-Properties Associates VII,
                                                General Partner
                                                By: NTS Capital Corporation,
                                                    General Partner


                                                    /s/ Richard L. Good
                                                    -------------------
                                                    Richard L. Good
                                                    President

                                                    /s/ Lynda J. Wilbourn
                                                    ---------------------
                                                    Lynda J. Wilbourn
                                                    Vice President
                                                    Principal Accounting Officer



Date:     August 12, 1998
          ---------------



                                     - 14 -

<PAGE>