<PAGE>




                                  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                September 30, 1996

                                       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 (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months,  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 September 30, 1996 and December 31, 1995                    3

         Statements of Operations
           For the three months and nine months ended
           September 30, 1996 and 1995                                       4

         Statements of Cash Flows
           For the three months and nine months ended
           September 30, 1996 and 1995                                       5

         Notes to Financial Statements                                     6-7

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

                                     PART II

1.       Legal Proceedings                                                  13
2.       Changes in Securities                                              13
3.       Defaults upon Senior Securities                                    13
4.       Submission of Matters to a Vote of Security Holders                13
5.       Other Information                                                  13
6.       Exhibits and Reports on Form 8-K                                   13

Signatures                                                                  14

                                       -2-

<PAGE>

<TABLE>


PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements

                                              NTS-PROPERTIES VII, LTD.

                                  BALANCE SHEETS AND STATEMENT OF PARTNERS' EQUITY

<CAPTION>

                                                                      As of                           As of
                                                               September 30, 1996               December 31,1995*
                                                          ------------------------------     -------------------------


ASSETS
<S>                                                          <C>                               <C>                  
   Cash and equivalents                                      $             423,754             $             377,212
   Cash and equivalents - restricted                                       128,173                            55,014
   Investment securities                                                        --                           103,908
   Accounts receivable                                                      18,466                             8,098
   Land, buildings and amenities, net                                   11,007,995                        11,405,597
   Other assets                                                            149,974                           159,119
                                                             ---------------------             ---------------------

                                                             $          11,728,362                       $12,108,948
                                                             =====================             =====================

LIABILITIES AND PARTNERS' EQUITY
   Mortgages payable                                         $           5,397,233             $           5,509,479
   Accounts payable                                                         96,456                            53,878
   Distributions payable                                                    60,709                            64,471
   Security deposits                                                        41,725                            33,480
   Other liabilities                                                        80,684                             3,323
                                                             ---------------------             ---------------------

                                                                         5,676,807                         5,664,631

   Partners' equity                                                      6,051,555                         6,444,317
                                                             ---------------------             ---------------------

                                                             $          11,728,362             $          12,108,948
                                                             =====================             =====================

</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 loss - prior years                  (2,553,698)          (25,794)       (2,579,492)
Net loss - current year                    (56,667)             (572)          (57,239)
Cash distributions
  declared to date                      (2,077,537)          (20,985)       (2,098,522)
Repurchase of limited
  partnership units                       (148,992)               --          (148,992)
                                      ------------      ------------      ------------

Balances at September 30, 1996        $  6,098,806      $    (47,251)     $  6,051,555
                                      ============      ============      ============
</TABLE>

*  Reference  is made to the audited  financial  statements  in the Form 10-K as
   filed with the Commission on March 29, 1996.

                                       -3-

<PAGE>
<TABLE>



                            NTS-PROPERTIES VII, LTD.

                            STATEMENTS OF OPERATIONS

<CAPTION>


                                                  Three Months Ended                     Nine Months Ended
                                                     September 30,                         September 30,
                                         --------------------------------        -------------------------------

                                             1996                1995                1996                1995
                                         ------------        ------------        -----------         -----------

REVENUES:
<S>                                      <C>                 <C>                 <C>                 <C>        
  Rental income                          $   537,264         $   506,494         $ 1,530,895         $ 1,461,744
  Interest and other income                    3,845               3,155              13,191              10,256
                                         -----------         -----------         -----------         -----------

                                             541,109             509,649           1,544,086           1,472,000

EXPENSES:
  Operating expenses                         174,123             141,777             416,210             355,080
  Operating expenses - affiliated             54,817              62,291             161,453             184,864
  Amortization of initial leasing
     costs                                        --               1,130                 196               5,452
  Interest expense                           113,963             116,880             343,492             352,830
  Management fees                             27,851              26,134              78,987              75,687
  Real estate taxes                           25,907              26,828              77,363              79,546
  Professional and administrative
    expenses                                  12,161              14,338              38,649              42,040
  Professional and administrative
    expenses - affiliated                     24,261              25,049              78,000              74,505
  Depreciation and amortization              133,570             136,978             406,975             424,664
                                         -----------         -----------         -----------         -----------

                                             566,653             551,405           1,601,325           1,594,668
                                         -----------         -----------         -----------         -----------

Net loss                                 $   (25,544)        $   (41,756)        $   (57,239)        $  (122,668)
                                         ===========         ===========         ===========         ===========

Net loss allocated to the
  limited partners                       $   (25,289)        $   (41,338)        $   (56,667)        $  (121,441)
                                         ===========         ===========         ===========         ===========

Net loss per limited partnership
  unit                                   $     (0.04)        $     (0.06)        $     (0.09)        $     (0.19)
                                         ===========         ===========         ===========         ===========

Weighted average number of units             603,210             638,265             620,418             638,265
                                         ===========         ===========         ===========         ===========

</TABLE>



                                       -4-

<PAGE>

<TABLE>


                            NTS-PROPERTIES VII, LTD.

                            STATEMENTS OF CASH FLOWS

<CAPTION>

                                                               Three Months Ended              Nine Months Ended
                                                                 September 30,                   September 30,
                                                          --------------------------      --------------------------

                                                              1996           1995            1996            1995
                                                          ----------      ----------      ----------      ---------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                       <C>             <C>             <C>             <C>       
Net loss                                                  $ (25,544)      $ (41,756)      $ (57,239)      $(122,668)
Adjustments to reconcile net loss to
   net cash provided by operating
   activities:
      Accrued interest on investment
        securities                                            1,230          (1,502)          1,408          (2,825)
      Amortization of capitalized leasing
        costs                                                    --           1,130             196           5,452
      Depreciation and amortization                         133,570         136,978         406,975         424,664
      Changes in assets and liabilities:
        Cash and equivalents - restricted                   (24,992)        (20,794)        (72,151)        (63,751)
        Accounts receivable                                  (4,573)          9,896         (10,368)         12,652
        Other assets                                          7,584           8,172           2,929           2,345
        Accounts payable                                      4,488          18,811          42,578          16,552
        Security deposits                                     3,690          (1,110)          8,245          (1,962)
        Other liabilities                                    25,903          26,828          77,361          79,126
                                                          ---------       ---------       ---------       ---------

   Net cash provided by operating
      activities                                            121,356         136,653         399,934         349,585
                                                          ---------       ---------       ---------       ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and
   amenities                                                 (2,748)        (40,206)         (3,351)       (108,588)
Purchase of investment securities                                --        (102,500)       (207,439)       (202,363)
Maturity of investment securities                           207,439              --         309,939              --
                                                          ---------       ---------       ---------       ---------

   Net cash provided by (used in)
      investing activities                                  204,691        (142,706)         99,149        (310,951)
                                                          ---------       ---------       ---------       ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Cash and equivalents - restricted                            16,896              --          (1,008)             --
Principal payments on mortgages
   payable                                                  (38,206)        (35,119)       (112,246)       (103,178)
Cash distributions                                          (62,397)        (64,471)       (190,295)       (193,414)
Repurchase of limited partnership
   units                                                    (66,896)             --        (148,992)             --
                                                          ---------       ---------       ---------       ---------

   Net cash used in financing
      activities                                           (150,603)        (99,590)       (452,541)       (296,592)
                                                          ---------       ---------       ---------       ---------

   Net increase (decrease) in cash and
      equivalents                                           175,444        (105,643)         46,542        (257,958)

CASH AND EQUIVALENTS, beginning of
   period                                                   248,310         363,061         377,212         515,376
                                                          ---------       ---------       ---------       ---------

CASH AND EQUIVALENTS, end of period                       $ 423,754       $ 257,418       $ 423,754       $ 257,418
                                                          =========       =========       =========       =========

Interest paid on a cash basis                             $ 113,963       $ 117,049       $ 344,260       $ 353,328
                                                          =========       =========       =========       =========
</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  1995 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 nine months ended September 30, 1996 and 1995.

1.    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.


2.    Mortgages Payable

      Mortgages payable consist of the following:

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


      Mortgage  payable to an insurance  
      company bearing interest at a fixed
      rate of 8.375%, due October 5, 2002,
      secured by land and buildings            $    3,102,515   $   3,134,609

      Mortgage  payable to an insurance  
      company bearing interest at a fixed 
      rate of 8.375%, due October 5, 2002, 
      secured by land and buildings                   954,620         964,495

      Mortgage  payable to an insurance  
      company bearing interest at a fixed 
      rate of 8.5%, due November 15, 2005, 
      secured by land and building                  1,340,098       1,410,375
                                                -------------   -------------
 
                                                $   5,397,233   $   5,509,479
                                                =============   =============



      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 $6,900,000.


3.    Interest Repurchase Reserve

      As of December 31,  1995,  the  Partnership  had  established  an Interest
      Repurchase  Reserve in the amount of $127,653  pursuant to Section 16.4 of
      the Partnership's  Amended and Restated Agreement of Limited  Partnership.
      On May 24, 1996, the Partnership  elected to fund an additional  amount of
      $121,270  to its  Interest  Repurchase  Reserve.  With  these  funds,  the
      Partnership  will be able to  repurchase  up to 62,230 Units at a price of
      $4.00 per Unit. As of September 30, 1996, the  Partnership had repurchased
      a total of 37,248 Units. Repurchased Units are retired by the Partnership,
      thus increasing the share of ownership of each remaining investor.



                                       -6-

<PAGE>



4.    New Accounting Pronouncement


      In March 1995, the Financial  Accounting  Standards Board issued Statement
      No. 121 (the  "Statement")  on accounting for the impairment of long-lived
      assets, certain identifiable  intangibles,  and goodwill related to assets
      to be held and used. The Statement also establishes  accounting  standards
      for long-lived assets and certain identifiable  intangibles to be disposed
      of.  The  Partnership  adopted  the  Statement  as of  January  1, 1996 as
      required. No adjustments were required.

5.    Related Party Transactions

      Property  management  fees  of  $78,987  and  $75,687  were  paid  to  NTS
      Development Company, an affiliate of the general partner,  during the nine
      months ended  September 30, 1996 and 1995,  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.  Also pursuant to
      an  agreement,   NTS  Development   Company  will  receive  a  repair  and
      maintenance  fee equal to 5.9% of costs  incurred  which relate to capital
      improvements.  The Partnership incurred $3,337 as a repair and maintenance
      fee during the nine months ended  September 30, 1995, and has  capitalized
      this cost as a part of land, buildings and amenities. There was no similar
      fee incurred during the nine months ended September 30, 1996.

      The  Partnership   was  also  charged  the  following   amounts  from  NTS
      Development Company for the nine months ended September 30, 1996 and 1995.
      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.


                                      1996                       1995
                              ---------------------      --------------------

        Leasing               $              29,725      $             45,468
        Administrative                       96,243                    92,188
        Property manager                    112,089                   119,847
        Other                                 1,396                     1,866
                              ---------------------      --------------------

                              $             239,453      $            259,369
                              =====================      ====================

6.    Reclassification of 1995 Financial Statements

      Certain  reclassifications  have  been  made  to the  September  30,  1995
      financial   statements   to   conform   with  the   September   30,   1996
      classifications.  These  reclassifications  have no effect  on  previously
      reported operations.


                                       -7-

<PAGE>



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

Results of Operations

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


                                                     1996                 1995
                                                     ----                 ----

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

The Park at the Willows                               94%                  96%

Park Place Apartments Phase II                        94%                  92%

Property Owned in Joint Venture with
NTS-Properties IV and NTS-Properties
Plus Ltd. (ownership % at September
30, 1996)
------------------------------------

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


Rental and other income generated by the Partnership's  properties for the three
months and nine months ended September 30, 1996 and 1995 was as follows:


                                 Three Months Ended       Nine Months Ended
                                    September 30,           September 30,
                               -----------------------  ---------------------

                                  1996         1995        1996       1995
                               ----------   ----------  ---------- ----------
Wholly-owned Properties
-----------------------

The Park at the Willows         $  89,814   $   79,340  $  245,508 $  235,405

Park Place Apartments
  Phase II                      $ 374,453   $  354,025  $1,066,276 $1,010,879

Property owned in Joint
Venture with NTS-Properties
IV and NTS-Properties Plus
Ltd. (ownership % at
September 30, 1996)
---------------------------

Blankenbaker Business Center
  1A (31%)(1)                   $  73,478   $   73,552  $  220,392 $  217,990

(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 three months
       and nine months ended September 30, 1996 and 1995.

The Park at the Willows'  occupancy  decreased from 96% at September 30, 1995 to
94% at September  30, 1996.  Average  occupancy  for the nine month period ended
September 30 increased  from 92% in 1995 to 94% in 1996.  Average  occupancy for
the three month period ended  September 30 decreased  from 95% in 1995 to 94% in
1996.  Occupancy at  residential  properties  fluctuate  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.  The Park at the Willows
rental and other income increased for the three months and nine months ended

                                       -8-

<PAGE>



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

September  30,  1996 as compared  to the same  periods in 1995 due to  increased
rental rates,  decreased rental  concessions and increased income collected from
short term and month-to-month leases.

Park Place Apartments  Phase II's occupancy  increased from 92% at September 30,
1995 to 94% at September 30, 1996.  Average  occupancy for the nine month period
ended September 30 increased from 90% in 1995 to 93% in 1996.  Average occupancy
for the three month period ended  September 30 increased from 94% in 1995 to 95%
in 1996. Rental and other income at Park Place Apartments Phase II increased for
the three  months and nine months  ended  September  30, 1996 as compared to the
same  periods  in 1995 as a result of the  increase  in  average  occupancy  and
increased  rental rates.  Rental income also increased for the nine month period
due to increased  income from fully  furnished units as a result of an increased
number  of fully  furnished  units  being  leased.  Fully  furnished  units  are
apartments which rent at an additional premium above base rent.

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 nine months ended
September  30,  1996 as  compared  to the three  months  and nine  months  ended
September 30, 1995.

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 investments made by the
Partnership  with cash  reserves.  The increase in interest  income for the nine
months  ended  September  30,  1996 as  compared to the same period in 1995 is a
result of increased cash reserves being available for  investment.  Interest and
other income  remained  fairly constant for the three months ended September 30,
1996 as compared to the same period in 1995.

Operating  expenses  increased  for the  three  months  and  nine  months  ended
September  30,  1996 as  compared  to the same  periods  in 1995 as a result  of
increased  replacement  costs  (carpet  and  wallcovering),  increased  exterior
building repair costs and increased utility costs at Park Place Apartments Phase
II.  Operating  expenses at Blankenbaker  Business Center 1A and The Park at the
Willows  remained  fairly  constant  for the three  months and nine months ended
September 30, 1996 as compared to the same periods in 1995.

Operating  expenses - affiliated  decreased for the three months and nine months
ended  September 30, 1996 as compared to the same periods in 1995 as a result of
decreased  leasing  costs at  Blankenbaker  Business  Center  1A and Park  Place
Apartments Phase II. Operating expenses - affiliated remained fairly constant at
The Park at the  Willows  for both  the  three  month  and nine  month  periods.
Operating  expenses - affiliated are expenses incurred for services performed by
employees of NTS Development Company, an affiliate of the General Partner.

Amortization of capitalized leasing costs represents the amortization of various
costs which were  capitalized  during the initial leasing and start-up period of
Park Place Apartments  Phase II. The  amortization of capitalized  leasing costs
has decreased  for the three months and nine months ended  September 30, 1996 as
compared to the same periods in 1995 as a result of the costs capitalized during
start-up having become fully amortized during the first quarter of 1996.


                                       -9-

<PAGE>



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

The  decrease in interest  expense  for the three  months and nine months  ended
September  30, 1996 as compared to the same periods in 1995 is the 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.

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 and  professional  and  administrative  expenses have remained
fairly constant for the three months and nine months ended September 30, 1996 as
compared to the three months and nine months ended September 30, 1995.

The change in  professional  and  administrative  expenses - affiliated  for the
three  months and nine months ended  September  30, 1996 as compared to the same
periods in 1995 was not significant.  Professional and  administrative  expenses
affiliated  are expenses  incurred  for  services  performed by employees of NTS
Development Company, an affiliate of the General Partner.

Depreciation and amortization  decreased for the nine months ended September 30,
1996 as compared to the nine months  ended  September  30, 1995 as a result of a
portion of the original tenant  improvements at Blankenbaker  Business Center 1A
becoming fully  depreciated.  Depreciation and amortization have remained fairly
constant for the three months ended  September 30, 1996 as compared to the three
months  ended   September  30,  1995.   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 $13,800,000.

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

Cash provided by operations  was $399,934 and $349,585 for the nine months ended
September 30, 1996 and 1995, respectively.  These funds in conjunction with cash
on hand were used to make a 2%  (annualized)  cash  distribution of $186,533 and
$193,414 for the nine months ended  September  30, 1996 and 1995,  respectively.
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.  Cash reserves (which are unrestricted cash and equivalents
and  investment  securities  as shown on the  Partnership's  balance sheet as of
September  30) were  $423,754  and  $462,606  at  September  30,  1996 and 1995,
respectively.

As of September 30, 1996,  the  Partnership  had two mortgage loans each with an
insurance  company in the amount of  $3,102,515  and  $954,620.  Both  mortgages
currently bear a fixed interest rate of 8.375%,  are secured by a first mortgage
on Park Place Apartments  Phase II and are due October 5, 2002.  Current monthly
principal  payments  on both  mortgages  are based  upon a 27-year  amortization
schedule.  The  outstanding  principal  balance at maturity based on the current
rate of amortization would be $3,607,560 ($2,758,723 and $848,837).

As of  September  30, 1996,  Blankenbaker  Business  Center 1A, a joint  venture
between  the  Partnership,  NTS-Properties  IV  and  NTS-Properties  Plus  Ltd.,
affiliates of the General  Partner of the  Partnership,  had a mortgage  payable
with an insurance company in the amount of $4,275,999.  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 September
30, 1996 is $1,340,098. The mortgage bears interest at a fixed rate of 8.5% and

                                      -10-

<PAGE>




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

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.

As of December 31, 1995, the Partnership had established an Interest  Repurchase
Reserve in the amount of $127,653  pursuant to Section 16.4 of the Partnership's
Amended and Restated  Agreement  of Limited  Partnership.  On May 24, 1996,  the
Partnership  elected to fund an  additional  amount of $121,270 to its  Interest
Repurchase Reserve. With these funds, the Partnership will be able to repurchase
up to 62,230 Units at a price of $4.00 per Unit. As of September  30, 1996,  the
Partnership  had  repurchased  a total of 37,248  Units.  Repurchased  Units are
retired by the  Partnership,  thus  increasing  the share of  ownership  of each
remaining  investor.  The  Interest  Repurchase  Reserve  was  funded  from cash
reserves.

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.  Cash flows provided by investing activities are derived
from the  maturity  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 used in financing activities are for cash
distributions,  principal  payments  on  mortgages  payable and  repurchases  of
limited partnership Units. Cash flows used in financing  activities also include
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 1995.

The  primary  source of future  liquidity  and  distributions  is expected to be
derived from cash  generated by the  Partnership's  operating  properties  after
adequate cash  reserves are  established  for future  leasing,  renovations  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.  The
Partnership had no material  commitments for renovations or capital improvements
at September 30, 1996.

The table below  presents  that portion of the  distributions  that  represent a
return of capital on a Generally  Accepted  Accounting  Principle  basis for the
nine months ended September 30, 1996 and 1995.


                                          Cash
                      Net Loss        Distributions         Return of
                     Allocated          Declared             Capital
                  --------------      ------------        --------------

Limited Partners:
       1996       $     (56,667)      $   184,668         $     184,668
       1995            (121,441)          191,479               191,479

General Partner:
       1996       $        (572)      $     1,865         $       1,865
       1995              (1,227)            1,935                 1,935


                                      -11-

<PAGE>



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

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.

                                      -12-

<PAGE>



PART II.      OTHER INFORMATION


1.       Legal Proceedings

         None

2.       Changes in Securities

         None

3.       Defaults upon Senior Securities

         None

4.       Submission of Matters to a Vote of Security Holders

         None

5.       Other Information

         None

6.       Exhibits and Reports on Form 8-K

         (a)    Exhibits

                Exhibit 27.  Financial Data Schedule

         (b)    Reports on Form 8-K

                None.

                                      -13-

<PAGE>



                                   SIGNATURES

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

                                               NTS-PROPERTIES VII, LTD.
                                                     (Registrant)

                                       BY:    NTS-Properties Associates VII
                                              BY:   NTS Capital Corporation,
                                                    General Partner
                                                    
                                                    /s/ John W. Hampton
                                                    -------------------
                                                    John W. Hampton
                                                    Senior Vice President


Date:     November 11  , 1996

                              
                                      -14-