# UNITED STATES
SECURITIES AND EXCHANGE COMMISSION 
WASHINGTON, D.C. 20549

# FORM 10-Q

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

For
the quarterly period ended March 31, 2004

OR

# [  ] TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

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 offices)

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

(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 (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 [   ]

Indicate by check mark whether registrant is an accelerated filer (as defined in Rule 12b-2 of the
Securities Exchange Act).      Yes [   ]    No [X]

---

# TABLE OF CONTENTS

| |  |  |  |      
| |  |  |  | -----
| |  |  |  | Pages

# PART I 
FINANCIAL INFORMATION

|        |  |                                                                                            |  |      
|------- |  | ------------------------------------------------------------------------------------------ |  | -----
|       
|Item 1. |  | Financial Statements                                                                      
|       
|        |  | Balance Sheets as of March 31, 2004
     and December 31, 2003                             |  | 4    
|       
|        |  | Statement of Partners' Equity as of March 31, 2004                                         |  | 4    
|       
|        |  | Statements of Operations for the
     Three Months Ended March 31, 2004 and 2003           |  | 5    
|       
|        |  | Statements of Cash Flows for the
     Three Months Ended March 31, 2004 and 2003           |  | 6    
|       
|        |  | Notes to Financial Statements                                                              |  | 7-12 
|       
|Item 2. |  | Management's Discussion and Analysis of Financial
     Condition and Results of Operations |  | 13-19
|       
|Item 3. |  | Quantitative and Qualitative Disclosures About Market Risk                                 |  | 19   
|       
|Item 4. |  | Controls and Procedures                                                                    |  | 19   
|       

# PART II  OTHER INFORMATION

|            |  |  |  |      
|----------- |  |  |  | -----
|           
|Items 1 - 6 |  |  |  | 20-21
|           
|Signatures  |  |  |  | 22   

2

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Some of the statements included in
this quarterly report on Form 10-Q, particularly those included in Part I, Item 2 
Managements Discussion and Analysis of Financial Condition and Results of Operations
(MD&A), may be considered forward-looking statements because
the statements relate to matters which have not yet occurred. For example, phrases such as
we anticipate, believe or expect indicate that it is
possible that the event anticipated, believed or expected may not occur. If these events
do not occur, the result which we expected also may, or may not, occur in a different
manner, which may be more or less favorable to us. We do not undertake any obligation to
update these forward-looking statements.

Any forward-looking statements
included in MD&A, or elsewhere in this report, reflect our general partners best
judgment based on known factors, but 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 described in our filings with the
Securities and Exchange Commission, particularly our annual report on Form 10-K for the
year ended December 31, 2003. Any forward-looking information provided by us pursuant to
the safe harbor established by the Private Securities Litigation Reform Act of 1995 should
be evaluated in the context of these factors.

3

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# PART I  FINANCIAL
INFORMATION
Item 1  Financial Statements

# NTS-PROPERTIES VII, LTD.
BALANCE SHEETS

`As of               As of
                                                                    March 31,         December 31,
                                                                       2004               2003
                                                                ------------------  -----------------
                                                                   (UNAUDITED)
ASSETS
Cash and equivalents                                           $           169,028 $          263,655
Cash and equivalents - restricted                                           27,050             26,625
Accounts receivable, net                                                     3,006              4,577
Land, buildings and amenities, net                                       6,989,413          7,091,886
Investment in and advances to joint venture                                806,390            789,567
Other assets                                                                44,712             46,021
                                                                ------------------  -----------------

      TOTAL ASSETS                                             $         8,039,599 $        8,222,331
                                                                ==================  =================

LIABILITIES AND PARTNERS' EQUITY
Mortgage payable                                               $         3,299,607 $        3,339,017
Accounts payable                                                           136,505            184,617
Security deposits                                                           26,850             26,700
Other liabilities                                                           43,554             22,572
                                                                ------------------  -----------------

      TOTAL LIABILITIES                                                  3,506,516          3,572,906

COMMITMENTS AND CONTINGENCIES (Note 10)

PARTNERS' EQUITY                                                         4,533,083          4,649,425
                                                                ------------------  -----------------

TOTAL LIABILITIES AND PARTNERS' EQUITY                         $         8,039,599 $        8,222,331
                                                                ==================  =================`

# NTS-PROPERTIES VII, LTD.
STATEMENT OF PARTNERS EQUITY
(UNAUDITED)

`Limited            General
                                                   Partners            Partner              Total
                                               -----------------  ------------------  ------------------
PARTNERS' EQUITY/(DEFICIT)
Capital contributions, net of offering costs  $       10,935,700 $               100 $        10,935,800
Net loss - prior years                                (3,074,747)            (31,057)         (3,105,804)
Net loss - current year                                 (115,179)             (1,163)           (116,342)
Cash distributions declared to date                   (2,717,046)            (27,445)         (2,744,491)
Repurchase of limited partnership interests             (436,080)                 --            (436,080)
                                               -----------------  ------------------  ------------------

BALANCES ON MARCH 31, 2004                    $        4,592,648 $           (59,565)$         4,533,083
                                               =================  ==================  ==================`

The accompanying notes to financial
statements are an integral part of these statements.

4

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# NTS-PROPERTIES VII, LTD.
STATEMENTS OF OPERATIONS
(UNAUDITED)

`Three Months Ended
                                                                              March 31,
                                                                -------------------------------------
                                                                       2004               2003
                                                                ------------------  -----------------
REVENUES
Rental income                                                  $           385,305 $          431,371
                                                                ------------------  -----------------

     TOTAL REVENUES                                                        385,305            431,371
                                                                ------------------  -----------------

EXPENSES
Operating expenses                                                         104,682             97,940
Operating expenses - affiliated                                             72,941             72,966
Management fees                                                             19,450             22,600
Real estate taxes                                                           19,908             21,846
Professional and administrative expenses                                   116,106             60,549
Professional and administrative expenses - affiliated                       33,713             29,483
Depreciation and amortization                                              102,473            101,402
                                                                ------------------  -----------------

     TOTAL OPERATING EXPENSES                                              469,273            406,786
                                                                ------------------  -----------------

OPERATING (LOSS) INCOME                                                    (83,968)            24,585

Interest and other income                                                      819              1,423
Interest expense                                                           (60,940)           (63,895)
Income from investment in joint venture                                     27,747             28,543
                                                                ------------------  -----------------

Net loss                                                       $          (116,342)$           (9,344)
                                                                ==================  =================

Net loss allocated to the limited partners                     $          (115,179)$           (9,251)
                                                                ==================  =================

Net loss per limited partnership interest                      $            (0.21) $           (0.02)
                                                                ==================  =================

Weighted average number of limited partnership interests                   552,236            552,236
                                                                ==================  =================`

The accompanying notes to financial
statements are an integral part of these statements.

5

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# NTS-PROPERTIES VII, LTD.
STATEMENTS OF CASH FLOWS
(UNAUDITED)

`Three Months Ended
                                                                                March 31,
                                                                  --------------------------------------
                                                                        2004                 2003
                                                                  -----------------    -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                       $           (116,342)$             (9,344)
Adjustments to reconcile net loss to net cash provided by
  operating activities:
    Depreciation and amortization                                           103,253              102,182
    Income from investment in joint venture                                 (27,747)             (28,543)
    Changes in assets and liabilities:
      Cash and equivalents - restricted                                        (425)                (900)
      Accounts receivable                                                     1,571                2,604
      Other assets                                                              529                 (117)
      Accounts payable                                                      (48,112)              38,980
      Security deposits                                                         150                1,750
      Other liabilities                                                      20,982               19,300
                                                                  -----------------    -----------------

     Net cash (used in ) provided by operating activities                   (66,141)             125,912
                                                                  -----------------    -----------------

CASH FLOWS FROM INVESTING ACTIVITIES
Distributions from joint venture, net                                        10,924                  914
                                                                  -----------------    -----------------

     Net cash provided by investing activities                               10,924                  914
                                                                  -----------------    -----------------

CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgage and note payable                             (39,410)             (42,910)
                                                                  -----------------    -----------------

     Net cash used in financing activities                                  (39,410)             (42,910)
                                                                  -----------------    -----------------

     Net (decrease) increase in cash and equivalents                        (94,627)              83,916

CASH AND EQUIVALENTS, beginning of period                                   263,655              382,533
                                                                  -----------------    -----------------

CASH AND EQUIVALENTS, end of period                            $            169,028 $            466,449
                                                                  =================    =================

Interest paid on a cash basis                                  $             60,990 $             63,243
                                                                  =================    =================`

The accompanying notes to financial
statements are an integral part of these statements.

6

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# NTS-PROPERTIES VII, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

The unaudited financial statements
included herein should be read in conjunction with NTS-Properties VII, Ltd.s 2003
annual report on Form 10-K as filed with the Securities and Exchange Commission on March
26, 2004. In the opinion of our general partner, all adjustments, consisting only of
normal recurring accruals, necessary for a fair presentation have been made to the
accompanying financial statements for the three months ended March 31, 2004 and 2003. The
results of operations for the interim periods are not necessarily indicative of the
results that may be expected for the full year or any other interim period. As used in
this quarterly report on Form 10-Q the terms we, us or
our, as the context requires, may refer to NTS-Properties VII, Ltd. or its
interests in its properties and joint venture.

# Note 1 
Consolidation Policy and Joint Venture Accounting

The financial statements include the
accounts of all wholly-owned properties. Intercompany transactions and balances have been
eliminated. The less than 50% owned joint venture is accounted for under the equity
method.

# Note 2  Use of
Estimates in the Preparation of Financial Statements

The preparation of financial
statements in accordance with accounting principles generally accepted in the United
States 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.

# Note 3 
Concentration of Credit Risk

We own and operate, through a joint
venture, one commercial rental property  Blankenbaker Business Center 1A, in
Louisville, Kentucky. The sole tenant which occupies 100% of the property is a business
which has operations in the Louisville area. We also own and operate two apartment
communities  The Park at the Willows, in Louisville, Kentucky and Park Place
Apartments Phase II, in Lexington, Kentucky.

Our financial instruments that are
exposed to concentrations of credit risk consist of cash and equivalents. We maintain our
cash accounts primarily with banks located in Kentucky. Cash balances are insured by the
FDIC up to $100,000 per bank account. We may at times, in certain accounts, have deposits
in excess of $100,000.

7

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# Note 4  Cash and
Equivalents

Cash and equivalents include cash on
hand and short-term, highly liquid investments with initial maturities of three months or
less. We have a cash management program which provides for the overnight investment of
excess cash balances. Under an agreement with a bank, excess cash is invested in a
repurchase agreement for U.S. government or agency securities each night. As of March 31,
2004, approximately $105,000 of our overnight investment was included in cash and
equivalents.

# Note 5  Cash and
Equivalents  Restricted

Cash and equivalents 
restricted represents funds received for residential security deposits.

# Note 6  Basis of
Property and Depreciation

Land, buildings and amenities are
stated at historical cost, less accumulated depreciation. Costs directly associated with
the acquisition, development and construction of a project are capitalized. Depreciation
is computed using the straight-line method over the estimated useful lives of the assets
which are 7-30 years for land improvements, 7-30 years for buildings and improvements and
5-30 years for amenities. The aggregate cost of our properties for federal tax purposes is
approximately $12,847,000.

Statement of Financial Accounting
Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, specifies circumstances in which certain long-lived assets must
be reviewed for impairment. If the carrying amount of an asset exceeds the sum of its
expected future cash flows, the assets carrying value must be written down to fair
value. There were no impairment losses during any of the periods presented.

# Note 7  Investment
in Joint Venture

Blankenbaker Business Center Joint
Venture (the Joint Venture) was organized on December 28, 1990, by us and
NTS-Properties Plus Ltd. to own and operate Blankenbaker Business Center 1A (BBC
1A) and to acquire an approximately 2.49 acre parking lot that was being leased by
the business center from an affiliate of our general partner. On August 16, 1994, the
Joint Venture agreement was amended to admit NTS-Properties IV to the Joint Venture.

For the three months ended March 31,
2004 and 2003, BBC 1A had total revenues of $237,253 and $237,253, respectively, and net
income of $88,535 and $91,077, respectively.

8

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# Note 8  Mortgage
Payable

Mortgage payable consists of the
following:

`March 31,          December 31,
                                                                        2004                 2003
                                                                  -----------------    -----------------
Mortgage payable to an insurance company in monthly
installments, bearing interest at a fixed rate of 7.37%, due
October 15, 2012, secured by land and buildings.               $          3,299,607 $          3,339,017
                                                                  =================    =================`

Our mortgage may be prepaid but is
subject to a yield-maintenance premium.

As of March 31, 2004, the fair value
of long-term debt was approximately $3,369,000, based on the borrowing rates currently
available to us for mortgages with similar terms and average maturities.

# Note 9  Related
Party Transactions

Pursuant to an agreement with us, NTS
Development Company, an affiliate of our General Partner, receives property management
fees on a monthly basis. The monthly fees are equal to 5% of the gross revenues from our
apartment communities. Also pursuant to an agreement, NTS Development Company receives a
repair and maintenance fee equal to 5.9% of costs incurred which relates to capital
improvements and major repair and renovation projects. These repair and maintenance fees
are capitalized as part of land, buildings and amenities.

We were charged the following amounts
from NTS Development Company for the three months ended March 31, 2004 and 2003. 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.

`Three Months Ended
                                                                               March 31,
                                                                ----------------------------------------
                                                                       2004                 2003
                                                                -------------------  -------------------

Property management fees                                       $             19,450 $             22,600
                                                                -------------------  -------------------

Property management                                                          40,979               39,135
Leasing                                                                       6,758                7,525
Administrative - operating                                                   24,646               21,153
Other                                                                           558                5,153
                                                                -------------------  -------------------

     Total operating expenses - affiliated                                   72,941               72,966
                                                                -------------------  -------------------

Professional and administrative expenses - affiliated                        33,713               29,483
                                                                -------------------  -------------------

Total related party transactions                               $            126,104 $            125,049
                                                                ===================  ===================`

9

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# Note 10 
Commitments and Contingencies

As an owner of real estate, we are
subject to various environmental laws of federal, state and local governments. Our
compliance with existing laws has not had a material adverse effect on our financial
condition or results of operations. However, we cannot predict the impact of new or
changed laws or regulations on our current properties or on properties that we may acquire
in the future.

We are jointly and severally liable
under the mortgage loan agreement for the BBC 1A debt. The outstanding balance on this
mortgage on March 31, 2004 is $1,042,616. Our financial statements do not reflect a
liability for this mortgage.

Litigation

On December 12, 2001, three
individuals filed an action in the Superior Court of the State of California for the
County of Contra Costa (the Superior Court) originally captioned Buchanan,
et al. v. NTS-Properties Associates, et al. (Case No. C 01-05090)against the
general partners (the General Partners) of NTS-Properties III, NTS-Properties
IV, NTS-Properties V, NTS-Properties VI and NTS-Properties VII, Ltd. (the
Partnerships), as well as several individuals and entities affiliated with us.
The action purports to bring claims on behalf of a class of limited partners. These claims
are based on, among other things, tender offers made by the Partnerships and an affiliate
of the General Partners, as well as the operation of the Partnerships by the General
Partners. The plaintiffs allege, among other things, that the prices at which limited
partnership interests were purchased in these tender offers were too low. The plaintiffs
are seeking monetary damages and equitable relief, including an order directing the
disposition of the properties owned by the Partnerships and the distribution of the
proceeds. No amounts have been accrued as a liability for this action in our financial
statements. Under an indemnification agreement with our general partner, we are
responsible for the costs of defending any such action.

On February 27, 2003, two individuals
filed a class and derivative action in the Circuit Court of Jefferson County, Kentucky
captioned Bohm, et al. v. J.D. Nichols, et al.(Case No. 03-CI-01740) against
certain of the General Partners and several individuals and entities affiliated with us.
The complaint was amended to include the general partner of NTS-Properties III and the
general partner of NTS-Properties Plus Ltd., which is no longer in existence. In the
amended complaint, the plaintiffs purport to bring claims on behalf of a class of limited
partners and derivatively on behalf of us and the Partnerships based on alleged
overpayment of fees, prohibited investments, improper failures to make distributions,
purchases of limited partnerships interests at insufficient prices and other violations of
the limited partnership agreements. The plaintiffs are seeking, among other things,
compensatory and punitive damages in an unspecified amount, an accounting, the appointment
of a receiver or liquidating trustee, the entry of an order of dissolution against the
Partnerships, a declaratory judgment and injunctive relief. No amounts have been accrued
as a liability for this action in our financial statements. Our general partner believes
that this action is without merit and is vigorously defending it.

10

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On June 20, 2003, the General
Partners reached an agreement in principle with the representatives of the class of
plaintiffs to settle the Buchanan litigation. This agreed upon settlement includes
releases for all of the parties for all of the claims asserted in the Buchananlitigation and the Bohmlitigation. As part of the agreed upon settlement, the
General Partners agreed to pursue a merger of the Partnerships and other real estate
entities affiliated with the General Partners into a newly-formed entity named NTS Realty
Holdings Limited Partnership (NTS Realty).

On December 5, 2003, the General
Partners, certain of their affiliates and the class of plaintiffs in the Buchananlitigation jointly filed a Stipulation and Agreement of Settlement (the
Settlement Agreement) with the Superior Court. The Settlement Agreement sets
forth in writing the terms of the agreed upon settlement the parties reached on June 20,
2003. On February 26, 2004, the Superior Court preliminarily approved the Settlement
Agreement as within the range of reasonableness and that it is fair, just and adequate to
the class of plaintiffs. The Superior Court scheduled a hearing to finally determine
whether the Settlement Agreement is in the best interests of the class of plaintiffs and
whether the Buchananlitigation should be dismissed with prejudice.

On March 2, 2004, we, along with all
defendants, filed a Motion to Dismiss the Bohmlitigation. The Motion is currently
pending before the court.

On May 6, 2004, the Superior Court
granted its final approval of the Settlement Agreement. At the final hearing, any member
of the class of plaintiffs was given the opportunity to object to the final approval of
the Settlement Agreement, the entry of a final judgment dismissing with prejudice the
Buchananlitigation, or an application of an award for attorneys fees and
expenses to plaintiffs counsel. The Superior Courts order provides, among
other things, that: (1) the Settlement Agreement, and all transactions contemplated
thereby, including the proposed merger of the Partnerships into NTS Realty, are fair,
reasonable and adequate, and in the best interests of the class of plaintiffs; (2) the
plaintiffs complaint and each and every cause of action and claim set forth therein
is dismissed with prejudice; (3) each class member is barred from (a) transferring,
selling or otherwise disposing of (other than by operation of law) their interests until
the earlier of the closing date of the merger, the termination of the settlement or June
30, 2004; and (4) each class member who requested to be excluded from the settlement
released their claims in the Bohm litigation.

For the three months ended March 31,
2004, our share of the legal costs for theBuchanan and Bohmlitigations was
approximately $29,000, which was included in our professional and administrative expenses.

We do not believe there is any other
litigation threatened against us other than routine litigation arising out of the ordinary
course of business, some of which is expected to be covered by insurance, none of which is
expected to have a material effect on our financial position or results of operations,
except as discussed herein.

11

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Proposed Merger

As part of the Settlement Agreement,
our general partner and the general partners of the four public partnerships affiliated
with us, have agreed to pursue a merger of the partnerships and several other affiliated
real estate entities into a newly formed limited partnership known as NTS Realty. The
merger is subject to, among other things, approval by a majority of the limited partner
interests in each partnership. We may not seek the approval of the limited partners until
a filing made by NTS Realty with the Securities and Exchange Commission is declared
effective. For the three months ended March 31, 2004, our share of the legal and
professional fees for the proposed merger was approximately $64,000.

On February 4, 2004, NTS Realty filed
a joint consent solicitation statement/prospectus on Form S-4 with the Securities and
Exchange Commission. The solicitation statement/prospectus presents the merger of
NTS-Properties III; NTS-Properties IV; NTS-Properties V; NTS-Properties VI; and
NTS-Properties VII, Ltd. with NTS Realty. Concurrent with the merger, ORIG, LLC, a
Kentucky limited liability company, which is affiliated with our general partner, will
contribute substantially all its real estate assets and all of its liabilities to NTS
Realty.

# Note 11  Segment
Reporting

Our reportable operating segments
include only one segment  Apartment Community Operations.

12

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# Item 2 
Managements Discussion and Analysis of Financial Condition and Results of Operations

Managements Discussion and
Analysis of Financial Condition and Results of Operations should be read in conjunction
with the Financial Statements in Item 1 and the cautionary statements below.

# Critical Accounting
Policies

General

A critical accounting policy is one
that would materially effect our operations or financial condition, and requires
management to make estimates or judgments in certain circumstances. These judgments often
result from the need to make estimates about the effect of matters that are inherently
uncertain. Critical accounting policies discussed in this section are not to be confused
with accounting principles and methods disclosed in accordance with accounting principles
generally accepted in the United States (GAAP). GAAP requires information in
financial statements about accounting principles, methods used and disclosures pertaining
to significant estimates. The following disclosure discusses judgments known to management
pertaining to trends, events or uncertainties known which were taken into consideration
upon the application of those policies and the likelihood that materially different
amounts would be reported upon taking into consideration different conditions and
assumptions.

Impairment and Valuation

Statement of Financial Accounting
Standards (SFAS) No. 144 Accounting for the Impairment or Disposal of
Long-Lived Assets, specifies circumstances in which certain long-lived assets must
be reviewed for impairment. If the carrying amount of an asset exceeds the sum of its
expected future cash flows, the assets carrying value must be written down to fair
value. In determining the value of an investment property and whether the investment
property is impaired, management considers several factors such as projected rental and
vacancy rates, property operating expenses, capital expenditures and interest rates. The
capitalization rate used to determine property valuation is based on the market in which
the investment property is located, length of leases, tenant financial strength, the
economy in general, demographics, environment, property location, visibility, age and
physical condition among others. All of these factors are considered by management in
determining the value of any particular investment property. The value of any particular
investment property is sensitive to the actual results of any of these factors, either
individually or taken as a whole. If the actual results differ from managements
judgment, the valuation could be negatively or positively affected.

13

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Recognition of Rental
Income

Our apartment communities have
operating leases with apartment residents with terms generally of twelve months or less.
We recognize rental revenue related to these leases on an accrual basis when due from
residents. In accordance with our standard lease terms, rental payments are generally due
on a monthly basis.

Cost Capitalization and
Depreciation Policies

We review all expenditures and
capitalize any item exceeding $1,000 deemed to be an upgrade or a tenant improvement with
an expected useful life greater than one year. Land, buildings and amenities are stated at
cost. Depreciation expense is computed using the straight-line method over the estimated
useful lives of the assets. Buildings and improvements have estimated useful lives between
7-30 years, land improvements have estimated useful lives of between 7-30 years and
amenities have estimated useful lives between 5-30 years.

# Results of Operations

The following tables include our
selected summarized operating data for the three months ended March 31, 2004 and 2003.
This data is presented to provide assistance in identifying trends in our operating
results and other factors affecting our business. This data should be read in conjunction
with our financial statements, including the notes thereto, in Part I, Item 1 of this
report.

`Three Months Ended
                                                                             March 31,
                                                              ---------------------------------------
                                                                       2004               2003
                                                              ---------------------------------------
Total revenues                                                 $           385,305  $         431,371
Operating expenses and operating
  expenses - affiliated                                                    177,623            170,906
Depreciation and amortization                                              102,473            101,402
Interest expense                                                            60,940             63,895
Net loss                                                                  (116,342)            (9,344)`

Rental income and tenant
reimbursements generated by our properties and joint venture for the three months ended
March 31, 2004 and 2003 were as follows:

`Three Months Ended
                                                                              March 31,
                                                                -------------------------------------
                                                                       2004               2003
                                                                ------------------  -----------------
Wholly-Owned Properties
The Park at the Willows                                        $            80,372 $           83,918
Park Place Apartments Phase II                                 $           304,933 $          347,453

Joint Venture Property
(Ownership % on March 31, 2004)
Blankenbaker Business Center 1A (31.34%)                       $           237,253 $          237,253`

14

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We believe the changes in rental income and tenant reimbursements from period to period are
temporary effects of each property's specific mix of lease maturities and are not indicative of any
known trend.

The occupancy levels at our properties and joint venture as of March 31, 2004 and 2003 were as
follows:

`Three Months Ended
                                                                            March 31,
                                                              -------------------------------------
                                                                     2004               2003
                                                              ------------------  -----------------
Wholly-Owned Properties
The Park at the Willows                                              92%                 92%
Park Place Apartments Phase II                                       80%                 93%

Joint Venture Properties
(Ownership % on March 31, 2004)
Blankenbaker Business Center 1A (31.34%)                             100%               100%`

We believe the changes in occupancy
on March 31 from year to year are temporary effects of each propertys specific mix
of lease maturities and are not indicative of any known trend.

The average occupancy levels at our
properties and joint ventures for the three months ended March 31, 2004 and 2003 were as
follows:

`Three Months Ended
                                                                            March 31,
                                                              -------------------------------------
                                                                     2004               2003
                                                              ------------------  -----------------
Wholly-Owned Properties
The Park at the Willows                                              92%                 94%
Park Place Apartments Phase II                                       80%                 91%

Joint Venture Properties
(Ownership % on March 31, 2004)
Blankenbaker Business Center 1A (31.34%)                             100%               100%`

We believe the changes in average
occupancy from period to period are temporary effects of each propertys specific mix
of lease maturities and are not indicative of any known trend.

We are making efforts to improve
occupancy at our apartment communities. We have an on-site leasing staff, who are
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 apartments and works with current residents on lease renewals.

15

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

The following discussion relating to
changes in our results of operations includes only material line items within our
Statements of Operations or line items for which there was a material change between the
three months ending March 31, 2004 and 2003.

Rental Income

Rental income for the three months
ended March 31, 2004 and 2003 was approximately $385,000 and $431,000, respectively. The
decrease of approximately $46,000, or 11%, was primarily the result of decreased average
occupancy at Park Place Apartments Phase II and The Park at the Willows.

Operating Expenses and
Operating Expenses  Affiliated

Our operating expenses did not change
significantly between the three months ended March 31, 2004 and 2003. There were no
offsetting material changes.

Operating expenses  affiliated
did not change significantly between the three months ended March 31, 2004 and 2003. There
were no offsetting material changes.

Operating expenses  affiliated
are for the services performed by employees of NTS Development Company, an affiliate of
our General Partner. These employee services include property management, leasing,
maintenance, security and other services necessary to manage and operate our business.

Professional and
Administrative Expenses and Professional and Administrative Expenses Affiliated

Professional and administrative
expenses for the three months ended March 31, 2004 and 2003 were approximately $116,000
and $61,000, respectively. The increase of approximately $55,000, or 90%, was primarily
the result of increased legal and professional fees related to our proposed merger and
litigation filed by limited partners. See Item 1  Note 10 for information regarding
our proposed merger and litigation filed by limited partners.

Professional and administrative
expenses  affiliated for the three months ended March 31, 2004 and 2003 were
approximately $34,000 and $29,000, respectively. The increase of approximately $5,000, or
17%, was primarily the result of increased personnel costs.

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Professional and administrative
expenses  affiliated are for the services performed by employees of NTS Development
Company, an affiliate of our General Partner. These employee services include legal,
financial and other services necessary to manage and operate our business.

Depreciation and
Amortization Expense

Our depreciation and amortization
expenses did not change significantly between the three months ended March 31, 2004 and
2003. There were no offsetting material changes.

Interest Expense

Our interest expense did not change
significantly between the three months ended March 31, 2004 and 2003. There were no
offsetting material changes.

Liquidity and Capital
Resources

The following table sets forth the
cash provided by or used in operating activities, investing activities and financing
activities for the three months ended March 31, 2004 and 2003.

Cash flows (used in) provided by:

`Three Months Ended
                                                                                  March 31,
                                                                  -----------------------------------------
                                                                         2004                  2003
                                                                  ------------------    -------------------
Operating activities                                           $             (66,141)$              125,912
Investing activities                                                          10,924                    914
Financing activities                                                         (39,410)               (42,910)
                                                                  ------------------    -------------------

     Net (decrease) increase in cash and equivalents           $             (94,627)$               83,916
                                                                  ==================    ===================`

Net cash provided by operating
activities was approximately $126,000 for the three months ended March 31, 2003. Net cash
used by operating activities for the three months ended March 31, 2004 was approximately
$66,000. The increase in net cash used was primarily driven by reduced earnings from
operations before non cash items and the change in accounts payable. The decreased
accounts payable includes payments for professional services related to our litigation
filed by limited partners and our proposed merger.

Net cash provided by investing
activities increased from approximately $1,000 for the three months ended March 31, 2003,
to approximately $11,000 for the three months ended March 31, 2004. The increase in net
cash used was primarily due to increased investment in the joint venture.

Net cash used in financing activities
decreased from approximately $43,000 for the three months ended March 31, 2003 to
approximately $39,000 for the three months ended March 31, 2004. The decrease was
primarily the result of decreased principal payments made in 2004.

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Due to the fact that no distributions
were made during the three months ended March 31, 2004 or 2003, the table which presents
that portion of the distributions that represents a return of capital in accordance with
GAAP has been omitted.

Future Liquidity

We believe the current occupancy
levels are considered adequate to fund the operations of our properties. However, our
future liquidity depends significantly on our properties occupancy remaining at a
level which provides for debt payments and adequate working capital, currently and in the
future. If occupancy were to fall below that level and remain at or below that level for a
significant period of time, our ability to make payments due under our debt agreements and
to continue paying daily operational costs would be greatly impaired. In addition, we may
be required to obtain financing in connection with the capital improvements and leasing
costs described below.

The primary source of future
liquidity is expected to be derived from cash generated by our properties after adequate
cash reserves are established for future leasing, roof replacement and renovation costs.
It is anticipated that the future cash flow from operations combined with our cash
reserves will be sufficient to meet these needs. Cash reserves (which are unrestricted
cash and equivalents as shown on our balance sheet) were $169,028 on March 31, 2004.

We are aware that the sole commercial
tenant of our joint ventures commercial building is making efforts to seek
alternatives to renewing its expiring lease. The failure of this tenant to renew its lease
would result in a loss of annual rental revenue and operating expense recoveries of
approximately $938,000 to the joint venture. Income from our investment in the joint
venture that owns this property would decrease accordingly. This would significantly
affect our liquidity, and could result in significant costs to refurbish the vacated space
and locate a new tenant. At this time, we are not certain whether the tenant intends to
renew its lease as allowed by the lease agreement, or vacate its space.

The demand on future liquidity is
anticipated to increase as a result of the replacement of the roofs at Park Place
Apartments Phase II (18 buildings), all of which were installed using shingles produced by
a single manufacturer. The shingles appear to contain defects which may cause the roofs to
fail. As the shingle manufacturer has declared bankruptcy, we do not expect to be able to
recover any of the costs of the roof replacements in the event of any such failures. We do
not have sufficient working capital to make all of the roof replacements at one time. As
of March 31, 2004, fifteen roof replacements have been completed. The total cost of
replacing the remaining roofs is estimated to be $60,000 ($20,000 per building). The three
remaining roof replacements have been budgeted for 2004.

We have no other material commitments
for renovations or capital expenditures as of March 31, 2004.

18

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Proposed Merger

As part of the Settlement Agreement,
our general partner and the general partners of the four public partnerships affiliated
with us, have agreed to pursue a merger of the partnerships and several other affiliated
real estate entities into a newly formed limited partnership known as NTS Realty Holdings
Limited Partnership (NTS Realty). The merger is subject to, among other
things, approval by a majority of the limited partner interests in each partnership. We
may not seek the approval of the limited partners until a filing made by NTS Realty with
the Securities and Exchange Commission is declared effective. For the three months ended
March 31, 2004, our share of the legal and professional fees for the proposed merger was
approximately $64,000.

On February 4, 2004, NTS Realty filed
a joint consent solicitation statement/prospectus on Form S-4 with the Securities and
Exchange Commission. The solicitation statement/prospectus presents the merger of
NTS-Properties III; NTS-Properties IV; NTS-Properties V; NTS-Properties VI; and
NTS-Properties VII, Ltd. with NTS Realty. Concurrent with the merger, ORIG, LLC, a
Kentucky limited liability company, which is affiliated with our general partner, will
contribute substantially all its real estate assets and all of its liabilities to NTS
Realty.

Website Information

Our website address is
www.ntsdevelopment.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act are available and may be accessed
free of charge through the About NTS section of our website as soon as
reasonably practicable after we electronically file this material with, or furnish it to,
the SEC. Our website and the information contained therein or connected thereto are not
incorporated into this quarterly report on Form 10-Q.

# Item 3 
Quantitative and Qualitative Disclosures About Market Risk

Our primary market risk exposure with
regard to financial instruments is changes in interest rates. Our mortgage payable bears
interest at a fixed rate. A hypothetical 100 basis point increase in interest rates would
result in an approximate $161,000 decrease in the fair value of debt.

# Item 4  Controls
and Procedures

Our General Partner, with the
participation of the Chief Executive Officer and Chief Financial Officer, has evaluated
the effectiveness of our disclosure controls and procedures as of March 31, 2004. Based on
that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that
our disclosure controls and procedures were effective as of March 31, 2004. There were no
material changes in our internal controls over financial reporting during the first
quarter of 2004.

19

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# PART II  OTHER
INFORMATION

# Item 1  Legal
Proceedings

On May 6, 2004, the Superior Court of
the State of California for the County of Contra Costa granted its final approval of the
Stipulation and Agreement of Settlement (the Settlement Agreement) jointly
filed by the general partners (the General Partners) of NTS-Properties III,
NTS-Properties IV, NTS-Properties V, NTS-Properties VI and NTS-Properties VII, Ltd. (the
Partnerships), along with certain of their affiliates, with the class of
plaintiffs in the action originally captioned Buchanan, et al. v. NTS-Properties
Associates, et al.(Case No. C 01-05090) on December 5, 2003. At the final hearing,
any member of the class of plaintiffs was given the opportunity to object to the final
approval of the Settlement Agreement, the entry of a final judgment dismissing with
prejudice the Buchananlitigation, or an application of an award for
attorneys fees and expenses to plaintiffs counsel. The Superior Courts
order provides, among other things, that: (1) the Settlement Agreement, and all
transactions contemplated thereby, including the proposed merger of the Partnerships into
NTS Realty Holdings Limited Partnership, are fair, reasonable and adequate, and in the
best interests of the class of plaintiffs; (2) the plaintiffs complaint and each and
every cause of action and claim set forth therein is dismissed with prejudice; (3) each
class member is barred from (a) transferring, selling or otherwise disposing of (other
than by operation of law) their interests until the earlier of the closing date of the
merger, the termination of the settlement or June 30, 2004; and (4) each class member who
requested to be excluded from the settlement released their claims in the Bohm
litigation.

Items 2 through 5 are omitted
because these items are inapplicable or the answers to the items are negative.

# Item 6  Exhibits
and Reports on Form 8-K

|            |                                                          |    
|----------- | -------------------------------------------------------- | ---
|Exhibit No. |                                                          |    
|            |                                                          |    
|3           | Amended and Restated Agreement and Certificate           | *  
|            | of Limited Partnership of NTS-Properties VII, Ltd.,      |    
|            | a Florida limited partnership.                           |    
|            |                                                          |    
|10          | Property Management Agreement and Construction           | *  
|            | Agreement between NTS Development Company and            |    
|            | NTS-Properties VII, Ltd., a Florida limited partnership. |    
|            |                                                          |    
|14          | Code of Ethics                                           | ** 
|            |                                                          |    
|31.1        | Certification of Chief Executive Officer Pursuant to     | ***
|            | Rule 13a-14(a) and Rule 15d-14(a) of the Securities      |    
|            | Exchange Act, as amended.                                |    

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|     |                                                      |    
|---- | ---------------------------------------------------- | ---
|31.2 | Certification of Chief Financial Officer Pursuant to | ***
|     | Rule 13a-14(a) and Rule 15d-14(a) of the Securities  |    
|     | Exchange Act, as amended.                            |    
|     |                                                      |    
|32.1 | Certification of Chief Executive Officer Pursuant to | ***
|     | 18 U.S.C. 1350, as adopted pursuant to Section 906   |    
|     | of the Sarbanes-Oxley Act of 2002.                   |    
|     |                                                      |    
|32.2 | Certification of Chief Financial Officer Pursuant to | ***
|     | 18 U.S.C. 1350, as adopted pursuant to Section 906   |    
|     | of the Sarbanes-Oxley Act of 2002.                   |    
|     |                                                      |    

|    |                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   | Incorporated by reference to documents filed with the Securities and Exchange
Commission in connection with the filing of the Registration Statements on Form S-11
on May 15, 1987 (effective October 29, 1987) under Commission File No. 33-14308.
|    |                                                                                                                                                                                                                                                    
|**  | See www.ntsdevelopment.comfor our code of ethics.                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                    
|*** | Attached as an exhibit with this Form 10-Q.                                                                                                                                                                                                        

# Reports on Form 8-K

We filed a Form 8-K on February 2,
2004, to inform investors of an offer by CMG Partners, LLC to purchase their interests in
NTS-Properties VII, Ltd. for $5.75 per interest in cash. We also informed the investors
that we recommended a rejection of the offer and provided reasons for our recommendation.

We filed a Form 8-K on February 6,
2004, to announce that NTS Realty Holdings Limited Partnership filed a Form S-4, which
included a joint consent solicitation statement/prospectus, with the Securities and
Exchange Commission on February 4, 2004.

We filed a Form 8-K on March 1, 2004,
to announce the preliminary approval of the settlement with the class of plaintiffs in the
action originally captioned Buchanan et al. v. NTS-Properties Associates, et al.
(Case No. C 01-05090) by the Superior Court of the State of California for the County of
Contra Costa.

We filed a Form 8-K on May 10, 2004,
to announce the final approval of the settlement with the class of plaintiffs in the
action originally captioned Buchanan et al. v. NTS-Properties Associates, et al.
(Case No. C 01-05090) by the Superior Court of the State of California for the County of
Contra Costa.

21

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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.

|NTS-PROPERTIES VII, LTD.
|------------------------
|
|                        
|By:                     
|                        
|                        
|                        
|                        
|                        
|                        

|/s/ Brian F. Lavin                                
|--------------------------------------------------
|                                                  
|Brian F. Lavin                                    
|President of NTS Capital Corporation              
|                                                  
|                                                  
|/s/ Gregory A. Wells                              
|                                                  
|Gregory A. Wells                                  
|Chief Financial Officer of NTS Capital Corporation
|                                                  
|                                                  
|Date: May 13, 2004                                

22