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      March 31, 1998

                        OR

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

         For the transition period from _________ to _______

         Commission File Number               0-17589

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

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

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

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

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

Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months,  and (2) has been subject to such filing  requirements
for the past 90 days.

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


<PAGE>



                                TABLE OF CONTENTS

                                                                          Pages

                                     PART I

Item 1.     Financial Statements

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

            Statements of Operations
              For the three months ended March 31, 1998 and 1997              4

            Statements of Cash Flows
              For the three months ended March 31, 1998 and 1997              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>



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

                            NTS-PROPERTIES VII, LTD.

                BALANCE SHEETS AND STATEMENT OF PARTNERS' EQUITY
<CAPTION>


                                         As of                  As of
                                     March 31, 1998      December 31, 1997*
                                     --------------      ------------------

ASSETS

<S>                                    <C>                  <C>        
Cash and equivalents                   $   409,240          $   164,714
Cash and equivalents - restricted          153,032              176,636
Investment securities                      100,388              338,129
Accounts receivable                          1,299                  858
Land, buildings and amenities, net      10,269,042           10,361,786
Other assets                               150,355              137,022
                                       -----------          -----------

                                       $11,083,356          $11,179,145
                                       ===========          ===========

LIABILITIES AND PARTNERS' EQUITY

Mortgages payable                      $ 5,250,594          $ 5,303,947
Accounts payable                            40,978               38,815
Distributions payable                       58,524               60,426
Security deposits                           32,550               36,325
Other liabilities                           32,564                6,787
                                       -----------          -----------

                                         5,415,210            5,446,300

Partners' equity                         5,668,146            5,732,845
                                       -----------          -----------

                                       $11,083,356          $11,179,145
                                       ===========          ===========

</TABLE>
<TABLE>
<CAPTION>

                                      Limited         General
                                      Partners        Partner          Total
                                      --------        -------          -----

<S>                                <C>             <C>             <C>    
PARTNERS' EQUITY
Capital contributions, net of
 offering costs                    $ 10,935,700    $        100    $ 10,935,800
Net income (loss) - prior years      (2,615,475)        (26,418)     (2,641,893)
Net income - current year                18,804             190          18,994
Cash distributions declared to
 date                                (2,434,803)        (24,594)     (2,459,397)
Repurchase of limited
 partnership Units                     (185,358)           --          (185,358)
                                   ------------    ------------    ------------

Balances at March 31, 1998         $  5,718,868    $    (50,722)   $  5,668,146
                                   ============    ============    ============

</TABLE>

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

                                      - 3 -

<PAGE>
<TABLE>



                            NTS-PROPERTIES VII, LTD.

                            STATEMENTS OF OPERATIONS

<CAPTION>

                                                   Three Months Ended
                                                        March 31,
                                                   ------------------

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

<S>                                             <C>           <C>    
Revenues:
 Rental income                                  $ 462,189     $ 484,230
 Interest and other income                          6,784         3,953
                                                ---------     ---------

                                                  468,973       488,183
Expenses:
 Operating expenses                                84,127       112,037
 Operating expenses - affiliated                   61,274        61,558
 Interest expense                                  98,878       111,902
 Management fees                                   24,200        25,051
 Real estate taxes                                 25,778        24,894
 Professional and administrative expenses          11,536        13,835
 Professional and administrative expenses
  - affiliated                                     22,282        20,314
 Depreciation and amortization                    121,904       129,148
                                                ---------     ---------

                                                  449,979       498,739
                                                ---------     ---------

Net income (loss)                               $  18,994     $ (10,556)
                                                =========     =========

Net income (loss) allocated to the limited
 partners                                       $  18,804     $ (10,450)
                                                =========     =========

Net income (loss) per limited partnership
 unit                                           $     .03     $    (.02)
                                                =========     =========

Weighted average number of limited
 partnership units                                596,493       599,466
                                                =========     =========


</TABLE>
                                      - 4 -

<PAGE>
<TABLE>


                            NTS-PROPERTIES VII, LTD.

                            STATEMENTS OF CASH FLOWS

<CAPTION>

                                                           Three Months Ended
                                                                March 31,
                                                           ------------------

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

<S>                                                      <C>          <C>    
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                                        $  18,994    $ (10,556)
Adjustments to reconcile net income (loss) to net
 cash provided by operating activities:
  Accrued interest on investment securities                  1,349         --
  Depreciation and amortization                            121,904      129,148
  Changes in assets and liabilities:
   Cash and equivalents - restricted                        (1,566)     (22,215)
   Accounts receivable                                        (441)       3,157
   Other assets                                             (9,848)     (17,377)
   Accounts payable                                          2,163          336
   Security deposits                                        (3,775)         815
   Other liabilities                                        25,777       24,894
                                                         ---------    ---------

  Net cash provided by operating activities                154,557      108,202
                                                         ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and amenities                 (27,472)      (1,880)
Purchase of investment securities                         (300,000)        --
Maturity of investment securities                          536,392         --
                                                         ---------    ---------

  Net cash provided by (used in) investing
   activities                                              208,920       (1,880)
                                                         ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Cash and equivalents - restricted                           25,170        8,648
Principal payments on mortgages payable                    (53,353)     (39,850)
Cash distributions                                         (60,426)     (60,645)
Repurchase of limited partnership Units                    (25,170)      (8,648)
Addition to loan costs                                      (5,172)        --
                                                         ---------    ---------

  Net cash used in financing activities                   (118,951)    (100,495)
                                                         ---------    ---------

  Net increase in cash and equivalents                     244,526        5,827

CASH AND EQUIVALENTS, beginning of period                  164,714      278,620
                                                         ---------    ---------

CASH AND EQUIVALENTS, end of period                      $ 409,240    $ 284,447
                                                         =========    =========

Interest paid on a cash basis                            $  99,789    $ 112,320
                                                         =========    =========

</TABLE>

                                      - 5 -

<PAGE>



                            NTS-PROPERTIES VII, LTD.

                          NOTES TO FINANCIAL STATEMENTS

The financial  statements included herein should be read in conjunction with the
Partnership's  1997 Annual Report.  In the opinion of the General  Partner,  all
adjustments (only consisting of normal recurring  accruals) necessary for a fair
presentation  have been made to the  accompanying  financial  statements for the
three months ended March 31, 1998 and 1997.

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

     Investment  securities represent  investments in Certificates of Deposit or
     securities issued by the U.S. Government with initial maturities of greater
     than three months.  The  Partnership  intends to hold the securities  until
     maturity.  During  the three  months  ended  March 31,  1998 and 1997,  the
     Partnership sold no investment securities.

     The following  provides details regarding the investments held at March 31,
     1998:



                                       Amortized    Maturity     Value at
                   Type                   Cost        Date       Maturity
                  ------              ----------    --------     ---------

          Certificate of Deposit      $  100,388    06/15/98     $ 101,467
                                      ==========                 =========


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



                                      Amortized      Maturity     Value at
                   Type                  Cost          Date       Maturity
                  ------                ------       --------     ---------

          Certificate of Deposit    $   112,348      02/04/98    $  112,908

          Certificate of Deposit        100,543      03/05/98       101,492

          Certificate of Deposit        125,238      03/30/98       127,336
                                     ----------                   ---------

                                    $   338,129                  $  341,736
                                     ==========                   =========












                                      - 6 -

<PAGE>



3.   Mortgages Payable
     -----------------

     Mortgages payable consist of the following:


                                                      March 31,    December 31,
                                                        1998           1997
                                                        ----           ----
     Mortgage  payable to an insurance  
     company, bearing interest at a fixed 
     rate of 7.37%, due October 15, 2012,
     secured by land and buildings                  $ 4,065,180    $ 4,091,369
     
     Mortgage payable to an insurance
     company, bearing interest at a fixed
     rate of 8.5%, due November 15, 2005,
     secured by land and building                     1,185,414      1,212,578
                                                     ----------     ----------
                                                    $ 5,250,594    $ 5,303,947
                                                     ==========     ==========


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

4.   Interest Repurchase Reserve
     ---------------------------

     Pursuant  to  Section  16.4  of  the  Partnership's  Amended  and  Restated
     Agreement of Limited Partnership,  the Partnership  established an Interest
     Repurchase Reserve.  Through March 1998, the Partnership has funded a total
     amount of $287,841 to the Reserve. As of March 31, 1998 the Partnership has
     repurchased a total of 44,242 Units for $185,358. Repurchased Units will be
     retired by the Partnership,  thus increasing the share of ownership of each
     remaining  investor.  The Interest  Repurchase Reserve was funded from cash
     reserves.  The amount remaining in the Interest Repurchase Reserve at March
     31, 1998 was $102,483.  With these remaining funds, the Partnership will be
     able to  repurchase  17,080  Units at a price of $6.00 per Unit.  The above
     offering price per Unit was  established by the General Partner in its sole
     discretion and does not purport to represent the fair market or liquidation
     value of the Unit.


5.   Related Party Transactions
     --------------------------

     Property   management  fees  of  $24,200  and  $25,051  were  paid  to  NTS
     Development Company, an affiliate of the General Partner,  during the three
     months ended March 31, 1998 and 1997, respectively. The fee is paid monthly
     in an  amount  equal  to 5% of the  gross  revenues  from  the  residential
     properties  and 6% of the  gross  revenues  from  the  commercial  property
     pursuant to an agreement with the  Partnership.  The  Partnership  also was
     charged the following  amounts from NTS  Development  Company for the three
     months ended March 31, 1998 and 1997.  These  charges  include  items which
     have been expensed as operating  expenses - affiliated or professional  and
     administrative  expenses - affiliated and items which have been capitalized
     as other assets or as land, buildings and amenities.


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

          Leasing                    $  7,989     $ 11,328
          Administrative               28,213       27,049
          Property manager             47,325       43,408
          Other                            28           88
                                     --------     --------
 
                                     $ 83,555     $ 81,873
                                     ========     ========


                                      - 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 March 31 were as
follows:


                                          1998                 1997
                                          ----                 ----

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

The Park at the Willows                          96%            79%

Park Place Apartments Phase II                   80%            88%

Property Owned in Joint Venture with
NTS-Properties IV and NTS-Properties
Plus Ltd. (Ownership % at March 31,
1998)
------------------------------------

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

Rental and other income generated by the Partnership's  properties for the three
months ended March 31, 1998 and 1997 was as follows:


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

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

The Park at the Willows                       $  85,033            $  75,050

Park Place Apartments Phase II                $ 303,579            $ 336,458

Property owned in Joint Venture with
NTS-Properties IV and NTS-Properties
Plus Ltd. (Ownership % at March 31,
1998)
------------------------------------

Blankenbaker Business Center 1A (31%)(1)      $  74,436            $  73,478

(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
       ended March 31, 1998 and 1997.

The Park at the Willows'  occupancy  increased from 79% at March 31, 1997 to 96%
at March 31, 1998.  Average  occupancy for the three month period ended March 31
increased from 85% in 1997 to 92% in 1998.  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.  Large changes in occupancy at The Park at the Willows are due
to the fact that the complex  has only 48 units.  One vacant  apartment  in this
complex equates to a 2% decrease in occupancy;  therefore,  occupancy percentage
changes  may appear  distorted  on a  percentage  basis when  compared  to other
residential  properties.  In  residential  properties  it is  not  uncommon  for
multiple  residents to vacate at month-end with new residents  taking  occupancy
within a few days.  When this occurs at The Park at the  Willows,  the change in
occupancy will be much greater than at other residential  properties  because of
its small  size.  The  increase  in rental  and other  income at The Park at the
Willows for the three months ended March 31, 1998 as compared to the same period
in 1997 is due to the  increase in average  occupancy  and an increase in income
from fully furnished  units.  Fully furnished units are apartments which rent at
an additional premium above base rent.


                                      - 8 -

<PAGE>



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

Park Place Apartments Phase II's occupancy  decreased from 88% at March 31, 1997
to 80% at March 31,  1998.  Average  occupancy  for the three month period ended
March 31 at Park Place  Apartments Phase II decreased from 88% in 1997 to 84% in
1998. In the opinion of the General Partner of the Partnership,  the decrease in
occupancy at Park Place Apartments Phase II is only a temporary  fluctuation and
does not represent a downward  occupancy trend.  Rental and other income at Park
Place Apartments Phase II decreased for the three months ended March 31, 1998 as
compared  to the same  period in 1997 as a result  of the  decrease  in  average
occupancy.

A  wholly-owned  subsidiary  of The  Prudential  Insurance  Company  of  America
(Prudential  Service  Bureau,  Inc.) has leased  100% of  Blankenbaker  Business
Center 1A through July 2005.  In addition to monthly rent  payments,  Prudential
Service  Bureau,  Inc. is obligated to pay  substantially  all of the  operating
expenses attributable to its space. Blankenbaker Business Center 1A's rental and
other income  remained fairly constant for the three months ended March 31, 1998
as compared to the three months ended March 31, 1997.

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

Interest and other income includes  interest income from short-term  investments
made by the Partnership with cash reserves.  The increase in interest income for
the three  months ended March 31, 1998 as compared to the same period in 1997 is
a result of increased cash reserves being available for investment.

Operating  expenses  decreased  for the three  months  ended  March 31,  1998 as
compared to the same period in 1997 as a result of decreased  interior painting,
roof  repair  and  replacement  (carpet  and  wallcovering)  costs at Park Place
Apartments  Phase  II.  Operating  expenses  at  The  Park  at the  Willows  and
Blankenbaker  Business  Center 1A remained  fairly  constant for the three month
period.

Operating  expenses - affiliated  remained  fairly constant for the three months
ended March 31, 1998 as compared to the same period in 1997.  Operating expenses
- affiliated  are expenses  incurred for services  performed by employees of NTS
Development Company, an affiliate of the General Partner.

The  decrease in interest  expense for the three  months ended March 31, 1998 as
compared  to the same period in 1997 is the result of a lower  interest  rate on
the new debt obligation obtained October 1997 (7.37% versus 8.375%) and a result
of the  Partnership's  decreasing  debt level as a result of principal  payments
made. See the Liquidity and Capital  Resources  section of this item for details
regarding the Partnership's debt.

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

Real estate taxes, professional and administrative expenses and professional and
administrative expenses - affiliated have remained fairly constant for the three
months  ended March 31, 1998 as  compared  to the three  months  ended March 31,
1997.  Professional  and  administrative  expenses  -  affiliated  are  expenses
incurred for services  performed by  employees of NTS  Development  Company,  an
affiliate of the General Partner.



                                      - 9 -

<PAGE>



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

Depreciation  and  amortization  decreased  for the three months ended March 31,
1998 as  compared  to the three  months  ended  March 31,  1997 as a result of a
portion of the assets  with  shorter  lives at Park  Place  Apartments  Phase II
becoming fully  depreciated.  Depreciation  is computed using the  straight-line
method over the estimated useful lives of the assets which are 10 - 30 years for
land  improvements,   30  years  for  buildings,  5  -  30  years  for  building
improvements  and  5 - 30  years  for  amenities.  The  aggregate  cost  of  the
Partnership's properties for Federal tax purposes is approximately $12,200,000.

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

Cash provided by operations was $154,557 and $108,202 for the three months ended
March 31, 1998 and 1997,  respectively.  These funds in conjunction with cash on
hand were used to pay a 2% (annualized)  cash distribution of $58,524 (1998) and
a  2%  (annualized)  cash   distribution  of  $60,427  (1997).   The  annualized
distribution   rate  is  calculated  as  a  percent  of  the  original   capital
contribution. The limited partners received 99% and the General Partner received
1%  of  these  distributions.   The  primary  source  of  future  liquidity  and
distributions is expected to be derived from cash generated by the Partnership's
properties  after adequate cash reserves are  established for future leasing and
tenant finish costs.  Cash reserves (which are unrestricted cash and equivalents
and  investment  securities  as shown on the  Partnership's  balance sheet as of
March 31) were $509,628 and $284,447 at March 31, 1998 and 1997, respectively.

As of March 31, 1998, the Partnership  had a mortgage  payable with an insurance
company in the amount of $4,065,180. The mortgage bears interest at a fixed rate
of 7.37% and matures October 15, 2012 and is secured by the land,  buildings and
amenities of Park Place  Apartments Phase II. Current monthly payments are based
upon a 19-year amortization. The outstanding principal balance at maturity based
on the current rate of amortization will be $1,414,978.

As of March 31, 1998,  Blankenbaker  Business Center Joint Venture, in which the
Partnership  has a  joint  venture  interest,  had a  mortgage  payable  with an
insurance  company in the amount of  $3,782,431.  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 March 31,
1998 is  $1,185,414.  The mortgage bears interest at a fixed rate of 8.5% and is
due November  15, 2005.  Current  monthly  principal  payments are based upon an
11-year amortization  schedule. At maturity,  the mortgage will have been repaid
based on the current rate of amortization.

Pursuant to Section 16.4 of the Partnership's  Amended and Restated Agreement of
Limited  Partnership,  the Partnership  has  established an Interest  Repurchase
Reserve.  Through  March  1998,  the  Partnership  has funded a total  amount of
$287,841 to the Reserve. As of March 31, 1998, the Partnership has repurchased a
total of 44,242  Units for  $185,358.  Repurchased  Units will be retired by the
Partnership,  thus increasing the share of ownership of each remaining investor.
The  Interest  Repurchase  Reserve  was funded  from cash  reserves.  The amount
remaining in the  Interest  Repurchase  Reserve at March 31, 1998 was  $102,483.
With these remaining funds,  the Partnership  will be able to repurchase  17,080
Units at a price of $6.00  per  Unit.  The  above  offering  price  per Unit was
established by the General  Partner in its sole  discretion and does not purport
to represent the fair market or liquidation value of the Unit.

The  majority  of  the  Partnership's   cash  flow  is  derived  from  operating
activities. Cash flows used in investing activities are for capital improvements
at the Partnership's properties. These improvements are funded by cash flow from
operations. Cash flows used in investing activities are also for the purchase of
investment  securities.   As  part  of  its  cash  management  activities,   the
Partnership has purchased Certificates of Deposit or securities issued by the U.
S.  Government  with initial  maturities of greater than three months to improve
its return on its cash reserves. The


                                     - 10 -
<PAGE>



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

Partnership held the securities until maturity. Cash flows provided by investing
activities  are a result of the maturity of these  investment  securities.  Cash
flows  used in  financing  activities  are  for  cash  distributions,  principal
payments on mortgages payable and repurchases of limited partnership Units. Cash
flows provided by financing activities  represents the utilization of cash which
has been reserved by the Partnership  for the repurchase of limited  partnership
Units.  The  Partnership  does not  expect any  material  changes in the mix and
relative cost of capital resources from those in 1997.

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 March 31, 1998.

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

The table below  presents  that portion of the  distributions  that  represent a
return of capital on a Generally  Accepted  Accounting  Principle  basis for the
three months ended March 31, 1998 and 1997.


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

Limited Partners:
       1998            $ 18,804             $   57,939          $  39,135
       1997             (10,450)                59,823             59,823

General Partner:
       1998            $    190             $      585          $     395
       1997                (106)                   604                604



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.



                                     - 11 -

<PAGE>



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

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

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

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

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

                                     - 12 -

<PAGE>



PART II.  OTHER INFORMATION

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:

              There were no reports on Form 8-K for the three months ended March
              31, 1998.



                                     - 13 -

<PAGE>



                                   SIGNATURES
                                   ----------

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


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

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


                                               /s/ John W. Hampton
                                               -------------------
                                               John W. Hampton
                                               Senior Vice President



Date:    May 14, 1998
         ------------



                                     - 14 -

<PAGE>