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, 1997

                                                     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               0-18952

                            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, 1997 and December 31, 1996                    3

            Statements of Operations
              For the three months ended March 31, 1997 and 1996            4

            Statements of Cash Flows
              For the three months ended March 31, 1997 and 1996            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, 1997   December 31, 1996*
                                                 --------------   ------------------

ASSETS
<S>                                                <C>               <C>        
Cash and equivalents                               $   284,447       $   278,620
Cash and equivalents - restricted                      175,572           162,005
Accounts receivable                                     11,361            14,518
Land, buildings and amenities, net                  10,753,715        10,878,976
Other assets                                           155,751           140,380
                                                   -----------       -----------

                                                   $11,380,846       $11,474,499
                                                   ===========       ===========

LIABILITIES AND PARTNERS' EQUITY
Mortgages payable                                  $ 5,318,365       $ 5,358,215
Accounts payable                                        90,637            90,301
Distributions payable                                   60,427            60,645
Security deposits                                       40,615            39,800
Other liabilities                                       31,681             6,787
                                                   -----------       -----------

                                                     5,541,725         5,555,748

Partners' equity                                     5,839,121         5,918,751
                                                   -----------       -----------

                                                   $11,380,846       $11,474,499
                                                   ===========       ===========
</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      (2,679,317)        (27,063)     (2,706,380)
Net loss - current year                 (10,450)           (106)        (10,556)
Cash distributions declared to
 date                                (2,197,399)        (22,196)     (2,219,595)
Repurchase of limited
 partnership Units                     (160,148)             --        (160,148)
                                   ------------    ------------    ------------

Balances at March 31, 1997         $  5,888,386    $    (49,265)   $  5,839,121
                                   ============    ============    ============
</TABLE>

*   Reference is made to the audited  financial  statements  in the Form 10-K as
    filed with the Commission on March 27, 1997.

                                      - 3 -

<PAGE>

<TABLE>


                            NTS-PROPERTIES VII, LTD.

                            STATEMENTS OF OPERATIONS


<CAPTION>

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

                                                 1997         1996
                                              ----------   ----------
<S>                                           <C>          <C>      
Revenues:
  Rental income                               $ 484,230    $ 506,853
  Interest and other income                       3,953        4,977
                                              ---------    ---------

                                                488,183      511,830
 Expenses:
  Operating expenses                            112,037       88,903
  Operating expenses - affiliated                61,558       56,141
  Interest expense                              111,902      115,069
  Management fees                                25,051       26,144
  Real estate taxes                              24,894       25,778
  Professional and administrative expenses       13,835       12,582
  Professional and administrative expenses
   - affiliated                                  20,314       32,389
  Depreciation and amortization                 129,148      136,730
                                              ---------    ---------

                                                498,739      493,736
                                              ---------    ---------

 Net income (loss)                            $ (10,556)   $  18,094
                                              =========    =========

 Net income (loss) allocated to the limited
  partners                                    $ (10,450)   $  17,913
                                              =========    =========

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

 Weighted average number of limited
  partnership units                             599,466      636,252
                                              =========    =========

</TABLE>


                                      - 4 -

<PAGE>

<TABLE>


                            NTS-PROPERTIES VII, LTD.

                            STATEMENTS OF CASH FLOWS



<CAPTION>
                                                           Three Months Ended
                                                                March 31,
                                                           -------------------

                                                            1997         1996
                                                         ----------   ----------

<S>                                                      <C>          <C>      
Net income (loss)                                        $ (10,556)   $  18,094
Adjustments to reconcile net income (loss) to net
 cash provided by operating activities:
  Accrued interest on investment securities                     --        1,408
  Depreciation and amortization                            129,148      136,730
  Changes in assets and liabilities:
   Cash and equivalents - restricted                       (22,215)     (22,832)
   Accounts receivable                                       3,157       (5,645)
   Other assets                                            (17,377)     (12,041)
   Accounts payable                                            336       15,281
   Security deposits                                           815        1,530
   Other liabilities                                        24,894       25,778
                                                         ---------    ---------

  Net cash provided by operating activities                108,202      158,303
                                                         ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and amenities                  (1,880)        (445)
Maturity of investment securities                               --      102,499
                                                         ---------    ---------

  Net cash provided by (used in) investing
   activities                                               (1,880)     102,054
                                                         ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Cash and equivalents - restricted                            8,648       41,380
Principal payments on mortgages payable                    (39,850)     (36,630)
Cash distributions                                         (60,645)     (64,471)
Repurchase of limited partnership Units                     (8,648)     (41,380)
                                                         ---------    ---------

  Net cash used in financing activities                   (100,495)    (101,101)
                                                         ---------    ---------

  Net increase in cash and equivalents                       5,827      159,256

CASH AND EQUIVALENTS, beginning of period                  278,620      249,559
                                                         ---------    ---------

CASH AND EQUIVALENTS, end of period                      $ 284,447    $ 408,815
                                                         =========    =========

Interest paid on a cash basis                            $ 112,320    $ 115,538
                                                         =========    =========
</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  1996 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, 1997 and 1996.

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 1996, the Partnership sold no investment  securities.  At
     March 31, 1997 and December 31, 1996,  the  Partnership  held no investment
     securities with initial maturities greater than three months.

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

     Mortgages payable consist of the following:

                                                   March 31,        December 31,
                                                     1997              1996
                                                  -----------       -----------
     Mortgage payable to an insurance
     company, bearing interest at a fixed
     rate of 8.375%, due October 5, 2002,
     secured by land and buildings                $ 3,079,976       $ 3,091,363

     Mortgage payable to an insurance
     company, bearing interest at a fixed
     rate of 8.375%, due October 5, 2002,
     secured by land and buildings                    947,685           951,189

     Mortgage payable to an insurance
     company, bearing interest at a fixed
     rate of 8.5%, due November 15, 2005,
     secured by land and building                   1,290,704         1,315,663
                                                   ----------        ----------
                                                  $ 5,318,365       $ 5,358,215
                                                   ===========       ==========


     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 $6,660,000.








                                      - 6 -

<PAGE>



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 1997, the Partnership has funded a total
     amount of  $248,923  to the  Reserve  which will allow the  Partnership  to
     repurchase up to 62,230 Units at a price of $4.00 per Unit. As of March 31,
     1997 the  Partnership has repurchased a total of 40,037 Units for $160,148.
     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, 1997 was $88,775.

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

     Property   management  fees  of  $25,051  and  $26,144  were  paid  to  NTS
     Development Company, an affiliate of the general partner,  during the three
     months ended March 31, 1997 and 1996, 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, 1997 and 1996.  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.


                                              1997            1996
                                            ---------       --------

               Leasing                      $ 11,328        $ 10,341
               Administrative                 27,049          38,912
               Property manager               43,408          39,277
               Other                              88            --
                                            --------        --------

                                            $ 81,873        $ 88,530
                                            ========        ========



6.   Reclassification of 1996 Financial Statements
     ---------------------------------------------

     Certain  reclassifications  have been made to the March 31, 1996  financial
     statements  to  conform  with the March  31,  1997  classifications.  These
     reclassifications have no effect on previously reported operations.


















                                      - 7 -

<PAGE>





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

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

The  occupancy  levels at the  Partnership's  properties  as of March 31 were as
follows:


                                             1997          1996
                                            ------        ------

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

The Park at the Willows                       79%           98%

Park Place Apartments Phase II                88%           93%

Property Owned in Joint Venture with
NTS-Properties IV and NTS-Properties
Plus Ltd. (Ownership % at March 31,
1997)
------------------------------------

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

Rental and other income generated by the Partnership's  properties for the three
months ended March 31, 1997 and 1996 was as follows:


                                                1997                 1996
                                             ---------            ---------

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

The Park at the Willows                      $  75,050            $  80,892

Park Place Apartments Phase II               $ 336,458            $ 352,653

Property owned in Joint Venture with
NTS-Properties IV and NTS-Properties
Plus Ltd. (Ownership % at March 31,
1997)
------------------------------------

Blankenbaker Business Center 1A (31%)(1)     $  73,478            $  73,437

(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, 1997 and 1996.

The Park at the Willows'  occupancy  decreased from 98% at March 31, 1996 to 79%
at March 31, 1997.  Average  occupancy for the three month period ended March 31
decreased from 98% in 1996 to 85% in 1997.  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. In the opinion of the General Partner of the Partnership,  the
decrease in  occupancy  for the three months ended March 31, 1997 as compared to
the same period in 1996 is only a temporary fluctuation and does not represent a
downward  occupancy trend. 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

                                      - 8 -

<PAGE>



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

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  decrease in rental and other income at The Park
at the Willows for the three months ended March 31, 1997 as compared to the same
period in 1996 was due to the 13%  decrease  in  average  occupancy.  Rental and
other income at The Park at the Willows also  decreased due to decreased  income
from fully furnished  units.  Fully furnished units are apartments which rent at
an additional premium above base rent.

Park Place Apartments Phase II's occupancy  decreased from 93% at March 31, 1996
to 88% at March 31,  1997.  Average  occupancy  for the three month period ended
March 31 at Park Place  Apartments Phase II decreased from 94% in 1996 to 88% in
1997. 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, 1997 as
compared  to the same  period in 1996 as a result  of the  decrease  in  average
occupancy  and  decreased  income  from fully  furnished  units as a result of a
decrease in the number of fully furnished units being leased.

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, 1997
as compared to the three months ended March 31, 1996.

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

Interest and other income includes  interest income from investments made by the
Partnership  with cash reserves.  The decrease in interest  income for the three
months  ended March 31, 1997 as compared to the same period in 1996 was a result
of decreased cash reserves being available for investment.

Operating  expenses  increased  for the three  months  ended  March 31,  1997 as
compared to the same period in 1996 as a result of increased  interior painting,
roof  repair  and  vacant  utility  costs at Park  Place  Apartments  Phase  II,
increased carpet replacement costs at The Park at the Willows and increased roof
repair  costs at  Blankenbaker  Business  Center 1A. The  increases in operating
expenses were partially  offset by decreased  snow removal and furniture  rental
costs at Park Place Apartments Phase II.

Operating  expenses - affiliated  increased for the three months ended March 31,
1997 as compared to the same  period in 1996 as a result of  increased  property
management costs at all of the Partnership's  properties.  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, 1997 as
compared  to the  same  period  in  1996  is  the  result  of the  Partnership's
decreasing debt level as a result of principal payments made.


                                      - 9 -

<PAGE>



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

See the  Liquidity  and  Capital  Resources  section  of this  item for  details
regarding the Partnership's debt.

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

Real estate taxes and  professional  and  administrative  expenses have remained
fairly  constant  for the three  months  ended March 31, 1997 as compared to the
three months ended March 31, 1996.

Professional and  administrative  expenses - affiliated  decreased for the three
months ended March 31, 1997 as compared to the three months ended March 31, 1996
due to  decreased  salary  costs.  Professional  and  administrative  expenses -
affiliated  are expenses  incurred  for  services  performed by employees of NTS
Development Company, an affiliate of the General Partner.

Depreciation  and  amortization  decreased  for the three months ended March 31,
1997 as  compared  to the three  months  ended  March 31,  1996 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 $108,202 and $158,303 for the three months ended
March 31, 1997 and 1996,  respectively.  These funds in conjunction with cash on
hand were used to pay a 2% (annualized)  cash distribution of $60,427 (1997) and
a  2%  (annualized)  cash   distribution  of  $63,426  (1996).   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
as shown on the  Partnership's  balance  sheet as of March 31) were $284,447 and
$408,815 at March 31, 1997 and 1996, respectively.

As of March 31, 1997,  the  Partnership  had mortgages  payable in the amount of
$4,027,661  ($3,079,976  and  $947,685)  from  two  insurance  companies.   Both
mortgages  bear a fixed  interest rate of 8.375% for the first 60 months and are
due  October  5,  2002.  At the end of the 56th month from the date of the notes
(notes  dated  September  8,  1992),  the  insurance  companies  will notify the
Partnership  of the interest rate which is their then  prevailing  interest rate
for loans with a term of five years on properties  comparable to the  apartments
(the "Modified Rate"). The Partnership will have 30 days to accept or reject the
Modified rate. If the Modified Rate is rejected by the  Partnership,  the entire
unpaid principal  balance is due with the 60th  installment of interest.  If the
Partnership  accepts the Modified Rate, it becomes effective the 61st month from
the date of the notes.  Both  mortgages are secured by a first  mortgage on Park
Place Apartments Phase II. Current monthly principal  payments on both mortgages
are based upon a 27-year amortization  schedule.  If the Partnership accepts the
Modified Rate, the principal balance of both mortgages will be amortized using a
22-year  amortization   schedule  beginning  the  61st  month.  The  outstanding
principal balance at maturity based on the current rate of amortization would be
$3,607,560 ($2,758,723 and $848,837).

                                     - 10 -

<PAGE>



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

The General Partner of the Partnership is presently exploring the possibility of
refinancing  the  mortgages  payable  discussed  above due to the interest  rate
change  which will be  effective  September  1997.  If an  interest  rate can be
obtained which would be less than the Modified  Rate,  together with a favorable
amortization schedule, the loans will likely be refinanced.

As of March 31, 1997,  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  $4,118,392.  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,
1997 is  $1,290,704.  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  1997,  the  Partnership  has funded a total  amount of
$248,923 to the Reserve  which will allow the  Partnership  to  repurchase up to
62,230 units at a price of $4.00 per Unit. As of March 31, 1997, the Partnership
has repurchased a total of 40,037 Units for $160,148.  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,
1997 was $88,775.

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  provided by investing  activities  are derived from the
maturity of investment  securities.  As part of its cash management  activities,
the  Partnership has purchased  Certificates of Deposit or securities  issued by
the U. S.  Government  with initial  maturities  of greater than three months to
improve its return on its cash  reserves.  The  Partnership  held the securities
until  maturity.   Cash  flows  used  in  financing   activities  are  for  cash
distributions,  principal  payments  on  mortgages  payable and  repurchases  of
limited   partnership  Units.  Cash  flows  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 1996.

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, 1997.













                              (Continued next page)

                                     - 11 -

<PAGE>



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

The table below  presents  that portion of the  distributions  that  represent a
return of capital on a Generally  Accepted  Accounting  Principle  basis for the
three months ended March 31, 1997 and 1996.


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

Limited Partners:
       1997                 $(10,450)      $ 59,823           $ 59,823
       1996                    17,913        62,792             44,879

General Partner:
       1997                $    (106)      $    604           $    604
       1996                      181            634                453


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

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

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

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

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

                                     - 12 -

<PAGE>



PART II.  OTHER INFORMATION

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, 1997.



                                     - 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 12 , 1997
       


                                     - 14 -

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