<PAGE>



                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                    FORM 10-Q

(Mark one)

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

        For the quarterly period ended      June 30, 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               0-17589

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

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

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

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

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

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

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


<PAGE>




                                TABLE OF CONTENTS

                                                                       Pages

                                     PART I

Item 1.     Financial Statements

            Balance Sheets and Statement of Partners' Equity
              as of June 30, 1997 and December 31, 1996                    3

            Statements of Operations
              For the three months and six months ended
                June 30, 1997 and 1996                                     4

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

<TABLE>


PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements

                            NTS-PROPERTIES VII, LTD.

                BALANCE SHEETS AND STATEMENT OF PARTNERS' EQUITY
<CAPTION>



                                                      As of            As of
                                                  June 30, 1997   December 31, 1996*
                                                  -------------   ------------------
ASSETS

<S>                                                <C>               <C>        
Cash and equivalents                               $   323,737       $   278,620
Cash and equivalents - restricted                      197,758           162,005
Accounts receivable                                      2,707            14,518
Land, buildings and amenities, net                  10,630,602        10,878,976
Other assets                                           144,446           140,380
                                                   -----------       -----------

                                                   $11,299,250       $11,474,499
                                                   ===========       ===========

LIABILITIES AND PARTNERS' EQUITY

Mortgages payable                                  $ 5,277,668       $ 5,358,215
Accounts payable                                        74,248            90,301
Distributions payable                                   60,426            60,645
Security deposits                                       41,440            39,800
Other liabilities                                       56,576             6,787
                                                   -----------       -----------

                                                     5,510,358         5,555,748

Partners' equity                                     5,788,892         5,918,751
                                                   -----------       -----------

                                                   $11,299,250       $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                   (316)             (3)           (319)
Cash distributions declared to
 date                               (2,257,221)        (22,800)     (2,280,021)
Repurchase of limited
 partnership Units                    (160,188)             --        (160,188)
                                  ------------    ------------    ------------

Balances at June 30, 1997         $  5,838,658    $    (49,766)   $  5,788,892
                                  ============    ============    ============
</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             Six Months Ended
                                             June 30,                      June 30,
                                             --------                      --------

                                        1997          1996           1997           1996
                                    -----------   -----------    -----------    -----------
<S>                                 <C>           <C>            <C>            <C>        
REVENUES:
  Rental income                     $   502,542   $   486,778    $   986,773    $   993,630
  Interest and other income               5,474         4,369          9,427          9,346
                                    -----------   -----------    -----------    -----------

                                        508,016       491,147        996,200      1,002,976

EXPENSES:
  Operating expenses                    118,135       153,380        230,173        242,282
  Operating expenses - affiliated        52,823        50,496        114,381        106,637
  Interest expense                      111,472       114,460        223,373        229,529
  Management fees                        25,995        24,993         51,047         51,138
  Real estate taxes                      24,894        25,677         49,788         51,455
  Professional and administrative
    expenses                             15,083        13,905         28,917         26,488
  Professional and administrative
    expenses - affiliated                20,549        21,350         40,863         53,739
  Depreciation and amortization         128,828       136,673        257,977        273,403
                                    -----------   -----------    -----------    -----------

                                        497,779       540,934        996,519      1,034,671
                                    -----------   -----------    -----------    -----------

Net income (loss)                   $    10,237   $   (49,787)   $      (319)   $   (31,695)
                                    ===========   ===========    ===========    ===========

Net income (loss) allocated to
 the limited partners               $    10,135   $   (49,289)   $      (316)   $   (31,378)
                                    ===========   ===========    ===========    ===========

Net income (loss) per limited
 partnership unit                   $      0.02   $     (0.08)   $      0.00    $     (0.05)
                                    ===========   ===========    ===========    ===========

Weighted average number of units        598,221       621,982        598,840        629,117
                                    ===========   ===========    ===========    ===========

</TABLE>



                                      - 4 -

<PAGE>

<TABLE>


                            NTS-PROPERTIES VII, LTD.

                            STATEMENTS OF CASH FLOWS

<CAPTION>

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

                                            1997         1996         1997         1996
                                         ----------   ----------   ----------   ----------
<S>                                      <C>          <C>          <C>          <C>       
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                        $  10,237    $ (49,787)   $    (319)   $ (31,695)
Adjustments to reconcile net income
 (loss) to net cash provided by
 operating activities:
   Accrued interest on investment
      securities                                --       (1,230)          --          178
   Depreciation and amortization           128,828      136,673      257,977      273,403
   Changes in assets and liabilities
    Cash and equivalents - restricted      (22,226)     (24,327)     (44,441)     (47,159)
    Accounts receivable                      8,654         (150)      11,811       (5,795)
    Other assets                             9,299        7,585       (8,079)      (4,455)
    Accounts payable                       (16,389)      22,809      (16,053)      38,090
    Security deposits                          825        3,025        1,640        4,555
    Other liabilities                       24,894       25,678       49,788       51,456
                                         ---------    ---------    ---------    ---------

   Net cash provided by operating
      activities                           144,122      120,276      252,324      278,578
                                         ---------    ---------    ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and
  amenities                                 (3,708)        (158)      (5,588)        (603)
Purchase of investment securities               --     (207,439)          --     (207,439)
Maturity of investment securities               --           --           --      102,500
                                         ---------    ---------    ---------    ---------

   Net cash used in investing
      activities                            (3,708)    (207,597)      (5,588)    (105,542)
                                         ---------    ---------    ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Cash and equivalents - restricted               40      (80,554)       8,688      (39,174)
Principal payments on mortgages
   payable                                 (40,697)     (37,410)     (80,547)     (74,040)
Cash distributions                         (60,427)     (63,427)    (121,072)    (127,898)
Repurchase of limited partnership
   Units                                       (40)     (40,716)      (8,688)     (82,096)
                                         ---------    ---------    ---------    ---------

   Net cash used in financing
      activities                          (101,124)    (222,107)    (201,619)    (323,208)
                                         ---------    ---------    ---------    ---------

   Net increase (decrease) in cash and
      equivalents                           39,290     (309,428)      45,117     (150,172)

CASH AND EQUIVALENTS, beginning of
   period                                  284,447      408,815      278,620      249,559
                                         ---------    ---------    ---------    ---------

CASH AND EQUIVALENTS, end of period      $ 323,737    $  99,387    $ 323,737    $  99,387
                                         =========    =========    =========    =========

Interest paid on a cash basis            $ 111,472    $ 114,759    $ 223,791    $ 230,297
                                         =========    =========    =========    =========

</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 and six months ended June 30, 1997 and 1996.

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

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

2.   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.

3.   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  and  1997,  the  Partnership  sold  no  investment
     securities. At June 30, 1997 and December 31, 1996, the Partnership held no
     investment securities with initial maturities greater than three months.

4.   Mortgages Payable
     -----------------

     Mortgages payable consist of the following:

                                                  June 30,        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               $ 3,068,348      $ 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                   944,108          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                  1,265,212        1,315,663
                                                 -----------       ----------

                                                 $ 5,277,668      $ 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 $6,600,000.

                                      - 6 -

<PAGE>



5.   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 June 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 June 30,
     1997 the  Partnership has repurchased a total of 40,047 Units for $160,188.
     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 June 30, 1997 was $88,735.

6.   Related Party Transactions
     --------------------------

     Property   management  fees  of  $51,047  and  $51,138  were  paid  to  NTS
     Development  Company,  an affiliate of the general partner,  during the six
     months ended June 30, 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 six
     months ended June 30, 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            $ 20,273   $ 18,328
                     Administrative       54,332     66,784
                     Property manager     80,525     75,192
                     Other                   113         72
                                        --------   --------

                                        $155,243   $160,376
                                        ========   ========



7.   Reclassification of 1996 Financial Statements
     ---------------------------------------------

     Certain  reclassifications  have been made to the June 30,  1996  financial
     statements  to  conform  with  the  June 30,  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 June 30 were as
follows:


                                                1997                 1996
                                                ----                 ----

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

The Park at the Willows                          94%                  85%

Park Place Apartments Phase II                   94%                  89%

Property Owned in Joint Venture with
NTS-Properties IV and NTS-Properties
Plus Ltd. (Ownership % at June 30,
1997)
------------------------------------

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

Rental and other income generated by the Partnership's  properties for the three
months and six months ended June 30, 1997 and 1996 was as follows:


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

                                        1997       1996        1997     1996
                                      ---------  ---------  --------- ---------
Wholly-owned Properties
-----------------------

The Park at the Willows               $  79,945  $  74,801  $ 154,995 $ 155,694

Park Place Apartments Phase II        $ 350,648  $ 339,170  $ 687,106 $ 691,823

Property owned in Joint Venture
with NTS-Properties IV and NTS-
Properties Plus Ltd. (Ownership %
at June 30, 1997)
---------------------------------

Blankenbaker Business Center 1A       $  73,506  $  73,478  $ 146,984 $ 146,914
(31%)(1)


(1)    Revenues  shown  in this  table  represent  the  Partnership's  share  of
       revenues generated by Blankenbaker  Business Center 1A. The Partnership's
       percentage  interest in the joint venture was 31% during the three months
       ended June 30, 1997 and 1996.

The Park at the Willows' occupancy increased from 85% at June 30, 1996 to 94% at
June  30,  1997.  Average  occupancy  for the six  month  period  ended  June 30
decreased from 93% in 1996 to 88% in 1997. Average occupancy for the three month
period  ended June 30  increased  from 89% in 1996 to 90% in 1997.  Occupancy at
residential properties fluctuates on a continuous basis. Period ending occupancy
percentages represent occupancy only on a specific date;  therefore,  it is more
meaningful   to  look  at   average   occupancy   percentages   which  are  more
representative  of the entire  period's  results.  In the opinion of the General
Partner of the Partnership  the decrease in average  occupancy for the six month
period is only a temporary  fluctuation and does not represent a downward 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

                                      - 8 -

<PAGE>



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

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 changes in occupancy will be much greater than at other
residential  properties  because  of its small  size.  The Park at the  Willows'
rental and other income  remained  fairly constant for the six months ended June
30,  1997 as compared to the six months  ended June 30,  1996.  Rental and other
income  increased at The Park at the Willows for the three months ended June 30,
1997 as  compared  to the same  period in 1996 as a result of  increased  rental
rates and the increase in average occupancy.

Park Place Apartments  Phase II's occupancy  increased from 89% at June 30, 1996
to 94% at June 30, 1997.  Average  occupancy for the six month period ended June
30  decreased  from 92% (1996) to 89% (1997).  Average  occupancy  for the three
month period ended June 30 decreased  from 92% (1996) to 90% (1997).  Rental and
other income at Park Place  Apartments Phase II remained fairly constant for the
six months  ended June 30, 1997 as  compared to the same period in 1996.  Rental
and other  income at Park  Place  Apartments  Phase II  increased  for the three
months ended June 30, 1997 as compared to the same period in 1996 as a result of
increased rental rates.

A  wholly-owned  subsidiary  of the  Prudential  Insurance  Company  of  America
(Prudential  Service  Bureau,  Inc.) has leased  100% of  Blankenbaker  Business
Center 1A through July 2005.  In addition to monthly rent  payments,  Prudential
Service  Bureau,  Inc. is obligated to pay  substantially  all of the  operating
expenses attributable to its space. Blankenbaker Business Center 1A's rental and
other income  remained fairly constant for the three months and six months ended
June 30, 1997 as compared to the same periods in 1996.

If present  trends  continue,  the  Partnership  will be able to continue at its
current level of operation 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 financing.

Interest and other income includes  interest income from investments made by the
Partnership with cash reserves. Interest income remained fairly constant for the
six months  ended June 30,  1997 as  compared  to the same  period in 1996.  The
increase in interest income for the three months ended June 30, 1997 as compared
to the  same  period  in 1996 is a  result  of  increased  cash  reserves  being
available for investment.

Operating  expenses decreased for the three months and six months ended June 30,
1997  as  compared  to the  same  periods  in  1996  as a  result  of  decreased
replacement costs (carpet, vinyl and wallcovering) and decreased building repair
and  maintenance  costs at Park  Place  Apartments  Phase II. The  decreases  in
operating  expenses for both the three month and six month periods are partially
offset by increased carpet replacement costs and increased  landscaping costs at
The Park at the Willows and increased  exterior  building repair and maintenance
costs at Blankenbaker Business Center 1A.

Operating  expenses - affiliated  increased  for the three months and six months
ended  June 30,  1997 as  compared  to the same  periods  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 and six months ended June
30,  1997  as  compared  to the  same  periods  in  1996  is the  result  of the
Partnership's  decreasing debt level as a result of principal payments made. See
the Liquidity and Capital  Resources  section of this item for details regarding
the Partnership's debt.


                                      - 9 -

<PAGE>



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

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

Real estate taxes and professional and  administrative  expenses remained fairly
constant  for the three months and six months ended June 30, 1997 as compared to
the same periods in 1996.

Professional and  administrative  expenses - affiliated  decreased for the three
months and six months  ended June 30, 1997 as  compared  to the same  periods in
1996 as a result of 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 and six months
ended June 30,  1997 as  compared  to the same  periods in 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 $252,324 and $278,578 for the six months ended
June 30, 1997 and 1996,  respectively.  These funds in conjunction  with cash on
hand  were used to pay a 2%  (annualized)  cash  distribution  of  $120,853  and
$125,825  for the six months  ended June 30,  1997 and 1996,  respectively.  The
annualized  distribution rate is calculated as a percent of the original capital
contribution. The limited partners received 99% and the general partner received
1%  of  these  distributions.   The  primary  source  of  future  liquidity  and
distributions is expected to be derived from cash generated by the Partnership's
properties  after adequate cash reserves are  established for future leasing and
tenant finish costs.  Cash reserves (which are unrestricted cash and equivalents
and investment securities as shown on the Partnership's balance sheet as of June
30) were $323,737 and $308,056 at June 30, 1997 and 1996, respectively.

As of June 30, 1997,  the  Partnership  had  mortgages  payable in the amount of
$4,012,456($3,068,348 and $944,108) 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 June 30, 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  $4,037,051.  The  mortgage is recorded as a
liability  of the  Joint  Venture  and is  secured  by the  assets  of the Joint
Venture.  The Partnership's  proportionate  interest in the mortgage at June 30,
1997 is  $1,265,212.  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  June  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 June 30, 1997, the  Partnership
has repurchased a total of 40,047 Units for $160,188.  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 June 30,
1997 was $88,735.

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
investments securities.  Cash flows provided by investing activities are derived
from the  maturity  of  investment  securities.  As part of its cash  management
activities,  the Partnership has purchased Certificates of Deposit or securities
issued by the U. S.  Government  with initial  maturities  of greater than three
months to improve  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 used in financing  activities also include
cash which has been reserved by the  Partnership  for the  repurchase of limited
partnership  Units.  Cash flows provided by financing  activities  represent 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 June 30, 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 six
months ended June 30, 1997 and 1996.


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

Limited Partners:
       1997                $    (316)             $ 119,644          $ 119,644
       1996                  (31,378)               124,566            124,566

General Partner:
       1997                $      (3)             $   1,209          $   1,209
       1996                     (317)                 1,259              1,259


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 June
              30, 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:    August 11 , 1997



                                     - 15 -