UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                    FORM 10-K

(Mark One)

         X     ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

               For the fiscal year ended    December 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    0-11176

                               NTS-PROPERTIES III
             (Exact name of registrant as specified in its charter)

             Georgia                           61-1017240
  (State or other jurisdiction of            (I.R.S. Employer
  incorporation or organization)            Identification No.)



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

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

Securities registered pursuant to Section 12(b) of the Act:

                                      None

Securities registered pursuant to Section 12(g) of the Act:

                          Limited Partnership Interests
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.
                                                   YES  X         NO

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Exhibit Index: See Page 40

Total Pages: 43


<PAGE>



                                TABLE OF CONTENTS
                                -----------------



                                                                         Pages
                                                                         -----

                                     PART I

Items 1 and 2    Business and Properties                                  3-10
Item 3           Legal Proceedings                                          10
Item 4           Submission of Matters to a Vote
                   of Security Holders                                      10


                                     PART II

Item 5           Market for the Registrant's Limited Partnership
                   Interests and Related Partner Matters                    11
Item 6           Selected Financial Data                                    12
Item 7           Management's Discussion and Analysis of
                   Financial Condition and Results of
                   Operations                                            13-22
Item 8           Financial Statements and Supplementary
                   Data                                                  23-34
Item 9           Changes in and Disagreements with
                   Accountants on Accounting and
                   Financial Disclosure                                     35


                                    PART III

Item 10          Directors and Executive Officers of
                   the Registrant                                        36-37
Item 11          Management Remuneration and Transactions                   37
Item 12          Security Ownership of Certain Beneficial
                   Owners and Management                                    38
Item 13          Certain Relationships and Related
                   Transactions                                          38-39


                                     PART IV

Item 14          Exhibits, Financial Statement Schedules
                   and Reports on Form 8-K                               40-42


Signatures                                                                  43



                                      - 2 -

<PAGE>



                                     PART I


Items 1. and 2.  Business and Properties
                 -----------------------


General
-------

Some of the statements included in Items 1. and 2., Business and Properties, 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.

NTS-Properties III (the "Partnership") is a limited partnership  organized under
the laws of the state of  Georgia  on June 24,  1982.  The  General  Partner  is
NTS-Properties  Associates,  a Georgia limited  partnership.  As of December 31,
1997, the Partnership owned the following properties:

        -  Peachtree  Corporate  Center,  a  business  park  with  approximately
           192,000 net  rentable  square feet located in  Norcross,  Georgia,  a
           suburb of Atlanta. Acquired complete on January 26, 1983.

        -  Plainview Plaza II, an office complex with approximately  113,000 net
           rentable square feet located in Jeffersontown,  Kentucky, a suburb of
           Louisville. Acquired complete on January 26, 1983.

        -  Plainview  Triad North, an office complex with  approximately  89,000
           net rentable square feet located in Jeffersontown, Kentucky.
           Acquired complete on February 15, 1983.

The  Partnership has a fee title interest in the above  properties.  The General
Partner  believes that the  Partnership's  properties are adequately  covered by
insurance.

Plainview Plaza II is encumbered by a permanent mortgage payable to an insurance
company.  The  outstanding  balance at  December  31, 1997 was  $2,234,603.  The
mortgage is payable in monthly installments of $32,335 which includes principal,
interest and property taxes.  The mortgage bears a fixed interest rate of 9.125%
and is due November 1, 1998. The outstanding principal balance at maturity based
on the  current  rate  of  amortization  will be  $2,140,539.  See  below  for a
discussion  regarding the  Partnership's  plans for this mortgage  which matures
during the next twelve months.

The  Partnership's  properties  are  encumbered  by a  mortgage  payable  to  an
insurance  company.  The loan is secured by a first mortgage on Plainview  Triad
North and Peachtree Corporate Center with a second mortgage behind the holder of
the  permanent  mortgage  on  Plainview  Plaza II.  The  outstanding  balance at
December  31,  1997  was   $4,500,000.   The  mortgage  is  payable  in  monthly
installments of $25,050  (interest  only).  As part of the loan  agreement,  the
Partnership  was required to place in escrow  $6,500 each month during the first
five loan years  (loan  obtained  May 1991).  The Funds will be  released as the
heating,  ventilating and air conditioning ("HVAC") system and asphalt paving at
Peachtree Corporate Center are replaced.  The mortgage bears a variable interest
rate which adjusts  quarterly to 60 basis points over the 10-year  treasury bill
rate.  At no time during the first five loan years did the rate exceed 11.65% or
fall below 7.65% per annum in accordance

                                      - 3 -

<PAGE>



General - Continued
-------------------

with the terms of the loan.  After the fifth loan year,  no interest  rate floor
and/or  ceiling  applies.  The  current  rate at  December  31,  1997 was 6.68%.
Effective  January 1, 1998,  the  interest  rate  adjusted to 6.34%.  The unpaid
balance of the loan is due June 1, 2001.

Subsequent to December 31, 1997, the  Partnership  obtained a commitment from an
insurance  company for  permanent  financing  in the amount of  $6,800,000.  The
mortgage payable will bear interest at a fixed rate of 6.89% and will be secured
by a first  mortgage on Plainview  Plaza II. The repayment of principal  will be
amortized  over 17 years,  with  monthly  payments  of  principal  and  interest
totaling approximately $56,600. The proceeds of the mortgage will be used to pay
off the current $2,234,603 and $4,500,000 mortgages payable and pay loan closing
costs.  The loan  commitment  expires April 1, 1998, and the loan is expected to
close on or prior to that date.

Currently,  the  Partnership's  plans for  renovations  and other major  capital
expenditures   include   tenant  finish   improvements   as  required  by  lease
negotiations at the Partnership's  properties.  Changes to current tenant finish
improvements are a typical part of any lease negotiation. Improvements generally
include a revision to the current floor plan to  accommodate  a tenant's  needs,
new  carpeting  and paint  and/or  wallcovering.  The  extent  and cost of these
improvements   are  determined  by  the  size  of  the  space  and  whether  the
improvements are for a new tenant or incurred because of a lease renewal. Tenant
finish  improvements  will be funded by cash flow from  operations  and/or  cash
reserves. As of December 31, 1997, the Partnership had the following commitments
for tenant finish improvements.

As of December 31, 1997,  the  Partnership  had a  commitment  of  approximately
$250,000 for tenant finish improvements at Plainview Plaza II as the result of a
new  five-year  lease for  approximately  16,900  square  feet.  The  project is
expected to be completed during the first quarter of 1998.

As of December 31, 1997, the Partnership  also had a commitment of approximately
$58,500 for tenant finish improvements at Peachtree Corporate Center as a result
of a lease renewal and expansion by a current  tenant.  The expansion  increases
the tenant's  current  leased space by  approximately  2,300 square feet and the
renewal  extends the lease five years.  The project is expected to be  completed
during the first quarter of 1998.

As of December 31, 1997, the Partnership  also had a commitment of approximately
$350,000 for tenant finish  improvements  at Plainview Plaza II as a result of a
lease renewal with NTS Development Company, an affiliate of the General Partner.
The renewal  extends the lease for five years,  through March 2002,  and is at a
rate of $14.50 per square foot for 20,368 square feet. Approximately $192,000 of
the $350,000  project was completed  during 1997.  The project is expected to be
completed during the first half of 1998.

On December 21, 1997, a fire occurred at Plainview Plaza II. The fire damage was
contained  to a small area in one  building  in the  offices of NTS  Development
Company,  an affiliate of the General  Partner.  The damages are covered 100% by
insurance.  Therefore,  the  Partnership  will not incur  costs  related to this
incident.

Subsequent  to  December  31,  1997,  the  Partnership   made  a  commitment  of
approximately  $18,000 for tenant finish improvements at Plainview Plaza II as a
result of a lease  renewal and  expansion  of a current  tenant.  The  expansion
increases the tenant's current leased space by approximately 900 square feet and
the renewal extends the lease for fourteen months. The project is expected to be
completed during the first quarter of 1998.



                                      - 4 -

<PAGE>



General - Continued
-------------------

Subsequent  to December  31, 1997,  the  Partnership  also made a commitment  of
approximately $12,000 for tenant finish improvements at Plainview Triad North as
a result of a lease  renewal and  expansion of a current  tenant.  The expansion
increases the tenant's current leased space by approximately 800 square feet and
the renewal  extends the lease for five years through  January 2003. The project
is expected to be completed during the first quarter of 1998.

Subsequent  to December  31, 1997,  the  Partnership  also made a commitment  of
approximately  $20,000 for tenant finish  improvements at Plainview Triad North.
Two vacant  suites will be  renovated  in  anticipation  of future  leases.  The
project is expected to be completed during the first quarter of 1998.

Subsequent  to December  31, 1997,  the  Partnership  also made a commitment  of
approximately  $10,000 for tenant  finish  improvements  at Peachtree  Corporate
Center.  These  improvements  were made to the suite  which is  occupied  by the
on-site property  manager/leasing agent. The project is expected to be completed
during the first quarter of 1998.

The source of funds for the commitments listed above is expected to be cash flow
from operations and/or cash reserves.

The  Partnership's  plans for renovations  and other major capital  expenditures
also include the replacement of the HVAC system at Peachtree  Corporate  Center.
The HVAC system at Peachtree  Corporate Center is designed in such a manner that
each suite's system is separate in structure;  therefore,  individual  units are
replaced only as needed.  Effective  July 1995, new leases and lease renewals at
Peachtree  Corporate  Center require the tenant to maintain and replace the HVAC
system in the leased space beginning one year from the date of occupancy.  As of
December 31,  1997,  approximately  40% of the center's  tenants were subject to
this lease provision.  Through May 1996 the Partnership escrowed cash monthly to
fund the HVAC system  replacements at Peachtree  Corporate Center.  During 1997,
$15,759  was  released  from  the  escrow  account.  (See the  discussion  above
regarding the repair escrow).  The balance in the escrow account at December 31,
1997 was $273,632.

At Plainview Plaza II, the  Partnership's  renovation of the property is nearing
completion.  Remaining  items to be  completed  during  the  first  half of 1998
include landscaping,  exterior staircase renovation,  sidewalk  replacements,  a
handicap  restroom,  site  lighting  upgrades  and new signage.  Currently,  the
remaining  project costs are estimated at approximately  $200,000.  All of these
projects are part of the  Partnership's  continued  effort to make the Plainview
Plaza II property more competitive and enhance its value. These projects will be
funded with a combination of cash reserves and cash flow from operations.

The  Partnership  had no other material  commitments for renovations and capital
improvements at December 31, 1997 than those previously discussed.

The lease for Aetna Life  Insurance  Company,  the largest  tenant of  Plainview
Triad North,  occupying  nearly 65% of the  building,  was  extended  during the
second  quarter of 1997 from  August 1997 to August  1998.  There were no tenant
finish  improvements as a result of this renewal.  Aetna accounts for nearly 22%
of the NTS-Properties  III total revenue.  During the third quarter of 1997, the
Partnership  received  notice that Aetna will vacate the  property at the end of
the extended  lease term.  The  Partnership  is currently  negotiating a 120 day
renewal with the tenant at their request. Any costs associated with this renewal
would  not  be  significant.  In  the  opinion  of the  General  Partner  of the
Partnership,  the 120 day extension  will be all that can be  anticipated.  As a
result of the expected  move-out,  there will likely be a protracted  period for
the property to become fully leased again and  substantial  funds will likely be
needed for leasing  expenses  especially  those needed to refinish space for new
tenants. As this time, the amount of such expenses are unknown.  The partnership
is actively seeking new tenants for this space.

                                      - 5 -

<PAGE>



General - Continued
-------------------

The  Partnership  is engaged  solely in the  business  of owning  and  operating
commercial  real estate.  A  presentation  of  information  concerning  industry
segments is not applicable.

The current  business of the Partnership is consistent with the original purpose
of the  Partnership  which was to acquire,  own and operate  Plainview Plaza II,
Peachtree   Corporate  Center  and  Plainview  Triad  North.  The  Partnership's
properties are in a condition suitable for their intended use.

The Partnership  intends to hold the Properties until such time as sale or other
disposition   appears  to  be   advantageous   with  a  view  to  achieving  the
Partnership's  investment objectives or it appears that such objectives will not
be met. In deciding  whether to sell a Property,  the Partnership  will consider
factors such as potential capital appreciation, cash flow and Federal income tax
considerations,  including  possible  adverse Federal income tax consequences to
the  Limited  Partners.  The General  Partner of the  Partnership  is  currently
exploring  the  marketability  of  certain  of its  properties  and  has not yet
determined  if any of the  properties  might be sold in the next 12  months  and
there are no contracts for sale under negotiation at the present time.

Plainview Plaza II
------------------

Except as indicated in the table below,  base annual  rents,  which  include the
cost of utilities,  currently  range from $11.88 to $15.85 per square foot.  The
average base annual rental as of December 31, 1997 was approximately  $14.22 per
square  foot.  Office space is  ordinarily  leased for between one to five years
with the majority of current leases  providing for five year terms (1).  Current
leases terminate  between 1998 and 2005. One lease provides for three,  one-year
renewal  options at a rate which is negotiated  between  lessor and lessee.  All
leases  provide for tenants to  contribute  toward the payment of  increases  in
common area maintenance expenses, insurance, utilities and real estate taxes. As
of December  31, 1997,  there were 9 tenants  leasing  office space  aggregating
approximately  97,000  square  feet of  rentable  area.  The  tenants who occupy
Plainview  Plaza  II  are  professional  service-oriented   organizations.   The
principal occupations/professions practiced include real estate, architecture, a
payroll processing center, a data processing center and management offices for a
regional  grocery chain. Two tenants lease more than 10% of Plainview Plaza II's
rentable  area:  The Kroger  Company  (46.5%) and NTS  Development  Company,  an
affiliate  of  the  General  Partner  (17.7%).   The  lease  terms  between  the
Partnership  and NTS  Development  Company are on terms no less  favorable  than
those which could be obtained from an  unaffiliated  third party.  The occupancy
levels as of December 31 were 84% (1997),89%  (1996), 82% (1995), 88% (1994) and
83% (1993).

(1)     Excluding  The Kroger  Company  lease.  The current  lease term is for a
        period of eight  years and four  months.  The Kroger  Company has been a
        tenant of Plainview Plaza II since 1979.




                              (Continued next page)









                                      - 6 -

<PAGE>



Plainview Plaza II - Continued
------------------------------

The following table contains approximate data concerning the leases in effect on
December 31, 1997.


Major Tenants:

                                                      Current Base
                                  Sq. Ft. and         Annual Rental
                                    % of Net         and % of Gross
                       Year of      Rentable           Base Annual      Renewal
      Name           Expiration       Area               Rental         Options
      ----           ----------       ----               ------         -------

NTS Development
 Company                2002     20,368 (17.7%)    $295,932 (24.9%)      None
The Kroger Company      2005     53,435 (46.5%)    $566,928 (47.7%)(1)   None


(1)    The Kroger Company lease provides that they pay their own electricity and
       cleaning costs and thus the base rent is below $11.88 per square foot.

Other Tenants:

                                                  Current Base
                                Sq. Ft. and       Annual Rental
                                  % of Net       and % of Gross
      No. of        Year of       Rentable         Base Annual      Renewal
      Tenants     Expiration        Area             Rental         Options
      -------     ----------        ----             ------         -------

         3           1998       6,792  (5.9%)   $ 83,328  (7.0%)     None
         1           1999       1,154  (1.0%)   $ 17,808  (1.5%)   Right of
                                                                  1st Refusal
         2           2000       9,462  (8.3%)   $139,848 (11.8%)   3-1 Year
        None         2001            - -              - -            - -
         1           2002       5,880  (5.1%)   $ 83,784  (7.1%)     None


Plainview Triad North
---------------------

Base annual rentals,  which include the cost of utilities,  currently range from
$12.65 to $14.48 per square  foot.  The average  base rental as of December  31,
1997 was approximately $13.38 per square foot. Office space is ordinarily leased
for one to five years with the majority of current leases providing for one year
terms.  Current leases  terminate  between 1998 and 2002. All leases provide for
tenants to contribute toward the payment of increases in common area maintenance
expenses,  insurance,  utilities and real estate taxes. As of December 31, 1997,
there were 8 tenants  leasing  office  space  aggregating  approximately  76,900
square feet of rentable area. The tenants who occupy  Plainview  Triad North are
professional       serviceoriented       organizations.       The      principal
occupations/professions practiced include insurance, healthcare, mortgage broker
and sales.  One tenant leases more than 10% of Plainview Triad North's  rentable
area: Aetna Life Insurance  Company (64.5%).  The occupancy levels at the office
building as of December 31 were 86% (1997),  91% (1996),  93% (1995), 95% (1994)
and 91% (1993).

The following table contains approximate data concerning the leases in effect on
December 31, 1997:

Major Tenant:

                                                      Current Base
                                     Sq. Ft. and      Annual Rental
                                      % of Net       and % of Gross
                         Year of      Rentable         Base Annual     Renewal
       Name            Expiration       Area             Rental        Options
       ----            ----------       ----             ------        -------
    Aetna Life
 Insurance Company        1998     57,848 (64.5%)   $775,164 (75.3%)     None

                                     - 7 -

<PAGE>

Plainview Triad North - Continued
---------------------------------

Other Tenants:

                                                    Current Base
                                  Sq. Ft. and       Annual Rental
                                     % of Net      and % of Gross
       No. of        Year of        Rentable         Base Annual      Renewal
      Tenants       Expiration        Area             Rental         Options
      -------       ----------        ----             ------         -------

         5             1998      15,668 (17.5%)   $206,513 (20.1%)      None
         1             1999       1,088  (1.2%)   $ 13,800  (1.3%)      None
        None           2000            - -               - -             - -
        None           2001            - -               - -             - -
         1             2002       2,328  (2.6%)   $ 33,720  (3.3%)      None

Peachtree Corporate Center
--------------------------

Base annual rentals,  which exclude the cost of utilities,  currently range from
$7.17 to $12.48 per square foot for office space, $3.71 to $6.72 per square foot
for warehouse space and $3.41 per square foot for mezzanine  storage space.  The
average  base annual  rental for all space  leased as of  December  31, 1997 was
$6.41 per square foot.  Office,  warehouse  and/or  mezzanine  storage  space is
ordinarily  leased for  between  two and six years with the  majority of current
leases providing for three year terms. Current leases terminate between 1998 and
2003.  All leases  provide  for  tenants  to  contribute  toward the  payment of
increases in common area maintenance expenses,  insurance and real estate taxes.
As of December 31, 1997,  there were 48 tenants  leasing  office,  warehouse and
storage space aggregating approximately 161,200(1) square feet of rentable area,
none of which leased more than 10% of the business  park's  rentable  area.  The
tenants who occupy Peachtree Corporate Center are professional  service-oriented
organizations.  The principal  occupation/profession  practiced is sales-related
services.  The occupancy  levels at the business park as of December 31 were 86%
(1997), 85% (1996), 89% (1995), 80% (1994) and 82% (1993).

(1)   Excludes approximately 3,300 square feet which is occupied by the business
      park's property management and leasing staff.

The following table contains approximate data concerning the leases in effect on
December 31, 1997:
                                                 Current Base
                                Sq. Ft. and      Annual Rental
                                  % of Net      and % of Gross
      No. of       Year of       Rentable         Base Annual      Renewal
      Tenants     Expiration       Area (2)         Rental         Options
      -------    -----------  --------------   ----------------   ---------

        15           1998     37,274 (19.3%)   $233,892 (22.7%)      None
        12           1999     53,402 (29.8%)   $342,790 (33.3%)      None
        18           2000     63,001 (32.9%)   $407,400 (39.3%)      None
         2           2001      3,900  (2.0%)   $ 21,840  (2.1%)      None
       None          2002           - -               - -             - -
         1           2003      3,160  (1.7%)   $ 26,532  (2.6%)      None

(2) Rentable  area  includes only ground floor square feet (office and warehouse
space).


General
-------

Additional operating data regarding the Partnership's properties is furnished in
the following table.

                                                                     Peachtree
                           Plainview            Plainview            Corporate
                            Plaza II          Triad North             Center
                            --------          -----------             ------
Federal tax basis        $ 8,783,270          $ 6,988,441          $ 9,583,875

Realty tax rate          $    .01118          $    .01118          $    .03445

Annual realty taxes      $    61,904          $    48,093          $    96,355

                                     - 8 -
<PAGE>

General - Continued
-------------------

Depreciation for book purposes is computed using the  straight-line  method over
the  estimated  useful  lives of the  assets  which  are 5 - 30  years  for land
improvements, 30 years for buildings, 5 - 30 years for building improvements and
3 -  30  years  for  amenities.  The  estimated  realty  taxes  on  all  planned
renovations would not be material.

See Management's Discussion and Analysis of Financial Condition and Results
of Operations (Item 7.) for explanations regarding the fluctuations of
income and occupancy at the Partnership's properties.

Competition
-----------

The  Partnership's  properties are subject to competition  from similar types of
properties  (including,  in  certain  areas,  properties  owned  or  managed  by
affiliates of the General  Partner) in the  respective  vicinities in which they
are located. Such competition is generally for the retention of existing tenants
or  for  new  tenants  when  vacancies  occur.  The  Partnership  maintains  the
suitability  and  competitiveness  of its  properties  primarily on the basis of
effective  rents and service  provided to  tenants.  Competition  is expected to
increase in the future as a result of the construction of additional properties.
As of December 31,  1997,  there are no  properties  under  construction  in the
respective  vicinities in which the properties are located.  The Partnership has
not  commissioned  a formal  market  analysis of  competitive  conditions in any
market  in which it owns  properties,  but  relies  upon  the  market  condition
knowledge of the employees of NTS  Development  Company who manage and supervise
leasing for each property.

Management of Properties
------------------------

NTS Development Company, an affiliate of NTS Properties Associates,  the General
Partner  of  the  Partnership,  directs  the  management  of  the  Partnership's
properties  pursuant  to a  written  agreement.  NTS  Development  Company  is a
wholly-owned subsidiary of NTS Corporation.  Mr. J. D. Nichols has a controlling
interest  in  NTS  Corporation  and  is a  General  Partner  of  NTS  Properties
Associates.  Under  the  agreement,  the  Property  Manager  establishes  rental
policies and rates and directs the marketing activity of leasing  personnel.  It
also  coordinates the purchase of equipment and supplies,  maintenance  activity
and the selection of all vendors,  suppliers  and  independent  contractors.  As
compensation for its services,  the Property  Manager received  $168,006 for the
year ended  December 31, 1997. The fee is equal to 5% of gross revenues from the
Partnership's properties.

In addition,  the management  agreement requires the Partnership to purchase all
insurance relating to the managed  properties,  to pay the direct  out-of-pocket
expenses  of the  Property  Manager  in  connection  with the  operation  of the
properties,  including the cost of goods and materials used for and on behalf of
the  Partnership,  and to  reimburse  the  Property  Manager  for the  salaries,
commissions,  fringe  benefits,  and  related  employment  expenses  of  on-site
personnel.

The term of the Management  Agreement  between NTS  Development  Company and the
Partnership was for an initial term of five years, and thereafter for succeeding
one-year periods,  unless canceled.  The Agreement is subject to cancellation by
either  party upon sixty days  written  notice.  As of December  31,  1997,  the
Management Agreement is still in effect.







                                      - 9 -

<PAGE>



Conflict of Interest
--------------------

Because the  principals of the General  Partner and/or its affiliates own and/or
operate real estate  properties  other than those owned by the Partnership  that
are or could be in  competition  with the  Partnership,  potential  conflicts of
interest  exist.  Because the  Partnership  was organized and is operated by the
General  Partner,   these  conflicts  are  not  resolved  through  arm's  length
negotiations  but through the exercise of the General  Partner's  good  judgment
consistent  with its fiduciary  responsibility  to the Limited  Partners and the
Partnership's  investment  objectives  and  policies.  The  General  Partner  is
accountable  to the  Limited  Partners  as a  fiduciary  and  consequently  must
exercise  good faith and  integrity in handling  the  Partnership's  affairs.  A
provision has been made in the  Partnership  Agreement that the General  Partner
will not be liable to the Partnership except for acts or omissions  performed or
omitted  fraudulently  in  bad  faith  or  with  negligence.  In  addition,  the
Partnership Agreement provides for indemnification of the General Partner by the
Partnership  for liability  resulting from errors in judgment or certain acts or
omissions.  With respect to these potential  conflicts of interest,  the General
Partner and its affiliates retain a free right to compete with the Partnership's
properties  including the right to develop  competing  properties now and in the
future,  in addition to those existing  properties which may compete directly or
indirectly.

NTS Development  Company,  the Property  Manager and an affiliate of the General
Partner,  acts in a similar capacity for other  affiliated  entities in the same
geographic  region where the Partnership has property  interests.  The agreement
with the Property  Manager is on terms no less favorable to the Partnership than
those  which could be  obtained  from a third party for similar  services in the
same  geographical  region in which the properties are located.  The contract is
terminable by either party without penalty upon 60 days written notice.

There are no other  agreements or  relationships  between the  Partnership,  the
General Partner and its affiliates other than those previously described.

Employees
---------

The  Partnership  has no  employees;  however,  employees of an affiliate of the
General  Partner are  available  to perform  services for the  Partnership.  The
Partnership  reimburses  this  affiliate for the actual costs of providing  such
services.


Item 3.  Legal Proceedings
         -----------------

None.


Item 4.  Submission of Matters to a Vote of Security Holders
         ---------------------------------------------------

None.













                                     - 10 -

<PAGE>



                                     PART II

Item 5.      Market for Registrant's Limited Partnership Interests and Related
             -----------------------------------------------------------------
             Partner Matters
             ---------------

The  Partnership  had 1,051  limited  partners as of March 6, 1998.  There is no
established  trading market for the limited  partnership  interests,  nor is one
likely to develop.

Cash distributions and allocations of net income (loss) are made as described in
Note 1C to the Partnership's  1997 financial  statements.  Annual  distributions
totaling $7.50 (1996) and $10.00 (1995) were paid per limited  partnership unit.
No distribution  was made during 1997.  Quarterly  distributions  are determined
based on current cash  balances,  cash flow being  generated by  operations  and
required cash reserves, as determined by the General Partner, for future leasing
costs,  tenant finish costs and capital  improvements.  Distributions  were paid
quarterly as follows:


                           1997                1996                 1995
                          ------              ------               -----

First quarter            $  --              $  2.50              $  2.50
Second quarter              --                 2.50                 2.50
Third quarter               --                 2.50                 2.50
Fourth quarter              --                  --                  2.50
                          ------              ------              ------

                         $  --              $  7.50              $ 10.00
                          ======             =======              ======

The table below  presents  that portion of the  distributions  that  represent a
return of capital on a Generally  Accepted  Accounting  Principle  basis for the
years ended  December  31,  1997,  1996 and 1995.  The  General  Partner did not
receive a  distribution  during these years.  Distributions  were funded by cash
flow derived from operating activities.



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

Limited Partners:
       1997              $ 239,206              $   --               $   --
       1996                284,097                108,018                --
       1995               (86,496)                154,125             154,125




                                     - 11 -

<PAGE>
<TABLE>


Item 6.  Selected Financial Data
         -----------------------

For the years ended December 31, 1997, 1996, 1995, 1994 and 1993.

<CAPTION>
                                                     1997            1996            1995             1994           1993
                                                 ------------    ------------    ------------    ------------    ------------
<S>                                              <C>             <C>             <C>             <C>             <C>
Total revenues                                   $  3,426,290    $  3,265,631    $  3,073,103    $  2,960,275    $  2,830,574

Total expenses                                     (3,291,720)     (3,076,384)     (3,262,493)     (3,157,866)     (3,149,056)
                                                 ------------    ------------    ------------    ------------    ------------

Net income (loss)                                $    134,570    $    189,247    $   (189,390)   $   (197,591)   $   (318,482)
                                                 ============    ============    ============    ============    ============

Net income(loss)
 allocated to:
 General Partner                                 $   (104,636)   $    (94,850)   $   (102,894)   $   (100,529)   $   (103,802)
 Limited partners                                $    239,206    $    284,097    $    (86,496)   $    (97,062)   $   (214,680)

Net income (loss) per
 limited partnership                             $      17.00    $      19.70    $      (5.58)   $      (6.22)   $     (13.76)
 unit

Weighted average number
 of limited partnership
 units                                                 14,072          14,418          15,495          15,600          15,600

Cumulative net income (loss) allocated to:
  General Partner                                $ (2,395,121)   $ (2,290,485)   $ (2,195,635)   $ (2,092,741)   $ (1,992,212)
  Limited partners                               $     74,801    $   (164,405)   $   (448,502)   $   (362,006)   $   (264,944)

Cumulative taxable income (loss) allocated to:
  General Partner                                $ (2,737,694)   $ (2,845,410)   $ (2,696,785)   $ (2,545,416)   $ (2,390,433)
  Limited partners                               $   (851,088)   $   (682,815)   $   (928,736)   $   (926,612)   $   (719,138)

Distributions declared:
 General Partner                                 $         --    $         --    $         --    $         --    $         --
 Limited partners                                $         --    $    108,018    $    154,125    $     39,000    $         --

Cumulative distributions
 declared:
  General Partners                               $    206,985    $    206,985    $    206,985    $    206,985    $    206,985
  Limited partner                                $ 11,349,845    $ 11,349,845    $ 11,241,827    $ 11,087,702    $ 11,048,702

At year end:
 Land, buildings and
  amenities, net                                 $  9,789,485    $  8,850,783    $  9,585,286    $ 10,242,936    $ 10,783,103

Total assets                                     $ 11,122,316    $ 10,975,886    $ 11,120,854    $ 11,862,286    $ 12,011,140

Mortgages Payable                                $  6,734,603    $  6,859,637    $  6,964,619    $  7,060,749    $  7,148,009

</TABLE>

The  above  selected  financial  data  should  be read in  conjunction  with the
financial  statements  and related notes  appearing  elsewhere in this Form 10-K
report.


                                     - 12 -

<PAGE>



Item 7.      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 December 31 were as
follows:


                                      1997             1996             1995
                                      ----             ----             ----
     Plainview Plaza II                84%              89%              82%

     Plainview Triad North             86%              91%              93%

     Peachtree Corporate Center        86%              85%              89%

The rental and other income  generated by the  Partnership's  properties for the
years ended December 31 were as follows:



                                      1997           1996           1995
                                      ----           ----           ----
     Plainview Plaza II            $1,244,744     $1,091,826     $1,098,934

     Plainview Triad North         $1,057,964     $1,017,816     $  953,799

     Peachtree Corporate Center    $1,088,708     $1,108,933     $  986,828

Plainview Plaza II's year-ending  occupancy  decreased 5% from 1996 to 1997 as a
result of three  tenants,  who had  occupied  approximately  4,300  square feet,
vacating  at the end of their  lease  term,  and a  decrease  in square  footage
(approximately  2,800 square feet) by NTS Development  Company,  an affiliate of
the General Partner.  NTS Development  Company  consolidated its leased space so
the  Partnership  could  accommodate  an  expansion by a current  tenant.  These
decreases are partially offset by an approximate  3,200 square foot expansion of
a current tenant.  Average occupancy at Plainview Plaza II increased from 84% in
1996 to 88% in 1997. The increase in rental and other income at Plainview  Plaza
II from 1996 to 1997 is due  primarily to the increase in average  occupancy and
increased rental rates for lease renewals during the year.

As of December 31, 1997, Plainview Plaza II had approximately 16,900 square feet
of  additional  space leased to a new tenant.  The tenant took  occupancy in the
first quarter of 1998.  Subsequent to December 31, 1997, one expansion lease for
approximately  900 square feet was signed at Plainview Plaza II. The tenant took
occupancy  during the first quarter of 1998.  With the new lease and  expansion,
Plainview  Plaza II's occupancy  should improve to 100% during the first quarter
of 1998.  See the Liquidity and Capital  Resources  section of this item for the
tenant finish commitments relating to these leases.

Plainview Plaza II's year-ending  occupancy  increased 7% from 1995 to 1996 as a
result of four new leases  totaling  approximately  9,200 square  feet.  Of this
total, approximately 5,400 square feet represents an expansion and lease renewal
by the Kroger Company, a major tenant at Plainview Plaza II. The renewal extends
the lease to January 31, 2005. Average occupancy at Plainview Plaza II decreased
from 85% in 1995 to 84% in 1996.  The  decrease  in rental  and other  income at
Plainview Plaza II from 1995 to 1996 is due to the decrease in average occupancy
during the year.



                                     - 13 -

<PAGE>



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

Plainview Triad North's year-ending  occupancy decreased 5% from 1996 to 1997 as
the result of a tenant, who occupied  approximately  4,900 square feet, vacating
prior to the end of the lease term,  but is  continuing  to pay rent through the
end of the lease term (May 1998).  The decrease in occupancy is partially offset
by the expansion  (approximately  700 square feet) of a current tenant.  Average
occupancy  decreased from 93% in 1996 to 90% in 1997. The increase in rental and
other income at  Plainview  Triad North from 1996 to 1997 is due to the increase
of rental rates for lease  renewals and a decrease in the provision for doubtful
accounts during the year.

Plainview Triad North's year-ending  occupancy decreased 2% from 1995 to 1996 as
a result of the  move-out of one tenant  (occupied  approximately  3,400  square
feet) at the end of the lease term.  Partially  offsetting the move-out is a new
lease totaling approximately 1,100 square feet. Average occupancy decreased from
94% in 1995 to 93% in 1996.  Rental and other income increased from 1995 to 1996
due to an  increase  in rental  rates for lease  renewals  and a decrease in the
provision for doubtful accounts.

Peachtree  Corporate Center's  year-ending  occupancy  increased 1% from 1996 to
1997 as the  result of seven new leases  totaling  approximately  17,600  square
feet. Of this total,  approximately  9,000 square feet  represent  expansions by
three  current  tenants.  Partially  offsetting  the new  leases  are six tenant
move-outs totaling approximately 16,600 square feet. Approximately 11,600 square
feet of this total  represents  four tenants who vacated at the end of the lease
term.  The remaining  5,000 square feet of the total  move-outs is the result of
one tenant (3,200 square feet) who exercised a termination option and one tenant
(1,800 square feet) who vacated and ceased  making rental  payments in breach of
the lease terms due principally to bankruptcy.  Average occupancy decreased from
93% in 1996 to 86% in 1997.  The  decrease  in rental  and  other  income is due
primarily to the decrease in average occupancy during the year.

As of December 31,  1997,  Peachtree  Corporate  Center has 2,300 square feet of
additional  space leased to a current tenant.  The tenant took occupancy  during
February 1998. Peachtree Corporate Center also had 1,200 square feet leased to a
new tenant at December 31, 1997.  The tenant took  occupancy  during March 1998.
With the new leases,  Peachtree  Corporate  Center's occupancy should improve to
88% during the first quarter of 1998. There are no material commitments relating
to the new lease. See the Liquidity and Capital  Resources  section of this item
for the tenant finish commitment relating to the expansion lease.

Peachtree  Corporate Center's  year-ending  occupancy  decreased 4% from 1995 to
1996 as a result of  move-outs  by ten  tenants who had  occupied  approximately
27,100  square  feet and the  downsizing  of one  tenant by 1,200  square  feet.
Approximately  12,400 square feet of the total move-outs  represent four tenants
who vacated and ceased making  rental  payments in breach of the lease terms due
principally to bankruptcy.  There was no accrued  income  associated  with these
leases.  Approximately  14,700 square feet of the total move-outs are the result
of six tenants who  vacated at the end of the lease term.  Partially  offsetting
the move-outs and downsizing are seven new leases totaling  approximately 21,000
square feet, of which approximately  6,000 square feet represents  expansions by
two current tenants.  Average occupancy at Peachtree  Corporate Center increased
from 89% in 1995 to 93% in 1996. Rental and other income at Peachtree  Corporate
Center  increased  from  1995 to 1996 as a  result  of an  increase  in  average
occupancy and a decrease in the provision for doubtful accounts.

In cases of tenants who cease making rental  payments or abandon the premises in
breach of their lease,  the Partnership  pursues  collection  through the use of
collection  agencies or other remedies  available by law when practical.  In the
case of tenants who vacated Peachtree Corporate Center as a result

                                     - 14 -

<PAGE>



Result of Operations - Continued
--------------------------------

of bankruptcy,  the Partnership has taken legal action when it was thought there
could be a possible  collection.  There have been no significant funds recovered
as a result of these  actions  during  1997 or 1996.  Approximately  $5,500  was
recovered during 1995. As of December 31, 1997, there were no on-going cases.

Current  and  projected  future  occupancy  levels are  considered  adequate  to
continue the operation of the Partnership's  properties without the need for any
additional  financing.  See  the  discussion  below  regarding  the  Aetna  Life
Insurance Company lease at Plainview Triad North.

Interest  and other  income  includes  interest  income  earned from  short-term
investments  made by the Partnership  with cash reserves and from funds escrowed
for the replacement of the heating,  ventilating and air  conditioning  ("HVAC")
system and  asphalt  paving at  Peachtree  Corporate  Center.  The  decrease  in
interest  income  from 1996 to 1997 is a result of a decrease  in cash  reserves
available for investment and a decrease in interest  earned on the Escrow Funds.
The increase in interest  income from 1995 to 1996 is a result of an increase in
interest  earned on the Escrow Funds and an increase in cash reserves  available
for investment.

Operating  expenses  increased  from  1996 to 1997 as the  result  of  increased
landscaping  and  advertising  costs at Plainview  Plaza II and Plainview  Triad
North,  an increase in HVAC repair and  replacement  costs at Plainview Plaza II
and Peachtree  Corporate Center,  and increased utility costs at Plainview Plaza
II.

Operating  expenses  increased  from  1995  to  1996 as a  result  of  increased
janitorial  costs and increased HVAC repair and  replacement  costs at Plainview
Plaza II and  Plainview  Triad North and  increased  utility  costs at Plainview
Plaza II. The increase in operating  expenses  during 1996 at Plainview Plaza II
and  Plainview  Triad  North  can  also  be  attributed  to an  upgrade  of each
building's  security system.  Operating  expenses at Peachtree  Corporate Center
remained fairly constant during the year.

The increase in operating expenses - affiliated from 1996 to 1997 is a result of
increased leasing costs at Plainview Triad North and Peachtree  Corporate Center
and an increase in property  management  costs at  Plainview  Triad  North.  The
increase in leasing costs at Plainview  Triad North is primarily a result of the
Aetna Life Insurance Company lease situation as discussed below. The increase in
operating  expenses - affiliated  is partially  offset by a decrease in property
management costs at Peachtree Corporate Center.  Operating expenses - affiliated
are expenses  incurred for  services  performed by employees of NTS  Development
Company, an affiliate of the General Partner.

The decrease in operating expenses - affiliated from 1995 to 1996 is a result of
decreased property management costs at all of the Partnership's properties and a
decrease  in leasing  costs at  Peachtree  Corporate  Center.  The  decrease  is
partially  offset by an increase in leasing  costs at Plainview  Triad North and
Plainview Plaza II.

The 1997 write-off of unamortized building,  land and tenant improvements can be
attributed to Plainview Plaza II. Changes to current tenant  improvements  are a
typical part of any lease negotiation. Improvements generally include a revision
to the current  floor plan to  accommodate a tenant's  needs,  new carpeting and
paint and/or wallcovering.  In order to complete the renovation, it is sometimes
necessary to replace  improvements which have not been fully  depreciated.  This
results in a write-off of  unamortized  tenant  improvements.  The  write-off of
unamortized  building  improvements  at Plainview  Plaza II is the result of the
renovations of the common area lobbies,  corridors and restrooms.  The write-off
of unamortized land

                                     - 15 -

<PAGE>



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

improvements at Plainview Plaza II is the result of renovations of the sidewalks
and landscaping during the year. The write-off of unamortized  building and land
represents the cost of previous assets which had not been fully depreciated.

The 1995  write-off  of  unamortized  building  and tenant  improvements  can be
attributed to Peachtree Corporate Center (tenant and building  improvements) and
Plainview  Plaza  II  (building  improvements).  The  write-off  of  unamortized
building  improvements at Peachtree  Corporate  Center is the result of exterior
building  renovations.  The write-off of unamortized  building  improvements  at
Plainview  Plaza  II is the  result  of a  common  area  lobby  renovation.  The
renovation  included an upgrade of current restroom  facilities,  new carpet and
wallcoverings.  The write-off  represents the cost of previous renovations which
had not been fully depreciated.

The increase in the amortization of capitalized  leasing costs from 1996 to 1997
is a result of a special tenant  allowance paid to The Kroger Company in October
1996. The change in the  amortization of capitalized  leasing costs from 1995 to
1996 was not significant.

The  decrease in interest  expense from 1996 to 1997 is due to the fact that the
interest rate on the $4,500,000  mortgage  payable was lower in 1997 compared to
1996. The interest rate was 7.65% from January to June 1996,  7.46% from July to
September  1996,  and 7.33% from  October to  December  1996  versus  6.94% from
January  to March  1997,  7.39%  from  April to June  1997,  7.05%  from July to
September  1997,  and 6.68% from October to December  1997. The interest rate on
this note adjusts  quarterly to 60 basis points over the 10-year  treasury  bill
rate.  The  decrease in interest  expenses is also due to a decrease in interest
expense on the $2,234,603  mortgage  payable as a result of continued  principal
payments.  See the  Liquidity  and  Capital  Resources  section of this item for
details regarding the Partnership's debt.

The  decrease in interest  expense from 1995 to 1996 is due to the fact that the
interest rate on the $4,500,000  mortgage  payable was lower in 1996 compared to
1995.  The interest rate was 8.41% from January to March 1995,  7.76% from April
to September  1995,  and 7.65% from  October to December  1995 versus 7.65% from
January to June 1996,  7.46% from July to September 1996, and 7.33% from October
to December 1996. The decrease in interest  expense is also due to a decrease in
interest  expense on the  $2,359,637  (balance as of December 31, 1996) mortgage
payable as a result of continued principal payments.

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  years will differ from the  fluctuations  of
management fee expense.

The  decrease in real estate  taxes from 1996 to 1997 and from 1995 to 1996 is a
result of a decrease in the tax rates at all of the Partnership's properties.

Professional and  administrative  expenses remained fairly constant from 1996 to
1997.

The increase in professional  and  administrative  expenses from 1995 to 1996 is
due  primarily  to an  increase  in  outside  legal  fees  which  relate  to the
Partnership's  Interest Repurchase Program and an increase in outside accounting
fees.





                                     - 16 -

<PAGE>



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

The decrease in professional and administrative  expenses - affiliated from 1996
to 1997 is due  primarily  to a  decrease  in  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.

The change in professional and administrative expenses - affiliated from 1995 to
1996 was not significant.

The decrease in depreciation  and  amortization  from 1996 to 1997 is due to the
fact  that a  portion  of the  Partnership's  assets  (primarily  tenant  finish
improvements)  have become  fully  depreciated  since  December  31,  1996.  The
decrease in depreciation  and  amortization is partially  offset by assets being
placed in service since  December 31, 1996.  Depreciation  is computed using the
straight-line method over the estimated useful lives of the assets which are 5 -
30 years  for  land  improvements,  30 years  for  buildings,  5 - 30 years  for
building improvements and 3 - 30 years for amenities.  The aggregate cost of the
Partnership's properties for Federal tax purposes is approximately $25,400,000.

The decrease in depreciation  and  amortization  from 1995 to 1996 is due to the
fact  that a  portion  of the  Partnership's  assets  (primarily  tenant  finish
improvements) have become fully depreciated since December 31, 1995.


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

The  Partnership had cash flow from  operations of $1,075,282  (1997),  $947,953
(1996) and $1,055,054  (1995).  These funds,  in conjunction  with cash on hand,
were used to make a .75% (annualized)  distribution of $108,018 in 1996 and a 1%
(annualized)  distribution of $154,125 in 1995. The annualized distribution rate
is calculated as a percent of the initial equity.  The limited partners received
100% of  these  distributions.  The  Partnership  has  indefinitely  interrupted
distributions  starting  December 31, 1996. See below for a further  discussion.
Cash  reserves  (which are  unrestricted  cash and  equivalents  and  investment
securities as shown on the  Partnership's  balance sheet as of December 31) were
$368,531,   $571,683  and  $729,939  at  December  31,  1997,   1996  and  1995,
respectively.

As of December 31, 1997 the Partnership  had a mortgage  payable to an insurance
company in the amount of $4,500,000. The mortgage bears a variable interest rate
which adjusts  quarterly to 60 basis points over the 10-year treasury bill rate.
At no time  during the first five loan years  (loan  obtained  May 1991) did the
rate exceed 11.65 % or fall below 7.65% per annum in  accordance  with the terms
of the loan.  After the fifth loan year, no interest  rate floor and/or  ceiling
applies.  The current rate at December 31, 1997 was 6.68%.  Effective January 1,
1998,  the  interest  rate  adjusted  to 6.34%.  The loan is  secured by a first
mortgage on Plainview Triad North and Peachtree  Corporate  Center with a second
position behind the holder of the permanent  mortgage on Plainview Plaza II. The
unpaid balance of the loan is due June 1, 2001.

As of December  31,  1997,  the  Partnership  also had a mortgage  payable to an
insurance  company  in the  amount of  $2,234,603.  The  mortgage  bears a fixed
interest rate of 9.125% and is due November 1, 1998. The outstanding  balance at
maturity based on the current rate of amortization will be $2,140,539.

Subsequent to December 31, 1997, the  Partnership  obtained a commitment from an
insurance  company for  permanent  financing  in the amount of  $6,800,000.  The
mortgage payable will bear interest at a fixed rate of 6.89% and will be secured
by a first  mortgage on Plainview  Plaza II. The repayment of principal  will be
amortized  over 17 years,  with  monthly  payments  of  principal  and  interest
totaling approximately $56,650. The proceeds of the

                                     - 17 -

<PAGE>



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

mortgage will be used to pay off the current $2,234,603 and $4,500,000 mortgages
payable and pay loan closing costs.  The loan  commitment  expires April 1, 1998
and the loan is expected to close on or prior to that date.

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.

The  majority  of  the  Partnership's   cash  flow  is  derived  from  operating
activities.  Cash  flows used in  investing  activities  are for  tenant  finish
improvements and other capital additions and are funded by operating activities.
Changes  to  current  tenant  improvements  are a  typical  part  of  any  lease
negotiation. Improvements generally include a revision to the current floor plan
to accommodate a tenant's  needs,  new carpeting and paint and/or  wallcovering.
The  extent and cost of these  improvements  are  determined  by the size of the
space and whether the improvements are for a new tenant or incurred because of a
lease renewal.  Cash flows used in investing  activities also include cash which
is being  escrowed for the  replacement of the HVAC system and asphalt paving at
Peachtree  Corporate Center and purchases of investment  securities.  As part of
its cash management  activities,  the Partnership has purchased  Certificates of
Deposit or securities issued by the U.S.  Government with initial  maturities of
greater  than  three  months to  improve  the  return on its  excess  cash.  The
Partnership held the securities until maturity. Cash flows provided by investing
activities  are from the  release of the escrow  funds  mentioned  above and the
maturity  of  investment  securities.  Cash flows used in  financing  activities
include cash  distributions,  principal  payments on the $2.2  million  mortgage
payable and repurchases of limited  partnership  Units. The Partnership does not
expect any material changes in the mix and relative cost of capital resources.

In the next 12 months,  the General Partner expects a demand on future liquidity
as a result of 117,583  square feet in leases  expiring  during 1998  (Plainview
Plaza II - 6,792 square  feet,  Plainview  Triad North - 73,517  square feet and
Peachtree  Corporate  Center - 37,274 square  feet).  The majority of the square
feet in leases  which  expire  in 1998  relate to a single  tenant  (Aetna  Life
Insurance  Company)  at  Plainview  Triad  North.  See  below  for a  discussion
regarding the lease for this tenant. At this time, the future leasing and tenant
finish  costs which will be  required to renew the current  leases or obtain new
tenants are unknown.  As of December 31, 1997, the Partnership had the following
material commitments for tenant finish improvements.

As of December 31, 1997,  the  Partnership  had a  commitment  of  approximately
$250,000 for tenant finish improvements at Plainview Plaza II as the result of a
new  five-year  lease for  approximately  16,900  square  feet.  The  project is
expected to be complete during the first quarter of 1998.

As of December 31, 1997, the Partnership  also had a commitment of approximately
$58,500 for tenant finish improvements at Peachtree Corporate Center as a result
of a lease renewal and expansion by a current  tenant.  The expansion  increases
the tenant's  current  leased space by  approximately  2,300 square feet and the
renewal  extends the lease five years.  The project is expected to be  completed
during the first quarter of 1998.

As of December 31, 1997, the Partnership  also had a commitment of approximately
$350,000 for tenant finish  improvements  at Plainview Plaza II as a result of a
lease renewal with NTS Development Company, an affiliate of the General Partner.
The renewal  extends the lease five years,  through March 2002, and is at a rate
of $14.50 per square foot for 20,368 square feet.  Approximately $192,000 of the
$350,000  project  was  completed  during  1997.  The  project is expected to be
completed during the first half of 1998.


                                     - 18 -

<PAGE>



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

The source of funds for the commitments listed above is expected to be cash flow
from operations and/or cash reserves.

On December 21, 1997, a fire occurred at Plainview Plaza II. The fire damage was
contained  to a small area in one  building  in the  offices of NTS  Development
Company,  an affiliate of the General  Partner.  The damages are covered 100% by
insurance.  Therefore,  the  Partnership  will not incur  costs  related to this
incident.

At Plainview Plaza II, the  Partnership's  renovation of the property is nearing
completion.  Remaining  items to be  completed  during  the  first  half of 1998
include landscaping,  exterior staircase renovation,  sidewalk  replacements,  a
handicap  restroom,  site  lighting  upgrades  and new signage.  Currently,  the
remaining  project costs are estimated at approximately  $200,000.  All of these
projects are part of the  Partnership's  continued  effort to make the Plainview
Plaza II property more competitive and enhance its value. These projects will be
funded with a combination of cash reserves and cash flow from operations.

During 1995, the Partnership  established an Interest  Repurchase Reserve in the
amount of $156,000  pursuant to Section  16.4 of the  Partnership's  Amended and
Restated Agreement of Limited Partnership. With these funds, the Partnership was
able to  repurchase  750 Units at a price of $208 per  Unit.  During  1996,  the
Partnership  elected to fund an additional  $243,700 to its Interest  Repurchase
Reserve  ($100,000  on  January  3 and  $143,700  on May 24).  With  these  1996
fundings,  the Partnership  will be able to repurchase an additional 1,170 Units
at a price of $208 per Unit.  As of  December  31,  1997,  the  Partnership  had
repurchased a total of 1,530 Units for $318,240.  Repurchased  Units are retired
by the  Partnership,  thus  increasing  the share of ownership of each remaining
investor.  The Interest Repurchase Reserve was funded from cash reserves.  As of
December 17, 1996,  the repurchase of limited  partnership  Units was suspended.
Upon the suspension of repurchases, previously designated funds were returned to
unrestricted cash reserves. See below for further discussion.

The lease for Aetna Life  Insurance  Company,  the largest  tenant of  Plainview
Triad North,  occupying  nearly 65% of the  building,  was  extended  during the
second  quarter of 1997 from  August 1997 to August  1998.  There were no tenant
finish  improvements as a result of this renewal.  Aetna accounts for nearly 22%
of the NTS-Properties  III total revenue.  During the third quarter of 1997, the
Partnership  received  notice that Aetna will vacate the  property at the end of
the extended  lease term.  The  Partnership  is currently  negotiating a 120 day
renewal with the tenant at their request. Any costs associated with this renewal
would  not  be  significant.  In  the  opinion  of the  General  Partner  of the
Partnership,  the 120 day extension  will be all that can be  anticipated.  As a
result of the expected  move-out,  there will likely be a protracted  period for
the property to become fully leased again and  substantial  funds will likely be
needed for leasing  expenses  especially  those needed to refinish space for new
tenants. As this time, the amount of such expenses are unknown.  The Partnership
is actively seeking new tenants for this space.

Accordingly,   to  conserve  funds  in   anticipation  of  the  loss  of  Aetna,
distributions were suspended starting December 31, 1996.

Subsequent to December 31, 1997, the Partnership  elected to resume the Interest
Repurchase  Program and fund $50,000 to its Interest  Repurchase  Reserve.  With
this funding,  the  Partnership  will be able to repurchase up to 200 additional
Units  at a price  of $250 per  Unit.  If the  number  of  Units  submitted  for
repurchase  exceeds that which can be  repurchased by the  Partnership  with the
current  funding,  those  additional  Units  may be  repurchased  in  subsequent
quarters as cash flow  availability  permits.  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 value or liquidation value of the Unit. The
Partnership notified the limited partners of this action and opportunity by mail
during January 1998.

                                     - 19 -

<PAGE>



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

Subsequent  to  December  31,  1997,  the  Partnership   made  a  commitment  of
approximately  $18,200 for tenant finish improvements at Plainview Plaza II as a
result of a lease  renewal and  expansion  of a current  tenant.  The  expansion
increases the tenant's current leased space by approximately 900 square feet and
the renewal extends the lease for fourteen months. The project is expected to be
completed during the first quarter of 1998.

Subsequent  to December  31, 1997,  the  Partnership  also made a commitment  of
approximately $12,000 for tenant finish improvements at Plainview Triad North as
a result of a lease  renewal and  expansion of a current  tenant.  The expansion
increases the tenant's current leased space by approximately 800 square feet and
the renewal  extends the lease for five years through  January 2003. The project
is expected to be completed during the first quarter of 1998.

Subsequent  to  December  31,  1997,  the  Partnership   made  a  commitment  of
approximately  $20,000 for tenant finish  improvements at Plainview Triad North.
Two vacant  suites will be  renovated  in  anticipation  of future  leases.  The
project is expected to be completed during the first quarter of 1998.

Subsequent  to  December  31,  1997,  the  Partnership   made  a  commitment  of
approximately  $10,000 for tenant  finish  improvements  at Peachtree  Corporate
Center.  These  improvements  were made to the suite  which is  occupied  by the
on-site property  manager/leasing agent. The project is expected to be completed
during the first quarter of 1998.

During  1998,  the  Partnership  plans to  replace  the roof on one of the three
buildings at Plainview Plaza II. This project is expected to be completed by the
end of 1998.

During 1998, the Partnership also plans to explore the possibilities of a common
area  and  exterior  building   renovation  at  Plainview  Triad  North.   These
renovations  would be designed to make the property more competitive and enhance
its value.

The source of funds for the commitments listed above is expected to be cash flow
from operations and/or cash reserves.  It is anticipated that the cash flow from
operations  and  cash  reserves  will be  sufficient  to meet  the  needs of the
Partnership.

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  issue,  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 1997 was immaterial.




                                     - 20 -

<PAGE>



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

The  Partnership  had no other material  commitments  for renovations or capital
improvements as of December 31, 1997.

The table below  presents  that portion of the  distributions  that  represent a
return of capital on a Generally  Accepted  Accounting  Principle  basis for the
years ended  December  31,  1997,  1996 and 1995.  The  General  Partner did not
receive a  distribution  during these years.  Distributions  were funded by cash
flow derived from operating activities.


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

     Limited Partners:
           1997             $ 239,206       $    --         $    --
           1996               284,097         108,018            --
           1995               (86,496)        154,125         154,125

The following  describes the efforts being taken by the  Partnership to increase
the occupancy levels at the  Partnership's  properties.  At Peachtree  Corporate
Center in Norcross,  Georgia,  the  Partnership has an on-site leasing agent, an
employee of NTS Development  Company (an affiliate of the General Partner),  who
makes calls to potential tenants, negotiates lease renewals with current tenants
and manages local  advertising with the assistance of NTS Development  Company's
marketing staff. The leasing and renewal negotiations for Plainview Plaza II and
Plainview  Triad  North  are  handled  by  leasing  agents,   employees  of  NTS
Development  Company,  located in Louisville,  Kentucky.  The leasing agents are
located in the same city as both commercial properties.  All advertising for the
Louisville properties is also coordinated by NTS Development Company's marketing
staff located in Louisville, Kentucky.

Leases at all the  Partnership's  properties  provide for tenants to  contribute
toward the payment of increases in common area maintenance expenses,  insurance,
utilities  and real  estate  taxes.  This lease  provision  should  protect  the
Partnership's operations from the impact of inflation and changing prices.

Some of the statements included in Item 7, 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 Managements'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.



                                     - 21 -

<PAGE>



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

The Partnership's principal activity is the leasing and management of commercial
office buildings and a business center. If a major commercial tenant defaults on
its  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.






















































                                     - 22 -

<PAGE>



Item 8.  Financial Statements and Supplementary Data
         -------------------------------------------



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                    ----------------------------------------



To NTS-Properties III:

We have  audited  the  accompanying  balance  sheets of  NTS-Properties  III, (a
Georgia  limited  partnership) as of December 31, 1997 and 1996, and the related
statements of operations,  partners' equity and cash flows for each of the three
years in the period ended December 31, 1997. These financial  statements and the
schedules  referred  to  below  are  the  responsibility  of  the  Partnership's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements and schedules based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position of  NTS-Properties  III as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended  December 31, 1997 in conformity
with generally accepted accounting principles.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial statements taken as a whole. The schedules included on pages 41 and 42
are  presented  for  purposes of  complying  with the  Securities  and  Exchange
Commission's  rules  and  are  not  a  required  part  of  the  basic  financial
statements.  These  schedules  have been  subjected to the  auditing  procedures
applied in the audits of the basic  financial  statements  and, in our  opinion,
fairly state in all  material  respects the  financial  data  required to be set
forth therein in relation to the basic financial statements taken as a whole.






                                                 ARTHUR ANDERSEN LLP


Louisville, Kentucky
March 6, 1998


                                     - 23 -

<PAGE>

<TABLE>

                               NTS-PROPERTIES III

                                 BALANCE SHEETS

                        AS OF DECEMBER 31, 1997 AND 1996

<CAPTION>




                                                        1997            1996
                                                     -----------     -----------
ASSETS

<S>                                                  <C>             <C>
Cash and equivalents                                 $   266,940     $   571,683
Cash and equivalents - restricted                        284,599         401,090
Investment securities                                    101,591           --
Accounts receivable, net of allowance
 for doubtful accounts of $42,035 (1997)
 and $81,980 (1996)                                      269,922         198,970
Land, buildings and amenities, net                     9,789,485       8,850,783
Construction in progress                                  39,477         577,233
Other assets                                             370,302         376,127
                                                     -----------     -----------

  Total assets                                       $11,122,316     $10,975,886
                                                     ===========     ===========

LIABILITIES AND PARTNERS' EQUITY

Mortgages payable                                    $ 6,734,603     $ 6,859,637
Accounts payable - operations                             36,773          97,702
Accounts payable - construction                          102,655          54,070
Security deposits                                        103,816          92,934
Other liabilities                                        155,179          11,415
                                                     -----------     -----------

                                                       7,133,026       7,115,758

Commitments and Contingencies

Partners' equity                                       3,989,290       3,860,128
                                                     -----------     -----------

                                                     $11,122,316     $10,975,886
                                                     ===========     ===========

</TABLE>

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

                                     - 24 -

<PAGE>

<TABLE>

                               NTS-PROPERTIES III

                            STATEMENTS OF OPERATIONS

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<CAPTION>

                                                1997         1996           1995
                                            -----------   -----------   -----------

<S>                                         <C>           <C>           <C>
Revenues:
 Rental income, net of provision for
  doubtful accounts of $28,661 (1997),
  $53,043 (1996) and $68,680 (1995)         $ 3,090,978   $ 2,898,415   $ 2,717,965
 Rental income - affiliated                     295,031       314,499       312,660
 Interest and other income                       40,281        52,717        42,478
                                            -----------   -----------   -----------

                                              3,426,290     3,265,631     3,073,103
Expenses:
 Operating expenses                             794,637       699,602       669,302
 Operating expenses - affiliated                440,458       313,956       337,133
 Write-off of unamortized building, land
  and tenant improvements                        86,406          --          56,693
 Amortization of capitalized leasing
  costs                                          24,423         9,707         4,667
 Interest Expense                               524,901       558,878       583,034
 Management fees                                168,006       158,463       161,638
 Real estate taxes                              206,603       210,797       216,225
 Professional and administrative
  expenses                                       60,604        64,251        56,384
 Professional and administrative
  expenses - affiliated                         133,969       145,814       141,552
 Depreciation and amortization                  851,713       914,916     1,035,865
                                            -----------   -----------   -----------

                                              3,291,720     3,076,384     3,262,493
                                            -----------   -----------   -----------

Net income (loss)                           $   134,570   $   189,247   $  (189,390)
                                            ===========   ===========   ===========

Net income (loss) allocated to the
limited partners                            $   239,206   $   284,097   $   (86,496)
                                            ===========   ===========   ===========

Net income (loss) per limited partnership
 unit                                       $     17.00   $     19.70   $     (5.58)
                                            ===========   ===========   ===========

Weighted average number of limited
 partnership units                               14,072        14,418        15,495
                                            ===========   ===========   ===========

</TABLE>
The  accompanying  notes to financial  statements  are an integral part of these
statements.





                                     - 25 -

<PAGE>

<TABLE>

                               NTS-PROPERTIES III

                         STATEMENTS OF PARTNERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<CAPTION>

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

<S>                                   <C>            <C>            <C>
Balances at December 31, 1994         $ 4,150,292    $   284,954    $ 4,435,246

 Net loss                                 (86,496)      (102,894)      (189,390)

 Distributions declared                  (154,125)         --          (154,125)

 Repurchase of limited partnership
  units                                  (156,000)         --          (156,000)
                                      -----------    -----------    -----------

Balance at December 31, 1995            3,753,671        182,060      3,935,731

 Net income(loss)                         284,097        (94,850)       189,24

 Distributions declared                  (108,018)         --          (108,018)

 Repurchase of limited partnership
  units                                  (156,832)         --          (156,832)
                                      -----------    -----------    -----------

Balances at December 31, 1996           3,772,918         87,210      3,860,128

 Net income (loss)                        239,206       (104,636)       134,570

 Repurchase of limited partnership
  units                                    (5,408)         --            (5,408)
                                      -----------    -----------    -----------

Balances at December 31, 1997         $ 4,006,716    $   (17,426)   $ 3,989,290
                                      ===========    ===========    ===========

</TABLE>
The  accompanying  notes to financial  statements  are an integral part of these
statements.
























                                     - 26 -

<PAGE>
<TABLE>


                               NTS-PROPERTIES III

                            STATEMENTS OF CASH FLOWS

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>


                                                    1997           1996           1995
                                                -----------    -----------    -----------


<S>                                             <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                               $   134,570    $   189,247    $  (189,390)
Adjustments to reconcile net income(loss) to
 net cash provided by operating activities:
  Provision for doubtful accounts                    28,661         53,043         68,680
  Accrued interest on investment securities            (923)         1,402         (1,402)
  Write-off of unamortized building, land and
   tenant improvements                               86,406             --         56,693
  Amortization of capitalized leasing costs          24,423          9,707          4,667
  Depreciation and amortization                     851,713        914,916      1,035,865
  Change in assets and liabilities:
   Cash and equivalents - restricted                 (4,595)          (446)        (5,925)
   Accounts receivable                              (99,613)       (75,202)        93,986
   Other assets                                     (39,079)      (165,294)       (14,127)
   Accounts payable - operations                    (60,929)        24,895         (2,427)
   Security deposits                                 10,882         (2,560)        11,450
   Other liabilities                                143,766         (1,755)        (3,016)
                                                -----------    -----------    -----------

  Net cash provided by operating activities       1,075,282        947,953      1,055,054
                                                -----------    -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings, amenities and
 construction in progress                        (1,270,002)      (685,003)      (564,612)
Decrease (increase) in cash equivalents-
 restricted                                           4,219        104,020        (88,248)
Purchase of investment securities                  (304,521)      (855,999)      (401,461)
Maturity of investment securities                   203,853        957,652        299,808
                                                -----------    -----------    -----------

  Net cash used in investing activities          (1,366,451)      (479,330)      (754,513)
                                                -----------    -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Cash distributions                                    --          (145,142)      (156,000)
Principal payments on mortgage payable             (125,034)      (104,982)       (95,860)
Repurchase of limited partnership units              (5,408)      (156,832)      (156,000)
Decrease (increase)in cash and equivalent-
   restricted                                       116,868       (116,868)         --
                                                -----------    -----------    -----------

  Net cash used in financing activities             (13,574)      (523,824)      (407,860)
                                                -----------    -----------    -----------

  Net increase (decrease) in cash and
   equivalents                                     (304,743)       (55,201)      (107,319)

CASH AND EQUIVALENTS, beginning of period           571,683        626,884        734,203
                                                -----------    -----------    -----------

CASH AND EQUIVALENTS, end of period             $   266,940    $   571,683    $   626,884
                                                ===========    ===========    ===========

Interest paid on a cash basis                   $   570,819    $   560,389    $   585,825
                                                ===========    ===========    ===========

</TABLE>
The  accompanying  notes to financial  statements  are an integral part of these
statements.


                                     - 27 -

<PAGE>



                               NTS-PROPERTIES III

                          NOTES TO FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


1.     Significant Accounting Policies
       -------------------------------

       A)    Organization
             ------------

             NTS-Properties  III (the  "Partnership")  is a limited  partnership
             organized  under the laws of the State of Georgia on June 24, 1982.
             The General Partner is NTS-Properties Associates, a Georgia limited
             partnership.  The  Partnership  is in the  business  of owning  and
             operating commercial real estate.

       B)    Properties
             ----------

             The Partnership owns and operates the following properties:

             -  Peachtree  Corporate Center, a business park with  approximately
                192,000 net rentable square feet located in Norcross, Georgia, a
                suburb of Atlanta.

             -  Plainview Plaza II, an office complex with approximately 113,000
                net rentable square feet located in Jeffersontown,  Kentucky,  a
                suburb of Louisville.

             -  Plainview  Triad North,  an office  complex  with  approximately
                89,000  net  rentable  square  feet  located  in  Jeffersontown,
                Kentucky.

       C)    Allocation of Net Income (Loss) and Cash Distributions
             ------------------------------------------------------

             Net Cash Receipts, as defined in the partnership agreement, will be
             distributed,  to the extent made available, to the limited partners
             in an amount equal to the greater of 10% per year,  non-cumulative,
             of their invested  capital or their pro rata share of such Net Cash
             Receipts, as defined in the partnership  agreement.  The balance of
             the Net Cash  Receipts,  as defined in the  partnership  agreement,
             would be available for  distribution  to the General  Partner until
             the  General  Partner has  received  its pro rata share of such Net
             Cash Receipts.  At such time as the limited  partners have received
             cash distributions  equal to their original capital  contributions,
             cash flow would be distributed 52% to the limited  partners and 48%
             to the General  Partner.  In general,  operating  income and losses
             (exclusive of  depreciation)  are allocated to the limited partners
             and  the  General   Partner  in  proportion  to  their   respective
             distributions  of cash. In no event,  however,  will the portion of
             any item of Partnership  income,  gain,  loss,  deduction or credit
             allocated to the General Partner be less than 1%. Starting December
             31,   1996,   the   Partnership   has   indefinitely    interrupted
             distributions.

             Depreciation   of  the  assets  acquired  on  the  date  operations
             commenced  is  allocated  directly to the limited  partners and the
             General  Partner  based  upon  their  respective  tax  basis in the
             property. Depreciation of assets subsequently acquired is allocated
             based on the  limited  partners'  interests  of 65% and the General
             Partner's  interest  of  35%.  In the  accompanying  Statements  of
             Operations,  net income  (loss) was  allocated  99% to the  limited
             partners  and 1% to the  General  Partner  net  of the  effects  of
             depreciation   on  contributed   assets  in  accordance   with  the
             Partnership Agreement.



                                     - 28 -

<PAGE>



1. Significant Accounting Policies - Continued
   -------------------------------------------

       D)    Tax Status
             ----------

             The  Partnership  has received a ruling from the  Internal  Revenue
             Service  stating that the  Partnership  is  classified as a limited
             partnership   for  federal  income  tax  purposes.   As  such,  the
             Partnership makes no provision for income taxes. The taxable income
             or loss is passed through to the holders of interests for inclusion
             on their individual income tax returns.

             The  reconciliation  of net income (loss) for  financial  statement
             purposes and for income tax reporting is as follows:


                                            1997        1996         1995
                                         ----------  ----------   ---------

             Net income (loss)            $ 134,570   $ 189,247   $(189,390)
             Items handled differently
             for tax purposes:
               Depreciation                (204,471)   (111,830)    (10,224)
               Write-off of unamortized
                 building and tenant
                 improvements               (86,819)    (22,864)    (90,300)
               Rental income                139,596      47,180      99,696
               Allowance for doubtful
                 accounts                   (39,945)     (8,352)     36,505
               Other                         (3,490)      3,915         219
                                          ---------   ---------    --------

            Taxable income(loss)          $ (60,559)  $  97,296   $(153,494)
                                          =========   =========   =========

       E)    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.

       F)    Cash and Equivalents - Restricted
             ---------------------------------

             Cash and  equivalents - restricted  represent  1)escrow funds which
             are to be released as the heating, ventilating and air conditioning
             ("HVAC")  system and asphalt paving at Peachtree  Corporate  Center
             are replaced and 2) funds which have been  escrowed with a mortgage
             company for NTS Plainview  Plaza II's property  taxes in accordance
             with the loan agreements.

       G)    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  investments  are
             carried at cost which  approximates  market value.  The Partnership
             intends to hold the securities  until maturity.  During 1995, 1996,
             and 1997  the  Partnership  sold no  investment  securities.  As of
             December 31, 1996, the Partnership held no investment securities.







                                     - 29 -

<PAGE>



1.     Significant Accounting Policies - Continued
       -------------------------------------------

        G)   Investment Securities - Continued
             ---------------------------------

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


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

               Certificate of deposit     $101,591    02/13/98     $102,232
                                          ========                 ========

       H)    Basis of Property and Depreciation
             ----------------------------------

             Land, buildings and amenities are stated at cost to the Partnership
             as determined by the historical cost of the property to the General
             Partner for its interest and by the purchase  price of the property
             to  the   Partnership   for  the   limited   partners'   interests.
             Depreciation  is computed using the  straight-line  method over the
             estimated  useful lives of the assets which are 5-30 years for land
             improvements,  5-30 years for buildings and improvements and 3 - 30
             years for amenities.

             Statement  of  Financial   Accounting  Standards  (SFAS)  No.  121,
             Accounting  for the  Impairment of Long-Lived  Assets and for Long-
             Lived Assets to be Disposed Of,  specifies  circumstances  in which
             certain long-lived assets must be reviewed for impairment.  If such
             review  indicates that the carrying  amount of an asset exceeds the
             sum of its expected future cash flows,  the asset's  carrying value
             must be written down to fair value.  Application  of this  standard
             during the years ended December 31, 1997 and 1996 did not result in
             an impairment loss.

       I)    Rental Income and Deferred Leasing Commissions
             ----------------------------------------------

             Certain of the  Partnership's  lease  agreements  are structured to
             include scheduled and specified rent increases over the lease term.
             For financial reporting  purposes,  the income from these leases is
             being  recognized  on a  straight-line  basis over the lease  term.
             Accrued income  connected with these leases is included in accounts
             receivable and totaled $52,072 and $61,465 at December 31, 1997 and
             1996,  respectively.  All  commissions  paid to leasing  agents are
             deferred and  amortized on a  straight-line  basis over the term of
             the lease to which they apply.

       J)    Advertising
             -----------

             The  Partnership  expenses   advertising-type  costs  as  incurred.
             Advertising  expense was immaterial to the  Partnership  during the
             years ended December 31, 1997, 1996 and 1995.

       K)    Statements of Cash Flows
             ------------------------

             For purposes of reporting cash flows, cash and equivalents  include
             cash on hand and short-term, highly liquid investments with initial
             maturities of three months or less.

       L)    Reclassifications of 1996 and 1995 Financial Statements
             -------------------------------------------------------

             Certain  reclassifications  have been made to the December 31, 1996
             and 1995  financial  statements  to conform with  December 31, 1997
             classifications.   These   reclassifications   have  no  effect  on
             previously reported operations.

                                     - 30 -

<PAGE>



2.     Concentration of Credit Risk
       ----------------------------

       NTS-Properties  III is a  limited  partnership  which  owns and  operates
       commercial  properties  in Norcross,  Georgia,  a suburb of Atlanta,  and
       Jeffersontown,  Kentucky, a suburb of Louisville. One tenant in Plainview
       Triad North  occupies 65% of the office  building's net rentable area and
       one tenant in Plainview  Plaza II occupies  46% of the office  building's
       net rentable area.  Substantially  all of the  Partnership's  tenants are
       local  businesses or are businesses which have operations in the location
       in which they lease space.


3.     Interest Repurchase Reserve
       ---------------------------

       On October 3, 1995, the  Partnership  established an Interest  Repurchase
       Reserve  in the  amount  of  $156,000  pursuant  to  Section  16.4 of the
       Partnership's  Amended and  Restated  Agreement  of Limited  Partnership.
       Under  Section  16.4,  limited  partners may request the  Partnership  to
       repurchase their respective  interests  (Units) in the Partnership.  With
       this funding, the Partnership was able to repurchase 750 Units at a price
       of $208  per  Unit.  During  1996,  the  Partnership  elected  to fund an
       additional  $243,700 to its  Interest  Repurchase  Reserve  ($100,000  on
       January  3 and  $143,700  on May  24).  With  these  1996  fundings,  the
       Partnership  will be able to repurchase  an  additional  1,170 Units at a
       price of $208 per Unit.  Through  December 31, 1997, the  Partnership had
       repurchased  a total of 1,530 Units for $318,240.  Repurchased  Units are
       retired by the  Partnership,  thus  increasing  the share of ownership of
       each remaining investor.  The Interest Repurchase Reserve was funded from
       cash  reserves.  On  December  17,  1996 the  Partnership  suspended  the
       Interest  Repurchase  Program.  See Note 9 Subsequent  Events for further
       information regarding the Interest Repurchase Program.


4.     Land, Buildings and Amenities
       -----------------------------

       The  following   schedule  provides  an  analysis  of  the  Partnership's
       investment in property held for lease as of December 31:


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

          Land and improvements          $ 4,583,398   $ 4,446,084
          Buildings and improvements      20,605,923    19,347,515
          Amenities                          126,788       126,788
                                          ----------    ----------

                                          25,316,109    23,920,387

          Less accumulated depreciation   15,526,624    15,069,604
                                          ----------    ----------

                                         $ 9,789,485   $ 8,850,783
                                          ==========    ==========










                                     - 31 -

<PAGE>



5.     Mortgages Payable
       -----------------

       Mortgages payable as of December 31 consist of the following:


                                                 1997           1996
                                             -----------    -----------
       Mortgage payable to an insurance
       company bearing interest at 9.125%,
       maturing November 1, 1998, secured
       by land and building                  $ 2,234,603    $ 2,359,637

       Mortgage payable to an insurance
       company maturing June 1, 2001,
       secured by land and  buildings,
       bearing a variable interest rate
       based on the 10-year treasury bill
       rate plus 60 basis points. The rate
       is adjusted quarterly.  The current
       rate at December 31, 1997
       is 6.68%                                4,500,000      4,500,000
                                              ----------     ----------
                                             $ 6,734,603    $ 6,859,637
                                              ==========     ==========

       The $2,234,603  mortgage is payable in monthly  installments  of $32,335,
       which  includes   principal,   interest  and  property  tax  escrow.  The
       $4,500,000  mortgage  is  payable  in  monthly  installments  of  $25,050
       (interest only). Scheduled maturities of debt are as follows:

                 For the Years Ended December 31,        Amount
                 --------------------------------      -----------

                               1998                    $ 2,234,603
                               1999                        --
                               2000                        --
                               2001                      4,500,000
                                                        ----------

                                                       $ 6,734,603
                                                       ===========

       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 $6,889,500.

       Effective  January 1, 1998, the interest rate on the $4,500,000  mortgage
       payable adjusted to 6.34%.

       The $2,234,603 mortgage matures within the next twelve months. See Note 9
       Subsequent Events for a further discussion regarding this mortgage.


6.     Rental Income Under Operating Leases
       ------------------------------------

       The  following  is  a  schedule  of  minimum   future  rental  income  on
       noncancellable operating leases as of December 31, 1997:

               For the Years Ended December 31,       Amount
               --------------------------------     -----------

                             1998                   $ 2,561,199
                             1999                     1,567,041
                             2000                     1,191,734
                             2001                       965,758
                             2002                       650,639
                         Thereafter                   1,165,244
                                                    -----------
                                                    $ 8,101,615
                                                    ===========

                                     - 32 -

<PAGE>



7.     Related Party Transactions
       --------------------------

       Property management fees of $168,006 (1997), $158,463 (1996) and $161,638
       (1995) were paid to NTS Development  Company, an affiliate of the General
       Partner, pursuant to an agreement with the Partnership.  The fee is equal
       to 5% of gross revenues from the Partnership's properties. Also permitted
       by an  agreement  with the  Partnership,  NTS  Development  Company  will
       receive a repair  and  maintenance  fee  equal to 5.9% of costs  incurred
       which  relate to  capital  improvements.  The  Partnership  has  incurred
       $74,367  and  $41,001  as a repair and  maintenance  fee during the years
       ended December 31, 1997 and 1996, respectively,  and has capitalized this
       cost as a part of land,  buildings  and  amenities.  As  permitted  by an
       agreement,  the Partnership  also was charged the following  amounts from
       NTS  Development  Company for the years ended December 31, 1997, 1996 and
       1995.  These charges  include items which have been expensed as operating
       expenses  affiliated  or  professional  and  administrative   expenses  -
       affiliated  and items which have been  capitalized  as other assets or as
       land, buildings and amenities.


                                 1997       1996        1995
                               --------   --------    --------

          Leasing              $279,851   $144,372    $124,826
          Administrative        166,422    175,414     172,070
          Property manager      171,324    182,750     214,574
          Other                  28,460     21,515       7,838
                               --------   --------    --------

                               $646,057   $524,051    $519,308
                               ========   ========    ========

       During January 1997, NTS Development Company leased 23,160 square feet of
       the  available  space in Plainview  Plaza II at a base rent of $13.50 per
       square foot.  During February and March of 1997, NTS Development  Company
       leased 20,368 square feet.  Effective  April 1, 1997, the NTS Development
       Company  lease was extended for five years to March 2002 at a rental rate
       of $14.50 per square foot for 20,368  square feet.  The  Partnership  has
       received  approximately  $295,000 in rental payments from NTS Development
       Company  during 1997. As a result of the lease renewal,  the  Partnership
       has  made a  commitment  for  approximately  $350,000  of  tenant  finish
       improvements.  Approximately $192,000 of the project was completed during
       1997.

       During  the years  ended  December  31,  1996 and 1995,  NTS  Development
       Company leased approximately 23,000 square feet of the available space in
       the Plainview  Plaza II property at a base rent of  approximately  $13.50
       per square  foot.  The  Partnership  received  approximately  $314,000 in
       rental payments from NTS Development Company during both 1996 and 1995.


8.     Commitments and Contingencies
       -----------------------------

       One tenant at Plainview  Triad North occupies nearly 65% of the building.
       During the third quarter of 1997, the  Partnership  received  notice that
       the tenant will vacate the property at the end of the lease term,  August
       1998. The Partnership is currently negotiating a 120 day renewal with the
       tenant at their request. Any costs associated with this renewal would not
       be significant. In the opinion of the General Partner of the Partnership,
       the 120 day extension will be all that can be  anticipated.  As a result,
       there will likely be a protracted period for the property to become fully
       leased  again and  substantial  funds will  likely be needed for  leasing
       expenses;  especially those needed to refinish space for new tenants.  At
       this time, the amount of such expenses are unknown.

                                     - 33 -

<PAGE>



8.     Commitments and Contingencies - Continued
       -----------------------------------------

       As  of  December  31,  1997,   the   Partnership   had  a  commitment  of
       approximately  $250,000 for tenant finish improvements at Plainview Plaza
       II as the result of a new five-year lease for approximately 16,900 square
       feet. The project is expected to be completed during the first quarter of
       1998.

       As of  December  31,  1997,  the  Partnership  also had a  commitment  of
       approximately   $58,500  for  tenant  finish  improvements  at  Peachtree
       Corporate  Center  as a result  of a lease  renewal  and  expansion  by a
       current tenant. The expansion increases the tenant's current leased space
       by approximately 2,300 square feet and the renewal extends the lease five
       years.  The project is expected to be completed  during the first quarter
       of 1998.

       At  Plainview  Plaza  II,  the   Partnership   expects  to  complete  the
       landscaping  and  exterior  building  renovations,  and the addition of a
       handicap restroom facility during 1998. The remaining commitment for this
       project is approximately $200,000.

       It is  anticipated  that the cash flow from  operations and cash reserves
       will be sufficient to meet the needs of the Partnership.

       For additional commitments see Note 7 Related Party Transactions and Note
       9 Subsequent Events.

9.     Subsequent Events
       -----------------

       Subsequent to December 31, 1997,  the  Partnership  elected to resume the
       Interest   Repurchase  Program  and  to  fund  $50,000  to  its  Interest
       Repurchase  Reserve.  With this funding,  the Partnership will be able to
       repurchase up to 200 additional Units at a price of $250 per Unit. If the
       number  of Units  submitted  for  repurchase  exceeds  that  which can be
       repurchased by the Partnership with the current funding, those additional
       Units may be repurchased in subsequent quarters. 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  value or  liquidation
       value of the Units. The Partnership notified the limited partners of this
       action and opportunity by mail during January 1998.

       Subsequent to December 31, 1997,  the  Partnership  obtained a commitment
       from an  insurance  company  for  permanent  financing  in the  amount of
       $6,800,000.  The mortgage  payable will bear  interest at a fixed rate of
       6.89% and will be secured by a first mortgage on Plainview  Plaza II. The
       repayment of the principal  will be amortized  over 17 years with monthly
       payments of principal and interest totaling  approximately  $56,600.  The
       proceeds of the mortgage  will be used to pay off the current  $2,234,603
       and $4,500,000  mortgages  payable and pay loan closing  costs.  The loan
       commitment expires April 1, 1998, and the loan is expected to close on or
       prior to that date.














                                     - 34 -

<PAGE>



Item 9.      Changes in and Disagreements with Accountants on Accounting and
             ---------------------------------------------------------------
             Financial Disclosure
             --------------------


None.





























































                                     - 35 -

<PAGE>



                                    PART III

Item 10. Directors and Executive Officers of the Registrant
         --------------------------------------------------

Because the Partnership is a limited  partnership and not a corporation,  it has
no  directors  or  officers  as  such.  Management  of  the  Partnership  is the
responsibility   of  the  General  Partner,   NTS-Properties   Associates.   The
Partnership has entered into a management contract with NTS Development Company,
an affiliate of the General Partner, to provide property management services.

The General Partners of NTS-Properties Associates are as follows:

J. D. Nichols
-------------

Mr.  Nichols  (age  56)  is  the  managing  General  Partner  of  NTS-Properties
Associates and is Chairman of the Board of NTS Corporation  (since 1985) and NTS
Development Company (since 1977).

L. C. Aroh
----------

Mr. Aroh (age 66) has been an independent real estate developer for the past ten
years.  He is a  partner  in a  number  of real  estate  developments  with  the
principals of NTS Development Company.

NTS Capital Corporation
-----------------------

NTS Capital Corporation (formerly NTS Corporation) is a Kentucky corporation
formed in October 1979.  J. D. Nichols is Chairman of the Board and the sole
director of NTS Capital Corporation.

Alliance Realty Corporation
---------------------------

Alliance Realty Corporation was formed in September 1982, and is a wholly-
owned subsidiary of SN Alliance, Inc.  SN Alliance, Inc. is also the parent
corporation of Stifel, Nicolas & Company, Inc. which acted as the Dealer
Manager in connection with the offering for the interests.

Gary D. Adams
-------------

Mr. Adams (age 51) is Senior Vice President of NTS Development Company.
Since joining the NTS organization in May 1977, Mr. Adams has been involved
in the development, construction and management of properties in the
southeast region.

A. Toni Rizzo
-------------

Mr.  Rizzo (age 50) joined  Abel  Construction  during  1995 as the  Director of
Business  Development.  From  1985 to 1995,  Mr.  Rizzo  was an  officer  of the
Huntington Group and prior to 1985 was an employee of NTS Development Company.

The Manager of the Partnership's properties is NTS Development Company, the
executive officers and/or directors of which are Messrs. J. D. Nichols,
Richard L. Good, Brian F. Lavin and John W. Hampton.

Richard L. Good
---------------

Mr. Good (age 58),  President and Chief  Operating  Officer of NTS  Corporation,
President  of  NTS  Development  Company  and  Chairman  of  the  Board  of  NTS
Securities, Inc., joined the Manager in January 1985. From 1981 through 1984, he
was Executive Vice President of Jacques-Miller, Inc., a real estate syndication,
property management and financial planning firm in Nashville, Tennessee.


                                     - 36 -

<PAGE>



Item 10. Directors and Executive Officers of the Registrant - Continued
         --------------------------------------------------------------

Brian F. Lavin
--------------

Mr. Lavin (age 44) serves as Executive Vice President of NTS Development Company
and  President  of the  Company's  Income  Properties.  As  such,  Mr.  Lavin is
responsible for all NTS commercial real estate  development,  land  acquisitions
and oversees the management of all commercial office buildings, business centers
and multi-family residential communities. Prior to joining NTS, Mr. Lavin served
as President of the Residential  Division of Paragon Group,  Inc., and as a Vice
President of  Paragon's  Midwest  Division.  In this  capacity,  he directed the
development,   marketing,  leasing  and  management  operations  for  the  firms
expanding  portfolios.  Mr. Lavin  attended the  University of Missouri where he
received his Bachelor's  Degree in Business  Administration.  He has served as a
Director of the Louisville Apartment Association. He is a licensed Kentucky Real
Estate  Broker and  Certified  Property  Manager.  Mr.  Lavin is a member of the
Institute  of Real  Estate  Management,  and  council  member of the Urban  Land
Institute.  He  currently  serves  on the  University  of  Louisville  Board  of
Overseers and is on the Board of Directors of the National Multi-Housing Council
and the Louisville Science Center.

John W. Hampton
---------------

Mr.  Hampton (age 48) is Senior Vice President of NTS  Development  Company with
responsibility  for all  accounting  operations.  Before  joining the Manager in
March 1991, Mr. Hampton was Vice President - Finance and Chief Financial Officer
of the  Sturgeon-Thornton-Marrett  Development  Company in  Louisville  for nine
years. Prior to that he was with Alexander Grant & Company CPA's. Mr. Hampton is
a Certified  Public  Accountant  and a graduate of the  University of Louisville
with a Bachelor of Science  degree in  Commerce.  He is a member of the American
Institute of CPA's and the Kentucky Society of CPA's.


Item 11. Management Remuneration and Transactions
         ----------------------------------------

The officers and/or directors of the corporate General Partner receive no direct
remuneration in such  capacities.  The Partnership is required to pay a property
management  fee based on gross rentals to NTS  Development.  The  Partnership is
also required to pay to NTS Development  company a repair and maintenance fee on
costs related to specific  projects.  Also,  NTS  Development  Company  provides
certain  other  services  to  the  Partnership.  See  Note  7 to  the  financial
statements which sets forth  transactions  with NTS Development  Company for the
years ended December 31, 1997, 1996 and 1995.

The General Partner is entitled to receive cash distributions and allocations of
profits  and losses from the  Partnership.  Generally,  the  General  Partner is
entitled to a 10% non-cumulative annual return on its capital contributions from
the cash  income  of the  Partnership  (after  payment  of a like  amount to the
limited  partners).  At such time as the limited  partners  have  received  cash
distributions  from all sources equal to their original  capital  contributions,
cash flow will be  distributed  52% to limited  partners  and 48% to the General
Partner.  In no event,  however,  will the  portion  of any item of  Partnership
income, gain, loss, deduction or credit allocated to the General Partner be less
than 1%.










                                     - 37 -

<PAGE>



Item 12. Security Ownership of Certain Beneficial Owners and Management
         --------------------------------------------------------------

The General Partner is NTS-Properties Associates, a Georgia limited partnership,
10172 Linn Station Road, Louisville, Kentucky 40223. The partners of the General
Partner and their total respective interests in NTS-Properties Associates are as
follows:

       J. D. Nichols
       10172 Linn Station Road                                    86.07%
       Louisville, Kentucky 40223

       L. C. Aroh
       10904 Old Bridge Place                                      8.64%
       Louisville, Kentucky 40223

       Gary D. Adams
       3300 University Boulevard, Suite 150                        1.26%
       Winter Park, Florida 32792

       A. Toni Rizzo
       515 Willowhurst Place                                       1.26%
       Louisville, Kentucky 40223

       NTS Capital Corporation
       10172 Linn Station Road                                     2.67%
       Louisville, Kentucky 40223

       Alliance Realty Corporation
       500 North Broadway                                          0.10%
       St. Louis, Missouri 63102


Item 13.      Certain Relationships and Related Transactions
              ----------------------------------------------

Property management fees of $168,006 (1997), $158,463 (1996) and $161,638 (1995)
were paid to NTS  Development  Company,  an  affiliate  of the General  Partner,
pursuant to an agreement with the  Partnership.  The fee is equal to 5% of gross
revenues from the Partnership's properties.  Also permitted by an agreement with
the Partnership,  NTS Development  Company will receive a repair and maintenance
fee equal to 5.9% of costs  incurred which relate to capital  improvements.  The
Partnership has incurred $74,367 and $41,001 and as a repair and maintenance fee
during  the  years  ended  December  31,  1997 and 1996,  respectively,  and has
capitalized this cost as a part of land,  buildings and amenities.  As permitted
by an agreement, the Partnership also was charged the following amounts from NTS
Development  Company for the years ended December 31, 1997, 1996 and 1995. These
charges  include  items  which  have  been  expensed  as  operating  expenses  -
affiliated or professional  and  administrative  expenses - affiliated and items
which have been capitalized as other assets or as land, buildings and amenities.


                            1997         1996         1995
                          --------     --------     --------

     Leasing              $279,851     $144,372     $124,826
     Administrative        166,422      175,414      172,070
     Property manager      171,324      182,750      214,574
     Other                  28,460       21,515        7,838
                           -------      -------      -------

                          $646,057     $524,051     $519,308
                           =======      =======      =======

During  January 1997, NTS  Development  Company leased 23,160 square feet of the
available  space in Plainview Plaza II at a base rent of $13.50 per square foot.
During February and March of 1997, NTS Development Company


                                     - 38 -

<PAGE>



Item 13.      Certain Relationships and Related Transactions - Continued
              ----------------------------------------------------------

leased 20,368 square feet.  Effective April 1, 1997, the NTS Development Company
lease was  extended  for five years to March 2002 at a rental rate of $14.50 per
square foot for 20,368 square feet. The Partnership  has received  approximately
$295,000 in rental  payments  from NTS  Development  Company  during 1997.  As a
result  of  the  lease  renewal,  the  Partnership  has  made a  commitment  for
approximately $350,000 of tenant finish improvements.  Approximately $192,000 of
the project was completed during 1997.

During the years ended  December  31,  1996 and 1995,  NTS  Development  Company
leased  approximately 23,000 square feet of the available space in the Plainview
Plaza II property at a base rent of  approximately  $13.50 per square foot.  The
Partnership  received   approximately  $314,000  in  rental  payments  from  NTS
Development Company during 1996 and 1995.

There are no other reportable business  relationships  between the Partnership's
creditors,  customers,  and suppliers and officers of the Manager or the General
Partner as of December 31, 1997.















































                                     - 39 -

<PAGE>



                                     PART IV


Item 14.      Exhibits, Financial Statement Schedules, and Reports on Form 8-K
              ----------------------------------------------------------------

1.      Financial statements

        The financial  statements for the years ended  December 31, 1997,  1996,
        1995  together  with the report of Arthur  Andersen  LLP dated  March 6,
        1998,  appear in Item 8. The  following  financial  statement  schedules
        should be read in conjunction with such financial statements.

2.      Financial statement schedules

        Schedules:                                             Page No.
                                                               -------

        III - Real Estate and Accumulated Depreciation          41-42

        All other  schedules have been omitted  because they are not applicable,
        or not required,  or because the required information is included in the
        financial statements or notes thereto.

3.      Exhibits

        Exhibit No.                                            Page No.
        ----------                                             -------
         3.     Amended and Restated                              *
                Agreement and Certificate
                of Limited Partnership of
                NTS-Properties III

        10.     Management Agreement between                      *
                NTS Development Company and
                NTS-Properties III

        27.     Financial Data Schedule                       Included
                                                              herewith

        *       Incorporated by reference to documents filed with the Securities
                and  Exchange  Commission  in  connection  with  the  filing  of
                Registration Statements on Form S-11 on June 25, 1982 (effective
                October 13, 1982) under Commission File No. 2-78152.

4.      Reports on Form 8-K

        No reports on Form 8-K were filed during the three months ended December
        31, 1997.


                                     - 40 -

<PAGE>
<TABLE>


                               NTS-PROPERTIES III

             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                             AS OF DECEMBER 31, 1997

<CAPTION>


                                                                                    Peachtree
                                                        Plainview     Plainview     Corporate
                                                         Plaza II    Triad North      Center         Total
                                                       -----------   -----------   -----------   -----------

<S>                                                    <C>           <C>           <C>           <C>
Encumbrances                                                (A)           (B)           (B)

Initial cost to partnership:
  Land                                                 $ 1,379,172   $ 1,217,886   $ 1,408,375   $ 4,005,433
  Buildings and improvements                             4,963,604     4,512,172     6,231,114    15,706,890

Cost capitalized subsequent to acquisition:
  Improvements                                           2,415,430     1,258,383     1,929,973     5,603,786
  Carrying costs                                                --            --            --            --

Gross amount at which carried December 31, 1997 (C):
  Land                                                 $ 1,616,135   $ 1,295,856   $ 1,671,407   $ 4,583,398
  Buildings and improvements                             7,142,071     5,692,585     7,898,055    20,732,711
                                                       -----------   -----------   -----------   -----------

  Total                                                $ 8,758,206   $ 6,988,441   $ 9,569,462   $25,316,109
                                                       ===========   ===========   ===========   ===========

Accumulated depreciation                               $ 4,753,975   $ 4,162,798   $ 6,609,851   $15,526,624
                                                       ===========   ===========   ===========   ===========

Date of construction                                        N/A           N/A           N/A

Date Acquired                                              01/83         02/83         01/83

Life at which depreciation in
 latest income statement is
 computed                                                   (D)           (D)           (D)

<FN>

(A) First and second mortgage held by two insurance companies.

(B) First mortgage held by an insurance company.

(C) Aggregate cost of real estate for tax purposes is $25,355,586.

(D)  Depreciation is computed using the straight-line  method over the estimated
     useful lives of the assets which are 5 - 30 years for land improvements,  5
     - 30 years for buildings and improvements and 3 - 30 years for amenities.
</FN>
</TABLE>
                                     - 41 -

<PAGE>
<TABLE>


                               NTS-PROPERTIES III

             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<CAPTION>

                                                   Real            Accumulated
                                                  Estate           Depreciation
                                               ------------        ------------

<S>                                            <C>                 <C>
Balances at December 31, 1994                  $ 23,694,323        $ 13,451,387

Additions during period:
 Improvements (a)                                   414,424               --
 Depreciation (b)                                    --               1,015,382

Deductions during period:
 Retirements                                       (276,716)           (220,024)
                                               ------------        ------------

Balances at December 31, 1995                    23,832,031          14,246,745

Additions during period:
 Improvements (a)                                   160,532               --
 Depreciation (b)                                     --                894,435

Deductions during period:
 Retirements                                        (72,176)            (71,576)
                                               ------------        ------------

Balances at December 31, 1996                    23,920,387          15,069,604

Additions during period:
 Improvements (a)                                 1,856,340               --
 Depreciation (b)                                     --                831,231

Deductions during period:
 Retirements                                       (460,618)           (374,211)
                                               ------------        ------------

Balances at December 31, 1997                  $ 25,316,109        $ 15,526,624
                                               ============        ============

<FN>
(a)  The  additions  to  improvements  on this  schedule  will  differ  from the
     additions to land, buildings, amenities and construction in progress on the
     Statements  of Cash Flows  primarily due to the fact that  construction  in
     progress is not included in the real estate balance above.

(b)  The additions  charged to  accumulated  depreciation  on this schedule will
     differ from the  depreciation  and  amortization  on the Statements of Cash
     Flows due to the amortization of loan costs.
</FN>
</TABLE>

                                     - 42 -

<PAGE>




                                   SIGNATURES
                                   ----------

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


                                            NTS-PROPERTIES III
                                            ------------------
                                               (Registrant)

                                            BY:   NTS-Properties Associates,
                                                  General Partner
                                                  BY: NTS Capital Corporation,
                                                      General PartneR


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



Date: March 23, 1998


Pursuant to the  requirements  of the Securities and Exchange Act of 1934,  this
Form  10-K has been  signed  below by the  following  persons  on  behalf of the
registrant in their capacities and on the date indicated above.

              Signature                  Title
              ---------                  -----



/s/ J. D. Nichols                  General Partner of NTS-Properties
    J. D. Nichols                  Associates and Chairman of the Board and
                                   Sole Director of NTS Capital Corporation

/s/ Richard L. Good                President of NTS Capital Corporation
    Richard L. Good


/s/ John W. Hampton                Senior Vice President of NTS Capital
    John W. Hampton                Corporation


The Partnership is a limited  partnership and no proxy material has been sent to
the limited partners.




















                                     - 43 -


<PAGE>