<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K


                Annual Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

                   For the Fiscal Year Ended DECEMBER 31, 1999

                             Commission File Number
                                     0-13810


                       REAL ESTATE ASSOCIATES LIMITED VII
                        A CALIFORNIA LIMITED PARTNERSHIP


                  I.R.S. Employer Identification No. 95-3290316

         9090 WILSHIRE BLVD., SUITE 201, BEVERLY HILLS, CALIFORNIA 90211

        Registrant's Telephone Number, Including Area Code (310) 278-2191

      Securities Registered Pursuant to Section 12(b) or 12(g) of the Act:

                                      NONE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed with the Commission by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding twelve months (or 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 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]



<PAGE>   2
PART I.

ITEM 1. BUSINESS

Real Estate Associates Limited VII ("REAL VII" or the "Partnership") is a
limited partnership which was formed under the laws of the State of California
on May 24, 1983. On February 1, 1984, the Partnership offered 2,600 units
consisting of 10,400 limited partnership interests and warrants to purchase a
maximum of 5,200 additional limited partnership interests through a public
offering managed by E.F. Hutton Inc.

The general partners of the Partnership are National Partnership Investments
Corp. ("NAPICO"), a California Corporation (the "Corporate General Partner"),
and National Partnership Investments Associates II ("NAPIA II"). NAPIA II is a
limited partnership formed under the California Limited Partnership Act and
consists of Mr. Charles H. Boxenbaum and two unrelated individuals as limited
partners. The business of the Partnership is conducted primarily by NAPICO.

Prior to December 30, 1998, NAPICO was a wholly owned subsidiary of Casden
Investment Corporation ("CIC"), which is wholly owned by Alan I. Casden. On
December 30, 1998, Casden Properties Operating Partnership, L.P. (the "Operating
Partnership"), a majority owned subsidiary of Casden Properties Inc., a real
estate investment trust organized by Alan I. Casden, purchased a 95.25% economic
interest in NAPICO. The current members of NAPICO's Board of Directors are
Charles H. Boxenbaum, Bruce E. Nelson and Alan I.
Casden.

The Partnership holds limited partnership interests in 21 local limited
partnerships as of December 31, 1999. The Partnership also holds a general
partner interest in Real Estate Associates IV ("REA IV") which, in turn, holds
limited partnership interests in 15 additional local limited partnerships;
therefore, the Partnership holds interests, either directly or indirectly
through REA IV, in 36 local limited partnerships. The other general partner of
REA IV is NAPICO. In December 1998, the Partnership sold its interest in 11
local limited partnerships to the Operating Partnership. Each of the local
partnerships owns a low income housing project which is subsidized and/or has a
mortgage note payable to or is insured by agencies of the federal or local
government.

In order to stimulate private investment in low income housing, the federal
government and certain state and local agencies have provided significant
ownership incentives, including among others, interest subsidies, rent
supplements, and mortgage insurance, with the intent of reducing certain market
risks and providing investors with certain tax benefits, plus limited cash
distributions and the possibility of long-term capital gains. There remain,
however, significant risks. The long-term nature of investments in government
assisted housing limits the ability of the Partnership to vary its portfolio in
response to changing economic, financial, and investment conditions. Such
investments are also subject to changes in local economic circumstances and
housing patterns, as well as rising operating costs, vacancies, rent collection
difficulties, energy shortages, and other factors which have an impact on real
estate values. These projects also require greater management expertise and may
have higher operating expenses than conventional housing projects.

Under recently adopted law and policy, the United States Department of Housing
and Urban Development ("HUD") has determined not to renew the Housing Assistance
Payment ("HAP") Contracts on a long term basis on the existing terms. In
connection with renewals of the HAP Contracts under such new law and policy, the
amount of rental assistance payments under renewed HAP Contracts will be based
on market rentals instead of above market rentals, which may be the case under
existing HAP Contracts. The payments under the renewed HAP Contracts are not
expected to be in an amount that would provide sufficient cash flow to permit
owners of properties subject to HAP Contracts to meet the debt service
requirements of existing loans insured by the Federal Housing Administration of
HUD ("FHA") unless such mortgage loans are restructured. In order to address the
reduction in payments under HAP Contracts as a result of this new policy, the
Multi-family Assisted Housing Reform and Affordability Act of 1997 ("MAHRAA"),
which was adopted in October 1997, provides for the restructuring of mortgage
loans insured by the FHA with respect to properties subject to the Section 8
program.



                                       1
<PAGE>   3

Under MAHRAA, an FHA-insured mortgage loan can be restructured into a first
mortgage loan which will be amortized on a current basis and a low interest
second mortgage loan payable to FHA which will only be payable on maturity of
the first mortgage loan. This restructuring results in a reduction in annual
debt service payable by the owner of the FHA-insured mortgage loan and is
expected to result in an insurance payment from FHA to the holder of the
FHA-insured loan due to the reduction in the principal amount. MAHRAA also
phases out project- based subsidies on selected properties serving families not
located in rental markets with limited supply, converting such subsidies to a
tenant-based subsidy.

On September 11, 1998, HUD issued interim regulations implementing MAHRAA and
final regulations are expected to be issued in 2000.

When the HAP Contracts are subject to renewal, there can be no assurance that
the local limited partnerships in which the Partnership has an investment will
be permitted to restructure its mortgage indebtedness under MAHRAA. In addition,
the economic impact on the Partnership of the combination of the reduced
payments under the HAP Contracts and the restructuring of the existing
FHA-insured mortgage loans under MAHRAA is uncertain.

The partnerships in which the Partnership has invested are principally existing
local limited partnerships. The Partnership became the limited partner in these
local limited partnerships pursuant to arm's-length negotiations with the local
partnership's general partners who are often the original project developers. In
certain other cases, the Partnership invested in newly formed local partnerships
which, in turn, acquired the projects. As a limited partner, the Partnership's
liability for obligations of the local limited partnership is limited to its
investment. The local general partner of the local limited partnership retains
the responsibility of maintaining, operating and managing the project. Under
certain circumstances of default, the Partnership has the right to replace the
general partner of the local limited partnerships, but otherwise does not have
control of sale, refinancing, etc.

Although each of the partnerships in which the Partnership has invested will
generally own a project which must compete in the market place for tenants,
interest subsidies and rent supplements from governmental agencies make it
possible to offer these dwelling units to eligible "low income" tenants at a
cost significantly below the market rate for comparable conventionally financed
dwelling units in the area.



                                       2
<PAGE>   4

During 1999, all of the projects in which the Partnership had invested were
substantially rented. The following is a schedule of the status, as of December
31, 1999, of the projects owned by local partnerships in which the Partnership,
either directly or indirectly through REA IV, has invested.


            SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS
                       IN WHICH REAL VII HAS AN INVESTMENT
                                DECEMBER 31, 1999

<TABLE>
<CAPTION>
                                                Units Authorized
                                                   For Rental
                                                Assistance Under
                                                  Section 8 or
                                                   Other Rent                            Percentage of
                                 No. of             Supplement               Units        Total Units
Name and Location                 Units              Program               Occupied        Occupied
-----------------                 -----              -------               --------        --------
<S>                              <C>            <C>                        <C>           <C>
Aristocrat Manor                   114                114/0                   88             77%
  Hot Springs, AR

Arkansas City Apts.                 16                 0/12                   13             81%
  Arkansas City, AR

Bellair Manor Apts.                 68                 68/7                   68            100%
  Niles, OH

Birch Manor Apts. I                 60                 60/0                   60            100%
  Medina, OH

Birch Manor Apts II                 60                 60/0                   60            100%
  Medina, OH

Bluewater Apts.                    116                 None                  105             91%
  Port Huron, MI

Clarkwood Apts. I                   72                 28/0                   68             94%
  Elyria, OH

Clarkwood Apts. II                 120                120/0                  114             95%
  Elyria, OH

Cleveland Apts. I                   50                 50/0                   50            100%
  Hayti, MO

Cleveland Apts. II                  50                 50/0                   50            100%
  Hayti, MO

Cleveland Apts. III                 21                 21/0                   21            100%
  Hayti, MO
</TABLE>



                                       3
<PAGE>   5

            SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS
                       IN WHICH REAL VII HAS AN INVESTMENT
                                DECEMBER 31, 1999
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                 Units Authorized
                                                    For Rental
                                                 Assistance Under
                                                   Section 8 or
                                                    Other Rent                           Percentage of
                               No. of               Supplement                Units       Total Units
Name and Location               Units                 Program               Occupied       Occupied
-----------------               -----                 -------               --------       --------
<S>                              <C>            <C>                        <C>           <C>
Danbury Park Manor                 151                 86/0                  141             93%
  Superior Township, MI

Desoto Apts.                        42                 42/0                   42            100%
  Desoto, MO

Dexter Apts.                        50                 50/0                   46             92%
  Dexter, MO

Edgewood Terrace II                258                103/0                  252             98%
  Washington, DC

Goodlette Arms Apts.               250                250/0                  249            100%
  Naples, FL

Hampshire House                    150                150/0                  150            100%
  Warren, OH

Henrico Arms                       232                232/0                  232            100%
  Richmond, VA

Ivywood Apts.                      124                124/0                  123             99%
  Columbus, OH

Jasper County Prop.                 24                 None                   24            100%
  Heidelberg, MS

Nantucket Apts.                     60                 59/0                   59             98%
  Alliance, OH

Newton Apts.                        36                 None                   30             83%
  Newton, MS

Oak Hill Apts.                     120                120/0                  114             95%
  Franklin, PA

Oakview Apts.                       32                  0/7                   29             91%
  Monticello, AR
</TABLE>



                                       4
<PAGE>   6

            SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS
                       IN WHICH REAL VII HAS AN INVESTMENT
                                DECEMBER 31, 1999
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                           Units Authorized
                                              For Rental
                                           Assistance Under
                                             Section 8 or
                                              Other Rent                     Percentage of
                               No. of         Supplement           Units      Total Units
Name and Location               Units           Program          Occupied      Occupied
-----------------               -----           -------          --------      --------
<S>                              <C>       <C>                   <C>         <C>
Oakwood Park I Apts                50             None             49            98%
  Lorain, OH

Oakwood Park II Apts               78             None             71            91%
  Lorain, OH

Pachuta Apartments                 16             0/16             16           100%
  Pachuta, MS

Parkway Towers Apt                104            104/0            101            97%
  E. Providence, RI

Pebbleshire Apts.                 120             24/0            120           100%
  Vernon Hills, IL

Rand Grove Village                212            212/0            204            96%
  Palatine, IL

Richards Park Apts.                60             24/0             59            98%
  Elyria, OH

Shubuta Properties                 16             0/16             16           100%
  Shubuta, MS

South Glen Apts.                  159             14/0            155            97%
  Trenton, MI

Tradewinds East                   150             None            139            93%
  Essexville, MI

Warren Heights Apts II             88             88/0             85            97%
  Warren, OH

Yorkview Estates                   50             50/0             47            94%
  Massillon, OH                 -----        ---------          -----


  TOTAL                         3,379         2,303/51          3,250            96%
                                =====        =========          =====
</TABLE>



                                       5
<PAGE>   7

ITEM 2. PROPERTIES

The local limited and general partnerships in which REAL VII holds interests own
various multi-family rental properties. See Item 1 for information pertaining to
these properties.


ITEM 3. LEGAL PROCEEDINGS

On August 27, 1998, two investors holding an aggregate of eight units of limited
partnership interests in Real Estate Associates Limited III (an affiliated
partnership in which NAPICO is the managing general partner) and two investors
holding an aggregate of five units of limited partnership interest in Real
Estate Associates Limited VI (another affiliated partnership in which NAPICO is
the managing general partner) commenced an action in the United States District
Court for the Central District of California against the Partnership, NAPICO and
certain other affiliated entities. The complaint alleges that the defendants
breached their fiduciary duty to the limited partners of certain NAPICO managed
partnerships and made materially false and misleading statements in the consent
solicitation statements sent to the limited partners of such partnerships
relating to approval of the transfer of partnership interests in limited
partnerships, owning certain of the properties, to the Operating Partnership
organized by an affiliate of NAPICO. The plaintiffs seek equitable relief, as
well as compensatory damages and litigation related costs. On August 4, 1999,
one investor holding one unit of limited partnership interest in Housing
Programs Limited (another affiliated partnership in which NAPICO is the managing
general partner) commenced a virtually identical action in the United States
District Court for the Central District of California against the Partnership,
NAPICO and certain other affiliated entities. The managing general partner of
such NAPICO managed partnerships and the other defendants believe that the
plaintiffs' claims are without merit and intend to contest the actions
vigorously.

As of December 31, 1999, the Partnership's Corporate General Partner was a
plaintiff or defendant in several lawsuits. None of these suits were related to
REAL VII.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

In August 1998, a consent solicitation statement was sent to the limited
partners setting forth the terms and conditions of the purchase of the limited
partners' interests, held for investment by the Partnership, by a real estate
investment trust organized by an affiliate of NAPICO, together with certain
amendments to the Partnership Agreement and other disclosures of various
conflicts of interest in connection with the proposed transaction. Prior to the
sale of the partnership interests in 1998, the consents of the limited partners
to the sale and amendments to the Partnership Agreement were obtained.

PART II.

ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP INTERESTS AND RELATED SECURITY
        HOLDER MATTERS.

The Limited Partnership Interests are not traded on a public exchange but were
sold through a public offering managed by E.F. Hutton Inc. It is not anticipated
that any public market will develop for the purchase and sale of any partnership
interest. Limited Partnership Interests may be transferred only if certain
requirements are satisfied. At December 31, 1999, there were 3,180 registered
holders of units in the Partnership. No distributions have been made from the
inception of the Partnership to December 31, 1999. The Partnership has invested
in certain government assisted projects under programs which in many instances
restrict the cash return available to project owners. The Partnership was not
designed to provide cash distributions to investors in circumstances other than
refinancing or disposition of its investments in limited partnerships. In March
1999, the Partnership made a distribution of $272,250 to the limited partners
and $2,750 to the general partners, using proceeds from the sale of the
partnership interests.



                                       6
<PAGE>   8

ITEM 6.     SELECTED FINANCIAL DATA:


<TABLE>
<CAPTION>
                                                            Year Ended December 31,
                               ----------------------------------------------------------------------------------------
                                   1999               1998               1997               1996               1995
                               ------------       ------------       ------------       ------------       ------------
<S>                            <C>                <C>                <C>                <C>                <C>
Loss From Operations           $ (2,402,772)      $ (3,639,747)      $ (3,472,967)      $ (3,240,566)      $ (3,234,086)

Gain on Sale of Limited
   Partnership Interests                 --          7,132,262                 --                 --                 --

Distributions From
   Limited Partnerships
   Recognized as Income             357,404            199,985            234,084             63,515             19,632

Equity in Loss of Limited
   Partnerships and
   Amortization of
   Acquisition Costs               (145,660)        (9,496,388)           (61,791)          (243,392)          (511,033)
                               ------------       ------------       ------------       ------------       ------------

Net Loss                       $ (2,191,028)      $ (5,803,888)      $ (3,300,674)      $ (3,420,443)      $ (3,725,487)
                               ============       ============       ============       ============       ============

Net Loss per Limited
   Partnership Interest        $       (104)      $       (276)      $       (157)      $       (163)      $       (177)
                               ============       ============       ============       ============       ============



Total assets                   $    335,843       $    794,295       $ 17,422,816       $ 18,321,519       $ 19,183,742
                               ============       ============       ============       ============       ============

Investments in Limited
   Partnerships                $    239,464       $    359,566       $ 16,870,487       $ 17,873,759       $ 18,600,961
                               ============       ============       ============       ============       ============

Notes Payable                  $ 17,424,501       $ 17,424,501       $ 24,869,501       $ 24,869,501       $ 24,869,501
                               ============       ============       ============       ============       ============

Fees and Expenses Due to
   General Partner             $  5,006,313       $  4,506,134       $  3,762,494       $  3,213,854       $  2,630,214
                               ============       ============       ============       ============       ============
</TABLE>



                                       7
<PAGE>   9

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

LIQUIDITY

The Partnership's primary sources of funds include interest income on money
market funds and certificates of deposit and distributions from local
partnerships in which the Partnership has invested. It is not expected that any
of the local partnerships in which the Partnership has invested will generate
cash flow sufficient to provide for distributions to the Partnership's limited
partners in any material amount. The Partnership made a cash distribution to
investors in March 1999, using proceeds from the disposition of its investments
in certain limited partnerships.

CAPITAL RESOURCES

The Partnership received $39,000,000 in subscriptions for units of limited
partnership interests (at $5,000 per unit) during the period March 7, 1984 to
June 11, 1985, pursuant to a registration statement on Form S-11.

RESULTS OF OPERATIONS

The Partnership was formed to provide various benefits to its partners as
discussed in Item 1. It is anticipated that the local limited partnerships in
which REAL VII has invested could produce tax losses for as long as 20 years.
Tax benefits will decline over time as the advantages of accelerated
depreciation are greatest in the earlier years, as deductions for interest
expense will decrease as mortgage principal is amortized and as the Tax Reform
Act of 1986 limits the deductions available.

At December 31, 1999, the Partnership has investments in 36 limited
partnerships, all of which own housing projects that were substantially all
rented. The Partnership sold its interests in 11 local partnerships in December
1998. The Partnership, as a limited partner, is entitled to 93% to 99% of the
profits and losses of the local limited partnerships. The Partnership accounts
for its investments in the local limited partnerships on the equity method,
thereby adjusting its investment balance by its proportionate share of the
income or loss of the local limited partnerships. Equity in losses of limited
partnerships are recognized in the financial statements until the limited
partnership investment account is reduced to a zero balance. Losses incurred
after the limited partnership investment account is reduced to zero are not
recognized. Limited partners are not liable for losses beyond their contributed
capital.

Distributions received from limited partnerships are recognized as return of
capital until the investment balance has been reduced to zero or to a negative
amount equal to future capital contributions required. Subsequent distributions
received are recognized as income.

The total income (losses) from the local partnerships that were allocated to the
Partnership was $289,000, ($527,000) and ($441,000) for the years ended December
31, 1999, 1998 and 1997, respectively. However, because losses incurred after
the investment account is reduced to a zero balance are not recognized, the
Partnership recognized equity in (loss) income of limited partnerships of
$(145,660), $61,964 and $(61,791) for the years ended December 31, 1999, 1998
and 1997, respectively. In addition, the loss recorded by the Partnership in
1998 includes impairment losses of $9,558,352 recognized on the carrying values
of certain investments in local limited partnerships in 1998. The loss increased
in 1999 as a result of the sale of partnership interests in December 1998, which
had generated income in prior years. The cumulative amount of the unrecognized
equity in losses of certain limited partnerships was approximately $9,741,000
and $9,916,000 as of December 31, 1999 and 1998, respectively.



                                       8
<PAGE>   10

Distributions from the local limited partnerships in which the Partnership did
not have a positive investment balance were $357,404, $199,985 and $234,084 for
the years ended December 31, 1999, 1998 and 1997, respectively. These amounts
were recognized as income on the accompanying statements of operations, in
accordance with the equity method of accounting. As a result of the impairment
losses recognized in 1998, there were more local limited partnerships with no
positive partner investment balance, which caused those types of distributions
to increase.

As of December 31, 1999, 1998 and 1997, the Partnership has cash and cash
equivalents of $96,379, $0 and $447,200, respectively. Substantially all of
these amounts are on deposit with two high credit quality financial
institutions, earning interest. This resulted in the Partnership earning $2,723,
$18,004 and $15,330 in interest income for the years ended December 31, 1999,
1998 and 1997, respectively. The amount of interest income varies with market
rates available on investments and with the amount of funds available for
investment. Cash equivalents can be converted to cash to meet obligations of the
Partnership as they arise. The Partnership intends to continue investing
available funds in this manner.

The Partnership is obligated on non-recourse notes payable of $17,424,501 at
December 31, 1999 and 1998, which bear interest at 9.5 percent per annum and
have principal maturities ranging from August 1999 to December 2002. The notes
and related interest are payable from cash flow generated from operations of the
related rental properties as defined in the notes. These obligations are
collateralized by the Partnership's investments in the limited partnerships.
Unpaid interest is due at maturity of the notes. Because the Partnership was
relieved of certain notes at the end of 1998 in connection with the sale of the
limited partnership interests, interest expense has decreased from $2,329,415
and $2,344,792 for 1998 and 1997, respectively, to $1,652,605 for 1999.

A recurring partnership expense is the annual management fee. The fee is payable
to the Corporate General Partner of the Partnership and is calculated at .5
percent of the Partnership's original remaining invested assets. The management
fee is paid to the Corporate General Partner for its continuing management of
partnership affairs. The fee is payable beginning with the month following the
Partnership's initial investment in a local limited partnership. Because of the
decrease in invested assets at the end of 1998 as a result of the sale of
partnership interests, management fees decreased from $743,640 for 1998 and 1997
to $500,179 for 1999.

Under recently adopted law and policy, the United States Department of Housing
and Urban Development ("HUD") has determined not to renew the Housing Assistance
Payment ("HAP") Contracts on a long term basis on the existing terms. In
connection with renewals of the HAP Contracts under such new law and policy, the
amount of rental assistance payments under renewed HAP Contracts will be based
on market rentals instead of above market rentals, which may be the case under
existing HAP Contracts. The payments under the renewed HAP Contracts are not
expected to be in an amount that would provide sufficient cash flow to permit
owners of properties subject to HAP Contracts to meet the debt service
requirements of existing loans insured by the Federal Housing Administration of
HUD ("FHA") unless such mortgage loans are restructured. In order to address the
reduction in payments under HAP Contracts as a result of this new policy, the
Multi-family Assisted Housing Reform and Affordability Act of 1997 ("MAHRAA"),
which was adopted in October 1997, provides for the restructuring of mortgage
loans insured by the FHA with respect to properties subject to the Section 8
program. Under MAHRAA, an FHA-insured mortgage loan can be restructured into a
first mortgage loan which will be amortized on a current basis and a low
interest second mortgage loan payable to FHA which will only be payable on
maturity of the first mortgage loan. This restructuring results in a reduction
in annual debt service payable to the owner of the FHA-insured mortgage loan and
is expected to result in an insurance payment from FHA to the holder of the
FHA-insured loan due to the reduction in the principal amount. MAHRAA also
phases out project-based subsidies on selected properties serving families not
located in rental markets with limited supply, converting such subsidies to a
tenant-based subsidy.



                                       9
<PAGE>   11

On September 11, 1998, HUD issued interim regulations implementing MAHRAA and
final regulations are expected to be issued in 2000.

When the HAP Contracts are subject to renewal, there can be no assurance that
the local limited partnerships in which the Partnership has an investment will
be permitted to restructure their mortgage indebtedness under MAHRAA. In
addition, the economic impact on the Partnerships of the combination of the
reduced payments under the HAP Contracts and the restructuring of the existing
FHA-insured mortgage loans under MAHRAA is uncertain.

As a result of the foregoing, the Partnership, in 1997, undertook an extensive
review of disposition, refinancing or re-engineering alternatives for the
properties in which the limited partnerships have invested and are subject to
HUD mortgage and rental subsidy programs. The Partnership has incurred expenses
in connection with this review by various third party professionals, including
accounting, legal, valuation, structural and engineering costs, which amounted
to $50,730, $327,951 and $167,778 for the years ended December 31, 1999, 1998
and 1997, respectively, and are included in general and administrative expenses.

On December 30, 1998, the Partnership sold its limited partnership interests in
11 local limited partnerships with a total carrying value of $6,588,686 to the
Operating Partnership. The sale resulted in proceeds to the Partnership of
$400,000 and a net gain of $7,132,262, after being relieved of notes and
interest payable of $13,515,691 and incurring selling costs of $194,743. The
cash proceeds were held in escrow at December 31, 1998, and were collected in
1999. In March 1999, the Partnership made cash distributions of $272,250 to the
limited partners and $2,750 to the general partners, using proceeds from the
sale of the partnership interests.

The Operating Partnership purchased such limited partner interests for cash,
which it raised in connection with a private placement of its equity securities.
The purchase was subject to, among other things, (i) the purchase of the general
partner interests in the local limited partnerships by the Operating
Partnership; (iii) the approval of HUD and certain state housing finance
agencies; and (iii) the consent of the limited partners to the sale of the local
limited partnership interests held for investment by the Partnership.

In August 1998, a consent solicitation statement was sent to the limited
partners setting forth the terms and conditions of the purchase of the limited
partners' interests held for investment by the Partnership, together with
certain amendments to the Partnership Agreement and other disclosures of various
conflicts of interest in connection with the proposed transaction. Prior to the
sale of the partnership interests, the consents of the limited partners to the
sale and amendments to the Partnership Agreement were obtained.

Operating expenses, other than interest expense and management fees, consist of
legal and accounting fees for services rendered to the Partnership and general
and administrative expenses. Legal and accounting fees were generally consistent
and were $118,460, $125,129 and $109,967 for the years ended December 31, 1999,
1998 and 1997, respectively. General and administrative expenses were $134,251,
$459,567 and $289,898 for the years ended December 31, 1999, 1998 and 1997,
respectively. Included in administrative expenses are reimbursements to NAPICO
for certain expenses, which totaled $16,920, $46,979 and $46,975 for the years
ended December 31, 1999, 1998 and 1997, respectively. Also included in general
and administrative expenses for 1999, 1998 and 1997 is $50,730, $327,951 and
$167,778, respectively, related to the aforementioned third party reviewed of
the properties owned by the local partnerships. Accounts payable at December 31,
1998 includes $33,882 of such costs.

Revenues and expenses of the local limited partnerships decreased during the
year ended December 31, 1999, as compared to prior years, as a result of the
sale of 11 partnership interests on December 30, 1998.

Total revenue for the local partnerships has decreased from $28,239,000 and
$28,267,000 for the years ended December 31, 1998 and 1997, respectively, to
$19,626,000 for the year ended December 31, 1999.



                                       10
<PAGE>   12

Total expenses for the local partnerships decreased from $29,421,000 and
$29,397,000 for the years ended December 31, 1998 and 1997, respectively, to
$19,980,000 for the year ended December 31, 1999.

The total net loss for the local partnerships for 1999, 1998 and 1997 aggregated
$354,000, $1,182,000 and $1,095,000, respectively. The income (losses) allocated
to the Partnership were $289,000, ($527,000) and ($441,000) for 1999, 1998 and
1997, respectively.

During the year ended December 31, 1997, the local limited partnership that owns
Meherrin consummated the sale of the apartment complex. The Partnership received
$187,297 which was recognized as distributions to income. The Partnership's
financial statements reflect no investment in the Meherrin Local Partnership,
thus no gain was recognized upon the sale.

The Partnership, as a limited partner in the local partnerships in which it has
invested, is subject to the risks incident to the construction, management and
ownership of improved real estate. The Partnership investments are also subject
to adverse general economic conditions and, accordingly, the status of the
national economy, including substantial unemployment, concurrent inflation and
changing legislation, could increase vacancy levels, rental payment defaults and
operating expenses, which in turn, could substantially increase the risk of
operating losses for the projects.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Partnership is exposed to market risk primarily due to fluctuations in
interest rates. Specifically, the Partnership is subject to market risk
resulting from fluctuations in the general level of U.S. interest rates as the
Partnership's debt of $17,424,501 is based on a weighted average fixed rate of
9.6% per annum. As a result, the Partnership will be obligated to pay
contractually agreed upon rates of interest on its fixed rate debt, unless
management refinances its existing fixed rate debt and potentially incur
substantial prepayment penalties.

The following table provides information about the Partnership's interest rate
sensitive financial instruments, including, amounts due at maturity, principal
amortization, weighted average interest rates and fair market values as of
December 31, 1999 (in thousands):

<TABLE>
<CAPTION>
                                                                                                                     Fair Market
                              2000           2001           2002      2003    2004    Thereafter        Total           Value
                              ----           ----           ----      ----    ----    ----------        -----           -----
<S>                      <C>               <C>            <C>         <C>     <C>     <C>          <C>               <C>
Interest Rate Sensitive
  Liabilities:

Fixed Rate Debt .....    $  13,279,000     $2,555,000    $1,590,501                                $17,424,501       $17,424,501
     Weighted Average
     Interest Rate ..              9.5%           9.8%           10%                                       9.6%
</TABLE>


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements and Supplementary Data are listed under Item 14.


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

Not applicable.



                                       11
<PAGE>   13

                       REAL ESTATE ASSOCIATES LIMITED VII
                       (A California limited partnership)

                              FINANCIAL STATEMENTS,
                          FINANCIAL STATEMENT SCHEDULES
                   AND INDEPENDENT PUBLIC ACCOUNTANTS' REPORT
                                DECEMBER 31, 1999



                                       12
<PAGE>   14

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of
Real Estate Associates Limited VII
(A California limited partnership)

We have audited the accompanying balance sheets of Real Estate Associates
Limited VII (a California limited partnership) as of December 31, 1999 and 1998,
and the related statements of operations, partners' deficiency and cash flows
for each of the three years in the period ended December 31, 1999. Our audits
also included the financial statement schedules listed in the index in item 14.
These financial statements and financial statement schedules are the
responsibility of the management of the Partnership. Our responsibility is to
express an opinion on these financial statements and financial statement
schedules based on our audits. We did not audit the financial statements of
certain limited partnerships, the investments in which are reflected in the
accompanying financial statements using the equity method of accounting. The
investments in these limited partnerships represent 26 percent of total assets
as of December 31, 1998, and the equity in loss of these limited partnerships
represents 1 percent and 13 percent of the total net loss of the Partnership for
the years ended December 31, 1998 and 1997, respectively, and represent a
substantial portion of the investee information in Note 2 and the financial
statement schedules. The financial statements of these limited partnerships were
audited by other auditors. Their reports have been furnished to us and our
opinion, insofar as it relates to the amounts included for these limited
partnerships, is based solely on the reports of the other auditors.

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 our audits and the reports of other auditors provide a reasonable
basis for our opinion.

In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Real Estate Associates Limited VII as of December 31,
1999 and 1998, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1999 in conformity with
generally accepted accounting principles. Also, in our opinion, based on our
audits and the reports of other auditors, such financial statement schedules,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.

The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 3 to the
financial statements, the Partnership's recurring losses from operations,
partners' deficiency and past due notes and related accrued interest payable of
$31,202,449 raise substantial doubt about the Partnership's ability to continue
as a going concern. Management's plans concerning these matters are also
described in Note 3. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.


DELOITTE & TOUCHE LLP

Los Angeles, California
March 31, 2000



                                       13
<PAGE>   15

                       REAL ESTATE ASSOCIATES LIMITED VII
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                                 BALANCE SHEETS

                           DECEMBER 31, 1999 AND 1998

                                     ASSETS

<TABLE>
<CAPTION>
                                                              1999               1998
                                                          ------------       ------------
<S>                                                       <C>                <C>
INVESTMENTS IN LIMITED PARTNERSHIPS (Note 2)              $    239,464       $    359,566

CASH                                                            96,379                 --

CASH DUE FROM ESCROW (Note 2)                                       --            400,000

OTHER ASSETS                                                        --             34,729
                                                          ------------       ------------

          TOTAL ASSETS                                    $    335,843       $    794,295
                                                          ============       ============


                      LIABILITIES AND PARTNERS' DEFICIENCY

LIABILITIES:
     Notes payable (Note 3)                               $ 17,424,501       $ 17,424,501
     Accrued interest payable (Note 3)                      23,588,625         22,023,528
     Accrued fees and expenses
        due general partner (Note 4)                         5,006,313          4,506,134
     Accounts payable and other liabilities (Note 2)            64,456            122,156
                                                          ------------       ------------

                                                            46,083,895         44,076,319
                                                          ------------       ------------

COMMITMENTS AND CONTINGENCIES (Notes 4 and 5)

PARTNERS' DEFICIENCY:
     General partners                                         (780,611)          (755,951)
     Limited partners                                      (44,967,441)       (42,526,073)
                                                          ------------       ------------

                                                           (45,748,052)       (43,282,024)
                                                          ------------       ------------
           TOTAL LIABILITIES AND PARTNERS'
                DEFICIENCY                                $    335,843       $    794,295
                                                          ============       ============
</TABLE>



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



                                       14
<PAGE>   16

                       REAL ESTATE ASSOCIATES LIMITED VII
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                            STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


<TABLE>
<CAPTION>
                                                        1999               1998             1997
                                                     -----------       -----------       -----------
<S>                                                  <C>               <C>               <C>
REVENUE:
     Interest and other income                       $     2,723       $    18,004       $    15,330
                                                     -----------       -----------       -----------

OPERATING EXPENSES:
     Interest (Note 3)                                 1,652,605         2,329,415         2,344,792
     Management fees - general partner (Note 4)          500,179           743,640           743,640
     General and administrative (Note 4)                 134,251           459,567           289,898
     Legal and accounting                                118,460           125,129           109,967
                                                     -----------       -----------       -----------

                                                       2,405,495         3,657,751         3,488,297
                                                     -----------       -----------       -----------

LOSS FROM OPERATIONS                                  (2,402,772)       (3,639,747)       (3,472,967)

GAIN ON SALE OF LIMITED PARTNERSHIP
     INTERESTS (Note 2)                                       --         7,132,262                --

DISTRIBUTIONS FROM LIMITED
     PARTNERSHIP RECOGNIZED
     AS INCOME (Note 2)                                  357,404           199,985           234,084

EQUITY IN LOSS OF LIMITED
     PARTNERSHIPS AND AMORTIZATION
     OF ADDITIONAL BASIS AND
     ACQUISITION COSTS (Note 2)                         (145,660)       (9,496,388)          (61,791)
                                                     -----------       -----------       -----------

NET LOSS                                             $(2,191,028)      $(5,803,888)      $(3,300,674)
                                                     ===========       ===========       ===========

NET LOSS PER LIMITED PARTNERSHIP
     INTEREST                                        $      (104)      $      (276)      $      (157)
                                                     ===========       ===========       ===========
</TABLE>



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



                                       15
<PAGE>   17

                       REAL ESTATE ASSOCIATES LIMITED VII
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                       STATEMENTS OF PARTNERS' DEFICIENCY
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997



<TABLE>
<CAPTION>
                                       General           Limited
                                      Partners           Partners            Total
                                    ------------       ------------       ------------
<S>                                 <C>                <C>                <C>
DEFICIENCY, January 1, 1997         $   (664,905)      $(33,512,557)      $(34,177,462)

    Net loss for 1997                    (33,007)        (3,267,667)        (3,300,674)
                                    ------------       ------------       ------------

DEFICIENCY, December 31, 1997           (697,912)       (36,780,224)       (37,478,136)

    Net loss for 1998                    (58,039)        (5,745,849)        (5,803,888)
                                    ------------       ------------       ------------

DEFICIENCY, December 31, 1998           (755,951)       (42,526,073)       (43,282,024)

    Distributions to partners             (2,750)          (272,250)          (275,000)

    Net loss for 1999                    (21,910)        (2,169,118)        (2,191,028)
                                    ------------       ------------       ------------

DEFICIENCY, December 31, 1999       $   (780,611)      $(44,967,441)      $(45,748,052)
                                    ============       ============       ============
</TABLE>



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



                                       16
<PAGE>   18
                       REAL ESTATE ASSOCIATES LIMITED VII
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                            STATEMENTS OF CASH FLOWS
            FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


<TABLE>
<CAPTION>
                                                                   1999              1998              1997
                                                                -----------       -----------       -----------
<S>                                                             <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                   $(2,191,028)      $(5,803,888)      $(3,300,674)
     Adjustments to reconcile net loss to net cash
        used in operating activities:
           Gain on sale of limited partnership interests                 --        (7,132,262)               --
           Equity in loss of limited partnerships
               and amortization of additional basis
               and acquisition costs                                145,660         9,496,388            61,791
            Decrease in other assets                                 34,729            70,400                --
            Increase in accrued interest payable                  1,565,097         2,069,181         1,759,601
            Increase in accrued fees and expenses
               due general partner                                  500,179           743,640           548,640
            (Decrease) increase in accounts payable                 (57,700)            5,844            93,730
                                                                -----------       -----------       -----------

                  Net cash used in operating activities              (3,063)         (550,697)         (836,912)
                                                                -----------       -----------       -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Costs related to sale of partnership interest                       --          (194,743)               --
     Distributions from limited partnerships recognized
        as a return of capital                                       26,734           461,516           966,260
     Capital contributions to limited partnerships                  (52,292)          (35,669)          (24,779)
     Proceeds from sale of limited partnership interests            400,000                --                --
                                                                -----------       -----------       -----------

                 Net cash provided by investing activities          374,442           231,104           941,481
                                                                -----------       -----------       -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Payment of notes payable                                            --          (127,607)               --
     Distributions to partners                                     (275,000)               --                --
                                                                -----------       -----------       -----------

                 Net cash used in financing activities             (275,000)         (127,607)               --
                                                                -----------       -----------       -----------

NET INCREASE (DECREASE) IN CASH                                      96,379          (447,200)          104,569

CASH, BEGINNING OF YEAR                                                  --           447,200           342,631
                                                                -----------       -----------       -----------

CASH, END OF YEAR                                               $    96,379       $        --       $   447,200
                                                                ===========       ===========       ===========

SUPPLEMENTAL DISCLOSURE OF
   CASH FLOW INFORMATION
     Cash paid during the year for interest                     $    87,508       $   260,234       $   585,191
                                                                ===========       ===========       ===========

SUPPLEMENTAL SCHEDULE OF
   NON-CASH FINANCING ACTIVITIES
     See Note 2 to financial statements regarding notes
     and interest payable
</TABLE>


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



                                       17
<PAGE>   19

                       REAL ESTATE ASSOCIATES LIMITED VII
                       (a California limited partnership)

                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999


1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        ORGANIZATION

        Real Estate Associates Limited VII (the "Partnership") was formed under
        the California Limited Partnership Act on May 24, 1983. The Partnership
        was formed to invest primarily in other limited partnerships or joint
        ventures which own and operate primarily federal, state or local
        government-assisted housing projects. The general partners are Coast
        Housing Investments Associates, a limited partnership and National
        Partnership Investments Corp. (NAPICO), the Corporate General Partner,
        and National Partnership Investments Associates II (NAPIA II), a limited
        partnership. The business of REAL VII is conducted primarily by NAPICO.

        Prior to December 30, 1998, NAPICO was a wholly owned subsidiary of
        Casden Investment Corporation ("CIC"), which is wholly owned by Alan I.
        Casden. On December 30, 1998, Casden Properties Operating Partnership,
        L.P. (the "Operating Partnership"), a majority owned subsidiary of
        Casden Properties Inc., a real estate investment trust organized by Alan
        I. Casden, purchased a 95.25% economic interest in NAPICO.

        These financial statements include the accounts of Real Estate
        Associates Limited VII and Real Estate Associates IV ("REA IV"), a
        California general partnership in which the Partnership holds a 99
        percent general partner interest. Losses in excess of the minority
        investment that would otherwise be attributed to the minority interest
        are being allocated to the Partnership.

        The Partnership issued 5,200 units of limited partnership interests
        through a public offering. Each unit was comprised of two limited
        partnership interests and two warrants granting the investor the right
        to purchase two additional limited partnership interests. An additional
        10,400 interests associated with warrants were exercised. The general
        partners have a 1 percent interest in profits and losses of the
        Partnership. The limited partners have the remaining 99 percent interest
        in proportion to their respective investments.

        The Partnership shall be dissolved only upon the expiration of 50
        complete calendar years (December 31, 2033) from the date of the
        formation of the Partnership or the occurrence of various other events
        as specified in the Partnership agreement.



                                       18
<PAGE>   20

                       REAL ESTATE ASSOCIATES LIMITED VII
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1999


1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        Upon total or partial liquidation of the Partnership or the disposition
        or partial disposition of a project or project interest and distribution
        of the proceeds, the general partners will be entitled to a liquidation
        fee as stipulated in the Partnership agreement. The limited partners
        will have a priority return equal to their invested capital attributable
        to the project(s) or project interest(s) sold and shall receive from the
        sale of the project(s) or project interest(s) an amount sufficient to
        pay state and federal income taxes, if any, calculated at the maximum
        rate then in effect. The general partners' fee may accrue but shall not
        be paid until the limited partners have received distributions equal to
        100 percent of their capital contributions.

        On December 30, 1998, the Partnership sold its interests in 11 local
        limited partnerships for $400,000 to the Operating Partnership.

        USES OF ESTIMATES

        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 reported amounts of revenues and expenses
        during the reporting period. Actual results could differ from those
        estimates.

        METHOD OF ACCOUNTING FOR INVESTMENTS IN LIMITED PARTNERSHIPS

        The investments in limited partnerships are accounted for on the equity
        method. Acquisition, selection and other costs related to the
        acquisition of the projects have been capitalized as part of the
        investment account and are being amortized on a straight line basis over
        the estimated lives of the underlying assets, which is generally 30
        years.

        NET LOSS PER LIMITED PARTNERSHIP INTEREST

        Net loss per limited partnership interest was computed by dividing the
        limited partners' share of net loss by the number of limited partnership
        interests outstanding during the years. The number of limited
        partnership interests was 20,802 for all years presented.



                                       19
<PAGE>   21

                       REAL ESTATE ASSOCIATES LIMITED VII
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1999


1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        IMPAIRMENT OF LONG-LIVED ASSETS

        The Partnership reviews long-lived assets to determine if there has been
        any permanent impairment whenever events or changes in circumstances
        indicate that the carrying amount of the asset may not be recoverable.
        If the sum of the expected future cash flows is less than the carrying
        amount of the assets, the Partnership recognizes an impairment loss.
        During 1998, the Partnership recognized an impairment loss of $9,558,352
        related to certain investments in local limited partnerships, which has
        been included in equity in loss of limited partnerships.

2.      INVESTMENTS IN LIMITED PARTNERSHIPS

        The Partnership holds limited partnership interests in 21 limited
        partnerships as of December 31, 1999 and 1998, after selling its
        interests in 11 limited partnerships in 1998. In addition, the
        Partnership holds a general partner interest in REA IV. NAPICO is also
        the general partner in REA IV. REA IV, in turn, holds limited partner
        interests in 15 additional limited partnerships. In total, therefore,
        the Partnership holds interests, either directly or indirectly through
        REA IV, in 36 partnerships all of which own residential low income
        rental projects consisting of 3,379 apartment units. The mortgage loans
        of these projects are payable to or insured by various governmental
        agencies.

        The Partnership, as a limited partner, is entitled to between 93 percent
        and 99 percent of the profits and losses in the limited partnerships it
        has invested in directly. The Partnership is also entitled to 99 percent
        of the profits and losses of REA IV. REA IV holds a 99 percent interest
        in each of the limited partnerships in which it has invested.

        Equity in losses of limited partnerships is recognized in the financial
        statements until the limited partnership investment account is reduced
        to a zero balance. Losses incurred after the limited partnership
        investment account is reduced to zero are not recognized. The cumulative
        amount of the unrecognized equity in losses of certain unconsolidated
        limited partnerships was approximately $9,741,000 and $9,916,000 as of
        December 31, 1999 and 1998, respectively.

        Distributions from the limited partnerships are accounted for as a
        return of capital until the investment balance is reduced to zero.
        Subsequent distributions received are recognized as income.



                                       20
<PAGE>   22
                       REAL ESTATE ASSOCIATES LIMITED VII
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1999


2.      INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)

        The following is a summary of the investments in limited partnerships
        and reconciliation to the limited partnership accounts:

<TABLE>
<CAPTION>
                                                          1999               1998
                                                      ------------       ------------
<S>                                                   <C>                <C>
        Investment balance, beginning of year         $    359,566       $ 16,870,487
        Cash distributions recognized as
          a return of capital                              (26,734)          (461,516)
        Equity in loss of limited partnerships            (138,184)        (9,309,403)
        Investment in limited partnership sold                             (6,588,686)
        Amortization of additional basis and
          capitalized acquisition costs and fees            (7,476)          (186,985)
        Capital contributions                               52,292             35,669
                                                      ------------       ------------
        Investment balance, end of year               $    239,464       $    359,566
                                                      ============       ============
</TABLE>

        The difference between the investment per the accompanying balance
        sheets at December 31, 1999 and 1998, and the equity per the limited
        partnerships' combined financial statements is due primarily to
        cumulative unrecognized equity in losses of certain limited
        partnerships, additional basis and costs capitalized to the investment
        account, cumulative distributions recognized as income and recognition
        of impairment losses.

        Selected financial information from the combined financial statements at
        December 31, 1999 and 1998 and for each of the three years in the period
        ended December 31, 1999, of the limited partnerships in which the
        Partnership has invested directly or indirectly, is as follows:

                                 Balance Sheets
<TABLE>
<CAPTION>
                                                                1999           1998
                                                              --------       --------
                                                                   (in thousands)
<S>                                                           <C>            <C>
        Land and buildings, net                               $ 42,945       $ 43,072
                                                              ========       ========

        Total assets                                          $ 56,906       $ 56,433
                                                              ========       ========

        Mortgages loan payable                                $ 44,661       $ 46,240
                                                              ========       ========

        Total liabilities                                     $ 59,697       $ 60,455
                                                              ========       ========

        Deficiency of Real Estate Associates Limited VII      $ (2,334)      $ (3,559)
                                                              ========       ========

        Deficiency of other partners                          $   (457)      $   (463)
                                                              ========       ========
</TABLE>



                                       21
<PAGE>   23

                       REAL ESTATE ASSOCIATES LIMITED VII
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1999


2.      INVESTMENT IN LIMITED PARTNERSHIPS (CONTINUED)

                            Statements of Operations

<TABLE>
<CAPTION>
                                                  1999           1998           1997
                                                --------       --------       --------
                                                           (in thousands)
<S>                                             <C>            <C>            <C>
        Total revenue                           $ 19,626       $ 28,239       $ 28,267
                                                ========       ========       ========

        Interest expense                        $  1,526       $  3,423       $  4,078
                                                ========       ========       ========

        Depreciation                            $  3,390       $  5,555       $  5,512
                                                ========       ========       ========

        Total expenses                          $ 19,980       $ 29,421       $ 29,362
                                                ========       ========       ========

        Net loss                                $   (354)      $ (1,182)      $ (1,095)
                                                ========       ========       ========

        Net income (loss) allocable to the
           Partnership                          $    289       $   (527)      $   (441)
                                                ========       ========       ========
</TABLE>

        Land and buildings above have been adjusted for the amount by which the
        investments in the limited partnerships exceed the Partnership's share
        of the net book value of the underlying net assets of the investee which
        are recorded at historical costs. Depreciation on the adjustment is
        provided for over the estimated remaining useful lives of the
        properties.

        Prior to the sale of certain partnership interests on December 30, 1998,
        an affiliate of NAPICO was the general partner in 26 of the limited
        partnerships included above, and another affiliate received property
        management fees of approximately 5 to 6 percent of the revenue from
        three of these partnerships. Subsequent to the sale of certain
        partnership interests, an affiliate of NAPICO is the general partner in
        19 of the limited partnerships, and another affiliate manages one of the
        limited partnerships' properties. The affiliate received property
        management fees of $50,700, $115,731 and $117,571 in 1999, 1998 and
        1997, respectively. The following sets forth the significant data for
        the partnerships in which an affiliate of NAPICO is currently the
        general partner, reflected in the accompanying financial statements
        using the equity method of accounting:



                                       22
<PAGE>   24

                       REAL ESTATE ASSOCIATES LIMITED VII
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1999


2.      INVESTMENT IN LIMITED PARTNERSHIPS (CONTINUED)

<TABLE>
<CAPTION>
                                                                1999           1998           1997
                                                              --------       --------       --------
                                                                          (in thousands)
<S>                                                           <C>            <C>            <C>
        Total assets                                          $ 23,846       $ 24,626
                                                              ========       ========

        Total liabilities                                     $ 34,515       $ 34,124
                                                              ========       ========

        Deficiency of Real Estate Associates Limited VII      $(10,481)      $ (9,319)
                                                              ========       ========

        Deficiency of other partners                          $   (188)      $   (179)
                                                              ========       ========

        Total revenue                                         $  8,967       $ 13,019       $ 12,950
                                                              ========       ========       ========

        Net loss                                              $   (757)      $ (1,217)      $ (1,240)
                                                              ========       ========       ========
</TABLE>

        The Meherrin Local Partnership had been operating at a deficit. During
        the year ended December 31, 1997, the apartment complex was sold. The
        Partnership received $187,297 which was recognized as income. No gain
        was recognized upon the sale, as the Partnership had a zero investment
        balance in Meherrin.

        Under recently adopted law and policy, the United States Department of
        Housing and Urban Development ("HUD") has determined not to renew the
        Housing Assistance Payment ("HAP") Contracts on a long term basis on the
        existing terms. In connection with renewals of the HAP Contracts under
        such new law and policy, the amount of rental assistance payments under
        renewed HAP Contracts will be based on market rentals instead of above
        market rentals, which may be the case under existing HAP Contracts. The
        payments under the renewed HAP Contracts are not expected to be in an
        amount that would provide sufficient cash flow to permit owners of
        properties subject to HAP Contracts to meet the debt service
        requirements of existing loans insured by the Federal Housing
        Administration of HUD ("FHA") unless such mortgage loans are
        restructured. In order to address the reduction in payments under HAP
        Contracts as a result of this new policy, the Multi-family Assisted
        Housing Reform and Affordability Act of 1997 ("MAHRAA"), which was
        adopted in October 1997, provides for the restructuring of mortgage
        loans insured by the FHA with respect to properties subject to the
        Section 8 program. Under MAHRAA, an FHA-insured



                                       23
<PAGE>   25

                       REAL ESTATE ASSOCIATES LIMITED VII
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1999


2.      INVESTMENT IN LIMITED PARTNERSHIPS (CONTINUED)

        mortgage loan can be restructured into a first mortgage loan which will
        be amortized on a current basis and a low interest second mortgage loan
        payable to FHA which will only be payable on maturity of the first
        mortgage loan. This restructuring results in a reduction in annual debt
        service payable by the owner of the FHA-insured mortgage loan and is
        expected to result in an insurance payment from FHA to the holder of the
        FHA-insured loan due to the reduction in the principal amount. MAHRAA
        also phases out project-based subsidies on selected properties serving
        families not located in rental markets with limited supply, converting
        such subsidies to a tenant-based subsidy.

        On September 11, 1998, HUD issued interim regulations implementing
        MAHRAA and final regulations are expected to be issued in 2000.

        When the HAP Contracts are subject to renewal, there can be no assurance
        that the local limited partnerships in which the Partnership has an
        investment will be permitted to restructure its mortgage indebtedness
        under MAHRAA. In addition, the economic impact on the Partnership of the
        combination of the reduced payments under the HAP Contracts and the
        restructuring of the existing FHA-insured mortgage loans under MAHRAA is
        uncertain.

        As a result of the foregoing, the Partnership, in 1997, undertook an
        extensive review of disposition, refinancing or re-engineering
        alternatives for the properties in which the limited partnerships have
        invested and are subject to HUD mortgage and rental subsidy programs.
        The Partnership has incurred expenses in connection with this review by
        various third party professionals, including accounting, legal,
        valuation, structural and engineering costs, which amounted to $50,730,
        $327,951 and $167,778 for the years ended December 31, 1999, 1998 and
        1997, respectively, and are included in general and administrative
        expenses. Accounts payable at December 31, 1998 includes $33,882 of such
        costs.

        On December 30, 1998, the Partnership sold its limited partnership
        interests in 11 local limited partnerships with a total carrying value
        of $6,588,686 to the Operating Partnership. The sale resulted in
        proceeds to the Partnership of $400,000 and a net gain of $7,132,262,
        after being relieved of notes and interest payable of $13,515,691 and
        incurring selling costs of $194,743. The cash proceeds were held in
        escrow at December 31, 1998 and were collected in 1999. In March 1999,
        the Partnership made cash distributions of $272,250 to the limited
        partners and $2,750 to the general partners, using proceeds from the
        sale of the partnership interests.



                                       24
<PAGE>   26

                       REAL ESTATE ASSOCIATES LIMITED VII
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1999


2.      INVESTMENT IN LIMITED PARTNERSHIPS (CONTINUED)

        The Operating Partnership purchased such limited partner interests for
        cash, which it raised in connection with a private placement of its
        equity securities. The purchase was subject to, among other things, (i)
        the purchase of the general partner interests in the local limited
        partnerships by the Operating Partnership; (iii) the approval of HUD and
        certain state housing finance agencies; and (iii) the consent of the
        limited partners to the sale of the local limited partnership interests
        held for investment by the Partnership.

        In August 1998, a consent solicitation statement was sent to the limited
        partners setting forth the terms and conditions of the purchase of the
        limited partners' interests held for investment by the Partnership,
        together with certain amendments to the Partnership Agreement and other
        disclosures of various conflicts of interest in connection with the
        proposed transaction. Prior to the sale of the partnership interests,
        the consents of the limited partners to the sale and amendments to the
        Partnership Agreement were obtained.

3.      NOTES PAYABLE

        Certain of the Partnership's investments involved purchases of
        partnership interests from partners who subsequently withdrew from the
        operating partnership. As of December 31, 1999, the Partnership is
        obligated on non-recourse notes payable of $17,424,501, bearing interest
        at 9.5 to 10 percent, to the sellers of the partnership interests. The
        Partnership was relieved of notes payable in the amount of $7,445,000 in
        connection with the sale of the partnership interests to the Operating
        Partnership in 1998. The notes have principal maturity dates ranging
        from August 1999 to December 2002 or upon sale or refinancing of the
        underlying partnership properties. These obligations and related
        interest are collateralized by the Partnership's investments in the
        investee limited partnerships and are payable only out of cash
        distributions from the investee partnerships, as defined in the notes.
        Unpaid interest is due at maturity of the notes.



                                       25
<PAGE>   27

                       REAL ESTATE ASSOCIATES LIMITED VII
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1999


3.      NOTES PAYABLE (CONTINUED)

        Maturity dates on the notes and related accrued interest payable are as
        follows:

<TABLE>
<CAPTION>
                                                             Accrued
        Years Ending December 31,            Notes           Interest
        -------------------------         -----------      -----------
<S>                                       <C>              <C>
        2000                              $13,279,000      $17,923,449
        2001                                2,555,000        3,384,217
        2002                                1,590,501        2,280,959
                                          -----------      -----------
                                          $17,424,501      $23,588,625
                                          ===========      ===========
</TABLE>

        Notes and related accrued interest payable, aggregating $31,202,449
        became payable in 1999. Due to the Partnership's lack of cash and
        partners' deficiency, there is substantial doubt about its ability to
        make these payments, which would result in the possible foreclosure of
        the investments in the local limited partnerships. As a result, there is
        substantial doubt about the Partnership's ability to continue as a going
        concern.

        Subsequent to year end, the Partnership entered into an agreement with a
        note holder related to a note in the amount $2,200,000 plus accrued
        interest of $2,934,572 as of December 31, 1999 that became payable in
        1999. Subject to certain conditions, the note holder agreed to cancel
        the note and accrued interest and make a payment of $100,000 to the
        Partnership in exchange for the Partnership surrendering its interest in
        the related encumbered limited partnership. Upon satisfaction of all
        conditions, the Partnership will recognize a gain on this transaction of
        approximately $5,200,000 as it has a zero investment balance in this
        limited partnership.

        Management is in process of attempting to negotiate extensions of the
        maturity dates on the past due notes payable.

4.      FEES AND EXPENSES DUE GENERAL PARTNER

        Under the terms of the Restated Certificate and Agreement of Limited
        Partnership, the Partnership is obligated to NAPICO for an annual
        management fee equal to .5 percent of the original remaining invested
        assets of the remaining partnerships. Invested assets are defined as the
        costs of acquiring project interests, including the proportionate amount
        of the mortgage loans related to the Partnership's interest in the
        capital accounts of the respective partnerships.

        The Partnership reimburses NAPICO for certain expenses. The
        reimbursement to NAPICO was $16,920, $46,979 and $46,975 in 1999, 1998
        and 1997, respectively, and is included in administrative expenses.



                                       26
<PAGE>   28

                       REAL ESTATE ASSOCIATES LIMITED VII
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1999


5.      CONTINGENCIES

        On August 27, 1998, two investors holding an aggregate of eight units of
        limited partnership interests in Real Estate Associates Limited III (an
        affiliated partnership in which NAPICO is the managing general partner)
        and two investors holding an aggregate of five units of limited
        partnership interest in Real Estate Associates Limited VI (another
        affiliated partnership in which NAPICO is the managing general partner)
        commenced an action in the United States District Court for the Central
        District of California against the Partnership, NAPICO and certain other
        affiliated entities. The complaint alleges that the defendants breached
        their fiduciary duty to the limited partners of certain NAPICO managed
        partnerships and made materially false and misleading statements in the
        consent solicitation statements sent to the limited partners of such
        partnerships relating to approval of the transfer of partnership
        interests in limited partnerships, owning certain of the properties, to
        the Operating Partnership organized by an affiliate of NAPICO. The
        plaintiffs seek equitable relief, as well as compensatory damages and
        litigation related costs. On August 4, 1999, one investor holding one
        unit of limited partnership interest in Housing Programs Limited
        (another affiliated partnership in which NAPICO is the managing general
        partner) commenced a virtually identical action in the United States
        District Court for the Central District of California against the
        Partnership, NAPICO and certain other affiliated entities. The managing
        general partner of such NAPICO managed partnerships and the other
        defendants believe that the plaintiffs' claims are without merit and
        intend to contest the actions vigorously.

        The corporate general partner of the Partnership is a plaintiff in
        various lawsuits and has also been named a defendant in other lawsuits
        arising from transactions in the ordinary course of business. In the
        opinion of management and the corporate general partner, the claims will
        not result in any material liability to the Partnership.

6.      INCOME TAXES

        No provision has been made for income taxes in the accompanying
        financial statements since such taxes, if any, are the liability of the
        individual partners. The major differences in tax and financial
        reporting result from the use of different bases and depreciation
        methods for the properties held by the limited partnerships. Differences
        in tax and financial reporting also arise as losses are not recognized
        for financial reporting purposes when the investment balance has been
        reduced to zero.



                                       27
<PAGE>   29

                       REAL ESTATE ASSOCIATES LIMITED VII
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1999

7.      FAIR VALUE OF FINANCIAL INSTRUMENTS

        Statement of Financial Accounting Standards No. 107, "Disclosure about
        Fair Value of Financial Instruments," requires disclosure of fair value
        information about financial instruments. The carrying amount of assets
        and liabilities reported on the balance sheets that require such
        disclosure approximates fair value due to their short-term maturity.

8.      FOURTH-QUARTER ADJUSTMENT

        The Partnership's policy is to record its equity in the loss of limited
        partnerships on a quarterly basis, using estimated financial information
        furnished by the various local operating general partners. The equity in
        loss of limited partnerships reflected in the accompanying annual
        financial statements is based primarily upon audited financial
        statements of the investee limited partnerships. The decrease of
        approximately $167,000 between the estimated nine-month equity in loss
        and the actual 1999 year end equity in loss has been recorded in the
        fourth quarter.



                                       28
<PAGE>   30

                                                                        SCHEDULE

                       REAL ESTATE ASSOCIATES LIMITED VII
                       INVESTMENTS IN LIMITED PARTNERSHIPS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                          Year Ended December 31, 1999
                              ------------------------------------------------------------------------------
                                                                  Cash          Equity
                                Balance                          Distri-          in              Balance
                                January           Capital        butions        Income           December
Limited Partnerships            1, 1999       Contributions     Received        (Loss)           31, 1999
--------------------         -------------    -------------   -------------   --------------    ------------
<S>                           <C>             <C>             <C>             <C>               <C>
Aristocrat Manor              $               $               $               $                 $
Arkansas City Apts.
Bellair Manor Apts.
Birch Manor I                                        2,307          (2,307)                              --
Birch Manor II                                       1,680          (1,680)                              --
Bluewater Apts.
Clarkwood Apts. I                                    3,206          (3,206)                              --
Clarkwood Apts. II                                   3,268          (3,268)                              --
Cleveland I                         9,171                           (9,171)                              --
Cleveland II
Cleveland III
Danbury Park Manor
Desoto Apts.
Dexter Apts.
Edgewood Terrace II               350,395                                          (110,931)        239,464
Goodlette Arms Apts.
Hampshire House Apts.
Henrico Arms
Ivywood Apts.
Jasper County                                        9,271                           (9,271)             --
Nantucket Apts.
Newton Apts.
Oak Hill I
Oakview Apts.
Oakwood Park I                                       3,405          (1,805)          (1,600)             --
Oakwood Park II                                      2,554          (2,554)                              --
Pachuta Apts.                                       23,858                          (23,858)             --
Parkway Towers
Pebbleshire Apts.
Rand Grove Village
Richards Park Apts.                                  2,743          (2,743)                              --
Shubuta Properties
South Glen Apts.
Tradewinds East Apts.
Warren Heights Apts. II
Yorkview Estates
                             -------------    -------------   -------------   --------------    ------------
                             $     359,566    $      52,292   $     (26,734)  $     (145,660)   $    239,464
                             =============    =============   =============   ==============    ============
</TABLE>



                                       29
<PAGE>   31

                                                                        SCHEDULE
                                                                     (CONTINUED)

                       REAL ESTATE ASSOCIATES LIMITED VII
                       INVESTMENTS IN LIMITED PARTNERSHIPS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                              Year Ended December 31, 1998
                             ----------------------------------------------------------------------------------------------
                                                                  Cash           Equity
                               Balance                           Distri-            in                            Balance
                               January           Capital         butions          Income                         December
Limited Partnerships           1, 1998        Contributions     Received          (Loss)             Sale        31, 1998
                             ------------     -------------   -------------   --------------    ------------   ------------
<S>                          <C>              <C>             <C>             <C>               <C>            <C>
Anthracite Apartments*       $  1,054,456     $               $    (25,948)   $      46,548     $ (1,075,056)  $
Aristocrat Manor                  428,050                                          (428,050)
Arkansas City Apts.
Arrowsmith Apts.*                 300,214                          (24,818)         (13,401)       (261,995)
Ashland Manor*                                       4,060          (4,060)
Bangor House*                   1,485,524                                            88,983      (1,574,507)
Bellair Manor Apts.               229,540                           (3,531)        (226,009)
Birch Manor I                                        2,249          (2,249)
Birch Manor II                                       1,355          (1,355)
Bluewater Apts.                 1,938,577                          (13,502)      (1,925,075)
Center City Apts.*              2,509,667                          (36,470)         125,672      (2,598,869)
Clarkwood Apts. I                                    2,900          (2,900)
Clarkwood Apts. II                                   3,657          (3,657)
Cleveland I                        15,335                           (5,422)            (742)                         9,171
Cleveland II                       31,115                           (5,753)         (25,362)
Cleveland III
Danbury Park Manor
Desoto Apts.                       78,903                           (1,667)         (77,236)
Dexter Apts.                       10,412                           (5,418)          (4,994)
Edgewood Terrace II               463,069                                          (112,674)                       350,395
Goodlette Arms Apts.            2,458,687                           (1,485)      (2,457,202)
Hampshire House Apts.
Henrico Arms
Ivywood Apts.                     253,948                                          (253,948)
Jasper County
King Towers*                      207,114                             (647)         (63,141)       (143,326)
Nantucket Apts.                   224,253                           (3,379)        (220,874)
Newton Apts.
Oak Hill I                         45,552                                           (45,552)
Oakview Apts.
Oakwood Park I                                       3,338          (3,338)
Oakwood Park II                                      4,636          (4,636)
Pachuta Apts.
Parkway Towers                  1,989,251                          (15,635)      (1,973,616)
Pebbleshire Apts.                                    9,840          (9,840)
Pinebrook Apts.*                  786,035                                            29,836        (815,871)
Rand Grove Village
Richards Park Apts.                                  1,313          (1,313)
Ridgewood Towers*                 356,751                         (256,116)        (100,635)
Shubuta Properties
South Glen Apts.
South Park Apts.*                                    2,321          (2,321)
Sunland Terrace*
Tradewinds East Apts.           1,575,656                          (19,388)      (1,556,268)
Warren Heights Apts. II           195,110                           (1,694)        (193,416)
White Cliffs Apts.*               129,449                           (1,722)          (8,665)       (119,062)
Yorkview Estates                  103,819                           (3,252)        (100,567)
                             ------------     -------------   -------------   --------------    ------------   ------------
                             $ 16,870,487     $      35,669   $    (461,516)  $   (9,496,388)   $ (6,588,686)  $    359,566
                             =============    =============   =============   ==============    ============   ============
</TABLE>

*Sold to the Operating Partnership in 1998.



                                       30
<PAGE>   32

                                                                        SCHEDULE
                                                                     (CONTINUED)

                       REAL ESTATE ASSOCIATES LIMITED VII
                       INVESTMENTS IN LIMITED PARTNERSHIPS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                      Year Ended December 31, 1997
                             -------------------------------------------------------------------------------
                                                                  Cash            Equity
                               Balance                           Distri-            in             Balance
                               January           Capital         butions          Income          December
Limited Partnerships           1, 1997        Contributions     Received          (Loss)          31, 1997
                             ------------     -------------   -------------     -----------     ------------

<S>                         <C>               <C>              <C>              <C>             <C>
Anthracite Apts.            $   1,053,910     $                $   (25,948)     $    26,494     $ 1,054,456
Aristocrat Manor                  496,521                                           (68,471)        428,050
Arkansas City Apts.
Arrowsmith Apts.                  372,420                          (55,000)         (17,206)        300,214
Ashland Manor                                        1,483          (1,483)
Bangor House                    1,684,384                         (296,478)          97,618       1,485,524
Bellair Manor Apts.               259,346                           (1,826)         (27,980)        229,540
Birch Manor I                                        1,149          (1,149)
Birch Manor II
Bluewater Apts.                 1,866,348                          (13,502)          85,731       1,938,577
Center City Apts.               2,345,638                          (36,470)         200,499       2,509,667
Clarkwood Apts. I                                    1,696          (1,696)
Clarkwood Apts. II                                   3,173          (3,173)
Cleveland I                        52,481                          (35,008)          (2,138)         15,335
Cleveland II                       78,823                          (20,389)         (27,319)         31,115
Cleveland III
Danbury Park Manor
Desoto Apts.                      109,159                          (26,303)          (3,953)         78,903
Dexter Apts.                       63,571                          (28,783)         (24,376)         10,412
Edgewood Terrace II               664,034                          (16,279)        (184,686)        463,069
Goodlette Arms Apts.            2,429,091                           (1,485)          31,081       2,458,687
Hampshire House Apts.
Henrico Arms
Ivywood Apts.                     306,172                              (32)         (52,192)        253,948
Jasper County
King Towers                       239,612                           (2,266)         (30,232)        207,114
Meherrin Landings
Nantucket Apts.                   237,051                           (3,066)          (9,732)        224,253
Newton Apts.
Oak Hill I                        103,548                                           (57,996)         45,552
Oakview Apts.
Oakwood Park I                                         786            (786)
Oakwood Park II                                        171            (171)
Pachuta Apts.
Parkway Towers                  1,823,359                          (16,537)         182,429       1,989,251
Pebbleshire Apts.                                    9,840          (9,840)
Pinebrook Apts.                   770,843                                            15,192         786,035
Rand Grove Village                229,394                          (24,284)        (205,110)              -
Richards Park Apts.                                  2,992          (2,992)
Ridgewood Towers                  564,681                         (312,501)         104,571         356,751
Shubuta Properties
South Glen Apts.
South Park Apts.                                     3,489          (3,489)
Sunland Terrace
Tradewinds East Apts.           1,586,724                          (19,388)           8,320       1,575,656
Warren Heights Apts. II           242,208                             (519)         (46,579)        195,110
White Cliffs Apts.                170,432                           (3,172)         (37,811)        129,449
Yorkview Estates                  124,009                           (2,245)         (17,945)        103,819
                             ------------       ----------     -----------      -----------     -----------

                             $ 17,873,759       $   24,779     $  (966,260)     $   (61,791)    $16,870,487
                             ============       ==========     ===========      ===========     ===========
</TABLE>



                                       31
<PAGE>   33
                                                                        SCHEDULE
                                                                     (CONTINUED)

                       REAL ESTATE ASSOCIATES LIMITED VII
        INVESTMENTS IN, EQUITY IN EARNINGS OF AND DIVIDENDS RECEIVED FROM
                          AFFILIATES AND OTHER PERSONS
                               FOR THE YEARS ENDED
                        DECEMBER 31, 1999, 1998 AND 1997


NOTES:     1.    Equity in income (losses) of the limited partnerships
                 represents the Partnership's allocable share of the net results
                 of operations from the limited partnerships for the year.
                 Equity in losses of the limited partnerships will be recognized
                 until the investment balance is reduced to zero or below zero
                 to an amount equal to future capital contributions to be made
                 by the Partnership.

           2.    Cash distributions from the limited partnerships will be
                 treated as a return of the investment and will reduce the
                 investment balance until such time as the investment is reduced
                 to an amount equal to additional contributions. Distributions
                 subsequently received will be recognized as income.



                                       32
<PAGE>   34


                       REAL ESTATE ASSOCIATES LIMITED VII           SCHEDULE III
                    REAL ESTATE AND ACCUMULATED DEPRECIATION         (CONTINUED)
                 OF PROPERTY HELD BY LOCAL LIMITED PARTNERSHIPS
                        IN WHICH REAL VII HAS INVESTMENTS
                                DECEMBER 31, 1999

<TABLE>
<CAPTION>
                                                                                 Buildings,
                                                                                Furnishings
                                                                                & Equipment
                                                                                  Amount
                                     Number       Outstanding                     Carried
                                      of           Mortgage                       at close                        Accumulated
Partnership/Location                 Units           Loan            Land         of period         Total        Depreciation
--------------------             ------------    ------------    ------------    ------------    ------------    ------------
<S>                              <C>             <C>             <C>             <C>             <C>             <C>
Aristocrat Manor                          114    $  1,155,600    $    265,158    $  3,022,505    $  3,287,663    $  1,429,954
       Hot Springs, AR
Arkansas City Apartments                   16         496,466          22,416         504,920         527,336         173,618
       Arkansas City, AR
Bluewater Apartments                      116       1,637,503         130,163       4,020,004       4,150,167       2,008,401
       Port Huron, MI
Cleveland Apartments I                     50         761,333          60,000       1,422,437       1,482,437         897,445
       Hayti, MO
Cleveland Apartments II                    50         757,978          50,000       1,450,620       1,500,620         899,698
       Hayti, MO
Cleveland Apartments III                   21         335,973          25,000         604,465         629,465         390,312
       Hayti, MO
Danbury Park Manor                        151       1,713,020         183,752       4,938,657       5,122,409       2,333,081
       Superior Township, MI
Desoto Apartments                          42         630,354          50,000       1,223,647       1,273,647         758,281
       Desoto, MO
Dexter Apartments                          50         768,399          50,000       1,522,910       1,572,910         958,420
       Dexter, MO
Goodlette Arms Apartments                 250       2,884,972       1,227,147       6,423,955       7,651,102       3,700,818
     Naples, FL
Henrico Arms                              232       2,663,825         206,980       3,973,186       4,180,166       3,566,761
       Richmond, VA
Jasper County Prop                         24         659,778          33,000         777,716         810,716         730,880
       Heidelberg, MS
Newton Apartments                          36         988,018          55,017       1,067,583       1,122,600       1,048,285
       Newton, MS
Oakview Apartments                         32       1,105,262          75,000       1,174,431       1,249,431         380,722
       Monticello, AR
Pachuta Apartments                         16         444,019          20,680         490,732         511,412         485,616
       Pachuta, MS
Parkway Towers Apartments                 104         921,877         287,919       4,343,012       4,630,931       3,938,005
       East Providence, RI
Rand Grove Village                        212       2,584,697         491,000       6,699,910       7,190,910       6,194,884
       Palatine, IL
Shubuta Properties                         16         441,646          23,179         553,156         576,335         507,171
       Shubuta, MS
South Glen Apartments                     159       2,647,231         298,089       5,101,327       5,399,416       4,674,318
       Trenton, MI
Tradewinds East Apartments                150       2,162,482         117,692       5,412,650       5,530,342       2,750,115
       Essexville, MI
Bellair Manor Apartments                   68         845,297         152,995       1,546,944       1,699,939         799,257
       Niles, OH
Birch Manor Apartments I                   60         506,248          60,889       1,322,956       1,383,845         683,534
       Medina, OH
Birch Manor Apartments II                  60         691,508          50,284       1,386,407       1,436,691         716,317
       Medina, OH
Clarkwood Apartments I                     72         559,683          68,841       1,532,128       1,600,969         791,601
       Elyria, OH
Clarkwood Apartments II                   120       1,042,358          92,510       2,628,368       2,720,878       1,357,986
       Elyria, OH
Hampshire House Apartments                150       2,804,328         101,163       3,945,365       4,046,528       2,038,436
       Warren, OH
Ivywood Apartments                        124       1,565,021         200,184       2,938,855       3,139,039       1,514,879
       Columbus, OH
Nantucket Apartments                       60         582,784          34,676       1,303,765       1,338,441         672,100
       Alliance, OH
Oak Hill Apartments                       120       1,790,492          75,834       3,089,355       3,165,189       1,594,462
       Franklin, PA
Oakwood Park I Apartments                  50         206,029          63,123         854,198         917,321         440,385
       Lorain, OH
Oakwood Park II Apartments                 78         377,933         102,202       1,378,989       1,481,191         712,473
       Lorain, OH
Richards Park Apartments                   60         683,708          52,416       1,418,923       1,471,339         725,566
       Elyria, OH
Warren Heights Apartments II               88       1,115,557          21,803       2,202,950       2,224,753       1,138,196
       Warren, OH
Yorkview Estates                           50         621,163          22,049       1,202,879       1,224,928         621,488
       Massillon, OH
Edgewood Terrace II                       258       3,668,433         525,000       9,800,129      10,325,129       7,229,683
       Washington, DC
Pebbleshire Apartments                    120       1,839,878         359,943       4,311,798       4,671,741       2,228,951
       Vernon Hills, IL
Additional basis of real                                              238,728       4,110,491       4,349,219       1,559,668
        estate due to capital
        contribution to
        investee limited
        partnership
                                 ------------    ------------    ------------    ------------    ------------    ------------
     TOTAL                               3379    $ 44,660,853    $  5,894,832    $ 99,702,323    $105,597,155    $ 62,651,767
                                 ============    ============    ============    ============    ============    ============
</TABLE>



                                       33
<PAGE>   35

                                                                    SCHEDULE III
                                                                     (CONTINUED)

                       REAL ESTATE ASSOCIATES LIMITED VII
              REAL ESTATE AND ACCUMULATED DEPRECIATION OF PROPERTY
                       HELD BY LOCAL LIMITED PARTNERSHIPS
                        IN WHICH REAL VII HAS INVESTMENTS
                                DECEMBER 31, 1999

NOTES:      1.   Each local limited partnership has developed, owns and operates
                 the housing project.  Substantially all project costs,
                 including construction period interest expense, were
                 capitalized by the limited partnerships.

            2.   Depreciation is provided for by various methods over the
                 estimated useful lives of the projects. The estimated composite
                 useful lives of the buildings are from 25 to 40 years.

            3.   Investments in property and equipment:


<TABLE>
<CAPTION>
                                                 Buildings,
                                                Furnishings,
                                                    And
                                   Land           Equipment           Total
                              -------------     -------------     -------------
<S>                           <C>               <C>               <C>
Balance, January 1, 1997      $   6,890,624     $ 146,945,231     $ 153,835,855

Net deletions - 1997                (84,424)       (1,151,672)       (1,236,096)
                              -------------     -------------     -------------

Balance, December 31, 1997        6,806,200       145,793,559       152,599,759

Sale of Properties               (1,638,515)      (47,366,524)      (49,005,039)

Net additions - 1998                688,860           177,371           866,231
                              -------------     -------------     -------------

Balance, December 31, 1998        5,856,545        98,604,406       104,460,951

Net additions - 1999                 38,287         1,097,917         1,136,204
                              -------------     -------------     -------------

Balance, December 31, 1999    $   5,894,832     $  99,702,323     $ 105,597,155
                              =============     =============     =============
</TABLE>



                                       34
<PAGE>   36

                                                                    SCHEDULE III
                                                                     (CONTINUED)


                       REAL ESTATE ASSOCIATES LIMITED VII
              REAL ESTATE AND ACCUMULATED DEPRECIATION OF PROPERTY
                       HELD BY LOCAL LIMITED PARTNERSHIPS
                        IN WHICH REAL VII HAS INVESTMENTS
                                DECEMBER 31, 1999


<TABLE>
<CAPTION>
                                                          Buildings,
                                                         Furnishings
                                                             And
                                                          Equipment
                                                        ------------
<S>                                                     <C>
Accumulated Depreciation:

Balance, January 1, 1997                                $ 74,627,832

Net additions, 1997                                        5,376,393
                                                        ------------

Balance, December 31, 1997                                80,004,225

Sale of Properties                                       (24,273,559)

Net additions, 1998                                        5,657,944
                                                        ------------

Balance, December 31, 1998                                61,388,610

Net additions, 1999                                        1,263,157
                                                        ------------

Balance, December 31, 1999                              $ 62,651,767
                                                        ============
</TABLE>



                                       35
<PAGE>   37

PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

REAL ESTATE ASSOCIATES LIMITED VII (the "Partnership") has no directors or
executive officers of its own.

Prior to December 30, 1998, NAPICO was a wholly owned subsidiary of Casden
Investment Corporation ("CIC"), which is wholly owned by Alan I. Casden. On
December 30, 1998, Casden Properties Operating Partnership, L.P. (the "Operating
Partnership"), a majority owned subsidiary of Casden Properties Inc., a real
estate investment trust organized by Alan I. Casden, purchased a 95.25% economic
interest in NAPICO. The following biographical information is presented for the
directors and executive officers of NAPICO with principal responsibility for the
Partnership's affairs.

CHARLES H. BOXENBAUM, 70, Chairman of the Board of Directors and Chief Executive
Officer of NAPICO.

Mr. Boxenbaum has been associated with NAPICO since its inception. He has been
active in the real estate industry since 1960, and prior to joining NAPICO was a
real estate broker with the Beverly Hills firm of Carl Rhodes Company.

Mr. Boxenbaum has been a guest lecturer at national and state realty
conventions, certified properties exchanger's seminars, Los Angeles Town Hall,
National Association of Home Builders, International Council of Shopping
Centers, Society of Conventional Appraisers, California Real Estate Association,
National Institute of Real Estate Brokers, Appraisal Institute, various mortgage
banking seminars, and the North American Property Forum held in London, England.
In 1963, he was the winner of the Snyder Award, the highest annual award offered
by the National Association of Real Estate Boards for Best Exchange. He is one
of the founders and a past director of the First Los Angeles Bank, organized in
November 1974. Mr. Boxenbaum was a member of the Board of Directors of the
National Housing Council. Mr. Boxenbaum received his Bachelor of Arts degree
from the University of Chicago.

BRUCE E. NELSON, 48, President and a director of NAPICO.

Mr. Nelson joined NAPICO in 1980 and became President in February 1989. He is
responsible for the operations of all NAPICO sponsored limited partnerships.
Prior to that he was primarily responsible for the securities aspects of the
publicly offered real estate investment programs. Mr. Nelson is also involved in
the identification, analysis, and negotiation of real estate investments.

From February 1979 to October 1980, Mr. Nelson held the position of Associate
General Counsel at Western Consulting Group, Inc., private residential and
commercial real estate syndicators. Prior to that time Mr. Nelson was engaged in
the private practice of law in Los Angeles. Mr. Nelson received his Bachelor of
Arts degree from the University of Wisconsin and is a graduate of the University
of Colorado School of Law. He is a member of the State Bar of California and is
a licensed real estate broker in California and Texas.

ALAN I. CASDEN, 54, Chairman of Casden Properties Inc., a director and member of
the audit committee of NAPICO, and chairman of the Executive Committee of
NAPICO.

Mr. Casden has been involved in approximately $3 billion of real estate
financings and sales and has been responsible for the development and
construction of more than 12,000 apartment units and 5,000 single-family homes
and condominiums.

Mr. Casden is a member of the American Institute of Certified Public Accountants
and of the California Society of Certified Public Accountants. Mr. Casden is a
member of the advisory board of the National Multi-Family Housing Conference,
the Multi-Family Housing Council, and the President's Council of the California
Building



                                       36
<PAGE>   38

Industry Association. He also serves on the advisory board to the School of
Accounting of the University of Southern California. He holds a Bachelor of
Science and a Masters in Business Administration degree from the University of
Southern California.

PAUL PATIERNO, 43, Chief Financial Officer.

Mr. Patierno joined NAPICO in 1998 and is responsible for its financial affairs,
as well as the limited partnerships sponsored by it. From 1995 until joining
NAPICO in September 1998, Mr. Patierno was a senior manager in the affordable
housing group of Altschuler, Melvoin and Glasser LLP, a national public
accounting firm. From 1990 to 1995, he practiced public accounting with a firm
specializing in real estate syndication. Mr. Patierno received his bachelor of
science degree in accounting from California State University at Northridge, and
is a member of the American Institute of Certified Public Accountants and the
California Society of Certified Public Accountants.

PATRICIA W. TOY, 70, Senior Vice President - Communications and Assistant
Secretary.

Mrs. Toy joined NAPICO in 1977, following her receipt of an MBA from the
Graduate School of Management, UCLA. From 1952 to 1956, Mrs. Toy served as a
U.S. Naval Officer in communications and personnel assignments. She holds a
Bachelor of Arts Degree from the University of Nebraska.

MARK L. WALTHER, 39, Executive Vice President, General Counsel and Assistant
Secretary.

Mr. Walther joined NAPICO in 1987 and is responsible for the legal affairs of
the NAPICO sponsored limited partnerships. Prior to joining NAPICO, Mr. Walther
worked in the San Francisco law firm of Browne and Kahn which specialized in
construction litigation. Mr. Walther received his Bachelor of Arts Degree in
Political Science from the University of California, Santa Barbara and is a
graduate of the University of California, Davis, School of Law. He is a member
of the State Bar of Hawaii.

NAPICO and several of its officers, directors and affiliates, including Charles
H. Boxenbaum, Bruce E. Nelson and Alan I. Casden, consented to the entry, on
June 25, 1997, of an administrative cease and desist order by the U.S.
Securities and Exchange Commission (the "Commission"), without admitting or
denying any of the findings made by the Commission. The Commission found that
NAPICO and others had violated certain federal securities laws in connection
with transactions unrelated to the Partnership. The Commission's order did not
impose any cost, burden or penalty on any partnership managed by NAPICO and does
not impact NAPICO's ability to serve as the Partnership's Managing General
Partner.



                                       37
<PAGE>   39

ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS

Real Estate Associates Limited VII has no officers, directors or employees.
However, under the terms of the Restated Certificate and Agreement of Limited
Partnership, the Partnership is obligated to pay the Corporate General Partner
an annual management fee. The annual management fee is approximately equal to .5
percent of the invested assets, including the Partnership's allocable share of
the mortgages related to the real estate properties held by local limited
partnerships. The fee is earned beginning in the month the Partnership makes its
initial contribution to the local partnership. In addition, the Partnership
reimburses the Corporate General Partner for certain expenses.

An affiliate of the General Partner is responsible for the on-site property
management for a property owned by limited partnership in which the Partnership
has invested.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a)     Security Ownership of Certain Beneficial Owners

        The General Partners own all of the outstanding general partnership
        interests of REAL VII; no person is known to own beneficially in excess
        of 5 percent of the outstanding limited partnership interests.

(b)     With the exception of the initial limited partner, Bruce Nelson, who is
        an officer of the Corporate General Partner, none of the officers or
        directors of the Corporate General Partner own directly or beneficially
        any limited partnership interests in REAL VII.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Partnership has no officers, directors or employees of its own. All of its
affairs are managed by the Corporate General Partner, National Partnership
Investments Corp. The Partnership is obligated to NAPICO for an annual
management fee equal to .4 percent of the original remaining invested assets of
the limited partnerships. Invested assets is defined as the costs of acquiring
project interests, including the proportionate amount of the mortgage loans
related to the Partnership's interest in the capital accounts of the respective
partnerships. The management fee was $500,179 for the year ended December 31,
1999 and $743,640 for each of the two years in the period ended December 31,
1998.

The Partnership reimburses NAPICO for certain expenses. The reimbursement to
NAPICO was $16,920, $46,979 and $46,975 in 1999, 1998 and 1997, respectively,
and is included in operating expenses.

An affiliate of NAPICO was the general partner in 26 of the limited partnerships
in which the partnership interests were sold on December 30, 1998, and another
affiliate received property management fees of approximately 5 to 6 percent of
the revenue from three of these partnerships. Subsequent to the sale of certain
partnership interests, NAPICO is the general partner in 19 of the limited
partnerships, and another affiliate manages one of the limited partnerships'
properties. The affiliate received property management fees of $50,700, $115,731
and $117,571 in 1999, 1998 and 1997, respectively.

On December 30, 1998, the Partnership sold its limited partnership interests in
11 local limited partnerships, with a total carrying value of $6,588,686, to the
Operating Partnership. The sale resulted in proceeds to the Partnership of
$400,000 and a net gain of $7,132,262 after being relieved of notes and interest
payable of $13,515,691 and incurring selling costs of $194,743. In March 1999,
the Partnership made cash distributions of $272,250 to the limited partners and
$2,750 to the general partners, using proceeds from the sale of the partnership
interests.



                                       38
<PAGE>   40

The Operating Partnership purchased such limited partner interests for cash,
which it raised in connection with a private placement of its equity securities.
The purchase was subject to, among other things, (i) the purchase of the general
partner interests in the local limited partnerships by the Operating
Partnership; (ii) the approval of HUD and certain state housing finance
agencies; and (iii) the consent of the limited partners to the sale of the local
limited partnership interests held for investment by the Partnership.

In August 1998, a consent solicitation statement was sent to the limited
partners setting forth the terms and conditions of the purchase of the limited
partners' interests held for investment by the Partnership, together with
certain amendments to the Partnership Agreement and other disclosures of various
conflicts of interest in connection with the proposed transaction. Prior to the
sale of the partnership interests, the consents of the limited partners to the
sale and amendments to the Partnership Agreement were obtained.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K:

FINANCIAL STATEMENTS

Report of Independent Public Accountants.

Balance Sheets as of December 31, 1999 and 1998.

Statements of Operations for the years ended December 31, 1999, 1998 and 1997.

Statements of Partners' Deficiency for the years ended December 31, 1999, 1998
and 1997.

Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997.

Notes to Financial Statements.

FINANCIAL STATEMENT SCHEDULES
APPLICABLE TO REAL ESTATE ASSOCIATES LIMITED VII, REAL ESTATE ASSOCIATES IV AND
THE LIMITED PARTNERSHIPS IN WHICH REAL ESTATE ASSOCIATES LIMITED VII AND REAL
ESTATE ASSOCIATES IV HAVE INVESTMENTS.

Schedule - Investments in Limited Partnerships, December 31, 1999, 1998 and
1997.

Schedule III - Real Estate and Accumulated Depreciation, December 31, 1999, 1998
and 1997.

The remaining schedules are omitted because the required information is included
in the financial statements and notes thereto or they are not applicable or not
required.

EXHIBITS

(3)     Articles of incorporation and bylaws: The registrant is not
        incorporated. The Partnership Agreement was filed with Form S-11
        #2-84816 which is incorporated herein by reference.

(10)    Material contracts: The registrant is not party to any material
        contracts, other than the Restated Certificate and Agreement of Limited
        Partnership dated May 24, 1983 and the forty-eight contracts
        representing the partnership investment in local limited partnership's
        as previously filed at the Securities Exchange Commission, File #2-84816
        which is hereby incorporated by reference.

REPORTS ON FORM 8-K

No reports on Form 8-K were filed during the year ended December 31, 1999.



                                       39
<PAGE>   41

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Los Angeles,
State of California.


REAL ESTATE ASSOCIATES LIMITED VII

By:        NATIONAL PARTNERSHIP INVESTMENTS CORP.
           General Partner

/s/ CHARLES H. BOXENBAUM
------------------------------------
Charles H. Boxenbaum
Chairman of the Board of Directors
and Chief Executive Officer


/s/ BRUCE E. NELSON
------------------------------------
Bruce E. Nelson
Director and President


/s/ ALAN I. CASDEN
------------------------------------
Alan I. Casden
Director


/s/ PAUL PATIERNO
------------------------------------
Paul Patierno
Chief Financial Officer



                                       40