<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003

                                       or

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

                 For the Transition period from ______ to ______

                         COMMISSION FILE NUMBER: 0-11779

                         S/M REAL ESTATE FUND VII, LTD.
                         ------------------------------
              Exact Name of Registrant as Specified in its Charter

            Texas                                    75-1845682
            -----                                    ----------
(State or other jurisdiction              (I.R.S. Employer Identification No.)
of incorporation of organization)

5520 LBJ Freeway, Suite 500, Dallas, Texas          75240
------------------------------------------          -----
 (Address of principal executive offices)         (Zip code)

                                 (972) 404-7100
                                 --------------
              (Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                 Yes [X] No [ ]

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

                                 Yes [ ] No [X]

<PAGE>

S/M REAL ESTATE FUND VII, LTD.

<TABLE>
<CAPTION>
                                                 AT SEPTEMBER 30,
                                                      2003           AT DECEMBER 31,
BALANCE SHEETS                                     (UNAUDITED)            2002
-------------------------------------------------------------------------------------
<S>                                              <C>                 <C>
ASSETS
Real estate, at cost:
   Land                                          $        962,216    $        962,216
   Building and improvements                            7,963,177           7,963,821
                                                 ----------------    ----------------
                                                        8,925,393           8,926,037
   Less accumulated depreciation                       (7,379,673)         (7,104,900)
                                                 ----------------    ----------------
                                                        1,545,720           1,821,137

Cash and cash equivalents                                 142,883             259,663
Cash held in escrow                                       231,073              82,565
Restricted cash - replacement reserve                      11,918              24,156
Accounts receivable                                         4,947              10,133
Other assets, net                                         109,640              89,380
-------------------------------------------------------------------------------------
     TOTAL ASSETS                                $      2,046,181    $      2,287,034
=====================================================================================
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
   First mortgage note payable                   $      6,091,519    $      6,148,505
   Accounts payable:
     Trade                                                 39,449              21,094
     Affiliates                                            40,665              40,665
   Accrued expenses and other liabilities                 227,193              43,405
                                                 ----------------    ----------------
     Total Liabilities                                  6,398,826           6,253,669
                                                 ----------------    ----------------
Partners' Deficit:
   General Partners                                      (130,138)           (126,278)
   Limited Partners (11,080 units outstanding)         (4,222,507)         (3,840,357)
                                                 ----------------    ----------------
     Total Partners' Deficit                           (4,352,645)         (3,966,635)
-------------------------------------------------------------------------------------
     TOTAL LIABILITIES AND PARTNERS' DEFICIT     $      2,046,181    $      2,287,034
=====================================================================================
</TABLE>

<TABLE>
<CAPTION>
STATEMENT OF PARTNERS' DEFICIT (UNAUDITED)          GENERAL        LIMITED
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003       PARTNERS       PARTNERS         TOTAL
-------------------------------------------------------------------------------------------
<S>                                               <C>            <C>            <C>
BALANCE AT DECEMBER 31, 2002                      $  (126,278)   $(3,840,357)   $(3,966,635)
Net loss                                               (3,860)      (382,150)      (386,010)
-------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 2003                     $  (130,138)   $(4,222,507)   $(4,352,645)
===========================================================================================
</TABLE>

See accompanying notes to the financial statements.                            2

<PAGE>

S/M REAL ESTATE FUND VII, LTD.

<TABLE>
<CAPTION>
                                         THREE MONTHS ENDED SEPTEMBER 30,         NINE MONTHS ENDED SEPTEMBER 30,
STATEMENTS OF OPERATIONS (UNAUDITED)        2003                2002                2003                2002
-------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                 <C>                 <C>                 <C>
INCOME
Rental                                 $        367,198    $        340,705    $      1,070,163    $      1,060,860
Interest and other                                1,278               1,668               3,695               4,313
                                       ----------------    ----------------    ----------------    ----------------
     Total Income                               368,476             342,373           1,073,858           1,065,173
-------------------------------------------------------------------------------------------------------------------
EXPENSES
Property operating                              230,345             199,063             642,142             553,107
Interest                                        111,691             113,031             332,438             336,342
Depreciation and amortization                   106,650             107,162             320,019             323,451
General and administrative                       74,736              16,936             165,269              51,577
                                       ----------------    ----------------    ----------------    ----------------
     Total Expenses                             523,422             436,192           1,459,868           1,264,477
-------------------------------------------------------------------------------------------------------------------
NET LOSS                               $       (154,946)   $        (93,819)   $       (386,010)   $       (199,304)
===================================================================================================================
NET LOSS ALLOCATED:
To the General Partners                $         (1,549)   $           (938)   $         (3,860)   $         (1,993)
To the Limited Partners                        (153,397)            (92,881)           (382,150)           (197,311)
-------------------------------------------------------------------------------------------------------------------
                                       $       (154,946)   $        (93,819)   $       (386,010)   $       (199,304)
===================================================================================================================
PER LIMITED PARTNERSHIP UNIT
(11,080 OUTSTANDING)                   $         (13.84)   $          (8.38)   $         (34.49)   $         (17.81)
===================================================================================================================
</TABLE>

See accompanying notes to the financial statements.                            3

<PAGE>

S/M REAL ESTATE FUND VII, LTD.

<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30,                          2003         2002
-------------------------------------------------------------------------------------
<S>                                                            <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                       $(386,010)   $(199,304)
Adjustments to reconcile net loss to net cash
  (used in) provided by operating activities:
   Depreciation and amortization                                 320,019      323,451
   Increase (decrease) in cash arising from changes in
   operating assets and liabilities:
     Cash held in escrow                                        (148,508)    (165,433)
     Accounts receivable                                           5,186       (3,032)
     Other assets                                                (24,845)     (19,707)
     Accounts payable                                             18,355        5,427
     Accrued expenses and other liabilities                      183,788      142,154
                                                               ---------    ---------
Net cash (used in) provided by operating activities              (32,015)      83,556
-------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash - replacement reserve                 12,238       93,991
Additions to real estate                                         (40,017)     (29,194)
                                                               ---------    ---------
Net cash (used in) provided by investing activities              (27,779)      64,797
-------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES - Payments of principal
   on first mortgage note payable                                (56,986)     (53,082)
-------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents            (116,780)      95,271
Cash and cash equivalents, beginning of period                   259,663      216,234
-------------------------------------------------------------------------------------
Cash and cash equivalents, end of period                       $ 142,883    $ 311,505
=====================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest                       $ 332,438    $ 336,342
=====================================================================================
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
Write-off of fully depreciated building and improvements       $  40,661    $  43,728
=====================================================================================
</TABLE>

See accompanying notes to the financial statements.                            4

<PAGE>

S/M REAL ESTATE FUND VII, LTD.

         NOTES TO THE FINANCIAL STATEMENTS

         The quarterly unaudited financial statements for S/M Real Estate Fund
         VII, Ltd. (the "Partnership") include all normal and recurring
         adjustments which are, in the opinion of the general partners,
         necessary to present a fair statement of financial position as of
         September 30, 2003, the results of operations for the three and nine
         months ended September 30, 2003 and 2002, the change in partners'
         deficit for the nine months ended September 30, 2003, and the cash
         flows for the nine months ended September 30, 2003 and 2002. Results of
         operations for the period are not necessarily indicative of the results
         to be expected for the full year.

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

         During the nine months ended September 30, 2003 and 2002, the general
         partners or their affiliates were reimbursed for Partnership
         administrative and operating expenses, excluding property management
         fees, in the amounts of $8,069 and $8,891, respectively. Property
         management fees earned by an affiliate of the Partnership's general
         partners were $43,220 and $42,604 for the nine months ended September
         30, 2003 and 2002, respectively.

         The financial information included in this interim report as of
         September 30, 2003 and for the three and nine months ended September
         30, 2003 and 2002 has been prepared by management without audit by
         independent certified public accountants. The Partnership's 2002 annual
         report contains audited financial statements including the notes to the
         financial statements and should be read in conjunction with the
         financial information contained in this interim report.

         No significant events other than mentioned below have occurred
         subsequent to fiscal year 2002, and no material contingencies exist
         which would require disclosure in this interim report per Regulation
         S-X, Rule 10-01, Paragraph (a)(5).

         On July 3, 2003, the Partnership filed with the Securities and Exchange
         Commission preliminary proxy materials and on September 16, 2003, the
         Partnership filed with the Securities and Exchange Commission
         definitive proxy materials regarding a proposed sale of the
         Partnership's sole property and the dissolution and liquidation of the
         Partnership. Definitive proxy materials were sent to limited partners
         seeking their approval of these proposals. On October 23, 2003, the
         Partnership held a special meeting of limited partners to vote on two
         proposals described in the definitive proxy materials dated September
         16, 2003: (1) the sale of the Partnership's final property, Fifth
         Avenue Apartments, and amendments of the Partnership's partnership
         agreement to disband the Investment Committee and to change the
         allocation of cash distributions from sales or refinancings among
         limited partners and general partners; and (2) the subsequent
         dissolution and liquidation of the Partnership. Limited partnerships
         representing a quorum were present at the special meeting. Both
         proposals were approved by the requisite number of limited partnership
         interests. As a result, the Partnership began marketing the Fifth
         Avenue property for sale and continues to operate until such time as
         the property is sold and the Partnership is dissolved and liquidated.
         Despite these approvals, there can be no assurance that the Partnership
         will consummate the sale and the dissolution and liquidation of the
         Partnership. In accordance with the provisions of SFAS 144, the Fifth
         Avenue property will be disclosed as held for sale in future financial
         statements and depreciation ceased subsequent to the approval of the
         sale of the Fifth Avenue property.

                                                                               5

<PAGE>

S/M REAL ESTATE FUND VII, LTD.

         PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS.

         Liquidity and Capital Resources

         Under the terms of the Partnership's loan agreement, the Partnership is
         required to make fixed monthly payments of principal and interest in
         the amount of $43,269 until maturity on January 1, 2009, at which time
         the entire outstanding principal balance and accrued interest is due.
         Under the terms of the loan agreement, the Partnership is required to
         make monthly contributions of $3,905 which are held by the lender
         pending application for the completion of certain required repairs to
         the Fifth Avenue property. At September 30, 2003, the balance in this
         replacement reserve account was $11,918.

         Cash and cash equivalents totaled $142,883 at September 30, 2003,
         compared to $259,663 at December 31, 2002. The $116,780 decrease is
         primarily attributable to cash used by operations, debt service
         payments and payments made to the replacement reserve account and
         escrow account, partially offset by the release of restricted cash (see
         below).

         Cash held in escrow increased to $231,073 at September 30, 2003, from
         $82,565 at December 31, 2002. The $148,508 increase is attributable to
         contributions to the insurance and real estate tax escrow as required
         by the Partnership's loan agreement offset in part by payment of annual
         insurance premiums.

         Restricted cash replacement reserve decreased to $11,918 at September
         30, 2003, from $24,156 at December 31, 2002. The $12,238 decrease is
         attributable to the release of $47,531 for replacements, offset in part
         by monthly contributions to the replacements reserve in accordance with
         the terms of the loan agreement.

         Other assets increased to $109,640 at September 30, 2003, from $89,380
         at December 31, 2002. The increase is primarily due to increases in
         prepaid insurance partially offset by the amortization of loan costs.

         Accounts receivable totaled $4,947 at September 30, 2003, compared to
         $10,133 at December 31, 2002. The decrease is primarily attributable to
         the timing of tenant rental receipts. Accounts payable totaled $80,114
         at September 30, 2003, compared to $61,759 at December 31, 2002. The
         increase is primarily attributable to the timing of payments for
         utilities and repair and maintenance costs.

         Accrued expenses and other liabilities totaled $227,193 at September
         30, 2003, compared to $43,405 at December 31, 2002. The increase is
         primarily attributable to the timing of payments for real estate taxes
         and partnership administrative costs.

         The Partnership's general partners currently expect funds from
         operations to be sufficient to pay all obligations for 2003, including
         debt service. In the event of any cash flow deficits, it is expected
         that such deficits will be funded by the Partnership's existing cash
         balances. However, there can be no assurance that the Partnership will
         have sufficient cash to fund any such deficits.

         Results of Operations

         Operations resulted in net losses of $154,946 and $386,010 for the
         three and nine-month periods ended September 30, 2003, respectively,
         and $93,819 and $199,304 for the three and nine-month periods ended
         September 30, 2002, respectively. The increased net loss for the three
         and nine-months ended September 30, 2003 from the corresponding periods
         in 2002 are primarily attributable to increases in property operating
         expenses and partnership administrative costs.

         Rental income totaled $367,198 and $1,070,163 for the three and
         nine-month periods ended September 30, 2003, respectively, compared to
         $340,705 and $1,060,860, respectively, for the corresponding periods in
         2002. Occupancy at Fifth Avenue averaged approximately 97% and 94% for
         the three and nine-month periods ended September 30, 2003,
         respectively, compared to 94% and 95% for the three and nine-month
         periods ended September 30, 2002, respectively. The average rental
         income per occupied square foot at Fifth Avenue was $11.52 and $9.74
         for the three and nine months ended September 30, 2003, respectively,
         compared to $8.59 and $8.75, respectively, for the corresponding
         periods in 2002.

                                                                               6

<PAGE>

S/M REAL ESTATE FUND VII, LTD.

         Total expenses for the three and nine-month periods ended September 30,
         2003 were $523,422 and $1,459,868, respectively, compared to $436,192
         and $1,264,477, respectively, for the three and nine-month periods
         ended September 30, 2002. The increases are primarily attributable to
         increases in property operating expenses and general and administrative
         expenses.

         Property operating expenses consist primarily of on-site personnel
         expenses, utility costs, repair and maintenance costs, property
         management fees, advertising costs, insurance and real estate taxes.
         Property operating expenses for the three and nine-month periods ended
         September 30, 2003 were $230,345 and $642,142, respectively, compared
         to $199,063 and $553,107, respectively, for the three and nine-month
         periods ended September 30, 2002. The increases are primarily
         attributable to higher apartment preparation costs, repair and
         maintenance costs, leasing and promotional costs, property office
         administrative costs and property insurance costs.

         General and administrative expenses for the three and nine-month
         periods ended September 30, 2003 were $74,736 and $165,269,
         respectively, compared to $16,936 and $51,577, respectively, for the
         three and nine-month periods ended September 30, 2002. The increases
         are primarily due to higher legal and other professional expenses
         primarily associated with the filing and distribution of the definitive
         proxy materials as discussed below.

         On July 3, 2003, the Partnership filed with the Securities and Exchange
         Commission preliminary proxy materials and on September 16, 2003, the
         Partnership filed with the Securities and Exchange Commission
         definitive proxy materials regarding a proposed sale of the
         Partnership's sole property and the dissolution and liquidation of the
         Partnership. Definitive proxy materials were sent to limited partners
         seeking their approval of these proposals. On October 23, 2003, the
         Partnership held a special meeting of limited partners to vote on two
         proposals described in the definitive proxy materials dated September
         16, 2003: (1) the sale of the Partnership's final property, Fifth
         Avenue Apartments, and amendments of the Partnership's partnership
         agreement to disband the Investment Committee and to change the
         allocation of cash distributions from sales or refinancings among
         limited partners and general partners; and (2) the subsequent
         dissolution and liquidation of the Partnership. Limited partnerships
         representing a quorum were present at the special meeting. Both
         proposals were approved by the requisite number of limited partnership
         interests. As a result, the Partnership began marketing the Fifth
         Avenue property for sale and continues to operate until such time as
         the property is sold and the Partnership is dissolved and liquidated.
         Despite these approvals, there can be no assurance that the Partnership
         will consummate the sale and the dissolution and liquidation of the
         Partnership.  In accordance with the provisions of SFAS 144, the Fifth
         Avenue property will be disclosed as held for sale in future financial
         statements and depreciation ceased subsequent to the approval of the
         sale of the Fifth Avenue property.

         General

         Words or phrases when used in this Form 10-Q or other filings with the
         Securities and Exchange Commission, such as "does not believe" and
         "believes," or similar expressions are intended to identify
         "forward-looking statements" within the meaning of the Private
         Securities Litigation Reform Act of 1995.

         PART I, ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
         RISK

         There have been no material changes in the information related to the
         market risk of the Partnership since December 31, 2002.

                                                                               7

<PAGE>

S/M REAL ESTATE FUND VII, LTD.

         PART I, ITEM 4. CONTROLS AND PROCEDURES

         As of September 30, 2003, we carried out an evaluation, under the
         supervision and with the participation of the chief executive officer
         and chief financial officer of our general partner, of the
         effectiveness of the design and operation of our disclosure controls
         and procedures (as defined in Rule 13a-15(e) under the Securities
         Exchange Act of 1934). Based on this evaluation, the chief executive
         officer and chief financial officer concluded that our disclosure
         controls and procedures were effective as of September 30, 2003 to
         provide reasonable assurance that information required to be disclosed
         by us in our periodic SEC Exchange Act reports is recorded, processed,
         summarized and reported within the time periods specified by the SEC's
         rules and forms, and to provide reasonable assurance that information
         required to be disclosed by us is accumulated and communicated to our
         management, including the chief executive officer and chief financial
         officer of our general partners, as appropriate to allow timely
         decisions regarding required disclosure.

         There were no changes in our internal control over financial reporting
         (as such term is defined in Rule 13a-15(f) under the Exchange Act) that
         occurred during the quarter ended September 30, 2003, that has
         materially affected, or is reasonably likely to materially affect, our
         internal control over financial reporting.

                                                                               8

<PAGE>

S/M REAL ESTATE FUND VII, LTD.

         PART                       II OTHER INFORMATION

         ITEMS 1-3 AND 5            Not applicable.

         ITEM 4                     Submission of Matters to a Vote of Security
                                    Holders.

                                    On October 23, 2003, the Partnership held a
                                    special meeting of limited partners to
                                    consider and approve two proposals described
                                    in the definitive proxy materials mailed to
                                    limited partners on or about September 16,
                                    2003:

                                    (1) the sale of the Partnership's sole
                                        property, and amendments to the
                                        Partnership's partnership agreement to
                                        disband the Investment Committee and
                                        change the allocation of certain
                                        distributions; and

                                    (2) the subsequent dissolution and
                                        liquidation of the Partnership.

                                    With respect to proposal 1, 5,990 limited
                                    partner interests voted for the proposal,
                                    285 voted against and 82 were abstentions or
                                    broker non-votes. With respect to proposal
                                    2, 6,064 limited partner interest voted for
                                    the proposal, 211 voted against and 82 were
                                    abstentions or broker non-votes.

         ITEM 6                     Exhibits and reports on Form 8-K.

                                    (a) Exhibits -

                                    2.1      Voluntary Petition of
                                             Shearson-Murray Real Estate Fund
                                             VII, Ltd. to commence a case under
                                             Chapter 11 of the Federal
                                             Bankruptcy Code in the United
                                             States Bankruptcy Court for the
                                             Western District of Texas-Austin
                                             Division, as filed on June 6, 1989.
                                             Reference is made to Exhibit 2a to
                                             the Partnership's Annual Report on
                                             Form 10-K filed with the Securities
                                             and Exchange Commission on June 14,
                                             1989.

                                    2.2      Modified First Amended Plan of
                                             Reorganization of Shearson-Murray
                                             Real Estate Fund VII, Ltd. in the
                                             United States Bankruptcy Court for
                                             the Western District of
                                             Texas-Austin Division Case No.
                                             89-11662-LC filed February 20,
                                             1990. Reference is made to the
                                             Partnership's Annual Report on Form
                                             10-K filed with the Securities and
                                             Exchange Commission on April 12,
                                             1990.

                                    3        Agreement of Limited Partnership of
                                             Shearson-Murray Real Estate Fund
                                             VII, Ltd., as amended as of
                                             September 30, 1983. Reference is
                                             made to Partnership's Form 8-K
                                             filed with the Securities and
                                             Exchange Commission on October 26,
                                             1983. Reference is made to Exhibit
                                             A to the Prospectus dated June 10,
                                             1983 contained in Amendment No. 3
                                             to Partnership's Form S-11
                                             Registration Statement filed with
                                             the Securities and Exchange
                                             Commission June 10, 1983.

                                    10.1     Assignment and Assumption Agreement
                                             between Murray Management
                                             Corporation and Anterra Management
                                             Corporation for property management
                                             and leasing services dated January
                                             1, 1990. Reference is made to
                                             Exhibit 10u to the Partnership's
                                             Annual Report on Form 10-K filed
                                             with the Securities and Exchange
                                             Commission May 15, 1990.

                                    10.2     Loan Agreement between S/M Real
                                             Estate Fund VII, Ltd. and General
                                             Electric Capital Corporation, dated
                                             December 3, 1998. Reference is made
                                             to Exhibit 10.1 to Partnership's
                                             Form 8-K filed with the Securities
                                             and Exchange Commission on December
                                             14, 1998.

                                                                               9

<PAGE>

S/M REAL ESTATE FUND VII, LTD.

                                    31.1*    Section 302 Certification of Chief
                                             Executive Officer.

                                    31.2*    Section 302 Certification of Chief
                                             Financial Officer.

                                    32.1*    Certification of Chief Executive
                                             Officer Pursuant to 18 U.S.C.
                                             Section 1350, as Adopted Pursuant
                                             to Section 906 of the
                                             Sarbanes-Oxley Act of 2002.

                                    32.2*    Certification of Chief Financial
                                             Officer Pursuant to 18 U.S.C.
                                             Section 1350, as Adopted Pursuant
                                             to Section 906 of the
                                             Sarbanes-Oxley Act of 2002.

                                    99.1     Pages A-16 to A-18 of Exhibit A to
                                             the Prospectus dated June 10, 1983,
                                             contained in Amendment No. 3 to
                                             Partnership's Form S-11
                                             Registration Statement filed with
                                             the Securities and Exchange
                                             Commission on June 10, 1983.
                                             Reference is made to Exhibit 28a to
                                             the Partnership's Annual Report on
                                             Form 10-K filed with the Securities
                                             and Exchange Commission on May 12,
                                             1988.

                                    99.2     Pages 10-18 of the Prospectus dated
                                             June 10, 1983, contained in
                                             Amendment No. 3 to Partnership's
                                             Form S-11 Registration Statement
                                             filed with the Securities and
                                             Exchange Commission on June 10,
                                             1983. Reference is made to Exhibit
                                             28b to the Partnership's Annual
                                             Report on Form 10-K filed with the
                                             Securities and Exchange Commission
                                             on May 12, 1988.

                                    99.3     Compromise Settlement Agreement
                                             between S/M Real Estate Fund VII,
                                             Ltd. and Federal National Mortgage
                                             Association, dated May 6, 1996.
                                             Reference is made to Exhibit 99.1
                                             to the Partnership's Quarterly
                                             Report on Form 10-Q for the quarter
                                             ended June 30, 1996 filed with the
                                             Securities and Exchange Commission.

                                    99.4     $5,830,000 Multifamily Note and
                                             Addendum, dated May 30, 1996.
                                             Reference is made to Exhibit 99.2
                                             to the Partnership's Quarterly
                                             Report on Form 10-Q for the quarter
                                             ended June 30, 1996 filed with the
                                             Securities and Exchange Commission.

                                    99.5     $681,142 Subordinate Multifamily
                                             Note and Addendum, dated May 30,
                                             1996. Reference is made to Exhibit
                                             99.3 to the Partnership's Quarterly
                                             Report on Form 10-Q for the quarter
                                             ended June 30, 1996 filed with the
                                             Securities and Exchange Commission.

                                    99.6     $6,400,000 Promissory Note, dated
                                             December 3, 1998. Reference is made
                                             to Exhibit 99.1 of the
                                             Partnership's Form 8-K filed with
                                             the Securities and Exchange
                                             Commission on December 14, 1998.

                                    (b)      Reports on Form 8-K - No reports on
                                             Form 8-K were filed during the
                                             quarter ended September 30, 2003.


---------------------
* Filed herewith.

                                                                              10

<PAGE>

S/M REAL ESTATE FUND VII, LTD.

                                   SIGNATURES

         Pursuant to the requirements 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.

                                       S/M REAL ESTATE FUND VII, LTD.

                                   BY: SM7 APARTMENT INVESTORS INC.
                                       General Partner

         Date: November 13, 2003       BY: /s/ Richard E. Hoffmann
                                           -------------------------------
                                       Name: Richard E. Hoffmann
                                       Title: Chief Executive Officer,
                                              Director, President and Treasurer

         Date: November 13, 2003       BY: /s/ Sandy Robison
                                           -------------------------------
                                       Name: Sandy Robison
                                       Title: Chief Financial Officer,
                                              Vice President,
                                              Secretary and Controller

                                                                              11

<PAGE>

S/M REAL ESTATE FUND VII, LTD.

                                INDEX TO EXHIBITS

     Document
     Number                                 Description

     2.1          Voluntary Petition of Shearson-Murray Real Estate Fund VII,
                  Ltd. to commence a case under Chapter 11 of the Federal
                  Bankruptcy Code in the United States Bankruptcy Court for the
                  Western District of Texas-Austin Division, as filed on June 6,
                  1989. Reference is made to Exhibit 2a to the Partnership's
                  Annual Report on Form 10-K filed with the Securities and
                  Exchange Commission on June 14, 1989.

     2.2          Modified First Amended Plan of Reorganization of
                  Shearson-Murray Real Estate Fund VII, Ltd. in the United
                  States Bankruptcy Court for the Western District of
                  Texas-Austin Division Case No. 89-11662-LC filed February 20,
                  1990. Reference is made to the Partnership's Annual Report on
                  Form 10-K filed with the Securities and Exchange Commission on
                  April 12, 1990.

     3            Agreement of Limited Partnership of Shearson-Murray Real
                  Estate Fund VII, Ltd., as amended as of September 30, 1983.
                  Reference is made to Partnership's Form 8-K filed with the
                  Securities and Exchange Commission on October 26, 1983.
                  Reference is made to Exhibit A to the Prospectus dated June
                  10, 1983 contained in Amendment No. 3 to Partnership's Form
                  S-11 Registration Statement filed with the Securities and
                  Exchange Commission on June 10, 1983.

     10.1         Assignment and Assumption Agreement between Murray Management
                  Corporation and Anterra Management Corporation for property
                  management and leasing services dated January 1, 1990.
                  Reference is made to Exhibit 10u to the Partnership's Annual
                  Report on Form 10-K filed with the Securities and Exchange
                  Commission May 15, 1990.

     10.2         Loan Agreement between S/M Real Estate Fund VII, Ltd. and
                  General Electric Capital Corporation, dated December 3, 1998.
                  Reference is made to Exhibit 10.1 to Partnership's Form 8-K
                  filed with the Securities and Exchange Commission on December
                  14, 1998.

     31.1         Section 302 Certification of Chief Executive Officer

     31.2         Section 302 Certification of Chief Financial Officer

     32.1         Certification of Chief Executive Officer Pursuant to 18 U.S.C.
                  Section 1350, as Adopted Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.

     32.2         Certification of Chief Financial Officer Pursuant to 18 U.S.C.
                  Section 1350, as Adopted Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.

     99.1         Pages A-16 to A-18 of Exhibit A to the Prospectus dated June
                  10, 1983, contained in Amendment No. 3 to Partnership's Form
                  S-11 Registration Statement filed with the Securities and
                  Exchange Commission on June 10, 1983. Reference is made to
                  Exhibit 28a to the Partnership's Annual Report on Form 10-K
                  filed with the Securities and Exchange Commission on May 12,
                  1988.

     99.2         Pages 10-18 of the Prospectus dated June 10, 1983, contained
                  in Amendment No. 3 to Partnership's Form S-11 Registration
                  Statement filed with the Securities and Exchange Commission on
                  June 10, 1983. Reference is made to Exhibit 28b to the
                  Partnership's Form 10-K filed with the Securities and Exchange
                  Commission on May 12, 1988.

     99.3         Compromise Settlement Agreement between S/M Real Estate Fund
                  VII, Ltd. and Federal National Mortgage Association, dated May
                  6, 1996. Reference is made to Exhibit 99.1 to the
                  Partnership's Quarterly Report on Form 10-Q for the quarter
                  ended June 30, 1996 filed with the Securities and Exchange
                  Commission.

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<PAGE>

S/M REAL ESTATE FUND VII, LTD.

                          INDEX TO EXHIBITS (continued)

     Document
      Number                               Description

     99.4         $5,830,000 Multifamily Note and Addendum, dated May 30, 1996.
                  Reference is made to Exhibit 99.2 to the Partnership's
                  Quarterly Report on Form 10-Q for the quarter ended June 30,
                  1996 filed with the Securities and Exchange Commission.

     99.5         $681,142 Subordinate Multifamily Note and Addendum, dated May
                  30, 1996. Reference is made to Exhibit 99.3 to the
                  Partnership's Quarterly Report on Form 10-Q for the quarter
                  ended June 30, 1996 filed with the Securities and Exchange
                  Commission.

     99.6         $6,400,000 Promissory Note, dated December 3, 1998. Reference
                  is made to Exhibit 99.1 of the Registrant's Form 8-K filed
                  with the Securities and Exchange Commission on December 14,
                  1998.

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