<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 MARCH 31, 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


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


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

                                 (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>
BALANCE SHEETS                                       AT MARCH 31,      AT DECEMBER 31,
                                                         2003               2002
                                                     (UNAUDITED)
                                                     ------------      ---------------
<S>                                                  <C>                <C>
ASSETS
Real estate, at cost:
   Land                                              $   962,216        $   962,216
   Building and improvements                           7,935,952          7,963,821
                                                     -----------        -----------
                                                       8,898,168          8,926,037
   Less accumulated depreciation                      (7,169,300)        (7,104,900)
                                                     -----------        -----------
                                                       1,728,868          1,821,137

Cash and cash equivalents                                213,316            259,663
Cash held in escrow                                      152,972             82,565
Restricted cash - replacement reserve                     11,944             24,156
Accounts receivable                                       10,688             10,133
Other assets, net                                         75,779             89,380
                                                     -----------        -----------
     TOTAL ASSETS                                    $ 2,193,567        $ 2,287,034
                                                     ===========        ===========
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
   First mortgage note payable                       $ 6,128,636        $ 6,148,505
   Accounts payable:
     Trade                                                21,406             21,094
     Affiliates                                           40,665             40,665
   Accrued expenses and other liabilities                 94,061             43,405
                                                     -----------        -----------
     Total Liabilities                                 6,284,768          6,253,669
                                                     -----------        -----------
Partners' Deficit:
   General Partners                                     (127,524)          (126,278)
   Limited Partners (11,080 units outstanding)        (3,963,677)        (3,840,357)
                                                     -----------        -----------
     Total Partners' Deficit                          (4,091,201)        (3,966,635)
                                                     -----------        -----------
     TOTAL LIABILITIES AND PARTNERS' DEFICIT         $ 2,193,567        $ 2,287,034
                                                     ===========        ===========
</Table>


STATEMENT OF PARTNERS' DEFICIT (UNAUDITED)

<Table>
<Caption>
                                               GENERAL            LIMITED
FOR THE THREE MONTHS ENDED MARCH 31, 2003     PARTNERS           PARTNERS             TOTAL
                                             -----------        -----------        -----------
<S>                                          <C>                <C>                <C>
BALANCE AT DECEMBER 31, 2002                 $  (126,278)       $(3,840,357)       $(3,966,635)
Net loss                                          (1,246)          (123,320)          (124,566)
                                             -----------        -----------        -----------
BALANCE AT MARCH 31, 2003                    $  (127,524)       $(3,963,677)       $(4,091,201)
                                             ===========        ===========        ===========
</Table>


See accompanying notes to the financial statements.                            2
<PAGE>
S/M REAL ESTATE FUND VII LTD.


STATEMENTS OF OPERATIONS (UNAUDITED)

<Table>
<Caption>
FOR THE THREE MONTHS ENDED MARCH 31,          2003             2002
                                           ---------        ---------
<S>                                        <C>              <C>
INCOME
Rental                                     $ 343,997        $ 355,777
Interest and other                             1,140            1,577
                                           ---------        ---------
     Total Income                            345,137          357,354
                                           ---------        ---------
EXPENSES
Property operating                           202,586          181,259
Interest                                     109,939          111,203
Depreciation and amortization                106,589          108,161
General and administrative                    50,589           13,167
                                           ---------        ---------
     Total Expenses                          469,703          413,790
                                           ---------        ---------
     NET LOSS                              $(124,566)       $ (56,436)
                                           =========        =========
NET LOSS ALLOCATED:
   To the General Partners                 $  (1,246)       $    (564)
   To the Limited Partners                  (123,320)         (55,872)
                                           ---------        ---------
                                           $(124,566)       $ (56,436)
                                           =========        =========
PER LIMITED PARTNERSHIP UNIT
(11,080 OUTSTANDING)                       $  (11.13)       $   (5.04)
                                           =========        =========
</Table>


See accompanying notes to the financial statements.                            3
<PAGE>
S/M REAL ESTATE FUND VII LTD.


STATEMENTS OF CASH FLOWS (UNAUDITED)

<Table>
<Caption>
FOR THE THREE MONTHS ENDED MARCH 31,                                  2003             2002
                                                                   ---------        ---------
<S>                                                                <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                           $(124,566)       $ (56,436)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
   Depreciation and amortization                                     106,589          108,161
   Increase (decrease) in cash arising from changes in
   operating assets and liabilities:
     Cash held in escrow                                             (70,407)         (72,630)
     Accounts receivable                                                (555)          (3,033)
     Other assets                                                     12,073            7,711
     Accounts payable                                                    312              297
     Accrued expenses and other liabilities                           50,656           37,249
                                                                   ---------        ---------
Net cash (used in) provided by operating activities                  (25,898)          21,319
                                                                   ---------        ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash - replacement reserve                     12,212           93,831
Additions to real estate                                             (12,792)         (13,765)
                                                                   ---------        ---------
Net cash (used in) provided by investing activities                     (580)          80,066
                                                                   ---------        ---------
CASH FLOWS FROM FINANCING ACTIVITIES - Payments of principal
   on first mortgage note payable                                    (19,869)         (18,605)
                                                                   ---------        ---------
Net (decrease) increase in cash and cash equivalents                 (46,347)          82,780
Cash and cash equivalents, beginning of period                       259,663          216,234
                                                                   ---------        ---------
Cash and cash equivalents, end of period                           $ 213,316        $ 299,014
                                                                   =========        =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest                           $ 109,939        $ 111,203
                                                                   =========        =========
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 March 31, 2003, the results of operations for the three
months ended March 31, 2003 and 2002, the change in partners' deficit for the
three months ended March 31, 2003, and the cash flows for the three months ended
March 31, 2003 and 2002. Results of operations for the period are not
necessarily indicative of the results to be expected for the full year.

No significant events 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).

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 three months ended March 31, 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 $3,025 and
$2,820, respectively. Property management fees earned by an affiliate of the
Partnership's general partners were $14,002 and $14,256 for the three months
ended March 31, 2003 and 2002, respectively.

The financial information included in this interim report as of March 31, 2003
and for the three months ended March 31, 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.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
The main provisions of this statement address the classification of debt
extinguishments and accounting for certain lease transactions. The provisions of
this statement regarding gain or loss on extinguishment of debt apply to fiscal
years beginning after May 15, 2002 and the provisions apply to transactions
occurring after May 15, 2002. Upon adoption, early extinguishments will not
continue to qualify for extraordinary item treatment. The Partnership adopted
SFAS No. 145 on January 1, 2002 and there was no impact to the Partnership's
financial position or results of operation.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others, an interpretation of FASB Statements No. 5, 57, and 107
and rescission of FASB Interpretation No. 34." This Interpretation elaborates on
the disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under guarantees issued. The Interpretation
also clarifies that a guarantor is required to recognize, at inception of a
guarantee, a liability for the fair value of the obligation undertaken. The
initial recognition and measurement provisions of this Interpretation are
applicable to guarantees issued or modified after December 31, 2002.
Implementation of these provisions of this Interpretation had no effect on the
Partnership's financial position or results of operations. The disclosure
requirements in this Interpretation are effective for interim and annual periods
ending after December 15, 2002. The Partnership has no additional items to
disclose in connection with this Interpretation.


                                                                               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 Fifth Avenue. At March 31, 2003, the balance in this
replacement reserve account was $11,944.

Cash and cash equivalents totaled $213,316 at March 31, 2003, compared to
$259,663 at December 31, 2002. The $46,347 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 $152,972 at March 31, 2003 from $82,565 at
December 31, 2002. The $70,407 increase is attributable to contributions to the
insurance and real estate tax escrow, as required by the Partnership's loan
agreement.

Restricted cash replacement reserve decreased to $11,944 at March 31, 2003, from
$24,156 at December 31, 2002. The $12,212 decrease is attributable to the
release of $23,995 for replacements, offset in part by monthly contributions to
the replacements reserve in accordance with the terms of the loan agreement.

Other assets decreased to $75,779 at March 31, 2003, from $89,380 at December
31, 2002. The decrease is primarily due to decreases in prepaid insurance and
the amortization of loan costs.

Accrued expenses and other liabilities totaled $94,061 at March 31, 2003,
compared to $43,405 at December 31, 2002. The change 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 $124,566 for the three-month period ended
March 31, 2003, and $56,436 for the three-month period ended March 31, 2002. The
increased net loss for the three months ended March 31, 2003 from the
corresponding period in 2002 is primarily attributable to decreases in rental
and interest income and increases in property operating expenses and partnership
administrative costs.

Rental income totaled $343,997 for the three-month period ended March 31, 2003,
compared with $355,777 for the three-month period ended March 31, 2002.
Occupancy at Fifth Avenue averaged approximately 91% and 96% for the three-month
periods ended March 31, 2003 and 2002, respectively. The average rental income
per occupied square foot at Fifth Avenue was $8.91 for the three-month period
ended March 31, 2003, compared to $8.75 for the corresponding period in 2002.

Total expenses for the three-month period ended March 31, 2003 were $469,703
compared to $413,790 for the three-month period ended March 31, 2002. The
increase is 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-month period ended March 31, 2003 were $202,586 compared to
$181,259 for the three-month period ended March 31, 2002. The increase is
primarily attributable to higher apartment preparation costs, utility costs,
repair and maintenance costs and property insurance costs.




                                                                               6
<PAGE>
S/M REAL ESTATE FUND VII, LTD.

General and administrative expenses for the three-month period ended March 31,
2003 were $50,589 compared to $13,167 for the three-month period ended March 31,
2002. The increase is due primarily to higher legal and other professional
expenses.

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.


PART I, ITEM 4. CONTROLS AND PROCEDURES

Within 90 days prior to the date of this report, 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. Based on this
evaluation, the chief executive officer and chief financial officer concluded
that our disclosure controls and procedures are effective in timely alerting
them to material information required to be included in our periodic SEC
reports.

In addition, we reviewed our internal controls, and there has been no
significant changes in our internal controls or in other factors including any
corrective actions with regard to significant deficiencies and material
weaknesses that could significantly affect those controls subsequent to the date
of their last evaluation.



                                                                               7

<PAGE>
S/M REAL ESTATE FUND VII, LTD.

PART II                    OTHER INFORMATION

ITEMS 1-5                  Not applicable.

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 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 on 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.

                           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.


                                                                               8
<PAGE>
S/M REAL ESTATE FUND VII, LTD.



                           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.

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

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


                           (b) Reports on Form 8-K - No reports on Form 8-K
                               were filed during the quarter ended March 31,
                               2003.


                                                                         9
<PAGE>
                                   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: May 12, 2003                     BY:    /s/ Richard E. Hoffmann
                                              ----------------------------------
                                       Name:  Richard E. Hoffmann
                                       Title: Chief Executive Officer, Director,
                                              President and Treasurer



Date: May 12, 2003                     BY:    /s/ Sandy Robison
                                              ----------------------------------
                                       Name:  Sandy Robison
                                       Title: Chief Financial Officer,
                                              Vice President, Secretary and
                                              Controller


                                                                              10
<PAGE>

S/M REAL ESTATE FUND VII, LTD.

                                 CERTIFICATIONS

I, Richard E. Hoffmann, certify that:

         1.       I have reviewed this quarterly report on Form 10-Q of S/M Real
                  Estate Fund VII, Ltd.;

         2.       Based on my knowledge, this quarterly report does not contain
                  any untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the period covered by this
                  quarterly report;

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this quarterly report,
                  fairly present in all material respects the financial
                  condition, results of operations and cash flows of the
                  registrant as of, and for, the period presented in this
                  quarterly report;

         4.       The registrant's other certifying officer and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14) for the registrant and we have:

                           a)       designed such disclosure controls and
                                    procedures to ensure that material
                                    information relating to the registrant,
                                    including its consolidated subsidiaries, is
                                    made known to us by others within those
                                    entities, particularly during the period in
                                    which this quarterly report is being
                                    prepared;

                           b)       evaluated the effectiveness of our
                                    disclosure controls and procedures as of a
                                    date within 90 days prior to the filing date
                                    of this quarterly report (the "Evaluation
                                    Date"); and

                           c)       presented in this quarterly report our
                                    conclusions about the effectiveness of the
                                    disclosure controls and procedures based on
                                    our evaluation as of the Evaluation Date;

         5.       The registrant's other certifying officer and I have
                  disclosed, based on our most recent evaluation, to the
                  registrant's auditors and the audit committee of registrant's
                  board of directors (or persons performing the equivalent
                  function):

                           a)       all significant deficiencies in the design
                                    or operation of internal controls which
                                    could adversely affect our ability to
                                    record, process, summarize and report
                                    financial data and have identified for the
                                    registrant's auditors any material
                                    weaknesses in internal controls; and

                           b)       any fraud, whether or not material, that
                                    involves management or other employees who
                                    have a significant role in our internal
                                    controls;

         6.       The registrant's other certifying officer and I have indicated
                  in this quarterly report whether there were significant
                  changes in internal controls or in other factors that could
                  significantly affect internal controls subsequent to the date
                  of our most recent evaluation, including any corrective
                  actions with regard to significant deficiencies and material
                  weaknesses.


Date:  May 12, 2003             BY:      /s/ Richard E. Hoffmann
                                ------------------------------------------------
                                Name:    Richard E. Hoffmann
                                Title:   Chief Executive Officer, Director,
                                         President and Treasurer of SM7
                                         Apartment Investors Inc., a general
                                         partner


                                                                              11
<PAGE>

S/M REAL ESTATE FUND VII, LTD.

                                 CERTIFICATIONS

I, Sandy Robison, certify that:

         1.       I have reviewed this quarterly report on Form 10-Q of S/M Real
                  Estate Fund VII, Ltd.;

         2.       Based on my knowledge, this quarterly report does not contain
                  any untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the period covered by this
                  quarterly report;

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this quarterly report,
                  fairly present in all material respects the financial
                  condition, results of operations and cash flows of the
                  registrant as of, and for, the period presented in this
                  quarterly report;

         4.       The registrant's other certifying officer and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14) for the registrant and we have:

                           a)       designed such disclosure controls and
                                    procedures to ensure that material
                                    information relating to the registrant,
                                    including its consolidated subsidiaries, is
                                    made known to us by others within those
                                    entities, particularly during the period in
                                    which this quarterly report is being
                                    prepared;

                           b)       evaluated the effectiveness of our
                                    disclosure controls and procedures as of a
                                    date within 90 days prior to the filing date
                                    of this quarterly report (the "Evaluation
                                    Date"); and

                           c)       presented in this quarterly report our
                                    conclusions about the effectiveness of the
                                    disclosure controls and procedures based on
                                    our evaluation as of the Evaluation Date;

         5.       The registrant's other certifying officer and I have
                  disclosed, based on our most recent evaluation, to the
                  registrant's auditors and the audit committee of registrant's
                  board of directors (or persons performing the equivalent
                  function):

                           a)       all significant deficiencies in the design
                                    or operation of internal controls which
                                    could adversely affect our ability to
                                    record, process, summarize and report
                                    financial data and have identified for the
                                    registrant's auditors any material
                                    weaknesses in internal controls; and

                           b)       any fraud, whether or not material, that
                                    involves management or other employees who
                                    have a significant role in our internal
                                    controls;

         6.       The registrant's other certifying officer and I have indicated
                  in this quarterly report whether there were significant
                  changes in internal controls or in other factors that could
                  significantly affect internal controls subsequent to the date
                  of our most recent evaluation, including any corrective
                  actions with regard to significant deficiencies and material
                  weaknesses.




Date:  May 12, 2003              BY:      /s/ Sandy Robison
                                ------------------------------------------------
                                Name:    Sandy Robison
                                Title:   Chief Financial Officer,
                                         Vice President, Secretary and
                                         Controller of SM7 Apartment
                                         Investors Inc., a general partner


                                                                              12
<PAGE>
S/M REAL ESTATE FUND VII, LTD.



                                INDEX TO EXHIBITS

<Table>
<Caption>
Document
 Number           Description
--------          -----------
<S>               <C>
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 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 on 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.

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.

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.
</Table>


<PAGE>
S/M REAL ESTATE FUND VII, LTD.



                          INDEX TO EXHIBITS (continued)

<Table>
<Caption>
Document
 Number           Description
--------          -----------
<S>               <C>
99.7              Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.8              Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
</Table>