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

# FORM 10-Q

# [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004

OR

# [   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-13400

NTS-PROPERTIES V,
A MARYLAND LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)

|Maryland                        | 61-1051452                          
|------------------------------- | ------------------------------------
|(State or other jurisdiction of | (I.R.S. Employer Identification No.)
|incorporation or organization)  |                                     

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

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

(Former name, former address and former fiscal year, if changed since last report)

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 registrant is an accelerated filer (as defined in Rule 12b-2 of the
Exchange Act).     Yes [   ]    No [X]

---

# TABLE OF CONTENTS

| |  |  |  |      
| |  |  |  | -----
| |  |  |  | Pages

# PART I  FINANCIAL INFORMATION

|        |  |                                                                                                            |  |      
|------- |  | ---------------------------------------------------------------------------------------------------------- |  | -----
|Item 1. |  | Consolidated Financial Statements (Unaudited)                                                             
|       
|        |  | Consolidated Balance Sheets as of September 30, 2004 and December 31, 2003                                 |  | 4    
|       
|        |  | Consolidated Statement of Partners' Equity as of September 30, 2004                                        |  | 4    
|       
|        |  | Consolidated Statements of Operations for the Three and
     Nine Months Ended September 30, 2004 and 2003 |  | 5    
|       
|        |  | Consolidated Statements of Cash Flows for the Nine Months
      Ended September 30, 2004 and 2003          |  | 6    
|       
|        |  | Notes to Consolidated Financial Statements                                                                 |  | 7-18 
|       
|Item 2. |  | Management's Discussion and Analysis of Financial
     Condition and Results of Operations                 |  | 19-30
|       
|Item 3. |  | Quantitative and Qualitative Disclosures About Market Risk                                                 |  | 31   
|       
|Item 4. |  | Controls and Procedures                                                                                    |  | 31   
|       

# PART II  OTHER INFORMATION

|            |  |  |  |      
|----------- |  |  |  | -----
|Items 1 - 6 |  |  |  | 32-34
|           
|Signatures  |  |  |  | 35   

2

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Some of the statements included in
this quarterly report on Form 10-Q, particularly those included in Part I, Item 2 
Managements Discussion and Analysis of Financial Condition and Results of Operations
(MD&A), may be considered forward-looking statements because
the statements relate to matters which have not yet occurred. For example, phrases such as
we anticipate, believe or expect indicate that it is
possible that the event anticipated, believed or expected may not occur. If these events
do not occur, the result which we expected also may, or may not, occur in a different
manner, which may be more or less favorable to us. We do not undertake any obligation to
update these forward-looking statements.

Any forward-looking statements
included in MD&A, or elsewhere in this report, reflect our general partners best
judgment based on known factors, but involve risks and uncertainties. Actual results could
differ materially from those anticipated in any forward-looking statements as a result of
a number of factors, including but not limited to those described in our filings with the
Securities and Exchange Commission, particularly our annual report on Form 10-K for the
year ended December 31, 2003. Any forward-looking information provided by us pursuant to
the safe harbor established by the Private Securities Litigation Reform Act of 1995 should
be evaluated in the context of these factors.

3

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# PART I  FINANCIAL
INFORMATIONItem 1  Consolidated Financial Statements

# NTS-PROPERTIES V,
A MARYLAND LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS

`As of               As of
                                                                  September 30,       December 31,
                                                                       2004               2003
                                                                ------------------  -----------------
                                                                   (UNAUDITED)
ASSETS
Cash and equivalents                                           $           299,273 $          191,321
Cash and equivalents - restricted                                          755,976            363,643
Accounts receivable, net                                                   661,730            576,113
Land, buildings and amenities, net                                      19,691,909         20,360,408
Other assets                                                               764,140            893,961
                                                                ------------------  -----------------

      TOTAL ASSETS                                             $        22,173,028 $       22,385,446
                                                                ==================  =================

LIABILITIES AND PARTNERS' EQUITY
Mortgages payable                                              $        13,337,353 $       13,614,792
Accounts payable and accrued expenses                                      926,264            725,261
Accounts payable - affiliate                                               709,112            294,771
Security deposits                                                          240,595            210,252
Other liabilities                                                          633,796            192,601
                                                                ------------------  -----------------

      TOTAL LIABILITIES                                                 15,847,120         15,037,677

MINORITY INTEREST                                                          968,517          1,015,947

COMMITMENTS AND CONTINGENCIES (Note 10)

PARTNERS' EQUITY                                                         5,357,391          6,331,822
                                                                ------------------  -----------------

TOTAL LIABILITIES AND PARTNERS' EQUITY                         $        22,173,028 $       22,385,446
                                                                ==================  =================`

# NTS-PROPERTIES V,
A MARYLAND LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF PARTNERS EQUITY
(UNAUDITED)

`Limited            General
                                                   Partners            Partner              Total
                                               -----------------  ------------------  ------------------
PARTNERS' EQUITY/(DEFICIT)
Capital contributions, net of offering costs  $       30,582,037 $               100 $        30,582,137
Net (loss) income - prior years                       (6,453,939)             48,606          (6,405,333)
Net loss - current year                                 (964,687)             (9,744)           (974,431)
Cash distributions declared to date                  (16,641,480)           (168,177)        (16,809,657)
Repurchase of limited partnership interests           (1,035,325)                 --          (1,035,325)
                                               -----------------  ------------------  ------------------

BALANCES ON SEPTEMBER 30, 2004                $        5,486,606 $          (129,215)$         5,357,391
                                               =================  ==================  ==================`

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

4

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# NTS-PROPERTIES V,
A MARYLAND LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

`Three Months Ended              Nine Months Ended
                                                               September 30,                  September 30,
                                                       -----------------------------  -----------------------------
                                                            2004           2003           2004            2003
                                                       --------------  -------------  -------------  --------------
REVENUES
Rental income                                         $       971,085 $      972,431 $    2,897,850 $     2,988,568
Tenant reimbursements                                         286,827        259,836        854,953         842,115
                                                       --------------  -------------  -------------  --------------

     TOTAL REVENUES                                         1,257,912      1,232,267      3,752,803       3,830,683
                                                       --------------  -------------  -------------  --------------

EXPENSES
Operating expenses                                            432,967        356,111      1,172,015       1,062,354
Operating expenses - affiliated                               153,333        127,541        467,984         421,112
Management fees                                                67,696         66,852        205,273         216,111
Real estate taxes                                             203,278        127,014        466,924         394,668
Professional and administrative expenses                      161,239        132,515        604,832         504,975
Professional and administrative expenses - affiliated          57,950         43,145        160,445         139,868
Depreciation and amortization                                 324,012        308,569        970,532         929,563
                                                       --------------  -------------  -------------  --------------

     TOTAL OPERATING EXPENSES                               1,400,475      1,161,747      4,048,005       3,668,651
                                                       --------------  -------------  -------------  --------------

OPERATING (LOSS) INCOME                                      (142,563)        70,520       (295,202)        162,032

Interest and other income                                       4,906          1,952         17,161           4,778
Interest expense                                             (239,838)      (238,760)      (729,062)       (733,053)
Loss on disposal of assets                                       (920)        (1,430)        (5,095)         (1,430)
                                                       --------------  -------------  -------------  --------------

Loss before minority interest                                (378,415)      (167,718)    (1,012,198)       (567,673)
Minority interest loss                                        (28,098)        (4,925)       (37,767)           (283)
                                                       --------------  -------------  -------------  --------------

Net loss                                              $      (350,317)$     (162,793)$     (974,431)$      (567,390)
                                                       ==============  =============  =============  ==============

Net loss allocated to the limited partners            $      (346,814)$     (161,165)$     (964,687)$      (561,716)
                                                       ==============  =============  =============  ==============

Net loss per limited partnership interest             $        (11.36)$        (5.28)$       (31.61)$        (18.40)
                                                       ==============  =============  =============  ==============

Weighted average number of limited
  partnership interests                                        30,521         30,521         30,521          30,521
                                                       ==============  =============  =============  ==============`

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

5

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# NTS-PROPERTIES V,
A MARYLAND LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

`Nine Months Ended
                                                                              September 30,
                                                                  --------------------------------------
                                                                        2004                 2003
                                                                  -----------------    -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                       $           (974,431)$           (567,390)
Adjustments to reconcile net loss to net cash provided by
  operating activities:
    Provision for doubtful accounts                                          64,929                8,882
    Write-off of uncollectible accounts receivable                           (4,994)              (8,753)
    Loss on disposal of assets                                                5,095                1,430
    Depreciation and amortization                                         1,137,542            1,089,584
    Minority interest loss                                                  (37,767)                (283)
    Changes in assets and liabilities:
      Cash and equivalents - restricted                                    (392,333)            (496,135)
      Accounts receivable                                                  (145,552)            (100,925)
      Other assets                                                          (34,073)            (311,844)
      Accounts payable and accrued expenses                                 615,344              879,567
      Security deposits                                                      30,343               48,205
      Other liabilities                                                     441,195              419,766
                                                                  -----------------    -----------------

     Net cash provided by operating activities                              705,298              962,104
                                                                  -----------------    -----------------

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and amenities                                 (307,128)            (728,996)
Minority interest                                                            (9,663)              (2,614)
                                                                  -----------------    -----------------

     Net cash used in investing activities                                 (316,791)            (731,610)
                                                                  -----------------    -----------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgages payable                                             279,969              465,714
Principal payments on mortgages payable                                    (557,408)            (643,538)
Additions to loan costs                                                      (3,116)             (29,564)
                                                                  -----------------    -----------------

     Net cash used in financing activities                                 (280,555)            (207,388)
                                                                  -----------------    -----------------

     Net increase in cash and equivalents                                   107,952               23,106

CASH AND EQUIVALENTS, beginning of period                                   191,321              235,801
                                                                  -----------------    -----------------

CASH AND EQUIVALENTS, end of period                            $            299,273 $            258,907
                                                                  =================    =================

Interest paid on a cash basis                                  $            687,325 $            693,476
                                                                  =================    =================`

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

6

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# NTS-PROPERTIES V,
A MARYLAND LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The unaudited consolidated financial
statements included herein should be read in conjunction with NTS-Properties Vs 2003
annual report on Form 10-K as filed with the Securities and Exchange Commission on March
29, 2004. In the opinion of our general partner, all adjustments, consisting only of
normal recurring accruals, necessary for a fair presentation have been made to the
accompanying consolidated financial statements for the three and nine months ended
September 30, 2004 and 2003. The results of operations for the interim periods are not
necessarily indicative of the results that may be expected for the full year or any other
interim period. As used in this quarterly report on Form 10-Q the terms we,
us or our, as the context requires, may refer to NTS-Properties V
or its interests in its properties and joint ventures.

# Note 1 
Consolidation Policy

The consolidated financial statements
include the accounts of all wholly-owned properties and majority-owned joint ventures.
Intercompany transactions and balances have been eliminated.

Minority Interest

In May 2003, the Financial Accounting
Standards Board (FASB) issued Statement No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity
(SFAS 150). SFAS 150 establishes standards for classifying and measuring as
liabilities certain financial instruments that embody obligations of the issuer and have
characteristics of both liabilities and equity. SFAS 150 was effective for all financial
instruments created or modified after May 31, 2003, and otherwise was effective at the
beginning of the first interim period beginning after June 15, 2003. On November 7, 2003,
FASB Staff Position No. FAS 150-3 was issued, which deferred for an indefinite period the
classification and measurement provisions, but not the disclosure provisions of SFAS 150.

We consolidate certain properties
that are also owned by affiliated parties that have noncontrolling interests. In certain
cases, the applicable joint venture agreement provides for a contractual termination date
of the agreement based on certain specified events. SFAS 150 describes this type of
arrangement as a limited-life subsidiary. SFAS 150 requires the disclosure of
the estimated settlement value of these noncontrolling interests. As of September 30,
2004, the estimated settlement value of these noncontrolling interests is approximately
$3,470,000. This settlement value is based on estimated third party consideration paid to
the joint venture upon disposition of each property and is net of all other assets and
liabilities including any yield maintenance that would have been due on that date had the
mortgage encumbering each property been prepaid on September 30, 2004. Due to the inherent
risks and uncertainties related to the operations and sale of real estate assets, among
other things, the amount of any potential distribution to the noncontrolling interests is
likely to change.

7

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# Note 2  Use of
Estimates in the Preparation of Financial Statements

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

# Note 3 
Concentration of Credit Risk

We own and operate or have a joint
venture investment in one commercial property  Commonwealth Business Center Phase
II, in Louisville, Kentucky and three commercial properties  Lakeshore Business
Center Phases I, II and III, in Ft. Lauderdale, Florida. We also have a joint venture
investment in an apartment community  The Willows of Plainview Phase II, in
Louisville, Kentucky.

Our financial instruments that are
exposed to concentrations of credit risk consist of cash and equivalents. We maintain our
cash accounts primarily with banks located in Kentucky. Cash balances are insured by the
FDIC up to $100,000 per bank account. We may at times, in certain accounts, have deposits
in excess of $100,000.

# Note 4  Cash and
Equivalents

Cash and equivalents include cash on
hand and short-term, highly liquid investments with initial maturities of three months or
less. We have a cash management program which provides for the overnight investment of
excess cash balances. Under an agreement with a bank, excess cash is invested in a
repurchase agreement for U.S. government or agency securities each night. As of September
30, 2004, approximately $121,000 of our overnight investment was included in cash and
equivalents.

# Note 5  Cash and
Equivalents  Restricted

Cash and equivalents 
restricted represents funds received for residential security deposits and funds which
have been escrowed with mortgage companies for property taxes and capital improvements in
accordance with the loan agreements with said mortgage companies.

# Note 6  Basis of
Property and Depreciation

Land, buildings and amenities are
stated at historical cost, less accumulated depreciation. Costs directly associated with
the acquisition, development and construction of a project are capitalized. Depreciation
is computed using the straight-line method over the estimated useful lives of the assets
which are 5-30 years for land improvements, 3-30 years for buildings and improvements,
3-30 years for amenities and the applicable lease term for tenant improvements. The
aggregate cost of our properties for federal tax purposes is approximately $42,054,000.

8

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Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, specifies circumstances in which certain long-lived assets must be reviewed
for impairment. If the carrying amount of an asset exceeds the sum of its expected future
cash flows, the assets carrying value must be written down to fair value. There were
no impairment losses during any of the periods presented.

# Note 7  Mortgages
Payable

Mortgages payable consist of the
following:

`September 30,        December 31,
                                                                        2004                 2003
                                                                  -----------------    -----------------
Mortgage payable to an insurance company in monthly
installments, bearing interest at a fixed rate of 8.125%, due
August 1, 2008, secured by land and a building.                $          3,183,529 $          3,356,890

Mortgage payable to an insurance company in monthly
installments, bearing interest at a fixed rate of 8.125%, due
August 1, 2008, secured by land and buildings.                            2,958,964            3,120,096

Mortgage payable to a bank on demand with interest payable in
monthly installments, at a variable rate based on LIBOR daily
rate plus 2.5%, currently 3.615%, due October 1, 2005, secured
by land and a building.                                                   2,912,356            2,632,387

Mortgage payable to an insurance company in monthly
installments, bearing interest at a fixed rate of 7.2%, due
January 5, 2013, secured by land, buildings and amenities.                2,180,321            2,319,883

Mortgage payable to an insurance company in monthly
installments, bearing interest at a fixed rate of 7.2%, due
January 5, 2013, secured by land, buildings and amenities.                1,302,183            1,385,536

Mortgage payable to a bank on demand with interest payable in
monthly installments, at a variable rate based on LIBOR one-
month rate plus 2.75%, currently 4.400%, due February 1,
2005, secured by land and a building.                                       800,000              800,000
                                                                  -----------------    -----------------

                                                               $         13,337,353 $         13,614,792
                                                                  =================    =================`

On October 18, 2004, the escrow
balances of $180,735 at Lakeshore Business Center Phase I and $185,252 at Lakeshore
Business Center Phase II were applied to the outstanding principal balances on the
respective mortgages. This transaction does not change any terms of the existing
mortgages.

Our mortgages may be prepaid but are
generally subject to a yield-maintenance premium. As of September 30, 2004, the fair value
of long-term debt is approximately $13,817,000, based on the borrowing rates currently
available to us for mortgages with similar terms and average maturities.

9

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# Note 8  Accounts
Payable  Affiliate

Accounts payable  affiliate
includes amounts owed to NTS Development Company for reimbursement of salary and overhead
expenses.

NTS Development Company has agreed to
defer, until March 31, 2005, amounts owed to them by us as of December 31, 2003 and those
amounts accruing from January 1, 2004 through March 31, 2005, other than as permitted by
our cash flows. There can be no assurances that NTS Development Company will continue to
defer amounts due them past March 31, 2005.

# Note 9  Related
Party Transactions

Pursuant to an agreement with us, NTS
Development Company, an affiliate of our General Partner, receives property management
fees on a monthly basis. The monthly fees are equal to 5% of the gross receipts from our
apartment community and 6% of the gross receipts from our commercial properties. Also
pursuant to an agreement, NTS Development Company receives a repair and maintenance fee
equal to 5.9% of costs incurred which relates to capital improvements and major repair and
renovation projects. These repair and maintenance fees are capitalized as part of land,
buildings and amenities.

We were charged the following amounts
from NTS Development Company for the nine months ended September 30, 2004 and 2003. These
charges include items which have been expensed as operating expenses  affiliated or
professional and administrative expenses  affiliated and items which have been
capitalized as other assets or as land, buildings and amenities.

`Nine Months Ended
                                                                             September 30,
                                                                ----------------------------------------
                                                                       2004                 2003
                                                                -------------------  -------------------

Property management fees                                       $            205,273 $            216,111
                                                                -------------------  -------------------

Property management                                                         332,352              285,501
Leasing                                                                      32,810               55,590
Administrative - operating                                                   96,834               79,490
Other                                                                         5,988                  531
                                                                -------------------  -------------------

     Total operating expenses - affiliated                                  467,984              421,112
                                                                -------------------  -------------------

Professional and administrative expenses - affiliated                       160,445              139,868
                                                                -------------------  -------------------

Repair and maintenance fees                                                  12,262                5,132
Leasing commissions                                                             567                1,020
                                                                -------------------  -------------------

     Total related party transactions capitalized                            12,829                6,152
                                                                -------------------  -------------------

Total related party transactions                               $            846,531 $            783,243
                                                                ===================  ===================`

10

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# Note 10 
Commitments and Contingencies

As an owner of real estate, we are
subject to various environmental laws of federal, state and local governments. Our
compliance with existing laws has not had a material adverse effect on our financial
condition or results of operations. However, we cannot predict the impact of new or
changed laws or regulations on our current properties or on properties that we may acquire
in the future.

Litigation

On December 12, 2001, three
individuals filed an action in the Superior Court of the State of California for the
County of Contra Costa (the Superior Court) originally captioned Buchanan,
et al. v. NTS-Properties Associates, et al. (Case No. C 01-05090) against the
general partners (the General Partners) of NTS-Properties III, NTS-Properties
IV, NTS-Properties V, NTS-Properties VI and NTS-Properties VII, Ltd. (the
Partnerships), as well as several individuals and entities affiliated with us.
The action purported to bring claims on behalf of a class of limited partners. These
claims were based on, among other things, tender offers made by the Partnerships and an
affiliate of the General Partners, as well as the operation of the Partnerships by the
General Partners. The plaintiffs alleged, among other things, that the prices at which
limited partnership interests were purchased in these tender offers were too low. The
plaintiffs sought monetary damages and equitable relief, including an order directing the
disposition of the properties owned by the Partnerships and the distribution of the
proceeds. No amounts have been accrued for the settlement of this action in our financial
statements.

On February 27, 2003, two individuals
filed a class and derivative action in the Circuit Court of Jefferson County, Kentucky
captioned Bohm, et al. v. J.D. Nichols, et al.(Case No. 03-CI-01740) against
certain of the General Partners and several individuals and entities affiliated with us.
The complaint was amended to include the general partner of NTS-Properties III and the
general partner of NTS-Properties Plus Ltd., which is no longer in existence. In the
amended complaint, the plaintiffs purport to bring claims on behalf of a class of limited
partners and derivatively on behalf of us and the Partnerships based on alleged
overpayment of fees, prohibited investments, improper failures to make distributions,
purchases of limited partnerships interests at insufficient prices and other violations of
the limited partnership agreements. The plaintiffs are seeking, among other things,
compensatory and punitive damages in an unspecified amount, an accounting, the appointment
of a receiver or liquidating trustee, the entry of an order of dissolution against the
Partnerships, a declaratory judgment and injunctive relief. No amounts have been accrued
for the settlement of this action in our financial statements. Our general partner and
legal counsel believe that this action is without merit and are vigorously defending it.

On June 20, 2003, the General
Partners reached an agreement in principle with the representatives of the class of
plaintiffs to settle the Buchanan litigation. This agreed upon settlement includes
releases for all of the parties for all of the claims asserted in the Buchanan
litigation and the Bohmlitigation. As part of the agreed upon settlement, the
General Partners agreed to pursue a merger of

11

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the Partnerships and other real
estate entities affiliated with the General Partners into a newly-formed entity named NTS
Realty Holdings Limited Partnership (NTS Realty). NTS Development Company
agreed to pay the Partnerships $1,500,000 on the closing date of the merger. We expect to
receive $345,000 of this payment.

On December 5, 2003, the General
Partners, certain of their affiliates and the class of plaintiffs in the Buchanan
litigation jointly filed a Stipulation and Agreement of Settlement (the
Settlement Agreement) with the Superior Court. The Settlement Agreement sets
forth the terms of the agreed upon settlement the parties reached on June 20, 2003. On
February 26, 2004, the Superior Court preliminarily approved the Settlement Agreement as
within the range of reasonableness and that it is fair, just and adequate to the class of
plaintiffs. The Superior Court scheduled a hearing to finally determine whether the
Settlement Agreement is in the best interests of the class of plaintiffs and whether the
Buchananlitigation should be dismissed with prejudice.

On March 2, 2004, we, along with all
defendants, filed a Motion to Dismiss the Bohm litigation. After the Motion to
Dismiss was fully briefed, the settlement agreement in the Buchanan litigation
received final court approval. The Circuit Court of Jefferson County, Kentucky, instructed
the plaintiffs in the Bohm litigation to file an amended complaint in light of the
approved settlement of the Buchanan litigation. The plaintiffs in the Bohm
litigation filed a corrected Second Amended Complaint on August 11, 2004. We, along with
all defendants, filed a Motion to Strike the corrected Second Amended Complaint. A hearing
on this motion is scheduled for January 14, 2005. Our general partner believes that the
claims asserted in the corrected Second Amended Complaint have no merit.

On May 6, 2004, the Superior Court
granted its final approval of the Settlement Agreement. At the final hearing, any member
of the class of plaintiffs was given the opportunity to object to the final approval of
the Settlement Agreement, the entry of a final judgment dismissing with prejudice the
Buchananlitigation, or an application of an award for attorneys fees and
expenses to plaintiffs counsel. The Superior Courts order provides, among
other things, that: (1) the Settlement Agreement, and all transactions contemplated
thereby, including the proposed merger of the Partnerships into NTS Realty, are fair,
reasonable and adequate, and in the best interests of the class of plaintiffs; (2) the
plaintiffs complaint and each and every cause of action and claim set forth therein
is dismissed with prejudice; (3) each class member is barred from transferring, selling or
otherwise disposing of (other than by operation of law) their interests until the earlier
of the closing date of the merger, the termination of the settlement or June 30, 2004; and
(4) each class member who requested to be excluded from the settlement released their
claims in the Bohm litigation.

On June 11, 2004, Joseph Bohm and
David Duval, class members who objected to the Settlement Agreement but were overruled by
the Superior Court, filed an appeal in the Court of Appeals of the State of California,
first Appellate District. Our general partner believes that this appeal has no merit and
intends to defend it and the decision of the Superior Court.

12

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Under an indemnification agreement
with our general partner, we are responsible for the costs of defending any litigation.
For the nine months ended September 30, 2004 and 2003, our share of the legal costs for
theBuchanan and Bohm litigations was approximately $174,000 and $217,000,
respectively, which was included in our professional and administrative expenses.

We do not believe there is any other
litigation threatened against us other than routine litigation arising out of the ordinary
course of business, some of which is expected to be covered by insurance, none of which is
expected to have a material effect on our financial position or results of operations,
except as discussed herein.

Proposed Merger

As part of the Settlement Agreement,
our general partner and the general partners of the four public partnerships affiliated
with us, have agreed to pursue a merger of the partnerships and several other affiliated
real estate entities into NTS Realty. The merger is subject to, among other things,
approval by a majority of the limited partner interests in each partnership. For the nine
months ended September 30, 2004 and 2003, our share of the legal and professional fees for
the proposed merger was approximately $367,000 and $87,000, respectively, which was
included in our professional and administrative expenses.

On February 4, 2004, NTS Realty filed
a joint consent solicitation statement/prospectus on Form S-4 with the Securities and
Exchange Commission. The solicitation statement/prospectus presents the merger of the
Partnerships with NTS Realty. Concurrent with the merger, ORIG, LLC, a Kentucky limited
liability company, which is affiliated with our general partner, will contribute
substantially all its real estate assets and all of its liabilities to NTS Realty. NTS
Realty filed Amendment No. 1 on June 18, 2004, Amendment No. 2 on August 13, 2004 and
Amendment No. 3 on September 30, 2004.

On October 25, 2004 and October 27,
2004, NTS Realty filed Amendment No. 4 and Amendment No. 5, respectively, to its
registration statement on Form S-4, which includes a joint consent solicitation
statement/prospectus, with the Securities and Exchange Commission to seek approval of the
merger of the Partnerships into NTS Realty. The general partners of the Partnerships
agreed to pursue a merger of the Partnerships in the Stipulation and Agreement of
Settlement that was jointly filed by the general partners, along with certain of their
affiliates, with the class of plaintiffs in the action originally captioned Buchanan, et al. v.
NTS-Properties Associates, et al. (Case No. C 01-05090).

On October 27, 2004, the Securities
and Exchange Commission signed an order declaring NTS Realtys registration statement
to be effective and the Partnerships began mailing the joint consent solicitation
statement/prospectus to their respective limited partners.

13

---

# Note 11  Segment
Reporting

Our reportable operating segments are
Residential and Commercial Real Estate Operations. The residential operations represent
our ownership and operating results relative to the apartment complex known as The Willows
of Plainview Phase II. The commercial real estate operations represent our ownership and
operating results relative to suburban commercial office space known as Commonwealth
Business Center Phase II and Lakeshore Business Center Phases I, II and III.

The financial information of the
operating segments has been prepared using a management approach, which is consistent with
the basis and manner in which our management internally reports financial information for
the purposes of assisting in making internal operating decisions. Our management evaluated
performance based on stand-alone operating segment net income.

Professional and administrative
expenses, interest and other income, depreciation, interest expense and minority interest
income (loss) recorded at the Partnership level have not been allocated to the segments.

`Three Months Ended September 30, 2004
                                               ---------------------------------------------------------

                                                  Residential         Commercial            Total
                                               -----------------  ------------------  ------------------
Rental income                                 $          267,645 $           703,440 $           971,085
Tenant reimbursements                                         --             286,827             286,827
                                               -----------------  ------------------  ------------------

     Total revenues                                      267,645             990,267           1,257,912
                                               -----------------  ------------------  ------------------

Operating expenses and operating expenses -
  affiliated                                             135,479             450,821             586,300
Management fees                                           13,208              54,488              67,696
Real estate taxes                                         14,490             188,788             203,278
Depreciation and amortization                             57,248             263,306             320,554
                                               -----------------  ------------------  ------------------

     Total operating expenses                            220,425             957,403           1,177,828
                                               -----------------  ------------------  ------------------

Operating income                                          47,220              32,864              80,084

Interest and other income                                     27               4,625               4,652
Interest expense                                         (63,614)           (171,133)           (234,747)
Loss on disposal of assets                                  (920)                 --                (920)
                                               -----------------  ------------------  ------------------

Net loss                                      $          (17,287)$          (133,644)$          (150,931)
                                               =================  ==================  ==================`

14

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`Three Months Ended September 30, 2003
                                               ---------------------------------------------------------

                                                  Residential         Commercial            Total
                                               -----------------  ------------------  ------------------
Rental income                                 $          306,070 $           666,361 $           972,431
Tenant reimbursements                                         --             259,836             259,836
                                               -----------------  ------------------  ------------------

     Total revenues                                      306,070             926,197           1,232,267
                                               -----------------  ------------------  ------------------

Operating expenses and operating expenses -
  affiliated                                             124,305             359,347             483,652
Management fees                                           15,003              51,849              66,852
Real estate taxes                                          9,966             117,048             127,014
Depreciation and amortization                             56,966             246,949             303,915
                                               -----------------  ------------------  ------------------

     Total operating expenses                            206,240             775,193             981,433
                                               -----------------  ------------------  ------------------

Operating income                                          99,830             151,004             250,834

Interest and other income                                    496                 745               1,241
Interest expense                                         (68,885)           (164,784)           (233,669)
Loss on disposal of assets                                    --              (1,430)             (1,430)
                                               -----------------  ------------------  ------------------

Net income (loss)                             $           31,441 $           (14,465)$            16,976
                                               =================  ==================  ==================`

`Nine Months Ended September 30, 2004
                                               ---------------------------------------------------------

                                                  Residential         Commercial            Total
                                               -----------------  ------------------  ------------------
Rental income                                 $          845,253 $         2,052,597 $         2,897,850
Tenant reimbursements                                         --             854,953             854,953
                                               -----------------  ------------------  ------------------

     Total revenues                                      845,253           2,907,550           3,752,803
                                               -----------------  ------------------  ------------------

Operating expenses and operating expenses -
  affiliated                                             436,702           1,203,297           1,639,999
Management fees                                           43,317             161,956             205,273
Real estate taxes                                         43,470             423,454             466,924
Depreciation and amortization                            170,743             787,021             957,764
                                               -----------------  ------------------  ------------------

     Total operating expenses                            694,232           2,575,728           3,269,960
                                               -----------------  ------------------  ------------------

Operating income                                         151,021             331,822             482,843

Interest and other income                                    604              15,254              15,858
Interest expense                                        (194,877)           (518,913)           (713,790)
Loss of disposal of assets                                (5,095)                 --              (5,095)
                                               -----------------  ------------------  ------------------

Net loss                                      $          (48,347)$          (171,837)$          (220,184)
                                               =================  ==================  ==================`

15

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`Nine Months Ended September 30, 2003
                                               ---------------------------------------------------------

                                                  Residential         Commercial            Total
                                               -----------------  ------------------  ------------------
Rental income                                 $          925,962 $         2,062,606 $         2,988,568
Tenant reimbursements                                         --             842,115             842,115
                                               -----------------  ------------------  ------------------

     Total revenues                                      925,962           2,904,721           3,830,683
                                               -----------------  ------------------  ------------------

Operating expenses and operating expenses -
  affiliated                                             372,287           1,111,179           1,483,466
Management fees                                           47,407             168,704             216,111
Real estate taxes                                         43,524             351,144             394,668
Depreciation and amortization                            171,356             744,243             915,599
                                               -----------------  ------------------  ------------------

     Total operating expenses                            634,574           2,375,270           3,009,844
                                               -----------------  ------------------  ------------------

Operating income                                         291,388             529,451             820,839

Interest and other income                                    734               3,189               3,923
Interest expense                                        (210,484)           (507,297)           (717,781)
Loss on disposal of assets                                    --              (1,430)             (1,430)
                                               -----------------  ------------------  ------------------

Net income                                    $           81,638 $            23,913 $           105,551
                                               =================  ==================  ==================`

16

---

A reconciliation of the totals
reported for the operating segments to the applicable line items in the consolidated
financial statements for the three and nine months ended September 30, 2004 and 2003, is
necessary given amounts recorded at the Partnership level and not allocated to the
operating properties for internal reporting purposes.

`Three Months Ended
                                                                          September 30,
                                                             ----------------------------------------
                                                                    2004                 2003
                                                             -------------------  -------------------
DEPRECIATION AND AMORTIZATION
Total depreciation and amortization for reportable segments $            320,554 $            303,915
Depreciation and amortization for Partnership                              3,458                4,654
                                                             -------------------  -------------------

     Total depreciation and amortization                    $            324,012 $            308,569
                                                             ===================  ===================

INTEREST AND OTHER INCOME
Total interest and other income for reportable segments     $              4,652 $              1,241
Interest and other income for Partnership                                    254                  711
                                                             -------------------  -------------------

     Total interest and other income                        $              4,906 $              1,952
                                                             ===================  ===================

INTEREST EXPENSE
Total interest expense for reportable segments              $           (234,747)$           (233,669)
Interest expense for Partnership                                          (5,091)              (5,091)
                                                             -------------------  -------------------

     Total interest expense                                 $           (239,838)$           (238,760)
                                                             ===================  ===================

NET LOSS
Total net (loss) income for reportable segments             $           (150,931)$             16,976
Net loss for Partnership (1)                                            (227,484)            (184,694)
Minority interest loss                                                   (28,098)              (4,925)
                                                             -------------------  -------------------

     Total net loss                                         $           (350,317)$           (162,793)
                                                             ===================  ===================`

|(1) | The Partnership net loss is primarily composed of professional and
          administrative costs born by the Partnership as well as interest and other
          income, depreciation, interest expense and minority interest recorded at the
          partnership level and not allocated to the operating segments. The professional
          and administrative costs include the tax and public company reporting and
          compliance costs associated with a public limited partnership.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

17

---

`Nine Months Ended
                                                                          September 30,
                                                             ----------------------------------------
                                                                    2004                 2003
                                                             -------------------  -------------------
DEPRECIATION AND AMORTIZATION
Total depreciation and amortization for reportable segments $            957,764 $            915,599
Depreciation and amortization for Partnership                             12,768               13,964
                                                             -------------------  -------------------

     Total depreciation and amortization                    $            970,532 $            929,563
                                                             ===================  ===================

INTEREST AND OTHER INCOME
Total interest and other income for reportable segments     $             15,858 $              3,923
Interest and other income for Partnership                                  1,303                  855
                                                             -------------------  -------------------

     Total interest and other income                        $             17,161 $              4,778
                                                             ===================  ===================

INTEREST EXPENSE
Total interest expense for reportable segments              $           (713,790)$           (717,781)
Interest expense for Partnership                                         (15,272)             (15,272)
                                                             -------------------  -------------------

     Total interest expense                                 $           (729,062)$           (733,053)
                                                             ===================  ===================

NET LOSS
Total net (loss) income for reportable segments             $           (220,184)$            105,551
Net loss for Partnership (1)                                            (792,014)            (673,224)
Minority interest loss                                                   (37,767)                (283)
                                                             -------------------  -------------------

     Total net loss                                         $           (974,431)$           (567,390)
                                                             ===================  ===================`

|(1) | The Partnership net loss is primarily composed of professional and
          administrative costs born by the Partnership as well as interest and other
          income, depreciation, interest expense and minority interest recorded at the
          partnership level and not allocated to the operating segments. The professional
          and administrative costs include the tax and public company reporting and
          compliance costs associated with a public limited partnership.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

18

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# Item 2 
Managements Discussion and Analysis of Financial Condition and Results of Operations

Managements Discussion and
Analysis of Financial Condition and Results of Operations should be read in conjunction
with the Consolidated Financial Statements in Item 1 and the cautionary statements below.

# Critical Accounting
Policies

General

A critical accounting policy is one
that would materially affect our operations or financial condition, and requires
management to make estimates or judgments in certain circumstances. These judgments often
result from the need to make estimates about the effect of matters that are inherently
uncertain. Critical accounting policies discussed in this section are not to be confused
with accounting principles and methods disclosed in accordance with U.S. generally
accepted accounting principles (GAAP). GAAP requires information in financial
statements about accounting principles, methods used and disclosures pertaining to
significant estimates. The following disclosure discusses judgments known to management
pertaining to trends, events or uncertainties known which were taken into consideration
upon the application of those policies and the likelihood that materially different
amounts would be reported upon taking into consideration different conditions and
assumptions.

Impairment and Valuation

Statement of Financial Accounting
Standards No. 144 Accounting for the Impairment or Disposal of Long-Lived
Assets, specifies circumstances in which certain long-lived assets must be reviewed
for impairment. If the carrying amount of an asset exceeds the sum of its expected future
cash flows, the assets carrying value must be written down to fair value. In
determining the value of an investment property and whether the investment property is
impaired, management considers several factors such as projected rental and vacancy rates,
property operating expenses, capital expenditures and interest rates. The capitalization
rate used to determine property valuation is based on the market in which the investment
property is located, length of leases, tenant financial strength, the economy in general,
demographics, environment, property location, visibility, age and physical condition among
others. All of these factors are considered by management in determining the value of any
particular investment property. The value of any particular investment property is
sensitive to the actual results of any of these factors, either individually or taken as a
whole. If the actual results differ from managements judgment, the valuation could
be negatively or positively affected.

19

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Recognition of Rental
Income

Our apartment community has operating
leases with apartment residents with terms generally of 12 months or less. We recognize
rental revenue related to these leases on an accrual basis when due from residents. In
accordance with our standard lease terms, rental payments are generally due on a monthly
basis.

Our commercial property leases are
accounted for as operating leases. We accrue minimum rents on a straight-line basis over
the terms of their respective leases. We structure our leases to allow us to recover a
significant portion of our property operating expenses, real estate taxes and repairs and
maintenance expenses from our commercial tenants. Property operating expenses typically
include utility, insurance, security, janitorial, landscaping and other administrative
expenses. We accrue reimbursements from tenants for recoverable portions of all these
expenses as revenue in the period the applicable expenditures are incurred. We also
receive estimated payments for these reimbursements from substantially all our tenants
throughout the year. We do this to reduce the risk of loss on uncollectible accounts once
we perform the final year-end billings for recoverable expenditures. We recognize the
difference between estimated recoveries and the final billed amounts in the subsequent
year and we believe these differences were not material in any period presented.

Under GAAP, we are required to
recognize rental income based on the effective monthly rent for each lease. The effective
monthly rent is equal to the average monthly rent during the term of the lease, not the
stated rent for any particular month. The process, known as straight-lining or
stepping rent generally has the effect of increasing rental revenues during
the early phases of a lease and decreasing rental revenues in the latter phases of a
lease. Due to the impact of straight- lining, rental income exceeded the cash
collected for rent by approximately $136,000 and $78,000, for the nine months ended
September 30, 2004 and 2003, respectively. If rental income calculated on a straight-line
basis exceeds the cash rent due under the lease, the difference is recorded as an increase
in deferred rent receivable and included as a component of accounts receivable on the
relevant balance sheet. If the cash rent due under the lease exceeds rental income
calculated on a straight-line basis, the difference is recorded as a decrease in deferred
rent receivable and is recorded as a decrease of accounts receivable on the relevant
balance sheet. We defer recognition of contingent rental income, such as percentage or
excess rent, until the specified target that triggers the contingent rental income is
achieved. We periodically review the collectability of outstanding receivables. Allowances
are generally taken for tenants with outstanding balances due for a period greater than
ninety days and for tenants with potentially uncollectible outstanding balances due for a
period less than ninety days.

Recognition of Lease
Termination Income

We recognize lease termination income
upon receipt of the income. We accrue lease termination income if there is a signed
termination agreement, all of the conditions of the agreement have been met and the tenant
is no longer occupying the property.

20

---

Cost Capitalization and
Depreciation Policies

We review all expenditures and
capitalize any item exceeding $1,000 deemed to be an upgrade or a tenant improvement with
an expected useful life greater than one year. Land, buildings and amenities are stated at
cost. Depreciation expense is computed using the straight-line method over the estimated
useful lives of the assets. Buildings and improvements have estimated useful lives between
3-30 years, land improvements have estimated useful lives between 5-30 years and amenities
have estimated useful lives between 3-30 years.

Minority Interest

In May 2003, the Financial Accounting
Standards Board (FASB) issued Statement No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity(SFAS
150). SFAS 150 establishes standards for classifying and measuring as liabilities
certain financial instruments that embody obligations of the issuer and have
characteristics of both liabilities and equity. SFAS 150 was effective for all financial
instruments created or modified after May 31, 2003, and otherwise was effective at the
beginning of the first interim period beginning after June 15, 2003. On November 7, 2003,
FASB Staff Position No. FAS 150-3 was issued, which deferred for an indefinite period the
classification and measurement provisions, but not the disclosure provisions of SFAS 150.

We consolidate certain properties
that are also owned by affiliated parties that have noncontrolling interests. In certain
cases, the applicable joint venture agreement provides for a contractual termination date
of the agreement based on certain specified events. SFAS 150 describes this type of
arrangement as a limited-life subsidiary. SFAS 150 requires the disclosure of
the estimated settlement value of these noncontrolling interests. As of September 30,
2004, the estimated settlement value of these noncontrolling interests is approximately
$3,470,000. This settlement value is based on estimated third party consideration paid to
the joint venture upon disposition of each property and is net of all other assets and
liabilities including any yield maintenance that would have been due on that date had the
mortgages encumbering each property been prepaid on September 30, 2004. Due to the
inherent risks and uncertainties related to the operations and sale of real estate assets,
among other things, the amount of any potential distribution to the noncontrolling
interests is likely to change.

21

---

# Results of Operations

The following tables include our
selected summarized operating data for the three and nine months ended September 30, 2004
and 2003. This data is presented to provide assistance in identifying trends in our
operating results and other factors affecting our business. This data should be read in
conjunction with our consolidated financial statements, including the notes thereto, in
Part I, Item 1 of this report.

`Three Months Ended September 30, 2004
                                            -----------------------------------------------------------------------
                                                 Residential       Commercial       Partnership         Total
                                            -----------------------------------------------------------------------
Net revenues                                  $        267,645 $         990,267 $             -- $       1,257,912
Operating expenses and operating
  expenses - affiliated                                135,479           450,821               --           586,300
Depreciation and amortization                           57,248           263,306            3,458           324,012
Interest expense                                       (63,614)         (171,133)          (5,091)         (239,838)
Net loss                                               (17,287)         (133,644)        (199,386)         (350,317)`

`Three Months Ended September 30, 2003
                                            -----------------------------------------------------------------------
                                                 Residential       Commercial       Partnership         Total
                                            -----------------------------------------------------------------------
Net revenues                                  $        306,070 $         926,197 $             -- $       1,232,267
Operating expenses and operating
  expenses - affiliated                                124,305           359,347               --           483,652
Depreciation and amortization                           56,966           246,949            4,654           308,569
Interest expense                                       (68,885)         (164,784)          (5,091)         (238,760)
Net income (loss)                                       31,441           (14,465)        (179,769)         (162,793)`

`Nine Months Ended September 30, 2004
                                            -----------------------------------------------------------------------
                                                 Residential       Commercial       Partnership         Total
                                            -----------------------------------------------------------------------
Net revenues                                  $        845,253 $       2,907,550 $             -- $       3,752,803
Operating expenses and operating
  expenses - affiliated                                436,702         1,203,297               --         1,639,999
Depreciation and amortization                          170,743           787,021           12,768           970,532
Interest expense                                      (194,877)         (518,913)         (15,272)         (729,062)
Net loss                                               (48,347)         (171,837)        (754,247)         (974,431)`

`Nine Months Ended September 30, 2003
                                            -----------------------------------------------------------------------
                                                 Residential       Commercial       Partnership         Total
                                            -----------------------------------------------------------------------
Net revenues                                  $        925,962 $       2,904,721 $             -- $       3,830,683
Operating expenses and operating
  expenses - affiliated                                372,287         1,111,179               --         1,483,466
Depreciation and amortization                          171,356           744,243           13,964           929,563
Interest expense                                      (210,484)         (507,297)         (15,272)         (733,053)
Net income (loss)                                       81,638            23,913         (672,941)         (567,390)`

22

---

During our most recent operating
period net revenues for the residential segment have decreased primarily due to lower
average occupancy and a decrease in the average rental rate per unit. Net revenues year to
date for the commercial segment have slightly increased primarily due to increased average
occupancy at Lakeshore Business Center Phase III as a result of our efforts to lease this
recently constructed property. The increase is partially offset by a decrease in
lease-buy-out income at Lakeshore Business Center Phases I and II and decreased average
occupancy at Commonwealth Business Center Phase II, where we have not been successful in
renewing several tenants expired leases. We continue our leasing efforts by seeking
new tenants for this property. Net revenues quarter to date have increased primarily due
to an increase in common area maintenance income at Lakeshore Business Center Phase III,
as the result of an increase in average occupancy. Operating expenses and operating
expenses  affiliated increased primarily due to an increase in repairs and
maintenance, changes in personnel and annual salary increases at both the residential and
commercial segments. The increase is also due to an increase in bad debt expense at
Lakeshore Business Center Phase II. Depreciation expense has increased due to the addition
of fixed assets, while interest expense has remained relatively stable. The expenses
related to our ongoing litigation file by limited partners and settlement directed merger
costs have negatively impacted our partnership net losses.

Rental income and tenant
reimbursements generated by our property and joint ventures for the three and nine months
ended September 30, 2004 and 2003 were as follows:

`Three Months Ended              Nine Months Ended
                                                               September 30,                  September 30,
                                                       -----------------------------  -----------------------------
                                                            2004           2003           2004            2003
                                                       --------------  -------------  -------------  --------------
Wholly-Owned Property
Commonwealth Business Center Phase II                 $       108,396 $      122,209 $      306,718 $       366,079

Joint Venture Properties
(Ownership % on September 30, 2004)
The Willows of Plainview Phase II (90.30%)            $       267,645 $      306,070 $      845,253 $       925,962
Lakeshore Business Center Phase I (81.19%)                    368,528        358,083      1,109,234       1,153,987
Lakeshore Business Center Phase II (81.19%)                   365,532        332,046      1,067,678       1,112,246
Lakeshore Business Center Phase III (81.19%)                  147,811        113,859        423,920         272,409`

We believe the changes in rental
income and tenant reimbursements from period to period are temporary effects of each
propertys specific mix of lease maturities and are not indicative of any known
trend, except as described above for Commonwealth Business Center Phase II and Lakeshore
Business Center Phase III.

23

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The occupancy levels at our property
and joint ventures as of September 30, 2004 and 2003 were as follows:

`September 30,
                                                               -----------------------------------------
                                                                      2004                   2003
                                                               ------------------     ------------------
Wholly-Owned Property
Commonwealth Business Center Phase II                                 56%                    67%

Joint Venture Properties
(Ownership % on September 30, 2004)
The Willows of Plainview Phase II (90.30%)                            82%                    83%
Lakeshore Business Center Phase I (81.19%)                            72%                    72%
Lakeshore Business Center Phase II (81.19%)                           73%                    78%
Lakeshore Business Center Phase III (81.19%)                          89%                    89%`

We believe the changes in occupancy
on September 30 from year to year are temporary effects of each propertys specific
mix of lease maturities and are not indicative of any known trend, except as described
above for Commonwealth Business Center Phase II and Lakeshore Business Center Phase III.

The average occupancy levels at our
property and joint ventures for the three and nine months ended September 30, 2004 and
2003 were as follows:

`Three Months Ended                   Nine Months Ended
                                                                September 30,                       September 30,
                                                       -------------------------------     --------------------------------
                                                           2004              2003              2004               2003
                                                       -------------     -------------     -------------      -------------
Wholly-Owned Property
Commonwealth Business Center Phase II                       60%               68%               61%                68%

Joint Venture Properties
(Ownership % on September 30, 2004)
The Willows of Plainview Phase II (90.30%)                  79%               87%               81%                85%
Lakeshore Business Center Phase I (81.19%)                  72%               71%               72%                70%
Lakeshore Business Center Phase II (81.19%)                 77%               81%               79%                81%
Lakeshore Business Center Phase III (81.19%)                89%               72%               89%                49%`

We believe the changes in average
occupancy from period to period are temporary effects of each propertys specific mix
of lease maturities and are not indicative of any known trend, except as described above
for Commonwealth Business Center Phase II and Lakeshore Business Center Phase III.

The following discussion relating to
changes in our results of operations includes only material line items within our
Statements of Operations or line items for which there was a material change between the
three and nine months ending September 30, 2004 and 2003.

24

---

Rental Income and Tenant
Reimbursements

Our rental income and tenant
reimbursements for the three months ended September 30, 2004 and 2003 were approximately
$1,258,000 and $1,232,000, respectively. The increase of $26,000, or 2%, was primarily due
to an increase in common area maintenance income at Lakeshore Business Center Phase III,
as the result of an increase in average occupancy.

Our rental income and tenant
reimbursements for the nine months ended September 30, 2004 and 2003 were approximately
$3,753,000 and $3,831,000, respectively. The decrease of $78,000, or 2%, was primarily due
to a decrease in average occupancy and a decrease in the average rental rate per unit at
The Willows of Plainview Phase II.

Operating Expenses and
Operating Expenses  Affiliated

Our operating expenses for the three
months ended September 30, 2004 and 2003 were approximately $433,000 and $356,000,
respectively. Our operating expenses for the nine months ended September 30, 2004 and 2003
were approximately $1,172,000 and $1,062,000, respectively. The increase of $77,000, or
22%, and $110,000, or 10%, respectively, is primarily due to an increase in repairs and
maintenance at Lakeshore Business Center Phases I, II and III, Commonwealth Business
Center Phase II and The Willows of Plainview Phase II, an increase in landscaping and
cleaning services at Lakeshore Business Center Phases I, II and III and an increase in bad
debt expense at Lakeshore Business Center Phase II. The overall increase is partially
offset by a decrease in insurance expense at Lakeshore Business Center Phases I, II and
III, a decrease in landscaping at Commonwealth Business Center Phase II, a decrease in
loan fees at Lakeshore Business Center Phase III and a decrease in non-recoverable
expenses related to legal fees at Commonwealth Business Center Phase II and Lakeshore
Business Center Phases I, II and III.

Our operating expenses 
affiliated for the three months ended September 30, 2004 and 2003 were approximately
$153,000 and $127,000, respectively. Our operating expenses  affiliated for the nine
months ended September 30, 2004 and 2003 were approximately $468,000 and $421,000,
respectively. The increase of $26,000, or 20%, and $47,000, or 11%, respectively, is
primarily due to annual salary increases and changes in personnel at The Willows of
Plainview Phase II and Commonwealth Business Center Phase II.

Operating expenses  affiliated
are for the services performed by employees of NTS Development Company, an affiliate of
our General Partner. These employee services include property management, leasing,
maintenance, security and other services necessary to manage and operate our business.

25

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Professional and
Administrative Expenses and Professional and Administrative Expenses Affiliated

Our professional and administrative
expenses for the three months ended September 30, 2004 and 2003 were approximately
$161,000 and $133,000, respectively. Our professional and administrative expenses for the
nine months ended September 30, 2004 and 2003 were approximately $605,000 and $505,000,
respectively. The increase of $28,000, or 21%, and $100,000, or 20%, respectively, is
primarily the result of increased legal and professional fees associated with our ongoing
litigation filed by limited partners and settlement directed merger costs. See Part I,
Item I  Note 10 for information regarding or proposed merger.

Our professional and administrative
expenses  affiliated for the three months ended September 30, 2004 and 2003 were
approximately $58,000 and $43,000, respectively. Our professional and administrative
expenses  affiliated for the nine months ended September 30, 2004 and 2003 were approximately
$161,000 and $140,000, respectively. The increase of $15,000, or 34%, and $21,000, or 15%,
respectively, is primarily the result of changes in personnel and annual salary increases.

Professional and administrative
expenses  affiliated are for the services performed by employees of NTS Development
Company, an affiliate of our General Partner. These employee services include legal,
financial and other services necessary to manage and operate our business.

Professional and administrative
expenses  affiliated consisted of approximately the following for the periods
presented:

`Nine Months Ended
                                                                          September 30,
                                                              -------------------------------------
                                                                     2004               2003
                                                              ------------------  -----------------
Finance                                                      $            39,000 $           30,000
Accounting                                                                81,000             65,000
Investor Relations                                                        17,000             19,000
Human Resources                                                            9,000             10,000
Overhead                                                                  15,000             16,000
                                                              ------------------  -----------------

Total                                                        $           161,000 $          140,000
                                                              ==================  =================`

Depreciation and
Amortization Expense

Our depreciation and amortization
expense did not change significantly for the three and nine months ended September 30,
2004 and 2003. There were no offsetting material changes.

Interest Expense

Our interest expense did not change
significantly for the three and nine months ended September 30, 2004 and 2003. There were
no offsetting material changes.

26

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# Liquidity and Capital
Resources

The following table sets forth the
cash provided by or used in operating activities, investing activities and financing
activities for the nine months ended September 30, 2004 and 2003.

Cash flows provided by (used in):

`Nine Months Ended
                                                                                September 30,
                                                                  -----------------------------------------
                                                                         2004                  2003
                                                                  ------------------    -------------------
Operating activities                                           $             705,298 $              962,104
Investing activities                                                        (316,791)              (731,610)
Financing activities                                                        (280,555)              (207,388)
                                                                  ------------------    -------------------

     Net increase in cash and equivalents                      $             107,952 $               23,106
                                                                  ==================    ===================`

Net cash provided by operating
activities decreased from approximately $962,000 for the nine months ended September 30,
2003 to approximately $705,000 for the nine months ended September 30, 2004. The decrease
is primarily due to increased net loss from operations as a result of increased expenses
associated with our ongoing litigation filed by limited partners and settlement directed
merger costs.

Net cash used in investing activities
decreased from approximately $732,000 for the nine months ended September 30, 2003 to
approximately $317,000 for the nine months ended September 30, 2004. The decrease is
primarily due to decreased capital expenditures at Lakeshore Business Center Phase III.

Net cash flow used in financing
activities increased from approximately $207,000 for the nine months ended September 30,
2003 to approximately $281,000 for the nine months ended September 30, 2004. The increase
is primarily the result of refinancing the existing loans at Lakeshore Business Center
Phases I and II, which suspended principal payments and refinancing the construction loan
at Lakeshore Business Center Phase III, which resulted in decreased borrowings.

Due to the fact that no distributions
were made during the nine months ended September 30, 2004 or 2003, the table which
presents that portion of the distributions that represents a return of capital in
accordance with GAAP has been omitted.

Future Liquidity

Our future liquidity depends
significantly on our properties occupancy remaining at a level which provides for
debt payments and adequate working capital, currently and in the future. If occupancy were
to fall below that level and remain at or below that level for a significant period of
time, our ability to make payments due under our debt agreements and to continue paying
daily operational costs would be greatly impaired. In addition, we may be required to
obtain financing in connection with the capital improvements and leasing costs described
below.

27

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NTS Development Company has agreed to
defer, until March 31, 2005, amounts owed to them by us as of December 31, 2003 and those
amounts accruing from January 1, 2004 through March 31, 2005, other than as permitted by
our cash flows. There can be no assurances that NTS Development Company will continue to
defer amounts due them past March 31, 2005. If these amounts are not deferred, such action
could have a material adverse effect on our liquidity and financial condition. Payment of
such deferred amounts would be dependent upon available operating cash flow or funding
from potential third-party resources in the form of loans or advances.

On October 18, 2004, the escrow
balances of $180,735 at Lakeshore Business Center Phase I and $185,252 at Lakeshore
Business Center Phase II were applied to the outstanding principal balances on the
respective mortgages. This transaction does not change any terms of the existing
mortgages.

Currently, our plans for renovations
and other major capital expenditures include tenant improvements at our commercial
properties as required by lease negotiations at these properties. Changes to current
tenant finish improvements are a typical part of any lease negotiation. Improvements
generally include a revision to the current floor plan to accommodate a tenants
needs, new carpeting and paint and/or wallcovering. The extent and cost of the
improvements are determined by the size of the space being leased and whether the
improvements are for a new tenant or incurred because of a lease renewal.

Over the next 12 months we have
planned various building improvement and repair projects at both our commercial and
residential segments. At Commonwealth Business Center Phase II, we plan to reseal and
stripe the parking lot for an estimated cost of approximately $10,000 and perform HVAC
replacements for an estimated cost of approximately $30,000. At Lakeshore Business Center
Phase I, we plan to install security cameras for an estimated cost of approximately
$15,000, repaint the building exteriors for an estimated cost of approximately $30,000,
redecorate the building corridors and restrooms for an estimated cost of approximately
$30,000 and perform HVAC replacements for an estimated cost of approximately $38,000. At
Lakeshore Business Center Phase II, we plan to install security cameras for an estimated
cost of approximately $14,000 and perform HVAC replacements for an estimated cost of
approximately $16,000.

At Commonwealth Business Center Phase
II, approximately $71,000 in tenant improvements will be needed to return the building to
full occupancy and retain existing tenants. At Lakeshore Business Center Phase II, we have
a commitment from a tenant to provide approximately $22,000 in tenant improvements on
approximately 6,000 square feet. As of September 30, 2004, approximately $13,000 of this
cost has been incurred. At Lakeshore Business Center Phase III, we have a commitment from
a tenant to provide approximately $163,000 in tenant improvements on approximately 4,000
square feet. As of September 30, 2004, approximately $98,000 of this cost has been
incurred. This new lease agreement will bring Lakeshore Business Center Phase III to 100%
percent occupancy by the end of 2004.

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At The Willows of Plainview Phase II,
we plan to install chimney saddles for an estimated cost of approximately $28,000, perform
HVAC replacements for an estimated cost of approximately $31,000, repair the sidewalks for an
estimated cost of approximately $17,000, install security alarms for an estimated cost of
approximately $8,000 and resurface the tennis court for an estimated cost of approximately
$9,000.

The demands on liquidity as discussed
above will be managed by our general partner using cash provided by operations, cash
reserves, deferral of amounts owed to NTS Development Company and existing or additional
financing secured by our properties. Typically, these capital improvements and leasing
costs require use of existing financing or additional financing. There can be no guarantee
that such funds will be available at which time our general partner will manage the demand
on liquidity according to our best interest.

We are making efforts to increase the
occupancy levels at our properties. At Commonwealth Business Center Phase II, the leasing
and renewal negotiations are conducted by leasing agents that are employees of NTS
Development Company in Louisville, Kentucky. The leasing agents are located in the same
city as the property. All advertising is coordinated by NTS Development Companys
marketing staff located in Louisville, Kentucky. The leasing and renewal negotiations at
Lakeshore Business Center Phases I, II and III are managed by an employee of NTS
Development Company. At The Willows of Plainview Phase II, we have an on-site leasing
staff that are employees of NTS Development Company, who facilitate all on-site visits
from potential tenants, make visits to local companies to promote fully furnished
apartments, negotiate lease renewals with current residents and coordinate all local
advertising with NTS Development Companys marketing staff.

Leases at our commercial properties
provide for tenants to contribute toward the payment of common area maintenance expenses,
insurance and real estate taxes. These lease provisions, along with the fact that
residential leases are generally for a period of one year, provide limited protection to
our operations from the impact of inflation and changing prices.

We have no other material commitments
for renovations or capital improvements as of September 30, 2004.

# Proposed Merger

As part of the Settlement Agreement,
our general partner and the general partners of the four public partnerships affiliated
with us, have agreed to pursue a merger of the partnerships and several other affiliated
real estate entities into NTS Realty Holdings Limited Partnership (NTS
Realty). The merger is subject to, among other things, approval by a majority of the
limited partner interests in each partnership. For the nine months ended September 30,
2004 and 2003, our share of the legal and professional fees for the proposed merger was
approximately $367,000 and $87,000, respectively, which was included in our professional
and administrative expenses.

29

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On February 4, 2004, NTS Realty filed
a joint consent solicitation statement/prospectus on Form S-4 with the Securities and
Exchange Commission. The solicitation statement/prospectus presents the merger of
NTS-Properties III; NTS-Properties IV; NTS-Properties V; NTS-Properties VI; and
NTS-Properties VII, Ltd. with NTS Realty. Concurrent with the merger, ORIG, LLC, a
Kentucky limited liability company, which is affiliated with our general partner, will
contribute substantially all its real estate assets and all of its liabilities to NTS
Realty. NTS Realty filed Amendment No. 1 on June 18, 2004, Amendment No. 2 on August 13,
2004 and Amendment No. 3 on September 30, 2004.

On October 25, 2004 and October 27,
2004, NTS Realty filed Amendment No. 4 and Amendment No. 5, respectively, to its
registration statement on Form S-4, which includes a joint consent solicitation
statement/prospectus, with the Securities and Exchange Commission to seek approval of the
merger of NTS-Properties III, NTS-Properties IV, NTS-Properties V, NTS-Properties VI and
NTS-Properties VII, Ltd. (the Partnerships) into NTS Realty. The general
partners of the Partnerships agreed to pursue a merger of the Partnerships in the
Stipulation and Agreement of Settlement that was jointly filed by the general partners,
along with certain of their affiliates, with the class of plaintiffs in the action
originally captioned Buchanan, et al. v. NTS-Properties Associates, et al. (Case No. C 01-05090).

On October 27, 2004, the Securities
and Exchange Commission signed an order declaring NTS Realtys registration statement
to be effective and the Partnerships began mailing the joint consent solicitation
statement/prospectus to their respective limited partners.

# Ownership of Joint
Ventures

On June 25, 2002, NTS-Properties Plus
Ltd. merged with ORIG, LLC, (ORIG) an affiliate of ours. ORIG is the surviving
entity as a result of this merger. NTS-Properties V continues to hold a 81.19% interest in
the L/U II Joint Venture after the completion of the NTS-Properties Plus Ltd./ORIG Merger.
ORIG now holds a 7.69% interest in the L/U II Joint Venture.

# Website Information

Our website address is
www.ntsdevelopment.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act are available and may be accessed
free of charge through the About NTS section of our website as soon as
reasonably practicable after we electronically file this material with, or furnish it to,
the SEC. Our website and the information contained therein or connected thereto are not
incorporated into this quarterly report on Form 10-Q.

30

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# Item 3 
Quantitative and Qualitative Disclosures About Market Risk

Our primary market risk exposure with
regard to financial instruments stems from changes in interest rates. All of our debt
bears interest at a fixed rate with the exception of the $2,912,356 mortgage payable on
Lakeshore Business Center Phase III and the $800,000 mortgage payable on Commonwealth
Business Center Phase II. On September 30, 2004, a hypothetical 100 basis point increase
in interest rates would result in an approximate $278,000 decrease in the fair value of
the debt and would increase interest expense on the variable rate mortgages by
approximately $37,000 annually.

# Item 4  Controls
and Procedures

Our General Partner, with the
participation of the Chief Executive Officer and Chief Financial Officer, has evaluated
the effectiveness of our disclosure controls and procedures as of September 30, 2004.
Based on that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures were effective as of September 30,
2004. There were no material changes in our internal controls over financial reporting
during the nine months ended September 30, 2004.

31

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# PART II  OTHER INFORMATION

# Item 1  Legal Proceedings

On May 6, 2004, the Superior Court of
the State of California for the County of Contra Costa granted its final approval of the
Stipulation and Agreement of Settlement (the Settlement Agreement) jointly
filed by the general partners (the General Partners) of NTS-Properties III,
NTS-Properties IV, NTS-Properties V, NTS-Properties VI and NTS-Properties VII, Ltd. (the
Partnerships), along with certain of their affiliates, with the class of
plaintiffs in the action originally captioned Buchanan, et al. v. NTS-Properties
Associates, et al. (Case No. C 01-05090) on December 5, 2003.  At the final hearing,
any member of the class of plaintiffs was given the opportunity to object to the final
approval of the Settlement Agreement, the entry of a final judgment dismissing with
prejudice the Buchanan litigation, or an application of an award for attorneys fees
and expenses to plaintiffs counsel. The Superior Courts order provides,
among other things, that: (1) the Settlement Agreement, and all transactions contemplated
thereby, including the proposed merger of the Partnerships into NTS Realty Holdings
Limited Partnership, are fair, reasonable and adequate, and in the best interests of the
class of plaintiffs; (2) the plaintiffs complaint and each and every cause of action
and claim set forth therein is dismissed with prejudice; (3) each class member is barred
from transferring, selling or otherwise disposing of (other than by operation of law)
their interests until the earlier of the closing date of the merger, the termination of
the settlement or June 30, 2004; and (4) each class member who requested to be excluded
from the settlement released their claims in the Bohm litigation.

On June 11, 2004, Joseph Bohm and
David Duval, class members who objected to the Settlement Agreement but were overruled by
the Superior Court, filed an appeal in the Court of Appeals of the State of California,
first Appellate District.

On February 27, 2003, two individuals
filed a class and derivative action in the Circuit Court of Jefferson County, Kentucky
captioned Bohm, et al. v. J.D. Nichols, et al. (Case No. 03-CI-01740) against certain of
the General Partners and several individuals and entities affiliated with us. The
complaint was amended to include the general partner of NTS-Properties III and the general
partner of NTS-Properties Plus Ltd., which is no longer in existence. In the amended
complaint, the plaintiffs purport to bring claims on behalf of a class of limited partners
and derivatively on behalf of us and the Partnerships based on alleged overpayment of
fees, prohibited investments, improper failures to make distributions, purchases of
limited partnerships interests at insufficient prices and other violations of the limited
partnership agreements. The plaintiffs are seeking, among other things, compensatory and
punitive damages in an unspecified amount, an accounting, the appointment of a receiver or
liquidating trustee, the entry of an order of dissolution against the Partnerships, a
declaratory judgment and injunctive relief. No amounts have been accrued for the
settlement of this action in our financial statements. Our general partner and legal
counsel believe that this action is without merit and are vigorously defending it.

32

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On March 2, 2004, we, along with all
defendants, filed a Motion to Dismiss the Bohm litigation. After the Motion to Dismiss was
fully briefed, the settlement agreement in the Buchanan litigation received final court
approval. The Circuit Court of Jefferson County, Kentucky, instructed the plaintiffs in the Bohm litigation to
file an amended complaint in light of the approved settlement of the Buchanan litigation.
The plaintiffs in the Bohm litigation filed a corrected Second Amended Complaint on August
11, 2004. We, along with all defendants, filed a Motion to Strike the corrected Second
Amended Complaint. A hearing on this motion is scheduled for January 14, 2005. Our general
partner believes that the claims asserted in the corrected Second Amended Complaint have
no merit.

Items 2 through 5 are omitted because these items are inapplicable or the answers to the items are negative.

# Item 6  Exhibits

Exhibit No.

|     |                                                                                                                                            |     
|---- | ------------------------------------------------------------------------------------------------------------------------------------------ | ----
|3    | Amended and Restated Agreement and Certificate
of Limited Partnership of NTS-Properties V,
a Maryland limited partnership.                 | *   
|    
|3a   | First Amendment to Amended and Restated
Agreement of Limited Partnership of
NTS-Properties V, a Maryland limited partnership.              | **  
|    
|10   | Property Management Agreement between
NTS Development Company and NTS-Properties V,
a Maryland limited partnership.                        | *   
|    
|14   | Code of Ethics.                                                                                                                            | *** 
|    
|31.1 | Certification of Chief Executive Officer Pursuant to
Rule 13a-14(a) and Rule 15d-14(a) of the Securities
Exchange Act, as amended.         | ****
|    
|31.2 | Certification of Chief Financial Officer Pursuant to
Rule 13a-14(a) and Rule 15d-14(a) of the Securities
Exchange Act, as amended.         | ****
|    
|32.1 | Certification of Chief Executive Officer Pursuant to
18 U.S.C. 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. | ****

33

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|     |                                                                                                                                                                                                                                                 |     
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----
|32.2 | Certification of Chief Financial Officer Pursuant to
18 U.S.C. 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.                                                                                                      | ****
|    
|*    | Incorporated by reference to documents filed with the Securities and Exchange
Commission in connection with the filing of the Registration Statements on Form S-11
on May 1, 1984 (effective August 1, 1984) under Commission File No. 2-90818.
|    
|**   | Incorporated by reference to Form 10-K filed with the Securities and Exchange
Commission for the fiscal year ended December 31, 1987 under Commission
File No. 0-13400.                                                                        
|    
|***  | See www.ntsdevelopment.comfor our code of ethics.                                                                                                                                                                                              
|    
|**** | Attached as an exhibit with this Form 10-Q.                                                                                                                                                                                                    

Reports on Form 8-K

We filed a Form 8-K on August 17,
2004, to inform investors of a mini-tender offer by CMG Partners, LLC to purchase their
interests in NTS-Properties V for $250 per interest in cash. We also informed the
investors that we recommended a rejection of the offer and provided reasons for our
recommendation.

We filed a Form 8-K on October 29,
2004 to announce that on October 25, 2004 and October 27, 2004, NTS Realty Holdings
Limited Partnership (NTS Realty) filed Amendment No. 4 and Amendment No. 5,
respectively, to its registration statement on Form S-4. NTS Realty filed the original Form S-4 on February 4, 2004, Amendment No. 1
on June 18, 2004, Amendment No. 2 on August 13, 2004 and Amendment No. 3 on September 30,
2004.

34

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|NTS-PROPERTIES V,
A MARYLAND LIMITED PARTNERSHIP
|------------------------------------------------
|
|                                                
|By:                                             
|                                                
|                                                
|                                                
|                                                
|                                                
|                                                

|/s/ Brian F. Lavin                                
|--------------------------------------------------
|                                                  
|Brian F. Lavin                                    
|President of NTS Capital Corporation              
|                                                  
|                                                  
|/s/ Gregory A. Wells                              
|                                                  
|Gregory A. Wells                                  
|Chief Financial Officer of NTS Capital Corporation
|                                                  
|                                                  
|Date: November 15, 2004                           

35