UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                    FORM 10-K

(Mark One)

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

                For the fiscal year ended    December 31, 1997

                                          OR

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

                For the transition period from ________ to ________

                         Commission file number    0-11655

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

             Kentucky                                61-1026356
  (State or other jurisdiction of                (I.R.S. Employer
  incorporation or organization)                Identification No.)


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

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

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

                                      None

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

                          Limited Partnership Interests
                                (Title of Class)

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

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

Exhibit Index: See page 65
Total Pages: 70


<PAGE>



                                TABLE OF CONTENTS



                                                                           Pages
                                                                           -----

                                     PART I

Items 1 and 2     Business and Properties                                   3-23
Item 3            Legal Proceedings                                           24
Item 4            Submission of Matters to a Vote of
                    Security Holders                                          24


                                     PART II


Item 5            Market for the Registrant's Limited Partnership
                    Interests and Related Partner Matters                     25
Item 6            Selected Financial Data                                     26
Item 7            Management's Discussion and Analysis of
                    Financial Condition and Results of Operations          27-42
Item 8            Financial Statements and Supplementary Data              43-61
Item 9            Changes in and Disagreements with Accountants
                    on Accounting and Financial Disclosure                    62


                                    PART III


Item 10           Directors and Executive Officers of the
                    Registrant                                             62-63
Item 11           Management Remuneration and Transactions                    63
Item 12           Security Ownership of Certain Beneficial
                    Owners and Management                                     64
Item 13           Certain Relationships and Related Transactions              64


                                     PART IV


Item 14           Exhibits, Financial Statement Schedules
                    and Reports on Form 8-K                                65-69


Signatures                                                                    70



                                      - 2 -

<PAGE>



                                     PART I

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

General
-------

Some of the statements included in Items 1. and 2., Business and Properties, may
be considered to be "forward-looking statements" since such statements relate to
matters  which  have  not  yet  occurred.  For  example,  phrases  such  as "the
Partnership  anticipates",  "believes" or "expects" indicate that it is possible
that the event  anticipated,  believed  or expected  may not occur.  Should such
event not occur,  then the result which the  Partnership  expected  also may not
occur or occur in a different manner, which may be more or less favorable to the
Partnership.  The  Partnership  does not  undertake  any  obligation to publicly
release the result of any revisions to these forwardlooking  statements that may
be made to reflect any future events or circumstances.

NTS-Properties IV., Ltd., a Kentucky Limited Partnership,  (the "Partnership" or
"NTS-Properties  IV") is a limited  partnership  organized under the laws of the
Commonwealth of Kentucky on May 13, 1983. The General Partner is  NTS-Properties
Associates  IV, a Kentucky  limited  partnership.  As of December 31, 1997,  the
Partnership owned the following properties:

       -   Commonwealth   Business  Center  Phase  I,  a  business  center  with
           approximately  57,000  net  rentable  ground  floor  square  feet and
           approximately   24,000  net   rentable   mezzanine   square  feet  in
           Louisville, Kentucky, constructed by the Partnership.

       -   Plainview  Point Office Center Phases I and II, an office center with
           approximately   56,000  net  rentable   square  feet  in  Louisville,
           Kentucky, acquired complete by the Partnership.

       -   The Willows of Plainview Phase I, a 118-unit luxury apartment complex
           in Louisville, Kentucky, constructed by the Partnership.

       -   A joint  venture  interest  in  The  Willows of Plainview Phase II, a
           144-unit   luxury   apartment   complex  in   Louisville,   Kentucky,
           constructed  by the joint venture  between the  Partnership  and NTS-
           Properties  V, a Maryland  Limited  Partnership,  an affiliate of the
           General  Partner  of  the  Partnership,   ("NTS-Properties  V").  The
           Partnership's  percentage  interest  in the joint  venture was 10% at
           December 31, 1997.

       -   A joint venture interest in Golf Brook Apartments,  a 195-unit luxury
           apartment  complex  in  Orlando,  Florida,  constructed  by the joint
           venture  between the Partnership  and  NTS-Properties  VI, a Maryland
           Limited  Partnership,  an  affiliate  of the  General  Partner of the
           Partnership,  ("NTS-Properties  VI").  The  Partnership's  percentage
           interest in the joint venture was 4% at December 31, 1997.

       -   A joint venture  interest in Plainview  Point III Office  Center,  an
           office center with  approximately  62,000 net rentable square feet in
           Louisville,  Kentucky,  constructed by the joint venture  between the
           Partnership  and  NTS-Properties  VI.  The  Partnership's  percentage
           interest in the joint venture was 5% at December 31, 1997.

       -   A  joint  venture  interest in  Blankenbaker  Business Center  1A,  a
           business center with  approximately  50,000 net rentable ground floor
           square feet and  approximately  50,000 net rentable  mezzanine square
           feet located in Louisville,  Kentucky,  acquired  complete by a joint
           venture  between  NTS-Properties  Plus Ltd. and  NTS-Properties  VII,
           Ltd.,  affiliates  of the  General  Partner of the  Partnership.  The
           Partnership's  percentage  interest  in the joint  venture was 30% at
           December 31, 1997.

                                      - 3 -

<PAGE>



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

       -      A joint venture  interest  in  the  Lakeshore/University  II Joint
              Venture  ("L/U II Joint  Venture").  The L/U II Joint  Venture was
              formed  on  January  23,  1995  among  the  Partnership  and  NTS-
              Properties V,  NTS-Properties  Plus Ltd. and NTS/Fort  Lauderdale,
              Ltd.,  affiliates of the General Partner of the  Partnership.  The
              Partnership's  percentage interest in the joint venture was 18% at
              December 31, 1997.

              A  description  of the  properties  owned  by the L/U II Joint
              Venture appears below:

              -     Lakeshore  Business  Center Phase I - a business  center
                    with  approximately  103,000  net  rentable  square feet
                    located in Fort Lauderdale,  Florida,  acquired complete
                    by the joint venture.

              -     Lakeshore  Business  Center Phase II - a business center
                    with  approximately  97,000  net  rentable  square  feet
                    located in Fort Lauderdale,  Florida,  acquired complete
                    by the joint venture.

              -     University  Business Center Phase II - a business center
                    with  approximately  78,000  net  rentable  first  floor
                    (office and service) and second floor office square feet
                    and approximately  10,000 net rentable  mezzanine square
                    feet located in Orlando,  Florida,  acquired complete by
                    the joint venture.

              -     Outparcel  Building Sites -  approximately  6.2 acres of
                    undeveloped  land  adjacent  to the  Lakeshore  Business
                    Center  development,   which  is  zoned  for  commercial
                    development.

The Partnership or the joint venture in which the Partnership is a partner has a
fee title interest in the above properties.  In the opinion of the Partnership's
management, the properties are adequately covered by insurance.

Commonwealth  Business Center Phase I is encumbered by a mortgage  payable to an
insurance company.  The outstanding balance at December 31, 1997 was $2,238,591.
The mortgage  bears interest at a fixed rate of 8.8% and is due October 1, 2004.
Monthly principal payments are based upon a 10-year  amortization  schedule.  At
maturity,  the  mortgage  will have been  repaid  based on the  current  rate of
amortization.

Plainview  Point  Office  Center  Phases  I and  II is  not  encumbered  by  any
outstanding mortgages at December 31, 1997.

The Willows of Plainview  Phase I is encumbered by permanent  mortgages with two
insurance companies. Both loans are secured by a first mortgage on the property.
The  outstanding  balance of the  mortgages at December 31, 1997 was  $3,900,000
($1,998,000  and  $1,902,000).  Both  mortgages bear interest at a fixed rate of
7.2% and are due January 5, 2013.  Monthly principal  payments on both notes are
based upon a 15-year  amortization  schedule.  At maturity,  the loans will have
been repaid based on the current rate of amortization.

The  Willows of  Plainview  Phase II, an  apartment  joint  venture  between the
Partnership and NTS-Properties V, is encumbered by permanent  mortgages with two
insurance  companies.  The outstanding balances of the mortgages at December 31,
1997 was $5,100,000 ($3,193,000 and $1,907,000). The mortgages





                                      - 4 -

<PAGE>



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

are  recorded  as  a  liability  of  the  Joint   Venture.   The   Partnership's
proportionate  interest  in the  mortgages  at  December  31,  1997 is  $514,079
($321,854 and  $192,225).  Both  mortgages bear interest at a fixed rate of 7.2%
and are due January 5, 2013.  Monthly  principal  payments on both mortgages are
based upon a 15-year  amortization  schedule.  At maturity,  the loans will have
been repaid based on the current rate of amortization.

Golf  Brook  Apartments,  a joint  venture  between  the  Partnership  and  NTS-
Properties VI, is encumbered by a mortgage payable to an insurance company.  The
$9,000,000  mortgage payable is recorded as a liability by  NTS-Properties VI in
accordance  with the Joint Venture  Agreement.  The mortgage bears interest at a
fixed rate of 7.43% and matures May 15,  2009.  The  outstanding  balance of the
loan at December 31, 1997 is $8,724,588.

Plainview Point III Office Center is not encumbered by any outstanding mortgages
as of December 31, 1997.

Blankenbaker  Business  Center  1A, a joint  venture  between  the  Partnership,
NTS-Properties  VII,  Ltd. and  NTS-Properties  Plus Ltd.,  is  encumbered  by a
mortgage payable to an insurance  company.  The outstanding  balance at December
31, 1997 was  $3,869,108.  The  mortgage is recorded as a liability of the Joint
Venture.  The Partnership's  proportionate  interest in the mortgage at December
31, 1997 is $1,163,828.  The mortgage bears interest at a fixed rate of 8.5% and
is due November 15, 2005.  Monthly principal  payments are based upon an 11-year
amortization  schedule. At maturity, the mortgage will have been repaid based on
the current rate of amortization.

The  properties  owned by the  Lakeshore/University  II Joint  Venture,  a joint
venture between the Partnership,  NTS-Properties V, NTS-Properties Plus Ltd. and
NTS/Fort  Lauderdale,  Ltd., are encumbered by mortgages payable to an insurance
company as follows:

               Loan Balance
               at 12/31/97      Encumbered Property
               -----------      -------------------

               $5,606,774       Lakeshore Business Center Phase II
               $5,374,127       University Business Center Phase II
               $5,211,275       Lakeshore Business Center Phase I

The loans are recorded as a liability of the Joint  Venture.  The  Partnership's
proportionate  interest  in the  loans at  December  31,  1997  was  $1,000,809,
$959,282 and $930,213, respectively. The mortgages bear interest at a fixed rate
of  8.125%,  are due  August 1, 2008 and are  secured by the assets of the Joint
Venture.  Monthly  principal  payments  are based  upon a  12-year  amortization
schedule. At maturity, the loans will have been repaid based on the current rate
of amortization.

For a  further  discussion  regarding  the  terms  of the  debt  financings  see
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations (Item 7).

Currently,  the  Partnership's  plans for  renovations  and other major  capital
expenditures   include   tenant  finish   improvements   as  required  by  lease
negotiations  at  the  Partnership's  properties.   Changes  to  current  tenant
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  and  whether  the
improvements are for a new tenant or incurred because of a lease renewal.





                                      - 5 -

<PAGE>



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

Philip Crosby Associates,  Inc. ("Crosby")  previously leased 100% of University
Business Center Phase II, which is owned by the Lakeshore/University II (L/U II)
Joint Venture.  The original lease term was for seven years, and the tenant took
occupancy in April 1991. During 1994, 1995 and 1996, Crosby sub-leased,  through
the end of  their  lease  term,  approximately  85,000  square  feet  (including
approximately  10,000  square feet of mezzanine  space) of  University  Business
Center Phase II's  approximately  88,000  square feet of net  rentable  area (or
96%). Of the total being sub-leased,  approximately  73,000 square feet (or 86%)
was  leased  by Full Sail  Recorders,  Inc.  ("Full  Sail"),  a major  tenant at
University Business Center Phase I, a neighboring property owned by an affiliate
of the  General  Partner of the  Partnership.  During  this  period and  through
December 1996,  Crosby continued to make rent payments  pursuant to the original
lease terms.  During 1996, the Joint Venture received notice that Crosby did not
intend to pay full rental due under the original lease agreement,  including and
subsequent to January 1997. The Partnership's  proportionate share of the rental
income from this property  accounted for  approximately 6% of the  partnership's
total revenues during 1996. Although the Joint Venture did not have formal lease
agreements  with the  sub-lessees  noted  above  during this  period,  beginning
February 1997 rent payments  from these  sub-lessees  have been made directly to
the Joint Venture.

During 1997,  Crosby  abandoned its business,  sold all or most of its operating
assets and informed the Joint Venture that Crosby may be  insolvent.  During the
third  quarter of 1997,  a  conditional  settlement  was  reached at a mediation
conference with Crosby and its corporate parent,  whereby,  subject to the Joint
Venture's acceptance of the settlement terms, the corporate parent agreed to pay
a portion of Crosby's liability to the Joint Venture in full satisfaction of all
claims  against Crosby and any of its  affiliates.  During the fourth quarter of
1997, the L/U II Joint Venture  informed Crosby and its corporate parent that it
accepted the terms of the conditional  settlement,  whereby Crosby's parent paid
to the L/U II Joint  Venture  the sum of $300,000  in full  satisfaction  of all
claims.  These funds were  received  by the L/U II Joint  Venture on October 23,
1997.  The  Partnership's  proportionate  share of the settlement was $54,000 or
18%. The amount of the  settlement  was  substantially  less than the  aggregate
liability of Crosby to the Joint Venture  resulting from Crosby's  default under
its lease.  This deficit is partially offset by the rent payments  received from
the sub-lessees, as discussed above.

In  December  1995,  Full  Sail  signed a 33 month  lease  with the L/U II Joint
Venture for  approximately  41,000  square feet it  sub-leased  from Crosby.  In
November 1996,  Full Sail signed a lease  amendment  which  increased the square
footage  from 41,000  square feet to 48,000  square feet and  extended the lease
term from 33 months to 76 months. In addition,  in November 1996, Full Sail also
signed a 52 month lease for an  additional  approximately  21,000 square feet of
space it sub-leased from Crosby. Both leases aggregate 69,000 square feet or 78%
of the  business  center's net  rentable  area and commence  April 1998 when the
Crosby  original lease term ends. As part of the lease  negotiations,  Full Sail
will  receive  a total  of  $450,000  in  special  tenant  allowances  ($200,000
resulting  from the original lease signed  December 1995 and $250,000  resulting
from the lease amendment  signed November  1996).  Approximately  $92,000 of the
total  allowance is to be  reimbursed  by Full Sail to the L/U II Joint  Venture
pursuant to the lease terms. The  Partnership's  proportionate  share of the net
commitment  ($450,000 less $92,000) is approximately  $64,000 or 18%. The tenant
allowance  will be due and  payable  to Full  Sail  pursuant  to the  previously
mentioned  lease  agreements,  as  appropriate  invoices for tenant finish costs
incurred by Full Sail are submitted to the L/U II Joint  Venture.  The source of
funds for this  commitment  is expected to be cash flow from  operations  and/or
cash reserves .


                                      - 6 -

<PAGE>



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

The Joint Venture is currently  negotiating  directly with the other  sublessees
discussed  above to enter into leases for the  remaining  space  available.  The
future  leasing and tenant  finish  costs which will be required to release this
space is unknown at this time but is not expected to be substantial.

As of December 31, 1997,  the  Partnership  had a commitment  for  approximately
$42,500 of tenant finish  improvements at Plainview Point Office Center Phases I
and II. The  commitment  is the  result of a  two-phase  expansion  by a current
tenant which increases the tenant's current leased space by approximately  2,000
square feet in the first  phase and by  approximately  6,400  square feet in the
second phase.  The portion of the commitment  relating to the first phase of the
expansion is approximately $13,000 and was completed during the first quarter of
1998.  The  commitment  for the second phase of the  expansion is  approximately
$30,000 and is expected to occur during the fourth  quarter of 1999.  The source
of funds for this  project is  expected to be cash flow from  operations  and/or
cash reserves.

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

On December  21, 1997,  the  Partnership  obtained  two  mortgage  loans from an
insurance  company  totaling   $3,900,000   ($1,998,000  and  $1,902,000).   The
outstanding  balances of the loans at  December  31,  1997 were  $1,998,000  and
$1,902,000, respectively, for a total of $3,900,000. The mortgages bear interest
at a fixed rate of 7.2%,  are due January 5, 2013 and are secured by The Willows
of  Plainview  Phase I.  Monthly  principal  payments  are based  upon a 15-year
amortization schedule. At maturity, the loans will have been repaid based on the
current rate of  amortization.  The proceeds from the loans were used to pay off
the  Partnership's  mortgages  payable of  approximately  $3,876,000  which bore
interest at a fixed rate of 7% and to fund loan closing  costs.  The loans which
were paid off had a maturity date of December 5, 2003.

On December 21,  1997,  The Willows of  Plainview  Phase II, an apartment  joint
venture  between the  Partnership  and  NTS-Properties  V, obtained two mortgage
loans from an insurance company totaling $5,100,000 ($3,193,000 and $1,907,000).
The  outstanding  balances of the loans at December 31, 1997 were $3,193,000 and
$1,907,000,   respectively,   for  a  total  of  $5,100,000.  The  Partnership's
proportionate  interest  in the loans at  December  31,  1997 was  $321,854  and
$192,225,  respectively, for a total of $514,079. The mortgages bear interest at
a fixed rate of 7.2%,  are due  January 5, 2013 and are secured by the assets of
the  Joint  Venture.  Monthly  principal  payments  are  based  upon  a  15-year
amortization schedule. At maturity, the loans will have been repaid based on the
current rate of  amortization.  The proceeds from the loans were used to pay off
the property's mortgages payable of approximately $5,070,000 which bore interest
at a fixed  rate of 7.5%  and to fund  loan  closing  costs.  The  Partnership's
proportionate  interest  in the  notes  which  were  paid off was  approximately
$510,000 or 10%.  The notes which were paid off had a maturity  date of December
5, 2003.

The  Partnership is engaged solely in the business of developing,  constructing,
owning and  operating  residential  apartments  and  commercial  real estate.  A
presentation about industry segments is not applicable.

The current  business of the Partnership is consistent with the original purpose
of the Partnership which was to invest in real property,  which was either under
development or proposed for development,  on which it would develop,  construct,
own and operate apartment complexes,  business parks, and retail, industrial and
office  buildings.  The Partnership  properties are in a condition  suitable for
their intended use.


                                      - 7 -

<PAGE>



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

The Partnership  intends to hold the properties until such time as sale or other
disposition   appears  to  be   advantageous   with  a  view  to  achieving  the
Partnership's  investment objectives or it appears that such objectives will not
be met. In deciding  whether to sell a property,  the Partnership  will consider
factors such as potential capital appreciation, cash flow and Federal income tax
considerations,  including  possible  adverse Federal income tax consequences to
the  Limited  Partners.  The General  Partner of the  Partnership  is  currently
exploring  the  marketability  of  certain  of its  properties,  and has not yet
determined  if any of the  properties  might  be  sold in the  next  12  months.
Additionally, the outparcel building sites owned by the L/U II Joint Venture are
being  marketed  for sale.  See below for a  further  discussion  regarding  the
possible sale of University Business Center Phase II.

On December 30, 1997, Full Sail delivered written notice to the Partnership that
Full Sail had (i)  exercised  its right of first  refusal  under its lease  with
NTS-Properties  V, an affiliate of the General  Partner of the  Partnership,  to
purchase  University  Business  Center Phase I office building and the Phase III
vacant land adjacent to the University  Business  Center  development,  and (ii)
exercised  its  right of first  refusal  under  its  lease  with NTS  University
Boulevard Joint Venture to purchase  University  Business Center Phase II office
building,  for an aggregate  purchase price for all three of  $18,700,000.  Full
Sail  exercised  its right of first  refusal  under the leases in  response to a
letter of intent to purchase  University I, University II and the Phase III land
which was previously  received by the Partnership  from an  unaffiliated  buyer.
Under its right of first refusal,  Full Sail must purchase the properties on the
same terms and  conditions as  contemplated  by the letter of intent.  Full Sail
agreed in its notice to the  Partnership to proceed to negotiate in good faith a
definitive purchase agreement for these properties. Because no binding agreement
exists  for the  purchase  of the  properties  at  this  time,  there  can be no
assurance that a mutual agreement of purchase and sale will be reached among the
parties,  nor that the sale of the properties will be consummated.  As such, the
Partnership  has not  determined  the use of net  proceeds  after  repayment  of
outstanding  debt from any such  sale nor has it  determined  the  impact on the
future  results of operations or financial  position.  The  University II office
building  is  owned  by the  L/U II  Joint  Venture,  the  successor  to the NTS
University  Boulevard Joint Venture,  in which the Partnership owns an 18% joint
venture interest. Under the terms of the right of first refusal, the closings of
the sale of  University  I,  University  II and the Phase III vacant land are to
occur simultaneously.

Commonwealth Business Center Phase I
------------------------------------

Base annual rents,  which exclude the cost of  utilities,  currently  range from
$8.09 to $11.83 per square foot for ground  floor office  space,  $3.97 to $6.04
per square foot for ground floor  warehouse space and $7.32 to $10.72 per square
foot for mezzanine  office  space.  The average base annual rental for all space
leased as of December 31, 1997 was $8.03. Space is ordinarily leased for between
three and six years with the majority of current square footage being leased for
a term of five  years  (1).  Current  leases  terminate  between  1998 and 2004.
Several of the leases  provide for renewal  options  ranging  from three to five
years at rates which are based upon increases in the consumer price index and/or
are  negotiated  between  lessor and lessee.  All leases  provide for tenants to
contribute toward the payment of common

(1) Excluding the Mid-America Data Processing, Inc. current lease which is for
10-years.






                                      - 8 -

<PAGE>

Commonwealth Business Center Phase I - Continued
------------------------------------------------

area expenses,  insurance and real estate taxes. As of December 31, 1997,  there
were 11 tenants  leasing office and warehouse  space  aggregating  approximately
49,022  square feet of rentable  area (1).  The tenants who occupy  Commonwealth
Business Center Phase I are  professional  service oriented  organizations.  The
principal  occupations/professions  practiced  include a  stockbrokerage  house,
insurance  and  machinery  sales/service.  One  tenant  leases  more than 10% of
Commonwealth   Business  Center  Phase  I's  rentable  area:   Mid-America  Data
Processing,  Inc.  (33.8%).  The occupancy  levels at the business  center as of
December 31 were 87% (1997), 86% (1996 and 1995), 82% (1994) and 75% (1993).

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

Major Tenant:
                                                      Current Base
                                    Sq. Ft. and       Annual Rental
                                      % of Net       and % of Gross
                       Year of        Rentable         Base Annual      Renewal
       Name          Expiration       Area(1)            Rental         Options
       ----          ----------       -------            ------         -------

Mid-America Data
  Processing, Inc.      2004       19,101 (33.8%)   $304,116 (52.1%)     None



Other Tenants:

                                                 Current Base
                                Sq. Ft. and       Annual Rental
                                  % of Net       and % of Gross
      No. of      Year of         Rentable         Base Annual       Renewal
      Tenants    Expiration       Area(1)            Rental          Options
      -------    ----------       -------            ------          -------

         3          1998       4,022  (7.0%)    $ 28,347  (4.9%)  Termination-
                                                                    30 day
         2          1999       7,634 (13.5%)    $102,120 (17.4%)  2 Three-Year
         3          2000       9,475 (16.7%)    $ 82,272 (14.1%)      (2)
         1          2001       3,190  (5.6%)    $ 22,870  (3.9%)      None
         1          2002       5,600  (9.9%)    $ 44,520  (7.6%)      None


(1) Rentable area includes only ground square feet (office and warehouse space).
(2) 3 Three-Year and 1 Five-Year.

Plainview Point Office Center Phases I and II
---------------------------------------------

Except as indicated in the table below,  base annual  rents,  which  include the
cost of utilities,  currently  range from $11.69 to $14.00 per square foot.  The
average base annual rental as of December 31, 1997 was approximately  $12.50 per
square  foot.  Office space is  ordinarily  leased for between two to five years
with the  majority of current  square  footage  being leased for a term of three
years (3).  Current leases  terminate  between 1998 and 2006. One lease provides
for a renewal  option of five years at a rate which will be  negotiated  between
lessor and  lessee.  All leases  provide for  tenants to  contribute  toward the
payment of increases in common area maintenance expenses,  insurance,  utilities
and real estate  taxes.  As of December 31, 1997,  there were 8 tenants  leasing
office space aggregating  approximately 40,901 square feet of rentable area. The
tenants  who  occupy   Plainview  Point  Office  Center  Phases  I  and  II  are
professional     service     oriented      organizations.      The     principal
occupations/professions  practiced  include  a  business  school,  telemarketing
services and respiratory  therapy  services.  Two tenants lease more than 10% of
Plainview Point Office Center's  rentable area: ICT Group,  Inc. (10.7%) and ITT
Educational Services, Inc. (36.0%). The occupancy levels at the office center as
of  December  31 were 73% (1997),  88%  (1996),  85% (1995),  74% (1994) and 43%
(1993).

(3)   Excluding the ITT Educational  Services,  Inc. lease which is for 10 years
      and the Independent Life and Accident  Insurance lease which is for 10 1/2
      years.

                                      - 9 -
<PAGE>

Plainview Point Office Center Phases I and II - Continued
---------------------------------------------------------

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

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

 ICT Group, Inc.      1998       6,031 (10.7%)   $ 70,524 (15.2%)       None

 ITT Educational
  Services, Inc.      2004      20,232 (36.0%)   $204,948 (44.2%)(1) 1 Five-Year

(1) The lease  provides that the tenant will pay its own  electricity  costs and
    thus the base rent is below $12.50.

Other Tenants:

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

     4           1998         8,141 (14.5%)   $108,720 (23.5%)      None
     1           1999         2,338  (4.2%)   $ 29,225  (6.3%)      None
    None      2000-2005             --               --             None
     1           2006         4,159  (7.4%)   $ 49,908 (10.8%)      None


The Willows of Plainview Phase I
--------------------------------

Units at The Willows of Plainview Phase I include one and  two-bedroom  loft and
deluxe  apartments  and  two-bedroom  townhomes.  All  units  have  wall-to-wall
carpeting,  individually  controlled heating and air conditioning,  dishwashers,
ranges,  refrigerators  and garbage  disposals.  All units,  except  one-bedroom
lofts, have washer/dryer  hook-ups. The one-bedroom lofts have stackable washers
and dryers.  Tenants  have access to and the use of  coin-operated  washer/dryer
facilities, clubhouse, management offices, pool, whirlpool and tennis courts.

Monthly  rental  rates at The  Willows  of  Plainview  Phase I start at $639 for
one-bedroom apartments, $919 for two-bedroom apartments and $999 for two-bedroom
townhomes,  with  additional  monthly  rental  amounts for special  features and
locations.  Tenants pay all costs of heating,  air conditioning and electricity.
Most  leases are for a period of one year.  Units will be rented in some  cases,
however,  on a shorter term basis at an additional  charge. The occupancy levels
at the  apartment  complex as of December 31 were 92%  (1997),  89% (1996),  91%
(1995) and 87% (1994 and 1993).

The Willows of Plainview Phase II
---------------------------------

See the discussion  under The Willows of Plainview Phase I. Monthly rental rates
at The Willows of Plainview Phase II start at $639 for  one-bedroom  apartments,
$919 for  two-bedroom  apartments and $1,019 for  two-bedroom  town homes,  with
additional  monthly  rental  amounts for special  features  and  locations.  The
occupancy levels at the apartment complex as of December 31 were 90% (1997), 92%
(1996), 94% (1995), 93% (1994) and 91% (1993).

Golf Brook Apartments
---------------------

Units at Golf Brook Apartments  include two and  three-bedroom  units. All units
have   wall-to-wall   carpeting,   individually   controlled   heating  and  air
conditioning,   dishwashers,   ranges,  refrigerators,   garbage  disposals  and
washer/dryer hook-ups.  Tenants have access to and use of clubhouse,  management
offices, pool and tennis courts.

                                     - 10 -
<PAGE>



Golf Brooks Apartments - Continued
----------------------------------

Monthly rental rates at Golf Brook  Apartments  start at $1,130 for  two-bedroom
apartments and $1,360 for  three-bedroom  apartments,  with  additional  monthly
rental  amounts for special  features  and  locations.  Tenants pay all costs of
heating,  air conditioning and electricity.  Most leases are for a period of one
year. Units will be rented in some cases, however, on a shorter term basis at an
additional  charge. The occupancy levels at the apartment complex as of December
31 were 96% (1997), 97% (1996), 91% (1995), 93% (1994) and 91% (1993).

Plainview Point III Office Center
---------------------------------

Base annual rents,  which  include the cost of  utilities,  range from $13.90 to
$17.00 per square foot for first and second  floor  office  space and $13.00 per
square foot for lower level office space. The average base annual rental for all
types of space leased as of December 31, 1997 was $14.42 per square foot. Office
space is  ordinarily  leased for between two and six years with the  majority of
current  square  footage being leased for a term of five years.  Current  leases
terminate  between  1998 and 2001.  Some leases  provide for renewal  options of
between  two and five  years at rates  which are  based  upon  increases  in the
consumer price index and/or are negotiated between lessor and lessee. All leases
provide for tenants to contribute toward the payment of increases in common area
maintenance expenses, insurance, utilities and real estate taxes. As of December
31, 1997,  there were seven  tenants  leasing  space  aggregating  approximately
60,121 square feet of rentable area. The tenants who occupy  Plainview Point III
Office Center are  professional  service oriented  organizations.  The principal
occupations/professions  practiced  include  real  estate  and  insurance.  Four
tenants lease more than 10% of the office center's rentable area: The Prudential
Company of America (10.3%),  Underwriters Safety & Claims, Inc. (18.4%),  RE/MAX
Properties East, Inc.  (24.4%) and Univa Health Network  (26.7%).  The occupancy
levels at the office  center as of December 31 were 96% (1997),  91% (1996 ,1995
and 1994) and 87% (1993).

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

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

The Prudential Company
  of America               1998     6,474 (10.3%)   $ 95,964 (11.1%) 1 Five-Year
Underwriters Safety &
  Claims, Inc.             2001    11,535 (18.4%)   $149,952 (17.3%)    None
RE/MAX Properties East,
  Inc.                     1999    15,300 (24.4%)   $225,600 (26.0%) 1 Two-Year
Univa Health Network       2000    16,727 (26.7%)   $232,500 (26.8%) 1 Five-Year


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

  None     1998-1999          --                --                  --
   3         2000       10,085 (16.1%)   $163,140 (18.8%)      1 Three-Year







                                     - 11 -

<PAGE>



Blankenbaker Business Center 1A
-------------------------------

Prudential Service Bureau, Inc. has leased 100% of Blankenbaker  Business Center
1A. The annual base rent, which does not include the cost of utilities, is $7.89
per square  foot for ground  floor  office  space and $7.10 per square  foot for
second floor office space. The average base annual rental for all types of space
leased as of  December  31,  1997 was $7.48.  The lease term is for 11 years and
expires in July 2005.  Prudential Service Bureau, Inc. is a professional service
oriented  organization  which deals in  insurance  claim  processing.  The lease
provides  for the  tenant to  contribute  toward  the  payment  of  common  area
expenses,  insurance and real estate taxes.  The occupancy level at the business
center as of December 31, 1997, 1996, 1995, 1994 and 1993 was 100%.

The following table contains  approximate data concerning the lease in effect as
of December 31, 1997:

Major Tenant:
                                                   Current Base
                                   Sq. Ft. and     Annual Rental
                                    % of Net      and % of Gross
                       Year of      Rentable        Base Annual      Renewal
       Name          Expiration      Area(1)          Rental         Options
       ----          ----------      -------          ------         -------

Prudential Service
  Bureau, Inc.          2005      48,463 (100%)   $752,787 (100%)      None

(1) Rentable area includes only ground floor square feet.

Lakeshore Business Center Phase I
---------------------------------

Base annual rents,  which exclude the cost of  utilities,  currently  range from
$9.78 to $12.47 per square foot for first floor  office  space,  $6.18 to $10.58
per square  foot for first  floor  service  space and $8.93 to $11.75 per square
foot for second floor office space. The average base annual rental for all space
leased as of  December  31,  1997 was  $10.23.  Space is  ordinarily  leased for
between one and eight years with the majority of current  square  footage  being
leased for a term of five years.  Current  leases expire  between 1998 and 2002.
All leases  provide for tenants to contribute  toward the payment of common area
expenses,  insurance and real estate taxes. As of December 31, 1997,  there were
34 tenants  leasing  office  space  (first and second  floor) and service  space
aggregating  approximately  99,268 square feet of rentable area. The tenants who
occupy  Lakeshore  Business  Center Phase I are  professional  service  oriented
organizations.  The principal  occupations/professions  practiced include health
care services, telemarketing services and management offices for both a cellular
communications  chain and a soft drink company.  One tenant leases more than 10%
of Lakeshore  Business  Center Phase I's rentable area: U. S. Homecare  Infusion
Therapy Products of Florida (11.7%). The occupancy levels at the business center
as of  December  31 were 96%  (1997),  92% (1996 and 1995),  80%  (1994)and  58%
(1993).

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

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

U.S. Homecare
 Infusion Therapy
 Products of
 Florida                1998      12,081 (11.7%)  $135,912 (13.4%)      (2)

(2) Tenant has option to renew its lease for an unspecified period of time.




                                     - 12 -

<PAGE>
Lakeshore Business Center Phase I - Continued
---------------------------------------------
Other Tenants:

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

   12        1998         23,293 (22.8%)    $229,916 (22.6%)          None
    7        1999         31,162 (30.1%)    $303,516 (29.9%)      5 Three-Year
    9        2000         22,932 (22.2%)    $236,435 (23.3%)      2 Three-Year
    1        2001          1,495  (1.4%)    $ 17,568  (1.7%)      1 Three-Year
    4        2002          8,305  (8.0%)    $ 92,592  (9.1%)      2 Three-Year


Lakeshore Business Center Phase II
----------------------------------

Base annual rents,  which exclude the cost of  utilities,  currently  range from
$10.00 to $12.54  per  square  foot for first  floor  office  space and $9.80 to
$14.95 per square foot for second  floor office  space.  The average base annual
rental  for all space  leased  as of  December  31,  1997 was  $11.33.  Space is
ordinarily  leased for  between  one and six years with the  majority of current
square  footage  being leased for a term of five years.  Current  leases  expire
between 1998 and 2003.  Five leases  provide for renewal  options at rates which
are based upon  increases  in the  consumer  price index  and/or are  negotiated
between lessor and lessee.  All leases provide for tenants to contribute  toward
the payment of common area  expenses,  insurance  and real estate  taxes.  As of
December 31, 1997,  there were 22 tenants leasing office space (first and second
floor)  and  service  space  aggregating  approximately  95,981  square  feet of
rentable area (1). The tenants who occupy Lakeshore Business Center Phase II are
professional     service     oriented      organizations.      The     principal
occupations/professions   practiced  include  health  care  services,  insurance
services and  management  offices for the Florida state  lottery.  Three tenants
lease more than 10% of  Lakeshore  Business  Center  Phase II's  rentable  area:
Northwest Medical Center, Inc. (10.4%),  Progressive  American Insurance (10.9%)
and Lambda Physik  (13.0%).  The occupancy  levels at the business  center as of
December 31 were 100% (1997), 89% (1996), 72% (1995), 78% (1994) and 75% (1993).

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

Major Tenants:
                                                    Current Base
                                    Sq. Ft. and     Annual Rental
                                     % of Net      and % of Gross
                       Year of      Rentable        Base Annual        Renewal
       Name          Expiration      Area(1)          Rental           Options
       ----          ----------      -------          ------           -------

Northwest Medical
 Center, Inc.           2000     10,132 (10.4%)   $130,584 (11.9%)      None

Progressive American
 Insurance              1999     10,580 (10.9%)   $127,176 (11.5%)  1 Three-Year

Lambda Physik           2002     12,644 (13.0%)   $139,080 (12.6%)  1 Five-Year

Other Tenants:
                                              Current Base
                            Sq. Ft. and       Annual Rental
                              % of Net       and % of Gross
  No. of     Year of         Rentable          Base Annual        Renewal
  Tenants   Expiration       Area (1)            Rental           Options
  -------   ----------  ----------------    ----------------    ----------
     4         1998       18,028 (18.5%)    $213,575 (19.4%)        (2)
     4         1999       11,566 (11.9%)    $128,970 (11.6%)    1 Three-Year
     7         2000       15,677 (16.2%)    $176,050 (16.1%)        None
     2         2001        8,361  (8.6%)    $ 84,912  (7.7%)        None
     1         2002        4,805  (4.9%)    $ 53,444  (4.8%)    1 Three-Year
     1         2003        4,188  (4.3%)    $ 48,156  (4.4%)        None

(1) Excludes  approximately  1,218 square feet which is occupied by the business
    center's property management and leasing staff.
(2) 1 Two-Year and 1 Three-Year.
                                     - 13 -

<PAGE>
University Business Center Phase II
-----------------------------------

Philip Crosby Associates, Inc. ("Crosby") had leased 100% of University Business
Center Phase II. (See above for a further  discussion  regarding  Crosby and its
lease with the Joint  Venture).  The original lease term was for seven years and
the tenant took  occupancy in April 1991.  During  1997,  Crosby  abandoned  its
business,  sold all or most of its assets and informed the Joint Venture that it
may be insolvent.  During the fourth  quarter of 1997,  the L/U II Joint Venture
accepted  $300,000  from Crosby's  parent  company in full  satisfaction  of all
claims (the Partnership's proportionate share is $54,000 or 18%). As of December
31, 1997,  approximately  85,000 square feet of the business  center  (including
approximately  10,000  square  feet of  mezzanine  space) was  occupied  by four
tenants who previously had sub-leases with Crosby.  Sub-lease base annual rents,
which  exclude the cost of utilities,  currently  range from $8.89 to $11.70 per
square foot for first floor office  space,  first floor  service  space,  second
floor office space and mezzanine  space.  The average base annual rental for all
types of space  sublet as of  December  31,  1997 was  $10.24.  The  sub-tenants
occupying  University Business Center Phase II are professional service oriented
organizations.  The  principal   occupations/professions  practiced  include  an
audio/video  school and studio and home  building.  Two tenants have sublet more
than 10% of University  Business  Center Phase II's rentable area (1): U.S. Home
Corporation (11.7%) and Full Sail Recorders,  Inc.(80.9%).  The occupancy levels
at the  business  center as of December 31 were 99% (1997 and 1996),  95% (1995)
and 100% (1994 and 1993).

The following  table  contains  approximate  data  concerning  the sub-leases in
effect as of December 31, 1997:

Major Tenants:

                                                       Current Base
                                      Sq. Ft. and      Annual Rental
                                        % of Net      and % of Gross
                         Year of       Rentable         Base Annual     Renewal
       Name            Expiration      Area (1)           Rental        Options
       ----            ----------   --------------   ----------------  ---------

U.S. Home Corporation     1998       9,132 (11.7%)    $105,744 (12.2%)    None


Full Sail Recorders       1998      62,912 (80.9%)    $735,984 (84.6%)     (2)

Other Tenants:

                                             Current Base
                          Sq. Ft. and       Annual Rental
                            % of Net        and % of Gross
 No. of     Year of         Rentable          Base Annual        Renewal
 Tenants   Expiration       Area (1)            Rental           Options
 -------   ----------  ----------------    ----------------    ----------

    2        1998        2,602 ( 3.3%)     $ 29,056 ( 3.2%)       None


(1) Rentable area includes only first floor (office and service)square  feet and
    second  floor  office  square  feet  and  excludes   1,791  square  feet  of
    maintenance space.

(2) Full Sail  Recorders  has signed a lease for 48,667  square  feet  beginning
    April 1998 through July 2004 at a rate of $11.76 per square foot.  Full Sail
    has also signed a lease for an additional 20,696 square feet beginning April
    1998 through July 2002 at a rate of $12.73 per square foot.







                                     - 14 -

<PAGE>



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

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


                               Federal               Realty              Annual
                             Tax Basis             Tax Rate        Realty Taxes
                             ---------             --------        ------------
Wholly-Owned Properties
-----------------------

Commonwealth Business
Center Phase I              $4,018,470             $.010980            $ 35,363

Plainview Point Office
Center Phases I and II       3,442,293              .011180              18,051

The Willows of
Plainview Phase I            7,359,299              .011180              50,810

Property Owned in Joint
Venture with NTS-
Properties V
------------

The Willows of
Plainview Phase II           7,893,189              .011180              58,069

Properties Owned in
Joint Venture with NTS-
Properties VI
-------------

Golf Brook Apartments       16,100,810              .018637             259,677

Plainview Point III
Office Center                4,193,863              .011180              34,849

Property Owned in Joint
Venture with NTS-
Properties VII and NTS-
Properties Plus Ltd.
-------------------

Blankenbaker Business
Center 1A                    7,356,545              .010980              56,914

Properties Owned
Through Lakeshore/
University II Joint
Venture (L/U II Joint
Venture)
-------

Lakeshore Business
Center Phase I              10,133,167              .026789             176,642

Lakeshore Business
Center Phase II             12,204,414              .026789             140,432

University Business
Center Phase II              7,104,723              .020011             107,161

Percentage  ownership has not been applied to the information in the above table
for properties owned through a joint venture.



                                     - 15 -

<PAGE>



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

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

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

Investment in Joint Ventures
----------------------------

NTS Willows  Phase II Joint  Venture - On  September  1, 1984,  the  Partnership
entered  into a  joint  venture  agreement  with  NTS-Properties  V to  develop,
construct, own and operate a 144 - unit luxury apartment complex on an 8.29 acre
site in  Louisville,  Kentucky  known as The Willows of Plainview  Phase II. The
term of the Joint Venture shall continue until dissolved.

Dissolution  shall  occur  upon,  but not  before,  the  first  to  occur of the
following:

      (a)     the withdrawal, bankruptcy or dissolution of a Partner or the
              execution by a Partner of an assignment for the benefit of its
              creditors;

      (b)     the  sale,  condemnation  or taking  by  eminent  domain of all or
              substantially all of the assets of the Partnership, other than its
              cash and cash equivalent assets;

      (c)     the vote or consent of each of the Partners to dissolve the
              Partnership; or

      (d)     September 30, 2028.

The  Partnership  contributed  land  valued at  $800,000  and  NTS-Properties  V
contributed approximately $7,455,000, the construction and carrying costs of the
apartment  complex.  No future  contributions are anticipated as of December 31,
1997.

The apartment  complex is encumbered by permanent  mortgages  with two insurance
companies.  Both loans are  secured by a first  mortgage  on the  property.  The
outstanding  balance  of the  mortgages  at  December  31,  1997  is  $5,100,000
($3,193,000  and  $1,907,000).  The mortgages are recorded as a liability of the
Joint  Venture.  The  Partnership's  proportionate  interest in the mortgages at
December 31, 1997 is $514,079  ($321,854  and  $192,225).  Both  mortgages  bear
interest at a fixed rate of 7.2% and are due January 5, 2013.  At maturity,  the
loans will have been  repaid  based on the  current  rate of  amortization.  See
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations  (Item 7) for a further  discussion  regarding  the terms of the debt
financing.

The Net Cash Flow for each calendar  quarter is  distributed  to the Partners in
accordance with their respective  Percentage  Interests.  The term Net Cash Flow
means the excess,  if any, of (A) the gross  receipts from the operations of the
Joint Venture Property  (including  investment  income) for such period plus any
funds released from previously  established reserves (referred to in clause (iv)
below),  over (B) the sum of (i) all cash  operating  expenses paid by the Joint
Venture  Property  during such period in the course of  business,  (ii)  capital
expenditures  during such period not funded by capital  contributions,  loans or
paid out of previously  established reserves,  (iii) payments during such period
on account of  amortization  of the principal of any debts or liabilities of the
Joint Venture property and (iv) reserves for

                                     - 16 -

<PAGE>



Investment in Joint Ventures - Continued
----------------------------------------

contingent  liabilities  and  future  expenses  of the Joint  Venture  Property.
Percentage  Interest means that percentage which the capital  contributions of a
Partner bears to the aggregate capital contributions of all the Partners.

Net income or net loss is  allocated  between the  Partners in  accordance  with
their respective Percentage Interests. The Partnership's ownership share was 10%
at December 31, 1997.

The  Partnership  has no liability for funding losses of the joint venture as of
December 31, 1997.

NTS Ft.  Lauderdale  Office Joint  Venture - On April 1, 1985,  the  Partnership
entered  into a  joint  venture  agreement  with  NTS-Properties  V to  develop,
construct,  own and  operate an office  warehouse  building  in Ft.  Lauderdale,
Florida known as Lakeshore Business Center Phase I.

The  Partnership  contributed  land valued at $1,752,982  and  NTS-Properties  V
contributed approximately  $9,170,000,  the cost of constructing and leasing the
building.  On January 23, 1995,  the partners of the NTS Ft.  Lauderdale  Office
Joint Venture contributed  Lakeshore Business Center Phase I to the newly formed
Lakeshore/University  II (L/U II) Joint Venture. For a further discussion of the
Lakeshore/University II Joint Venture, see below.

NTS Sabal Golf Villas  Joint  Venture - On September  1, 1985,  the  Partnership
entered  into a joint  venture  agreement  with  NTS-Properties  VI to  develop,
construct,  own and operate a 158-unit luxury apartment  complex on a 13.15 acre
site in Orlando,  Florida known as Golf Brook  Apartments Phase I. On January 1,
1987, the joint venture  agreement was amended to include Golf Brook  Apartments
Phase  II, a 37-unit  luxury  apartment  complex  located  on a 3.069  acre site
adjacent to Golf Brook  Apartments  Phase I. The term of the Joint Venture shall
continue until  dissolved.  Dissolution  shall occur upon,  but not before,  the
first to occur of the following:

      (a)     the withdrawal, bankruptcy or dissolution of a Partner or the
              execution by a Partner of an assignment for the benefit of its
              creditors;

      (b)     the  sale,  condemnation  or taking  by  eminent  domain of all or
              substantially all of the assets of the Partnership, other than its
              cash and cash-equivalent assets;

      (c)     the vote or consent of each of the Partners to dissolve the
              Partnership; or

      (d)     September 30, 2025.

The  Partnership  contributed  land  valued at  $1,900,000  with a related  note
payable to a bank of $1,200,000.  NTS-Properties  VI  contributed  approximately
$15,800,000, the cost of constructing and leasing the apartments. NTS-Properties
VI also  contributed  funds to retire the $1,200,000  note payable to a bank. No
future contributions are anticipated as of December 31, 1997.

Golf  Brook  Apartments  is  encumbered  by a mortgage  payable to an  insurance
company.  The original  borrowings  obtained by the  Partnership  for Golf Brook
Apartments were used to fund a portion of the Partnership's  contribution to the
Joint  Venture.  The current  mortgage  payable of  $9,000,000  is recorded as a
liability by the Partnership in accordance with the Joint Venture Agreement. The
mortgage  payable bears  interest at a fixed rate of 7.43%,  is due May 15, 2009
and is secured by the assets of Golf Brook  Apartments.  At  maturity,  the loan
will have been repaid based on the current rate of amortization.




                                     - 17 -

<PAGE>



Investment in Joint Ventures - Continued
----------------------------------------

The Net Cash Flow for each calendar  quarter is  distributed  to the Partners in
accordance with their respective  Percentage  Interests.  The Term Net Cash Flow
means the excess,  if any, of (a) the sum of (i) the gross receipts of the Joint
Venture Property, for such period, other than capital  contributions,  plus (ii)
any funds from previously  established  reserves (referred to in clause (b) (iv)
below),  over (b) the sum of (i) all cash  expenses  paid by the  Joint  Venture
Property during such period,  (ii) all capital  expenditures paid in cash during
such period, (iii) payments during such period on account of amortization of the
principal of any debts or  liabilities of the Joint Venture  Property,  and (iv)
reserves for  contingent  liabilities  and future  expenses of the Joint Venture
Property,  as established by the Partners;  provided,  however, that the amounts
referred to in (i),  (ii) and (iii)  above shall be taken in to account  only to
the  extent  not  funded  by  capital  contributions  or paid out of  previously
established  reserves.  Percentage  Interest  means  that  percentage  which the
capital  contributions of a Partner bears to the aggregate capital contributions
of all the Partners.

Net income or net loss is  allocated  between the  Partners in  accordance  with
their respective Percentage Interests.  The Partnership's ownership share was 4%
at December 31, 1997.

The  Partnership  has no liability for funding losses of the joint venture as of
December 31, 1997.

Plainview  Point III Joint Venture - On March 1, 1987, the  Partnership  entered
into a joint venture agreement with NTS-Properties VI to develop, construct, own
and operate an office building in Louisville,  Kentucky known as Plainview Point
III  Office  Center.  The  terms  of the  Joint  Venture  shall  continue  until
dissolved.  Dissolution shall occur upon, but not before,  the first to occur of
the following:

      (a)     the withdrawal, bankruptcy or dissolution of a Partner or the
              execution by a Partner of an assignment for the benefit of its
              creditors;

      (b)     the  sale,  condemnation  or taking  by  eminent  domain of all or
              substantially all of the assets of the Real Property,  unless such
              disposition  is, in whole or in part,  represented by a promissory
              note of the purchaser;

      (c)     the vote or consent of each of the Partners to dissolve the
              Partnership; or

      (d)     December 30, 2026.

The  Partnership  contributed  land valued at $790,000 with an outstanding  note
payable to a bank of $550,000 which was secured by the land.  NTS-Properties  VI
contributed  approximately  $4,100,000,  the cost to  construct  and  lease  the
building.  NTS-Properties  VI also contributed funds to retire the $550,000 note
payable to the bank. No future  contributions are anticipated as of December 31,
1997.

The office center is not encumbered by any outstanding  mortgages as of December
31, 1997.

The Net Cash Flow for each calendar  quarter is  distributed  to the Partners in
accordance with their respective  Percentage  Interests.  The term Net Cash Flow
means the excess,  if any, of (a) the sum of (i) the gross receipts of the Joint
Venture Property, for such period, other than capital  contributions,  plus (ii)
any funds from previously  established  reserves (referred to in clause (b) (iv)
below),  over (b) the sum of (i) all cash  expenses  paid by the  Joint  Venture
Property during such period,  (ii) all capital  expenditures paid in cash during
such period, (iii) payments during such period on account of amortization of the
principal of any debts or  liabilities of the Joint Venture  Property,  and (iv)
reserves for contingent

                                     - 18 -

<PAGE>



Investment in Joint Ventures - Continued
----------------------------------------

liabilities and future expenses of the Joint Venture Property, as established by
the Partners;  provided,  however, that the amounts referred to in (i), (ii) and
(iii)  above  shall be taken in to  account  only to the  extent  not  funded by
capital contributions or paid out of previously established reserves. Percentage
Interest  means that  percentage  which the capital  contributions  of a Partner
bears to the aggregate capital contributions of all the Partners.

Net income or net loss is  allocated  between the  Partners in  accordance  with
their respective Percentage Interests.  The Partnership's ownership share was 5%
at December 31, 1997.

The  Partnership  has no liability for funding losses of the joint venture as of
December 31, 1997.

Blankenbaker   Business   Center  Joint  Venture  -  On  August  16,  1994,  the
Blankenbaker  Business  Center Joint Venture  agreement was amended to admit the
Partnership  to the Joint Venture.  The Joint Venture was  originally  formed on
December 28, 1990 between  NTS-Properties  Plus Ltd.  and NTS-  Properties  VII,
Ltd.,  affiliates of the General Partner of the Partnership,  to own and operate
Blankenbaker  Business  Center  1A and to  acquire  an  approximately  2.49 acre
parking lot that was being  leased by the  business  center from an affiliate of
the General  Partner.  The use of the parking lot is a provision of the tenant's
lease agreement with the business  center.  The terms of the Joint Venture shall
continue until  dissolved.  Dissolution  shall occur upon,  but not before,  the
first to occur of the following:

      (a)     the withdrawal, bankruptcy or dissolution of a Partner or the
              execution by a Partner of an assignment for the benefit of its
              creditors;

      (b)     the  sale,  condemnation  or taking  by  eminent  domain of all or
              substantially  all of the assets of the Real  Property and Parking
              Lot  and  the  sale  and/or   collection   of  any   evidences  of
              indebtedness received in connection therewith;

      (c)     the vote or consent of each of the Partners to dissolve the
              Partnership; or

      (d)     December 31, 2030.

In 1990 when the Joint Venture was originally formed,  NTS-Properties  VII, Ltd.
contributed  $450,000 which was used for additional  tenant  improvements to the
business center, and contributed $325,000 to purchase the 2.49 acre parking lot.
The  additional  tenant  improvements  were made to the business  center and the
parking  lot  was  purchased  in  1991.  NTS-Properties  Plus  Ltd.  contributed
Blankenbaker Business Center 1A together with improvements and personal property
subject to mortgage indebtedness of $4,715,000.  During November 1994, this note
payable was replaced with permanent  financing in the amount of $4,800,000.  The
outstanding  balance at  December  31,  1997 was  $3,869,108.  The  mortgage  is
recorded as a liability of the Joint Venture.  The  Partnership's  proportionate
interest in the mortgage at December 31, 1997 was $1,163,828. The mortgage bears
interest at a fixed rate of 8.5% and is due November 15, 2005. Monthly principal
payments are based upon an 11-year amortization.  At maturity, the mortgage will
have been repaid based on the current rate of amortization.

On April 28, 1994,  the Joint Venture  obtained  $1,100,000 in debt financing to
fund a portion of the tenant finish and leasing costs which were associated with
the Prudential Service Bureau, Inc. lease renewal and expansion.  The $1,100,000
note bore interest at the Prime Rate + 1 1/2%. In order for the Joint Venture to
obtain the $4,800,000 of permanent  financing  discussed above, it was necessary
for the Joint Venture to seek an

                                     - 19 -

<PAGE>



Investment in Joint Ventures - Continued
----------------------------------------

additional  Joint Venture  partner to provide the funds necessary for the tenant
finish and leasing  costs instead of debt  financing.  The  $1,100,000  note was
retired in August 1994.  This  resulted in the Joint  Venture's  debt being at a
level where permanent financing could be obtained and serviced.

On August 16, 1994, NTS-Properties IV contributed $1,100,000 and NTS- Properties
VII, Ltd.  contributed  $500,000 in  accordance  with the agreement to amend the
Joint Venture. The need for additional capital by the Joint Venture was a result
of the lease renewal and  expansion  which was signed April 28, 1994 between the
Joint Venture and Prudential.  NTS-Properties Plus Ltd. was not in a position to
contribute additional capital, nor was NTS-Properties VII, Ltd. in a position to
contribute all of the capital required for this project.  NTS-Properties  IV was
willing to  participate  in the Joint Venture and to  contribute,  together with
NTS-Properties  VII,  Ltd.,  the capital  necessary with respect to the project.
NTS-Properties  Plus Ltd.  agreed to the admission of  NTS-Properties  IV to the
Joint  Venture,  and to  the  capital  contributions  by  NTS-Properties  IV and
NTS-Properties  VII,  Ltd. with the  knowledge  that its joint venture  interest
would, as a result,  decrease. With this expansion,  Prudential occupied 100% of
the business center. No future  contributions are anticipated as of December 31,
1997.

The Net Cash Flow for each calendar  quarter is  distributed  to the Partners in
accordance with the respective Percentage Interests.  The term Net Cash Flow for
any  period  shall  mean the  excess,  if any,  of (A) the sum of (i) the  gross
receipts of the Joint  Venture  Property  for such  period,  other than  capital
contributions,  plus (ii) any funds  released by the  Partners  from  previously
established reserves (referred to in clause (B) (iv) below), over (B) the sum of
(i) all cash operating  expenses paid by the Joint Venture  Property during such
period in the course of the  business,  (ii) capital  expenditures  paid in cash
during such period, (iii) payments during such period on account of amortization
of the principal of any debts or liabilities  of the Joint Venture  Property and
(iv)  reserves  for  contingent  liabilities  and future  expenses  of the Joint
Venture  Property as established by the Partners;  provided,  however,  that the
amounts  referred  to in (B)(i),  (ii) and (iii)  above shall only be taken into
account  to the  extent  not  funded  by  capital  contributions  or paid out of
previously established reserves. Percentage Interest means that percentage which
the  capital   contributions  of  a  Partner  bears  to  the  aggregate  capital
contributions of all the Partners.

Net income or net loss is  allocated  between the  Partners in  accordance  with
their respective Percentage Interests. The Partnership's ownership share was 30%
at December 31, 1997.

The  Partnership  has no liability for funding losses of the joint venture as of
December 31, 1997.

Lakeshore/University II Joint Venture - On January 23, 1995, a new joint venture
known as the  Lakeshore/University  II Joint Venture (L/U II Joint  Venture) was
formed among the Partnership and NTS-Properties V, NTS- Properties Plus Ltd. and
NTS/Fort Lauderdale, Ltd., affiliates of the General Partner of the Partnership,
for purposes of owning  Lakeshore  Business  Center Phases I and II,  University
Business Center Phase II and certain  undeveloped tracts of land adjacent to the
Lakeshore Business Center development.








                                     - 20 -

<PAGE>



Investment in Joint Ventures - Continued
----------------------------------------

The table below identifies which properties were contributed to the L/U II Joint
Venture and the respective  owners of such properties  prior to the formation of
the joint venture.


               Property                           Contributing Owner
               --------                           ------------------

      Lakeshore Business Center Phase I       NTS-Properties IV and NTS-
                                              Properties V

      Lakeshore Business Center Phase II      NTS-Properties Plus Ltd.

      Undeveloped land adjacent to the        NTS-Properties Plus Ltd.
      Lakeshore Business Center
      development (3.8 acres)

      Undeveloped land adjacent to the        NTS/Fort Lauderdale, Ltd.
      Lakeshore Business Center
      development (2.4 acres)

      University Business Center Phase II     NTS-Properties V and NTS-
                                              Properties Plus Ltd.

The term of the Joint Venture shall continue until dissolved.  Dissolution shall
occur upon, but not before, the first to occur of the following:

      (a)    the withdrawal, bankruptcy or dissolution of a Partner or the
             execution by a Partner of an assignment for the benefit of its
             creditors;

      (b)    the  sale,  condemnation  or  taking  by  eminent  domain of all or
             substantially  all  of  the  Real  Property  and  the  sale  and/or
             collection of any evidences of indebtedness  received in connection
             therewith;

      (c)    the  vote or  consent  of  each of the  Partners  to  dissolve  the
             Partnership; or

      (d) December 31, 2030.

Each of the  properties was  contributed to the L/U II Joint Venture  subject to
existing  indebtedness,  except for Lakeshore  Business Center Phase I which was
contributed to the joint venture free and clear of any mortgage  liens,  and all
such  indebtedness was assumed by the joint venture.  Mortgages were recorded on
Lakeshore Business Center Phase I in the amount of $5,500,000, and on University
Business  Center  Phase II in the  amount of  $3,000,000,  in favor of the banks
which held the  indebtedness on University  Business Center Phase II,  Lakeshore
Business  Center  Phase  II and the  undeveloped  tracts  of land  prior  to the
formation of the joint venture.  In addition to the above,  the Partnership also
contributed  $750,000 to the L/U II Joint Venture.  As a result of the valuation
of the  properties  contributed  to the L/U II Joint  Venture,  the  Partnership
obtained an 18% partnership interest in the joint venture.

The properties of the L/U II Joint Venture are  encumbered by mortgages  payable
to an insurance company as follows:

              Loan Balance
              at 12/31/97           Encumbered Property
              -----------           -------------------

               $5,606,774           Lakeshore Business Center Phase II
               $5,374,127           University Business Center Phase II
               $5,211,275           Lakeshore Business Center Phase I

                                     - 21 -

<PAGE>



Investment in Joint Ventures - Continued
----------------------------------------

The loans are recorded as liabilities of the Joint  Venture.  The  Partnership's
proportionate  interest  in the  loans  at  December  31,  1997  was  $2,890,304
($1,000,809, $959,282 and $930,213). The mortgages bear interest at a fixed rate
of 8.125% and are due August 1, 2008.  Monthly principal payments are based upon
a 12-year amortization  schedule.  At maturity,  the loans will have been repaid
based on the current rate of amortization.

The Net Cash Flow for each calendar  quarter is  distributed  to the Partners in
accordance with their  respective  Percentage  Interest.  The term Net Cash Flow
means the excess,  if any, of (A) the sum of (i) the gross receipts of the Joint
Venture Properties for such period (including loan proceeds), other than capital
contributions, plus (ii) any funds released from previously established reserves
(referred  to in  clause  (B)(iv)  below),  over  (B) the  sum of (i)  all  cash
operating expenses paid by the Joint Venture during such period in the course of
business,  (ii)  capital  expenditures  paid in cash during such  period,  (iii)
payments  during such period on account of  amortization of the principal of any
debts or  liabilities  of the Joint  Venture and (iv)  reserves  for  contingent
liabilities  and future  expenses of the Joint  Venture,  as  established by the
Partners;  provided,  however,  that the amounts referred to in (B)(i), (ii) and
(iii) above shall only be taken into account to the extent not funded by capital
contributions  or  paid  out  of  previously  established  reserves.  Percentage
Interest  means that  percentage  which the capital  contributions  of a Partner
bears to the aggregate capital contributions of all the Partners.

Net income or net loss is  allocated  between the  partners in  accordance  with
their respective Percentage Interests. The Partnership's ownership share was 18%
at December 31, 1997.

The  Partnership  had no liability for funding losses of the joint venture as of
December 31, 1997.

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

The  Partnership's  properties are subject to competition  from similar types of
properties  (including,  in  certain  areas,  properties  owned  or  managed  by
affiliates of the General  Partner) in the  respective  vicinities in which they
are located. Such competition is generally for the retention of existing tenants
or  for  new  tenants  when  vacancies  occur.  The  Partnership  maintains  the
suitability  and  competitiveness  of its  properties  primarily on the basis of
effective  rents,  amenities  and service  provided to tenants.  Competition  is
expected to increase in the future as a result of the construction of additional
properties.  As of December 31, 1997, there are no properties under construction
in the respective vicinities in which the properties are located, except for, in
the vicinity of Golf Brook  Apartments,  there are 726 apartment units currently
under construction which are scheduled to be completed during 1998. At this time
it is unknown the effect  these new units will have on  occupancy  at Golf Brook
Apartments.  The  Partnership  has not  commissioned a formal market analysis of
competitive  conditions  in any market in which it owns  properties,  but relies
upon the market condition  knowledge of the employees of NTS Development Company
who manage and supervise leasing for each property.

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

NTS Development Company, an affiliate of NTS-Properties Associates IV, the
General Partner of the Partnership, directs the management of the
Partnership's properties pursuant to a written agreement.  NTS Development
Company is a wholly-owned subsidiary of NTS Corporation.  Mr. J. D. Nichols
has a controlling interest in NTS Corporation and is a General Partner of
NTS-Properties Associates IV.  Under the agreement, the Property Manager
establishes rental policies and rates and directs the marketing activity of


                                     - 22 -

<PAGE>



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

leasing  personnel.  It also coordinates the purchase of equipment and supplies,
maintenance activity and the selection of all vendors, suppliers and independent
contractors.  As compensation for its services,  the Property Manager received a
total of $208,837 for the year ended  December  31, 1997.  $138,351 was received
from commercial properties and $70,486 was received from residential properties.
The fee is equal to 6% of gross  revenues from  commercial  properties and 5% of
gross revenues from residential properties.

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

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

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

Because the  principals of the General  Partner and/or its affiliates own and/or
operate real estate  properties  other than those owned by the Partnership  that
are or could be in  competition  with the  Partnership,  potential  conflicts of
interest exist.  Because the Partnership was organized by and is operated by the
General  Partner,   these  conflicts  are  not  resolved   through   arms-length
negotiations  but through the exercise of the General  Partner's  good  judgment
consistent  with its fiduciary  responsibility  to the Limited  Partners and the
Partnership's  investment  objectives  and  policies.  The  General  Partner  is
accountable  to the  Limited  Partners  as a  fiduciary  and  consequently  must
exercise  good faith and  integrity in handling  the  Partnership's  affairs.  A
provision has been made in the  Partnership  Agreement that the General  Partner
will not be liable to the Partnership except for acts or omissions  performed or
omitted  fraudulently,  in bad  faith  or  with  negligence.  In  addition,  the
Partnership Agreement provides for indemnification by the General Partner of the
Partnership for liability  resulting from errors in judgement or certain acts or
omissions. The General Partner and its affiliates retain a free right to compete
with the  Partnership's  properties  including  the right to  develop  competing
properties now and in the future in addition to those existing  properties which
may compete  directly or  indirectly.  NTS  Development  Company,  the  Property
Manager and an affiliate of the General Partner,  acts in a similar capacity for
other  affiliated  entities in the same geographic  region where the Partnership
has property  interests.  The agreement with the Property Manager is on terms no
less  favorable  to the  Partnership  than those which could be obtained  from a
third party for similar  services in the same  geographical  region in which the
properties  are located.  The  contract is  terminable  by either party  without
penalty upon 60 days written notice.

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

Employees
---------

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


                                     - 23 -

<PAGE>



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

None.

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

None.

                                     - 24 -

<PAGE>



                                     PART II

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

There is no established  trading market for the limited  partnership  interests.
The  Partnership  had  2,385  limited   partners  as  of  March  6,  1998.  Cash
distributions  and  allocations of income and loss are made as described in Note
1C to the Partnership's 1997 financial statements.

Annual  distributions  totaling  $8.00  (1996) and $37.00  (1995)  were paid per
limited  partnership  unit.  1995  distributions  include a $25 per unit special
distribution  from the  Partnership's  cash reserves.  No distribution  was made
during  1997.  Quarterly  distributions  are  determined  based on current  cash
balances,  cash flow being generated by operations and cash reserves needed,  as
determined by the General Partner, for future leasing costs, tenant finish costs
and capital improvements. Distributions were paid quarterly as follows:


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

     First quarter       $  --          $ 3.00        $28.00
     Second quarter         --            3.00          3.00
     Third quarter          --            2.00          3.00
     Fourth quarter         --             --           3.00
                          ------         ------        -----

                         $  --          $ 8.00        $37.00
                          ======         ======        =====

The table below  presents  that portion of the  distributions  that  represent a
return of capital on a Generally  Accepted  Accounting  Principle  basis for the
years ended December 31, 1997, 1996 and 1995.


                           Cash
                          Net Loss            Distributions         Return of
                          Allocated              Declared            Capital
                          ---------              --------            -------

Limited Partners:
       1997              $ (48,560)            $    --           $     --
       1996                (45,719)               222,842            222,842
       1995               (422,220)             1,100,565          1,100,565

General Partner:
       1997              $    (490)            $    --           $     --
       1996                   (462)                 2,251              2,251
       1995                 (4,265)                11,117             11,117



                                     - 25 -

<PAGE>

<TABLE>

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

Years ended December 31, 1997, 1996, 1995, 1994 and 1993.
<CAPTION>

                                                    1997            1996            1995            1994            1993
                                                ------------    ------------    ------------    ------------    ------------

<S>                                             <C>             <C>             <C>             <C>             <C>
Rental and other income                         $  3,708,597    $  3,577,554    $  3,285,430    $  2,595,299    $  2,184,317
Total expenses                                    (3,680,643)     (3,610,839)     (3,711,915)     (2,901,514)     (2,448,865)
                                                ------------    ------------    ------------    ------------    ------------
Income (loss) before
 extraordinary item                                   27,954         (33,285)       (426,485)       (306,215)       (264,548)
Extraordinary item                                   (77,004)        (12,896)          --              --              --
                                                ------------    ------------    ------------    ------------    ------------

Net loss                                        $    (49,050)   $    (46,181)   $   (426,485)   $   (306,215)   $   (264,548)
                                                ============    ============    ============    ============    ============

Net loss allocated to:
 General Partner                                $       (490)   $       (462)   $     (4,265)   $     (3,062)   $     (2,645)
 Limited partners                               $    (48,560)   $    (45,719)   $   (422,220)   $   (303,153)   $   (261,903)

Net loss per limited
 partnership unit                               $      (1.82)   $      (1.63)   $     (14.19)   $     (10.19)   $      (8.80)

Weighted average number
 of limited partnership
 units                                                26,708          28,012          29,745          29,745          29,745

Cumulative net income
 (loss)allocated to:
  General Partner                               $      2,916    $      3,406    $      3,868    $      8,133    $     11,195
  Limited partners                              $    288,540    $    337,100    $    382,819    $    805,039    $  1,108,192

Cumulative taxable income (loss)allocated to:
  General Partner                               $    (24,092)   $    (24,618)   $    (24,486)   $    (20,830)   $    (14,278)
  Limited partners                              $ (2,385,433)   $ (2,437,521)   $ (2,424,353)   $ (2,062,388)   $ (1,413,707)

Distributions declared:
 General Partner                                $       --      $      2,251    $     11,117    $      3,479    $      3,438
 Limited partners                               $       --      $    222,842    $  1,100,565    $    344,447    $    340,282

Cumulative distributions
 declared to:
  General Partner                               $    218,253    $    218,253    $    216,002    $    204,885    $    201,406
  Limited partners                              $ 21,607,636    $ 21,607,636    $ 21,384,794    $ 20,284,229    $ 19,939,782

At year end:
Land, buildings and
 amenities, net                                 $ 13,023,781    $ 13,801,251    $ 14,617,818    $ 11,974,200    $  9,808,367

Total assets                                    $ 14,812,308    $ 15,406,286    $ 16,645,788    $ 15,483,541    $ 15,242,567

Mortgages and notes
 payable                                        $ 10,706,802    $ 11,236,625    $ 11,592,641    $  8,895,313    $  8,132,325

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

                                     - 26 -

<PAGE>
Item 7.      Management's Discussion and Analysis of Financial Condition and
             ---------------------------------------------------------------
             Results of Operations
             ---------------------

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

The occupancy levels at the  Partnership's  properties as of December 31 were as
follows:


                                   Percentage
                                  Ownership at
                                     12/31/97       1997        1996       1995
                                   ------------     ----        ----       ----
Wholly-Owned Properties
-----------------------

Commonwealth Business Center           100%          87%         86%        86%
Phase I

Plainview Point Office Center          100%          73%         88%        85%
Phases I and II

The Willows of Plainview Phase I       100%          92%         89%        91%

Properties Owned in Joint Venture
with NTS-Properties V
---------------------------------

The Willows of Plainview Phase II       10%          90%         92%        94%

Lakeshore Business Center Phase I                                           See
(See L/U II Joint Venture below)        N/A          N/A         N/A       below
                                                                            (1)
Properties Owned in Joint Venture
with NTS-Properties VI
---------------------------------

Golf Brook Apartments                    4%          96%         97%        91%

Plainview Point III Office Center        5%          96%         91%        91%

Property Owned in Joint Venture
with NTS-Properties VII, Ltd. and
NTS-Properties Plus Ltd.
---------------------------------

Blankenbaker Business Center 1A         30%         100%        100%       100%

Properties Owned Through
Lakeshore/University II Joint
Venture (L/U II Joint Venture)
------------------------------

Lakeshore Business Center Phase I       18%          96%         92%        92%

Lakeshore Business Center Phase II      18%         100%         89%        72%

University Business Center              18%          99%         99%        95%
Phase II


(1)    During the first quarter of 1995, the Partnership's ownership interest in
       Lakeshore  Business  Center  Phase I changed.  See below for a discussion
       regarding this change.






                                     - 27 -

<PAGE>



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

The rental and other income  generated by the  Partnership's  properties for the
years ended December 31, 1997, 1996 and 1995 were as follows:


                            Percentage
                             Ownership
                           at 12/31/97      1997           1996         1995
                           -----------  -----------    -----------    --------

Wholly-Owned Properties
-----------------------

Commonwealth Business
Center Phase I                 100%     $  657,888     $  684,996   $  618,041

Plainview Point Office
Center Phases I and II         100%     $  571,950     $  544,023   $  462,855

The Willows of Plainview
Phase I                        100%     $1,231,150     $1,108,767   $1,043,360

Properties Owned in Joint
Venture with NTS-
Properties V
-------------------------

The Willows of Plainview
Phase II                        10%     $  137,881     $  123,547   $  115,380

Lakeshore Business Center
Phase I (See L/U II Joint                                           $   14,282
Venture below)                  N/A          N/A            N/A          (1)

Properties Owned in Joint
Venture with NTS-
Properties VI
-------------------------

Golf Brook Apartments            4%     $  113,578     $  115,828   $  112,549

Plainview Point III
Office Center                    5%     $   38,512     $   38,079   $   22,351

Property Owned in Joint
Venture with NTS-
Properties VII, Ltd. And
NTS-Properties Plus Ltd.
------------------------

Blankenbaker Business
Center 1A                       30%     $  277,713     $  277,578   $  275,378

                              (Continued next page)

Revenues shown in the table above and below for properties owned through a joint
venture represent only the Partnership's percentage interest in those revenues.

(1)    During the first quarter of 1995, the Partnership's ownership interest in
       Lakeshore   Business   Center   Phase  I   changed.   The   Partnership's
       proportionate  share of rental and other  income from January 23, 1995 to
       December  31,  1995  is  reflected  below.  See  below  for a  discussion
       regarding this change.





                                     - 28 -

<PAGE>



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


                            Percentage
                            Ownership
                           at 12/31/97       1997           1996         1995
                           -----------   -----------    -----------  --------

Properties Owned through
Lakeshore/University II
Joint Venture (L/U II
Joint Venture)
------------------------

Lakeshore Business Center
Phase I                         18%      $  253,826     $  237,375   $  191,785

Lakeshore Business Center
Phase II                        18%      $  251,910     $  207,357   $  192,167

University Business
Center Phase II                 18%      $  148,536     $  215,922   $  198,064


As  previously  discussed  in the  Partnership's  Form  10-K for the year  ended
December  31,  1996,  on January  23,  1995,  a new joint  venture  known as the
Lakeshore/University  II Joint  Venture (L/U II Joint  Venture) was formed among
the  Partnership and  NTS-Properties  V,  NTS-Properties  Plus Ltd. and NTS/Fort
Lauderdale,  Ltd.,  affiliates of the General  Partner of the  Partnership,  for
purposes  of  owning  Lakeshore  Business  Center  Phases  I and II,  University
Business Center Phase II and certain  undeveloped tracts of land adjacent to the
Lakeshore Business Center development.

The table below identifies which properties were contributed to the L/U II Joint
Venture and the respective  owners of such properties  prior to the formation of
the joint venture.

           Property                           Contributing Owner
           --------                           ------------------

Lakeshore Business Center Phase I         NTS-Properties IV and NTS-
                                          Properties V

Lakeshore Business Center Phase II        NTS-Properties Plus Ltd.

Undeveloped land adjacent to the          NTS-Properties Plus Ltd.
Lakeshore Business Center
development (3.8 acres)

Undeveloped land adjacent to the          NTS/Fort Lauderdale, Ltd.
Lakeshore Business Center
development (2.4 acres)

University Business Center                NTS-Properties V and NTS-Properties
Phase II                                  Plus Ltd.


Each of the properties  were  contributed to the L/U II Joint Venture subject to
existing  indebtedness,  except for Lakeshore  Business Center Phase I which was
contributed to the joint venture free and clear of any mortgage  liens,  and all
such  indebtedness was assumed by the joint venture.  Mortgages were recorded on
Lakeshore Business Center Phase I in the amount of $5,500,000, and on University
Business  Center  Phase II in the  amount of  $3,000,000,  in favor of the banks
which held the  indebtedness on University  Business Center Phase II,  Lakeshore
Business  Center  Phase  II and the  undeveloped  tracts  of land  prior  to the
formation of the joint venture.  In addition to the above,  the Partnership also
contributed $750,000 to the L/U II Joint Venture. As


                                     - 29 -

<PAGE>



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

a result of the  valuation  of the  properties  contributed  to the L/U II Joint
Venture,  the  Partnership  obtained  an 18%  partnership  interest in the joint
venture.

The 1% increase in year-ending occupancy at Commonwealth Business Center Phase I
can be attributed to four new leases totaling  approximately  7,500 square feet.
Included in the total are two expansions of  approximately  5,000 square feet by
existing tenants.  Partially  offsetting the new leases are two tenant move-outs
of  approximately  7,200 square feet. One tenant vacated at the end of the lease
term (4,000 square feet) and one tenant vacated the premises prior to the end of
the lease term due to a  downsizing  decision  by the  tenant's  parent  company
(3,200 square feet). The tenant paid the Partnership a lease  termination fee of
$6,300 in the fourth quarter of 1996 (recorded as rental  income).  There was no
accrued income connected with this lease.  Average occupancy  decreased from 91%
in 1996 to 85% in 1997. Rental and other income at Commonwealth  Business Center
Phase I decreased  from 1996 to 1997  primarily  as a result of the  decrease in
average occupancy.

Year-ending  occupancy at Commonwealth Business Center Phase I remained constant
at 86% from 1995 to 1996.  During  1996,  there was one new lease for a total of
3,600  square feet and an  expansion  of  approximately  1,600 square feet by an
existing  tenant.  Offsetting the new lease and expansion is one tenant move-out
at the end of the  lease  term  of  approximately  5,500  square  feet.  Average
occupancy  increased from 81% in 1995 to 91% in 1996. Rental and other income at
Commonwealth  Business Center Phase I increased from 1995 to 1996 as a result of
the  increase  in average  occupancy  and an  increase  in common  area  expense
reimbursements.  Tenants at  Commonwealth  Business Center Phase I reimburse the
Partnership for common area expenses as part of the lease agreements.

The 15%  decrease in  year-ending  occupancy at  Plainview  Point Office  Center
Phases I and II from 1996 to 1997 can be attributed to four tenant  move-outs at
the end of the lease terms totaling  approximately 9,500 square feet.  Partially
offsetting  the move-outs is one new lease of  approximately  1,100 square feet.
Average  occupancy at Plainview  Point Office  Center  Phases I and II decreased
from 86% in 1996 to 83% in 1997.  In the opinion of the  General  Partner of the
Partnership,  the decrease in occupancy is only a temporary fluctuation and does
not represent a downward  occupancy trend.  Rental and other income at Plainview
Point Office Center Phases I and II increased  from 1996 to 1997  primarily as a
result of an increase in common area expense reimbursements. Leases at Plainview
Point Office Center Phases I and II provide for tenants to contribute toward the
payment of increases in common area maintenance expenses,  insurance,  utilities
and real estate taxes.

As of December  31, 1997,  Plainview  Point  Office  Center  Phases I and II has
approximately 8,400 square feet of additional office space leased to an existing
tenant which currently occupies approximately 20,000 square feet (or 36%) of the
building's  total  rentable  area.  The  expansion  is scheduled to occur in two
phases. The tenant took occupancy of the first phase, approximately 2,000 square
feet,  during the first quarter of 1998.  With the first phase of the expansion,
the office  center's  occupancy  has  improved to 76%.  The second  phase of the
expansion,  approximately  6,400 square  feet,  is scheduled to occur during the
fourth quarter of 1999. See the Liquidity and Capital  Resources section of this
item for the tenant finish commitment related to this lease.

The 3% increase in year-ending occupancy at Plainview Point Office Center
Phases I and II from 1995 to 1996 can be attributed to two new leases
totaling approximately 1,700 square feet.  Included in this total is an
expansion of approximately 1,000 square feet by an existing tenant.  There

                                     - 30 -

<PAGE>



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

were no tenant  move-outs  during 1996.  Average  occupancy  at Plainview  Point
Office  Center  Phases I and II has  increased  from 77% in 1995 to 86% in 1996.
Rental  and other  income  at  Plainview  Point  Office  Center  Phases I and II
increased  in 1996 as  compared  to 1995 as a result of the  increase in average
occupancy and an increase in rental rates.

Year-ending  occupancy  at The Willows of Plainview  Phase I increased  from 89%
(1996) to 92% (1997). Average occupancy increased from 89% (1996) to 93% (1997).
Occupancy at residential properties fluctuate on a continuous basis. Year-ending
occupancy percentages represent occupancy only on a specific date; therefore, it
is  more  meaningful  to  consider  average  occupancy   percentages  which  are
representative  of the entire year's  results.  The increase in rental and other
income at The Willow of Plainview  Phase I from 1996 to 1997 is primarily due to
the increase in average occupancy.

Year-ending  occupancy  at The Willows of Plainview  Phase I decreased  from 91%
(1995) to 89% (1996).  However,  average  occupancy  from 1995 to 1996 increased
from 87% to 89%,  respectively.  The  increase in rental and other income at The
Willows of  Plainview  Phase I from 1995 to 1996 is a result of the  increase in
average occupancy, increased fees collected upon early lease terminations and an
increase in rental rates.

Year-ending  occupancy at The Willows of Plainview  Phase II decreased  from 92%
(1996) to 90%  (1997) and  average  occupancy  decreased  from 95% (1996) to 91%
(1997).  The  increase in rental and other  income at The  Willows of  Plainview
Phase II is due  primarily to an increase in income from  fullyfurnished  units.
Fully-furnished  units are apartments which rent at an additional  premium above
base rent.  Therefore,  it is possible for occupancy to decrease and revenues to
increase when the number of fully furnished units has increased.

The Willows of Plainview  Phase II's  year-ending  occupancy  decreased from 94%
(1995) to 92%  (1996) and  average  occupancy  increased  from 92% (1995) to 95%
(1996). The increase in rental and other income from 1995 to 1996 is a result of
the increase in average  occupancy,  an increase in rental rates and an increase
in income from fully-furnished units.

Year-ending  occupancy at Golf Brook Apartments decreased from 97% (1996) to 96%
(1997).  Average occupancy  decreased from 94% (1996) to 93% (1997).  Golf Brook
Apartments'  year-ending  occupancy increased 6% from 1995 to 1996 while average
occupancy  remained  constant at 94% in 1995 and 1996.  The change in rental and
other income at Golf Brook Apartments from 1996 to 1997 and from 1995 to 1996 is
not significant.

The 5% increase in  year-ending  occupancy at Plainview  Point III Office Center
from  1996 to 1997 can be  attributed  to one new lease of  approximately  4,800
square feet. Partially offsetting the new lease is the downsizing of an existing
tenant of approximately  1,600 square feet. Average occupancy decreased from 93%
(1996) to 90%  (1997).  Rental and other  income  remained  fairly  constant  at
Plainview Point III Office Center from 1996 to 1997.

Year-ending  occupancy at Plainview  Point III Office Center  remained  constant
(91%) from 1995 to 1996.  Two  tenants  expanded  existing  space for a total of
approximately  2,500  square  feet and one tenant  occupying  2,500  square feet
vacated  at the end of the lease  term.  Average  occupancy  increased  from 55%
(1995) to 93% (1996).  Rental and other income  increased at Plainview Point III
Office  Center  from  1995  to 1996  as a  result  of the  increase  in  average
occupancy.





                                     - 31 -

<PAGE>



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

A  wholly-owned  subsidiary  of The  Prudential  Insurance  Company  of  America
(Prudential  Service  Bureau,  Inc.) has leased  100% of  Blankenbaker  Business
Center 1A. In addition to monthly rent payments, Prudential Service Bureau, Inc.
is obligated to pay substantially all of the operating expenses  attributable to
its space. The change in rental and other income at Blankenbaker Business Center
1A from 1996 to 1997 and from 1995 to 1996 was not significant.

The 4% increase in year-ending  occupancy at Lakeshore  Business  Center Phase I
from 1996 to 1997 can be  attributed to four new leases  totaling  approximately
6,400  square feet and an expansion  by a current  tenant of its existing  space
totaling  approximately 2,100 square feet.  Partially  offsetting the new leases
are three  tenants  vacating  prior to the end of the lease  term - one due to a
downsizing  decision by the tenant's  parent company (1,200 square feet - tenant
paid the L/U II Joint  Venture  a lease  termination  fee  [recorded  as  rental
income] of approximately  $7,000 of which the Partnership's  proportionate share
is $1,300 or 18%),  one due to a  decision  by  management  to allow a tenant to
terminate  its lease early to  accommodate  a new long term tenant (1,900 square
feet - tenant paid the L/U II Joint Venture a lease termination fee [recorded as
rental income] of approximately $5,000 of which the Partnership's  proportionate
share is $900 or 18%), and one due to a decision by management to allow a tenant
to terminate its lease early at Lakeshore  Business Center Phase I (1,300 square
feet) and move into increased square footage at Lakeshore  Business Center Phase
II in order to  accommodate  the  tenant's  needs.  There was no accrued  income
connected  with these  leases.  Also  partially  offsetting  the new leases is a
reduction of 466 square feet by a current tenant of its existing space.  Average
occupancy at Lakeshore Business Center Phase I decreased from 97% in 1996 to 96%
in 1997.  Rental and other  income  increased  from 1996 to 1997  primarily as a
result of an  increase  in common area  expense  reimbursements.  Tenants at the
business  center  reimburse the  Partnership for common area expenses as part of
the lease agreements.

Year-ending  occupancy at Lakeshore  Business  Center Phase I remained  constant
(92%) from 1995 to 1996.  Six new leases  totaling  approximately  10,600 square
feet,  including  approximately  3,400 square feet in  expansions by two current
tenants,  are offset by five  tenant  move-outs  totaling  approximately  10,000
square  feet.  The five  move-outs  consist of two tenants  (2,700  square feet)
vacating at the end of the lease term, one tenant (1,600 square feet) exercising
a termination  option,  and two tenants  vacating  prior to the end of the lease
term - one due to a business decision to consolidate its office space at another
location  (700 square feet - tenant paid rent  through end of lease) and one due
to bankruptcy (5,000 square feet - tenant ceased rental payments). The write-off
of accrued  income  connected  with these  leases was not  significant.  Average
occupancy at Lakeshore Business Center Phase I increased from 84% in 1995 to 97%
in 1996.  Rental and other income increased from 1995 to 1996 as a result of the
increase in average occupancy.

Year-ending  occupancy at Lakeshore  Business Center Phase II increased from 89%
(1996)  to 100%  (1997) as a result of five new  leases  totaling  approximately
16,000 square feet which includes an  approximately  1,800 square foot expansion
by Lambda Physik,  a current  tenant.  Lambda Physik leases nearly 12,700 square
feet and has become the largest tenant in the building  occupying  approximately
13% of the building's total rentable square feet.  Partially  offsetting the new
leases is one tenant  move-out,  at the end of the lease term, of  approximately
4,800 square feet.  Average  occupancy  at  Lakeshore  Business  Center Phase II
increased from 80% (1996) to 94% (1997). The increase in rental and other income
at Lakeshore Business Center Phase II from 1996 to 1997 is primarily a result of
the  increase  in average  occupancy  and an  increase  in common  area  expense
reimbursements.

                                     - 32 -

<PAGE>



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

Year-ending  occupancy at Lakeshore  Business Center Phase II increased from 72%
(1995)  to 89%  (1996)  as a result of five new  leases  totaling  approximately
19,200 square feet which includes  approximately 7,000 square feet in expansions
by two current  tenants.  Partially  offsetting the new leases and expansions is
one tenant move-out, totaling 2,800 square feet vacating prior to the end of the
lease term but  continuing to pay rent through the end of the lease term (August
1997).  Average  occupancy at Lakeshore  Business Center Phase II increased from
76% (1995) to 80% (1996). Overall, rental and other income at Lakeshore Business
Center Phase II remained fairly constant from 1995 to 1996 despite a 4% increase
in average  occupancy.  This is primarily a result of a decrease in rental rates
on lease renewals. As discussed in previous filings, prior to the Ft. Lauderdale
area  experiencing  an economic  downturn,  the  property  was able to negotiate
higher net effective  rental rates than 1995 and 1996 market rental rates.  As a
result,  the leases that were  renewed at the end of 1995 and the  beginning  of
1996  renewed  at  a  lower  net  effective   rental  rate.  The   Partnership's
proportionate  share of the rental and other income at Lakeshore Business Center
II, however, increased in 1996 as compared to 1995. This is due to the fact that
the Partnership  acquired an interest in Lakeshore Business Center Phase II as a
result of the formation of the Lakeshore/University  Joint Venture (L/U II Joint
Venture) on January 23, 1995.  (See above for a discussion  regarding  the Joint
Venture.)

Philip Crosby Associates,  Inc. ("Crosby")  previously leased 100% of University
Business  Center Phase II. The  original  lease term was for seven years and the
tenant  took  occupancy  in April  1991.  As a result of Crosby  downsizing  and
sub-leasing the majority of its leased space,  occupancy has decreased to 99% at
December  31, 1997 and 1996 to 95% at December 31, 1995.  During  January  1997,
Crosby vacated the remaining space it occupied at the business center. See below
for further  discussion of Crosby and its leased space.  Rental and other income
at University  Business  Center Phase II decreased  from 1996 to 1997 due to the
following.  Through  the end of 1996,  Crosby  continued  to make rent  payments
pursuant to the original  lease term.  During 1996,  the Joint Venture  received
notice  that  Crosby  did not  intend  to pay full  rental  due  under the lease
agreement  including and subsequent to January 1997.  Although the Joint Venture
does not presently  have lease  agreements(except  as noted below) with Crosby's
sub-tenants,  beginning  February 1997, rent payments from Crosby's  sub-tenants
have been made directly to the Joint Venture,  which are substantially less than
what Crosby owed. During 1997, the Joint Venture recognized income to the extent
of what was  collected  from the  sub-tenants.  The decrease in rental and other
income is also due to the fact that  approximately  $70,000  of  accrued  income
connected  with the Crosby  lease was  written-off  during the first  quarter of
1997, of which the Partnership's  proportionate share was approximately  $13,000
or 18%.

The  Partnership's  proportionate  share  of the  rental  and  other  income  at
University  Business Center Phase II increased from 1995 to 1996. This is due to
the fact that the Partnership acquired an interest in University Business Center
Phase II as a result of the formation of the L/U II Joint Venture on January 23,
1995.  (See above for a discussion of the Joint  Venture).  Overall,  rental and
other income at University  Business Center Phase II remained fairly constant in
1996 as compared to 1995.

In cases of tenants who cease making rental  payments or abandon the premises in
breach of their lease,  the Partnership  pursues  collection  through the use of
collection agencies or other remedies available by law when practical.  In cases
where tenants have vacated as a result of bankruptcy,  the Partnership has taken
legal  action when it has thought  there could be a possible  collection.  There
have been no funds  recovered as a result of these actions  during 1996 or 1995.
During 1997,  $300,000 was  collected  from Philip  Crosby  Associates,  Inc., a
former  tenant  at  University  Business  Center  Phase  II.  The  Partnership's
proportionate share was $54,000 or 18%.
See below for a further discussion of this matter.


                                     - 33 -

<PAGE>



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

Current  occupancy  levels are considered  adequate to continue the operation of
the Partnership's properties. See the Liquidity and Capital Resources section of
this item for a discussion regarding the Partnership's debt financing.

Interest  and  other  income  includes  income  from  investments  made  by  the
partnership with cash reserves. Interest income increased from 1996 to 1997 as a
result of an increase in cash reserves available for investment. The increase in
other income from 1996 to 1997 is a result of an insurance  claim  reimbursement
for  roof  damage  exceeding  the cost to  repair  the  roof at The  Willows  of
Plainview Phases I and II. Interest and other income decreased from 1995 to 1996
as a result of a decrease in cash reserves available for investment.

The  increase  in  operating  expenses  from  1996 to 1997 is due  primarily  to
increased  landscaping costs and legal expenses at the Partnership's  commercial
properties,  increased  exterior building  renovations at Blankenbaker  Business
Center 1A and increased  advertising expenses at The Willows of Plainview Phases
I and II. There were no significant  fluctuations in operating  expenses at Golf
Brook Apartments from 1996 to 1997.

The increase in  operating  expenses  from 1995 to 1996 is due  partially to the
Partnership  acquiring  an interest in the L/U II Joint  Venture in January 1995
(see  discussion  above).  The  increase  in  operating  expenses is also due to
increased  utility  costs,  increased  general  building  maintenance  costs and
increased legal expenses at the Partnership's commercial properties.  There were
no  significant   fluctuations  in  operating   expenses  at  the  Partnership's
residential properties.

The increase in operating expenses-affiliated from 1996 to 1997 is due primarily
to  increased  property   management  costs  at  the  Partnership's   commercial
properties  and at The  Willows  of  Plainview  Phases I and II.  There  were no
significant   fluctuations  in  operating   expenses-affiliated  at  Golf  Brook
Apartments  from 1996 to 1997.  Operating  expenses-affiliated  are expenses for
services performed by employees of NTS Development  Company, an affiliate of the
General Partner of the Partnership.

Operating expenses-affiliated decreased in 1996 as compared to 1995 primarily as
a result of decreased  leasing and property  management costs at Plainview Point
Office  Center  Phases  I and  II,  Commonwealth  Business  Center  Phase  I and
Blankenbaker  Business Center 1A. Partially offsetting the decrease in operating
expenses -affiliated is the Partnership's  acquisition of an interest in the L/U
II  Joint  Venture  in  January  1995  (see  discussion  above).  There  were no
significant  fluctuations in operating expenses- affiliated at the Partnership's
residential properties in 1996 as compared to 1995.

Both the 1996 and 1995 write-off of  unamortized  building  improvements  can be
attributed to Plainview  Point Office Center Phases I and II. The 1996 write-off
is the result of an exterior  stair  replacement  and represents the cost of the
stairs  which  were  replaced  that had not  been  fully  depreciated.  The 1995
write-off is the result of lobby renovations and represents the cost of previous
renovations that had not been fully depreciated.

The 1997 write-off of unamortized loan costs (treated as an extraordinary  item)
relates to loan costs  associated with The Willows of Plainview  Phases I and II
mortgages payable. The unamortized loan costs were expensed due to the fact that
the mortgages were retired in 1997 prior to their  maturity  (December 5, 2003).
See the  Liquidity  and  Capital  Resources  section  of this  item for  further
discussion.





                                     - 34 -

<PAGE>



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

The 1996  write-off of unamortized  loan costs relates to loan costs  associated
with the L/U II Joint Venture's notes payable.  The unamortized  loan costs were
expensed  due to the fact that the notes  were  retired  in 1996  prior to their
maturity  (January 31, 1998). See the Liquidity and Capital Resources section of
this item for further discussion.

The change in amortization of capitalized leasing costs from 1996 to 1997 is not
significant. The decrease in amortization of capitalized leasing costs from 1995
to 1996 is due  primarily to costs  capitalized  during the initial  lease-up at
University Business Center Phase II becoming fully amortized in 1995.

The decrease in interest  expense from 1996 to 1997 is due  primarily to a lower
interest rate on the permanent financing obtained by the L/U II Joint Venture in
July  1996  (8.125%  compared  to a rate of 10.6%  on the  previous  debt).  The
decrease is also due to continued principal payments on the mortgages payable by
the Partnership and its Joint Venture properties.

The decrease in interest expense in 1996 as compared to 1995 is due primarily to
continued  principal  payments  on  the  mortgages  and  notes  payable  of  the
Partnership and its joint venture  properties.  The decrease in interest expense
can also be  attributed  to a lower  interest  rate on the  permanent  financing
obtained by the L/U II Joint  Venture on July 23, 1996.  See the  Liquidity  and
Capital  Resources  section of this item for details regarding the Partnership's
debt.

Management  fees are  calculated as a percentage of cash  collections;  however,
revenue for reporting  purposes is recorded on the accrual  basis.  As a result,
the  fluctuations of revenues between years will differ from the fluctuations of
management  fee  expense.  The  increase  in  management  fee expense in 1996 as
compared to 1995 is also attributed to the Partnership  acquiring an interest in
the L/U II Joint Venture in January 1995 (discussed above).

The  change  in real  estate  taxes  from 1996 to 1997 is not  significant.  The
increase  in real  estate  taxes  from  1995 to  1996  is  primarily  due to the
Partnership  acquiring  an interest in the L/U II Joint  Venture in January 1995
(discussed above).  There were no significant  fluctuations at the Partnership's
other properties from 1995 to 1996.

The increase in professional  and  administrative  expenses from 1996 to 1997 is
due to an  increase in outside  legal fees.  The  decrease in  professional  and
administrative expenses from 1995 to 1996 is due mainly to a decrease in outside
legal  fees  and  litigation  settlement  expenses.  The  litigation  originally
instituted by an investor in the Partnership  against her investment advisor and
involving claims between the investment advisor and the Partnership, its General
Partner  and  NTS-Properties  V, an  affiliate  of the  General  Partner  of the
Partnership,  and its General  Partner was settled  during 1995. At a settlement
conference  before  the Court  (U.S.D.C.,  S.D.  NY),  the  parties  agreed on a
confidential basis to settle the litigation, and any and all other claims of the
Third-Party  Plaintiffs  in  exchange  for the  payment by the  Partnership  and
NTS-Properties  V of certain  monies,  without the  admission  of fault or wrong
doing.

The decrease in professional and administrative expenses-affiliated from 1996 to
1997 is due mainly to decreased salary costs.  Professional  and  administrative
expenses - affiliated  are  expenses for services  performed by employees of NTS
Development Company, an affiliate of the General Partner.

The increase in professional and administrative expenses-affiliated from 1995 to
1996 is due mainly to increased salary costs.


                                     - 35 -

<PAGE>



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

The change in depreciation and  amortization  expense from 1996 to 1997 and from
1995  to  1996  was  not   significant.   Depreciation  is  computed  using  the
straight-line  method of  depreciation  over the  estimated  useful lives of the
assets which are 5-30 years for land improvements,  30 years for buildings, 5-30
years for building improvements and 5-30 years for amenities. The aggregate cost
of the  Partnership's  properties  for  Federal tax  purposes  is  approximately
$24,600,000.

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

Cash provided by operations was $1,176,545 (1997),  $936,169 (1996) and $815,327
(1995). These funds, in conjunction with cash on hand, were used to make a 1.05%
(annualized)   distribution   of  $225,093   (1996)  and  a  4.8%   (annualized)
distribution of $1,111,682 (1995). The distribution made during the three months
ended  March 31, 1995  included a special  $751,136  distribution  made from the
Partnership's cash reserves.  The Partnership does not anticipate making another
special  distribution  in the near term.  The  annualized  distribution  rate is
calculated as a percent of the original  capital  contribution  less a return of
capital of $235.64 per limited  partnership  unit made from the  proceeds of the
sale of Sabal Club Apartments in 1988. The limited partners received 99% and the
General Partners received 1% of these distributions.  No distributions were made
during the year ended  December 31, 1997 or the quarter ended  December 31, 1996
due  to   uncertainties   involving   the  Crosby  lease  as  discussed   below.
Distributions will be resumed once the Partnership has established adequate cash
reserves and is generating cash from operations which, in management's  opinion,
is  sufficient to warrant  future  distributions.  The primary  source of future
liquidity and distributions is expected to be derived from cash generated by the
Partnership's properties after adequate cash reserves are established for future
leasing costs, tenant finish costs and other capital improvements. Cash reserves
(which are unrestricted cash and equivalents and investment  securities as shown
on the Partnership's  balance sheet as of December 31) were $698,481,  $346,479,
and $681,197 at December 31, 1997, 1996 and 1995, respectively.

On July 23, 1996, the L/U II Joint Venture obtained three mortgage loans from an
insurance company totaling $17,400,000 ($6,025,000,  $5,775,000 and $5,600,000).
The  outstanding  balances  of the loans at December  31, 1997 were  $5,606,774,
$5,374,127 and $5,211,275,  respectively.  The loans are recorded as a liability
of the Joint Venture. The Partnership's  proportionate  interest in the loans at
December 31, 1997 was  $1,000,809,  $959,282  and  $930,213,  respectively.  The
mortgages  bear  interest at a fixed rate of 8.125%,  are due August 1, 2008 and
are secured by the assets of the Joint Venture.  Monthly principal  payments are
based upon a 12-year  amortization  schedule.  At maturity,  the loans will have
been repaid based on the current  rate of  amortization.  The proceeds  from the
loans were used to pay off the Joint  Venture's  notes payable of  approximately
$16,800,000  which  bore  interest  at a fixed  rate of 10.6%  and to fund  loan
closing  costs  of  approximately  $280,000.  The  Partnership's   proportionate
interest in the notes which were paid off was  approximately  $3,000,000 or 18%.
The notes  which were paid off had a  maturity  date of January  31,  1998.  The
remaining proceeds will be used to fund Joint Venture tenant finish improvements
and leasing costs.

On December  21, 1997,  the  Partnership  obtained  two  mortgage  loans from an
insurance  company  totaling   $3,900,000   ($1,998,000  and  $1,902,000).   The
outstanding  balances of the loans at  December  31,  1997 were  $1,998,000  and
$1,902,000, respectively, for a total of $3,900,000. The mortgages bear interest
at a fixed rate of 7.2%,  are due January 5, 2013 and are secured by The Willows
of  Plainview  Phase I.  Monthly  principal  payments  are based  upon a 15-year
amortization schedule. At maturity, the loans will have been repaid based on the
current rate of  amortization.  The proceeds from the loans were used to pay off
the  Partnership's  mortgages  payable of  approximately  $3,876,000  which bore
interest at a fixed rate of 7% and to fund loan closing  costs.  The notes which
were paid off had a maturity date of December 5, 2003.

                                     - 36 -

<PAGE>



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

On December 21,  1997,  The Willows of  Plainview  Phase II, an apartment  joint
venture  between the  Partnership  and  NTS-Properties  V, obtained two mortgage
loans from an insurance company totaling $5,100,000 ($3,193,000 and $1,907,000).
The  outstanding  balances of the loans at December 31, 1997 were $3,193,000 and
$1,907,000,   respectively,   for  a  total  of  $5,100,000.  The  Partnership's
proportionate  interest  in the loans at  December  31,  1997 was  $321,854  and
$192,225,  respectively, for a total of $514,079. The mortgages bear interest at
a fixed rate of 7.2% , are due  January 5, 2013 and are secured by the assets of
the  Joint  Venture.  Monthly  principal  payments  are  based  upon  a  15-year
amortization schedule. At maturity, the loans will have been repaid based on the
current rate of  amortization.  The proceeds from the loans were used to pay off
the property's mortgages payable of approximately $5,070,000 which bore interest
at a fixed  rate of 7.5%  and to fund  loan  closing  costs.  The  Partnership's
proportionate  interest  in the  notes  which  were  paid off was  approximately
$510,000 or 10%.  The notes which were paid off had a maturity  date of December
5, 2003.

As of  December  31,  1997,  the  Partnership  has a  mortgage  payable  with an
insurance  company  in the amount of  $2,238,591.  The  mortgage  payable is due
October  1,  2004,  bears  interest  at a fixed  rate of 8.8% and is  secured by
Commonwealth  Business Center Phase I. Monthly principal payments are based upon
a 10-year amortization schedule. At maturity, the mortgage will have been repaid
based on the current rate of amortization.

As of December 31, 1997, the  Blankenbaker  Business  Center Joint Venture had a
mortgage  payable with an  insurance  company in the amount of  $3,869,108.  The
mortgage is recorded as a liability  of the Joint  Venture and is secured by the
assets of the Joint Venture.  The  Partnership's  proportionate  interest in the
mortgage at December 31, 1997 is  $1,163,828.  The mortgage  bears interest at a
fixed rate of 8.5% and is due November 15, 2005.  Monthly principal payments are
based upon an 11-year amortization schedule. At maturity, the mortgage will have
been repaid based on the current rate of amortization.

The  majority  of  the  Partnership's   cash  flow  is  derived  from  operating
activities.  Cash  flows used in  investing  activities  are for  tenant  finish
improvements and other capital additions and were funded by operating activities
or cash reserves.  Changes to current tenant finish  improvements  are a typical
part of any lease negotiation.  Improvements generally include a revision to the
current  floor plan to  accommodate  a tenant's  needs,  new carpeting and paint
and/or wallcovering. The extent and cost of these improvements are determined by
the size of the space  and  whether  the  improvements  are for a new  tenant or
incurred because of a lease renewal. Cash flows used in investing activities are
also for the purchase of investment  securities.  As part of its cash management
activities,  the Partnership has purchased Certificates of Deposit or securities
issued by the U.S.  Government  with  initial  maturities  of greater than three
months to improve the return on its cash reserves.  The  Partnership  intends to
hold the securities until maturity.  Cash flows used in investing  activities in
1995 also  include cash which was  escrowed  for capital  expenditures,  leasing
commissions  and tenant  improvements  at the  properties  owned by L/U II Joint
Venture.  Cash  flows  provided  by  investing  activities  were the result of a
release of the escrowed  funds and from the maturity of  investment  securities.
Cash flows used in financing  activities are for cash distributions,  payment of
loan costs,  principal  payments on mortgages and notes payable,  repurchases of
limited  partnership  Units and an increase in funds reserved by the Partnership
for the  repurchase  of  limited  partnership  Units.  Cash  flows  provided  by
financing  activities  represent  an increase  in  mortgages  payable.  The 1995
capital  contribution to a joint venture  represents the  Partnership's  capital
contribution to the L/U II Joint Venture net of the Partnership's  proportionate
interest in the joint venture's capital contributions.  The Partnership utilizes
the  proportionate   consolidation   method  of  accounting  for  joint  venture
properties.   The   Partnership's   interest  in  the  joint  venture's  assets,
liabilities,  revenues,  expenses and cash flows are combined on a  line-by-line
basis with the Partnership's  own assets,  liabilities,  revenues,  expenses and
cash flows.

                                     - 37 -

<PAGE>



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

The  Partnership  does not expect any  material  changes in the mix and relative
cost of capital resources except for interest and principal payments required by
the debt  financings  obtained by the  Partnership  and The Willows of Plainview
Phase II  Joint  Venture  on  December  21,  1997  (see  discussion  above)  and
renovations and other major capital expenditures, including tenant finish, which
may be required  to be funded  from cash  reserves if they exceed cash flow from
operating activities.

The table below  presents  that portion of the  distributions  that  represent a
return of capital on a Generally  Accepted  Accounting  Principle  basis for the
years ended December 31, 1997, 1996 and 1995.

                                                    Cash           Return
                                 Net Loss       Distributions        of
                                 Allocated        Declared         Capital
                                 ---------        --------         -------

          Limited Partners:

                  1997          $  (48,560)    $     --         $     --
                  1996             (45,719)        222,842         222,842
                  1995            (422,220)      1,100,565       1,100,565

          General Partner:

                  1997          $     (490)    $     --         $     --
                  1996                (462)          2,251           2,251
                  1995              (4,265)         11,117          11,117

Philip Crosby Associates,  Inc. ("Crosby")  previously leased 100% of University
Business Center Phase II, which is owned by the Lakeshore/University II (L/U II)
Joint Venture.  The original lease term was for seven years, and the tenant took
occupancy in April 1991. During 1994, 1995 and 1996, Crosby sub-leased,  through
the end of  their  lease  term,  approximately  85,000  square  feet  (including
approximately  10,000  square feet of mezzanine  space) of  University  Business
Center Phase II's  approximately  88,000  square feet of net  rentable  area (or
96%). Of the total being sub-leased,  approximately  73,000 square feet (or 86%)
was  leased  by Full Sail  Recorders,  Inc.  ("Full  Sail"),  a major  tenant at
University Business Center Phase I, a neighboring property owned by an affiliate
of the  General  Partner of the  Partnership.  During  this  period and  through
December 1996,  Crosby continued to make rent payments  pursuant to the original
lease terms.  During 1996, the Joint Venture received notice that Crosby did not
intend to pay full rental due under the original lease agreement,  including and
subsequent to January 1997. The Partnership's  proportionate share of the rental
income from this property  accounted for  approximately 6% of the  partnership's
total revenues during 1996. Although the Joint Venture did not have formal lease
agreements  with the  sub-lessees  noted  above  during this  period,  beginning
February 1997 rent payments  from these  sub-lessees  have been made directly to
the Joint Venture.

During 1997,  Crosby  abandoned its business,  sold all or most of its operating
assets and informed the Joint Venture that Crosby may be  insolvent.  During the
third  quarter of 1997,  a  conditional  settlement  was  reached at a mediation
conference with Crosby and its corporate parent,  whereby,  subject to the Joint
Venture's acceptance of the settlement terms, the corporate parent agreed to pay
a portion of Crosby's liability to the Joint Venture in full satisfaction of all
claims  against Crosby and any of its  affiliates.  During the fourth quarter of
1997, the L/U II Joint Venture  informed Crosby and its corporate parent that it
accepted the terms of the conditional  settlement,  whereby Crosby's parent paid
to the L/U II Joint  Venture  the sum of $300,000  in full  satisfaction  of all
claims.  These funds were  received  by the L/U II Joint  Venture on October 23,
1997.  The  Partnership's  proportionate  share of the settlement was $54,000 or
18%. The amount of the  settlement  was  substantially  less than the  aggregate
liability of Crosby to the Joint Venture  resulting from Crosby's  default under
its lease.  This deficit is partially offset by the rent payments  received from
the sub-lessees, as discussed above.

                                     - 38 -

<PAGE>



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

In  December  1995,  Full  Sail  signed a 33 month  lease  with the L/U II Joint
Venture for  approximately  41,000  square feet it  sub-leased  from Crosby.  In
November 1996,  Full Sail signed a lease  amendment  which  increased the square
footage  from 41,000  square feet to 48,000  square feet and  extended the lease
term from 33 months to 76 months. In addition,  in November 1996, Full Sail also
signed a 52 month lease for an  additional  approximately  21,000 square feet of
space it sub-leased from Crosby. Both leases aggregate 69,000 square feet or 78%
of the  business  center's net  rentable  area and commence  April 1998 when the
Crosby  original lease term ends. As part of the lease  negotiations,  Full Sail
will  receive  a total  of  $450,000  in  special  tenant  allowances  ($200,000
resulting  from the original lease signed  December 1995 and $250,000  resulting
from the lease amendment  signed November  1996).  Approximately  $92,000 of the
total  allowance is to be  reimbursed  by Full Sail to the L/U II Joint  Venture
pursuant to the lease terms. The  Partnership's  proportionate  share of the net
commitment  ($450,000 less $92,000) is approximately  $64,000 or 18%. The tenant
allowance  will be due and  payable  to Full  Sail  pursuant  to the  previously
mentioned  lease  agreements,  as  appropriate  invoices for tenant finish costs
incurred by Full Sail are submitted to the L/U II Joint  Venture.  The source of
funds for this  commitment  is expected to be cash flow from  operations  and/or
cash reserves .

The Joint Venture is currently  negotiating  directly with the other  sublessees
discussed  above to enter into leases for the  remaining  space  available.  The
future  leasing and tenant  finish  costs which will be required to release this
space is unknown at this time but is not expected to be substantial.

As of December 31, 1997,  the  Partnership  had a commitment  for  approximately
$42,500 of tenant finish  improvements at Plainview Point Office Center Phases I
and II. The  commitment  is the  result of a  two-phase  expansion  by a current
tenant which increases the tenant's current leased space by approximately  2,000
square feet in the first  phase and by  approximately  6,400  square feet in the
second phase.  The portion of the commitment  relating to the first phase of the
expansion is approximately $13,000 and was completed during the first quarter of
1998.  The  commitment  for the second phase of the  expansion is  approximately
$30,000 and is expected to occur during the fourth  quarter of 1999.  The source
of funds for this  project is  expected to be cash flow from  operations  and/or
cash reserves.

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

In the next 12 months, the demand on future liquidity is anticipated to increase
as the  Partnership  continues  its efforts in the leasing of the  Partnership's
commercial properties.  At this time, the future leasing and tenant finish costs
which will be required to renew current leases that expire during 1998 or obtain
new tenants are unknown.

The Partnership has conducted a comprehensive  review of its computer systems to
identify  the  systems  that  could be  affected  by the Year 2000  Issue and is
developing an  implementation  plan to resolve the issue. The Year 2000 Issue, a
world wide problem,  is the result of computer  programs being written using two
digits rather than four to define the applicable year. Any of the  Partnership's
programs  that have  time-sensitive  software may recognize a date using "00" as
the year 1900  rather  than the year 2000.  This could  result in major  systems
failures or  miscalculations.  The  Partnership  presently  believes that,  with
modifications  to existing  software and  conversions to new software,  the Year
2000  problem   will  not  pose   significant   operational   problems  for  the
Partnership's   computer   systems.   The  Partnership   continues  to  evaluate
appropriate  courses of  corrective  action,  including  replacement  of certain
systems whose  associated  costs would be recorded as assets and amortized.  The
Partnership does not expect the costs associated with the resolution of the Year
2000 Issue to have a material  effect on its  financial  position  or results of
operations.  The associated costs will be funded by cash flow from operations or
cash reserves. The amount expensed in 1997 was immaterial.

                                     - 39 -

<PAGE>



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

The  primary  source of future  liquidity  and  distributions  is expected to be
derived from cash  generated by the  Partnership's  operating  properties  after
adequate  cash  reserves are  established  for future  leasing and tenant finish
costs.  It is anticipated  that the cash flow from  operations and cash reserves
will be sufficient to meet the needs of the Partnership.

On February 1, 1996, the Partnership  established an Interest Repurchase Reserve
in the amount of $297,450 pursuant to Section 16.4 of the Partnership's  Amended
and Restated  Agreement of Limited  Partnership.  Under  Section  16.4,  limited
partners may request the Partnership to repurchase  their  respective  interests
(Units)  in  the  Partnership.   With  this  Interest  Repurchase  Reserve,  the
Partnership was able to repurchase  1,983 Units at a price of $150 per Unit. The
Partnership  notified the limited  partners by letter dated  February 1, 1996 of
the  establishment  of the Interest  Repurchase  Reserve and the  opportunity to
request that the Partnership repurchase Units at the established price.

On May 24,  1996,  the  Partnership  elected  to fund an  additional  amount  of
$277,620 to its Interest Repurchase  Reserve.  With these funds, the Partnership
will be able to  repurchase  an  additional  1,850  Units at a price of $150 per
Unit. Through December 31, 1997, 3,056 Units have been repurchased for $458,400.
Repurchased  Units are being retired by the  Partnership,  thus  increasing  the
share of ownership of each remaining  investor.  The Interest Repurchase Reserve
was funded from cash reserves.

Due to  uncertainties  involving  the  Crosby  lease  as  discussed  above,  the
Partnership has taken the following actions. On January 10, 1997, the repurchase
of limited  partnership Units was interrupted.  Second,  effective  December 30,
1996, distributions were indefinitely suspended.

A conditional  settlement  was reached at a court ordered  mediation  conference
with  Crosby,  its parent  company,  and the Joint  Venture.  The Joint  Venture
accepted the  settlement  terms and their  parent  company has paid a portion of
Crosby's  liability  to the Joint  Venture  in full  satisfaction  of all claims
against Crosby and any of its affiliates (see above for a further  discussion of
the Crosby settlement).

On November 7, 1997,  the  Partnership  elected to fund an additional  amount of
$45,000 to its Interest Repurchase Reserve.  With this funding,  the Partnership
will be able to repurchase up to 300 Units at a currently  contemplated price of
$150 per  Unit.  The  Partnership  has  notified  the  Limited  Partners  of the
additional  funding to the  Repurchase  Reserve and this  opportunity to request
that the Partnership  repurchase Units at the established  price by letter dated
November 7, 1997.

Subsequent to December 31, 1997, the  Partnership  elected to fund an additional
amount of $60,000 to its Interest  Repurchase  Reserve.  With this funding,  the
partnership  will be able to repurchase up to 400 additional Units at a price of
$150 per  Unit.  The  first  units to be  repurchased  will be those  previously
submitted  and not  repurchased  with the earlier  Interest  Repurchase  Reserve
fundings to the extent that those unit  holders  reconfirm  their desire to sell
their Units. If the number of Units submitted for repurchase  exceeds that which
can be repurchased by the Partnership with the remaining  balance of the current
fundings,  those additional Units may be repurchased in subsequent quarters. The
above offering price per Unit was established by the General Partner in its sole
discretion  and  does  not  purport  to  represent  the  fair  market  value  or
liquidation value of the Unit.

The following  describes the efforts being taken by the  Partnership to increase
the occupancy levels at the Partnership's commercial properties. The leasing and
renewal negotiations at the Lakeshore Business Center development are handled by
an on-site leasing agent, an employee of NTS



                                     - 40 -

<PAGE>



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

Development  Company (an affiliate of the General  Partner of the  Partnership),
who makes calls to potential  tenants,  negotiates  lease  renewals with current
tenants and manages local  advertising  with the  assistance of NTS  Development
Company's  marketing staff.  The leasing and renewal  negotiations at University
Business  Center  Phase II are  handled by a leasing  agent,  an employee of NTS
Development Company, located at the University Business Center development.  The
leasing and renewal  negotiations  for the  Partnership's  remaining  commercial
properties are handled by leasing agents,  employees of NTS Development Company,
located in Louisville, Kentucky. The leasing agents are located in the same city
as commercial properties. All advertising for these properties is coordinated by
NTS Development Company's marketing staff located in Louisville, Kentucky.

In an effort to continue to improve occupancy at the  Partnership's  residential
properties,  the  Partnership  has an on-site  leasing  staff,  employees of NTS
Development Company, at each of the apartment communities. The staff handles all
on-site visits from potential  tenants,  coordinates  local advertising with NTS
Development  Company's  marketing  staff,  makes  visits to local  companies  to
promote  fully  furnished  units and  negotiates  lease  renewals  with  current
residents.

Leases at Commonwealth Business Center Phase I, Blankenbaker Business Center 1A,
University  Business Center Phase II and Lakeshore  Business Center Phases I and
II provide for tenants to contribute toward the payment of common area expenses,
insurance and real estate taxes.  Leases at Lakeshore  Business  Center Phases I
and II and University  Business  Center Phase II also provide for rent increases
which are based upon increases in the consumer price index.  Leases at Plainview
Point  Office  Center  Phases I and II and  Plainview  Point III  Office  Center
provide for tenants to contribute toward the payment of increases in common area
maintenance  expenses,  insurance,  utilities and real estate taxes. These lease
provisions,  along with the fact that  residential  leases are  generally  for a
period of one year, should protect the Partnership's  operations from the impact
of inflation and changing prices.

The L/U II Joint  Venture  owns  approximately  6 acres of land  adjacent to the
Lakeshore  Business  Center  development  in  Ft.   Lauderdale,   Florida.   The
Partnership's  proportionate interest at December 31, 1997 in the asset held for
sale is $297,251.  The Joint Venture  continues to actively  market the land for
sale. In management's  opinion,  the net book value approximates the fair market
value less cost to sell.

On December 30, 1997, Full Sail delivered written notice to the Partnership that
Full Sail had (i)  exercised  its right of first  refusal  under its lease  with
NTS-Properties V to purchase  University Business Center Phase I office building
and the Phase  III  vacant  land  adjacent  to the  University  Business  Center
development,  and (ii) exercised its right of first refusal under its lease with
NTS University  Boulevard Joint Venture to purchase  University  Business Center
Phase II  office  building,  for an  aggregate  purchase  price for all three of
$18,700,000.  Full Sail exercised its right of first refusal under the leases in
response to a letter of intent to purchase  University I,  University II and the
Phase  III  land  which  was  previously  received  by the  Partnership  from an
unaffiliated  buyer.  Under its right of first refusal,  Full Sail must purchase
the properties on the same terms and conditions as contemplated by the letter of
intent.  Full  Sail  agreed in its  notice  to the  Partnership  to  proceed  to
negotiate in good faith a definitive  purchase  agreement for these  properties.
Because no binding  agreement  exists for the purchase of the properties at this
time,  there can be no  assurance  that a mutual  agreement of purchase and sale
will be reached among the parties,  nor that the sale of the properties  will be
consummated. As such, the Partnership has not determined the use of net proceeds
after repayment of outstanding debt from any such sale nor has it determined the
impact  on  the  future  results  of  operations  or  financial  positions.  The
University  II  office  building  is  owned  by the L/U II  Joint  Venture,  the
successor to the NTS University Boulevard Joint Venture, in which

                                     - 41 -

<PAGE>



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

the Partnership owns an 18% joint venture interest. Under the terms of the right
of first  refusal,  the closings of the sale of University I,  University II and
the Phase III vacant land are to occur simultaneously.

Some of the statements included in Item 7, Management's  Discussion and Analysis
of  Financial  Condition  and Results of  Operations,  may be  considered  to be
"forward-looking  statements" since such statements relate to matters which have
not yet occurred.  For example,  phrases such as "the Partnership  anticipates",
"believes"  or  "  expects"   indicate  that  it  is  possible  that  the  event
anticipated,  believed or expected may not occur.  Should such events not occur,
then the result which the Partnership  expected also may not occur or occur in a
different  manner,  which may be more or less favorable to the Partnership.  The
Partnership does not undertake any obligations to publicly release the result of
any revisions to these  forward-looking  statements  that may be made to reflect
any future events or circumstances.

Any forward-looking  statements included in Management's Discussion and Analysis
of Financial  Condition and Results of Operations,  or elsewhere in this report,
which reflect  management's best judgement based on factors known, involve risks
and uncertainties. Actual results could differ materially from those anticipated
in any forward-looking  statements as a result of a number of factors, including
but not  limited  to those  discussed  below.  Any  forward-looking  information
provided by the  Partnership  pursuant to the safe harbor  established by recent
securities legislation should be evaluated in the context of these factors.

The Partnership's principal activity is the leasing and management of commercial
office  buildings,   business  centers  and  apartment  complexes.  If  a  major
commercial  tenant  or a large  number of  apartment  lessees  default  on their
leases,  the  Partnership's   ability  to  make  payments  due  under  its  debt
agreements,  payment of operating costs and other partnership  expenses would be
directly  impacted.  A lessees  ability to make  payments  are  subject to risks
generally  associated with real estate,  many of which are beyond the control of
the Partnership,  including general or local economic  conditions,  competition,
interest rates, real estate tax rates, other operating expenses and acts of God.































                                     - 42 -

<PAGE>



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


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

To NTS-Properties IV,

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

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

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

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial  statements  taken  as a whole.  The  schedules  included  on pages 66
through 69 are  presented  for purposes of  complying  with the  Securities  and
Exchange  Commission's  rules and are not a required part of the basic financial
statements.  These  schedules  have been  subjected to the  auditing  procedures
applied in the audits of the basic  financial  statements  and, in our  opinion,
fairly state in all  material  respects the  financial  data  required to be set
forth therein in relation to the basic financial statements taken as a whole.




                                          ARTHUR ANDERSEN LLP


Louisville, Kentucky
March 6, 1998


                                     - 43 -

<PAGE>
<TABLE>


                                NTS-PROPERTIES IV

                                 BALANCE SHEETS

                        AS OF DECEMBER 31, 1997 AND 1996

<CAPTION>

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

<S>                                                  <C>             <C>
Cash and equivalents                                 $   276,145     $   346,479
Cash and equivalents - restricted                        108,724          68,193
Investment securities                                    422,336           --
Accounts receivable, net of allowance
 for doubtful accounts of $0 (1997)and
 $7,551 (1996)                                           243,134         347,133
Land, buildings and amenities, net                    13,023,781      13,801,251
Asset held for sale                                      297,251         297,251
Other assets                                             440,937         545,979
                                                     -----------     -----------

                                                     $14,812,308     $15,406,286
                                                     ===========     ===========

LIABILITIES AND PARTNERS' EQUITY

Mortgages payable                                    $10,706,802     $11,236,625
Accounts payable - operations                            113,724         136,332
Accounts payable - construction                            8,694           5,831
Security deposits                                         83,390          83,911
Other Liabilities                                         65,473          26,412
                                                     -----------     -----------

                                                      10,978,083      11,489,111

Commitments and Contingencies

Partners' equity                                       3,834,225       3,917,175
                                                     -----------     -----------

                                                     $14,812,308     $15,406,286
                                                     ===========     ===========

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


                                     - 44 -

<PAGE>
<TABLE>
                                NTS-PROPERTIES IV

                            STATEMENTS OF OPERATIONS

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

<CAPTION>
                                                          1997           1996            1995
                                                      ------------   -----------     -----------
Revenues:
<S>                                                   <C>            <C>             <C>
 Rental income, net of provision for
  doubtful accounts of $0(1997 and 1996)
  and $12,018 (1995)                                   $ 3,616,883   $ 3,544,153     $ 3,231,420
 Interest and other income                                  91,714        33,401          54,010
                                                       -----------   -----------     -----------

                                                         3,708,597     3,577,554       3,285,430
Expenses:
 Operating expenses                                        813,091       662,463         604,846
 Operating expenses - affiliated                           398,950       371,856         395,570
 Write-off of unamortized tenant
  and building improvements                                   --           6,871          31,636
 Write-off of unamortized loan costs                          --            --              --
 Amortization of capitalized leasing
  costs                                                     20,951        20,908          26,645
 Interest expense                                          855,488       940,941         979,241
 Management fees                                           208,837       204,165         186,176
 Real estate taxes                                         224,345       220,956         215,165
 Professional and administrative
  expenses                                                 102,345        94,799         203,990
 Professional and administrative
  expenses - affiliated                                    150,715       171,778         138,737
 Depreciation and amortization                             905,921       916,102         929,909
                                                       -----------   -----------     -----------

                                                         3,680,643     3,610,839       3,711,915
                                                       -----------   -----------     -----------

Income (loss) before extraordinary item                     27,954       (33,285)       (426,485)
Extraordinary item - write-off of
  unamortized loan costs                                   (77,004)      (12,896)           --
                                                       -----------   -----------     -----------

Net loss                                               $   (49,050)  $   (46,181)    $  (426,485)
                                                       ===========   ===========     ===========

Net income (loss) allocated to the limited partners:
  Income (loss) before extraordinary item              $    27,674   $   (32,952)    $  (422,220)

  Extraordinary item                                       (76,234)      (12,767)           --
                                                       -----------   -----------     -----------

  Net income (loss)                                    $   (48,560)  $   (45,719)    $  (422,220)
                                                       ===========   ===========     ===========

Net income (loss) per limited partnership Unit:
  Income (loss) before extraordinary item              $      1.03   $     (1.18)    $    (14.19)

  Extraordinary item                                         (2.85)         (.45)           --
                                                       -----------   -----------     -----------

Net loss per limited partnership Unit                  $     (1.82)  $     (1.63)    $    (14.19)
                                                       ===========   ===========     ===========

Weighted average number of limited
 partnership units                                          26,708        28,012          29,745
                                                       ===========   ===========     ===========

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


                                     - 45 -

<PAGE>
<TABLE>


                                NTS-PROPERTIES IV

                         STATEMENTS OF PARTNERS' EQUITY

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


                                       Limite         General
                                      Partners       Partners         Total
                                     -----------    -----------    -----------

<S>                                  <C>            <C>            <C>
Balances at December 31, 1994        $ 6,347,869    $  (196,753)   $ 6,151,116

 Net loss                               (422,220)        (4,265)      (426,485)

 Distributions declared               (1,100,565)       (11,117)    (1,111,682)
                                     -----------    -----------    -----------

Balances at December 31, 1995          4,825,084       (212,135)     4,612,949

 Net loss                                (45,719)          (462)       (46,181)

 Distributions declared                 (222,842)        (2,251)      (225,093)

 Repurchase of limited partnership
  Units                                 (424,500)            --       (424,500)
                                     -----------    -----------    -----------

Balances at December 31, 1996          4,132,023       (214,848)     3,917,175

 Net loss                                (48,560)          (490)       (49,050)

 Repurchase of limited partnership
  Units                                  (33,900)            --        (33,900)
                                     -----------    -----------    -----------

Balances at December 31, 1997        $ 4,049,563    $  (215,338)   $ 3,834,225
                                     ===========    ===========    ===========

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


                                     - 46 -

<PAGE>

<TABLE>

                                NTS-PROPERTIES IV

                            STATEMENTS OF CASH FLOWS

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

                                                    1997           1996            1995
                                                ------------   ------------     ----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                              <C>            <C>            <C>
Net loss                                         $   (49,050)   $   (46,181)   $  (426,485)
Adjustments to reconcile net loss to net
 cash provided by operating activities:
  Accrued interest on investment securities           (3,877)         3,642         (3,642)
  Provision for doubtful accounts                       --             --           12,018
  Write-off of unamortized tenant and building
   improvements                                         --            6,871         31,636
  Write-off of unamortized loan costs                 77,004         12,896           --
  Amortization of capitalized leasing costs           20,951         20,908         26,645
  Depreciation and amortization                      905,921        916,102        929,909
  Changes in assets and liabilities:
   Cash and equivalents - restricted                   4,719         (8,834)       (22,993)
   Accounts receivable                               103,999         84,639        260,173
   Other assets                                      100,947         13,366          5,821
   Accounts payable - operations                     (22,608)       (76,265)        80,942
   Security deposits                                    (521)           (84)         2,644
   Other liabilities                                  39,060          9,109        (81,341)
                                                 -----------    -----------    -----------

  Net cash provided by operating activities        1,176,545        936,169        815,327
                                                 -----------    -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and amenities           (99,261)      (108,563)      (433,655)
Decrease (increase) in cash and equivalents -
 restricted                                             --            2,450         (2,450)
Purchase of investment securities                   (799,777)          --         (698,227)
Maturity of investment securities                    381,318        400,945        297,282
                                                 -----------    -----------    -----------

  Net cash provided by (used in) investing
   activities                                       (517,720)       294,832       (837,050)
                                                 -----------    -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Increase in mortgages payable                      4,414,080      3,105,900           --
Principal payments on mortgages and notes
 payable                                          (4,943,902)    (3,461,916)      (354,010)
Capital contribution to a joint venture                 --             --         (616,125)
Cash distributions                                      --         (315,228)    (1,111,683)
Additions to loan costs                             (120,187)       (64,888)       (25,823)
Repurchase of limited partnership Units              (33,900)      (424,500)          --
Increase in cash and equivalents - restricted        (45,250)          (500)          --
                                                 -----------    -----------    -----------

  Net cash used in financing activities             (729,159)    (1,161,132)    (2,107,641)
                                                 -----------    -----------    -----------

  Net increase (decrease) in cash and
   equivalents                                       (70,334)        69,869     (2,129,364)

CASH AND EQUIVALENTS, beginning of year              346,479        276,610      2,405,974
                                                 -----------    -----------    -----------

CASH AND EQUIVALENTS, end of year                $   276,145    $   346,479    $   276,610
                                                 ===========    ===========    ===========

Interest paid on a cash basis                    $   876,871    $   950,760    $   978,622
                                                 ===========    ===========    ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.


                                     - 47 -

<PAGE>



                                NTS-PROPERTIES IV

                          NOTES TO FINANCIAL STATEMENTS

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

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

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

             NTS-Properties  IV (the  "Partnership")  is a  limited  partnership
             organized under the laws of the Commonwealth of Kentucky on May 13,
             1983.  The  General  Partner  is  NTS-Properties  Associates  IV, a
             Kentucky limited partnership. The Partnership is in the business of
             developing,   constructing,   owning  and   operating   residential
             apartments and commercial real estate.

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

             The Partnership owns and operates the following properties:

             -  Commonwealth  Business  Center  Phase I, a business  center with
                approximately  57,000 net rentable  ground floor square feet and
                approximately  24,000  net  rentable  mezzanine  square  feet in
                Louisville, Kentucky.

             -  Plainview  Point Office Center Phases I and II, an office center
                with   approximately   56,000  net   rentable   square  feet  in
                Louisville, Kentucky.

             -  The Willows of Plainview  Phase I, a 118-unit  luxury  apartment
                complex in Louisville, Kentucky.

             -  A 10% joint venture  interest in The Willows of Plainview  Phase
                II, a 144-unit luxury apartment complex in Louisville, Kentucky.

             -  A 4% joint venture interest in Golf Brook Apartments, a 195-unit
                luxury apartment complex in Orlando, Florida.

             -  A 5% joint  venture  interest  in  Plainview  Point  III  Office
                Center, an office center with approximately  62,000 net rentable
                square feet in Louisville, Kentucky.

             -  A 30% joint venture interest in Blankenbaker Business Center 1A,
                a business center with approximately  50,000 net rentable ground
                floor  square  feet  and   approximately   50,000  net  rentable
                mezzanine square feet in Louisville, Kentucky.

             -  An 18% joint  venture  interest in the  Lakeshore/University  II
                Joint  Venture.  A description  of the  properties  owned by the
                Joint Venture appears below:

                -   Lakeshore  Business  Center Phase I - a business center with
                    approximately  103,000  rentable square feet located in Fort
                    Lauderdale, Florida.

                -   Lakeshore  Business Center Phase II - a business center with
                    approximately  97,000 net  rentable  square feet  located in
                    Fort Lauderdale, Florida.






                                     - 48 -

<PAGE>



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

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

               -    University   Business   Center  Phase II - a business center
                    with  approximately  78,000 net rentable first floor (office
                    and  service)  and  second  floor  office  square  feet  and
                    approximately  10,000 net  rentable  mezzanine  square  feet
                    located in Orlando, Florida.

                -   Outparcel  Building  Sites  -  approximately  6.2  acres  of
                    undeveloped  land adjacent to the Lakeshore  Business Center
                    development which is zoned for commercial development.


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

             Net Cash Receipts made  available for  distribution,  as defined in
             the  partnership  agreement,  will  be  distributed  1)  99% to the
             limited  partners and 1% to the General  Partner  until the limited
             partners have received their 8% Preference  Distribution as defined
             in the  partnership  agreement;  2) to the  General  Partner  in an
             amount  equal to  approximately  10% of the  limited  partners'  8%
             Preference  Distribution;  and 3) the remainder, 90% to the limited
             partners  and 10% to the General  Partner.  Starting  December  31,
             1996, the Partnership has indefinitely interrupted distributions.

             Net Cash Proceeds, as defined in the partnership  agreement,  which
             are available for  distribution  will be  distributed 1) 99% to the
             limited  partners and 1% to the General  Partner  until the limited
             partners  have  received  distributions  from all sources  equal to
             their  Original  Capital plus the amount of any deficiency in their
             8% Cumulative Distribution as defined in the partnership agreement;
             and 2) the  remainder,  75% to the limited  partners and 25% to the
             General  Partner.  Net income  (loss) is to be allocated 99% to the
             limited partners and 1% to the General Partner.

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

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





                           (Notes continued next page)














                                     - 49 -

<PAGE>



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

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

             A reconciliation  of net loss for financial  statement  purposes
             versus that for income tax reporting is as follows:


                                              1997          1996         1995
                                           ----------    ----------   ----------
             Net loss                      $ (49,050)    $ (46,181)   $(426,485)
             Items handled differently
              for tax purposes:
                Depreciation and
                 amortization                 (1,014)      (18,531)     (18,448)
                Capitalized leasing
                 costs                           237           111        6,635
                Rental income                138,433        75,494       73,129
                Write-off of unamortized
                 tenant improvements         (28,620)      (15,890)     (12,556)
                Allowance for doubtful
                 accounts                     (7,372)       (8,303)      12,104
                                           ---------     ---------     --------

             Taxable income (loss)         $  52,614     $ (13,300)   $(365,621)
                                           =========     =========    =========



       E)    Use of Estimates in the Preparation of Financial Statements
             -----------------------------------------------------------

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

       F)    Joint Venture Accounting
             ------------------------

             The Partnership has adopted the proportionate  consolidation method
             of  accounting  for joint  venture  properties.  The  Partnership's
             proportionate interest in the joint venture's assets,  liabilities,
             revenues,  expenses and cash flows are  combined on a  line-by-line
             basis with the Partnership's own assets, liabilities,  revenues and
             expenses and cash flows. All intercompany accounts and transactions
             have been eliminated in consolidation.

             Proportionate  consolidation  is utilized by the Partnership due to
             the  fact  that  the  ownership  of joint  venture  properties,  in
             substance,  is not subject to joint control.  The managing  General
             Partners  of the sole  partner  of the NTS  sponsored  partnerships
             which have formed joint  ventures are  substantially  the same.  As
             such,   decisions  regarding   financing,   development,   sale  or
             operations  do not require  the  approval  of  different  partners.
             Additionally,   the  joint  venture  properties  are  in  the  same
             business/industry  as their  respective  joint venture partners and
             their asset,  liability,  revenue and expense  accounts  correspond
             with the accounts of such partners. It is the belief of the General
             Partner of the Partnership that the financial statement disclosures
             resulting  from  proportionate   consolidation  provides  the  most
             meaningful presentation of assets, liabilities,  revenues, expenses
             and cash flows for the years presented given the commonality of the
             Partnership's operations.

                                     - 50 -

<PAGE>



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

       G)    Cash and Equivalents - Restricted
             ---------------------------------

             Cash and  equivalents - restricted  represent 1) funds received for
             residential  security  deposits,  2) funds which have been escrowed
             with  mortgage  companies  for  property  taxes  and  insurance  in
             accordance  with  the  loan  agreements  and  3)  funds  which  the
             Partnership has reserved for the repurchase of limited  partnership
             Units.

       H)    Investment Securities
             ---------------------

             Investment  securities  represent  investments in  Certificates  of
             Deposit or securities  issued by the U.S.  Government  with initial
             maturities  of  greater  than three  months.  The  investments  are
             carried at cost which  approximates  market value.  The Partnership
             intends to hold the securities  until  maturity.  During 1997, 1996
             and 1995 the Partnership sold no investment securities.

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


                                            Amortized   Maturity     Value at
                   Type                        Cost       Date       Maturity
                   ----                       ------     ------      --------
               Certificate of deposit        $101,627   01/30/98     $102,052
               Certificate of deposit         120,091   02/27/98      121,081
               Certificate of deposit         100,467   03/31/98      101,808
               Certificate of deposit         100,151   04/03/98      101,537
                                              -------                 -------
                                             $422,336                $426,478
                                              =======                 =======

             The  Partnership   held  no  investment   securities  with  initial
             maturities greater than three months during 1996.

     I)      Basis of Property and Depreciation
             ----------------------------------

             Land,   buildings   and   amenities  are  stated  at  cost  to  the
             Partnership.   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,  5-30 years for  building and  improvements  and 5-30
             years for amenities.

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

     J)      Rental Income and Capitalized Leasing Costs

             Certain of the  Partnership's  lease  agreements for the commercial
             properties are  structured to include  scheduled and specified rent
             increases  over the lease term. For financial  reporting  purposes,
             the income from these leases is being recognized on a straight-line
             basis over the lease  term.  Accrued  income  connected  with these
             leases is included in accounts  receivable and totaled $164,608 and
             $264,019 at December 31, 1997 and 1996, respectively.

                                     - 51 -

<PAGE>



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

       J)    Rental Income and Capitalized Leasing Costs - Continued
             -------------------------------------------------------

             All  commissions  paid to commercial  leasing agents and incentives
             paid to tenants are deferred and amortized on a straight-line basis
             over the  applicable  lease term. In addition,  certain other costs
             associated   with  the  initial   leasing  of  the  properties  are
             capitalized and amortized over a five year period.

       K)    Advertising
             -----------

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

       L)    Statements of Cash Flows
             ------------------------

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

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

       NTS-Properties IV owns and operates commercial  properties in Louisville,
       Kentucky, Orlando, Florida and Ft. Lauderdale, Florida. Substantially all
       of the Partnership's tenants are local businesses or are businesses which
       have operations in the location in which they lease space. In Louisville,
       Kentucky, one tenant occupies 100% of the Blankenbaker Business Center 1A
       property.  The  Partnership  also  owns and  operates,  either  wholly or
       through a joint venture,  residential properties in Louisville,  Kentucky
       and Orlando,  Florida.  The  apartment  unit is generally  the  principal
       residence of the tenant.

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

       On February 1, 1996, the Partnership  established an Interest  Repurchase
       Reserve  in the  amount  of  $297,450  pursuant  to  Section  16.4 of the
       Partnership's  Amended and  Restated  Agreement  of Limited  Partnership.
       Under  Section  16.4,  limited  partners may request the  Partnership  to
       repurchase their respective  interests  (Units) in the Partnership.  With
       these funds,  the  Partnership  was able to  repurchase  1,983 Units at a
       price of $150 per Unit. The Partnership  notified the limited partners by
       letter  dated  February  1,  1996 of the  establishment  of the  Interest
       Repurchase  Reserve and the  opportunity to request that the  Partnership
       repurchase Units at the established price.

       On May 24, 1996, the Partnership  elected to fund an additional amount of
       $277,620 to its  Interest  Repurchase  Reserve.  With this  funding,  the
       Partnership  will be able to repurchase  an  additional  1,850 Units at a
       price of $150 per Unit.  Through December 31, 1997, 3,056 Units have been
       repurchased  for  $458,400.  Repurchased  Units are being  retired by the
       Partnership,  thus  increasing  the share of ownership of each  remaining
       investor. The Interest Repurchase Reserve was funded from cash reserves.

       Due to uncertainties  involving the Crosby lease as discussed in Note 10,
       Commitments and Contingencies, the Partnership interrupted the repurchase
       of limited partnership Units, effective January 10, 1997.

       On November 7, 1997, the Partnership elected to fund an additional amount
       of $45,000 to its Interest  Repurchase  Reserve.  With this funding,  the
       Partnership will be able to repurchase up to 300 Units at


                                     - 52 -

<PAGE>



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

       a currently contemplated price of $150 per Unit. The Partnership notified
       the Limited Partners of the additional  funding to the Repurchase Reserve
       and this opportunity to request that the Partnership  repurchase Units at
       the established price by letter dated November 7, 1997.

       For additional information regarding the Interest Repurchase Reserve, see
       Note 11, Subsequent Events.

4.     Investment in Joint Ventures
       ----------------------------

       A)    NTS/Willows Phase II Joint Venture
             ----------------------------------

             In 1984,  the  Partnership  entered into a joint venture  agreement
             with  NTS-Properties  V, an affiliate of the General Partner of the
             Partnership,  to develop and construct a 144-unit luxury  apartment
             complex on an 8.29-acre site in  Louisville,  Kentucky known as The
             Willows of Plainview  Phase II. The  Partnership  contributed  land
             valued at $800,000 and  NTS-Properties V contributed  approximately
             $7,455,000,  the  construction  and carrying costs of the apartment
             complex.  The project was  completed in August 1985.  Net income or
             net loss is allocated each calendar quarter based on the respective
             partnership's  contribution.  The Partnership's ownership share was
             10% at December  31,  1997.  The  Partnership's  share of the joint
             venture's net operating income was $2,450 (1997), $6,623 (1996) and
             $4,233 (1995).

       B)    NTS Ft. Lauderdale Office Joint Venture
             ---------------------------------------

             In 1985,  the  Partnership  entered into a joint venture  agreement
             with   NTS-Properties  V  to  develop  an   approximately   103,000
             square-foot  commercial business center known as Lakeshore Business
             Center  Phase  I,  located  in  Fort   Lauderdale,   Florida.   The
             Partnership   contributed   land  valued  at  $1,752,982  and  NTS-
             Properties  V  contributed  approximately  $9,170,000,  the cost of
             constructing  and leasing the building.  The net income or net loss
             was  allocated  each  calendar  quarter  based  on  the  respective
             partnership's  contribution.  The Partnership's  share of the joint
             venture's net operating income was $2,085 (1995).

             On January 23, 1995, the partners of the NTS Ft.  Lauderdale Office
             Joint Venture contributed  Lakeshore Business Center Phase I to the
             newly formed  Lakeshore/University II (L/U II) Joint Venture. Refer
             to Note 4F for a further discussion of the new joint venture.

       C)    NTS Sabal Golf Villas Joint Venture
             -----------------------------------

             In 1985,  the  Partnership  entered into a joint venture  agreement
             with  NTS-Properties VI, an affiliate of the General Partner of the
             Partnership,  to develop and construct a 158-unit luxury  apartment
             complex on a 13.15-acre site in Orlando, Florida to be known as the
             Golf Brook  Apartments  Phase I. The Partnership  contributed  land
             valued at $1,900,000 with an outstanding  note payable to a bank of
             $1,200,000  which was secured by the land. On January 1, 1987,  the
             joint   venture   agreement  was  amended  to  include  Golf  Brook
             Apartments Phase II, a 37-unit luxury apartment  complex located on
             a 3.069-acre site adjacent to Golf Brook  Apartments  Phase I. NTS-
             Properties VI contributed  approximately  $15,800,000,  the cost of
             constructing  and leasing  the  complexes.  NTS-Properties  VI also
             contributed  funds to retire  the  $1,200,000  note  payable to the
             bank.


                                     - 53 -

<PAGE>



4.     Investment in Joint Ventures - Continued
       ----------------------------------------

       C)    NTS Sabal Golf Villas Joint Venture - Continued
             -----------------------------------------------

             Net  income  or net  loss  is  allocated  based  on the  respective
             contribution  of each  partnership  as of the end of each  calendar
             quarter.  The Partnership's  ownership share was 4% at December 31,
             1997. The Partnership's  share of the joint venture's net operating
             income was $39,930 (1997), $42,329 (1996) and $43,768 (1995).

       D)    Plainview Point III Joint Venture
             ---------------------------------

             In 1987,  the  Partnership  entered into a joint venture  agreement
             with  NTS-Properties  VI to develop and construct an  approximately
             62,000 square foot office building located in Louisville,  Kentucky
             to be known  as  Plainview  Point  Phase  III  Office  Center.  The
             Partnership contributed land valued at $790,000 with an outstanding
             note  payable to a bank of $550,000  which was secured by the land.
             NTS-Properties VI contributed approximately $4,100,000, the cost to
             construct   and  lease  the   building.   NTS-Properties   VI  also
             contributed funds to retire the $550,000 note payable to the bank.

             Net  income  or net  loss  is  allocated  based  on the  respective
             partnership's  contribution as of the end of each calendar quarter.
             The Partnership's  ownership share was 5% at December 31, 1997. The
             Partnership's  share of the joint  venture's net  operating  income
             (loss) was ($3,511) (1997), $(1,668) (1996) and $648 (1995).

       E)    Blankenbaker Business Center Joint Venture
             ------------------------------------------

             On August 16, 1994, the Blankenbaker  Business Center Joint Venture
             agreement  was  amended  to  admit  the  Partnership  to the  Joint
             Venture.  The Joint Venture was  originally  formed on December 28,
             1990 between NTS-Properties Plus Ltd. and NTS-Properties VII, Ltd.,
             affiliates of the General  Partner of the  Partnership,  to own and
             operate   Blankenbaker   Business  Center  1A  and  to  acquire  an
             approximately  2.49 acre  parking lot that was being  leased by the
             business center from an affiliate of the General  Partner.  The use
             of the parking lot is a provision of the tenants's  lease agreement
             with the business center.

             In  accordance  with the Joint  Venture  Agreement  Amendment,  the
             Partnership  contributed  $1,100,000 and  NTS-Properties  VII, Ltd.
             contributed  $500,000.  The  General  Partner  of  the  Partnership
             determined the utilization of a portion of the  Partnership's  cash
             reserves to  participate  in the Joint  Venture would be consistent
             with the  investment  objectives  set  forth  in the  Partnership's
             partnership agreement, and should enhance the future returns of the
             Partnership.

             The need for  additional  capital by the Joint Venture was a result
             of the lease renewal and expansion  which was signed April 28, 1994
             between  the Joint  Venture and  Prudential  Service  Bureau,  Inc.
             ("Prudential").  The lease  expanded  Prudential's  leased space by
             approximately  15,000  square feet and extended  its current  lease
             term through  July 2005.  Approximately  12,000  square feet of the
             expansion  was into new space  which had to be  constructed  on the
             second level of the existing business center.  With this expansion,
             Prudential  occupied  100% of the  business  center  (approximately
             101,000 square feet). The tenant finish and leasing costs connected
             with the lease renewal and expansion were approximately $1,400,000.




                                     - 54 -

<PAGE>



4.     Investment in Joint Ventures - Continued
       ----------------------------------------

       E)    Blankenbaker Business Center Joint Venture - Continued
             ------------------------------------------------------

             In  order  to  calculate  the  revised  joint  venture   percentage
             interests,  the  assets  of the  Joint  Venture  were  revalued  in
             connection with the admission of the Partnership as a joint venture
             partner and the additional capital contributions.  The value of the
             Joint Venture's assets  immediately prior to the additional capital
             contributions   was  $6,764,322  and  its   outstanding   debt  was
             $4,650,042,  with  net  equity  being  $2,114,280.  The  difference
             between  the value of the Joint  Venture's  assets and the value at
             which they were carried on the books of the Joint  Venture has been
             allocated to NTS-Properties  VII, Ltd. and NTS-Properties Plus Ltd.
             in determining each Joint Venture partner's percentage interest.

             As a result of its capital contribution, the Partnership obtained a
             30%  interest  in the Joint  Venture.  NTS-Properties  Plus  Ltd.'s
             interest in the Joint Venture decreased from 69% to 39% as a result
             of the capital  contributions made by NTS-Properties  VII, Ltd. and
             the Partnership.  NTS-Properties  VII, Ltd.'s interest in the Joint
             Venture remained at 31%.

             Net  income  or net  loss  is  allocated  based  on the  respective
             contribution  of  each  partner  as of  the  end of  each  calendar
             quarter. The Partnership's  ownership share was 30% at December 31,
             1997. The Partnership's  share of the joint venture's net operating
             loss was $51,817 (1997), $46,438 (1996) and $60,080 (1995).

       F)    Lakeshore/University II Joint Venture
             -------------------------------------

             On  January  23,   1995,   a  new  joint   venture   known  as  the
             Lakeshore/University  II Joint  Venture (L/U II Joint  Venture) was
             formed among the Partnership and  NTS-Properties V,  NTS-Properties
             Plus Ltd. and NTS/Fort Lauderdale,  Ltd., affiliates of the General
             Partner  of the  Partnership,  for  purposes  of  owning  Lakeshore
             Business Center Phases I and II,  University  Business Center Phase
             II and certain undeveloped tracts of land adjacent to the Lakeshore
             Business  Center  development.  The table  below  identifies  which
             properties  were  contributed  to the L/U II Joint  Venture and the
             respective  owners of such properties prior to the formation of the
             joint venture.

             Property (Net Asset Contributed)     Contributing Owner
             --------------------------------     ------------------

             Lakeshore Business Center            NTS-Properties IV and NTS-
             Phase I ($6,249,667)                 Properties V

             Lakeshore Business Center            NTS-Properties Plus Ltd.
             Phase II (-$1,023,535)

             Undeveloped land adjacent to the     NTS-Properties Plus Ltd.
             Lakeshore Business Center
             development (3.8 acres)(-$670,709)

             Undeveloped land adjacent to the     NTS/Fort Lauderdale, Ltd.
             Lakeshore Business Center
             development (2.4 acres)($27,104)

             University Business Center           NTS-Properties V and NTS-
             Phase II ($953,236)                  Properties Plus Ltd.

             Each of the properties were contributed to the L/U II Joint Venture
             subject to existing  indebtedness,  except for  Lakeshore  Business
             Center Phase I which was  contributed to the joint venture free and
             clear of any mortgage liens, and all such  indebtedness was assumed
             by the L/U II joint venture. Mortgages were recorded on Lakeshore

                                     - 55 -

<PAGE>



4.     Investment in Joint Ventures - Continued
       ----------------------------------------

       F)    Lakeshore/University II Joint Venture - Continued
             -------------------------------------------------

             Business  Center  Phase  I in  the  amount  of  $5,500,000,  and on
             University Business Center Phase II in the amount of $3,000,000, in
             favor of the  banks  which  held  the  indebtedness  on  University
             Business  Center Phase II,  Lakeshore  Business Center Phase II and
             the undeveloped  tracts of land prior to the formation of the joint
             venture. In addition to the above, the Partnership also contributed
             $750,000 to the L/U II Joint Venture.  The Partnership's  ownership
             share was 18% at December 31, 1997.

             Net  income  or net  loss  is  allocated  based  on the  respective
             contribution  of  each  partner  as of  the  end of  each  calendar
             quarter.  The  Partnership's  share  of  the  joint  venture's  net
             operating loss was $135,710  (1997),  $176,357  (1996) and $220,756
             (1995).

5.     Land, Buildings and Amenities
       -----------------------------

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


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

          Land and improvements             $ 5,551,534           $ 5,551,101
          Buildings, improvements
          and amenities                      18,806,479            18,757,537
                                             ----------            ----------

                                             24,358,013            24,308,638

          Less accumulated depreciation      11,334,232            10,507,387
                                             ----------            ----------

                                            $13,023,781           $13,801,251
                                             ==========            ==========


6.     Asset Held for Sale
       -------------------

       Asset held for sale of  $297,251  at December  31,  1997  represents  the
       Partnership's  proportionate  share of  approximately  6.2  acres of land
       owned by the L/U II Joint  Venture  which is  adjacent  to the  Lakeshore
       Business Center development in Ft. Lauderdale,  Florida.  In management's
       opinion,  the net book value approximates the fair market value less cost
       to sell.





















                                     - 56 -

<PAGE>



7.     Mortgages Payable
       -----------------

       Mortgages payable as of December 31 consist of the following:

                                                    1997           1996
                                                -----------     -----------
       Mortgage payable with an insurance
       company,  bearing interest at a fixed
       rate of 8.8%, due October 1, 2004,
       secured by land and building             $ 2,238,591     $ 2,467,606

       Mortgage payable with an insurance
       company, bearing interest at a fixed
       rate of 7.2%, due January 5, 2013,
       secured by land, buildings and
       amenities                                  1,998,000           --

       Mortgage payable with an insurance
       company, bearing interest at a fixed
       rate of 7.2%, due January 5, 2013,
       secured by land, buildings and
       amenities                                  1,902,000           --

       Mortgage payable with an insurance
       company, bearing interest at a fixed
       rate of 7%, due December 5, 2003,
       secured by land, buildings and
       amenities                                      --          2,012,389

       Mortgage payable with an insurance
       company, bearing interest at a fixed
       rate of 7%, due December 5, 2003
       secured by land, building and
       amenities                                      --          1,916,561

       Mortgage payable with an insurance
       company, bearing interest at a fixed
       rate of 8.5%, due November 15, 2005,
       secured by land and building               1,163,828       1,262,767

       Mortgage payable with an insurance
       company,  bearing interest at a fixed
       rate of 8.125% due August 1, 2008,
       secured by land and building               1,000,809       1,057,548

       Mortgage payable with an insurance
       company bearing interest at a fixed
       rate of 8.125%, due August 1, 2008,
       secured by land and building                 959,282       1,013,666

       Mortgage payable with an insurance
       company bearing interest at a fixed
       rate of 8.125%, due August 1, 2008,
       secured by land and building                 930,213         982,949

       Mortgage payable with an insurance
       company, bearing interest at a fixed
       rate of 7.2%, due January 5, 2013,
       secured by land, buildings and
       amenities                                    321,854           --

       Mortgage payable with an insurance
       company, bearing interest at a fixed
       rate of 7.2%, due January 5, 2013,
       secured by land, buildings and
       amenities                                    192,225           --


                            (Continued on next page)


                                     - 57 -

<PAGE>


7.     Mortgages Payable - Continued
       -----------------------------

                                                  1997             1996
                                              -----------      -----------
       Mortgage payable with an insurance
       company,  bearing interest at a fixed
       rate of 7.5%, due December 5, 2003,
       secured by land, buildings and
       amenities                              $    --          $   327,573

       Mortgage payable with an insurance
       company, bearing interest at a fixed
       rate of 7.5%, due December 5, 2003,
       secured by land, buildings and
       amenities                                   --              195,566
                                              -----------      -----------
                                              $10,706,802      $11,236,625
                                              ===========      ===========


       The mortgages are payable in aggregate  monthly  installments of $144,631
       which includes  principal,  interest,  insurance  escrow and property tax
       escrow.

       Scheduled maturities of debt are as follows:

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

                            1998                                  $   691,079
                            1999                                      764,675
                            2000                                      829,746
                            2001                                      900,390
                            2002                                      977,086
                         Thereafter                                 6,543,826
                                                                  -----------
                                                                  $10,706,802
                                                                  ===========

       Based on the borrowing rates  currently  available to the Partnership for
       mortgages  with similar terms and average  maturities,  the fair value of
       long-term debt approximates carrying value.

       The 1997 write-off of unamortized loan costs (treated as an extraordinary
       item)  relates to loan costs  associated  with The  Willows of  Plainview
       Phases I and II  mortgages  payable.  The  unamortized  loan  costs  were
       expensed due to the fact that the mortgages were retired in 1997 prior to
       their maturity (December 5, 2003).

       The 1996 write-off of unamortized loan costs (treated as an extraordinary
       item)relates  to loan costs  associated  with the L/U II Joint  Venture's
       notes payable.  The unamortized  loan costs were expensed due to the fact
       that the notes were retired in 1996 prior to their maturity  (January 31,
       1998).















                                     - 58 -

<PAGE>



8.     Rental Income Under Operating Leases
       ------------------------------------

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

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

                            1998                                  $ 1,582,753
                            1999                                    1,405,305
                            2000                                    1,176,263
                            2001                                    1,068,153
                            2002                                      985,356
                         Thereafter                                 1,793,332
                                                                  -----------
                                                                  $ 8,011,162
                                                                  ===========


9.     Related Party Transactions
       --------------------------

       Property management fees of $208,837 (1997), $204,165 (1996) and $186,176
       (1995) were paid to NTS Development  Company, an affiliate of the General
       Partner of the Partnership. The fee is equal to 5% of gross revenues from
       residential   properties  and  6%  of  gross  revenues  from   commercial
       properties pursuant to an agreement with the Partnership. As permitted by
       an  agreement,   NTS  Development  Company  will  receive  a  repair  and
       maintenance  fee equal to 5.9% of costs  incurred which relate to capital
       improvements. The Partnership has incurred $14,351 and $7,770 as a repair
       and  maintenance  fee during the years ended  December  31, 1997 and 1996
       respectively,  and has capitalized this cost as a part of land, buildings
       and amenities.

       As  permitted  by an  agreement,  the  Partnership  was also  charged the
       following  amounts  from NTS  Development  Company  for the  years  ended
       December 31, 1997, 1996 and 1995.  These charges include items which have
       been  expensed as operating  expenses - affiliated  or  professional  and
       administrative   expenses  -   affiliated   and  items  which  have  been
       capitalized as other assets or as land, buildings and amenities.



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

          Leasing                 $121,834          $108,913         $115,557
          Administrative           196,182           214,530          178,910
          Property manager         261,511           241,289          253,574
          Other                      5,015             8,674            9,291
                                  --------          --------         --------

                                  $584,542          $573,406         $557,332
                                  ========          ========         ========


       On January 23, 1995, the Partnership  contributed  $750,000 to the L/U II
       Joint Venture. For details regarding this transaction, refer to Note 4F.


10.    Commitments and Contingencies
       -----------------------------

       Philip  Crosby  Associates,  Inc.  ("Crosby")  previously  leased 100% of
       University   Business   Center   Phase   II,   which   is  owned  by  the
       Lakeshore/University  II (L/U II) Joint Venture.  The original lease term
       was for seven years, and the tenant took occupancy in April 1991.  During
       1994, 1995 and 1996,  Crosby  sub-leased,  through the end of their lease
       term,  approximately  85,000 square feet (including  approximately 10,000
       square feet of mezzanine space) of University  Business Center Phase II's
       approximately 88,000 square feet of net rentable area (or

                                     - 59 -

<PAGE>



10.    Commitments and Contingencies - Continued
       -----------------------------------------

       96%). Of the total being sub-leased, approximately 73,000 square feet (or
       86%) was  leased by Full Sail  Recorders,  Inc.  ("Full  Sail"),  a major
       tenant at  University  Business  Center Phase I, a  neighboring  property
       owned by an affiliate of the General Partner of the  Partnership.  During
       this period and through  December  1996,  Crosby  continued  to make rent
       payments  pursuant to the original  lease terms.  During 1996,  the Joint
       Venture received notice that Crosby did not intend to pay full rental due
       under the original lease  agreement,  including and subsequent to January
       1997.  The  Partnership's  proportionate  share of the rental income from
       this property  accounted for approximately 6% of the partnership's  total
       revenues  during  1996.  Although  the Joint  Venture did not have formal
       lease  agreements  with the  sub-lessees  noted above during this period,
       beginning  February 1997 rent payments from these  sub-lessees  have been
       made directly to the Joint Venture.

       During  1997,  Crosby  abandoned  its  business,  sold all or most of its
       operating  assets  and  informed  the Joint  Venture  that  Crosby may be
       insolvent. During the third quarter of 1997, a conditional settlement was
       reached at a mediation  conference with Crosby and its corporate  parent,
       whereby,  subject to the Joint  Venture's  acceptance  of the  settlement
       terms, the corporate parent agreed to pay a portion of Crosby's liability
       to the Joint Venture in full  satisfaction  of all claims  against Crosby
       and any of its affiliates.  During the fourth quarter of 1997, the L/U II
       Joint Venture  informed Crosby and its corporate  parent that it accepted
       the terms of the conditional settlement,  whereby Crosby's parent paid to
       the L/U II Joint Venture the sum of $300,000 in full  satisfaction of all
       claims.  These funds were received by the L/U II Joint Venture on October
       23, 1997.  The  Partnership's  proportionate  share of the settlement was
       $54,000 or 18%. The amount of the settlement was substantially  less than
       the  aggregate  liability of Crosby to the Joint Venture  resulting  from
       Crosby's default under its lease. This deficit is partially offset by the
       rent payments received from the sub-lessees, as discussed above.

       In December 1995, Full Sail signed a 33 month lease with the L/U II Joint
       Venture for  approximately  41,000 square feet it sub-leased from Crosby.
       In November 1996,  Full Sail signed a lease amendment which increased the
       square footage from 41,000 square feet to 48,000 square feet and extended
       the lease  term from 33 months to 76 months.  In  addition,  in  November
       1996,  Full  Sail  also  signed  a  52  month  lease  for  an  additional
       approximately 21,000 square feet of space it sub-leased from Crosby. Both
       leases aggregate  69,000 square feet or 78% of the business  center's net
       rentable area and commence April 1998 when the Crosby original lease term
       ends. As part of the lease  negotiations,  Full Sail will receive a total
       of $450,000 in special  tenant  allowances  ($200,000  resulting from the
       original lease signed December 1995 and $250,000 resulting from the lease
       amendment  signed  November  1996).  Approximately  $92,000  of the total
       allowance is to be  reimbursed  by Full Sail to the L/U II Joint  Venture
       pursuant to the lease terms. The Partnership's proportionate share of the
       net commitment  ($450,000 less $92,000) is approximately  $64,000 or 18%.
       The tenant allowance will be due and payable to Full Sail pursuant to the
       previously mentioned lease agreements, as appropriate invoices for tenant
       finish  costs  incurred  by Full Sail are  submitted  to the L/U II Joint
       Venture.  The source of funds for this  commitment is expected to be cash
       flow from operations and/or cash reserves .

       The  Joint  Venture  is  currently  negotiating  directly  with the other
       sublessees  discussed  above to enter into leases for the remaining space
       available.  The future  leasing  and tenant  finish  costs  which will be
       required  to  release  this  space  is  unknown  at this  time but is not
       expected to be substantial.

       On  December  30,  1997,  Full  Sail  delivered  written  notice  to  the
       Partnership  that Full Sail had (i)  exercised its right of first refusal
       under its lease with  NTS-Properties  V to purchase  University  Business
       Center Phase I office building and the Phase III vacant land adjacent

                                     - 60 -

<PAGE>



10.    Commitments and Contingencies - Continued
       -----------------------------------------

       to the University  Business  Center  development,  and (ii) exercised its
       right of first  refusal  under its lease  with NTS  University  Boulevard
       Joint  Venture to purchase  University  Business  Center  Phase II office
       building,  for an aggregate  purchase price for all three of $18,700,000.
       Full Sail  exercised  its  right of first  refusal  under  the  leases in
       response to a letter of intent to purchase  University  I,  University II
       and the Phase III land which was previously  received by the  Partnership
       from an unaffiliated  buyer. Under its right of first refusal,  Full Sail
       must  purchase  the  properties  on the  same  terms  and  conditions  as
       contemplated  by the letter of intent.  Full Sail agreed in its notice to
       the  Partnership  to proceed  to  negotiate  in good  faith a  definitive
       purchase  agreement for these  properties.  Because no binding  agreement
       exists for the purchase of the  properties at this time,  there can be no
       assurance  that a mutual  agreement  of purchase and sale will be reached
       among  the  parties,  nor  that  the  sale  of  the  properties  will  be
       consummated.  As such, the  Partnership has not determined the use of net
       proceeds after  repayment of outstanding  debt from any such sale nor has
       it determined the impact on the future results of operations or financial
       positions. The University II office building is owned by the L/U II Joint
       Venture,  the successor to the NTS University Boulevard Joint Venture, in
       which the Partnership owns an 18% joint venture interest. Under the terms
       of the right of first refusal,  the closings of the sale of University I,
       University II and the Phase III vacant land are to occur simultaneously.

11.    Subsequent Events
       -----------------

       Subsequent  to December  31,  1997,  the  Partnership  elected to fund an
       additional  amount of $60,000 to its Interest  Repurchase  Reserve.  With
       this  funding,  the  Partnership  will be able  to  repurchase  up to 400
       additional  Units at a price  of $150 per  Unit.  The  first  units to be
       repurchased will be those  previously  submitted and not repurchased with
       the earlier Interest Repurchase Reserve fundings to the extent that those
       unit holders reconfirm their desire to sell their Units. If the number of
       Units  submitted for repurchase  exceeds that which can be repurchased by
       the Partnership with the remaining balance of the current fundings, those
       additional  Units may be  repurchased in subsequent  quarters.  The above
       offering  price per Unit was  established  by the General  Partner in its
       sole  discretion  and does not purport to represent the fair market value
       or liquidation value of the Unit.




























                                     - 61 -

<PAGE>



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

None.


                                    PART III

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

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

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

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

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

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

NTS Capital  Corporation  (formerly NTS  Corporation) is a Kentucky  corporation
formed in October  1979. At the present time its capital is $1,000 and it is not
anticipated that such capital will be significantly  increased. J. D. Nichols is
Chairman of the Board and the sole director of NTS Capital Corporation.

NTS Sub-Partnership IV
----------------------

NTS  Sub-partnership IV is a Kentucky limited partnership whose primary business
purpose is to acquire, own and hold an interest in NTS-Properties Associates IV.
The partners of NTS  Sub-partnership IV include various management  personnel of
NTS Corporation and its affiliates.

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

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

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

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

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

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

Mr. Lavin (age 44) serves as Executive Vice President of NTS Development Company
and  President  of the  Company's  Income  Properties.  As  such,  Mr.  Lavin is
responsible for all NTS commercial real estate  development,  land  acquisitions
and oversees the management of all commercial office buildings, business centers
and multi-family residential communities. Prior to joining

                                     - 62 -

<PAGE>



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

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

NTS, Mr. Lavin served as President of the Residential Division of Paragon Group,
Inc., and as a Vice President of Paragon's Midwest  Division.  In this capacity,
he directed the development,  marketing,  leasing and management  operations for
the firms  expanding  portfolios.  Mr. Lavin attended the University of Missouri
where he  received  his  Bachelor's  Degree in Business  Administration.  He has
served as a Director of the Louisville Apartment  Association.  He is a licensed
Kentucky  Real Estate  Broker and  Certified  Property  Manager.  Mr. Lavin is a
member of the  Institute of Real Estate  Management,  and council  member of the
Urban Land Institute.  He currently serves on the University of Louisville Board
of Overseers  and is on the Board of  Directors  of the  National  Multi-Housing
Council and the Louisville Science Center.

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

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


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

The officers and/or directors of the corporate General Partner receive no direct
remuneration in such  capacities.  The Partnership is required to pay a property
management fee based on gross rentals to NTS Development  Company,  an affiliate
of  the  General  Partner.  The  Partnership  is  also  required  to  pay to NTS
Development  Company a repair and  maintenance  fee on costs related to specific
projects and a refinancing  fee on Net Cash Proceeds from the refinancing of any
Partnership  property.  Also, NTS  Development  Company  provides  certain other
services to the Partnership.  See Note 9 to the financial  statements which sets
forth  transactions  with  affiliates of the General Partner for the years ended
December 31, 1997, 1996 and 1995.

The General Partner is entitled to receive cash distributions and allocations of
profits and losses from the Partnership. See Note 1C to the financial statements
which  describes  the methods  used to  determine  income  allocations  and cash
distributions.





















                                     - 63 -

<PAGE>



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

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

       J. D. Nichols                             69.69%
       10172 Linn Station Road
       Louisville, Kentucky 40223

       NTS Sub-partnership IV                    30.00%
       10172 Linn Station Road
       Louisville, Kentucky 40223

       NTS Capital Corporation                     .30%
       10172 Linn Station Road
       Louisville, Kentucky 40223

       Alliance Realty Corporation                 .01%
       500 North Broadway
       St. Louis, Missouri 63102

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

Property management fees of $208,837 (1997), $204,165 (1996) and $186,176 (1995)
were paid to NTS Development Company, an affiliate of the General Partner of the
Partnership.  The  fee  is  equal  to  5% of  gross  revenues  from  residential
properties and 6% of gross revenues from  commercial  properties  pursuant to an
agreement with the  Partnership.  As permitted by an agreement,  NTS Development
Company  will  receive  a  repair  and  maintenance  fee  equal to 5.9% of costs
incurred  which relate to capital  improvements.  The  Partnership  has incurred
$14,351  and $7,770 as a repair  and  maintenance  fee  during  the years  ended
December 31, 1997 and 1996,  respectively,  and has  capitalized  this cost as a
part of land, buildings and amenities.

As permitted by an  agreement,  the  Partnership  was also charged the following
amounts from NTS Development Company for the years ended December 31, 1997, 1996
and 1995.  These  charges  include  items which have been  expensed as operating
expenses - affiliated or professional and  administrative  expenses - affiliated
and items which have been capitalized as other assets or as land,  buildings and
amenities.




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

     Leasing                $121,834          $108,913         $115,557
     Administrative          196,182           214,530          178,910
     Property manager        261,511           241,289          253,574
     Other                     5,015             8,674            9,291
                            --------          --------         --------

                            $584,542          $573,406         $557,332
                            ========          ========         ========


On January 23, 1995, the  Partnership  contributed  $750,000 to the L/U II Joint
Venture.  For  details  regarding  this  transaction,  refer  to  Note 4F of the
Partnership's  1997  financial  statements  and  Items  1. and 2.  Business  and
Properties.

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

                                     - 64 -

<PAGE>



                                     PART IV

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

1.      Financial statements

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

2.      Financial statement schedules

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

        III-Real Estate and Accumulated Depreciation              66-69

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

3.      Exhibits

        Exhibit No.                                                Page No.
        -----------                                                --------

         3.      Amended and Restated Agreement and Certificate       *
                 of Limited Partnership of NTS-Properties IV

        10.      Property Management Agreement and Construction       *
                 Management Agreement between NTS Development
                 Company and NTS-Properties IV

        27.      Financial Data Schedule                           Included
                                                                   herewith

         *       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 16,
                 1983  (effective  August 1,  1983)  under  Commission  File No.
                 2-83771.

4.      Reports on Form 8-K

        Form  8-K was  filed  November  7,  1997 to  report  in Item 5 that  the
        Partnership  has elected to fund an additional  amount of $45,000 to its
        Interest Repurchase Reserve.






















                                     - 65 -

<PAGE>
<TABLE>


                                NTS-PROPERTIES IV

             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                             AS OF DECEMBER 31, 1997

<CAPTION>


                                                  Commonwealth    Plainview
                                                    Business    Point Office    The Willows    The Willows
                                                     Center     Center Phases  of Plainview   of Plainview
                                                    Phase I       I and II       Phase I        Phase II
                                                   ----------    ----------     ----------     ----------

Encumbrances                                          (A)           None            (B)            (B)

<S>                                                <C>           <C>            <C>            <C>
Initial cost to partnership:
  Land                                             $  928,867    $  356,048     $1,798,292     $  170,808
  Buildings and improvements                        1,419,653     2,214,001      5,447,513        585,917

Cost capitalized subsequent to acquisition:
  Improvements                                      1,713,495       872,244        170,939         50,195
  Other                                                --             --            --              --
Gross amount at which carried December 31, 1997:
  Land                                             $  939,987    $  454,262     $1,832,605     $  181,465
  Buildings and improvements                        3,122,028     2,988,031      5,584,139        625,455
                                                   ----------    ----------     ----------     ----------

  Total                                            $4,062,015    $3,442,293     $7,416,744     $  806,920
                                                   ==========    ==========     ==========     ==========

Accumulated depreciation                           $2,253,252    $1,464,140     $3,515,692     $  378,311
                                                   ==========    ==========     ==========     ==========

Date of construction                                  06/84          N/A          03/85          08/85

Date Acquired                                          N/A          04/84          N/A            N/A

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

<FN>

(A) First mortgage held by an insurance company.

(B) First mortgage held by two insurance companies.

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

                                     - 66 -

<PAGE>
<TABLE>


                                NTS-PROPERTIES IV

             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                             AS OF DECEMBER 31, 1997

<CAPTION>


                                                                                               Lakeshore
                                                                  Plainview    Blankenbaker     Business
                                                   Golf Brook     Point III      Business        Center
                                                   Apartments   Office Center   Center 1A       Phase I
                                                   ----------   -------------  ------------   ----------

Encumbrances                                           (A)           None          (A)            (A)

<S>                                                <C>          <C>            <C>            <C>
Initial cost to partnership:
  Land                                             $  175,557   $      65,211  $    582,561   $  422,983
  Buildings and improvements                          474,566         116,284     2,263,506      662,259

Cost capitalized subsequent to acquisition:
  Improvements                                         (1,987)         50,419        92,355      537,632
  Other (B)                                              --            --            --          184,250
Gross amount at which carried December 31, 1997:
  Land                                             $  174,986   $      66,373  $    672,364   $  479,210
  Buildings and improvements                          473,150         165,541     2,266,058    1,327,914
                                                   ----------   -------------  ------------   ----------

  Total                                            $  648,136   $     231,914  $ 2,938,422    $1,807,124
                                                   ==========   =============  ============   ==========

Accumulated depreciation                           $  230,846   $      91,257  $ 1,088,350    $  890,814
                                                   ==========   =============  ============   ==========

Date of construction                                  05/88           01/88        N/A           05/86

Date Acquired                                          N/A             N/A        08/94           N/A

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

<FN>
(A) First mortgage held by an insurance company.

(B)  Represents  NTS-Properties  IV's increased  interest in Lakeshore  Business
     Center Phase I as a result of the formation of the  Lakeshore/University II
     Joint Venture in 1995.

(C)  Depreciation is computed using the straight-line  method over the estimated
     useful lives of the assets which are 5-30 years for land improvements, 5-30
     years for buildings and improvements and 5-30 years for amenities.
</FN>
</TABLE>
                                     - 67 -

<PAGE>
<TABLE>


                                NTS-PROPERTIES IV

             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                             AS OF DECEMBER 31, 1997

<CAPTION>


                                                         Lakeshore    University
                                                         Business      Business
                                                          Center        Center       Total
                                                         Phase II      Phase II   Pages 66-68
                                                        ----------   -----------  -----------

Encumbrances                                                 (A)           (A)

<S>                                                     <C>          <C>          <C>
Initial cost to partnership:
  Land                                                 $   658,760   $   388,156  $  5,547,243
  Buildings and improvements                             1,508,328     1,567,339    16,259,366

Cost capitalized subsequent to acquisition:
  Improvements                                              40,593         --        3,525,885
  Other                                                      --            --          184,250

Gross amount at which carried December 31, 1997 (B):
  Land                                                 $   658,760   $   388,156  $  5,848,168
  Buildings and improvements                             1,548,921     1,567,339    19,668,576
                                                       -----------   -----------  ------------

  Total                                                $ 2,207,681   $ 1,955,495  $ 25,516,744
                                                       ===========   ===========  ============

Accumulated depreciation                               $   810,452   $   611,118  $ 11,334,232
                                                       ===========   ===========  ============

Date of construction                                        N/A           N/A

Date Acquired                                              01/95         01/95

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

<FN>
(A) First mortgage held by an insurance company.

(B) Aggregate cost of real estate for tax purposes is $24,630,016.

(C)  Depreciation is computed using the straight-line  method over the estimated
     useful lives of the assets which are 5-30 years for land improvements, 5-30
     years for buildings and improvements and 5-30 years for amenities.

(D)  Total gross cost at December 31, 1997                          $25,516,744
     Adjust land contribution from fair
         market value to cost:
          Golf Brook Apartments                                        (662,731)
          Plainview Point III Office Center                            (496,000)
                                                                     -----------

                                                                     $24,358,013
                                                                     ===========
</FN>
</TABLE>

                                     - 68 -

<PAGE>

<TABLE>

                                NTS-PROPERTIES IV

             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

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

<CAPTION>

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

<S>                                            <C>                 <C>
Balances at December 31, 1994                  $ 19,803,452        $  7,829,252

Additions during period:
 Improvements                                       298,146              --
 Depreciation (a)                                    --                 896,863
 Other (b)                                        4,306,835           1,032,864
Deductions during period:
 Retirements                                        (96,421)            (64,785)
                                               ------------        ------------

Balances at December 31, 1995                    24,312,012           9,694,194

Additions during period:
 Improvements                                        73,741              --
 Depreciation (a)                                    --                 883,436

Deductions during period:
 Retirements                                        (77,115)            (70,243)
                                               ------------        ------------

Balances at December 31, 1996                    24,308,638          10,507,387

Additions during period:
 Improvements                                        99,673              --
 Depreciation (a)                                    --                 877,005

Deductions during period:
 Retirements                                        (50,298)            (50,160)
                                               ------------        ------------

Balances at December 31, 1997                  $ 24,358,013        $ 11,334,232
                                               ============        ============


<FN>
(a)  The additions  charged to  accumulated  depreciation  on this schedule will
     differ from the  depreciation  and  amortization  on the Statements of Cash
     Flows due to the amortization of loan costs.
(b)  Represents the increase in the Partnership's interest in Lakeshore Business
     Center Phase I land and buildings and the Partnership's  share of Lakeshore
     Business  Center Phase II's and University  Business Center Phase II's land
     and buildings  recorded under the proportionate  consolidation  method. All
     are the result of the formation of the
     Lakeshore/University II Joint Venture in 1995.
</FN>
</TABLE>
                                     - 69 -

<PAGE>


                                   SIGNATURES
                                   ----------

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

                                        NTS-PROPERTIES IV
                                        -----------------
                                           (Registrant)
                                        BY:   NTS-Properties Associates IV,
                                              General Partner
                                              BY: NTS Capital Corporation,
                                                  General Partner


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



Date: March 26, 1998



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

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



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

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


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



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




















                                     - 70 -