1
FORM 10-K--ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

(As last amended in Rel. No. 34-29354 eff. 7-1-91)

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

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]

For the fiscal year ended DECEMBER 31, 1995

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

For the transition period from _______to________
Commission file number 0-16718

NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)

STATE OF WASHINGTON 91-1366564
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

3600 WASHINGTON MUTUAL TOWER
1201 THIRD AVENUE, SEATTLE, WASHINGTON 98101
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (206) 621-1351

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

Title of each class Name of each exchange on which registered

(NONE) (NONE)

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

UNITS OF LIMITED PARTNERSHIP INTEREST

(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 [ ]

DOCUMENTS INCORPORATED BY REFERENCE

(Partially Incorporated into Part IV)

(1) Form S-1 Registration Statement declared effective on August
6, 1987 (No. 33-13879).

(2) Form 10-K Annual Reports for fiscal years ended December 31,
1987, December 31, 1988, December 31, 1990, December 31, 1992
and December 31, 1993 respectively.

(3) Form 10-Q Quarterly Reports for periods ended June 30, 1989,
September 30, 1989 and March
31, 1993, respectively.

(4) Form 8-K dated September 27, 1993

(5) Form 8-K dated March 1, 1996

This filing contains pages. Exhibits Index appears on page .
Financial Statements/Schedules Index appears on page .

PART I

ITEM 1. BUSINESS

Northland Cable Properties Seven Limited Partnership (the
"Partnership") is a Washington limited partnership consisting of two general
partners (the "General Partners") and approximately 2,906 limited partners as of
December 31, 1995. Northland Communications Corporation, a Washington
corporation, is the Managing General Partner of the Partnership (referred to
herein as "Northland" or the "Managing General Partner"). FN Equities Joint
Venture, a California general partnership, is the Administrative General Partner
of the Partnership (the "Administrative General Partner").

Northland was formed in March 1981 and is principally involved in the
ownership and management of cable television systems. Northland currently
manages the operations and is the General Partner for cable television systems
owned by 6 limited partnerships. Northland is also the parent company of
Northland Cable Properties, Inc. which was formed in February 1995 and is
principally involved in direct ownership of cable television systems. Northland
is a subsidiary of Northland Telecommunications Corporation ("NTC"). Other
subsidiaries of NTC include:

NORTHLAND CABLE TELEVISION, INC. - formed in October 1985 and
principally involved in the direct ownership of cable television
systems. Owner of Northland Cable News, Inc.

NORTHLAND CABLE NEWS, INC. - formed in May 1994 and
principally involved in the production and development of
local programming.

NORTHLAND CABLE SERVICES CORPORATION - formed in August 1993 as the
holding company for the following entities:

CABLE TELEVISION BILLING, INC. - formed in June 1987 and
principally involved in the development and production of
computer software used in connection with the billing and
financial recordkeeping for cable systems owned or managed by
Northland or Northland Cable Television, Inc.

NORTHLAND INVESTMENT CORPORATION - formed in 1988 and
principally involved in the underwriting of Northland
sponsored limited partnership securities offerings.

CABLE AD-CONCEPTS, INC. - formed in November 1993 and
principally involved in the production and development of
video commercial advertisements.

NORTHLAND MEDIA, INC. - formed in April 1995 as the holding company for
the following entity:

STATESBORO MEDIA, INC. - formed in April 1995 and principally
involved in acquiring and operating an AM radio station
serving the community of Statesboro, GA and surrounding areas.

The partnership was formed on April 17, 1987 and began operations in
1987 with the acquisition of a cable television system serving two communities
in Texas and one system in Washington. Subsequently, in 1988, the Partnership
acquired another cable television system in Washington and sold a sub-system in
Texas. In 1993, the Partnership purchased a cable television system in Bayview,
Washington. (Collectively, the cable television systems are referred to herein
as the "Systems".) As of December 31, 1995, the total number of basic
subscribers served by the Systems was 22,620, and the partnership's penetration
rate (basic subscribers as a percentage of homes passed) was

approximately 72% as compared to an industry average of approximately 64%, as
reported by PAUL KAGAN AND ASSOCIATES, INC. The Partnership's properties are
located in rural areas which, to some extent, do not offer consistently
acceptable off-air network signals. This factor, combined with the existence of
fewer entertainment alternatives than in large markets contributes to a larger
proportion of the population subscribing to cable television (higher
penetration).

The Partnership has 10 non-exclusive franchises to operate the Systems.
These franchises, which will expire at various dates through 2017, have been
granted by local and county authorities in the areas in which the
Systems operate. Annual franchise fees are paid to the granting governmental
authorities. These fees vary between 1% and 5% and are generally based on the
respective gross revenues of the Systems in a particular community. The
franchises may be terminated for failure to comply with their respective
conditions.

The Partnership serves the communities and surrounding areas of Brenham
and Bay City, Texas, as well as Camano Island and Sequim, Washington. The
following is a description of these areas:

Brenham, TX: Brenham, Texas, with a population of approximately 12,000
is strategically located about midway between Houston and Austin. The population
has grown steadily over the last 15 years at a rate of two and one-half percent
per year. The city of Brenham serves as a hub for commerce, trade and services
to the surrounding counties of Burleson, Waller, Lee, Fayette, Austin, Colorado
and Grimes. Brenham's proximity to Houston makes it a gateway through which
international trade and commerce proceed to Austin, San Antonio and other
western cities. A main line of the Santa Fe Railway also services the city.
Certain information regarding the Brenham, TX system as of December 31, 1995 is
as follows:

Basic Subscribers 4,326
Tier Subscribers 1,032
Premium Subscribers 1,185
Estimated Homes Passed 5,500

Bay City, TX: The Bay City system serves the communities of Bay City,
Markham, Matagorda, Van Vleck and certain unincorporated areas of Matagorda
county in southeast Texas. The local economies of the communities included in
the Bay City system are based primarily in agriculture, chemical manufacturing
and petroleum processing. Rich, productive agricultural lands are located along
the banks of the Colorado River in the Bay City area. Rice is the major crop.

There is an abundance of recreational and sporting activities in the
Bay City area, including freshwater and deep-sea fishing. The Gulf of Mexico,
Matagorda Beach, the Colorado River, bays and bayous combine to meet the
recreational needs of both tourists and residents. Certain information regarding
the Bay City, TX system as of December 31, 1995 is as follows:

Basic Subscribers 5,711
Tier Subscribers 2,234
Premium Subscribers 1,948
Estimated Homes Passed 8,450

Camano Island, WA: Camano Island is approximately 16 miles long and six
miles wide with a year-round population of over 6,000. Located in the Puget
Sound, north of Seattle and five miles west of Stanwood, Washington, the island
is connected to the mainland by a bridge which provides easy access to
neighboring communities. The Camano Island system also serves the communities of
Stanwood, WA and Bayview, WA.
4

Camano Island is currently experiencing growth at a rate of 200 to 250
new homes per year. The island is primarily residential with neighborhood
grocery stores, service stations, restaurants and other incidental services. The
neighboring mainland community of Stanwood provides the area with an education
system, additional shopping and medical services. Many employed residents of
Camano Island work in the neighboring cities of Everett (an industrial center),
Stanwood and Mount Vernon (mainly agricultural), while many have chosen Camano
Island as a retirement residence. Certain information regarding the Camano
Island, WA system as of December 31, 1995 is as follows:

Basic Subscribers 6,936
Tier Subscribers 1,683
Premium Subscribers 1,677
Estimated Homes Passed 9,230

Sequim, WA: Clallam County's population is approximately 53,400, with
approximately 17,300 residing in the city of Port Angeles, the county seat.
Sequim is located approximately 15 miles east of Port Angeles. The county's work
force is concentrated in the lumber/wood products, logging, tourism,
aerospace/aviation, fishing and education industries. Some of the most
productive forest land in the United States is located on the Olympic Peninsula,
and timber has been the traditional mainstay of Clallam County's economy. A
natural deep-water harbor and relative proximity to the Far East have encouraged
international trade development for the county's products. The Olympic National
Park, ferry access to Victoria, British Columbia, sport fishing, and other
scenic and recreational attractions bring a steady stream of tourists through
Clallam County. Certain information regarding the Sequim, WA system as of
December 31, 1995 is as follows:

Basic Subscribers 5,647
Tier Subscribers 2,849
Premium Subscribers 714
Estimated Homes Passed 7,810

The Partnership had 38 employees as of December 31, 1995. Management of
these systems is handled through offices located in the towns of Brenham and Bay
City, Texas. The Sequim and Camano systems share the costs of offices maintained
by affiliates of the Partnership pursuant to the terms of operating management
agreements. Pursuant to the Agreement of Limited Partnership, the Partnership
reimburses the Managing General Partner for time spent by the Managing General
Partner's accounting staff on Partnership accounting and bookkeeping matters.
(See Item 13(a) below.)

The Partnership's cable television business is not considered seasonal.
The business of the Partnership is not dependent upon a single customer or a few
customers, the loss of any one or more of which would have a material adverse
effect on its business. No customer accounts for 10% or more of revenues. No
material portion of the Partnership's business is subject to renegotiation of
profits or termination of contracts or subcontracts at the election of any
governmental unit, except that franchise agreements may be terminated or
modified by the franchising authorities as noted above. During the last year,
the Partnership did not engage in any research and development activities.

Partnership revenues are derived primarily from monthly payments
received from cable television subscribers. Subscribers are divided into three
categories: basic subscribers, tier subscribers and premium subscribers. "Basic
subscribers" are households that subscribe to the basic level of service, which
generally provides access to the three major television networks (ABC, NBC and
CBS), a few independent local stations, PBS (the Public Broadcasting System) and
certain satellite programming services, such as ESPN, CNN or The Discovery
Channel. "Tier subscribers" are households that subscribe to an additional level
of programming service, such as Cartoon

Network, CNBC or American Movie Classics. "Premium subscribers" are
households that subscribe to one or more "pay channels" in addition to the basic
service. These pay channels include such services as Showtime, Home Box Office,
Cinemax, Disney or The Movie Channel.

COMPETITION

Due to factors such as the non-exclusivity of the Partnership's
franchises, recent regulatory changes and Congressional action, the rapid pace
of technological developments, and the adverse publicity received by the cable
industry regarding the lack of competition, there is a substantial likelihood
that the Partnership's systems will be subject to a greater degree of
competition in the future.

Other Entertainment Alternatives The Partnership's systems compete with
other communications and entertainment media, including conventional
over-the-air television broadcasting stations. Cable television service was
first offered as a means of improving television reception in markets where
terrain factors or remoteness from major cities limited the availability of
over-the-air television broadcasts. In some of the areas served by the
Partnership's systems, several of the broadcast television channels can be
adequately received off-air. The extent to which cable television service is
competitive with broadcast stations depends in significant part upon the cable
television system's ability to provide an even greater variety of programming
than available off-air.

Cable television systems also are susceptible to competition from other
video programming delivery systems (discussed below), from other forms of home
entertainment such as video cassette recorders, and, in varying degrees, from
sources of entertainment in the communities served, including motion picture
theaters, live theater and sporting events.

Overbuilds Recent federal legislation and court decisions have
increased the likelihood that incumbent cable operators will face instances of
"overbuilding". Overbuilding occurs when a cable operator who is not affiliated
with the incumbent franchise holder applies for and receives a second franchise
from the local franchising authority and constructs a cable system in direct
competition with that of the incumbent. None of the Partnership's franchises
provide for exclusivity. Overbuilding typically occurs where the overbuilder
believes it can attract a profitable share of the incumbent operator's customer
base. Overbuilding also may occur if the local franchising authority authorizes
construction of a governmentally owned and operated cable system. However,
Management believes that given the current regulatory environment related to
cable rates, the attractiveness of overbuilding may have been diminished.

Wireless Services A variety of services, often generically referred to
as "wireless" cable, distribute video programming via omnidirectional low-power
microwave signals from a stationary transmitter to customers at fixed locations.
For many years such services faced governmental restrictions on the types of
programming they could distribute and were generally prevented, by regulatory
and technological reasons, from distributing the quantity of programming
distributed by cable operators. Wireless operators also faced difficulty in
obtaining access to certain programming produced by vendors affiliated with the
cable industry.

In recent years, the Federal Communications Commission (the "FCC") has
adopted policies for authorizing new technologies and providing a more favorable
regulatory environment for certain existing wireless technologies. Such policies
have the potential to create additional competition for cable television
systems. The FCC recently amended its regulations to enable multi-channel,
multi-point distribution services ("MMDS"), to compete more

effectively with cable television systems by making available additional
channels to the MMDS industry.

On December 10, 1992, the FCC commenced a rulemaking in which a new
wireless multichannel video service is proposed to be created. The proposed new
service is called the Local Multichannel Distribution Service ("LMDS") and will
operate in the 27.5 - 29.5 MHz frequency band. LMDS providers, as the FCC
currently proposes, would have no restrictions on the kinds of service that may
be offered. No major technological advances which would adversely affect the
Partnership's business have been made during 1995.

There can be no assurance, however, that future competition brought
about by MMDS, LMDS and other wireless technologies will not have a material
adverse effect on Partnership operations. As noted below, the recent
Congressional legislation, among other things, is designed to make programming
that is currently available to the cable television industry available to other
technologies to foster the growth of alternative video programming delivery
services.

Satellite Delivered Services Additional competition exists from private
cable television systems serving condominiums, apartment complexes and other
private residential developments. The operators of these private systems,
generally referred to as Satellite Master Antenna Television ("SMATV")
providers, often enter into exclusive agreements with apartment building owners
or homeowner's associations that preclude operators of franchised cable
television systems from serving residents of such private complexes. Due to the
widespread availability of reasonably priced satellite signal reception dishes
or earth stations, SMATV systems now can offer both improved reception of local
televisions station and many of the same satellite-delivered programming
services that are offered by franchised cable television systems. Moreover,
SMATV systems generally are free of the regulatory burdens imposed on franchised
cable television systems. Although a number of states and some municipalities
have enacted laws and ordinances to afford operators of franchised cable
television systems access to private complexes, several of such laws and
ordinances have been challenged successfully in the courts, and others are under
attack. Because the Partnership generally has been able to enter into access
agreements with owners of private complexes, in Management's opinion, successful
challenges to access statutes would not have a material adverse effect on the
operations of the Partnership.

Reasonably priced earth stations designed for private home use now
enable individual households to receive many of the satellite-delivered
programming services formerly available only to cable television subscribers.
Many satellite programmers now encode their signals in order to allow reception
only by means of authorized decoding equipment.

Direct broadcast satellite ("DBS") service consists of satellite
services that focus on delivering programming services directly to homes using
high-power signals transmitted by satellites to receiving facilities located on
the premises of subscribers. With an antenna as small as 18 inches, a DBS
customer can receive a hundred or more programming signals. Several companies
are preparing to have high-powered DBS systems in place by the middle of this
decade, and two, DirecTv, an affiliate of Hughes Communications, United States
Satellite Broadcasting Co., an affiliate of Hubbard Broadcasting and Primestar,
owned by a consortium of cable television operators, have launched their
systems. It is expected that these DBS operators will use video compression
technology to increase the channel capacity of their systems to provide a
package of movies, broadcast stations and other programming services competitive
with those of cable television systems.

Using a national base of subscribers, it is possible that DBS companies
may be able to offer new and highly specialized services which may not be
available to the cable television industry, but as channel capacity and

penetration of cable television systems increase, the cable industry is expected
to have the ability to offer additional services as well. Because DBS systems
deliver their services using satellite technology, they may not be able to
provide services that are of local interest to their subscribers, and may not be
able to maintain a local presence, which is considered a significant advantage
in developing and maintaining subscriber support. The extent to which DBS
systems will be competitive with the services provided by cable television
systems will depend, among other things, on the ability of DBS operators to
finance substantial start-up costs and to create their own programming or to
obtain access to existing programming. Recent federal legislation requires cable
programmers under certain circumstances to offer their programming to operators
of DBS, MMDS and other multi-channel video systems at not unreasonably
discriminatory prices.

During 1995, the Partnership did not experience any significant
subscriber loss to DBS. There can be no assurance, however, that future
competition brought about by DBS will not have a material adverse impact on
Partnership operations.

Telephone Companies Federal law, FCC regulations and the 1982 federal
court consent decree (the "Modified Final Judgment") that settled the 1974
antitrust suit against AT&T all limit in various ways the provision of video
programming and other information services by telephone companies. Federal law
codifies FCC cross-ownership regulations which, among other things, prohibit
local telephone exchange companies including the seven Regional Bell Operating
Companies ("RBOCs"), from providing video programming directly to subscribers
within their local exchange service areas, except in rural areas or by specific
waiver of FCC rules. These statutory provisions and corresponding FCC
regulations are of particular competitive importance because these telephone
companies already own much of the plant necessary for cable television
operations, such as poles, underground conduits, associated rights-of-way and
connections to the home.

In July 1991, the U.S. District Court responsible for the Modified
Final Judgment lifted the prohibition on the provision of information services
by the RBOCs. As a result, the RBOCs were allowed to acquire or construct cable
television systems outside of their own service areas. Another federal court
held that the cable/telco cross-ownership prohibitions unconstitutionally
abridge the First Amendment rights of the RBOCs and other telephone companies.
Several RBOCs have entered into agreements to purchase cable television systems
outside their service areas. Management believes that such purchases of existing
cable television systems do not represent a significant competitive threat to
the Partnership

In July 1992, the FCC voted to authorize additional competition to
cable television by video programmers using broadband common carrier facilities
constructed by telephone companies. The FCC allowed telephone companies to take
ownership interests of up to 5% in such programmers. Several telephone companies
have sought approval from the FCC to build such "video dialtone" systems and
several experimental systems have been approved by the FCC. No such systems were
proposed in a community in which the Partnership holds a cable franchise.

Recent Federal laws have significantly changed the restrictions on
telephone companies with respect to their ability to own and operate video
programming delivery systems within their own service areas. See "Regulation -
The 1996 Act."

There can be no assurance that future competition brought on by
telephone company participation in the cable television industry will not have a
material adverse effect on the Partnership's operations.

REGULATION

The Partnership's business is subject to intensive regulation at the
federal and local levels, and to a lesser degree, at the state level. The FCC,
the principal federal regulatory agency with jurisdiction over cable television,
is responsible for implementing federal policies such as rate regulation, cable
system relations with other communications media, cross-ownership, signal
carriage, equal employment opportunity and technical performance. Provisions of
regulatory events that have impacted the Partnership's operations are summarized
below.

The 1992 Cable Act. On October 5, 1992, Congress enacted the Cable
Television Consumer Protection and Competition Act of 1992 (the "1992 Cable
Act"), which significantly increased regulation of the cable television
industry. The 1992 Cable Act became generally effective on December 4, 1992,
although certain provisions became effective at later dates. The 1992 Cable Act
represents a significant change in the regulatory framework under which cable
television systems operate and has had and likely will continue to have a
significant impact on the cable industry and the Partnership's business.

Since the Cable Communications Policy Act of 1984 (the "1984 Cable
Act") became effective, and prior to the enactment of the 1992 Cable Act, rates
for cable services were unregulated for substantially all of the Partnership's
systems. Effective September 1, 1993, rate regulation was instituted for certain
cable television services and equipment in communities that are not subject to
"effective competition" as defined in the legislation. Effective competition is
defined by this law to exist only where (i) fewer than 30 percent of the
households in the franchise area subscribe to the cable service of a cable
system; (ii) there are at least two unaffiliated multichannel video programming
distributors serving the franchise area meeting certain penetration criteria; or
(iii) a multichannel video programming distributor is available to 50 percent of
the homes in the franchise area and is operated by the franchising authority.
Virtually all cable television systems in the United States, including all of
the Partnership's systems, are not subject to effective competition under this
definition and therefore are subject to rate regulation for basic service by
local franchising authority officials under the oversight of the FCC and subject
to rate regulation for their remaining programming services (other than those
offered for a per-channel or per- program charge) by the FCC.

The 1992 Cable Act requires each cable system to establish a basic
service tier consisting, at a minimum, of all local broadcast signals and all
non-satellite delivered distant broadcast signals which the system wishes to
carry, and all public, educational and governmental access programming. On April
1, 1993, the FCC adopted its initial regulations governing rates for the basic
service tier. Under the regulations adopted by the FCC on April 1, 1993, local
franchising authorities, after meeting certain requirements, can require cable
operators to reduce the rates for the basic service tier by up to 10 percent
from the rates in effect on September 30, 1992, if those rates exceed a
per-channel benchmark established by the FCC. Local franchising authorities also
are empowered to regulate the rates charged for installation and lease of the
equipment used by subscribers to receive the basic service tier and the
installation and monthly use of connections for additional television sets. The
FCC's regulations require franchising authorities to regulate these rates on the
basis of actual cost standards developed by the FCC.

A local franchising authority seeking to regulate basic service rates
must certify to the FCC that, among other things, it has adopted regulations
consistent with the FCC's rate regulation guidelines and criteria. If a local
franchising authority's certification is deficient or subsequently is revoked,
then the FCC is required to regulate the cable operator's basic service rates

until the local franchising authority is properly certified or until such time
as effective competition exists within the cable system's franchise area.

Under the initial regulations adopted by the FCC on April 1, 1993, the
FCC, in response to complaints by a subscriber, franchising authority or other
governmental entity, required cable operators to reduce the rates for tiers of
service other than the basic service tier ("CPST's") by up to 10 percent from
the rates in effect on September 30, 1992, if those rates were determined to
exceed a per-channel benchmark established by the FCC. In response to
complaints, the FCC also regulates, on the basis of actual cost, the rates for
equipment used only to receive these higher service tiers.

Only the FCC may regulate CPST's. Neither the FCC nor a local
franchising authority has jurisdiction over a cable system's rates for
programming provided on a per-channel or per-program basis.

As part of the implementation of the new regulations, the FCC froze all
rates in effect on April 5, 1993 until May 15, 1994, except rates for premium
and pay-per-view programming services and equipment. On February 22, 1994, the
FCC adopted rules that modify, among other things, the FCC's benchmark system
for determining the maximum rates for regulated services on cable systems not
subject to effective competition. In addition to adopting new, lower benchmark
levels, the FCC's regulations (i) allow local franchising authorities to require
cable operators to reduce the rate for the basic service tier by up to 17
percent from the rates in effect on September 30, 1992 if those rates exceed the
new per-channel benchmarks by that amount, and (ii) allow the FCC, in response
to a complaint, to require cable operators to reduce the rates for CPST's by up
to 17 percent from the rates in effect on September 30, 1992 if those rates
exceed the new per-channel benchmarks by that amount.

In late 1994, the FCC revised its regulations governing the manner in which
cable operators may charge subscribers for new cable programming services. The
FCC instituted a three-year flat fee mark-up plan for charges relating to new
channels of cable programming services in addition to the present formula for
calculating the permissible rate for new services. Commencing January 1, 1995,
operators may charge for new channels of cable programming services added after
May 14, 1994 at a rate of up to 20 cents per channel, but may not make
adjustments to monthly rates totaling more than $1.20 plus an additional 30
cents for programming license fees per subscriber over the first two years of
the three-year period for these new services. Cable operators may charge an
additional 20 cents in the third year only for channels added in that year plus
the costs for the programming. Cable operators electing to use the 20 cents per
channel adjustment may not also take a 7.5% mark-up on programming cost
increases, which is permitted under the FCC's current rate regulations. The FCC
indicated that it would request further comment on whether cable operators
should continue to receive the 7.5% mark-up on increases in license fees on
existing programming services.

Additionally, the FCC will permit cable operators to offer New Product
Tiers ("NPT") at rates which they elect so long as, among other conditions,
other channels that are subject to rate regulation are priced in conformity with
applicable regulations and cable operators do not remove programming services
from existing service tiers and offer them on the NPT.

Under the 1992 Cable Act, cable systems may not require subscribers to
purchase any service tier other than the basic tier as a condition of access to
video programming offered on a per-channel or per-program basis. Cable systems
are allowed a 10-year phase-in period to the extent necessary to implement the
required technology to facilitate such access. The FCC may grant extensions of
the 10-year time period, if deemed necessary.

The 1992 Cable Act also provides that the consent of most television
stations (except satellite-delivered television stations that were provided to
the cable television industry as of May 1, 1991, and noncommercial stations)
would be required before a cable system could retransmit their signals.
Alternatively, a television station could elect to exercise must-carry rights.
Must-carry rights entitle a local broadcast station to demand carriage on a
cable system, and a system generally is required to devote up to one-third of
its channel capacity for the carriage of local stations. Litigation challenging
the constitutionality of the mandatory broadcast signal carriage requirements of
the 1992 Cable Act is currently pending before the United States Supreme Court.
The must-carry rules will remain in effect during the pendency of the
proceedings before the United States Supreme Court. If must-carry
requirements withstand judicial review, the requirements may cause displacement
of more attractive programming. If retransmission consent requirements withstand
judicial review and broadcast stations require significant monetary payments for
cable system carriage of their signals, the cost of such signal carriage may
adversely affect the Partnership's operations.

In addition, the 1992 Cable Act (i) requires cable programmers under
certain circumstances to offer their programming to present and future
competitors of cable television such as multichannel multipoint distribution
services ("MMDS"), satellite master antenna systems ("SMATV") and direct
broadcast satellite system operators; (ii) prohibits new exclusive contracts
with program suppliers without FCC approval; (iii) bars municipalities from
granting exclusive franchises and from unreasonably refusing to grant additional
competitive franchises; (iv) permits municipal authorities to operate a cable
system without a franchise; (v) regulates the ownership by cable operators of
other media such as MMDS and SMATV; (vi) bars, subject to several stated
exceptions, cable operators from selling or transferring ownership in a cable
system for a three-year period following the acquisition or initial construction
of the system; and (vii) prohibits a cable operator from charging a customer for
any service or equipment that the subscriber has not affirmatively requested.

In response to the 1992 Cable Act, the FCC has imposed or will impose
new regulations in the areas of customer service, technical standards,
compatibility with other consumer electronic equipment such as "cable ready"
television sets and video cassette recorders, equal employment opportunity,
privacy, rates for leased access channels, obscene or indecent programming,
limits on national cable system ownership concentration, standards for limiting
the number of channels that a cable television system operator could program
with programming services controlled by such operator and disposition of a
customer's home wiring.

The 1992 Cable Act and subsequent FCC rulings have generally increased
the administrative and operational expenses of cable television systems as a
result of additional regulatory oversight by the FCC and local franchise
authorities. There have been several lawsuits filed by cable operators and
programmers in federal court challenging various aspects of the 1992 Cable Act.
The litigation concerning the must-carry rules is described above. Appeals also
have been filed in connection with litigation resulting from the FCC's rate
regulation rulemaking decisions. The Partnership cannot determine at this time
the outcome of pending FCC rulemakings, the litigation described herein, or the
impact of any adverse judicial or administrative decisions on the Partnership's
systems or business.

Other Regulatory Developments In November 1991, the FCC released a
Report and Order in which it concluded, among other things, that the 1984 Cable
Act and the FCC's regulatory cross-ownership restrictions do not prohibit
interexchange carriers (i.e., long distance telephone companies) from acquiring
cable television systems or entering into joint ventures with cable operators in
areas where such interexchange carriers provide their long

distance telephone services. The FCC also concluded that a local exchange
carrier (i.e., the local telephone company) that provides a common carrier-based
system to distribute video programming to subscribers and a third party
programmer using such common carrier services are not required by federal law to
obtain a cable television franchise from the local franchising authority in
order to provide such video programming services to the public. The FCC's
decision described in the preceding sentence has been appealed and these appeals
are currently pending.

In 1989, the FCC issued new syndicated exclusivity and network
non-duplication rules which enable local television broadcasters to compel cable
television operators to delete certain programming on distant broadcast signals.
Those rules took effect January 1, 1990. Under the rules, all television
broadcasters, including independent stations, can compel cable television
operators to delete syndicated programming from distant signals if the local
broadcaster negotiated exclusive rights to such programming. Local network
affiliates may insist that a cable television operator delete a network
broadcast on a distant signal. The rules made certain distant signals a less
attractive source of programming for the Partnership's systems, since much of
such distant signals' programming may have to be deleted.

The FCC currently regulates the rates and conditions imposed by public
utilities for use of their poles, unless, under the Federal Pole Attachments
Act, state public service commissions are able to demonstrate that they regulate
the cable television pole attachment rates. In the absence of state regulation,
the FCC administers pole attachment rates through the use of a formula which it
has devised. The validity of this FCC function was upheld by the United States
Supreme Court.

THE 1996 ACT

On February 8, 1996, the Telecommunications Act of 1996 (the "1996
Act") was enacted which dramatically changed federal telecommunications laws and
the future competitiveness of the industry. Many of the changes called for by
the 1996 Act will not take effect until the FCC issues new regulations which, in
some cases, may not be completed for a few years. Because of this, the full
impact of the 1996 Act on the Partnership's operations cannot be determined at
this time. A summary of the provisions impacting the cable television industry,
more specifically those impacting the Partnership's operations, follows:

CPST Rate Regulation FCC regulation of rates for CPST's has been
eliminated for small cable systems served by small companies. Small cable
systems are those having 50,000 or fewer subscribers served by companies with
fewer than one percent of national cable subscribers (approximately 600,000).
All of the Partnership's cable systems qualify as small cable systems. Basic
tier rates remain subject to regulation by the local franchising authority under
most circumstances until effective competition exists. The 1996 Act expands the
definition of effective competition to include the offering of video programming
services directly to subscribers in a franchised area by the local exchange
carrier, its affiliates, or any multichannel video programming distributor which
uses the facilities of the local exchange carrier. No penetration criteria
exists that triggers the presence of effective competition under these
circumstances.

Telephone Companies The 1996 Act allows telephone companies to offer
video programming directly to customers in their service areas immediately upon
enactment. They may provide video programming as a cable operator fully subject
to the 1996 Act, or a radio-based multichannel programming distributor not
subject to any provisions of the 1996 Act or through non-franchised "open video
systems" offering non-discriminatory capacity to unaffiliated programmers,
subject to selected provisions of the 1996 Act. Although Management's opinion is
that the probability of competition from telcos in
12

rural areas is unlikely in the near future, there are no assurances such
competition will not materialize.

The 1996 Act encompasses various other aspects of providing cable
television service including prices for equipment, discounting of rates to
multiple dwelling units, lifting of anti-trafficking restrictions,
cable-telephone cross ownership provisions, pole attachment rate formulas, rate
uniformity, program access, scrambling and censoring of PEG and leased access
channels.

Copyright Cable television systems are subject to federal copyright
licensing, covering carriage of television broadcast signals. In exchange for
paying a percentage of their revenues to a federal copyright royalty pool, cable
television operators obtain a compulsory license to retransmit copyrighted
materials from broadcast signals. Existing Copyright Office regulations require
that compulsory copyright payments be calculated on the basis of revenue derived
from any service tier containing broadcast retransmission. Although the FCC has
no formal jurisdiction over this area, it has recommended to Congress to
eliminate the compulsory copyright scheme altogether. The Copyright Office has
similarly recommended such a repeal. Without the compulsory license, cable
television operators would need to negotiate rights from the copyright owners
for each program carried on each broadcast station in each cable system's
channel lineup. Such negotiated agreements could increase the cost to cable
television operators of carrying broadcast signals. Thus, given the uncertain
but possible adoption of this type of copyright legislation, the nature or
amount of the Partnership's future payments for broadcast signal carriage cannot
be predicted at this time.

Local Regulation Cable television systems are generally operated
pursuant to franchises, permits or licenses issued by a municipality or other
local government entity. Each franchise generally contains provisions governing
fees to be paid to the franchising authority, sale or transfer of the franchise,
territory of the franchise, design and technical performance of the system, use
and occupancy of public streets and number and types of cable television
services provided. Franchises are usually issued for fixed terms and must
periodically be renewed. There can be no assurance that the franchises for the
Partnership's systems will be renewed as they expire, although the Partnership
believes that its cable systems generally have been operated in a manner that
satisfies the standards of the 1984 Cable Act, as amended by the 1992 Cable Act,
for franchise renewal. In the event the franchises are renewed, the Partnership
cannot predict the impact of any new or different conditions that might be
imposed by the franchising authorities in connection with such renewals.

Summary The foregoing does not purport to be a summary of all present
and proposed federal, state and local regulations and legislation relating to
the cable television industry. Other existing federal legislation and
regulations, copyright licensing and, in many jurisdictions, state and local
franchise requirements are currently the subject of a variety of judicial
proceedings, legislative hearings and administrative and legislative proposals
which could change, in varying degrees, the manner in which cable television
systems operate. Neither the outcome of these proceedings nor their impact upon
the cable television industry or the Partnership can be predicted at this time.

The Partnership expects to adapt its business to adjust to the changes
that may be required under any scenario of regulation. At this time, the
Partnership cannot assess the effects, if any, that regulation may have on the
Partnership's operations and potential appreciation of its Systems. There can be
no assurance, however, that the final form of regulation will not have a
material adverse impact on partnership operations.

ITEM 2. PROPERTIES

The Partnership's cable television systems are located in and around
Brenham and Bay City, Texas and Camano Island, Sequim, Stanwood, and Bayview,
Washington. The principal physical properties of the Systems consist of system
components (including antennas, coaxial cable, electronic amplification and
distribution equipment), motor vehicles, miscellaneous hardware, spare parts and
real property, including office buildings and headend sites and buildings. The
Partnership's cable plant passed approximately 30,990 homes as of December 31,
1995. Management believes that the Partnership's plant passes all areas which
are currently economically feasible to service. Future line extensions depend
upon the density of homes in the area as well as available capital resources for
the construction of new plant. (See Part II. Item 7. Liquidity and Capital
Resources.)

In February 1996, the Partnership amended its term loan agreement
increasing its overall credit limit to $35,000,000. Terms of the credit
agreement provide for a $32,000,000 term loan payable in graduating quarterly
installments beginning September 30, 1996, and a $3,000,000 revolving credit
facility converting to a term loan on February 1, 1999 with graduating quarterly
installments of principal. Both facilities mature June 30, 2004.

As of the date of this filing $26,400,000 was outstanding under the
amended term loan facility. The incremental borrowing was used to acquire two
cable systems serving the city of Vidalia, Georgia and surrounding areas (the
"Vidalia systems") and to pay certain transaction costs. The aggregate purchase
price for the Vidalia systems was $10,247,000. Of the total purchase price
$9,620,625 was paid up front and $326,375 was deposited into an escrow account
to be paid no later than July 1, 1996 net of certain post-closing adjustments.
The balance of the purchase price of $300,000 represents a non-interest bearing
unsecured seller note payable September 1, 1996. The Vidalia systems serve a
total of 6,400 basic subscribers.

The Partnership is currently negotiating the purchase of additional
cable systems to be financed by the remaining credit available under its bank
loan agreement. As of this date, no definitive purchase agreements have been
signed.

ITEM 3. LEGAL PROCEEDINGS

None.

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

(a) There is no established public trading market for the
Partnership's units of limited partnership interest.

(b) The approximate number of equity holders as of December 31,
1995, is as follows:

Limited Partners: 2,906

General Partners: 2

(c) During 1995, the Partnership made cash distributions of
$496,895 to the limited partners and $5,019 to the Managing General Partner. The
limited partners have received in the aggregate in the form of cash
distributions $2,983,120 on total initial contributions of $24,893,000 as of
December 31, 1995. As of December 31, 1995, the Partnership had repurchased
$57,000 in limited partnership units ($500 per unit). Future distributions
depend upon results of operations, leverage ratios, and compliance with
financial covenants required by the Partnership's lender, but are expected to
remain at their current level.

ITEM 6. SELECTED FINANCIAL DATA

Years ended December 31,
---------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- -------
SUMMARY OF OPERATIONS:

Revenue $ 8,526,053 $ 7,757,306 $ 6,768,601 $ 6,016,984 $ 5,503,658
Operating income (loss) 40,080 (91,965) (713,339) (1,237,271) (1,525,006)
Loss on disposal of
assets (17,626) 0 (43,013) (31,583) 0
Net loss (1,205,316) (1,265,325) (2,014,094) (2,493,393) (3,060,939)
Net loss per limited
partner unit
(weighted average) .. (24) (25) (40) (50) (62)
Cumulative tax losses
per limited partner
unit (405) (415) (425) (433) (379)

Total assets $ 14,520,969 $ 17,549,748 $ 20,172,231 $ 18,640,643 $ 22,250,905
Notes payable 16,056,381 17,537,318 18,465,537 14,547,895 15,007,854
Total liabilities 17,149,665 18,461,214 19,316,433 15,268,766 15,864,312
General partners'
deficit (238,836) (221,764) (204,092) (178,931) (148,974)
Limited partners'
(deficit)capital (2,389,860) (689,702) 1,059,890 3,550,808 6,535,567
Distributions per
limited partner unit 10 10 10 10 10
Cumulative distribu-
tions per limited
partner unit 60 50 40 30 20

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

RESULTS OF OPERATIONS

1995 AND 1994

Total revenue reached $8,526,053 for the year ended December 31, 1995,
representing an increase of approximately 10% over 1994. This is mainly due to
the launch of tier service in the Camano, WA system and rate increases placed
into effect April 1995. Of the 1995 revenue, $5,994,967 (70%) is derived from
subscriptions to basic service, $740,233 (9%) from subscriptions to premium
services, $591,089 (7%) from subscriptions to tier services, $246,083 (3%) from
installation charges, $301,599 (3%) from service maintenance revenue and
$652,082 (8%) from other sources.

The following table displays historical average rate information for
various services offered by the Partnership's systems (amounts per subscriber
per month):

1995 1994 1993 1992 1991
---- ---- ---- ---- ----

Basic Rate $ 21.80 $ 20.90 $ 19.90 $ 19.20 $ 18.61
Tier Rate 6.85 5.75 5.75 4.60 4.26
HBO Rate 10.65 10.25 10.25 10.68 10.68
Cinemax Rate 8.15 8.15 8.15 9.25 9.12
Showtime Rate 10.20 9.40 9.70 9.85 9.85
Movie Channel Rate 9.25 8.95 8.95 9.43 9.43
Disney Rate 7.50 7.50 8.30 8.60 8.60
Additional
Outlet Rate -- -- -- 3.15 3.15
Service Contract
Rate 2.85 2.80 3.00 -- --

Operating expenses totaled $814,106 for the year ended December 31,
1995, representing an increase of approximately 10% over 1994. The increase is
primarily attributable to higher system maintenance expense and increased salary
and benefit costs. Salary and benefit costs are the major component of operating
expenses. Employee wages are reviewed annually, and in most cases, increased
based on cost of living adjustments and other factors. Therefore, management
expects the trend of increases in operating expense to continue.

General and administrative expenses totaled $2,035,931 for the year
ended December 31, 1995, representing an increase of approximately 8% over 1994.
This is mainly due to increased salary and benefit costs, and increases in
revenue based expenses, such as franchise fees and management fees. Significant
administrative expenses are based on Partnership revenues (franchise fees,
copyright fees and management fees). Therefore, as the Partnership's revenues
increase, the trend of increased administrative expenses is expected to
continue.

Programming expenses totaled $1,952,044 for the year ended December 31,
1995, representing an increase of approximately 26% over 1994. This is due to
increased costs charged by various program suppliers, as well as the addition of
new channels. Programming expenses mainly consist of payments made to suppliers
of various cable programming services. As these costs are based on the number of
subscribers served, future subscriber increases will cause the trend of
programming expense increases to continue. Moreover, rate increases

from program suppliers, as well as new fees due to the launch of
additional channels, will contribute to the trend of increased programming
costs.

Depreciation and amortization expense remained consistent with the prior year
due to certain assets becoming fully depreciated during the year offset by fixed
asset purchases.

Interest expense for the year ended December 31, 1995 increased approximately 5%
as compared to 1994. The Partnership's average bank debt balance decreased from
approximately $17,994,000 during 1994 to $16,797,000 during 1995 mainly due to
scheduled principal repayments. The Partnership's effective interest rate during
1995 was approximately 7.35% as compared to a rate of approximately 6.53% during
1994.

The operating losses incurred by the Partnership are historically a result of
significant non-cash charges to income for depreciation and amortization. Prior
to the deduction for these non-cash items, the Partnership has generated
positive operating income, which has increased in each year in the three year
period ending December 31, 1995. Management anticipates that this trend will
continue, and that the Partnership will continue to generate net operating
losses after depreciation and amortization until a majority of the Partnership's
assets are fully depreciated.

1994 AND 1993

Total revenue reached $7,757,306 for the year ended December 31, 1994,
representing an increase of approximately 15% over 1993. This is mainly due to
the acquisition of the Bayview, WA System in September 1993. Additionally,
increases in revenue are attributable to rate increases placed into effect in
1994, a 3% increase in basic subscribers, increases in advertising revenue and
increased service maintenance revenue offset by a decrease in additional outlet
income. Of the 1994 revenue, $5,576,881 (72%) is derived from subscriptions to
basic service, $726,732 (9%) from subscriptions to premium services, $367,121
(5%) from subscriptions to tier services, $252,031 (3%) from installation
charges, $284,163 (4%) from service maintenance revenue and $550,378 (7%) from
other sources.

Operating expenses totaled $741,435 for the year ended December 31,
1994, representing an increase of approximately 11% over 1993. The increase is
partially due to the additional salary and benefit costs associated with the
Bayview acquisition

General and administrative expenses totaled $1,882,548 for the year
ended December 31, 1994, representing an increase of approximately 12% over
1993. This is mainly due to franchise fees related to the Bayview system
acquired in 1993, increases in discretionary incentive compensation during the
current year, and increases in revenue based expenses such as other franchise
fees and management fees

Programming expenses totaled $1,543,944 for the year ended December 31,
1994, representing an increase of approximately 29% over 1993. This is due to
increased costs charged by various program suppliers, and costs related to
services offered in the Bayview, WA System

Depreciation and amortization expense decreased approximately 6% as
compared to 1993. Decreases due to certain assets being fully amortized were
partially offset by increases due to fixed assets and intangibles acquired with
the purchase of the Bayview, WA System.

Interest expense for the year ended December 31, 1994 decreased
approximately 7% as compared to 1993. The Partnership's average bank debt
balance increased from approximately $16,492,000 during 1993 to $17,994,000

during 1994 mainly due to a borrowing to finance the acquisition of the Bayview,
WA System. The Partnership's effective interest rate during 1994 was
approximately 6.53%, as compared to a rate of approximately 7.64% during 1993.

EFFECTS OF REGULATION

On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Act"). The 1992 Act and
subsequent revisions and rulemakings substantially re-regulated the cable
television industry. The regulatory aspects of the 1992 Act included giving the
local franchising authorities and the FCC the ability to regulate rates for
basic services, equipment charges and additional CPST's when certain conditions
were met. All of the Partnership's cable systems were potentially subject to
rate regulation. The most significant impact of rate regulation was the
inability to raise rates for regulated services as costs of operation rose
during an FCC imposed rate freeze from April 5, 1993 to May 15, 1994. This has
contributed to operating margins before depreciation and amortization declining
from 48% for the twelve months ended December 31, 1993 to 46% for the same
period in 1994.

On February 8, 1996, the Telecommunications Act of 1996 (the 1996 Act)
became law. The 1996 Act will eliminate all rate controls on CPST's of small
cable systems, defined by the 1996 Act as systems serving fewer than 50,000
subscribers owned by operators serving fewer than 1% of all subscribers in the
United States (approximately 600,000 subscribers). All of the Partnership's
cable systems qualify as small cable systems. Many of the changes called for by
the 1996 Act will not take effect until the FCC issues new regulations, a
process that could take from several months to a few years depending on the
complexity of the required changes and the statutory time limits. Because of
this the full impact of the 1996 Act on the Partnership's operations cannot be
determined at this time.

As of the date of this filing, the Partnership has received
notification that local franchising authorities with jurisdiction over
approximately 22% of the Partnership's subscribers have elected to certify and
no formal requests for rate justifications have been received from franchise
authorities. Based on Management's analysis, the rates charged by these systems
are within the maximum rates allowed under the current FCC rate regulations.

LIQUIDITY AND CAPITAL RESOURCES

During 1995, the Partnership's primary source of liquidity was cash
flow from operations and credit available under the bank loan facility. The
Partnership generates cash on a monthly basis through the monthly billing of
subscribers for cable services. Losses from uncollectible accounts have not been
material. During 1995, cash generated from monthly billings was sufficient to
meet the Partnership's needs for working capital, capital expenditures
(excluding acquisitions) and debt service. Management's projections for 1996
show that the cash generated from monthly subscriber billings should be
sufficient to meet the Partnership's working capital needs, as well as meeting
the debt service obligations of its bank loan.

At December 31, 1995, the Partnership's term loan balance was
$16,056,381. As of the date of this filing, interest rates on the credit
facility were as follows: $7,300,000 fixed at 6.965% under the terms of an
interest rate swap agreement with the Partnership's lender expiring January 16,
1998 and $8,091,000 fixed at 6.025% under the terms of a self-amortizing
interest rate swap agreement with the Partnership's lender expiring September
16, 1996. The balance of $665,381 bears interest at the prime rate plus 3/8%
(currently 8.625%). The above rates include a margin paid to the lender based on
overall leverage and may increase or decrease as the Partnership's overall
leverage fluctuates.
18

At December 31, 1995, the Partnership was required under the terms of
its credit agreement to maintain certain financial ratios including a Senior
Debt to Annualized Cash Flow Ratio of 4.00 to 1 and an Annualized Cash Flow to
Pro Forma Debt Service Ratio of 1.15 to 1. At December 31, 1995, the Partnership
was in compliance with all covenants of its loan agreement.

ECONOMIC CONDITIONS

Historically, the effects of inflation have been considered in
determining to what extent rates will be increased for various services
provided. It is expected that the future rate of inflation will continue to be a
significant variable in determining rates charged for services provided, subject
to the provisions of the 1996 Act. Because of the deregulatory nature of the
1996 Act, the Partnership does not expect the future rate of inflation to have a
material adverse impact on operations.

CAPITAL EXPENDITURES

During 1995, the Partnership incurred approximately $600,000 in capital
expenditures. These expenditures included commercial insertion equipment and
channel additions in the Brenham, TX system, relocation of portions of
distribution plant and launch of an additional tier in the Camano, WA system as
well as line extensions in various systems.

Management estimates that the Partnership will spend approximately
$1,000,000 on capital expenditures during 1996. These expenditures include
distribution plant upgrades, line extensions, channel additions, commercial
insertion equipment and vehicle replacements in various systems.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The audited financial statements of the Partnership for the years ended
December 31, 1995, 1994 and 1993 are included as a part of this filing (see Item
14(a)(1) below).

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

The Partnership has no directors or officers. The Managing General
Partner of the Partnership is Northland Communications Corporation, a Washington
corporation; the Administrative General Partner of the Partnership is FN
Equities Joint Venture, a California general partnership.

Certain information regarding the officers and directors of Northland
is set forth below.

JOHN S. WHETZELL (AGE 54). Mr. Whetzell is the founder of Northland
Communications Corporation and has been President since its inception and a
Director since March 1982. Mr. Whetzell became Chairman of the Board of
Directors in December 1984. He also serves as President and Chairman of the
Board of Northland Telecommunications Corporation, Northland Cable Television,
Inc., Northland Cable Services Corporation, Cable Ad-Concepts, Inc., Cable
Television Billing, Inc. and Northland Cable News, Inc. He has been involved
with the cable television industry for over 21 years and currently serves as a
director on the board of the Cable Antenna Television Association, a national
cable television association. Between March 1979 and February 1982 he was in
charge of the Ernst & Whinney national cable television consulting services. Mr.
Whetzell first became involved in the cable television industry when he served
as the Chief Economist of the Cable Television Bureau of the Federal
Communications Commission (FCC) from May 1974 to February 1979. He provided
economic studies which support the deregulation of cable television both in
federal and state arenas. He participated in the formulation of accounting
standards for the industry and assisted the FCC in negotiating and developing
the pole attachment rate formula for cable television. His undergraduate degree
is in economics from George Washington University, and he has an MBA degree from
New York University.

JOHN E. IVERSON (AGE 59). Mr. Iverson is the Assistant Secretary of
Northland Communications Corporation and has served on the Board of Directors
since December 1984. He also serves on the Board of Directors of Northland
Telecommunications Corporation, Northland Cable Television, Inc., Northland
Cable Services Corporation, Cable Ad-Concepts, Inc. and Cable Television
Billing, Inc., Northland Investment Corporation and Northland Cable News, Inc.
He is currently a partner in the law firm of Ryan, Swanson & Cleveland,
Northland's general counsel. He is a member of the Washington State Bar
Association and American Bar Association and has been practicing law for more
than 33 years. Mr. Iverson is the past president and a current Trustee of the
Pacific Northwest Ballet Association. Mr. Iverson has a Juris Doctor degree from
the University of Washington.

ARLEN I. PRENTICE (AGE 58). Since July 1985, Mr. Prentice has served on
the Board of Directors of Northland Telecommunications Corporation, and he
served on the Board of Directors of Northland Communications Corporation between
March 1982 and July 1985. Since 1969, Mr. Prentice has been Chairman and Chief
Executive Officer of Kibble & Prentice, a diversified financial services firm.
Kibble & Prentice has four divisions, which include Estate Planning and Business
Insurance, Financial Planning and Investments, Employee Benefit Services, and
Property and Casualty Insurance. Mr. Prentice is a Chartered Life Underwriter,
Chartered Financial Consultant, past President of the Million Dollar Round Table
and a registered representative of Investment Management and Research. Mr.
Prentice has a Bachelor of Arts degree from the University of Washington.

MILTON A. BARRETT, JR. (AGE 61). Since April 1986, Mr. Barrett has
served on the Board of Directors of NTC. In 1995, he retired from the
Weyerhaeuser Company after thirty-four years of service. At the time of his
retirement,

Mr. Barrett was a Vice President of Sales and Marketing as well as
chairman of Weyerhaeuser's business ethics committee. Mr. Barrett is a graduate
of Princeton University magna cum laude and of the Harvard University Graduate
School of Business Administration.

RICHARD I. CLARK (AGE 38). Mr. Clark has served as Vice President of
Northland since March 1982. He has served on the Board of Directors of both
Northland Communications Corporation and Northland Telecommunications
Corporation since July 1985. He also serves as Vice President and Director of
Northland Cable Services Corporation, Cable Ad-Concepts, Inc., Cable Television
Billing, Inc., and Northland Cable News, Inc. Mr. Clark was elected Treasurer in
April 1987, prior to which he served as Secretary from March 1982. He also
serves as a registered principal, President and director of Northland Investment
Corporation. Mr. Clark was an original incorporator of Northland and is
responsible for the administration and investor relations activities of
Northland, including financial planning and corporate development. From July
1979 to February 1982, Mr. Clark was employed by Ernst & Whinney in the area of
providing cable television consultation services and has been involved with the
cable television industry for nearly 17 years. He has directed cable television
feasibility studies and on-site market surveys. Mr. Clark has assisted in the
design and maintenance of financial and budget computer programs, and he has
prepared documents for major cable television companies in franchising and
budgeting projects though the application of these programs. In 1979, Mr. Clark
graduated cum laude from Pacific Lutheran University with a Bachelor of Arts
degree in accounting.

ARTHUR H. MAZZOLA (AGE 73). Mr. Mazzola was elected to the Board of
Directors of Northland Telecommunications Corporation in April 1987. From 1985
to 1990, he was Senior Vice President of Benjamin Franklin Leasing Company,
Inc., an equipment lease financing company. Currently, Mr. Mazzola is serving as
Business Development Coordinator at Bank of California. Prior to his association
with Benjamin Franklin Leasing Company, Mr. Mazzola served as President of
Federal Capital Corporation and Trans Pacific Lease Co., Inc. Both of these
companies also engaged exclusively in equipment lease financing. Mr. Mazzola is
a past Board Chairman and current Trustee of the Pacific Northwest Ballet
Association and current Board Member of the Dante Alighieri Society. Mr. Mazzola
attended Boston University School of Business in 1943 where he studied
economics.

TRAVIS H. KEELER (AGE 55). Mr. Keeler was elected to the Board of
Directors of Northland Telecommunications Corporation in April 1987. Since May
1985, he has served as President of Overall Laundry Services, Inc., an
industrial laundry and garment rental firm. Mr. Keeler received a Bachelor of
Arts degree from the University of Washington in 1962.

JAMES E. HANLON (AGE 62). Since June 1985, Mr. Hanlon has been a
Divisional Vice President for Northland's Tyler, Texas regional office and is
currently responsible for the management of systems serving approximately 92,900
basic subscribers in Texas, Alabama and Mississippi. He also serves as Vice
President for Northland Cable News, Inc. Prior to his association with
Northland, he served as Chief Executive of M.C.T. Communications, a cable
television company, from 1981 to June 1985. His responsibilities included
supervision of the franchise, construction and operation of a cable television
system located near Tyler, Texas. From 1979 to 1981, Mr. Hanlon was President of
the CATV Division of Buford Television, Inc., and from 1973 to 1979, he served
as President and General Manager of Suffolk Cablevision in Suffolk County, New
York. Mr. Hanlon has also served as Vice President and Corporate Controller of
Viacom International, Inc. and Division Controller of New York Yankees, Inc. Mr.
Hanlon has a Bachelor of Science degree in Business Administration from St.
Johns University.
21

JAMES A. PENNEY (AGE 41). Mr. Penney is Vice President and General
Counsel for Northland. He has served as Vice President and General Counsel for
Northland Telecommunications Corporation, Northland Communications Corporation,
Northland Cable Television, Inc. and Northland Cable News, Inc. since September
1985 and was elected Secretary in April 1987. He also serves as Vice President
and General Counsel for Northland Cable Services Corporation, Cable Ad-Concepts,
Inc. and Cable Television Billing, Inc. He is responsible for advising all
Northland systems with regard to legal and regulatory matters, and also is
involved in the acquisition and financing of new cable systems. From 1983 until
1985 he was associated with the law firm of Ryan, Swanson & Cleveland,
Northland's general counsel. Mr. Penney holds a Bachelor of Arts Degree from the
University of Florida and a Juris Doctor from The College of William and Mary,
where he was a member of The William and Mary Law Review.

GARY S. JONES (AGE 38). Mr. Jones is Vice President of Northland. Mr.
Jones joined Northland in March 1986 as Controller and has been Vice President
of Northland Telecommunications Corporation, Northland Communications
Corporation and Northland Cable Television, Inc. since October 1986. He also
serves as Vice President for Northland Cable Services Corporation, Cable
Ad-Concepts, Inc., Cable Television Billing, Inc. and Northland Cable News, Inc.
Mr. Jones is responsible for cash management, financial reporting and banking
relations for Northland and is involved in the acquisition and financing of new
cable systems. Prior to joining Northland, Mr. Jones was employed as a Certified
Public Accountant with Laventhol & Horwath from 1980 to 1986. Mr. Jones received
his Bachelor of Arts degree in Business Administration with a major in
accounting from the University of Washington in 1979.

RICHARD J. DYSTE (AGE 50). Mr. Dyste has served as Vice
President-Technical Services of Northland Telecommunications Corporation,
Northland Communications Corporation and Northland Cable Television, Inc. since
April 1987. He also serves as Vice President for Cable Ad-Concepts, Inc. and
Northland Cable News, Inc. He is currently responsible for the management of
systems serving approximately 48,600 basic subscribers in California, Idaho,
Oregon and Washington. Mr. Dyste is the past president and a current member of
the Mount Rainier Chapter of the Society of Cable Television Engineers, Inc. Mr.
Dyste joined Northland in 1986 as an engineer and served as Operations
Consultant to Northland Communications Corporation from August 1986 until April
1987. From 1977 to 1985, Mr. Dyste owned and operated Bainbridge TV Cable. Mr.
Dyste is a graduate of Washington Technology Institute.

H. LEE JOHNSON (AGE 52). Mr. Johnson has served as Divisional Vice
President for Northland's Statesboro, Georgia regional office since March 1994.
Mr. Johnson is responsible for the management of systems serving over 50,400
subscribers located in South Carolina, North Carolina, Georgia and Mississippi.
He also serves as Vice President for Northland Cable News, Inc. Mr. Johnson has
been employed in the cable industry for nearly 27 years. Mr. Johnson has
attended and received certificates of completion from numerous industry training
seminars including courses sponsored by Jerrold Electronics, Scientific Atlanta,
and the Society of Cable Television Engineers. Mr. Johnson also received a
certificate of completion from CATA in public relations.

Certain information regarding the officers and directors of FN Equities
Joint Venture is set forth below:

MILES Z. GORDON (AGE 48). Mr. Gordon, President and Chief Executive
Officer of Financial Network Investment Corporation (FNIC), has a comprehensive
background in both the securities industry and securities law and regulation. In
1972, he joined the Los Angeles office of the Securities and Exchange Commission
(SEC), and in 1974 he was appointed Branch Chief of the Investment Company and
Investment Advisors Examination Division. Mr.

Gordon left the SEC in 1978 to practice law. Within one year, he accepted a
position as Vice President of a major national securities broker/dealer firm
headquartered in Long Beach, California. He subsequently accepted the presidency
of this firm in early 1980. In 1983, he helped form and became President and
Chief Executive Officer of FNIC. This leading firm is now one of the largest
independent broker/dealers in the United States. A graduate of Michigan State
University (and current board member of the Visitors for the College of Social
Science for MSU), Mr. Gordon received his Juris Doctorate from the University of
California at Los Angeles School of Law. He presently serves as Chairman of the
Securities Industry Association Independent Contractor Firms Committee. Mr.
Gordon was also Chairman and a member of the NASD District Business Conduct
Committee and a former member of the NASD Board of Governors. He is past
president of the California Syndication Forum and has also served on several
committees for the Securities Industry Association. Mr. Gordon has appeared on
television and radio programs, been featured in numerous magazine and newspaper
articles as an industry spokesperson, and is a frequent speaker at many industry
seminars and conventions.

JOHN S. SIMMERS (AGE 45). Mr. Simmers, Executive Vice President and
Chief Operating Officer of Financial Network Investment Corporation (FNIC), has
an extensive background in the securities industry. He began his career as a
reporter for Dunn and Bradstreet, then joined the National Association of
Securities Dealers (NASD) in 1974. Knowledgeable in all aspects of broker/dealer
regulations, operations, and products, Mr. Simmers was responsible for reviewing
the activities of member firms in twelve states. Mr. Simmers left the NASD seven
years later to accept a position as Vice President of the securities
broker/dealer, retail, wholesale and investment advisory subsidiaries of a
publicly held investment company headquartered in Long Beach, California. He
left this firm in 1983 to help form and become Executive Vice President and
Chief Operating Officer of FNIC. This full service broker/dealer firm has
offices located across the United States. Mr. Simmers is a graduate of Ohio
State University. He served on the Board of Directors of the California
Association of Independent Broker/Dealers and was a member of the Real Estate
Securities and Syndication Institute, the NASD District Business Conduct
Committee (District 2 South), and the International Association for Financial
Planning Due Diligence Steering Committee, which was organized to work toward
improving the quality and consistency of due diligence in the securities
industry. Mr. Simmers currently serves as a member of the NASD Direct
Participation Programs Committee, and has spoken at numerous seminars and
conventions.

HARRY M. KITTER (AGE 40). Mr. Kitter has served as Controller for
Financial Network Investment Corporation since 1983. Prior to this association
from 1981 to 1983 he was employed as the Los Angeles Internal Audit Manager at
the Pacific Stock Exchange. From 1978 to 1981, he was Senior Accountant at
Arthur Young & Co., C.P.A. He holds an MBA from the University of Pittsburgh and
a bachelor's degree in economics from Lafayette College, Easton, Pennsylvania.

ITEM 11. EXECUTIVE COMPENSATION

The Partnership does not have executive officers. However, compensation
was paid to the General Partner during 1995 as indicated in Note 3 to the Notes
to Financial Statements--December 31, 1995 (see Items 14(a)(1) and 13(a) below).
In addition, cash distribution were made to the Managing General Partner in 1995
(see Item 5(c) above).

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(A) CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Security ownership of
management as of December 31, 1995 is as follows:
23

AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP CLASS
-------------- ------------------- --------- -----

General Partner's Northland Communications (See Note A) (See Note A)
Interest Corporation
1201 Third Avenue
Suite 3600
Seattle, Washington 98101

General Partner's FN Equities Joint Venture (See Note B) (See Note B)
Interest 2780 Skypark Dr.
Suite 300
Torrance, California 90505

Note A: Northland has a 1% interest in the Partnership, which
increases to 20% interest in the Partnership at such time as the limited
partners have received 100% of their aggregate cash contributions plus a
preferred return. The natural person who exercises voting and/or investment
control over these interests is John S. Whetzell.

Note B: FN Equities Joint Venture has no interest (0%) in the
Partnership until such time as the limited partners have received 100% of their
aggregate cash contributions plus a preferred return, at which time FN Equities
Joint Venture will have a 5% interest in the Partnership. The natural person who
exercises voting and/or investment control over these interests is John S.
Simmers.

(B) CHANGES IN CONTROL. Northland has pledged its ownership interest as
Managing General Partner of the Partnership to its lender as collateral pursuant
to the terms of the term loan agreement between Northland and its lender.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

(A) TRANSACTIONS WITH MANAGEMENT AND OTHERS. The Managing General
Partner receives a management fee equal to 5% of the gross revenues of the
Partnership, not including revenues from any sale or refinancing of the
Partnership's Systems. The Managing General Partner also receives reimbursement
of normal operating and general and administrative expenses incurred on behalf
of the Partnership.

The Partnership has entered into operating management agreements with
affiliates managed by the General Partner. Under the terms of these agreements,
the Partnership or an affiliate serves as the executive managing agent for
certain cable television systems and is reimbursed for certain operating,
programming and administrative expenses.

The Partnership has also entered into an operating and management
agreement with NCTV, an affiliated partnership organized and managed by
Northland. Under the terms of this agreement, the Partnership serves as the
exclusive managing agent for one of NCTV's cable systems, and is reimbursed for
certain operating, administrative and programming costs.

Cable Television Billing, Inc. ("CTB"), an affiliate of Northland,
provides software installation and billing services to the Partnership's
Systems.
24

Northland Cable News, Inc. ("NCN"), an affiliate of Northland, provides
programming to the Partnership's systems.

Cable Ad-Concepts, Inc. ("CAC"), an affiliate of Northland, provides
the production and development of video commercial advertisements and
advertising sales support.

See Note 3 of the Notes to Financial Statements--December 31, 1995 for
disclosures regarding transactions with the General Partners and affiliates.

The following schedule summarizes these transactions:

FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1995 1994 1993
---------- ---------- ---------

Partnership management fees $421,821 $387,865 $338,462
Operating expense reimbursements 503,181 472,617 312,085
Software installation and
billing service fees to CTB 44,606 38,787 46,298
Programming fees to NCN 172,698 64,836 --
Reimbursements to CAC for
services 41,668 13,012 --
Reimbursements to affiliates
(net) 51,780 9,021 315,660
Amounts due to General Partner
and affiliates at year end 82,363 40,387 39,761

Management believes that all of the above transactions are on terms as
favorable to the Partnership as could be obtained from unaffiliated parties for
comparable goods or services.

As disclosed in the Partnership's Prospectus (which has been
incorporated by reference), certain conflicts of interest may arise between the
Partnership and the General Partners and their affiliates. Certain conflicts may
arise due to the allocation of management time, services and functions between
the Partnership and existing and future partnerships as well as other business
ventures. The General Partners have sought to minimize these conflicts by
allocating costs between systems on a reasonable basis. Each limited partner may
have access to the books and non-confidential records of the Partnership. A
review of the books will allow a limited partner to assess the reasonableness of
these allocations. The Agreement of Limited Partnership provides for any limited
partner owning 10% or more of the Partnership units to call a special meeting of
the Limited Partners, by giving written notice to the General Partners
specifying in general terms the subjects to be considered. In the event of a
dispute between the General Partners and Limited Partners which cannot be
otherwise resolved, the Agreement of Limited Partnership provides steps for the
removal of a General Partner by Limited Partners.

(B) CERTAIN BUSINESS RELATIONSHIPS. John E. Iverson, a
Director and Assistant Secretary of the Managing General Partner, is a partner
of the law firm of Ryan, Swanson & Cleveland, which has rendered and is expected
to continue to render legal services to the Managing General Partner and the
Partnership.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM

8-K

(A) DOCUMENTS FILED AS A PART OF THIS REPORT:

SEQUENTIALLY
NUMBERED
PAGE
--------

(1)...............................................................................FINANCIAL STATEMENTS:

Auditors' Report...........................................................____

Balance Sheets--December 31, 1995 and 1994.................................____

Statements of Operations for the years
ended December 31, 1995, 1994 and 1993.....................................____

Statements of Changes in Partners' Capital
(Deficit) for the years ended December 31,
1995, 1994 and 1993........................................................____

Statements of Cash Flows for the years
ended December 31, 1995, 1994 and 1993.....................................____

Notes to Financial Statements--December 31,
1995.......................................................................____

(2) EXHIBITS:

4.1 Forms of Amended and Restated Certificate of
Agreement of Limited Partnership(1)

10.1 Brenham Franchise(2)

10.1 Amendment to Brenham Franchise4

10.3 Washington County Franchise(2)

10.4 Island County Franchise (Amended)(2)

10.5 Bay City Franchise(2)

10.6 Sweeney Franchise(2)

10.7 West Columbia Franchise(2)

10.8 Wharton Franchise(2)

10.9 Tenneco Development Corp. Franchise(3)

10.10 Sequim Franchise(1)

10.11 Clallam County Franchise(1)

10.12 Credit Agreement with National Westminster
Bank USA(1)

10.13 First, Second and Third Amendments to Credit
Agreement with National Westminster Bank USA3

10.14 Amended and Restated Management Agreement with
Northland Communications Corporation3

10.15 Operating Management Agreement with Northland
Cable Television, Inc.3

10.16 Assignment and Transfer Agreement with
Northland Telecommunications Corporation dated
May 24, 19894

10.17 Agreement of Purchase and Sale with Sagebrush
Cable Limited Partnership5

10.18 Fourth, Fifth, Sixth and Seventh Amendments to
Credit Agreement with National Westminster
Bank USA6

10.19 Franchise Agreement with the City of Sequim,
WA effective as of May 6, 19927

10.20 Franchise Agreement with Clallam County, WA
effective as of May 29, 19927

10.21 Eighth Amendment to Credit Agreement with
National Westminster Bank USA dated as of May
28, 19927

10.22 Asset Purchase Agreement between Northland
Cable Properties Seven Limited Partnership
(Buyer) and Country Cable, Inc. (Seller)8

10.23 Amendment to Asset Purchase Agreement between
Northland Cable Properties Seven Limited
Partnership and Country Cable, Inc. dated
September 14, 19939

10.24 Commercial Loan Agreement between
Seattle-First National Bank and Northland
Cable Properties Seven Limited Partnership
dated September 24, 19939

10.25 Franchise Agreement with Island County, WA
dated October 4, 199310

10.26 Franchise Agreement with Skagit County -
Assignment and Assumption Agreement dated
September 27, 199310

10.27 Franchise Agreement with Whatcom County -
Assignment and Assumption Agreement dated
September 27, 199310

10.28 Amendment to Commercial Loan Agreement dated
March 15, 199410

10.29 Operating and Management Agreement with
Northland Cable Television, Inc. dated
November 1, 199411

10.30 Asset Purchase Agreement between Northland
Cable Properties Seven Limited Partnership and
Southland Cablevision, Inc.12

10.31 Asset Purchase Agreement between Northland
Cable Properties Seven Limited Partnership and
TCI Cablevision of Georgia, Inc.12
27

(1) Incorporated by reference from the Partnership's
Form S-1 Registration Statement declared effective
on August 6, 1987

(2) Incorporated by reference from the partnership's
Form 10-K Annual Report for the fiscal year ended
December 31, 1987.

(3) Incorporated by reference from the partnership's
Form 10-K Annual Report for the year ended December
31, 1988.

(4) Incorporated by reference from the partnership's
Form 10-Q Quarterly Report for the period ended June
30, 1989.

(5) Incorporated by reference from the partnership's
Form 10-Q Quarterly Report for the period ended
September 30, 1989.

(6) Incorporated by reference from the partnership's
Form 10-K Annual Report for the fiscal year ended
December 31, 1990.

(7) Incorporated by reference from the partnership's
Form 10-K Annual Report for the fiscal year ended
December 31, 1992.

(8) Incorporated by reference from the partnership's
Form 10-Q Quarterly Report for the period ended
March 31, 1993

(9) Incorporated by reference from the partnership's
Form 8-K dated September 27, 1993

(10) Incorporated by reference from the partnership's
Form 10-K Annual Report for the fiscal year ended
December 31, 1993.

(11) Incorporated by reference from the partnership's
Form 10-K Annual Report for the fiscal year ended
December 31, 1993.

(12) Incorporated by reference from the partnership's
Form 8-K dated March 1, 1996.

(B) REPORTS ON FORM 8-K. No Partnership reports on Form 8-K have been
filed during the fourth quarter of the fiscal year ended December 31, 1995.

SIGNATURES

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

NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP

By: NORTHLAND COMMUNICATIONS CORPORATION
(Managing General Partner)

By /s/ John S. Whetzell Date: 3/28/96
-------------------------------- ----------------
John S. Whetzell, President

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

SIGNATURES CAPACITIES DATE

/s/ John S. Whetzell Chief executive officer, principal 3/28/96
- --------------------- financial officer, and principal
John S. Whetzell accounting officer of registrant;
chief executive officer, principal
financial officer and chairman of the
board of directors of Northland
Communications Corporation

/s/ Richard I. Clark Director of Northland Communications 3/28/96
- --------------------- Corporation
Richard I. Clark

/s/ John E. Iverson Director of Northland Communications 3/28/96
- --------------------- Corporation
John E. Iverson

/s/ Gary S. Jones Vice President and principal accounting 3/28/96
- --------------------- officer of Northland Communications
Gary S. Jones Corporation

29
EXHIBITS INDEX

Sequentially
Exhibit Numbered
Number Description Page
- ------ ------------------------------------------------- ------------

10.32 Commercial Loan Agreement between Northland Cable
Properties Seven Limited Partnership and Seattle
First National Bank dated February 29, 1996 -----

27.0 Financial Data Schedule -----

NORTHLAND CABLE PROPERTIES SEVEN LIMITED
PARTNERSHIP

FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1994
TOGETHER WITH AUDITORS' REPORT

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of
Northland Cable Properties Seven Limited Partnership:

We have audited the accompanying balance sheets of Northland Cable Properties
Seven Limited Partnership (a Washington limited partnership) as of December 31,
1995 and 1994, and the related statements of operations, changes in partners'
capital (deficit) and cash flows for each of the three years in the period ended
December 31, 1995. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements 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 Northland Cable Properties
Seven Limited Partnership as of December 31, 1995 and 1994, and the results of
its operations and its cash flows for the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.

Arthur Anderson LLP

Seattle, Washington,
January 24, 1996

32
NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP

BALANCE SHEETS -- DECEMBER 31, 1995 AND 1994

ASSETS

1995 1994
------------ ------------

CASH $ 309,737 $ 263,051

ACCOUNTS RECEIVABLE 227,249 195,505

PREPAID EXPENSES 61,141 48,576

INVESTMENT IN CABLE TELEVISION
PROPERTIES:
Property and equipment, at cost 17,470,098 16,965,107
Less--accumulated depreciation (9,415,089) (7,789,802)
------------ ------------
8,055,009 9,175,305

Franchise agreements (net of
accumulated amortization of
$14,953,551 in 1995 and
$13,030,173 in 1994) 5,389,915 7,313,003
Organization costs (net of
accumulated amortization of
$1,481,974 in 1995 and
$1,470,962 in 1994) 33,583 41,295
Noncompetition agreements and
other intangibles (net of
accumulated amortization of
$4,098,958 in 1995 and
$4,035,345 in 1994) 258,096 321,201
Goodwill (net of accumulated
amortization of $36,690 in
1995 and $31,117 in 1994) 186,239 191,812
------------ ------------
Total investment in cable
television properties 13,922,842 17,042,616
------------ ------------

Total assets $ 14,520,969 $ 17,549,748
============ ============

LIABILITIES AND PARTNERS' DEFICIT

1995 1994
------------ ------------

LIABILITIES:
Accounts payable and accrued
expenses $ 733,096 $ 568,603
Due to General Partner and
affiliates 82,363 40,387
Deposits 41,793 53,285
Subscriber prepayments 236,032 261,621
Notes payable 16,056,381 17,537,318
------------ ------------
Total liabilities 17,149,665 18,461,214
------------ ------------

COMMITMENTS AND CONTINGENCIES (Note 7)

PARTNERS' DEFICIT:
General partners-
Contributed capital (24,113) (24,113)
Accumulated deficit (214,723) (197,651)
------------ ------------
(238,836) (221,764)
------------ ------------
Limited partners-
Contributed capital, net -
49,672 units in 1995 and
49,692 units in 1994 18,867,756 18,877,756
Accumulated deficit (21,257,616) (19,567,458)
------------ ------------
(2,389,860) (689,702)
------------ ------------
Total liabilities and
partners' deficit $ 14,520,969 $ 17,549,748
============ ============

The accompanying notes are an integral part of these balance sheets.

NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

1995 1994 1993
------ ------ -----

REVENUE $ 8,526,053 $ 7,757,306 $ 6,768,601
----------- ----------- -----------
EXPENSES:
Operating (including $90,110,
$80,331 and $234,655, net, to
affiliates in 1995, 1994 and
1993, respectively) 814,106 741,435 669,905
General and administrative
(including $927,555, $800,157 and
$806,011, net, to affiliates in
1995, 1994 and 1993,
respectively) 2,035,931 1,882,548 1,686,065
Programming (including $214,366,
$72,011 and $(5,456), net, to
(from) affiliates in 1995, 1994
and 1993, respectively) 1,952,044 1,543,944 1,195,968
Depreciation and amortization 3,683,892 3,681,344 3,930,002
----------- ----------- -----------
8,485,973 7,849,271 7,481,940
----------- ----------- -----------
Operating income (loss) 40,080 (91,965) (713,339)

OTHER INCOME (EXPENSE):
Interest income 7,394 2,020 2,571
Interest expense (1,235,164) (1,175,380) (1,260,313)
Loss on disposal of assets (17,626) -- (43,013)
----------- ----------- -----------
Net loss $(1,205,316) $(1,265,325) $(2,014,094)
=========== =========== ===========

ALLOCATION OF NET LOSS:
General partners $ (12,053) $ (12,653) $ (20,141)
=========== =========== ===========

Limited partners $(1,193,263) $(1,252,672) $(1,993,953)
=========== =========== ===========

NET LOSS PER LIMITED PARTNERSHIP UNIT $ (24) $ (25) $ (40)
=========== =========== ===========

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

NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

General Limited
Partners Partners Total
--------- ----------- -----------

BALANCE, December 31, 1992 $(178,931) $ 3,550,808 $ 3,371,877

Cash distributions ($10.00 per limited
partnership unit) (5,020) (496,965) (501,985)

Net loss (20,141) (1,993,953) (2,014,094)
--------- ----------- -----------
BALANCE, December 31, 1993 (204,092) 1,059,890 855,798

Cash distributions ($10.00 per limited
partnership unit) (5,019) (496,920) (501,939)

Net loss (12,653) (1,252,672) (1,265,325)
--------- ----------- -----------
BALANCE, December 31, 1994 (221,764) (689,702) (911,466)

Cash distributions ($10.00 per limited
partnership unit) (5,019) (496,895) (501,914)

Repurchase of limited partnership units -- (10,000) (10,000)

Net loss (12,053) (1,193,263) (1,205,316)
--------- ----------- -----------
BALANCE, December 31, 1995 $(238,836) $(2,389,860) $(2,628,696)
========= =========== ===========

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

NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

1995 1994 1993
----------- ----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss $(1,205,316) $(1,265,325) $ (2,014,094)
Adjustments to reconcile net loss to net cash provided
by operating activities-
Depreciation and amortization 3,683,892 3,681,344 3,930,002
Loss on disposal of assets 17,626 -- 43,013
(Increase) decrease in operating assets:
Accounts receivable (31,744) (16,932) (27,410)
Prepaid expenses (12,565) 5,986 33,973
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses 164,493 72,860 133,377
Due to General Partner and affiliates 41,976 626 (20,123)
Deposits (11,492) (16,620) (352)
Subscriber prepayments (25,589) 16,134 17,123
----------- ----------- ------------
Net cash provided by operating activities 2,621,281 2,478,073 2,095,509
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of cable system and other -- -- (4,104,411)
Purchase of property and equipment, net (577,646) (878,740) (1,212,428)
----------- ----------- ------------
Net cash used in investing activities (577,646) (878,740) (5,316,839)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable -- -- 18,783,166
Principal payments on notes payable (1,480,937) (928,219) (14,865,524)
Repurchase of limited partnership units (10,000) -- --
Loan fees (4,098) (5,023) (289,742)
Distributions to partners (501,914) (501,939) (501,985)
----------- ----------- ------------
Net cash (used in) provided by financing activities (1,996,949) (1,435,181) 3,125,915
----------- ----------- ------------
INCREASE (DECREASE) IN CASH 46,686 164,152 (95,415)

CASH, beginning of year 263,051 98,899 194,314
----------- ----------- ------------
CASH, end of year $ 309,737 $ 263,051 $ 98,899
=========== =========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 1,142,324 $ 1,140,484 $ 1,263,382
=========== =========== ============

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

NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1995

1. ORGANIZATION AND PARTNERS' INTERESTS:

Formation and Business

Northland Cable Properties Seven Limited Partnership (the Partnership), a
Washington limited partnership, was formed on April 17, 1987. The Partnership
was formed to acquire, develop and operate cable television systems. The
Partnership began operations on September 1, 1987, by acquiring a cable
television system in Brenham, Texas. Additional acquisitions include systems
serving seven cities and three unincorporated counties in southeast Texas; a
system serving Camano Island, Washington; two systems serving certain
unincorporated portions of Clallam County, Washington; and a system serving
certain portions of Skagit and Whatcom counties, Washington. The Partnership has
10 nonexclusive franchises to operate the cable systems for periods which will
expire at various dates through 2017.

Northland Communications Corporation is the Managing General Partner (the
General Partner) of the Partnership. Certain affiliates of the Partnership also
own and operate other cable television systems. In addition, the General Partner
manages cable television systems for other limited partnerships for which it is
General Partner.

FN Equities Joint Venture, a California joint venture, is the Administrative
General Partner of the Partnership.

Contributed Capital, Commissions and Offering Costs

The capitalization of the Partnership is set forth in the accompanying
statements of changes in partners' capital (deficit). No limited partner is
obligated to make any additional contribution to partnership capital.

The general partners purchased their 1% interest in the Partnership by
contributing $1,000 to partnership capital.

Pursuant to the Partnership Agreement, brokerage fees paid to an affiliate of
the Administrative General Partner and other offering costs are recorded as a
reduction of limited partners' capital. The Administrative General Partner
received a fee for providing certain administrative services to the Partnership.

Organization Costs

Organization costs originally included reimbursements of approximately $35,000
to the General Partner for costs incurred on the Partnership's behalf and fees
of $1,618,045 as compensation for selecting and arranging the purchase of the
cable television systems. Amounts recorded as organization costs have been
reduced subsequent to the sale of certain cable television systems.

-2-

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Depreciation

Depreciation of property and equipment is provided using the straight-line
method over the following estimated service lives:

Buildings 20 years
Distribution plant 10 years
Other equipment and leasehold improvements 5-20 years

Allocation of Cost of Purchased Cable Television Systems

The Partnership allocated the total contract purchase price of cable television
systems acquired as follows: first, to the estimated fair value of net tangible
assets acquired; then, to noncompetition agreements and other intangibles and
franchise agreements; then, any excess was allocated to goodwill.

Intangible Assets

Costs assigned to franchise agreements, organization costs, noncompetition
agreements and other intangibles and goodwill are being amortized using the
straight-line method over the following estimated useful lives:

Franchise agreements 10-25 years
Organization costs 5 years
Noncompetition agreements and
other intangibles 5-8 years
Goodwill 40 years

Revenue Recognition

The Partnership recognizes revenue in the month service is provided to customers
and accounts for advance payments on services to be rendered as subscriber
prepayments.

Reclassifications

Certain reclassifications have been made to conform prior years' data with the
current year presentation.

Estimates Used in Financial Statement Presentation

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and the 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.

38
-3-

3. TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES:

Management Fees

The General Partner receives a fee for managing the Partnership equal to 5% of
the gross revenues of the Partnership, excluding revenues from the sale of cable
television systems or franchises. The amount of management fees charged by the
General Partner was $421,821, $387,865 and $338,462 for 1995, 1994 and 1993,
respectively.

Income Allocation

All items of income, loss, deduction and credit are allocated 99% to the limited
partners and 1% to the general partners until the limited partners have received
aggregate cash distributions in an amount equal to aggregate capital
contributions as defined in the limited partnership agreement. Thereafter, the
general partners receive 25% and the limited partners are allocated 75% of
partnership income and losses. Cash distributions from operations will be
allocated in accordance with the net income and net loss percentages then in
effect. Prior to the General Partner's receiving cash distributions from
operations for any year, the limited partners must receive cash distributions in
an amount equal to the lesser of i) 50% of the limited partners' allocable share
of net income for such year or ii) the federal income tax payable on the limited
partners' allocable share of net income using the then highest marginal federal
income tax rate applicable to such net income. Any distributions other than from
cash flow, such as from the sale or refinancing of a system or upon dissolution
of the Partnership, will be determined according to contractual stipulations in
the Partnership Agreement.

The limited partners' total initial contributions to capital were $24,893,000
($500 per partnership unit). As of December 31, 1995, $2,983,120 ($50 per
partnership unit) had been distributed to the limited partners and the
Partnership has repurchased $57,000 of limited partnership units ($500 per
unit).

Reimbursements

The General Partner provides certain centralized services to the Partnership and
other affiliated entities. As set forth in the Partnership Agreement, the
Partnership reimburses the General Partner for the cost of those services
provided by the General Partner to the Partnership. These services include
engineering, marketing, management services, accounting, bookkeeping, legal,
copying, office rent and computer services.

The amounts billed to the Partnership for these services are based on the
General Partner's cost. The cost of certain services is charged directly to the
Partnership, based upon actual time spent by employees of the General Partner.
The cost of other services is allocated to the Partnership and other affiliated
entities based upon their relative size, revenue and other factors. The amounts
charged to the Partnership by the General Partner for these services were
$503,181, $472,617 and $312,085 for 1995, 1994 and 1993, respectively.

In 1995, 1994 and 1993, the Partnership paid software installation charges and
billing service fees to an affiliate, amounting to $44,606, $38,787 and $46,298,
respectively.

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The Partnership has entered into operating management agreements with affiliates
managed by the General Partner. Under the terms of these agreements, the
Partnership or an affiliate serves as the executive managing agent for certain
cable television systems and is reimbursed for certain operating, programming
and administrative expenses. The Partnership paid $51,780, $9,021 and $315,660,
net, under the terms of these agreements during 1995, 1994 and 1993,
respectively.

In September 1994, the Partnership began paying monthly program license fees to
Northland Cable News, Inc. (NCN), an affiliate of the General Partner, for the
rights to distribute programming developed and produced by NCN. Total license
fees paid to NCN during 1995 and 1994 were $172,698 and $64,836, respectively.

Cable Ad Concepts, Inc. (CAC), an affiliate of the General Partner, was formed
in 1993 and began operations in 1994. CAC was organized to assist in the
development of local advertising markets and management and training of local
sales staffs. CAC billed the Partnership $41,668 and $13,012 in 1995 and 1994,
respectively, for these services.

Due to General Partner and Affiliates

The liability to the General Partner and affiliates consists of the following:

December 31,
---------------------
1995 1994
------- ------

Management fees $39,894 $30,862
Reimbursable operating costs 49,158 47,357
Due from affiliates, net (6,689) (37,832)
------- -------
$82,363 $40,387
======= =======

4. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:

December 31,
----------------------------
1995 1994

Land and buildings $ 342,648 $ 342,648
Distribution plant 16,114,550 15,573,602
Other equipment 982,207 994,466
Leasehold improvements 14,389 11,903
Construction in progress 16,304 42,488
----------- -----------
17,470,098 16,965,107

Less--accumulated depreciation 9,415,089 7,789,802
----------- -----------
$ 8,055,009 $ 9,175,305
=========== ===========

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Replacements, renewals and improvements are capitalized. Maintenance and repairs
are charged to expense as incurred.

5. NOTES PAYABLE:

Notes payable consist of the following:

December 31,
---------------------------
1995 1994
----------- -----------

Term loan agreement, collateralized by a
first lien position on all present and
future assets of the Partnership.
Interest rates vary based on certain
financial covenants; currently 6.57%
(weighted average). Graduated principal
payments due quarterly until maturity on
December 31, 2000.
$16,056,381 $17,532,830

Other - 4,488
----------- -----------
$16,056,381 $17,537,318
=========== ===========

Annual maturities of notes payable after December 31, 1995 are as follows:

1996 $ 2,030,117
1997 2,583,785
1998 3,137,454
1999 3,875,678
2000 4,429,347
-----------
$16,056,381
===========

Under the term loan agreement, the Partnership has agreed to restrictive
covenants which require the maintenance of certain ratios, including an
Annualized Cash Flow to Pro Forma Debt Service Ratio of 1.15 to 1 and a Senior
Debt to Annualized Cash Flow Ratio of 4.00 to 1, among other restrictions. The
General Partner submits quarterly debt compliance reports to the Partnership's
creditor under this agreement.

The Partnership has entered into an interest rate swap agreement to reduce the
impact of changes in interest rates. Interest rate swap transactions generally
involve the exchange of fixed and floating interest payment obligations without
the exchange of the underlying principal amounts. At December 31, 1995, the
Partnership had outstanding one interest rate swap agreement with its bank,
having a notional principal amount of $8,091,000. This agreement effectively
changes the Partnership's interest rate exposure to a fixed rate of 4.40%, plus
an applicable margin based on certain financial covenants (the margin at
December 31, 1995 was 1.625%). The interest-rate swap agreement expires on
September 30, 1996. At December 31, 1995, no payment would have been required to
settle these agreements, based on information received from financial
institutions.

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The counterparty to the Partnership's interest rate swap agreements is the
Partnership's creditor. The Partnership is exposed to credit risk to the extent
of nonperformance by this counterparty; however, management believes the risk of
incurring losses due to credit risk is remote. The notional amount of the
instrument discussed above reflected the extent of involvement in the
instrument, but did not represent the Partnership's exposure to market risk.
Considerable judgment is required to develop the estimates of fair value; thus,
the estimates provided above are not necessarily indicative of the amounts that
could be realized in a current market exchange.

6. INCOME TAXES:

Income taxes have not been recorded in the accompanying financial statements
because they are obligations of the partners. The federal and state income tax
returns of the Partnership are prepared and filed by the General Partner.

The tax returns, the qualification of the Partnership as such for tax purposes,
and the amount of distributable partnership income or loss are subject to
examination by federal and state taxing authorities. If such examinations result
in changes with respect to the Partnership's qualification or in changes with
respect to the income or loss, the tax liability of the partners would likely be
changed accordingly.

Taxable income to the limited partners was approximately $497,000, $497,000 and
$405,000 for the three years in the period ended December 31, 1995, and is
different from that reported in the statement of operations due to the
difference in depreciation expense allowed for tax purposes and that amount
recognized under generally accepted accounting principles. There were no other
significant differences between taxable income and the net loss reported in the
statements of operations.

In general, under current federal income tax laws, a partner's allocated share
of tax losses from a partnership is allowed as a deduction on his individual
income tax return only to the extent of the partner's adjusted basis in his
partnership interest at the end of the tax year. Any excess losses over adjusted
basis may be carried forward to future tax years and are allowed as deductions
to the extent the partner has an increase in his adjusted basis in the
Partnership through either an allocation of partnership income or additional
capital contributions to the Partnership.

In addition, the current tax law does not allow a taxpayer to use losses from a
business activity in which he does not materially participate (a "passive
activity," e.g., a limited partner in a limited partnership) to offset other
income such as salary, active business income, dividends, interest, royalties
and capital gains. However, such losses can be used to offset other income from
passive activities. Disallowed losses can be carried forward indefinitely to
offset future income from passive activities. Disallowed losses can be used in
full when the taxpayer recognizes gain or loss upon the disposition of his
entire interest in the passive activity.

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7. COMMITMENTS AND CONTINGENCIES:

Lease Arrangements

The Partnership leases certain tower sites, office facilities and pole
attachments under leases accounted for as operating leases. Rental expense
included in operations amounts to $145,062, $134,702 and $127,073 in 1995, 1994
and 1993, respectively. Minimum lease payments to the end of the lease term are
as follows:

1996 $14,700
1997 10,500
1998 3,900
1999 3,900
2000 3,900
Thereafter 12,300
-------
$49,200
=======

Effects of Regulation

On October 5, 1992, Congress enacted the Cable Television Consumer Protection
and Competition Act of 1992 (the 1992 Act). On April 1, 1993, the Federal
Communications Commission (FCC) adopted rules implementing rate regulation and
certain other provisions of the 1992 Act, which became effective September 1,
1993. On February 22, 1994, the FCC adopted further rate regulation rules
requiring additional reductions, which became effective May 15, 1994, and
revised the benchmarks and formulas used to calculate such rates. Also in
February, the FCC's initial rules governing cost-of-service showings were
adopted with an effective date of May 15, 1994. Cable operators may pursue
cost-of-service showings to justify charging rates for regulated services in
excess of those established by the FCC in its benchmark regulatory scheme.

On May 5, 1995, the FCC announced the adoption of a simplified set of rate
regulation rules applicable to small cable systems, defined as a system serving
15,000 or fewer subscribers, owned by small companies, defined as a company
serving 400,000 or fewer subscribers. Under the FCC's definition, the
Partnership is a small company and each of the Partnership's cable systems are
small systems. Maximum permitted rates under these revised rules are dependent
on several factors including the number of regulated channels offered, the net
asset basis of plant and equipment used to deliver regulated services, the
number of subscribers served and a reasonable rate of return. It is management's
opinion that, in all material respects, the rates in effect in the Partnership's
cable systems are within the maximum allowable rates permitted under the FCC's
small cable system rules.

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On February 8, 1996, the Telecommunications Act of 1996 (the 1996 Act) became
law. The 1996 Act will eliminate all rate controls on cable programming service
tiers of small cable systems, defined by the 1996 Act as systems serving fewer
than 50,000 subscribers owned by operators serving fewer than 1% of all
subscribers in the United States (approximately 600,000 subscribers). All of the
Partnership's cable systems qualify as small cable systems. Many of the changes
called for by the 1996 Act will not take effect until the FCC issues new
regulations, a process that could take from several months to a few years
depending on the complexity of the required changes and the statutory time
limits. Because of this, the full impact of the 1996 Act on the Partnership's
operations cannot be determined at this time.

8. SUBSEQUENT TRANSACTION:

The Partnership has signed an asset purchase agreement to acquire a cable
television system serving approximately 2,400 subscribers in central Georgia.
The purchase price is $3,710,000, subject to certain adjustments at closing.
This purchase is anticipated to occur in February 1996.

Additionally, the Partnership is currently in the process of negotiating the
acquisition of cable television systems serving approximately 7,200 subscribers
in central Georgia for an approximate purchase price of $12,125,000. These
purchases are expected to be completed in February and April 1996.

The Partnership has reached an agreement with its current lender to increase its
current facility up to a maximum of $35,000,000 including a $32,000,000 term
loan and $3,000,000 revolving credit facility to finance these acquisitions and
provide future working capital.