##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K/A
 þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934.
 For the year ended December 31, 2004
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of
the
Securities Exchange Act of 1934.
 For the transition period from      to
 Commission File number 000-24175
 ATEL Capital Equipment Fund VII, L.P.
  California
    
    94-3248318(State or other jurisdiction of
    
    (I. R. S. Employerincorporation or organization)
    
    Identification No.)
 600 California Street, 6th Floor, San Francisco, California 94108-2733
 (415) 989-8800
 None
 Limited Partnership Units
 o þ
 o þ
 þ o
 o
  o o þ
 o þ
  o
   DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS  PART IItem 1. BUSINESSItem 2. PROPERTIESItem 3. LEGAL PROCEEDINGSItem 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIItem 5. MARKET FOR REGISTRANTS LIMITED PARTNERSHIP UNITS AND RELATED MATTERSItem 6. SELECTED FINANCIAL DATAItem 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSItem 7a. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISKItem 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAItem 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURESItem 9a. CONTROLS AND PROCEDURESPART IIIItem 10. DIRECTORS AND EXECUTIVE OFFICERSItem 11. EXECUTIVE COMPENSATIONItem 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTItem 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSItem 14. PRINCIPAL ACCOUNTING FEES AND SERVICESPART IVItem 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESSIGNATURESEXHIBIT 14.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2    Table of Contents  
 PART I
 
 Item 1. BUSINESS
 General Development of Business
    Narrative Description of Business
      Lessee
    
    Type of Equipment
    
    2004
    
    2003
    
    2002Transamerica Leasing International
    
    Transportation
    
    17%
    
    *
    
    *General Motors Corporation
    
    Materials Handling
    
    *
    
    *
    
    11%
 
 *
    
    Less than 10%.   2




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##### Table of Contents



Equipment Leasing Activities
  Purchase Price Excluding
    
    
    Percentage of TotalAsset Types
    
    Acquisition Fees
    
    
    AcquisitionsTransportation
    
    $
    135,842,930
    
    
    
    44.87
    %Manufacturing
    
    
    45,709,520
    
    
    
    15.10
    %Mining
    
    
    30,756,101
    
    
    
    10.16
    %Marine vessels
    
    
    22,335,250
    
    
    
    7.38
    %Materials handling
    
    
    16,318,944
    
    
    
    5.39
    %Office automation
    
    
    11,449,934
    
    
    
    3.78
    %Medical
    
    
    9,133,951
    
    
    
    3.02
    %Aircraft
    
    
    6,310,979
    
    
    
    2.08
    %Other *
    
    
    24,893,437
    
    
    
    8.22
    %$
    302,751,046
    
    
    
    100.00
    %
 
 *
    
    Individual amounts included in Other represent less than 2.5% of the total. Purchase Price Excluding
    
    
    Percentage of TotalIndustry of Lessee
    
    Acquisition Fees
    
    
    AcquisitionsTransportation, rail
    
    $
    73,779,368
    
    
    
    24.36
    %Municipalities
    
    
    45,050,058
    
    
    
    14.88
    %Transportation, other
    
    
    43,079,361
    
    
    
    14.23
    %Manufacturing, other
    
    
    41,295,886
    
    
    
    13.64
    %Electronics
    
    
    26,062,302
    
    
    
    8.61
    %Mining
    
    
    17,670,967
    
    
    
    5.84
    %Business services
    
    
    15,093,493
    
    
    
    4.99
    %Primary metals
    
    
    13,251,254
    
    
    
    4.38
    %Other *
    
    
    27,468,357
    
    
    
    9.07
    %$
    302,751,046
    
    
    
    100.00
    %
 
 *
    
    Individual amounts included in Other represent less than 2.5% of the total. 3




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##### Table of Contents



Excess ofOriginal
    
    
    
    
    
    
    Rents OverAsset Types
    
    Equipment Cost
    
    
    Sale Price
    
    
    Expenses *Mining
    
    $
    38,745,966
    
    
    $
    11,086,865
    
    
    $
    35,092,518Transportation
    
    
    27,172,154
    
    
    
    10,877,022
    
    
    
    17,864,099Marine vessels
    
    
    16,459,061
    
    
    
    3,056,241
    
    
    
    17,057,837Office automation
    
    
    15,535,652
    
    
    
    1,502,508
    
    
    
    16,797,085Medical
    
    
    12,809,895
    
    
    
    8,416,248
    
    
    
    6,772,818Aircraft
    
    
    10,982,354
    
    
    
    3,757,240
    
    
    
    10,798,091Other
    
    
    4,876,844
    
    
    
    560,000
    
    
    
    4,140,528Manufacturing
    
    
    4,759,285
    
    
    
    2,352,872
    
    
    
    4,020,720Materials handling
    
    
    4,708,142
    
    
    
    4,954,738
    
    
    
    2,576,835$
    136,049,353
    
    
    $
    46,563,734
    
    
    $
    115,120,531
 
 *
    
    Includes only those expenses directly related to the production of the related rents.  
 Item 2. PROPERTIES
  
 Item 3. LEGAL PROCEEDINGS
  Martin Marietta Magnesia Specialties Inc.:
  Cargill,Inc. / GWI Leasing Corporation:
   
 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  4




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PART II
 
 Item 5. MARKET FOR REGISTRANTS LIMITED PARTNERSHIP UNITS AND RELATED MATTERS
 Market Information
  Holders
  ERISA Valuation
   Dividends
      5




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2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Net income (loss) per Unit, based on
weighted average Units outstanding, as
restated
    
    $
    (0.16
    )
    
    $
    (0.35
    )
    
    $
    (0.25
    )
    
    $
    (0.00
    )
    
    $
    0.51Return of investment
    
    
    0.71
    
    
    
    1.35
    
    
    
    1.25
    
    
    
    1.00
    
    
    
    0.50Distributions per Unit, based on weighed
average Units outstanding
    
    
    0.55
    
    
    
    1.00
    
    
    
    1.00
    
    
    
    1.00
    
    
    
    1.01Differences due to timing of distributions
    
    
    (0.05
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.01
    )Actual distribution rates, per Unit
    
    $
    0.50
    
    
    $
    1.00
    
    
    $
    1.00
    
    
    $
    1.00
    
    
    $
    1.00
 
 Item 6. SELECTED FINANCIAL DATA
  2004
    
    2003
    
    2002
    
    2001
    
    2000Restated
    
    Restated
    
    Restated
    
    Restated
    
    RestatedGross revenues
    
    $
    15,124,737
    
    
    $
    22,658,497
    
    
    $
    25,942,773
    
    
    $
    30,646,525
    
    
    $
    41,463,919Net (loss) income
    
    $
    (1,755,553
    )
    
    $
    (3,970,096
    )
    
    $
    (2,542,454
    )
    
    $
    2,790,526
    
    
    $
    8,897,712Weighted average Units
outstanding
    
    
    14,995,550
    
    
    
    14,995,675
    
    
    
    14,996,050
    
    
    
    14,996,050
    
    
    
    14,996,050Net (loss) income
allocated to Limited
Partners
    
    $
    (2,437,517
    )
    
    $
    (5,210,007
    )
    
    $
    (3,746,338
    )
    
    $
    (8,997
    )
    
    $
    7,677,596Net (loss) income per
Unit, based on
weighted average Units
outstanding
    
    $
    (0.16
    )
    
    $
    (0.35
    )
    
    $
    (0.25
    )
    
    $
    (0.00
    )
    
    $
    0.51Distributions per
Unit, based on
weighted average Units
outstanding
    
    $
    0.55
    
    
    $
    1.00
    
    
    $
    1.00
    
    
    $
    1.00
    
    
    $
    1.01Total assets
    
    $
    56,032,775
    
    
    $
    74,831,963
    
    
    $
    116,420,193
    
    
    $
    136,197,015
    
    
    $
    158,093,434Non-recourse debt
    
    $
    467,709
    
    
    $
    1,586,403
    
    
    $
    4,577,308
    
    
    $
    9,971,225
    
    
    $
    15,452,741Other long-term debt
    
    $
    8,997,000
    
    
    $
    15,759,000
    
    
    $
    33,546,000
    
    
    $
    38,540,000
    
    
    $
    44,877,000Total Partners Capital
    
    $
    31,220,264
    
    
    $
    41,320,772
    
    
    $
    60,791,679
    
    
    $
    79,836,247
    
    
    $
    94,656,296
 
 Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Restated Financial Results
  6




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
    
    An amount of $518,000 to record an impairment charge in the fourth quarter of 2002
instead of the first quarter of 2003 when it was originally recorded. The effect of this
entry increases Impairment losses in 2002 and reduces Impairment losses in 2003 by the
corresponding amount.
    
    Revenue from operating leases was reduced in 2004 by $94,391 to reduce revenue recorded
associated with a utilization lease.
    
    Gain (loss) on sale of assets was increased by $53,550 to properly reflect a sale of an
asset in the fourth quarter of 2004.
    
    Taxes on income and franchise fees increased in 2002 by $105,000 to reflect a liability
related to taxes for the year.
    
    In 2004, equipment improvements of $573,339 were reclassified from Other assets to
Investments in equipment and leases, net.
   Capital Resources and Liquidity
   Total amount available under the financing arrangement
    
    $
    75,000,000Term loan to AFS as of December 31, 2004
    
    
    (2,027,636
    )Total available under the acquisition and warehouse facilities
    
    
    72,972,364Amount borrowed by the Partnership under the acquisition facility
    
    
    (13,500,000
    )Amounts borrowed by affiliated partnerships and limited liability
companies under the acquisition facility
    
    
    (17,000,000
    )Total remaining available under the acquisition and warehouse facilities
    
    $
    42,472,364
  7




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8




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Cash Flows
 2004 vs. 2003:
    2003 vs. 2002:
   9




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Results of Operations
   2004
    
    
    2003Transportation, rail
    
    
    30
    %
    
    
    22
    %Transportation, other
    
    
    26
    %
    
    
    21
    %Manufacturing
    
    
    14
    %
    
    
    21
    %Municipalities
    
    
    13
    %
    
    
    14
    %
  Utilization of equipment purchased byyear
    
    2004
    
    
    2003
    
    
    20022004
    
    
    
    
    
    
    
    
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    2002
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
  2004 vs. 2003:
 10




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2003 vs. 2002:
      Derivative Financial Instruments
   11




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Recent Accounting Pronouncements
    (i)
    
    Special purpose entities (SPEs) created prior to February 1, 2003. The Partnership must apply
either the provisions of FIN 46 or early adopt the provisions of FIN 46-R at the end of the
first interim or annual reporting period ending after December 15, 2003.(ii)
    
    Non-SPEs created prior to February 1, 2003. The Partnership is required to adopt FIN 46-R at the
end of the first interim or annual reporting period ending after March 15, 2004.(iii)
    
    All entities, regardless of whether a SPE, that were created subsequent to January 31, 2003. The
provisions of FIN 46 were applicable for variable interests in entities obtained after January
31, 2003.
  Critical Accounting Policies
  Equipment on operating leases:
  12




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Direct financing leases:
    Initial direct costs:
  Use of estimates:
  Asset valuation:
  
 Item 7a. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
     13




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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  14




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15




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ATEL CAPITAL EQUIPMENT FUND VII, L.P.
 BALANCE SHEETS
 DECEMBER 31, 2004 AND 2003
 (Restated)
 ASSETS
 2004
    
    
    2003Cash and cash equivalents
    
    $
    1,222,623
    
    
    $
    835,628Accounts receivable, net of allowance for
doubtful accounts of $540,880 in 2004 and
$524,880 in 2003
    
    
    1,286,342
    
    
    
    2,149,089Other assets
    
    
    53,445
    
    
    
    Investments in equipment and leases, net
    
    
    53,470,365
    
    
    
    71,847,246Total assets
    
    $
    56,032,775
    
    
    $
    74,831,963LIABILITIES AND PARTNERS CAPITALNon-recourse
debt
    
    $
    467,709
    
    
    $
    1,586,403Other long-term debt
    
    
    8,997,000
    
    
    
    15,759,000Line of credit
    
    
    13,500,000
    
    
    
    13,500,000Accounts payable and accruals:General Partner
    
    
    458,460
    
    
    
    481,818Other
    
    
    636,037
    
    
    
    755,573Accrued interest payable
    
    
    61,723
    
    
    
    36,929Interest rate swap contracts
    
    
    292,886
    
    
    
    886,207Unearned operating lease income
    
    
    398,696
    
    
    
    505,261Total liabilities
    
    
    24,812,511
    
    
    
    33,511,191Partners capital:Accumulated other comprehensive loss
    
    
    (287,766
    )
    
    
    (886,207
    )General Partner
    
    
    
    
    
    
    Limited Partners
    
    
    31,508,030
    
    
    
    42,206,979Total Partners capital
    
    
    31,220,264
    
    
    
    41,320,772Total liabilities and Partners capital
    
    $
    56,032,775
    
    
    $
    74,831,963
  16




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ATEL CAPITAL EQUIPMENT FUND VII, L.P.
 STATEMENTS OF OPERATIONS
 YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
 (Restated)
 2004
    
    
    2003
    
    
    2002Revenues:Leasing activities:Operating leases
    
    $
    14,706,918
    
    
    $
    20,083,732
    
    
    $
    25,631,019Direct financing leases
    
    
    618,823
    
    
    
    728,449
    
    
    
    1,378,498Gain (loss) on sale of assets
    
    
    (620,704
    )
    
    
    1,449,492
    
    
    
    (1,270,985
    )Interest income
    
    
    5,047
    
    
    
    4,563
    
    
    
    14,000Other
    
    
    414,653
    
    
    
    392,261
    
    
    
    190,24115,124,737
    
    
    
    22,658,497
    
    
    
    25,942,773Expenses:Depreciation of operating lease assets
    
    
    10,416,101
    
    
    
    15,220,612
    
    
    
    18,424,332Interest
    
    
    1,371,978
    
    
    
    1,916,785
    
    
    
    3,206,557Cost reimbursements to General Partner
    
    
    801,634
    
    
    
    849,984
    
    
    
    906,455Railcar maintenance
    
    
    689,450
    
    
    
    773,875
    
    
    
    712,235Equipment and incentive management fees to
General Partner
    
    
    634,486
    
    
    
    889,571
    
    
    
    947,568Impairment losses
    
    
    455,366
    
    
    
    4,772,639
    
    
    
    2,629,593Professional fees
    
    
    346,085
    
    
    
    176,812
    
    
    
    199,993Marine vessel maintenance
    
    
    323,993
    
    
    
    
    
    
    
    Provision for doubtful accounts
    
    
    313,892
    
    
    
    516,794
    
    
    
    285,000Insurance
    
    
    210,607
    
    
    
    141,513
    
    
    
    Equipment storage
    
    
    150,705
    
    
    
    215,749
    
    
    
    Taxes on income and franchise fees
    
    
    94,267
    
    
    
    128,178
    
    
    
    128,124Amortization of initial direct costs
    
    
    75,910
    
    
    
    284,612
    
    
    
    284,082Other
    
    
    995,816
    
    
    
    741,469
    
    
    
    761,28816,880,290
    
    
    
    26,628,593
    
    
    
    28,485,227Net loss
    
    $
    (1,755,553
    )
    
    $
    (3,970,096
    )
    
    $
    (2,542,454
    )Net loss:General Partner
    
    $
    681,964
    
    
    $
    1,239,911
    
    
    $
    1,203,884Limited Partners
    
    
    (2,437,517
    )
    
    
    (5,210,007
    )
    
    
    (3,746,338
    )$
    (1,755,553
    )
    
    $
    (3,970,096
    )
    
    $
    (2,542,454
    )Net loss per Limited Partnership unit
    
    $
    (0.16
    )
    
    $
    (0.35
    )
    
    $
    (0.25
    )Weighted average number of units outstanding
    
    
    14,995,550
    
    
    
    14,995,675
    
    
    
    14,996,050
  17




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ATEL CAPITAL EQUIPMENT FUND VII, L.P.
 STATEMENTS OF CHANGES IN PARTNERS CAPITAL
 YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
 (Restated)
 OtherCompreLimited Partners
    
    
    General
    
    
    hensiveUnits
    
    
    Amount
    
    
    Partner
    
    
    Loss
    
    
    TotalBalance December 31, 2001, as previously reported
    
    
    14,996,050
    
    
    $
    80,818,857
    
    
    $
    
    
    
    $
    (1,326,006
    )
    
    $
    79,492,851Cumulative effect of prior period adjustments (see Note 3)
    
    
    
    
    
    
    343,396
    
    
    
    
    
    
    
    
    
    
    
    343,396Balance December 31, 2001, as restated
    
    
    14,996,050
    
    
    
    81,162,253
    
    
    
    
    
    
    
    (1,326,006
    )
    
    
    79,836,247Distributions to Limited Partners ($1.00 per Unit)
    
    
    
    
    
    
    (14,999,876
    )
    
    
    
    
    
    
    
    
    
    
    (14,999,876
    )Distributions to General Partner
    
    
    
    
    
    
    
    
    
    
    (1,203,884
    )
    
    
    
    
    
    
    (1,203,884
    )Unrealized change in value of interest rate swap contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (298,354
    )
    
    
    (298,354
    )Net income (loss), as restated
    
    
    
    
    
    
    (3,746,338
    )
    
    
    1,203,884
    
    
    
    
    
    
    
    (2,542,454
    )Balance December 31, 2002, as restated
    
    
    14,996,050
    
    
    
    62,416,039
    
    
    
    
    
    
    
    (1,624,360
    )
    
    
    60,791,679Distributions to Limited Partners ($1.00 per Unit)
    
    
    
    
    
    
    (14,997,209
    )
    
    
    
    
    
    
    
    
    
    
    (14,997,209
    )Distributions to General Partner
    
    
    
    
    
    
    
    
    
    
    (1,239,911
    )
    
    
    
    
    
    
    (1,239,911
    )Limited partnership units repurchased
    
    
    (500
    )
    
    
    (1,844
    )
    
    
    
    
    
    
    
    
    
    
    (1,844
    )Unrealized change in value of interest rate swap contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    738,153
    
    
    
    738,153Net income (loss), as restated
    
    
    
    
    
    
    (5,210,007
    )
    
    
    1,239,911
    
    
    
    
    
    
    
    (3,970,096
    )Balance December 31, 2003, as restated
    
    
    14,995,550
    
    
    
    42,206,979
    
    
    
    
    
    
    
    (886,207
    )
    
    
    41,320,772Distributions to Limited Partners ($0.55 per Unit)
    
    
    
    
    
    
    (8,261,432
    )
    
    
    
    
    
    
    
    
    
    
    (8,261,432
    )Distributions to General Partner
    
    
    
    
    
    
    
    
    
    
    (681,964
    )
    
    
    
    
    
    
    (681,964
    )Unrealized change in value of interest rate swap contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    593,321
    
    
    
    593,321Reclassification adjustment for portion of swap liability
charged to net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,120
    
    
    
    5,120Net income (loss), as restated
    
    
    
    
    
    
    (2,437,517
    )
    
    
    681,964
    
    
    
    
    
    
    
    (1,755,553
    )Balance December 31, 2004, as restated
    
    
    14,995,550
    
    
    $
    31,508,030
    
    
    $
    
    
    
    $
    (287,766
    )
    
    $
    31,220,264
  18




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##### Table of Contents



ATEL CAPITAL EQUIPMENT FUND VII, L.P.
 STATEMENTS OF CASH FLOWS
 YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
 (Restated)
 2004
    
    
    2003
    
    
    2002Operating activities:Net loss
    
    $
    (1,755,553
    )
    
    $
    (3,970,096
    )
    
    $
    (2,542,454
    )Adjustment to reconcile net loss to net cash provided by
operating activities:Depreciation of operating lease assets
    
    
    10,416,101
    
    
    
    15,220,612
    
    
    
    18,424,332Amortization of initial direct costs
    
    
    75,910
    
    
    
    284,612
    
    
    
    284,082Impairment losses
    
    
    455,366
    
    
    
    4,772,639
    
    
    
    2,629,593Provision for doubtful accounts
    
    
    313,892
    
    
    
    516,794
    
    
    
    285,000(Gain) loss on sales of assets
    
    
    620,704
    
    
    
    (1,449,492
    )
    
    
    1,270,985Recognized portion of unrealized loss on interest rate swaps
    
    
    5,120
    
    
    
    
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    548,855
    
    
    
    1,161,897
    
    
    
    (568,946
    )Due from General Partner
    
    
    
    
    
    
    253,543
    
    
    
    (253,543
    )Other assets
    
    
    (53,445
    )
    
    
    10,019
    
    
    
    97,996Accounts payable, General Partner
    
    
    (23,358
    )
    
    
    481,818
    
    
    
    (580,916
    )Accounts payable, other
    
    
    (119,536
    )
    
    
    (101,886
    )
    
    
    346,861Accrued interest payable
    
    
    24,794
    
    
    
    (46,655
    )
    
    
    44,672Unearned operating lease income
    
    
    (106,565
    )
    
    
    (507,723
    )
    
    
    36,419Net cash provided by operating activities
    
    
    10,402,285
    
    
    
    16,626,082
    
    
    
    19,474,081Investing activities:Proceeds from sales of assets
    
    
    5,503,961
    
    
    
    15,724,456
    
    
    
    2,229,481Reduction of net investment in direct financing leases
    
    
    1,878,178
    
    
    
    2,021,859
    
    
    
    3,032,098Equipment improvement costs
    
    
    (573,339
    )
    
    
    
    
    
    
    Purchases of equipment on direct financing leases
    
    
    
    
    
    
    
    
    
    
    (3,052,582
    )Initial direct lease costs
    
    
    
    
    
    
    
    
    
    
    (60,922
    )Purchases of equipment on operating leases
    
    
    
    
    
    
    
    
    
    
    (3,959,522
    )Net cash provided by (used in) investing activities
    
    
    6,808,800
    
    
    
    17,746,315
    
    
    
    (1,811,447
    )Financing activities:Borrowings under line of credit
    
    
    21,500,000
    
    
    
    21,500,000
    
    
    
    19,500,000Repayments of borrowings under line of credit
    
    
    (21,500,000
    )
    
    
    (21,300,000
    )
    
    
    (10,300,000
    )Repayments of other long-term debt
    
    
    (6,762,000
    )
    
    
    (17,787,000
    )
    
    
    (15,094,000
    )Distributions to Limited Partners
    
    
    (8,261,432
    )
    
    
    (14,997,209
    )
    
    
    (14,999,876
    )Repayments of non-recourse debt
    
    
    (1,118,694
    )
    
    
    (3,394,879
    )
    
    
    (4,406,894
    )Distributions to General Partner
    
    
    (681,964
    )
    
    
    (1,239,911
    )
    
    
    (1,203,884
    )Proceeds of non-recourse debt
    
    
    
    
    
    
    1,489,905
    
    
    
    Repurchase of limited partnership units
    
    
    
    
    
    
    (1,844
    )
    
    
    Proceeds of other long-term debt
    
    
    
    
    
    
    
    
    
    
    10,100,000Net cash used in financing activities
    
    
    (16,824,090
    )
    
    
    (35,730,938
    )
    
    
    (16,404,654
    )
 19




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##### Table of Contents



ATEL CAPITAL EQUIPMENT FUND VII, L.P.
 STATEMENTS OF CASH FLOWS
(CONTINUED)
 YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
 (Restated)
 2004
    
    
    2003
    
    
    2002Net increase (decrease) in cash and cash equivalents
    
    
    386,995
    
    
    
    (1,358,541
    )
    
    
    1,257,980Cash and cash equivalents at beginning of year
    
    
    835,628
    
    
    
    2,194,169
    
    
    
    936,189Cash and cash equivalents at end of year
    
    $
    1,222,623
    
    
    $
    835,628
    
    
    $
    2,194,169Supplemental disclosures of cash flow information:Cash paid during the year for interest
    
    $
    1,347,184
    
    
    $
    1,963,440
    
    
    $
    3,161,885Schedule of non-cash transactions:Change in fair value of interest rate swaps contracts
    
    $
    593,321
    
    
    $
    738,153
    
    
    $
    (298,354
    )Offset of accounts receivable and debt service per
lease and debt agreement:Accrued interest payable
    
    $
    
    
    
    $
    (108,819
    )
    
    $
    (207,727
    )Non-recourse debt
    
    
    
    
    
    
    (1,085,931
    )
    
    
    (987,023
    )$
    
    
    
    $
    (1,194,750
    )
    
    $
    (1,194,750
    )Accounts receivable
    
    $
    
    
    
    $
    1,194,750
    
    
    $
    1,194,750
  20




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##### Table of Contents



ATEL CAPITAL EQUIPMENT FUND VII, L.P.
 NOTES TO FINANCIAL STATEMENTS
 DECEMBER 31, 2004
 (Restated)
 1. Organization and Limited Partnership matters:
       2. Summary of significant accounting policies:
 Basis of presentation:
  Use of estimates:
  Cash and cash equivalents:
  Accounts receivable:
  Equipment on operating leases:
  21




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##### Table of Contents



ATEL CAPITAL EQUIPMENT FUND VII, L.P.
 NOTES TO FINANCIAL STATEMENTS
 DECEMBER 31, 2004
 (Restated)
 2. Summary of significant accounting policies (continued):
 Initial direct costs:
  Income taxes:
   2004
    
    
    2003Financial statement basis of net assets, as restated
    
    $
    31,220,264
    
    
    $
    41,320,772Tax basis of net assets (unaudited)
    
    
    (33,380,850
    )
    
    
    (34,616,905
    )Difference
    
    $
    64,601,114
    
    
    $
    75,937,677
   2004
    
    
    2003
    
    
    2002Net loss per financial statements, as restated
    
    $
    (1,755,553
    )
    
    $
    (3,970,096
    )
    
    $
    (2,542,454
    )Reconciling item  impact due to restatement (Note 3)
    
    
    77,018
    
    
    
    (341,304
    )
    
    
    769,951Tax adjustments (unaudited):Adjustment to depreciation expense
    
    
    5,592,580
    
    
    
    3,927,717
    
    
    
    (9,817,508
    )Adjustments to lease revenues
    
    
    5,810,609
    
    
    
    (60,586
    )
    
    
    1,442,714Provision for doubtful accounts
    
    
    300,455
    
    
    
    516,794
    
    
    
    285,000Provision for losses
    
    
    (731,865
    )
    
    
    5,290,639
    
    
    
    2,111,593Net income (loss) per federal tax return (unaudited)
    
    $
    9,293,244
    
    
    $
    5,363,164
    
    
    $
    (7,750,704
    )
 Per unit data:
  22




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##### Table of Contents



ATEL CAPITAL EQUIPMENT FUND VII, L.P.
 NOTES TO FINANCIAL STATEMENTS
 DECEMBER 31, 2004
 (Restated)
 2. Summary of significant accounting policies (continued):
 Asset valuation:
    Credit risk:
  Derivative financial instruments:
      23




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##### Table of Contents



ATEL CAPITAL EQUIPMENT FUND VII, L.P.
 NOTES TO FINANCIAL STATEMENTS
 DECEMBER 31, 2004
 (Restated)
 2. Summary of significant accounting policies (continued):
 Revenue recognition:
 Direct financing leases
    Recent accounting pronouncements:
        24




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##### Table of Contents



ATEL CAPITAL EQUIPMENT FUND VII, L.P.
 NOTES TO FINANCIAL STATEMENTS
 DECEMBER 31, 2004
 (Restated)
 3. Restated financial results:
   
    
    An amount of $518,000 to record an impairment charge in the fourth quarter of 2002
instead of the first quarter of 2003 when it was originally recorded. The effect of this
entry increases Impairment losses in 2002 and reduces Impairment losses in 2003 by the
corresponding amount.
    
    Revenue from operating leases was reduced in 2004 by $94,391 to reduce revenue recorded
associated with a utilization lease.
    
    Gain (loss) on sale of assets was increased by $53,550 to properly reflect a sale of an
asset in the fourth quarter of 2004.
    
    Taxes on income and franchise fees increased in 2002 by $105,000 to reflect a liability
related to taxes for the year.
    
    In 2004, equipment improvements of $573,339 were reclassified from Other assets to
Investments in equipment and leases, net.
   25




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##### Table of Contents



ATEL
CAPITAL EQUIPMENT FUND VII, L.P.
 NOTES
TO FINANCIAL STATEMENTS
 DECEMBER
31, 2004
 (Restated)
 Restatement adjustments for years ended December 31:
 Adjustments to
    
    
    Adjustments to
    
    
    Adjustments to
    
    
    Cumulativenet loss
    
    
    net loss
    
    
    net loss
    
    
    adjustment(increase)
    
    
    (increase)
    
    
    (increase)
    
    
    priordecrease
    
    
    decrease
    
    
    decrease
    
    
    to January 1,2004
    
    
    2003
    
    
    2002
    
    
    2002Operating leases
    
    $
    (94,391
    )
    
    $
    
    
    
    $
    
    
    
    $
    Gain (loss) on sale of assets
    
    
    53,550
    
    
    
    
    
    
    
    
    
    
    
    Cost reimbursements to General Partner
    
    
    
    
    
    
    
    
    
    
    (47,040
    )
    
    
    1,467,920Impairment loss
    
    
    
    
    
    
    518,000
    
    
    
    (518,000
    )
    
    
    Taxes on income and franchise fees
    
    
    
    
    
    
    
    
    
    
    (105,000
    )
    
    
    Amortization of initial direct costs
    
    
    (36,177
    )
    
    
    (176,696
    )
    
    
    (99,911
    )
    
    
    (1,124,524
    )Net change in net income and in net loss
    
    $
    (77,018
    )
    
    $
    341,304
    
    
    $
    (769,951
    )
    
    $
    343,396Net change in net income and in net loss:General Partner
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Limited Partners
    
    
    (77,018
    )
    
    
    341,304
    
    
    
    (769,951
    )
    
    
    343,396$
    (77,018
    )
    
    $
    341,304
    
    
    $
    (769,951
    )
    
    $
    343,396Net change in net income and in net loss
per Limited Partnership Unit
    
    $
    (0.00
    )
    
    $
    0.02
    
    
    $
    (0.05
    )
    
    $
    0.02
 Balance Sheets (Condensed) as of December 31:
 2004
    
    
    2003As reported
    
    
    Restated
    
    
    As reported
    
    
    RestatedAssets:Accounts receivable, net of allowance
for doubtful accounts of $540,880 in
2004 and $524,880 in 2003
    
    $
    1,380,733
    
    
    $
    1,286,342
    
    
    $
    2,149,089
    
    
    $
    2,149,089Other assets
    
    $
    626,784
    
    
    $
    53,445
    
    
    $
    
    
    
    $
    Investments in equipment and leases, net
    
    $
    52,859,904
    
    
    $
    53,470,365
    
    
    $
    71,827,497
    
    
    $
    71,847,246Total assets
    
    $
    56,090,044
    
    
    $
    56,032,775
    
    
    $
    74,812,214
    
    
    $
    74,831,963Liabilities:Accounts payable and accruals:Other
    
    $
    531,037
    
    
    $
    636,037
    
    
    $
    650,573
    
    
    $
    755,573Total liabilities
    
    $
    24,707,511
    
    
    $
    24,812,511
    
    
    $
    33,406,191
    
    
    $
    33,511,191Partners capital:Limited Partners
    
    $
    31,670,299
    
    
    $
    31,508,030
    
    
    $
    42,292,230
    
    
    $
    42,206,979Total Partners capital
    
    $
    31,382,533
    
    
    $
    31,220,264
    
    
    $
    41,406,023
    
    
    $
    41,320,772Total liabilities and Partners capital
    
    $
    56,090,044
    
    
    $
    56,032,775
    
    
    $
    74,812,214
    
    
    $
    74,831,963
 26




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##### Table of Contents



ATEL
CAPITAL EQUIPMENT FUND VII, L.P.
 NOTES
TO FINANCIAL STATEMENTS
 DECEMBER
31, 2004
 (Restated)
 3. Restated financial results (continued):
 Statements of Operations (Condensed) for the years ended December 31:
 2004
    
    
    2003
    
    
    2002As reported
    
    
    Restated
    
    
    As reported
    
    
    Restated
    
    
    As reported
    
    
    RestatedRevenues:Leasing activities:Operating leases
    
    $
    14,801,309
    
    
    $
    14,706,918
    
    
    $
    20,083,732
    
    
    $
    20,083,732
    
    
    $
    25,631,019
    
    
    $
    25,631,019Gain (loss) on
sale of assets
    
    $
    (674,254
    )
    
    $
    (620,704
    )
    
    $
    1,449,492
    
    
    $
    1,449,492
    
    
    $
    (1,270,985
    )
    
    $
    (1,270,985
    )Total revenues
    
    $
    15,165,578
    
    
    $
    15,124,737
    
    
    $
    22,658,497
    
    
    $
    22,658,497
    
    
    $
    25,942,773
    
    
    $
    25,942,773Expenses:Cost
reimbursements to
General Partner
    
    $
    801,634
    
    
    $
    801,634
    
    
    $
    849,984
    
    
    $
    849,984
    
    
    $
    859,415
    
    
    $
    906,455Impairment losses
    
    $
    455,366
    
    
    $
    455,366
    
    
    $
    5,290,639
    
    
    $
    4,772,639
    
    
    $
    2,111,593
    
    
    $
    2,629,593Tax on income and
franchise fees
    
    $
    94,267
    
    
    $
    94,267
    
    
    $
    128,178
    
    
    $
    128,178
    
    
    $
    23,124
    
    
    $
    128,124Amortization of
initial direct
costs
    
    $
    39,733
    
    
    
    75,910
    
    
    $
    107,916
    
    
    $
    284,612
    
    
    $
    184,171
    
    
    $
    284,082Total expenses
    
    $
    16,844,113
    
    
    $
    16,880,290
    
    
    $
    26,969,897
    
    
    $
    26,628,593
    
    
    $
    27,715,276
    
    
    $
    28,485,227Net loss
    
    $
    (1,678,535
    )
    
    $
    (1,755,553
    )
    
    $
    (4,311,400
    )
    
    $
    (3,970,096
    )
    
    $
    (1,772,503
    )
    
    $
    (2,542,454
    )Net loss:Limited Partners
    
    $
    (2,360,499
    )
    
    $
    (2,437,517
    )
    
    $
    (5,551,311
    )
    
    $
    (5,210,007
    )
    
    $
    (2,976,387
    )
    
    $
    (3,746,338
    )Net loss
    
    $
    (1,678,535
    )
    
    $
    (1,755,553
    )
    
    $
    (4,311,400
    )
    
    $
    (3,970,096
    )
    
    $
    (1,772,503
    )
    
    $
    (2,542,454
    )Net loss per Limited
Partnership unit
    
    $
    (0.16
    )
    
    $
    (0.16
    )
    
    $
    (0.37
    )
    
    $
    (0.35
    )
    
    $
    (0.20
    )
    
    $
    (0.25
    )Weighted average
number of units
outstanding
    
    
    14,995,550
    
    
    
    14,995,550
    
    
    
    14,995,675
    
    
    
    14,995,675
    
    
    
    14,996,050
    
    
    
    14,996,050
 27




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##### Table of Contents



ATEL
CAPITAL EQUIPMENT FUND VII, L.P.
 NOTES
TO FINANCIAL STATEMENTS
 DECEMBER
31, 2004
 (Restated)
 3. Restated financial results (continued):
 Statements of Cash Flows (Condensed) for the years ended December 31:
 2004
    
    
    2003
    
    
    2002As reported
    
    
    Restated
    
    
    As reported
    
    
    Restated
    
    
    As reported
    
    
    RestatedOperating activities:Net loss
    
    $
    (1,678,535
    )
    
    $
    (1,755,553
    )
    
    $
    (4,311,400
    )
    
    $
    (3,970,096
    )
    
    $
    (1,772,503
    )
    
    $
    (2,542,454
    )Adjustment to reconcile
net loss to net cash
provided by operating
activities:Amortization of initial
direct costs
    
    $
    39,733
    
    
    $
    75,910
    
    
    $
    107,916
    
    
    $
    284,612
    
    
    $
    184,171
    
    
    $
    284,082Impairment losses
    
    $
    455,366
    
    
    $
    455,366
    
    
    $
    5,290,639
    
    
    $
    4,772,639
    
    
    $
    2,111,593
    
    
    $
    2,629,593(Gain) loss on the sale of
assets
    
    $
    674,254
    
    
    $
    620,704
    
    
    $
    (1,449,492
    )
    
    $
    (1,449,492
    )
    
    $
    1,270,985
    
    
    $
    1,270,985Changes in operating
assets and liabilities:Accounts receivable
    
    $
    454,464
    
    
    $
    548,855
    
    
    $
    1,161,897
    
    
    $
    1,161,897
    
    
    $
    (568,946
    )
    
    $
    (568,946
    )Other assets
    
    $
    (626,784
    )
    
    $
    (53,445
    )
    
    $
    10,019
    
    
    $
    10,019
    
    
    $
    97,996
    
    
    $
    97,996Accounts payable, other
    
    $
    (119,536
    )
    
    $
    (119,536
    )
    
    $
    (101,886
    )
    
    $
    (101,886
    )
    
    $
    241,861
    
    
    $
    346,861Net cash provided by
operating activities
    
    $
    9,828,946
    
    
    $
    10,402,285
    
    
    $
    16,626,082
    
    
    $
    16,626,082
    
    
    $
    19,521,121
    
    
    $
    19,474,081Investing activities:Equipment improvement costs
    
    $
    
    
    
    $
    (573,339
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Initial direct lease costs
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (107,962
    )
    
    $
    (60,922
    )Net cash provided by (used
in) investing activities
    
    $
    7,382,139
    
    
    $
    6,808,800
    
    
    $
    17,746,315
    
    
    $
    17,746,315
    
    
    $
    (1,858,487
    )
    
    $
    (1,811,447
    )
 4. Investments in equipment and leases, net:
  Depreciation/AmortizationExpense orAmortization of
    
    
    Reclassi-December 31,
    
    
    Impairment
    
    
    Direct Financing
    
    
    fications or
    
    
    December 31,2003
    
    
    Losses
    
    
    Leases
    
    
    Dispositions
    
    
    2004Restated
    
    
    
    
    
    
    Restated
    
    
    Restated
    
    
    RestatedNet investment in operating
leases
    
    $
    51,653,739
    
    
    $
    (455,366
    )
    
    $
    (10,416,101
    )
    
    $
    6,465,115
    
    
    $
    47,247,387Net investment in direct financing
leases, as restated
    
    
    8,178,561
    
    
    
    
    
    
    
    (1,978,529
    )
    
    
    (3,484,910
    )
    
    
    2,715,122Assets held for sale or lease, net
of accumulated depreciation of
$4,796,259 in 2004 and $18,795,631
in 2003, as restated
    
    
    11,891,344
    
    
    
    
    
    
    
    
    
    
    
    (8,431,180
    )
    
    
    3,460,164Initial direct costs, net of
accumulated amortization of
$2,428,443 in 2004 and $2,357,898 in
2003, as restated
    
    
    123,602
    
    
    
    
    
    
    
    (75,910
    )
    
    
    
    
    
    
    47,692$
    71,847,246
    
    
    $
    (455,366
    )
    
    $
    (12,470,540
    )
    
    $
    (5,450,975
    )
    
    $
    53,470,365
 28




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##### Table of Contents



ATEL
CAPITAL EQUIPMENT FUND VII, L.P.
 NOTES
TO FINANCIAL STATEMENTS
 DECEMBER
31, 2004
 (Restated)
 4. Investments in equipment and leases, net (continued):
 Impairment of investments in leases and assets held for sale or lease:
   2004
    
    
    2003
    
    
    2002Restated
    
    
    RestatedDepreciation expense
    
    $
    10,416,101
    
    
    $
    15,220,612
    
    
    $
    18,424,332Impairment losses
    
    
    455,366
    
    
    
    4,772,639
    
    
    
    2,629,593$
    10,871,467
    
    
    $
    19,993,251
    
    
    $
    21,053,925
  2004
    
    
    2003
    
    
    2002Restated
    
    
    RestatedLocomotives
    
    $
    
    
    
    $
    2,475,000
    
    
    $
    300,000Off shore supply vessels
    
    
    
    
    
    
    1,022,000
    
    
    
    Mining equipment
    
    
    
    
    
    
    731,619
    
    
    
    Covered grain hopper cars, as
restated
    
    
    
    
    
    
    299
    
    
    
    1,592,326Petroleum rail tank cars
    
    
    
    
    
    
    325,462
    
    
    
    Barges, as restated
    
    
    
    
    
    
    218,259
    
    
    
    737,267Refuse trucks and other
vehicles
    
    
    455,366
    
    
    
    
    
    
    
    $
    455,366
    
    
    $
    4,772,639
    
    
    $
    2,629,593
  29




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##### Table of Contents



ATEL
CAPITAL EQUIPMENT FUND VII, L.P.
 NOTES
TO FINANCIAL STATEMENTS
 DECEMBER
31, 2004
 (Restated)
 4. Investments in equipment and leases, net (continued):
 Operating leases:
  Reclassi-December 31,
    
    
    Impairment
    
    
    Depreciation
    
    
    fications or
    
    

December 31,2003
    
    
    Losses
    
    
    Expense
    
    
    Dispositions
    
    
    2004Transportation

restated
    
    $
    72,164,281
    
    
    $
    
    
    
    $
    
    
    
    $
    23,218,092
    
    
    $
    95,382,373Construction
    
    
    20,168,993
    
    
    
    
    
    
    
    
    
    
    
    (12,214,614
    )
    
    
    7,954,379Marine
vessels / barges 
restated
    
    
    14,978,042
    
    
    
    
    
    
    
    
    
    
    
    (9,147,197
    )
    
    
    5,830,845Mining equipment
    
    
    8,410,345
    
    
    
    
    
    
    
    
    
    
    
    (3,710,770
    )
    
    
    4,699,575Manufacturing
    
    
    4,553,440
    
    
    
    
    
    
    
    
    
    
    
    (683,092
    )
    
    
    3,870,348Communications
    
    
    3,748,058
    
    
    
    
    
    
    
    
    
    
    
    (3,607,678
    )
    
    
    140,380Materials handling
    
    
    3,558,657
    
    
    
    
    
    
    
    
    
    
    
    (111,345
    )
    
    
    3,447,312Office automation
    
    
    3,521,046
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,521,046Other
    
    
    3,347,789
    
    
    
    
    
    
    
    
    
    
    
    608,677
    
    
    
    3,956,466134,450,651
    
    
    
    
    
    
    
    
    
    
    
    (5,647,927
    )
    
    
    128,802,724Less accumulated
depreciation
    
    
    (82,796,912
    )
    
    
    (455,366
    )
    
    
    (10,416,101
    )
    
    
    12,113,042
    
    
    
    (81,555,337
    )Total  restated
    
    $
    51,653,739
    
    
    $
    (455,366
    )
    
    $
    (10,416,101
    )
    
    $
    6,465,115
    
    
    $
    47,247,387
 Direct financing leases:
  2004
    
    
    2003RestatedTotal minimum lease payments receivable
    
    $
    2,787,065
    
    
    $
    5,860,231Estimated residual values of leased equipment (unguaranteed)
    
    
    1,115,398
    
    
    
    4,638,162Investment in direct financing leases
    
    
    3,902,463
    
    
    
    10,498,393Less unearned income
    
    
    (1,187,341
    )
    
    
    (2,319,832
    )Net investment in direct financing leases
    
    $
    2,715,122
    
    
    $
    8,178,561
  DirectYear ending
    
    
    
    
    
    FinancingDecember
31,
    
    Operating Leases
    
    
    Leases
    
    
    TotalRestated
    
    
    Restated
    
    
    Restated2005
    
    $
    8,808,052
    
    
    $
    1,372,368
    
    
    $
    10,180,4202006
    
    
    5,185,604
    
    
    
    708,415
    
    
    
    5,894,0192007
    
    
    3,936,979
    
    
    
    512,748
    
    
    
    4,449,7272008
    
    
    3,468,889
    
    
    
    193,534
    
    
    
    3,662,4232009
    
    
    3,075,627
    
    
    
    
    
    
    
    3,075,627Thereafter
    
    
    375,415
    
    
    
    
    
    
    
    375,415$
    24,850,566
    
    
    $
    2,787,065
    
    
    $
    27,637,631
 30




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##### Table of Contents



ATEL CAPITAL EQUIPMENT FUND VII, L.P.
 NOTES TO FINANCIAL STATEMENTS
 DECEMBER 31, 2004
 (Restated)
 5. Non-recourse debt:
   Year endingDecember 31,
    
    
    Principal
    
    
    Interest
    
    
    Total2005
    
    
    $
    251,586
    
    
    $
    24,182
    
    
    $
    275,7682006
    
    
    
    101,568
    
    
    
    11,462
    
    
    
    113,0302007
    
    
    
    90,838
    
    
    
    5,141
    
    
    
    95,9792008
    
    
    
    23,717
    
    
    
    277
    
    
    
    23,994$
    467,709
    
    
    $
    41,062
    
    
    $
    508,771
 6. Other long-term debt:
    31




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##### Table of Contents



ATEL CAPITAL EQUIPMENT FUND VII, L.P.
 NOTES TO FINANCIAL STATEMENTS
 DECEMBER 31, 2004
 (Restated)
 6. Other long-term debt (continued):
  Notional
    
    
    SwapOriginal
    
    
    Balance
    
    
    Balance
    
    
    Value
    
    
    Payment Rate onAmount
    
    
    December 31,
    
    
    December 31,
    
    
    December 31,
    
    
    Interest SwapDate Borrowed
    
    
    Borrowed
    
    
    2004
    
    
    2004
    
    
    2004
    
    
    Agreement4/1/1998
    
    
    $
    21,770,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    *7/1/1998
    
    
    
    25,000,000
    
    
    
    1,811,000
    
    
    
    1,824,322
    
    
    
    (75,010
    )
    
    
    6.155
    %10/1/1998
    
    
    
    20,000,000
    
    
    
    1,425,000
    
    
    
    1,530,182
    
    
    
    (17,886
    )
    
    
    5.550
    %4/16/1999
    
    
    
    9,000,000
    
    
    
    995,000
    
    
    
    998,434
    
    
    
    (19,447
    )
    
    
    5.890
    %1/26/2000
    
    
    
    11,700,000
    
    
    
    2,672,000
    
    
    
    2,670,664
    
    
    
    (153,984
    )
    
    
    7.580
    %5/25/2001
    
    
    
    2,000,000
    
    
    
    527,000
    
    
    
    582,705
    
    
    
    (12,538
    )
    
    
    5.790
    %9/28/2001
    
    
    
    6,000,000
    
    
    
    1,512,000
    
    
    
    1,774,978
    
    
    
    (14,021
    )
    
    
    4.360
    %1/31/2002
    
    
    
    4,400,000
    
    
    
    55,000
    
    
    
    
    
    
    
    
    
    
    
    *2/19/2002
    
    
    
    5,700,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    *$
    105,570,000
    
    
    $
    8,997,000
    
    
    $
    9,381,285
    
    
    $
    (292,886
    )
 
 *
    
    Under the terms of the Program, no interest rate swap agreements were required for these
borrowings.  Debt
    
    
    Debt
    
    
    
    
    
    
    
    
    
    
    Rates onYear ending
    
    
    Principal
    
    
    Principal
    
    
    
    
    
    
    
    
    
    
    Interest SwapDecember 31,
    
    
    Swapped
    
    
    Not Swapped
    
    
    Interest
    
    
    Total
    
    
    Agreements**2005
    
    
    $
    5,405,000
    
    
    $
    12,000
    
    
    $
    404,456
    
    
    $
    5,821,456
    
    
    
    6.146%-6.450
    %2006
    
    
    
    2,033,000
    
    
    
    43,000
    
    
    
    167,037
    
    
    
    2,243,037
    
    
    
    6.593%-6.897
    %2007
    
    
    
    1,504,000
    
    
    
    
    
    
    
    16,816
    
    
    
    1,520,816
    
    
    
    6.872%-6.879
    %$
    8,942,000
    
    
    $
    55,000
    
    
    $
    588,309
    
    
    $
    9,585,309
 
 **
    
    Represents the range of monthly weighted average fixed interest rates paid for amounts maturing
in the particular year. The receive-variable rate portion of the swap represents commercial paper
rates (2.860% at December 31, 2004).  7. Related party transactions:
    32




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##### Table of Contents



ATEL CAPITAL EQUIPMENT FUND VII, L.P.
 NOTES TO FINANCIAL STATEMENTS
 DECEMBER 31, 2004
 (Restated)
 7. Related party transactions (continued):
    2004
    
    
    2003
    
    
    2002Equipment and
incentive
management fees to
General Partner
    
    $
    634,486
    
    
    $
    889,571
    
    
    $
    947,568Cost reimbursements
to General Partner,
as restated
    
    
    801,634
    
    
    
    849,984
    
    
    
    906,455$
    1,436,120
    
    
    $
    1,739,555
    
    
    $
    1,854,023
   8. Partners capital:
        33




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##### Table of Contents



ATEL CAPITAL EQUIPMENT FUND VII, L.P.
 NOTES TO FINANCIAL STATEMENTS
 DECEMBER 31, 2004
 (Restated)
 8. Partners capital (continued):
  9. Concentration of credit risk and major customers:
   2004
    
    2003Transportation, rail
    
    
    30
    %
    
    
    22
    %Transportation, other
    
    
    26
    %
    
    
    21
    %Manufacturing
    
    
    14
    %
    
    
    21
    %Municipalities
    
    
    13
    %
    
    
    14
    %
  10. Line of credit:
  Total amount available under the financing arrangement
    
    $
    75,000,000Term loan to AFS as of December 31, 2004
    
    
    (2,027,636
    )Total available under the acquisition and warehouse facilities
    
    
    72,972,364Amount borrowed by the Partnership under the acquisition facility
    
    
    (13,500,000
    )Amounts borrowed by affiliated partnerships and limited liability
companies under the acquisition facility
    
    
    (17,000,000
    )Total remaining available under the acquisition and warehouse facilities
    
    $
    42,472,364
    34




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##### Table of Contents



ATEL CAPITAL EQUIPMENT FUND VII, L.P.
 NOTES TO FINANCIAL STATEMENTS
 DECEMBER 31, 2004
 (Restated)
 10. Line of credit (continued):
  Loan amount
    
    
    Interest rate$
    500,000
    
    
    
    5.75
    %1,000,000
    
    
    
    4.62
    %9,500,000
    
    
    
    4.62
    %1,000,000
    
    
    
    4.75
    %1,500,000
    
    
    
    4.75
    %$
    13,500,000
 11. Fair value of financial instruments:
  Non-recourse debt:
  Other long-term debt:
  Line of credit:
  Interest rate swaps:
  12. Comprehensive loss:
  2004
    
    
    2003
    
    
    2002Restated
    
    
    Restated
    
    
    RestatedNet loss
    
    $
    (1,755,553
    )
    
    $
    (3,970,096
    )
    
    $
    (2,542,454
    )Other comprehensive income:Reclassification adjustment for portion of
swap liability charged to net loss
    
    
    5,120
    
    
    
    
    
    
    
    Change in value of interest rate swap contracts
    
    
    593,321
    
    
    
    738,153
    
    
    
    (298,354
    )Comprehensive net loss
    
    $
    (1,157,112
    )
    
    $
    (3,231,943
    )
    
    $
    (2,840,808
    )There were no other sources of comprehensive net loss
    
    
    .
 35




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##### Table of Contents



ATEL CAPITAL EQUIPMENT FUND VII, L.P.
 NOTES TO FINANCIAL STATEMENTS
 DECEMBER 31, 2004
 (Restated)
 13. Selected quarterly data (unaudited):
   March 31,
    
    June 30,
    
    September 30,
    
    December 31,2003
    
    2003
    
    2003
    
    2003Restated
    
    Restated
    
    Restated
    
    RestatedQuarter endedTotal revenues
    
    $
    7,999,426
    
    
    $
    4,607,630
    
    
    $
    5,009,446
    
    
    $
    5,041,995Net income (loss)
    
    $
    876,384
    
    
    $
    356,846
    
    
    $
    (3,856,854
    )
    
    $
    (1,346,472
    )General Partner
    
    $
    308,138
    
    
    $
    319,070
    
    
    $
    302,788
    
    
    $
    309,915Limited Partners
    
    $
    568,246
    
    
    $
    37,776
    
    
    $
    (4,159,642
    )
    
    $
    (1,656,387
    )Net income (loss)
per Limited
Partnership unit
    
    $
    0.04
    
    
    $
    0.00
    
    
    $
    (0.28
    )
    
    $
    (0.11
    )Weighted average number of Units outstanding
    
    
    14,995,550
    
    
    
    14,995,550
    
    
    
    14,995,550
    
    
    
    14,995,550
 March 31,
    
    June 30,
    
    September 30,
    
    December 31,2004
    
    2004
    
    2004
    
    2004Restated
    
    Restated
    
    Restated
    
    RestatedQuarter endedTotal revenues
    
    $
    4,225,576
    
    
    $
    4,661,072
    
    
    $
    2,959,653
    
    
    $
    3,278,436Net income (loss)
    
    $
    (1,483,083
    )
    
    $
    710,616
    
    
    $
    (258,987
    )
    
    $
    (724,099
    )General Partner
    
    $
    213,941
    
    
    $
    199,910
    
    
    $
    115,352
    
    
    $
    152,761Limited Partner
    
    $
    (1,697,024
    )
    
    $
    510,706
    
    
    $
    (374,339
    )
    
    $
    (876,860
    )Net income (loss)
per Limited
Partnership unit
    
    $
    (0.11
    )
    
    $
    0.03
    
    
    $
    (0.02
    )
    
    $
    (0.06
    )Weighted average number of Units outstanding
    
    
    14,995,550
    
    
    
    14,995,550
    
    
    
    14,995,550
    
    
    
    14,995,550
 14. Commitments:
  36




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##### Table of Contents



ATEL CAPITAL EQUIPMENT FUND VII, L.P.
 NOTES TO FINANCIAL STATEMENTS
 DECEMBER 31, 2004
 (Restated)
 15. Reserves and provisions for doubtful accounts:
  Reserve for
    
    
    Allowance forlosses and
    
    
    doubtfulimpairments
    
    
    accountsBalance December 31, 2001
    
    $
    504,227
    
    
    $
    118,067Provision, as restated
    
    
    2,629,593
    
    
    
    285,000Charge offs, as restated
    
    
    (3,133,820
    )
    
    
    Balance December 31, 2002
    
    
    
    
    
    
    403,067Provision, as restated
    
    
    4,772,639
    
    
    
    516,794Charge offs, as restated
    
    
    (4,772,639
    )
    
    
    (394,981
    )Balance December 31, 2003
    
    
    
    
    
    
    524,880Provision
    
    
    455,366
    
    
    
    313,892Charge offs
    
    
    (455,366
    )
    
    
    (297,892
    )Balance December 31, 2004
    
    $
    
    
    
    $
    540,880
  16. Guarantees:
  17. Subsequent event:
  18. Settlement:
  37




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##### Table of Contents



Item 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
  
 Item 9a.
    
    CONTROLS AND PROCEDURES
 Evaluation of disclosure controls and procedures
   Changes in internal control
     38




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##### Table of Contents



PART III
 
 Item 10.
    
    DIRECTORS AND EXECUTIVE OFFICERS
     Dean L. Cash
    
    President and Chief Executive officer of ATEL Financial Services, LLC (General Partner)Paritosh K. Choksi
    
    Executive Vice President and Chief Financial and Operating Officer of ATEL Financial
Services, LLC (General Partner)Vasco H. Morais
    
    Senior Vice President, Secretary and General Counsel for ATEL Financial Services, LLC
(General Partner)
 
  
  
  
 39




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##### Table of Contents



Audit Committee
  Section 16(a) Beneficial Ownership Reporting Compliance
  Code of Ethics
  
 Item 11.
    
    EXECUTIVE COMPENSATION
   Equipment Management Fees
  Incentive Management Fees
       40




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##### Table of Contents



Equipment Resale Fees
  Equipment Re-lease Fee
  General Partners Interest in Operating Proceeds
  
 Item 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
 Security Ownership of Certain Beneficial Owners
  Security Ownership of Management
  (1)
    
    (2)
    
    (3)
    
    (4)Name and Address of
    
    Amount and Nature of
    
    PercentTitle of Class
    
    Beneficial Owner
    
    Beneficial Ownership
    
    of ClassLimited Partnership Units
    
    Dean Cash
    
    Initial Limited Partner Units
    
    
    0.0002
    %600 California Street, 6th Floor
    
    25 Units ($250)San Francisco, CA 94108
    
    (owned by wife)
 Changes in Control
   41




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##### Table of Contents



Item 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  42




---



##### Table of Contents



Item 14.
    
    PRINCIPAL ACCOUNTING FEES AND SERVICES
  2004
    
    
    2003Audit fees
    
    $
    161,017
    
    
    $
    58,413Audit related fees
    
    
    
    
    
    
    Tax fees
    
    
    31,478
    
    
    
    31,600Other
    
    
    
    
    
    
    $
    192,495
    
    
    $
    90,013
   43




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##### Table of Contents



PART IV
 
 Item 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)
    
    
    
    
    
    Financial Statements and Schedules:1.
    
    
    Financial StatementsIncluded in Part II of this report:Report of Independent Registered Public Accounting FirmBalance Sheets at December 31, 2004 and 2003Statements of Operations for the years ended December 31, 2004, 2003 and 2002Statements of Changes in Partners Capital for the years ended December 31, 2004, 2003 and 2002Statement of Cash Flows for the years ended December 31, 2004, 2003 and 2002Notes to Financial Statements2.
    
    
    Financial Statement SchedulesAll schedules for which provision is made in the applicable accounting regulations of the
Securities and Exchange Commission are not required under the related instructions or are
inapplicable and, therefore, have been omitted.(b)
    
    
    
    
    
    Exhibits:(3) and (4) Amended and Restated Agreement of Limited Partnership, included as Exhibit B to
the Prospectus included in the registrants registration statement on form S-1 effective
November 29, 1996, (File No. 333-08879) is hereby incorporated herein by this reference(14.1) Code of Ethics(31.1) Rule 13a-14(a)/ 15d-14(a) Certification of Paritosh K. Choksi(31.2) Rule 13a-14(a)/ 15d-14(a) Certification of Dean L. Cash(32.1) Certification Pursuant to 18 U.S.C. section 1350 of Dean L. Cash(32.2) Certification Pursuant to 18 U.S.C. section 1350 of Paritosh K. Choksi
 44




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##### Table of Contents



SIGNATURES
   
 By:
    
    ATEL Financial Services, LLC,General Partner of RegistrantBy:
    
    /s/ Dean CashDean Cash,President and Chief Executive Officer ofATEL Financial Services, LLC (General Partner)By:
    
    /s/ Paritosh K. ChoksiParitosh K. Choksi,Executive Vice President and Chief Financial and Operating Officer ofATEL Financial Services, LLC (General Partner)
  SIGNATURE
    
    CAPACITIES
    
    DATE/s/ Dean Cash

Dean Cash
    
    President and Chief Executive Officer of
ATEL Financial Services, LLC (General Partner)
    
    March 31, 2006/s/ Paritosh K. Choksi

Paritosh K. Choksi
    
    Executive Vice President and Chief Financial and Operating Officer of
ATEL Financial Services, LLC (General Partner)
    
    March 31, 2006
  45