Form 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

            |X| Annual report pursuant to section 13 or 15(d) of the
                Securities Exchange Act of 1934 (no fee required)
                For the Year Ended December 31, 2003
                                       OR
            |_| Transition report pursuant to section 13 or 15(d) of the
                Securities Exchange Act of 1934 (no fee required)
                For the transition period from ____ to ____

                         Commission File number 0-24175

                      ATEL Capital Equipment Fund VII, L.P.

           California                                         94-3248318
           ----------                                         ----------
(State or other jurisdiction of                            (I. R. S. Employer
 incorporation or organization)                            Identification No.)

     600 California Street, 6th Floor, San Francisco, California 94108-2733
                    (Address of principal executive offices)

        Registrant's telephone number, including area code (415) 989-8800
        Securities registered pursuant to section 12(b) of the Act: None

Securities  registered pursuant to section 12(g) of the Act: Limited Partnership
Units

Indicate  by a check  mark  whether  the  registrant  (1) has filed all  reports
required to be filed by section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

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

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes |_| No |X|

State the aggregate market value of voting stock held by  non-affiliates  of the
registrant: Inapplicable

The number of Limited  Partnership Units outstanding as of December 31, 2003 was
14,995,550.

                       DOCUMENTS INCORPORATED BY REFERENCE

Prospectus  dated November 29, 1996,  filed pursuant to Rule 424(b)  (Commission
File No. 333-08879) is hereby incorporated by reference into Part IV hereof.





                                       1
<PAGE>

                                     PART I

Item 1:  BUSINESS

General Development of Business

ATEL Capital  Equipment  Fund VII, L.P. (the  Partnership)  was formed under the
laws of the state of California in May 1996. The  Partnership was formed for the
purpose  of  acquiring  equipment  to  engage  in  equipment  leasing  and sales
activities.  The General Partner of the  Partnership is ATEL Financial  Services
LLC (AFS). Prior to converting to a limited liability company structure, AFS was
formerly known as ATEL Financial Corporation.

The  Partnership  conducted  a public  offering of  15,000,000  Units of Limited
Partnership Interest (Units) at a price of $10 per Unit. On January 7, 1997, the
Partnership  commenced operations in its primary business (leasing  activities).
As of  November  27,  1998,  the  Partnership  had  received  subscriptions  for
15,000,000  ($150,000,000)  Limited  Partnership  Units  and  the  offering  was
terminated.   As  of  December  31,  2003,  14,995,550  Units  were  issued  and
outstanding.

The Partnership's  principal objectives are to invest in a diversified portfolio
of  equipment  that will (i)  preserve,  protect  and return  the  Partnership's
invested  capital;  (ii) generate regular  distributions to the partners of cash
from operations and cash from sales or refinancing,  with any balance  remaining
after certain minimum  distributions to be used to purchase additional equipment
during the reinvestment period ("Reinvestment Period"), ending December 31, 2004
and (iii) provide additional distributions following the Reinvestment Period and
until all equipment has been sold.  The  Partnership  is governed by its Limited
Partnership Agreement.

Narrative Description of Business

The  Partnership  has acquired and intends to acquire various types of equipment
and to lease such  equipment  pursuant to  "Operating"  leases and "High Payout"
leases,  whereby  "Operating"  leases are  defined as being  leases in which the
minimum  lease  payments  during the initial  lease term do not recover the full
cost of the  equipment  and "High  Payout"  leases  recover at least 90% of such
cost. It is the intention of AFS that a majority of the aggregate purchase price
of equipment  will  represent  equipment  leased under "High Payout" leases upon
final  investment  of the net proceeds of the offering and that no more than 20%
of the  aggregate  purchase  price of  equipment  will be invested in  equipment
acquired from a single manufacturer.

The Partnership will generally only purchase  equipment for which a lease exists
or for which a lease will be entered into at the time of the purchase.

As of December 31, 2003, the  Partnership  had purchased  equipment with a total
acquisition price of $302,751,046.

The  Partnership's  objective  is to  lease a  minimum  of 75% of the  equipment
acquired  with the net  proceeds  of the  offering  to lessees  that (i) have an
aggregate credit rating by Moody's Investor  Service,  Inc. of Baa or better, or
the credit  equivalent as determined by AFS, with the aggregate  rating weighted
to account  for the  original  equipment  cost for each item  leased or (ii) are
established  hospitals with histories of  profitability or  municipalities.  The
balance of the original  equipment  portfolio  may include  equipment  leased to
lessees,  which  although  deemed  creditworthy  by AFS,  would not  satisfy the
general  credit  rating  criteria  for the  portfolio.  In  excess of 75% of the
equipment  acquired  with the net  proceeds of the  offering  (based on original
purchase cost) has been leased to lessees with an aggregate credit rating of Baa
or better or to such hospitals or municipalities as described in (ii) above.

During 2003, no single lessee generated 10% of the Partnership's lease revenues.
As set forth below,  during 2002,  one lessee  generated  11% the  Partnership's
lease  revenues.  During 2001, no single lessee  generated  more than 10% of the
Partnership's lease revenues.

Lessee                       Type of Equipment   2003   2002  2001
------                       -----------------   ----   ----  ----
General Motors Corporation   Materials Handling    *    11%    *
*  Less than 10%.

These percentages are not expected to be comparable in future periods.

The equipment leasing industry is highly competitive.  Equipment  manufacturers,
corporations, partnerships and others offer users an alternative to the purchase
of most types of equipment with payment terms that vary widely  depending on the
lease term and type of  equipment.  The ability of the  Partnership  to keep the
equipment leased and/or operating and the terms of the acquisitions,  leases and
dispositions  of equipment  depends on various factors (many of which are not in
the control of AFS or the  Partnership),  such as general  economic  conditions,
including the effects of inflation or recession,  and fluctuations in supply and
demand for various  types of  equipment  resulting  from,  among  other  things,
technological and economic obsolescence.



                                       2
<PAGE>

AFS will seek to limit the amount  invested in equipment to any single lessee to
not more than 20% of the aggregate purchase price of equipment owned at any time
during the Reinvestment Period.

The business of the Partnership is not seasonal.

The Partnership has no full time employees.

Equipment Leasing Activities

The Partnership has acquired a diversified portfolio of equipment. The equipment
has been leased to lessees in various industries. The following tables set forth
the types of equipment acquired by the Partnership through December 31, 2003 and
the  industries  to which the  assets  have been  leased.  The  Partnership  has
purchased  certain assets subject to existing  non-recourse  debt. For financial
statement purposes,  non-recourse debt has been offset against the investment in
certain direct finance leases where the right of offset exists.

                                Purchase Price Excluding   Percentage of Total
Asset Types                          Acquisition Fees          Acquisitions
-----------                          ----------------          ------------
Transportation, rail cars               $ 64,328,409                21.24%
Manufacturing                             45,709,520                15.10%
Mining                                    30,756,101                10.16%
Transportation, other                     26,723,940                 8.83%
Transportation, intermodal
   containers                             26,631,519                 8.80%
Marine vessels                            22,335,250                 7.38%
Materials handling                        16,318,944                 5.39%
Motor Vehicles                            13,148,102                 4.34%
Office automation                         11,449,934                 3.78%
Medical                                    9,133,951                 3.02%
Aircraft                                   6,310,979                 2.08%
Railroad locomotives                       5,010,960                 1.66%
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 Total
Industry of Lessee                   Acquisition Fees          Acquisitions
------------------                   ----------------          ------------
Transportation, 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.

Through December 31, 2003, the Partnership has disposed of certain leased assets
as set forth below:

                                                             Excess of
                          Original                           Rents Over
Asset Types             Equipment Cost     Sale Price        Expenses *
-----------             --------------     ----------        ----------
Transportation             $29,387,573       $ 9,567,099      $ 24,341,560
Manufacturing               26,498,662        10,655,547        17,142,619
Materials handling          12,290,706         8,229,534         6,257,530
Office automation           11,675,941         1,461,397        11,937,397
Other                        5,183,318           601,227         5,691,791
Furniture and fixtures       4,759,285         2,352,872         4,020,720
Aircraft                     4,708,142         4,954,738         2,576,835
Mining                       4,602,966         1,908,058         4,469,911
Food processing              2,182,333         1,329,201         1,980,738
                       ----------------  ---------------- -----------------
                          $101,288,926      $ 41,059,673      $ 78,419,101
                       ================  ================ =================

* Includes only those expenses directly related to the production of the related
rents.

For further information regarding the Partnership's equipment lease portfolio as
of December 31, 2003,  see Note 3 to the financial  statements,  Investments  in
equipment and leases, as set forth in Part II, Item 8, Financial  Statements and
Supplementary Data.




                                       3
<PAGE>

Item 2.  PROPERTIES

The  Partnership  does not own or lease  any real  property,  plant or  material
physical properties other than the equipment held for lease as set forth in Item
1.


Item 3.  LEGAL PROCEEDINGS

In the ordinary  course of  conducting  business,  there may be certain  claims,
suits,  and  complaints  filed  against  the  Partnership.  In  the  opinion  of
management, the outcome of such matters, if any, will not have a material impact
on the Partnership's  consolidated  financial position or results of operations.
No material legal  proceedings are currently  pending against the Partnership or
against  any of its assets.  The  following  is a  discussion  of legal  matters
involving  the  Partnership,  but  which do not  represent  claims  against  the
Partnership or its assets.

Martin Marietta Magnesia Specialties Inc.:

The Partnership has filed a suit against Martin  Marietta  Magnesia  Specialties
Inc. for failure to maintain  equipment in accordance  with the lease  contract.
The Partnership has made a claim for recovery of $179,679 in damages. No amounts
related to this action  have been  recorded in the  financial  statements  as of
December 31, 2003.

Cargill Inc. / GWI Leasing Corporation:

Cargill Inc. is a lessee of the Partnership. GWI Leasing Corporation manages the
equipment under the Cargill lease on behalf of the Partnership.  The Partnership
is seeking  unspecified  damages  from  Cargill for  failure to perform  certain
responsibilities  relating  to the  equipment  under  the lease  agreement.  The
Partnership  is seeking  damages  from GWI  Leasing  Corporation  for failure to
enforce the terms of the lease contract.  No amounts related to this matter have
been recorded in the financial statements as of December 31, 2003.


Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

                                     PART II

Item 5.  MARKET FOR REGISTRANT'S LIMITED PARTNERSHIP UNITS
              AND RELATED MATTERS

Market Information

The Units are  transferable  subject to restrictions on transfers that have been
imposed under the securities  laws of certain  states.  However,  as a result of
such restrictions, the size of the Partnership and its investment objectives, to
AFS's knowledge,  no established  public secondary  trading market has developed
and it is unlikely that a public trading market will develop in the future. As a
result, there is no currently ascertainable market value for the Units.

Holders

As of December 31, 2003,  a total of 5,582  investors  were holders of record of
Units in the Partnership.

ERISA Valuation

In order to permit  ERISA  fiduciaries  who hold Units to satisfy  their  annual
reporting  requirements,  AFS estimated the value per Unit of the  Partnership's
assets as of September  30,  2003.  AFS  calculated  the  estimated  liquidation
proceeds  that  would  be  realized  by the  Partnership,  assuming  an  orderly
disposition  of all of the  Partnership's  assets as of  January  1,  2004.  The
estimates  were based on the amount of  remaining  lease  payments  on  existing
Partnership  leases,  and the estimated residual values of the equipment held by
the Partnership  upon the termination of those leases.  This valuation was based
solely on AFS's perception of market conditions and the types and amounts of the
Partnership's assets. No independent valuation was sought.

After  calculating  the  aggregate  estimated  disposition  proceeds,  AFS  then
calculated  the  portion of the  aggregate  estimated  value of the  Partnership
assets  that  would  be  distributed  to  Unit  holders  on  liquidation  of the
Partnership, and divided the total so distributable by the number of outstanding
Units.  As of  September  30,  2003,  the  value  of the  Partnership's  assets,
calculated  on this  basis,  was  approximately  $5.38 per Unit.  The  foregoing
valuation was performed solely for the ERISA purposes  described above. There is
no market for the Units,  and,  accordingly,  this value does not  represent  an
estimate  of the amount a Unit holder  would  receive if he were to seek to sell
his  Units.  Furthermore,  there  can  be no  assurance  as to  the  amount  the
Partnership  may actually  receive if and when it seeks to liquidate its assets,
or the amount of lease  payments  and  equipment  disposition  proceeds  it will
actually receive over the remaining term of the Partnership.



                                       4
<PAGE>

Dividends

The  Partnership  does not make  dividend  distributions.  However,  the Limited
Partners of the  Partnership are entitled to certain  distributions  as provided
under the Limited Partnership Agreement.

AFS has sole  discretion in determining the amount of  distributions;  provided,
however, that AFS will not reinvest in equipment,  but will distribute,  subject
to payment of any  obligations  of the  Partnership,  such  available  cash from
operations and cash from sales or refinancing as may be necessary to cause total
distributions  to the Limited  Partners  for each year  during the  Reinvestment
Period to equal $1.00 per Unit. The Reinvestment Period ends December 31, 2004.

The rate for monthly  distributions  from 2003  operations was $0.0833 per Unit.
The  distributions  were paid in  February  2003  through  December  2003 and in
January 2004. For each quarterly  distribution  (paid in April, July and October
2003 and in January 2004) the rate was $0.25 per Unit.  Distributions  were from
2003 cash flows from operations.

The rate for monthly  distributions  from 2002  operations was $0.0833 per Unit.
The  distributions  were paid in  February  2002  through  December  2002 and in
January 2003. For each quarterly  distribution  (paid in April, July and October
2002 and in January 2003) the rate was $0.25 per Unit.  Distributions  were from
2002 cash flows from operations.

The rate for monthly  distributions  from 2001  operations was $0.0833 per Unit.
The  distributions  were paid in  February  2001  through  December  2001 and in
January 2002. For each quarterly  distribution  (paid in April, July and October
2001 and in January 2002) the rate was $0.25 per Unit.  Distributions  were from
2001 cash flows from operations.

The following table presents summarized  information regarding  distributions to
Limited Partners:
<TABLE>
<CAPTION>

                                                  2003             2002              2001              2000              1999
                                                  ----             ----              ----              ----              ----
<S>                                                   <C>              <C>               <C>               <C>               <C>
Net income (loss) per Unit, based on
   weighted average Units outstanding                $ (0.37)         $ (0.20)           $ 0.01            $ 0.53           $ (0.17)
Return of investment                                    1.37             1.20              0.99              0.48              1.17
                                             ---------------- ----------------  ---------------- ----------------- -----------------
Distributions per Unit, based on
   weighted average Units outstanding                   1.00             1.00              1.00              1.01              1.00
Differences due to timing of distributions                 -                -                 -             (0.01)                -
                                             ---------------- ----------------  ---------------- ----------------- -----------------
Actual distribution rates, per Unit                   $ 1.00           $ 1.00            $ 1.00            $ 1.00            $ 1.00
                                             ================ ================  ================ ================= =================
</TABLE>


Item 6.  SELECTED FINANCIAL DATA

The following  table  presents  selected  financial  data of the  Partnership at
December 31, 2003, 2002, 2001, 2000 and 1999 and for the years then ended.  This
financial data should be read in conjunction  with the financial  statements and
related notes included under Part II, Item 8.
<TABLE>
<CAPTION>


                                                  2003             2002              2001              2000              1999
                                                  ----             ----              ----              ----              ----
<S>                                              <C>             <C>               <C>               <C>               <C>
Gross revenues                                   $22,484,703     $ 25,942,773      $ 30,646,525      $ 41,463,919      $ 39,634,771
Net income (loss)                               $ (4,311,400)    $ (1,772,503)      $ 2,939,818       $ 9,158,705      $ (2,159,370)
Weighted average Units outstanding                14,995,675       14,996,050        14,996,050        14,996,050        14,996,050
Net income (loss) allocated to
   Limited Partners                             $ (5,551,311)    $ (2,976,387)        $ 140,295       $ 7,938,589      $ (2,622,996)
Net income (loss) per Unit, based on
   weighted average Units outstanding                $ (0.37)         $ (0.20)           $ 0.01            $ 0.53           $ (0.17)
Distributions per Unit, based on
   weighted average Units outstanding                 $ 1.00           $ 1.00            $ 1.00            $ 1.01            $ 1.00
Total Assets                                     $74,812,214    $ 116,223,748     $ 135,853,619     $ 157,600,746      $191,424,300
Non-recourse Debt                                $ 1,586,403      $ 4,577,308       $ 9,971,225      $ 15,452,741      $ 21,780,420
Other Long-term Debt                             $15,759,000     $ 33,546,000      $ 38,540,000      $ 44,877,000      $ 53,181,000
Total Partners' Capital                          $41,406,023     $ 61,218,234      $ 79,492,851      $ 94,163,608      $101,313,784
</TABLE>


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

Statements  contained in this Item 7,  "Management's  Discussion and Analysis of
Financial Condition and Results of Operations," and elsewhere in this Form 10-K,
which  are  not  historical  facts,  may  be  forward-looking  statements.  Such
statements  are  subject  to risks and  uncertainties  that could  cause  actual
results to differ  materially from those projected.  Investors are cautioned not
to attribute undue certainty to these  forward-looking  statements,  which speak
only as of the date of this Form 10-K.  We undertake no  obligation  to publicly
release any revisions to these  forward-looking  statements to reflect events or
circumstances  after the date of this Form 10-K or to reflect the  occurrence of
unanticipated events, other than as required by law.



                                       5
<PAGE>

Capital Resources and Liquidity

The Partnership's public offering provided for a total maximum capitalization of
$150,000,000.  As of November 27, 1998, the offering was  concluded.  As of that
date, subscriptions for 15,000,000 Units had been received and accepted.

The  liquidity of the  Partnership  will vary in the future,  increasing  to the
extent cash flows from leases and proceeds of asset sales exceed  expenses,  and
decreasing  as lease  assets  are  acquired,  as  distributions  are made to the
Limited  Partners and to the extent  expenses  exceed cash flows from leases and
proceeds from asset sales.

As another source of liquidity,  the Partnership is expected to have contractual
obligations  with a diversified  group of lessees for fixed lease terms at fixed
rental amounts. As the initial lease terms expire, the Partnership will re-lease
or sell the  equipment.  The future  liquidity  beyond the  contractual  minimum
rentals will depend on AFS's  success in  re-leasing or selling the equipment as
it comes off lease.

The  Partnership  participates  with  AFS and  certain  of its  affiliates  in a
$58,627,656 revolving line of credit (comprised of an acquisition facility and a
warehouse facility) with a financial institution that includes certain financial
covenants. The line of credit expires on June 28, 2004. As of December 31, 2003,
borrowings under the facility were as follows:

Amount borrowed by the Partnership under the acquisition
   facility                                                    $    13,500,000
Amounts borrowed by affiliated partnerships and limited
   liability companies under the acquisition facility                9,500,000
                                                              -----------------
Total borrowings under the acquisition facility                     23,000,000
Amounts borrowed by AFS and its sister corporation under
   the warehouse facility                                                    -
                                                              -----------------
Total outstanding balance                                      $    23,000,000
                                                              =================

Total available under the line of credit                       $    58,627,656
Total outstanding balance                                          (23,000,000)
                                                              -----------------
Remaining availability                                         $    35,627,656
                                                              =================

Draws on the acquisition facility by any individual borrower are secured only by
that borrower's assets,  including  equipment and related leases.  Borrowings on
the  warehouse  facility  are  recourse  jointly to  certain  of the  affiliated
partnerships and limited liability companies, the Partnership and AFS.

The credit agreement  includes certain  financial  covenants  applicable to each
borrower.  The  Partnership  was in compliance with its covenants as of December
31, 2003.

The Partnership  anticipates reinvesting a portion of lease payments from assets
owned in new leasing  transactions.  Such reinvestment will occur only after the
payment  of  all  obligations,   including  debt  service  (both  principal  and
interest),  the  payment  of  management  fees to AFS  and  providing  for  cash
distributions to the Limited Partners. At December 31, 2003, the Partnership had
no commitments to purchase lease assets.

As of December 31, 2003, cash balances  consisted of working capital and amounts
reserved for distributions to be paid in January 2004, generated from operations
in 2003.

The Partnership  currently has available adequate reserves to meet its immediate
cash  requirements  and those of the next twelve months,  but in the event those
reserves  were found to be  inadequate,  the  Partnership  would  likely be in a
position to borrow against its current portfolio to meet such requirements.  AFS
envisions no such requirements for operating purposes.

In 1998, the Partnership  established a $65 million  receivables funding program
with a receivables  financing company that issues commercial paper rated A1 from
Standard and Poors and P1 from Moody's  Investor  Services.  In this receivables
funding  program,  the  lenders  received  a  general  lien  against  all of the
otherwise  unencumbered  assets of the  Partnership.  The program  provided  for
borrowing at a variable  interest  rate and required AFS to enter into  interest
rate swap  agreements  with certain hedge  counterparties  (also rated A1/P1) to
mitigate  the  interest  rate risk  associated  with a variable  rate note.  AFS
anticipated  that this program  would allow the  Partnership  to avail itself of
lower  cost  debt  than  that   available  for  individual   non-recourse   debt
transactions.  The Partnership's  ability to borrow under the program expired in
February 2002.

See Item 7a and Note 5 to the financial statements, Other long-term debt, as set
forth in Part II, Item 8,  Financial  Statements  and  Supplementary  Data,  for
additional information regarding this program and related interest rate swaps.

It was the intention of the Partnership to use the  receivables  funding program
as its primary source of debt financing.  The  Partnership  will continue to use
its sources of non-recourse  secured debt financing on a transaction  basis as a
means of mitigating credit risk.

                                       6
<PAGE>

AFS expects that aggregate borrowings in the future will be approximately 50% of
aggregate equipment cost. In any event, the Limited Partnership Agreement limits
such borrowings to 50% of the total cost of equipment, in aggregate.

See Note 4 to the financial statements,  Non-recourse debt, as set forth in Part
II,  Item  8,  Financial  Statements  and  Supplementary  Data,  for  additional
information regarding non-recourse debt.

The  Partnership  commenced  regular  distributions,  based on cash  flows  from
operations,  beginning with the month of January 1997. See Items 5 and 6 of this
report for additional information regarding distributions.

If  inflation  in the general  economy  becomes  significant,  it may affect the
Partnership  inasmuch as the residual  (resale) values and rates on re-leases of
the  Partnership's  leased  assets may  increase as the costs of similar  assets
increase.  However,  the  Partnership's  revenues from existing leases would not
increase,  as such rates are generally fixed for the terms of the leases without
adjustment for inflation.

If interest rates increase  significantly,  the lease rates that the Partnership
can obtain on future  leases will be expected to increase as the cost of capital
is a significant  factor in the pricing of lease  financing.  Leases  already in
place, for the most part, would not be affected by changes in interest rates.

Cash Flows

2003 vs. 2002:

Cash flows from operations  decreased from $19,521,121 in 2002 to $16,452,288 in
2003,  a decrease  of  $3,068,833.  Rents from  operating  leases is the primary
source of operating cash flows. Sales of operating lease assets in 2002 and 2003
led to the decrease in operating lease revenues compared to 2002.

In 2003 and  2002,  sources  of cash  from  investing  activities  consisted  of
proceeds  from the sales of lease  assets and from rents from  direct  financing
leases.  Proceeds from the sales of lease assets  increased  from  $2,229,481 in
2002 to  $15,724,456 in 2003, an increase of  $13,494,975.  The assets that were
sold in 2002 had an original costs of approximately $14,826,000. The assets sold
in 2003 had an original cost of approximately $33,950,000. A significant portion
of the assets  sold in 2003 were still on lease and had  higher  average  values
than those sold in 2002.  As a result,  sales  proceeds were higher in 2003 when
compared to 2002. Proceeds from the sales of lease assets are not expected to be
consistent  from one period to  another.  Rents  from  direct  financing  leases
decreased  by $836,445  (from  $3,032,098  in 2002 to  $2,195,653  in 2003) as a
result of sales of lease assets in 2002 and 2003.

In 2003,  financing  sources of cash consisted of proceeds of a new non-recourse
note payable of $1,489,905 and  borrowings on the line of credit.  Borrowings on
the line of credit were used to manage  short term cash  requirements.  In 2002,
financing  sources of cash  consisted  of proceeds of other  long-term  debt and
borrowings on the line of credit.  In 2002, the proceeds of other long-term debt
were used to make  payments  on the line of credit.  In 2002,  proceeds of other
long-term debt were used as long-term financing on the acquisition of assets. In
2002,  borrowings  on the line of credit  were used to  manage  short  term cash
requirements.

Cash was used to repay  $17,787,000  of  other  long-term  debt in 2003.  Of the
amount  paid,  $11,524,000  was due to payments  that had been  scheduled  as of
December 31, 2002 and  $6,263,000  represented  early  repayments  made in 2003.
Repayments of non-recourse debt were the result of scheduled payments.

2002 vs. 2001:

Cash flows from operations  decreased from $22,972,558 in 2001 to $19,521,121 in
2002,  a decrease  of  $3,451,437.  Rents from  operating  leases is the primary
source of operating cash flows.  Lease terminations and sales of operating lease
assets in 2001 and 2002 led to the decrease in operating lease revenues compared
to 2001.

In 2002,  sources of cash from investing  activities  consisted of proceeds from
the sales of lease assets and from rents from direct financing leases.  Proceeds
from the sales of lease assets  decreased from  $3,830,077 in 2001 to $2,229,481
in 2002, a decrease of  $1,600,596.  Proceeds from the sales of lease assets are
not expected to be  consistent  from one period to another as the sales of lease
assets is subject to various  factors such as the timing of lease  terminations,
the  timing of market  demand and the  condition  and  uniqueness  of the assets
subject to sale.  Rents from direct  financing leases increased by $771,036 as a
result of acquisitions of lease assets in 2001 and 2002.

In 2002,  financing  sources of cash consisted of proceeds of long-term debt and
borrowings  on the line of credit.  The proceeds of long-term  debt were used to
repay the line of credit.

Cash  used  for   distributions  to  partners  did  not  change   significantly.
Non-recourse  debt payments  scheduled in 2002 were less than those scheduled in
2001. This was the cause of the decrease in debt payments.

Cash  used to repay  long-term  debt  increased  as a result  of the  additional
borrowings in 2002.



                                       7
<PAGE>

Results of Operations

Substantially   all   employees  of  AFS  track  time   incurred  in  performing
administrative  services on behalf of the  Partnership.  AFS  believes  that the
costs  reimbursed  are the lower of (i) actual  costs  incurred on behalf of the
Partnership  or (ii)  the  amount  the  Partnership  would  be  required  to pay
independent  parties  for  comparable   administrative   services  in  the  same
geographic location.

As of December 31, 2003, 2002 and 2001,  there were  concentrations  (defined as
greater than 10%) of  equipment  leased to lessees in certain  industries  (as a
percentage of total equipment cost) as follows:

                                      2003              2002              2001
Transportation, rail                   22%               15%              13%
Manufacturing                          21%               24%               *
Transportation, other                  21%               14%              14%
Municipalities                         14%               13%              17%

*  Less than 10%

2003 vs. 2002:

Operations  resulted in a net loss of  $4,311,400 in 2003 compared to $1,772,503
in  2002.  The  primary  reason  for the  increased  loss  is due to  additional
impairment  losses of $5,290,639 in 2003, an increase of $3,179,046  compared to
2002.

Revenues from operating leases decreased from $25,631,019 in 2002 to $20,083,732
in 2003, a decrease of $5,547,287.  Decreases  resulted from asset sales in 2002
and in 2003.  In 2003,  the  Partnership  recorded  gains on sales of  assets of
$1,449,492 compared to losses of $1,270,985 in 2002, a difference of $2,720,477.
Such gains and  losses  are not  expected  to be  consistent  from one period to
another.

Depreciation  expense  decreased from $18,424,332 in 2002 to $15,220,612 in 2003
(a decrease of $3,203,720)  as a result of sales of  depreciable  assets in 2002
and 2003.

Interest  expense  declined as a result of  scheduled  and early debt  payments.
Total debt, including the line of credit, decreased from $51,423,308 at December
31, 2002 to $30,845,403 at December 31, 2003.

Management  periodically reviews the carrying values of its assets on leases and
assets held for lease or sale. As a result of that review, management determined
that the values of certain  mining  equipment and fleets of jumbo covered hopper
cars,  petroleum rail tank cars, off shore supply vessels,  tidewater barges and
diesel  electric  locomotives  had  declined  in  value to the  extent  that the
carrying  values had become  impaired.  This  decline is the result of decreased
long-term demand for these types of assets and a corresponding  reduction in the
amounts of rental payments that these assets currently  command.  Management has
recorded a provision  for the decline in value of those  assets in the amount of
$5,290,639 for the year ended December 31, 2003. In 2002, impairment losses were
$2,111,593.  See additional discussion of the impairment losses recorded in Note
14 in the financial statements included in Part I, Item 8 of this report.

2002 vs. 2001:

Operations  resulted in a loss of  $1,772,503  in 2002 compared to net income of
$2,939,818  in 2001.  The primary  cause of the  decrease is the  provision  for
losses  and  impairments  of  $2,111,593  recorded  in 2002.  There  was no such
provision in 2001.

Revenues from leases  decreased from $31,726,016 in 2001 to $27,009,517 in 2002,
a decrease of $4,716,499.  Revenue  increases  resulting from asset purchases in
2001 and in 2002 were offset by the  effects of income  producing  asset  sales.
Lower  lease  rates  realized  on lease  renewals  has also  contributed  to the
decrease in lease revenues.  Losses on sales of assets increased from $1,145,708
in 2001 to $1,270,985  in 2002,  an increase of $125,277.  Such gains and losses
are not expected to be consistent from one period to another.

Depreciation expense decreased by $1,404,812 compared to 2001 as a result of the
sales of depreciable assets in 2001 and 2002.

Interest  expense  declined  as a  result  of  scheduled  debt  payments.  These
repayments exceeded the amounts of new borrowings in 2002. Total debt, including
the  line  of  credit,  decreased  from  $52,611,225  at  December  31,  2001 to
$51,423,308 at December 31, 2002.

As a result of management's  periodic  reviews the carrying values of its assets
on leases  and assets  held for lease or sale,  management  determined  that the
values of fleets of jumbo  covered  hopper  cars,  tidewater  barges  and diesel
electric  locomotives  had  declined  in value to the extent  that the  carrying
values had become  impaired.  This decline is the result of decreased  long-term
demand for these types of assets and a corresponding reduction in the amounts of
rental payments that these assets currently  command.  Management has recorded a
provision  for the decline in value of those assets in the amount of  $2,111,593
for the year ended December 31, 2002. There were no impairment losses in 2001.



                                       8
<PAGE>

Derivative Financial Instruments

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standards ("SFAS") No. 133,  Accounting for Derivative
Instruments  and  Hedging  Activities,  which  established  new  accounting  and
reporting standards for derivative instruments. SFAS No. 133 has been amended by
SFAS No. 137,  issued in June 1999, by SFAS No. 138,  issued in June 2000 and by
SFAS No. 149, issued in June 2003.

SFAS No. 133, as amended,  requires the Partnership to recognize all derivatives
as  either  assets  or  liabilities  in the  balance  sheet  and  measure  those
instruments  at  fair  value.  It  further  provides   criteria  for  derivative
instruments  to be  designated  as fair value,  cash flow,  or foreign  currency
hedges, and establishes  accounting  standards for reporting changes in the fair
value of the derivative instruments.

The  Partnership  adopted  SFAS No. 133, as  amended,  on January 1, 2001.  Upon
adoption,  the Partnership  recorded  interest rate swap hedging  instruments at
fair value in the balance sheet and  recognized the changes in fair value in net
income or other comprehensive  income, in accordance with SFAS No. 133. See Note
5 to the financial  statements,  Other  long-term debt, as set forth in Part II,
Item 8, Financial Statements and Supplementary Data, for additional information.

Recent Accounting Pronouncements

In  January   2003,   the  FASB  issued   Interpretation   No.  46  ("FIN  46"),
"Consolidation of Variable Interest Entities,  an interpretation of ARB 51." The
primary  objectives  of  this  interpretation  are to  provide  guidance  on the
identification  of entities for which  control is achieved  through  means other
than through voting rights ("variable  interest  entities") and how to determine
when  and  which  business   enterprise  (the  "primary   beneficiary")   should
consolidate  the  variable  interest  entity.  This new model for  consolidation
applies to an entity in which  either (i) the equity  investors  (if any) do not
have a controlling  financial interest; or (ii) the equity investment at risk is
insufficient to finance that entity's  activities  without receiving  additional
subordinated  financial support from other parties. In addition, FIN 46 requires
that  the  primary  beneficiary,  as  well  as  all  other  enterprises  with  a
significant  variable  interest in a variable  interest entity,  make additional
disclosures.  Certain  disclosure  requirements  of FIN 46  were  effective  for
financial statements issued after January 31, 2003.

In  December  2003,  the  FASB  issued  FIN  No.  46  (revised  December  2003),
"Consolidation  of Variable  Interest  Entities" ("FIN 46-R") to address certain
FIN 46 implementation  issues.  The effective dates and impact of FIN 46 and FIN
46-R are as follows:

(i) Special  purpose  entities  ("SPEs")  created prior to February 1, 2003. The
company 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 company 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.

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.  The  adoption of the
provisions  applicable to SPEs and all other variable  interests  obtained after
January 31, 2003 did not have a material impact on the  Partnership's  financial
statements.  The Partnership is currently  evaluating the impact of adopting FIN
46-R  applicable  to  Non-SPEs  created  prior to  February 1, 2003 but does not
expect a material impact.

In April 2002,  the FASB  issued FASB  Statement  No.  145,  Rescission  of FASB
Statements No. 4, 44, and 64,  Amendment of FASB Statement No. 13, and Technical
Corrections (Statement No. 145). Among other things,  Statement No. 145 rescinds
Statement No. 4, which required that all gains and losses from extinguishment of
debt be reported as an  extraordinary  item.  The adoption of Statement No. 145,
effective  January  1,  2003,  did not  have  any  effect  on the  Partnership's
consolidated  financial  position,   consolidated  results  of  operations,   or
liquidity.

Critical Accounting Policies

The policies  discussed below are considered by management of the Partnership to
be  critical  to an  understanding  of the  Partnership's  financial  statements
because their application requires significant complex or subjective  judgments,
decisions,   or  assessments,   with  financial  reporting  results  relying  on
estimation about the effect of matters that are inherently  uncertain.  Specific
risks for these  critical  accounting  policies are  described in the  following
paragraphs.  The Partnership also states these accounting  policies in the notes
to the financial  statements  and in relevant  sections in this  discussion  and
analysis.  For all of these  policies,  management  cautions  that future events
rarely develop  exactly as forecast,  and the best estimates  routinely  require
adjustment.



                                       9
<PAGE>

Equipment on operating leases:

Equipment  subject to operating leases is stated at cost.  Depreciation is being
recognized on a straight-line method over the terms of the related leases to the
equipment's  estimated  residual values at the end of the leases.  Revenues from
operating leases are recognized evenly over the terms of the related leases.

Direct financing leases:

Income from direct financing lease  transactions is reported using the financing
method  of  accounting,  in which the  Partnership's  investment  in the  leased
property is reported as a  receivable  from the lessee to be  recovered  through
future rentals. The income portion of each rental payment is calculated so as to
generate a constant rate of return on the net receivable outstanding.

Allowances for losses on direct financing leases are typically established based
on historical charge offs and collections  experience and are usually determined
by specifically identified lessees and billed and unbilled receivables.

Direct financing leases are placed in a non-accrual status based on specifically
identified lessees.  Such leases are only returned to an accrual status based on
a case by case  review  of AFS.  Direct  financing  leases  are  charged  off on
specific identification by AFS.

Use of Estimates:

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States  requires  management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting  period.  Actual  results  could  differ  from those  estimates.  Such
estimates primarily relate to the determination of residual values at the end of
the lease term and  expected  future  cash flows  used for  impairment  analysis
purposes.

Asset Valuation:

Recorded values of the Partnership's  asset portfolio are periodically  reviewed
for impairment in accordance  with Statement of Financial  Accounting  Standards
(SFAS) No. 144,  Accounting for the Impairment or Disposal of Long-Lived Assets.
An impairment loss is measured and recognized only if the estimated undiscounted
future cash flows of the asset are less than their net book value. The estimated
undiscounted  future cash flows are the sum of the estimated  residual  value of
the asset at the end of the asset's  expected  holding  period and  estimates of
undiscounted future rents. The residual value assumes,  among other things, that
the asset is  utilized  normally  in an open,  unrestricted  and stable  market.
Short-term  fluctuations  in the market place are  disregarded and it is assumed
that there is no  necessity  either to dispose  of a  significant  number of the
assets, if held in quantity,  simultaneously or to dispose of the asset quickly.
Impairment is measured as the  difference  between the fair value (as determined
by the  discounted  estimated  future cash flows) of the assets and its carrying
value on the measurement date.


Item 7a.  QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

The Partnership,  like most other companies, is exposed to certain market risks,
including  primarily  changes in interest rates.  The  Partnership  believes its
exposure to other market risks,  including  foreign currency exchange rate risk,
commodity  risk and equity price risk, are  insignificant  to both its financial
position and results of operations.

In general,  the  Partnership's  strategy is to manage its  exposure to interest
rate risk by obtaining fixed rate debt. Current fixed rate debt is structured so
as to match the cash flows  required to service the debt to the payment  streams
under fixed rate lease  receivables.  The payments under the leases are assigned
to the lenders in  satisfaction  of the debt.  Furthermore,  the Partnership has
historically been able to maintain a stable spread between its cost of funds and
lease yields in both periods of rising and falling interest rates. Nevertheless,
the  Partnership  frequently  funds leases with its floating rate line of credit
and is,  therefore,  exposed to  interest  rate risk until fixed  interest  rate
financing is arranged,  or the floating  interest rate line of credit is repaid.
As of December 31, 2003, there was an outstanding  balance of $13,500,000 on the
floating rate line of credit and the effective  interest rate of the  borrowings
ranged from 3.03% to 4.00%.

Also, as described in Item 7 in the caption  "Capital  Resources and Liquidity,"
the  Partnership  entered into a  receivables  funding  facility in 1998.  Since
interest on the outstanding  balances under the facility varies, the Partnership
is exposed to market risks associated with changing interest rates. To hedge its
interest rate risk,  the  Partnership  enters into  interest  rate swaps,  which
effectively convert the underlying interest  characteristic on the facility from
floating to fixed.



                                       10
<PAGE>

Under the swap agreements,  the Partnership  makes or receives variable interest
payments to or from the counterparty  based on a notional  principal amount. The
net  differential  paid or  received  by the  Partnership  is  recognized  as an
adjustment to interest expense related to the facility balances. The amount paid
or received  represents the difference  between the payments  required under the
variable  interest  rate  facility and the amounts due under the facility at the
fixed  (hedged)  interest  rate.  As of December  31,  2003,  borrowings  on the
facility were $15,759,000 and the associated  variable interest rate was 1.5154%
and the average fixed interest rate achieved with the swap agreements was 6.086%
at December 31, 2003.

In general, these swap agreements eliminate the Partnership's interest rate risk
associated with variable rate borrowings. However, the Partnership is exposed to
and manages credit risk associated  with the  counterparty to the swap agreement
by dealing only with  institutions  it  considers  financially  sound.  If these
agreements were not in place, based on the Partnership's  facility borrowings at
December 31, 2003, a hypothetical  1.00% increase or decrease in market interest
rates would  increase or  decrease  the  Partnership's  2004  variable  interest
expense by approximately $127,500.

See the Notes to the Financial  Statements as set forth in Item 8 for additional
information.


Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See the  Report  of  Independent  Auditors,  Financial  Statements  and Notes to
Financial Statements attached hereto at pages 12 through 32.



                                       11
<PAGE>

                REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS



The Partners
ATEL Capital Equipment Fund VII, L.P.

We have audited the accompanying  balance sheets of ATEL Capital  Equipment Fund
VII,  L.P.  (Partnership)  as of  December  31,  2003 and 2002,  and the related
statements of operations,  changes in partners'  capital and cash flows for each
of the three  years in the period  ended  December  31,  2003.  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 auditing standards generally accepted
in the United States. 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 ATEL Capital  Equipment Fund
VII, L.P. at December 31, 2003 and 2002,  and the results of its  operations and
its cash flows for each of the three  years in the  period  ended  December  31,
2003, in conformity with accounting  principles generally accepted in the United
States.

                                                          /s/ ERNST & YOUNG LLP

San Francisco, California
February 20, 2004





                                       12
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                                 BALANCE SHEETS

                           DECEMBER 31, 2003 AND 2002


                                     ASSETS

                                                   2003              2002
                                                   ----              ----
Cash and cash equivalents                           $ 835,628       $ 2,194,169

Accounts receivable, net of allowance for
   doubtful accounts of $524,880 in 2003
   and $403,067 in 2002                             2,149,089         4,848,736

Due from General Partner                                    -           253,543

Other assets                                                -            10,019

Investments in equipment and leases                71,827,497       108,917,281
                                             ----------------- -----------------
Total assets                                     $ 74,812,214      $116,223,748
                                             ================= =================



                       LIABILITIES AND PARTNERS' CAPITAL


Non-recourse debt                                 $ 1,586,403       $ 4,577,308

Other long-term debt                               15,759,000        33,546,000

Line of credit                                     13,500,000        13,300,000

Accounts payable and accruals:
   General Partner                                    481,818                 -
   Other                                              650,573           752,459

Accrued interest payable                               36,929           192,403

Interest rate swap contracts                          886,207         1,624,360

Unearned operating lease income                       505,261         1,012,984
                                             ----------------- -----------------
                                                   33,406,191        55,005,514

Partners' capital:
   Accumulated other comprehensive income            (886,207)       (1,624,360)
   Partners' capital                               42,292,230        62,842,594
                                             ----------------- -----------------
Total Partners' capital                            41,406,023        61,218,234
                                             ----------------- -----------------
Total liabilities and Partners' capital          $ 74,812,214      $116,223,748
                                             ================= =================

                             See accompanying notes.


                                       13
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                            STATEMENTS OF OPERATIONS

                  YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

<TABLE>
<CAPTION>

Revenues:                                                       2003              2002              2001
                                                                ----              ----              ----
Leasing activities:
<S>                                                           <C>               <C>               <C>
   Operating leases                                           $ 20,083,732      $ 25,631,019      $ 30,657,648
   Direct financing leases                                         554,655         1,378,498         1,068,368
   Gain (loss) on sale of assets                                 1,449,492        (1,270,985)       (1,145,708)
Interest income                                                      4,563            14,000            55,569
Other                                                              392,261           190,241            10,648
                                                           ---------------- ----------------- -----------------
                                                                22,484,703        25,942,773        30,646,525
Expenses:
Depreciation of operating lease assets                          15,220,612        18,424,332        19,829,145
Impairment losses                                                5,290,639         2,111,593                 -
Interest                                                         1,916,785         3,206,557         4,029,695
Equipment and incentive management fees to General Partner         889,571           947,568         1,175,912
Cost reimbursements to General Partner                             849,984           859,415           851,382
Railcar maintenance                                                773,875           712,235           727,444
Provision for doubtful accounts                                    343,000           285,000           118,067
Equipment storage                                                  215,749                 -                 -
Professional fees                                                  176,812           199,993           163,006
Insurance                                                          141,513                 -            41,019
Taxes on income and franchise fees                                 128,178            23,124             6,299
Amortization of initial direct costs                               107,916           184,171           194,104
Other                                                              741,469           761,288           570,634
                                                           ---------------- ----------------- -----------------
                                                                26,796,103       27,715,276         27,706,707
                                                           ---------------- ----------------- -----------------
Net (loss) income                                             $ (4,311,400)     $ (1,772,503)      $ 2,939,818
                                                           ================ ================= =================

Net (loss) income:
   General Partner                                             $ 1,239,911       $ 1,203,884       $ 2,799,523
   Limited Partners                                             (5,551,311)       (2,976,387)          140,295
                                                           ---------------- ----------------- -----------------
                                                              $ (4,311,400)     $ (1,772,503)      $ 2,939,818
                                                           ================ ================= =================

Net (loss) income per Limited Partnership unit                     $ (0.37)          $ (0.20)           $ 0.01
                                                           ================ ================= =================

Weighted average number of units outstanding                     14,995,675       14,996,050         14,996,050
</TABLE>








                             See accompanying notes.


                                       14
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL

                  YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                                                   Accumulated
                                                                                                      Other
                                                             Limited Partners                     Comprehensive
                                                             ----------------       General           Income
                                                  Units           Amount            Partner           (Loss)            Total
<S>              <C> <C>                          <C>            <C>               <C>                <C>              <C>
Balance December 31, 2000                         14,996,050     $ 95,678,209      $ (1,514,601)              $ -      $ 94,163,608

Cumulative effect of change in
   accounting principle at
   January 1, 2001                                                          -                 -           281,661           281,661
Unrealized change in value of
   interest rate swap contracts                                             -                 -        (1,607,667)       (1,607,667)
Distributions to Limited Partners
   ($1.00 per Unit)                                               (14,999,647)                -                 -       (14,999,647)
Distributions to General Partner                                            -        (1,284,922)                -        (1,284,922)
Net income                                                            140,295         2,799,523                 -         2,939,818
                                             ---------------- ----------------  ---------------- ----------------- -----------------
Balance December 31, 2001                         14,996,050       80,818,857                 -        (1,326,006)       79,492,851

Distributions 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)                                                  (2,976,387)        1,203,884                 -        (1,772,503)
                                             ---------------- ----------------  ---------------- ----------------- -----------------
Balance December 31, 2002                         14,996,050       62,842,594                 -        (1,624,360)       61,218,234

Distributions 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           738,153
Net income (loss)                                                  (5,551,311)        1,239,911                 -        (4,311,400)
                                             ---------------- ----------------  ---------------- ----------------- -----------------
Balance December 31, 2003                         14,995,550     $ 42,292,230               $ -        $ (886,207)     $ 41,406,023
                                             ================ ================  ================ ================= =================
</TABLE>



                             See accompanying notes.


                                       15
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                            STATEMENTS OF CASH FLOWS

                  YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                                     2003              2002              2001
                                                                                     ----              ----              ----
Operating activities:
<S>                                                                                <C>               <C>                <C>
Net income (loss)                                                                  $ (4,311,400)     $ (1,772,503)      $ 2,939,818
Adjustment to reconcile net income (loss) to net cash provided by
   operating activities:
     Depreciation of operating lease assets                                          15,220,612        18,424,332        19,829,145
     Amortization of initial direct costs                                               107,916           184,171           194,104
     Impairment losses                                                                5,290,639         2,111,593                 -
     Provision for doubtful accounts                                                    343,000           285,000           118,067
     (Gain) loss on sales of assets                                                  (1,449,492)        1,270,985         1,145,708
     Changes in operating assets and liabilities:
         Accounts receivable                                                          1,161,897          (568,946)         (850,046)
         Due from General Partner                                                       253,543          (253,543)                -
         Other assets                                                                    10,019            97,996           (18,004)
         Accounts payable, General Partner                                              481,818          (580,916)          (24,768)
         Accounts payable, other                                                       (101,886)          241,861          (193,163)
         Accrued interest payable                                                       (46,655)           44,672           119,226
         Unearned operating lease income                                               (507,723)           36,419          (287,529)
                                                                                ---------------- ----------------- -----------------
Net cash provided by operating activities                                            16,452,288        19,521,121        22,972,558
                                                                                ---------------- ----------------- -----------------

Investing activities:
Proceeds from sales of assets                                                        15,724,456         2,229,481         3,830,077
Reduction of net investment in direct financing leases                                2,195,653         3,032,098         2,261,062
Purchases of equipment on direct financing leases                                             -        (3,052,582)       (4,344,293)
Initial direct lease costs                                                                    -          (107,962)          (48,560)
Purchases of equipment on operating leases                                                    -        (3,959,522)       (1,950,111)
                                                                                ---------------- ----------------- -----------------
Net cash provided by (used in) investing activities                                  17,920,109        (1,858,487)         (251,825)
                                                                                ---------------- ----------------- -----------------

Financing activities:
Borrowings under line of credit                                                      21,500,000        19,500,000        12,900,000
Repayments of borrowings under line of credit                                       (21,300,000)      (10,300,000)       (8,800,000)
Repayments of other long-term debt                                                  (17,787,000)      (15,094,000)      (14,337,000)
Distributions to Limited Partners                                                   (14,997,209)      (14,999,876)      (14,999,647)
Repayments of non-recourse debt                                                      (3,394,879)       (4,406,894)       (4,584,392)
Distributions to General Partner                                                     (1,239,911)       (1,203,884)       (1,284,922)
Proceeds of non-recourse debt                                                         1,489,905                 -                 -
Repurchase of limited partnership units                                                  (1,844)                -                 -
Proceeds of other long-term debt                                                              -        10,100,000         8,000,000
                                                                                ---------------- ----------------- -----------------
Net cash used in financing activities                                               (35,730,938)      (16,404,654)      (23,105,961)
                                                                                ---------------- ----------------- -----------------
Net (decrease) increase in cash and cash equivalents                                 (1,358,541)        1,257,980          (385,228)
Cash and cash equivalents at beginning of year                                        2,194,169           936,189         1,321,417
                                                                                ---------------- ----------------- -----------------
Cash and cash equivalents at end of year                                              $ 835,628       $ 2,194,169         $ 936,189
                                                                                ================ ================= =================
</TABLE>


                                       16
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                            STATEMENTS OF CASH FLOWS
                                   (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


<TABLE>
<CAPTION>
                                                                                     2003              2002              2001
                                                                                     ----              ----              ----

<S>                                                                                 <C>               <C>               <C>
Supplemental disclosures of cash flow information:
Cash paid during the year for interest                                              $ 1,963,440       $ 3,161,885       $ 3,910,469
                                                                                ================ ================= =================

Schedule of non-cash transactions:

Change in fair value of interest rate swaps contracts                                 $ 738,153        $ (298,354)     $ (1,607,667)
                                                                                ================ ================= =================

Offset of accounts receivable and debt service per lease and debt agreement:
Accrued interest payable                                                             $ (108,819)       $ (207,727)       $ (297,626)
Non-recourse debt                                                                    (1,085,931)         (987,023)         (897,124)
                                                                                ---------------- ----------------- -----------------
                                                                                   $ (1,194,750)     $ (1,194,750)     $ (1,194,750)
                                                                                ================ ================= =================

Accounts receivable                                                                 $ 1,194,750       $ 1,194,750       $ 1,194,750
                                                                                ================ ================= =================
</TABLE>


                             See accompanying notes.


                                       17
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2003


1.  Organization and Partnership matters:

ATEL Capital  Equipment  Fund VII, L.P. (the  Partnership)  was formed under the
laws of the state of  California  on May 17, 1996 for the  purpose of  acquiring
equipment to engage in equipment leasing and sales activities,  primarily in the
United States. The Partnership may continue until December 31, 2017.

Upon the sale of the  minimum  amount of Units of Limited  Partnership  interest
(Units) (120,000 Units)  ($1,200,000) and the receipt of the proceeds thereof on
January 7, 1997, the Partnership commenced operations.

The General Partner of the  Partnership is ATEL Financial  Services LLC ("AFS").
Prior to converting to a limited liability company  structure,  AFS was formerly
known as ATEL Financial Corporation.

The Partnership's business consists of leasing various types of equipment. As of
December 31, 2003,  the original  terms of the leases  ranged from six months to
ten years.

Pursuant to the Limited  Partnership  Agreement,  AFS receives  compensation and
reimbursements  for services rendered on behalf of the Partnership (See Note 6).
AFS is required to maintain in the  Partnership  reasonable  cash  reserves  for
working capital, the repurchase of Units and contingencies.

The Partnership's  principal objectives are to invest in a diversified portfolio
of  equipment  that will (i)  preserve,  protect  and return  the  Partnership's
invested  capital;  (ii) generate regular  distributions to the partners of cash
from operations and cash from sales or refinancing,  with any balance  remaining
after certain minimum  distributions to be used to purchase additional equipment
during the  Reinvestment  Period,  ending  December  31, 2004 and (iii)  provide
additional  distributions  following  the  Reinvestment  Period  and  until  all
equipment has been sold. The Partnership is governed by its Limited  Partnership
Agreement.


2. Summary of significant accounting policies:

Cash and cash equivalents:

Cash and cash equivalents include cash in banks and cash equivalent  investments
with original maturities of ninety days or less.

Accounts receivable:

Accounts  receivable  represent  the amounts  billed under lease  contracts  and
currently due to the Partnership. Allowances for doubtful accounts are typically
established  based on historical  charge offs and collection  experience and are
usually determined by specifically identified lessees and invoiced amounts.

Equipment on operating leases:

Equipment  subject to operating leases is stated at cost.  Depreciation is being
recognized on a straight-line method over the terms of the related leases to the
equipment's  estimated  residual values at the end of the leases.  Revenues from
operating leases are recognized evenly over the terms of the related leases.



                                       18
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2003


2. Summary of significant accounting policies (continued):

Direct financing leases:

Income from direct financing lease  transactions is reported using the financing
method  of  accounting,  in which the  Partnership's  investment  in the  leased
property is reported as a  receivable  from the lessee to be  recovered  through
future rentals. The income portion of each rental payment is calculated so as to
generate a constant rate of return on the net receivable outstanding.

Allowances for losses on direct financing leases are typically established based
on historical charge offs and collections  experience and are usually determined
by specifically identified lessees and billed and unbilled receivables.

Direct financing leases are placed in a non-accrual status based on specifically
identified lessees.  Such leases are only returned to an accrual status based on
a case by case  review  of AFS.  Direct  financing  leases  are  charged  off on
specific identification by AFS.

Initial direct costs:

The Partnership capitalizes initial direct costs associated with the acquisition
of lease  assets.  The  costs are  amortized  over a five  year  period  using a
straight line method.

Income taxes:

The  Partnership  does not provide for income  taxes since all income and losses
are the liability of the  individual  partners and are allocated to the partners
for inclusion in their individual tax returns.

The tax basis of the  Partnership's  net assets and liabilities  varies from the
amounts presented in these financial statements at December 31 (unaudited):

                                               2003              2002
                                               ----              ----
Financial statement basis of net assets      $ 41,406,023      $ 61,218,234
Tax basis of net assets                       (34,616,905)      (22,854,898)
                                          ---------------- -----------------
Difference                                   $ 76,022,928      $ 84,073,132
                                          ================ =================

The  primary  differences  between  the tax basis of net assets and the  amounts
recorded in the financial statements are the result of differences in accounting
for syndication costs and differences  between the depreciation  methods used in
the financial statements and the Partnership's tax returns.

The  following  reconciles  the net (loss)  income  reported in these  financial
statements to the income (loss) reported on the Partnership's federal tax return
(unaudited) for each of the years ended December 31:

<TABLE>
<CAPTION>
                                                           2003              2002              2001
                                                           ----              ----              ----
<S>                                                      <C>               <C>                <C>
Net income (loss) per financial statements               $ (4,311,400)     $ (1,772,503)      $ 2,939,818
Adjustment to depreciation expense                          3,927,717        (9,817,508)      (18,455,212)
Adjustments to lease revenues                                 113,208         1,442,714         2,145,833
Provision for doubtful accounts                               343,000           285,000           118,067
Provision for losses                                        5,290,639         2,111,593                 -
                                                      ---------------- ----------------- -----------------
Net income (loss) per federal tax return                  $ 5,363,164      $ (7,750,704)     $(13,251,494)
                                                      ================ ================= =================
</TABLE>


                                       19
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2003


2. Summary of significant accounting policies (continued):

Per unit data:

Net income and distributions per unit are based upon the weighted average number
of units outstanding during the period.

Asset valuation:

Recorded values of the Partnership's  asset portfolio are periodically  reviewed
for impairment in accordance  with Statement of Financial  Accounting  Standards
(SFAS) No. 144,  Accounting for the Impairment or Disposal of Long-Lived Assets.
An impairment loss is measured and recognized only if the estimated undiscounted
future cash flows of the asset are less than their net book value. The estimated
undiscounted  future cash flows are the sum of the estimated  residual  value of
the asset at the end of the asset's  expected  holding  period and  estimates of
undiscounted future rents. The residual value assumes,  among other things, that
the asset is  utilized  normally  in an open,  unrestricted  and stable  market.
Short-term  fluctuations  in the market place are  disregarded and it is assumed
that there is no  necessity  either to dispose  of a  significant  number of the
assets, if held in quantity,  simultaneously or to dispose of the asset quickly.
Impairment is measured as the  difference  between the fair value (as determined
by the  discounted  estimated  future cash flows) of the assets and its carrying
value on the measurement date.

The  Partnership  adopted  SFAS 144 as of January 1, 2002.  The  adoption of the
Statement  did not have a  significant  impact  on the  Partnership's  financial
position or results of operations.

Credit risk:

Financial instruments that potentially subject the Partnership to concentrations
of  credit  risk  include  cash  and  cash  equivalents,  direct  finance  lease
receivables and accounts  receivable.  The Partnership  places its cash deposits
and  temporary  cash  investments  with  creditworthy,  high  quality  financial
institutions.  The concentration of such deposits and temporary cash investments
is not  deemed  to  create  a  significant  risk  to the  Partnership.  Accounts
receivable represent amounts due from lessees in various industries,  related to
equipment on operating and direct financing leases. See Note 8 for a description
of lessees by industry as of December 31, 2003, 2002 and 2001.

Derivative financial instruments:

In June 1998, the Financial  Accounting  Standards  Board (FASB) issued SFAS No.
133,  Accounting  for  Derivative  Instruments  and  Hedging  Activities,  which
established new accounting and reporting  standards for derivative  instruments.
SFAS No. 133 has been amended by SFAS No. 137,  issued in June 1999, by SFAS No.
138, issued in June 2000 and by SFAS No. 149, issued in June 2003.

SFAS No. 133, as amended,  requires the Partnership to recognize all derivatives
as  either  assets  or  liabilities  in the  balance  sheet  and to carry  those
instruments  at  fair  value.  It  further  provides   criteria  for  derivative
instruments  to be  designated  as fair value,  cash flow,  or foreign  currency
hedges, and establishes  accounting  standards for reporting changes in the fair
value of the  derivative  instruments.  Upon  adoption  on January 1, 2001,  the
Partnership  adjusted hedging instruments to fair value in the balance sheet and
recognized the  offsetting  gains or losses as adjustments to be reported in net
income or other comprehensive income, as appropriate.

The Partnership utilizes cash flow hedges comprised of interest rate swaps. Such
interest  rate swaps are linked to and are  designed to  effectively  adjust the
interest rate sensitivity of specific long-term debt.



                                       20
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2003


2. Summary of significant accounting policies (continued):

Derivative financial instruments (continued):

The effective portion of the change in fair value of the hedging  derivatives is
recorded in equity as a component  of  Accumulated  Other  Comprehensive  Income
(AOCI) and the  ineffective  portion (if any)  directly in earnings.  Amounts in
AOCI are  reclassified  into earnings in a manner  consistent  with the earnings
pattern of the underlying hedged item (generally reflected in interest expense).
If a hedged item is dedesignated prior to maturity, previous adjustments to AOCI
are  recognized  in earnings to match the  earnings  recognition  pattern of the
hedged  item  (e.g.,  level  yield  amortization  if  hedging  interest  bearing
instruments).  Interest  income or expense on most hedging  derivatives  used to
manage  interest rate exposure is recorded on an accrual basis, as an adjustment
to the yield of the link  exposures  over the periods  covered by the contracts.
This  matches  the income  recognition  treatment  of the  exposure  (i.e.,  the
liabilities,  which are carried at historical cost, with interest recorded on an
accrual basis).

Credit exposure from derivative financial  instruments arises from the risk of a
counterparty default on the derivative contract.  The amount of the loss created
by the default is the  replacement  cost or current  positive  fair value of the
defaulted contract.

Use of estimates:

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States  requires  management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting  period.  Actual  results  could  differ  from those  estimates.  Such
estimates primarily relate to the determination of residual values at the end of
the lease term and  expected  future  cash flows  used for  impairment  analysis
purposes.

Basis of presentation:

The  accompanying  financial  statements  have been prepared in accordance  with
accounting  principles  generally  accepted in the United States.  Certain prior
year amounts have been reclassified to conform to the current year presentation.

Recent accounting pronouncements:

In  January   2003,   the  FASB  issued   Interpretation   No.  46  ("FIN  46"),
"Consolidation of Variable Interest Entities,  an interpretation of ARB 51." The
primary  objectives  of  this  interpretation  are to  provide  guidance  on the
identification  of entities for which  control is achieved  through  means other
than through voting rights ("variable  interest  entities") and how to determine
when  and  which  business   enterprise  (the  "primary   beneficiary")   should
consolidate  the  variable  interest  entity.  This new model for  consolidation
applies to an entity in which  either (i) the equity  investors  (if any) do not
have a controlling  financial interest; or (ii) the equity investment at risk is
insufficient to finance that entity's  activities  without receiving  additional
subordinated  financial support from other parties. In addition, FIN 46 requires
that  the  primary  beneficiary,  as  well  as  all  other  enterprises  with  a
significant  variable  interest in a variable  interest entity,  make additional
disclosures.  Certain  disclosure  requirements  of FIN 46  were  effective  for
financial statements issued after January 31, 2003.



                                       21
<PAGE>

                     ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2003


2. Summary of significant accounting policies (continued):

Recent accounting pronouncements (continued):

In  December  2003,  the  FASB  issued  FIN  No.  46  (revised  December  2003),
"Consolidation  of Variable  Interest  Entities" ("FIN 46-R") to address certain
FIN 46 implementation  issues.  The effective dates and impact of FIN 46 and FIN
46-R are as follows:

(i) Special  purpose  entities  ("SPEs")  created prior to February 1, 2003. The
company 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 company 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.

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.  The  adoption of the
provisions  applicable to SPEs and all other variable  interests  obtained after
January 31, 2003 did not have a material impact on the  Partnership's  financial
statements.  The Partnership is currently  evaluating the impact of adopting FIN
46-R  applicable  to  Non-SPEs  created  prior to  February 1, 2003 but does not
expect a material impact.

In April 2002,  the FASB  issued FASB  Statement  No.  145,  Rescission  of FASB
Statements No. 4, 44, and 64,  Amendment of FASB Statement No. 13, and Technical
Corrections (Statement No. 145). Among other things,  Statement No. 145 rescinds
Statement No. 4, which required that all gains and losses from extinguishment of
debt be reported as an  extraordinary  item.  The adoption of Statement No. 145,
effective  January  1,  2003,  did not  have  any  effect  on the  Partnership's
consolidated  financial  position,   consolidated  results  of  operations,   or
liquidity.


                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2003


3. Investments in equipment and leases:

The Partnership's investments in equipment and leases consist of the following:

<TABLE>
<CAPTION>
                                                                                Depreciation /
                                                                                 Amortization
                                                                                  Expense or
                                                                                Amortization of     Reclassi-
                                             December 31,       Impairment      Direct Financing   fications or    December 31,
                                                  2002            Losses            Leases         Dispositions          2003
                                                  ----            ------            ------         ------------          ----
<S>                                              <C>             <C>              <C>                <C>               <C>
Net investment in operating leases               $82,215,309     $ (2,960,323)    $ (15,220,612)     $(12,380,635)     $ 51,653,739
Net investment in direct financing
   leases                                         16,227,117                -        (2,195,653)       (5,852,903)        8,178,561
Assets held for sale or lease, net of
   accumulated depreciation of
   $18,795,631 in 2003 and $9,679,501 in
   2002                                           10,263,086       (2,330,316)                -         3,958,574        11,891,344
Initial direct costs, net of
   accumulated amortization of
   $956,767 in 2003 and $905,356 in 2002             211,769                -          (107,916)                -           103,853
                                             ---------------- ----------------  ---------------- ----------------- -----------------
                                                $108,917,281     $ (5,290,639)    $ (17,524,181)     $(14,274,964)     $ 71,827,497
                                             ================ ================  ================ ================= =================
</TABLE>

Impairments of investments in leases and assets held for sale or lease:

Management  periodically reviews the carrying values of its assets on leases and
assets held for lease or sale. As a result of the reviews, management determined
that the fair values of fleets of jumbo covered  hopper cars,  tidewater  barges
and diesel  electric  locomotives  had  declined in value to the extent that the
carrying  values  had  become  impaired.  The fair  values  of the  assets  were
determined based on the sum of the discounted estimated future cash flows of the
assets.  Charges to  operations  were  recorded for the declines in value of the
assets in the amounts of $5,290,639  and $2,111,593 for the years ended December
31, 2003 and 2002, respectively.

Impairment losses are recorded as an addition to accumulated depreciation of the
impaired assets.  Depreciation expense and impairment losses on property subject
to operating leases and property held for lease or sale consist of the following
for each of the years ended December 31:

                              2003              2002              2001
                              ----              ----              ----
Depreciation expense        $ 15,220,612      $ 18,424,332      $ 19,829,145
Impairment losses              5,290,639         2,111,593                 -
                         ----------------  ---------------- -----------------
                            $ 20,511,251      $ 20,535,925      $ 19,829,145
                         ================  ================ =================




                                       22
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2003


3. Investment in leases (continued):

Impairments  of  investments  in  leases  and  assets  held  for  sale or  lease
(continued):

Due to  continued  declines in the markets for certain  types of assets,  during
2003 and 2002  management  determined  that the  value of  certain  assets  were
impaired.  There were no impairment  losses in 2001.  The  Partnership  recorded
impairment losses as follows for each of the years ended December 31:

                                              2003              2002
                                              ----              ----
Locomotives                                   $2,475,000    $      300,000
Off shore supply vessels                       1,022,000                 -
Mining equipment                                 731,619                 -
Covered grain hopper cars                        457,286         1,135,339
Petroleum rail tank cars                         325,462                 -
Barges                                           279,272           676,254
                                         ---------------- -----------------
                                          $    5,290,639   $     2,111,593
                                         ================ =================

All of the  property  subject to leases was  acquired in the years 1997  through
2002.

Operating leases:

Property subject to operating leases consists of the following:

<TABLE>
<CAPTION>
                                                                                                    Reclassi-
                                             December 31,       Impairment       Depreciation      fications or    December 31,
                                                  2002            Losses            Expense        Dispositions          2003
                                                  ----            ------            -------        ------------          ----
<S>                                              <C>                      <C>               <C>      <C>               <C>
Transportation                                   $74,889,008              $ -               $ -      $ (2,724,727)     $ 72,164,281
Construction                                      22,414,263                -                 -        (2,245,270)       20,168,993
Marine vessels / barges                           27,030,136                -                 -       (12,052,094)       14,978,042
Mining equipment                                   9,012,965                -                 -          (602,620)        8,410,345
Manufacturing                                      9,367,388                -                 -        (4,813,948)        4,553,440
Communications                                     4,309,885                -                 -          (561,827)        3,748,058
Materials handling                                 9,009,095                -                 -        (5,450,438)        3,558,657
Office automation                                  3,604,688                -                 -           (83,642)        3,521,046
Other                                              6,034,386                -                 -        (2,686,597)        3,347,789
                                             ---------------- ----------------  ---------------- ----------------- -----------------
                                                 165,671,814                -                 -       (31,221,163)      134,450,651
Less accumulated depreciation                    (83,456,505)      (2,960,323)      (15,220,612)       18,840,528       (82,796,912)
                                             ---------------- ----------------  ---------------- ----------------- -----------------
                                                 $82,215,309     $ (2,960,323)    $ (15,220,612)     $(12,380,635)     $ 51,653,739
                                             ================ ================  ================ ================= =================
</TABLE>




                                       23
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2003


3. Investment in leases (continued):

Direct financing leases:

As of December  31,  2003,  investment  in direct  financing  leases  consist of
various transportation, manufacturing and medical equipment. The following lists
the components of the Partnership's  investment in direct financing leases as of
December 31, 2003 and 2002:

<TABLE>
<CAPTION>
                                                                 2003              2002
                                                                 ----              ----
<S>                                                             <C>              <C>
Total minimum lease payments receivable                         $ 5,860,231      $ 14,018,775
Estimated residual values of leased equipment (unguaranteed)      4,638,162         6,286,069
                                                            ---------------- -----------------
Investment in direct financing leases                            10,498,393        20,304,844
Less unearned income                                             (2,319,832)       (4,077,727)
                                                            ---------------- -----------------
Net investment in direct financing leases                       $ 8,178,561      $ 16,227,117
                                                            ================ =================
</TABLE>

At December 31, 2003, the aggregate  amounts of future minimum lease payments to
be received under operating and direct financing leases are as follows:

                                           Direct
     Year ending         Operating        Financing
     December 31,         Leases           Leases             Total
     ------------         ------           ------             -----
               2004       $10,031,195      $ 2,114,183      $ 12,145,378
               2005         5,400,567        2,114,183         7,514,750
               2006         1,954,507          924,286         2,878,793
               2007           778,800          513,624         1,292,424
               2008           414,600          193,955           608,555
         Thereafter            38,400                -            38,400
                      ---------------- ----------------  ----------------
                          $18,618,069      $ 5,860,231      $ 24,478,300
                      ================ ================  ================


                                       24
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2003


4.  Non-recourse debt:

At December 31, 2003,  non-recourse  debt consists of notes payable to financial
institutions.  The notes are due in varying monthly, quarterly,  semi-annual and
annual  payments.  Interest on the notes is at fixed rates  ranging from 5.5% to
7.0%.  The notes are secured by  assignments  of lease  payments  and pledges of
assets.  At December  31,  2003,  the  carrying  value of the pledged  assets is
$2,390,658. During 2003, an additional $1,489,905 was borrowed. The notes mature
from 2004 through 2008.

Future minimum payments of non-recourse debt are as follows:

    Year ending
    December 31,        Principal        Interest            Total
              2004       $ 1,118,695         $ 53,992       $ 1,172,687
              2005           251,586           24,182           275,768
              2006           101,568           11,462           113,030
              2007            90,838            5,141            95,979
              2008            23,716              279            23,995
                     ---------------- ----------------  ----------------
                         $ 1,586,403         $ 95,056       $ 1,681,459
                     ================ ================  ================



5. Other long-term debt:

In 1998, the Partnership  entered into a $65 million receivables funding program
(the Program) with a receivables  financing company that issues commercial paper
rated A1 by Standard and Poors and P1 by Moody's  Investor  Services.  Under the
Program,  the receivables  financing company receives a general lien against all
of the otherwise  unencumbered  assets of the Partnership.  The Program provides
for borrowing at a variable interest rate (1.5154% at December 31, 2003),  based
on an index of A1 commercial  paper. The Program expired as to new borrowings in
February 2002.

The Program  requires AFS, on behalf of the  Partnership,  to enter into various
interest  rate swaps with a financial  institution  (also rated A1/P1) to manage
interest rate exposure  associated  with  variable  rate  obligations  under the
Program by effectively  converting the variable rate debt to fixed rates.  As of
December  31,  2003,  the  Partnership  receives or pays  interest on a notional
principal of $16,573,550,  based on the difference between nominal rates ranging
from 4.36% to 7.58% and the variable rate under the Program. No actual borrowing
or lending is involved. The termination of the swaps coincides with the maturity
of the debt  with the  last of the  swaps  maturing  in 2008.  Through  the swap
agreements,  the interest rates have been effectively fixed. The differential to
be paid or  received  is  accrued as  interest  rates  change and is  recognized
currently as an adjustment to interest expense related to the debt.



                                       25
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2003


5. Other long-term debt (continued):

 Borrowings under the Program are as follows:
<TABLE>
<CAPTION>

                                                                 Notional            Swap
                              Original           Balance          Balance            Value       Payment Rate on
                               Amount         December 31,     December 31,      December 31,     Interest Swap
           Date Borrowed      Borrowed            2003             2003              2003           Agreement
           -------------      --------            ----             ----              ----           ---------
<S>          <C>              <C>                  <C>              <C>                <C>            <C>
             4/1/1998         $ 21,770,000         $ 247,000        $ 374,199          $ (7,341)      6.220%
             7/1/1998           25,000,000         2,505,000        2,518,900          (174,821)      6.155%
             10/1/1998          20,000,000         3,194,000        3,331,603          (120,158)      5.550%
             4/16/1999           9,000,000         1,733,000        1,736,776           (81,050)      5.890%
             1/26/2000          11,700,000         4,333,000        4,488,957          (368,637)      7.580%
             5/25/2001           2,000,000           904,000        1,009,167           (46,807)      5.790%
             9/28/2001           6,000,000         2,674,000        3,113,948           (87,393)      4.360%
             1/31/2002           4,400,000           169,000                -                 -         *
             2/19/2002           5,700,000                 -                -                 -         *
                          -----------------  ---------------- ----------------  ----------------
                             $ 105,570,000       $15,759,000     $ 16,573,550        $ (886,207)
                          =================  ================ ================  ================
</TABLE>

* Under the terms of the Program, no interest rate swap agreements were required
for these borrowings.

The long-term  debt  borrowings  mature from 2004 through 2008.  Future  minimum
principal payments of long-term debt and annual swap notional  reductions are as
follows:

<TABLE>
<CAPTION>
                                Debt              Debt                                               Rates on
          Year ending        Principal          Principal                                         Interest Swap
          December 31,        Swapped          Not Swapped       Interest            Total         Agreements**
                              -------          -----------       --------            -----         ------------
<S>                  <C>       <C>                 <C>              <C>             <C>          <C>    <C>
                     2004      $ 6,648,000         $ 114,000        $ 777,674       $ 7,539,674  6.074%-6.135%
                     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          901,000                 -           75,818           976,818  6.872%-7.028%
                     2008          603,000                 -           18,843           621,843  7.066%-7.580%
                          -----------------  ---------------- ----------------  ----------------
                              $ 15,590,000         $ 169,000      $ 1,443,828      $ 17,202,828
                          =================  ================ ================  ================
</TABLE>

** 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 (1.5154% at December 31, 2003).

In 2003 and 2002,  the net effect of the  interest  rate  swaps was to  increase
interest expense by $952,386 and $955,401, respectively.




                                       26
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2003


6.  Related party transactions:

The  terms  of  the  Limited  Partnership  Agreement  provide  that  AFS  and/or
affiliates  are entitled to receive  certain fees for equipment  management  and
resale and for management of the Partnership.

The Limited Partnership Agreement allows for the reimbursement of costs incurred
by AFS in providing  administrative services to the Partnership.  Administrative
services provided include  Partnership  accounting,  investor  relations,  legal
counsel  and  lease  and  equipment  documentation.  AFS is not  reimbursed  for
services  whereby it is entitled to receive a separate fee as  compensation  for
such services, such as disposition of equipment.  Reimbursable costs incurred by
AFS are  allocated to the  Partnership  based upon  estimated  time  incurred by
employees  working on  Partnership  business and an allocation of rent and other
costs based on utilization studies.

Each of ATEL Leasing Corporation  ("ALC"),  ATEL Equipment  Corporation ("AEC"),
ATEL  Investor  Services  ("AIS") and AFS is a  wholly-owned  subsidiary of ATEL
Capital Group and performs  services for the Partnership.  Acquisition  services
are  performed  for  the  Partnership  by  ALC,  equipment   management,   lease
administration  and asset  disposition  services are performed by AEC,  investor
relations  and  communications   services  are  performed  by  AIS  and  general
administrative services for the Partnership are performed by AFS.

Substantially   all   employees  of  AFS  record  time  incurred  in  performing
administrative  services on behalf of all of the  Partnerships  serviced by AFS.
AFS  believes  that the  costs  reimbursed  are the  lower of (i)  actual  costs
incurred on behalf of the Partnership or (ii) the amount the  Partnership  would
be required to pay independent parties for comparable administrative services in
the same geographic location and are reimbursable in accordance with the Limited
Partnership Agreement.

Incentive  management  fees are computed as 4.0% of  distributions  of cash from
operations,  as defined  in the  Limited  Partnership  Agreement  and  equipment
management fees are computed as 3.5% of gross revenues from operating leases, as
defined in the Limited Partnership Agreement plus 2% of gross revenues from full
payout leases, as defined in the Limited Partnership Agreement.

AFS  earned  fees,  commissions  and  reimbursements,  pursuant  to the  Limited
Partnership  Agreement  as follows  during each of the years ended  December 31,
2003, 2002 and 2001:

<TABLE>
<CAPTION>
                                                               2003              2002              2001
                                                               ----              ----              ----
<S>                                                             <C>               <C>             <C>
Equipment and incentive management fees to General Partner      $ 889,571         $ 947,568       $ 1,175,912
Cost reimbursements to General Partner                            849,984           859,415           851,382
                                                          ---------------- ----------------- -----------------
                                                              $ 1,739,555       $ 1,806,983       $ 2,027,294
                                                          ================ ================= =================
</TABLE>

The Limited  Partnership  Agreement  places an annual and a cumulative limit for
cost  reimbursements  to AFS.  The  cumulative  limit  increases  annually.  Any
reimbursable  costs  incurred by AFS during the year exceeding the annual and/or
cumulative  limits  cannot be  reimbursed  in the  current  year,  though may be
reimbursable  in  future  years.  As of  December  31,  2003,  AFS had  incurred
approximately $876,000 of costs that are expected to be reimbursed to AFS by the
Partnership in 2004 and 2005.






                                       27
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2003


7.  Partners' capital:

As of December  31,  2003,  14,995,550  Units were issued and  outstanding.  The
Partnership  is  authorized to issue up to  15,000,050  Units,  including the 50
Units issued to the Initial Limited Partners, as defined.

The Partnership's Net Profits,  Net Losses,  and Tax Credits are to be allocated
92.5% to the Limited  Partners and 7.5% to AFS. In accordance  with the terms of
the of Limited Partnership Agreement, additional allocations of income were made
to AFS in 2003,  2002 and 2001. The amounts  allocated were  determined to bring
AFS's ending capital account balance to zero at the end of each period.

As defined in the Limited Partnership Agreement, available Cash from Operations,
shall be distributed as follows:

First,  Distributions  of Cash  from  Operations  shall be 88.5% to the  Limited
Partners, 7.5% to AFS and 4% to AFS or its affiliate designated as the recipient
of the  Incentive  Management  Fee,  until the Limited  Partners  have  received
Aggregate  Distributions in an amount equal to their Original  Invested Capital,
as defined,  plus a 10% per annum cumulative  (compounded daily) return on their
Adjusted Invested Capital, as defined in the Limited Partnership Agreement.

Second,  85%  to the  Limited  Partners,  7.5%  to AFS  and  7.5%  to AFS or its
affiliate designated as the recipient of the Incentive Management Fee.

As defined in the Limited  Partnership  Agreement,  available Cash from Sales or
Refinancing, are to be distributed as follows:

First,  Distributions  of Sales or  Refinancings  shall be 92.5% to the  Limited
Partners and 7.5% to AFS,  until the Limited  Partners have  received  Aggregate
Distributions in an amount equal to their Original Invested Capital, as defined,
plus a 10% per annum  cumulative  (compounded  daily)  return on their  Adjusted
Invested Capital.

Second,  85%  to the  Limited  Partners,  7.5%  to AFS  and  7.5%  to AFS or its
affiliate designated as the recipient of the Incentive Management Fee.



                                       28
<PAGE>

                     ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2003


8. Concentration of credit risk and major customers:

The Partnership  leases equipment to lessees in diversified  industries.  Leases
are subject to AFS's credit committee review.  The leases provide for the return
of the equipment upon default.

As of December 31, 2003, 2002 and 2001,  there were  concentrations  (defined as
greater than 10%) of  equipment  leased to lessees in certain  industries  (as a
percentage of total equipment cost) as follows:

                                2003              2002              2001
                                ----              ----              ----
 Transportation, rail            22%               15%              13%
 Manufacturing                   21%               24%               *
 Transportation, other           21%               14%              14%
 Municipalities                  14%               13%              17%

*  Less than 10%

During 2003,  no customers  comprised  10% of the  Partnership's  revenues  from
leases.  During 2002, one customer  comprised 11% of the Partnership's  revenues
from  leases.  During  2001,  no  customers  comprised  in  excess of 10% of the
Partnership's revenues from leases.


9.  Line of credit:

The  Partnership  participates  with  AFS and  certain  of its  affiliates  in a
$58,627,656 revolving line of credit (comprised of an acquisition facility and a
warehouse facility) with a financial institution that includes certain financial
covenants. The line of credit expires on June 28, 2004. As of December 31, 2003,
borrowings under the facility were as follows:

Amount borrowed by the Partnership under the acquisition
   facility                                                    $    13,500,000
Amounts borrowed by affiliated partnerships and limited
   liability companies under the acquisition facility                9,500,000
                                                              -----------------
Total borrowings under the acquisition facility                     23,000,000
Amounts borrowed by AFS and its sister corporation under
   the warehouse facility                                                    -
                                                              -----------------
Total outstanding balance                                      $    23,000,000
                                                              =================

Total available under the line of credit                       $    58,627,656
Total outstanding balance                                          (23,000,000)
                                                              -----------------
Remaining availability                                         $    35,627,656
                                                              =================

Draws on the acquisition facility by any individual borrower are secured only by
that borrower's assets,  including  equipment and related leases.  Borrowings on
the  warehouse  facility  are  recourse  jointly to  certain  of the  affiliated
partnerships and limited liability companies, the Partnership and AFS.



                                       29
<PAGE>

                     ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2003


9. Line of credit (continued):

The Partnership borrowed $21,500,000, $19,500,000 and $12,900,000 under the line
of credit during 2003,  2002 and 2001,  respectively.  Repayments on the line of
credit were $21,300,000,  $10,300,000 and $8,800,000 during 2003, 2002 and 2001,
respectively.  Interest  on the line of credit is based on either the thirty day
LIBOR rate or the bank's prime rate.  The effective  interest rate on borrowings
at December 31, 2003 ranged from 3.03% to 4.00%.

The credit agreement  includes certain  financial  covenants  applicable to each
borrower.  The  Partnership  was in compliance with its covenants as of December
31, 2003.


10. Fair value of financial instruments:

The  recorded  amounts  of the  Company's  cash and cash  equivalents,  accounts
receivable,  accounts payable and accruals at December 31, 2003 approximate fair
value because of the liquidity and short-term maturity of these instruments.

Non-recourse debt:

The  fair  value  of the  Partnership's  non-recourse  debt is  estimated  using
discounted cash flow analyses,  based on the Partnership's  current  incremental
borrowing rates for similar types of borrowing arrangements.  The estimated fair
value of the Partnership's non-recourse debt at December 31, 2003 is $1,567,030.

Other long-term debt:

The carrying value of the  Partnership's  other long-term debt  approximates its
fair value at December 31, 2003 as  borrowings  are at a variable  interest rate
that adjusts to current market interest rates.

Line of credit:

The  carrying  amounts  of  the  Partnership's  variable  rate  line  of  credit
approximates fair value.

Interest rate swaps:

The fair  value of  interest  rate swaps is  estimated  by  management  based on
independent  valuations or discounting the fixed cash flows paid under each swap
using the rate at which the  Partnership  could  enter into new swaps of similar
maturities. Swaps are recorded at fair value at December 31, 2003 and 2002.






                                       30
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2003


11. Comprehensive net income (loss):

For the years ended  December 31, 2003,  2002 and in 2001,  other  comprehensive
income (loss) consisted of the following:

<TABLE>
<CAPTION>
                                                                                     2003              2002              2001
                                                                                     ----              ----              ----
<S>                                                                                <C>               <C>                <C>
Net (loss) income                                                                  $ (4,311,400)     $ (1,772,503)      $ 2,939,818
Other comprehensive income:
   Cumulative effect of change in accounting principle at January 1, 2001                     -                 -           281,661
   Change in value of interest rate swap contracts                                      738,153          (298,354)       (1,607,667)
                                                                                ---------------- ----------------- -----------------
Comprehensive net (loss) income                                                    $ (3,573,247)     $ (2,070,857)      $ 1,613,812
                                                                                ================ ================= =================
</TABLE>

There were no other sources of comprehensive net income (loss).


12. Selected quarterly data (unaudited):

<TABLE>
<CAPTION>
                                                                 March 31,         June 30,       September 30,      December 31,
Quarter ended                                                      2002              2002              2002              2002
                                                                   ----              ----              ----              ----

<S>                                                               <C>               <C>               <C>               <C>
Total revenues                                                    $ 7,075,556       $ 5,277,040       $ 6,713,097       $ 6,877,080
Net income (loss)                                                   $ 219,517      $ (1,047,882)        $ (91,256)       $ (852,882)
Net loss per limited partnership unit                                 $ (0.01)          $ (0.09)          $ (0.03)          $ (0.07)
</TABLE>
<TABLE>
<CAPTION>

                                                                 March 31,         June 30,       September 30,      December 31,
Quarter ended                                                      2003              2003              2003              2003
                                                                   ----              ----              ----              ----

<S>                                                               <C>               <C>               <C>               <C>
Total revenues                                                    $ 7,999,426       $ 4,607,630       $ 5,009,446       $ 4,868,201
Net income (loss)                                                   $ 650,136          $ 95,361      $ (3,776,766)     $ (1,280,131)
Net income (loss) per limited partnership unit                         $ 0.02           $ (0.01)          $ (0.27)          $ (0.11)
</TABLE>


13.  Commitments:

At December 31, 2003,  the  Partnership  had no  commitments  to purchase  lease
assets.




                                       31
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2003


14. Reserves, impairment losses and provisions for doubtful accounts:

Activity in the reserve for losses and  impairments  and allowances for doubtful
accounts consists of the following:

                                            Reserve for      Allowance for
                                            losses and         doubtful
                                            impairments        accounts

      Balance December 31, 2000              $    504,227               $ -
      Provision                                         -           118,067
      Charge offs                                       -                 -
                                          ----------------  ----------------
      Balance December 31, 2001                   504,227           118,067
      Provision                                 2,111,593           285,000
      Charge offs                              (2,615,820)                -
                                          ----------------  ----------------
      Balance December 31, 2002                         -           403,067
      Provision                                 5,290,639           343,000
      Charge offs                              (5,290,639)         (221,187)
                                          ----------------  ----------------
      Balance December 31, 2003                       $ -         $ 524,880
                                          ================  ================

In 2003 it came  to the  Company's  attention  that  the  amounts  recorded  for
impairments of covered rail hopper cars as of December 31, 2002 was  understated
by $518,000.  During the three months ended March 31, 2003, the Company recorded
additional  impairment  losses of  $518,000 to correct  the  accounting  for the
transaction.  The Company  does not believe  that this amount is material to the
period in which it should  have been  recorded,  nor that it is  material to the
Company's operating results for the year ending December 31, 2003.

The impact on 2002 would be a reduction  of  members'  equity and an increase of
the net loss of $518,000 ($0.03 per Limited  Liability  Company unit).  Net loss
for the year ended  December 31, 2003 would be decreased by $518,000  ($0.03 per
Limited Liability Company unit).



                                       32
<PAGE>

Item 9. CHANGES IN AND  DISAGREEMENTS  WITH AUDITORS ON ACCOUNTING AND FINANCIAL
DISCLOSURES

None


Item 9A.  CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Under  the  supervision  and  with the  participation  of our  management  (ATEL
Financial  Services,  LLC as General  Partner of the  registrant,  including the
chief  executive  officer and chief  financial  officer),  an  evaluation of the
effectiveness  of the  design  and  operation  of the  Partnership's  disclosure
controls and procedures [as defined in Rules  240.13a-14(c) under the Securities
Exchange Act of 1934] was  performed as of a date within  ninety days before the
filing  date of this  annual  report.  Based  upon  this  evaluation,  the chief
executive  officer and the chief  financial  officer  concluded  that, as of the
evaluation date,  except as noted below, our disclosure  controls and procedures
were  effective  for the purposes of  recording,  processing,  summarizing,  and
timely reporting  information required to be disclosed by us in the reports that
we file under the Securities  Exchange Act of 1934; and that such information is
accumulated  and  communicated  to our  management  in  order  to  allow  timely
decisions regarding required disclosure.

Due to the increased scrutiny and reporting  requirements of Sarbanes-Oxley,  it
came to the  attention of the chief  executive  officer and the chief  financial
officer of the  Partnership in connection  with the audit of the Partnership for
the year ended December 31, 2003, that enhanced internal controls were needed to
facilitate a more effective closing of the Partnership's  financial  statements,
and that this would require additional skilled personnel.  To address this issue
the  Partnership  has taken steps to upgrade the accounting  staff and will take
additional steps in 2004 to add personnel to its accounting department to ensure
that the  Partnership's  ability to execute internal  controls in accounting and
reconciliation  in the closing  process  will be adequate  in all  respects.  It
should be noted that the  control  issues  affecting  the  closing  process  and
disclosure  did not  materially  affect the  accuracy  and  completeness  of the
Partnership's  financial reporting and disclosure  reflected in this report, and
the audited  financial  statements  included herein contain no  qualification or
limitation on the scope of the auditor's opinion.

Changes in internal controls

There have been no  significant  changes in our  internal  controls  or in other
factors that could  significantly  affect our disclosure controls and procedures
subsequent to the evaluation date nor were there any significant deficiencies or
material  weaknesses in our internal controls,  except as described in the prior
paragraphs.


                                    PART III

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS

The  registrant  is a Limited  Partnership  and,  therefore,  has no officers or
directors.

All of the  outstanding  capital  stock  of AFS is held by  ATEL  Capital  Group
("ACG"), a holding company formed to control AFS and affiliated  companies.  The
outstanding voting capital stock of ATEL Capital Group is owned 5% by A. J. Batt
and 95% by Dean Cash.

Each of ATEL Leasing Corporation  ("ALC"),  ATEL Equipment  Corporation ("AEC"),
ATEL  Investor  Services  ("AIS") and ATEL  Financial  Services LLC ("AFS") is a
wholly-owned  subsidiary  of ATEL Capital  Group and  performs  services for the
Partnership.  Acquisition  services are  performed for the  Partnership  by ALC,
equipment  management,  lease  administration and asset disposition services are
performed by AEC, investor relations and  communications  services are performed
by AIS and general administrative  services for the Partnership are performed by
AFS. ATEL Securities Corporation ("ASC") is a wholly-owned subsidiary of AFS.

The officers  and  directors of ATEL  Capital  Group and its  affiliates  are as
follows:

Dean L. Cash              Chairman of the Board of Directors of ACG, AFS, ALC,
                                AEC, AIS and ASC; President and Chief Executive
                                Officer of ACG, AFS and AEC

Paritosh K. Choksi        Director, Executive Vice President, Chief Operating
                                Officer and Chief Financial Officer of ACG, AFS,
                                ALC, AEC and AIS

Donald E. Carpenter       Vice President and Controller of ACG, AFS, ALC, AEC
                                and AIS; Chief Financial Officer of ASC

Vasco H. Morais           Senior Vice President, Secretary and General Counsel
                                for ACG, AFS, ALC, AIS and AEC



                                       33
<PAGE>

Dean L. Cash, age 53, joined ACG as director of marketing in 1980 and has been a
vice president  since 1981,  executive vice president  since 1983 and a director
since 1984.  He has been  President  and CEO since April 2001.  Prior to joining
ACG,  Mr.  Cash  was a  senior  marketing  representative  for  Martin  Marietta
Corporation, data systems division, from 1979 to 1980. From 1977 to 1979, he was
employed  by  General  Electric  Corporation,   where  he  was  an  applications
specialist in the medical systems division and a marketing representative in the
information  services division.  Mr. Cash was a systems engineer with Electronic
Data Systems from 1975 to 1977, and was involved in  maintaining  and developing
software  for  commercial  applications.  Mr.  Cash  received  a B.S.  degree in
psychology and mathematics in 1972 and an M.B.A.  degree with a concentration in
finance in 1975 from Florida State  University.  Mr. Cash is an arbitrator  with
the American Arbitration Association.

Paritosh  K.  Choksi,  age 50,  joined ACG in 1999 as a  director,  senior  vice
president  and its  chief  financial  officer.  He  became  its  executive  vice
president  and COO in April 2001.  Prior to joining  ACG,  Mr.  Choksi was chief
financial officer at Wink  Communications,  Inc. from 1997 to 1999. From 1977 to
1997, Mr. Choksi was with Phoenix American  Incorporated,  a financial  services
and management  company,  where he held various positions during his tenure, and
was senior vice president, chief financial officer and director when he left the
company.  Mr.  Choksi was involved in all  corporate  matters at Phoenix and was
responsible  for Phoenix's  capital  market needs.  He also served on the credit
committee  overseeing  all  corporate  investments,  including its venture lease
portfolio.  Mr. Choksi was a part of the executive  management team which caused
Phoenix's  portfolio to increase  from $50 million in assets to over $2 billion.
Mr. Choksi  received a bachelor of technology  degree in mechanical  engineering
from the Indian Institute of Technology,  Bombay; and an M.B.A.  degree from the
University of California, Berkeley.

Donald E. Carpenter, age 55, joined ACG in 1986 as controller.  Prior to joining
ACG, Mr. Carpenter was an audit  supervisor with Laventhol & Horwath,  certified
public accountants in San Francisco, California, from 1983 to 1986. From 1979 to
1983,  Mr.  Carpenter  was an  audit  senior  with  Deloitte,  Haskins  & Sells,
certified public accountants,  in San Jose,  California.  From 1971 to 1975, Mr.
Carpenter was a Supply Corp officer in the U. S. Navy. Mr. Carpenter  received a
B.S. degree in mathematics  (magna cum laude) from California State  University,
Fresno in 1971 and completed a second major in accounting in 1978. Mr. Carpenter
has been a California certified public accountant since 1981.

Vasco H. Morais,  age 45, joined ACG in 1989 as general counsel to provide legal
support in the  drafting  and  reviewing  of lease  documentation,  advising  on
general corporate law matters, and assisting on securities law issues. From 1986
to 1989,  Mr.  Morais was  employed  by the  BankAmeriLease  Companies,  Bank of
America's  equipment leasing  subsidiaries,  providing in-house legal support on
the  documentation  of  tax-oriented  and non-tax  oriented direct and leveraged
lease transactions, vendor leasing programs and general corporate matters. Prior
to the BankAmeriLease  Companies,  Mr. Morais was with the Consolidated  Capital
Companies in the corporate and securities legal department  involved in drafting
and reviewing  contracts,  advising on corporate law matters and  securities law
issues.  Mr.  Morais  received  a B.A.  degree  in 1982 from the  University  of
California in Berkeley,  a J.D.  degree in 1986 from Golden Gate  University Law
School and an M.B.A.  (Finance) in 1997 from Golden Gate University.  Mr. Morais
has been an active member of the State Bar of California since 1986.

Audit Committee

ATEL Leasing Corporation is the managing member of ATEL Financial Services, LLC.
ATEL Financial Services LLC is the General Partner of the registrant.  The board
of  directors  of ATEL Leasing  Corporation  acts as the audit  committee of the
registrant.  Dean L. Cash and  Paritosh  K.  Choksi are  members of the board of
directors  of  ALC  and  are  deemed  to be  financial  experts.  They  are  not
independent of the Partnership.

Code of Ethics

ACG on  behalf  of AFS and ALC  has  adopted  a code  of  ethics  for its  Chief
Executive  Officer,  Chief Financial Officer and Chief Accounting  Officer.  The
Code of Ethics is included as Exhibit 14.1 to this report.


Item 11.  EXECUTIVE COMPENSATION

The  registrant  is a Limited  Partnership  and,  therefore,  has no officers or
directors.

Set forth hereinafter is a description of the nature of remuneration paid and to
be paid to AFS and its Affiliates. The amount of such remuneration paid in 2003,
2002 and 2001 is set forth in Item 8 of this report under the caption "Financial
Statements and Supplementary Data - Notes to the Financial  Statements - Related
party transactions," at Note 6 thereof, which information is hereby incorporated
by reference.

Selling Commissions

The  Partnership  will pay  selling  commissions  in the amount of 9.5% of Gross
Proceeds,  as defined, to ATEL Securities  Corporation,  an affiliate of AFS. Of
this amount, the majority is expected to be reallowed to other broker/dealers.



                                       34
<PAGE>

Through  December  31,  1998,  $14,250,000  of  such  commissions  (the  maximum
allowable  amount)  had  been  paid to AFS or its  affiliates.  Of that  amount,
$12,327,297  was  reallowed to other  broker/dealers.  None have been paid since
1998, nor will any additional amounts be paid in future periods.

Equipment Management Fees

As compensation  for its service  rendered  generally in managing or supervising
the management of the  Partnership's  equipment and in supervising other ongoing
service  and  activities  including,   among  others,  arranging  for  necessary
maintenance  and  repair of  equipment,  collecting  revenue,  paying  operating
expenses,  determining  the  equipment  is  being  used in  accordance  with all
operative  contractual  arrangements,  property  and  sales tax  monitoring  and
preparation  of financial  data,  AFS or its  affiliates are entitled to receive
management  fees which are payable  for each fiscal  quarter and are to be in an
amount equal to (i) 3.5% of the gross lease revenues from "operating" leases and
(ii) 2% of gross lease  revenues  from "full  payout"  leases which  contain net
lease provisions.

See Note 6 to the  financial  statements  included  in Item 8 of this report for
amounts paid.

Incentive Management Fees

As compensation  for its service  rendered in  establishing  and maintaining the
composition of the  Partnership's  equipment  portfolio and its  acquisition and
debt strategies and supervising fund  administration  including  supervision the
preparation  of reports and  maintenance  of financial and operating data of the
Partnership,  Securities and Exchange  Commission and Internal  Revenue  service
filings,  returns  and  reports,  AFS  is  entitled  to  receive  the  Incentive
management fee which shall be payable for each fiscal quarter.

Available Cash from Operations, as defined in the Limited Partnership Agreement,
shall be distributed as follows:

First,  Distributions  of Cash  from  Operations  shall be 88.5% to the  Limited
Partners, 7.5% to AFS and 4% to AFS or its affiliate designated as the recipient
of the  Incentive  Management  Fee,  until the Limited  Partners  have  received
Aggregate  Distributions in an amount equal to their Original  Invested Capital,
as defined,  plus a 10% per annum cumulative  (compounded daily) return on their
Adjusted Invested Capital, as defined in the Limited Partnership Agreement.

Second,  85%  to the  Limited  Partners,  7.5%  to AFS  and  7.5%  to AFS or its
affiliate designated as the recipient of the Incentive Management Fee.

Available Cash from Sales or Refinancing,  as defined in the Limited Partnership
Agreement, shall be distributed as follows:

First,  Distributions  of Sales or  Refinancings  shall be 92.5% to the  Limited
Partners and 7.5% to AFS,  until the Limited  Partners have  received  Aggregate
Distributions in an amount equal to their Original Invested Capital, as defined,
plus a 10% per annum  cumulative  (compounded  daily)  return on their  Adjusted
Invested Capital.

Second,  85%  to the  Limited  Partners,  7.5%  to AFS  and  7.5%  to AFS or its
affiliate designated as the recipient of the Incentive Management Fee.

See Note 6 to the  financial  statements  included  in Item 8 of this report for
amounts paid.

Equipment Resale Fees

As compensation  for service  rendered in connection with the sale of equipment,
AFS is entitled to receive an amount  equal to the lesser of (i) 3% of the sales
price of the equipment,  or (ii) one-half the normal competitive equipment sales
commission charged by unaffiliated parties for such service. Such fee is payable
only  after the  Limited  Partners  have  received  a return  of their  adjusted
invested capital (as defined in the Limited  Partnership  Agreement) plus 10% of
their adjusted invested return of their adjusted invested capital (as defined in
the Limited  Partnership  Agreement) plus 10% of their adjusted invested capital
per annum calculated on a cumulative  basis,  compounded  daily,  commencing the
last day of the  quarter  in which  the  Limited  Partner  was  admitted  to the
Partnership. To date, none have been accrued or paid.

Equipment Re-lease Fee

As compensation  for providing  re-leasing  service,  AFS is entitled to receive
fees equal to 2% of the gross  rentals or the  comparable  competitive  rate for
such service relating to comparable  equipment,  whichever is less, derived from
the re-lease  provided that (i) AFS or their  affiliates  have and will maintain
adequate staff to render such service to the Partnership,  (ii) no such re-lease
fee is payable in connection with the re-lease of equipment to a previous lessee
or its  affiliates,  (iii)  AFS  or its  affiliates  have  rendered  substantial
re-leasing  service  in  connection  with  such  re-lease  and  (iv)  AFS or its
affiliates are compensated for rendering equipment  management service. To date,
none have been accrued or paid.



                                       35
<PAGE>

General Partner's Interest in Operating Proceeds

Net income,  net loss and  investment  tax credits  are  allocated  92.5% to the
Limited  Partners and 7.5% to AFS. In  accordance  with the terms of the Limited
Partnership  Agreement,  additional  allocations  of income  were made to AFS in
2003, 2002 and 2001. The amounts  allocated were determined so as to bring AFS's
ending capital account balance to zero at the end of each period.  See financial
statements  included in Item 8, Part I of this report for amounts  allocated  to
AFS in 2003, 2002 and 2001.


Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners

At December 31, 2003, no investor is known to hold  beneficially more than 5% of
the issued and outstanding Units.

Security Ownership of Management

The ultimate  shareholders of AFS are beneficial  owners of Limited  Partnership
Units as follows:

<TABLE>
<CAPTION>
 (1)                                  (2)                                (3)                                (4)
                                      Name and Address of                Amount and Nature of             Percent
     Title of Class                     Beneficial Owner                 Beneficial Ownership             of Class

<S>                               <C>                                <C>                                      <C>
Limited Partnership Units         A. J. Batt                         Initial Limited Partner Units            0.00017%
                                  600 California Street, 6th Floor   25 Units ($250)
                                    San Francisco, CA 94108          (owned by wife)

Limited Partnership Units          Dean Cash                         Initial Limited Partner Units            0.00017%
                                   600 California Street, 6th Floor  25 Units ($250)
                                   San Francisco, CA 94108          (owned by wife)
</TABLE>
Changes in Control

The Limited Partners have the right, by vote of the Limited Partners owning more
than 50% of the  outstanding  Limited  Partnership  units,  to  remove a General
Partner.

AFS may at any time  call a meeting  of the  Limited  Partners  or a vote of the
Limited  Partners  without a meeting,  on matters on which they are  entitled to
vote,  and  shall  call such  meeting  or for vote  without a meeting  following
receipt of a written request  therefore of Limited  Partners holding 10% or more
of the total outstanding Limited Partnership units.


Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  responses  to Item 1 of this report  under the caption  "Equipment  Leasing
Activities," Item 8 of this report under the caption  "Financial  Statements and
Supplemental  Data  -  Notes  to  the  Financial   Statements  -  Related  party
transactions"  at Note 6 thereof,  and Item 11 of this report  under the caption
"Executive Compensation," are hereby incorporated by reference.


Item 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

During the most recent two years, the Partnership incurred audit, audit related,
tax and other fees with its principal auditors as follows:

                                             2003              2002
                                             ----              ----
    Audit fees                           $       58,413 $          56,920
    Audit related fees                                -                 -
    Tax fees                                     31,600            33,836
    Other                                             -                 -
                                        ----------------  ----------------
                                               $ 90,013          $ 90,756
                                        ================  ================

ATEL Leasing Corporation is the managing member of ATEL Financial Services, LLC.
ATEL Financial Services LLC is the General Partner of the registrant.  The board
of  directors  of ATEL Leasing  Corporation  acts as the audit  committee of the
registrant.  Engagements  for audit  services,  audit  related  services and tax
services are approved in advance by the Chief Financial  Officer of ATEL Leasing
Corporation acting as a member of the board of directors of that company.




                                       36
<PAGE>

                                     PART IV

Item 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
               ON FORM 8-K

   (a)    Financial Statements and Schedules
       1. Financial Statements
          Included in Part II of this report:
          Report of Independent Auditors

          Balance Sheets at December 31, 2003 and 2002

          Statements of Operations for the years ended  December 31, 2003,  2002
          and 2001

          Statements  of  Changes  in  Partners'  Capital  for the  years  ended
          December 31, 2003, 2002 and 2001

          Statement of Cash Flows for the years ended  December  31, 2003,  2002
          and 2001

          Notes to Financial Statements

       2. Financial Statement Schedules

          All 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)    Reports on Form 8-K for the fourth quarter of 2003 Report dated
          October 20, 2003

   (c)    Exhibits
          (3) and (4) Agreement of Limited Partnership, included as Exhibit B to
          Prospectus (Exhibit 28.1), is incorporated herein by reference to the
          report on Form 10K for the period ended December 31, 1996 (File No.
          333-08879).

          (14.1) Code of Ethics

          (31.1) Certification of Paritosh K. Choksi

          (31.2) 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



                                       37
<PAGE>

                                   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.



Date:      3/26/2004

                                    ATEL Capital Equipment Fund VII, L.P.
                               (Registrant)


       By: ATEL Financial Services, LLC,
           General Partner of Registrant



                        By:    /s/ Dean Cash
                              -----------------------------------------------
                              Dean Cash,
                              President and Chief Executive Officer of
                              ATEL Financial Services, LLC (General
                              Partner)




                        By:   /s/ Paritosh K. Choksi
                              -----------------------------------------------
                              Paritosh K. Choksi,
                              Executive Vice President of ATEL
                              Financial Services, LLC (General Partner)







                                       38
<PAGE>

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


SIGNATURE                           CAPACITIES                           DATE



       /s/ Dean Cash        President, Chairman and Chief              3/26/2004
--------------------------  Executive officer of ATEL
        Dean Cash           Financial  Services, LLC



  /s/ Paritosh K. Choksi    Executive Vice President and director      3/26/2004
--------------------------  of ATEL Financial  Services, LLC,
    Paritosh K. Choksi      principal financial officer of
                            registrant; principal financial officer
                            and director of ATEL Financial Services, LLC



 /s/ Donald E. Carpenter    Principal accounting officer of            3/26/2004
--------------------------  registrant; principal accounting
   Donald E. Carpenter      officer of ATEL Financial Services, LLC





Supplemental  Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act:

No proxy  materials  have been or will be sent to  security  holders.  An annual
report will be furnished to security  holders  subsequent  to the filing of this
report on Form 10-K, and copies thereof will be furnished  supplementally to the
Commission when forwarded to the security holders.



                                       39
<PAGE>

                                  EXHIBIT 14.1


                               ATEL CAPITAL GROUP

  CODE OF ETHICS FOR CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER AND CHIEF
                               ACCOUNTING OFFICER

A. SCOPE.

This ATEL Capital Group Code of Ethics is applicable to the ATEL Capital Group's
Chief  Executive  Officer,  Chief  Financial  Officer  and the Chief  Accounting
Officer,  or  persons  acting  in  such  capacity   (collectively  the  "Covered
Officers"),  each of whom acts in such capacity on behalf of its affiliate, ATEL
Financial  Services,  LLC, which is the general partner or manager,  as the case
may  be,  of each of the  public  limited  partnerships  and  limited  liability
companies sponsored by the Company.  ATEL Capital Group is referred to herein as
the  "Company,"  ATEL  Financial  Services,  LLC is referred to as "AFS" and the
sponsored limited  partnerships and limited liability  companies are referred to
herein as the "Funds" and each of them as a "Fund."  The board of  directors  of
ATEL Leasing Corporation ("ALC"), an affiliate of the Company that serves as the
managing member of ATEL Financial Services,  LLC, ("AFS") the manager or general
partner of each of the Funds,  is the first  board of  directors  in  management
succession for each Fund.

Accordingly,  under the Securities and Exchange  Commission's  interpretation of
its disclosure rules, the ATEL Leasing  Corporation board of directors functions
as the de facto audit committee for each Fund with respect to all procedural and
disclosure  requirements  applicable to audit  committees  under  Securities and
Exchange Commission rules. The Company's Board of Directors shall have oversight
responsibility  over the  activities of ALC's Board of Directors for purposes of
this Code of Ethics.

B. PURPOSE.

The  Company  is proud of the  values  with  which it and its  subsidiaries  and
affiliates  conduct  business.  It has and will  continue  to uphold the highest
levels of business  ethics and personal  integrity in all types of  transactions
and  interactions.  To this end, this Code of Ethics serves to (1) emphasize the
Company's  commitment to ethics and compliance with the law; (2) set forth basic
standards of ethical and legal behavior;  (3) provide  reporting  mechanisms for
known or suspected ethical or legal violations;  and (4) help prevent and detect
wrongdoing.  This Code of Ethics is  intended  to  augment  and  supplement  the
standard of ethics and business conduct expected of all Company  employees,  and
its  limitation to Covered  Officers is not intended to limit the  obligation of
all Company  employees to adhere to the highest standards of business ethics and
integrity in all transactions and interactions  conducted while in the Company's
employ.

Given the  variety and  complexity  of ethical  questions  that may arise in the
course of  business of the  Company  and its  subsidiaries,  this Code of Ethics
serves only as a rough guide.  Confronted with ethically  ambiguous  situations,
the Covered  Officers  should  remember the Company's  commitment to the highest
ethical standards and seek independent advice,  where necessary,  to ensure that
all actions they take on behalf of the Company and its  subsidiaries  honor this
commitment.

C. ETHICS STANDARDS.

1. Honest and Ethical Conduct.

The Covered  Officers shall behave  honestly and ethically at all times and with
all people.  They shall act in good faith,  with due care, and shall engage only
in fair and open  competition,  by treating  ethically  competitors,  suppliers,
customers,  and  colleagues.  They  shall  not  misrepresent  facts or engage in
illegal,  unethical, or anti-competitive  practices for personal or professional
gain.

2. Conflicts of Interest.

This fundamental  standard of honest and ethical conduct extends to the handling
of  conflicts  of  interest.  The  Covered  Officers  shall  avoid  any  actual,
potential,   or  apparent  conflicts  of  interest  with  the  Company  and  its
subsidiaries and affiliates,  including the Funds, and any personal  activities,
investments,  or associations that might give rise to such conflicts. They shall
not  compete  with or use the  Company,  any of its  subsidiaries  or a Fund for
personal gain, self-deal,  or take advantage of corporate or Fund opportunities.
They shall act on behalf of the  Company,  its  subsidiaries  and the Funds free
from  improper  influence  or the  appearance  of  improper  influence  on their
judgment or performance of duties. A Covered Officer shall disclose any material
transaction or relationship  that  reasonably  could be expected to give rise to
such a conflict to the  Company's  General  Counsel or a member of the Company's
Board of Directors.  The board of directors of ATEL Leasing Corporation ("ALC"),
an affiliate of the Company that serves as the managing member of ATEL Financial
Services,  LLC,  ("AFS") the manager or general partner of each of the Funds, is
the first board of directors in management succession for each Fund.



                                       40
<PAGE>

Notwithstanding  the  foregoing,  it is  understood,  as fully  disclosed in the
offering  documents for each Fund, that AFS as manager or general partner of the
Fund has certain inherent  conflicts of interest.  The provisions of each Fund's
Operating  Agreement  or  Limited  Partnership  Agreement  have been  drafted to
address the obligations, restrictions and limitations on the power and authority
of AFS to manage each Fund's  affairs,  including  restrictions  prohibiting  or
limiting the terms of any transactions in which conflicts of interest may arise.
Furthermore,  AFS has a  fiduciary  duty to each Fund as its  manager or general
partner.  It is therefore  expressly  understood  by the Company and the Covered
Officers that any and all actions by AFS and its personnel  that comply with the
provisions of a Fund's Operating Agreement or Limited Partnership Agreement,  as
the case may be, and are consistent  with AFS's fiduciary duty to the Fund, will
not  be  considered   material   transactions  or  relationships  which  require
disclosure or reporting under this Code of Ethics.

3. Timely and Truthful Disclosure.

In reports and documents  filed with or submitted to the Securities and Exchange
Commission and other  regulators by the Company,  its subsidiaries or affiliates
or a  Fund,  and  in  other  public  communications  made  by the  Company,  its
subsidiaries  or  affiliates  or  a  Fund,  the  Covered   Officers  shall  make
disclosures that are full,  fair,  accurate,  timely,  and  understandable.  The
Covered  Officers shall provide  thorough and accurate  financial and accounting
data for inclusion in such disclosures. The Covered Officers shall not knowingly
conceal or falsify  information,  misrepresent  material facts, or omit material
facts necessary to avoid misleading the Company's,  any of its  subsidiaries' or
affiliates' or a Fund's independent public auditors or investors.

4. Legal Compliance.

In conducting the business of the Company,  its  subsidiaries and affiliates and
the Funds, the Covered Officers shall comply with applicable  governmental laws,
rules,  and  regulations at all levels of government in the United States and in
any  non-U.S.  jurisdiction  in which  the  Company,  any of its  affiliates  or
subsidiaries  or  a  Fund  does  business,  as  well  as  applicable  rules  and
regulations of  self-regulatory  organizations of which the Company,  any of its
affiliates  or  subsidiaries  or a Fund is a member.  If the Covered  Officer is
unsure  whether a particular  action would violate an applicable  law,  rule, or
regulation,  he or she should seek the advice of inside counsel (if  available),
and, where necessary, outside counsel before undertaking it.

D. VIOLATIONS OF ETHICAL STANDARDS.

1. Reporting Known or Suspected Violations.

The Covered  Officers  will  promptly  bring to the  attention of the  Company's
General Counsel or the Board of Directors any information  concerning a material
violation of any of the laws, rules or regulations applicable to the Company and
the  operation of its  businesses,  by the Company or any agent  thereof,  or of
violation of this Code of Ethics. The Company's General Counsel will investigate
reports of violations and the findings  communicated  to the Company's  Board of
Directors.

2. Accountability for Violations.

If the Company's Board of Directors determines that this Code of Ethics has been
violated,  either directly, by failure to report a violation,  or by withholding
information  related to a violation,  it may  discipline  the offending  Covered
Officer for  non-compliance  with  penalties up to and including  termination of
employment.  Violations of this Code of Ethics may also constitute violations of
law and may result in criminal penalties and civil liabilities for the offending
Covered Officer and the Company, its subsidiaries, affiliates or a Fund.





                                       41
<PAGE>

Exhibit 31.1
                                 CERTIFICATIONS


I, Paritosh K. Choksi, certify that:

1. I have  reviewed  this annual  report on Form 10-K of ATEL Cash  Distribution
Fund VII, LP;

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

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

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

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

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

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

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

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

     b) any fraud,  whether or not material,  that involves  management or other
     employees  who  have  a  significant  role  in  the  registrant's  internal
     controls; and

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



Date:        3/26/2004

/s/ Paritosh K. Choksi
-------------------------
Paritosh K. Choksi
Principal financial officer of registrant, Executive
Vice President of General Partner


                                       42
<PAGE>

Exhibit 31.2
                                 CERTIFICATIONS


I, Dean L. Cash, certify that:

1. I have  reviewed  this annual  report on Form 10-K of ATEL Cash  Distribution
Fund VII, LP;

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

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

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

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

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

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

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

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

     b) any fraud,  whether or not material,  that involves  management or other
     employees  who  have  a  significant  role  in  the  registrant's  internal
     controls; and

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



Date:        3/26/2004

 /s/ Dean Cash
------------------
Dean L. Cash
President and Chief Executive
Officer of General Partner


                                       43
<PAGE>

Exhibit 32.1
                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual report on Form 10K of ATEL Cash  Distribution Fund
VII, LP, (the  "Partnership")  for the period  ended  December 31, 2003 as filed
with the Securities and Exchange  Commission on the date hereof (the  "Report"),
and  pursuant  to 18  U.S.C.  ss.1350,  as  adopted  pursuant  to  ss.906 of the
Sarbanes-Oxley  Act of 2002, I, Dean L. Cash,  Chief  Executive  Officer of ATEL
Financial  Services,  LLC,  general partner of the  Partnership,  hereby certify
that:

1. The Report fully complies with the  requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934 ; and

2. The  information  contained in the Report  fairly  presents,  in all material
respects, the financial condition and results of operations of the Partnership.

Date:        3/26/2004



 /s/ Dean Cash
-----------------
Dean L. Cash
President and Chief Executive
Officer of General Partner



                                       44
<PAGE>

Exhibit 32.2
                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual report on Form 10K of ATEL Cash  Distribution Fund
VII, LP, (the  "Partnership")  for the period  ended  December 31, 2003 as filed
with the Securities and Exchange  Commission on the date hereof (the  "Report"),
and  pursuant  to 18  U.S.C.  ss.1350,  as  adopted  pursuant  to  ss.906 of the
Sarbanes-Oxley  Act of 2002, I, Paritosh K. Choksi,  Chief Financial  Officer of
ATEL Financial Services, LLC, general partner of the Partnership, hereby certify
that:

1. The Report fully complies with the  requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934 ; and

2. The  information  contained in the Report  fairly  presents,  in all material
respects, the financial condition and results of operations of the Partnership.

Date:        3/26/2004



/s/ Paritosh K. Choksi
------------------------
Paritosh K. Choksi
Executive Vice President of General
Partner, Principal financial officer of registrant


                                       45
<PAGE>