Form 10K

                       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 (fee  required)  For
                           the Year Ended December 31, 1996
                                                            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 333-08879

                      ATEL Capital Equipment Fund VII, L.P.

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

           235 Pine Street, 6th Floor, San Francisco, California 94104
                    (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: None

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 |_| No |X|

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

                       DOCUMENTS INCORPORATED BY REFERENCE

Prospectus  dated November 26, 1996,  filed pursuant to Rule 424(b)  (Commission
File No. 33-08879) is hereby incorporated by reference into Part IV hereof.


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|


                          Index to Exhibits on Page 19
<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 Partnership is conducting a public  offering of 15,000,000  units of Limited
Partnership  interest  (Units),  at a price of $10 per Unit.  As of December 31,
1996, the Partnership had received  subscriptions for 93,542 ($935,420)  Limited
Partnership  Units in addition to the Initial Limited Partners' Units. No Units,
in addition to the Initial Limited  Partners' Units,  were issued or outstanding
as of December 31, 1996. At December 31, 1996, all of the subscriptions received
were being held in escrow.  On January 6, 1997,  subscriptions  for the  minimum
number of Units (120,000,  $1,200,000) had been received and the General Partner
requested  that the  subscriptions,  except  those  received  from  Pennsylvania
investors (400 units, $4,000), be released to the Partnership. On that date, the
Partnership  commenced operations in its primary business (leasing  activities).
As of February 13, 1997, the Partnership had received  subscriptions for 774,425
units ($7,744,250) and the General Partner requested that the remaining funds in
escrow (from Pennsylvania investors) be released to the Partnership.

The Partnership's  principal objectives are to invest in a diversified portfolio
of  equipment  which 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 72 months after the end of the year in
which the  Final  Closing  occurs  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,  where  "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 the  General  Partner  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 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 February 28, 1997, the  Partnership  had purchased  equipment with a total
acquisition price of $7,421,906.

The  Partnership's  objective  is to  lease a  minimum  of 75% of the  equipment
acquired  with the net  proceeds of the  offering  to lessees  which (i) have an
aggregate credit rating by Moody's Investor  service,  Inc. of Baa or better, or
the credit  equivalent as determined by the General Partner,  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 the General
Partner, would not satisfy the general credit rating criteria for the portfolio.
<PAGE>

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 which 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 the General Partner 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.

The General  Partner 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.


Item 2.  PROPERTIES

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


Item 3.  LEGAL PROCEEDINGS

Inapplicable.


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

Inapplicable.


                                     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 which 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
the General Partner'  knowledge,  no established public secondary trading market
has developed and it is unlikely  that a public  trading  market will develop in
the future.

Holders

As of December 31, 1996, a total of two investors  were record  holders of Units
in the Partnership.

<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.

The General  Partner  shall have sole  discretion in  determining  the amount of
distributions;  provided, however, that the General Partner 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.


Item 6.  SELECTED FINANCIAL DATA

The following  table  presents  selected  financial  data of the  Partnership at
December 31, 1996.  This financial  data should be read in conjunction  with the
financial statements and related notes included under Item 8 of this report.

Weighted average Limited Partner Units outstanding                          50

Total Assets                                                              $600

Total Long-term Non-recourse Debt                                         None

Total Partners' Capital                                                   $600


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

Capital Resources and Liquidity

The Partnership  commenced its offering on November 29, 1996. As of December 31,
1996, all of the proceeds of the offering were held by the escrow agent.  During
the funding period and until the  Partnership's  initial  portfolio of equipment
has been purchased,  funds which have been received, but which have not yet been
invested  in leased  equipment,  are  invested in  interest-bearing  accounts or
high-quality/short-term  commercial  paper.  The  Partnership's  public offering
provides for a total maximum capitalization of $150,000,000.

During the funding  period,  the  Partnership's  primary  source of liquidity is
subscription  proceeds from the public  offering of Units.  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 the General  Partner's  success in  re-leasing or selling
the equipment as it comes off lease.


<PAGE>

The  Partnership  participates  with the  General  Partner  and  certain  of its
affiliates  in  a  $90,000,000   revolving  line  of  credit  with  a  financial
institution  that  includes  certain  financial  covenants.  The line of  credit
expires on October 28,  1997.  As of December  31,  1996,  the  Partnership  and
certain of its affiliates have borrowed  $9,821,300 under the warehouse facility
(included in the  $90,000,000  line of credit) and used the proceeds to purchase
assets under lease to several  lessees.  At such time as any of these assets are
transferred to the Partnership,  any related  borrowings would be assumed by the
Partnership.  At December 31, 1996,  $38,857,117 was available under the line of
credit.



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 and acquisition fees to the General Partner
and providing for cash distributions to the Limited Partners.

The Partnership  currently has available adequate reserves to meet its immediate
cash requirements,  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.  The General  Partner  envisions  no such
requirements  for  operating  purposes,  nor have they explored with lenders the
possibility of obtaining loans. There can be no assurance as to the terms of any
such financing or that the Partnership will be able to obtain such loans.

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

The  Partnership  commenced  regular  distributions,  based on cash  flows  from
operations,  beginning with the month of January 1997. The distribution was made
in February 1997.

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.

Results of Operations

As of January 7, 1997,  subscriptions  for the  minimum  amount of the  offering
($1,200,000) had been received and accepted by the Partnership. As of that date,
the  Partnership   commenced   operations  in  its  primary  business   (leasing
activities).  There  were no  operations  in 1996.  Because of the timing of the
commencement of operations and the fact that the initial portfolio  acquisitions
have not been  completed,  the results of operations in 1997 are not expected to
be comparable to future periods. After the Partnership's public offering and its
initial  asset  acquisition  stage  terminate,  the  results of  operations  are
expected to change significantly.

Substantially  all  employees  of the  General  Partner  track time  incurred in
performing  administrative  services on behalf of the  Partnership.  The General
Partner  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.


Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Financial  Statements and Notes to Financial  Statements  attached hereto at
pages 6 through 9.

<PAGE>

                         REPORT OF INDEPENDENT AUDITORS






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


We have audited the  accompanying  balance sheet of ATEL Capital  Equipment Fund
VII,  L.P. as of December  31,  1996 and the  related  statements  of changes in
partners'  capital and cash flows for the period  from May 17, 1996  (inception)
through December 31,1996.  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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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, 1996 and its changes in  partners'  capital and cash
flows for the period from May 17, 1996 (inception)  through December 31,1996, in
conformity with generally accepted accounting principles.





                                                   ERNST & YOUNG LLP

San Francisco,  California  February 7, 1997, except for Note 5, as to which the
date is February 28, 1997



<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.
                        (A Development Stage Enterprise)

                                  BALANCE SHEET

                                DECEMBER 31, 1996


                                     ASSETS

Cash                                                                      $600
                                                                         ======


                        LIABILITIES AND PARTNERS' CAPITAL


Partners' capital:
     General Partner                                                      $100
     Limited Partners                                                      500
                                                                         ------
Total partners' capital                                                   $600
                                                                         ======




                    STATEMENT OF CHANGES IN PARTNERS' CAPITAL

                  FOR THE PERIOD FROM MAY 17, 1996 (INCEPTION)
                            THROUGH DECEMBER 31, 1996

                                  Limited Partners       General
                                  Units      Amount      Partner          Total

Capital contributions              50         $500         $100           $600
                                  ====       ======       ======         =====




                             STATEMENT OF CASH FLOWS

                  FOR THE PERIOD FROM MAY 17, 1996 (INCEPTION)
                            THROUGH DECEMBER 31, 1996


Financing activities:
Capital contributions received                                            $600
                                                                         ------
Net increase in cash                                                       600
                                                                         ------
Cash at end of period                                                     $600
                                                                         ======


                             See accompanying notes.
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.
                        (A Development Stage Enterprise)

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 1996


1.  Organization and Partnership matters:

ATEL Capital  Equipment Fund VII, L.P. (the Fund),  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. Contributions in the amount
of $600 were received as of July 17, 1996, $100 of which represented the General
Partner's (ATEL Financial Corporation's)  continuing interest, and $500 of which
represented the Initial Limited Partners' capital investment.

As of December 31, 1996, the Fund had not commenced  operations other than those
relating to organizational  matters.  The Fund, or the General Partner on behalf
of the Fund, will incur costs in connection with the organization,  registration
and issuance of the Limited Partnership Units (Units).  The amount of such costs
to be born by the Fund is  limited  by  certain  provisions  of the  Partnership
Agreement. Operations commenced January 7, 1997.

2.  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.


3.  Partners' capital:

As of  December  31,  1996,  50 Units were  issued and  outstanding.  The Fund's
registration  statement  with the  Securities  and  Exchange  Commission  became
effective  November 29, 1996.  The Fund is  authorized to issue up to 15,000,000
additional  Units.  As of December  31,  1996,  subscriptions  for 93,542  Units
($935,420)  had been  received  by the  Partnership  and were  being held by the
escrow agent. On January 6, 1997, the General Partner  requested that the escrow
agent  release the funds to the  Partnership,  except those funds  received from
Pennsylvania  investors (400 Units, $4,000). As of that date,  subscriptions for
149,442 Units were accepted.

The  Partnership  Net Profits,  Net Losses,  and Tax Credits are to be allocated
92.5% to the Limited Partners and 7.5% to the General Partner.

Available Cash from Operations and Cash from Sales and  Refinancing,  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 the  General  Partner  and 4% to the  General  Partner 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 the General Partner and 7.5% to the
General  Partner or its  affiliate  designated as the recipient of the Incentive
Management Fee.

<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.
                        (A Development Stage Enterprise)

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 1996


3.  Partners' capital (continued):

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 the  General  Partner,  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 the General Partner and 7.5% to the
General  Partner or its  affiliate  designated as the recipient of the Incentive
Management Fee.


4. Commitments and management:

The terms of the Limited Partnership  Agreement provide that the General Partner
and/or  affiliates  are entitled to receive  certain  fees, in addition to those
described  above,  which are more fully  described  in Section 8 of the  Limited
Partnership  Agreement.  The  additional  fees to  management  include  fees for
equipment management and resale.


5.  Lines of credit:

The  Partnership  participates  with the  General  Partner  and  certain  of its
Affiliates in a $90,000,000 revolving credit agreement with a group of financial
institutions  which  expires on October  28,  1997.  The  agreement  includes an
acquisition  facility and a warehouse  facility which are used to provide bridge
financing  for  assets  on  leases.  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 Affiliates, the Partnership and the General Partner.


Certain of the  Affiliates  had borrowed an aggregate  of  $9,821,300  under the
warehouse facility as of December 31, 1996.

The credit agreement  includes certain  financial  covenants  applicable to each
borrower.  The  Partnership  was in compliance with its covenants as of December
31, 1996. At December 31, 1996, $38,857,117 was available under this agreement.



6.  Subsequent events:

As of February 28, 1997, the Partnership had received and accepted subscriptions
for  1,051,744  Units  ($10,517,440),  in  addition  to the Units  issued to the
initial limited partners.  As of that date, the Partnership had purchased assets
with a total cost of $7,421,906.

<PAGE>

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

Inapplicable.


                                            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 ATEL Financial  Corporation (the General
Partner) is held by ATEL Capital  Group  ("ACG"),  a holding  company  formed to
control the General  Partner and  affiliated  companies  pursuant to a corporate
restructuring  completed in July 1994.  The  outstanding  capital  stock of ATEL
Capital Group is owned 75% by A. J. Batt and 25% by Dean Cash,  and was obtained
in the  restructuring in exchange for their capital  interests in ATEL Financial
Corporation.

Each of ATEL Leasing Corporation  ("ALC"),  ATEL Equipment  Corporation ("AEC"),
ATEL  Investor  services  ("AIS") and ATEL  Financial  Corporation  ("AFC") 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  service are
performed by AEC, investor relations and communications service are performed by
AIS and general administrative service for the Partnership are performed by AFC.
ATEL  Securities  Corporation  ("ASC"),  is a  wholly-owned  subsidiary  of ATEL
Financial Corporation.

The officers and directors of ATEL Capital Group, ATEL Financial Corporation and
their affiliates are as follows:

A. J. Batt . . . . . . . . Chairman of the Board of Directors of ACG, AFC, ALC,
                           AEC, AIS and ASC; President and Chief Executive
                           Officer of ACG, AFC and AEC

Dean L. Cash . . . . . . . Director, Executive Vice President and Chief
                           Operating Officer of ACG, AFC, and AEC; Director,
                           President and Chief Executive Officer of ALC, AIS
                           and ASC

F. Randall Bigony . . . .  Senior Vice President and Chief Financial Officer of
                           ACG, AFC, ALC, AIS and AEC

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

Vasco H. Morais . . . . .  General Counsel for ACG, AFC, ALC, AIS and AEC

William J. Bullock . . . . Director of Asset Management of AEC

Jeffrey A. Schwager . . .  Vice President - Syndication of ALC

Russell H. Wilder . . . .  Vice President - Credit of AEC

John P. Scarcella . . . .  Vice President of ASC
<PAGE>

A. J. Batt, age 60, founded ATEL in 1977 and has been its president and chairman
of the  board of  directors  since  its  inception.  From  1973 to 1977,  he was
employed by GATX  Leasing  Corporation  as  manager-data  processing  and equity
placement for the lease underwriting department, which was involved in equipment
financing  for  major  corporations.  From  1967 to 1973  Mr.  Batt was a senior
technical representative for General Electric Corporation, involved in sales and
support  services for computer  time-sharing  applications  for corporations and
financial  institutions.  Prior to that time, he was employed by North  American
Aviation as an  engineer  involved in the Apollo  project.  Mr. Batt  received a
B.Sc.  degree with honors in  mathematics  and physics  from the  University  of
British Columbia in 1961.

Dean L. Cash,  age 46, joined ATEL as director of marketing in 1980 and has been
a vice president since 1981,  executive vice president since 1983 and a director
since  1984.   Prior  to  joining  ATEL,   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.

F.  Randall  Bigony,  age 39,  joined  ATEL in  1992  to  review  administrative
operations  within  ATEL  Financial  Corporation  and to develop  and  implement
functional  plans to  support  company  growth.  He  currently  oversees  ATEL's
accounting, MIS and treasury functions. From 1987 until joining ATEL, Mr. Bigony
was  president  of F.  Randall  Bigony & Co., a  consulting  firm that  provided
financial and strategic  planning  services to emerging growth  companies.  From
1983 to 1987,  he was a manager  with the  accounting  firm of Ernst &  Whinney,
serving  clients in its management  consulting  practice.  Mr. Bigony received a
B.A.  degree in business  from the  University  of  Massachusetts  and an M.B.A.
degree in finance from the University of California,  Berkeley. He is a founding
board  member and acting  treasurer  of the I Have a Dream  Foundation  Bay Area
Chapter.

Donald E. Carpenter, age 48, joined ATEL in 1986 as controller. Prior to joining
ATEL, 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 38, joined ATEL 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 and a J.D. degree in 1986 from Golden Gate University Law
School.  Mr.  Morais  has been an active  member of the State Bar of  California
since 1986. <PAGE>

William J.  Bullock,  age 33,  joined  ATEL in 1991,  as the  director  of asset
management. He assumed responsibility for the disposition of off-lease equipment
and  residual  valuation  analysis on new lease  transactions.  Prior to joining
ATEL,  Mr.  Bullock  was a senior  member of the  equipment  group at  McDonnell
Douglas  Finance  Corporation("MDFC")  responsible  for  managing its $4 billion
portfolio of leases.  Mr. Bullock was involved in negotiating sales and renewals
as well as preparing and  inspecting  equipment.  Prior to joining MDFC in 1989,
Mr. Bullock was the Senior  Negotiator at Equitable  Leasing (a subsidiary of GE
Capital Equipment Corp.) in San Diego. At Equitable, he handled the end-of-lease
negotiations  and equipment  dispositions of a portfolio  comprised of equipment
leased primarily to Fortune 200 companies.  Mr. Bullock has been a member of the
Equipment Lessors  Association  ("ELA") since 1987 and has authored ELA industry
articles.  He  received a B.S.  degree in  Finance in 1987 from San Diego  State
University and is pursuing his M.B.A.

Jeffrey A. Schwager, age 36, joined ATEL in 1991 as vice president - syndication
and is responsible for acquiring  transactions  from  intermediaries  as well as
debt and equity  placement.  Prior to joining ATEL, Mr. Schwager was a member of
General Electric Capital Corporation's  Institutional Financing Group. There, he
was  responsible  for   originating   equipment  lease  and  corporate   finance
opportunities,  as well as soliciting  equipment  portfolios in conjunction with
marketing a proprietary capital enhancement product. From 1985 through 1990, Mr.
Schwager held several positions with Bank Ireland/First Financial, most recently
Vice  President  Marketing,   where  he  was  responsible  for  originating  and
negotiating  tax-oriented  leveraged lease financings for Fortune 500 companies.
From 1983 to 1985 Mr.  Schwager  was an  Associate  Consultant  with The Bigelow
Company,  a middle market  investment  banking and management  consulting  firm,
developing and  implementing  strategic plans for a number of clients.  Prior to
The Bigelow Company,  he worked for Petro-Lewis  Corporation as a joint-interest
accountant.  Mr.  Schwager  received  his B.S. in Business  Administration  from
Babson College in 1982, majoring in Finance and Entrepreneurial Studies.

Russell  H.  Wilder,  age 42,  joined  ATEL in  1992 as Vice  President  of ATEL
Business Credit, a wholly-owned  subsidiary of ACG. Immediately prior to joining
ATEL,  Mr.  Wilder was a personal  property  broker  specializing  in  equipment
leasing  and  financing  and an  outside  contractor  in the areas of credit and
collections.  From 1985 to 1990 he was Vice President and Manager of Leasing for
Fireside Thrift Co., a Teledyne subsidiary,  and was responsible for all aspects
of setting up and  managing  the  department,  which  operated as a small ticket
lease  funding  source.  From  1983 to  1985 he was  with  Wells  Fargo  Leasing
Corporation  as  Assistant  Vice  President  in the credit  department  where he
oversaw all credit analysis on  transactions in excess of $2 million.  From 1978
to 1983 he was District Credit Manager with  Westinghouse  Credit  Corporation's
Industrial Group and was responsible for all non-marketing operations of various
district offices. Mr. Wilder holds a B.S. with Honors in Agricultural  Economics
and Business  Management from the University of California at Davis. He has been
awarded the Certified Lease Professional  designation by the Western Association
of Equipment Lessors.

John P. Scarcella,  age 35, joined ATEL Securities as vice president in 1992. He
is involved in the marketing of securities offered by ASC. Prior to joining ASC,
from 1987 to 1991,  he was  employed  by Lansing  Pacific  Fund,  a real  estate
investment  trust in San Mateo,  California  and acted as  director  of investor
relations.   From  1984  to  1987,   Mr.   Scarcella   acted  as  broker  dealer
representative  for Lansing  Capital  Corporation,  where he was involved in the
marketing of direct  participation  programs and REITs. Mr. Scarcella received a
B.S.C.  degree with emphasis in investment finance in 1983 and an M.B.A.  degree
with a concentration in marketing in 1991 from Santa Clara University.
<PAGE>
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 the General Partner and their affiliates. As of December 31, 1996, no
amounts have been paid to the General Partner by the Partnership.

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 the
General  Partner.  Of this  amount,  the majority is expected to be reallowed to
other broker/dealers.

Through  December 31, 1996, no such  commissions had been either accrued or paid
to the General Partner or its affiliates.

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,  the  General  Partner 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  revenues  from
"operating" leases and (ii) 2% of gross revenues from "full payout" leases which
contain net lease provisions.

Through  December 31, 1996, no such fees had been either  accrued or paid to the
General Partner or its affiliates.

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,  the General Partner shall be 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 the  General  Partner  and 4% to the  General  Partner 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.


<PAGE>

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

Through  December 31, 1996, no such fees had been either  accrued or paid to the
General Partner or its affiliates.

Equipment Resale Fees

As compensation  for service  rendered in connection with the sale of equipment,
the General  Partner  shall be 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 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,  the General Partner shall
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  provide that (i) the General Partner 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) the General Partner or its affiliates
have rendered  substantial  re-leasing  service in connection with such re-lease
and (iv) the General  Partner or its  affiliates are  compensated  for rendering
equipment management service. To date, none have been accrued or paid.

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 the  general  partner.  In 1996,  there  were no
operations  nor were  there any  allocations  of  income  or loss to either  the
General Partner or the Limited Partners.



<PAGE>

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
            MANAGEMENT

Security Ownership of Certain Beneficial Owners

At December 31, 1996 two investors held  beneficially more than 5% of the issued
and outstanding Units.

Security Ownership of Management

The  shareholders  of the  General  Partner  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
<C>                        <C>                           <C>                            <C>
Limited Partnership Units  A. J. Batt                    Initial Limited Partner Units  50.0000%
                           235 Pine Street, 6th Floor    25 Units ($250)
                           San Francisco, CA 94104             (owned by wife)

Limited Partnership Units  Dean Cash                     Initial Limited Partner Units  50.0000%
                           235 Pine Street, 6th Floor    25 Units ($250)
                           San Francisco, CA 94104             (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.

The General Partner 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 therefor 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  11  of  this  report  under  the  caption   Executive
Compensation, are hereby incorporated herein by reference.





<PAGE>

                                     PART IV

Item 14.  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 Sheet at December 31, 1996
                           Statement of Changes  in  Partners'  Capital  for the
                              period  from  May  17,  1996  (inception)  through
                              December 31, 1996
                           Statement of Cash Flows for the  period  from May 17,
                              1996 (inception) through December 31, 1996
                           Notes to Financial Statements

                        2. Financial Statement Schedules
                           Allschedules  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 1996
                           None

                      (c) Exhibits
                           (3) and (4) Agreement of Limited Partnership,
                           included as Exhibit B to Prospectus (Exhibit 28.1)


                           (28)  Additional Exhibits

                                       28.1 Prospectus dated November 29, 1996


<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:  3/27/1997

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


                      By:  ATEL Financial Corporation,
                           General Partner of Registrant



                                      By:   /s/  A. J. Batt
                                            -----------------------------------
                                            A. J. Batt,
                                            President and Chief Executive
                                            Officer of ATEL Financial
                                            Corporation (General Partner)




                                      By:    /s/ Dean Cash
                                            -----------------------------------
                                            Dean Cash,
                                            Executive vice President of ATEL
                                            Financial Corporation (General
                                            Partner)






<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/ A. J. Batt                President, chairman and              3/27/1997
---------------------          chief executive officer of
     A. J. Batt                ATEL Financial Corporation



 /s/ Dean Cash                 Executive vice president and         3/27/1997
---------------------          director of ATEL Financial
     Dean Cash                 Corporation



 /s/ F. Randall Bigony         Principal financial officer          3/27/1997
-----------------------        of registrant; principal
     F. Randall Bigony         financial officer of ATEL
                               Financial Corporation



 /s/ Donald E. Carpenter       Principal accounting officer         3/27/1997
------------------------       of registrant; principal
     Donald E. Carpenter       accounting officer of ATEL
                               Financial Corporation





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.

<PAGE>

                                INDEX TO EXHIBITS

      Index Number                             Exhibit

          3 & 4            Agreement of Limited Partnership, included as
                           Exhibit B to Prospectus


          28.1             Prospectus