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Form 10-Q

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

|X| Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
For the quarterly period ended June 30, 2003

|_| Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
For the transition period from _______ to _______

Commission File Number 0-24175

ATEL Capital Equipment Fund VII, L.P.
(Exact name of registrant as specified in its charter)

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



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

The number of Limited Partnership Units outstanding as of June 30, 2003 was
14,995,550

DOCUMENTS INCORPORATED BY REFERENCE

None


1


Part I. FINANCIAL INFORMATION

Item 1. Financial Statements.




2


ATEL CAPITAL EQUIPMENT FUND VII, L.P.

BALANCE SHEETS

JUNE 30, 2003 AND DECEMBER 31, 2002
(Unaudited)


ASSETS



2003 2002


Cash and cash equivalents $ 1,630,643 $ 2,194,169

Accounts receivable, net of allowance for doubtful
accounts of $524,150 in 2003 and $403,067 in 2002 2,698,538 4,848,736

Due from General Partner 33,851 253,543

Other assets - 10,019

Investments in leases 86,803,392 108,917,281
------------------ -------------------
Total assets $91,166,424 $ 116,223,748
================== ===================


LIABILITIES AND PARTNERS' CAPITAL




Long-term debt $18,944,000 $ 33,546,000

Non-recourse debt 1,093,282 4,577,308

Line of credit 14,000,000 13,300,000

Accounts payable 642,798 752,459

Accrued interest payable 43,565 192,403

Interest rate swap contracts 1,121,280 1,624,360

Unearned operating lease income 981,178 1,012,984
------------------ -------------------
Total liabilities 36,826,103 55,005,514

Partners' capital 54,340,321 61,218,234
------------------ -------------------
Total partners' capital 54,340,321 61,218,234
------------------ -------------------
Total liabilities and partners' capital $91,166,424 $ 116,223,748
================== ===================


See accompanying notes.


3


ATEL CAPITAL EQUIPMENT FUND VII, L.P.

STATEMENTS OF OPERATIONS

SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 2003 AND 2002
(Unaudited)




Six Months Three Months
Ended June 30, Ended June 30,
2003 2002 2003 2002
Revenues:
Leasing activities:

Operating leases $ 9,938,031 $12,543,651 $ 4,394,962 $ 5,832,667
Direct financing 428,758 768,332 154,426 364,652
Gain (loss) on sales of assets 2,189,125 (1,057,988) 35,680 (1,010,652)
Interest 2,441 8,542 773 2,425
Other 48,701 90,059 21,789 87,948
------------------ ------------------ ------------------ -------------------
12,607,056 12,352,596 4,607,630 5,277,040
Expenses:
Depreciation and amortization 7,871,614 9,095,832 3,347,997 4,672,320
Interest expense 1,088,342 1,737,408 468,049 847,810
Cost reimbursements to General Partner 803,734 672,409 23,430 108,383
Impairment losses 517,926 - - -
Equipment and incentive management fees to
General Partner 471,482 491,462 110,518 209,110
Railcar and equipment maintenance 425,070 347,462 315,580 194,252
Provision for (recovery of) doubtful accounts 136,000 370,000 (84,000) 70,000
Franchise fees and income taxes 128,178 23,124 128,178 23,124
Professional fees 95,318 148,480 59,017 54,951
Other 323,895 294,784 143,500 144,972
------------------ ------------------ ------------------ -------------------
11,861,559 13,180,961 4,512,269 6,324,922
------------------ ------------------ ------------------ -------------------
Net income (loss) $ 745,497 $ (828,365) $ 95,361 $ (1,047,882)
================== ================== ================== ===================

Net income (loss):
General Partner $ 627,208 $ 596,584 $ 319,070 $ 300,277
Limited Partners 118,289 (1,424,949) (223,709) (1,348,159)
------------------ ------------------ ------------------ -------------------
$ 745,497 $ (828,365) $ 95,361 $ (1,047,882)
================== ================== ================== ===================

Net income (loss) per Limited Partnership Unit $0.01 ($0.10) ($0.01) ($0.09)
Weighted average number of Units outstanding 14,995,883 14,996,050 14,995,717 14,996,050


See accompanying notes.


4


ATEL CAPITAL EQUIPMENT FUND VII, L.P.

STATEMENT OF CHANGES IN PARTNERS' CAPITAL

SIX MONTH PERIOD ENDED
JUNE 30, 2003
(Unaudited)




Accumulated
Other
Comprehensive
Limited Partners General Income
Units Amount Partner (Loss) Total


Balance December 31, 2002 14,996,050 $62,842,594 $ - $(1,624,360) $ 61,218,234
Unrealized change in value of
interest rate swap contracts - - 503,080 503,080
Limited partnership units
repurchased (500) (1,844) - - (1,844)
Distributions to partners (7,497,438) (627,208) - (8,124,646)
Net income 118,289 627,208 - 745,497
------------------- ------------------ ------------------ ------------------ -------------------
Balance June 30, 2003 14,995,550 $55,461,601 $ - $(1,121,280) $ 54,340,321
=================== ================== ================== ================== ===================


See accompanying notes.


5


ATEL CAPITAL EQUIPMENT FUND VII, L.P.

STATEMENTS OF CASH FLOWS

SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 2003 AND 2002
(Unaudited)



Six Months Three Months
Ended June 30, Ended June 30,
2003 2002 2003 2002
Operating activities:

Net income (loss) $ 745,497 $ (828,365) $ 95,361 $ (1,047,882)
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Depreciation 7,871,614 9,095,832 3,347,997 4,672,320
(Gain) loss on sales of assets (2,189,125) 1,057,988 (35,680) 1,010,652
Provision for (recovery of) doubtful accounts 136,000 370,000 (84,000) 70,000
Impairment losses 517,926 - - -
Changes in operating assets and liabilities:
Accounts receivable 2,014,198 1,918,443 758,663 580,491
Due from General Partner 219,692 - (33,851) -
Other assets 10,019 77,998 - 9,999
Accounts payable, General Partner - (580,916) (909,051) (287,088)
Accounts payable, other (109,661) 560,675 17,901 303,897
Accrued interest expense (148,838) (176,550) (112,100) (105,079)
Unearned lease income (31,806) (160,130) 243,997 (204,262)
------------------ ------------------ ------------------ -------------------
Net cash provided by operations 9,035,516 11,334,975 3,289,237 5,003,048
------------------ ------------------ ------------------ -------------------

Investing activities:
Proceeds from sales of assets 14,942,797 925,430 253,216 684,549
Reduction in net investment in direct financing
leases 970,677 1,597,356 409,106 787,491
Purchases of equipment on operating leases - (3,959,522) - -
Purchases of equipment on direct financing
leases - (3,052,572) - 6,568
Payment of initial direct costs to General Partner - (107,961) - -
------------------ ------------------ ------------------ -------------------
Net cash provided by (used in) investing
activities 15,913,474 (4,597,269) 662,322 1,478,608
------------------ ------------------ ------------------ -------------------




6


ATEL CAPITAL EQUIPMENT FUND VII, L.P.

STATEMENTS OF CASH FLOWS
(Continued)

SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 2003 AND 2002
(Unaudited)




Six Months Three Months
Ended June 30, Ended June 30,
2003 2002 2003 2002
Financing activities:

Distributions to limited partners (7,497,438) (7,499,854) (3,747,490) (3,749,906)
Distributions to General Partner (627,208) (596,584) (319,070) (300,277)
Repurchase of limited partnership units (1,844) - (1,844) -
Repayments of long-term debt (14,602,000) (8,111,000) (11,415,000) (3,515,000)
Proceeds of long-term debt - 10,100,000 - -
Borrowings under line of credit 14,500,000 13,200,000 14,000,000 3,500,000
Repayments of borrowings under line of credit (13,800,000) (10,300,000) - (500,000)
Repayments of non-recourse debt (3,484,026) (2,943,303) (2,219,770) (1,186,766)
------------------ ------------------ ------------------ -------------------
Net cash used in financing activities (25,512,516) (6,150,741) (3,703,174) (5,751,949)
------------------ ------------------ ------------------ -------------------
Net (decrease) increase in cash and cash
equivalents (563,526) 586,965 248,385 729,707
Cash and cash equivalents at beginning of
period 2,194,169 936,189 1,382,258 793,447
------------------ ------------------ ------------------ -------------------
Cash and cash equivalents at end of period $ 1,630,643 $ 1,523,154 $ 1,630,643 $ 1,523,154
================== ================== ================== ===================

Supplemental disclosures of cash flow
information:
Cash paid during the period for interest $ 1,237,180 $ 1,913,958 $ 580,149 $ 952,889
================== ================== ================== ===================

Schedule of non-cash transactions:
Change in fair value of interest rate swap contracts $ 503,080 $ 624,828 $ 390,186 $ 383,707
================== ================== ================== ===================








See accompanying notes.


7


ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2003
(Unaudited)


1. Summary of significant accounting policies:

Interim financial statements:

The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with instructions to Form 10-Q and Article 10 of Regulation S-X. The
unaudited interim financial statements reflect all adjustments which are, in the
opinion of the General Partner, necessary to a fair statement of financial
position and results of operations for the interim periods presented. All such
adjustments are of a normal recurring nature. These unaudited interim financial
statements should be read in conjunction with the financial statements and notes
thereto contained in the report on Form 10-K for the year ended December 31,
2002, filed with the Securities and Exchange Commission.


2. Organization and partnership matters:

ATEL Capital Equipment Fund VII, L.P. (the Fund), was formed under the laws of
the State of California on July 17, 1996, for the purpose of acquiring equipment
to engage in equipment leasing and sales activities.

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

The Partnership does not make a provision for income taxes since all income and
losses will be allocated to the Partners for inclusion in their individual tax
returns.

ATEL Financial Services, LLC, an affiliated entity, acts as the General Partner
of the Fund.


3. Investment in leases:

The Partnership's investment in leases consists of the following:



Depreciation
Balance Expense or Reclassi- Balance
December 31, Impairment Amortization fications or June 30,
2002 Losses of Leases Dispositions 2003
Net investment in operating

leases $ 84,026,902 $ (517,926) $ (7,786,008) $ (17,245,623) $ 58,477,345
Net investment in direct
financing leases 16,227,117 - (970,677) (6,062,850) 9,193,590
Assets held for sale or lease 10,563,086 - - 8,443,208 19,006,294
Reserve for losses (2,111,593) - - 2,111,593 -
Initial direct costs, net of
accumulated amortization 211,769 (85,606) - 126,163
------------------- ------------------ ------------------ ------------------ -------------------
$108,917,281 $ (517,926) $ (8,842,291) $ (12,753,672) $ 86,803,392
=================== ================== ================== ================== ===================





8


ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2003
(Unaudited)


3. Investment in leases (continued):

Operating leases:

Property on operating leases consists of the following:



Balance Dispositions & Balance
December 31, Impairment Reclassifications June 30,
2002 Losses 1st Quarter 2nd Quarter 2003

Transportation $ 74,889,008 $ - $ 1,654,985 $ (295,923) $ 76,248,070
Marine vessels / barges 27,030,136 - (7,335,250) (11,562,386) 8,132,500
Construction 22,414,263 - (1,165,750) (92,773) 21,155,740
Manufacturing 9,367,388 - (4,813,948) - 4,553,440
Materials handling 9,009,095 - (4,058,323) (100,762) 4,850,010
Mining 9,012,965 - (369,793) - 8,643,172
Other 6,034,386 - (2,654,831) 167,378 3,546,933
Communications 4,309,885 - (561,827) - 3,748,058
Office automation 3,604,688 - (83,642) - 3,521,046
------------------- ------------------ ------------------ ------------------ -------------------
165,671,814 - (19,388,379) (11,884,466) 134,398,969
Less accumulated depreciation (81,644,912) (517,926) 3,373,458 2,867,756 (75,921,624)
------------------- ------------------ ------------------ ------------------ -------------------
$ 84,026,902 $ (517,926) $ (16,014,921) $(9,016,710) $ 58,477,345
=================== ================== ================== ================== ===================


In 2003, there were charges to net income for impairments of operating lease
assets in the amount of $517,926. The charges related to covered grain hopper
cars on lease to various lessees. The impairment resulted from decreased
estimated cash flows expected to be generated by the assets over their remaining
lives.

Direct financing leases:

The following lists the components of the Company's investment in direct
financing leases as of June 30, 2003:

Total minimum lease payments receivable $ 7,024,068
Estimated residual values of leased equipment (unguaranteed) 4,961,238
---------------
Investment in direct financing leases 11,985,306
Less unearned income (2,791,716)
---------------
Net investment in direct financing leases $ 9,193,590
===============

All of the property on leases was acquired in 1997, 1998, 1999, 2001 and 2002.



9


ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2003
(Unaudited)


3. Investment in leases (continued):

At June 30, 2003, the aggregate amounts of future minimum lease payments are as
follows:



Direct
Operating Financing
Leases Leases Total

Six months ending December 31, 2003 $ 8,296,264 $ 1,067,808 $ 9,364,072
Year ending December 31, 2004 11,587,409 2,135,616 13,723,025
2005 7,173,701 2,135,616 9,309,317
2006 3,769,599 945,719 4,715,318
2007 2,946,607 535,056 3,481,663
Thereafter 5,874,014 204,253 6,078,267
------------------ ------------------ ------------------
$39,647,594 $ 7,024,068 $46,671,662
================== ================== ==================



4. Non-recourse debt:

Notes payable to financial institutions are due in varying monthly and quarterly
installments of principal and interest. The notes are secured by assignments of
lease payments and pledges of the assets which were purchased with the proceeds
of the particular notes. Interest rates on the notes vary from 7.40% to 8.828%.

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




Principal Interest Total

Six months ending December 31, 2003 $ 140,636 $ 42,247 $ 182,883
Year ending December 31, 2004 298,403 67,364 365,767
2005 322,838 42,927 365,765
2006 216,850 20,179 237,029
2007 90,838 5,141 95,979
Thereafter 23,717 278 23,995
------------------ ------------------ ------------------
$ 1,093,282 $ 178,136 $ 1,271,418
================== ================== ==================



5. 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 (1.6178% at June 30, 2003), based on
an index of A1 commercial paper. As of June 30, 2002, the program was closed as
to additional borrowings.



10


ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2003
(Unaudited)


5. Long-term debt (continued):

The Program requires the General Partner 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 June 30,
2003, the Partnership receives or pays interest on a notional principal of
$18,692,000, 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 last of the swaps terminates in 2008. 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.

Borrowings under the Program are as follows:


Original Balance Rate on
Date Amount June 30, Interest Swap
Borrowed Borrowed 2003 Agreement
4/1/1998 $21,770,000 $ 621,000 6.220%
7/1/1998 25,000,000 2,857,000 6.155%
10/1/1998 20,000,000 3,961,000 5.550%
4/16/1999 9,000,000 2,091,000 5.890%
1/26/2000 11,700,000 5,064,000 7.580%
5/25/2001 2,000,000 1,079,000 5.790%
9/28/2001 6,000,000 3,017,000 4.360%
1/31/2002 4,400,000 254,000 *
2/19/2002 5,700,000 - *
------------------ ------------------
$105,570,000 $18,944,000
================== ==================

* 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 are as follows:



Swap Notional / Debt Rates on
Debt Principal Interest Swap
Principal Not Swapped Interest Total Agreements**

Six months ending December 31, 2003 $ 3,618,000 $ 96,000 $ 530,637 $ 4,244,637 6.074%-6.105%
Year ending December 31, 2004 6,104,000 114,000 763,305 6,981,305 6.107%-6.194%
2005 4,883,000 12,000 433,855 5,328,855 6.234%-6.676%
2006 1,645,000 30,000 228,734 1,903,734 6.870%-7.132%
2007 722,000 - 152,988 874,988 7.138%-7.361%
2008 1,720,000 - 101,435 1,821,435 7.399%-7.480%
------------------- ------------------ ------------------ ------------------
$ 18,692,000 $ 252,000 $ 2,210,954 $21,154,954
=================== ================== ================== ==================


** 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 (1.6178% at June 30, 2003).



11


ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2003
(Unaudited)


6. Related party transactions:

The terms of the Limited Partnership Agreement provide that the General Partner
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 the General Partner in providing administrative services to the Partnership.
Administrative services provided include Partnership accounting, investor
relations, legal counsel and lease and equipment documentation. The General
Partner is not reimbursed for services where it is entitled to receive a
separate fee as compensation for such services, such as acquisition and
management of equipment. Reimbursable costs incurred by the General Partner are
allocated to the Partnership based upon actual time incurred by employees
working on Partnership business and an allocation of rent and other costs based
on utilization studies.

Substantially all employees of the General Partner record time incurred in
performing administrative services on behalf of all of the Partnerships serviced
by the General Partner. 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 and are
reimbursable in accordance with the Limited Partnership Agreement.

The General Partner and/or Affiliates earned fees, commissions and
reimbursements, pursuant to the Limited Partnership Agreement during the six and
three month periods ended June 30, 2003 and 2002 as follows:



Six Months Three Months
Ended June 30, Ended June 30,
2003 2002 2003 2002
Incentive management fees and equipment

management fees $ 471,482 $ 491,462 $ 110,518 $ 209,110
Administrative costs reimbursed to General
Partner 803,734 672,409 23,430 108,383
------------------ ------------------ ------------------ -------------------
$ 1,275,216 $ 1,163,871 $ 133,948 $ 317,493
================== ================== ================== ===================




12


ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2003
(Unaudited)


7. Partner's capital:

As of June 30, 2003, 14,995,550 Units were issued and outstanding.

The Partnership's Net Profits, Net Losses, and Tax Credits are to be allocated
92.5% to the Limited Partners and 7.5% to the General Partner. In accordance
with the terms of the of Limited Partnership Agreement, an additional
allocations of income were made to the General Partner in 2003 and 2002. The
amount allocated was determined to bring the General Partner's ending capital
account balance to zero.

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.

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.


8. Line of credit:

The Partnership participates with the General Partner and certain of its
affiliates in a $56,736,746 revolving line of credit with a financial
institution that includes certain financial covenants. The line of credit
expires on June 28, 2004. As of June 30, 2003, borrowings under the facility
were as follows:

Amount borrowed by the Partnership under the acquisition
facility $ 14,000,000
Amounts borrowed by affiliated partnerships and limited
liability companies under the acquisition facility 12,500,000
-------------------
Total borrowings under the acquisition facility 26,500,000
Amounts borrowed by the General Partner and its sister
corporation under the warehouse facility -
-------------------
Total outstanding balance $ 26,500,000
===================

Total available under the line of credit $ 56,736,746
Total outstanding balance (26,500,000)
-------------------
Remaining availability $ 30,236,746
===================



13


ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2003
(Unaudited)


8. Line of credit (continued):

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 fund and the Managing Member.

The credit agreement includes certain financial covenants applicable to each
borrower. The fund was in compliance with its covenants as of June 30, 2003.


9. Commitments:

As of June 30, 2003, the Partnership had no outstanding commitments to purchase
lease equipment.


10. Other comprehensive income:

In 2003 and 2002, other comprehensive income consisted of the following:



Six Months Three Months
Ended June 30, Ended June 30,
2003 2002 2003 2002


Net income (loss) $ 745,497 $ (828,365) $ 95,361 $ (1,047,882)
Other comprehensive income:
Change in fair value of interest rate swap contracts 503,080 624,828 390,186 383,707
------------------ ------------------ ------------------ -------------------
Comprehensive net income (loss) $ 1,248,577 $ (203,537) $ 485,547 $ (664,175)
================== ================== ================== ===================


There were no other sources of comprehensive net income.


14


Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations


Statements contained in this Item 2, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and elsewhere in this Form 10-Q,
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-Q. 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-Q or to reflect the occurrence of
unanticipated events, other than as required by law.

Capital Resources and Liquidity

During the first and second quarters of 2003, the Partnership's primary activity
was engaging in equipment leasing activities.

The liquidity of the Partnership will vary in the future, increasing to the
extent cash flows from leases 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.

As another source of liquidity, the Partnership has 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.

The Partnership participates with the General Partner and certain of its
affiliates in a $56,736,746 revolving line of credit with a financial
institution that includes certain financial covenants. The line of credit
expires on June 28, 2004. As of June 30, 2003, borrowings under the facility
were as follows:

Amount borrowed by the Partnership under the acquisition
facility $ 14,000,000
Amounts borrowed by affiliated partnerships and limited
liability companies under the acquisition facility 12,500,000
-------------------
Total borrowings under the acquisition facility 26,500,000
Amounts borrowed by the General Partner and its sister
corporation under the warehouse facility -
-------------------
Total outstanding balance $ 26,500,000
===================

Total available under the line of credit $ 56,736,746
Total outstanding balance (26,500,000)
-------------------
Remaining availability $ 30,236,746
===================

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

The Partnership currently has available adequate reserves to meet contingencies,
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.

No commitments of capital have been or are expected to be made other than for
the acquisition of additional equipment. There were no such commitments as of
June 30, 2003.

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.



15


Cash Flows, 2003 vs. 2002:

During the first half of 2003, the Partnership's primary sources of cash were
the proceeds of lease asset sales and borrowings under the line of credit.
During the first half of 2002, the Partnership's primary source of liquidity was
rents from assets on operating leases.

Cash from operating activities was almost entirely from operating lease rents in
both 2003 and in 2002 for both the three and six month periods.

Sources of cash from investing activities consisted of proceeds from sales of
assets and direct financing lease rents. Proceeds from sales of lease assets
increased significantly compared to 2002. In 2003 and 2002, cash was used in
investing activities to purchase assets on operating and direct financing leases
and to pay initial direct costs to the General Partner. There were no such
purchases in 2003.

In the first quarter of 2003, proceeds from the sales of lease assets were used
to repay the line of credit. The amounts of cash proceeds received in excess of
the amounts which were subsequently used to pay down the long-term debt were
used to make distributions to the limited partners. In the second quarter of
2003, cash was borrowed under the line of credit in orderd to pay down the
balance of the long-term debt. In 2002 , cash from financing sources consisted
of proceeds of long-term debt and borrowings under the line of credit. In both
2002, proceeds of long-term debt were used to repay amounts due on the line of
credit. Repayments of long-term debt have changed as a result of scheduled
payments. Distributions to partners did not change significantly compared to
2002.

Results of operations, 2003 vs. 2002:

Operations in 2003 resulted in a net income of $745,497 (six months) and $95,361
(three months). Operations in 2002 resulted in a net loss of $828,365 (six
months) and $1,047,882 (three months). Net income for the six month period ended
June 30, 2003, was primarily the result of gains of $2,189,125 recognized on the
sales of lease assets. The losses in 2002 were directly related to the losses
incurred in sales of lease assets in the second quarter of 2002. The
Partnership's primary source of revenues is from operating leases. This is
expected to remain true in future periods. Operating lease revenues for the six
month periods decreased from $12,543,651 in 2002 to $9,938,031 in 2003. For the
three month periods, they decreased from $5,832,667 in 2002 to $4,394,962 in
2003. The decreases were the result of asset sales in 2002 and in 2003.

Depreciation expense is the single largest expense of the Partnership and is
expected to remain so in future periods. As lease assets have been sold over the
last year, operating lease revenues have declined. This has also led to
decreases in depreciation expense. Total debt has decreased from $54,556,922 at
June 30, 2002 to $34,037,382 at June 30, 2003, a decrease of $20,519,540
compared to June 30, 2002. This has led to the decrease in interest expense in
2003 compared to the comparable periods in 2002. For the six month periods,
interest decreased by $649,066. For the three month period, the decrease was
$379,761.

In 2003, there were charges to net income for impairments of operating lease
assets in the amount of $517,926. The charges related to covered grain hopper
cars on lease to various lessees. The impairment resulted from decreased
estimated cash flows expected to be generated by the assets over their remaining
lives.

Item 3. Quantitative and Qualitative Disclosures of Market Risk.

The Fund, like most other companies, is exposed to certain market risks,
including primarily changes in interest rates. The Fund 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 Fund'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 Fund 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 Fund
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 June 30, 2003, the
outstanding balance on the floating rate line of credit was $14,000,000.

Also, the Fund entered into a receivables funding facility in 1998. Since
interest on the outstanding balances under the facility varies, the Fund is
exposed to market risks associated with changing interest rates. To hedge its
interest rate risk, the Fund enters into interest rate swaps, which effectively
convert the underlying interest characteristic on the facility from floating to
fixed.



16


Under the swap agreements, the Fund 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 Fund 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 June 30, 2003, borrowings on the facility were
$18,944,000 and the associated variable interest rate was 1.6178% and the
average fixed interest rate achieved with the swap agreements was 6.087% at June
30, 2003. As of June 30, 2003, the estimated fair value of the interest rate
swaps was $1,121,280.


Item 4. Controls and procedures.

Internal Controls

As of June 30, 2003, an evaluation was performed under the supervision and with
the participation of the Fund's management, including the CEO and CFO of the
General Partner, of the effectiveness of the design and operation of the Fund's
disclosure controls and procedures. Based on that evaluation, the Fund's
management, including the CEO and CFO of the General Partner, concluded that the
Fund's disclosure controls and procedures were effective as of June 30, 2003.
There have been no significant changes in the Fund's internal controls or in
other factors that could significantly affect internal controls subsequent to
June 30, 2003.

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.

Evaluation of disclosure controls and procedures

Under the supervision and with the participation of our management, including
the CEO and CFO, an evaluation of the effectiveness of the design and operation
of the Fund's disclosure controls and procedures, as defined in Rules
240.13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 was
performed as of a date within ninety days before the filing date of this
quarterly report. Based upon this evaluation, the CEO and CFO of the General
Partner concluded that, as of the evaluation date, 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.


PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

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.

Applied Magnetics Corporation:

In January 2000, Applied Magnetics Corporation (the "Debtor") filed for
protection from creditors under Chapter 11 of the U.S. Bankruptcy Code. The Fund
had assets with a total net book value of $8,048,095 leased to Applied Magnetics
Corporation at the bankruptcy filing date. On January 31, 2000, the General
Partner was appointed to the Official Committee of Unsecured Creditors and
currently serves as the Chairperson of the Committee. Procedures were quickly
undertaken for the liquidation of the Fund's leased equipment, which proceeds
resulted in recoveries of $1,773,798 or 21.7% of original equipment cost. As of
November 1, 2000, liquidation of the assets was completed.

The debtor filed a Plan of Reorganization (the "Plan"), which was approved by a
vote of the creditors of the Debtor in October 2001. The Plan provided that the
Debtor change its name to Integrated Micro-Technology (IMT), and enter into a
new line of business, the manufacture and production of "micro-machines." As
part of the Plan, the Fund, along with the other unsecured creditors, receives a
proportionate share of its unsecured claims in the form of ownership shares and
warrants in the newly formed business. The success of this new business plan is
highly uncertain.

On February 13, 2002, the reorganized Debtor filed a notice of objection to the
Fund's claim due to duplication and an improper liquidated damages provision.
The Fund disputed this and, as of July 26, 2002, agreement has been reached
between the Fund and Debtor as to the amount of the Fund's claim, and the
Debtor's objection to the Fund's claim was withdrawn.

On April 28, 2003, the Fund received 139,133 shares of IMT stock. The Fund
anticipates additional amounts may be recoverable through its equity interests
in the reorganized lessee's business, however, any recoveries above the amounts
received upon liquidation of the Fund's equipment are highly uncertain and
speculative.



17


Pioneer Companies, Inc.:

On July 31, 2001, petitions for reorganization under Chapter 11 of the U.S.
Bankruptcy Code were filed by the Pioneer Companies, Inc., et al (the "Debtor").
The Fund's Proof of Claim was timely filed on October 14, 2001, with the
Bankruptcy Clerk in Houston. The Fund is the successor in interest to First
Union Rail Corporation (FURC) under four (4) tank car lease schedules for 36
tank cars with Pioneer Chlor-Alkali Company, Inc. n/k/a Pioneer Americas, Inc.
(together, the "Lease"). FURC manages the Lease for the Fund. The Order
Confirming Debtor's Joint Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code ("Plan") was entered on November 28, 2001. The Effective Date,
as defined in the Plan, was December 31, 2001. Pursuant to Schedules 6.1(a)(x)
and 6.1(a)(y) of the Plan, the Lease was rejected by the Debtor.

Although the equipment was to be returned to FURC by December 31, 2001, the
Debtor continued to use and pay for the equipment under the lease on a
month-to-month basis. A letter agreement has been executed by the Debtor to
formalize an understanding for debtor's continued use of the equipment under the
terms of the Lease on a month-to-month basis until the cars were returned. The
Debtor has also objected to the Fund's claim, which objection was disputed by
the Fund and has been resolved with the Debtor allowing the Fund an allowed
secured claim in the amount of $193,765 via a stipulation that was filed with
the court in April 2003.

At this point, all equipment has been returned to the Fund, and is in the
process of being re-leased and/or sold. The full extent of any recovery is not
known at this time as the unsecured claim amount is being paid out in the form
of stock, which, while publicly traded, has a low valuation. The Fund intends to
hold onto the stock received until such time as the market price improves.


Item 2. Changes In Securities.

Inapplicable.

Item 3. Defaults Upon Senior Securities.

Inapplicable.

Item 4. Submission Of Matters To A Vote Of Security Holders.

Inapplicable.

Item 5. Other Information.

Inapplicable.

Item 6. Exhibits And Reports On Form 8-K.

(a) Documents filed as a part of this report

1. Financial Statements

Included in Part I of this report:

Balance Sheets, June 30, 2003 and December 31, 2002.

Statement of changes in partners' capital for the six months ended
June 30, 2003.

Statements of operations for the six and three month periods ended
June 30, 2003 and 2002.

Statements of cash flows for the six and three month periods ended
June 30, 2003 and 2002.

Notes to the Financial Statements.

2. Financial Statement Schedules

All other 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) Report on Form 8-K

None



18


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 Quarterly report on Form 10Q of ATEL Capital Equipment
Fund VII, LP, (the "Partnership") for the period ended June 30, 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 Company.


/s/ Dean L. Cash
- -------------------------------------
Dean L. Cash
President and Chief Executive
Officer of General Partner
August 12, 2003

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 Quarterly report on Form 10Q of ATEL Capital Equipment
Fund VII, LP, (the "Partnership") for the period ended June 30, 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 Company.


/s/ Paritosh K. Choksi
- -------------------------------------
Paritosh K. Choksi
Executive Vice President of General
Partner, Principal financial officer of registrant
August 12, 2003

19



I, Paritosh K. Choksi, certify that:

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

2. Based on my knowledge, this quarterly 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 quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly 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, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly 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
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly 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
quarterly 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: August 12, 2003



/s/ Paritosh K. Choksi
- -------------------------------------
Paritosh K. Choksi
Principal Financial Officer of Registrant, Executive
Vice President of General Partner


20


CERTIFICATIONS


I, Dean L. Cash, certify that:

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

2. Based on my knowledge, this quarterly 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 quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly 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, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly 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
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly 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
quarterly 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: August 12, 2003



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


21


SIGNATURES


Pursuant to the requirements 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:
August 12, 2003

ATEL CAPITAL EQUIPMENT FUND VII, L.P.
(Registrant)



By: ATEL Financial Services, LLC
General Partner of Registrant




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




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



By: /s/ Donald E. Carpenter
---------------------------------------
Donald E. Carpenter
Principal accounting
officer of registrant

22