EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dean L. Cash, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ATEL Capital Equipment Fund VII, L.P.;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 11, 2012

/s/ Dean L. Cash Dean L. Cash President and Chief Executive Officer of ATEL Financial Services, LLC (General Partner)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Paritosh K. Choksi, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ATEL Capital Equipment Fund VII, L.P.;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 11, 2012

/s/ Paritosh K. Choksi Paritosh K. Choksi Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Financial Services, LLC (General Partner)

EX-32.1

Exhibit 32.1

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

In connection with the Quarterly Report of ATEL Capital Equipment Fund VII, L.P. (the “Partnership”) on Form 10-Q for the period ended March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dean L. Cash, President and Chief Executive Officer of ATEL Financial Services, LLC, General Partner of the Partnership, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

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

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

Date: May 11, 2012

/s/ Dean L. Cash Dean L. Cash President and Chief Executive Officer of ATEL Financial Services, LLC (General Partner)

A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

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

In connection with the Quarterly Report of ATEL Capital Equipment Fund VII, L.P. (the “Partnership”) on Form 10-Q for the period ended March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Paritosh K. Choksi, Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Financial Services, LLC, General Partner of the Partnership, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

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

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

Date: May 11, 2012

/s/ Paritosh K. Choksi Paritosh K. Choksi Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Financial Services, LLC (General Partner)

A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.

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Summary of significant accounting policies

3 Months Ended

Mar. 31, 2012

Summary of significant accounting policies

2. Summary of significant accounting policies:

Basis of presentation:

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q as mandated by the Securities and Exchange Commission. The unaudited interim financial statements reflect all adjustments which are, in the opinion of the General Partner, necessary for a fair statement of financial position and results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. Operating results for the three months ended March 31, 2012 are not necessarily indicative of the results to be expected for the full year.

Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had no significant effect on the reported financial position or results from operations.

Footnote and tabular amounts are presented in thousands, except as to Units and per Unit data.

In preparing the accompanying unaudited financial statements, the General Partner has reviewed events that have occurred after March 31, 2012, up until the issuance of the financial statements. No events were noted which would require disclosure in the footnotes to the financial statements, or adjustments thereto.

Use of estimates:

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

Segment reporting:

The Partnership is not organized by multiple operating segments for the purpose of making operating decisions or assessing performance. Accordingly the Partnership operates in one reportable operating segment in the United States.

However, certain of the Partnership’s lessee customers may have international operations. In these instances, the Partnership is aware that certain equipment, primarily rail and transportation, may periodically exit the country. However, these lessee customers are US-based, and it is impractical for the Partnership to track, on an asset-by-asset and day-by-day basis, where these assets are deployed. The primary geographic regions in which the Partnership sought leasing opportunities were North America and Europe.

The table below summarizes geographic information relating to the sources, by nation, of the Partnership’s total revenues for three months ended March 31, 2012 and 2011 and long-lived tangible assets as of March 31, 2012 and December 31, 2011 (dollars in thousands):

	For The Three Months Ended March 31,
	2012		% of Total			2011		% of Total
Revenue
United States	$	1,098		93	%	$	852		98	%
United Kingdom		—		0	%		16		2	%
Canada		80		7	%		—		0	%
Total International		80		7	%		16		2	%
Total	$	1,178		100	%	$	868		100	%

	As of March 31,					As of December 31,
	2012		% of Total			2011		% of Total
Long-lived assets
United States	$	7,127		97	%	$	7,309		97	%
United Kingdom		—		0	%		—		0	%
Canada		240		3	%		240		3	%
Total International		240		3	%		240		3	%
Total	$	7,367		100	%	$	7,549		100	%

Other loss, net:

Other loss, net represents $7 thousand of foreign currency translation losses during the prior year period. The Partnership had no foreign currency translation transactions during the current year period.

Per Unit data:

Net income (loss) and distributions per Unit are based upon the weighted average number of Limited Partnership Units outstanding during the period.

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Organization and Limited Partnership matters

3 Months Ended

Mar. 31, 2012

Organization and Limited Partnership matters

1. Organization and Limited Partnership matters:

ATEL Capital Equipment Fund VII, L.P. (the “Partnership” or 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, primarily in the United States. The Partnership may continue until December 31, 2017. The General Partner of the Partnership is ATEL Financial Services, LLC (“AFS”), a California limited liability company. Prior to converting to a limited liability company structure, AFS was formerly known as ATEL Financial Corporation.

The Partnership conducted a public offering of 15,000,000 Units of Limited Partnership Interest (“Units”), at a price of $10 per Unit. On January 7, 1997, subscriptions for the minimum number of Units (120,000, $1.2 million) had been received (excluding subscriptions from Pennsylvania investors) and AFS requested that the subscriptions be released to the Partnership. On that date, the Partnership commenced operations in its primary business. Gross contributions in the amount of $150 million (15,000,000 units) were received as of November 27, 1998, exclusive of $500 of Initial Partners’ capital investment and $100 of AFS’ capital investment. The offering was terminated on November 27, 1998. As of March 31, 2012, 14,985,550 Units remain issued and outstanding.

The Partnership’s principal objectives have been to invest in a diversified portfolio of equipment that (i) preserves, protects and returns the Partnership’s invested capital; (ii) generates regular distributions to the partners of cash from operations and cash from sales or refinancing, with any balance remaining after certain minimum distributions to be used to purchase additional equipment during the reinvestment period (“Reinvestment Period”) (defined as six full years following the year the offering was terminated), which ended December 31, 2004 and (iii) provides additional distributions following the Reinvestment Period and until all equipment has been sold. The Partnership is governed by its Limited Partnership Agreement (“Partnership Agreement”).

Pursuant to the Partnership Agreement, AFS receives compensation for services rendered and reimbursements for costs incurred on behalf of the Partnership (Note 5). The Partnership is required to maintain reasonable cash reserves for working capital, the repurchase of Units and contingencies. The repurchase of Units is solely at the discretion of AFS.

As of March 31, 2012, the Partnership continues to be in the liquidation phase of its life cycle as defined in the Partnership Agreement.

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, 2011, filed with the Securities and Exchange Commission.

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BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
ASSETS
Cash and cash equivalents	$ 1,824	$ 1,354
Accounts receivable, net of allowance for doubtful accounts of $209 as of March 31, 2012 and $11 December 31, 2011	152	307
Investments in equipment and leases, net of accumulated depreciation of $39,099 as of March 31, 2012 and $39,106 as of December 31, 2011	7,367	7,549
Other assets	6	6
Total assets	9,349	9,216
Accounts payable and accrued liabilities:
General Partner	355	670
Other	391	416
Unearned operating lease income	293	247
Total liabilities	1,039	1,333
Commitments and contingencies
Partners' capital:
General Partner
Limited Partners	8,310	7,883
Total Partners' capital	8,310	7,883
Total liabilities and Partners' capital	$ 9,349	$ 9,216

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STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (Parenthetical) (USD $)	12 Months Ended
	Dec. 31, 2011
Distributions to Limited Partners, per Unit	$ 0.25

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STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Operating activities:
Net income (loss)	$ 427	$ (894)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Gain on sales of assets	(29)	(28)
Depreciation of operating lease assets	123	386
Provision for doubtful accounts	198
Changes in operating assets and liabilities:
Accounts receivable	(43)	108
Other assets		3
Accounts payable:
General Partner	(315)	303
Other	(25)	30
Unearned lease income	46	102
Net cash provided by operating activities	382	10
Investing activities:
Proceeds from sales of lease assets	45	61
Principal payments received on direct financing leases	43	23
Net cash provided by investing activities	88	84
Financing activities:
Net cash provided by financing activities
Net increase in cash and cash equivalents	470	94
Cash and cash equivalents at beginning of period	1,354	2,637
Cash and cash equivalents at end of period	1,824	2,731
Schedule of non-cash transactions:
Improvements to operating lease equipment		$ 150

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BALANCE SHEETS (Parenthetical) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Accounts receivable, allowance for doubtful accounts	$ 209	$ 11
Investments in equipment and leases, accumulated depreciation	$ 39,099	$ 39,106

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Document and Entity Information	3 Months Ended
	Mar. 31, 2012	Apr. 30, 2012
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q1
Trading Symbol	ZZHJA
Entity Registrant Name	ATEL CAPITAL EQUIPMENT FUND VII LP
Entity Central Index Key	0001019542
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Units Outstanding		14,985,550

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STATEMENTS OF OPERATIONS (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Leasing activities:
Operating leases	$ 1,090	$ 755
Direct financing leases	53	75
Gain on sales of assets	29	28
Other	6	10
Total revenues	1,178	868
Expenses:
Depreciation of operating lease assets	123	386
Marine vessel maintenance and other operating costs		6
Cost reimbursements to General Partner	81	750
Other management fees	44	14
Equipment and incentive management fees to General Partner	34	30
Railcar and equipment maintenance	157	143
Professional fees	41	57
Insurance	2	5
Equipment storage	2	37
Franchise fees and state taxes		19
Freight and shipping	1	234
Outside services	19	11
Provision for doubtful accounts	198
Property taxes		29
Postage	5	6
Printing and photocopying	10	2
Other	34	26
Total operating expenses	751	1,755
Income (loss) from operations	427	(887)
Other loss, net		(7)
Net income (loss)	427	(894)
Net income (loss):
General Partner
Limited Partners	427	(894)
Net income (loss)	$ 427	$ (894)
Net income (loss) per Limited Partnership Unit	0.03	(0.06)
Weighted average number of Units outstanding	14,985,550	14,985,550

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Related party transactions

3 Months Ended

Mar. 31, 2012

Related party transactions

5. Related party transactions:

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

The Partnership Agreement allows for the reimbursement of costs incurred by AFS in providing administrative services to the Partnership. Administrative services provided include Partnership accounting, investor relations, legal counsel and lease and equipment documentation. AFS is not reimbursed for services whereby it is entitled to receive a separate fee as compensation for such services, such as disposition of equipment. The Partnership would be liable for certain future costs to be incurred by AFS to manage the administrative services provided to the Partnership.

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

Cost reimbursements to the General Partner are based on its costs incurred in performing administrative services for the Partnership. These costs are allocated to each managed entity based on certain criteria such as managed assets, number of investors or contributed capital based upon the type of cost incurred, subject to limitations as described below.

Incentive management fees are computed as 4.0% of distributions of cash from operations, as defined in the Partnership Agreement and equipment management fees are computed as 3.5% of gross revenues from operating leases, as defined in the Partnership Agreement plus 2.0% of gross revenues from full payout leases, as defined in the Partnership Agreement.

During the three months ended March 31, 2012 and 2011, AFS and/or affiliates earned fees and commissions, and billed for reimbursements, pursuant to the Partnership Agreement as follows (in thousands):

	Three Months Ended March 31,
	2012		2011
Equipment and incentive management fees to General Partner	$	34	$	30
Cost reimbursements to General Partner and/or affiliates		81		750
	$	115	$	780

The Fund’s Limited Partnership Agreement places an annual and cumulative limit for cost reimbursements to AFS and/or its affiliates. Any reimbursable costs incurred by AFS and/or affiliates during the year exceeding the annual and/or cumulative limits cannot be reimbursed in the current year, though such costs may be reimbursable in future years to the extent such amounts may be payable if within the annual and cumulative limits in such future years. The Fund is a finite life and self liquidating entity, and AFS and its affiliates have no recourse against the Fund for the amount of any unpaid excess reimbursable administrative expenses. The Fund will continue to require administrative services from AFS and its affiliates through the end of its term, and will therefore continue to incur reimbursable administrative expenses in each year. For the year ending December 31, 2012, it is not anticipated that the amount of reimbursable expenses billed to the Fund will exceed either the annual or the cumulative limitations. Such is reflective of the continued diminishing Fund asset base over which reimbursements are calculated.

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Investment in equipment and leases, net

3 Months Ended

Mar. 31, 2012

Investment in equipment and leases, net

4. Investment in equipment and leases, net:

The Partnership’s investments in equipment and leases consist of the following (in thousands):

	Balance December 31, 2011		Reclassifications & Additions/ Dispositions			Depreciation/ Amortization Expense or Amortization of Leases			Balance March 31, 2012
Net investment in operating leases	$	7,075	$	(16	)	$	(123	)	$	6,936
Net investment in direct financing leases		405		(10	)		(43	)		352
Assets held for sale or lease, net		69		10			—			79
Total	$	7,549	$	(16	)	$	(166	)	$	7,367

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

Management periodically reviews the carrying values of its assets on leases and assets held for lease or sale. Impairment losses are recorded as an adjustment to the net investment in operating leases. No impairment losses were recorded during the three months ended March 31, 2012 and 2011.

The Partnership utilizes a straight line depreciation method over the term of the equipment lease for equipment on operating leases currently in its portfolio. Depreciation expense on the Partnership’s equipment was approximately $123 thousand and $386 thousand for the three months ended March 31, 2012 and 2011, respectively.

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

Operating leases:

Property on operating leases consists of the following (in thousands):

	Balance December 31, 2011			Additions			Reclassifications or Dispositions			Balance March 31, 2012
Transportation	$	29,707		$	—		$	(128	)	$	29,579
Marine vessels/barges		15,675			—			—			15,675
Construction		156			—			—			156
Materials handling		83			—			—			83
		45,621			—			(128	)		45,493
Less: accumulated depreciation		(38,546	)		(123	)		112			(38,557	)
Total	$	7,075		$	(123	)	$	(16	)	$	6,936

The average estimated residual value for assets on operating leases was 14% of the assets’ original cost at March 31, 2012 and December 31, 2011.

The Partnership earns revenues from its marine vessels and certain lease assets based on utilization of such assets or through fixed term leases. Contingent rentals (i.e., short-term, operating charter hire payments) and the associated expenses are recorded when earned and/or incurred. The revenues associated with these rentals are included as a component of Operating Lease Revenues. Prior to 2011, the most significant sources of contingent rentals were the Partnership’s two largest marine vessels. Such vessels were converted to fixed term leases in August 2010 and March 2011. There were no contingent rentals for the three months ended March 31, 2012 as compared to $29 thousand for the prior year period

As of March 31, 2012, certain operating leases with a total book value of $148 thousand were placed on non-accrual status as a result of a lessee bankruptcy. No impairment was deemed necessary as the carrying amount of the underlying equipment was well below estimated scrap value.

Direct financing leases:

As of March 31, 2012 and December 31, 2011, investment in direct financing leases primarily consists of various transportation, ground support and manufacturing equipment. The components of the Partnership’s investment in direct financing leases as of March 31, 2012 and December 31, 2011 are as follows (in thousands):

	March 31, 2012			December 31, 2011
Total minimum lease payments receivable	$	436		$	533
Estimated residual values of leased equipment (unguaranteed)		65			75
Investment in direct financing leases		501			608
Less unearned income		(149	)		(203	)
Net investment in direct financing leases	$	352		$	405

There were no net investments in direct financing leases in non-accrual status as of March 31, 2012 and December 31, 2011.

At March 31, 2012, the aggregate amounts of future minimum lease payments are as follows (in thousands):

	Operating Leases		Direct Financing Leases		Total
Nine months ending December 31, 2012	$	2,218	$	271	$	2,489
Year ending December 31, 2013		1,077		165		1,242
2014		341		—		341
2015		320		—		320
2016		27		—		27
	$	3,983	$	436	$	4,419

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Partners' capital

3 Months Ended

Mar. 31, 2012

Partners' capital

8. Partners’ capital:

As of March 31, 2012 and December 31, 2011, 14,985,550 Units were issued and outstanding. The Partnership had been authorized to issue up to 15,000,050 Units, including the 50 Units issued to the Initial Limited Partners, as defined.

The Partnership has the right, exercisable at the General Partner’s discretion, but not the obligation, to repurchase Units of a Unitholder who ceases to be a U.S. Citizen, for a price equal to 100% of the holder’s capital account. The Partnership is otherwise permitted, but not required, to repurchase Units upon a holder’s request. The repurchase of Fund Units is made in accordance with Section 13 of the Amended and Restated Agreement of Limited Partnership. The repurchase would be at the discretion of the General Partner on terms it determines to be appropriate under given circumstances, in the event that the General Partner deems such repurchase to be in the best interest of the Partnership; provided, the Partnership is never required to repurchase any Units. Upon the repurchase of any Units by the Fund, the tendered Units are cancelled. Units repurchased in prior periods were repurchased at amounts representing the original investment less cumulative distributions made to the Unitholder with respect to the Units. All Units repurchased during a quarter are deemed to be repurchased effective the last day of the preceding quarter, and are not deemed to be outstanding during, or entitled to allocations of net income, net loss or distributions for the quarter in which such repurchase occurs.

As defined in the Partnership Agreement, the Partnership’s Net Income, Net Losses, and Distributions are to be allocated 92.5% to the Limited Partners and 7.5% to AFS.

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

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

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

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

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

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

There were no distributions to Limited Partners for the three months ended March 31, 2012 and 2011

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Gain contingencies

3 Months Ended

Mar. 31, 2012

Gain contingencies

6. Gain contingencies:

The Partnership’s vessel activity in the Gulf of Mexico was severely impacted by the British Petroleum (“BP”) “Deep Water Horizon” oil spill of 2010 which severely adversely impacted charter activity in the Gulf region. BP established a program to compensate those businesses and individuals suffering economic hardship and loss as a result of the Deep Water Horizon oil spill. The Partnership has submitted a claim to the BP program administrator seeking an approximate $2.8 million for loss of revenues during the period of the vessel’s diminished activity commencing at the time of the oil spill and continuing through 2010. While BP’s claim administrator reviews the Partnership’s claim, and the Partnership believes such claim to be of merit, the amount of any compensation or award from BP is currently extremely difficult to determine. As such, the potential for compensation or award has not been recorded on the Partnership’s books and records.

ATEL filed a claim on behalf of certain of its Funds for the under-reporting of revenue by a fleet manager of three marine vessels, seeking to recover an approximate $2.8 million for the years 2005 – 2007 (of which the Partnership’s portion is an approximate $1.4 million). Such amounts are not considered material to any of the Funds in any given year. While the Funds’ recovery with respect to this matter may be substantial, there is no assurance that judgment will be rendered in favor of the Funds. The trial date for this matter has been rescheduled several times, and the suit has recently been assigned to a newly-appointed Federal Judge and a new trial date has been set for June of 2012. The outcome of this claim remains uncertain.

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Guarantees

3 Months Ended

Mar. 31, 2012

Guarantees

7. Guarantees:

The Partnership enters into contracts that contain a variety of indemnifications. The Partnership’s maximum exposure under these arrangements is unknown. However, the Partnership has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

The General Partner knows of no facts or circumstances that would make the Partnership’s contractual commitments outside standard mutual covenants applicable to commercial transactions between businesses. Accordingly, the Partnership believes that these indemnification obligations are made in the ordinary course of business as part of standard commercial and industry practice, and that any potential liability under the Partnership’s similar commitments is remote. Should any such indemnification obligation become payable, the Partnership would separately record and/or disclose such liability in accordance with GAAP.

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STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (USD $) In Thousands, except Share data	Total	Limited Partners	General Partner
Beginning Balance at Dec. 31, 2010	$ 10,838	$ 10,838
Beginning Balance (in shares) at Dec. 31, 2010		14,985,550
Distributions to Limited Partners ($0.25 per Unit)	(3,747)	(3,747)
Distributions to General Partner	(304)		(304)
Net income	1,096	792	304
Ending Balance at Dec. 31, 2011	7,883	7,883
Ending Balance (in shares) at Dec. 31, 2011		14,985,550
Net income	427	427
Ending Balance at Mar. 31, 2012	$ 8,310	$ 8,310
Ending Balance (in shares) at Mar. 31, 2012		14,985,550

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Allowance for credit losses

3 Months Ended

Mar. 31, 2012

Allowance for credit losses

3. Allowance for credit losses:

Activity in the allowance for credit losses consists of the following (in thousands):

	Accounts Receivable Allowance for Doubtful Accounts					Valuation Adjustments on Financing Receivables		Total Allowance for Credit Losses
	Finance Leases			Operating Leases		Finance Leases
Balance December 31, 2010	$	10		$	1	$	—	$	11
Provision		—			—		—		—
Balance December 31, 2011		10			1		—		11
Provision (reversal of provision)		(9	)		207		—		198
Balance as of March 31, 2012	$	1		$	208	$	—	$	209

Accounts receivable

Accounts receivable represent the amounts billed under operating and direct financing lease contracts which are currently due to the Partnership.

Allowances for doubtful accounts are typically established based upon their aging and historical charge off and collection experience and the creditworthiness of specifically identified lessees, and invoiced amounts. Accounts receivable deemed uncollectible are generally charged off against the allowance on a specific identification basis. Recoveries of amounts that were previously written-off are recorded as other income in the period received.

Accounts receivable are generally placed in a non-accrual status (i.e., no revenue is recognized) when payments are more than 90 days past due. Additionally, management periodically reviews the creditworthiness of companies with lease payments outstanding less than 90 days. Based upon management’s judgment, such leases may be placed in non-accrual status. Leases placed on non-accrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the remaining unpaid receivable is probable. Until such time, all payments received are applied only against outstanding principal balances.

Financing receivables

In addition to the allowance established for delinquent accounts receivable, the total allowance related solely to financing receivables also includes anticipated impairment charges on direct financing leases.

The asset underlying a direct financing lease contract is considered impaired if the estimated undiscounted future cash flows of the asset are less than its net book value. The estimated undiscounted future cash flows are the sum of the estimated residual value of the asset at the end of the asset’s expected holding period and estimates of undiscounted future rents. The residual value assumes, among other things, that the asset is utilized normally in an open, unrestricted and stable market. Short-term fluctuations in the market place are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly.

As of March 31, 2012 and December 31, 2011, the Partnership did not record an allowance for credit losses related to its financing receivables. The Partnership’s recorded investment in financing receivables at March 31, 2012 and December 31, 2011 are as follows (in thousands):

March 31, 2012	Finance Leases		Total
Allowance for credit losses:
Ending balance	$	—	$	—
Ending balance: individually evaluated for impairment	$	—	$	—
Ending balance: collectively evaluated for impairment	$	—	$	—
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—
Financing receivables:
Ending balance	$	352	$	352
Ending balance: individually evaluated for impairment	$	352	$	352
Ending balance: collectively evaluated for impairment	$	—	$	—
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—

December 31, 2011	Finance Leases		Total
Allowance for credit losses:
Ending balance	$	—	$	—
Ending balance: individually evaluated for impairment	$	—	$	—
Ending balance: collectively evaluated for impairment	$	—	$	—
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—
Financing receivables:
Ending balance	$	405	$	405
Ending balance: individually evaluated for impairment	$	405	$	405
Ending balance: collectively evaluated for impairment	$	—	$	—
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—

The Partnership evaluates the credit quality of its financing receivables on a scale equivalent to the following quality indicators related to corporate risk profiles:

Pass – Any account whose lessee/debtor, co-lessee/debtor or any guarantor has a credit rating on publicly traded or privately placed debt issues as rated by Moody’s or S&P for either Senior Unsecured debt, Long Term Issuer rating or Issuer rating that are in the tiers of ratings generally recognized by the investment community as constituting an Investment Grade credit rating; or, has been determined by the General Partner to be an Investment Grade Equivalent or High Quality Corporate Credit per its Credit Policy or has a Not Rated internal rating by the General Partner and the account is not considered by the Chief Credit Officer of the General Partner to fall into one of the three risk profiles below.

Special Mention – Any traditional corporate type account with potential weaknesses (e.g. large net losses or major industry downturns) or, any growth capital account that has less than three months of cash as of the end of the calendar quarter to fund their continuing operations. These accounts deserve management’s close attention. If left uncorrected, those potential weaknesses may result in deterioration of the Fund’s receivable at some future date.

Substandard – Any account that is inadequately protected by the current worth and paying capacity of the borrower or of the collateral pledged, if any. Accounts that are so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Fund will sustain some loss as the likelihood of fully collecting all receivables may be questionable if the deficiencies are not corrected. Such accounts are on the General Partner’s Credit Watch List.

Doubtful – Any account where the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Accordingly, an account that is so classified is on the General Partner’s Credit Watch List, and has been declared in default and the General Partner has repossessed, or is attempting to repossess, the equipment it financed. This category includes impaired leases as applicable.

At March 31, 2012 and December 31, 2011, the Partnership’s financing receivables by credit quality indicator and by class of financing receivables are as follows (in thousands):

	Finance Leases
	March 31, 2012		December 31, 2011
Pass	$	352	$	405
Special mention		—		—
Substandard		—		—
Doubtful		—		—
Total	$	352	$	405

At March 31, 2012 and December 31, 2011, investment in financing receivables is aged as follows (in thousands):

March 31, 2012	30 – 59 Days Past Due		60 – 89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment>90 Days and Accruing
Finance leases	$	—	$	—	$	56	$	56	$	296	$	352	$	56

December 31, 2011	30 – 59 Days Past Due		60 – 89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment>90 Days and Accruing
Finance leases	$	—	$	—	$	—	$	—	$	405	$	405	$	—

The Partnership did not carry an impairment reserve on its financing receivables at March 31, 2012 and December 31, 2011. At March 31, 2012, certain net investments in financing receivables with related accounts receivable past due more than 90 days are still on an accrual basis based on management’s assessment of the collectability of such receivables. However, these accounts receivable are fully reserved and included in the allowance for doubtful accounts presented above. At December 31, 2011, there were no accounts receivable related to net investments in financing receivables placed in non-accrual status.