Form 10-Q

UNITED STATES
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, 2013


o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from to

Commission File number 000-24175

ATEL Capital Equipment Fund VII, L.P.

(Exact name of registrant as specified in its charter)


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

The Transamerica Pyramid, 600 Montgomery Street, 9th Floor, San Francisco, California 94111
(Address of principal executive offices)

Registrant’s telephone number, including area code (415) 989-8800

Securities registered pursuant to section 12(b) of the Act: None

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer, large accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).Yes o No x

The number of Limited Partnership Units outstanding as of July 31, 2013 was 14,985,550.

DOCUMENTS INCORPORATED BY REFERENCE

None.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

BALANCE SHEETS

JUNE 30, 2013 AND DECEMBER 31, 2012
(In Thousands)


	June 30, 2013		December 31, 2012
	(Unaudited)
ASSETS
Cash and cash equivalents	$	1,433	$	686
Accounts receivable, net of allowance for doubtful accounts of $327 as of June 30, 2013 and $133 as of December 31, 2012		217		652
Investments in equipment and leases, net of accumulated depreciation of $38,585 as of June 30, 2013 and $38,658 as of December 31, 2012		6,382		6,765
Prepaid expenses and other assets		22		17
Total assets	$	8,054	$	8,120
LIABILITIES AND PARTNERS’ CAPITAL
Accounts payable and accrued liabilities:
General Partner	$	230	$	420
Other		289		421
Unearned operating lease income		36		98
Total liabilities		555		939
Commitments and contingencies
Partners’ capital:
General Partner		—		—
Limited Partners		7,499		7,181
Total Partners’ capital		7,499		7,181
Total liabilities and Partners’ capital	$	8,054	$	8,120

See accompanying notes.

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

STATEMENTS OF INCOME

FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2013 AND 2012
(In Thousands except Units and Per Unit Data)
(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Revenues:
Leasing activities:
Operating leases	$	679	$	1,029	$	1,441	$	2,119
Direct financing leases		11		46		33		99
Gain on sales of assets		14		125		53		154
Other		—		—		—		6
Total revenues		704		1,200		1,527		2,378
Expenses:
Depreciation of operating lease assets		105		120		219		243
Marine vessel maintenance and other operating costs		—		—		61		—
Cost reimbursements to General Partner		52		51		117		132
Equipment and incentive management fees to General Partner		13		28		39		62
Railcar and equipment maintenance		115		212		244		369
Professional fees		6		66		41		107
Insurance		31		4		47		6
Outside services		23		18		47		37
Other management fees		24		42		48		86
Equipment storage		3		2		5		4
Franchise fees and state taxes		15		15		16		15
Freight and shipping		13		2		19		3
Provision for credit losses		81		63		194		261
Property taxes		—		1		12		1
Postage		3		9		9		14
Printing and photocopying		—		11		12		21
Other		36		17		79		51
Total operating expenses		520		661		1,209		1,412
Net income	$	184	$	539	$	318	$	966
Net income:
General Partner	$	—	$	—	$	—	$	—
Limited Partners		184		539		318		966
	$	184	$	539	$	318	$	966
Net income per Limited Partnership Unit	$	0.01	$	0.04	$	0.02	$	0.06
Weighted average number of Units outstanding		14,985,550		14,985,550		14,985,550		14,985,550

See accompanying notes.

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2012 AND
FOR THE SIX MONTHS ENDED JUNE 30, 2013
(In Thousands except Units and Per Unit Data)


	Limited Partners					General Partner			Total
	Units		Amount			General Partner			Total
Balance December 31, 2011		14,985,550	$	7,883		$	—		$	7,883
Distributions to Limited Partners ($0.18 per Unit)		—		(2,623	)		—			(2,623	)
Distributions to General Partner		—		—			(213	)		(213	)
Net income		—		1,921			213			2,134
Balance December 31, 2012		14,985,550		7,181			—			7,181
Net income		—		318			—			318
Balance June 30, 2013 (Unaudited)		14,985,550	$	7,499		$	—		$	7,499

See accompanying notes.

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

STATEMENTS OF CASH FLOWS

FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2013 AND 2012
(In Thousands)
(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Operating activities:
Net income	$	184		$	539		$	318		$	966
Adjustments to reconcile net income to cash provided by operating activities:
Gain on sales of assets		(14	)		(125	)		(53	)		(154	)
Depreciation of operating lease assets		105			120			219			243
Provision for credit losses		81			63			194			261
Changes in operating assets and liabilities:
Accounts receivable		153			(92	)		241			(135	)
Prepaid expenses and other assets		(8	)		(9	)		(5	)		(9	)
Accounts payable:
General Partner		(37	)		(46	)		(190	)		(361	)
Other		(21	)		(27	)		(132	)		(52	)
Unearned lease income		(123	)		(54	)		(62	)		(8	)
Net cash provided by operating activities		320			369			530			751
Investing activities:
Proceeds from sales of lease assets		23			165			85			210
Principal payments received on direct financing leases		65			47			132			90
Net cash provided by investing activities		88			212			217			300
Financing activities:
Net cash provided by financing activities		—			—			—			—
Net increase in cash and cash equivalents		408			581			747			1,051
Cash and cash equivalents at beginning of period		1,025			1,824			686			1,354
Cash and cash equivalents at end of period	$	1,433		$	2,405		$	1,433		$	2,405
Supplemental disclosures of cash flow information:
Cash paid during the period for taxes	$	39		$	39		$	40		$	39

See accompanying notes.

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

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 June 30, 2013, 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 (See 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 June 30, 2013, the Partnership continues 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, 2012, filed with the Securities and Exchange Commission.

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 and six months ended June 30, 2013 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.

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

2. Summary of significant accounting policies: - (continued)

In preparing the accompanying unaudited financial statements, the General Partner has reviewed events that have occurred after June 30, 2013, 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 the six months ended June 30, 2013 and 2012 and long-lived tangible assets as of June 30, 2013 and December 31, 2012 (dollars in thousands):


	For The Six Months Ended June 30,
	2013		% of Total			2012		% of Total
Revenue
United States	$	1,367		90	%	$	2,218		93	%
Canada		160		10	%		160		7	%
Total International		160		10	%		160		7	%
Total	$	1,527		100	%	$	2,378		100	%


	As of June 30,					As of December 31,
	2013		% of Total			2012		% of Total
Long-lived assets
United States	$	6,142		96	%	$	6,525		96	%
Canada		240		4	%		240		4	%
Total International		240		4	%		240		4	%
Total	$	6,382		100	%	$	6,765		100	%

Per Unit data:

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

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

2. Summary of significant accounting policies: - (continued)

Recent accounting pronouncements:

Recent accounting standards updates as issued by the Financial Accounting Standards Board (FASB) were evaluated and determined to be not applicable to the Partnership.

3. Allowance for credit losses:

The Partnership’s allowance for credit losses are as follows (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, 2011	$	10		$	1	$	—	$	11
(Reversal of provision) provision		(10	)		132		—		122
Balance December 31, 2012		—			133		—		133
Provision		—			194		—		194
Balance June 30, 2013	$	—		$	327	$	—	$	327

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 marketplace 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.

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

3. Allowance for credit losses: - (continued)

As of June 30, 2013 and December 31, 2012, the Partnership did not record an allowance for credit losses related to its financing receivables. The Partnership’s recorded investment in financing receivables at June 30, 2013 and December 31, 2012 are as follows (in thousands):


June 30, 2013	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	$	65	$	65
Ending balance: individually evaluated for impairment	$	65	$	65
Ending balance: collectively evaluated for impairment	$	—	$	—
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—


December 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	$	197	$	197
Ending balance: individually evaluated for impairment	$	197	$	197
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.

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

3. Allowance for credit losses: - (continued)

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 June 30, 2013 and December 31, 2012, the Partnership’s financing receivables by credit quality indicator and by class of financing receivables are as follows (in thousands):


	Finance Leases
	June 30, 2013		December 31, 2012
Pass	$	65	$	197
Special mention		—		—
Substandard		—		—
Doubtful		—		—
Total	$	65	$	197

At June 30, 2013 and December 31, 2012, investment in financing receivables is aged as follows (in thousands):


June 30, 2013	31 – 60 Days Past Due		61 – 90 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment >90 Days and Accruing
Finance leases	$	—	$	10	$	—	$	10	$	55	$	65	$	—


December 31, 2012	31 – 60 Days Past Due		61 – 90 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment >90 Days and Accruing
Finance leases	$	—	$	—	$	—	$	—	$	197	$	197	$	—

The Partnership did not carry an impairment reserve on its financing receivables at June 30, 2013 and December 31, 2012. At June 30, 2013 and December 31, 2012, there were no investments in financing receivables with related accounts receivable past due more than 90 days which were still on an accrual basis.

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

4. Investment in equipment and leases, net:

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


	Balance December 31, 2012		Reclassifications & Additions/ Dispositions			Depreciation/ Amortization Expense or Amortization of Leases			Balance June 30, 2013
Net investment in operating leases	$	5,284	$	(1,352	)	$	(219	)	$	3,713
Net investment in direct financing leases		197		(15	)		(132	)		50
Assets held for sale or lease, net		1,284		1,335			—			2,619
Total	$	6,765	$	(32	)	$	(351	)	$	6,382

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 and six months ended June 30, 2013 and 2012.

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 $105 thousand and $120 thousand for the respective three months ended June 30, 2013 and 2012, and $219 thousand and $243 thousand for the respective six months ended June 30, 2013 and 2012.

All of the remaining property subject to leases was acquired in the years 1997 to 1998.

Operating leases:

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


	Balance December 31, 2012			Additions			Reclassifications or Dispositions			Balance June 30, 2013
Transportation	$	28,689		$	—		$	(181	)	$	28,508
Marine vessels		7,400			—			(7,400	)		—
Materials handling		83			—			—			83
		36,172			—			(7,581	)		28,591
Less accumulated depreciation		(30,888	)		(219	)		6,229			(24,878	)
Total	$	5,284		$	(219	)	$	(1,352	)	$	3,713

The average estimated residual value for assets on operating leases was 13% and 14% of the assets’ original cost at June 30, 2013 and December 31, 2012, respectively. There were no operating leases in non-accrual status at June 30, 2013 and December 31, 2012.

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 and totaled $15 thousand and $58 thousand for the respective three months ended June 30, 2013 and 2012, and $30 thousand and $58 thousand for the respective six months ended June 30, 2013 and 2012.

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

4. Investment in equipment and leases, net: - (continued)

Direct financing leases:

As of June 30, 2013, investment in direct financing leases consists primarily of manufacturing equipment. As of December 31, 2012, such investment consisted primarily of various transportation, ground support and manufacturing equipment. The components of the Partnership’s investment in direct financing leases as of June 30, 2013 and December 31, 2012 are as follows (in thousands):


	June 30, 2013		December 31, 2012
Total minimum lease payments receivable	$	—	$	165
Estimated residual values of leased equipment (unguaranteed)		50		65
Investment in direct financing leases		50		230
Less unearned income		—		(33	)
Net investment in direct financing leases	$	50	$	197

The Partnership’s remaining direct financing lease matures on July 1, 2013. At June 30, 2013, the Partnership retained a $50 thousand residual position in the equipment underlying such direct financing lease.

At June 30, 2013, the aggregate amounts of future minimum lease payments are as follows (in thousands):


	Operating Leases
Six months ending December 31, 2013	$	966
Year ending December 31, 2014		724
2015		631
2016		337
2017		311
2018		78
	$	3,047

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 will 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 total assets, number of investors or contributed capital based upon the type of cost incurred, subject to limitations as described below.

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

5. Related party transactions: - (continued)

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 and six months ended June 30, 2013 and 2012, AFS and/or affiliates earned fees and commissions, and billed for reimbursements, pursuant to the Partnership Agreement as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Cost reimbursements to General Partner	$	52	$	51	$	117	$	132
Equipment and incentive management fees to General Partner		13		28		39		62
	$	65	$	79	$	156	$	194

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, 2013, 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.

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 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. The BP claim administrator denied the Partnership’s claim on the basis that the Partnership suffered damages as a result of the President’s moratorium on oil drilling subsequent to the Deep Water Horizon accident. The Partnership believes its claim continues to be of merit, and has opted out of the BP claims fund, and is pursuing a claim in a collective action with other similarly situated plaintiffs. Currently, the amount of any compensation or award from BP is 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 the Partnership and certain affiliated entities in Federal court in New Orleans for the under-reporting of revenue by a fleet manager of three marine vessels, seeking to recover an approximate amount of 10% of gross proceeds, which in the aggregate for all affiliated entities represents $2.8 million for the years 2005-2007 (of which the Partnership’s portion is an approximate $1.4 million). The annual allocable portion of the claim is not considered material to the Partnership in any given year. The trial was concluded during the first week of August 2012. In October 2012, the matter was remitted to the Federal Judge to render a decision on both the law and the facts. The decision of the Court was rendered at the end of

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

6. Gain contingencies: - (continued)

June 2013 and the court found in favor of the defendants. The Partnership filed an appeal of the court’s decision and is hopeful for a recovery of all or portion of its asserted claims, but the outcome of the litigation remains uncertain as of such date. As a result of the ruling, the defendants have filed a claim for legal fees and costs, of which the Partnership’s portion would amount to approximately $350 thousand, however, this claim remains in dispute pending the outcome of the appeal, and a final award in favor of either party remains uncertain at this time.

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.

8. Partners’ capital:

As of June 30, 2013 and December 31, 2012, 14,985,550 Units were issued and outstanding. The Partnership had been authorized to issue up to 15,000,000 Units, in addition to the 50 Units issued to the initial Partners.

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.

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

8. Partners’ capital: - (continued)

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 declared or paid during the three and six months ended June 30, 2013 and 2012.

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,” (“MD&A”) 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. In particular, economic recession and changes in general economic conditions, including, fluctuations in demand for equipment, lease rates, and interest rates, may result in delays in leasing, re-leasing, and disposition of equipment, and reduced returns on invested capital. The Partnership’s performance is subject to risks relating to lessee defaults and the creditworthiness of its lessees. The Partnership’s performance is also subject to risks relating to the value of its equipment at the end of its leases, which may be affected by the condition of the equipment, technological obsolescence and the markets for new and used equipment at the end of lease terms. 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.

Overview

ATEL Capital Equipment Fund VII, L.P. (the “Partnership” or the “Fund”) is a California partnership that was formed in May 1996 for the purpose of engaging in the sale of limited liability investment units and acquiring equipment to generate revenues from equipment leasing and sales activities, primarily in the United States.

The Partnership conducted a public offering of 15,000,000 Units of Limited Partnership Interest (“Units”), at a price of $10 per Unit. The offering was terminated in November 1998. During early 1999, the Partnership completed its initial acquisition stage with the investment of the net proceeds from the public offering of Units. Subsequently, throughout the reinvestment period (“Reinvestment Period”) (defined as six full years following the year the offering was terminated), the Partnership reinvested cash flow in excess of certain amounts required to be distributed to the Limited Partners and/or utilized its credit facilities to acquire additional equipment.

The Partnership may continue until December 31, 2017. However, pursuant to the guidelines of the Limited Partnership Agreement (“Partnership Agreement”), the Partnership began to liquidate its assets and distribute the proceeds thereof after the end of the Reinvestment Period which ended in December 2004.

As of June 30, 2013, the Partnership continues in its liquidation phase. Accordingly, assets that mature will be returned to inventory and most likely will be subsequently sold, which will result in decreasing revenue as earning assets decrease. Periodic distributions are paid at the discretion of the General Partner.

Results of Operations

The three months ended June 30, 2013 versus the three months ended June 30, 2012

The Partnership had net income of $184 thousand and $539 thousand for the three months ended June 30, 2013 and 2012, respectively. The results for the second quarter of 2013 reflect decreases in both total revenues and total operating expenses when compared to the prior year period.

Revenues

Total revenues for the second quarter of 2013 decreased by $496 thousand, or 41%, as compared to the prior year period. The net decrease in total revenues was mostly attributable to reductions in operating lease revenues and gains on sales of assets.

Operating lease revenue decreased by $350 thousand mainly due to the December 2012 and June 2013 termination of leases relative to the Fund’s marine vessels, lower negotiated rates on certain leases which renewed during the first quarter of 2013, a decrease in usage-based rental income during the current year period, and the impact of continued run-off and dispositions of lease assets.

Gain on sales of assets declined by $111 thousand primarily due to a period over period decrease in volume and change in mix of assets sold.

Expenses

Total operating expenses for the second quarter of 2013 decreased by $141 thousand, or 21%, as compared to the prior year period. The net reduction in expenses was primarily a result of decreases in railcar maintenance costs and professional fees offset, in part, by an increase in insurance costs.

Railcar maintenance costs decreased by $97 thousand as the prior year period amount included maintenance and refurbishment costs related to inventoried railcars that have mostly been re-leased during 2012. Maintenance costs further declined as a result of the continued decrease in the number of railcars owned by the Partnership, consistent with a fund in liquidation.

Moreover, professional fees declined by $60 thousand as the prior year period amount included legal fees associated with the Fund’s claim against its former marine vessel management company due to an alleged under-reporting of revenue.

Partially offsetting the aforementioned decreases in expenses was a $27 thousand increase in insurance costs. Insurance costs increased as the responsibility for insurance coverage on the marine vessels was assumed by the Fund with the termination of both vessel charters. Prior to the termination of the leases, all operating expenses were assumed by the lessee under a “bareboat charter” provision which transferred possession and full control of the vessels (but not title), including all legal and financial responsibility, to the lessee. Under this type of arrangement, the lessee pays for all maintenance and operating expenses, including fuel, crew, port expenses and all required insurance coverage.

The six months ended June 30, 2013 versus the six months ended June 30, 2012

The Partnership had net income of $318 thousand and $966 thousand for the six months ended June 30, 2013 and 2012, respectively. The results for the first half of 2013 reflect decreases in both total revenues and total operating expenses when compared to the prior year period.

Revenues

Total revenues for the first half of 2013 decreased by $851 thousand, or 36%, as compared to the prior year. The net decrease in total revenues was mostly attributable to decreases in operating lease revenues, gains on sales of assets and direct financing lease revenues.

Operating lease revenues decreased by $678 thousand mainly due to the December 2012 and June 2013 termination of leases relative to the Fund’s marine vessels, lower negotiated rates on certain leases which renewed during the first quarter of 2013, a reduction in usage-based rental income, and the impact of continued run-off and dispositions of lease assets. Gain on sales of assets revenue declined by $101 thousand primarily due to a period over period reduction in volume and change in mix of assets sold; and, direct financing lease revenues decreased by $66 thousand primarily due to run-off of the portfolio.

Expenses

Total operating expenses for the first half of 2013 decreased by $203 thousand, or 14%, as compared to the prior year period. The net decline was mainly due to decreases in railcar and equipment maintenance costs, the provision for credit losses, professional fees and other management fees. Such decreases in expenses were partially offset by increases in marine vessel maintenance and other operating costs, insurance costs and other expense.

Railcar maintenance costs decreased by $125 thousand as the prior year period amount included maintenance and refurbishment costs related to inventoried railcars that have mostly been re-leased during 2012. Maintenance costs further declined as a result of the continued decrease in the number of railcars owned by the Partnership. The provision for credit losses decreased by $67 thousand due to a period over period decrease in reserves relative to certain receivables that have been delinquent more than 90 days. In addition, certain leases were placed on non-accrual status during the prior year period resulting from a lessee bankruptcy.

Professional fees declined by $66 thousand as the prior year period amount included legal fees associated with the Fund’s claim against its former marine vessel management company due to an alleged under-reporting of revenue; and other management fees declined by $38 thousand due to the aforementioned termination of the marine vessels’ charters formerly managed by a third party manager.

Partially offsetting the aforementioned decreases in expenses were increases in marine vessel maintenance and other operating costs, insurance costs and other expense totaling $61 thousand, $41 thousand, and $28 thousand, respectively. The increase in marine vessel maintenance and other operating costs was largely due to costs incurred to repair vessel propellers during the current year period. The responsibility for such vessel maintenance and other operating expenses was assumed by the Fund on its marine vessels upon the termination of both vessels’ charters as previously discussed. Likewise, insurance costs increased as the responsibility for insurance coverage on the marine vessels was assumed by the Fund with the termination of the marine vessel charters; and, other expense increased largely due to remarketing fees associated with re-leasing of certain railcars.

Capital Resources and Liquidity

At June 30, 2013 and December 31, 2012, the Partnership’s cash and cash equivalents totaled $1.4 million and $686 thousand, respectively. The liquidity of the Partnership varies, increasing to the extent cash flows from leases and proceeds from lease asset sales exceed expenses and decreasing as distributions are made to the partners and to the extent expenses exceed cash flows from leases and proceeds from asset sales.

The primary source of liquidity for the Partnership has been its cash flow from leasing activities. As the initial lease terms have expired, the Partnership ventured to re-lease or sell the equipment. Future liquidity will depend on the Partnership’s success in remarketing or selling the equipment as it comes off rental.

If inflation in the general economy becomes significant, it may affect the Partnership in as much 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. In addition, if interest rates increase significantly under such circumstances, 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.

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

Cash Flows

The following table sets forth summary cash flow data (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Net cash provided by:
Operating activities	$	320	$	369	$	530	$	751
Investing activities		88		212		217		300
Financing activities		—		—		—		—
Net increase in cash and cash equivalents	$	408	$	581	$	747	$	1,051

The three months ended June 30, 2013 versus the three months ended June 30, 2012

During the three months ended June 30, 2013 and 2012, the Partnership’s primary source of liquidity has been its cash flows from its portfolio of operating lease contracts and direct financing leases. In addition, the Fund realized $23 thousand and $165 thousand of proceeds from sales of equipment during the respective three months ended June 30, 2013 and 2012.

During the same comparative periods, cash was primarily used to pay invoices related to General Partner fees and expenses, and other payables. As the Fund is in its liquidation phase, any future financing activity is anticipated to only include distributions to Partners.

The six months ended June 30, 2013 versus the six months ended June 30, 2012

During the six months ended June 30, 2013 and 2012, the Partnership’s primary source of liquidity has been its cash flows from its portfolio of operating lease contracts and direct financing leases. In addition, the Fund realized $85 thousand and $210 thousand of proceeds from sales of equipment during the respective six months ended June 30, 2013 and 2012.

During the same comparative periods, cash was primarily used to pay invoices related to General Partner fees and expenses, and other payables.

Distributions

The Partnership commenced periodic distributions, based on cash flows from operations, beginning with the month of January 1997. During its liquidation phase, the rates and frequency of periodic distributions paid by the Fund are solely at the discretion of the General Partner. There were no distributions declared or paid during the three and six months ended June 30, 2013 and 2012.

Commitments and Contingencies and Off-Balance Sheet Transactions

Commitments and contingencies

At June 30, 2013, the Partnership had no commitments to purchase lease assets or fund investments in notes receivable and pursuant to the Partnership Agreement, the Partnership will no longer purchase any new lease assets.

Gain Contingencies

remains uncertain as of such date. As a result of the ruling, the defendants have filed a claim for legal fees and costs, of which the Partnership’s portion would amount to approximately $350 thousand, however, this claim remains in dispute pending the outcome of the appeal, and a final award in favor of either party remains uncertain at this time.

Off-Balance Sheet Transactions

None.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America 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. On an on-going basis, the Partnership evaluates its estimates, which are based upon historical experiences, market trends and financial forecasts, and upon various other assumptions that management believes to be reasonable under the circumstances and at that certain point in time. Actual results may differ, significantly at times, from these estimates under different assumptions or conditions.

The Partnership’s critical accounting policies are described in its Annual Report on Form 10-K for the year ended December 31, 2012. There have been no material changes to the Partnership’s critical accounting policies since December 31, 2012.

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures

The Partnership’s General Partner’s President and Chief Executive Officer, and Executive Vice President and Chief Financial Officer and Chief Operating Officer (“Management”), evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based on the evaluation of the Partnership’s disclosure controls and procedures, Management concluded that as of the end of the period covered by this report, the design and operation of these disclosure controls and procedures were effective.

The Partnership does not control the financial reporting process, and is solely dependent on the Management of the General Partner, which is responsible for providing the Partnership with financial statements in accordance with generally accepted accounting principles in the United States. The General Partner’s disclosure controls and procedures, as applicable to the Partnership, were effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

Changes in internal control

There were no changes in the General Partner’s internal control over financial reporting, as it is applicable to the Partnership, during the quarter ended June 30, 2013 that have materially affected, or are reasonably likely to materially affect, the General Partner’s internal control over financial reporting, as it is applicable to the Partnership.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

Documents filed as a part of this report:

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 not applicable, and therefore have been omitted.

Other Exhibits


31.1		Rule 13a-14(a)/15d-14(a) Certification of Dean L. Cash
31.2		Rule 13a-14(a)/15d-14(a) Certification of Paritosh K. Choksi
32.1		Certification Pursuant to 18 U.S.C. section 1350 of Dean L. Cash
32.2		Certification Pursuant to 18 U.S.C. section 1350 of Paritosh K. Choksi
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

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 13, 2013

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
ATEL Financial Services, LLC (General Partner)

By:

/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)

By:

/s/ Samuel Schussler

Samuel Schussler
Vice President and Chief Accounting Officer of
ATEL Financial Services, LLC (General Partner)


Part I. Financial Information			3
Item 1. Financial Statements (Unaudited)			3
Balance Sheets, June 30, 2013 and December 31, 2012			3
Statements of Income for the three and six months ended June 30, 2013 and 2012			4
Statements of Changes in Partners’ Capital for the year ended December 31, 2012 and for the six months ended June 30, 2013			5
Statements of Cash Flows for the three and six months ended June 30, 2013 and 2012			6
Notes to the Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			17
Item 4. Controls and Procedures			21
Part II. Other Information			22
Item 1. Legal Proceedings			22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			22
Item 3. Defaults Upon Senior Securities			22
Item 4. Mine Safety Disclosures			22
Item 5. Other Information			22
Item 6. Exhibits			22

Form 10-Q

For the quarterly period ended June 30, 2013

For the transition period from to

Commission File number 000-24175

ATEL Capital Equipment Fund VII, L.P.

DOCUMENTS INCORPORATED BY REFERENCE

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

Index

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

BALANCE SHEETS

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

STATEMENTS OF INCOME

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

STATEMENTS OF CASH FLOWS

ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS (Unaudited)

1. Organization and Limited Partnership matters:

2. Summary of significant accounting policies:

Basis of presentation:

ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS (Unaudited)

2. Summary of significant accounting policies: - (continued)

Use of estimates:

Segment reporting:

Per Unit data:

ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS (Unaudited)

2. Summary of significant accounting policies: - (continued)

Recent accounting pronouncements:

3. Allowance for credit losses:

Accounts receivable

Financing receivables

ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS (Unaudited)

3. Allowance for credit losses: - (continued)

ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS (Unaudited)

3. Allowance for credit losses: - (continued)

ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS (Unaudited)

4. Investment in equipment and leases, net:

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

Operating leases:

ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS (Unaudited)

4. Investment in equipment and leases, net: - (continued)

Direct financing leases:

5. Related party transactions:

ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS (Unaudited)

5. Related party transactions: - (continued)

6. Gain contingencies:

ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS (Unaudited)

6. Gain contingencies: - (continued)

7. Guarantees:

8. Partners’ capital:

ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS (Unaudited)

8. Partners’ capital: - (continued)

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

Overview

Results of Operations

The three months ended June 30, 2013 versus the three months ended June 30, 2012

Revenues

Expenses

The six months ended June 30, 2013 versus the six months ended June 30, 2012

Revenues

Expenses

Capital Resources and Liquidity

Cash Flows

The three months ended June 30, 2013 versus the three months ended June 30, 2012

The six months ended June 30, 2013 versus the six months ended June 30, 2012

Distributions

Commitments and Contingencies and Off-Balance Sheet Transactions

Commitments and contingencies

Gain Contingencies

Off-Balance Sheet Transactions

Critical Accounting Policies and Estimates

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures

Changes in internal control

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Item 3. Defaults Upon Senior Securities.

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL CAPITAL EQUIPMENT FUND VII, L.P.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

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