Form 10K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                        |X|  Annual  report  pursuant  to section 13 or 15(d) of
                             the  Securities   Exchange  Act  of  1934  (no  fee
                             required) For the Year Ended December 31, 2000
                                       OR
                        |_|  Transition  report  pursuant to section 13 or 15(d)
                             of the  Securities  Exchange  Act of  1934  (no fee
                             required)  For the  transition  period from ____ to
                             ____

                         Commission File number 0-24175

                      ATEL Capital Equipment Fund VII, L.P.

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

           235 Pine Street, 6th Floor, San Francisco, California 94104
                    (Address of principal executive offices)

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

Securities  registered pursuant to section 12(g) of the Act: 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 |_|

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


                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None


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






                                       1


                                     PART I

Item 1:  BUSINESS

General Development of Business

ATEL Capital  Equipment  Fund VII, L.P. (the  Partnership)  was formed under the
laws of the State of California in May 1996. The  Partnership was formed for the
purpose  of  acquiring  equipment  to  engage  in  equipment  leasing  and sales
activities. The General Partner of the Partnership is ATEL Financial Corporation
(ATEL).

The  Partnership  conducted  a public  offering of  15,000,000  Units of Limited
Partnership Interest (Units) at a price of $10 per Unit. On January 7, 1997, the
Partnership  commenced operations in its primary business (leasing  activities).
As of  November  27,  1998,  the  Partnership  had  received  subscriptions  for
15,000,000  ($150,000,000)  Limited  Partnership  Units  and  the  offering  was
terminated.   As  of  December  31,  2000,  14,996,050  Units  were  issued  and
outstanding.

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

Narrative Description of Business

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

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

As of December 31, 2000, the  Partnership  had purchased  equipment with a total
acquisition price of $289,421,680.

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



                                       2


During 2000, no single lessee generated more than 10% of the Partnership's lease
revenues. During 1999 and 1998 certain lessees generated significant portions of
the Partnership's total lease revenues as follows:

          Lessee            Type of Equipment               1999      1998
          ------            -----------------               ----      ----
Burlington Northern Santa   Locomotives & intermodal        10%        17%
   Fe Railroad Company          containers
NYK Lines                   Intermodal containers            *         10%
*  Less than 10%.

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

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

The General  Partner will seek to limit the amount  invested in equipment to any
single lessee to not more than 20% of the aggregate  purchase price of equipment
owned at any time during the reinvestment period.

The business of the Partnership is not seasonal.

The Partnership has no full time employees.

Equipment Leasing Activities

Through December 31, 2000, the Partnership has disposed of certain leased assets
as set forth below:

                                                                    Excess of
          Type of           Original                                Rents Over
         Equipment        Equipment Cost         Sale Price         Expenses *
         ---------        --------------         ----------         ----------
Manufacturing                $15,089,798         $ 6,323,632        $ 8,851,236
Transportation                 6,923,021           4,363,914          5,093,337
Aircraft                       3,764,124           4,330,088          1,814,760
Other                          1,808,916             311,239          1,041,063
Office automation              1,677,828             374,321          1,249,542
Food processing                1,612,852           1,243,592            980,308
Furniture and fixtures         1,350,493             765,340          1,068,345
Mining                           816,729             888,685            173,808
Materials handling               481,128              17,595            610,889
                         ----------------   -----------------   ----------------
                             $33,524,889        $ 18,618,406       $ 20,883,288
                         ================   =================   ================

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



                                       3


The Partnership has acquired a diversified portfolio of equipment. The equipment
has been leased to lessees in various industries. The following tables set forth
the types of equipment acquired by the Partnership through December 31, 2000 and
the  industries  to which the  assets  have been  leased.  The  Partnership  has
purchased  certain assets subject to existing  non-recourse  debt. For financial
statement purposes,  non-recourse debt has been offset against the investment in
certain direct finance leases where the right of setoff exists.

                                   Purchase Price Excluding Percentage of Total
        Asset Types                    Acquisition Fees         Acquisitions
        -----------                    ----------------         ------------
Transportation, rail cars                 $ 64,328,409                29.83%
Manufacturing                               45,427,770                15.70%
Mining                                      30,756,101                10.63%
Transportation, other                       26,723,940                 9.23%
Transportation, intermodal
   containers                               26,631,519                 9.20%
Marine vessels                              22,335,250                 7.72%
Motor Vehicles                              12,437,158                 4.30%
Office automation                           11,449,934                 3.96%
Medical                                      9,133,951                 3.16%
Aircraft                                     6,310,979                 2.18%
Materials handling                           6,840,192                 2.36%
Railroad locomotives                         5,010,960                 1.73%
Other *                                     22,035,517                 7.61%
                                       ----------------      ----------------
                                         $ 289,421,680               100.00%
                                       ================      ================

                                   Purchase Price Excluding Percentage of Total
    Industry of Lessee                 Acquisition Fees        Acquisitions
    ------------------                 ----------------        ------------
Transportation, rail                      $ 73,779,368                34.97%
Municipalities                               45,050,058               15.57%
Transportation, other                        43,079,361               14.88%
Manufacturing, other                         30,086,803               10.40%
Electronics                                  24,418,734                8.44%
Mining                                       17,194,252                5.94%
Business services                            15,093,493                5.22%
Primary metals                               13,251,254                4.58%
Other *                                      27,468,357                9.49%
                                       ----------------      ----------------
                                         $ 289,421,680               100.00%
                                       ================      ================

* Individual amounts included in "Other" represent less than 2.5% of the total.

For further information regarding the Partnership's equipment lease portfolio as
of December 31, 2000,  see Note 3 to the financial  statements,  Investments  in
equipment  and  leases,   set  forth  in  Item  8,   Financial   Statements  and
Supplementary Data.


Item 2.  PROPERTIES

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




                                       4


Item 3.  LEGAL PROCEEDINGS

No material legal  proceedings are currently  pending against the Partnership or
against  any of its assets.  The  following  is a  discussion  of legal  matters
involving  the  Partnership  but  which  do not  represent  claims  against  the
Partnership or its assets.

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

The Partnership  anticipates  additional amounts may be recoverable  through the
reorganization  of the lessee's  business,  however,  any  recoveries  above the
amounts  received upon  liquidation  of the  Partnership's  equipment are highly
uncertain and speculative.


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

None


                                     PART II

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

Market Information

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

Holders

As of December 31, 2000, a total of 5,665 investors were record holders of Units
in the Partnership.

Dividends

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

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

The rate for monthly  distributions  from 2000  operations was $0.0833 per Unit.
The  distributions  were made in  February  2000  through  December  2000 and in
January 2001. For each quarterly  distribution  (made in April, July and October
2000 and in January 2001) the rate was $0.25 per Unit.  Distributions  were from
2000 cash flows from operations.



                                       5


The rate for monthly  distributions  from 1999  operations was $0.0833 per Unit.
The  distributions  were made in  February  1999  through  December  1999 and in
January 2000. For each quarterly  distribution  (made in April, July and October
1999 and in January 2000) the rate was $0.25 per Unit.  Distributions  were from
1999 cash flows from operations.

The rate for monthly  distributions  from 1998  operations was $0.0833 per Unit.
The  distributions  were made in  February  1998  through  December  1998 and in
January 1999. For each quarterly  distribution  (made in April, July and October
1998 and in January 1999) the rate was $0.25 per Unit.  Distributions  were from
1998 cash  flows  from  operations.  The  amounts  paid to holders of Units were
adjusted  based on the length of time  within  the  previous  calendar  month or
quarter that the Units were outstanding.

The following table presents summarized  information regarding  distributions to
Limited Partners:

                                              2000     1999     1998      1997
                                              ----     ----     ----      ----
Distributions of net income (loss)          $ 0.53  $ (0.17)  $ 0.46   $ (0.20)
Return of investment                          0.48     1.17     0.45      0.99
                                          --------- -------- --------  --------
Distributions per Unit                        1.01     1.00     0.91      0.79
Differences due to timing of distributions   (0.01)    0.00     0.09      0.21
                                          --------- -------- --------  --------
Nominal distribution rates from above       $ 1.00   $ 1.00   $ 1.00    $ 1.00
                                          ========= ======== ========  ========


Item 6.  SELECTED FINANCIAL DATA

The following  table  presents  selected  financial  data of the  Partnership at
December 31, 2000, 1999, 1998, 1997 and 1996. This financial data should be read
in  conjunction  with the financial  statements and related notes included under
Item 8 of this report.




                                                   2000             1999              1998             1997               1996
                                                   ----             ----              ----             ----               ----
                                                                                                          
Gross revenues                                    $41,463,919     $ 39,634,771      $ 37,195,090      $ 7,373,981          $ -

Net income (loss)                                 $ 9,158,705     $ (2,159,370)      $ 5,279,496       $ (738,233)         $ -

Weighted average Units outstanding                 14,996,050       14,996,050        10,729,510        3,380,442           50

Net income (loss) per Unit, based on
   weighted average Units outstanding                  $ 0.53          $ (0.17)           $ 0.46          $ (0.20)         $ -

Distributions per Unit, based on
   weighted average Units outstanding                  $ 1.01           $ 1.00            $ 0.91           $ 0.79          $ -

Total Assets                                     $157,600,746    $ 191,424,300     $ 212,456,902    $ 104,416,786        $ 600

Non-recourse Debt                                 $15,452,741     $ 21,780,420      $ 16,599,347      $ 8,127,374          $ -

Other long-term debt                              $44,877,000     $ 53,181,000      $ 61,553,000              $ -          $ -

Total Partners' Capital                           $94,163,608    $ 101,313,784     $ 119,711,246     $ 53,900,414        $ 600





                                       6


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


Capital Resources and Liquidity

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

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

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

The  Partnership  participates  with the  General  Partner  and  certain  of its
affiliates  in  a  $77,500,000   revolving  line  of  credit  with  a  financial
institution  that  includes  certain  financial  covenants.  The line of  credit
expires on July 28,  2001.  As of December  31,  2000,  the  Partnership  had no
borrowings  under  this  line of  credit  and  the  remaining  availability  was
$39,969,040.

The Partnership  anticipates reinvesting a portion of lease payments from assets
owned in new leasing  transactions.  Such reinvestment will occur only after the
payment  of  all  obligations,   including  debt  service  (both  principal  and
interest), the payment of management and acquisition fees to the General Partner
and providing for cash  distributions to the Limited  Partners.  At December 31,
2000, there were no commitments to purchase lease assets.

As of December 31, 2000,  all cash  balances  consisted of amounts  reserved for
distributions in January 2001, generated from operations in 2000.

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

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

It is the intention of the Partnership to use the receivables funding program to
finance  assets  leased to those  lessees  which,  in the opinion of the General
Partner,  have a relatively  lower  potential  risk of lease  default than those
lessees with equipment  financed with  non-recourse  debt. The Partnership  will
continue to use its traditional  sources of non-recourse  secured debt financing
on a transaction basis as a means of mitigating credit risk.

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



                                       7


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

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

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


Cash Flows

             2000 vs. 1999:

Cash flows from operations  decreased from $29,817,476 in 1999 to $28,382,888 in
2000,  and decrease of $1,434,588.  Rents from  operating  leases is the primary
source of operating cash flows.  Purchases of operating lease assets in 1999 led
to the slight increase in operating lease revenues compared to 1999.

In 2000,  sources of cash from investing  activities  consisted of proceeds from
the sales of lease assets and from rents from direct financing leases.  Proceeds
from the sales of lease assets  increased from $2,469,199 in 1999 to $10,439,849
in 2000, an increase of $7,970,650. Rents from direct financing leases decreased
by $851,900 as a result of sales of lease assets in 1999 and 2000.

In 2000,  financing  sources of cash  consisted of proceeds of  long-term  debt,
proceeds of non-recourse debt and borrowings on the line of credit. The proceeds
of  long-term  debt  were  used to repay  the  line of  credit.  The  additional
non-recourse  debt was assumed as a part of the  acquisition of leased assets in
2000.

Cash  used  for   distributions  to  partners  did  not  change   significantly.
Non-recourse  debt payments  increased as a result of the early repayment of the
debt associated with the leases to Applied Magnetics.

Cash used to repay long-term debt decreased as a result scheduled payments,  net
of the effect of the additional  borrowings in 2000.  Overall,  average balances
were lower in 2000 than in 1999.

             1999 vs. 1998:

Cash flows from operations  increased from $21,650,163 in 1998 to $29,817,476 in
1999.  The  primary  source of cash flows from  operations  is  operating  lease
revenues.  Operating  lease  revenues  increased  from  $33,655,697  in  1998 to
$36,784,290 in 1999.

Sources of cash flows from  investing  activities  consists of direct  financing
lease rents and the proceeds from sales of lease assets.  Cash flows from direct
financing  leases  increased  from  $2,345,113  in 1998 to  $3,406,564  in 1999.
Proceeds  from  sales of  lease  assets  decreased  from  $4,742,122  in 1998 to
$2,469,199 in 1999. The most significant use of cash in investing activities was
for the purchase of operating lease assets.

Borrowings on the line of credit  ($15,822,824),  proceeds of non-recourse  debt
($9,520,748)  and proceeds of other  long-term debt  ($9,000,000)  were the only
sources  of cash  from  financing  activities  in 1999.  Financing  uses of cash
consisted  of  repayments  on the line of  credit,  non-recourse  debt and other
long-term debt and distributions to the Partners. Payments of long-term debt and
non-recourse  debt  increased  compared  to  1998  as  scheduled  debt  payments
increased. Distributions to the Limited Partners increased as the average number
of outstanding Units increased from 10,729,510 in 1998 to 14,996,050 in 1999.



                                       8


Results of Operations

As of January 7, 1997,  subscriptions  for the  minimum  amount of the  offering
($1,200,000) had been received and accepted by the Partnership. As of that date,
the  Partnership   commenced   operations  in  its  primary  business   (leasing
activities). There were no operations in 1996.

             2000 vs. 1999:

Operations resulted in net income of $9,158,705 compared to a loss of $2,159,370
in 1999.

Revenues from leases  increased from $38,780,392 in 1999 to $38,849,507 in 2000,
an increase of $69,115.  Increases resulting from asset purchases in 1999 and in
2000  were  offset by the  effects  of  assets  sales.  Gains on sales of assets
increased  from  $784,853  in  1999  to  $2,381,787  in  2000,  an  increase  of
$1,596,934.  Such gains (and losses) are not expected to be consistent  from one
period to another.

Depreciation  expense  increased  slightly  (less than 2%) compared to 1999 as a
result of asset acquisitions in 1999.

Interest  expense  declined as a result  schedule  debt  payments  and the early
extinguishment   of  the  Applied   Magnetics   debt.   These   repayments   and
extinguishments  exceeded  the amounts of new  borrowings  in 2000.  Total debt,
including the line of credit, decreased from $86,111,420 at December 31, 1999 to
$60,329,741 at December 31, 2000.

In 2000, there were no new major lease defaults similar to the Applied Magnetics
default  in 1999.  Consequently,  there  were no new  provisions  for  losses or
doubtful accounts in 2000.

The Partnership  recognized an extraordinary gain on the early extinguishment of
debt of  $2,056,574.  This was related to the  non-recourse  debt on the Applied
Magnetics leases which was extinguished upon foreclosure by the lender in 2000.

             1999 vs. 1998:

Revenues increased from $37,195,090 in 1998 to $39,634,771 in 1999. The increase
was the result of operating lease  acquisitions in 1998 and in 1999. As a result
of those additions to operating  lease assets,  depreciation  expense  increased
from  $22,691,501 in 1998 to $24,532,198 in 1999.  Operating leases are expected
to remain as the Partnership's  primary source of revenues in future periods and
depreciation is expected to continue as the single largest of the  Partnership's
expenses.

Interest  expense  increased from  $5,473,480 in 1998 to $6,082,904 in 1999 as a
result of higher  average debt  balances in 1999  compared to 1998.  Most of the
debt was incurred in 1998 in relation to the  acquisition  of the  Partnership's
portfolio of lease assets.

In 1999, Applied Magnetics,  one of the Partnership's lessees,  defaulted on its
lease  obligations  to the  Partnership.  The General  Partner did not expect to
recover  any of the  uncollected  rentals  outstanding  under  the  leases.  The
Partnership wrote down the related lease assets to their net realizable value as
of December 31, 1999. All accounts receivable for amounts billed and outstanding
under the leases have been fully reserved.  In 1999, a provision lease losses of
$6,054,134 was provided in relation to this lessee. In addition, a provision for
doubtful accounts of $724,906 was made against accounts receivable.

Impact of the Year 2000

To date, the Partnership  has experienced no significant  Year 2000 problems and
the General  Partner  believes it does not have  continued  exposure to the Year
2000 problem.



                                       9


Recent Accounting Pronouncement

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

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

The  Partnership  will adopt SFAS No. 133, as amended,  on January 1, 2001.  The
General  Partner  believes  that the  adoption of SFAS No. 133,  will not have a
material  effect  on  the  Partnership's  results  of  operations  or  financial
position.


Item 7a.  QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

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

In  general,  the  Partnership  manages its  exposure  to interest  rate risk by
obtaining  fixed rate debt. The fixed rate debt is structured so as to match the
cash flows required to service the debt to the payment  streams under fixed rate
lease receivables.  The payments under the leases are assigned to the lenders in
satisfaction of the debt.  Furthermore,  the Partnership has  historically  been
able to maintain a stable  spread  between its cost of funds and lease yields in
both  periods  of  rising  and  falling  rates.  Nevertheless,  the  Partnership
frequently funds leases with its floating rate line of credit and is, therefore,
exposed to interest  rate risk until fixed rate  financing is  arranged,  or the
floating  rate line of credit is repaid.  As of December 31, 2000,  there was no
outstanding  balance on the floating rate line of credit.  Also, as described in
the caption  "Capital  Resources and Liquidity," the Partnership  entered into a
receivables funding facility in 1998. Since interest on the outstanding balances
under the facility varies, the Partnership is exposed to market risks associated
with changing interest rates.

To hedge its interest rate risk, the Partnership enters into interest rate swaps
which effectively modify the underlying interest  characteristic on the facility
from floating to fixed.  Under the swap  agreements,  the  Partnership  makes or
receives  variable  interest  payments  to or from the  counterparty  based on a
notional  principal  amount.  The  net  differential  paid  or  received  by the
Partnership  is recognized as an adjustment to interest  expense  related to the
facility balances. The amount paid or received represents the difference between
the payments required under the variable rate facility and the amounts due under
facility at the fixed (hedged) rate. As of December 31, 2000,  borrowings on the
facility were  $44,877,000  and the  associated  variable rate was 6.7527%.  The
average fixed rate achieved with the swap agreements was 6.31%.

In general, these swap agreements eliminate the Partnership's interest rate risk
associated with variable rate borrowings. However, the Partnership is exposed to
and manages credit risk  associated  with the  counterparty by dealing only with
institutions it considers  financially  sound.  If these  agreements were not in
place,  based on the Partnership's  facility  borrowings at December 31, 2000, a
hypothetical 1.00% increase or decrease in market interest rates, would increase
or decrease the  Partnership's  2001 variable  interest expense by approximately
$378,000.


Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


See the  Report  of  Independent  Auditors,  Financial  Statements  and Notes to
Financial Statements attached hereto at pages 11 through 27.



                                       10


                REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS



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


We have audited the accompanying  balance sheets of ATEL Capital  Equipment Fund
VII,  L.P. as of  December  31, 2000 and 1999,  and the  related  statements  of
operations,  changes in  partners'  capital and cash flows for each of the three
years in the period ended December 31, 2000. These financial  statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of ATEL Capital  Equipment Fund
VII,  L.P. at December  31,  2000 and 1999,  and the results of its  operations,
changes in its partners'  capital and its cash flows for each of the three years
in the period ended December 31, 2000, in conformity with accounting  principles
generally accepted in the United States.

                                                           /s/ ERNST & YOUNG LLP

San Francisco, California
February 5, 2001





                                       11


                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                                 BALANCE SHEETS

                           DECEMBER 31, 2000 AND 1999


                                     ASSETS

                                               2000               1999
                                               ----               ----
Cash and cash equivalents                     $ 1,321,417        $ 1,674,372

Accounts receivable, net of allowance for
   doubtful accounts of $724,906 in 1999,
   none in 2000                                 6,222,311          5,626,105

Other assets                                       90,011            130,007

Investments in equipment and leases           149,967,007        183,993,816
                                          ----------------  -----------------
Total assets                                $ 157,600,746       $191,424,300
                                          ================  =================




                       LIABILITIES AND PARTNERS' CAPITAL


Non-recourse debt                            $ 15,452,741       $ 21,780,420
Other long-term debt                           44,877,000         53,181,000

Line of credit                                          -         11,150,000

Accounts payable and accruals:
   General Partner                                605,684          1,435,651
   Other                                          703,761            425,896

Accrued interest payable                          533,858            714,697

Unearned lease income                           1,264,094          1,422,852
                                          ----------------  -----------------
                                               63,437,138         90,110,516

Partners' capital (deficit):
     General Partner                           (1,514,601)        (1,514,601)
     Limited Partners                          95,678,209        102,828,385
                                          ----------------  -----------------
Total partners' capital                        94,163,608        101,313,784
                                          ----------------  -----------------
Total liabilities and partners' capital     $ 157,600,746       $191,424,300
                                          ================  =================


                             See accompanying notes.


                                       12


                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                            STATEMENTS OF OPERATIONS

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998




                                                                          2000             1999               1998
                                                                          ----             ----               ----
Revenues:
Leasing activities:
                                                                                                   
   Operating leases                                                     $ 37,500,588     $ 36,784,290       $ 33,655,697
   Direct financing leases                                                 1,153,226        1,852,614          1,532,235
   Leveraged leases                                                          195,693          143,488            131,515
   Gain on sales of assets                                                 2,381,787          784,853          1,795,336
Interest income                                                              157,678           49,225             67,313
Other                                                                         74,947           20,301             12,994
                                                                    ----------------- ----------------  -----------------
                                                                          41,463,919       39,634,771         37,195,090

Expenses:
Depreciation and amortization                                             25,306,146       24,868,782         22,861,169
Interest                                                                   5,307,064        6,082,904          5,473,480
Equipment and incentive management fees to affiliates                      1,770,779        1,892,306          1,559,090
Other                                                                        973,204        1,467,738            756,971
Administrative cost reimbursements to General Partner                        917,952          556,577          1,056,746
Professional fees                                                             86,643          146,794            151,183
Provision for losses and impairments                                               -        6,054,134             56,955
Provision for doubtful accounts                                                    -          724,906                  -
                                                                    ----------------- ----------------  -----------------
                                                                          34,361,788       41,794,141         31,915,594
                                                                    ----------------- ----------------  -----------------
Income (loss) before extraordinary item                                    7,102,131       (2,159,370)         5,279,496
Extraordinary gain on early extinguishment of debt                         2,056,574                -                  -
                                                                    ----------------- ----------------  -----------------
Net income (loss)                                                        $ 9,158,705     $ (2,159,370)       $ 5,279,496
                                                                    ================= ================  =================

Net income (loss):
   General Partner                                                       $ 1,220,116        $ 463,626          $ 395,962
   Limited Partners                                                        7,938,589       (2,622,996)         4,883,534
                                                                    ----------------- ----------------  -----------------
                                                                         $ 9,158,705     $ (2,159,370)       $ 5,279,496
                                                                    ================= ================  =================

Income (loss) before extraordinary item per Limited Partnership unit          $ 0.40          $ (0.17)            $ 0.46
Extraordinary gain on early extinguishment of debt
   per Limited Partnership unit                                                 0.13                -                  -
                                                                    ----------------- ----------------  -----------------
Net income (loss) per Limited Partnership unit                                $ 0.53          $ (0.17)            $ 0.46
                                                                    ================= ================  =================


Weighted average number of units outstanding                              14,996,050       14,996,050         10,729,510




                             See accompanying notes.


                                       13


                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998




                                                                   Limited Partners      General
                                                       Units            Amount           Partner            Total
                                                       -----            ------           -------            -----
                                                                                               
Balance December 31, 1997                               6,716,896      $ 54,147,875       $ (247,461)      $ 53,900,414

Capital contributions received                          8,283,154        82,831,540                -         82,831,540
Less selling commissions paid to affiliates                              (7,868,996)               -         (7,868,996)
Other syndication costs paid to affiliates                               (3,727,420)               -         (3,727,420)
Rescission of investment                                   (4,000)          (40,000)               -            (40,000)
Distributions to Limited Partners ($0.91 per Unit)                       (9,798,122)               -         (9,798,122)
Distributions to General Partner                                                  -         (865,666)          (865,666)
Net income                                                                4,883,534          395,962          5,279,496
                                                  ---------------- ----------------- ----------------  -----------------
Balance December 31, 1998                              14,996,050       120,428,411         (717,165)       119,711,246
Distributions to Limited Partners ($1.00 per Unit)                      (14,977,030)               -        (14,977,030)
Distributions to General Partner                                                  -       (1,261,062)        (1,261,062)
Net income (loss)                                                        (2,622,996)         463,626         (2,159,370)
                                                  ---------------- ----------------- ----------------  -----------------
Balance December 31, 1999                              14,996,050       102,828,385       (1,514,601)       101,313,784
Distributions to Limited Partners ($1.01 per Unit)                      (15,088,765)               -        (15,088,765)
Distributions to General Partner                                                  -       (1,220,116)        (1,220,116)
Net income                                                                7,938,589        1,220,116          9,158,705
                                                  ---------------- ----------------- ----------------  -----------------
Balance December 31, 2000                              14,996,050      $ 95,678,209     $ (1,514,601)      $ 94,163,608
                                                  ================ ================= ================  =================




                             See accompanying notes.


                                       14


                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                            STATEMENTS OF CASH FLOWS

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998



                                                                    2000             1999               1998
                                                                    ----             ----               ----
Operating activities:
                                                                                              
Net income (loss)                                                  $ 9,158,705     $ (2,159,370)       $ 5,279,496
Adjustment to reconcile net income (loss) to net
   cash provided by operating activities:
     Leveraged lease income                                           (195,693)        (143,488)          (131,515)
     Depreciation and amortization                                  25,306,146       24,868,782         22,861,169
     Provision for losses and impairments                                    -        6,054,134             56,955
     Provision for doubtful accounts                                         -          724,906                  -
     Gain on sales of assets                                        (2,381,787)        (784,853)        (1,795,336)
     Extraordinary gain on early extinguishment of debt             (2,056,574)               -                  -
     Changes in operating assets and liabilities:
         Accounts receivable                                          (596,206)          29,875         (5,463,667)
         Other assets                                                   39,996           39,996             29,997
         Accounts payable, General Partner                            (829,967)       1,057,696             43,699
         Accounts payable, other                                       277,865         (258,579)           148,854
         Accrued interest payable                                     (180,839)         (91,056)           608,089
         Unearned lease income                                        (158,758)         479,433             12,422
                                                              ----------------- ----------------  -----------------
Net cash provided by operating activities                           28,382,888       29,817,476         21,650,163
                                                              ----------------- ----------------  -----------------

Investing activities:

Proceeds from sales of assets                                       10,439,849        2,469,199          4,742,122
Reduction of net investment in direct financing leases               2,554,664        3,406,564          2,345,113
Purchases of equipment on direct financing leases                   (1,678,000)        (860,492)       (10,800,420)
Initial direct lease costs                                             (18,370)        (880,362)          (196,646)
Purchases of equipment on operating leases                                   -      (13,793,316)      (120,126,565)
                                                              ----------------- ----------------  -----------------
Net cash provided by (used in) investing activities                 11,298,143       (9,658,407)      (124,036,396)
                                                              ----------------- ----------------  -----------------

Financing activities:
Distributions to Limited Partners                                  (15,088,765)     (14,977,030)        (9,798,122)
Distributions to General Partner                                    (1,220,116)      (1,261,062)          (865,666)
Borrowings under line of credit                                        450,000       15,822,824         53,029,261
Repayments of borrowings under line of credit                      (11,600,000)     (16,454,531)       (81,638,014)
Proceeds of long-term debt                                          11,700,000        9,000,000         66,770,000
Repayments of long-term debt                                       (17,947,426)     (17,372,000)        (5,217,000)
Proceeds of non-recourse debt                                          584,403        9,520,748         11,165,217
Repayments of non-recourse debt                                     (6,912,082)      (4,339,675)        (2,693,244)
Capital contributions received                                               -                -         82,831,540
Payment of selling commissions and other syndication
   costs to General Partner                                                  -                -        (11,596,416)
Rescission of investment                                                     -                -            (40,000)
                                                              ----------------- ----------------  -----------------
Net cash (used in) provided by financing activities                (40,033,986)     (20,060,726)       101,947,556
                                                              ----------------- ----------------  -----------------
Net (decrease) increase in cash and cash equivalents                  (352,955)          98,343           (438,677)
Cash and cash equivalents at beginning of period                     1,674,372        1,576,029          2,014,706
                                                              ----------------- ----------------  -----------------
Cash and cash equivalents at end of period                         $ 1,321,417      $ 1,674,372        $ 1,576,029
                                                              ================= ================  =================



                                       15


                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                            STATEMENTS OF CASH FLOWS
                                   (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998




                                                                    2000             1999               1998
                                                                    ----             ----               ----

Supplemental disclosures of cash flow information:
                                                                                              
Cash paid during the year for interest                             $ 5,487,903      $ 6,173,960        $ 4,865,391
                                                              ================= ================  =================

Schedule of non-cash transactions:

Extraordinary gain on early extinguishment of debt                 $ 2,056,574              $ -                $ -
                                                              ================= ================  =================





                             See accompanying notes.


                                       16


                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

     December 31, 2000


1.  Organization and Partnership matters:

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

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

The General Partner of the Partnership is ATEL Financial Corporation (ATEL).

The Partnership, or the General Partner on behalf of the Partnership, will incur
costs in  connection  with the  organization,  registration  and issuance of the
Units. The amount of such costs to be borne by the Partnership is limited to 15%
of Gross  Proceeds of up to  $25,000,000  and 14% of Gross Proceeds in excess of
$25,000,000.

The Partnership's business consists of leasing various types of equipment. As of
December 31, 2000, the original terms of the leases ranged from eighteen  months
to eleven years.

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


2.  Summary of significant accounting policies:

Equipment on operating leases:

Equipment on operating leases is stated at cost.  Depreciation is being provided
by use of the  straight-line  method over the terms of the related leases to the
equipment's estimated residual values at the end of the leases.

Revenues  from  operating  leases are  recognized  evenly  over the lives of the
related leases.

Direct financing leases:

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

Investment in leveraged leases:

Leases which are financed  principally with non-recourse debt at lease inception
and which meet certain other  criteria are  accounted  for as leveraged  leases.
Leveraged lease contracts  receivable are stated net of the related non-recourse
debt service (which  includes  unpaid  principal and aggregate  interest on such
debt) plus estimated  residual values.  Unearned income represents the excess of
anticipated  cash flows (after  taking into account the related debt service and
residual  values)  over the  investment  in the lease and is  amortized  using a
constant rate of return  applied to the net investment  when such  investment is
positive.



                                       17


                     ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

     December 31, 2000


2.  Summary of significant accounting policies (continued):

Statements of cash flows:

For purposes of the Statements of Cash Flows, cash and cash equivalents  include
cash in banks and cash equivalent investments with original maturities of ninety
days or less.

Income taxes:

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

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

                                                  2000             1999
                                                  ----             ----
   Financial statement basis of net assets      $ 94,163,608    $ 101,313,784
   Tax basis of net assets                        28,061,745       54,867,781
                                            ----------------- ----------------
   Difference                                   $ 66,101,863     $ 46,446,003
                                            ================= ================

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

The  following  reconciles  the net income  (loss)  reported in these  financial
statements  to  the  loss  reported  on the  Partnership's  federal  tax  return
(unaudited):



                                                    2000             1999               1998
                                                    ----             ----               ----
                                                                              
   Net income (loss) per financial statements      $ 9,158,705     $ (2,159,370)       $ 5,279,496
   Adjustment to depreciation expense              (20,229,067)     (38,503,336)       (34,679,816)
   Adjustments to lease revenues                       573,208        3,664,666          2,840,660
   Provision for losses                                      -        6,054,134             56,955
                                              ----------------- ----------------  -----------------
   Net loss per federal tax return               $ (10,497,154)    $(30,943,906)      $(26,502,705)
                                              ================= ================  =================


Per unit data:

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




                                       18


                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

     December 31, 2000


2.  Summary of significant accounting policies (continued):

Credit risk:

Financial   instruments   which   potentially   subject   the   Partnership   to
concentrations  of credit risk  include cash and cash  equivalents  and accounts
receivable.  The  Partnership  places  its  cash  deposits  and  temporary  cash
investments  with  creditworthy,   high  quality  financial  institutions.   The
concentration  of such deposits and temporary cash  investments is not deemed to
create a significant  risk to the  Partnership.  Accounts  receivable  represent
amounts  due from  lessees  in  various  industries,  related  to  equipment  on
operating and direct financing  leases.  See Note 8 for a description of lessees
by industry as of December 31, 2000, 1999 and 1998.

Use of estimates:

The preparation of financial  statements in conformity  with generally  accepted
accounting principles 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.

Reserve for losses and impairments:

The  Partnership  maintains a reserve on its investments in equipment and leases
for losses and impairments which are inherent in the portfolio as of the balance
sheet date. The General Partner's evaluation of the adequacy of the allowance is
a judgmental  estimate that is based on a review of individual leases, past loss
experience and other factors.  While the General Partner  believes the allowance
is adequate to cover known losses, it is reasonably  possible that the allowance
may change in the near term.  However,  such  change is not  expected  to have a
material  effect on the financial  position or future  operating  results of the
Partnership.  It is the Partnership's policy to charge off amounts which, in the
opinion  of the  General  Partner,  are  not  recoverable  from  lessees  or the
disposition of the collateral. See Note 11.

Recent Accounting Pronouncement:

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

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

The  Partnership  will adopt SFAS No. 133, as amended,  on January 1, 2001.  The
Partnership  enters into interest  rate swaps (see Note 5). The General  Partner
believes that the adoption of SFAS No. 133,  will not have a material  effect on
the Partnership's results of operations or financial position.





                                       19


                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

     December 31, 2000


3.  Investments in equipment and leases:

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



                                                                                Depreciation
                                                                                 Expense or        Reclass-
                                            December 31,                        Amortization     ifications or    December 31,
                                                 1999           Additions        of Leases       Dispositions           2000
                                                 ----           ---------        ---------       ------------           ----
                                                                                                       
Net investment in operating leases             $164,971,672                      $ (25,118,244)    $ (8,136,260)     $131,717,168
Net investment in direct financing
   leases                                        22,388,627      $ 1,678,000        (2,554,664)      (4,424,497)       17,087,466
Net investment in leveraged leases                1,724,071                -           195,693       (1,919,764)                -
Reserve for losses and impairments               (6,185,366)               -                 -        5,681,139          (504,227)
Assets held for sale or lease                       491,758                -                 -          741,320         1,233,078
Initial direct costs, net of
   accumulated amortization of
   $532,599 in 2000 and $344,698 in 1999            603,054           18,370          (187,902)               -           433,522
                                            ---------------- ---------------- ----------------- ----------------  -----------------
                                               $183,993,816      $ 1,696,370     $ (27,665,117)    $ (8,058,062)      $149,967,007
                                            ================ ================ ================= ================  =================


Operating leases:

Property on operating lease consists of the following:



                                                                    Reclass-
                              December 31,                        ifications or    December 31,
                                   1999           Additions       Dispositions           2000
                                   ----           ---------       ------------           ----
                                                                           
Transportation                  $ 100,584,087                        $ 1,080,770       $101,664,857
Marine vessels / barges            27,609,897                           (333,418)        27,276,479
Construction                       23,002,563                                  -         23,002,563
Manufacturing                      22,508,006                        (10,706,688)        11,801,318
Office automation                  11,100,543                         (1,220,003)         9,880,540
Mining                              8,536,249                                  -          8,536,249
Materials handling                  5,907,524                           (348,050)         5,559,474
Other                               7,855,730                         (2,746,899)         5,108,831
Communications                      7,740,986                         (3,353,167)         4,387,819
                              ---------------- ----------------- ----------------  -----------------
                                  214,845,585                        (17,627,455)       197,218,130
Less accumulated depreciation     (49,873,913)    $ (25,118,244)       9,491,195        (65,500,962)
                              ---------------- ----------------- ----------------  -----------------
                                $ 164,971,672     $ (25,118,244)    $ (8,136,260)      $131,717,168
                              ================ ================= ================  =================




                                       20


                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                December 31, 2000


3.  Investments in equipment and leases (continued):

Direct financing leases:

As of December  31,  2000,  investment  in direct  financing  leases  consist of
various transportation, manufacturing and medical equipment. The following lists
the components of the Partnership's  investment in direct financing leases as of
December 31, 2000 and 1999:

                                                    2000             1999
                                                    ----             ----
Total minimum lease payments receivable           $ 14,005,112     $ 20,333,222
Estimated residual values of leased
   equipment (unguaranteed)                          8,443,602        8,775,528
                                              ----------------- ----------------
Investment in direct financing leases               22,448,714       29,108,750
Less unearned income                                (5,361,248)      (6,720,123)
                                              ----------------- ----------------
Net investment in direct financing leases         $ 17,087,466     $ 22,388,627
                                              ================= ================

All of the property on leases was acquired in the years 1997 through 2000.

At December 31, 2000,  the aggregate  amounts of future  minimum lease  payments
under operating and direct financing leases are as follows:

                                                Direct
           Year ending        Operating        Financing
           December 31,        Leases           Leases            Total
           ------------        ------           ------            -----
                    2001       $27,245,706      $ 3,235,027      $ 30,480,733
                    2002        20,002,060        2,613,437        22,615,497
                    2003        12,297,414        2,252,772        14,550,186
                    2004         7,995,002        2,203,182        10,198,184
                    2005         5,513,217        2,158,731         7,671,948
              Thereafter         2,069,750        1,541,963         3,611,713
                           ---------------- ---------------- -----------------
                               $75,123,149     $ 14,005,112      $ 89,128,261
                           ================ ================ =================

Leveraged leases:

As of December 31, 1999, investment in leveraged leases consists of railroad box
cars.  There were no leveraged  leases as of December 31,  2000.  The  following
lists the components of the  Partnership's  investment in leveraged leases as of
December 31, 1999:

Aggregate rentals receivable                                        $ 1,291,272
Less aggregate principal and interest payable on non-recourse loans  (1,083,503)
Estimated residual value of leased assets                             1,672,855
Less unearned income                                                   (156,553)
                                                                   -------------
Net investment in leveraged leases                                  $ 1,724,071
                                                                   =============



                                       21


                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

     December 31, 2000


3.  Investments in equipment and leases (continued):

Reserves for losses and impairments:

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

               Balance December 31, 1997                $ 74,277
               Provision                                  56,955
                                                 ----------------
               Balance December 31, 1998                 131,232
               Provision                               6,054,134
                                                 ----------------
               Balance December 31, 1999               6,185,366
               Charge offs                            (5,681,139)
                                                 ----------------
               Balance December 31, 2000               $ 504,227
                                                 ================

At December 31, 2000, there were no commitments to purchase lease assets.


4.  Non-recourse debt:

At December 31, 2000,  non-recourse  debt consists of notes payable to financial
institutions.  The notes are due in varying  monthly,  quarterly and semi-annual
payments.  Interest  on the notes is at rates from 7.1% to 16.9%.  The notes are
secured by assignments of lease payments and pledges of assets.  At December 31,
2000, the carrying value of the pledged assets is $31,318,509.  The notes mature
from 2001 through 2008.

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

        Year ending
        December 31,       Principal        Interest           Total
                 2001       $ 5,476,816      $ 1,339,144       $ 6,815,960
                 2002         5,761,771          813,843         6,575,614
                 2003         3,261,508          288,853         3,550,361
                 2004           298,403           67,364           365,767
                 2005           322,838           42,927           365,765
           Thereafter           331,405           25,597           357,002
                        ---------------- ---------------- -----------------
                            $15,452,741      $ 2,577,728      $ 18,030,469
                        ================ ================ =================








                                       22


                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

     December 31, 2000


5.  Other long-term debt:

In 1998, the Partnership  entered into a $65 million receivables funding program
(the Program) with a receivables  financing company that issues commercial paper
rated A1 by Standard and Poors and P1 by Moody's  Investor  Services.  Under the
Program,  the receivables  financing company receives a general lien against all
of the otherwise  unencumbered  assets of the Partnership.  The Program provides
for borrowing at a variable interest rate (6.7527% at December 31, 2000).

The Program  requires the General  Partner to enter into various  interest  rate
swaps with a financial  institution  (also rated A1/P1) to manage  interest rate
exposure  associated  with  variable  rate  obligations  under  the  Program  by
effectively converting the variable rate debt to fixed rates. As of December 31,
2000,  the  Partnership  receives or pays  interest on a notional  principal  of
$44,877,000, based on the difference between nominal rates ranging from 5.55% to
7.58% and the variable rate under the Program. No actual borrowing or lending is
involved.  The last of the swaps terminates in 2008. The differential to be paid
or received is accrued as interest  rates change and is recognized  currently as
an adjustment to interest expense related to the debt.

 Borrowings under the Program are as follows:
                                                               Variable Interest
                 Original         Balance          Rate on         Rate at
                  Amount       December 31,     Interest Swap   December 31,
Date Borrowed    Borrowed          2000           Agreement         2000
- -------------    --------          ----           ---------         ----
  4/1/1998        $21,770,000     $ 9,323,000       6.220%         6.7527%
  7/1/1998         25,000,000       9,307,000       6.155%         6.7527%
 10/1/1998         20,000,000      11,974,000       5.550%         6.7527%
 4/16/1999          9,000,000       4,092,000       5.890%         6.7527%
 1/26/2000         11,700,000      10,181,000       7.580%         6.7527%
               --------------- ---------------
                  $87,470,000    $ 44,877,000
               =============== ===============

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

     Year ending
     December 31,        Principal        Interest           Total
                         ---------        --------           -----
               2001       $13,724,000      $ 2,410,467      $ 16,134,467
               2002        11,131,000        1,640,179        12,771,179
               2003         7,200,000        1,075,640         8,275,640
               2004         5,422,000          676,854         6,098,854
               2005         3,986,000          369,993         4,355,993
         Thereafter         3,414,000          328,282         3,742,282
                      ---------------- ---------------- -----------------
                          $44,877,000      $ 6,501,415      $ 51,378,415
                      ================ ================ =================





                                       23


                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

     December 31, 2000


6.  Related party transactions:

The terms of the Limited Partnership  Agreement provide that the General Partner
and/or   Affiliates   are  entitled  to  receive   certain  fees  for  equipment
acquisition, management and resale and for management of the Partnership.

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

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

The  General   Partner   and/or   Affiliates   earned  fees,   commissions   and
reimbursements,  pursuant to the Limited Partnership Agreement as follows during
2000, 1999 and 1998:



                                                                                      2000               1999              1998
                                                                                      ----               ----              ----
                                                                                                             
Incentive  management  fees  (computed  as 4.0% of  distributions  of cash  from
operations,  as defined in the  Limited  Partnership  Agreement)  and  equipment
management  fees (computed as 3.5% of gross revenues from operating  leases,  as
defined in the Limited Partnership Agreement plus 2% of gross revenues from full
payout leases, as defined in the Limited Partnership  Agreement).                  $ 1,770,779      $ 1,892,306       $  1,559,090


Administrative cost reimbursements to General Partner                                  917,952          556,577          1,056,746

Selling  commissions  (equal  to  9.5%  of the  selling  price  of  the  Limited
Partnership units, deducted from Limited Partners' capital)                                  -                -          7,868,996

Reimbursement of other syndication costs                                                     -                -          3,727,420
                                                                                --------------- ----------------  -----------------
                                                                                   $ 2,688,731      $ 2,448,883       $ 14,212,252
                                                                                =============== ================  =================


The General Partner or an Affiliate may purchase  equipment in its own name, the
name of an  Affiliate or the name of a nominee,  a trust or  otherwise  and hold
title  thereto on a temporary or interim basis  (generally  not in excess of six
months) for the purpose of facilitating the acquisition of such equipment or the
completion of manufacture  of the equipment or for any other purpose  related to
the business of the Partnership,  provided,  however that (i) the transaction is
in the best interest of the Partnership; (ii) such equipment is purchased by the
Partnership  for a purchase  price no greater than the cost of such equipment to
the General Partner or Affiliate  (including any out-of-pocket  carrying costs),
except for compensation permitted by the Agreement of Limited Partnership; (iii)
there is no difference  in interest  terms of the loans secured by the equipment
at the time  acquired by the General  Partner or Affiliate and the time acquired
by the Partnership;  (iv) there is no benefit arising out of such transaction to
the  General  Partner or its  Affiliate  apart from the  compensation  otherwise
permitted by the Agreement of Limited Partnership;  and (v) all income generated
by, and all expenses associated with,  equipment so acquired shall be treated as
belonging to the Partnership.



                                       24


                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

     December 31, 2000


7.  Partners' capital:

As of  December  31,  2000,  14,996,050  Units  ($149,960,050)  were  issued and
outstanding.  The  Partnership  is authorized  to issue up to 15,000,050  Units,
including the 50 Units issued to the Initial Limited Partners.

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

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

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

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

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

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

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

Additional  allocations  of income were made to the General  Partner in 1999 and
2000. The amount  allocated was determined so as to bring the General  Partner's
ending capital account balance to the amount of capital  contributions  that the
General Partner will be required to make in a future period.




                                       25


                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

     December 31, 2000


8.  Concentration of credit risk and major customers:

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

As of December 31, 2000, 1999 and 1998 there were  concentrations  (greater than
10%) of equipment  leased to lessees in certain  industries  (as a percentage of
total equipment cost) as follows:

                                     2000              1999             1998
                                     ----              ----             ----
      Transportation, rail            19%              19%               27%
      Municipalities                  16%              15%               16%
      Transportation, other           12%               *                16%
      Electronics                      *               12%                *
      *  Less than 10%

During  2000,  no  customers  comprised  in excess  of 10% of the  Partnership's
revenues  from  leases.   During  1999,  one  customer   comprised  10%  of  the
Partnership's revenues from leases. During 1998, two customers comprised 17% and
10% of the Partnership's revenues from leases.


9.  Line of credit:

The  Partnership  participates  with the  General  Partner  and  certain  of its
Affiliates in a $77,500,000 revolving credit agreement with a group of financial
institutions  which  expires  on  July  28,  2001.  The  agreement  includes  an
acquisition  facility and a warehouse  facility which are used to provide bridge
financing  for  assets  on  leases.  Draws on the  acquisition  facility  by any
individual  borrower  are  secured  only by that  borrower's  assets,  including
equipment and related leases.  Borrowings on the warehouse facility are recourse
jointly to certain of the Affiliates, the Partnership and the General Partner.

The Partnership borrowed $450,000, $15,822,824 and $53,029,261 under the line of
credit  during  2000,  1999 and 1998,  respectively.  Repayments  on the line of
credit were $11,600,000,  $16,454,331 and $1,638,014 during 2000, 1999 and 1998,
respectively. There was no outstanding balance as of December 31, 2000. Interest
on the line of credit is based on either the thirty day LIBOR rate or the bank's
prime rate.

The credit agreement  includes certain  financial  covenants  applicable to each
borrower.  The  Partnership  was in compliance with its covenants as of December
31, 2000. At December 31, 2000, $39,969,040 was available under this agreement.



                                       26


                      ATEL CAPITAL EQUIPMENT FUND VII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

     December 31, 2000


10.  Fair value of financial instruments:

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial  instrument for which it is practicable to estimate that
value.

Cash and cash equivalents:

The carrying amount of cash and cash equivalents approximates fair value because
of the short-term maturity of these instruments.

Non-recourse debt:

The  fair  value  of the  Partnership's  non-recourse  debt is  estimated  using
discounted cash flow analyses,  based on the Partnership's  current  incremental
borrowing rates for similar types of borrowing arrangements.  The estimated fair
value  of  the   Partnership's   non-recourse  debt  at  December  31,  2000  is
$15,783,034.

Other long-term debt:

The fair value of the  Partnership's  other  long-term  debt is estimated  using
discounted  cash flow  analyses,  based on the  Partnership's  current  variable
borrowing rate for the facility. The estimated fair value of the other long-term
debt at December 31, 2000 is $44,277,187.

Line of credit:

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

Interest rate swaps:

The fair value of interest rate swaps is estimated by discounting the fixed cash
flows paid under each swap using the rate at which the  Partnership  could enter
into new swaps of similar maturities.  The carrying amounts of the interest rate
swaps approximate fair value at December 31, 2000.


11.  Provision for losses and impairments:

In January 2000, one of the Partnership's lessees filed for reorganization under
Chapter 11 of the United States Bankruptcy Code. The Partnership determined that
the  assets  under  operating  leases  with a net book  value of  $8,048,095  at
December 31, 1999 leased to this particular  lessee were impaired as of December
31, 1999. The  Partnership  estimated that the proceeds from the future sales of
those assets which were financed with  non-recourse debt would not be sufficient
to satisfy the non-recourse  lender. The debt balance was $2,056,474 at December
31,  1999.  As result,  the  Partnership  fully  reserved for those assets as of
December 31, 1999. The portion of the assets not financed with non-recourse debt
were written  down to their  expected  net  realizable  value as of December 31,
1999.

Upon foreclosure by the lender and upon sale of the financed assets in 2000, the
Partnership  recognized an extraordinary  gain on the extinguishment of the debt
$2,056,474.




                                       27


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

None


                                    PART III

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS

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

All of the outstanding capital stock of ATEL Financial  Corporation (the General
Partner) is held by ATEL Capital  Group  ("ACG"),  a holding  company  formed to
control ATEL and affiliated  companies.  The outstanding voting capital stock of
ATEL Capital Group is owned 75% by A. J. Batt and 25% by Dean Cash.

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

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

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

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

Paritosh K. Choksi           Director, Senior Vice President and Chief Financial
                              Officer of ACG, AFC, ALC, AEC and AIS

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

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

A. J. Batt, age 64, founded ATEL in 1977 and has been its president and chairman
of the  board of  directors  since  its  inception.  From  1973 to 1977,  he was
employed by GATX  Leasing  Corporation  as  manager-data  processing  and equity
placement for the lease underwriting department, which was involved in equipment
financing  for  major  corporations.  From  1967 to 1973  Mr.  Batt was a senior
technical representative for General Electric Corporation, involved in sales and
support  services for computer  time-sharing  applications  for corporations and
financial  institutions.  Prior to that time, he was employed by North  American
Aviation as an  engineer  involved in the Apollo  project.  Mr. Batt  received a
B.Sc.  degree with honors in  mathematics  and physics  from the  University  of
British Columbia in 1961.

Dean L. Cash,  age 50, joined ATEL as director of marketing in 1980 and has been
a vice president since 1981,  executive vice president since 1983 and a director
since  1984.   Prior  to  joining  ATEL,   Mr.  Cash  was  a  senior   marketing
representative for Martin Marietta Corporation, data systems division, from 1979
to 1980.  From 1977 to 1979,  he was employed by General  Electric  Corporation,
where he was an applications  specialist in the medical  systems  division and a
marketing  representative in the information  services division.  Mr. Cash was a
systems  engineer  with  Electronic  Data  Systems  from  1975 to 1977,  and was
involved in maintaining and developing software for commercial applications. Mr.
Cash received a B.S.  degree in psychology and mathematics in 1972 and an M.B.A.
degree with a  concentration  in finance in 1975 from Florida State  University.
Mr. Cash is an arbitrator with the American Arbitration Association.



                                       28


Paritosh K.  Choksi,  age 47,  joined  ATEL in 1999 as a  director,  senior vice
president and its chief financial officer. Prior to joining ATEL, Mr. Choksi was
chief  financial  officer at Wink  Communications,  Inc. from 1997 to 1999. From
1977 to 1997,  Mr. Choksi was with Phoenix  American  Incorporated,  a financial
services and  management  company,  where he held various  positions  during his
tenure, and was senior vice president, chief financial officer and director when
he left the company. Mr. Choksi was involved in all corporate matters at Phoenix
and was  responsible  for Phoenix's  capital market needs. He also served on the
credit  committee  overseeing all corporate  investments,  including its venture
lease  portfolio.  Mr. Choksi was a part of the executive  management team which
caused  Phoenix's  portfolio  to increase  from $50 million in assets to over $2
billion.  Mr.  Choksi  received a bachelor of  technology  degree in  mechanical
engineering  from the Indian  Institute  of  Technology,  Bombay;  and an M.B.A.
degree from the University of California, Berkeley.

Donald E. Carpenter, age 52, joined ATEL in 1986 as controller. Prior to joining
ATEL, Mr. Carpenter was an audit supervisor with Laventhol & Horwath,  certified
public accountants in San Francisco, California, from 1983 to 1986. From 1979 to
1983,  Mr.  Carpenter  was an  audit  senior  with  Deloitte,  Haskins  & Sells,
certified public accountants,  in San Jose,  California.  From 1971 to 1975, Mr.
Carpenter was a Supply Corp officer in the U. S. Navy. Mr. Carpenter  received a
B.S. degree in mathematics  (magna cum laude) from California State  University,
Fresno in 1971 and completed a second major in accounting in 1978. Mr. Carpenter
has been a California certified public accountant since 1981.

Vasco H. Morais, age 42, joined ATEL in 1989 as general counsel to provide legal
support in the  drafting  and  reviewing  of lease  documentation,  advising  on
general corporate law matters, and assisting on securities law issues. From 1986
to 1989,  Mr.  Morais was  employed  by the  BankAmeriLease  Companies,  Bank of
America's  equipment leasing  subsidiaries,  providing in-house legal support on
the  documentation  of  tax-oriented  and non-tax  oriented direct and leveraged
lease transactions, vendor leasing programs and general corporate matters. Prior
to the BankAmeriLease  Companies,  Mr. Morais was with the Consolidated  Capital
Companies in the corporate and securities legal department  involved in drafting
and reviewing  contracts,  advising on corporate law matters and  securities law
issues.  Mr.  Morais  received  a B.A.  degree  in 1982 from the  University  of
California in Berkeley,  a J.D.  degree in 1986 from Golden Gate  University Law
School and an M.B.A.  (Finance) in 1997 from Golden Gate University.  Mr. Morais
has been an active member of the State Bar of California since 1986.


Item 11.  EXECUTIVE COMPENSATION

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

Set forth hereinafter is a description of the nature of remuneration paid and to
be  paid  to the  General  Partner  and  its  Affiliates.  The  amount  of  such
remuneration  paid in 2000,  1999 and 1998 is set forth in Item 8 of this report
under the caption  "Financial  Statements and Supplementary  Data - Notes to the
Financial  Statements - Related party  transactions,"  at Note 6 thereof,  which
information is hereby incorporated by reference.

Selling Commissions

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

Through  December  31,  1998,  $14,250,000  of  such  commissions  (the  maximum
allowable  amount) had been paid to the General  Partner or its  affiliates.  Of
that amount, $12,327,297 was reallowed to other broker/dealers.



                                       29


Equipment Management Fees

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

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

Incentive Management Fees

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

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

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

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

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

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

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

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

Equipment Resale Fees

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



                                       30


Equipment Re-lease Fee

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

General Partner's Interest in Operating Proceeds

Net income,  net loss and  investment  tax credits  are  allocated  92.5% to the
Limited  Partners  and 7.5% to the General  Partner.  See  financial  statements
included in Item 8, Part I of this report for amounts  allocated  to the General
Partner in 2000, 1999 and 1998.


Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners

At December 31, 2000, no investor is known to hold  beneficially more than 5% of
the issued and outstanding Units.

Security Ownership of Management

The  shareholders  of the  General  Partner  are  beneficial  owners of  Limited
Partnership Units as follows:



            (1)                   (2)                               (3)                            (4)
                                  Name and Address of               Amount and Nature of         Percent
       Title of Class               Beneficial Owner                Beneficial Ownership         of Class
       --------------               ----------------                --------------------         --------

                                                                                            
Limited Partnership Units     A. J. Batt                        Initial Limited Partner Units        0.00017%
                               235 Pine Street, 6th Floor     25 Units ($250)
                                San Francisco, CA 94104                (owned by wife)

Limited Partnership Units      Dean Cash                        Initial Limited Partner Units        0.00017%
                               235 Pine Street, 6th Floor     25 Units ($250)
                                San Francisco, CA 94104                (owned by wife)


Changes in Control

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

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


Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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




                                       31


                                     PART IV

Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
               ON FORM 8-K

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

                             Report of Independent Auditors

                             Balance Sheets at December 31, 2000 and 1999

                             Statements  of  Operations   for  the  years  ended
                             December  31,  2000,  1999 and 1998

                             Statements of Changes in  Partners' Capital for the
                             years ended December 31, 2000,  1999 and 1998

                             Statement of Cash Flows for the years ended
                             December 31, 2000,  1999 and 1998

                            Notes to Financial Statements

                         2.  Financial Statement Schedules
                             All schedules for  which  provision  is made in the
                                applicable   accounting   regulations   of   the
                                Securities  and  Exchange   Commission  are  not
                                required under the related  instructions  or are
                                inapplicable and, therefore, have been omitted.

                         (b) Reports on Form 8-K for the fourth quarter of 2000
                             None

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



                                       32


                                   SIGNATURES


Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.



  Date:  3/23/2001

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


    By:  ATEL Financial Corporation,
         General Partner of Registrant



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




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







                                       33


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


           SIGNATURE                     CAPACITIES                   DATE



/s/  A. J. Batt            President and Chief Executive Officer of 3/23/2001
- -------------------------- ATEL Financial Corporation (General
A. J. Batt                 Partner)







 /s/ Dean Cash             Executive Vice President of ATEL         3/23/2001
- -------------------------- Financial Corporation (General Partner)
Dean Cash




/s/ Paritosh K. Choksi     Principal financial officer of           3/23/2001
- -------------------------- registrant; principal financial officer
Paritosh K. Choksi         and director of ATEL Financial
                           Corporation





/s/ Donald E. Carpenter    Principal accounting officer of          3/23/2001
- -------------------------- registrant; principal accounting officer
Donald E. Carpenter        of ATEL Financial Corporation




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

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

                                       34