UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K



|x | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
|- | -------------------------------------------------------------------------------------

For the year ended December 31, 2008



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

For the transition period from  to

Commission
File number 000-51858

ATEL Capital Equipment Fund XI, LLC

(Exact name of registrant as specified in its charter)



|                                                               |  |                                       
|-------------------------------------------------------------- |  | --------------------------------------
|California                                                     |  | 20-1357935                            
|(State or other jurisdiction of incorporation or organization) |  | (I. R. S. Employer Identification No.)

600 California Street, 6th Floor, San Francisco, California 94108-2733

(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 Liability Company Units

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ̈    No  x

If this report is an annual or transition report,
indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Act of 1934.    Yes   ̈    No  x

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer
and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):



|                           |  |                      |  |                                              |  |                             
|-------------------------- |  | -------------------- |  | -------------------------------------------- |  | ----------------------------
|Large accelerated filer   ̈ |  | Accelerated filer   ̈ |  | Non-accelerated filer   ̈                     |  | Smaller reporting company  x
|                           |  |                      |  | (Do not check if a smallerreporting company) |  |                             

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

State the aggregate market value of voting stock held by non-affiliates of the registrant: Not applicable

State the aggregate market value of the
voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days. (See
definition of affiliate in Rule 12b-2 of the Exchange Act.) Not applicable

The number of Limited Liability Company Units outstanding as of
February 28, 2009 was 5,210,507.

DOCUMENTS INCORPORATED BY REFERENCE

None.









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PART I



|Item 1. | BUSINESS
|------- | --------

General Development of Business

ATEL Capital Equipment Fund XI, LLC (the Company) was formed under the laws of the State of California on June 25, 2004. The Company was formed for
the purpose of acquiring equipment to engage in equipment leasing, lending and sales activities. Also, from time to time, the Company may purchase securities of its borrowers or receive warrants to purchase securities in connection with its lending
arrangements. The Managing Member of the Company is ATEL Financial Services, LLC (AFS), a California limited liability company. The Company may continue until December 31, 2025. Each Members personal liability for obligations
of the Company generally will be limited to the amount of their respective contributions and rights to undistributed profits and assets of the Company.

The Company conducted a public offering of 15,000,000 Limited Liability Company Units (Units), at a price of $10 per Unit. On May 31, 2005, subscriptions for the minimum number of Units (120,000, representing $1.2 million)
had been received and AFS requested that the subscriptions be released to the Company. On that date, the Company commenced operations in its primary business (acquiring equipment to engage in equipment leasing, lending and sales activities). As of
July 13, 2005, the Company had received subscriptions for 958,274 Units ($9.6 million), thus exceeding the $7.5 million minimum requirement for Pennsylvania, and AFS requested that the remaining funds in escrow (from Pennsylvania investors) be
released to the Company. The Company terminated sales of Units effective April 30, 2006. Net contributions of $52.3 million were received through December 31, 2008, consisting of approximately $52.8 million in gross contributions from
Other Members purchasing Units under the public offering less rescissions and repurchases of $532 thousand. As of December 31, 2008, 5,230,507 Units were issued and outstanding.

The Companys principal objectives are to invest in a diversified portfolio of equipment that (i) preserves, protects and returns the Companys invested capital; (ii) generates regular
distributions to the Members of cash from operations and cash from sales or refinancing, with any balance remaining after certain minimum distributions to be used to purchase additional equipment during the reinvestment period (Reinvestment
Period) (defined as six full years following the year the offering was terminated), which ends December 31, 2012, and (iii) provides additional distributions following the Reinvestment Period and until all equipment has been sold.
The Company is governed by its Limited Liability Company Operating Agreement (Operating Agreement), as amended.

The Company, or AFS on behalf
of the Company, has incurred costs in connection with the organization, registration and issuance of the Limited Liability Company Units (see Note 7 to the financial statements included in Item 8 of this report). The amount of such costs to be
borne by the Company is limited by certain provisions of the Companys Operating Agreement. The Company will pay AFS and affiliates of AFS substantial fees which may result in a conflict of interest. The Company will pay substantial fees to AFS
and its affiliates before distributions are paid to investors even if the Company does not produce profits. Therefore, the financial position of the Company could change significantly.

The Company is in its acquisition phase and is making distributions on a monthly and quarterly basis. Periodic distributions commenced in June 2005.

Narrative Description of Business

The Company has acquired and intends to acquire various types of new and
used equipment subject to leases and to make loans secured by equipment acquired by its borrowers. The Companys investment objective is to acquire investments primarily in low-technology, low-obsolescence equipment such as materials handling
equipment, manufacturing equipment, mining equipment, and transportation equipment. A portion of the portfolio will include some more technology-dependent equipment such as certain types of communications equipment, medical equipment, manufacturing
equipment and office equipment.

The Company only purchases equipment under pre-existing leases or for which a lease will be entered into concurrently at
the time of the purchase. Through December 31, 2008, the Company had purchased equipment with a total acquisition price of $63.4 million. The Company had also loaned $15.1 million for notes receivable secured by various assets.



2



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The Companys objective is to lease a minimum of 75% of the equipment (by cost), as of the date of the final
commitment of its proceeds from the sale of Units, to lessees that the Manager deems to be high quality corporate credits, of which at least half of the high quality corporate credits satisfying the 75% minimum requirement will have either an
average credit rating by Moodys Investors Service, Inc. of Baa or better, or the credit equivalent as determined by the Manager, with the average rating weighted to account for the original equipment cost for each item leased; and
the balance will be public and private corporations with substantial revenues and histories of profitable operations, as well as established hospitals with histories of profitability or municipalities. The remaining 25% of the initial equipment
portfolio may include assets financed for companies which, although deemed creditworthy by the Manager, would not satisfy the specific credit criteria for the portfolio described above. Included in this 25% of the portfolio may be one or more growth
capital financing investments. No more than 20% of the initial portfolio, by cost, will consist of these growth capital financing investments.

During 2008
and 2007, certain lessees generated significant portions of the Companys total operating revenues as follows:



|                               |  |                    |  |  |  |                                   |  |     
|------------------------------ |  | ------------------ |  |  |  | --------------------------------- |  | ----
|                               |  |                    |  |  |  | Percentage of TotalLease Revenues
|Lessee                         |  | Type of Equipment  |  |  |  | 2008                              |  | 2007
|Washington Group International |  | Construction       |  |  |  | 12%                               |  | *   
|New NGC, Inc.                  |  | Materials handling |  |  |  | 11%                               |  | *   
|International Paper Co.        |  | Materials handling |  |  |  | 10%                               |  | 13% 
|Union Pacific                  |  | Transportation     |  |  |  | 10%                               |  | 11% 



|* | Less than 10%
|- | -------------

The above 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 that vary widely depending on the lease term, type of equipment and creditworthiness of the lessee. The ability of the Company 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 AFS or the Company), 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.

AFS will
use its best efforts to diversify lessees by geography and industry and to maintain an appropriate balance and diversity in the types of equipment acquired and the types of leases entered into by the Company, and will apply the following policies:
(i) AFS will seek to limit the amount invested in equipment leased to any single lessee to not more than 20% of the aggregate purchase price of equipment owned at any time during the reinvestment period following investment of the initial
offering proceeds; (ii) in no event will the Companys equity investment in equipment leased to a single lessee exceed an amount equal to 20% of the maximum capital from the sale of Units (or $30 million); (iii) when all the offering
proceeds are committed to equipment and all permanent debt has been put in place, at least a majority of the equipment, based on the aggregate purchase price, will be subject to leases with scheduled lease payments returning at least 90% of the
purchase price of the equipment; and (iv) AFS will seek to invest not more than 20% of the aggregate purchase price of equipment in equipment acquired from a single manufacturer. However, this last limitation is a general guideline only, and
the Company may acquire equipment from a single manufacturer in excess of the stated percentage during the offering period and before the offering proceeds are fully invested, or if AFS deems such a course of action to be in the Companys best
interest.

The primary geographic regions in which the Company seeks leasing opportunities are North America and Europe. The table below summarizes
geographic information relating to the sources, by nation, of the Companys operating revenues for the year ended December 31, 2008 and 2007:



|                |  |      |  |     
|--------------- |  | ---- |  | ----
|Geographic area |  | 2008 |  | 2007
|United States   |  | 92%  |  | 91% 
|Europe          |  | 8%   |  | 9%  

The business of the Company is not seasonal.



3



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The Company has no full time employees. AFS employees and affiliates provide the services the Company requires to
effectively operate. The cost of these services is reimbursed by the Company to AFS and affiliates per the Operating Agreement.

Equipment Leasing
Activities

The Company 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 Company through December 31, 2008 and the industries to which the assets have been leased (in thousands):



|                                                                                                                          |  |                                                 |        |                                 |   |                              |  |   |    
|------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------- | ------ | ------------------------------- | - | ---------------------------- |  | - | ---
|Asset Types                                                                                                               |  | Purchase PriceExcluding    Acquisition Fees     |        | Percentage of TotalAcquisitions |   |                             
|Transportation                                                                                                            |  | $                                               | 21,534 |                                 |   | 33.95%                       | 
|Materials handling                                                                                                        |  |                                                 | 21,957 |                                 |   | 34.63%                       | 
|Construction                                                                                                              |  |                                                 | 12,441 |                                 |   | 19.61%                       | 
|Manufacturing                                                                                                             |  |                                                 | 2,280  |                                 |   | 3.59%                        | 
|Logging and lumber                                                                                                        |  |                                                 | 2,001  |                                 |   | 3.15%                        | 
|Aviation                                                                                                                  |  |                                                 | 1,658  |                                 |   | 2.61%                        | 
|Marine vessels                                                                                                            |  |                                                 | 1,415  |                                 |   | 2.23%                        | 
|Office furniture                                                                                                          |  |                                                 | 146    |                                 |   | 0.23%                        | 
|                                                                                                                          |  |                                                 |        |                                 |   |                              | 
|                                                                                                                          |  | $                                               | 63,432 |                                 |   | 100.00%                      | 
|                                                                                                                          |  |                                                 |        |                                 |   |                              | 
|Industry of Lessee                                                                                                        |  | Purchase PriceExcludingAcquisition Fees         |        | Percentage of TotalAcquisitions |  
|Manufacturing                                                                                                             |  | $                                               | 37,878 |                                 |   | 59.72%                       | 
|Transportation, rail                                                                                                      |  |                                                 | 11,924 |                                 |   | 18.80%                       | 
|Transportation services                                                                                                   |  |                                                 | 8,319  |                                 |   | 13.11%                       | 
|Health care                                                                                                               |  |                                                 | 4,967  |                                 |   | 7.83%                        | 
|Electrical                                                                                                                |  |                                                 | 344    |                                 |   | 0.54%                        | 
|                                                                                                                          |  |                                                 |        |                                 |   |                              | 
|                                                                                                                          |  | $                                               | 63,432 |                                 |   | 100.00%                      | 
|                                                                                                                          |  |                                                 |        |                                 |   |                              | 
|From inception to December 31, 2008, the Company has disposed
of certain leased assets as set forth below (in thousands):
|                                                                                                                          |  |                                                 |       
|Asset Types                                                                                                               |  | OriginalEquipment CostExcludingAcquisition Fees |        | Sale Price                      |   | Excess ofRents OverExpense *
|Transportation                                                                                                            |  | $                                               | 201    |                                 | $ | 246                          |  | $ | 7  
|Construction                                                                                                              |  |                                                 | 560    |                                 |   | 472                          |  |   | 348
|                                                                                                                          |  |                                                 |        |                                 |   |                              |  |   |    
|                                                                                                                          |  | $                                               | 761    |                                 | $ | 718                          |  | $ | 355
|                                                                                                                          |  |                                                 |        |                                 |   |                              |  |   |    



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

For further information regarding the Companys equipment lease portfolio as of December 31, 2008, see Note 6 to the financial statements, Investments in equipment and leases, net, as set forth in Part II,
Item 8, Financial Statements and Supplementary Data.



4



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Notes Receivable Activities

The Company finances a diversified portfolio of assets in diverse industries. The following tables set forth the types of assets financed by the Company through December 31, 2008 and the industries to which the
assets have been financed (in thousands):



|                           |  |                                         |        |                             |         |  | 
|-------------------------- |  | --------------------------------------- | ------ | --------------------------- | ------- |  | 
|Asset Types                |  | Amount FinancedExcludingAcquistion Fees |        | Percentage of TotalFundings |         | 
|Computer equipment         |  | $                                       | 7,815  |                             | 51.77%  | 
|Equipment and other assets |  |                                         | 6,410  |                             | 42.46%  | 
|Manufacturing              |  |                                         | 871    |                             | 5.77%   | 
|                           |  |                                         |        |                             |         | 
|                           |  | $                                       | 15,096 |                             | 100.00% | 
|                           |  |                                         |        |                             |         | 
|Industry of Borrower       |  | Amount
FinancedExcludingAcquistion Fees |        | Percentage of TotalFundings |        
|Communications             |  | $                                       | 3,948  |                             | 26.15%  | 
|Business services          |  |                                         | 3,010  |                             | 19.94%  | 
|Manufacturing              |  |                                         | 2,503  |                             | 16.58%  | 
|Health care                |  |                                         | 2,833  |                             | 18.77%  | 
|Technology                 |  |                                         | 1,682  |                             | 11.14%  | 
|Electronics                |  |                                         | 1,120  |                             | 7.42%   | 
|                           |  |                                         |        |                             |         | 
|                           |  | $                                       | 15,096 |                             | 100.00% | 
|                           |  |                                         |        |                             |         | 

From inception to December 31, 2008, assets financed by the Company that are associated with terminated loans
are as follows (in thousands):



|                           |  |                                          |       |                      |   |                        |  |   |      
|-------------------------- |  | ---------------------------------------- | ----- | -------------------- | - | ---------------------- |  | - | -----
|Asset Types                |  | Amount FinancedExcludingAcquisition Fees |       | Disposition Proceeds |   | Total PaymentsReceived
|Equipment and other assets |  | $                                        | 3,075 |                      | $ | 683                    |  | $ | 3,186
|Computer equipment         |  |                                          | 4,682 |                      |   | 2,843                  |  |   | 3,640
|                           |  |                                          |       |                      |   |                        |  |   |      
|                           |  | $                                        | 7,757 |                      | $ | 3,526                  |  | $ | 6,826
|                           |  |                                          |       |                      |   |                        |  |   |      

For further information regarding the Companys notes receivable portfolio as of December 31, 2008, see
Note 4 to the financial statements, Notes receivable, net, as set forth in Part II, Item 8, Financial Statements and Supplementary Data.



|Item 2. | PROPERTIES
|------- | ----------

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



|Item 3. | LEGAL PROCEEDINGS
|------- | -----------------

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



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

None.



5



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PART II



|Item 5. | MARKET FOR COMMON EQUITY AND RELATED SECURITY HOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ---------------------------------------------------------------------------------------------------------------------

Market Information

There are certain material conditions and
restrictions on the transfer of Units imposed by the terms of the Limited Liability Company Operating Agreement. Consequently, there is no public market for Units and it is not anticipated that a public market for Units will develop. In the absence
of a public market for the Units, there is no currently ascertainable fair market value for the Units.

Holders

As of December 31, 2008, a total of 1,180 investors were Unitholders of record in the Company.

Distributions

The Unitholders of record are entitled to certain distributions as provided under the Operating
Agreement.

AFS has sole discretion in determining the amount of distributions; provided, however, that AFS will not cause the Company to reinvest
operating revenues in equipment, but will distribute available cash, subject to payment of any obligations of the Company, (i) in an amount sufficient to allow an investor in a 31% federal income tax bracket to meet the federal and state income
taxes due on income from the operations of the Fund; (ii) through the first full fiscal quarter ending at least six months after termination of the offering of Units, an amount equal to the lesser of: (a) a rate of return on their original
capital contribution equal to 2.5% over the average yield on five-year United States Treasury Bonds for the fiscal quarter immediately preceding the date of distribution, as published in a national financial newspaper from time to time (with a
minimum of 8% per annum and a maximum of 10% per annum), or (b) 90% of the total amount of cash available for distributions; and (iii) for each quarter during the rest of the reinvestment period, an amount equal to 8% per
annum on their original capital contribution.

The rate for monthly distributions from 2008 operations was $0.08 per Unit for the period from January
through December 2008. Likewise, the rate for monthly distributions from 2007 operations was $0.08 per Unit for the period from January through December 2007. The rate for each of the quarterly distributions paid in 2008 and 2007 was $0.23 per Unit.

The following table presents summarized information regarding distributions to members other than the Managing Member (Other Members):



|                                                                                          |  |      |       |   |      |   |       |  
|----------------------------------------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | -
|                                                                                          |  | 2008 |       |   | 2007 |  
|Net loss per Unit, based on weighted average Unit outstanding                             |  | $    | (0.24 | ) |      | $ | (0.32 | )
|Return of investment                                                                      |  |      | 1.16  |   |      |   | 1.25  |  
|                                                                                          |  |      |       |   |      |   |       |  
|Distributions declared per Unit, based on weighted average Other Member Units outstanding |  |      | 0.92  |   |      |   | 0.93  |  
|Differences due to timing of distributions                                                |  |      | -     |   |      |   | -     |  
|                                                                                          |  |      |       |   |      |   |       |  
|Actual distributions paid per Unit                                                        |  | $    | 0.92  |   |      | $ | 0.93  |  
|                                                                                          |  |      |       |   |      |   |       |  



|Item 6. | SELECTED FINANCIAL DATA
|------- | -----------------------

A smaller reporting company is not
required to present selected financial data in accordance with item 301(c) of Regulation S-K.



6



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|Item 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

Statements contained in this Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations

(MD&A) and elsewhere in this Form 10-K, which are not historical facts, may be forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to
differ materially from those projected. In particular, the economic recession and changes in general economic conditions, including fluctuations in demand for equipment, lease rates, and interest rates, may result in delays in investment and
reinvestment, delays in leasing, re-leasing, and disposition of equipment, and reduced returns on invested capital. The Companys performance is subject to risks relating to lessee defaults and the creditworthiness of its lessees. The
Companys performance is also subject to risks relating to the value of its equipment at the end of its leases, which may be affected by the condition of the equipment, technological obsolescence and the markets for new and used equipment at
the end of lease terms. Investors are cautioned not to attribute undue certainty to these forward-looking statements, which speak only as of the date of this Form 10-K. We undertake no obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the date of this Form 10-K or to reflect the occurrence of unanticipated events, other than as required by law.

Overview

ATEL Capital Equipment Fund XI, LLC (the Company) is a California limited liability
company that was formed in June 2004 for the purpose of engaging in the sale of limited liability company investment units and acquiring equipment to generate revenues from equipment leasing, lending and sales activities, primarily in the United
States.

The Company conducted a public offering of 15,000,000 Limited Liability Company Units (Units), at a price of $10 per Unit. The
offering was terminated in April 2006. During 2006, the Company completed its initial acquisition stage with the investment of the net proceeds from the public offering of Units. Subsequently, during the reinvestment period (Reinvestment
Period) (defined as six full years following the year the offering was terminated), the Company has reinvested cash flow in excess of certain amounts required to be distributed to the Other Members and/or utilized its credit facilities to
acquire additional equipment. Throughout the Reinvestment Period, which ends December 31, 2012, the Company anticipates continued reinvestment of cash flow in excess of minimum distributions and other obligations. The Company is governed by its
Limited Liability Company Operating Agreement (Operating Agreement), as amended.

The Company may continue until December 31, 2025.
Periodic distributions are paid at the discretion of the Managing Member.

Capital Resources and Liquidity

The liquidity of the Company varies, 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 Members and to the extent expenses exceed cash flows from leases and proceeds from asset sales.

The primary
source of liquidity for the Company is its cash flow from leasing activities. As the lease terms expire, the Company will re-lease or sell the equipment. The future liquidity beyond the contractual minimum rentals will depend on AFSs success
in remarketing or selling the equipment as it comes off rental.

Throughout the Reinvestment Period (as defined in the Operating Agreement), the Company
anticipates reinvesting a portion of lease payments from assets owned, and/or payments received on notes receivable, in new leasing or financing transactions. Such reinvestment will occur only after the payment of all obligations, including debt
service (both principal and interest), the payment of management fees to AFS and providing for cash distributions to the Members.

In a normal economy, if
inflation in the general economy becomes significant, it may affect the Company in as much as the residual (resale) values and rates on re-leases of the Companys leased assets may increase as the costs of similar assets increase. However, the
Companys revenues from existing leases and notes would not increase as such rates are generally fixed for the terms of the leases and notes without adjustment for inflation. In addition, if interest rates increase significantly under such
circumstances, the rates that the Company can obtain on future lease or financing transactions will be expected to increase as the cost of capital is a significant factor in the pricing of leases and investments in notes receivable. Leases and notes
already in place, for the most part, would not be affected by changes in interest rates.



7



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

The Company participates with AFS and certain of its affiliates in a financing arrangement (comprised of a working capital facility to AFS, an acquisition
facility and a warehouse facility to AFS, the Company and affiliates, and a venture facility available to an affiliate) with a group of financial institutions that includes certain financial covenants. The financial arrangement is for $75 million.
Originally scheduled to expire in June 2009, the facility was amended effective December 22, 2008 to extend the term of the agreement through June 2010. Under such amendment, the tangible net worth threshold for ATEL 12, LLC participation in the
acquisition facility was reduced from $15 million to $7.5 million. As of December 31, 2008, ATEL 12, LLC was eligible to participate.

Borrowings under the
facility as of December 31, 2008 were as follows:



|                                                                                                                           |  |   |        |  
|-------------------------------------------------------------------------------------------------------------------------- |  | - | ------ | -
|Total available under the financing arrangement                                                                            |  | $ | 75,000 |  
|Amount borrowed by the Company under the acquisition facility                                                              |  |   | (500   | )
|Amounts borrowed by affiliated partnerships and limited liability companies under the acquisition and warehouse facilities |  |   | (8,323 | )
|                                                                                                                           |  |   |        |  
|Total remaining available under the acquisition and warehouse facilities                                                   |  | $ | 66,177 |  
|                                                                                                                           |  |   |        |  

The Company is contingently liable for principal payments under the warehouse facility as borrowings are recourse
jointly and severally to the extent of the pro-rata share of the Companys net worth as compared to the aggregate net worth of certain of the affiliated partnerships and limited liability companies of the Company and including AFS and ALC
(which latter two entities are 100% liable). The Company and its affiliates pay an annual commitment fee to have access to this line of credit. As of December 31, 2008, borrowings of $1.3 million were outstanding under the warehouse facility.
The Companys maximum obligation on the outstanding warehouse balance at December 31, 2008 was approximately $264 thousand.

The interest rate on
the Master Terms Agreement is based on either the LIBOR/Eurocurrency rate of 1-, 2-, 3- or 6-month maturity plus a lender designated spread, or the banks Prime rate, which re-prices daily. Principal amounts of loans made under the Master Terms
Agreement that are prepaid may be re-borrowed on the terms and subject to the conditions set forth under the Master Terms Agreement. The effective interest rate on borrowings at December 31, 2008 was 3.25%.

Draws on the acquisition facility by any affiliated partnership and/or limited liability company borrower are secured by a blanket lien on that borrowers assets,
including but not limited to equipment and related leases.

To manage the warehousing facility for the holding of assets prior to allocation to specific
investor programs, a Warehousing Trust Agreement has been entered into by the Company, AFS, ALC, and certain of the affiliated partnerships and limited liability companies. The warehousing facility is used to acquire and hold, on a short-term basis,
certain lease transactions that meet the investment objectives of each of such entities. Each of the leasing programs sponsored by AFS and ALC currently in its acquisition stage is a pro rata participant in the Warehousing Trust Agreement, as
described below. When a program no longer has a need for short term financing provided by the warehousing facility, it is removed from participation, and as new leasing investment entities are formed by AFS and ALC and commence their acquisition
stages, these new entities are added. As of December 31, 2008, the investment program participants were ATEL Capital Equipment Fund IX, LLC, ATEL Capital Equipment Fund X, LLC, the Company and ATEL 12, LLC. Pursuant to the Warehousing Trust
Agreement, the benefit of the lease transaction assets, and the corresponding liabilities under the warehouse borrowing facility, inure to each of such entities based upon each entitys pro-rata share in the warehousing trust estate. The
pro-rata share is calculated as a ratio of the net worth of each entity over the aggregate net worth of all entities benefiting from the warehouse trust estate, excepting that the trustees, AFS and ALC, are both liable for their pro-rata
shares of the obligations based on their respective net worth, and jointly liable for the pro rata portion of the obligations of each of the affiliated partnerships and limited liability companies participating under the borrowing facility.
Transactions are financed through this warehousing facility only until the transactions are allocated to a specific program for purchase or are otherwise disposed by AFS and ALC. When a determination is made to allocate the transaction to a specific
program for purchase by the program, the purchaser repays the debt associated with the asset, either with cash or by means of the acquisition facility financing, the asset is removed from the warehouse facility collateral, and ownership of the asset
and any debt obligation associated with the asset are assumed solely by the purchasing entity.



8



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As of December 31, 2008, the full amount remaining available under the joint acquisition and warehouse facility is
potentially available to the Company, subject to certain terms or agreement limitations. However, as amounts are drawn on the facility by each of the Company and the affiliates who are borrowers under the facility, the amount available to all is
reduced. As the warehousing facility is a short term bridge facility, any amounts borrowed under the warehousing facility, and then repaid by the affiliated borrowers (including the Company) upon allocation of an acquisition to a specific purchaser,
become available under the warehouse facility for further short term borrowing.

The financing arrangement discussed above includes certain financial and
non-financial covenants applicable to each borrower. The Company and affiliates were in compliance with all covenants as of December 31, 2008.

The
Company also has access to certain sources of non-recourse debt financing, which the Company will use on a transaction basis as a means of mitigating credit risk, as the credit risk is effectively transferred to the lender who retains recourse
against collateralized assets. During 2008, the Company utilized such sources of non-recourse debt financing and at December 31, 2008, had $17.4 million of non-recourse debt outstanding consisting of notes payable to financial institutions. For
detailed information on the Companys debt obligations, see Notes 8 and 9 to the financial statements as set forth in Part II, Item 8, Financial Statements and Supplementary Data.

The Company commenced periodic distributions, based on cash flows from operations, beginning with the month of June 2005. Additional distributions have been consistently
made through December 2008.

As of December 31, 2008, the Company had no outstanding commitments to purchase lease assets or finance loans.

Cash Flows

2008 vs. 2007

Operating Activities

Cash provided by operating activities increased
by $2.5 million, or 44%, for the year ended December 31, 2008 as compared to prior year. The net increase in cash flow was primarily attributable to improved operating results, as adjusted for non-cash revenue and expense items such as gains on
sales of assets and depreciation expense, reduced payments made against accounts payable and accrued liabilities, and increased net collections of outstanding accounts receivable offset, in part, by a decline in unearned operating lease income.

The increase in operating results, as adjusted for non-cash items, benefited cash flow by $2.6 million and was mainly due to a 17% increase in operating
lease revenues. In addition, the Company also saw year over year decreases in acquisition expense, outside services and professional fees totaling 95%, 63% and 36%, respectively. These reductions in expense were offset, in part, by a 17% increase in
interest expense on the Companys outstanding debt.

The net reduction in payments made against accounts payable and accrued liabilities improved cash
flow by $540 thousand. Total payments during 2007 were significantly higher primarily due to the payment of approximately $1.5 million of 2006 accruals related to asset purchases. This was partially offset by the 2008 payment of 2007 accruals
related to asset purchases and reimbursements to AFS, higher sales tax payments and a refund of a lessee overpayment during the second quarter of 2008. Similarly, the year over year increase in net collections of outstanding accounts receivable
improved cash flow by $222 thousand.

The aforementioned increases in cash flow were partially offset by a $968 thousand decrease resulting from a decline
in unearned operating lease income. The decline in unearned operating lease income was primarily due to a year over year reduction in prepayments received, combined with an increase in realized unearned rents.

Investing Activities

Cash provided by investing activities totaled
$3.1 million for 2008 compared to cash used in investing activities totaling $18.6 million for 2007, a $21.7 million improvement. The net improvement in cash flow was primarily a result of decreases in cash used to purchase lease assets, fund
investments in notes receivable, acquire investment securities and pay for initial direct costs related to asset purchases; offset, in part, by a reduction in proceeds from both early termination of notes receivable and sales of lease assets and
payments received on the Companys investment in notes receivable.



9



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Cash used to originate and fund leases and notes receivables as well as purchase investment securities decreased by $20.3
million, $3.1 million and $266 thousand, respectively. In addition, initial direct costs associated with asset purchases declined by $189 thousand. These decreases were attributable to a decline in acquisition phase activity as the Fund has
approached full investment.

Partially offsetting the aforementioned increases in cash flow were decreases of $1.1 million, $623 thousand and $497 thousand
resulting from reductions in proceeds from early termination of notes receivable, payments received on notes receivable and proceeds from sales of lease assets, respectively.

The decrease in proceeds from early termination of notes receivable was due to a year over year drop in prepayments of notes receivable. The decline in payments received on notes receivable was largely attributable to
the drop in outstanding notes receivable as a result of maturities, prepayments and early terminations; and the reduction in proceeds from sales of lease assets was mainly due to a diminished level of lease assets available for sale resulting from a
year over year decrease in terminating least assets.

Financing Activities

Net cash used in financing activities totaled $11.9 million for 2008 compared to cash provided by financing activities of $9.8 million for 2007, a decrease of $21.7 million. The net decrease in cash flow was primarily
due to a net reduction in proceeds from borrowings during the comparative years. The reduction in Company borrowings is consistent with the decline in acquisition phase activity.

Results of Operations

Cost reimbursements to the Managing Member are based on its costs incurred in
performing administrative services for the Company. These costs are allocated to each managed entity based on certain criteria such as total assets, number of investors or contributed capital based upon the type of cost incurred.

The Operating Agreement places an annual limit and a cumulative limit for cost reimbursements to AFS and/or affiliates. Any reimbursable costs incurred by AFS and/or
affiliates during the year exceeding the annual and/or cumulative limits cannot be reimbursed in the current year, though such costs may be reimbursable in future years to the extent of the cumulative limit. As of December 31, 2008, the Company
has not exceeded the annual and/or cumulative limitations discussed above.

2008 vs. 2007

The Company had net losses of $883 thousand and $1.2 million for the years ended December, 2008 and 2007, respectively. Results for 2008 reflect increases in both total
revenues and operating expenses when compared with results for prior year.

Revenues

Total revenues for 2008 increased by $1.3 million, or 12%, as compared to the prior year. The net growth in total revenues was primarily a result of a $1.7 million increase in operating lease revenue offset, in part,
by a $177 thousand decrease in interest income on notes receivable, a $139 thousand decline in net gains on sales of lease assets and early terminations of notes receivable and a $55 thousand reduction in interest income on the Companys cash
deposits.

The period over period increase in operating lease revenue was mainly due to the 2008 full year impact of the $20.8 million asset additions made
during 2007.

Gains on sales of lease assets and early terminations of notes receivable declined due to an absence of lease asset sales activity during
2008, when compared to 2007, and a year over year decrease in early terminations of notes, respectively. Interest income received on the notes was reduced largely due to declining notes receivable balances resulting from prepayments and run-off of
the portfolio; and interest income on cash deposits decreased due to lower period over period average cash balances and the lower interest rate environment.



10



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Expenses

Total
expenses for 2008 increased by $889 thousand, or 7%, as compared to prior year. The net increase in total expenses was primarily due to increases totaling $1.5 million, $326 thousand and $191 thousand in depreciation expense, provision for credit
losses and interest expense, respectively. These increases were partially offset by decreases of $830 thousand in acquisition expense, a combined $243 thousand in professional fees and outside services expense and $32 thousand in other expense.

The increase in depreciation expense was mainly due to the growth in depreciable assets since December 31, 2007. The provision for credit losses
increased as the Company recorded a $496 thousand reserve related to two borrowers that have defaulted on their respective notes. This increase was offset, in part, by approximately $91 thousand of payments received on previously reserved
delinquencies. Interest expense increased mainly due to higher year-to-date 2008 average outstanding debt balances as compared to prior year.

Partially
offsetting the aforementioned increases in expenses was a reduction in acquisition expense as a result of the year over year decline in asset acquisition activity as the Fund has approached full investment. In addition, professional fees and outside
services decreased primarily due to the elimination of costs associated with the audit and restatement of the Companys prior years financial statements, which were completed by the third quarter of 2007; and other expense declined
primarily due to the absence of an inspection fee related to marine barges that was incurred in 2007, and a year over year decrease in income and franchise taxes.

Recent Accounting Pronouncements

In October 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff
Position (FSP) No. FAS 157-3, Determining the Fair Value of a Financial Asset in a Market That Is Not Active (FSP No. 157-3), which clarifies the application of Statement of Financial Accounting Standards
(SFAS) No. 157, Fair Value Measurements (SFAS 157), when the market for a financial asset is inactive. Specifically, FSP No. 157-3 clarifies how (1) managements internal assumptions should be
considered in measuring fair value when observable data are not present, (2) observable market information from an inactive market should be taken into account, and (3) the use of broker quotes or pricing services should be considered in
assessing the relevance of observable and unobservable data to measure fair value. The guidance in FSP No. 157-3 is effective immediately and was adopted by the Company on October 1, 2008. The adoption of FSP No. 157-3 did not have a
significant effect on the Companys financial position, results of operations or cash flows.

In March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging Activities (SFAS 161), as an amendment to SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS 161 requires that objectives for
using derivative instruments be disclosed in terms of underlying risk and accounting designation. The fair value of derivative instruments and their gains and losses will need to be presented in tabular format in order to present a more complete
picture of the effects of using derivative instruments. SFAS 161 is effective for financial statements issued for fiscal years beginning after November 15, 2008. The Company is currently evaluating the impact of adopting this pronouncement.

In December 2007, the FASB issued SFAS No. 141R, Business Combinations (SFAS 141R). SFAS 141R replaces SFAS 141 and
establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non controlling interest in the acquiree and the goodwill acquired.
SFAS 141R also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination. This standard is effective for fiscal years beginning after December 15, 2008. The Company
does not presently anticipate the adoption of SFAS 141R to significantly impact its financial position, results of operations or cash flows.

In February
2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilitiesincluding an amendment of FASB Statement No. 115 (SFAS 159). This Statement permits entities to choose to
measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Boards long-term measurement objectives for accounting
for financial instruments. The Company adopted the provisions of SFAS 159 on January 1, 2008. The adoption of SFAS 159 did not have a significant effect on the Companys financial position, results of operations or cash flows.



11



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In September 2006, the FASB issued SFAS 157. This standard clarifies the definition of fair value for financial
reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. The provisions of SFAS 157 were to be effective for fiscal years beginning after November 15, 2007.
However, in February 2008, the FASB issued FSP No. FAS 157-2, Effective Date of FASB Statement No. 157 (FSP No. 157-2), which defers the effective date of SFAS 157 as it pertains to fair value measurements of
nonfinancial assets and nonfinancial liabilities until fiscal years beginning after November 15, 2008. On January 1, 2008, the Company adopted the provisions of SFAS 157 except as it applied to its investment in leases, and other
nonfinancial assets and nonfinancial liabilities as noted in FSP No. 157-2. The partial adoption of SFAS 157 did not have a significant effect on the Companys financial position, results of operations or cash flows. The Company is in the
process of evaluating the impact of the deferred provisions of SFAS 157.

Critical Accounting Policies and Estimates

The policies discussed below are considered by management of the Company to be critical to an understanding of the Companys financial statements because their
application requires significantly complex or subjective judgments, decisions, or assessments, with financial reporting results relying on estimation about the effect of matters that are inherently uncertain. Specific risks for these critical
accounting policies are described in the following paragraphs. The Company also states these accounting policies in the notes to the financial statements and in relevant sections in this discussion and analysis. For all of these policies, management
cautions that future events rarely develop exactly as forecast, and the best estimates routinely require adjustment.

Use of estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates. Such estimates primarily relate to the determination of residual values at the end of the lease term and expected future cash flows used for impairment analysis purposes
and for determination of the allowance for doubtful accounts and reserve for credit losses on notes receivable.

Equipment on operating leases and
related revenue recognition:

Equipment subject to operating leases is stated at cost. Depreciation is being recognized on a straight-line method over
the terms of the related leases to the equipments estimated residual values at the end of the leases. Maintenance costs associated with the Funds portfolio of leased assets are expensed as incurred.

Operating lease revenue is recognized on a straight-line basis over the term of the underlying leases. The initial lease terms will vary as to the type of equipment
subject to the leases, the needs of the lessees and the terms to be negotiated, but initial leases are generally from 36 to 120 months. The difference between rent received and rental revenue recognized is recorded as unearned operating lease income
on the balance sheet.

Direct financing leases and related revenue recognition:

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

Allowances for losses on direct financing leases are typically established based on historical charge off and collection experience and the collectability of specifically identified lessees and billed and unbilled
receivables. Direct financing leases are written-off as they are deemed uncollectible.

Direct financing leases are generally placed in a non-accrual
status (i.e., no revenue is recognized) when payments are more than 90 days past due. Additionally, management periodically reviews the credit worthiness of all direct finance lessees with payments outstanding less than 90 days. Based upon
managements judgment, direct finance lessees may be placed in a non-accrual status. Leases placed on non-accrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the
remaining unpaid lease payments is probable.



12



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Notes receivable, unearned interest income and related revenue recognition:

The Company records all future payments of principal and interest on notes as notes receivable and then offsets the related unearned interest income. For financial
statement purposes, the Company reports only the principal due on the balance sheet. The unearned interest is recognized over the term of the note and the income portion of each note payment is calculated so as to generate a constant rate of return
on the net balance outstanding. Any fees or costs related to notes receivable are recorded as part of the net investment in notes receivable and amortized over the term of the loan.

Allowances for losses on notes receivable are typically established based on historical charge off and collection experience and the collectability of specifically identified borrowers and billed and unbilled
receivables. Notes are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the
note agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Notes are written off to the allowance as they
are deemed uncollectible.

Notes receivable are generally placed in a non-accrual status (i.e., no revenue is recognized) when payments are more than 90
days past due. Additionally, management periodically reviews the credit worthiness of companies with note payments outstanding less than 90 days. Based upon managements judgment, notes may be placed in a non-accrual status. Notes placed on
non-accrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the remaining unpaid receivable is probable.

Initial direct costs:

The Company capitalizes initial direct costs (IDC) associated with the origination
and funding of lease assets and investments in notes receivable as defined in SFAS No. 91, Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases. IDC includes
both internal costs (e.g., the costs of employees activities in connection with successful lease and loan originations) and external broker fees incurred with such originations. The costs are amortized on a lease by lease (or note by note)
basis based on actual contract term using a straight-line method for operating leases and the effective interest rate method for direct finance leases and notes receivable. Upon disposal of the underlying lease or loan assets, both the initial
direct costs and the associated accumulated amortization are relieved. Costs related to leases or notes receivable that are not consummated are not eligible for capitalization as initial direct costs and are expensed as acquisition expense.

Asset valuation:

Recorded values of the
Companys asset portfolio are periodically reviewed for impairment in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. An impairment loss is measured and recognized only if the
estimated undiscounted future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the estimated residual value of the asset at the end of the assets expected holding period
and estimates of undiscounted future rents. The residual value assumes, among other things, that the asset is utilized normally in an open, unrestricted and stable market. Short-term fluctuations in the market place are disregarded and it is assumed
that there is no necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly. Impairment is measured as the difference between the fair value (as determined by a valuation
method using discounted estimated future cash flows) of the assets and its carrying value on the measurement date.



|Item 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------

See the Report of
Independent Registered Public Accounting Firm, Financial Statements and Notes to Financial Statements attached hereto at pages 14 through 34.



13



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Members

ATEL Capital Equipment Fund XI, LLC

We have audited the accompanying balance sheets of ATEL Capital Equipment Fund XI, LLC (the Company) as of December 31, 2008 and 2007, and the related
statements of operations, changes in members capital, and cash flows for the years then ended. These financial statements are the responsibility of the Management of the Companys Managing Member. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the
Companys internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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 XI, LLC as of December 31, 2008 and 2007, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

/s/ Moss Adams LLP

San Francisco,
California

March 26, 2009



14



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ATEL CAPITAL EQUIPMENT FUND XI, LLC

BALANCE SHEETS

DECEMBER 31, 2008 AND 2007

(In Thousands)



|                                                                                                                                                                                                |  |      |        |      |   |       
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- | - | ------
|                                                                                                                                                                                                |  | 2008 |        | 2007
|                                                                                                                                                                                                |  |     
|ASSETS                                                                                                                                                                                          |  |      |        |      |   |       
|Cash and cash equivalents                                                                                                                                                                       |  | $    | 904    |      | $ | 1,662 
|Accounts receivable, net of allowance for doubtful accounts of $178 as of December 31, 2008 and $125 as of December 31,
2007                                                                    |  |      | 254    |      |   | 418   
|Notes receivable, net of unearned interest income of $896 and allowance for credit losses of $479 as of December 31, 2008 and net of
unearned interest income of $1,432 as of December 31, 2007 |  |      | 3,994  |      |   | 7,336 
|Investments in securities                                                                                                                                                                       |  |      | 421    |      |   | 497   
|Investments in equipment and leases, net of accumulated depreciation of $23,524 as of December 31, 2008 and $13,547 as of
December 31, 2007                                                     |  |      | 39,490 |      |   | 49,106
|Due from affiliate                                                                                                                                                                              |  |      | -      |      |   | 146   
|Other assets                                                                                                                                                                                    |  |      | 36     |      |   | 32    
|                                                                                                                                                                                                |  |      |        |      |   |       
|Total assets                                                                                                                                                                                    |  | $    | 45,099 |      | $ | 59,197
|                                                                                                                                                                                                |  |      |        |      |   |       
|                                                                                                                                                                                                |  |     
|LIABILITIES AND MEMBERS CAPITAL                                                                                                                                                                |  |      |        |      |   |       
|Accounts payable and accrued liabilities:                                                                                                                                                       |  |      |        |      |   |       
|Managing Member                                                                                                                                                                                 |  | $    | 121    |      | $ | 381   
|Accrued distributions to Other Members                                                                                                                                                          |  |      | 554    |      |   | 554   
|Other                                                                                                                                                                                           |  |      | 326    |      |   | 668   
|Non-recourse debt                                                                                                                                                                               |  |      | 17,389 |      |   | 20,579
|Acquisition facility obligation                                                                                                                                                                 |  |      | 500    |      |   | 4,000 
|Unearned operating lease income                                                                                                                                                                 |  |      | 695    |      |   | 1,388 
|                                                                                                                                                                                                |  |      |        |      |   |       
|Total liabilities                                                                                                                                                                               |  |      | 19,585 |      |   | 27,570
|                                                                                                                                                                                                |  |      |        |      |   |       
|Commitments and contingencies                                                                                                                                                                   |  |      |        |      |   |       
|Members capital:                                                                                                                                                                               |  |      |        |      |   |       
|Managing Member                                                                                                                                                                                 |  |      | -      |      |   | -     
|Other Members                                                                                                                                                                                   |  |      | 25,514 |      |   | 31,627
|                                                                                                                                                                                                |  |      |        |      |   |       
|Total Members capital                                                                                                                                                                          |  |      | 25,514 |      |   | 31,627
|                                                                                                                                                                                                |  |      |        |      |   |       
|Total liabilities and Members capital                                                                                                                                                          |  | $    | 45,099 |      | $ | 59,197
|                                                                                                                                                                                                |  |      |        |      |   |       

See accompanying notes.



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ATEL CAPITAL EQUIPMENT FUND XI, LLC

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

(In Thousands Except for Units and Per Unit Data)



|                                                            |  |      |           |   |      |   |           |  
|----------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                            |  | 2008 |           |   | 2007 |  
|Revenues:                                                   |  |      |           |   |      |   |           |  
|Operating lease income                                      |  | $    | 11,820    |   |      | $ | 10,074    |  
|Direct financing leases                                     |  |      | 3         |   |      |   | 3         |  
|Notes receivable interest income                            |  |      | 596       |   |      |   | 773       |  
|Gain on sale of assets and early termination of notes       |  |      | 76        |   |      |   | 215       |  
|Gain on sale of securities                                  |  |      | 54        |   |      |   | 93        |  
|Interest income                                             |  |      | 24        |   |      |   | 79        |  
|Other                                                       |  |      | 42        |   |      |   | 56        |  
|                                                            |  |      |           |   |      |   |           |  
|Total revenues                                              |  |      | 12,615    |   |      |   | 11,293    |  
|                                                            |  |     
|Expenses:                                                   |  |      |           |   |      |   |           |  
|Depreciation of operating lease assets                      |  |      | 9,976     |   |      |   | 8,510     |  
|Asset management fees to Managing Member                    |  |      | 648       |   |      |   | 629       |  
|Acquisition expense                                         |  |      | 48        |   |      |   | 878       |  
|Cost reimbursements to Managing Member                      |  |      | 498       |   |      |   | 523       |  
|Provision for losses and doubtful accounts                  |  |      | 405       |   |      |   | 79        |  
|Amortization of initial direct costs                        |  |      | 205       |   |      |   | 188       |  
|Interest expense                                            |  |      | 1,298     |   |      |   | 1,107     |  
|Professional fees                                           |  |      | 265       |   |      |   | 416       |  
|Outside services                                            |  |      | 55        |   |      |   | 147       |  
|Other                                                       |  |      | 108       |   |      |   | 140       |  
|                                                            |  |      |           |   |      |   |           |  
|Total operating expenses                                    |  |      | 13,506    |   |      |   | 12,617    |  
|Other income, net                                           |  |      | 8         |   |      |   | 100       |  
|                                                            |  |      |           |   |      |   |           |  
|Net loss                                                    |  | $    | (883      | ) |      | $ | (1,224    | )
|                                                            |  |      |           |   |      |   |           |  
|                                                            |  |     
|Net income (loss):                                          |  |      |           |   |      |   |           |  
|Managing Member                                             |  | $    | 392       |   |      | $ | 426       |  
|Other Members                                               |  |      | (1,275    | ) |      |   | (1,650    | )
|                                                            |  |      |           |   |      |   |           |  
|                                                            |  | $    | (883      | ) |      | $ | (1,224    | )
|                                                            |  |      |           |   |      |   |           |  
|                                                            |  |     
|Net loss per Limited Liability Company Unit (Other Members) |  | $    | (0.24     | ) |      | $ | (0.32     | )
|Weighted average number of Units outstanding                |  |      | 5,230,507 |   |      |   | 5,231,645 |  

See accompanying notes.



16



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ATEL CAPITAL EQUIPMENT FUND XI, LLC

STATEMENT OF CHANGES IN MEMBERS CAPITAL

FOR THE YEARS ENDED DECEMBER
31, 2008 AND 2007

(In Thousands Except for Units and Per Unit Data)



|                                                |  |               |   |  |                |        |   |  |       |      |   |  |   |        |  
|----------------------------------------------- |  | ------------- | - |  | -------------- | ------ | - |  | ----- | ---- | - |  | - | ------ | -
|                                                |  | Other
Members |   |  | ManagingMember |        |   |  |      
|                                                |  | Units         |   |  | Amount         |        |   |  | Total |     
|Balance December 31, 2006                       |  | 5,232,607     |   |  | $              | 38,135 |   |  | $     | -    |   |  | $ | 38,135 |  
|Repurchases of Limited Liability Company Units  |  | (600          | ) |  |                | (5     | ) |  |       | -    |   |  |   | (5     | )
|Rescissions of capital contributions            |  | (1,500        | ) |  |                | (15    | ) |  |       | -    |   |  |   | (15    | )
|Distributions to Other Members ($0.93 per Unit) |  | -             |   |  |                | (4,838 | ) |  |       | -    |   |  |   | (4,838 | )
|Distributions to Managing Member                |  | -             |   |  |                | -      |   |  |       | (426 | ) |  |   | (426   | )
|Net (loss) income                               |  | -             |   |  |                | (1,650 | ) |  |       | 426  |   |  |   | (1,224 | )
|                                                |  |               |   |  |                |        |   |  |       |      |   |  |   |        |  
|Balance December 31, 2007                       |  | 5,230,507     |   |  |                | 31,627 |   |  |       | -    |   |  |   | 31,627 |  
|Distributions to Other Members ($0.92 per Unit) |  | -             |   |  |                | (4,838 | ) |  |       | -    |   |  |   | (4,838 | )
|Distributions to Managing Member                |  | -             |   |  |                | -      |   |  |       | (392 | ) |  |   | (392   | )
|Net (loss) income                               |  | -             |   |  |                | (1,275 | ) |  |       | 392  |   |  |   | (883   | )
|                                                |  |               |   |  |                |        |   |  |       |      |   |  |   |        |  
|Balance December 31, 2008                       |  | 5,230,507     |   |  | $              | 25,514 |   |  | $     | -    |   |  | $ | 25,514 |  
|                                                |  |               |   |  |                |        |   |  |       |      |   |  |   |        |  

See accompanying notes.



17



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

(In Thousands)



|                                                                           |  |      |         |   |      |   |         |  
|-------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                                           |  | 2008 |         |   | 2007 |  
|Operating activities:                                                      |  |      |         |   |      |   |         |  
|Net loss                                                                   |  | $    | (883    | ) |      | $ | (1,224  | )
|Adjustment to reconcile net loss to cash provided by operating activities: |  |      |         |   |      |   |         |  
|Gain on sales of assets and early termination of notes                     |  |      | (76     | ) |      |   | (215    | )
|Depreciation of operating lease assets                                     |  |      | 9,976   |   |      |   | 8,510   |  
|Amortization of initial direct costs                                       |  |      | 205     |   |      |   | 188     |  
|Amortization of unearned income on direct finance leases                   |  |      | (3      | ) |      |   | (3      | )
|Amortization of unearned income on notes receivable                        |  |      | (596    | ) |      |   | (773    | )
|Provision for losses and doubtful accounts                                 |  |      | (90     | ) |      |   | 79      |  
|Provision for losses on notes receivable                                   |  |      | 495     |   |      |   | (143    | )
|Gain on sale of securities                                                 |  |      | (54     | ) |      |   | (93     | )
|Changes in operating assets and liabilities:                               |  |      |         |   |      |   |         |  
|Accounts receivable                                                        |  |      | 254     |   |      |   | 32      |  
|Prepaid expenses and other assets                                          |  |      | (4      | ) |      |   | (31     | )
|Accounts payable, Managing Member                                          |  |      | (260    | ) |      |   | 193     |  
|Accounts payable, other                                                    |  |      | (342    | ) |      |   | (1,043  | )
|Accounts payable, affiliates                                               |  |      | 146     |   |      |   | (146    | )
|Unearned operating lease income                                            |  |      | (693    | ) |      |   | 275     |  
|                                                                           |  |      |         |   |      |   |         |  
|Net cash provided by operating activities                                  |  |      | 8,075   |   |      |   | 5,606   |  
|                                                                           |  |      |         |   |      |   |         |  
|                                                                           |  |     
|Investing activities:                                                      |  |      |         |   |      |   |         |  
|Purchases of equipment on operating leases                                 |  |      | (543    | ) |      |   | (20,802 | )
|Purchase of securities                                                     |  |      | (76     | ) |      |   | (342    | )
|Proceeds from early termination of notes receivable                        |  |      | 1,223   |   |      |   | 2,303   |  
|Proceeds from sales of lease assets                                        |  |      | -       |   |      |   | 497     |  
|Payments of initial direct costs                                           |  |      | (12     | ) |      |   | (201    | )
|Payments received on direct finance leases                                 |  |      | 10      |   |      |   | 9       |  
|Note receivable advances                                                   |  |      | (625    | ) |      |   | (3,725  | )
|Proceeds from sale of securities                                           |  |      | 206     |   |      |   | 93      |  
|Payments received on notes receivable                                      |  |      | 2,904   |   |      |   | 3,527   |  
|                                                                           |  |      |         |   |      |   |         |  
|Net cash provided by (used in) investing activities                        |  |      | 3,087   |   |      |   | (18,641 | )
|                                                                           |  |      |         |   |      |   |         |  
|                                                                           |  |     
|Financing activities:                                                      |  |      |         |   |      |   |         |  
|Borrowings under non-recourse debt                                         |  |      | 2,738   |   |      |   | 23,121  |  
|Repayments under non-recourse debt                                         |  |      | (5,928  | ) |      |   | (2,542  | )
|Borrowings under acquisition facility                                      |  |      | 3,000   |   |      |   | 13,500  |  
|Repayments under acquisition facility                                      |  |      | (6,500  | ) |      |   | (19,000 | )
|Distributions to Other Members                                             |  |      | (4,838  | ) |      |   | (4,838  | )
|Distributions to Managing Member                                           |  |      | (392    | ) |      |   | (426    | )
|Rescissions and repurchases of capital contributions                       |  |      | -       |   |      |   | (20     | )
|                                                                           |  |      |         |   |      |   |         |  
|Net cash (used in) provided by financing activities                        |  |      | (11,920 | ) |      |   | 9,795   |  
|                                                                           |  |      |         |   |      |   |         |  
|                                                                           |  |     
|Net decrease in cash and cash equivalents                                  |  |      | (758    | ) |      |   | (3,240  | )
|Cash and cash equivalents at beginning of year                             |  |      | 1,662   |   |      |   | 4,902   |  
|                                                                           |  |      |         |   |      |   |         |  
|Cash and cash equivalents at end of year                                   |  | $    | 904     |   |      | $ | 1,662   |  
|                                                                           |  |      |         |   |      |   |         |  
|                                                                           |  |     
|Supplemental disclosures of cash flow information:                         |  |      |         |   |      |   |         |  
|Cash paid during the year for interest                                     |  | $    | 1,335   |   |      | $ | 988     |  
|                                                                           |  |      |         |   |      |   |         |  
|Cash paid during the year for taxes                                        |  | $    | 35      |   |      | $ | 33      |  
|                                                                           |  |      |         |   |      |   |         |  
|Schedule of non-cash transactions:                                         |  |      |         |   |      |   |         |  
|Distributions payable to Other Members at year-end                         |  | $    | 554     |   |      | $ | 554     |  
|                                                                           |  |      |         |   |      |   |         |  

See accompanying notes.



18



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



|1. | Organization and Limited Liability Company matters:
|-- | ---------------------------------------------------

ATEL Capital
Equipment Fund XI, LLC (the Company) was formed under the laws of the State of California on June 25, 2004. The Company was formed for the purpose of acquiring equipment to engage in equipment leasing, lending and sales activities.
Also, from time to time, the Company may purchase securities of its borrowers or receive warrants to purchase securities in connection with its lending arrangements. The Managing Member of the Company is ATEL Financial Services, LLC
(AFS), a California limited liability company. The Company may continue until December 31, 2025. Each Members personal liability for obligations of the Company generally will be limited to the amount of their respective
contributions and rights to undistributed profits and assets of the Company.

The Company conducted a public offering of 15,000,000 Limited Liability
Company Units (Units), at a price of $10 per Unit. On May 31, 2005, subscriptions for the minimum number of Units (120,000, representing $1.2 million) had been received and AFS requested that the subscriptions be released to the
Company. On that date, the Company commenced operations in its primary business (acquiring equipment to engage in equipment leasing, lending and sales activities). As of July 13, 2005, the Company had received subscriptions for 958,274 Units
($9.6 million), thus exceeding the $7.5 million minimum requirement for Pennsylvania, and AFS requested that the remaining funds in escrow (from Pennsylvania investors) be released to the Company. The Company terminated sales of Units effective
April 30, 2006. Net contributions of $52.3 million were received through December 31, 2008, consisting of approximately $52.8 million in gross contributions from Other Members purchasing Units under the public offering less rescissions and
repurchases of $532 thousand. As of December 31, 2008, 5,230,507 Units were issued and outstanding.

The Companys principal objectives are to
invest in a diversified portfolio of equipment that (i) preserves, protects and returns the Companys invested capital; (ii) generates regular distributions to the Members of cash from operations and cash from sales or refinancing,
with any balance remaining after certain minimum distributions to be used to purchase additional equipment during the reinvestment period (Reinvestment Period) (defined as six full years following the year the offering was terminated),
which ends December 31, 2012, and (iii) provides additional distributions following the Reinvestment Period and until all equipment has been sold. The Company is governed by its Limited Liability Company Operating Agreement
(Operating Agreement), as amended.

The Company, or AFS on behalf of the Company, has incurred costs in connection with the organization,
registration and issuance of the Limited Liability Company Units (see Note 7). The amount of such costs to be borne by the Company is limited by certain provisions of the Companys Operating Agreement. The Company will pay AFS and affiliates of
AFS substantial fees which may result in a conflict of interest. The Company will pay substantial fees to AFS and its affiliates before distributions are paid to investors even if the Company does not produce profits. Therefore, the financial
position of the Company could change significantly.

The Company is in its acquisition phase and is making distributions on a monthly and quarterly basis.
Periodic distributions commenced in June 2005.



|2. | Summary of significant accounting policies:
|-- | -------------------------------------------

Basis of
presentation:

The accompanying balance sheets as of December 31, 2008 and 2007, and the related statements of operations and changes in
members capital and cash flows for the years then ended, have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). Certain prior year amounts have been reclassified to
conform to the current year presentation. These reclassifications had no effect on equity or net income.

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

Use of estimates:

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could



19



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



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



differ from those estimates. Such estimates primarily relate to the determination of residual values at the end of the lease term and expected future cash
flows used for impairment analysis purposes and for determination of the allowance for doubtful accounts and reserve for credit losses on notes receivable.

Cash and cash equivalents:

Cash and cash equivalents include cash in banks and cash equivalent investments such as U.S. Treasury
instruments with original and/or purchased maturities of ninety days or less.

Accounts receivable:

Accounts receivable represent the amounts billed under operating and direct financing lease contracts which are currently due to the Company. Allowances for doubtful
accounts are established based on historical charge off and collection experience and the collectability of specifically identified lessees and invoiced amounts. Accounts receivable deemed uncollectible are charged off against the allowance on
specific identification basis. Recoveries of amounts that were previously written-off are recorded as other income in the period received.

Credit risk:

Financial instruments that potentially subject the Company to concentrations of credit risk include cash and cash equivalents, direct finance lease
receivables, notes receivable and accounts receivable. The Company places the majority of its cash deposits and temporary cash investments in U.S. Treasury denominated instruments with the remainder placed in financial institutions where the
principal is 100% guaranteed under the Troubled Asset Relief Program Act of 2008 (TARP), so as to meet ongoing working capital requirements. The concentration of such deposits and temporary cash investments is not deemed to create a
significant risk to the Company. Accounts and notes receivable represent amounts due from lessees or borrowers in various industries, related to equipment on operating and direct financing leases or notes receivable. See Note 3 for a description of
lessees and financial borrowers by industry as of December 31, 2008 and 2007.

Equipment on operating leases and related revenue recognition:

Equipment subject to operating leases is stated at cost. Depreciation is being recognized on a straight-line method over the terms of the related leases to
the equipments estimated residual values at the end of the leases. Maintenance costs associated with the Funds portfolio of leased assets are expensed upon receipt of invoice.

Operating lease revenue is recognized on a straight-line basis over the term of the underlying leases. The initial lease terms will vary as to the type of equipment
subject to the leases, the needs of the lessees and the terms to be negotiated, but initial leases are generally on terms from 36 to 120 months. The difference between rent received and rental revenue recognized is recorded as unearned operating
lease income on the balance sheet.

Direct financing leases and related revenue recognition:

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

Allowances for losses on direct financing leases are typically established based on historical charge off and collection experience and the collectability of
specifically identified lessees and billed and unbilled receivables. Direct financing leases are charged-off to the allowance as they are deemed uncollectible.



20



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



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



Direct financing leases are generally placed in a non-accrual status (i.e., no revenue is recognized) when payments are more than 90 days past due. Additionally,
management periodically reviews the credit worthiness of all direct finance lessees with payments outstanding less than 90 days. Based upon managements judgment, direct finance lessees may be placed in a non-accrual status. Leases placed on
non-accrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the remaining unpaid lease payments is probable.

Notes receivable, unearned interest income and related revenue recognition:

The Company records all future payments
of principal and interest on notes as notes receivable, which is then offset by the amount of any related unearned interest income. For financial statement purposes, the Company reports only the net amount of principal due on the balance sheet. The
unearned interest is recognized over the term of the note and the income portion of each note payment is calculated so as to generate a constant rate of return on the net balance outstanding. Any fees or costs related to notes receivable are
recorded as part of the net investment in notes receivable and amortized over the term of the loan.

Allowances for losses on notes receivable are
typically established based on historical charge off and collection experience and the collectability of specifically identified borrowers and billed and unbilled receivables. Notes are considered impaired when, based on current information and
events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the note agreement. Factors considered by management in determining impairment include
payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Notes are charged off to the allowance as they are deemed uncollectible.

Notes receivable are generally placed in a non-accrual status (i.e., no revenue is recognized) when payments are more than 90 days past due. Additionally, management
periodically reviews the creditworthiness of companies with note payments outstanding less than 90 days. Based upon managements judgment, notes may be placed in a non-accrual status. Notes placed on non-accrual status are only returned to an
accrual status when the account has been brought current and management believes recovery of the remaining unpaid receivable is probable. The fair value of the Companys notes receivable is commensurate with the amount at which the asset could
be collected in a current transaction, exclusive of transaction costs such as prepayment penalties. The estimated fair value of the Companys notes receivable was $4.0 million and $7.3 million at December 31, 2008 and 2007, respectively.

Initial direct costs:

The Company capitalizes initial
direct costs (IDC) associated with the origination and funding of lease assets and investments in notes receivable as defined in Statement of Financial Accounting Standards (SFAS) No. 91, Accounting for
Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases. IDC includes both internal costs (e.g., the costs of employees activities in connection with successful lease and loan
originations) and external broker fees incurred with such originations. The costs are amortized on a lease by lease (or note by note) basis based on actual contract term using a straight-line method for operating leases and the effective interest
rate method for direct finance leases and notes receivable. Upon disposal of the underlying lease or loan assets, both the initial direct costs and the associated accumulated amortization are relieved. Costs related to leases or notes receivable
that are not consummated are not eligible for capitalization as initial direct costs and are expensed as acquisition expense.

Acquisition expense:

Acquisition expense represents costs which include, but are not limited to, legal fees and expenses, travel and communication expenses, cost of appraisals,
accounting fees and expenses and miscellaneous expenses related to the selection and acquisition of equipment which are reimbursable to the Managing Member under the terms of the Operating Agreement. As the costs are not eligible for capitalization
as initial direct costs, such amounts are expensed as incurred.



21



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



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



Asset valuation:

Recorded values of the Companys asset
portfolio are periodically reviewed for impairment in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. An impairment loss is measured and recognized only if the estimated undiscounted
future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the estimated residual value of the asset at the end of the assets expected holding period and estimates of
undiscounted future rents. The residual value assumes, among other things, that the asset is utilized normally in an open, unrestricted and stable market. Short-term fluctuations in the market place are disregarded and it is assumed that there is no
necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly. Impairment is measured as the difference between the fair value (as determined by a valuation method using
discounted estimated future cash flows) of the asset and its carrying value on the measurement date.

Segment reporting:

The Company reports segment information in accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. SFAS
No. 131 establishes annual and interim standards for operating segments of a company. It also requires entity-wide disclosures about the products and services an entity provides, the material countries in which it holds assets and reports
revenue, and its major customers. The Company is not organized by multiple operating segments for the purpose of making operating decisions or assessing performance. Accordingly, the Company operates in one reportable operating segment in the United
States.

The Companys principal decision makers are the Managing Members Chief Executive Officer and its Chief Financial Officer and Chief
Operating Officer. The Company believes that its equipment leasing business operates as one reportable segment because: a) the Company measures profit and loss at the equipment portfolio level as a whole; b) the principal decision makers do not
review information based on any operating segment other than the equipment leasing transaction portfolio; c) the Company does not maintain discrete financial information on any specific segment other than its equipment financing operations; d) the
Company has not chosen to organize its business around different products and services other than equipment lease financing; and e) the Company has not chosen to organize its business around geographic areas.

The primary geographic regions in which the Company seeks leasing opportunities are North America and Europe. The table below summarizes geographic information relating
to the sources, by nation, of the Companys total revenues for the years ended December 31, 2008 and 2007 and long-lived assets as of December 31, 2008 and 2007 (in thousands):



|                    |  |                                 |        |            |      |      |   |            |  |     
|------------------- |  | ------------------------------- | ------ | ---------- | ---- | ---- | - | ---------- |  | ----
|                    |  | For the year ended December 31,
|                    |  | 2008                            |        | % of Total |      | 2007 |   | % of Total
|Revenue             |  |                                 |        |            |      |      |   |            |  |     
|United States       |  | $                               | 11,632 |            | 92%  |      | $ | 10,310     |  | 91% 
|                    |  |                                 |        |            |      |      |   |            |  |     
|United Kingdom      |  |                                 | 983    |            | 8%   |      |   | 983        |  | 9%  
|                    |  |                                 |        |            |      |      |   |            |  |     
|Total International |  |                                 | 983    |            | 8%   |      |   | 983        |  | 9%  
|                    |  |                                 |        |            |      |      |   |            |  |     
|Total               |  | $                               | 12,615 |            | 100% |      | $ | 11,293     |  | 100%
|                    |  |                                 |        |            |      |      |   |            |  |     
|                    | 
|                    |  | As of December 31,             
|                    |  | 2008                            |        | % of Total |      | 2007 |   | % of Total
|Long-lived assets   |  |                                 |        |            |      |      |   |            |  |     
|United States       |  | $                               | 37,074 |            | 94%  |      | $ | 45,786     |  | 93% 
|                    |  |                                 |        |            |      |      |   |            |  |     
|United Kingdom      |  |                                 | 2,416  |            | 6%   |      |   | 3,320      |  | 7%  
|                    |  |                                 |        |            |      |      |   |            |  |     
|Total International |  |                                 | 2,416  |            | 6%   |      |   | 3,320      |  | 7%  
|                    |  |                                 |        |            |      |      |   |            |  |     
|Total               |  | $                               | 39,490 |            | 100% |      | $ | 49,106     |  | 100%
|                    |  |                                 |        |            |      |      |   |            |  |     



22



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



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



Investment in securities:

Purchased securities

Purchased securities are generally not registered for public sale and are carried at cost. Such securities are adjusted to fair value
if the fair value is less than the carrying value and such impairment is deemed by the Managing Member to be other than temporary. Factors considered by the Managing Member in determining fair value include, but are not limited to, available
financial information, the issuers ability to meet its current obligations and indications of the issuers subsequent ability to raise capital. Management has concluded that there are no identified events or changes in circumstances that
may have a significant adverse effect on the fair value of the instruments and that it is not practicable to estimate the fair value of the investment because of its illiquidity. Accordingly, such investment is stated at cost. See note 13 for
further discussion.

Warrants

Warrants owned by the Company are not registered for public sale, but are considered derivatives and are carried at an estimated fair value on the balance sheet at the end of the period, as determined by the Managing Member. At
December 31, 2008 and 2007, the Managing Member estimated the fair value of the warrants to be nominal in amount.

Foreign currency transactions:

Foreign currency transaction gains and losses are reported in the results of operations as other income or other loss in the
period in which they occur. Currently, the Company does not use derivative instruments to hedge its economic exposure with respect to assets, liabilities and firm commitments as the foreign currency transactions risks to date have not been
significant. The Company recognized net foreign currency gains of $8 thousand and $100 thousand for the years ended December 31, 2008 and 2007, respectively. Such net foreign currency gains are reflected as other income, net.

Unearned operating lease income:

The Company records prepayments on
operating leases as a liability, unearned operating lease income. The liability is recorded when the prepayments are received and recognized as operating lease revenue ratably over the period to which the prepayments relate.

Income taxes:

The Company is treated as a partnership for federal
income tax purposes. Pursuant to the provisions of Section 701 of the Internal Review Code, a partnership is not subject to federal income taxes. Accordingly, the Company has provided current income taxes for only those states, which levy
income taxes on partnerships. For the years ended December 31, 2008 and 2007, the current provision for state income taxes was approximately $24 thousand and $30 thousand, respectively.

The tax bases of the Companys net assets and liabilities vary from the amounts presented in these financial statements at December 31, 2008 and 2007 as
follows (in thousands):



|                                        |  |      |        |      |   |       
|--------------------------------------- |  | ---- | ------ | ---- | - | ------
|                                        |  | 2008 |        | 2007
|Financial statement basis of net assets |  | $    | 25,514 |      | $ | 31,627
|Tax basis of net assets (unaudited)     |  |      | 23,274 |      |   | 31,286
|                                        |  |      |        |      |   |       
|Difference                              |  | $    | 2,240  |      | $ | 341   
|                                        |  |      |        |      |   |       

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 Companys tax returns.



23



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



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



The following reconciles the net losses reported in these financial statements to the net losses reported on the Companys federal tax returns (unaudited) for the
years ended December 31, 2008 and 2007, respectively (in thousands):



|                                            |  |      |        |   |      |   |        |  
|------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                            |  | 2008 |        |   | 2007 |  
|Net loss per financial statements           |  | $    | (883   | ) |      | $ | (1,224 | )
|Tax adjustments (unaudited):                |  |      |        |   |      |   |        |  
|Adjustment to depreciation expense          |  |      | (1,740 | ) |      |   | (4,423 | )
|Provision for doubtful accounts             |  |      | 53     |   |      |   | 94     |  
|Provision for losses                        |  |      | 479    |   |      |   | -      |  
|Adjustments to revenues                     |  |      | (691   | ) |      |   | (93    | )
|Adjustments to gain on sales of assets      |  |      | -      |   |      |   | 29     |  
|Other                                       |  |      | -      |   |      |   | (258   | )
|                                            |  |      |        |   |      |   |        |  
|Net loss per federal tax return (unaudited) |  | $    | (2,782 | ) |      | $ | (5,875 | )
|                                            |  |      |        |   |      |   |        |  

Other income, net:

During the year ended December 31, 2008 and 2007, other income, net was comprised of gains on foreign currency transactions.

Per unit
data:

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

Recent accounting pronouncements:

In October 2008,
the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) No. FAS 157-3, Determining the Fair Value of a Financial Asset in a Market That Is Not Active (FSP No. 157-3),
which clarifies the application of SFAS No. 157, Fair Value Measurements (SFAS 157), when the market for a financial asset is inactive. Specifically, FSP No. 157-3 clarifies how (1) managements internal
assumptions should be considered in measuring fair value when observable data are not present, (2) observable market information from an inactive market should be taken into account, and (3) the use of broker quotes or pricing services
should be considered in assessing the relevance of observable and unobservable data to measure fair value. The guidance in FSP No. 157-3 is effective immediately and was adopted by the Company on October 1, 2008. The adoption of FSP
No. 157-3 did not have a significant effect on the Companys financial position, results of operations or cash flows.

In March 2008, the FASB
issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS 161), as an amendment to SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.
SFAS 161 requires that objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation. The fair value of derivative instruments and their gains and losses will need to be presented in tabular
format in order to present a more complete picture of the effects of using derivative instruments. SFAS 161 is effective for financial statements issued for fiscal years beginning after November 15, 2008. The Company is currently
evaluating the impact of adopting this pronouncement.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141R,
Business Combinations (SFAS 141R). SFAS 141R replaces SFAS 141 and establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the
liabilities assumed, any non controlling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination.
This standard is effective for fiscal years beginning after December 15, 2008. The Company does not presently anticipate the adoption of SFAS 141R to significantly impact its financial position, results of operations or cash flows.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilitiesincluding an amendment of FASB
Statement No. 115 (SFAS 159). This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with
the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value
measurement, which is consistent with the Boards long-term measurement objectives for accounting for financial instruments. The Company adopted the provisions of SFAS 159 on January 1, 2008. The adoption of SFAS 159 did not have a
significant effect on the Companys financial position, results of operations or cash flows.



24



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ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



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



In September 2006, the FASB issued SFAS 157. This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair
value and requires additional disclosures about the use of fair value measurements. The provisions of SFAS 157 were to be effective for fiscal years beginning after November 15, 2007. However, in February 2008, the FASB issued FSP
No. FAS 157-2, Effective Date of FASB Statement No. 157 (FSP No. 157-2), which defers the effective date of SFAS 157 as it pertains to fair value measurements of nonfinancial assets and nonfinancial liabilities
until fiscal years beginning after November 15, 2008. On January 1, 2008, the Company adopted the provisions of SFAS 157 except as it applied to its investment in leases, and other nonfinancial assets and nonfinancial liabilities as
noted in FSP No. 157-2. The partial adoption of SFAS 157 did not have a significant effect on the Companys financial position, results of operations or cash flows. The Company is in the process of evaluating the impact of the deferred
provisions of SFAS 157.



|3. | Concentration of credit risk and major customers:
|-- | -------------------------------------------------

The Company
leases equipment to lessees and provides debt financing to borrowers in diversified industries. Leases and notes receivable are subject to AFSs credit committee review. The leases and notes receivable provide for the return of the equipment to
the Company upon default.

As of December 31, 2008 and 2007, there were concentrations (greater than 10% as a percentage of total equipment cost) of
equipment leased to lessees and/or financial borrowers in certain industries as follows:



|                        |  |      |  |      |  | 
|----------------------- |  | ---- |  | ---- |  | 
|                        |  | 2008 |  | 2007 |  | 
|Transportation services |  | 37%  |  | 37%  | 
|Material handling       |  | 33%  |  | 32%  | 
|Construction            |  | 19%  |  | 19%  | 

During 2008 and 2007, certain lessees generated significant portions of the Companys total operating
revenues as follows:



|                               |  |                    |  |                                       |  |     
|------------------------------ |  | ------------------ |  | ------------------------------------- |  | ----
|                               |  |                    |  | Percentage of Total    Lease Revenues
|Lessee                         |  | Type of Equipment  |  | 2008                                  |  | 2007
|Washington Group International |  | Construction       |  | 12%                                   |  | *   
|New NGC, Inc.                  |  | Materials handling |  | 11%                                   |  | *   
|International Paper Co.        |  | Materials handling |  | 10%                                   |  | 13% 
|Union Pacific                  |  | Transportation     |  | 10%                                   |  | 11% 



|* | Less than 10%
|- | -------------



|4. | Notes receivable, net:
|-- | ----------------------

The Company has various notes receivable
from borrowers who have financed the purchase of equipment through the Company. The terms of the notes receivable were generally up to 120 months and bear interest at rates ranging from 8.5% to 16.0%. The notes are secured by the equipment financed.
The notes mature from 2009 through 2016. At December 31, 2008, the Company had a $479 thousand reserve for impairment losses related to a $499 thousand note receivable. There were no impaired notes at December 31, 2007.



25



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



The minimum future payments receivable as of December 31, 2008 are as follows (in thousands):



|                                                    |  |   |       |  
|--------------------------------------------------- |  | - | ----- | -
|Year ending December 31, 2009                       |  | $ | 1,948 |  
|2010                                                |  |   | 1,627 |  
|2011                                                |  |   | 514   |  
|2012                                                |  |   | 399   |  
|2013                                                |  |   | 295   |  
|Thereafter                                          |  |   | 576   |  
|                                                    |  |   |       |  
|                                                    |  |   | 5,359 |  
|Less: portion representing unearned interest income |  |   | (896  | )
|                                                    |  |   |       |  
|                                                    |  |   | 4,463 |  
|Unamortized indirect costs                          |  |   | 10    |  
|Less: allowance for credit losses                   |  |   | (479  | )
|                                                    |  |   |       |  
|Notes receivable, net                               |  | $ | 3,994 |  
|                                                    |  |   |       |  

IDC amortization expense related to notes receivable and the Companys operating and direct finance leases
for years ended December 31, 2008 and 2007 are as follows (in thousands):



|                                    |  |                                |     |      |   |    
|----------------------------------- |  | ------------------------------ | --- | ---- | - | ---
|                                    |  | For the year endedDecember 31,
|                                    |  | 2008                           |     | 2007
|IDC amortization - notes receivable |  | $                              | 21  |      | $ | 28 
|IDC amortization - lease assets     |  |                                | 184 |      |   | 160
|                                    |  |                                |     |      |   |    
|Total                               |  | $                              | 205 |      | $ | 188
|                                    |  |                                |     |      |   |    



|5. | Allowance for credit losses:
|-- | ----------------------------

The table below shows the
Companys allowance for credit losses as of December 31, 2008 and 2007 (in thousands):



|                            |  |                                      |      |   |                                   |   |       |  |   |      |  
|--------------------------- |  | ------------------------------------ | ---- | - | --------------------------------- | - | ----- |  | - | ---- | -
|                            |  | Reserve for    Losses andImpairments |      |   | Allowance for    DoubtfulAccounts |   | Total | 
|Balance December 31, 2006   |  | $                                    | 143  |   |                                   | $ | 31    |  | $ | 174  |  
|Provision for credit losses |  |                                      | -    |   |                                   |   | 94    |  |   | 94   |  
|Charge-offs                 |  |                                      | (143 | ) |                                   |   | -     |  |   | (143 | )
|                            |  |                                      |      |   |                                   |   |       |  |   |      |  
|Balance December 31, 2007   |  |                                      | -    |   |                                   |   | 125   |  |   | 125  |  
|Provision for credit losses |  |                                      | 496  |   |                                   |   | 53    |  |   | 549  |  
|Charge-offs                 |  |                                      | (17  | ) |                                   |   | -     |  |   | (17  | )
|                            |  |                                      |      |   |                                   |   |       |  |   |      |  
|Balance December 31, 2008   |  | $                                    | 479  |   |                                   | $ | 178   |  | $ | 657  |  
|                            |  |                                      |      |   |                                   |   |       |  |   |      |  



26



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ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



|6. | Investments in equipment and leases, net:
|-- | -----------------------------------------



The Companys investment in leases consists of the following (in thousands):



|                                                                                                                 |  |                             |        |                                               |   |                                                              |  |   |                             |   |  |   |       
|---------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | --------------------------------------------- | - | ------------------------------------------------------------ |  | - | --------------------------- | - |  | - | ------
|                                                                                                                 |  | Balance    December 31,2007 |        | Reclassifications    &Additions /Dispositions |   | Depreciation/    AmortizationExpense orAmortizationof
Leases |  |   | Balance    December 31,2008
|Net investment in operating leases                                                                               |  | $                           | 48,524 |                                               | $ | 543                                                          |  | $ | (9,976                      | ) |  | $ | 39,091
|Net investment in direct financing leases                                                                        |  |                             | 49     |                                               |   | -                                                            |  |   | (7                          | ) |  |   | 42    
|Initial direct costs, net of accumulated amortization of $368 at December 31, 2008 and $279 at December 31, 2007 |  |                             | 533    |                                               |   | 8                                                            |  |   | (184                        | ) |  |   | 357   
|                                                                                                                 |  |                             |        |                                               |   |                                                              |  |   |                             |   |  |   |       
|Total                                                                                                            |  | $                           | 49,106 |                                               | $ | 551                                                          |  | $ | (10,167                     | ) |  | $ | 39,490
|                                                                                                                 |  |                             |        |                                               |   |                                                              |  |   |                             |   |  |   |       

Additions to net investment in operating leases are stated at cost and include amounts accrued at
December 31, 2008 and 2007 related to asset purchase obligations.

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

Management periodically reviews the carrying values of its assets on leases and assets held for lease or sale. No impairment losses were recorded in
2008 or 2007. Depreciation expense on property subject to operating leases and property held for lease or sale was $10.0 million and $8.5 million for the years ended December 31, 2008 and 2007, respectively.

All of the leased property was acquired during the years 2005 through 2008.

Operating leases:

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



|                              |  |                             |         |   |           |   |        |                                      |  |                             |   |  |   |         |  
|----------------------------- |  | --------------------------- | ------- | - | --------- | - | ------ | ------------------------------------ |  | --------------------------- | - |  | - | ------- | -
|                              |  | Balance    December 31,2007 |         |   | Additions |   |        | Reclassifications    or Dispositions |  | Balance    December 31,2008 |  
|Materials handling            |  | $                           | 19,901  |   |           | $ | 543    |                                      |  | $                           | - |  | $ | 20,444  |  
|Construction                  |  |                             | 11,881  |   |           |   | -      |                                      |  |                             | - |  |   | 11,881  |  
|Transportation, rail          |  |                             | 11,723  |   |           |   | -      |                                      |  |                             | - |  |   | 11,723  |  
|Transportation, other         |  |                             | 11,122  |   |           |   | -      |                                      |  |                             | - |  |   | 11,122  |  
|Logging and lumber            |  |                             | 2,001   |   |           |   | -      |                                      |  |                             | - |  |   | 2,001   |  
|Aviation                      |  |                             | 1,658   |   |           |   | -      |                                      |  |                             | - |  |   | 1,658   |  
|Manufacturing                 |  |                             | 1,499   |   |           |   | -      |                                      |  |                             | - |  |   | 1,499   |  
|Marine                        |  |                             | 1,415   |   |           |   | -      |                                      |  |                             | - |  |   | 1,415   |  
|Research                      |  |                             | 725     |   |           |   | -      |                                      |  |                             | - |  |   | 725     |  
|Office furniture              |  |                             | 146     |   |           |   | -      |                                      |  |                             | - |  |   | 146     |  
|                              |  |                             |         |   |           |   |        |                                      |  |                             |   |  |   |         |  
|                              |  |                             | 62,071  |   |           |   | 543    |                                      |  |                             | - |  |   | 62,614  |  
|Less accumulated depreciation |  |                             | (13,547 | ) |           |   | (9,976 | )                                    |  |                             | - |  |   | (23,523 | )
|                              |  |                             |         |   |           |   |        |                                      |  |                             |   |  |   |         |  
|Total                         |  | $                           | 48,524  |   |           | $ | (9,433 | )                                    |  | $                           | - |  | $ | 39,091  |  
|                              |  |                             |         |   |           |   |        |                                      |  |                             |   |  |   |         |  

The average estimated residual value for assets on operating leases was 22% of the assets original cost at
December 31, 2008 and 2007.



27



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



|6. | Investment in equipment and leases, net (continued):
|-- | ----------------------------------------------------



Direct financing leases:

As of December 31, 2008, investment in
direct financing leases consists of materials handling equipment and office furniture. The following lists the components of the Companys investment in direct financing leases as of December 31, 2008 and 2007 (in thousands):



|                                                            |  |      |    |   |      |   |    |  
|----------------------------------------------------------- |  | ---- | -- | - | ---- | - | -- | -
|                                                            |  | 2008 |    |   | 2007 |  
|Total minimum lease payments receivable                     |  | $    | 37 |   |      | $ | 47 |  
|Estimated residual values of leasedequipment (unguaranteed) |  |      | 10 |   |      |   | 10 |  
|                                                            |  |      |    |   |      |   |    |  
|Investment in direct financing leases                       |  |      | 47 |   |      |   | 57 |  
|Less unearned income                                        |  |      | (5 | ) |      |   | (8 | )
|                                                            |  |      |    |   |      |   |    |  
|Net investment in direct financing leases                   |  | $    | 42 |   |      | $ | 49 |  
|                                                            |  |      |    |   |      |   |    |  

At December 31, 2008, the aggregate amounts of future minimum lease payments receivable are as follows (in
thousands):



|                              |  |                         |        |                                       |   |       |  |   |       
|----------------------------- |  | ----------------------- | ------ | ------------------------------------- | - | ----- |  | - | ------
|                              |  | Operating        Leases |        | Direct        Financing        Leases |   | Total
|Year ending December 31, 2009 |  | $                       | 10,051 |                                       | $ | 10    |  | $ | 10,061
|2010                          |  |                         | 8,947  |                                       |   | 9     |  |   | 8,956 
|2011                          |  |                         | 5,977  |                                       |   | 9     |  |   | 5,986 
|2012                          |  |                         | 2,920  |                                       |   | 9     |  |   | 2,929 
|2013                          |  |                         | 1,848  |                                       |   | -     |  |   | 1,848 
|Thereafter                    |  |                         | 1,839  |                                       |   | -     |  |   | 1,839 
|                              |  |                         |        |                                       |   |       |  |   |       
|                              |  | $                       | 31,582 |                                       | $ | 37    |  | $ | 31,619
|                              |  |                         |        |                                       |   |       |  |   |       

The Company utilizes a straight line depreciation method for equipment in all of the categories currently in its
portfolio of operating lease transactions. The useful lives for investment in leases by category are as follows (in years):



|                      |  |             |  | 
|--------------------- |  | ----------- |  | 
|Equipment category    |  | Useful Life |  | 
|Transportation, rail  |  | 30 - 35     |  | 
|Aviation              |  | 20 - 30     |  | 
|Marine vessels        |  | 20 - 30     |  | 
|Manufacturing         |  | 10 - 20     |  | 
|Construction          |  | 7 - 10      |  | 
|Logging & lumber      |  | 7 - 10      |  | 
|Materials handling    |  | 7 - 10      |  | 
|Office furniture      |  | 7 - 10      |  | 
|Research              |  | 7 - 10      |  | 
|Transportation, other |  | 7 - 10      |  | 



|7. | Related party transactions:
|-- | ---------------------------

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

The
Operating Agreement allows for the reimbursement of costs incurred by AFS in providing administrative services to the Company. Administrative services provided include Company accounting, finance/treasury, investor relations, legal counsel and lease
and equipment documentation. AFS is not reimbursed for services whereby it is entitled to receive a separate fee as compensation for such services, such as management of equipment. Reimbursable costs incurred by AFS are



28



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS

7.     Related party transactions
(continued):



allocated to the Company based upon estimated time incurred by employees working on Company business and an allocation of rent and other costs based on
utilization studies.

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

Cost reimbursements to the Managing Member are based on its costs incurred in performing administrative services for the Company. These costs are
allocated to each managed entity based on certain criteria such as total assets, number of investors or contributed capital based upon the type of cost incurred.

The Operating Agreement places an annual limit and a cumulative limit for cost reimbursements to AFS and/or affiliates. Any reimbursable costs incurred by AFS and/or affiliates during the year exceeding the annual and/or cumulative limits
cannot be reimbursed in the current year, though such costs may be reimbursable in future years to the extent of the cumulative limit. As of December 31, 2008, the Company has not exceeded the annual and/or cumulative limitations discussed
above.

AFS and/or affiliates earned fees, commissions and reimbursements, pursuant to the Operating Agreement as follows during each of the years ended
December 31, 2008 and 2007:



|                                                             |  |      |       |      |   |      
|------------------------------------------------------------ |  | ---- | ----- | ---- | - | -----
|                                                             |  | 2008 |       | 2007
|Administrative costs reimbursed to Managing Member           |  | $    | 498   |      | $ | 523  
|Asset management fees to Managing Member                     |  |      | 648   |      |   | 629  
|Acquisition and initial direct costs paid to Managing Member |  |      | 55    |      |   | 1,059
|                                                             |  |      |       |      |   |      
|                                                             |  | $    | 1,201 |      | $ | 2,211
|                                                             |  |      |       |      |   |      



|8. | Non-recourse debt:
|-- | ------------------

At December 31, 2008 and 2007,
non-recourse debt consists of notes payable to financial institutions. The notes are due in varying quarterly and semi-annual installments. Interest on the notes is at fixed rates ranging from 4.33% to 6.65%. The notes are secured by assignments of
lease payments and pledges of assets. At December 31, 2008, gross lease rentals totaled approximately $19.6 million over the remaining lease terms; and the carrying value of the pledged assets is approximately $23.2 million. The notes mature
from 2009 through 2015.

Future minimum payments of non-recourse debt are as follows (in thousands):



|                              |  |           |        |          |   |       |  |   |       
|----------------------------- |  | --------- | ------ | -------- | - | ----- |  | - | ------
|                              |  | Principal |        | Interest |   | Total
|Year ending December 31, 2009 |  | $         | 4,980  |          | $ | 893   |  | $ | 5,873 
|2010                          |  |           | 4,766  |          |   | 604   |  |   | 5,370 
|2011                          |  |           | 3,660  |          |   | 343   |  |   | 4,003 
|2012                          |  |           | 1,460  |          |   | 183   |  |   | 1,643 
|2013                          |  |           | 1,065  |          |   | 118   |  |   | 1,183 
|Thereafter                    |  |           | 1,458  |          |   | 80    |  |   | 1,538 
|                              |  |           |        |          |   |       |  |   |       
|                              |  | $         | 17,389 |          | $ | 2,221 |  | $ | 19,610
|                              |  |           |        |          |   |       |  |   |       



29



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



|9. | Borrowing facilities:
|-- | ---------------------



The Company participates with AFS and certain of its affiliates in a financing arrangement (comprised of a working capital facility to AFS, an acquisition facility and a warehouse facility to AFS, the Company and
affiliates, and a venture facility available to an affiliate) with a group of financial institutions that includes certain financial covenants. The financial arrangement is for $75 million. Originally scheduled to expire in June 2009, the facility
was amended effective December 22, 2008 to extend the term of the agreement through June 2010. Under such amendment, the tangible net worth threshold for ATEL 12, LLC participation in the acquisition facility was reduced from $15 million to $7.5
million. As of December 31, 2008, ATEL 12, LLC was eligible to participate.

As of December 31, 2008 and 2007, borrowings under the facility were as
follows (in thousands):



|                                                                                                                          |  |      |        |   |      |   |        |  
|------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                                                                                                          |  | 2008 |        |   | 2007 |  
|Total available under the financing arrangement                                                                           |  | $    | 75,000 |   |      | $ | 75,000 |  
|Amount borrowed by the Company under the acquisition facility                                                             |  |      | (500   | ) |      |   | (4,000 | )
|Amounts borrowed by affiliated partnerships and limited liabilitycompanies under the acquisition and warehouse facilities |  |      | (8,323 | ) |      |   | (4,625 | )
|                                                                                                                          |  |      |        |   |      |   |        |  
|Total remaining available under the acquisition and warehouse facilities                                                  |  | $    | 66,177 |   |      | $ | 66,375 |  
|                                                                                                                          |  |      |        |   |      |   |        |  

The Company is contingently liable for principal payments under the warehouse facility as borrowings are recourse
jointly and severally to the extent of the pro-rata share of the Companys net worth as compared to the aggregate net worth of certain of the affiliated partnerships and limited liability companies of the Company and including AFS and ALC
(which latter two entities are 100% liable). The Company and its affiliates pay an annual commitment fee to have access to this line of credit. As of December 31, 2008, borrowings of $1.3 million were outstanding under the warehouse facility.
The Companys maximum obligation on the outstanding warehouse balance at December 31, 2008 was approximately $264 thousand. There were no borrowings under the warehouse facility as of December 31, 2007.

The interest rate on the Master Terms Agreement is based on either the LIBOR/Eurocurrency rate of 1-, 2-, 3- or 6-month maturity plus a lender designated spread, or the
banks Prime rate, which re-prices daily. Principal amounts of loans made under the Master Terms Agreement that are prepaid may be re-borrowed on the terms and subject to the conditions set forth under the Master Terms Agreement. The effective
interest rate on borrowings was 3.25% at December 31, 2008 and ranged from 6.11% to 6.35% at December 31, 2007. The weighted average interest rate on borrowings was 4.55% and 7.00% during the years ended December 31, 2008 and 2007,
respectively.

Draws on the acquisition facility by any affiliated partnership and/or limited liability company borrower are secured by a blanket lien on
that borrowers assets, including but not limited to equipment and related leases.

To manage the warehousing facility for the holding of assets prior
to allocation to specific investor programs, a Warehousing Trust Agreement has been entered into by the Company, AFS, ALC, and certain of the affiliated partnerships and limited liability companies. The warehousing facility is used to acquire and
hold, on a short-term basis, certain lease transactions that meet the investment objectives of each of such entities. Each of the leasing programs sponsored by AFS and ALC currently in its acquisition stage is a pro rata participant in the
Warehousing Trust Agreement, as described below. When a program no longer has a need for short term financing provided by the warehousing facility, it is removed from participation, and as new leasing investment entities are formed by AFS and ALC
and commence their acquisition stages, these new entities are added. As of December 31, 2008, the investment program participants were ATEL Capital Equipment Fund IX, LLC, ATEL Capital Equipment Fund X, LLC, the Company and ATEL 12, LLC.
Pursuant to the Warehousing Trust Agreement, the benefit of the lease transaction assets, and the corresponding liabilities under the warehouse borrowing facility, inure to each of such entities based upon each entitys pro-rata share in the
warehousing trust estate. The pro-rata share is calculated as a ratio of the net worth of each entity over the aggregate net worth of all entities benefiting from the warehouse trust estate, excepting that the trustees, AFS and ALC, are
both liable for their pro-rata shares of the obligations based on their respective net worth, and jointly liable for the pro rata portion of the obligations of each of the affiliated partnerships and limited liability companies participating under
the borrowing facility. Transactions are financed through this warehousing facility only until the transactions are allocated to a specific program for purchase or are otherwise disposed by AFS and ALC. When a determination is made to allocate the
transaction to a specific program



30



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



|9. | Borrowing facilities (continued):
|-- | ---------------------------------



for purchase by the program, the purchaser repays the debt associated with the asset, either with cash or by means of the acquisition facility financing, the
asset is removed from the warehouse facility collateral, and ownership of the asset and any debt obligation associated with the asset are assumed solely by the purchasing entity.

As of December 31, 2008, the full amount remaining available under the joint acquisition and warehouse facility is potentially available to the Company, subject to certain terms or agreement limitations. However,
as amounts are drawn on the facility by each of the Company and the affiliates who are borrowers under the facility, the amount available to all is reduced. As the warehousing facility is a short term bridge facility, any amounts borrowed under the
warehousing facility, and then repaid by the affiliated borrowers (including the Company) upon allocation of an acquisition to a specific purchaser, become available under the warehouse facility for further short term borrowing.

The financing arrangement discussed above includes certain financial and non-financial covenants applicable to each borrower. The Company and affiliates were in
compliance with all covenants as of December 31, 2008.



|10. | Commitments:
|--- | ------------

At December 31, 2008, the Company had no
outstanding commitments to purchase lease assets or finance loans.



|11. | Guarantees:
|--- | -----------

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

In the normal course of business, the Company enters into contracts of various types, including lease contracts, contracts for the sale or purchase of lease assets,
management contracts, loan agreements, credit lines and other debt facilities. It is prevalent industry practice for most contracts of any significant value to include provisions that each of the contracting partiesin addition to assuming
liability for breaches of the representations, warranties, and covenants that are part of the underlying contractual obligationsalso assume an obligation to indemnify and hold the other contracting party harmless for such breaches, for harm
caused by such partys gross negligence and willful misconduct, including, in certain instances, certain costs and expenses arising from the contract. The Managing Member has substantial experience in managing similar leasing programs subject
to similar contractual commitments in similar transactions, and the losses and claims arising from these commitments have been insignificant, if any. Generally, to the extent these contracts are performed in the ordinary course of business under the
reasonable business judgment of the Managing Member, no liability will arise as a result of these provisions. The Managing Member has no reason to believe that the facts and circumstances relating to the Companys contractual commitments differ
from those it has entered into on behalf of the prior programs it has managed. The Managing Member knows of no facts or circumstances that would make the Companys contractual commitments outside standard mutual covenants applicable to
commercial transactions between businesses. Accordingly, the Company believes that these indemnification obligations are made in the ordinary course of business as part of standard commercial and industry practice, and that any potential liability
under the Companys similar commitments is remote. Should any such indemnification obligation become payable, the Company would separately record and/or disclose such liability in accordance with GAAP.



|12. | Members capital:
|--- | -----------------

As of December 31, 2008 and 2007,
5,230,507 Units were issued and outstanding. The Fund was authorized to issue up to 15,000,000 Units in addition to the Units issued to the initial members (50 Units). The Company terminated sales of Units effective April 30, 2006.

During the year ended December 31, 2007, the Company rescinded or repurchased Units totaling 2,100. There were no such rescissions or repurchases of Units during
2008. Rescissions or repurchases of Units is solely at the discretion of the Managing Member.



31



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



|12. | Members capital (continued):
|--- | -----------------------------



During the years ended December 31, 2008 and 2007, distributions to the Other Members were as follows (in thousands, except as to Units and per Unit data):



|                                             |  |      |           |      |   |          
|-------------------------------------------- |  | ---- | --------- | ---- | - | ---------
|                                             |  | 2008 |           | 2007
|Distributions declared                       |  | $    | 4,838     |      | $ | 4,838    
|Weighted average number of Units outstanding |  |      | 5,230,507 |      |   | 5,231,645
|                                             |  |      |           |      |   |          
|Weighted average distributions per Unit      |  | $    | 0.92      |      | $ | 0.93     
|                                             |  |      |           |      |   |          



|13. | Fair value of financial instruments:
|--- | ------------------------------------

On January 1, 2008, the
Company adopted SFAS 157, except as it applies to the nonfinancial assets and nonfinancial liabilities subject to FSP No. 157-2 and FSP No. FAS 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other
Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13. SFAS 157 clarifies the definition of fair value, prescribes methods for measuring fair value,
establishes a fair value hierarchy based on the inputs used to measure fair value, and expands disclosures about fair value measurements. The three levels of inputs within the fair value hierarchy are defined as follows:

Level 1  Quoted prices in active markets for identical assets or liabilities. An active market for the asset or liability is a market in which transactions
for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2  Quoted
prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuations in which all significant inputs are observable in the market.

Level 3  Valuation is modeled using significant inputs that are unobservable in the market. These unobservable inputs reflect the Companys own estimates
of assumptions that market participants would use in pricing the asset or liability.

At December 31, 2008, the Company had no financial assets or
liabilities that require measurement on a recurring or non-recurring basis under SFAS 157.

Alternatively, the following disclosure of the estimated fair
value of financial instruments is made in accordance with the requirements of SFAS No. 107, Disclosures about Fair Value of Financial Instruments (SFAS 107). Fair value estimates, methods and assumptions, set forth below
for the Companys financial instruments, are made solely to comply with the requirements of SFAS No. 107 and should be read in conjunction with the Companys financial statements and related notes.

The Company has determined the estimated fair value amounts by using market information and valuation methodologies that it considers appropriate consistent with SFAS
157. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize or has realized in a
current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. For all of these reasons, the aggregation of the fair values presented herein does not
represent, and should not be construed to represent, their underlying value.

Cash and cash equivalents:

The recorded amounts of the Companys cash and cash equivalents at December 31, 2008 approximate fair value because of the liquidity and short-term maturity of
these instruments.

Notes receivable:

The
Companys notes receivable are stated at the amount at which the asset could be collected in a current transaction, exclusive of transaction costs such as prepayment penalties.



32



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ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



|13. | Fair value of financial instruments (continued):
|--- | ------------------------------------------------



Investment in securities

The Companys investment securities are
not registered for public sale and are carried at cost. The investment securities are adjusted for impairment, if any, based upon factors which include, but are not limited to, available financial information, the issuers ability to meet its
current obligations and indications of the issuers subsequent ability to raise capital. Management has concluded that there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of
the instruments and that it is not practicable to estimate the fair value of the investment because of its illiquidity. Accordingly, such investment is stated at cost.

Non-recourse debt:

The fair value of the Companys non-recourse debt is estimated using discounted cash flow
analyses, based upon the Companys estimated current incremental borrowing rates for similar types of borrowing arrangements.

Borrowings:

Borrowings include the outstanding amounts on the Companys acquisition facility. The carrying amount of these variable rate obligations approximate
fair value based on current borrowing rates for similar types of borrowings.

Limitations

The fair value estimates presented herein were based on pertinent information available to the Company as of December 31, 2008 and 2007. Although the Company is not
aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since those dates and, therefore, current estimates of fair value
may differ significantly from the amounts presented herein.

The following table presents estimated fair values of the Companys financial instruments
in accordance with SFAS 107 at December 31, 2008 and 2007 (in thousands):



|                          |  |                    |        |                         |   |                    |  |                         |        |  |   |       
|------------------------- |  | ------------------ | ------ | ----------------------- | - | ------------------ |  | ----------------------- | ------ |  | - | ------
|                          |  | 2008               |        | 2007                   
|                          |  | Carrying    Amount |        | Estimated    Fair Value |   | Carrying    Amount |  | Estimated    Fair Value
|Financial assets:         |  |                    |        |                         |   |                    |  |                         |        |  |   |       
|Cash and cash equivalents |  | $                  | 904    |                         | $ | 904                |  | $                       | 1,662  |  | $ | 1,662 
|Notes receivable          |  |                    | 3,994  |                         |   | 3,994              |  |                         | 7,336  |  |   | 7,336 
|                          |  |                    |        |                        
|Financial liabilities:    |  |                    |        |                         |   |                    |  |                         |        |  |   |       
|Non-recourse debt         |  |                    | 17,389 |                         |   | 18,457             |  |                         | 20,597 |  |   | 21,201
|Borrowings                |  |                    | 500    |                         |   | 500                |  |                         | 4,000  |  |   | 4,000 



33



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|Item 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
|------- | -------------------------------------------------------------------------------------

None.

Item 9A(T).   CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

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

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

Managements Annual Report on Internal Control over Financial Reporting

The Management of the Managing Member is responsible
for establishing and maintaining adequate internal control over financial reporting as that term is defined in Exchange Act Rule 13a-15(f) for the Company, and for performing an assessment of the effectiveness of internal control over financial
reporting as of December 31, 2008. The internal control process of the Managing Member, as it is applicable to the Company, was designed to provide reasonable assurance to Management regarding the preparation and fair presentation of published
financial statements, and includes those policies and procedures that:



| | (1) | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in
the United States, and that the Companys receipts and expenditures are being made only in accordance with authorization of the Management of the Managing Member; and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets that could have a material effect
on the financial statements.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

All internal control processes, no matter how well designed, have inherent limitations. Therefore, even those
processes determined to be effective can provide only reasonable assurance with respect to the reliability of financial statement preparation and presentation. Further, projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Management of the Managing Member assessed the effectiveness of its internal control over financial reporting, as it is applicable to the Company, as of December 31, 2008. In making this assessment, it used the criteria set forth in
Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its assessment, Management of the Managing Member concluded that the Managing Members internal
control over financial reporting, as it is applicable to the Company, was effective as of December 31, 2008.

This annual report does not include an
attestation report of the Companys independent registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by the Companys independent registered public
accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only managements report in this annual report.

Changes in internal control

There were no changes in the Managing Members internal control over
financial reporting, as it is applicable to the Company, during the quarter ended December 31, 2008 that has materially affected, or is reasonably likely to materially affect, the Managing Members internal control over financial
reporting, as it is applicable to the Company.



34



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PART III



|Item 10. | DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
|-------- | ------------------------------------------------------------------------------------------------------------------

The registrant is a Limited Liability Company and has no officers or directors.

ATEL Financial Services, LLC (AFS) is the Companys Managing Member or Manager. AFS is controlled by ATEL Capital Group (ACG or ATEL), a holding company formed to control ATEL and affiliated
companies, through its subsidiaries, ATEL Leasing Corporation (ALC), AFSs managing member, and ATEL Business Credit, Inc. (ABC), the other member of AFS. ALC and ABC are AFSs only members. The outstanding voting
capital stock of ACG is owned 100% by Dean L. Cash.

Each of ALC and AFS is a subsidiary under the control of ACG and performs services for the Company.
Acquisition services, equipment management, lease administration and asset disposition services are performed by ALC; investor relations, communications services and general administrative services are performed by AFS. ATEL Securities Corporation
(ASC), a wholly-owned subsidiary of AFS, performed distribution services in connection with the Companys public offering of its Units.

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



|                   |  |                                                                                                                                   
|------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------
|Dean L. Cash       |  | President and Chief Executive Officer of ATEL Financial Services, LLC (Managing Member)                                           
|                   | 
|Paritosh K. Choksi |  | Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Financial Services, LLC (Managing Member)
|                   | 
|Vasco H. Morais    |  | Executive Vice President, Secretary and General Counsel of ATEL Financial Services, LLC (Managing Member)                         

Dean L. Cash, age 58, 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. He has been President and CEO since April 2001. 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.

Paritosh
K. Choksi, age 55, joined ATEL in 1999 as a director, senior vice president and its chief financial officer. He became its executive vice president and CFO/COO in April 2001. 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 is a member of the board
of directors of Syntel, Inc. 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.

Vasco H. Morais, age 50, 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,



35



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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.

Audit Committee

ALC is the managing member of AFS, the Managing Member of the registrant. The board of directors of ALC acts as the audit committee of the registrant. Dean L. Cash and
Paritosh K. Choksi are members of the board of directors of ALC and are deemed to be financial experts. They are not independent of the Company.

Section 16(a) Beneficial Ownership Reporting Compliance

Based solely on a review of Forms 3, 4, and 5, the Company is not aware
of any failures to file reports of beneficial ownership required to be filed during or for the year ended December 31, 2008.

Code of Ethics

A Code of Ethics that is applicable to the Company, including the Chief Executive Officer and Chief Financial Officer and Chief Operating Officer
of its Managing Member, AFS, or persons acting in such capacity on behalf of the Company, is included as Exhibit 14.1 to this report.



|Item 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------

The registrant has no officers or
directors.

Set forth hereinafter is a description of the nature of remuneration paid and to be paid to ATEL and its Affiliates. The amount of such
remuneration paid for the years ended December 31, 2008 and 2007 is set forth in Item 8 of this report under the caption Financial Statements and Supplementary Data - Notes to Financial Statements - Related party transactions,
at Note 7 thereof, which information is hereby incorporated by reference.

Selling Commissions

The Company paid selling commissions in the amount of 9% of Gross Proceeds, as defined, to ASC, an affiliate of AFS. Through December 31, 2008, $4.7 million of such
commissions had been paid to AFS or its affiliate. Of that amount, $3.9 million has been re-allowed to other broker/dealers.

Asset Management Fee
and Carried Interest

The Company pays AFS an Asset Management Fee in an amount equal to 4% of Operating Revenues, which includes Gross Lease
Revenues and Cash from Sales or Refinancing. The Asset Management Fee is paid on a monthly basis. The amount of the Asset Management Fee payable in any year is reduced for that year to the extent it would otherwise exceed the Asset Management Fee
Limit, as described below. The Asset Management Fee is paid for services rendered by AFS and its affiliates in determining portfolio and investment strategies (i.e., establishing and maintaining the composition of the Equipment portfolio as a whole
and the Companys overall debt structure) and generally managing or supervising the management of the Equipment.

AFS also receives, as its Carried
Interest, an amount equal to 7.5% of all Company Distributions.

AFS supervises performance of all management activities, including, among other
activities: the acquisition and financing of the equipment portfolio, collection of lease revenues, monitoring compliance by lessees with the lease terms, assuring that Equipment is being used in accordance with all operative contractual
arrangements, paying operating expenses and arranging for necessary maintenance and repair of equipment in the event a lessee fails to do so, monitoring property, sales and use tax compliance and preparation of operating financial data. AFS intends
to delegate all or a portion of its duties and the Asset Management Fee to one or more of its affiliates who are in the business of providing such services.



36



---

Limitations on Fees

The Fund has adopted a single Asset Management Fee plus the Carried Interest as a means of compensating the Manager for sponsoring the Fund and managing its operations. While this compensation structure is intended to simplify management
compensation for purposes of investors understanding, state securities administrators use a more complicated compensation structure in their review of equipment program offerings in order to assure that those offerings are fair under the
states merit review guidelines. The total of all Front End Fees, the Carried Interest and the Asset Management Fee will be subject to the Asset Management Fee Limit in order to assure these state administrators that Fund will not bear greater
fees than permitted under the state merit review guidelines. The North American Securities Administrators Association, Inc. (NASAA) is an organization of state securities administrators, those state government agencies responsible for
qualifying securities offerings in their respective states. NASAA has established standards for the qualification of a number of different types of securities offerings and investment products, including its Statement of Policy on Equipment Programs
(the NASAA Equipment Leasing Guidelines). Article IV, Sections C through G of the NASAA Equipment Leasing Guidelines establish the standards for payment of reasonable carried interests, promotional interests and fees for equipment
acquisition, management, resale and releasing services to equipment leasing program sponsors. Article IV, Sections C through G of the NASAA Equipment Leasing Guidelines set the maximum compensation payable to the sponsor and its affiliates from an
equipment leasing program such as the Fund. The Asset Management Fee Limit will equal the maximum compensation payable under Article IV, Sections C through G of the NASAA Equipment Leasing Guidelines as in effect on the date of the Funds
prospectus (the NASAA Fee Limitation). Under the Asset Management Fee Limit, the Fund will calculate the maximum fees payable under the NASAA Fee Limitation and guarantee that the Asset Management Fee it will pay the Manager and its
Affiliates, when added to its Carried Interest, will never exceed the fees and interests payable to a sponsor and its affiliates under the NASAA Fee Limitation.

Asset Management Fee Limit. The Asset Management Fee Limit will be calculated each year during the Funds term by calculating the total fees that would be paid to the Manager if the Manager were to be compensated on the basis of
the maximum compensation payable under the NASAA Fee Limitation, including the Managers Carried Interest, as described below. To the extent that the amount paid as Front End Fees, the Asset Management Fee, and the Carried Interest for any year
would cause the total fees to exceed the aggregate amount of fees calculated under the NASAA Fee Limitation for the year, the Asset Management Fee and/or Carried Interest for that year will be reduced to equal the maximum aggregate fees under the
NASAA Fee Limitation. To the extent any such fees are reduced, the amount of such reduction will be accrued and deferred, and such accrued and deferred compensation would be paid to the Manager in a subsequent period, but only to the extent that the
deferred compensation would be within the Asset Management Fee Limit for that later period. Any deferred fees that cannot be paid under the applicable limitations through the date of liquidation would be forfeited by the Manager at liquidation.

Under the NASAA Equipment Leasing Guidelines, the Fund is required to commit a minimum percentage of the Gross Proceeds to Investment in Equipment,
calculated as the greater of: (i) 80% of the Gross Proceeds reduced by 0.0625% for each 1% of indebtedness encumbering the Funds equipment; or (ii) 75% of such Gross Proceeds. The Fund intends to incur total indebtedness equal to 50%
of the aggregate cost of its equipment. The Operating Agreement requires the Fund to commit at least 85.875% of the Gross Proceeds to Investment in Equipment. Based on the formula in the NASAA Guidelines, the Funds minimum Investment in
Equipment would equal 76.875% of Gross Proceeds (80% - [50% x .0625%] = 76.875%), and the Funds minimum Investment in Equipment would therefore exceed the NASAA Fee Limitation minimum by 9%.

The amount of the Carried Interest permitted the Manager under the NASAA Fee Limitation will be dependent on the amount by which the percentage of Gross Proceeds the
Fund ultimately commits to Investment in Equipment exceeds the minimum Investment in Equipment under the NASAA Fee Limitation. The NASAA Fee Limitation permits the Manager and its Affiliates to receive compensation in the form of a carried interest
in Fund Net Income, Net Loss and Distributions equal to 1% for the first 2.5% of excess Investment in Equipment over the NASAA Guidelines minimum, 1% for the next 2% of such excess, and 1% for each additional 1% of excess Investment in Equipment.
With a minimum Investment in Equipment of 85.875%, the Manager and its Affiliates may receive an additional carried interest equal to 6.5% of Net Profit, Net Loss and Distributions under the foregoing formula (2.5% + 2% + 4.5% = 9%; 1% + 1% + 4.5% =
6.5%). At the lowest permitted level of Investment in Equipment, the NASAA Guidelines would permit the Manager and its Affiliates to receive a promotional interest equal to 5% of Distributions of Cash from Operations and 1% of Distributions of Sale
or Refinancing Proceeds until Members have received total Distributions equal to their Original Invested Capital plus an 8% per annum cumulative return on their Adjusted Invested Capital, and, thereafter, the promotional interest may increase
to 15% of all Distributions.



37



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With the additional carried interest calculated as described above, the maximum aggregate fees payable to the Manager and
Affiliates under the NASAA Guidelines as carried interest and promotional interest would equal 11.5% of Distributions of Cash from Operations (6.5% + 5% = 11.5%), and 7.5% of Distributions of Sale or Refinancing Proceeds (6.5% + 1% = 7.5%), before
the subordination level was reached, and 21.5% of all Distributions thereafter. The maximum amounts to be paid under the terms of the Operating Agreement are subject to the application of the Asset Management Fee Limit provided in Section 8.3
of the Agreement, which limits the annual amount payable to the Manager and its Affiliates as the Asset Management Fee and the Carried Interest to an aggregate not to exceed the total amount of fees that would be payable to the Manager and its
Affiliates under the NASAA Fee Limitation.

Upon completion of the offering of Units, final commitment of offering proceeds to acquisition of equipment and
establishment of final levels of permanent portfolio debt, the Manager will calculate the maximum carried interest and promotional interest payable to the Manager and its Affiliates under the NASAA Fee Limitation and compare such total permitted
fees to the total of the Asset Management Fee and Managers Carried Interest. If and to the extent that the Asset Management Fee and Managers Carried Interest would exceed the fees calculated under the NASAA Fee Limitation, the fees
payable to the Manager and its Affiliates will be reduced by an amount sufficient to cause the total of such compensation to comply with the NASAA Fee Limitation. The adjusted Asset Management Fee Limit will then be applied to the Asset Management
Fee and Carried Interest as described above. A comparison of the Front End Fees actually paid by the Fund and the NASAA Fee Limitation maximums will be repeated, and any required adjustments will be made, at least annually thereafter.

See Note 7 to the financial statements as set forth in Part II, Item 8, Financial Statements and Supplementary Data, for amounts paid.

Managing Members Interest in Operating Proceeds

AFS
receives an allocation of all 7.5% of all Company net income, net loss and investment tax credits corresponding to its Carried Interest in Distributions and the remaining 92.5% is allocated among the Members. See financial statements as set forth in
Part II, Item 8, Financial Statements and Supplementary Data, of this report for amounts allocated to AFS in 2008 and 2007.



|Item 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------

Security Ownership of Certain Beneficial Owners

At December 31, 2008, no investor is known to hold
beneficially more than 5% of the issued and outstanding Units.

Security Ownership of Management

The parent of AFS is the beneficial owner of Limited Liability Company Units as follows:



|                                |  |                                                                           |  |                                                       |  |                    |  
|------------------------------- |  | ------------------------------------------------------------------------- |  | ----------------------------------------------------- |  | ------------------ | -
|(1)Title of Class               |  | (2)Name and Address ofBeneficial Owner                                    |  | (3)Amount and Nature ofBeneficial
Ownership           |  | (4)Percent ofClass |  
|Limited Liability Company Units |  | ATEL Capital Group600 California Street, 6th FloorSan Francisco, CA 94108 |  | Initial Limited LiabilityCompany Units50 Units ($500) |  | 0.0004             | %

Changes in Control

The Members have the right, by vote of the Members owning more than 50% of the outstanding Limited Liability Company Units, to remove the Managing Member.

AFS may at any time call a meeting of the Members or a vote of the Members 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 Members holding 10% or more of the total outstanding Limited Liability Company Units.



38



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|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 Supplementary Data - Notes to Financial Statements - Related party transactions
at Note 7 thereof, and Item 10 of this report under the caption Executive Compensation, are hereby incorporated by reference.



|Item 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES
|-------- | --------------------------------------

During the last two years,
the Company incurred audit and other fees with its principal auditors as follows (in thousands):



|           |  |      |     |      |   |    
|---------- |  | ---- | --- | ---- | - | ---
|           |  | 2008 |     | 2007
|Audit fees |  | $    | 128 |      | $ | 116
|Other      |  |      | 33  |      |   | 1  
|           |  |      |     |      |   |    
|           |  | $    | 161 |      | $ | 117
|           |  |      |     |      |   |    

Audit fees consist of the aggregate fees and expenses billed in connection with the audit of the Companys
annual financial statements and the review of the financial statements included in the Companys quarterly reports on Form 10-Q.

Other fees represent
costs incurred in connection with various Agreed-Upon Procedures engagements.

ALC is the managing member of AFS, the Managing Member of the registrant.
The board of directors of ALC acts as the audit committee of the registrant. Engagements for audit services, audit related services and tax services are approved in advance by the Chief Financial Officer of ALC acting on behalf of the board of
directors in its role as the audit committee of the Company.

PART IV



|Item 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|-------- | ------------------------------------------



|(a) | Financial Statements and Schedules
|--- | ----------------------------------



|1. | Financial Statements
|-- | --------------------

Included in Part II of this report:

Report of Independent Registered Public Accounting Firm

Balance Sheets at December 31, 2008 and 2007

Statements of Operations for the years ended
December 31, 2008 and 2007

Statements of Changes in Members Capital for the years ended December 31, 2008 and 2007

Statements of Cash Flows for the years ended December 31, 2008 and 2007

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) | Exhibits
|--- | --------

(3) and (4) Amended and Restated Limited
Liability Company Operating Agreement, included as exhibit B to the Prospectus effective April 11, 2005 as filed on May 05, 2005 (File Number 333-120276) is hereby incorporated herein by reference.

| | (14.1) | Code of Ethics
| | ------ | --------------



| | (31.1) | Certification of Dean L. Cash pursuant to Rules 13a-14(a)/15d-14(a)
| | ------ | -------------------------------------------------------------------



| | (31.2) | Certification of Paritosh K. Choksi pursuant to Rules 13a-14(a)/15d-14(a)
| | ------ | -------------------------------------------------------------------------



| | (32.1) | Certification of Dean L. Cash pursuant to 18 U.S.C. section 1350
| | ------ | ----------------------------------------------------------------



| | (32.2) | Certification of Paritosh K. Choksi pursuant to 18 U.S.C. section 1350
| | ------ | ----------------------------------------------------------------------



39



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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: March 26, 2009

ATEL Capital Equipment Fund XI, LLC
(Registrant)



|By: | ATEL Financial Services, LLC
|--- | ----------------------------

Managing Member of
Registrant



By:

/s/ Dean L. CashDean L. Cash,President and Chief Executive Officer of ATEL
Financial Services, LLC (Managing Member)By:

/s/ Paritosh K. ChoksiParitosh K. Choksi,Executive Vice President and Chief Financial Officer
and Chief Operating Officer of ATEL Financial Services, LLC (Managing Member)By:

/s/ Samuel SchusslerSamuel Schussler,Vice President and Chief Accounting Officer of ATEL Financial Services, LLC (Managing Member)


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/ Dean L. Cash Dean L. Cash             |  | President and Chief Executive Officer of ATEL Financial
Services, LLC (Managing Member)                                            |  | March 26, 2009
|                                          |  |                                                                                                                                   
|/s/ Paritosh K. Choksi Paritosh K. Choksi |  | Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Financial Services, LLC (Managing Member) |  | March 26, 2009
|                                          |  |                                                                                                                                   
|/s/ Samuel Schussler Samuel Schussler     |  | Vice President and Chief Accounting Officer of ATEL Financial Services, LLC (Managing Member)                                      |  | March 26, 2009

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.



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