UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-KSB



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

For the year ended December 31, 2007



| ̈ | 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

(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

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act of 1934.  ̈

Check whether the issuer (1) 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  þ    No   ̈

Check if there is no disclosure of delinquent
filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB.  þ

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  þ

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

State the issuers revenues for the most
recent fiscal year: $11.3 million.

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 29, 2008 was 5,230,507.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Transitional Small Business disclosure Format (check one):    Yes   ̈    No  þ









---

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. 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s offering was terminated effective April 30, 2006.

As of December 31, 2007, 5,230,507 Units remained 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 7 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.

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 will only purchase equipment under pre-existing leases or for which a lease will be entered into concurrently at the time of the purchase.

Through December 31, 2007, the Company had purchased equipment with a total acquisition price of $62.9 million. The Company had also loaned $14.5 million for notes
receivable secured by various assets.

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



2



---

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 2007 and 2006, certain lessees generated significant portions of the Companys total operating revenues as follows:



|                             |  |                   |  |                                   |   |  |      |  
|---------------------------- |  | ----------------- |  | --------------------------------- | - |  | ---- | -
|                             |  |                   |  | Percentage of TotalLease Revenues |  
|Lessee                       |  | Type of Equipment |  | 2007                              |   |  | 2006 |  
|International Paper Co. -Mac |  | Material handling |  | 13                                | % |  | 15   | %
|Union Pacific                |  | Transportation    |  | 11                                | % |  | 18   | %
|Whirlpool Corporation        |  | Material handling |  | *                                 |   |  | 13   | %



|* | 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, 2007 and 2006:



|                |  |      |   |  |      |  
|--------------- |  | ---- | - |  | ---- | -
|Geographic area |  | 2007 |   |  | 2006 |  
|United States   |  | 91   | % |  | 88   | %
|Europe          |  | 9    | % |  | 12   | %

The business of the Company is not seasonal. The Company has no full time employees.



3



---

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, 2007 and the industries to which the assets have been leased (in thousands):



|                   |  |                                         |        |                                |        |  
|------------------ |  | --------------------------------------- | ------ | ------------------------------ | ------ | -
|Asset Types        |  | Purchase PriceExcludingAcquisition Fees |        | Percentageof TotalAcquisitions |       
|Transportation     |  | $                                       | 21,534 |                                | 34.24  | %
|Material handling  |  |                                         | 21,414 |                                | 34.05  | %
|Construction       |  |                                         | 12,441 |                                | 19.78  | %
|Manufacturing      |  |                                         | 2,280  |                                | 3.63   | %
|Logging and lumber |  |                                         | 2,001  |                                | 3.18   | %
|Aviation           |  |                                         | 1,658  |                                | 2.64   | %
|Marine vessels     |  |                                         | 1,415  |                                | 2.25   | %
|Office furniture   |  |                                         | 146    |                                | 0.23   | %
|                   |  |                                         |        |                                |        |  
|                   |  | $                                       | 62,889 |                                | 100.00 | %
|                   |  |                                         |        |                                |        |  



|                        |  |                                         |        |                                |        |  
|----------------------- |  | --------------------------------------- | ------ | ------------------------------ | ------ | -
|Industry of Lessee      |  | Purchase PriceExcludingAcquisition Fees |        | Percentageof TotalAcquisitions |       
|Manufacturing           |  | $                                       | 37,335 |                                | 59.37  | %
|Rail                    |  |                                         | 11,924 |                                | 18.96  | %
|Transportation services |  |                                         | 8,319  |                                | 13.23  | %
|Health care             |  |                                         | 4,967  |                                | 7.90   | %
|Electrical              |  |                                         | 344    |                                | 0.54   | %
|                        |  |                                         |        |                                |        |  
|                        |  | $                                       | 62,889 |                                | 100.00 | %
|                        |  |                                         |        |                                |        |  

From inception to December 31, 2007, 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, 2007, see Note 6 to the financial statements, Investments in equipment and leases, net, as set forth in Part II,
Item 7, Financial Statements and Supplementary Data.



4



---

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, 2007 and the industries to which the
assets have been financed.



|                           |  |                                          |        |                            |        |  
|-------------------------- |  | ---------------------------------------- | ------ | -------------------------- | ------ | -
|Asset Types                |  | Amount FinancedExcludingAcquisition Fees |        | Percentageof TotalFundings |       
|Computer equipment         |  | $                                        | 7,815  |                            | 54.00  | %
|Equipment and other assets |  |                                          | 5,785  |                            | 39.98  | %
|Manufacturing              |  |                                          | 871    |                            | 6.02   | %
|                           |  |                                          |        |                            |        |  
|                           |  | $                                        | 14,471 |                            | 100.00 | %
|                           |  |                                          |        |                            |        |  



|                   |  |                                          |        |                            |        |  
|------------------ |  | ---------------------------------------- | ------ | -------------------------- | ------ | -
|Industry of Lessee |  | Amount FinancedExcludingAcquisition Fees |        | Percentageof TotalFundings |       
|Communications     |  | $                                        | 3,948  |                            | 27.28  | %
|Business services  |  |                                          | 2,885  |                            | 19.94  | %
|Manufacturing      |  |                                          | 2,503  |                            | 17.30  | %
|Health services    |  |                                          | 2,458  |                            | 16.99  | %
|Technology         |  |                                          | 1,682  |                            | 11.62  | %
|Electronics        |  |                                          | 995    |                            | 6.87   | %
|                   |  |                                          |        |                            |        |  
|                   |  | $                                        | 14,471 |                            | 100.00 | %
|                   |  |                                          |        |                            |        |  

For further information regarding the Companys note receivable portfolio as of December 31, 2007, see
Note 4 to the financial statements, Notes receivable, as set forth in Part II, Item 7, 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 consolidated 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



---

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, 2007, a total of 1,180 investors were Unit holders of record in the Company.

Distributions

The Unit holders 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 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 2007 was $0.23 per Unit.

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



|                                                                                          |  |      |       |   |      |   |       |  
|----------------------------------------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | -
|                                                                                          |  | 2007 |       |   | 2006 |  
|Net loss per Unit, based on weighted average Unit outstanding                             |  | $    | (0.32 | ) |      | $ | (0.19 | )
|Return of investment                                                                      |  |      | 1.25  |   |      |   | 1.09  |  
|                                                                                          |  |      |       |   |      |   |       |  
|Distributions declared per Unit, based on weighted average Other Member Units outstanding |  |      | 0.93  |   |      |   | 0.90  |  
|Differences due to timing of distributions                                                |  |      |      |   |      |   | (0.01 | )
|                                                                                          |  |      |       |   |      |   |       |  
|Actual distributions paid per Unit                                                        |  | $    | 0.93  |   |      | $ | 0.89  |  
|                                                                                          |  |      |       |   |      |   |       |  



6



---

Use of Proceeds from Registered Securities

Information provided pursuant to § 228.701 (Item 701(f)) (formerly included in Form SR):



|(1) | Effective date of the offering: April 11, 2005; File Number: 333-120276.
|--- | ------------------------------------------------------------------------



|(2) | Offering commenced: April 11, 2005.
|--- | -----------------------------------



|(3) | The offering did not terminate before any securities were sold.
|--- | ---------------------------------------------------------------



|(4) | The offering was terminated on April 30, 2006.
|--- | ----------------------------------------------



|(5) | The managing underwriter is ATEL Securities Corporation.
|--- | --------------------------------------------------------



|(6) | The title of the registered class of securities is Units of Limited Liability Company Interest.
|--- | -------------------------------------------------------------------------------------------------



|(7) | Aggregate amount and offering price of securities registered and sold as of December 31, 2007 (in thousands):
|--- | -------------------------------------------------------------------------------------------------------------



|                                  |  |                  |  |                                            |         |            |           |                                       |   |       
|--------------------------------- |  | ---------------- |  | ------------------------------------------ | ------- | ---------- | --------- | ------------------------------------- | - | ------
|Title of Security                 |  | AmountRegistered |  | Aggregate priceof offeringamountregistered |         | Units sold |           | Aggregate price ofoffering amountsold
|Units of Limited Company Interest |  | 15,000,000       |  | $                                          | 150,000 |            | 5,231,107 |                                       | $ | 52,311



|(8) | Costs incurred for the issuers account in connection with the issuance and distribution of the securities registered for each category listed below (in thousands):
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                              |  |                                                                                                                                                                                                                       |        |                                    |   |       |  |   |      
|--------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------ | ---------------------------------- | - | ----- |  | - | -----
|                                                                                              |  | Direct or indirectpayments to directors,officers,
ManagingMembers of the issuer ortheir associates, topersons owning tenpercent or more of anyclass of equity securitiesof the issuer; and toaffiliates of the issuer |        | Direct orindirectpayments toothers |   | Total
|Underwriting discounts and commissions                                                        |  | $                                                                                                                                                                                                                     | 775    |                                    | $ | 3,949 |  | $ | 4,724
|Other expenses                                                                                |  |                                                                                                                                                                                                                       | 1,405  |                                    |   | 1,267 |  |   | 2,672
|                                                                                              |  |                                                                                                                                                                                                                       |        |                                    |   |       |  |   |      
|Total expenses                                                                                |  | $                                                                                                                                                                                                                     | 2,180  |                                    | $ | 5,216 |  | $ | 7,396
|                                                                                              |  |                                                                                                                                                                                                                       |        |                                    |   |       |  |   |      
|(9)    Net offering proceeds to the issuer after the total expenses in item 8 (in thousands): |  | $                                                                                                                                                                                                                     | 44,915



|(10) | The amount of net offering proceeds to the issuer used for each of the purposes listed below (in thousands):
|---- | ------------------------------------------------------------------------------------------------------------



|                                                     |  |                                                                                                                                                                                                                       |     |                                    |   |        |  |   |       
|---------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --- | ---------------------------------- | - | ------ |  | - | ------
|                                                     |  | Direct or indirectpayments to directors,officers,
ManagingMembers of the issuer ortheir associates, topersons owning tenpercent or more of anyclass of equity securitiesof the issuer; and toaffiliates of the issuer |     | Direct orindirectpaymentsto others |   | Total 
|Purchase and installation of machinery and equipment |  | $                                                                                                                                                                                                                     | 625 |                                    | $ | 33,476 |  | $ | 34,101
|Investments in notes receivable                      |  |                                                                                                                                                                                                                       | 68  |                                    |   | 10,746 |  |   | 10,814
|                                                     |  |                                                                                                                                                                                                                       |     |                                    |   |        |  |   |       
|                                                     |  | $                                                                                                                                                                                                                     | 693 |                                    | $ | 44,222 |  | $ | 44,915
|                                                     |  |                                                                                                                                                                                                                       |     |                                    |   |        |  |   |       



|(11) | The use of the proceeds in Item 10 does not represent a material change in the uses of proceeds described in the prospectus.
|---- | ----------------------------------------------------------------------------------------------------------------------------



7



---

|Item 6. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

Statements contained in this Item 6, Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) and elsewhere in this Form 10-KSB, which are not
historical facts, may be forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. In particular, economic recession and changes in general economic
conditions, including fluctuations in demand for equipment, lease rates, and interest rates, may result in delays in 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-KSB. 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-KSB 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 a diversified group of lessees for fixed lease terms at
fixed rental amounts. As the initial 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 re-leasing or selling the equipment as it
comes off lease.

The Company participates with AFS and certain of its affiliates in a financing arrangement (comprised of a working capital term loan
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 was originally $75 million and expired on June 28, 2007. The facility was renewed for an additional two years with an availability of $65 million pending redefinition of the lender base. On July 28, 2007, with a redefinition of
the lender base, the facility was amended to reset availability to $75 million. The arrangement expires in June 2009. The availability of borrowings to the Company under this financing arrangement is reduced by the amount outstanding on any of the
above mentioned facilities.



8



---

Borrowings under the facility as of December 31, 2007 were as follows:



|                                                                                                                           |  |   |        |  
|-------------------------------------------------------------------------------------------------------------------------- |  | - | ------ | -
|Total available under the financing arrangement                                                                            |  | $ | 75,000 |  
|Amount borrowed by the Company under the acquisition facility                                                              |  |   | (4,000 | )
|Amounts borrowed by affiliated partnerships and Limited Liability Companies under the acquisition and warehouse facilities |  |   | (4,625 | )
|                                                                                                                           |  |   |        |  
|Total remaining available under the acquisition and warehouse facilities                                                   |  | $ | 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. 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 at December 31, 2007 ranged from 6.11% to 6.35%.

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, 2007, 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.

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, 2007.

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.

AFS or an affiliate may
purchase equipment in its own name, the name of an affiliate or the name of a nominee, a trust or otherwise and hold title thereto on a temporary or interim basis for the purpose of facilitating the acquisition of such equipment or the completion of
manufacture of the equipment or for any other purpose related to the business of the Company, provided, however that: (i) the transaction is in the best interest of the Company; (ii) such equipment is



9



---

purchased by the Company for a purchase price no greater than the cost of such equipment to AFS or affiliate (including any out-of-pocket carrying costs),
except for compensation permitted by the Operating Agreement; (iii) there is no difference in interest terms of the loans secured by the equipment at the time acquired by AFS or affiliate and the time acquired by the Company; (iv) there is
no benefit arising out of such transaction to AFS or its affiliate apart from the compensation otherwise permitted by the Operating Agreement; and (v) all income generated by, and all expenses associated with, equipment so acquired will be
treated as belonging to the Company.

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.

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.

If interest rates increase significantly, 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.

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. During 2007, the Company utilized such sources of non-recourse debt financing and at December 31, 2007, had $20.6 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 7, 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 2007.

As of December 31, 2007 the Company had outstanding commitments to purchase or finance lease equipment of approximately
$6.7 million. This amount represents contract awards which may be cancelled by the prospective lessee or may not be accepted by the Company. Of the $6.7 million, $2.9 million was canceled subsequent to year-end.

Cash Flows

2007 vs. 2006

Operating Activities

The Companys primary source of cash from
operations has been rents from operating leases. Additionally, its cash flows are impacted by changes in certain operating assets and liabilities.

Cash
provided by operating activities increased by $370 thousand, or 6%, for the year ended December 31, 2007 as compared to 2006. The net increase in cash flow was primarily attributable to improved operating results as adjusted for non-cash
revenue and expense such as gains on sales of assets and depreciation expense, partially offset by increased payments made against accounts payable and accrued liabilities.

The year over year increase in operating results as adjusted for non-cash items, benefited cash flow by $2.5 million and was mainly due to a 68% increase in operating lease revenue offset, in part, by increases in
interest expense, professional fees and asset management fees.

Partially offsetting the aforementioned increase in cash flow was a decrease of $2.2
million attributable to increased payments made on accounts payable and accrued liabilities. The increase in payments was primarily due to the 2007 payment of approximately $1.5 million of 2006 accruals related to asset purchases.



10



---

Investing Activities

Cash used in investing activities decreased by $10.1 million, or 34%, for the year ended December 31, 2007 as compared to 2006. The net decrease in cash used (net increase in cash flow) was mainly due to a reduction in purchases of
lease assets, combined with increased proceeds from the sale of lease assets and early termination of notes receivable, and increased payments received on notes receivable.

The year over year reduction in purchases of lease assets benefited cash flow by $6.3 million and was primarily a result of a decline in acquisition phase activity. Likewise, the increase in proceeds from asset sales
benefited cash flow by $2.6 million, while the year over year increase in payments received on notes receivable improved cash flow by $718 thousand.

The
increase in proceeds was mostly attributable to an early termination of a note ($2.3 million) and the impact of a stronger market demand, which resulted in $276 thousand more proceeds on lease asset sales during 2007, as compared to prior year. The
increase in payments received on notes receivable during 2007, as compared to 2006, was primarily due to a partial prepayment made by one of the Companys larger lessees.

Financing Activities

Since the termination of the offering of Units in April 2006, the Company utilized its credit
facilities to finance asset purchases. Net cash provided by financing activities, inclusive of member contributions, decreased by $5.7 million, or 37%, during 2007 versus 2006. Net cash flow decreased as the 2006 amount included $13.1 million of
proceeds from the sale of Units. The absence of such proceeds in 2007 was partially offset by a year over year increase in net borrowings of $5.6 million and a decrease in syndication costs paid to the Managing Member of $2.0 million.

Results of Operations

On May 31, 2005, the Company
commenced operations in its primary business (acquiring equipment to engage in equipment leasing, lending and sales activities).

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, capital contributed or number of investors
depending upon the nature of the cost incurred.

The Operating Agreement places an annual limit and a cumulative limit for cost reimbursements to AFS
and/or affiliates. The cumulative limit increases annually. 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, 2007, costs reimbursable to AFS in future years totaled approximately $148 thousand.

2007 vs. 2006

The Company had net losses of $1.2 million and $621 thousand for the years ended December 31,
2007 and 2006, respectively. Results for 2007 reflect increases in both total revenues and operating expenses when compared with prior year results.

Revenues

Total revenues for 2007 increased by $4.3 million, or 60%, as compared to 2006. The net growth in total revenues was primarily due
to a $4.1 million increase in operating lease revenue combined with a $167 thousand increase in gains on sales of assets and early termination of notes.

The year over year increase in operating lease revenue was mainly due to revenues derived from the $20.8 million of lease assets purchased during 2007, while the net increase in gain on sales of assets was mainly due to an early termination
of a note receivable combined with higher gains recognized on 2007 asset sales, as compared to 2006, due to a stronger market demand in 2007 as compared to 2006.

Expenses

Total expenses for 2007 increased by $4.9 million, or 63%, as compared to 2006. The net increase in total expenses was primarily
due to increases in depreciation and interest expenses, asset management fees and professional fees offset, in part, by a decline in acquisition expense.

By far the largest expense of the Company, depreciation expense increased by $3.5 million, or 69%, in 2007 over 2006. The increase was primarily due to the growth in depreciable assets resulting from lease asset purchases during 2007.
Similarly, the year over year growth in the Companys asset portfolio resulted in a $261 thousand more asset management fees paid to the Managing Member.



11



---

During 2007, interest expense increased by $980 thousand, as compared to prior year, and was mainly due to the $15.1
million net increase in the Companys outstanding borrowings. In addition, professional fees also increased by $203 thousand during 2007, as compared to 2006. The increase was primarily due to the Companys restatement effort and the audit
of prior period financial statements, which was largely completed during the second quarter of 2007, as well as expenses associated with the Companys effort to be in compliance with the mandates of the Sarbanes-Oxley Act.

The cumulative increase in expenses discussed above was partially offset by a decline in acquisition expense. As defined by the Companys Operating Agreement,
acquisition expense shall mean expenses including, but not limited to, legal fees and expenses, travel and communication expenses, costs of appraisals, accounting fees and expenses, and miscellaneous expenses relating to selection and acquisition of
equipment, whether or not acquired. The decline in acquisition activity during 2007, compared to 2006, resulted in a $109 thousand decrease in acquisition expense.

Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (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 Statement 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. SFAS 159 is effective for the Company as of January 1, 2008. The Company
does not presently anticipate the adoption of SFAS 159 to significantly impact its financial position, results of operations or cash flows.

In September
2006, the FASB issued Statement No. 157, Fair Value Measurements (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 FASB Staff Position
(FSP) No. 157-2, which defers the effective date of SFAS No. 157 as it pertains to fair value measurements of nonfinancial assets and nonfinancial liabilities until fiscal years beginning after November 15, 2008. The
Company will adopt SFAS 157 except as it applies to its investment in equipment and leases, and other nonfinancial assets and nonfinancial liabilities as noted in FSP FAS 157-2. The Fund is in the process of determining the financial
impact the partial adoption of SFAS 157 will have on its results of operations and financial position.

In June 2006, the FASB issued Interpretation
No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of SFAS 109, Accounting for Income Taxes (FIN 48), to create a single model to address accounting for uncertainty in tax positions. FIN 48 clarifies
the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on deregulation, measurement, classification,
interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company adopted the provisions of FIN 48 on January 1, 2007. The adoption of FIN
48 did not have a significant effect on the Companys financial position, results of operations or cash flows.

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.



12



---

Use of estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 determination of the allowances for doubtful accounts and notes receivable.

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.

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.

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.



13



---

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 Statement of Financial Accounting Standards No. 91 (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., labor and overhead) and external broker fees incurred with the origination. The costs are
amortized on a lease by lease basis based on actual lease 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 assets and
notes receivable,, 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, such amounts
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.

Asset valuation:

Recorded values of the Companys asset
portfolio are periodically reviewed for impairment in accordance with Statement of Financial Accounting Standards 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 7. | FINANCIAL STATEMENTS
|------- | --------------------

See the Report of Independent Registered
Public Accounting Firm, Financial Statements and Notes to Financial Statements attached hereto at pages 15 through 34.



14



---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Members

ATEL Capital Equipment Fund XI, LLC

We have audited the accompanying balance sheet of ATEL Capital Equipment Fund XI, LLC (the Company) as of December 31, 2007, and the related statements
of operations, changes in members capital, and cash flows for each of the years in the two-year period ended December 31, 2007. These financial statements are the responsibility 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, 2007, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2007, in conformity with U.S. generally
accepted accounting principles.

/s/ Moss Adams LLP

San Francisco, California

March 26, 2008



15



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

BALANCE SHEET

DECEMBER 31, 2007

(In Thousands)



|                                                                                |  |   |       
|------------------------------------------------------------------------------- |  | - | ------
|ASSETS                                                                          |  |   |       
|Cash and cash equivalents                                                       |  | $ | 1,662 
|Accounts receivable, net of allowance for doubtful accounts of $125             |  |   | 418   
|Notes receivable, net of unearned interest income of $1,432                     |  |   | 7,336 
|Investments in securities, at cost                                              |  |   | 497   
|Investments in equipment and leases, net of accumulated depreciation of $13,547 |  |   | 49,106
|Due from Affiliate                                                              |  |   | 146   
|Other assets                                                                    |  |   | 32    
|                                                                                |  |   |       
|Total assets                                                                    |  | $ | 59,197
|                                                                                |  |   |       
|LIABILITIES AND MEMBERS CAPITAL                                                |  |   |       
|Accounts payable and accrued liabilities:                                       |  |   |       
|Managing Member                                                                 |  | $ | 381   
|Accrued distributions to Other Members                                          |  |   | 554   
|Other                                                                           |  |   | 668   
|Non-recourse debt                                                               |  |   | 20,579
|Acquisition facility obligation                                                 |  |   | 4,000 
|Unearned operating lease income                                                 |  |   | 1,388 
|                                                                                |  |   |       
|Total liabilities                                                               |  |   | 27,570
|                                                                                |  |   |       
|Commitments and contingencies                                                   |  |   |       
|Members capital:                                                               |  |   |       
|Managing Member                                                                 |  |   |      
|Other Members                                                                   |  |   | 31,627
|                                                                                |  |   |       
|Total Members capital                                                          |  |   | 31,627
|                                                                                |  |   |       
|Total liabilities and Members capital                                          |  | $ | 59,197
|                                                                                |  |   |       

See accompanying notes.



16



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

(In Thousands Except for Units and Per Unit Data)



|                                                            |  |      |           |   |      |   |           |  
|----------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                            |  | 2007 |           |   | 2006 |  
|Revenues:                                                   |  |      |           |   |      |   |           |  
|Operating lease income                                      |  | $    | 10,074    |   |      | $ | 5,993     |  
|Direct financing leases                                     |  |      | 3         |   |      |   |          |  
|Notes receivable interest income                            |  |      | 773       |   |      |   | 797       |  
|Gain on sale of assets and early termination of notes       |  |      | 215       |   |      |   | 48        |  
|Gain on sale of securities                                  |  |      | 93        |   |      |   | 8         |  
|Interest income                                             |  |      | 79        |   |      |   | 159       |  
|Other                                                       |  |      | 56        |   |      |   | 38        |  
|                                                            |  |      |           |   |      |   |           |  
|Total revenues                                              |  |      | 11,293    |   |      |   | 7,043     |  
|                                                            |  |      |           |   |      |   |           |  
|Expenses:                                                   |  |      |           |   |      |   |           |  
|Depreciation of operating lease assets                      |  |      | 8,510     |   |      |   | 5,021     |  
|Asset management fees to Managing Member                    |  |      | 629       |   |      |   | 368       |  
|Acquisition expense                                         |  |      | 878       |   |      |   | 987       |  
|Cost reimbursements to Managing Member                      |  |      | 523       |   |      |   | 449       |  
|Provision for credit losses                                 |  |      | 94        |   |      |   | 174       |  
|Amortization of initial direct costs                        |  |      | 188       |   |      |   | 140       |  
|Interest expense                                            |  |      | 1,107     |   |      |   | 127       |  
|Professional fees                                           |  |      | 416       |   |      |   | 213       |  
|Outside services                                            |  |      | 147       |   |      |   | 97        |  
|Other                                                       |  |      | 125       |   |      |   | 162       |  
|                                                            |  |      |           |   |      |   |           |  
|Total operating expenses                                    |  |      | 12,617    |   |      |   | 7,738     |  
|Other income, net                                           |  |      | 100       |   |      |   | 74        |  
|                                                            |  |      |           |   |      |   |           |  
|Net loss                                                    |  | $    | (1,224    | ) |      | $ | (621      | )
|                                                            |  |      |           |   |      |   |           |  
|Net income (loss):                                          |  |      |           |   |      |   |           |  
|Managing Member                                             |  | $    | 426       |   |      | $ | 330       |  
|Other Members                                               |  |      | (1,650    | ) |      |   | (951      | )
|                                                            |  |      |           |   |      |   |           |  
|                                                            |  | $    | (1,224    | ) |      | $ | (621      | )
|                                                            |  |      |           |   |      |   |           |  
|Net loss per Limited Liability Company Unit (Other Members) |  | $    | (0.32     | ) |      | $ | (0.19     | )
|Weighted average number of Units outstanding                |  |      | 5,231,645 |   |      |   | 5,002,130 |  

See accompanying notes.



17



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

STATEMENT OF CHANGES IN MEMBERS CAPITAL

FOR THE YEARS ENDED

DECEMBER 31, 2007 AND 2006

(In Thousands Except for Units and Per Unit Data)



|                                                          |  |               |   |  |          |        |   |        |   |      |       |  |   |        |  
|--------------------------------------------------------- |  | ------------- | - |  | -------- | ------ | - | ------ | - | ---- | ----- |  | - | ------ | -
|                                                          |  | Other Members |   |  | Managing |        |   |        |  
|                                                          |  | Units         |   |  | Amount   |        |   | Member |   |      | Total | 
|Balance December 31, 2005                                 |  | 3,950,348     |   |  | $        | 32,728 |   |        | $ |     |       |  | $ | 32,728 |  
|Capital contributions                                     |  | 1,314,859     |   |  |          | 13,149 |   |        |   |     |       |  |   | 13,149 |  
|Less selling commissions to affiliates                    |  |              |   |  |          | (1,183 | ) |        |   |     |       |  |   | (1,183 | )
|Other syndication costs to Managing Member and affiliates |  |              |   |  |          | (813   | ) |        |   |     |       |  |   | (813   | )
|Rescissions of capital contributions                      |  | (32,600       | ) |  |          | (312   | ) |        |   |     |       |  |   | (312   | )
|Distributions to Other Members ($.90 per Unit)            |  |              |   |  |          | (4,483 | ) |        |   |     |       |  |   | (4,483 | )
|Distributions to Managing Member                          |  |              |   |  |          |       |   |        |   | (330 | )     |  |   | (330   | )
|Net (loss) income                                         |  |              |   |  |          | (951   | ) |        |   | 330  |       |  |   | (621   | )
|                                                          |  |               |   |  |          |        |   |        |   |      |       |  |   |        |  
|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 |  
|                                                          |  |               |   |  |          |        |   |        |   |      |       |  |   |        |  

See accompanying notes.



18



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

(In Thousands)



|                                                                           |  |      |         |   |      |   |         |  
|-------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                                           |  | 2007 |         |   | 2006 |  
|Operating activities:                                                      |  |      |         |   |      |   |         |  
|Net loss                                                                   |  | $    | (1,224  | ) |      | $ | (621    | )
|Adjustment to reconcile net loss to cash provided by operating activities: |  |      |         |   |      |   |         |  
|Gain on sales of assets and early termination of notes                     |  |      | (215    | ) |      |   | (48     | )
|Depreciation of operating lease assets                                     |  |      | 8,510   |   |      |   | 5,021   |  
|Amortization of initial direct costs                                       |  |      | 188     |   |      |   | 140     |  
|Provision for doubtful accounts                                            |  |      | 94      |   |      |   | 31      |  
|Provision for losses on notes receivable                                   |  |      | (143    | ) |      |   | 143     |  
|Gain on sale of securities                                                 |  |      | (93     | ) |      |   | (8      | )
|Changes in operating assets and liabilities:                               |  |      |         |   |      |   |         |  
|Accounts receivable                                                        |  |      | 32      |   |      |   | (470    | )
|Prepaid expenses and other assets                                          |  |      | (31     | ) |      |   | 447     |  
|Accounts payable, Managing Member                                          |  |      | 193     |   |      |   | (262    | )
|Accounts payable, other                                                    |  |      | (1,043  | ) |      |   | 1,609   |  
|Accounts payable, affiliates                                               |  |      | (146    | ) |      |   | (142    | )
|Advances from Managing Member                                              |  |      |        |   |      |   | (300    | )
|Unearned operating lease income                                            |  |      | 275     |   |      |   | 487     |  
|                                                                           |  |      |         |   |      |   |         |  
|Net cash provided by operating activities                                  |  |      | 6,397   |   |      |   | 6,027   |  
|                                                                           |  |      |         |   |      |   |         |  
|Investing activities:                                                      |  |      |         |   |      |   |         |  
|Purchases of equipment on operating leases                                 |  |      | (20,802 | ) |      |   | (27,060 | )
|Purchases of equipment on direct financing leases                          |  |      |        |   |      |   | (55     | )
|Purchase of securities                                                     |  |      | (342    | ) |      |   | (156    | )
|Proceeds from early termination of notes receivable                        |  |      | 2,303   |   |      |   |        |  
|Proceeds from sales of lease assets                                        |  |      | 497     |   |      |   | 221     |  
|Payments of initial direct costs                                           |  |      | (201    | ) |      |   | (478    | )
|Reduction of net investment in direct financing leases                     |  |      | 6       |   |      |   | 1       |  
|Note receivable advances                                                   |  |      | (3,725  | ) |      |   | (4,021  | )
|Proceeds from sale of securities                                           |  |      | 93      |   |      |   | 8       |  
|Payments and amortization of notes receivable                              |  |      | 2,739   |   |      |   | 2,021   |  
|                                                                           |  |      |         |   |      |   |         |  
|Net cash used in investing activities                                      |  |      | (19,432 | ) |      |   | (29,519 | )
|                                                                           |  |      |         |   |      |   |         |  
|Financing activities:                                                      |  |      |         |   |      |   |         |  
|Borrowings under non-recourse debt                                         |  |      | 23,121  |   |      |   |        |  
|Repayments under non-recourse debt                                         |  |      | (2,542  | ) |      |   |        |  
|Borrowings under acquisition facility                                      |  |      | 13,500  |   |      |   | 12,500  |  
|Repayments under acquisition facility                                      |  |      | (19,000 | ) |      |   | (3,000  | )
|Syndication costs paid to Managing Member                                  |  |      |        |   |      |   | (1,996  | )
|Distributions to Other Members                                             |  |      | (4,838  | ) |      |   | (4,483  | )
|Distributions to Managing Member                                           |  |      | (426    | ) |      |   | (330    | )
|Capital contributions                                                      |  |      |        |   |      |   | 13,149  |  
|Rescissions and repurchases of capital contributions                       |  |      | (20     | ) |      |   | (312    | )
|                                                                           |  |      |         |   |      |   |         |  
|Net cash provided by financing activities                                  |  |      | 9,795   |   |      |   | 15,528  |  
|                                                                           |  |      |         |   |      |   |         |  
|Net decrease in cash and cash equivalents                                  |  |      | (3,240  | ) |      |   | (7,964  | )
|Cash and cash equivalents at beginning of year                             |  |      | 4,902   |   |      |   | 12,866  |  
|                                                                           |  |      |         |   |      |   |         |  
|Cash and cash equivalents at end of year                                   |  | $    | 1,662   |   |      | $ | 4,902   |  
|                                                                           |  |      |         |   |      |   |         |  
|Supplemental disclosures of cash flow information:                         |  |      |         |   |      |   |         |  
|Cash paid during the year for interest                                     |  | $    | 988     |   |      | $ | 109     |  
|                                                                           |  |      |         |   |      |   |         |  
|Cash paid during the year for taxes                                        |  | $    | 33      |   |      | $ | 42      |  
|                                                                           |  |      |         |   |      |   |         |  
|Schedule of non-cash transactions:                                         |  |      |         |   |      |   |         |  
|Distributions payable to Other Members at year-end                         |  | $    | 554     |   |      | $ | 554     |  
|                                                                           |  |      |         |   |      |   |         |  

See accompanying notes.



19



---

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.
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. As of December 31, 2007, 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 (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.



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

Basis of
presentation:

The accompanying balance sheet as of December 31, 2007, and the related statements of operations, changes in members capital,
and cash flows for the years ended December 31, 2007 and 2006 have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). Certain prior period amounts have been reclassified to conform
to the current period 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 accounting principles generally accepted in the United States 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



20



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



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

for
impairment analysis purposes and for determination of the allowances for doubtful accounts and notes receivable.

Cash and cash equivalents:

Cash and cash equivalents include cash in banks and cash equivalent investments with original 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 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 its cash deposits and temporary cash investments with
creditworthy, high quality financial institutions and believes that such concentration of such deposits and temporary cash investments is not deemed to create a significant risk. 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, 2007.

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.

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.



21



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



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

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.

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 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. 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 $7.3 million at December 31, 2007.

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 (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., labor
and overhead) and external broker fees incurred with the origination. The costs are amortized on a lease by lease basis based on actual lease 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 assets and notes receivable, 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.



22



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



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

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.

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 chief operating decision makers are the Managing Members Chief Executive Officer and its 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 chief operating 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.



23



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



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

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, 2007 and 2006 and net long-lived tangible assets as of December 31, 2007 (in thousands):



|                    |  |                                 |        |            |     |   |      |   |            |  |     |  
|------------------- |  | ------------------------------- | ------ | ---------- | --- | - | ---- | - | ---------- |  | --- | -
|                    |  | For the year ended December 31, |       
|                    |  | 2007                            |        | % of Total |     |   | 2006 |   | % of Total | 
|Revenue             |  |                                 |        |            |     |   |      |   |            |  |     |  
|United States       |  | $                               | 10,310 |            | 91  | % |      | $ | 6,196      |  | 88  | %
|                    |  |                                 |        |            |     |   |      |   |            |  |     |  
|United Kingdom      |  |                                 | 983    |            | 9   | % |      |   | 847        |  | 12  | %
|                    |  |                                 |        |            |     |   |      |   |            |  |     |  
|Total International |  |                                 | 983    |            | 9   | % |      |   | 847        |  | 12  | %
|                    |  |                                 |        |            |     |   |      |   |            |  |     |  
|Total               |  | $                               | 11,293 |            | 100 | % |      | $ | 7,043      |  | 100 | %
|                    |  |                                 |        |            |     |   |      |   |            |  |     |  



|                    |  |                    |        |            |     |  
|------------------- |  | ------------------ | ------ | ---------- | --- | -
|                    |  | As of December 31, |       
|                    |  | 2007               |        | % of Total |    
|Long-lived assets   |  |                    |        |            |     |  
|United States       |  | $                  | 45,786 |            | 93  | %
|                    |  |                    |        |            |     |  
|United Kingdom      |  |                    | 3,320  |            | 7   | %
|                    |  |                    |        |            |     |  
|Total International |  |                    | 3,320  |            | 7   | %
|                    |  |                    |        |            |     |  
|Total               |  | $                  | 49,106 |            | 100 | %
|                    |  |                    |        |            |     |  

Investment in securities:

Purchased securities

Purchased securities are not registered for public sale and are carried at
cost. Securities are adjusted to fair value if the carrying value is less than fair 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
cost, the type of investment, subsequent purchases of the same or similar investments by the Company or other investors, the current financial position and operating results of the company issuing the securities and such other factors as may be
deemed relevant. Such other factors 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. The Managing
Members estimate and assumption of fair value of the private securities may differ significantly from the values that would have been used had a ready market existed, and the differences could be material.

Warrants

Warrants owned by the
Company are not registered for public sale, but are considered derivatives and are carried at fair value on the balance sheet at the end of the period, as determined by the Managing Member. Factors considered by the Managing Member in determining
fair value include cost, the type of investment, subsequent purchases of the same or similar investments by the Company or other investors, the current financial position and operating results of the company issuing the securities and such other
factors as may be deemed relevant. The Managing Members estimate and assumption of fair value of the private securities may differ significantly from the values that would have been used had a ready market existed, and the differences could be
material. At December 31, 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 and



24



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



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

risks to
date have not been significant. The Company recognized net foreign currency gains of $100 thousand and $74 thousand for the years ended December 31, 2007 and 2006, 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, 2007 and 2006, the current provision for state income taxes was approximately $30 thousand and $40 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, 2007 and 2006 (in
thousands):



|                                        |  |      |        |   |      |   |       
|--------------------------------------- |  | ---- | ------ | - | ---- | - | ------
|                                        |  | 2007 |        |   | 2006
|Financial statement basis of net assets |  | $    | 31,627 |   |      | $ | 38,135
|Tax basis of net assets (unaudited)     |  |      | 31,286 |   |      |   | 42,232
|                                        |  |      |        |   |      |   |       
|Difference                              |  | $    | (341   | ) |      | $ | 4,097 
|                                        |  |      |        |   |      |   |       

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.

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, 2007 and 2006,
respectively (in thousands):



|                                            |  |      |        |   |      |   |        |  
|------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                            |  | 2007 |        |   | 2006 |  
|Net income (loss) per financial statements  |  | $    | (1,224 | ) |      | $ | (621   | )
|Tax adjustments (unaudited):                |  |      |        |   |      |   |        |  
|Adjustment to depreciation expense          |  |      | (4,423 | ) |      |   | (5,208 | )
|Provision for losses and doubtful accounts  |  |      | 94     |   |      |   | 174    |  
|Adjustments to revenues                     |  |      | (98    | ) |      |   | 805    |  
|Other                                       |  |      | (224   | ) |      |   |       |  
|                                            |  |      |        |   |      |   |        |  
|Net loss per federal tax return (unaudited) |  | $    | (5,875 | ) |      | $ | (4,850 | )
|                                            |  |      |        |   |      |   |        |  

Other income (loss), net:

During the year ended December 31, 2007 and 2006, other income, net was comprised of gains on foreign currency transactions.



25



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



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

Per
unit data:

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

Organization and Offering Expenses:

The Managing
Member and its affiliates were reimbursed for certain expenses in connection with the organization of the Company and the offering of units. Total Organization and Offering Expenses (Syndication Costs) paid or reimbursed by the Company,
including selling commissions payable directly by the Company, did not exceed 15% of offering proceeds up to $25 million (the Cap) and 14% of the offering proceeds in excess of the Cap. Syndication Costs were recorded by the
Company as a reduction of Other Members Capital.

Recent accounting pronouncements:

In December 2007, the Financial Accounting Standards Board (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 Statement 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. SFAS 159 is effective for the Company as of January 1, 2008. The Company does not presently anticipate the
adoption of SFAS 159 to significantly impact its financial position, results of operations or cash flows.

In September 2006, the FASB issued Statement
No. 157, Fair Value Measurements (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 FASB Staff Position (FSP) No. 157-2, which
defers the effective date of SFAS No. 157 as it pertains to fair value measurements of nonfinancial assets and nonfinancial liabilities until fiscal years beginning after November 15, 2008. The Company will adopt SFAS 157 except as it
applies to its investment in equipment and leases, and other nonfinancial assets and nonfinancial liabilities as noted in FSP FAS 157-2. The Fund is in the process of determining the financial impact the partial adoption of SFAS 157 will
have on its results of operations and financial position.

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in
Income Taxes, an interpretation of SFAS 109, Accounting for Income Taxes (FIN 48), to create a single model to address accounting for uncertainty in tax positions. FIN 48 clarifies the accounting for income taxes by prescribing a
minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on deregulation, measurement, classification, interest and penalties, accounting in interim periods,
disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company adopted the provisions of FIN 48 on January 1, 2007. The adoption of FIN 48 did not have a significant effect on the
Companys financial position, results of operations or cash flows.



26



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



|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, 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:



|                        |  |    |  
|----------------------- |  | -- | -
|Transportation services |  | 37 | %
|Material handling       |  | 32 | %
|Construction            |  | 19 | %

During 2007, two customers comprised 24% of the Companys revenues from leases. During 2006, three customers
comprised 46% of the Companys revenues from leases.



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

The Company has various notes receivable
from parties who have financed their purchase of equipment through the Company. The terms of the notes receivable generally are up to 120 months and bear interest at rates ranging from 8.5% to 17.5%. The notes are secured by the equipment financed.
There were no impaired notes at December 31, 2007. As of December 31, 2007, the minimum future payments receivable are as follows (in thousands):



|                                                    |  |   |        |  
|--------------------------------------------------- |  | - | ------ | -
|Year ending December 31, 2008                       |  | $ | 3,482  |  
|2009                                                |  |   | 2,389  |  
|2010                                                |  |   | 1,187  |  
|2011                                                |  |   | 422    |  
|2012                                                |  |   | 393    |  
|Thereafter                                          |  |   | 869    |  
|                                                    |  |   |        |  
|                                                    |  |   | 8,742  |  
|Less: portion representing unearned interest income |  |   | (1,432 | )
|                                                    |  |   |        |  
|                                                    |  |   | 7,310  |  
|Unamortized indirect costs                          |  |   | 26     |  
|                                                    |  |   |        |  
|Notes receivable, net                               |  | $ | 7,336  |  
|                                                    |  |   |        |  

For the years ended December 31, 2007 and 2006, IDC amortization expense related to notes receivable was $28
thousand and $30 thousand. Together with IDC amortization expense related to operating leases and direct finance leases (discussed in Note 6) of $160 thousand and $110 thousand, respectively, total IDC amortization expense was $188 thousand and $140
thousand for the years ended December 31, 2007 and 2006, respectively.



27



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



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

The Company did not have an allowance
for credit losses prior to 2006. The table below shows the Companys allowance for credit losses as of December 31, 2007 and 2006 (in thousands):



|                            |  |                                  |      |   |                               |   |       |  |   |      |  
|--------------------------- |  | -------------------------------- | ---- | - | ----------------------------- | - | ----- |  | - | ---- | -
|                            |  | Reserve forLosses andImpairments |      |   | Allowance forDoubtfulAccounts |   | Total | 
|Balance December 31, 2005   |  | $                                |     |   |                               | $ |      |  | $ |     |  
|Provision for credit losses |  |                                  | 143  |   |                               |   | 31    |  |   | 174  |  
|                            |  |                                  |      |   |                               |   |       |  |   |      |  
|Balance December 31, 2006   |  |                                  | 143  |   |                               |   | 31    |  |   | 174  |  
|Provision for credit losses |  |                                  |     |   |                               |   | 94    |  |   | 94   |  
|Charge-offs                 |  |                                  | (143 | ) |                               |   |      |  |   | (143 | )
|                            |  |                                  |      |   |                               |   |       |  |   |      |  
|Balance December 31, 2007   |  | $                                |     |   |                               | $ | 125   |  | $ | 125  |  
|                            |  |                                  |      |   |                               |   |       |  |   |      |  



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

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



|                                                                                                                 |  |                         |        |                                           |   |                                                          |  |   |                         |   |  |   |       
|---------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | ----------------------------------------- | - | -------------------------------------------------------- |  | - | ----------------------- | - |  | - | ------
|                                                                                                                 |  | BalanceDecember 31,2006 |        | Reclassifications&Additions /Dispositions |   | Depreciation/AmortizationExpense orAmortizationof Leases |  |   | BalanceDecember 31,2007
|Net investment in operating leases                                                                               |  | $                       | 36,625 |                                           | $ | 20,409                                                   |  | $ | (8,510                  | ) |  | $ | 48,524
|Net investment in direct financing leases                                                                        |  |                         | 55     |                                           |   |                                                         |  |   | (6                      | ) |  |   | 49    
|Initial direct costs, net of accumulated amortization of $279 at December 31, 2007 and $113 at December 31, 2006 |  |                         | 511    |                                           |   | 182                                                      |  |   | (160                    | ) |  |   | 533   
|                                                                                                                 |  |                         |        |                                           |   |                                                          |  |   |                         |   |  |   |       
|Total                                                                                                            |  | $                       | 37,191 |                                           | $ | 20,591                                                   |  | $ | (8,676                  | ) |  | $ | 49,106
|                                                                                                                 |  |                         |        |                                           |   |                                                          |  |   |                         |   |  |   |       

Additions to net investment in operating leases are stated at cost and include amounts accrued at
December 31, 2007 and 2006 related to asset purchase obligations.

For the years ended December 31, 2007 and 2006, IDC amortization expense
related to operating and direct finance leases was $160 thousand and $110 thousand, respectively.

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 2007 or 2006.

Depreciation expense on property subject to operating leases and property held for lease or sale was $8.5 million and $5.0
million for the years ended December 31, 2007 and 2006, respectively.

All of the leased property was acquired during the years 2005 through 2007.



28



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



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

Operating
leases:

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



|                              |  |                         |        |   |           |   |        |                                  |  |   |                         |   |  |   |         |  
|----------------------------- |  | ----------------------- | ------ | - | --------- | - | ------ | -------------------------------- |  | - | ----------------------- | - |  | - | ------- | -
|                              |  | BalanceDecember 31,2006 |        |   | Additions |   |        | Reclassificationsor Dispositions |  |   | BalanceDecember 31,2007 |  
|Transportation                |  | $                       | 20,302 |   |           | $ | 1,059  |                                  |  | $ | 1,484                   |   |  | $ | 22,845  |  
|Material handling             |  |                         | 14,749 |   |           |   | 6,665  |                                  |  |   | (1,513                  | ) |  |   | 19,901  |  
|Construction                  |  |                         | 3,562  |   |           |   | 8,879  |                                  |  |   | (560                    | ) |  |   | 11,881  |  
|Logging and lumber            |  |                         | 2,001  |   |           |   |       |                                  |  |   |                        |   |  |   | 2,001   |  
|Manufacturing                 |  |                         | 1,098  |   |           |   | 1,126  |                                  |  |   | (725                    | ) |  |   | 1,499   |  
|Marine vessels                |  |                         |       |   |           |   | 1,415  |                                  |  |   |                        |   |  |   | 1,415   |  
|Aviation                      |  |                         |       |   |           |   | 1,658  |                                  |  |   |                        |   |  |   | 1,658   |  
|Office furniture              |  |                         | 146    |   |           |   |       |                                  |  |   |                        |   |  |   | 146     |  
|Research                      |  |                         |       |   |           |   |       |                                  |  |   | 725                     |   |  |   | 725     |  
|                              |  |                         |        |   |           |   |        |                                  |  |   |                         |   |  |   |         |  
|                              |  |                         | 41,858 |   |           |   | 20,802 |                                  |  |   | (589                    | ) |  |   | 62,071  |  
|Less accumulated depreciation |  |                         | (5,233 | ) |           |   | (8,510 | )                                |  |   | 196                     |   |  |   | (13,547 | )
|                              |  |                         |        |   |           |   |        |                                  |  |   |                         |   |  |   |         |  
|Total                         |  | $                       | 36,625 |   |           | $ | 12,292 |                                  |  | $ | (393                    | ) |  | $ | 48,524  |  
|                              |  |                         |        |   |           |   |        |                                  |  |   |                         |   |  |   |         |  

Direct financing leases:

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



|                                                             |  |   |    |  
|------------------------------------------------------------ |  | - | -- | -
|Total minimum lease payments receivable                      |  | $ | 47 |  
|Estimated residual values of leased equipment (unguaranteed) |  |   | 10 |  
|                                                             |  |   |    |  
|Investment in direct financing leases                        |  |   | 57 |  
|Less unearned income                                         |  |   | (8 | )
|                                                             |  |   |    |  
|Net investment in direct financing leases                    |  | $ | 49 |  
|                                                             |  |   |    |  

At December 31, 2007, the aggregate amounts of future minimum lease payments receivable are as follows (in
thousands):



|                              |  |                 |        |                       |   |       |  |   |       
|----------------------------- |  | --------------- | ------ | --------------------- | - | ----- |  | - | ------
|                              |  | OperatingLeases |        | DirectFinancingLeases |   | Total
|Year ending December 31, 2008 |  | $               | 11,774 |                       | $ | 10    |  | $ | 11,784
|2009                          |  |                 | 9,890  |                       |   | 10    |  |   | 9,900 
|2010                          |  |                 | 8,790  |                       |   | 9     |  |   | 8,799 
|2011                          |  |                 | 5,825  |                       |   | 9     |  |   | 5,834 
|2012                          |  |                 | 2,789  |                       |   | 9     |  |   | 2,798 
|Thereafter                    |  |                 | 3,681  |                       |   |      |  |   | 3,681 
|                              |  |                 |        |                       |   |       |  |   |       
|                              |  | $               | 42,749 |                       | $ | 47    |  | $ | 42,796
|                              |  |                 |        |                       |   |       |  |   |       



29



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



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

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    
|Marine vessels       |  | 20 - 30    
|Aviation             |  | 20 - 30    
|Manufacturing        |  | 10 - 20    
|Logging and lumber   |  | 7 - 10     
|Material handling    |  | 7 - 10     
|Transportation       |  | 7 - 10     
|Office furniture     |  | 7 - 10     
|Construction         |  | 7 - 10     
|Research             |  | 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 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), ATEL Equipment Corporation (AEC), ATEL Investor Services (AIS) and AFS is a wholly-owned subsidiary of ATEL Capital Group and performs services for the Company. Acquisition
services are performed for the Company by ALC; equipment management, lease administration and asset disposition services are performed by AEC; investor relations and communications services are performed by AIS; and general administrative services
for the Company 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. The cumulative limit increases annually. 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, 2007, costs reimbursable to AFS in future years totaled approximately $148 thousand.

AFS and/or affiliates earned fees, commissions and reimbursements, pursuant to the Operating Agreement as follows during each of the years ended December 31, 2007
and 2006:



|                                                                                                                                  |  |      |       |      |   |      
|--------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----- | ---- | - | -----
|                                                                                                                                  |  | 2007 |       | 2006
|Selling commissions, Equal to 9% of the selling price of the Limited Liability Company Units, deducted from Other Members
capital |  | $    |      |      | $ | 1,183
|Reimbursement of other syndication costs to AFS and affiliates, deducted from Other Members capital                               |  |      |      |      |   | 813  
|Administrative costs reimbursed to Managing Member                                                                                |  |      | 523   |      |   | 449  
|Asset management fees to Managing Member                                                                                          |  |      | 629   |      |   | 368  
|Acquisition and initial direct costs paid to Managing Member                                                                      |  |      | 1,059 |      |   | 1,199
|                                                                                                                                  |  |      |       |      |   |      
|                                                                                                                                  |  | $    | 2,211 |      | $ | 4,012
|                                                                                                                                  |  |      |       |      |   |      



30



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



|8. | Non-recourse Debt:
|-- | ------------------

At December 31, 2007, non-recourse debt
consists of notes payable to financial institutions. The notes are due in varying quarterly and semi-annual payments. Interest on the notes is at fixed rates ranging from 5.74% to 6.65%. The notes are secured by assignments of lease payments and
pledges of assets. At December 31, 2007, the carrying value of the pledged assets is approximately $26.1 million. The notes mature from 2008 through 2015.

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



|                              |  |           |        |          |   |       |  |   |       
|----------------------------- |  | --------- | ------ | -------- | - | ----- |  | - | ------
|                              |  | Principal |        | Interest |   | Total
|Year ending December 31, 2008 |  | $         | 5,533  |          | $ | 1,116 |  | $ | 6,649 
|2009                          |  |           | 4,473  |          |   | 796   |  |   | 5,269 
|2010                          |  |           | 4,250  |          |   | 531   |  |   | 4,781 
|2011                          |  |           | 3,136  |          |   | 294   |  |   | 3,430 
|2012                          |  |           | 1,015  |          |   | 156   |  |   | 1,171 
|Thereafter                    |  |           | 2,172  |          |   | 189   |  |   | 2,361 
|                              |  |           |        |          |   |       |  |   |       
|                              |  | $         | 20,579 |          | $ | 3,082 |  | $ | 23,661
|                              |  |           |        |          |   |       |  |   |       



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

The Company participates with AFS and
certain of its affiliates in a financing arrangement (comprised of a working capital term loan 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 was originally $75 million and expired on June 28, 2007. The facility was renewed for an additional two years with an availability of
$65 million pending redefinition of the lender base. On July 28, 2007, with a redefinition of the lender base, the facility was amended to reset availability to $75 million. The arrangement expires in June 2009. The availability of borrowings
to the Company under this financing arrangement is reduced by the amount outstanding on any of the above mentioned facilities.

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



|                                                                                                                           |  |   |        |  
|-------------------------------------------------------------------------------------------------------------------------- |  | - | ------ | -
|Total available under the financing arrangement                                                                            |  | $ | 75,000 |  
|Amount borrowed by the Company under the acquisition facility                                                              |  |   | (4,000 | )
|Amounts borrowed by affiliated partnerships and Limited Liability Companies under the acquisition and warehouse facilities |  |   | (4,625 | )
|                                                                                                                           |  |   |        |  
|Total remaining available under the acquisition and warehouse facilities                                                   |  | $ | 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. 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 at December 31, 2007 ranged from 6.11% to 6.35%. During the year ended December 31, 2007, the weighted average interest rate on borrowings was 7.00%.

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



31



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



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

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, 2007, 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.

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, 2007.



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

At December 31, 2007, there were commitments to
purchase lease asset totaling approximately $6.7 million. This amount represents contract awards which may be canceled by the prospective lessee or may not be accepted by the Company. Of the $6.7 million, $2.9 million was cancelled subsequent to
year-end.



|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.



32



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



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

As of December 31, 2007, 5,230,507
Units were issued and outstanding. The Company was initially authorized to issue up to 15,000,000 Units. The Company terminated sales of Units effective April 30, 2006.

During the years ended December 31, 2007 and 2006, the Company rescinded or repurchased Units totaling 2,100 and 32,000, respectively. Rescissions or repurchases of Units is solely at the discretion of the
Managing Member.

Distributions to the Other Members were as follows (in thousands, except as to Units and per Unit data):



|                                             |  |      |           |      |   |          
|-------------------------------------------- |  | ---- | --------- | ---- | - | ---------
|                                             |  | 2007 |           | 2006
|Distributions declared                       |  | $    | 4,838     |      | $ | 4,483    
|Weighted average number of Units outstanding |  |      | 5,231,645 |      |   | 5,002,130
|                                             |  |      |           |      |   |          
|Weighted average distributions per Unit      |  | $    | 0.93      |      | $ | 0.90     
|                                             |  |      |           |      |   |          



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

The following disclosure of
the estimated fair value of financial instruments is made in accordance with the requirements of Statement of Financial Accounting Standards No. 107, Disclosures about Fair Value of Financial Instruments. Fair value estimates,
methods and assumptions, set forth below for the Companys financial instruments, are made solely to comply with the requirements of Statement 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. 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, and other accounts:

The recorded amounts of the Companys cash and cash equivalents, accounts receivable, accounts payable and accruals at December 31, 2007
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.

Investment securities

The
Companys investment securities are not registered for public sale and are stated 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.



33



---

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS



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

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. The estimated fair value of the Companys non-recourse debt at December 31, 2007 is $21.2 million.

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, 2007 and 2006. 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 sets forth the estimated fair values of the Companys
financial instruments as of December 31, 2007 and 2006 (in thousands):



|                                  |  |                |        |                     |   |                |  |                     |       |  |   |      
|--------------------------------- |  | -------------- | ------ | ------------------- | - | -------------- |  | ------------------- | ----- |  | - | -----
|                                  |  | 2007           |        | 2006               
|                                  |  | CarryingAmount |        | EstimatedFair Value |   | CarryingAmount |  | EstimatedFair Value
|Financial assets:                 |  |                |        |                     |   |                |  |                     |       |  |   |      
|Cash and cash equivalents         |  | $              | 1,662  |                     | $ | 1,662          |  | $                   | 4,902 |  | $ | 4,902
|Notes receivable                  |  |                | 7,336  |                     |   | 7,336          |  |                     | 8,408 |  |   | 8,408
|Investment in securities, at cost |  |                | 497    |                     |   | 497            |  |                     | 155   |  |   | 155  
|Financial liabilities:            |  |                |        |                     |   |                |  |                     |       |  |   |      
|Non-recourse debt                 |  |                | 20,597 |                     |   | 21,201         |  |                     |      |  |   |     
|Borrowings                        |  |                | 4,000  |                     |   | 4,000          |  |                     | 9,500 |  |   | 9,500



34



---

|Item 8. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
|------- | -------------------------------------------------------------------------------------

None.



|Item 8A. | 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
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 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, 2007. The internal control process of the Managing Member, as 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, because of changes in conditions, the effectiveness of internal control may vary
over time.

Management of the Managing Member assessed the effectiveness of its internal control over financial reporting, as is applicable to the Company,
as of December 31, 2007. 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 is applicable to the Company, was effective as of December 31, 2007.

The Company is a non-accelerated filer for the 2007 fiscal year. Accordingly, the Companys independent registered public accounting firm is not
currently required to issue an audit report on the Companys assessment of its internal control over financial reporting.

Changes in internal
control

There were no changes in the Managing Members internal control over financial reporting, as is applicable to the Company, during the
quarter ended December 31, 2007 that has materially affected, or is reasonably likely to materially affect, the Managing Members internal control over financial reporting, as is applicable to the Company.



35



---

PART III



|Item 9. | 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 ATEL Capital Group is owned 100% by Dean L. Cash.

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

The officers and directors of ATEL Capital Group 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 57, 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 54, 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.



36



---

Vasco H. Morais, age 49, joined ATEL in 1989 as general counsel to provide legal support in the drafting and reviewing of
lease documentation, advising on general corporate law matters, and assisting on securities law issues. From 1986 to 1989, Mr. Morais was employed by the BankAmeriLease Companies, Bank of Americas equipment leasing subsidiaries, providing
in-house legal support on the documentation of tax-oriented and non-tax oriented direct and leveraged lease transactions, vendor leasing programs and general corporate matters. Prior to the BankAmeriLease Companies, Mr. Morais was with the
Consolidated Capital Companies in the corporate and securities legal department involved in drafting and reviewing contracts, advising on corporate law matters and securities law issues. Mr. Morais received a B.A. degree in 1982 from the
University of California in Berkeley, a J.D. degree in 1986 from Golden Gate University Law School and an M.B.A. (Finance) in 1997 from Golden Gate University. Mr. Morais has been an active member of the State Bar of California since 1986.

Audit Committee

ATEL Leasing Corporation is
the managing member of ATEL Financial Services, LLC. ATEL Financial Services, LLC is the Managing Member of the registrant. The board of directors of ATEL Leasing Corporation 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, 2007.

Code of Ethics

ACG on behalf of AFS and ALC has adopted a code of ethics for its Chief Executive Officer and Chief Financial Officer and Chief Operating Officer.
The Code of Ethics is included as Exhibit 14.1 to this report.



|Item 10. | 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 in 2007 is set forth in Item 7 of this report under the caption Financial Statements and Supplementary Data - Notes to the 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 ATEL Securities Corporation, an affiliate of ATEL.

Through December 31, 2007, $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.



37



---

AFS supervises performance of among others activities, 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.

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



38



---

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.

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 2 1.5% 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.

A Carried Interest equal to 7.5% of all Distributions of Cash from Operations and Cash from Sales or Refinancing. See Note 7 to the financial
statements as set forth in Part II, Item 7, 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 7, Financial Statements and Supplementary Data, of this report for amounts allocated to AFS in 2007
and 2006.



|Item 11. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------

Security Ownership of Certain Beneficial Owners

At December 31, 2007, 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)Percentof Class |  
|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.



39



---

|Item 12. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
|-------- | ----------------------------------------------

The responses to
Item 1 of this report under the caption Equipment Leasing Activities, Item 7 of this report under the caption Financial Statements and Supplemental Data - Notes to the 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 13. | EXHIBITS
|-------- | --------



|(a) | Exhibits
|--- | --------



|              |  |                                                                               |  |                                                         
|------------- |  | ----------------------------------------------------------------------------- |  | --------------------------------------------------------
|ExhibitNumber |  | Description                                                                   |  | Reference toPrior Filing orExhibit NumberAttached Hereto
|              |  |                                                                              
|3             |  | Articles of Incorporation Bylaws                                              |  | 3a                                                      
|              |  |                                                                              
|4             |  | Instruments defining the rights of security holders, including indentures     |  | 3a                                                      
|              |  |                                                                              
|14            |  | Code of Ethics                                                                |  | 14.1                                                    
|              |  |                                                                              
|31            |  | Certification of Dean L. Cash pursuant to Rules 13a-14(a) and 15d-14(a)       |  | 31.1                                                    
|              |  |                                                                              
|31            |  | Certification of Paritosh K. Choksi pursuant to Rules 13a-14(a) and 15d-14(a) |  | 31.2                                                    
|              |  |                                                                              
|32            |  | Certification of Dean L. Cash pursuant to 18 U.S.C. section 1350              |  | 32.1                                                    
|              |  |                                                                              
|32            |  | Certification of Paritosh K. Choksi pursuant to 18 U.S.C. section 1350        |  | 32.2                                                    



|3a | 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.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|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):



|           |  |      |     |      |   |    
|---------- |  | ---- | --- | ---- | - | ---
|           |  | 2007 |     | 2006
|Audit fees |  | $    | 116 |      | $ | 114
|Other fees |  |      | 1   |      |   |   
|           |  |      |     |      |   |    
|           |  | $    | 117 |      | $ | 114
|           |  |      |     |      |   |    

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.

ATEL Leasing Corporation is the managing member of ATEL Financial Services,
LLC. ATEL Financial Services, LLC is the Managing Member of the registrant. The board of directors of ATEL Leasing Corporation 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 ATEL Leasing Corporation acting on behalf of the board of directors of ATEL Leasing Corporation in its role as the audit committee of the Company.



40



---

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, 2008

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)


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, 2008
|                                          |  |                                                                                                                                   
|/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, 2008

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-KSB, and copies thereof will be furnished supplementally to the Commission when forwarded to the security holders.



41