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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



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

For the quarterly period ended September 30, 2008



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

For the transition period from  to

Commission File number 000-51858

ATEL Capital Equipment Fund XI, LLC

(Exact name of registrant as specified in its charter)



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

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

(Address of principal executive offices)

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

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

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

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

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



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

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

The number of Limited Liability Company Units outstanding as of October 31, 2008 was 5,230,507.

DOCUMENTS INCORPORATED BY
REFERENCE

None.









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ATEL CAPITAL EQUIPMENT FUND XI, LLC

Index



|         |  |                                                                                                                                 |  |   
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------- |  | --
|Part I.  |  | Financial Information                                                                                                           |  | 3 
|         |  |                                                                                                                                
|Item 1.  |  | Financial Statements (Unaudited)                                                                                                |  | 3 
|         |  |                                                                                                                                
|         |  | Balance Sheets, September 30, 2008 and December 31, 2007                                                                        |  | 3 
|         |  |                                                                                                                                
|         |  | Statements of Operations for the three and nine months ended September 30, 2008 and 2007                                        |  | 4 
|         |  |                                                                                                                                
|         |  | Statements of Changes in Members Capital for the year ended December 31, 2007 and for the nine months ended September 30, 2008 |  | 5 
|         |  |                                                                                                                                
|         |  | Statements of Cash Flows for the three and nine months ended September 30, 2008 and 2007                                        |  | 6 
|         |  |                                                                                                                                
|         |  | Notes to the Financial Statements                                                                                               |  | 7 
|         |  |                                                                                                                                
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                           |  | 20
|         |  |                                                                                                                                
|Item 4.  |  | Controls and Procedures                                                                                                         |  | 26
|         |  |                                                                                                                                
|Part II. |  | Other Information                                                                                                               |  | 27
|         |  |                                                                                                                                
|Item 1.  |  | Legal Proceedings                                                                                                               |  | 27
|         |  |                                                                                                                                
|Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                     |  | 27
|         |  |                                                                                                                                
|Item 3.  |  | Defaults Upon Senior Securities                                                                                                 |  | 28
|         |  |                                                                                                                                
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                                             |  | 28
|         |  |                                                                                                                                
|Item 5.  |  | Other Information                                                                                                               |  | 28
|         |  |                                                                                                                                
|Item 6.  |  | Exhibits                                                                                                                        |  | 28



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Part I. FINANCIAL INFORMATION



|Item 1. | Financial Statements (Unaudited).
|------- | ---------------------------------

ATEL CAPITAL EQUIPMENT FUND XI, LLC

BALANCE SHEETS

SEPTEMBER 30, 2008 AND DECEMBER 31, 2007

(In Thousands)

(Unaudited)



|                                                                                                                                                                                         |  |                   |        |                  |   |       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------ | ---------------- | - | ------
|                                                                                                                                                                                         |  | September 30,2008 |        | December 31,2007
|ASSETS                                                                                                                                                                                   |  |                   |        |                  |   |       
|Cash and cash equivalents                                                                                                                                                                |  | $                 | 1,486  |                  | $ | 1,662 
|Accounts receivable, net of allowance for doubtful accounts of $19 as of September 30, 2008 and $125 as of December 31,
2007                                                             |  |                   | 394    |                  |   | 418   
|Notes receivable, net of unearned interest income of $973 and allowance for credit losses of $61 as of September 30, 2008 and unearned
interest income of $1,432 as of December 31, 2007 |  |                   | 4,815  |                  |   | 7,336 
|Investment in securities                                                                                                                                                                 |  |                   | 411    |                  |   | 497   
|Investments in equipment and leases, net of accumulated depreciation of $21,045 as of September 30, 2008 and $13,547 as of
December 31, 2007                                             |  |                   | 42,016 |                  |   | 49,106
|Due from affiliate                                                                                                                                                                       |  |                   |       |                  |   | 146   
|Other assets                                                                                                                                                                             |  |                   | 39     |                  |   | 32    
|                                                                                                                                                                                         |  |                   |        |                  |   |       
|Total assets                                                                                                                                                                             |  | $                 | 49,161 |                  | $ | 59,197
|                                                                                                                                                                                         |  |                   |        |                  |   |       
|LIABILITIES AND MEMBERS CAPITAL                                                                                                                                                         |  |                   |        |                  |   |       
|Accounts payable and accrued liabilities:                                                                                                                                                |  |                   |        |                  |   |       
|Managing Member                                                                                                                                                                          |  | $                 | 90     |                  | $ | 381   
|Affiliates                                                                                                                                                                               |  |                   | 4      |                  |   |      
|Accrued distributions to Other Members                                                                                                                                                   |  |                   | 554    |                  |   | 554   
|Other                                                                                                                                                                                    |  |                   | 322    |                  |   | 668   
|Non-recourse debt                                                                                                                                                                        |  |                   | 18,919 |                  |   | 20,579
|Acquisition facility obligation                                                                                                                                                          |  |                   | 1,000  |                  |   | 4,000 
|Unearned operating lease income                                                                                                                                                          |  |                   | 742    |                  |   | 1,388 
|                                                                                                                                                                                         |  |                   |        |                  |   |       
|Total liabilities                                                                                                                                                                        |  |                   | 21,631 |                  |   | 27,570
|                                                                                                                                                                                         |  |                   |        |                  |   |       
|Commitments and contingencies                                                                                                                                                            |  |                   |        |                  |   |       
|Members capital:                                                                                                                                                                        |  |                   |        |                  |   |       
|Managing Member                                                                                                                                                                          |  |                   |       |                  |   |      
|Other Members                                                                                                                                                                            |  |                   | 27,530 |                  |   | 31,627
|                                                                                                                                                                                         |  |                   |        |                  |   |       
|Total Members capital                                                                                                                                                                   |  |                   | 27,530 |                  |   | 31,627
|                                                                                                                                                                                         |  |                   |        |                  |   |       
|Total liabilities and Members capital                                                                                                                                                   |  | $                 | 49,161 |                  | $ | 59,197
|                                                                                                                                                                                         |  |                   |        |                  |   |       

See accompanying notes.



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ATEL CAPITAL EQUIPMENT FUND XI, LLC

STATEMENTS OF OPERATIONS

FOR THE
THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2008 AND 2007

(In Thousands, Except for Units and Per Unit Data)

(Unaudited)



|                                                            |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|----------------------------------------------------------- |  | ------------------------------- | --------- | - | ------------------------------ | - | --------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                                            |  | Three months endedSeptember 30, |           |   | Nine months endedSeptember 30, |  
|                                                            |  | 2008                            |           |   | 2007                           |   |           | 2008 |  |   | 2007      |  
|Revenues:                                                   |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|Operating lease income                                      |  | $                               | 2,992     |   |                                | $ | 2,740     |      |  | $ | 8,978     |   |  | $ | 7,179     |  
|Direct financing leases                                     |  |                                 | 1         |   |                                |   |          |      |  |   | 2         |   |  |   | 2         |  
|Notes receivable interest income                            |  |                                 | 123       |   |                                |   | 174       |      |  |   | 485       |   |  |   | 571       |  
|Gain on sale of assets and early termination of notes       |  |                                 | 18        |   |                                |   |          |      |  |   | 72        |   |  |   | 213       |  
|Gain on sale of securities                                  |  |                                 |          |   |                                |   |          |      |  |   | 54        |   |  |   | 9         |  
|Interest income                                             |  |                                 | 5         |   |                                |   | 24        |      |  |   | 22        |   |  |   | 66        |  
|Other                                                       |  |                                 | 13        |   |                                |   | 17        |      |  |   | 33        |   |  |   | 38        |  
|                                                            |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|Total revenues                                              |  |                                 | 3,152     |   |                                |   | 2,955     |      |  |   | 9,646     |   |  |   | 8,078     |  
|Expenses:                                                   |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|Depreciation of operating lease assets                      |  |                                 | 2,501     |   |                                |   | 2,339     |      |  |   | 7,498     |   |  |   | 6,070     |  
|Asset management fees to Managing Member                    |  |                                 | 155       |   |                                |   | 170       |      |  |   | 498       |   |  |   | 473       |  
|Acquisition expense                                         |  |                                 | 10        |   |                                |   | 140       |      |  |   | 45        |   |  |   | 566       |  
|Cost reimbursements to Managing Member                      |  |                                 | 82        |   |                                |   | 158       |      |  |   | 415       |   |  |   | 523       |  
|Reversal of provision for losses and doubtful accounts      |  |                                 | (9        | ) |                                |   | (18       | )    |  |   | (45       | ) |  |   | (20       | )
|Amortization of initial direct costs                        |  |                                 | 51        |   |                                |   | 47        |      |  |   | 156       |   |  |   | 137       |  
|Interest expense                                            |  |                                 | 306       |   |                                |   | 353       |      |  |   | 1,017     |   |  |   | 728       |  
|Professional fees                                           |  |                                 | 13        |   |                                |   | 37        |      |  |   | 163       |   |  |   | 338       |  
|Outside services                                            |  |                                 | 22        |   |                                |   | 30        |      |  |   | 38        |   |  |   | 81        |  
|Other                                                       |  |                                 | 13        |   |                                |   | 10        |      |  |   | 78        |   |  |   | 73        |  
|                                                            |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|Total operating expenses                                    |  |                                 | 3,144     |   |                                |   | 3,266     |      |  |   | 9,863     |   |  |   | 8,969     |  
|Other (expense) income, net                                 |  |                                 | (11       | ) |                                |   | 14        |      |  |   | 42        |   |  |   | 49        |  
|                                                            |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|Net loss                                                    |  | $                               | (3        | ) |                                | $ | (297      | )    |  | $ | (175      | ) |  | $ | (842      | )
|                                                            |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|Net income (loss):                                          |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|Managing Member                                             |  | $                               | 97        |   |                                | $ | 97        |      |  | $ | 293       |   |  | $ | 327       |  
|Other Members                                               |  |                                 | (100      | ) |                                |   | (394      | )    |  |   | (468      | ) |  |   | (1,169    | )
|                                                            |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|                                                            |  | $                               | (3        | ) |                                | $ | (297      | )    |  | $ | (175      | ) |  | $ | (842      | )
|                                                            |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|Net loss per Limited Liability Company Unit (Other Members) |  | $                               | (0.02     | ) |                                | $ | (0.06     | )    |  | $ | (0.09     | ) |  | $ | (0.22     | )
|Weighted average number of Units outstanding                |  |                                 | 5,230,507 |   |                                |   | 5,230,892 |      |  |   | 5,230,507 |   |  |   | 5,232,029 |  

See accompanying notes.



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ATEL CAPITAL EQUIPMENT FUND XI, LLC

STATEMENTS OF CHANGES IN MEMBERS CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2007

AND FOR THE

NINE MONTHS ENDED

SEPTEMBER 30, 2008

(In Thousands, Except for Units and Per Unit Data)

(Unaudited)



|                                                |  |               |   |  |                |        |   |  |       |      |   |  |   |        |  
|----------------------------------------------- |  | ------------- | - |  | -------------- | ------ | - |  | ----- | ---- | - |  | - | ------ | -
|                                                |  | Other Members |   |  | ManagingMember |        |   |  |      
|                                                |  | Units         |   |  | Amount         |        |   |  | Total |     
|Balance December 31, 2006                       |  | 5,232,607     |   |  | $              | 38,135 |   |  | $     |     |   |  | $ | 38,135 |  
|Repurchases of Limited Liability Company Units  |  | (600          | ) |  |                | (5     | ) |  |       |     |   |  |   | (5     | )
|Rescissions of capital contributions            |  | (1,500        | ) |  |                | (15    | ) |  |       |     |   |  |   | (15    | )
|Distributions to Other Members ($0.93 per Unit) |  |              |   |  |                | (4,838 | ) |  |       |     |   |  |   | (4,838 | )
|Distributions to Managing Member                |  |              |   |  |                |       |   |  |       | (426 | ) |  |   | (426   | )
|Net (loss) income                               |  |              |   |  |                | (1,650 | ) |  |       | 426  |   |  |   | (1,224 | )
|                                                |  |               |   |  |                |        |   |  |       |      |   |  |   |        |  
|Balance December 31, 2007                       |  | 5,230,507     |   |  |                | 31,627 |   |  |       |     |   |  |   | 31,627 |  
|Distributions to Other Members ($0.69 per Unit) |  |              |   |  |                | (3,629 | ) |  |       |     |   |  |   | (3,629 | )
|Distributions to Managing Member                |  |              |   |  |                |       |   |  |       | (293 | ) |  |   | (293   | )
|Net (loss) income                               |  |              |   |  |                | (468   | ) |  |       | 293  |   |  |   | (175   | )
|                                                |  |               |   |  |                |        |   |  |       |      |   |  |   |        |  
|Balance September 30, 2008                      |  | 5,230,507     |   |  | $              | 27,530 |   |  | $     |     |   |  | $ | 27,530 |  
|                                                |  |               |   |  |                |        |   |  |       |      |   |  |   |        |  

See accompanying notes.



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ATEL CAPITAL EQUIPMENT FUND XI, LLC

STATEMENTS OF CASH FLOWS

FOR THE
THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2008 AND 2007

(In Thousands)

(Unaudited)



|                                                                           |  |                                 |        |   |                                |   |         |      |  |   |        |   |  |   |         |  
|-------------------------------------------------------------------------- |  | ------------------------------- | ------ | - | ------------------------------ | - | ------- | ---- |  | - | ------ | - |  | - | ------- | -
|                                                                           |  | Three months endedSeptember 30, |        |   | Nine months endedSeptember 30, |  
|                                                                           |  | 2008                            |        |   | 2007                           |   |         | 2008 |  |   | 2007   |  
|Operating activities:                                                      |  |                                 |        |   |                                |   |         |      |  |   |        |   |  |   |         |  
|Net loss                                                                   |  | $                               | (3     | ) |                                | $ | (297    | )    |  | $ | (175   | ) |  | $ | (842    | )
|Adjustment to reconcile net loss to cash provided by operating activities: |  |                                 |        |   |                                |   |         |      |  |   |        |   |  |   |         |  
|Gain on sales of assets and early termination of notes                     |  |                                 | (18    | ) |                                |   |        |      |  |   | (72    | ) |  |   | (213    | )
|Depreciation of operating lease assets                                     |  |                                 | 2,501  |   |                                |   | 2,339   |      |  |   | 7,498  |   |  |   | 6,070   |  
|Amortization of initial direct costs                                       |  |                                 | 51     |   |                                |   | 47      |      |  |   | 156    |   |  |   | 137     |  
|Amortization of unearned income on direct finance leases                   |  |                                 | (1     | ) |                                |   |        |      |  |   | (2     | ) |  |   | (2      | )
|Amortization of unearned income on notes receivable                        |  |                                 | (123   | ) |                                |   | (174    | )    |  |   | (485   | ) |  |   | (571    | )
|Reversal of provision for losses and doubtful accounts                     |  |                                 | (9     | ) |                                |   | (18     | )    |  |   | (45    | ) |  |   | (20     | )
|Provision for losses on notes receivable                                   |  |                                 | 60     |   |                                |   |        |      |  |   | 60     |   |  |   |        |  
|Gain on sale of securities                                                 |  |                                 |       |   |                                |   |        |      |  |   | (54    | ) |  |   | (9      | )
|Changes in operating assets and liabilities:                               |  |                                 |        |   |                                |   |         |      |  |   |        |   |  |   |         |  
|Accounts receivable                                                        |  |                                 | (156   | ) |                                |   | (213    | )    |  |   | 69     |   |  |   | 136     |  
|Prepaid expenses and other assets                                          |  |                                 | (29    | ) |                                |   | (26     | )    |  |   | (7     | ) |  |   | (48     | )
|Accounts payable, Managing Member                                          |  |                                 | (11    | ) |                                |   | (274    | )    |  |   | (291   | ) |  |   | (224    | )
|Accounts payable, other                                                    |  |                                 | (11    | ) |                                |   | 412     |      |  |   | (346   | ) |  |   | (1,016  | )
|Accrued liabilities, affiliates                                            |  |                                 | 47     |   |                                |   | (80     | )    |  |   | 150    |   |  |   |        |  
|Unearned operating lease income                                            |  |                                 | (82    | ) |                                |   | (128    | )    |  |   | (646   | ) |  |   | (409    | )
|                                                                           |  |                                 |        |   |                                |   |         |      |  |   |        |   |  |   |         |  
|Net cash provided by operating activities                                  |  |                                 | 2,216  |   |                                |   | 1,588   |      |  |   | 5,810  |   |  |   | 2,989   |  
|                                                                           |  |                                 |        |   |                                |   |         |      |  |   |        |   |  |   |         |  
|Investing activities:                                                      |  |                                 |        |   |                                |   |         |      |  |   |        |   |  |   |         |  
|Purchases of equipment on operating leases                                 |  |                                 |       |   |                                |   | (11,117 | )    |  |   | (543   | ) |  |   | (18,248 | )
|Purchase of securities                                                     |  |                                 |       |   |                                |   | (188    | )    |  |   |       |   |  |   | (251    | )
|Proceeds from early termination of notes receivable                        |  |                                 | 310    |   |                                |   | 364     |      |  |   | 1,103  |   |  |   | 1,555   |  
|Proceeds from sales of lease assets                                        |  |                                 |       |   |                                |   |        |      |  |   |       |   |  |   | 478     |  
|Payments of initial direct costs                                           |  |                                 |       |   |                                |   | (101    | )    |  |   | (12    | ) |  |   | (156    | )
|Payments received on direct finance leases                                 |  |                                 | 3      |   |                                |   | 2       |      |  |   | 7      |   |  |   | 7       |  
|Note receivable advances                                                   |  |                                 |       |   |                                |   | (1,904  | )    |  |   | (375   | ) |  |   | (2,825  | )
|Proceeds from sale of securities                                           |  |                                 | 41     |   |                                |   |        |      |  |   | 140    |   |  |   | 9       |  
|Payments received on notes receivable                                      |  |                                 | 641    |   |                                |   | 1,382   |      |  |   | 2,276  |   |  |   | 3,058   |  
|                                                                           |  |                                 |        |   |                                |   |         |      |  |   |        |   |  |   |         |  
|Net cash provided by (used in) investing activities                        |  |                                 | 995    |   |                                |   | (11,562 | )    |  |   | 2,596  |   |  |   | (16,373 | )
|                                                                           |  |                                 |        |   |                                |   |         |      |  |   |        |   |  |   |         |  
|Financing activities:                                                      |  |                                 |        |   |                                |   |         |      |  |   |        |   |  |   |         |  
|Borrowings under non-recourse debt                                         |  |                                 |       |   |                                |   | 6,700   |      |  |   | 2,738  |   |  |   | 19,014  |  
|Repayments under non-recourse debt                                         |  |                                 | (1,496 | ) |                                |   | (789    | )    |  |   | (4,398 | ) |  |   | (1,365  | )
|Borrowings under acquisition facility                                      |  |                                 |       |   |                                |   | 3,500   |      |  |   | 3,000  |   |  |   | 10,500  |  
|Repayments under acquisition facility                                      |  |                                 |       |   |                                |   |        |      |  |   | (6,000 | ) |  |   | (15,000 | )
|Distributions to Other Members                                             |  |                                 | (1,210 | ) |                                |   | (1,210  | )    |  |   | (3,629 | ) |  |   | (3,629  | )
|Distributions to Managing Member                                           |  |                                 | (97    | ) |                                |   | (97     | )    |  |   | (293   | ) |  |   | (327    | )
|Rescissions and repurchases of capital contributions                       |  |                                 |       |   |                                |   | (20     | )    |  |   |       |   |  |   | (20     | )
|                                                                           |  |                                 |        |   |                                |   |         |      |  |   |        |   |  |   |         |  
|Net cash provided by (used in) financing activities                        |  |                                 | (2,803 | ) |                                |   | 8,084   |      |  |   | (8,582 | ) |  |   | 9,173   |  
|                                                                           |  |                                 |        |   |                                |   |         |      |  |   |        |   |  |   |         |  
|Net increase (decrease) in cash and cash equivalents                       |  |                                 | 408    |   |                                |   | (1,890  | )    |  |   | (176   | ) |  |   | (4,211  | )
|Cash and cash equivalents at beginning of period                           |  |                                 | 1,078  |   |                                |   | 2,581   |      |  |   | 1,662  |   |  |   | 4,902   |  
|                                                                           |  |                                 |        |   |                                |   |         |      |  |   |        |   |  |   |         |  
|Cash and cash equivalents at end of period                                 |  | $                               | 1,486  |   |                                | $ | 691     |      |  | $ | 1,486  |   |  | $ | 691     |  
|                                                                           |  |                                 |        |   |                                |   |         |      |  |   |        |   |  |   |         |  
|Supplemental disclosures of cash flow information:                         |  |                                 |        |   |                                |   |         |      |  |   |        |   |  |   |         |  
|Cash paid during the period for interest                                   |  | $                               | 310    |   |                                | $ | 311     |      |  | $ | 1,042  |   |  | $ | 634     |  
|                                                                           |  |                                 |        |   |                                |   |         |      |  |   |        |   |  |   |         |  
|Cash paid during the period for taxes                                      |  | $                               | 1      |   |                                | $ | 28      |      |  | $ | 36     |   |  | $ | 30      |  
|                                                                           |  |                                 |        |   |                                |   |         |      |  |   |        |   |  |   |         |  
|Schedule of non-cash transactions:                                         |  |                                 |        |   |                                |   |         |      |  |   |        |   |  |   |         |  
|Distributions payable to Other Members at period-end                       |  | $                               | 554    |   |                                | $ | 554     |      |  | $ | 554    |   |  | $ | 554     |  
|                                                                           |  |                                 |        |   |                                |   |         |      |  |   |        |   |  |   |         |  

See accompanying notes.



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##### Table of Contents

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS

1. Organization and
Limited Liability Company matters:

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

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

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

The Company, or AFS on behalf of the Company, has incurred costs in connection with the organization, registration and issuance of the Limited Liability
Company Units (Note 5). 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 unaudited financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (GAAP) for interim financial information and with instructions to Form 10-Q and Article 8 of Regulation S-X. The unaudited interim financial statements reflect all adjustments which are,
in the opinion of the Managing Member, necessary for a fair statement of financial position and results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. The preparation of financial statements
in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts in the financial statements and accompanying notes. Therefore, actual results could differ from those estimates. Operating results for the
three and nine months ended September 30, 2008 are not necessarily indicative of the results for the year ending December 31, 2008.



7



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##### Table of Contents

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS

2. Summary of significant accounting policies (continued):



The Companys unaudited interim financial statements should be read in conjunction with the financial statements
and notes thereto contained in the report on Form 10-K for the year ended December 31, 2007, filed with the Securities and Exchange Commission.

Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications had no effect on equity or net loss.

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

Cash and cash
equivalents:

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

Use of estimates:

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

Credit risk:

Financial instruments that potentially subject the
Company to concentrations of credit risk include cash and cash equivalents, direct finance lease receivables, notes receivable and accounts receivable. The Company places the majority of its cash deposits and temporary cash investments in U.S.
Treasury denominated instruments with the remainder placed in creditworthy, high quality financial institutions so as to meet ongoing working capital requirements. The concentration of such deposits and temporary cash investments is not deemed to
create a significant risk to the Company. Accounts and notes receivable represent amounts due from lessees or borrowers in various industries, related to equipment on operating and direct financing leases or notes receivable.

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., the costs of employees activities in connection with successful
lease and loan originations) and external broker fees incurred with such originations. The costs are amortized on a lease by lease (or note by note) basis based on actual contract term using a straight-line method for operating leases and the
effective interest rate method for direct finance leases and notes receivable. Upon disposal of the underlying lease or loan assets, both the initial direct costs and the associated accumulated amortization are relieved. Costs related to leases or
notes receivable that are not consummated are not eligible for capitalization as initial direct costs and are expensed as acquisition expense.

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.



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##### Table of Contents

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS

2. Summary of significant accounting policies (continued):



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

The primary geographic regions in which the Company seeks leasing opportunities are North America and Europe. The table below summarizes geographic information
relating to the sources, by nation, of the Companys total revenues for the nine months ended September 30, 2008 and 2007 and long-lived assets as of September 30, 2008 and December 31, 2007 (in thousands):



|                        |  |                                         |        |            |                    |   |      |   |            |  |     |  
|----------------------- |  | --------------------------------------- | ------ | ---------- | ------------------ | - | ---- | - | ---------- |  | --- | -
|                        |  | For the nine months ended September 30, |       
|                        |  | 2008                                    |        | % of Total |                    |   | 2007 |   | % of Total | 
|Revenue                 |  |                                         |        |            |                    |   |      |   |            |  |     |  
|United States           |  | $                                       | 8,909  |            | 92                 | % |      | $ | 7,341      |  | 91  | %
|                        |  |                                         |        |            |                    |   |      |   |            |  |     |  
|United Kingdom          |  |                                         | 737    |            | 8                  | % |      |   | 737        |  | 9   | %
|                        |  |                                         |        |            |                    |   |      |   |            |  |     |  
|Total International     |  |                                         | 737    |            | 8                  | % |      |   | 737        |  | 9   | %
|                        |  |                                         |        |            |                    |   |      |   |            |  |     |  
|Total                   |  | $                                       | 9,646  |            | 100                | % |      | $ | 8,078      |  | 100 | %
|                        |  |                                         |        |            |                    |   |      |   |            |  |     |  
|                        |  |                                        
|                        |  | As of September 30,                     |        |            | As of December 31, |  
|                        |  | 2008                                    |        | % of Total |                    |   | 2007 |   | % of Total | 
|Long-lived assets (net) |  |                                         |        |            |                    |   |      |   |            |  |     |  
|United States           |  | $                                       | 39,374 |            | 94                 | % |      | $ | 45,786     |  | 93  | %
|                        |  |                                         |        |            |                    |   |      |   |            |  |     |  
|United Kingdom          |  |                                         | 2,642  |            | 6                  | % |      |   | 3,320      |  | 7   | %
|                        |  |                                         |        |            |                    |   |      |   |            |  |     |  
|Total International     |  |                                         | 2,642  |            | 6                  | % |      |   | 3,320      |  | 7   | %
|                        |  |                                         |        |            |                    |   |      |   |            |  |     |  
|Total                   |  | $                                       | 42,016 |            | 100                | % |      | $ | 49,106     |  | 100 | %
|                        |  |                                         |        |            |                    |   |      |   |            |  |     |  

Investment in securities

Purchased securities

Purchased securities are generally not registered for public sale and are
carried at cost. Such securities are adjusted to fair value if the fair value is less than the carrying value and such impairment is deemed by the Managing Member to be other than temporary. Purchased securities in publicly traded borrowers are
carried at fair value. The Company utilizes quoted market prices to value its investments in publicly traded borrowers, and uses the borrowers subsequent private placements, on a per share basis, to estimate the fair value of its investments
in non-publicly traded borrowers. Such determination of fair value may be adjusted pursuant to other factors which include, but are not limited to, available financial information, the terms and condition of subsequent placements, 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. See note 11 for further discussion.



9



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##### Table of Contents

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS

2. Summary of significant accounting policies (continued):



Warrants

Warrants owned by the Company are not registered for public sale, but are considered derivatives and are carried at an estimated fair value on the balance sheet at the end of the period, as determined by the Managing
Member. At September 30, 2008 and December 31, 2007, the Managing Member estimated the fair value of the warrants to be nominal in amount. See note 11 for further discussion.

Foreign currency transactions:

Foreign currency transaction gains and losses are reported in the results of
operations as other income or other expense in the period in which they occur. Currently, the Company does not use derivative instruments to hedge its economic exposure with respect to assets, liabilities and firm commitments
as the foreign currency transactions risks to date have not been significant. The Company recognized a net foreign currency loss of $11 thousand and a net foreign currency gain of $14 thousand for the three months ended September 30, 2008 and
2007, respectively. For the nine months ended September 30, 2008 and 2007, the Company recognized net foreign currency gains of $42 thousand and $49 thousand, respectively. Such net foreign currency gains (losses) are reflected as other
(expense) income, net.

Per Unit data:

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

Recent Accounting
Pronouncements

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

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



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##### Table of Contents

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS

2. Summary of significant accounting policies (continued):



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

In September 2006,
the FASB issued SFAS 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 157 as it pertains to fair value measurements of nonfinancial assets and nonfinancial liabilities until fiscal years beginning after November 15, 2008. On January 1, 2008, the Company
adopted the provisions of SFAS 157 except as it applied to its investment in leases, and other nonfinancial assets and nonfinancial liabilities as noted in FSP No. 157-2. The partial adoption of SFAS 157 did not have a significant effect
on the Companys financial position, results of operations or cash flows. The Company is in the process of evaluating the impact of the deferred provisions of SFAS 157.

3. Notes receivable:

The Company has various notes receivable from borrowers who have financed the purchase of
equipment through the Company. The terms of the notes receivable were generally up to 120 months and bear interest at rates ranging from 8.5% to 17.4%. The notes are secured by the equipment financed. The notes mature from 2008 through 2016. At
September 30, 2008, the Company had a $61 thousand reserve for impairment losses related to two notes receivable. There were no impaired notes at December 31, 2007. The minimum future payments receivable as of September 30, 2008 are
as follows (in thousands):



|                                                    |  |  |  |   |       |  
|--------------------------------------------------- |  |  |  | - | ----- | -
|Three months ending December 31, 2008               |  |  |  | $ | 628   |  
|Year ending December 31, 2009                       |  |  |  |   | 1,977 |  
|2010                                                |  |  |  |   | 1,532 |  
|2011                                                |  |  |  |   | 439   |  
|2012                                                |  |  |  |   | 393   |  
|2013                                                |  |  |  |   | 295   |  
|Thereafter                                          |  |  |  |   | 573   |  
|                                                    |  |  |  |   |       |  
|                                                    |  |  |  |   | 5,837 |  
|Less: portion representing unearned interest income |  |  |  |   | (973  | )
|                                                    |  |  |  |   |       |  
|                                                    |  |  |  |   | 4,864 |  
|Unamortized indirect costs                          |  |  |  |   | 12    |  
|Less: allowance for credit losses                   |  |  |  |   | (61   | )
|                                                    |  |  |  |   |       |  
|Notes receivable, net                               |  |  |  | $ | 4,815 |  
|                                                    |  |  |  |   |       |  



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##### Table of Contents

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS

3. Notes receivable (continued):



IDC amortization expense related to notes receivable and the Companys operating and direct finance leases for
the three and nine months ended September 30, 2008 and 2007 are as follows (in thousands):



|                                    |  |                                 |    |                                |   |      |  |      |     |  |   |    
|----------------------------------- |  | ------------------------------- | -- | ------------------------------ | - | ---- |  | ---- | --- |  | - | ---
|                                    |  | Three months endedSeptember 30, |    | Nine months endedSeptember 30,
|                                    |  | 2008                            |    | 2007                           |   | 2008 |  | 2007
|IDC amortization - notes receivable |  | $                               | 5  |                                | $ | 6    |  | $    | 18  |  | $ | 21 
|IDC amortization - lease assets     |  |                                 | 46 |                                |   | 41   |  |      | 138 |  |   | 116
|                                    |  |                                 |    |                                |   |      |  |      |     |  |   |    
|Total                               |  | $                               | 51 |                                | $ | 47   |  | $    | 156 |  | $ | 137
|                                    |  |                                 |    |                                |   |      |  |      |     |  |   |    

4. Investment in equipment leases:

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



|                                                                                                                  |  |                         |        |                                            |   |                                                          |  |   |                          |   |  |   |       
|----------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | ------------------------------------------ | - | -------------------------------------------------------- |  | - | ------------------------ | - |  | - | ------
|                                                                                                                  |  | BalanceDecember 31,2007 |        | Reclassifications& Additions /Dispositions |   | Depreciation/AmortizationExpense orAmortizationof Leases |  |   | BalanceSeptember 30,2008
|Net investment in operating leases                                                                                |  | $                       | 48,524 |                                            | $ | 543                                                      |  | $ | (7,498                   | ) |  | $ | 41,569
|Net investment in direct financing leases                                                                         |  |                         | 49     |                                            |   |                                                         |  |   | (5                       | ) |  |   | 44    
|Initial direct costs, net of accumulated amortization of $411 at September 30, 2008 and $273 at December 31, 2007 |  |                         | 533    |                                            |   | 8                                                        |  |   | (138                     | ) |  |   | 403   
|                                                                                                                  |  |                         |        |                                            |   |                                                          |  |   |                          |   |  |   |       
|Total                                                                                                             |  | $                       | 49,106 |                                            | $ | 551                                                      |  | $ | (7,641                   | ) |  | $ | 42,016
|                                                                                                                  |  |                         |        |                                            |   |                                                          |  |   |                          |   |  |   |       

Additions to net investment in operating leases are stated at cost and include amounts accrued at
September 30, 2008 and December 31, 2007 related to asset purchase obligations.

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

Management periodically reviews the carrying values of its assets on leases and assets held for lease or sale. No impairment losses were
recorded for the three and nine months ended September 30, 2008 and 2007. Depreciation expense on property subject to operating leases and property held for lease or sale was $2.5 million and $2.3 million for the respective three months ended
September 30, 2008 and 2007; and $7.5 million and $6.1 million for the respective nine months ended September 30, 2008 and 2007.

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



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##### Table of Contents

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS

4. Investment in equipment leases (continued):



Operating leases:

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



|                              |  |                         |         |   |           |   |        |                                  |  |                          |   |  |   |         |  
|----------------------------- |  | ----------------------- | ------- | - | --------- | - | ------ | -------------------------------- |  | ------------------------ | - |  | - | ------- | -
|                              |  | BalanceDecember 31,2007 |         |   | Additions |   |        | Reclassificationsor Dispositions |  | BalanceSeptember 30,2008 |  
|Material handling             |  | $                       | 19,901  |   |           | $ | 543    |                                  |  | $                        |  |  | $ | 20,444  |  
|Construction                  |  |                         | 11,881  |   |           |   |       |                                  |  |                          |  |  |   | 11,881  |  
|Transportation, rail          |  |                         | 11,723  |   |           |   |       |                                  |  |                          |  |  |   | 11,723  |  
|Transportation, other         |  |                         | 11,122  |   |           |   |       |                                  |  |                          |  |  |   | 11,122  |  
|Logging and lumber            |  |                         | 2,001   |   |           |   |       |                                  |  |                          |  |  |   | 2,001   |  
|Aviation                      |  |                         | 1,658   |   |           |   |       |                                  |  |                          |  |  |   | 1,658   |  
|Manufacturing                 |  |                         | 1,499   |   |           |   |       |                                  |  |                          |  |  |   | 1,499   |  
|Marine                        |  |                         | 1,415   |   |           |   |       |                                  |  |                          |  |  |   | 1,415   |  
|Research                      |  |                         | 725     |   |           |   |       |                                  |  |                          |  |  |   | 725     |  
|Office furniture              |  |                         | 146     |   |           |   |       |                                  |  |                          |  |  |   | 146     |  
|                              |  |                         |         |   |           |   |        |                                  |  |                          |   |  |   |         |  
|                              |  |                         | 62,071  |   |           |   | 543    |                                  |  |                          |  |  |   | 62,614  |  
|Less accumulated depreciation |  |                         | (13,547 | ) |           |   | (7,498 | )                                |  |                          |  |  |   | (21,045 | )
|                              |  |                         |         |   |           |   |        |                                  |  |                          |   |  |   |         |  
|Total                         |  | $                       | 48,524  |   |           | $ | (6,955 | )                                |  | $                        |  |  | $ | 41,569  |  
|                              |  |                         |         |   |           |   |        |                                  |  |                          |   |  |   |         |  

The average estimated residual value for assets on operating leases was 22% of the assets original cost at
September 30, 2008 and December 31, 2007.

Direct financing leases:

As of September 30, 2008, investment in direct financing leases consisted of material handling equipment and office furniture. The following lists the components of the Companys investment in direct
financing leases as of September 30, 2008 and December 31, 2007 (in thousands):



|                                                             |  |                   |    |   |                  |   |    |  
|------------------------------------------------------------ |  | ----------------- | -- | - | ---------------- | - | -- | -
|                                                             |  | September 30,2008 |    |   | December 31,2007 |  
|Total minimum lease payments receivable                      |  | $                 | 39 |   |                  | $ | 47 |  
|Estimated residual values of leased equipment (unguaranteed) |  |                   | 11 |   |                  |   | 10 |  
|                                                             |  |                   |    |   |                  |   |    |  
|Investment in direct financing leases                        |  |                   | 50 |   |                  |   | 57 |  
|Less unearned income                                         |  |                   | (6 | ) |                  |   | (8 | )
|                                                             |  |                   |    |   |                  |   |    |  
|Net investment in direct financing leases                    |  | $                 | 44 |   |                  | $ | 49 |  
|                                                             |  |                   |    |   |                  |   |    |  



13



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##### Table of Contents

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS

4. Investment in equipment leases (continued):



At September 30, 2008, the aggregate amounts of future minimum lease payments to be received are as follows (in
thousands):



|                                      |  |  |  |                 |        |                       |   |       |  |   |       
|------------------------------------- |  |  |  | --------------- | ------ | --------------------- | - | ----- |  | - | ------
|                                      |  |  |  | OperatingLeases |        | DirectFinancingLeases |   | Total
|Three months ending December 31, 2008 |  |  |  | $               | 2,879  |                       | $ | 2     |  | $ | 2,881 
|Year ending December 31, 2009         |  |  |  |                 | 10,047 |                       |   | 10    |  |   | 10,057
|2010                                  |  |  |  |                 | 8,947  |                       |   | 9     |  |   | 8,956 
|2011                                  |  |  |  |                 | 5,977  |                       |   | 9     |  |   | 5,986 
|2012                                  |  |  |  |                 | 2,920  |                       |   | 9     |  |   | 2,929 
|2013                                  |  |  |  |                 | 1,848  |                       |   |      |  |   | 1,848 
|Thereafter                            |  |  |  |                 | 1,839  |                       |   |      |  |   | 1,839 
|                                      |  |  |  |                 |        |                       |   |       |  |   |       
|                                      |  |  |  | $               | 34,457 |                       | $ | 39    |  | $ | 34,496
|                                      |  |  |  |                 |        |                       |   |       |  |   |       

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



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

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



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##### Table of Contents

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS

5. Related party transactions (continued):



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.

During the three and nine months ended September 30, 2008 and 2007, AFS and/or affiliates earned fees, commissions and reimbursements, pursuant to the Operating
Agreement as follows (in thousands):



|                                                                      |  |                                 |     |                                |   |      |  |      |     |  |   |      
|--------------------------------------------------------------------- |  | ------------------------------- | --- | ------------------------------ | - | ---- |  | ---- | --- |  | - | -----
|                                                                      |  | Three Months EndedSeptember 30, |     | Nine Months EndedSeptember 30,
|                                                                      |  | 2008                            |     | 2007                           |   | 2008 |  | 2007
|Administrative costs reimbursed to Managing Member and/or affilitates |  | $                               | 82  |                                | $ | 158  |  | $    | 415 |  | $ | 523  
|Asset management fees to Managing Member and/or affiliates            |  |                                 | 155 |                                |   | 170  |  |      | 498 |  |   | 473  
|Acquisition and initial direct costs paid to Managing Member          |  |                                 | 10  |                                |   | 226  |  |      | 52  |  |   | 702  
|                                                                      |  |                                 |     |                                |   |      |  |      |     |  |   |      
|                                                                      |  | $                               | 247 |                                | $ | 554  |  | $    | 965 |  | $ | 1,698
|                                                                      |  |                                 |     |                                |   |      |  |      |     |  |   |      

6. Non-recourse debt:

At September 30, 2008, non-recourse debt consists of notes payable to financial institutions. The notes are due in varying quarterly and semi-annual installments. Interest on the notes is at fixed rates ranging from 4.33% to 6.65%. The
notes are secured by assignments of lease payments and pledges of assets. At September 30, 2008, gross lease rentals totaled approximately $20.8 million over the remaining lease terms; and the carrying value of the pledged assets is
approximately $24.7 million. The notes mature from 2008 through 2015.

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



|                                      |  |  |  |           |        |          |   |       |  |   |       
|------------------------------------- |  |  |  | --------- | ------ | -------- | - | ----- |  | - | ------
|                                      |  |  |  | Principal |        | Interest |   | Total
|Three months ending December 31, 2008 |  |  |  | $         | 1,544  |          | $ | 284   |  | $ | 1,828 
|Year ending December 31, 2009         |  |  |  |           | 4,966  |          |   | 892   |  |   | 5,858 
|2010                                  |  |  |  |           | 4,766  |          |   | 604   |  |   | 5,370 
|2011                                  |  |  |  |           | 3,660  |          |   | 343   |  |   | 4,003 
|2012                                  |  |  |  |           | 1,460  |          |   | 183   |  |   | 1,643 
|2013                                  |  |  |  |           | 1,065  |          |   | 118   |  |   | 1,183 
|Thereafter                            |  |  |  |           | 1,458  |          |   | 80    |  |   | 1,538 
|                                      |  |  |  |           |        |          |   |       |  |   |       
|                                      |  |  |  | $         | 18,919 |          | $ | 2,504 |  | $ | 21,423
|                                      |  |  |  |           |        |          |   |       |  |   |       

7. 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 is for $75 million and expires in June 2009. Under the terms of the
acquisition facility agreement, ATEL 12, LLC may only participate once its tangible net worth, as therein defined, equals or exceeds $15 million.



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##### Table of Contents

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS

7. Borrowing facilities (continued):



As of September 30, 2008 and December 31, 2007, borrowings under the facility were as follows (in
thousands):



|                                                                                                                           |  |                   |        |   |                  |   |        |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------ | - | ---------------- | - | ------ | -
|                                                                                                                           |  | September 30,2008 |        |   | December 31,2007 |  
|Total available under the financing arrangement                                                                            |  | $                 | 75,000 |   |                  | $ | 75,000 |  
|Amount borrowed by the Company under the acquisition facility                                                              |  |                   | (1,000 | ) |                  |   | (4,000 | )
|Amounts borrowed by affiliated partnerships and Limited Liability Companies under the acquisition and warehouse facilities |  |                   | (5,735 | ) |                  |   | (4,625 | )
|                                                                                                                           |  |                   |        |   |                  |   |        |  
|Total remaining available under the acquisition and warehouse facilities                                                   |  | $                 | 68,265 |   |                  | $ | 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 September 30, 2008 and December 31,
2007.

The interest rate on the Master Terms Agreement is based on either the LIBOR/Eurocurrency rate of 1-, 2-, 3- or 6-month maturity plus a lender
designated spread, or the banks Prime rate, which re-prices daily. Principal amounts of loans made under the Master Terms Agreement that are prepaid may be re-borrowed on the terms and subject to the conditions set forth under the Master Terms
Agreement. The effective interest rate on borrowings was 3.74% at September 30, 2008 and 6.11% to 6.35% at December 31, 2007. During the three months ended September 30, 2008 and 2007, the weighted average interest rate on borrowings
was 3.76% and 6.85%, respectively. The weighted average interest rate on borrowings was 4.62% and 6.79% during the nine months ended September 30, 2008 and 2007.

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
September 30, 2008, the investment program participants were ATEL Capital Equipment Fund IX, LLC, ATEL Capital Equipment Fund X, LLC, the Company and ATEL 12, LLC. Pursuant to the Warehousing Trust Agreement, the benefit of the lease
transaction assets, and the corresponding liabilities under the warehouse borrowing facility, inure to each of such entities based upon each entitys pro-rata share in the warehousing trust estate. The pro-rata share is calculated
as a ratio of the net worth of each entity over the aggregate net worth of all entities benefiting from the warehouse trust estate, excepting that the trustees, AFS and ALC, are both liable for their pro-rata shares of the obligations based on their
respective net worth, and jointly liable for the pro rata portion of the obligations of each of the affiliated partnerships and limited liability companies participating under the borrowing facility. Transactions are financed through this
warehousing facility only until the transactions are allocated to a specific program for purchase or are otherwise disposed by AFS and ALC. When a determination is made to allocate the transaction to a specific program for purchase by the program,
the purchaser repays the debt associated with the asset, either with cash or by means of the acquisition facility financing, the asset is removed from the warehouse facility collateral, and ownership of the asset and any debt obligation associated
with the asset are assumed solely by the purchasing entity.



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##### Table of Contents

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS

7. Borrowing facilities (continued)



As of September 30, 2008, the full amount remaining available under the joint acquisition and warehouse facility
is potentially available to the Company. However, as amounts are drawn on the facility by each of the Company and the affiliates who are borrowers under the facility, the amount available to all is reduced. As the warehousing facility is a short
term bridge facility, any amounts borrowed under the warehousing facility, and then repaid by the affiliated borrowers (including the Company) upon allocation of an acquisition to a specific purchaser, become available under the warehouse facility
for further short term borrowing.

The financing arrangement discussed above includes certain financial and non-financial covenants applicable to each
borrower. The Company and affiliates were in compliance with all covenants as of September 30, 2008.

8. Commitments:

As of September 30, 2008, the Company had outstanding commitments to purchase or finance lease equipment of approximately $250 thousand which may be funded during
2008. This amount represents contract awards which may be cancelled by the prospective lessee or may not be accepted by the Company. There were no cancellations subsequent to September 30, 2008.

9. 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.



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##### Table of Contents

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS

10. Members capital:



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

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



|                                             |  |                                 |           |                                |   |           |  |      |           |  |   |          
|-------------------------------------------- |  | ------------------------------- | --------- | ------------------------------ | - | --------- |  | ---- | --------- |  | - | ---------
|                                             |  | Three Months EndedSeptember 30, |           | Nine Months EndedSeptember 30,
|                                             |  | 2008                            |           | 2007                           |   | 2008      |  | 2007
|Distributions declared                       |  | $                               | 1,210     |                                | $ | 1,210     |  | $    | 3,629     |  | $ | 3,629    
|Weighted average number of Units outstanding |  |                                 | 5,230,507 |                                |   | 5,230,892 |  |      | 5,230,507 |  |   | 5,232,029
|                                             |  |                                 |           |                                |   |           |  |      |           |  |   |          
|Weighted average distributions per Unit      |  | $                               | 0.23      |                                | $ | 0.23      |  | $    | 0.69      |  | $ | 0.69     
|                                             |  |                                 |           |                                |   |           |  |      |           |  |   |          

11. Fair value of financial instruments:

On January 1, 2008, the Company adopted SFAS 157, Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosure requirements for fair
value measurements. The Company deferred the application of SFAS 157 for nonfinancial assets and nonfinancial liabilities as provided for by FSP No. 157-2, Effective Date of FASB Statement No. 157. Issued in February 2008, FSP
No. 157-2 defers the effective date of SFAS 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years for nonfinancial assets and nonfinancial liabilities, except items that are recognized or
disclosed at fair value in an entitys financial statements on a recurring basis (at least annually).

SFAS 157 defines the term fair
value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset
or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability.

SFAS 157 established a fair value hierarchy that prioritizes the inputs used to measure fair value into three broad levels, considering the relative reliability of the inputs. The fair value hierarchy assigns the
highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). A financial instruments categorization within the fair value hierarchy is
based upon the lowest level of an input to the valuation that is significant to the fair value measurement.

The three levels of inputs within the fair
value hierarchy are defined as follows:

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

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

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



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##### Table of Contents

ATEL CAPITAL EQUIPMENT FUND XI, LLC

NOTES TO FINANCIAL STATEMENTS

11. Fair value of financial instruments (continued):



Estimation of Fair Value

Fair value is based on quoted prices in an active market when available. In certain cases where a quoted price for an asset or liability is not available, the Company estimates the fair value based on various factors which include original
cost, the type and risk characteristics of the asset or liability, expected cash flow and market volatilities. Such estimates of fair value cannot be determined with precision and may not be realized in an actual sale or transfer of the asset or
liability in a current market exchange.

The following is a description of the valuation methodologies used for certain assets and the general
classification of these instruments pursuant to the fair value hierarchy.

Purchased securities

The Company utilizes quoted market prices to value its investments in publicly traded borrowers, and uses the borrowers subsequent private placements, on a per
share basis, to estimate the fair value of its investments in non-publicly traded borrowers. Such determination of fair value may be adjusted pursuant to other factors which include, but are not limited to, available financial information, the terms
and conditions of subsequent placements, the issuers ability to meet its current obligations and indications of the issuers subsequent ability to raise capital.

Investments in shares of borrowers who have subsequently completed a public offering and are actively traded are classified as Level 1 instruments. Securities where fair value is based on subsequent private placements
generally involve unobservable inputs that reflect managements own assumptions and are classified as Level 3 instruments. At September 30, 2008, the carrying value of purchased securities approximates fair value.

Warrants

Warrants owned by the Company are not registered for public
sale. The fair values of the warrants are determined based either upon the Black-Scholes pricing model for warrants with borrowers who are in S-1 registration with industry recognized investment bankers, or the price per share of subsequent private
placements. Such determination of fair value may be adjusted pursuant to other factors which include, but are not limited to, available financial information, the terms and conditions of subsequent placements, the issuers ability to meet its
current obligations and indications of the issuers subsequent ability to raise capital.

Warrants on shares of borrowers who are in S-1 registration
are generally classified as Level 2 instruments. Warrants where fair value is based on subsequent private placements generally involve unobservable inputs that reflect managements own assumptions and are classified as Level 3 instruments. At
September 30, 2008 and December 31, 2007, the Managing Member estimated the fair value of the warrants to be nominal in amount.



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##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

Statements contained in this Item 2, Managements Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this Form 10-Q, which are not historical facts, may be
forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. In particular, economic recession and changes in general economic conditions, including,
fluctuations in demand for equipment, lease rates, and interest rates, may result in delays in 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 market for new and used equipment at the end of lease terms. Investors are cautioned not to attribute undue certainty to these forward-looking statements, which speak only as of the
date of this Form 10-Q. We undertake no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events, other
than as required by law.

Overview

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

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

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

Capital Resources and Liquidity

The liquidity of the Company varies, increasing to the extent cash flows from leases and proceeds of
asset sales exceed expenses and decreasing as lease assets are acquired, as distributions are made to the Members and to the extent expenses exceed cash flows from leases and proceeds from asset sales.

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

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 is for $75 million and expires in June 2009. Under the terms of the acquisition facility
agreement, ATEL 12, LLC may only participate once its tangible net worth, as therein defined, equals or exceeds $15 million.



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##### Table of Contents

Borrowings under the facility as of September 30, 2008 were as follows (in thousands):



|                                                                                                                           |  |   |        |  
|-------------------------------------------------------------------------------------------------------------------------- |  | - | ------ | -
|Total available under the financing arrangement                                                                            |  | $ | 75,000 |  
|Amount borrowed by the Company under the acquisition facility                                                              |  |   | (1,000 | )
|Amounts borrowed by affiliated partnerships and Limited Liability Companies under the acquisition and warehouse facilities |  |   | (5,735 | )
|                                                                                                                           |  |   |        |  
|Total remaining available under the acquisition and warehouse facilities                                                   |  | $ | 68,265 |  
|                                                                                                                           |  |   |        |  

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 September 30, 2008.

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 September 30, 2008 was 3.74%.

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 September 30, 2008, the investment program participants were ATEL Capital Equipment Fund IX, LLC, ATEL Capital
Equipment Fund X, LLC, the Company and ATEL 12, LLC. Pursuant to the Warehousing Trust Agreement, the benefit of the lease transaction assets, and the corresponding liabilities under the warehouse borrowing facility, inure to each of such entities
based upon each entitys pro-rata share in the warehousing trust estate. The pro-rata share is calculated as a ratio of the net worth of each entity over the aggregate net worth of all entities benefiting from the warehouse trust
estate, excepting that the trustees, AFS and ALC, are both liable for their pro-rata shares of the obligations based on their respective net worth, and jointly liable for the pro rata portion of the obligations of each of the affiliated partnerships
and limited liability companies participating under the borrowing facility. Transactions are financed through this warehousing facility only until the transactions are allocated to a specific program for purchase or are otherwise disposed by AFS and
ALC. When a determination is made to allocate the transaction to a specific program for purchase by the program, the purchaser repays the debt associated with the asset, either with cash or by means of the acquisition facility financing, the asset
is removed from the warehouse facility collateral, and ownership of the asset and any debt obligation associated with the asset are assumed solely by the purchasing entity.

As of September 30, 2008, the full amount remaining available under the joint acquisition and warehouse facility is potentially available to the Company. However, as amounts are drawn on the facility by each of
the Company and the affiliates who are borrowers under the facility, the amount available to all is reduced. As the warehousing facility is a short term bridge facility, any amounts borrowed under the warehousing facility, and then repaid by the
affiliated borrowers (including the Company) upon allocation of an acquisition to a specific purchaser, become available under the warehouse facility for further short term borrowing.

The financing arrangement discussed above includes certain financial and non-financial covenants applicable to each borrower. The Company and affiliates were in compliance with all covenants as of September 30,
2008.

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.



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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 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 the first six months of 2008, the Company utilized such sources of non-recourse debt financing and at September 30, 2008, had $18.9 million of non-recourse debt outstanding
consisting of notes payable to financial institutions. For detailed information on the Companys debt obligations, see Notes 6 and 7 to the financial statements as set forth in Part I, Item 1, Financial Statements.

The Company commenced periodic distributions, based on cash flows from operations, beginning with the month of September 2005. Additional distributions have been
consistently made through September 30, 2008.

As of September 30, 2008, the Company had outstanding commitments to purchase or finance lease
equipment of approximately $250 thousand which may be funded during 2008. This amount represents contract awards which may be cancelled by the prospective lessee or may not be accepted by the Company. There were no cancellations subsequent to
September 30, 2008.

Cash Flows

The
three months ended September 30, 2008 versus the three months ended September 30, 2007

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 $628 thousand for the third quarter of 2008 as compared to the third quarter of
2007. 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, and a period over period decline in outstanding
accounts receivable.



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The increase in operating results, as adjusted for non-cash items, benefited cash flow by $561 thousand and was mainly
due to increased operating lease revenues combined with decreased acquisition expense and costs reimbursed to AFS. The period over period decrease in outstanding accounts receivable benefited cash flow by $57 thousand and was mainly due to the
collection of approximately $43 thousand of aged receivables during the third quarter of 2008.

Investing Activities

Cash provided by investing activities totaled $995 thousand for the third quarter of 2008 compared to cash used in investing activities totaling $11.6 million for the
prior year period, a $12.6 million improvement. The net improvement in cash flow was primarily a result of decreases in cash used to purchase lease assets, fund investments in notes receivable and acquire investment securities offset, in part, by a
decline in payments received on the Companys investment in notes receivable.

Cash used to originate and fund leases and notes receivables as well as
purchase investment securities decreased by $11.1 million, $1.9 million and $188 thousand, respectively. The decrease in cash used to acquire assets (increase in cash flow) was a result of the continued decline in acquisition phase activity.

Partially offsetting the above increases in cash flow was a $741 thousand decrease in payments received on notes receivable. The decrease was largely
attributable to the period over period decline in outstanding notes receivable as a result of maturities, prepayments and early terminations.

Financing
Activities

Net cash used in financing activities totaled $2.8 million for the third quarter of 2008 compared to cash provided by financing activities
of $8.1 million for the prior year period, a decrease of $10.9 million. The net decrease in cash flow was primarily due to a net reduction in proceeds from borrowings during the comparative periods.

The nine months ended September 30, 2008 versus the nine months ended September 30, 2007

Operating Activities

Cash provided by operating activities increased
by $2.8 million for the first nine months of 2008 as compared to the prior year period. 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, and reduced payments made against accounts payable and accrued liabilities offset, in part, by a decline in unearned operating lease income.

The increase in operating results, as adjusted for non-cash items, benefited cash flow by $2.3 million and was mainly due to a 25% increase in operating lease revenues combined with a 92% decrease in acquisition
expense offset, in part, by a 40% increase in interest expense on the Companys outstanding debt. The net reduction in payments made against accounts payable and accrued liabilities improved cash flow by $753 thousand. Total payments during the
first nine months of 2007 were significantly higher primarily due to the payment of approximately $1.5 million of 2006 accruals related to asset purchases. This was partially offset by higher sales tax payments and a refund of a lessee overpayment
during the second quarter of 2008.

The aforementioned increases in cash flow were partially offset by a $237 thousand decrease resulting from a decline in
unearned operating lease income. The decline in unearned operating lease income was primarily due to a period over period increase in realized unearned rents.

Investing Activities

Cash provided by investing activities totaled $2.6 million for the first nine months of 2008 compared to cash used in
investing activities totaling $16.4 million for the prior year period, a $19.0 million improvement. The net improvement in cash flow was primarily a result of decreases in cash used to purchase lease assets, fund investments in notes receivable and
acquire investment securities offset, in part, by a reduction in payments received on the Companys investment in notes receivable and proceeds from both sales of lease assets and early termination of notes receivable.



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Cash used to originate and fund leases and notes receivables as well as purchase investment securities decreased by $17.7
million, $2.5 million and $251 thousand, respectively. The decrease in cash used to acquire assets was a result of the continued decline in acquisition phase activity.

Partially offsetting the aforementioned increases in cash flow were decreases of $782 thousand, $478 thousand and $452 thousand resulting from reductions in payments received on notes receivable, proceeds from sales
of lease assets and proceeds from early termination of notes receivable, respectively.

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

Financing Activities

Net cash used in financing activities totaled
$8.6 million for the first nine months of 2008 compared to cash provided by financing activities of $9.2 million for the prior year period, a decrease of $17.8 million. The net decrease in cash flow was primarily due to a net reduction in proceeds
from borrowings during the comparative periods.

Results of Operations

The three months ended September 30, 2008 versus the three months ended September 30, 2007

The
Company had net losses of $3 thousand and $297 thousand for the three months ended September 30, 2008 and 2007, respectively. Results for the third quarter of 2008 reflect an increase in total revenues and a decrease in total operating expenses
when compared with results for the third quarter of 2007.

Revenues

Total revenues for the third quarter of 2008 increased by $197 thousand, or 7%, as compared to the third quarter of 2007. The net growth in total revenues was primarily due to a $252 thousand increase in operating
lease revenue offset, in part, by a $51 thousand decrease in interest income derived from the Companys investment in notes receivable.

The period
over period increase in operating lease revenue was mainly due to incremental revenues from the $3.1 million of lease assets purchased since September 30, 2007. The decrease in interest income received on the notes was attributable to declining
notes receivable balances primarily as a result of prepayments during the third quarter of 2008.

Expenses

Total expenses for the third quarter of 2008 decreased by $122 thousand, or 4%, as compared to the third quarter of 2007. The net decrease in total expenses was primarily
due to decreases of $130 thousand in acquisition expense, $76 thousand in costs reimbursed to AFS, $47 thousand in interest expense and a combined $32 thousand in professional fees and outside services expense. These decreases were partially offset
by a $162 thousand increase in depreciation expense.

The decrease in acquisition expense was primarily due to the period over period decline in asset
acquisitions  there were no lease assets purchased during the third quarter of 2008 versus $11.1 million purchased during the third quarter of 2007. Costs reimbursed to AFS also declined primarily due to a refinement of cost allocation
methodologies by the Managing Member which resulted in lower costs allocated to the Fund. The refinement of cost allocation methodologies is intended to ensure that Fund management costs are allocated appropriately. This process is continuous and is
evaluated, analyzed and modified as necessary. Further, interest expense decreased due quarter over quarter net reduction in the Companys borrowings; and professional fees and outside services declined largely due to the elimination of costs
associated with the audit and restatement of the Companys prior year financial statements, which were completed by the third quarter of 2007.

Partly
offsetting the aforementioned decreases in expenses was an increase in depreciation expense largely attributable to the period over period increase in depreciable assets resulting from lease asset purchases since September 2007.



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##### Table of Contents

The nine months ended September 30, 2008 versus the nine months ended September 30, 2007

The Company had net losses of $175 thousand and $842 thousand for the nine months ended September 30, 2008 and 2007, respectively. Results for
the first nine months of 2008 reflect increases in both total revenues and operating expenses when compared with results for the first nine months of 2007.

Revenues

Total revenues for the first nine months of 2008 increased by $1.6 million, or 19%, as compared to the first nine months of 2007.
The net growth in total revenues was primarily due to a $1.8 million increase in operating lease revenue and a $45 thousand incremental gain on the sale of securities. These increases were partially offset by a $141 thousand decrease in net gains on
sales of lease assets and early terminations of notes receivable, an $86 thousand decrease in notes receivable income and a $44 thousand decline in interest income on the Companys cash deposits.

The period over period increase in operating lease revenue was mainly due to revenues derived from the incremental change in the Companys portfolio of lease assets
since September 30, 2007; and the gain on the sale of securities reflects amounts associated with the conversion and tender of preferred securities and warrants in an investee that was acquired during the first nine months of 2008.

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

Expenses

Total expenses for the first nine months of 2008 increased
by $894 thousand, or 10%, as compared to the first nine months of 2007. The net increase in total expenses was primarily due to increases totaling $1.4 million and $289 thousand in depreciation expense and interest expense, respectively, partially
offset by decreases of $521 thousand in acquisition expense, a combined $218 thousand in professional fees and outside services expense, and $108 thousand in cost reimbursements to AFS.

The increase in depreciation expense was mainly due to the growth in depreciable assets since September 30, 2007. The increase in interest expense was largely attributable to higher year-to-date 2008 average
outstanding debt balances as compared to the prior year period.

Partially offsetting the aforementioned increases in expenses was a decline in acquisition
expense as a result of the period over period decline in asset acquisition activity. In addition, professional fees and outside services decreased primarily due to the elimination of costs associated with the audit and restatement of the
Companys prior year financial statements, which were completed by the third quarter of 2007; and costs reimbursed to AFS decreased primarily due to a refinement of cost allocation methodologies by the Managing Member which resulted in lower
costs allocated to the Fund as previously discussed.



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##### Table of Contents

|Item 4. | 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 Officer
and Chief 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 Officer and Chief Operating Officer concluded that as of the end of the period covered by this report,
the design and operation of these disclosure controls and procedures were effective.

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

Changes in internal control

There were no changes in the Managing Members internal control over financial reporting, as it is applicable to the Company, during the quarter ended
September 30, 2008 that has materially affected, or it is reasonably likely to materially affect, the Managing Members internal control over financial reporting, as it is applicable to the Company.



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##### Table of Contents

PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings.
|------- | ------------------

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



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

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 September 30, 2008 (dollars in thousands):
| | --- | ----------------------------------------------------------------------------------------------------------------------



|                                  |  |                  |  |                                              |         |            |           |                                       |   |       
|--------------------------------- |  | ---------------- |  | -------------------------------------------- | ------- | ---------- | --------- | ------------------------------------- | - | ------
|Title of Security                 |  | AmountRegistered |  | Aggregate price of offeringamount registered |         | 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 indirect payments todirectors, officers, ManagingMember of the issuer or
itsassociates, to persons owningten percent or more of any classof equity securities of the issuer;and to affiliates of the issuer |       | Direct orindirectpayments toothers |   | Total
|Underwriting discounts and commissions |  | $                                                                                                                                                                                                                     | 790   |                                    | $ | 3,949 |  | $ | 4,739
|Other expenses                         |  |                                                                                                                                                                                                                       | 1,405 |                                    |   | 1,267 |  |   | 2,672
|                                       |  |                                                                                                                                                                                                                       |       |                                    |   |       |  |   |      
|Total expenses                         |  | $                                                                                                                                                                                                                     | 2,195 |                                    | $ | 5,216 |  | $ | 7,411
|                                       |  |                                                                                                                                                                                                                       |       |                                    |   |       |  |   |      



|                                                                                              |  |   |       
|--------------------------------------------------------------------------------------------- |  | - | ------
|(9)    Net offering proceeds to the issuer after the total expenses in item 8 (in thousands): |  | $ | 44,900



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##### Table of Contents

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



|                                                     |  |                                                                                                                                                                                                                       |     |                                    |   |        |  |   |       
|---------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --- | ---------------------------------- | - | ------ |  | - | ------
|                                                     |  | Direct or indirect payments todirectors, officers, ManagingMember of the issuer or itsassociates, to
persons owningten percent or more of any classof equity securities of the issuer;and to affiliates of the issuer |     | Direct orindirectpaymentsto others |   | Total 
|Purchase and installation of machinery and equipment |  | $                                                                                                                                                                                                                     | 610 |                                    | $ | 33,476 |  | $ | 34,086
|Investments in notes receivable                      |  |                                                                                                                                                                                                                       | 68  |                                    |   | 10,746 |  |   | 10,814
|                                                     |  |                                                                                                                                                                                                                       |     |                                    |   |        |  |   |       
|                                                     |  | $                                                                                                                                                                                                                     | 678 |                                    | $ | 44,222 |  | $ | 44,900
|                                                     |  |                                                                                                                                                                                                                       |     |                                    |   |        |  |   |       



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



|Item 3. | Defaults Upon Senior Securities.
|------- | --------------------------------

None.



|Item 4. | Submission Of Matters To A Vote Of Security Holders.
|------- | ----------------------------------------------------

None.



|Item 5. | Other Information.
|------- | ------------------

None.



|Item 6. | Exhibits.
|------- | ---------

Documents filed as a part of this report:



| | 1. | Financial Statement Schedules
| | -- | -----------------------------

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



| | 2. | Other Exhibits
| | -- | --------------



|     |  |                                                                       
|---- |  | ----------------------------------------------------------------------
|31.1 |  | Rule 13a-14(a)/ 15d-14(a) Certification of Dean L. Cash               
|     | 
|31.2 |  | Rule 13a-14(a)/ 15d-14(a) Certification of Paritosh K. Choksi         
|     | 
|32.1 |  | Certification Pursuant to 18 U.S.C. section 1350 of Dean L. Cash      
|     | 
|32.2 |  | Certification Pursuant to 18 U.S.C. section 1350 of Paritosh K. Choksi



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 12, 2008

ATEL CAPITAL EQUIPMENT FUND XI,
LLC

(Registrant)



By:

ATEL Financial Services, LLCManaging Member of Registrant




|    |  |                                                                                                                                                      
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|By: |  | /s/ Dean L. Cash                                                                                                                                     
|    |  | Dean L. Cash President and Chief Executive Officer of
ATEL Financial Services, LLC (Managing Member)                                                 
|    | 
|By: |  | /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)
|    | 
|By: |  | /s/ Samuel Schussler                                                                                                                                 
|    |  | Samuel Schussler Vice President and Chief Accounting
Officer of ATEL Financial Services, LLC (Managing Member)                                       



29