ATEL CAPITAL EQUIPMENT FUND VIII, LLC

                         Limited Liability Company Units
                  $10 per Unit - Minimum Offering 120,000 Units
                    Minimum Investment -- 250 Units ($2,500)
  (200 Units or $2,000 for an Individual Retirement Account or Qualified Plan)

     ATEL Capital Equipment Fund VIII, LLC (the "Fund") is a California  limited
liability company of which ATEL Financial  Corporation  ("ATEL") is the Manager.
The Fund's  business  will be to acquire a  diversified  portfolio  of primarily
low-technology  capital  equipment  leased  to third  parties.  See  "Investment
Objectives  and  Policies."  The Fund  expects  (Continued  on  following  page)
-----------------------  
AN INVESTMENT IN THE FUND INVOLVES  SIGNIFICANT  RISKS.
(See  "Risk  Factors").  Among the most  prominent  risks are the  following:
 
- Limited voting rights for investors mean total reliance on the Manager for 
  Fund management, and the Manager may be subject to certain conflicts of 
  interest;  
- Substantial fees are payable to the Manager and its affiliates;  
- All equipment investments  are not  specified,  and  investors  cannot  fully
  assess the risks involved  in the Fund's  equipment  portfolio;  
- The Fund's  ability to realize lease  revenues and make cash distributions is
  subject to the risk of lessee defaults;  
- The use of secured debt may result in the loss of equipment used as
  collateral if the Fund is unable to pay its debt  obligations;  
- The Units will not be listed on any securities exchange and there are 
  significant  limitations on  transferability.  Accordingly,  investors may be 
  unable to dispose of Units except at discounts from the offering price, which 
  discounts may be substantial, and final  liquidation  is expected to occur  
  approximately  ten to eleven years after the date the final  investors  are  
  admitted  to the  Fund;  
- The  Fund's ability to diversify  its  portfolio of leased equipment by types
  of equipment, manufacturers, lessees and  geographic  regions is  dependent on
  the amount of capital  actually  raised and the amount of available  debt  
  financing (the Fund intends to incur debt equal to  approximately  50% of its 
  equipment  cost,  but there can be no  assurance as to the amount of available
  debt  financing);  
- A substantial  portion  of  distributions  will be, and a  substantial  
  portion of distributions by prior ATEL programs have been, a return of 
  invested capital, as opposed to investment  income, and the amount of 
  investment income investors may realize depends in part on the value of 
  equipment after the initial  leases terminate; and 

(Continued on the following page)

                            -----------------------
THESE  SECURITIES  HAVE NOT BEEN APPROVED OR  DISAPPROVED BY THE SECURITIES
AND  EXCHANGE  COMMISSION  OR  ANY  STATE  SECURITIES  COMMISSION  NOR  HAS  THE
COMMISSION  OR ANY STATE  SECURITIES  COMMISSION  PASSED  UPON THE  ACCURACY  OR
ADEQUACY OF THIS PROSPECTUS.  ANY  REPRESENTATION  TO THE CONTRARY IS A CRIMINAL
OFFENSE.
--------------------------------------------------------------------------------

                               Price to           Selling         Proceeds to 
                               Public             Commissions     Fund 
Per Unit                       $ 10               $ 0.95          $ 9.05
Total  Minimum                 $  1,200,000       $ 114,000       $ 1,086,000
Total  Maximum                 $150,000,000       $14,250,000     $135,750,000
                               ------------       -----------     ------------
--------------------------------------------------------------------------------

   
               THE DATE OF THIS PROSPECTUS IS December 7, 1998
    

 Any supplements which update this Prospectus are contained inside the back 
cover.

         ATEL Capital Equipment Fund VIII, LLC is not a mutual fund or any other
type of investment  company within the meaning of the Investment  Company Act of
1940 and is not subject to regulation thereunder.

                                        1

<PAGE>




(Cover page continued)


to  commit  approximately  86% of the total  proceeds  of this  offering  to the
purchase of equipment. At least an additional 0.5% of the total proceeds will be
retained by the Fund as working  capital  reserves.  The balance will be used to
pay selling  commissions  equal to 9.5% of the total proceeds and other expenses
in the estimated amount of from 2.5% to 3.5% of the offering proceeds (which may
be advanced by the Manager and  reimbursed by the Fund).  See  "Estimated Use of
Proceeds."


         The Fund's objective is to invest in a diversified  portfolio of leased
equipment which will generate regular cash distributions to investors. There can
be no assurance that such objective can be attained.

         It is anticipated that a substantial portion of such distributions will
be  tax-deferred  during the  initial  years of Fund  operations  as a result of
depreciation  available from equipment  purchased by the Fund. To the extent the
Fund's net income is reduced thereby and  distributions  exceed net income,  any
distributions  will be  considered  a return of  capital  and income tax will be
deferred until subsequent years.

         The offering is a best efforts minimum-maximum offering. A best efforts
offering is one in which no underwriter  guarantees  that any specific amount of
offering proceeds will be raised.  All offering proceeds will be deposited in an
escrow account and will not be released to the Fund, until  subscriptions  for a
minimum of 120,000 Units  ($1,200,000)  have been received and accepted.  Unless
the Fund receives and accepts  subscriptions for a minimum of 120,000 Units by a
date one year from the date of this Prospectus,  all subscription  proceeds will
be  promptly  released  from the escrow  account and  returned  to  subscribers,
together with all interest  earned  thereon.  If the minimum  offering amount is
achieved within the stated period,  the offering may continue for a period of up
to two years  from the date  hereof,  but will  terminate  when the  maximum  of
15,000,000 Units ($150,000,000) is sold or the offering is earlier terminated in
the discretion of the Fund and the Dealer Manager.


(Cover page risk factors continued)

  -      The return of investors' capital is not guaranteed and there can be no
         assurance as to the timing or amount of any distributions.


         Under the terms of its Operating Agreement,  the Fund will provide each
Holder  with  quarterly  and  annual  financial  statements,   Fund  information
necessary to prepare the Holder's federal income tax return and an annual report
of the Fund's business. The annual financial statements will be examined by, and
include the opinion of, an independent certified public accountant.

THE USE OF PROJECTIONS IN THIS OFFERING IS PROHIBITED.  ANY  REPRESENTATIONS  TO
THE CONTRARY AND ANY PREDICTIONS, WRITTEN OR ORAL, AS TO THE AMOUNT OR CERTAINTY
OF ANY PRESENT OR FUTURE CASH BENEFIT OR TAX CONSEQUENCE  WHICH MAY FLOW FROM AN
INVESTMENT  IN THE FUND IS A VIOLATION OF THE LAW.  HOWEVER,  SUCH  PROHIBITIONS
SHOULD NOT BE CONSTRUED TO PREVENT THE FUND FROM FILING  SUPPLEMENTALLY  ANY PRO
FORMA  FINANCIAL   STATEMENTS  REQUIRED  BY  THE  FEDERAL  SECURITIES  LAWS  AND
REGULATIONS THEREUNDER.

THE  FOLLOWING  LEGEND IS REQUIRED BY THE  ARIZONA  CORPORATION  COMMISSION
PURSUANT TO ITS RULE 14-4-118B: THESE ARE SPECULATIVE SECURITIES.


                                        2

<PAGE>




THE  COMMISSIONER  OF CORPORATIONS OF THE STATE OF CALIFORNIA DOES NOT RECOMMEND
OR ENDORSE THE PURCHASE OF THESE UNITS.

NOTICE TO PROSPECTIVE PURCHASERS IN THE STATE OF NEW HAMPSHIRE: NEITHER THE FACT
THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED NOR
THE FACT THAT A  SECURITY  IS  EFFECTIVELY  REGISTERED  OR A PERSON IS  LICENSED
CONSTITUTES A FINDING BY THE DIRECTOR OF THE NEW HAMPSHIRE  OFFICE OF SECURITIES
REGULATION  THAT ANY DOCUMENT FILED UNDER THE NEW HAMPSHIRE  UNIFORM  SECURITIES
ACT IS TRUE,  COMPLETE  AND NOT  MISLEADING.  NEITHER ANY SUCH FACT NOR THE FACT
THAT AN EXEMPTION OR  EXCEPTION  IS  AVAILABLE  FOR A SECURITY OR A  TRANSACTION
MEANS THAT THE DIRECTOR HAS PASSED IN ANY WAY UPON THE MERITS OR  QUALIFICATIONS
OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON,  SECURITY,  OR TRANSACTION.
IT IS  UNLAWFUL  TO MAKE,  OR CAUSE TO BE MADE,  TO ANY  PROSPECTIVE  PURCHASER,
CUSTOMER, OR CLIENT ANY REPRESENTATION  INCONSISTENT WITH THE PROVISIONS OF THIS
SECTION 421-B:20 OF THE NEW HAMPSHIRE UNIFORM SECURITIES ACT.

PENNSYLVANIA   INVESTORS:   BECAUSE  THE  MINIMUM   OFFERING   AMOUNT  IS  UNDER
$15,000,000,  YOU ARE  CAUTIONED  TO EVALUATE  CAREFULLY  THE FUND'S  ABILITY TO
ACCOMPLISH  FULLY ITS STATED  OBJECTIVES  AND INQUIRE AS TO THE  CURRENT  DOLLAR
VOLUME OF FUND SUBSCRIPTIONS.

IT IS  UNLAWFUL  TO  CONSUMMATE  A SALE OR  TRANSFER  OF THIS  SECURITY,  OR ANY
INTEREST THEREIN,  OR TO RECEIVE ANY CONSIDERATION  THEREFOR,  WITHOUT THE PRIOR
WRITTEN CONSENT OF THE  COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.

                                        3

<PAGE>




                                TABLE OF CONTENTS
    
                                                                         Page

SUMMARY OF THE OFFERING..................................................    8
    Risk Factors.........................................................    8
    Who Should Invest....................................................    9
    Estimated Use of Proceeds............................................    9
    Management Compensation..............................................    9
    Investment Objectives and Policies...................................    9
    Conflicts of Interest................................................   11
    Fiduciary Duty of the Manager........................................   11
    Management...........................................................   11
    Prior Performance Summary............................................   11
    Income, Losses and Distributions.....................................   11
    Reinvestment.........................................................   11
    Income Tax Consequences..............................................   11
    Summary of the Operating Agreement...................................   12
    Plan of Distribution.................................................   13
    Glossary.............................................................   13

RISK FACTORS.............................................................   14
  Limited Investor Voting Rights and
    Total Reliance on Management.........................................   14
  Manager's Compensation and
      Conflicts of Interest..............................................   14
  Unspecified Equipment and Lessees......................................   14
  Defaults by Lessees....................................................   14
  Risks of Leverage......................................................   14
  Balloon Payments.......................................................   15
  Limited Transferability of Units.......................................   15
  Diversification Dependent Upon Size of Fund............................   15
  Return on Investment Dependent Upon
    Residual Value of Equipment..........................................   16
  Portion of Distributions Characterized
      as Return of Capital...............................................   16
  Activities Outside of the United States................................   16
  General Risks in the Equipment Leasing Business........................   17
  Fluctuations in Demand for Equipment...................................   17
  Competition............................................................   17
  Risks of Operating Leases..............................................   17
  Casualty Losses........................................................   17
  Consequences of Government Regulation..................................   17
  Registration of Aircraft May Not Be Possible...........................   18
  Newly-Formed Entity....................................................   18
  Difficulty in Investing Proceeds.......................................   18
    
                                        4

<PAGE>

   


  Liability of Holders.................................................... 18
  Risks of Joint Ventures................................................. 18
  Limited Liability Companies Newly Established........................... 19
  Partnership Status...................................................... 19
  Certain Other Tax Considerations........................................ 19
  Tax Opinion............................................................. 20
  ERISA Considerations.................................................... 20

WHO SHOULD INVEST......................................................... 20

ESTIMATED USE OF PROCEEDS................................................. 22

MANAGEMENT COMPENSATION................................................... 23
    Summary Table......................................................... 23
    Narrative Description of Compensation................................. 25
    Limitations on Fees................................................... 26
    Defined Terms Used in Description of Compensation..................... 28

INVESTMENT OBJECTIVES AND POLICIES........................................ 31
    Principal Investment Objectives....................................... 31
    General Policies...................................................... 31
    Identified Equipment Acquisitions..................................... 33
    Types of Equipment.................................................... 34
    Prior Program Diversification......................................... 38
    Borrowing Policies.................................................... 39
    Description of Lessees................................................ 41
    Foreign Leases........................................................ 41
    Description of Leases................................................. 42
    Competition........................................................... 43
    Joint Venture Investments............................................. 44
    General Restrictions.................................................. 44
    Changes in Investment Objectives and Policies......................... 45

CONFLICTS OF INTEREST..................................................... 45

ORGANIZATIONAL DIAGRAM.................................................... 48

FIDUCIARY DUTY OF THE MANAGER............................................. 48

MANAGEMENT................................................................ 49
    The Manager........................................................... 49
    The Dealer Manager.................................................... 53

PRIOR PERFORMANCE SUMMARY................................................. 54

    
                                        5

<PAGE>

   


INCOME, LOSSES AND DISTRIBUTIONS......................................... 57
    Allocations of Net Income and Net Loss............................... 57
    Timing of Distributions.............................................. 57
    Allocations of Distributions......................................... 57
    Reinvestment......................................................... 58
    Return of Unused Capital............................................. 59
    Cash From Reserve Account............................................ 59
    Sources of Distributions - Accounting Matters........................ 60

CAPITALIZATION........................................................... 60

MANAGEMENT'S DISCUSSION AND ANALYSIS
  OF FINANCIAL CONDITION................................................. 61

FEDERAL INCOME TAX CONSEQUENCES.......................................... 63
    Summary.............................................................. 63
    Opinion of Counsel................................................... 65
    Classification as a "Partnership".................................... 66
    Allocations of Profits and Losses.................................... 67
    Income Recognition................................................... 68
    Taxation of Holders of Units......................................... 69
    Limitation on Deduction of Losses.................................... 69
    Tax Status of Leases................................................. 71
    Depreciation......................................................... 71
    Deductibility of Management Fees..................................... 73
    Tax Liability in Later Years......................................... 73
    Sales or Exchanges of Fund Equipment................................. 73
    Disposition of Units................................................. 74
    Liquidation of the Fund.............................................. 75
    Original Issue Discount.............................................. 75
    Fund Elections....................................................... 75
    Treatment of Gifts of Units.......................................... 76
    Investment by Qualified Plans and IRAS............................... 76
    Individual Tax Rates................................................. 77
    Alternative Minimum Tax.............................................. 78
    Fund Tax Returns and Tax Information................................. 78
    Interest and Penalties............................................... 79
    Audit of Tax Returns................................................. 79
    Registration Provisions.............................................. 80
    Miscellaneous Fund Tax Aspects....................................... 80
    Foreign Tax Considerations........................................... 81
    Taxation of Foreign Persons.......................................... 81
    Future Federal Income Tax Changes.................................... 82
    State and Local Taxes................................................ 82
    Need for Independent Advice.......................................... 83

    
                                        6

<PAGE>

   


ERISA CONSIDERATIONS.....................................................  83
    Prohibited Transactions Under ERISA and the Code.....................  83
    Plan Assets..........................................................  83
    Other ERISA Considerations...........................................  84

SUMMARY OF THE OPERATING AGREEMENT.......................................  84
    The Duties of the Manager............................................  85
    Liability of Holders.................................................  85
    Term and Dissolution.................................................  85
    Voting Rights of Members.............................................  86
    Dissenters' Rights and Limitations on
      Mergers and Roll-ups...............................................  86
    Meetings.............................................................  87
    Books of Account and Records.........................................  87
    Status of Units......................................................  87
    Transferability of Units.............................................  87
    Repurchase of Units..................................................  90
    Indemnification of the Manager.......................................  90

PLAN OF DISTRIBUTION.....................................................  91
    Distribution.........................................................  91
    Selling Compensation and Certain Expenses............................  91
    Escrow Arrangements..................................................  92
    Investments by Certain Persons.......................................  93
    State Requirements...................................................  93

REPORTS TO HOLDERS.......................................................  94

SUPPLEMENTAL SALES MATERIAL..............................................  95

LEGAL OPINIONS...........................................................  95

EXPERTS..................................................................  95

ADDITIONAL INFORMATION...................................................  96

GLOSSARY.................................................................  96

FINANCIAL STATEMENTS..................................................... F-1

Exhibit A - Prior Performance Information................................ A-1
Exhibit B - Operating Agreement.......................................... B-1
Exhibit C - Subscription Instructions and Documents...................... C-1
    

                                        7

<PAGE>




         No person has been  authorized to give any  information  or to make any
representations other than those contained in this Prospectus in connection with
the  offer  contained  herein,  and  if  given  or  made,  such  information  or
representation  must not be relied upon.  This Prospectus does not constitute an
offer or solicitation by anyone in any state or other jurisdiction in which such
offer or solicitation is not authorized or in which the person making such offer
is not  qualified  to do so or to any person to whom it is unlawful to make such
offer or solicitation. Neither the delivery of this Prospectus or any Supplement
nor  any  sale  made  hereunder  shall,  under  any  circumstances,   create  an
implication  that there has been no change in the facts set forth  herein  since
the date hereof;  however, if any material change not contemplated hereby occurs
while this  Prospectus  is required to be  delivered,  this  Prospectus  will be
amended or supplemented accordingly.


   
     Until March 7, 1999, all dealers  effecting  transactions in the registered
securities, whether or not participating in this distribution may be required to
deliver a  Prospectus.  This is in  addition  to the  obligation  of  dealers to
deliver a  Prospectus  when  acting as  underwriters  and with  respect to their
unsold allotments or subscriptions.
    


                             SUMMARY OF THE OFFERING

         The following is a summary of the pertinent  facts and highlights  from
the material  contained  in this  Prospectus.  More  detailed  information  with
respect to this offering may be found in the remainder of this Prospectus.

         Risk Factors: An investment in Units involves significant risks.

         The "Risk  Factors"  section  of this  Prospectus  contains  a detailed
discussion of the most  important  risks.  Please refer to those sections of the
Prospectus for discussions of material risk factors,  including, but not limited
to, the following risks:

  -      Limited voting rights for investors mean total reliance on the Manager
         for Fund management, and the Manager may
         be subject to certain conflicts of interest;

  -      Substantial fees are payable to the Manager and its affiliates;

  -      All equipment investments are not specified, and investors cannot fully
         assess the risks involved in the Fund's equipment
         portfolio;

  -      The Fund's ability to realize lease revenues and make cash 
         distributions is subject to the risk of lessee defaults;

  -      The use of secured debt may result in the loss of equipment used as 
         collateral if the Fund is unable to pay its debt
         obligations;

  -      The Units will not be listed on any  securities  exchange and there are
         significant limitations on transferability.  Accordingly, investors may
         be unable to dispose of Units  except at  discounts  from the  offering
         price,  which  discounts may be substantial,  and final  liquidation is
         expected to occur  approximately ten to eleven years after the date the
         final investors are admitted to the Fund;

  -      The Fund's  ability to diversify its  portfolio of leased  equipment by
         types of equipment,  manufacturers,  lessees and geographic  regions is
         dependent  on the amount of capital  actually  raised and the amount of
         available  debt  financing  (the Fund  intends  to incur  debt equal to
         approximately  50% of its equipment cost, but there can be no assurance
         as to the amount of available debt financing);

                                        8

<PAGE>




  -      A  substantial  portion of  distributions  will be,  and a  substantial
         portion of  distributions by prior ATEL programs have been, a return of
         invested capital,  as opposed to investment  income,  and the amount of
         investment income investors may realize depends in part on the value of
         equipment after the initial leases terminate; and

  -      The return of investors' capital is not guaranteed and there can be no
         assurance as to the timing or amount of any
         distributions.

         Who Should Invest:  The section of the Prospectus  entitled "Who Should
Invest"  contains an  explanation  of  investor  suitability  requirements,  and
describes  the minimum net worth and income  requirements  that  various  states
impose  on  investors.  In  particular,  that  discussion  addresses  the  rules
applicable to certain investors such as IRAs.


         Estimated  Use  of  Proceeds:  Of  each  dollar  raised  by  the  Fund,
approximately 86% is expected to be invested in the cash portion of the purchase
price of equipment.  An additional 0.5% will be retained as reserves for general
working capital  purposes.  The balance will be used to pay selling  commissions
equal to 9.5%,  and other  offering and  organization  expenses in the estimated
amount of from 2.5% to 3.5% (which may be advanced by the Manager and reimbursed
by the Fund).  See  "Estimated  Use of Proceeds" for a precise  breakdown of the
Fund's estimate as to the use of the capital it raises.


         Management  Compensation:  The Manager and its affiliates  will receive
substantial  fees and  compensation  in  connection  with this  offering and the
operation of the Fund's business, including the following:

         - Selling  commissions  on the sale of Units are  payable to the Dealer
Manager,  a  substantial  portion of which will be  reallowed  to  participating
broker  dealers.  The Dealer Manager may retain up to 1.5% of the total proceeds
from the sale of Units.

         - An annual  Asset  Management  Fee will be paid to the  Manager  in an
amount  equal  to 4.5% of the  revenues  from  leasing  and  disposition  of the
equipment held for lease by the Fund, subject to certain limitations.

         - The  Manager  will  have a  carried  interest  equal  to  7.5% of all
allocations of income, loss and cash distributions.

         See "Management  Compensation." The Manager has discretion with respect
to all  decisions  related to Fund  transactions,  and may  therefore be able to
affect the amount and timing of compensation payable by the Fund. See "Conflicts
of Interest - Receipt of Commissions, Fees and other Compensation by the Manager
and its Affiliates."

         Investment Objectives and Policies:  The Fund's objectives are to 
invest in a diversified portfolio of equipment for lease to third parties which
will:

         (i)   Preserve, protect and return the Fund's invested capital;
         (ii)  Generate  regular  distributions  to  investors  from  net  lease
revenues and from sales or refinancing of equipment,  with any balance remaining
after certain minimum  distributions  (see "Income,  Losses and  Distributions -
Allocations of  Distributions")  to be reinvested in equipment during the period
ending six years after the year in which this offering of Units  terminates (the
"Reinvestment Period"); and
         (iii) Provide   additional   distributions   after  the  end  of  the
Reinvestment Period and until all Equipment has been sold.

         There can be no assurance that any such objectives can be attained.



                                        9

<PAGE>




         The Fund's equipment  portfolio may include various types of equipment,
as described  more fully under  "Investment  Objectives  and Policies - Types of
Equipment."


         It  is  the  Fund's   investment   objective   to   acquire   primarily
low-technology, low-obsolescence equipment such as materials handling equipment,
manufacturing  equipment,  mining equipment,  and  transportation  equipment.  A
portion of the portfolio  may include  technology-dependent  equipment,  such as
certain types of  communications  equipment,  medical  equipment,  manufacturing
equipment  and office  equipment,  although the Fund will seek to invest in such
equipment  in a  manner  consistent  with its  primary  objective  of  acquiring
equipment  which is generally  subject to relatively low rates of  technological
obsolescence.  The  Operating  Agreement  does not limit the  Fund's  ability to
invest in high-technology  equipment.  Equipment that depends on high-technology
design or applications  for its value may lose value more rapidly than equipment
which is less  technology  dependent,  as advances in technology may render such
high-technology equipment functionally obsolete at an earlier date. See Table IV
of Exhibit A, "Prior  Performance  Information," for information  concerning the
composition  of the  equipment  portfolios  held by the  prior  public  programs
sponsored by the Manager and its affiliates which have investment objectives and
policies identical to those of the Fund.


         The  effect  of  owning   assets  which  may  be  subject  to  economic
depreciation is, generally,  that the investors' return on their capital, and in
some  cases  the  return  of their  capital,  is  dependent  on the rate of such
economic  depreciation.  In other words,  the residual  values realized upon the
sale,  re-lease or other  disposition  of the equipment  will play a significant
role in  determining  the  success  of the  investment.  Like  most  goods,  new
equipment  generally has a higher market value than  comparable  used equipment,
and capital  equipment  tends to lose value as it is used over a period of time.
An  equipment  lessor such as the Fund seeks to  negotiate  lease terms based in
part on its estimate of the value of the leased  equipment  upon  termination of
the  lease.  The  lessor  will  negotiate  a lease  rate  designed  to  generate
sufficient  rental  revenues over the term of the lease so that,  when the total
lease  payments are added to the  estimated  value of the  equipment  upon lease
termination,  the  lessor  will have  achieved a return of the  capital  used to
purchase the equipment plus an overall profit on the investment. There can be no
assurance,  however,  that the lessor's assumptions regarding the residual value
of the equipment will be accurate or that its objective will be achieved.

         A majority of the Fund's equipment will be leased on terms which return
at least 90% of the original purchase price through lease payments ("High Payout
Leases"),  and a  substantial  portion of the  purchase  prices of other  leased
assets may be expected to be returned through rents. The residual value risk and
the dependence on residual values to achieve a return on investment is discussed
under "Risk  Factors - Investment  Risks - Return on Investment  Dependent  Upon
Residual Value of Equipment."

         Upon  termination  of the  Fund's  leases,  the  Manager  will  seek to
re-lease or sell the  equipment,  provided  that  subsequent  leases will be for
terms consistent with the Fund's intended term.

         Other than as set forth under  "Investment  Objectives  and  Policies -
Identified Equipment Acquisitions" and in any supplement to this Prospectus, the
Fund does not currently  have  options,  contractual  obligations  or letters of
intent to acquire any equipment.  See "Risk Factors" and "Investment  Objectives
and Policies."

         There is no limit on the  borrowings on individual  items of equipment.
However,  the Fund's  objective  is to incur total  portfolio  debt equal to the
maximum permitted under the Operating Agreement, which is an amount equal to 50%
of the cost of its  equipment  as of the  date of its  final  investment  of the
offering proceeds or, thereafter,  as of the date any subsequent indebtedness is
incurred.  See "Risk Factors - Risks of Leverage" and "Investment Objectives and
Policies - Borrowing Policies."

  
                                     10
<PAGE>

     Conflicts of Interest:  The Manager will have  conflicts of interest in the
management of the Fund,  including  having  interests  which may be inconsistent
with those of the  investors  under some  circumstances  and being  permitted to
engage  in other  activities  which may  conflict  with  those of the Fund.  The
section of this Prospectus  entitled  "Conflicts of Interest" discusses the most
important of these  conflicts of interest and how the Manager intends to resolve
them.

         Fiduciary  Duty  of  the  Manager:   The  Manager  is  responsible  for
supervising all aspects of the  administration of the Fund and management of its
business.  The Manager,  as Manager of the Fund,  will act as a fiduciary to the
Fund, and, consequently, is required to exercise good faith and integrity in all
dealings with respect to Fund affairs. See "Fiduciary Duty of Manager." However,
the Fund will indemnify the Manager against certain  liabilities and the Manager
will have certain  conflicts  of interest,  as  described  under  "Conflicts  of
Interest."

         Management:  The  Manager  of the  Fund is ATEL  Financial  Corporation
("ATEL" or the "Manager"),  a California corporation.  Affiliates of the Manager
will provide various services to the Fund. See  "Management." The offices of the
Manager  and its  Affiliates  are  located at 235 Pine  Street,  6th Floor,  San
Francisco,  California  94104, and its telephone  numbers are (415) 989-8800 and
(800)  543-ATEL  (2835).  The  Manager's  balance  sheet  is  included  in  this
Prospectus under the caption "Financial Statements."

         Prior  Performance   Summary:  The  Manager  and  its  affiliates  have
sponsored seven prior public equipment leasing programs.  The seven prior public
programs have had investment objectives  substantially identical to those of the
Fund.  The  section  of the  Prospectus  entitled  "Prior  Performance  Summary"
contains a summary of certain of these  prior  investment  programs in which the
Manager and its affiliates  have been  involved.  The Prior  Performance  Tables
attached as Exhibit A to the Prospectus  include  statistical and financial data
regarding  these prior  investment  programs.  Upon  request,  the Manager  will
provide  a copy of the most  recent  annual  report  on Form 10-K for any of the
prior public programs.

         Income, Losses and Distributions: Fund income and loss for tax purposes
and cash distributions  shall be allocated 92.5% to investors in accordance with
their  respective  pro  rata  share  of the  outstanding  Units  and 7.5% to the
Manager.  The Fund intends to distribute all cash revenues  remaining after Fund
expenses,  including the annual Asset  Management Fee,  capital reserves and, to
the extent permitted under the limitations  described  below,  amounts set aside
for reinvestment in additional equipment. See "Income, Losses and Distributions"
for a more complete and precise description of these provisions.
   
     Upon  liquidation  of  the  Fund,  the  proceeds  of  liquidation  will  be
distributed in accordance with each Member's  positive capital account balance.
See "Income, Losses and Distributions."
    
     Reinvestment:   Subject  to  certain   limitations,   including  the  prior
distribution of cash in specified minimum amounts, the Manager may reinvest Fund
revenues in additional equipment through the end of a six-year period commencing
after the year this offering  closes.  See "Income,  Losses and  Distributions -
Reinvestment."

         Income Tax  Consequences:  The  following is a brief summary of, and is
qualified by, the more extensive  discussion of the material  federal income tax
consequences  set forth in "Income Tax  Consequences."  Investors should consult
with their tax and  financial  advisors to determine  whether an  investment  in
Units is suitable for their portfolio.

-        Partnership Classification.  Counsel is of the opinion that the Fund 
will be classified as a partnership for federal income tax purposes.


                                       11
<PAGE>

-        Allocation of Net Income and Net Loss.  In tax counsel's opinion, it is
         more likely than not that the tax allocation provisions in the 
         Operating Agreement will not be significantly modified by the Internal
         Revenue Service.

-        Income  Recognition.  Under certain  circumstances,  an investor's  tax
         liabilities  attributable  to his  investment  in the Fund  may,  for a
         particular year, exceed cash realized by such investor in that year. In
         computing  the  amount  of gain  recognized  upon  the  sale  or  other
         disposition  by a Holder of his Units,  such Holder will  generally  be
         deemed to have  received,  in addition to all amounts  actually paid to
         him, an amount equal to his allocable share of the outstanding  balance
         of the Fund liabilities.  As a result,  the amount of tax payable by an
         investor on the gain realized from a sale or  disposition  of his Units
         may exceed the cash received therefrom.

-        Limitations on Deduction of Losses.  There are certain limitations on 
         the ability of an investor to utilize his allocable share of Fund tax 
         losses.

-        Tax  Status  of  Leases.  In order  for  investors  to be  entitled  to
         depreciation deductions,  the equipment leases must be classified "true
         leases" for federal  income tax purposes.  The Manager has  represented
         that it will use its best efforts to assure that each item of equipment
         will  comply or will  substantially  comply with the  Internal  Revenue
         Service's equipment leasing guidelines.

-        Fund Elections.  The Fund is not expected to file an election under 
         Internal Revenue Code Section 754.  The absence of such election may 
         have an adverse effect on the marketability and sale price of the 
         Units.

-        UBTI.  The Fund will generate unrelated business taxable income to 
         Holders who are Qualified Plans or IRAs.
         
-        AMT.  The Fund's depreciation deductions may be subject to adjustment 
         under the alternative minimum tax.

         Summary of the Operating  Agreement:  The Operating Agreement that will
govern the relationship between the investors and the Manager is a complex legal
document,  and the section of the Prospectus  entitled "Summary of the Operating
Agreement"  summarizes  some  of  its  important  provisions.   Other  important
provisions  are  summarized  elsewhere  in the  Prospectus  under  the  captions
"Management  Compensation,"  "Income,  Losses and Distributions" and "Reports to
Holders."  The  following  is a  brief  summary  of  certain  provisions  of the
Operating  Agreement which are discussed in greater detail under "Summary of the
Operating Agreement."

-        Voting Rights of Members.  Each member of the Fund  ("Member")  will be
         entitled  to cast one vote for each Unit which such  Member  owns as of
         the date designated as the record date for any Member vote. The Members
         are entitled to vote on only certain fundamental organizational matters
         affecting  the  Fund,  and are not  authorized  to  participate  in the
         conduct of Fund operations or the  establishment or  implementation  of
         Fund investment policies.

-        Meetings.  The  Manager  or  Members  holding  10% or more of the total
         outstanding  Units may call a meeting  of the  Members or a vote of the
         Members  without a meeting,  on matters on which they are  entitled  to
         vote.

-        Dissenters'  Rights and  Limitations  on Mergers and Roll-ups.  Section
         16.7 of the Operating Agreement provides Members with certain rights in
         the event of any proposal involving an acquisition,  conversion, merger
         or consolidation transaction in which the investors would be issued new
         securities in the resulting entity.

-        Transferability  of Units. The Manager may condition the  effectiveness
         of any  proposed  transfer  of  Units or an  interest  in Units on such
         representations,  warranties, opinions of counsel acceptable to the
         Manager (such counsel to be selected and paid by the transferor or
         transferee) and other assurances

                                       12
<PAGE>

         as it considers appropriate as to certain specific matters set forth in
         the  Operating  Agreement, including, among other things, legal 
         opinions confirming that the proposed transfer is in compliance with
         applicable securities laws and will not result in adverse tax 
         consequences to the Fund.  Any  assignment,  sale,  exchange  or other
         transfer in  contravention  of any of the  provisions  of the Operating
         Agreement  shall  be void and  ineffectual,  and  shall  not bind or be
         recognized by the Fund.

-        Liability  of  Investors.   Under  the  Operating   Agreement  and  the
         California Act, an investor complying with the Operating Agreement will
         not be liable for Fund obligations in excess of his unreturned  capital
         contribution and share of undistributed profits;  provided that, if the
         Fund has made an improper distribution, the investor may be required to
         return the amount received as a result.

-        Status Of Units. Under the Operating Agreement, each Unit will be fully
         paid and  nonassessable  and all  Units  have  equal  voting  and other
         rights,  except as with respect to certain limitations on the voting of
         Units held by the Manager or its Affiliates.

-        Term and  Dissolution.  The Fund  intends to  liquidate  its assets and
         distribute the proceeds thereof beginning after the Reinvestment Period
         expires  (at the end of the sixth full year  following  the year during
         which  the  final  investors  are  admitted  to the  Fund)  with  final
         liquidation  expected to occur  approximately ten to eleven years after
         the date the final  investors  are admitted to the Fund.  In any event,
         the Fund may continue for a maximum period ending December 31, 2019.

-        The Duties of the Manager. ATEL Financial Corporation,  the Manager, is
         Manager of the Fund and,  under the terms of the  Operating  Agreement,
         has the exclusive management and control of all aspects of the business
         of the Fund.

-        Books of Account  and  Records.  The Manager is  responsible  under the
         Operating Agreement for keeping certain books of account and records of
         the Fund reflecting all of the contributions to the capital of the Fund
         and all of the expenses  and  transactions  of the Fund.  Such books of
         account and records will be kept at the principal  place of business of
         the Fund in the State of California, and each Member and his authorized
         representatives  shall have,  at all times during  reasonable  business
         hours,  free  access  to and the  right  to  inspect  and copy at their
         expense  such books of account  and all  records of the Fund,  and each
         Member  shall have the right to compel  the Fund to  deliver  copies of
         certain of these records on demand.

-        Indemnification of the Manager.  The Operating  Agreement provides that
         the Manager and its affiliates  who perform  services for the Fund will
         be indemnified against certain liabilities.

     Plan of  Distribution:  The Units will be offered  through ATEL  Securities
Corporation  (the "Dealer  Manager"),  an  Affiliate of the Manager.  The Dealer
Manager will in turn offer Units through other broker-dealers who are members of
the National  Association of Securities  Dealers,  Inc.  ("NASD").  See "Plan of
Distribution."

         Until  subscriptions  for a total of  120,000  Units are  received  and
accepted,  all  subscription  checks must be made  payable to, and all  offering
proceeds will be deposited in an escrow  account . The offering  will  terminate
not  later  than two  years  from the date of this  Prospectus,  subject  to any
re-qualification  or  renewal  of  qualification  of the  offering  which may be
required  in  certain  jurisdictions  after  the  end of the  first  year of the
offering.  Upon receipt and acceptance of  subscriptions to a minimum of 120,000
Units,  the  subscription  proceeds  will be released to the Fund.  See "Plan of
Distribution."

     Glossary: See "Glossary" for definitions of certain capitalized terms which
are not otherwise defined herein.

                                       13
<PAGE>

                                  RISK FACTORS

     The  purchase  of Units  involves  various  risks.  Therefore,  prospective
purchasers should consider the following factors, among others discussed in this
Prospectus, before making a decision to purchase Units.

         Limited  Investor  Voting Rights and Total Reliance on Management.  All
decisions with respect to the management of the Fund will be made exclusively by
the  Manager.  The success of the Fund will,  to a large  extent,  depend on the
quality of the management of the Fund,  particularly  as it relates to Equipment
acquisition,  leasing and disposition. Holders are not permitted to take part in
the  management  of the Fund and Members have only  limited  voting  rights.  An
affirmative  vote by  holders  of more  than  50% of the  outstanding  Units  is
required to remove the Manager. See "Summary of the Operating Agreement - Voting
Rights of  Holders."  Accordingly,  no person  should  purchase any of the Units
offered  hereby unless he is willing to entrust all aspects of the management of
the Fund to the Manager and has evaluated the Manager's  capabilities to perform
such  functions.   See   "Management"   and  Exhibit  A  -  "Prior   Performance
Information."

         Manager's Compensation and Conflicts of Interest.  Substantial fees are
payable to the  Manager  and its  Affiliates  before  distributions  are paid to
investors and even if the Fund does not generate profits.  The Manager will also
be subject to conflicts of interest in  connection  with its  management  of the
Fund.  In  particular,  the  anticipated  use of  leverage  equal  to 50% of the
aggregate cost of Equipment would result in higher Asset Management Fees than if
less debt were incurred.  See the discussion  under  "Investment  Objectives and
Policies - Borrowing Policies."

         Unspecified  Equipment and Lessees. It is not possible to assess all of
the potential risks of an investment in Units because all of the Equipment to be
purchased  and the lessees to whom such  Equipment  will be leased have not been
identified.  A prospective investor will not have complete information as to the
manufacturers from which the Fund will purchase Equipment,  the number of leases
to be entered into,  the specific  types and models of Equipment to be acquired,
or the identity,  financial  condition and  creditworthiness  of the lessees who
will lease such  Equipment.  The Holders  must rely solely upon the judgment and
ability of the Manager with respect to the  selection  and methods of investment
and reinvestment in Equipment,  evaluation of Equipment manufacturers,  types of
leases and potential lessees. See "Investment Objectives and Policies."

         Defaults by Lessees.  The default by a lessee under a lease may cause a
lease to terminate  and  Equipment to be returned to the Fund at a time when the
Manager or its agents may be unable  promptly to arrange for the  re-leasing  or
sale of such Equipment,  thus resulting in the loss of anticipated  revenues and
the  inability to recover the entire amount of the Fund's  original  investment.
Furthermore,  the Fund may experience  difficulties and delays in recovering the
Equipment from the defaulting lessee, if a lessee files for protection under the
bankruptcy  laws or otherwise.  The Equipment may be returned in poor  condition
and the Fund may be unable to enforce  the return  provisions  and other  lessee
obligations  in its lease  against an insolvent  lessee.  In addition a lessee's
deteriorating  financial  condition  may make  pursuing a recovery  of the lease
obligation from the lessee not worthwhile.  In any event,  the costs  associated
with  recovering  Equipment  upon a lessee's  default,  enforcing  the  lessee's
obligations   under  the  lease,  and  transporting,   storing,   repairing  and
remarketing  the Equipment  may be  substantial  and may  adversely  affect Fund
operations.  See the discussion under "Prior Performance Summary" and in Exhibit
A - "Prior Performance Tables" below.

         Risks of Leverage.  To finance a portion of the  purchase  price of its
Equipment  portfolio,  the Fund expects to incur  aggregate  indebtedness  in an
amount equal to the maximum permitted under the Operating Agreement.  Total Fund
debt may not exceed an amount equal to 50% of the aggregate cost of Equipment as
of the final  commitment  of the Net Proceeds and,  thereafter,  on the date any
subsequent  indebtedness is incurred.  Equipment  purchased on a leveraged basis
generally can be expected to be profitable only if it generates  sufficient cash
revenues  from rents and  residual  proceeds in excess of those  required to pay
interest  on the  related  debt,  recover  the  purchase  price and cover  other
operating expenses. The Fund intends to use both nonrecourse debt (debt in which
only the asset financed by the lender is collateral securing the obligation) and
recourse  debt (in which all of the  Fund's  assets  or a  selected  pool of the
assets  are  collateral  securing  the  obligation).  The Fund  expects to incur
recourse debt obligations in the form of asset  securitization  transactions and
short term bridge financing to provide temporary

                                       14

<PAGE>




financing for  transactions  approved for  acquisition by the Fund,  including a
common  recourse  debt facility with  affiliated  programs.  Upon a default by a
borrower under a secured debt transaction, the lender generally has the right to
accelerate the entire debt  obligation and to foreclose on the  collateral.  The
lender can thereby  force a sale of the  collateral  to satisfy the full balance
due under the debt obligation of the borrower. The use of leverage may therefore
cause  the  risk of loss  to the  Holders  to be  greater  than if no debt  were
incurred,  because fixed payment  obligations  must be met on certain  specified
dates  regardless of the amount of revenues  derived by the Fund from  leveraged
Equipment. At the same time, the use of debt increases the potential size of the
Fund's  Equipment  portfolio,  the amount of gross lease  revenues and potential
residual  proceeds,   and  would  also  thereby  increase  the  potential  Asset
Management  Fees  payable  to the  Manager,  as such  fees are  determined  as a
percentage of the Operating Revenues.

         Furthermore,  the amount of Distributions to the Holders and the amount
of  potential  tax benefits  may depend upon the  availability  and the terms of
financing  for the  purchase of  Equipment.  The Fund has not  entered  into any
agreements  to  obtain  such  financing,  and it is not  currently  possible  to
ascertain the  availability  of such  financing.  No assurance can be given that
financing  will be available  or, if  available,  that it will be provided  upon
terms which the Manager deems reasonable.

     See the discussion  under  "Investment  Objectives and Policies - Borrowing
Policies."

         Balloon Payments. The Fund may borrow on terms which do not provide for
amortization  of the entire  principal  amount or a substantial  portion thereof
prior to maturity.  Such  "balloon  payment"  debt  involves  greater risks than
secured debt where the principal  amount is amortized  over the term of the loan
because the ability of the Fund to repay at maturity the  outstanding  principal
amount may be dependent upon its ability to obtain adequate refinancing,  and in
turn  upon  economic  conditions  in  general  and the  value of the  underlying
Equipment in  particular.  There is no assurance  that the  Equipment  will have
sufficient value to permit the Fund to pay or refinance any such balloon payment
at  maturity.  Further,  a  significant  decline in the value of the  underlying
Equipment could result in a loss of the Equipment through foreclosure.

         Limited  Transferability of Units. There are significant limitations on
the transferability of Units, and, as a result of potential adverse tax effects,
the Manager will take steps to assure that no public trading market develops for
the Units offered hereby. Holders may not, therefore, be able to liquidate their
investments in the event of an emergency. In addition,  Units may not be readily
accepted as collateral for a loan. Consequently, the purchase of Units should be
considered only as a long-term investment.

         Diversification  Dependent  Upon Size of Fund.  The Fund will be funded
with contributions of not less than $1,200,000 nor more than  $150,000,000.  The
potential   for   portfolio   diversification   and   therefore   the  potential
profitability  of the Fund  may be  affected  by the  amount  of funds  actually
raised. In the event that the Fund receives only the minimum Gross Proceeds,  it
will have less ability to obtain  diversification of its Equipment portfolio and
lessees,  and the degree to which it may be adversely affected by the results of
any single lease transaction will be increased.  See "Estimated Use of Proceeds"
and "Plan of  Distribution."  It should be noted that there is no minimum number
of lease transactions nor is there any restriction on the percentage of offering
proceeds at the minimum offering amount which may be used to purchase  equipment
of a single  type or  equipment  leased  to a  single  lessee.  See  "Investment
Objectives and Policies."

                                       15
<PAGE>

         Return on  Investment  Dependent  Upon Residual  Value of Equipment.  A
substantial  portion of Fund distributions from lease revenues is expected to be
a return of capital.  The Fund's ability to generate  income from its investment
in Equipment  will depend in part upon the  continuing  value of such  Equipment
when its leases  terminate,  which in turn will depend upon, among other things:
(i) the condition of the  Equipment;  (ii) the cost of comparable new Equipment;
and (iii) the functional and  technological  obsolescence  of the Equipment.  In
general, leased equipment can be expected to depreciate in constant dollars
(that is, in dollars  discounted  for the effects of inflation  during the lease
term).  In structuring  the terms of Fund leases,  the Manager will make certain
assumptions  regarding the anticipated residual values of Equipment in an effort
to calculate lease rates which, when combined with estimated sale proceeds,  may
be expected to return the Fund's  invested  capital and provide a profit.  There
can be no assurance that the Fund's residual value  assumptions will prove to be
accurate  or that the  Equipment  will not  decline in value more  rapidly  than
anticipated.  For  information  concerning  performance of prior  programs,  see
Exhibit A- "Prior Performance Tables" below.

         Portion  of  Distributions  Characterized  as  Return of  Capital.  The
portion of each Distribution  which exceeds the Fund's net income for the fiscal
period in which the  Distribution is made would  constitute a return of capital.
In other  words,  to the  extent  an  investor  receives  cash in  excess of his
allocable  share of income  for a period,  he will be deemed to be  receiving  a
return of his invested capital rather than investment  income.  Distributions by
the Fund may be  characterized  for tax,  accounting and economic  purposes as a
return of capital, a return on capital (i.e., investment income) or a portion of
each, and for each such purpose may be characterized differently. The portion of
total  Distributions  which will  constitute a return of capital and the portion
which will constitute investment income upon termination of the Fund will depend
on a number of factors in the Fund's operations,  including the values which may
be realized on the sales of the Fund's  Equipment at the end of its leases,  and
cannot be determined  until its Equipment  portfolio is liquidated and the total
amount of all  Distributions  is compared  to the total  capital  invested.  The
amount  and  sources of cash  distributions  to  investors  in each of the prior
public  programs  sponsored by the Manager and its  Affiliates  are set forth in
Table III of Exhibit A to this  Prospectus.  Set forth under the line item "Cash
distributions  to  investors  on  a  GAAP  basis,"  are  the  amount  of  annual
distributions  by each prior  program per $1,000  invested  and the  portions of
which constitute  return of capital and investment  income.  It should be noted,
however,  that,  as  discussed  above with  respect  to the Fund,  the return of
capital and  investment  income  ultimately to be realized by the prior programs
will not be finally determinable until each program is completed and liquidated.

         Activities  Outside of the United States.  The Fund may lease Equipment
to foreign subsidiaries of United States corporations and to foreign lessees and
otherwise lease  Equipment which is to be used outside the United States.  There
is no limit on the amount of Equipment  which may be so leased,  but the Manager
will seek to limit the  aggregate  amount of the Fund's  equity  invested in all
Equipment  which is leased to such foreign  lessees and which is otherwise to be
used  primarily  outside  the  United  States  to not more than 20% of the Gross
Proceeds.  In such cases, the Fund's interest in the Equipment may be subject to
the regulatory,  taxing and judicial authorities of a foreign jurisdiction.  The
Fund will attempt to require foreign  lessees to consent to the  jurisdiction of
U.S. courts in the event disputes should arise regarding the lease.  Even if the
Fund is successful in this effort,  it may be difficult or impossible to enforce
judgments  obtained against foreign lessees in the event of a lease default,  or
to obtain  possession  of leased  Equipment  or  otherwise to enforce the Fund's
rights  under  the  related  lease.  Moreover,  the  use and  operation  of Fund
Equipment in foreign  jurisdictions  may subject the Equipment to  unanticipated
taxes,  assessments or  confiscation  without fair  compensation.  The Fund will
attempt to include in such leases  provisions  which will cause all payments due
under the leases to be made in U.S.  currency  and require  lessees to reimburse
the Fund for any  foreign  taxes  billed to the Fund and to  maintain  insurance
covering  the risk of  confiscation.  In the event that lease  payments or other
terms of the leases involve payments in other than U.S. currency,  the Fund will
be subject to the risk of  currency  exchange  rate  fluctuations,  which  could
reduce the Fund's overall return on an investment. Many countries also have laws
regulating the transfer and exchange of  currencies,  and such laws may affect a
foreign  lessee's  ability  to  comply  with  lease  terms.   Finally,   certain
depreciation  methods may not be  available  for  Equipment  leased by a foreign
lessee or "used  predominantly  outside the United  States." See the  discussion
below under "Income Tax  Consequences - Depreciation - Limitations on the Use of
MACRS - (1)  Property  Used  Predominantly  Outside the United  States,  and (2)
Tax-Exempt Leasing."


                                       16
<PAGE>


     General Risks in the Equipment  Leasing  Business.  The success of the Fund
will be affected by the quality of the Equipment, the viability of the Equipment
manufacturer,  the timing of the  purchases  of Equipment by the Manager and its
ability to forecast technological advances concerning such Equipment.  Equipment
leasing is  subject to the risk of credit  losses,  technological  and  economic
obsolescence and defaults by lessees.  Increases in operating  expenses borne by
the Fund (including  expenses  relating to energy,  labor,  taxes and insurance)
could  have an adverse  impact  upon the  Fund's  ability to keep the  Equipment
leased on a profitable basis.

         Fluctuations  in Demand for Equipment.  The ability of the Fund to keep
the Equipment leased and/or operating and the terms of acquisitions,  leases and
dispositions  of  Equipment  depend on  various  factors  (many of which are not
within the  control  of the  Manager  or the  Fund),  such as  general  economic
conditions, including the effects of inflation or recession, and fluctuations in
supply and demand for various  types of Equipment  resulting  from,  among other
things, technological and economic obsolescence.

         Competition.  The  equipment  leasing  industry is highly  competitive.
Equipment  manufacturers,  corporations,  partnerships and others offer users an
alternative  to the purchase of most types of equipment with payment terms which
vary  widely  depending  on the lease  term and type of  equipment.  In  seeking
suitable  lease  transactions,  the  Fund  will  compete  with  other  entities,
including financial  institutions,  manufacturers and public and private leasing
companies, some of which may have greater financial resources or experience than
the Fund and the Manager.  Such  competition  may have an adverse  effect on the
terms of lease transactions available to the Fund.

         Risks of Operating Leases.  Although Equipment  representing a majority
of the  aggregate  purchase  price of the Fund's  Equipment  portfolio as of the
final  investment of the Net Proceeds  must be leased under High Payout  Leases,
the Equipment  portfolio will predominantly  consist of investments in Operating
Leases, under which the Fund will receive aggregate rental payments in an amount
that is less than its  purchase  price for the  Equipment.  The Fund must,  upon
termination  of an Operating  Lease,  either  obtain a renewal from the original
lessee, find a new lessee or sell the Equipment in order to cover its investment
in such  Equipment.  If the Fund is unable to renew  leases,  to enter  into new
leases or to sell  Equipment  on  desirable  terms after the  expiration  of the
initial terms of Operating  Leases,  it may  experience  (i) loss of anticipated
revenues  and (ii)  the  inability  to  recover  the  Fund's  investment  in the
Equipment. For information concerning performance of prior programs, see Exhibit
A- "Prior Performance Tables" below.

         Casualty Losses.  Equipment may be damaged or lost as a result of fire,
weather, accident, theft or other events of casualty. There is no assurance that
all potential  casualties  will be insured,  insurable or that, if insured,  the
insurance proceeds will be sufficient to cover a casualty.

         Consequences  of  Government  Regulation.   The  use,  maintenance  and
ownership of certain types of Equipment  are regulated by federal,  state and/or
local  authorities  which may impose  restrictions and financial  burdens on the
Fund's  ownership  and  operation  of  such  Equipment.  Changes  in  government
regulations,  industry  standards or deregulation may also affect the ownership,
operation and resale of such Equipment.

         In  addition,  certain  types of Equipment  (such as  railcars,  marine
vessels and aircraft) are subject to extensive safety and operating  regulations
by  governmental  agencies  and/or  industry  organizations.  Such  agencies  or
organizations  may require  modifications  or capital  improvements  to items of
Equipment.  Such  modifications  or  improvements  may require the removal  from
service  of items of  Equipment  for a period  of time and  substantial  capital



                                       17
<PAGE>


expenditures  by the owner.  The terms of leases may provide for rent abatements
if required  improvements  cannot be made in a timely manner or if the Equipment
must remain out of service for an extended  period or is otherwise  removed from
service.  The Fund may as a result  experience  reductions or  interruptions  in
operating revenues from such leases. If the Fund lacked sufficient funds to make
a  required  improvement  or  modification,  it  might be  required  to sell the
affected  item of Equipment  or to sell other items of Equipment  owned by it in
order to obtain the necessary  funds; in either event,  the Fund might sustain a
loss on its investment in the items sold and might lose future revenues, and the
Holders might experience adverse tax consequences.

         Registration  of Aircraft and Marine  Vessels May Not Be Possible.  The
Fund may invest a portion of the Net  Proceeds in  aircraft  or marine  vessels.
Aircraft or marine vessels operated in the United States must be registered with
the Federal  Aviation  Administration  ("FAA") or the U.S. Coast Guard ("USCG"),
which  limit such  registration  to  aircraft  or marine  vessels  owned by U.S.
Citizens  and Resident  Aliens.  The FAA's and USCG's Rules are not clear on the
status of certain  forms of entity  which own  aircraft or marine  vessels,  and
there may be a risk that a Fund  aircraft or marine vessel may not be registered
or may have its registration  revoked. The Fund's acquisition of any aircraft or
marine  vessels  will  be  conditioned  on  appropriate  registration  with  the
government agency having jurisdiction. If such registration were revoked for any
reason, the aircraft or marine vessel could not be operated in the United States
airspace  or  territorial  waters,  and the Fund would be  subject to  resulting
risks,  including a possible  forced sale of the aircraft or marine vessel,  the
potential  for  uninsured  casualties,  the loss of the  benefits of the central
recording  system under  federal law (and exposure to liens not of record) and a
breach by the Fund of leases or financing agreements. See "Investment Objectives
and Policies -- Types of Equipment - Aircraft" and "- Maritime Equipment."

         Newly-Formed  Entity.  The Fund was  formed in July,  1998,  and has no
operating history.  No assurance can be given that the Fund's operations will be
successful or that it will meet its stated investment objectives.

         Difficulty in Investing  Proceeds.  There can be no assurance as to the
length of time it will take the Fund to invest the Net Proceeds.  A delay in the
investment  could affect the Fund's ability to meet its  investment  objectives.
Any overall  decline in corporate  expansion  or demand for capital  goods would
adversely affect the Fund's ability to invest the Net Proceeds.

         Liability of Holders.  A Member's personal liability for obligations of
the Fund generally will be limited,  under the California Act , to the amount of
his Capital  Contribution and his right to  undistributed  profits and assets of
the Fund.  Under  the  California  Act,  a Member  will not be  liable  for Fund
obligations  in  excess  of his  unreturned  Capital  Contribution  and share of
undistributed profits.  Notwithstanding the foregoing, a Member may be liable to
the Fund in an amount equal to any distribution  made by the Fund to such Member
to the extent that,  immediately after the distribution is made, all liabilities
of the Fund exceed the value of the Fund's assets.

         Risks of Joint Ventures. Some of the Fund's investments may be owned by
joint ventures between the Fund and unaffiliated third parties or, under certain
circumstances, Affiliates of the Fund or the Manager, or as co-tenants with such
parties. The investment by the Fund in joint ownership of Equipment,  instead of
investing in the Equipment  directly or as the sole owner, may involve risks not
otherwise present, including, for example, risks associated with the possibility
that the Fund's  co-venturer in an investment might become  bankrupt,  that such
co-venturer  may at any time have economic or business  interests or goals which
are  inconsistent  with the business  interests  or goals of the Fund,  that the
parties may reach an impasse on joint venture decisions or that such co-venturer
may be in a position to take action contrary to the instructions or the requests
of the Fund or  contrary  to the Fund's  policies  or  objectives.  Among  other
things,  actions  by such a  co-venturer  might  have the  result of  subjecting
Equipment  owned  by the  joint  venture  to  liabilities  in  excess  of  those
contemplated  by the terms of the joint  venture  agreement  or might have other
adverse  consequences for the Fund. (See  "Investment  Objectives and Policies -
Joint Venture Investments.")

                                       18
<PAGE>


         Limited  Liability  Companies  Newly  Established.  The  Fund  has been
organized  under the  California  Act,  which is based  upon a  Uniform  Limited
Liability  Company Act.  Although  most states have adopted some form of limited
liability  company  legislation,  state  statutes  vary  and  limited  liability
companies have only a short history in operation. As a result, there are limited
legal precedents  available for courts addressing  questions  concerning limited
liability company questions. Therefore,  uncertainty exists concerning potential
the judicial  interpretations  of the California Act and other relevant  limited
liability company provisions.

         Partnership  Status.  The Fund  will not  apply  for a ruling  from the
Internal  Revenue  Service  (the  "Service")  that it will  be  classified  as a
partnership  and not as an  association  taxable as a  corporation  for  federal
income tax purposes.  Furthermore,  there is the  possibility  that Units may be
considered to be "publicly traded," thereby resulting in the Fund being taxed as
a corporation.  The Manager will cause the Fund to contest any contention by the
Service that the Fund constitutes an association  taxable as a corporation,  but
Holders  should be aware  that  this may  result  in  additional  representation
expenses  (i.e.,  legal and  accounting  fees).  In the  event  that the Fund is
treated for tax purposes as an association, the effective yield on an investment
in the  Units  would be  substantially  reduced  because  certain  tax  benefits
associated  with the offering  would be  unavailable.  See  "Federal  Income Tax
Consequences."

         Certain Other Tax  Considerations.  In determining whether to invest in
the Units offered  hereby,  a prospective  Holder should consider other possible
tax consequences thereof which may include, among others:

                  (a)  the   Service   could   disallow  or  reduce  the  Fund's
         depreciation  deductions or other  deductions,  or reallocate among the
         Holders the items of Fund income,  gain, deduction and loss in a manner
         that is  different  from  the  provisions  contained  in the  Operating
         Agreement,  in each  case  potentially  resulting  in less  tax loss to
         Holders,   or   additional   taxable   income  to  Holders   without  a
         corresponding increase in cash Distributions;
                  (b) the investment by an exempt  organization  or a trustee or
         custodian  of a  Qualified  Plan or an IRA  will  result  in  unrelated
         business taxable income to the exempt  organization,  Qualified Plan or
         IRA;
                  (c) changes in the tax law or in the  Regulations  promulgated
         under the Code may  materially  and  adversely  affect the Fund and the
         Holders, including limiting the ability of entities such as the Fund to
         generate  passive  income,  and  could  adversely  affect  the value of
         equipment in general,  including the value of the Equipment acquired by
         the Fund;
                  (d) the tax  opinion  of  counsel  is  limited  in  scope  and
         qualified by certain  assumptions;  
                  (e) Holders may be subject to taxation of an amount in excess
         of  proceeds  actually received on a sale of the Units and/or the 
         Equipment and on undistributed income;
                  (f) the taxable losses incurred by the Fund will be subject to
         the passive loss limitation which will limit the  deductibility of such
         losses;
                  (g) possible audit of a Holder's tax return resulting from the
         audit  of the  Fund's  or  another  Holder's  return;  and 
                  (h) Holders may be required to file tax returns and pay state,
         local and/or foreign taxes as a result of an investment in the Fund.

         See  "Federal  Income Tax  Consequences"  for further  discussion  with
respect to the above and other  possible tax  consequences  of the ownership and
sale of Units.

         EACH PROSPECTIVE PURCHASER OF UNITS IS URGED TO CONSULT HIS TAX ADVISOR
WITH  SPECIFIC  REFERENCE  TO HIS OWN TAX  SITUATION  AND  POTENTIAL  CHANGES IN
APPLICABLE LAW.

                                       19
<PAGE>

         Tax  Opinion.  The Fund has  obtained an opinion  from its tax counsel,
Jackson  Tufts  Cole  &  Black,  LLP  ("Tax  Counsel"),  concerning  the  Fund's
classification  as a partnership  for federal income tax purposes.  See "Federal
Income Tax Consequences --  Classification  as a Partnership."  The opinion also
states that the summaries of federal  income tax  consequences  set forth herein
under the headings "Risk  Factors" and "Federal  Income Tax  Consequences"  have
been reviewed by Tax Counsel and, to the extent such summaries  involve  matters
of law, Tax Counsel is of the opinion that such  statements  of law are accurate
under  the  Code,   the   regulations   promulgated   thereunder   and  existing
interpretations thereof.

     The  opinion  of Tax  Counsel  is based  upon the facts  described  in this
Prospectus and upon the facts as they have been represented by the Manager.  Any
alteration of the facts may adversely affect the opinion rendered.  Furthermore,
the opinion of Tax Counsel is based upon existing law and applicable current and
proposed Treasury Regulations, current published administrative positions of the
Service  contained  in Revenue  Rulings and  Revenue  Procedures,  and  judicial
decisions,   all  of  which  are  subject  to  change  either  prospectively  or
retroactively.

         Each  prospective  investor  should  note that the  opinions  described
herein  represent  only Tax  Counsel's  best legal  judgment and have no binding
effect or official  status of any kind before the Service or the courts.  In the
absence of a ruling from the Service, there can be no assurance that the Service
will not challenge such conclusions (or the tax positions taken by the Fund).

         ERISA Considerations.  In considering an investment of a portion of the
assets of a Qualified  Plan or IRA in the Fund,  a fiduciary  should  assess (i)
whether the investment  satisfies the  diversification  requirements  of Section
404(a)(1)(C) of the Employee  Retirement Income Security Act of 1974, as amended
("ERISA")  (in the  case of IRAs  and  Keogh  Plans,  fiduciaries  should  first
determine whether the investment is subject to ERISA requirements), (ii) whether
the investment is prudent, as it is unlikely that there will be a market created
in which the Qualified  Plan or IRA can sell or otherwise  dispose of the Units,
and  (iii)  whether  the  investment  is  made  solely  in the  interest  of the
participants  in the Qualified Plan or IRA. Under certain  circumstances,  ERISA
and  the  Code,  as  interpreted  by the  Department  of  Labor,  will  apply  a
"look-through"  rule under  which the  assets of an entity in which a  Qualified
Plan or IRA  has  made an  equity  investment  may  generally  constitute  "plan
assets." For this reason, the Fund is limiting sales to Qualified Plans and IRAs
to less than 25% in value of the total  sale of Units at any time.  In the event
that Qualified  Plans or IRAs acquire more than 25% in value of the Units either
because the  investors  have  misrepresented  the status of their  investment or
because  of  transfers  made to  Qualified  Plans or IRAs the assets of the Fund
might be treated as "plan assets." ERISA also requires that the assets of a plan
be valued at their fair  market  value as of the close of the plan year.  It may
not be possible to value the Units  accurately from year to year,  because there
will not be a  secondary  market  for them and any  change  in the  value of the
Equipment may not be reflected in the value of the Units.

                                WHO SHOULD INVEST

         The Units  represent a  long-term  investment,  the primary  benefit of
which is expected to be Distributions.  A purchase of Units involves  investment
risks  and is  suitable  only for  persons  who meet the  financial  suitability
standards  described  herein  and who  have  no need  for  liquidity  from  this
investment.  See "Risk Factors." In order to subscribe for Units,  each investor
must execute a Subscription Agreement, a specimen of which is included herein as
Exhibit C. The  Subscription  Agreement  provided to the investor for  execution
must be accompanied by a copy of this  Prospectus,  and each  subscriber has the
right to cancel his or her  subscription  during a period of five  business days
after the  subscriber has submitted the executed  Subscription  Agreement to the
broker-dealer  through  which the Units are sold.  The Fund  and/or the  selling
broker-dealer  will send each investor a written  confirmation of the acceptance
of the investor's subscription for Units upon admission to the Fund.

                                       20
<PAGE>


     As a result of the relative lack of liquidity  and the long-term  nature of
the  investment,  the Fund has established  suitability  standards which require
that an investor  (including  subsequent  transferees)  (i) have an annual gross
income of at least $45,000 and a net worth  (exclusive of home, home furnishings
and automobiles) of at least $45,000;  or (ii) have a net worth (determined with
the  same   exclusions)  of  at  least   $150,000.   Certain  state   securities
commissioners have established  investor  suitability  standards  different from
those set forth above for the marketing,  sale or subsequent  transfers of Units
within their respective jurisdictions, which standards are set forth below under
"Plan of Distribution - State Requirements" or will be set forth in a supplement
hereto. By executing the Subscription  Agreement, an investor represents that he
meets the suitability standards applicable to him as set forth herein and in the
Subscription  Agreement,  and agrees that such  standards  may be applied to any
proposed  transferee  of  his  Units.   Notwithstanding   the  foregoing,   each
participating  broker-dealer who sells Units has the affirmative duty, confirmed
in the  Selected  Dealer  Agreement  entered  into with the Dealer  Manager,  to
determine  prior to the sale of Units that an  investment in Units is a suitable
investment for its subscribing  customer,  must execute a representation  in the
Subscription Agreement regarding such suitability, and must maintain information
concerning  such  suitability  for at  least  six  years  following  the date of
investment. The selling broker and the sponsor must make every reasonable effort
to determine that the purchase of Units is a suitable and appropriate investment
for each purchaser.

         The  minimum  number of Units which an  investor  may  purchase is 250,
representing  a total minimum  investment  of $2,500,  except that an Individual
Retirement  Account ("IRA") or a qualified  pension plan,  profit-sharing  plan,
stock bonus plan or Keogh Plan ("Qualified Plans") may purchase a minimum of 200
Units ($2,000).  Additional  investments  may  subsequently be made in a minimum
amount of 50 Units ($500) per subscription, and minimum additional increments of
one Unit  ($10).  Investors  seeking to acquire  additional  Units  after  their
initial  subscription  need not  complete a second  subscription  agreement.  In
addition to restrictions on transfer imposed by the Fund, an investor seeking to
transfer his Units  subsequent to his initial  investment  may be subject to the
securities  or "Blue  Sky" laws of the state in which  the  transfer  is to take
place.

         Because the Fund will be engaged in the business of equipment  leasing,
the  distributive  share of Fund income realized by a Qualified Plan or IRA will
be  taxable  to such  plan as  "unrelated  business  taxable  income"  under the
Internal Revenue Code (the "Code"). Furthermore, in considering an investment in
the  Fund,  plan   fiduciaries   should  consider,   among  other  things,   the
diversification  requirements of Section  401(a)(1)(C)  of the Code,  additional
legal requirements under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and the prudent investment standards generally imposed on plan
fiduciaries.  Additionally,  in certain circumstances the assets of an entity in
which a Qualified Plan or IRA has made an equity investment may constitute "plan
assets." To the extent  necessary to avoid this result,  the Fund will limit the
sale and transfer of Units to Qualified  Plans and IRAs so that less than 25% of
the total  outstanding  Units are held by Qualified Plans and IRAs at all times.
In order to satisfy such  requirement,  each investor must make a representation
at the time of his subscription as to the record and beneficial ownership of the
Units subscribed.  See "Income Tax Consequences -- Investment by Qualified Plans
and IRAs."

         Investors  should also note that the Fund is required by the  Operating
Agreement to distribute,  to the extent available, Cash from Operations and Cash
from Sales or Refinancing in any year to the extent  necessary to allow a Holder
in a 31%  federal  income  tax  bracket  (but not a higher  bracket)  to pay the
federal  income  taxes due with  respect to his  interest in Fund Net Income for
such  year.  Accordingly,  it is  possible  that a  Holder  subject  to a higher
effective tax rate might not receive  sufficient  Distributions  to pay such tax
liabilities.  However,  the Manager is also  required to make  Distributions  in
certain minimum amounts during the Reinvestment Period prior to any reinvestment
in Equipment and must distribute all available  revenues after the  Reinvestment
Period. The Manager anticipates that such Distributions will be in amounts which
will exceed the expected tax liabilities  resulting from allocations of Fund Net
Income regardless of the investors' respective tax brackets. See "Risk Factors -
Income and Distributions" and "Income,  Losses and  Distributions." In addition,
distributions to nonresident or foreign  investors may be subject to withholding
taxes which would reduce the amount of cash actually received by such investors.
See "Income Tax Consequences - Taxation of Foreign Persons" and "State Taxes."

                                       21
<PAGE>


     Under  federal law,  certain  types of  Equipment,  including  aircraft and
marine  vessels,  may not be  operated  unless  they are owned by United  States
Citizens or Resident  Aliens.  To assure that the Fund will not exceed  relevant
federal  limits on foreign  ownership,  the Manager will not permit in excess of
20% of the outstanding  Units to be held by persons other than U.S. Citizens and
Resident Aliens, and may deny or condition any proposed subscription or transfer
in order to comply with such limitation.  Furthermore,  any Holder who ceases to
be a United States Citizen or Resident Alien may be required to tender his Units
to the  Fund  for  repurchase  at a price  determined  pursuant  to the  formula
described under "Summary of Operating Agreement - Repurchase of Units." A HOLDER
WHO  FAILS TO  CONFORM  TO THE  REPRESENTATIONS  REGARDING  UNIT  OWNERSHIP  AND
CITIZENSHIP  REQUIREMENTS OR MISREPRESENTS HIS UNIT OWNERSHIP OR CITIZENSHIP MAY
FORFEIT  AND NO LONGER  BE  ENTITLED  TO CASH  DISTRIBUTIONS,  TAX  ALLOCATIONS,
RECEIPT OF REPORTS AND VOTING PRIVILEGES,  ALTHOUGH HE MAY REALIZE PROCEEDS UPON
THE TRANSFER OF HIS UNITS TO AN ELIGIBLE INVESTOR,  WHO WOULD BE ENTITLED TO THE
FULL ECONOMIC BENEFITS AND OTHER PRIVILEGES ATTRIBUTABLE TO SUCH UNITS.

                            ESTIMATED USE OF PROCEEDS

         Many of the  figures set forth below are  estimates,  and  consequently
should not be relied upon as a  prediction  of the actual use of the proceeds of
this  offering.  The Fund  expects  to  commit  approximately  87% of the  Gross
Proceeds of this offering to the cash portion of the purchase price of Equipment
plus capital reserves.
<TABLE>

                                            Minimum Offering                    Maximum Offering
                                            Amount            Percent           Amount            Percent

<S>                    <C>                    <C>             <C>               <C>               <C>    
Gross Offering Proceeds(1)......              $1,200,000      100.00%           $150,000,000      100.00%
Less Offering and
         Organization
         Expenses:
   Selling Commissions(2)......                  114,000        9.50%             14,250,000        9.50%
   Other Offering and Organ-
         ization Expenses(3)......                30,000        2.50%              5,250,000        3.50%
                                            ------------       ------            -------------     ------

Net Offering Proceeds                          1,056,000       88.00%            130,500,000        87.00%

Capital Reserves(4)...                             6,000        0.50%                750,000         0.50%
Amount Available for
         Cash Payments for
         Equipment(5)   ..                     1,050,000       87.50%            129,750,000        86.50%
                                               ---------      ------             -----------        ------
-------------

<FN>
         (1) The offering  amounts  shown do not include the Units  purchased by
the initial Holders.

         (2)  The  Fund  will  pay  ATEL  Securities  Corporation  (the  "Dealer
Manager"), an Affiliate of the Manager, selling commissions equal to 9.5% of the
Gross  Proceeds,  and the Dealer  Manager will in turn reallow to  participating
broker-dealers  selling commissions equal to 8% of the Gross Proceeds from Units
sold by them,  retaining the balance of 1.5%. See "Plan of Distribution." Out of

                                       22
<PAGE>

the  amounts   retained  by  the  Dealer  Manager,   it  may  pay  one  or  more
broker-dealers  for  "wholesaling"  services in  connection  with the  offering.
Wholesaling  services  include  coordinating  the sales effort of  participating
broker-dealers and training their personnel with respect to the offering.  Total
selling   commissions,   disbursements   and   reimbursements  to  participating
broker-dealers  may not  exceed  an amount  equal to 10% of the Gross  Proceeds,
except  that an  additional  1/2 of 1% of the  Gross  Proceeds  may be paid  for
accountable,  bona fide due  diligence  expenses.  If the  Manager,  the  Dealer
Manager or the  broker-dealers  engaged by the Dealer Manager to sell the Units,
or any of their  Affiliates or employees,  purchase any Units in this  offering,
the Dealer  Manager,  in its  discretion,  may reimburse to any such  purchasers
selling  commissions  paid  with  respect  to  such  Units.  Sales  to any  such
purchasers on such terms would be for investment purposes only, and the Fund and
the Manager  would not  recognize  any  attempted  transfer of such Units unless
certain conditions are satisfied. See "Plan of Distribution."

     (3) Consists of expenses  incurred in connection with the  organization and
formation of the Fund, legal, accounting and escrow fees, printing costs, filing
and qualification  fees and  disbursements  and  reimbursements to participating
broker-dealers in connection with the sale and distribution of Units;  provided,
however,  that total selling  commissions,  disbursements and  reimbursements to
participating broker-dealers may not exceed the limitations thereon set forth in
footnote (2) above. See "Management Compensation." The Manager has agreed to pay
all  Organization  and Offering  Expenses which exceed an amount equal to 15% of
the Gross  Proceeds  of the  offering  up to  $25,000,000  plus 14% of all Gross
Proceeds in excess of $25,000,000.  Notwithstanding the foregoing,  in the event
that the Fund's Gross  Proceeds upon the  termination  of the offering are in an
amount less than  $2,000,000,  the Manager  has agreed to pay all  Offering  and
Organization Expenses which exceed an amount equal to 12% of the Gross Proceeds.
Payment of such  expenses by the  Manager  will be made  without  recourse to or
reimbursement by the Fund.

         (4) The Fund will  initially  establish  capital  reserves in an amount
equal to 1/2 of 1% of Gross Proceeds for general working capital purposes.  This
amount may fluctuate  from time to time as the Manager  determines  the level of
reserves necessary for the proper operation of the Fund.

         (5) Includes the amount  available for the cash portion of the purchase
price to be paid for Equipment plus  Acquisition  Expenses of the Fund. The Fund
anticipates  paying  Acquisition  Expenses in an amount  equal to  approximately
0.25% of the Gross Proceeds.
</FN>
</TABLE>


                             MANAGEMENT COMPENSATION

Summary Table

         The following  table includes  estimates of the maximum  amounts of all
compensation  and  other  payments  that the  Manager  and its  Affiliates  will
receive,  directly or indirectly, in connection with the operations of the Fund,
all of which are described more completely below under "Narrative Description of
Compensation."  It should be noted that the terms of compensation and amounts of
Distributions  payable to the Manager and its Affiliates  were not determined by
arm's-length   negotiation.   See  "Conflicts  of  Interest  -  Non-Arm's-Length
Agreements"  below.  The Operating  Agreement does not permit the Manager or its
Affiliates  to receive fees or expenses in excess of the maximum  amount  stated
for each type of compensation  described below by reclassifying such items under
a different category.

                                       23

<PAGE>


                                                                Estimated Amount
Entity Receiving                                                Assuming Maximum
Compensation               Type of Compensation                 Units Sold



The Dealer Manager         Selling Commissions (Up to 1.5%    Total selling
                           of Gross Proceeds to be retained   commissions to be
                           by the Dealer Manager)             retained by the
                                                              Dealer Manager are
                                                              not expected to 
                                                              exceed $2,250,000.

Manager and Affiliates      Reimbursement of Organization     $5,250,000(1)
                            and  Offering  Expenses (when 
                            added to selling commissions,  
                            not to  exceed a total equal 
                            to 15% of Gross  proceeds up 
                            to $25 million and 14% of any 
                            additional Gross Proceeds)


                                OPERATIONAL STAGE


Manager and Affiliates       Asset  Management Fee (a fee    Not determinable
                             equal to 4.5% of  Operating     at this time (2)
                             Revenues,  subject to
                             limitations based on Fund 
                             operations) (3)

Manager and Affiliates       Reimbursement of Operating      Not determinable
                             Expenses, subject to certain    at this time (2)
                             limitations (4)

                             CARRIED INTEREST IN FUND

Manager and Affiliates       Interest equal to 7.5% of all   Not determinable
                             allocations of Fund Net Income, at this time (2)
                             Net Loss and Distributions

                                
(1)      The estimated maximum amount excludes selling  commissions,  which will
         be paid directly by the Fund,  and will  therefore not be reimbursed to
         the Manager.  Selling  commissions  are included as "Front End Fees" in
         the  calculation  of the minimum  Investment in Equipment  described in
         footnote (4) below. Total Organization and Offering Expenses payable or
         reimbursable  by  the  Fund,   including  selling  commissions  payable
         directly  by the Fund,  may not  exceed  an amount  equal to 15% of the
         Gross  Proceeds  up to  $25,000,000  plus 14% of all Gross  Proceeds in
         excess of $25,000,000.  It is anticipated that substantially all of the
         Organization  and Offering  Expenses,  other than selling  commissions,
         will be paid by the Manager and reimbursed by the Fund, subject to such
         limitations.



                                       24

<PAGE>




(2)      The Manager is unable to predict the amounts which may be realized. Any
         such  prediction  would depend on the amount of Equipment  acquired and
         retained,  the amount of debt  incurred  and other  factors  that would
         necessarily  involve  assumptions of future events which cannot be made
         at this time.

(3)      The Asset Management Fee will be subject to the Asset Management Fee 
         Limit, based on an alternative fee schedule, as described in the 
         discussion below under "Limitations on Fees". In addition, pursuant to
         Section 15.7 of the Operating Agreement, the Manager must commit not 
         less than 85.875% of the Gross Proceeds to "Investment in Equipment" 
         (which term includes the purchase price of Equipment, expenses such as
         interest and taxes and amounts set aside for reserves, but excludes 
         Front End Fees). In the event the total amount of Investment in
         Equipment would otherwise be insufficient, the Asset Management Fee 
         Limit will be adjusted, and the Asset Management Fee or the Manager's 
         Carried Interest would be decreased accordingly, as described in the 
         discussion below under "Limitations on Fees".

(4)      Beginning  with the first  full  year  after  the  termination  of this
         offering,  the total  amount of  Reimbursable  Administrative  Expenses
         payable  by the Fund  for the  remainder  of its term may not  exceed a
         cumulative   limit.   This  cumulative   limit  on  such   Reimbursable
         Administrative  Expenses  will equal,  as of any date, a maximum of (i)
         0.5% of the Gross Proceeds per annum if the total Gross Proceeds are at
         least  90% of the  maximum  Gross  Proceeds;  (ii)  0.75% of the  Gross
         Proceeds  per annum if the total Gross  Proceeds  are at least 75%, but
         less than 90%, of the maximum Gross Proceeds; and (iii) 1% of the Gross
         Proceeds per annum if the total Gross Proceeds are less than 75% of the
         maximum Gross Proceeds. In addition, beginning with the first full year
         after  the  termination  of  this  offering,   the  maximum  amount  of
         Reimbursable Administrative Expenses payable by the Fund for any single
         year shall be limited to an amount equal to 1% of the Gross Proceeds.

Narrative Description of Compensation

         Selling   Commissions.   The  Dealer   Manager  will  receive   selling
commissions on all sales of Units in an amount equal to 9.5% of Gross  Proceeds.
The Dealer Manager will reallow to participating  broker-dealers 8% of the Gross
Proceeds from Units sold by them, and may use a portion of the retained  selling
commissions to compensate certain  participating  broker-dealers for wholesaling
services or reimburse certain selling  expenses.  It is not anticipated that the
Dealer Manager or other Affiliates of the Manager will directly effect any sales
of the Units,  although  the Dealer  Manager will  provide  certain  wholesaling
services. See "Plan of Distribution."

         Reimbursement  of Organization and Offering  Expenses.  The Manager and
its Affiliates  will be reimbursed for certain  expenses in connection  with the
organization  of the Fund and the  offering  of Units.  Total  Organization  and
Offering  Expenses  payable  or  reimbursable  by the  Fund,  including  selling
commissions  payable directly by the Fund, may not exceed an amount equal to 15%
of the Gross Proceeds up to $25,000,000 plus 14% of all Gross Proceeds in excess
of $25,000,000.

         Asset Management Fee. The Fund will pay the Manager an Asset Management
Fee in an amount equal to 4.5% of Operating  Revenues,  which will include Gross
Lease Revenues and Cash From Sales or Refinancing. The Asset Management Fee will
be paid on a monthly  basis.  The amount of the Asset  Management Fee payable in
any year will be reduced for that year to the extent it would  otherwise  exceed
the Asset  Management Fee Limit, as described  below.  The Asset  Management Fee
will be paid  for  services  rendered  by the  Manager  and  its  Affiliates  in
determining  portfolio  and  investment   strategies  (i.e.,   establishing  and
maintaining the composition of the Equipment portfolio as a whole and the Fund's
overall debt structure) and generally  managing or supervising the management of
the  Equipment.   The  Manager  will  supervise   performance  of  among  others
activities,  collection of lease revenues, monitoring compliance by lessees with


                                       25

<PAGE>




the lease terms,  assuring that Equipment is being used in accordance  with
all operative contractual arrangements,  paying operating expenses and arranging
for necessary maintenance and repair of Equipment in the event a lessee fails to
do so,  monitoring  property,  sales and use tax compliance  and  preparation of
operating  financial  data. The Manager  intends to delegate all or a portion of
its duties and the Asset Management Fee to one or more of its Affiliates who are
in the business of providing such services. See "Management".

         Reimbursement of Operating Expenses. The Manager and its Affiliates may
be reimbursed  for expenses  advanced or incurred on the Fund's  behalf,  to the
extent permitted under the Operating  Agreement.  The Manager and its Affiliates
will be  reimbursed  (i) the actual  cost to the  Manager or its  Affiliates  of
services,  goods  and  materials  used  for and by the Fund  and  obtained  from
unaffiliated  parties;  (ii)  administrative  services  necessary to the prudent
operation of the Fund,  provided that reimbursement for administrative  services
will be at the lower of (a) the actual cost of such services,  or (b) the amount
which the Fund would be required to pay to  independent  parties for  comparable
services.  Beginning  with the first  full year  after the  termination  of this
offering,  the total amount of Reimbursable  Administrative  Expenses payable by
the Fund for the remainder of its term may not exceed a cumulative  limit. If at
least 75% of the maximum Gross  Proceeds are raised by the end of this offering,
the  cumulative  limit will be an amount equal to 0.5% of the gross proceeds per
annum as of any date. If less than 75% of the maximum Gross  Proceeds is raised,
then the  cumulative  limit will be an amount equal to 1% of the Gross  Proceeds
per annum. In addition, beginning with the first full year after the termination
of this offering,  the maximum amount of  Reimbursable  Administrative  Expenses
payable by the Fund for any single  year shall be limited to an amount  equal to
1% of the  Gross  Proceeds.  The  Manager  estimates  that the  total  amount of
Reimbursable  Administrative  Expenses  during  the  Fund's  first  full year of
operations  after  completion of the offering,  assuming  receipt of the maximum
Gross Proceeds,  may be approximately $400,000 to $500,000. See the footnotes to
Table  III  of  Exhibit  A  "Prior  Performance   Information"  for  information
concerning the reimbursement of operating  expenses by prior programs  sponsored
by the Manager and its Affiliates.

         Carried Interest in Fund Net Income,  Net Loss and  Distributions.  The
Fund Manager will have a Carried  Interest in the Fund as a Member equal to 7.5%
of all  allocations  of Net  Income,  Net Loss and  Distributions.  The  Carried
Interest in the Fund will  compensate  the Manager for  organizing  the Fund and
arranging for supervision of Fund administration (i.e., investor  communications
and services, regulatory reporting, accounting and transfers of Units).

Limitations on Fees.

         Asset Management Fee Limit. The Asset Management Fee will be subject to
the  Asset  Management  Fee  Limit.  The  Asset  Management  Fee  Limit  will be
calculated  each year during the Fund's term by calculating  the total fees that
would be paid to the Manager if the Manager were to be  compensated on the basis
of an  alternative  fee  schedule,  to  include  an  Equipment  Management  Fee,
Incentive  Management  Fee,  and  Equipment   Resale/Re-Leasing  Fee,  plus  the
Manager's  Carried  Interest,  as described below. To the extent that the amount
paid to the Manager as the Asset  Management  Fee plus its Carried  Interest for
any year  would  exceed  the  aggregate  amount of fees  calculated  under  this
alternative  fee schedule for the year, the Asset  Management Fee and/or Carried
Interest for that year will be reduced to equal the maximum aggregate fees under
the  alternative  fee  schedule.  To the extent any such fees are  reduced,  the
amount of such  reduction  will be accrued and  deferred,  and such  accrued and
deferred  compensation  would be paid to the Manager in a subsequent period, but
only if and to the  extent  that such  deferred  compensation  would be  payable
within the Asset  Management Fee Limit for the subsequent  period.  Any deferred
fees which cannot be paid under the  applicable  limitations  in any  subsequent
period  through the date of  liquidation  would be forfeited by the Manager upon
liquidation.


                                       26

<PAGE>

     Alternative Fee Schedule.  For purposes of the Asset  Management Fee Limit,
the  Fund  will  calculate  an  alternative   schedule  of  fees,   including  a
hypothetical  Equipment  Management Fee,  Incentive  Management  Fee,  Equipment
Resale/Re- Leasing Fee, and Carried Interest as follows:

                  An Equipment  Management  Fee will be  calculated to equal the
         lesser of (i) 3.5% of annual Gross Revenues from  Operating  Leases and
         2% of annual Gross  Revenues  from Full Payout Leases which contain Net
         Lease  Provisions),  or (ii) the fees  customarily  charged  by  others
         rendering  similar  services as an ongoing public  activity in the same
         geographic  location and for similar  types of  equipment.  If services
         with respect to certain Operating Leases are performed by nonaffiliated
         persons under the active  supervision  of the Manager or its Affiliate,
         then the amount so calculated  shall be 1% of Gross  Revenues from such
         Operating Leases.

                  An Incentive  Management Fee will be calculated to equal 4% of
         Distributions  of Cash from  Operations  until  Holders have received a
         return of their Original Invested Capital plus a Priority Distribution,
         and,  thereafter,  to equal a total of 7.5% of  Distributions  from all
         sources,  including Sale or Refinancing  Proceeds. In subordinating the
         increase in the Incentive  Management  Fee to a cumulative  return of a
         Holder's  Original  Invested  Capital plus a Priority  Distribution,  a
         Holder  would be  deemed to have  received  Distributions  of  Original
         Invested  Capital only to the extent that  Distributions  to the Holder
         exceed the amount of the Priority Distribution.

                  An Equipment  Resale/Re-Leasing  Fee will be  calculated in an
         amount  equal  to  the  lesser  of  (i) 3% of  the  sale  price  of the
         Equipment,  or (ii)  one-half  the normal  competitive  equipment  sale
         commission  charged by unaffiliated  parties for resale services.  Such
         fee would apply only after the Holders have  received a return of their
         Original Invested Capital plus a Priority  Distribution.  In connection
         with the releasing of Equipment to lessees other than previous  lessees
         or their Affiliates,  the fee would be in an amount equal to the lesser
         of (i)  the  competitive  rate  for  comparable  services  for  similar
         equipment,  or (ii) 2% of the gross  rental  payments  derived from the
         re-lease of such Equipment, payable out of each rental payment received
         by the Fund from such re-lease.

                  A Carried Interest equal to 7.5% of all  Distributions of Cash
         from Operations and Cash from Sales or Refinancing.

         Front End Fee Limitations.  The compensation payable as described above
will be subject to further adjustment based on the limitations on Front End Fees
imposed under the North American  Securities  Administrators  Association,  Inc.
("NASAA") Statement of Policy concerning Equipment Programs,  as amended through
October 24, 1991  (referred  to herein as the "NASAA  Guidelines").  The Manager
will  first  determine  the  effect,  if any,  of the Front End Fee  limitations
described  below and make any required  adjustments to the Asset  Management Fee
Limit.  Then the Manager will apply the adjusted  Asset  Management Fee Limit to
the Asset Management Fee and the Manager's Carried Interest.

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


                                       27

<PAGE>

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

         With the additional carried interest calculated as described above, the
maximum  aggregate  fees payable to the Manager and  Affiliates  under the NASAA
Guidelines as carried  interest and  promotional  interest  would equal 11.5% of
Distributions  of  Cash  from  Operations  (6.5%  + 5% =  11.5%),  and  7.5%  of
Distributions  of Sale or Refinancing  Proceeds  (6.5% + 1% = 7.5%),  before the
subordination level was reached, and 21.5% of all Distributions thereafter.  The
maximum  amounts  to be paid  under the  terms of the  Operating  Agreement  are
subject to the application of the Asset Fee Limit provided in Section 8.3 of the
Agreement,  which  limits  the annual  amount  payable  to the  Manager  and its
Affiliates as the Asset  Management Fee and the Carried Interest to an aggregate
not to exceed the total  amount of fees that would be payable to the Manager and
its Affiliates under the alternative fee schedule set forth in Section 8.3. This
overall  limitation  on annual fees will  include,  in addition to an  Equipment
Management  Fee and Equipment  Resale/Releasing  Fee,  amounts equal to 11.5% of
Distributions  of Cash from  Operations (4% as an Incentive  Management Fee plus
7.5% as the Carried Interest in Fund Distributions) and 7.5% of Distributions of
Sale or  Refinancing  Proceeds (as the Fund  Manager's  7.5%  Carried  Interest)
before the Priority Return, and 15% of all Distributions  thereafter (7.5% as an
Incentive Management Fee plus 7.5% as the Carried Interest).

         Upon  completion  of the  offering of Units,  final  commitment  of Net
Proceeds to  acquisition  of  Equipment  and  establishment  of final  levels of
permanent portfolio debt encumbering such Equipment, the Manager shall calculate
the maximum carried interest and promotional interest payable to the Manager and
its Affiliates  under the NASAA Guidelines and compare such total permitted fees
to the total of the Incentive Management Fees and Manager's Carried Interest. If
and to the extent that the fees  calculated  under the  alternative fee schedule
provided  in  Section  8.3 as the  Incentive  Management  Fee and the  Manager's
Carried  Interest  should exceed the maximum  promotional  interest plus carried
interest  permitted under the NASAA  Guidelines,  as described  above,  the fees
payable to the Manager and its Affiliates  shall be reduced.  In such event, the
Manager will reduce the amounts  calculated for purposes of the Asset Management
Fee Limit as the  Incentive  Management  Fee and/or the  Carried  Interest by an
amount  sufficient  to cause the total of such  compensation  to comply with the
limitations in the NASAA  Guidelines on the aggregate of  promotional  interests
and carried  interests.  The adjusted  Asset  Management  Fee Limit will then be
applied to the Asset  Management Fee and Carried  Interest as described above. A
comparison  of the  Front  End Fees  actually  paid by the  Fund  and the  NASAA
Guideline  maximums  shall be repeated,  and any required  adjustments  shall be
made, at least annually thereafter.

Defined Terms Used in Description of Compensation

Definitions  of  certain  capitalized  terms  used  in the  foregoing  narrative
description of compensation  payable to the Manager, and used in the alternative
fee schedule for purpose of calculating the Asset Management Fee Limitation, are
as follows:

                                       28
<PAGE>

"Adjusted  Invested  Capital" means, as of any date, the Original  Invested
Capital  attributable to the Units held by any Person on or before such date, as
decreased (but not below zero) by the amount by which (i) all Distributions with
respect  to such Units on or before the date of  determination  pursuant  to any
provision  of the  Operating  Agreement  exceed (ii) the  Priority  Distribution
attributable to such Units for such period.

"Asset  Management  Fee Limit" means the total fees  calculated  pursuant to the
alternative fee schedule as set forth under  "Limitations on Fees" above,  equal
to  the  aggregate  of  a  hypothetical   Equipment  Management  Fee,  Incentive
Management Fee, and Equipment  Resale/Re-Leasing Fee, plus the Carried Interest,
determined in the manner described therein.

"Carried Interest" or "Interest in Distributions" shall mean the allocable share
of Fund Distributions of Cash from Operations and Cash from Sales or Refinancing
payable to the Manager,  as a Member,  pursuant to Sections 10.4 and 10.5 of the
Agreement.

"Cash from Operations"  means the excess of Gross Lease Revenues (which excludes
revenues from Equipment sales or refinancing) over cash disbursements (including
an Equipment  Management  Fee and amounts  reinvested  by the Fund in Equipment)
without  reduction for  depreciation  and  amortization  of intangibles  such as
organization  and underwriting  costs but after a reasonable  allowance for cash
for  repairs,  replacements,   contingencies  and  anticipated  obligations,  as
determined by the Manager.

"Cash from Sales or  Refinancing"  means the net cash  realized by the Fund from
the sale, refinancing or other disposition of any Equipment after payment of all
expenses related to the transaction (including an Equipment Resale Fee).

"Distributions"  means any cash  distributed to Holders and the Manager  arising
from their  respective  interests in the Fund. "Full Payout Lease" means a lease
under which the  non-cancellable  rental payments due during the initial term of
the lease are at least  sufficient to cover the purchase  price of the Equipment
leased.

"Gross Lease  Revenues"  means all revenues  attributable to the Equipment other
than from  security  deposits paid by lessees,  but excluding  revenues from the
sale, refinancing or other disposition of Equipment.

"Net Income" or "Net Loss" means the taxable  income or taxable loss of the Fund
as determined for federal  income tax purposes,  computed by taking into account
each item of Fund income,  gain, loss,  deduction or credit not already included
in the  computation  of  taxable  income  and  taxable  loss,  but does not mean
Distributions.

"Operating  Lease" means a lease under which the aggregate  rental  payments due
during the  initial  term of the lease are less than the  purchase  price of the
Equipment leased.

"Operating  Revenues" means the total for any period of all Gross Lease Revenues
plus all Cash from Sales or Refinancing.

"Original Invested Capital" means the original gross purchase price of the Units
contributed  by each Member to the  capital of the Fund for his  interest in the
Fund,  which  amount shall be  attributed  to Units in the hands of a subsequent
Holder.


                                       29
<PAGE>


"Priority  Distribution"  for any  calendar  year or other  period  means,  with
respect to the Units held by any Person,  the average Adjusted  Invested Capital
with respect to such Units during each calendar year multiplied by 10% per annum
(calculated on a cumulative  basis,  compounded  daily, from the last day of the
calendar quarter in which the initial  purchaser of such Units was admitted as a
Holder  pursuant to the Operating  Agreement and pro rated for any fraction of a
calendar year for which such calculation is made).

"Reimbursable  Administrative  Expenses" shall mean the ordinary  recurring
administration expenses incurred by the Manager and reimbursed by the Fund. Such
expenses  shall not include  interest,  depreciation,  equipment  maintenance or
repair, third party services or other non-administrative expenses.

         See Article II of the Operating Agreement for more complete definitions
of the foregoing terms.



                                       30

<PAGE>


                       INVESTMENT OBJECTIVES AND POLICIES

Principal Investment Objectives

         The  Fund's  principal  objectives  are  to  invest  in  a  diversified
portfolio of primarily low-technology, low- obsolescence Equipment which will

                  (i)  preserve, protect and return the Fund's invested capital;

                  (ii) generate  regular  Distributions  to Holders of Cash from
Operations  and Cash From Sales or  Refinancing,  any  balance  remaining  after
certain minimum Distributions to be used to purchase additional Equipment during
the Reinvestment Period; and

                  (iii) provide  additional  Distributions  after the end of the
Reinvestment Period and until all Equipment has been sold.

         Distributions  will be made only to the extent cash is available  after
payment of Fund obligations (including payment of Fund administrative  expenses,
debt service and the Asset Management Fee) and allowance for necessary reserves.
Distributions  are  expected  to commence as of the quarter in which the minimum
offering  amount is achieved  and in which  investors  are admitted to the Fund.
However,  there can be no assurance as to the timing of  Distributions,  or that
any specific level of Distributions or any other objectives will be attained.

General Policies

         The Fund intends to acquire  various types of Equipment for lease.  See
the discussion below under "Types of Equipment." Generally,  the Fund expects to
acquire  newly-manufactured  Equipment.  However,  the Fund may also  invest  in
desirable  used  Equipment and Equipment  subject to  pre-existing  leases under
appropriate   circumstances   and  where  consistent  with  the  Fund's  overall
investment objectives.

         The Fund's investment objective is to acquire primarily low-technology,
low-obsolescence  equipment such as materials handling equipment,  manufacturing
equipment,  mining equipment,  and  transportation  equipment.  A portion of the
portfolio may include some more  technology-dependent  equipment such as certain
types of communications  equipment,  medical equipment,  manufacturing equipment
and office equipment, although the Fund will seek to invest in such equipment in
a manner consistent with its primary  objective of acquiring  equipment which is
generally  subject to relatively low rates of  technological  obsolescence.  The
Operating   Agreement   does  not  limit  the   Fund's   ability  to  invest  in
high-technology  Equipment.  See  Table  IV of  Exhibit  A,  "Prior  Performance
Information,"  for  information  concerning  the  composition  of the  equipment
portfolios held by the four prior public  programs  sponsored by the Manager and
its Affiliates which have investment objectives and policies similar to those of
the Fund.

         Like most goods, new equipment generally has a higher market value than
comparable  used equipment,  and capital  equipment tends to lose value as it is
used  over a period  of time.  An  equipment  lessor  such as the Fund  seeks to
negotiate  lease terms based in part on its  estimate of the value of the leased
equipment upon  termination of the lease. The lessor will negotiate a lease rate
designed to generate  sufficient  rental  revenues over the term of the lease so
that,  when the total lease  payments  are added to the  estimated  value of the
equipment upon lease termination,  the lessor will have achieved a return of the
capital used to purchase the equipment plus an overall profit on the investment.
There can be no assurance, however,

                                       31

<PAGE>




that the lessor's assumptions regarding the residual value of the equipment will
be accurate or that its objective will be achieved.


     The Manager  will seek to maintain an  appropriate  balance in the types of
Equipment  acquired and the types of leases entered into by the Fund. At least a
majority of the Fund's Equipment, based on the aggregate purchase price, will be
subject to High Payout Leases (with  noncancellable  lease payments returning at
least 90% of the  Equipment  Price  through  the term of the  lease)  upon final
investment  of the Net Proceeds and  completion  of permanent  financing for the
portfolio. In addition, the Manager will seek to invest not more than 20% of the
aggregate  purchase  price of  Equipment  in  Equipment  acquired  from a single
manufacturer.  However,  the latter  limitation is a general guideline only, and
the Manager may in its  discretion  cause the Fund to acquire  Equipment  from a
single manufacturer in excess of the stated percentage if it deems such a course
of action to be in the Fund's best interest.  A number of factors will determine
the actual  composition  of the Fund's  Equipment  portfolio;  for example,  the
amount of Gross  Proceeds  actually  received  prior to the  termination  of the
offering  will be a  significant  factor in  determining  the Fund's  ability to
diversify its portfolio.  Furthermore,  the Manager cannot anticipate what types
of Equipment  will be available and at what prices at the time the Fund is ready
to invest its funds. In structuring  leases, the Fund's lease rate and return on
investment objectives will vary based on the type of equipment, the terms of the
lease,  the credit  quality of the lessee  and  prevailing  lease and  financial
market  conditions.  The Manager will commit to a particular  lease  transaction
only if it  believes  that,  in the  context  of the  Fund's  overall  equipment
portfolio,  the transaction  will  contribute to the  satisfaction of the Fund's
investment objectives.  The Fund does not have any quantifiable "minimum rate of
return".  As noted above,  the Fund's  objectives  are to acquire a  diversified
portfolio of equipment  that will generate  sufficient  net cash flow to permit
regular   distributions  to  investors  and  additional  funds  to  reinvest  in
equipment.  Reinvestment  of revenues is permitted  only after  certain  minimum
rates of  distributions  are made  (see  "Income,  Losses  and  Distributions  -
Reinvestment"). Accordingly, the Manager will seek to structure a portfolio that
(i) is  diversified  as to  equpiment  type,  industry,  lessee  and  geographic
location;  (ii)  capable  of  generating  sufficient  net cash  flow to meet the
minimum distribution  requirements to permit reinvestment;  and (iii) capable of
generating  sufficient  cash flow to provide funds for additional  investment in
equipment.  The quantified  rates of return  necessary to meet these  objectives
through the end of the Reinvestment  Period will depend on a number of variables
which cannot be predicted with certainty this far in advance.


         As set forth above under "Principal Investment  Objectives," it will be
the  Fund's  objective  to  reinvest  in  additional  Equipment  any  Cash  from
Operations and Cash from Sales or Refinancing remaining after payment of certain
minimum  Distributions during the Reinvestment Period. The Fund will not acquire
Equipment  after the  Reinvestment  Period,  except to the extent  necessary  to
satisfy  obligations entered into prior to the end of the Reinvestment Period or
to maintain or improve Equipment already owned at such time.
   
         Other than as set forth below under "Identified Equipment Acquisitions"
and in any  supplement  to this  Prospectus,  the  Fund has not  invested  in or
committed to purchase any Equipment, and, as a result, there can be no assurance
as to  when  the  Net  Proceeds  from  the  offering  will  be  fully  invested.
Furthermore,  prospective  investors  may  not  have  an  opportunity  prior  to
investing to evaluate all of the Equipment to be acquired.  
    
         Prior to final funding of any acquisition of a single item of Equipment
which has a contract  purchase price in excess of  $1,000,000,  the Manager will
cause the Fund to obtain a future value  appraisal of the item of Equipment from
a qualified  independent  third party  appraiser.  The Manager may also,  in its
discretion,  obtain Equipment  appraisals for certain smaller acquisitions if it
deems an  appraisal  to be  appropriate  because of the type of  Equipment,  the
overall size of a transaction or otherwise.  It should be noted,  however,  that
any such appraisals would represent only the appraiser's opinion of the value of
the Equipment, and would not necessarily represent the actual amount which might
be realized by the Fund upon disposition of the Equipment.

         The Manager or an Affiliate may purchase Equipment in its own name, the
name of an  Affiliate or the name of a nominee,  a trust or  otherwise  and hold
title  thereto on a temporary or interim basis  (generally  not in excess of six
months) for the purpose of facilitating the acquisition of such Equipment or the
completion of manufacture  of the Equipment or for any other purpose  related to
the business of the Fund, provided,  however that: (i) the transaction is in the
best  interest of the Fund;  (ii) such  Equipment is purchased by the Fund for a
purchase  price no greater  than the cost of such  Equipment  to the  Manager 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 the Manager
or Affiliate and the time acquired by the Fund; (iv) there is no benefit arising
out of such transaction to the

                                       32

<PAGE>




Manager 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  shall be treated as  belonging to the
Fund.

         Any of the Net  Proceeds  received by the Fund during the first  twelve
months  following  the date hereof which have not been  invested or committed to
investment in Equipment  during the period ending eighteen months  following the
date hereof, and any of the Net Proceeds received thereafter which have not been
invested or committed to  investment  in Equipment  during the period ending six
months after the Final Closing Date (except, in either case, for amounts used to
pay Fund  operating  expenses or deemed to be required as capital  reserves,  as
determined  in the sole  discretion  of the Manager and in  accordance  with the
Operating Agreement) will be distributed pro rata by the Fund to the Holders. In
addition,  in order to  refund  to the  Holders  the  amount  of Front  End Fees
attributable to such returned  capital,  the Manager has agreed to contribute to
the Fund,  and the Fund shall  distribute to the Holders pro rata, the amount by
which (x) the  amount of  unused  capital  so  distributed,  divided  by (y) the
percentage  of Gross  Proceeds  remaining  after  payment of all Front End Fees,
exceeds the unused  capital so  distributed.  The Fund's funds will be available
for general use during the foregoing period and may be expended in operating the
Equipment  which has been acquired.  Net Proceeds will not be segregated or held
separate from other funds of the Fund pending  investment,  and no interest will
be payable to the Holders if uninvested  Net Proceeds are returned to them.  For
the purpose of the foregoing provision, Net Proceeds will be deemed to have been
committed  to  investment  and will not be returned to the Holders to the extent
written agreements in principle or letters of understanding were executed at any
time prior to the end of such period,  regardless of whether any such investment
is eventually  consummated,  and also to the extent any funds have been reserved
to make  contingent  payments in connection  with any  Equipment,  regardless of
whether any such payments are ever made.

Identified Equipment

     As of the date hereof ATEL Capital  Group,  the parent of the Manager,  has
been  awarded  lease  transactions  representing  equipment  purchase  costs  of
approximately  $4.2 million  which are suitable for  acquisition  by the Fund as
well as certain Affiliates of the Fund. Some or all of these transactions may be
allocated to the Fund, subject to the discretion of the Manager and depending on
future  circumstances  and the factors  discussed below in the second  paragraph
under "Conflicts of Interest - Competition for Investments."  ATEL Capital Group
has the right to allocate and assign  participations in these transactions among
its affiliates in its discretion, and the Manager has the authority to determine
what level of  participation,  if any, is  appropriate  for each of the programs
under its  management,  including  the Fund.  The Fund's  ability to acquire the
Equipment  described  below will be dependent  upon the amount of capital raised
and the timing of the Fund's capital raising efforts.  In addition,  the Manager
will cause the Fund to acquire these  transactions only to the extent consistent
with its investment  objectives at the time of each such acquisition.  There can
be no assurance as to what,  if any,  portion of these  transactions  awarded to
ATEL Capital  Group may be allocated  and assigned to the Fund.  However,  these
transactions  include  binding lease  commitments to ATEL Capital Group from the
following  lessees in the approximate  amounts noted:  General  Electric Company
($1.7  million  in new and used  manufacturing  equipment,  including  both High
Payout Leases and Operating Leases with the overall transaction  qualifying as a
High Payout Lease);  Hallsmith-Sysco  Food Service ($1 million in new trucks and
trailers under Full Payout Leases);  Signature Flight Support  Corporation ($1.2
million in new trucks  and  trailers  under High  Payout  Leases);  and  Tenneco
Automotive  ($200,000  in new  material  handling  equipment  under Full  Payout
Leases).  None of the foregoing  equipment is subject to indebtedness.  Although
the Fund may  incur  debt  upon  acquisition  or  finance  the  equipment  after
acquisition,  it has no current  financing  arrangements  or  commitments  with
respect  to such  equipment.  As is the  case  with  all  Fund  acquisitions, no
Acquisition  Fees will be  payable  to the  Manager or any of its Affiliates  in
connection with these proposed transactions.

Types of Equipment

         The Fund  intends  to  acquire  and lease a  diversified  portfolio  of
Equipment.  The  Fund  intends  to  invest  primarily  in  what it  deems  to be
relatively  low-technology,  low-obsolescence types of equipment. These types of
equipment  would  include  a  variety  of  items  which  are  not  dependent  on
high-technology  design or applications for their usefulness to lessees, and are
therefore less subject to rapid obsolescence than types which are so dependent.

                                       33

<PAGE>

         Equipment  acquisition  will be  subject  to the  Manager or its agents
obtaining such  information and reports,  and undertaking  such  inspections and
surveys as the Manager may deem  necessary  and  appropriate  to  determine  the
probable  economic life,  reliability  and  productivity  of the Equipment,  its
competitive  position with respect to other  equipment and its  suitability  and
desirability  as compared with other  equipment.  Purchases of new Equipment for
lease will  typically be made directly  from a  manufacturer  or its  authorized
dealers,  either  pursuant  to a  purchase  agreement  relating  to  significant
quantities of such  equipment,  through lease brokers,  or on an ad hoc basis to
meet the needs of a particular lessee.  There can be no assurance that favorable
purchase  agreements  can be negotiated  with equipment  manufacturers  or their
authorized  dealers or lease brokers at the time the Fund commences  operations.
In addition,  the Fund may enter into  sale/leaseback  transactions  pursuant to
which the Fund will purchase Equipment from companies which will  simultaneously
lease the Equipment from the Fund.

         The  following is a more detailed  description  of the various types of
Equipment  which the Fund may  purchase and lease.  The types of  Equipment  are
listed in  alphabetical  order,  and the discussion is not intended to imply any
order of emphasis in the Fund's acquisition policies. The final mix of Equipment
types in the Fund's  portfolio will depend on the factors  discussed above under
"General Policies."

         Aircraft. The Fund may invest in cargo and freight aircraft,  corporate
aircraft and aircraft used for medical evacuation and rescue purposes.  The Fund
may invest in commercial passenger aircraft,  provided that not more than 10% of
the maximum  Gross  Proceeds  will be committed  to the  purchase of  commercial
passenger  aircraft  and  provided  further  that any debt  used to  acquire  or
maintain  such  Equipment  will  either  be  secured  by the  obligations  of an
"investment  grade" lessee,  or will be  non-recourse to the other assets of the
Fund. The Manager  anticipates  that the Fund's cash investments in all types of
aircraft will not exceed an amount equal to 20% of the maximum  Gross  Proceeds.
Cargo and freight aircraft are used by commercial  freight carriers and national
and international mail and package delivery services exclusively for the hauling
of  cargo.  Corporate  aircraft,   including  both  helicopters  and  fixed-wing
aircraft,  are used by many businesses to move employees from city to city or to
locations  without  scheduled  air  service  and for  the  express  delivery  of
personnel,   components  and  products  at  various  manufacturing  and  service
facilities. Commercial passenger aircraft consist of aircraft used in the day to
day operation of scheduled  passenger air carriers.  All domestic  corporate and
commercial  aircraft are  registered  with the Federal  Aviation  Administration
("FAA").

         Under the Federal  Aviation Act of 1958, as amended (the "Act"),  it is
unlawful to operate an unregistered  aircraft in the United States.  In order to
be eligible for registration,  the rules and regulations of the FAA provide,  in
effect,  that  aircraft is eligible  for  registration  only if it is owned by a
United States Citizen or a Resident  Alien.  A literal  reading of the Act could
lead to the  conclusion  that aircraft in which the Fund has an interest are not
eligible for  registration  because the term United States Citizen is defined in
the Act to include a partnership in which each member is an "individual"  who is
a citizen of the  United  States or one of its  possessions,  and the Fund has a
corporate  Manager.  The  FAA has  indicated  informally  that  it  will  permit
registration  of an  aircraft  under the  Federal  Aviation  Act of 1958 and the
regulations  thereunder  in  the  name  of a  trustee  of a  trust  in  which  a
partnership  is the sole  beneficiary if the  partnership's  partners are United
States Citizens  (whether or not they are all  individuals) or Resident  Aliens.
However,  such  representations  are not  binding  on the  FAA;  therefore,  the
possibility  exists  that  the  FAA  would  challenge  such a  registration.  In
addition,  a registration  may be challenged and rendered invalid if a Member is
not,  contrary to his  representation  to the Fund, a United States Citizen or a
Resident Alien or if a Member ceases to be a United States Citizen or a Resident
Alien. Any challenge, if successful, could result in an inability to operate the
aircraft, substantial penalties, the premature sale of the aircraft, the loss of
the benefits of the central  recording  system under federal law thereby leaving
the aircraft exposed to liens or other interests not of record with the FAA, and
a breach by the Fund of lease  agreements  entered into in  connection  with the
aircraft.  Accordingly,  the  Manager  will  limit  the  ownership  of  Units or
interests  therein by any persons who are not United States Citizens or Resident
Aliens to not more than 20% of the outstanding Units.

                                       34

<PAGE>

         It is anticipated that any aircraft lease will provide,  as a condition
precedent to the transaction,  that application for registration shall have been
duly made and that the  prospective  lessee  shall have  temporary  or permanent
authority to operate the aircraft. If such authority were not obtainable because
of failure of registration, the lessee might be entitled to void the transaction
and the lease would not take effect.

         Communications  Equipment.  Communications  equipment is used for voice
and  data  transmission.  Its  applications  include,  but are not  limited  to,
telephone communication,  radio and television  broadcasting,  cable television,
and  satellite  communications.  The Fund may acquire  and lease  communications
equipment  including   telephone  equipment  and  systems,   data  communication
terminals,  cables, transmission wires, transmitters,  control and amplification
equipment,   repeaters,  monitoring  equipment,   teleprinters,   connector  and
switching equipment, satellite and microwave transmission facilities and support
equipment.

         Construction  Equipment.  Construction  equipment includes  bulldozers,
haulers, cranes, graders, backhoes,  front-end loaders, scrapers and asphalt and
cement  spreaders  used in a wide  variety of  applications  including  building
construction and road, bridge and other civil engineering construction projects.

         Energy Equipment.  Energy equipment includes  cogeneration  facilities,
transmission lines, generation facilities, compression and pumping equipment and
other processing and treatment equipment, as well as energy management systems.

         General Purpose Plant/Office Equipment. Plant/office equipment includes
racking,  shelving,  storage  bins,  portable  steel storage  sheds,  furniture,
fixtures,  tables,  counters,  desks, chairs,  cabinets and numerous other items
generally used in manufacturing plants, storage and distribution  facilities and
offices.

         Graphic Processing  Equipment.  Graphic  processing  equipment includes
print setters,  printing presses,  automatic drafting machines and all equipment
which is used for the visual  display of designs,  drawings and printed  matter.
Printing  presses come in a variety of sizes depending on the  applications  for
which they are used. Some printing presses are of a single color, whereas others
can apply up to eight colors. Phototype setters are used for the setting of type
for  publications  such as newspapers and magazines.  Computerized  type-setters
have become common in recent years,  as they simplify type- setting,  correction
of mistakes  and  lay-out of printed  pages.  Automatic  drafting  machines  are
computer  controlled  visual displays of drawings which enable designers to make
changes in engineering  drawings  without the time required to make a completely
new drawing by hand.

         Machine   Tools  and   Manufacturing   Equipment.   Machine  tools  and
manufacturing equipment include a wide variety of metalworking  machinery,  such
as lathes, drilling presses,  turning mills, grinders,  metal bending equipment,
metal  slitting  equipment  and  other  metal  forming  equipment  used  in  the
production of a variety of machinery and equipment. Some form of machine tool is
used in virtually  every  production  process of a metal  product or  component.
While some machine tools and  metalworking  equipment are built for a particular
end  product,  the  majority  of  machine  tools  can be  used in a  variety  of
applications.  Manufacturing  equipment  can also include  some high  technology
equipment.

         Maritime  Equipment.  Maritime  equipment  is widely  used in  shipping
industry as the most  cost-effective  way of  transporting  large  quantities of
commodities.  Such equipment includes dry bulk ships,  tankers,  supply vessels,
tug boats, hopper barges, tank barges and intermodal containers.  Marine vessels
include (i) tankers,  which are designed to carry liquid  commodities,  and (ii)
dry bulk  carriers,  which are  designed  to carry  homogenous  commodities.  In
addition,  certain vessels have been designed as combination  carriers that have
the capacity to carry both liquid and dry cargoes.


                                       35

<PAGE>


         Marine  vessels may be  registered  in countries  other than the United
States and may operate in international and foreign seas and waterways.  Certain
types of marine  vessels must be registered  prior to operation in the waterways
of the United States.  Marine vessel registration can be challenged and rendered
invalid under  circumstances  similar to those discussed with regard to aircraft
above.  Any  successful  challenge with respect to a marine vessel may result in
substantial  penalties,  including the forced sale of the vessel,  the potential
for  uninsured  casualties,  and a breach  by the  Partnership  of the  lease or
financing agreements related to the vessel.

         In addition, certain U. S. federal statutes and regulations provide for
the forfeiture to the U. S. Government of  transportation  equipment,  including
marine  vessels,  found to be used in the  transportation  of illegal  drugs and
other  contraband.  Upon the  acquisition  of vessels,  the Manager will seek to
cause the vessel owner to enter into the Sea Carrier  Initiative  Agreement with
the  U.S.  Customs  Service  whereby  the  vessel  owner  shall  agree  to  take
affirmative  steps to deter  illegal  access to and use of such vessels by those
engaged  in  trafficking  of items  deemed to be illegal  contraband,  including
illegal  drugs.  The law provides for an exception with respect to the owners of
vessels where the illegal activity has occurred  without the owner's  knowledge,
consent or  willful  blindness.  However,  there can be no  assurance  that if a
marine  vessel  owned by the Fund and  leased  to a third  party was found to be
engaged in such illegal  activities,  that it would not be seized or detained by
the U. S.  Government.  In that  event,  insurance  coverages  of the Fund could
mitigate its loss of income or pecuniary damages.

         Materials  Handling  Equipment.  Materials  handling equipment includes
many  varieties  of  fork  lift  trucks.  They  are  either  battery-powered  or
gas-powered,  and are used in  warehouses  and  factories  for the  movement  of
products and materials from one work station to another or from a warehouse to a
truck for shipment, or for the storing of products and materials.  The equipment
comes in a variety of styles,  depending  on the design of the items to be moved
and the design of the  shipping or  warehouse  facility.  However,  this type of
equipment  is  generally  of  standard  design  and can be used by a variety  of
industries.

     Medical Equipment. Medical equipment includes a wide variety of testing and
diagnostic equipment including:

     Radiology  Equipment.  This category includes x-ray equipment,  CAT and MRI
scanners  (i.e.,  body and head scanners) and other  equipment to be used in the
radiology departments of hospitals and clinics.

     Laboratory  Equipment.  This category includes blood analysis equipment and
other automated medical laboratory equipment.

     Other Medical  Equipment.  This general category  includes  equipment using
ultrasound  technology,  patient  monitoring  systems  and a  variety  of  other
equipment used in hospitals, clinics and medical laboratories.

     Photocopying  Equipment.  The Fund may acquire and lease  photocopying  and
other document duplicating or reproduction equipment.

                                       36
<PAGE>


     Railroad  Rolling Stock.  Railroad  rolling stock includes  gondolas,  tank
cars, boxcars,  hopper cars,  flatcars,  locomotives and various other equipment
used by railroads in the maintenance of their tracks.  Flatcars and boxcars have
a variety of designs,  some of which are  general  purpose and some of which are
special purpose.  Special purpose flatcars and boxcars are used for the shipment
of specific  products whereas a general purpose car can be used for the shipment
of a wide variety of products. Many electric utilities lease hopper cars for the
shipment of coal from the mine to the  generating  plant.  Tank cars are used to
transport liquids.  Locomotives are the engines,  generally diesel powered, that
drive  trains of railcars  from one location to another.  Locomotives  come in a
variety of designs which vary in the amount of horsepower produced.

         Research and  Experimentation  Equipment.  Research and experimentation
equipment  include  various  types of analyzers,  spectrometers,  oscilloscopes,
measuring  instruments,   gas  and  liquid   chromatographs,   physical  testing
centrifuges,  graphic  plotters and  printers,  laser  equipment,  digital-aided
design systems, scanning electron microscopes, dissolution sampling systems, and
other general  laboratory  instruments  and equipment used in businesses for the
development of ongoing research programs.

         Tractors,  Trailers and Trucks. Tractors,  trailers and trucks are used
for the  shipment of various  products  and goods from one  location to another.
Tractor-trailer  rigs are often used for longer shipments and delivery of larger
pieces; whereas heavy-duty trucks are generally used for the more local delivery
of large  products.  A "tractor"  refers to the power unit of a  tractor-trailer
combination.  The tractor cab is generally  manufactured  by one company and the
engine and drive train by another.  The engine may use  gasoline or diesel fuel.
Trailers  are the  container  portion  of a  tractor-trailer  rig and  come in a
variety of sizes and designs  depending  on the product to be shipped.  Trailers
may be designed for  intermodal  use so they can either be pulled by tractors or
transported  on railroad  flatcars.  Trailers  may be up to 45 feet long in most
states and most  commonly  have a set of twin axles (eight  wheels) to carry the
load.  A trailer  may be  enclosed  on a flatbed  for the  shipment  of large or
oversized  products,  and may be  refrigerated  for the  shipment of  perishable
products.  The Fund  intends  to  invest  in  trailers  that can be used for the
shipment  of  a  wide   variety  of  goods  and  are  not  limited  to  specific
applications.  Heavy-duty  trucks are large  trucks in which the engine and load
carrying  components  are mounted on a single frame.  The trucks can be used for
the  local  delivery  of  large  products  or for the  hauling  of  construction
materials.

         Miscellaneous  Equipment. The Fund may also acquire various other types
of equipment,  including, but not limited to, oil drilling equipment, mining and
ore-processing   equipment,   electronic  test  equipment,   office   automation
equipment,  furniture and fixtures,  automobiles,  dairy  production  equipment,
video  projection  and  production  equipment,  store  fixtures,  display cases,
freezers and equipment used in production facilities.

         Incidental  Property  Acquisitions.  Incidental  to an  acquisition  of
Equipment,  the Fund may acquire  certain  interests in real  property,  mineral
rights or other tangible or intangible  property or financial  instruments.  The
Fund may acquire  ownership of an item of Equipment by acquiring the  beneficial
interests  of a trust or the equity  interest in a special  purpose  corporation
which  holds an asset  sought by the Fund.  Nothing in the  Operating  Agreement
prohibits  the Fund  from  acquiring  any such  incidental  property  rights  or
indirect ownership interest,  provided that the primary purpose and objective is
the acquisition and leasing of equipment as described herein, the acquisition of
the incidental rights does not alter the essential  character of the transaction
as an acquisition and lease which otherwise satisfies the investment  objectives
and policies of the Fund,  and the  acquisition  does not  otherwise  violate or
circumvent any provision of the Operating Agreement.


                                       37
<PAGE>

Prior Program Diversification
   
     The prior public equipment  leasing  programs  sponsored by the Manager and
its Affiliates have had equipment portfolio objectives  substantially  identical
to those of the  Fund.  See  "Prior  Performance  Summary"  below  and the Prior
Performance Tables included as Exhibit A to this Prospectus for more information
concerning  these prior  programs.  The first  chart set forth below  (Figure 1)
represents the actual equipment portfolio  diversification by equipment type for
all prior ATEL public  programs as of August  31,  1998;  the second chart set
forth below (Figure 2) represents the actual equipment portfolio diversification
by lessee  industry for all prior ATEL public  programs as of August 31, 1998;
and the third chart set forth below (Figure 3) represents  the actual  portfolio
diversification  by the lessees'  geographic  location for all prior ATEL public
programs as of August 31, 1998.  Diversification  of the Fund's portfolio will
depend on a number of variables,  including the amount of Gross Proceeds  raised
and market conditions,  which cannot be predicted in advance. Although there can
be no assurance  that the Fund will achieve  diversification  similar to that of
the prior programs,  achieving such  diversification  will be one of the primary
investment objectives and policies of the Fund.
    

[GRAPHIC OMITTED - FIGURES 1, 2 and 3]

                                       38

<PAGE>


Borrowing Policies

         The Fund  expects to incur debt to finance the purchase of a portion of
its  Equipment  portfolio.  The  amount  of  borrowing  in  connection  with any
Equipment acquisition transaction will be determined by, among other things, the
credit of the lessee,  the terms of the lease,  the nature of the  Equipment and
the condition of the money market. There is no limit on the amount of debt which
may be incurred in connection with any single acquisition of Equipment. However,
the Fund may not incur aggregate indebtedness in excess of 50% of the total cost
of  Equipment  as of the  date of the  final  commitment  of Net  Proceeds  and,
thereafter,  as of the date any subsequent  indebtedness  is incurred.  The Fund
intends to borrow  amounts  equal to such  maximum debt level in order to fund a
portion  of  its  Equipment   acquisitions.   While  the  Manager  has  obtained
commitments  for certain  short term lines of credit,  there can be no assurance
that such short term credit or permanent financing will be available to the Fund
in the amounts desired or on terms  considered  reasonable by the Manager at the
time the Fund seeks to finance a specific Equipment acquisition.

         Financing for the Fund is expected to be a combination  of  nonrecourse
and recourse  debt.  The Manager  intends to use  nonrecourse  debt primarily to
finance  assets  leased to those lessees  which,  in the opinion of the Manager,
have a relatively  higher  potential risk of lease default than other lessees of
the Fund's  Equipment.  This use of  nonrecourse  debt will mitigate the risk of
loss due to default by such lessees.

         Nonrecourse  borrowing,  in the  context of the type of  business to be
conducted by the Fund,  means that the lender  providing the funds would only be
able to look to the Equipment purchased with such funds and the proceeds derived
from the leasing or  reselling of such  Equipment as security;  neither the Fund
nor any Member  (including the Manager) will be liable for repayment of any such
loan,  nor will any such loan be secured by other  Equipment  owned by the Fund.
Investors should note, however,  that the presence of nonrecourse  financing may
limit an  investor's  ability to claim  losses  from the Fund.  See  "Income Tax
Consequences - Limitation on Deduction of Losses - At Risk Rules."  Furthermore,
a creditor may under some  circumstances have recourse to the Fund's assets upon
establishing fraud or misrepresentation by the Fund.

         The Fund expects to incur recourse debt in connection  with  short-term
bridge financing and asset securitization, as described below. Recourse debt, in
the context of the type of business to be conducted by the Fund,  means that the
lender can look  beyond the  specific  asset  financed by the loan to all of the
assets of the  borrower,  or a  specified  pool of  assets,  as  collateral  for
repayment of its debt obligation.

         The Fund expects to incur  recourse debt in the context of temporary or
short-term  bridge financing used to acquire  equipment and which is intended to
be repaid through a combination of permanent financing, offering proceeds and/or
operating revenues. In addition,  the Fund may participate with other affiliated
programs and the Manager in a common recourse debt facility to provide temporary
or short-term  bridge financing of transactions  approved for acquisition by the
Fund and such Affiliates.  In such instances,  lease transactions may be held in
the name of an  Affiliate  of ATEL  for  convenience,  notwithstanding  that the
transaction  has  been  approved  for one or  more  participants.  The  ultimate
acquisition of the financed  transaction will depend on many factors,  including
without limitation,  the Fund's available cash, portfolio makeup, and investment
objectives at the time of closing.  See the discussion  under "Risk Factors" and
"Conflicts of Interest" above.

         The Fund may also incur  long-term  recourse  debt in the form of asset
securitization  transactions  in order to obtain lower  interest  rates or other
more  desirable  terms than may be available  for  individual  nonrecourse  debt
transactions. In an "asset securitization",  the lender would receive a security
interest  in a specified  pool of  "securitized"  Fund assets or a general  lien
against  all  of the  otherwise  unencumbered  assets  of  the  Fund.  It is the
intention of the Manager to use such

                                       39

<PAGE>


asset securitization  primarily to finance assets leased to those credits which,
in the opinion of the Manager,  have a relatively  lower potential risk of lease
default than those lessees with Equipment  financed with  nonrecourse  debt. The
Manager expects that an asset  securitization  financing would involve borrowing
at a variable interest rate based on an established  reference rate. The Manager
would seek to mitigate the Fund's  exposure to increases in the interest rate by
engaging in hedging  transactions  that would  effectively fix the interest rate
obligation  of the Fund.  The  Manager's  policy will be to incur  variable rate
financing only under conditions which limit the potential  adverse effect on the
Fund's anticipated return on the related lease transactions.

         In the case of any recourse bridge  financing or asset  securitization,
however,  the lender would not be entitled to look to the  individual  assets of
any Holder,  or, in many cases,  of the  Manager,  for  repayment of such loans.
Thus, the liability of the Holders would be limited to their unreturned  capital
contributions. See "Summary of the Operating Agreement Liability of Holders" for
a  discussion   of  potential   liability  of  Holders  for  return  of  certain
Distributions.  If, under tax  principles,  it is determined that the Manager or
one of its  Affiliates  bears the economic risk of loss for such recourse  debt,
then the recourse debt will be allocated to the Manager or its Affiliate for tax
basis  purposes and all  deductions  attributable  to the recourse  debt will be
allocated  to the  Manager or its  Affiliate.  See "Income  Tax  Consequences  -
Limitation on Deduction of Losses - Tax Basis."

         Other than in connection with short-term  bridge  financing or an asset
securitization  financing,  the Manager will seek to avoid borrowing under terms
which provide for a rate of interest  which may vary with the prime or reference
rate of  interest  of a lender.  The  Manager  will  attempt  to limit any other
variable  interest rate borrowing to those  instances in which the lessee agrees
to bear the cost of any increase in the interest  rate. If such debt is incurred
without a corresponding  variable lease payment obligation,  the Fund's interest
obligations  could increase while lease revenues  remain fixed.  Accordingly,  a
rise in the prime or reference rate may increase  borrowing costs and reduce the
amount of income and cash available for Distributions.  Historically,  the prime
rates charged by major banks have fluctuated; as a result, the precise amount of
interest  which  the Fund may be  charged  under  such  circumstances  cannot be
predicted.


         Fund indebtedness may provide for amortization of the principal balance
over the term of the loan through regular  payments of principal and interest or
may  provide  that all or a  substantial  portion of the  principal  due will be
payable in a single  "balloon  payment"  upon  maturity.  Such  balloon  payment
indebtedness  involves  greater  risks than  fully  amortizing  debt.  See "Risk
Factors - Balloon Payments."

         In the event that the Fund does not have  sufficient  funds to purchase
an item of Equipment at the time it is acquired  (including  prior to the Fund's
Final  Closing  Date),  the Fund may borrow  such funds from third  parties on a
short-term  basis,  and repay the loans out of the Net Proceeds derived from the
subsequent sale of Units.  Any such short-term loans may be unsecured or secured
by the assets acquired and/or other assets of the Fund.

         Although the Operating  Agreement  does not prohibit the Manager or its
Affiliates  from  lending to the Fund,  the Fund does not have any  intention or
arrangements  to borrow from such Persons.  In the event that any such borrowing
is incurred,  the terms may not permit the Manager or any Affiliate to receive a
rate of interest or other terms which are more  favorable  than those  generally
available from commercial lenders under the  circumstances.  In no event may the
Manager or its Affiliates provide financing to the Fund with a term in excess of
twelve months.


                                       40

<PAGE>

Description of Lessees

         The Fund will only  purchase  Equipment for which a lease exists or for
which a lease will be entered into at the time of purchase.

         The Fund's  objective is to lease a minimum of 75% of the Equipment (by
cost) acquired with the Net Proceeds to lessees which (i) have an average credit
rating by Moody's  Investor  Service,  Inc.  of "Baa" or  better,  or the credit
equivalent  as determined by the Manager,  with the average  rating  weighted to
account  for the  original  Equipment  cost for each  item  leased;  or (ii) are
established  hospitals with histories of  profitability or  municipalities.  The
Manager may determine that the credit equivalent of a Moody's Baa rating applies
to those lessees which are not rated by Moody's,  but which (i) have  comparable
credit  ratings as  determined  by other  nationally  recognized  credit  rating
services;  (ii)  although  not  rated by  nationally  recognized  credit  rating
services,  are believed by the Manager to have comparable  creditworthiness;  or
(iii) in the Manager's opinion, as a result of guarantees  provided,  collateral
given,  deposits made or other security  interests  granted,  have provided such
safeguards of the Fund's  interest in the Equipment  that the risk is equivalent
to that  involved  in a lease to a  company  with a credit  rating  of Baa.  The
balance of the original  Equipment  portfolio  may include  Equipment  leased to
lessees which,  although deemed  creditworthy by the Manager,  would not satisfy
the general  credit  rating  criteria for the  portfolio.  If the risk of lessee
default is not deemed  significant,  and the  potential  return is deemed by the
Manager to justify the risk  involved,  the Fund may enter into leases with such
lessees for up to 25% of the Equipment acquired with the Net Proceeds.

         In arranging lease  transactions  on behalf of corporate  investors and
securing  institutional  financing  for such  transactions,  the Manager and its
Affiliates  have been required to analyze and evaluate the  creditworthiness  of
potential  lessees.  See "Exhibit A - Prior Performance  Information."  However,
neither the Manager nor any of its  Affiliates  is in the  business of regularly
providing credit rating analyses as an independent activity. In order to analyze
whether a  prospective  lessee's  credit risk is  comparable  or equivalent to a
Moody's Baa rating,  the Manager will attempt to apply the standards  applicable
to  securities  qualifying  for the Baa rating.  Such  securities  are generally
deemed to be of "investment grade," neither highly protected nor poorly secured,
with earnings and asset  protection  which appear  adequate at present but which
may be questionable over any great length of time. Notwithstanding the Manager's
best efforts to assure the lessees' creditworthiness,  there can be no assurance
that lease defaults will not occur.

         It is not anticipated that the Fund's lessees will be located primarily
in any given geographic area. The Manager will use its best efforts to diversify
lessees by  geography  and  industry.  The Manager will seek to limit the amount
invested in  Equipment  leased to any single  lessee to not more than 20% of the
aggregate  purchase price of Equipment owned at any time during the Reinvestment
Period,  although  there can be no assurance that it will be successful in doing
so. The Operating Agreement provides,  however,  that in no event may the Fund's
equity  investment in Equipment leased to a single lessee exceed an amount equal
to 20% of the maximum Gross  Proceeds  from the sale of Units offered  hereunder
(or $30,000,000).

Foreign Leases

         There is no limit on the  amount  of  Equipment  which may be leased to
foreign subsidiaries of United States corporations,  to foreign lessees or which
may otherwise be permitted to be used  predominantly  outside the United States.
The Manager  does not have any specific  objective  with regard to the amount of
Equipment  to be subject  to foreign  leases,  but  intends to pursue  desirable
foreign  leasing  opportunities  for the Fund to the extent  consistent with the
Fund's overall investment objectives.

                                       41
<PAGE>


     Of the total Purchase  Price of Equipment  leased to foreign  lessees,  the
Manager will require that a minimum of 75% must  represent  Equipment  leased to
lessees  which  have a credit  risk  equivalent  to a credit  rating by  Moody's
Investor Service, Inc. of "Baa" (investment grade) or better, as determined by a
credit  rating agency which is generally  recognized  in the financial  services
industry  or,  if no such  credit  rating is  available,  as  determined  by the
Manager.  Any leases to foreign  lessees which do not meet the foregoing  credit
standard will either be guaranteed by a U.S.  parent  company of the lessee,  or
will involve lessees which have assets located in the United States with a value
equal  to or  greater  than the  original  purchase  cost of the Fund  Equipment
subject to the lease.

         The  Manager  will seek to limit  the  aggregate  amount of the  Fund's
equity invested in all Equipment leased to foreign lessees or which is otherwise
to be used primarily outside the United States to not more than 20% of the Gross
Proceeds. For this purpose, a lessee under a lease guaranteed by a United States
corporation will not be deemed a foreign lessee.

Description of Leases

         The  Equipment  will be leased to third parties  primarily  pursuant to
Operating  Leases,  including  High Payout Leases.  Operating  Leases are leases
which will  return to the lessor  less than the  purchase  price of the  subject
equipment from  non-cancellable  rentals  payable during the initial term of the
lease.  These  include  leases  where rental  payments are based upon  equipment
usage.  High Payout Leases are Operating Leases under which the  non-cancellable
lease payments and other payment obligations of the lessee are equal to at least
90% of the original purchase price of the Equipment paid by the Fund. A majority
of the aggregate purchase price of the Fund's Equipment will represent Equipment
leased under High Payout  Leases upon final  investment  of the Net Proceeds and
completion of permanent financing of the portfolio.

         Generally, in a lease involving new Equipment,  the lessee will express
an interest in lease  financing  for  equipment  and the Manager will attempt to
create a lease package for the  prospective  lessee.  In  formulating  the lease
package, the Manager will consider the following factors, among others: the type
of Equipment and its anticipated  residual value; the business of the lessee and
its credit rating; the cost of alternative  financing services,  and competitive
pricing and other market  factors.  The initial  lease terms will vary as to the
type of Equipment,  but will  generally be for 36 months to 84 months.  The Fund
may lease some  Equipment to federal,  state or local  governments,  or agencies
thereof.  Many of such leases will be subject to renewal each year, because many
governmental lessees must obtain appropriations for funds for their leases on an
annual basis. In addition, the Fund may, under appropriate circumstances, engage
in other  short-term  or "per diem" leases when the Manager deems it in the best
interests of the Fund and consistent with its overall objectives.

         Upon  termination  of the initial  term of an  Operating  Lease,  it is
necessary  either to renew or extend the lease,  lease the  Equipment to a third
party,  or sell the Equipment in order to obtain recovery of the purchase price.
If Equipment is sold at the end of the initial term of an Operating  Lease,  the
sale will likely result in a recapture of  depreciation.  Lease  rentals  during
comparable  terms are ordinarily  higher under Operating  Leases than under Full
Payout  Leases,  and,  accordingly,  the Manager  believes that  well-structured
Operating Leases may help the Fund satisfy its investment objectives.

         The Fund's  objective  will  generally be to lease the Equipment for an
initial lease term during which the lessee may not cancel the lease or otherwise
avoid the lease  obligation.  However,  where the Manager  deems it to be in the
Fund's best interests, because of favorable lease terms, anticipated high demand
for  particular  items of Equipment or otherwise,  it may permit an  appropriate
cancellation clause.

                                       42
<PAGE>


     The Manager  believes that the Fund will be able to lease or dispose of its
purchased  Equipment  profitably in the aggregate  after the initial lease terms
although no assurances can be given in this regard.  The Fund's ability to renew
or  extend  the terms of its  leases or to  re-lease  or sell the  Equipment  on
expiration of the initial  lease terms is dependent on many  factors,  including
possible  economic or technological  obsolescence of the Equipment,  competitive
practices and conditions and generally prevailing economic conditions.

         It is  anticipated  that the leases which the Fund will enter into will
generally be "net  leases,"  which provide that the lessee must bear the risk of
loss  of the  Equipment,  provide  adequate  insurance,  pay  applicable  taxes,
maintain the  Equipment  and  indemnify  the Fund from and against any liability
which  may  arise as the  result  of any act or  omission  by the  lessee or its
agents. In the case of Operating Leases, the Fund may be responsible for certain
of these obligations,  such as certain insurance and maintenance  expenses,  but
generally only during a period when the Equipment is not under lease.

         The Fund's lease agreements,  other than certain operating and per diem
leases,  will generally require the respective  lessees (i) to maintain casualty
insurance in an amount  equal to the greater of the full value of the  Equipment
or a specified  amount set forth in the lease,  and (ii) to  maintain  liability
insurance  naming  the Fund as an  additional  insured  with a minimum  limit of
$1,000,000 in coverage.

         The Fund may enter into  remarketing  agreements with  manufacturers of
Equipment on terms which are customary in the industry. A remarketing  agreement
is an agreement  whereby the  manufacturer  agrees with the lessor to assist the
lessor in finding a new lessee at the  termination  of the original  lease.  The
Manager  will  determine,  in its sole  discretion,  whether  to enter into such
agreements and with which  manufacturers to do so. Most  remarketing  agreements
call for the  manufacturer to find a second user only on a "best efforts" basis.
Thus, a remarketing  agreement does not assure the lessor that the equipment can
or will be  re-leased  at the end of the initial  lease term.  In the case of an
Operating Lease, the manufacturer will not be required to repurchase  Equipment,
but may,  through the use of its sales force and  contacts  with its  customers,
re-lease or sell such  Equipment for the benefit of the Fund. The monthly rental
payments under a new lease or the sale price of such Equipment  would be subject
to the  final  approval  of the  Manager.  Under a  remarketing  agreement,  the
manufacturer  participates  with the Fund in revenues on an incentive basis. The
manufacturer  would typically receive a percentage of the revenue derived by the
Fund from Equipment subject to a remarketing  agreement,  which percentage would
increase  substantially  after  the  Fund  derived  a  specified  return  on its
investment in such Equipment.

Competition

         Leasing  has  become  one  of  the  major  methods  by  which  American
businesses  finance  their  capital  equipment  needs.  See Figure 4 below for a
graphic-presentation  of the dollar amount of equipment investment and equipment
lease  financing in the United States for each year since 1982 (according to the
Equipment Leasing  Association,  a leasing industry trade  association).  Please
note that this chart reflects the growth of equipment  lease  financing from all
sources, including manufacturers,  financial institutions and private and public
lease financing  companies,  and not just public equipment leasing programs such
as  the  Fund.  Such  public  direct  participation  programs  represent  only a
relatively small portion of the total lease financing industry.

[GRAPHIC OMITTED - Figure 4]

                                       43

<PAGE>




         In  obtaining  lessees  the Fund will  compete  with  manufacturers  of
equipment which provide leasing programs and with established  leasing companies
and equipment  brokers.  Manufacturers of equipment may offer certain incentives
including maintenance services and trade-in or replacement  privileges which the
Fund cannot offer. The Fund may also be competing with  manufacturers and others
who offer leases that provide for longer terms and lower rates than leases which
the Fund will offer.  There are numerous  other  potential  entities,  including
entities  organized  and  managed  similarly  to the Fund,  seeking to  purchase
equipment subject to leases, some of which have greater financial resources than
the Fund.

Joint Venture Investments

         The  Fund  may  purchase  certain  of  its  Equipment  by  acquiring  a
controlling  interest in a partnership,  equipment  trust or other form of joint
venture with a  non-Affiliate  which owns such Equipment or beneficial  interest
therein.  For purposes of determining the permissibility of a joint venture with
a  non-Affiliate,  the  controlling  interest  requirement  may be  satisfied by
ownership  of  more  than  50% of the  venture's  capital  or  profits  or  from
provisions in the governing  agreement giving the Fund certain basic rights. For
example,  control  may  take  the  form of the  right  to  make or veto  certain
management decisions or provide for certain predetermined  benefits for the Fund
in the event that the other party or parties to the venture  should make certain
decisions respecting the sale,  refinancing or alteration of assets owned by the
venture.  The Fund may not acquire  Equipment jointly with others unless (i) the
joint  venture  agreement  does not authorize or require the Fund to do anything
with  respect to the  Equipment  which the Fund,  or the  Manager,  could not do
directly  because of the policies set forth in the Operating  Agreement and (ii)
the transaction does not result in payment of duplicate fees.

         The Fund may also  acquire  Equipment  by joint  venture or as co-owner
with an Affiliate.  In such event, the following conditions must be met: (i) the
Affiliate will be required to have substantially identical investment objectives
to those of the Fund; (ii) there are no duplicate fees; (iii) the Affiliate must
make its investment on substantially  the same terms and conditions as the Fund;
(iv) the Affiliate must have a compensation structure substantially identical to
that of the  Fund;  (v) the  venture  must be  entered  into in order to  obtain
diversification or to relieve the Manager or Affiliates from commitments entered
into under  Section  15.2.15 of the  Operating  Agreement or similar  provisions
governing the Affiliate; and (vi) the Fund has a right of first refusal should a
co-venturer  decide to sell the property owned by the venture.  Because both the
Fund and such Affiliate will be required to approve decisions  pertaining to the
Equipment,  it is possible that an impasse will develop.  If one party,  but not
the other,  wishes to sell the  Equipment,  the party not  desiring to sell will
have a right of first  refusal to  purchase  the other  party's  interest in the
Equipment.  The Fund may not,  however,  be able to exercise  its right of first
refusal  unless it has the  financial  resources  to do so,  and there can be no
assurances that it will.

         The  investment by the Fund in joint ventures which own Equipment or as
a co-owner of Equipment,  instead of investing  directly in the Equipment itself
or as the  sole  owner,  may  under  certain  circumstances  involve  risks  not
otherwise present, including, for example, risks associated with the possibility
that a Fund's  co-venturer might become bankrupt,  that the parties may reach an
impasse on joint venture  decisions,  or that each  co-venturer  may at any time
have  economic or business  interests or goals which are  inconsistent  with the
business  interests  or goals of the Fund.  See  "Risk  Factors - Risks of Joint
Ventures."

General Restrictions

         The Fund will not: (i) issue any Units after the Final  Closing Date or
issue  Units in  exchange  for  property,  (ii) make loans to the Manager or its
Affiliates,  (iii) invest in or underwrite the securities of other issuers, (iv)
operate in such a manner as to be  classified  as an  "investment  company"  for
purposes of the Investment  Company Act of 1940, (v) except as set forth herein,
purchase or lease any Equipment  from nor sell or lease  property to the Manager
or its  Affiliates,  or (vi)  except as  expressly  provided  herein,  grant the
Manager or any of its Affiliates any rebates or give-ups or participate in any

                                       44

<PAGE>




reciprocal  business  arrangements  with such parties which would circumvent the
restrictions in the Operating Agreement,  including the restrictions  applicable
to transactions with Affiliates. See Article 15 of the Operating Agreement for a
description of additional investment limitations.

         The Manager and its Affiliates, including their officers and directors,
may engage in other businesses or ventures that own,  finance,  lease,  operate,
manage,  broker  or  develop  equipment,  as well  as  businesses  unrelated  to
equipment leasing.  See "Conflicts of Interest,"  "Management  Compensation" and
"Management."

Changes in Investment Objectives and Policies

         Holders  have no voting  rights with  respect to the  establishment  or
implementation  of the  investment  objectives  and policies of the Fund, all of
which are the  responsibility of the Manager.  However,  the Manager cannot make
any material changes in the investment  objectives and policies  described above
without first  obtaining the written  consent or approval of Members owning more
than 50% of the total outstanding Units entitled to vote.

                              CONFLICTS OF INTEREST

         The Fund is subject to various conflicts of interest arising out of its
relationship  with the Manager and  Affiliates of the Manager.  These  conflicts
include, but are not limited to, the following:

         Other Activities of the Manager.  The Manager serves in the capacity of
Manager in other public programs engaged in the equipment leasing business,  and
it and its Affiliates otherwise engage in the business of purchasing and selling
equipment  and  arranging  leases for its own  account  and for the  accounts of
others. See Exhibit A - "Prior  Performance  Information." The Manager will have
conflicts of interest in  allocating  management  time,  services and  functions
among  the  prior  programs,  the  Fund,  any  future  investment  programs  and
activities  for their own  accounts.  The  Manager  believes  that it has or can
employ sufficient staff,  equipment and other resources to discharge fully their
responsibilities to each such activity.

         In addition, as Manager of prior and future programs,  the Manager will
be contingently liable for obligations of such partnerships,  except nonrecourse
indebtedness  relating to the  acquisition of equipment.  Such  obligations  are
expected to consist  primarily of normal  operating and other current  expenses,
and it is not believed this responsibility will materially affect the ability of
the Manager to satisfy its responsibilities to the Fund.
   
         Competition  for  Investments.  The  Manager  will  have  conflicts  of
interest to the extent that its prior or future investment  programs may compete
with the Fund for  opportunities  in the  acquisition  and leasing of equipment.
Prior public programs  currently in operation  include:  ATEL Cash  Distribution
Fund II ("ACDF II"), a California  limited  partnership;  ATEL Cash Distribution
Fund III, L.P. ("ACDF III"),  ATEL Cash  Distribution Fund IV, L.P. ("ACDF IV"),
ATEL Cash  Distribution Fund V, L.P. ("ACDF V"); ATEL Cash Distribution Fund VI,
L.P.  ("ACDF  VI");  and ATEL  Capital  Equipment  Fund VII,  L.P.  ("ACEF VII")
(together  collectively  referred to as the "Prior  Programs")  have  investment
objectives  substantially  identical  to those  of the  Fund and may have  funds
available  for  investment  at the  same  time the Fund is  seeking  to  acquire
Equipment.  ACDF II completed a fully-subscribed  public offering of $35,000,000
of its equity  interests in January 1990.  All of such gross  offering  proceeds
have been  committed  to  equipment  acquisitions,  estimated  organization  and
offering expenses and capital reserves.  ACDF III completed a public offering of
its equity  interests  on January 3,  1992,  pursuant  to which it raised  total
offering proceeds in the amount of approximately $73,900,000.  All of such gross
offering  proceeds  have been  committed  to equipment  acquisitions,  estimated
organization  and offering  expenses and capital  reserves.  ACDF IV completed a
fully-subscribed public offering of $75,000,000 of its equity interests on

                                       45

<PAGE>




February 4, 1993.  All of such gross  offering  proceeds  had been  committed to
equipment acquisitions, offering and organization expenses and capital reserves.
ACDF V completed  a public  offering of its equity  interests  in November  1994
pursuant  to which it  raised  total  offering  proceeds  in the  amount of $125
million.  All of such gross  offering  proceeds have been committed to equipment
acquisitions,  offering and organization expenses and capital reserves.  ACDF VI
completed  a  fully-subscribed  public  offering  of $125  million of its equity
interests  on November 22, 1996.  All of such gross  offering  proceeds had been
committed to equipment  acquisitions,  offering  and  organization  expenses and
capital  reserves as of such date.  ACEF VII completed a fully-subscribed public
offering of $150 million of its equity  interests as of November 29, 1998. All 
of such gross offering  proceeds had been  committed to equipment  acquisitions,
offering and organization expenses and capital reserves as of such date.
    
         One or more of the operating Prior Programs may have capital  available
to  invest in  additional  equipment  at a time when the Fund is also  active in
seeking to invest or reinvest in Equipment.  Certain of the equipment  owned and
to be  acquired  by the Prior  Programs  and the Fund may be similar  and may be
purchased  from  the  same  manufacturers.  Furthermore,  the  Manager  and  its
Affiliates may in the future form additional  investment programs having similar
objectives, and accordingly, the Fund may be in competition with any such future
programs formed by the Manager.

         Any  time  two  or  more  investment   programs  (including  the  Fund)
affiliated  with the Manager have funds  available to acquire and lease the same
types of equipment,  conflicts of interest may arise as to which of the programs
should proceed to acquire available items of equipment. In such situations,  the
Manager  will  analyze  the  equipment  already  purchased  by,  and  investment
objectives  of, each program  involved,  and will  determine  which program will
purchase the equipment based upon such factors,  among others, as (i) the amount
of cash  available in each program for such  acquisition  and the length of time
such funds have been  available,  (ii) the current and long-term  liabilities of
each program,  (iii) the effect of such  acquisition on the  diversification  of
each program's equipment  portfolio,  (iv) the estimated income tax consequences
to the  investors  in each  program  from  such  acquisition,  and (v) the  cash
distribution  objectives of each program.  If after  analyzing the foregoing and
any other  appropriate  factors,  the Manager  determines that such  acquisition
would be equally  suitable  for more than one  program,  then the Manager  shall
purchase such equipment for the programs on the basis of rotation with the order
of  priority  determined  by the  length  of time  each  program  has had  funds
available for investment,  with the available  equipment  allocated first to the
program which has had funds available for investment the longest.

         Receipt of Commissions,  Fees and Other Compensation by the Manager and
its  Affiliates.  Fund  operations  will result in certain  compensation  to the
Manager  and its  Affiliates.  See  "Management  Compensation."  The Manager has
absolute  discretion with respect to all decisions  related to such  operations.
Because the amount of such fees may depend,  in part,  on the debt  structure of
Equipment acquisitions and the timing of such transactions,  the Manager and its
Affiliates   may  be  subject  to  conflicts  of  interest  to  the  extent  the
acquisition,  retention,  re-lease  or  sale of  Equipment  and  the  terms  and
conditions thereof may be less advantageous to the Fund and more advantageous to
the Manager  under  certain  circumstances.  It should be noted that the Manager
intends  to cause  the Fund to incur  aggregate  acquisition  debt in an  amount
approximately equal to 50% of the total cost of Fund Equipment.

     In all cases  where the  Manager or its  Affiliate  may have a conflict  of
interest in  determining  the terms or timing of a  transaction  by the Fund, it
will exercise its discretion  strictly in accordance  with its fiduciary duty to
the Fund and the Holders. See "Fiduciary Duty of the Manager."

         Non-Arm's-Length  Agreements.  Any agreements and arrangements relating
to  compensation  between the Fund and the Manager or any of its Affiliates will
not be the result of arm's-length  negotiations  and the performance  thereof by
the  Manager  and  its  Affiliates   will  not  be  supervised  or  enforced  at
arm's-length.


                                       46

<PAGE>




         Distribution  of Units.  No independent  managing  underwriter has been
engaged  for  the  distribution  of  the  Units.  Furthermore,  ATEL  Securities
Corporation (the "Dealer  Manager"),  an Affiliate of the Manager which may sell
Units and will perform  certain  wholesaling  services for the Fund,  may not be
expected to have  performed due  diligence in the same manner as an  independent
broker-dealer.  The  Dealer  Manager  has  acted in the same  capacity  in prior
offerings  sponsored by the Manager and its  Affiliates and is expected to do so
in any future offerings that the Manager and its Affiliates may conduct.

         Lack of Separate Representation.  The Fund, the Manager and prospective
Holders have not been  represented  by separate  counsel in connection  with the
formation of the Fund,  drafting of the  Operating  Agreement or the offering of
Units. The attorneys,  accountants and other  professionals who perform services
for the Fund all perform similar services for the Manager and its Affiliates and
it is contemplated  that such dual  representation  will continue in the future.
However,  should a dispute arise  between the Fund and the Manager,  the Manager
will cause the Fund to retain separate counsel in connection with such matters.

         Joint Ventures with Affiliates of the Manager.  The Fund may enter into
joint  ownership or joint venture  agreements for the acquisition and leasing of
Equipment with other persons,  including  programs managed by the Manager or its
Affiliates.   See   "Investment   Objectives   and  Policies  -  Joint   Venture
Investments."  Should any such joint  ventures be  consummated,  the Manager may
face certain  conflicts of interest inasmuch as it may control and owe fiduciary
duties  to  both  the  Fund  and,  through  such   Affiliates,   the  affiliated
co-venturer.  For example,  because of the differing  financial positions of the
co-venturers,  it  may  be in the  best  interest  of one  entity  to  sell  the
jointly-held Equipment at a time when it is in the best interest of the other to
hold such  Equipment.  Nevertheless,  such  joint  ventures  are  restricted  to
circumstances  where the co-venturer's  investment  objectives are comparable to
the Fund's,  the Fund's  investment  is on  substantially  the same terms as the
co-venturer  and  the  compensation  to be  received  by  the  Manager  and  its
Affiliates from each co-venturer is substantially identical.

         Maintenance  of  Reserves.  The  Manager  will have the  discretion  to
determine the amount of reserves to be  maintained  by the Fund.  The Manager is
required by the  Operating  Agreement to establish  an initial  working  capital
reserve equal to one-half of 1% of the Gross Proceeds. This amount may fluctuate
from time to time as the Manager  determines the appropriate  amount of reserves
for the Fund to maintain. The Manager may be subject to conflicts of interest to
the  extent  that its  interests  may be served by the Fund  maintaining  higher
reserves in order to avoid the Manager's personal liability for Fund obligations
when such  reserves  might  otherwise be  distributed  to Holders.  Any personal
liability incurred by the Manager for Fund obligations, however, would generally
be  reimbursable  to the Manager by the Fund. As a result,  the Manager does not
believe any such potential  conflict will have a material  impact on the Fund or
the Holders.


                                       47

<PAGE>


                             ORGANIZATIONAL DIAGRAM


         The  following  diagram  (Figure 5) shows the  relationships  among the
Fund,  the Manager and certain of  Affiliates  of the Manager  which may perform
services  for the Fund (solid  lines  denote  ownership  and dotted lines denote
other relationships).
                                                   
                                    Figure 5


                           ATEL Capital Group ("ACG")




 ATEL Equipment        ATEL Financial        ATEL Investor        ATEL Leasing
 Corporation ("AEC")   Corporation ("Fund    Services ("AIS")     Corporation
                       Manager" or "AFC")                         ("ALC")




               ATEL Securities Corporation
                   (the "Dealer Manager")



                         ATEL Capital Equipment Fund VIII, LLC
                                  (the "Fund")


         ATEL Capital Group's capital stock is owned 75% by A.J. Batt and 25% by
Dean L. Cash. ATEL Capital Group owns 100% of the  outstanding  capital stock of
each of the Manager,  ALC, AIS and AEC. The Manager owns 100% of the outstanding
capital stock of the Dealer Manager.  See "Management"  for further  information
concerning the above entities and their respective officers and directors.

                          FIDUCIARY DUTY OF THE MANAGER

         The  Manager  is   accountable   to  the  Fund  as  a  fiduciary   and,
consequently,  is required to exercise  good faith and integrity in all dealings
with respect to Fund affairs.

         Under  California law and subject to certain  conditions,  a Member may
institute  legal action on behalf of the Fund (a  derivative  action) to recover
damages from a third party or to recover  damages  resulting  from a breach by a
Manager of its  fiduciary  duty.  In  addition,  a Member may  institute a legal
action on behalf of himself and all other  similarly  situated  Members (a class
action) to recover  damages  for a breach by a Manager  of its  fiduciary  duty,
subject to procedural rules generally applicable to class actions.  This area of
the law is complex  and  rapidly  changing,  and  investors  who have  questions
regarding the duties of a Manager and the remedies  available to Members  should
consult with their counsel.

                                       48

<PAGE>




         The Operating  Agreement  does not exculpate the Manager from liability
or provide it with any defenses for breaches of its fiduciary duty. However, the
fiduciary  duty owed by a Manager is similar in many  respects to the  fiduciary
duty owed by directors of a corporation to its  shareholders,  and is subject to
the same rule,  commonly  referred  to as the  "business  judgment  rule,"  that
directors  are not liable for  mistakes  in the good  faith  exercise  of honest
business  judgment or for losses incurred in the good faith performance of their
duties when performed with such care as an ordinarily  prudent person would use.
As a result of the business judgement rule, a Manager may not be held liable for
mistakes  made or losses  incurred  in the good  faith  exercise  of  reasonable
business  judgment.  Accordingly,  provision  has  been  made  in the  Operating
Agreement  that the  Manager  shall  have no  liability  to the Fund for  losses
arising  out of any act or omission by the  Manager,  provided  that the Manager
determined  in good faith that its conduct was in the best  interest of the Fund
and, provided further, that its conduct did not constitute fraud,  negligence or
misconduct.  As a result,  purchasers  of Units may have a more limited right of
action  in  certain  circumstances  than  they  would in the  absence  of such a
provision  in  the  Operating  Agreement  specifically  defining  the  Manager's
standard of care.

         The Operating  Agreement also provides that, to the extent permitted by
law, the Fund shall indemnify the Manager and its Affiliates  providing services
to the Fund against liability and related expenses  (including  attorneys' fees)
incurred  in  dealings  with third  parties,  provided  that the  conduct of the
Manager is consistent with the standards described in the preceding paragraph. A
successful  claim for such  indemnification  would  deplete  Fund  assets by the
amount  paid.  The Manager  shall not be  indemnified  against  any  liabilities
arising  under  the  Securities  Act of  1933.  The Fund  shall  not pay for any
insurance  covering liability of the Manager or any other persons for actions or
omissions for which indemnification is not permitted by the Operating Agreement.

         Subject  to  the   fiduciary   relationship,   the  Manager  has  broad
discretionary  powers to manage  the  affairs of the Fund under the terms of the
Operating  Agreement and under the California Act.  Generally,  actions taken by
the  Manager  are not  subject to vote or review by the  Holders,  except to the
limited extent  provided in the Operating  Agreement and under  California  law.
(See "Summary of the Operating Agreement.")

                                   MANAGEMENT

The Manager

         The Manager is ATEL Financial  Corporation  (the "Manager" or "AFC"), a
California corporation formed in 1977 under the name All Type Equipment Leasing,
Inc.  The  Manager's  offices are  located at 235 Pine  Street,  6th Floor,  San
Francisco,  California  94104,  and its telephone  numbers are  415/989-8800 and
800/543-ATEL. Its officers have extensive experience with transactions involving
the acquisition,  leasing, financing and disposition of equipment, as more fully
described  below and in Exhibit A hereto.  The  Manager and its  Affiliates  are
sometimes collectively referred to below as "ATEL" for convenience.

         Since its  organization  in 1977, ATEL has been active in several areas
within the equipment leasing industry,  including: (i) originating and financing
leveraged and single investor lease transactions for corporate  investors,  (ii)
acting as a  broker/packager  by  arranging  equity  and debt  participants  for
equipment lease transactions  originated by other leasing  companies,  and (iii)
consulting on the pricing and  structuring of equipment lease  transactions  for
banks, leasing companies and corporations. The Manager has organized seven prior
public limited  partnerships to acquire and lease equipment.  During the past 16
years, ATEL has participated in structuring  and/or arranging lease transactions
involving aggregate equipment costs in excess of $1 billion.

     All of the outstanding capital stock of ATEL Financial  Corporation is held
by ATEL Capital Group ("ACG"). The

                                       49

<PAGE>




outstanding  capital  stock of ATEL Capital  Group is owned 75% by A.J. Batt and
25% by Dean L. Cash. Each of ATEL Leasing  Corporation  ("ALC"),  ATEL Equipment
Corporation  ("AEC")  and  ATEL  Investor  Services  ("AIS")  is a  wholly-owned
subsidiary of ATEL Capital Group which will perform  services for the Fund under
the  direction of the Manager.  Acquisition  services  will be performed for the
Fund by  ALC,  equipment  management  and  asset  disposition  services  will be
performed by AEC, and AIS will perform  partnership  management,  administration
and investor services.  Finally, the Dealer Manager, ATEL Securities Corporation
("ASC"),  is a wholly-owned  subsidiary of ATEL Financial  Corporation.  See the
chart  included  under  the  caption  "Organizational  Diagram"  above  for more
information in this regard.

         The  officers  and  directors of ATEL  Capital  Group,  ATEL  Financial
Corporation and their Affiliates are as follows:

Name                       Positions

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

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

F. Randall Bigony..........Chief Financial Officer of ACG, AFC, ALC, AIS and AEC

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

Vasco H. Morais............General Counsel  for ACG, AFC, ALC, AIS and AEC

William J. Bullock.........Director of Asset Management of AEC

Carl W. Magnuson...........Vice President - Syndication of ALC

Barbara F. Medwadowski..   Vice President - Syndication of ALC
   
James A. Kamradt........   Director of Pricing and Syndication of ALC

Thomas D. Sbordone......   Senior Vice President - Marketing of ALC
    
Russell H. Wilder..........Vice President - Credit of ALC

John P. Scarcella..........Senior Vice President of ASC

         A. J. Batt, age 62, founded ATEL in 1977 and has been its president and
chairman of the board of directors  since its  inception,  and a director of the
Dealer Manager since its  organization  in October,  1985. From 1973 to 1977, he
was employed by GATX Leasing  Corporation as manager-data  processing and equity
placement for the lease underwriting department, which was involved in equipment
financing  for  major  corporations.  From  1967 to 1973  Mr.  Batt was a senior
technical representative for General Electric Corporation, involved in sales and
support  services for computer  time-sharing  applications  for corporations and
financial  institutions.  Prior to that time, he was employed by North  American
Aviation as an  engineer  involved in the Apollo  project.  Mr. Batt  received a
B.Sc.  degree with honors in  mathematics  and physics  from the  University  of
British  Columbia in 1961. Mr. Batt is qualified as a registered  principal with
the NASD.

         Dean L. Cash,  age 48, joined ATEL as director of marketing in 1980 and
has been a vice president since 1981,  executive vice president since 1983 and a
director  since  1984.  He has been a director of the Dealer  Manager  since its
organization and its president since 1986. Prior to joining ATEL, Mr. Cash was a
senior marketing representative for

                                       50

<PAGE>


Martin Marietta Corporation, data systems division, from 1979 to 1980. From
1977 to 1979, he was employed by General Electric  Corporation,  where he was an
applications  specialist  in  the  medical  systems  division  and  a  marketing
representative  in the  information  services  division.  Mr. Cash was a systems
engineer  with  Electronic  Data Systems from 1975 to 1977,  and was involved in
maintaining  and  developing  software  for  commercial  applications.  Mr. Cash
received  a B.S.  degree in  psychology  and  mathematics  in 1972 and an M.B.A.
degree with a  concentration  in finance in 1975 from Florida State  University.
Mr. Cash is an  arbitrator  with the  American  Arbitration  Association  and is
qualified as a registered principal with the NASD.

         F.  Randall  Bigony,  age 40,  joined  ATEL in 1992  and  became  chief
financial officer in 1994. From 1987 until joining AFC, Mr. Bigony was president
of F.  Randall  Bigony & Co., a  consulting  firm that  provided  financial  and
strategic planning services to emerging growth companies.  From 1983 to 1987, he
was a manager with the accounting  firm of Ernst & Whinney,  serving  clients in
its  management  consulting  practice.  Mr.  Bigony  received  a B.A.  degree in
business from the University of  Massachusetts  and an M.B.A.  degree in finance
from the University of California,  Berkeley.  He is a founding board member and
acting treasurer of the I Have a Dream Foundation - Bay Area Chapter.

         Donald E. Carpenter,  age 49, joined ATEL in 1986 as controller.  Prior
to joining  the  corporate  Manager,  Mr.  Carpenter  was  employed  as an audit
supervisor  with  Laventhol  &  Horwath,  certified  public  accountants  in San
Francisco,  California,  from 1983 to 1986. From 1979 to 1983, Mr. Carpenter was
employed by Deloitte Haskins & Sells,  certified public accountants in San Jose,
California.  From 1971 to 1975,  Mr.  Carpenter was a supply officer in the U.S.
Navy. Mr. Carpenter received a B.S. degree in mathematics (magna cum laude) from
California  State  University,  Fresno in 1971 and  completed a second  major in
accounting  in 1978.  Mr.  Carpenter  has  been a  California  certified  public
accountant since 1981. He is qualified as a registered principal with the NASD.

         Vasco H. Morais,  age 40, joined ATEL in 1989 as general  counsel.  Mr.
Morais manages  ATEL's legal  department,  which provides legal and  contractual
support in the  negotiating,  drafting,  documenting,  reviewing  and funding of
lease  transactions.  In addition,  Mr. Morais advises on general  corporate law
matters,  and assisting on securities law issues.  From 1986 to 1989, Mr. Morais
was  employed  by the  BankAmeriLease  Companies,  Bank of  America's  equipment
leasing  subsidiaries,  providing in-house legal support on the documentation of
tax-oriented  and non-tax  oriented  direct and  leveraged  lease  transactions,
vendor  leasing   programs  and  general   corporate   matters.   Prior  to  the
BankAmeriLease Companies, Mr. Morais was with the Consolidated Capital Companies
in the  Corporate  and  Securities  Legal  Department  involved in drafting  and
reviewing  contracts,  advising on  corporate  law matters  and  securities  law
issues.  Mr.  Morais  received  a B.A.  degree  in 1982 from the  University  of
California in Berkeley;  a J.D.  degree in 1986 from Golden Gate  University Law
School; and an M.B.A.  (Finance) degree from Golden Gate University in 1997. Mr.
Morais has been an active member of the State Bar of California since 1986.

         William J. Bullock, age 34, is a vice president of asset management. He
joined ATEL in 1991.  Mr. Bullock is responsible  for the  disposition  maturing
assets,  remarketing of off-lease  equipment,  supervision of lessee maintenance
practices,  equipment  inspection and residual  valuation  analysis on new lease
transactions.  Prior to joining  ATEL,  Mr.  Bullock was a senior  member of the
asset  management  department  at Boeing  Capital  (formerly  known as McDonnell
Douglas  Finance  Corporation).   While  there,  Mr.  Bullock  was  involved  in
negotiating sales, residual valuation and equipment appraisal and inspection for
MDFC's $ 4 billion  portfolio  of  leases.  Prior to joining  MDFC in 1989,  Mr.
Bullock was the senior negotiator at ELLCO Leasing (since acquired by GE Capital
Equipment   Corporation).   At  ELLCO,  he  was  responsible  for   end-of-lease
negotiations and equipment  dispositions of a $500 million diversified portfolio
of equipment. Mr. Bullock has been a member of the Equipment Lessors Association
("ELA") since 1987 and a member of ELA's  equipment  management  committee since
1994. Mr. Bullock received a B.S. degree in Finance in 1987 from San Diego State
University.

                                       51

<PAGE>




     Carl W.  Magnuson,  age 55,  joined  ATEL in 1994 and is Vice  President  -
Syndication for ALC. Mr. Magnuson is responsible for acquiring third party lease
transactions  and debt placement.  Prior to joining ATEL he was a Regional Group
Manager and Portfolio  Sales Manager for Bell  Atlantic  Systems  Leasing for 10
years.  From 1983 to 1984 he was Vice President and Chief  Financial  Officer of
the Handi-Kup  Company,  a plastics  manufacturer,  and from 1981 to 1982 he was
Controller for the Cyclotron  Corporation,  engaged in nuclear medicine research
and  development.  From 1978 to 1981 he was Executive  Vice President of Shannon
Financial Corporation, a middle market leasing corporation. From 1975 to 1978 he
was a Deputy Program Manager for the Watkins Johnson Company.  From 1968 to 1973
Mr.  Magnuson was an engineering  duty officer in the U. S. Navy.  Mr.  Magnuson
received a B.S. in Engineering  Science and an M.S. in Applied  Mathematics from
the Rensselaer Polytechnic Institute, an MS in Industrial Engineering/Operations
Research  from  Stanford  University,  and an  M.B.A.  from  the  University  of
California at Berkeley.

     Barbara F. Medwadowski, age 59, joined ATEL in 1997 and is vice president -
syndication  for ALC. Ms.  Medwadoski is responsible  for acquiring  thrid party
lease  transactions.  Prior to joining ATEL, she was a syndications  manager for
Mellon US Leasing  (successor to USL Capital and U.S.  leasing  Corporation) for
nine  years.  From 1985 to 1987,  she was a vice  president  with Great  Western
Leasing wehre she acquired lease and loan transactions from intermediaries. From
1982 through 1984, she was a portfolio  manager with U.S.  Leasing  Corporation.
Ms. Medwadowski  received an M.B.A.  degree from the University of California at
Berkeley in 1982. From 1964 through 1979, she was a senior  researcher in lipids
and  lipoproteins  at the  University of California  at Berkeley.  In 1964,  she
earned  an  M.S.  degree  in  nutrition  and  in  1961 a B.S.  degree  in  child
development, each from the University of California at Berkeley

   

     James A.  Kamradt,  age 37,  Director of Pricing and  Syndication  for ALC,
joined  ATEL  in  1997.  Mr.  Kamradt  is  involved  in  the  pricing  of  lease
transactions  and the placement of debt to lvereage certain  transactions.  From
1985 to 1997, Mr. Kamradt managed his own pricate consulting business, providing
underwriting and operational  services for numerous leasing companies.  Prior to
that, Mr. Kamradt was the National Operations Officer for the computer leasing 
division of Phoenix American; and Regional Credit Manager for Dana Commercial
Credit Corporation.  Mr. Kamradt received his B.S. from Michigan Technological
University's Engineering School of Business, and his M.B.A. from Haas School of
Business of the University of California, Berkeley.

     Thomas D.  Sbordone,  age 40, is Senior Vice President - Marketing for ALC.
He joined ATEL in 1993, as a regional vice president in the northeastern  United
States.  Mr.  Sbordone is currently  responsible  for new  business  development
within the eastern  U.S.,  including  management  of filed sales  personnel  and
directly  interfacting  with ATEL's existing and prospective  clients to achieve
the company's lease investment objectives. Prior to joining ATEL, Mr. Sbordone
was employed, from 1985, by American Finance Group, a Boston-based equipment 
lessor.  While there, Mr. Sbordone's various responsibilities involved lease
origination of vendor finance relationships.  Mr. Sbordone earned a B.S., with
honors, in finance and marketing from Northeastern University, and has attended
Bentley College Graduate School of Business.
    

         Russell H.  Wilder,  age 44,  joined ATEL in 1992 as Vice  President of
ATEL  Business  Credit.  Immediately  prior to joining  ATEL,  Mr.  Wilder was a
personal property broker  specializing in equipment leasing and financing and an
outside contractor in the areas of credit and collections.  From 1985 to 1990 he
was Vice  President  and Manager of Leasing for Fireside  Thrift Co., a Teledyne
subsidiary,  and was  responsible for all aspects of setting up and managing the
department,  which operated as a small ticket lease funding source. From 1983 to
1985 he was with Wells Fargo Leasing  Corporation as Assistant Vice President in
the credit  department  where he oversaw all credit  analysis on transactions in
excess of $2 million.  From 1978 to 1983 he was a District  Credit  Manager with
Westinghouse Credit  Corporation's  Industrial Group and was responsible for all
non-marketing  operations of various district  offices.  Mr. Wilder holds a B.S.
with  Honors  in  Agricultural   Economics  and  Business  Management  from  the
University  of  California  at Davis.  He has been awarded the  Certified  Lease
Professional designation by the Western Association of Equipment Lessors.

         John P. Scarcella,  age 37, joined the Dealer Manager as vice president
of  broker  dealer  relations  in  1992.  He is  involved  in the  marketing  of
securities  offered by the Dealer  Manager.  Prior to  joining  ATEL  Securities
Corporation, from 1987 to 1991, he was employed by Landsing Pacific Fund, a real
estate  investment  trust in San  Mateo,  California  and acted as  director  of
investor  relations.  From 1984 to 1987,  Mr.  Scarcella  acted as broker dealer
representative  for Landsing Capital  Corporation,  where he was involved in the
marketing of partnerships and REITs. Mr. Scarcella received a B.S.C. degree with
an  emphasis  in  investment  finance  in  1983  and  an  M.B.A.  degree  with a
concentration in marketing in 1991 from Santa Clara University.


                                       52
<PAGE>

Selection and Management of Investments

     An Affiliate of the Manager,  ATEL Leasing  Corporation,  will have primary
responsibility for selecting and negotiating  potential  acquisitions and leases
of Equipment,  subject to the Manager's supervision and approval.  The Manager's
Investment Committee will approve any acquisition before it is consummated.  The
Investment  Committee  currently  consists of A.J. Batt, Dean L. Cash, Donald E.
Carpenter and F. Randall Bigony.

         ATEL  Equipment   Corporation  will  manage  the  Fund's  portfolio  of
Equipment,  subject to the  Manager's  supervision.  Management  services  to be
provided  by AEC  include  collection  of lease  payments  from the  lessees  of
Equipment,  re-leasing  services  upon  termination  of  leases,  inspection  of
Equipment,  acting as a liaison between lessees and vendors, general supervision
of lessees and vendors to ensure that the  Equipment is being  properly used and
operated by lessees, arranging for maintenance and related services with respect
to the Equipment and the supervision, monitoring and review of others performing
services  for the  Fund.  Third  parties  may  participate  in  managing  or may
separately manage Equipment for which they will receive a fee from the Fund.

Management Compensation

         The  Fund is not  required  to pay the  officers  or  directors  of the
Manager  or its  Affiliates  any  remuneration.  However,  the Fund will pay the
Manager and its  Affiliates  the Asset  Management Fee for their services to the
Fund and the Manager will have a Carried  Interest in the Fund as a Member equal
to 7.5%  of  Fund  allocations  of  Distributions,  Net  Income  and  Net  Loss.
Furthermore,  the Fund will reimburse the Manager and its Affiliates for certain
costs  incurred on behalf of the Fund,  including the cost of certain  personnel
(excluding  controlling  persons  of the  Manager)  who will be  engaged  by the
Manager to perform administrative,  accounting,  secretarial, transfer and other
services  required  by the  Fund.  Such  individuals  may also  perform  similar
services for the Manager,  its  Affiliates and other  investment  programs to be
formed in the future. See "Management Compensation."

Changes in Management

         The  Operating  Agreement  provides  that the Manager may be removed as
Manager at any time upon the vote of Holders  owning  more than 50% of the total
outstanding  Units  entitled  to vote,  and  Holders  have the  right to elect a
successor Manager in place of the removed Manager by a similar vote. The Manager
may only withdraw  voluntarily from the Fund with the approval of Holders owning
in excess of 50% of the Units entitled to vote on Fund matters. The Holders have
no voice in the election of directors or  appointment of officers of the Manager
or its parent, ATEL Capital Group, and the capital stock of such entities can be
transferred without the consent of the Fund or the Holders.

         The  by-laws of the Manager  provide for a maximum of three  directors.
The by-laws can be amended to increase the number of directors  either by a vote
of  stockholders  or of directors.  In the event of a vacancy or increase in the
number of members of the board of directors,  the remaining  directors may elect
the members to serve until the next annual  meeting of directors.  Directors are
otherwise  elected  annually  by vote  of the  stockholders,  and the  directors
appoint corporate officers to serve at the will of the board.

The Dealer Manager

         ATEL  Securities  Corporation  (the "Dealer  Manager") was organized in
October 1985  principally for the purpose of  participating  in and facilitating
the  distribution  of securities of  partnerships to be sponsored by the Manager
and its  Affiliates.  The Dealer Manager became a member of the NASD in February
1986. The Dealer Manager is a wholly-owned subsidiary of ATEL.

         The Dealer  Manager will provide  certain  wholesaling  services to the
Fund in connection with the distribution of the Units offered hereby. (See "Plan
of  Distribution.")  The executive  officers and directors of the Dealer Manager
are discussed above under "The Manager."

                                       53

<PAGE>


                            PRIOR PERFORMANCE SUMMARY

         THE INFORMATION PRESENTED IN THIS SECTION AND IN THE TABLES INCLUDED AS
EXHIBIT  A TO  THIS  PROSPECTUS  REPRESENTS  THE  HISTORICAL  RESULTS  OF  PRIOR
EQUIPMENT  LEASING  PROGRAMS  SPONSORED  BY  THE  MANAGER  AND  ITS  AFFILIATES.
INVESTORS  IN THE FUND  SHOULD NOT ASSUME THAT THEY WILL  EXPERIENCE  INVESTMENT
RESULTS COMPARABLE TO THOSE EXPERIENCED BY INVESTORS IN SUCH PRIOR PROGRAMS.

         Since July 28,  1977,  the Manager and its  Affiliates  have  financed,
structured or arranged  equity and debt  participations  for  equipment  leasing
transactions  involving  total  equipment  costs in  excess of $1  billion.  The
Manager  sponsored and syndicated seven prior public equipment leasing programs.
See  Exhibit  A  -  Prior  Performance  Tables  for  more  detailed  information
concerning  the prior public  programs  (collectively  referred to herein as the
"Prior Programs").

         The  first  Prior  Program,   ATEL  Cash  Distribution  Fund  ("ACDF"),
commenced a public  offering of up to  $10,000,000  of its equity  interests  on
March 11, 1986.  ACDF terminated its offering on December 18, 1987 after raising
a total of $10,000,000 in offering proceeds from a total of approximately  1,000
investors,  all of which  proceeds  were  committed to  equipment  acquisitions,
organization and offering expenses and capital reserves.  ACDF public acquired a
variety  of types  of  equipment  with a total  purchase  cost of  approximately
$11,133,679.  See Table V -  "Acquisition  of  Equipment  by Prior  Programs" in
Exhibit A for further information  concerning the types of equipment acquired by
ACDF. All of such equipment had been sold and the  partnership was terminated as
of December 31, 1997. See Table IV - "Results of Completed  Program and Table VI
- "Sales or Disposals of  Equipment"  in Exhibit A. Through June 30, 1998,  ACDF
had  made  cash  distributions  to its  investors  in the  aggregate  amount  of
$1,121.03  per $1,000  invested.  Of this  amount a total of $244.89  represents
investment income and $876.14 represents return of capital.

         The second Prior Program,  ATEL Cash  Distribution Fund II ("ACDF II"),
commenced a public offering of up to $25,000,000 (with an option to increase the
offering to  $35,000,000)  of its equity  interests on January 4, 1988.  ACDF II
terminated  its offering on January 3, 1990 after raising a total of $35,000,000
in offering proceeds from a total of approximately 3,100 investors, all of which
proceeds  have  been  committed  to  equipment  acquisitions,  organization  and
offering expenses and capital reserves.  ACDF II had acquired a variety of types
of equipment  with a total  purchase  cost of  approximately  $52,270,536  as of
December 31, 1997. See Table V - "Acquisition of Equipment by Prior Programs" in
Exhibit A for further information  concerning the types of equipment acquired by
ACDF II. Of such  equipment,  items  representing  an original  purchase cost of
approximately $51,885,991 had been sold as of June 30, 1998. See Table VI "Sales
or Disposals of Equipment" in Exhibit A. Through June 30, 1998, ACDF II had made
cash  distributions  to its investors in the  aggregate  amount of $1,105.70 per
$1,000 invested.  Of this amount a total of $289.71 represents investment income
and $815.99 represents return of capital.

         The third Prior Program,  ATEL Cash Distribution Fund III ("ACDF III"),
commenced a public offering of up to $50,000,000 (with an option to increase the
offering to  $75,000,000)  of its equity  interests on January 4, 1990. ACDF III
terminated  its offering on January 3, 1992 after raising a total of $73,855,840
in offering proceeds from a total of approximately 4,822 investors, all of which
proceeds have been committed to equipment  acquisitions,  estimated organization
and offering expenses and capital  reserves.  ACDF III had acquired a variety of
types of equipment with a total purchase cost of approximately $99,629,941 as of
June 30, 1998.  See Table V -  "Acquisition  of Equipment by Prior  Programs" in
Exhibit A for further information  concerning the types of equipment acquired by
ACDF III. Of such equipment,  items  representing  an original  purchase cost of
approximately  $66,594,290  had been  sold as of June 30,  1998.  See Table VI -
"Sales or Disposals of Equipment" in Exhibit A. Through June 30, 1998,  ACDF III
had made cash


                                       54

<PAGE>





distributions  to its  investors in the  aggregate  amount of $1,003.64 per
$1,000 invested.  Of this amount a total of $261.90 represents investment income
and $741.74 represents return of capital.

         The fourth Prior Program,  ATEL Cash  Distribution Fund IV ("ACDF IV"),
commenced a public  offering of up to  $75,000,000  of its equity  interests  on
February  4, 1992.  ACDF IV  terminated  its  offering on February 3, 1993 after
raising  a  total  of  $75,000,000   in  offering   proceeds  from  a  total  of
approximately  4,873  investors,  all of which  proceeds have been  committed to
equipment acquisitions, estimated organization and offering expenses and capital
reserves.  ACDF IV had  acquired  a variety of types of  equipment  with a total
purchase cost of  approximately  $108,734,880 as of June 30, 1998. See Table V -
"Acquisition   of  Equipment  by  Prior  Programs"  in  Exhibit  A  for  further
information  concerning  the  types of  equipment  acquired  by ACDF IV. Of such
equipment,  items  representing  an  original  purchase  cost  of  approximately
$52,871,585  had  been  sold as of June 30,  1998.  See  Table  VI -  "Sales  or
Disposals of  Equipment"  in Exhibit A. Through June 30, 1998,  ACDF IV had made
cash  distributions  to its  investors  in the  aggregate  amount of $797.87 per
$1,000 invested.  Of this amount a total of $148.05 represents investment income
and $649.82 represents return of capital.  See Table III - "Operating Results of
Prior   Programs"  in  Exhibit  A  for  further   information   concerning  such
distributions.

         The fifth  Prior  Program,  ATEL Cash  Distribution  Fund V ("ACDF V"),
commenced a public  offering of up to  $125,000,000  of its equity  interests in
February 1993. ACDF V terminated its offering in November 1994,  after raising a
total of $125,000,000 in offering  proceeds from a total of approximately  7,217
investors,  all of which proceeds have been committed to equipment acquisitions,
estimated  organization and offering expenses and capital  reserves.  ACDF V had
acquired  a  variety  of  types  of  equipment  with a  total  purchase  cost of
approximately  $186,897,181  as of June 30, 1998. See Table V - "Acquisition  of
Equipment by Prior Programs" in Exhibit A for further information concerning the
types of equipment acquired by ACDF V. Of such equipment,  items representing an
original purchase cost of approximately $31,330,129 had been sold as of June 30,
1998.  See Table VI - "Sales or  Disposals of  Equipment"  in Exhibit A. Through
June 30,  1998,  ACDF V had made  cash  distributions  to its  investors  in the
aggregate  amount of $520.97  per  $1,000  invested.  Of this  amount a total of
$73.79 represents  investment  income and $447.18  represents return of capital.
See Table III - "Operating  Results of Prior  Programs" in Exhibit A for further
information concerning such distributions.

         The sixth Prior Program,  ATEL Cash  Distribution  Fund VI ("ACDF VI"),
commenced a public  offering of up to  $125,000,000  of its equity  interests in
November 1994. ACDF VI terminated its offering in November 1996, after raising a
total of $125,000,000 in offering  proceeds from a total of approximately  6,401
investors,  all of which proceeds have been committed to equipment acquisitions,
estimated  organization and offering expenses and capital reserves.  ACDF VI had
acquired  a  variety  of  types  of  equipment  with a  total  purchase  cost of
$208,277,121 as of June 30, 1998. See Table V "Acquisition of Equipment by Prior
Programs" in Exhibit A for further information concerning the types of equipment
acquired by ACDF VI. Of such equipment,  items representing an original purchase
cost of approximately $2,677,677 had been sold as of June 30, 1998. See Table VI
- "Sales or Disposals of Equipment" in Exhibit A. Through June 30, 1998, ACDF VI
had made cash  distributions to its investors in the aggregate amount of $321.36
per  $1,000  invested.  Of this  amount a total of $6.87  represents  investment
income and  $314.49  represents  return of capital.  See Table III -  "Operating
Results of Prior Programs" in Exhibit A for further information  concerning such
distributions.
   
     The seventh Prior  Program,  ATEL Capital  Equipment Fund VII ("ACEF VII"),
commenced a public  offering of up to  $150,000,000  of its equity  interests in
November 1996.  ACEF VII terminated its offering as of November 29, 1998,  after
raising a total of  $150,000,000  in offering  proceeds had been received from a
total  of  approximately  4,300  investors,  all of  which  proceeds  have  been
committed  to  equipment  acquisitions,   estimated  organization  and  offering
expenses  and  capital  reserves.  ACEF VII had  acquired  a variety of types of
equipment  with a total purchase cost of  $177,566,094  as of June 30, 1998. See
Table V - "Acquisition
    

                                       55

<PAGE>



of Equipment by Prior Programs" in Exhibit A for further information  concerning
the  types  of  equipment  acquired  by  ACEF  VII.  Of  such  equipment,  items
representing an original purchase cost of approximately $2,055,915 had been sold
as of June 30, 1998. See Table VI - "Sales or Disposals of Equipment" in Exhibit
A. Through June 30, 1998, ACEF VII had made cash  distributions to its investors
in the aggregate amount of $126.79 per $1,000  invested.  Of this amount a total
of $29.74 represents  investment income and $97.05 represents return of capital.
See Table III - "Operating  Results of Prior  Programs" in Exhibit A for further
information concerning such distributions.


         Although certain of the Prior Programs have experienced lessee defaults
in the ordinary  course of business,  none of the Prior Programs has experienced
an unanticipated  rate of default or other major adverse  business  developments
which the  Manager  believes  will  impair its  ability  to meet its  investment
objectives. As of June 30, 1998, the Prior Programs have acquired equipment with
a total  purchase  cost of  approximately  $787 million  during a period of over
twelve  years  since  the date the first  Prior  Program  commenced  operations.
Aggregate losses from material lessee defaults on these  transactions  have been
approximately  $1.2  million,  or  approximately  0.16% of the assets  acquired,
substantially  less than the amount assumed by the Manager and its Affiliates in
structuring  these  portfolios as the losses to be  anticipated  in the ordinary
course of leasing business.

         The Prior  Programs  have  investment  objectives  which are similar to
those of the Fund. The factors considered by the Manager in determining that the
investment  objectives  of the prior  programs were similar to those of the Fund
include the types of equipment to be  acquired,  the  structure of the leases to
such equipment, the credit criteria for lessees, the intended investment cycles,
the reinvestment  policies and the investment  goals of each program.  Therefore
all of the  information  set forth in the tables  included in Exhibit A - "Prior
Performance  Information"  may be deemed to relate to programs  with  investment
objectives similar to those of the Fund.

         In Tables I through III  information  is presented  with respect to all
Prior Programs sponsored by the Manager and its Affiliates which completed their
offerings of interests  within the five-year  period  ending  December 31, 1997,
except  that  ACDF VII has not  completed  its  public  offering  as of the date
hereof.  Accordingly,  the  tabular  information  concerning  ACDF  VII does not
reflect results of an operating period after completion of its funding.  Table V
includes information  regarding all acquisitions of equipment by Prior Programs.
Table VI includes  information  regarding all dispositions of equipment by Prior
Programs during the five year period ending December 31, 1997. Table IV includes
information  concerning  the one Prior Program that had completed its operations
as of December 31, 1997.

         The following is a list of the tables set forth in Exhibit A:

         Table I                    - Experience in Raising and Investing Funds
         Table II                   - Compensation to the Manager and Affiliates
         Table III                  - Operating Results of Prior Programs
         Table IV                   - Results of Completed Program
         Table V                    - Acquisition of Equipment by Prior Programs
         Table VI                   - Sales or Disposals of Equipment

The Manager  will  provide to any  investor,  upon  written  request and without
charge,  copies of the most  recent  Annual  Reports on Form 10-K filed with the
Securities  and  Exchange  Commission  by each of the Prior  Programs,  and will
provide to any investor,  for a reasonable  fee,  copies of the exhibits to such
reports.  Investors  may request such  information  by writing to ATEL  Investor
Services,  Inc. at 235 Pine Street,  6th Floor,  San  Francisco,  CA 94104 or by
calling the Manager at (415) 989-8800.


                                       56

<PAGE>




                        INCOME, LOSSES AND DISTRIBUTIONS

         The taxable  income and  taxable  loss of the Fund (the "Net Income and
Net Loss") and all Fund cash distributions shall be allocated 92.5% to investors
and 7.5% to the Manager as the Carried Interest.

Allocations of Net Income and Net Loss

         The  Fund  will  close  its  books  as of the end of each  quarter  and
allocate Net Income,  Net Loss and cash  distributions  on a daily basis,  i.e.,
Fund items will be allocated  to the  investors in the ratio in which the number
of Units held by each of them bears to the total  number of Units held by all as
of the last day of the fiscal quarter with respect to which such Net Income, Net
Loss and Distributions are attributable;  provided,  however, that, with respect
to Net Income,  Net Loss and cash  distributions  attributable  to the  offering
period  of  the  Units  (including  the  full  quarter  in  which  the  offering
terminates),  such  Net  Income,  Net  Loss  and  cash  distributions  shall  be
apportioned  in the ratio in which (i) the number of Units held by each investor
multiplied by the number of days during the period the investor  owned the Units
bears to (ii) the amount obtained by totaling the number of Units outstanding on
each day during such period. No Net Income, Net Loss and cash distributions with
respect to any  quarter  shall be  allocated  to Units  repurchased  by the Fund
during such quarter, and such Units shall not be deemed to have been outstanding
during such  quarter for  purposes of the  foregoing  allocations.  Transfers of
Member  interests  will not be effective  for any purpose until the first day of
the following quarter.

Timing of Distributions

         Fund cash  distributions are generally made and allocated to Holders on
a quarterly basis.  However,  the Manager will determine  amounts  available for
distributions  on a monthly rather than quarterly  basis.  All investors will be
entitled to elect to receive  distributions  monthly  rather than  quarterly  by
designating  such  election in a written  request  delivered to the Manager.  An
initial election to receive monthly rather than quarterly  distributions  may be
made  at  the  time  of  subscription  by  designating   such  election  on  the
Subscription Agreement. Thereafter, each investor may during each fiscal quarter
designate  an  election  to change  the timing of  distributions  payable to the
investor for the ensuing  fiscal  quarter by delivering to the Manager a written
request. Investors who have previously elected monthly distributions may at such
time elect to return to quarterly  distributions  and those receiving  quarterly
distributions may elect monthly distributions for the following quarter.

Allocations of Distributions

         Distributions  allocated to the  investors  as described  below will be
allocated  among  them on the  same  basis as Net  Income  and Net Loss is to be
allocated,  as described  under  "Allocations of Net Income and Net Loss" above.
Amounts to be  distributed  will be determined  after payment of Fund  operating
expenses, establishment or restoration of Capital reserves deemed appropriate by
the Manager,  and, to the extent permitted as described  below,  reinvestment in
additional Equipment.

         It is anticipated that income taxes on a portion of distributions  will
be deferred by depreciation  available from Equipment  purchased by the Fund. To
the extent Net Income is reduced by depreciation deductions,  distributions will
be considered return of capital for tax purposes and income tax will be deferred
until  subsequent   years.   Furthermore,   until  investors  receive  aggregate
distributions  equal to their original  capital,  a portion of each distribution
will  be  deemed  a  return  of  capital   rather  than  a  return  on  capital.
Notwithstanding   the   foregoing,   however,   the  Manager   intends  to  make
distributions  only  out  of  cash  from  operations  and  cash  from  sales  or
refinancing  and not out of capital  reserves or offering  proceeds held pending
investment.

                                       57

<PAGE>


         The Fund is  intended  to be  self-liquidating  in  nature.  After  the
expiration of the  Reinvestment  Period,  the Fund will distribute any available
cash, subject to the establishment of reserves deemed reasonably required by the
Manager for the proper  operation of the business of the Fund, which may include
reserves for the upgrading of Equipment in order to preserve its rental or sales
value or for purchasing  Equipment for which the Fund has committed  funds prior
to the end of the Reinvestment Period.

         Upon  liquidation  of the Fund,  the  proceeds of  liquidation  will be
distributed,  after  creditors  of the  Fund  (including  investors  who  may be
creditors)  have been paid or  provision  has been  made for their  payment,  in
accordance with each Member's positive Capital Account balance.  As a result, if
cash  distributions  are made during the period  between the date  investors are
first  admitted to the Fund and the end of the  offering of Units,  it is likely
that different amounts would be distributable  upon liquidation to the different
investors,  depending on their then Capital  Account  balances.  This difference
will be  substantially  reduced or eliminated by the special  allocation of gain
from the sale or other  disposition  of  Equipment to the  investors  which will
equalize  their  respective   Capital  Account  balances.   In  particular,   if
distributions  made during the offering period to investors who were admitted at
the initial  admission  date  reflect a return of capital (or to the extent that
such  investors  receive  allocations  of net losses  relating  to the  offering
period),  such investors will receive less on liquidation of the Fund than those
who were admitted at the final admission date.  Furthermore,  to the extent that
those   investors  who  were  admitted  at  the  first  admission  date  receive
allocations  of net  profits  relating to the  offering  period in excess of the
distributions  of cash for that same period,  such  investors  will receive more
distributions on liquidation than those investors who are admitted at end of the
offering.  As noted above, any such differences will be substantially reduced or
eliminated to the extent the Manager  equalizes Capital Accounts through the use
of special allocations of gain from the sale or other disposition of Equipment.

Reinvestment

         Subject to the limitations set forth herein,  the Manager has the right
to  reinvest on behalf of the Fund cash from  operations  and cash from sales or
refinancing during the Reinvestment  Period (which ends six years after the last
day of the year in which the offering of Units terminates).  Notwithstanding the
foregoing,  however, the Manager shall, at a minimum,  distribute, to the extent
available,  such  amounts  of cash  from  sales or  refinancing  and  cash  from
operations as may be sufficient to allow an investor in a 31% federal income tax
bracket  (but not a higher  bracket) to meet the federal and state  income taxes
due with respect to income  derived by him from the  operations of the Fund. See
"Risk Factors - Income in Excess of Distributions"  for a discussion of the risk
that a Holder in a higher tax bracket may, under some circumstances, be required
to pay certain tax  liabilities  out of his  personal  funds  rather than out of
amounts distributed by the Fund.

         Furthermore,  through the end of the  Reinvestment  Period the Fund may
reinvest cash from operations and cash from sales or refinancing, but only after
the Manager has caused the Fund to distribute to the investors:

         (i)      Through  the first  full  fiscal  quarter  ending at least six
                  months after  termination of the offering of Units,  an amount
                  equal to the lesser of (a) a rate of return on their  original
                  capital  contribution  equal to 3.5% over the average yield on
                  five-year  United States Treasury Bonds for the fiscal quarter
                  immediately  preceding the date of distribution,  as published
                  in a national  financial  newspaper  from time to time (with a
                  minimum  of 8% per annum and a maximum of 10% per  annum),  or
                  (b)  90%  of  the   total   amount  of  cash   available   for
                  distributions; and



                                       58

<PAGE>


         (ii)     for  each  quarter  during  the  balance  of the  Reinvestment
                  Period,  an amount equal to a rate of return on their original
                  capital  contribution  equal to 3.5% over the average yield on
                  five-year United States Treasury Bonds for the period from the
                  commencement  of the  offering  of  Units  through  a date six
                  months folowing the  termination  date of the offering (with a
                  minimum  of 8% per annum and a  maximum  of 10% per  annum) as
                  published in a national financial newspaper.

         Distributions  will be made only to the  extent  cash is  available  to
distribute  after  payment  of Fund  obligations  and  allowance  for  necessary
reserves. There can be no prediction as to any future rate of return on original
capital  investment nor assurance that any specific amount of cash distributions
can be  attained.  Distributions  may in any year be in  amounts  less  than the
amounts stated above.

Return of Unused Capital

         Any portion of the net  offering  proceeds  received by the Fund during
the first twelve months following the date hereof which has not been invested or
committed to Investment in Equipment  during the period ending  eighteen  months
from the date hereof,  and any of the net offering proceeds received  thereafter
which have not been invested or committed to Investment in Equipment  during the
period ending six months after the end of the offering (except,  in either case,
for amounts used to pay Fund  operating  expenses or deemed by the Manager to be
required as capital  reserves)  will be  distributed  to investors pro rata as a
return of capital.  In addition,  in order to refund to the investors the amount
of Front End Fees attributable to such returned capital,  the Manager has agreed
to contribute to the Fund, and the Fund shall  distribute to investors pro rata,
the amount by which (x) the amount of unused capital so distributed,  divided by
(y) the percentage of offering proceeds remaining after payment of all Front End
Fees, exceeds the unused capital so distributed.

Cash from Reserve Account

         The Operating  Agreement  requires that the Fund initially  establish a
cash reserve for general working capital purposes in an amount equal to not less
than 1/2 of 1% of the offering  proceeds  (equal to $6,000 if the minimum  Units
are sold and $750,000 if the maximum Units are sold).  Any cash reserves used as
provided herein need not be restored,  and, if restored,  shall be restored from
the operating revenues of the Fund. When Equipment is sold or otherwise disposed
of,  all  cash  reserves  specifically   allocated  to  such  Equipment  may  be
distributed  to the Holders as a return of  original  capital  investment  or be
applied as a reserve for other Equipment. Distributions of cash reserves will be
allocated  and  distributed  in the same manner as cash  proceeds  from sales or
refinancing  of  equipment.  Cash  reserves  which  the  Manager  deem no longer
reasonably  required to be maintained as reserves may be distributed or invested
by the Fund,  subject to the limitations  described  herein. No distributions or
investments will be made from Fund reserve accounts during the three-year period
following the date  investors  are first  admitted to the Fund;  thereafter,  no
distributions or investments will be made unless the Manager determines that the
reserves of the Fund, in any fiscal quarter,  are in excess of the amount deemed
sufficient in connection with the Fund's operations.

Sources of Distributions - Accounting Matters

         During  the  initial  years,  the  Fund  may  experience  a Net Loss in
accordance with generally accepted accounting principles,  and it is anticipated
that a substantial  portion of any such Net Loss would be caused by depreciation
which is a non-cash  expense.  As a result,  distributions,  if any, made in the
initial  years of the Fund may be  considered  to be a return of capital and not
investment income.

                                       59

<PAGE>




         Without  regard  to  the  accounting  method  adopted,  to  the  extent
Equipment  is not  producing  revenues  in excess of  operating  expenses,  debt
service  and  other   contractual   obligations   related  to  such   Equipment,
distributions may be considered a return of capital.

                                 CAPITALIZATION

         The  capitalization  of the Fund, as of the date of this Prospectus and
as  adjusted  to  reflect  the  issuance  and sale of the Units  offered  hereby
assuming the minimum 120,000 Units and the maximum  15,000,000 Units are sold is
as follows:

                                  As of           Minimum          Maximum
                               the Date           120,000       15,000,000
                              hereof(2)      Units          Units

Manager's
Capital Contribution(1)       $     100        $      100     $        100

Units of Limited
Fund Interest
($10 per Unit)                      500         1,200,500      150,000,500
                                -------         ---------      -----------

Total Capitalization          $     600        $1,200,600     $150,000,600

Less Estimated Organization
and Offering Expenses                -            144,000       20,250,000
                                 ------          --------       ----------

Net Capitalization             $    600        $1,056,600     $129,750,600
                                -------         ---------      -----------

---------------


            (1)  See   "Management   Compensation"   and  "Income,   Losses  and
Distributions"  for a description  of the fees and  compensation  payable to the
Manager and its Affiliates.

            (2) The Fund was originally  capitalized  with $600,  representing a
cash  contribution  to the Fund of $100 by the Manager and $500 from the initial
Holders.

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

            Until receipt and acceptance of subscriptions for 120,000 Units, the
Fund will not commence active operations.

            Following  achievement of such funding level,  subscription proceeds
will be  released  to the  Fund  from  escrow  and  applied  to the  payment  or
reimbursement  of  Organization  and Offering  Expenses,  leaving  estimated net
proceeds available for investment and operations of $1,056,000.  Thereafter, the
Fund  will   experience  a  relative   increase  in   liquidity  as   additional
subscriptions  for Units are received,  and a relative  decrease in liquidity as
Net Proceeds are expended in connection with the

                                       60

<PAGE>


acquisition and leasing of Equipment.

            The Fund will  acquire  Equipment  with cash  offering  proceeds and
indebtedness.  The Fund may borrow on a secured or unsecured basis amounts up to
50% (and  intends to borrow  the  maximum  amount  permitted)  of the  aggregate
purchase  price of  Equipment  as of the  date of the  final  investment  of Net
Proceeds and, thereafter,  on the date any subsequent  indebtedness is incurred.
The Fund currently has no  arrangements  with, or  commitments  from, any lender
with respect to such  financing.  The Manager  anticipates  that any acquisition
financing or other borrowing will be obtained from institutional lenders. Except
as discussed below in connection with asset securitization  financing,  the Fund
does not  currently  anticipate  that it will  engage  in any  material  hedging
transactions. See "Investment Objectives and Policies - Borrowing Policies."

            Until required for the  acquisition  or operation of Equipment,  the
Net  Proceeds  will be held  in  short-term,  liquid  investments.  The  Fund is
required by the  Operating  Agreement to establish  an initial  working  capital
reserve in the amount of 1/2 of 1% of the Gross  Proceeds.  See also "Summary of
the Operating Agreement - Reserves."

            For financial reporting purposes, Fund Equipment on operating leases
will generally be depreciated using the straight-line method, over periods equal
to the terms of the related leases to the Equipment,  down to an amount equal to
the estimated  residual value of the Equipment at the end of the related leases.
The treatment for financial  reporting  purposes  differs from cost recovery for
tax  purposes  (generally,  the Modified  Accelerated  Cost  Recovery  System or
"MACRS"),  in which the Service prescribes certain useful lives for each type of
equipment and the Code provides specific  accelerated rates of depreciation over
those useful lives. See "Income Tax Consequences - Depreciation".

            The  potential  effects of  inflation  on the Fund are  difficult to
predict.  If the general  economy  experiences  significant  rates of inflation,
however,  it could  affect the Fund in a number of ways.  The cost of  equipment
acquisitions  could increase with  inflation,  but such cost increases  could be
offset by the Fund's ability to increase lease rates in an inflationary  market.
Revenues from existing leases would not generally  increase with  inflation,  as
the Fund does not generally  expect to provide for rent escalation  clauses tied
to inflation in its leases. Nevertheless,  the anticipated residual values to be
realized  upon the sale or re-lease of equipment  upon lease  terminations  (and
thus the overall  cash flow from the Fund's  leases) may be expected to increase
with inflation as the cost of similar new and used equipment increases.

            Fluctuations  in  prevailing  interest  rates  could also affect the
Fund. The cost of capital reflected in interest rates is a significant factor in
determining  market  lease rates and the pricing of lease  financing  generally.
Higher  interest  rates could  affect the cost of Fund  borrowing,  reducing its
yield on leveraged  investments or reducing the  desirability  of leverage.  The
Fund would also expect that increases or decreases in prevailing  interest rates
would  generally  result in  corresponding  increases  or decreases in available
lease rates on new leases. Except as discussed below, interest rate fluctuations
would  generally have little or no effect on existing  leases,  as rates on such
leases  would  generally  be fixed  without any  adjustment  related to interest
rates.


            The Fund may incur  short term bridge  financing  bearing a variable
interest rate, but such borrowing  would  generally  involve little  exposure to
increased interest rates because of its limited duration.  However,  the Manager
expects  that any  asset  securitization  financing  obtained  by the Fund  will
involve borrowing at a variable interest rate based on an established  reference
rate. The Manager would seek to mitigate the Fund's exposure to increases in the
interest rate by engaging in hedging transactions that would effectively fix the
interest  rate  obligation of the Fund.  The  Manager's  policy will be to incur
variable  rate  financing  only  under  conditions  and  terms  which  limit the
potential adverse effect on the Fund's  anticipated  return on the related lease
transactions. Other than in connection with short-term bridge financing or asset
securitization  financing,  the Manager will seek to avoid borrowing under terms
which provide for a rate of interest which may vary. The Manager will attempt to
limit any other variable interest rate borrowing to those instances in which the
lessee agrees to bear the cost of any


                                       61

<PAGE>



increase in the interest rate. If such debt is incurred  without a corresponding
variable  lease  payment  obligation,  the  Fund's  interest  obligations  could
increase  while lease  revenues  remain fixed.  Accordingly,  a rise in interest
rates may  increase  borrowing  costs and  reduce  the amount of income and cash
available for Distributions.  Historically,  the interest rates charged by major
banks have  fluctuated;  as a result,  the precise  amount of interest which the
Fund may be charged under such circumstances cannot be predicted.


Year 2000 Compliance


            The year 2000 issue is the result of computer programs being written
using two digits  rather than four to define the  applicable  year. As a result,
the  programs  are not designed to make the  transition  to the year 2000.  This
computer  software problem is commonly referred to as the "year 2000" (or "Y2K")
issue. Computer programs with date-sensitive  applications may, if not modified,
fail or miscalculate  dates,  causing system failures,  the inability to process
transactions or other disruptions of operations.


     The Manager uses, and expects on behalf of the Fund to use, primarily third
party software and is communicating with key software vendors to ensure that the
systems  used by the  Manager  and the Fund are not  impaired  by the year  2000
issue.  Currently,  all of ATEL's critical  software systems are believed by the
Manager to be Y2K  compliant  except  one.  Compliance  of this final  system is
expected to be obtained in the first quarter of 1999.  Based on discussions with
the Manager's third party software vendor, the Manager believes that any cost to
be  incurred  by the Fund to  bring  this  system  into  compliance  will not be
material.  The Manager's  third party software vendor for the system in question
has  indicated  that it expects  the cost of  compliance  to be  included in the
annual upgrade and maintenance cost for the software system,  and that the total
incremental  amount of such cost is expected to be minimal.  Any such cost would
be allocated by the Manager  over the seven  public funds  (including  the Fund)
under its management  which use or will use the software.  This allocation would
be based on the relative size of each such program, and, given the timing of the
expense  and the  formative  stage of the Fund at the time the  expense is to be
incurred,  its  proportionate  allocation  of the expected  minimal cost will in
itself  be  minimal.  In no event  will  offering  proceeds  be  required  to be
committed to any such expenditure. If any cost is incurred by the Fund, it would
be an operating expense funded out of operating revenues.


            The  ultimate  impact of the year 2000 issue on the Fund will depend
to a great  extent  on the  manner  in which  the  issue is  addressed  by those
businesses  whose  operational  capability is important to the Fund.  Failure of
these  businesses to be Y2K compliant may impact credit quality or cause a delay
in payments made to the Fund. The Manager has contacted  those  businesses  with
which it currently has material  relationships in order to request  verification
of Y2K compliance.  The Manager believes that each of those entities will have a
material  self  interest  in  resolving  any year 2000 issue  affecting  its own
operations.


            Equipment to be purchased by the Fund may include technology subject
to the year  2000  issue.  Potential  year  2000  issues  will be among the many
factors  considered  by the Manager and its  affiliates in analyzing and pricing
lease  transactions  for  acquisition  by the Fund. The lessees of the equipment
will select  such  equipment  and may be  expected to consider  year 2000 issues
themselves in determining the suitability of the equipment for the lessee's use.
Most equipment is expected to be subject to fixed term, non-cancellable,  triple
net  leases.  In  addition,  new  equipment  may be  covered  by  manufacturer's
warranties. As a result of such triple net provisions and warranties, repairs or
modifications  necessary  to correct  year 2000  issues  will most likely be the
responsibility  of the  manufacturers  or the lessees,  and the Fund's rights to
lease  payments as a triple net lessor  will not be  affected by any  functional
issues  affecting  the  equipment.  It is expected that the lease terms for such
equipment will extend well beyond the year 2000.

            As a  result  of the  year  2000  issue,  the  Fund  may  experience
increased  costs  resulting  from  delayed  payments  from  lessees,  the  costs
associated  with the  collection of those  payments,  or costs  associated  with
manual processing  efforts in the event of a Y2K related system failure.  In any
event,  the Manager does not expect these  increased  costs to be significant or
that such costs will have any material  adverse  effect on the operations of the
Fund.  Nevertheless,  the impact of year 2000 issues  cannot be  predicted  with
certainty  and the Fund may be affected  both by the impact these issues have on
parties with which it has direct contractual and other  relationships as well as
by their impact on  financial  institutions  and the national and  international
economy as a whole. Accordingly, there can be no assurance that year 2000 issues
might not have some adverse impact on the operating  results  experienced by the
Fund.

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                        FEDERAL INCOME TAX CONSEQUENCES

            The  following  is a summary  of all  material  federal  income  tax
considerations  which may be relevant to a prospective  Holder.  However,  it is
impractical to set forth in this Prospectus all aspects of federal, state, local
and  foreign  tax law which may  affect a  Holder's  participation  in the Fund.
Furthermore,  the  discussion of various  aspects of federal,  state,  local and
foreign taxation contained herein is based on the Internal Revenue Code of 1986,
as amended (the "Code"),  existing laws,  judicial  decisions and administrative
regulations,  rulings and  practice,  all of which are  subject to change.  Each
prospective  Holder should consult his own tax counsel to satisfy  himself as to
the tax consequences of his investment.

            Jackson  Tufts Cole & Black,  LLP ("Tax  Counsel") as tax counsel to
the Fund, will not prepare or review the Fund's income tax information  returns,
which will be prepared by the management  and  independent  accountants  for the
Fund.  The Fund will  make a number  of  decisions  on such tax  matters  as the
expensing or  capitalizing  of  particular  items,  the proper period over which
capital costs may be  depreciated  or amortized,  the  allocation of acquisition
costs between  Equipment and management fees and many other similar items.  Such
matters  will be  handled  by the Fund,  often  with the  advice of  independent
accountants  retained  by the Fund,  and  usually  will not be  reviewed  by Tax
Counsel.

Summary

            The  following  is a  summary  of,  and is  qualified  by,  the more
extensive  discussion of the federal income tax  consequences  set forth in this
section.

     Opinion of  Counsel.  Tax  Counsel  has  delivered  its opinion to the Fund
concerning  the  likely  outcome  on the  merits of a  challenge  to the  Fund's
position on certain material tax issues. There are certain issues upon which Tax
Counsel cannot express an opinion. (See "Opinion of Counsel.")

     Classification  as a  "Partnership".  Tax Counsel has  rendered its opinion
that the Fund  will be  classified  as a  partnership  for  federal  income  tax
purpose. (See "Classification as a Partnership.")

     Allocations  of Profits and  Losses.  In Tax  Counsel's  opinion it is more
likely than not that the tax  allocation  provisions in the Operating  Agreement
will  not  be  significantly  modified  by the  Internal  Revenue  Service  (the
"Service") and that each Holder's  distributive share of income,  gain, loss and
deduction will be determined and allocated  substantially in accordance with the
Operating Agreement. (See "Allocations of Profits and Losses.")

     Income  Recognition.  The Fund's tax  returns  will be  prepared  using the
accrual method of accounting. Under such method, the Fund will include in income
items such as rentals and  interest  as and when earned by the Fund,  whether or
not  received.  (See "Income  Recognition.")  It is possible that a Holder's tax
liabilities may exceed cash  distributions to him in corresponding  years.  (See
"Income Recognition" and "Tax Liabilities in Later Years.")

     Taxation of Holders of Units.  A Holder's  share of Fund  income  generally
will not be identical to the Holder's share of Distributions.  Any Distributions
in excess of a Holder's  adjusted  tax basis in his Units will cause such Holder
to  recognize  such  excess as  taxable  income.  (See  "Taxation  of Holders of
Units.")

     Limitations on Deduction of Losses. There are certain limitations that will
restrict  the  ability of a Holder to utilize his  distributive  share of losses
from  the Fund to  offset  income  from  other  sources.  (See  "Limitations  on
Deduction of Losses.")


                                       63

<PAGE>



     Tax Status of Leases.  In order for the Fund and  Holders to be entitled to
depreciation  deductions, a lease of Equipment must be treated as a lease rather
than a sale or  financing  for  federal  income tax  purposes.  The  Manager has
represented that any initial lease of an item of Equipment acquired with the Net
Proceeds will comply or will  substantially  comply with the  equipment  leasing
guidelines  of the  Service  if the cost of such item  exceeds  10% of the Gross
Proceeds of this offering.  Furthermore,  the Manager has agreed to use its best
efforts  to cause any  other  lease  entered  into by the Fund to  satisfy  such
guidelines.  If the Fund's leases are treated as sales or financings rather than
leases for federal  income tax  purposes,  the Fund and the Holders would not be
entitled to depreciation  deductions  with respect to such leases.  On the other
hand, a portion of the lease rental payments  (otherwise fully taxable) would be
deemed to  constitute  a return of  capital,  which  would not be taxable to the
Holders. (See "Tax Status of Leases.")

     Deductibility  of  Management  Fees.  The Fund  intends to deduct the Asset
Management  Fee for  services  performed by the Manager or its  Affiliates.  The
Service  may  challenge  the  deductibility  of all or a  portion  of the  Asset
Management Fee. (See "Deductibility of Management Fees.")

     Sale or  Exchange  of Fund  Equipment.  The Fund's  gain or loss on sale or
disposition  of an item of  Equipment  will equal the  difference  between  sale
proceeds  (including  the amount of any  indebtedness  to which the Equipment is
subject)  and the  Fund's  adjusted  tax  basis  in the  Equipment.  In  certain
circumstances,  the  amount of tax  payable  by a Holder on his share of gain on
sale of Equipment may exceed his share of cash proceeds  therefrom.  (See "Sales
or Exchanges of Fund Equipment.")

     Disposition  of  Units.  On sale or  disposition  of Units,  a Holder  will
recognize gain equal to the excess,  if any, of cash received (plus the Holder's
share of any Fund  liabilities)  over the Holder's tax basis in the Units.  Such
gain will be taxed at  ordinary  income tax rates to the extent of  depreciation
recapture.  In certain  circumstances,  the amount of tax payable by a Holder on
the gain  realized from a sale or  disposition  of his Units may exceed the cash
received therefrom. (See "Disposition of Units.")

     Fund Elections.  The Fund is not expected to file an election under Section
754 of the Code.  The absence of such election may have an adverse effect on the
marketability and sale price of Units. (See "Fund Elections.")

     Investment by Qualified  Plans and IRAs.  The Fund will generate  unrelated
business  taxable  income to Holders who are Qualified  Plans or IRAs,  with the
result  that the Fund  income  will be  subject  to tax to the  extent  that the
Qualified  Plan's or IRA's  unrelated  business  taxable income from all sources
exceeds $1,000. (See "Investment by Qualified Plans and IRAs.")

     Alternative Minimum Tax. The tax preference items and adjustments under the
alternative  minimum  tax that may be present in the Fund  include the excess of
depreciation  deductions  claimed over deductions that would be allowable if the
Equipment were subject to depreciation  using the 150% declining balance method,
switching to the straight-line  method in later years. (See "Alternative Minimum
Tax.")

Opinion of Counsel

            The Fund has obtained an opinion  from  Jackson  Tufts Cole & Black,
LLP ("Tax  Counsel")  concerning the likely outcome on the merits of a challenge
to the Fund's position on certain federal income tax issues.  The opinion states
that the summary of federal income tax  consequences to the Holders set forth in
this  Prospectus  under the headings  "Risk Factors  Partnership  Status," "Risk
Factors - Certain Other Tax  Considerations,"  " Risk Factors - Tax Opinion" and
"Federal Income Tax  Consequences"  has been reviewed by Tax Counsel and, to the
extent such summaries involve matters of law,

                                       64

<PAGE>


Tax Counsel is of the opinion that such statements of law are accurate under the
Code, the Treasury Regulations and existing interpretations thereof.

            The opinion of Tax Counsel is based upon the facts described in this
Prospectus,  upon  facts as they have been  represented  by the  Manager  to Tax
Counsel,  and upon the  assumption  that the Fund will  operate its  business as
described in the  Prospectus.  Any alteration of the facts may adversely  affect
the opinion rendered. Furthermore, the opinion is based on the Code, current and
proposed Treasury Regulations, current published administrative positions of the
Service  contained  in Revenue  Rulings and  Revenue  Procedures,  and  judicial
decisions, which are subject to change either prospectively or retroactively.

            In the  preparation  and  rendition of its opinion,  Tax Counsel has
considered  and  addressed  in the  offering  materials  all of the material tax
issues  which Tax Counsel  believes  involve  the  reasonable  possibility  of a
challenge by the Service.

            Each  prospective  Holder  should  note that the  opinion  described
herein  represents  only Tax  Counsel's  best legal  judgment and has no binding
effect or official status of any kind. Thus, in the absence of a ruling from the
Service,  there can be no  assurance  that the Service  will not  challenge  the
conclusion or propriety of any of Tax Counsel's  opinions or that legislative or
administrative  changes or court  decisions may not be  forthcoming  which would
significantly  modify the statements  expressed herein.  Any such changes may or
may not be retroactive  with respect to  transactions  prior to the date of such
changes.

            Treasury  Regulations and certain ethical standards require specific
opinions to be rendered in connection  with an opinion of counsel  regarding the
federal tax consequences of a "tax shelter" investment. For this purpose, a "tax
shelter" is an investment  that has, as a significant or intended  feature,  the
generation  of tax  losses  or tax  credits  to  shelter  taxable  income or tax
liability from other sources. The Fund is not a "tax shelter" within the meaning
of the Treasury Regulations and said ethical standards.  Therefore, although Tax
Counsel is rendering its opinion on certain  material  federal income tax issues
relating  to an  investment  in the  Fund,  such  opinion  will not  follow  the
standards applicable to opinions with respect to "tax shelters."

            It should also be noted that there are certain issues upon which Tax
Counsel  cannot  express an opinion  because:  (i) the issue is subject to facts
that are not presently known and cannot readily be determined, (ii) the issue is
subject to future events, or (iii) the issue involves a question of law on which
there is  insufficient  judicial  or other  authority  upon  which a  conclusive
opinion can be based. Except for certain expenses that Tax Counsel has indicated
must be capitalized,  no opinion is expressed as to whether certain fees will be
deductible as ordinary and necessary  expenses  reasonable in amount in relation
to services rendered, and no opinion is expressed as to the proper allocation of
various  fees  and  expenses,   the  proper  periods  for  their   deduction  or
amortization,  or  whether  certain  fees  are  properly  allocable  to the cost
recovery  basis of the  Equipment.  If the  Fund's  position  were  successfully
challenged  by  the  Service,  the  asserted  deductions  could  be  reduced  or
eliminated. This would result in a proportionate increase in the taxable income,
or decrease in tax loss,  of the Holders for the tax year such  deductions  were
reduced or eliminated, resulting in the Holders being required to pay additional
tax for such year. In addition,  no opinion is expressed on the issue of whether
the Fund will be determined to be a "dealer" with respect to the Equipment.

Classification as a "Partnership"

            Provided that the Fund does not elect to be treated as a corporation
for federal  income tax purposes,  under the default  provisions of the Treasury
Regulations  issued  under  Code  Section  7701 (the  so-called  "check-the-box"
rules), the

                                       65

<PAGE>


Fund  will  be  classified  as a  partnership  and  will  not be  treated  as an
association  taxable as a  corporation  for  federal  income tax  purposes.  The
Manager  has  represented  to Tax  Counsel  that the Fund  will not make such an
election.

            The  treatment of the Fund as a partnership  for federal  income tax
purposes  is  based  upon the  present  provisions  of the  Code,  the  Treasury
Regulations,  and existing judicial and administrative  interpretations thereof,
all of which are subject to change. If the applicable Treasury  Regulations were
to be amended,  it is possible  that the Fund would not qualify as a partnership
under the amended regulations.

            Notwithstanding  the two  preceding  two  paragraphs,  if Units  are
considered  "publicly  traded," the Fund will be treated as a corporation  under
the  publicly  traded  partnership  provisions  of  Code  Section  7704.  (Being
classified  as a publicly  traded  partnership  also may have other  adverse tax
consequences.  See  "Limitation on Deduction of Losses Passive Loss  Limitation"
below.)  The Fund will be treated as  publicly  traded if Units are traded on an
established  securities  market or are readily tradable on a secondary market or
the substantial  equivalent thereof. An established securities market includes a
securities  exchange  as well as a  regular  over-the-counter  market.  Treasury
Regulations  under Code Section 7704 state that a secondary  market is generally
indicated by the  existence of a person  standing  ready to make a market in the
interests  of the  entity,  or where  the  holder of an  interest  has a readily
available,  regular and ongoing  opportunity  to sell or exchange  his  interest
through a public means of obtaining or providing  information  on offers to buy,
sell or exchange interests. Complicity or participation of a fund is relevant in
determining  whether  there is  public  trading  of its  units.  A fund  will be
considered as  participating  in public trading where trading in its units is in
fact  taking  place and the  fund's  governing  documents  impose no  meaningful
limitation on holders'  ability to readily  transfer their units. A fund's right
to refuse to  recognize  transfers is not a  meaningful  limitation  unless such
right is exercised (except in the case of transfers by reason of death,  divorce
or gift and occasional accommodation transfers).

            Whether the Units will become readily tradable on a secondary market
or the substantial  equivalent  thereof cannot be predicted with certainty.  The
Units  will not be  deemed  "readily  tradable  on a  secondary  market  (or the
substantial  equivalent thereof)" if any of the safe harbors provided for in the
Treasury  Regulations under Code Section 7704 is satisfied.  One of these is the
"2% safe harbor." It provides that a secondary market or its equivalent will not
exist if the sum of the  interests in capital or profits  attributable  to those
interests  that are sold or otherwise  transferred  during a fund's taxable year
does not exceed 2% of the total interests in capital or profits.

            Although neither the Fund nor the Manager will have any control over
an  independent  third  person  establishing  a secondary  market in Units,  the
Operating  Agreement requires that the Holders obtain the consent of the Manager
prior to any transfers of Units.  The Manager intends to exercise its discretion
in granting and withholding its consent to transfers in such a manner as to fall
within  the  parameters  of the  2%  safe  harbor  articulated  in the  Treasury
Regulations.  Accordingly,  based  on  representations  of  the  Manager  of its
intention  to  comply  with  the  2%  safe-harbor   provision  of  the  Treasury
Regulations,  Tax Counsel is of the opinion that, more likely than not, the Fund
will not be considered a "publicly traded" partnership.

            If the Fund were  treated  for  federal  income tax  purposes  as an
association  taxable  as a  corporation  in any  taxable  year,  (i) it would be
required to pay federal income taxes upon its taxable income,  rather than there
being no tax on income at the Fund  level;  (ii)  state and local  income  taxes
could be imposed on the Fund;  (iii) losses of the Fund would not be  reportable
by the Holders on their personal income tax returns;  and (iv) any Distributions
would be  taxable  to a Holder as  ordinary  income to the  extent of current or
accumulated  earnings  and  profits  or  treated  as gain  from  the sale of the
Holder's Units to the extent any Distribution exceeded such earnings and profits
and the tax basis of such Holder for the Units. In addition,  Distributions from
the Fund  would be  classified  as  portfolio  income  and,  thus  would  not be
available to offset passive  activity losses of any Holder.  (See "Limitation on
Deduction of Losses - Passive Loss Limitation" below.) If after

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<PAGE>


a period of  operations  the Fund  were  deemed  to have  become an  association
taxable as a corporation for federal income tax purposes,  such change in status
would result in taxable  income to a Holder  measured by the excess,  if any, of
his share of the  liabilities  of the Fund over the adjusted basis of his Units.
The effect of the foregoing would be to substantially reduce the effective yield
on an investment in Units.

            THE FOLLOWING  DISCUSSION IS BASED UPON THE ASSUMPTION THAT THE FUND
WILL BE CLASSIFIED AS A PARTNERSHIP FOR FEDERAL INCOME TAX PURPOSES.

Allocations of Profits and Losses

            Under Section 704(b) of the Code, a holder's  distributive  share of
fund income,  gain,  deduction or loss will be determined in accordance with the
operating  agreement,  unless  the  allocations  contained  therein  do not have
"substantial  economic  effect," in which case the  distributive  shares will be
determined in accordance with the holders' interests in the fund.

            An allocation has "economic  effect" under the Treasury  Regulations
if: (i) each  holder's  share of fund  items,  including  certain  nondeductible
expenditures  (such as  syndication  expenses),  is  reflected by an increase or
decrease in the capital  account  established for the holder;  (ii)  liquidation
proceeds are distributed in accordance with capital account balances;  and (iii)
any  holder  with a  capital  account  deficit  following  the  distribution  of
liquidation  proceeds  is  required  to restore  such  deficit  to the fund.  In
addition,  an  allocation  can have  economic  effect  even if a  holder  is not
required to restore a deficit  balance in his capital  account,  but only (i) to
the extent the allocation does not reduce his capital account balance below zero
(after  reducing the capital  account for certain  adjustments,  allocations  or
distributions  in excess of income which are reasonably  expected in the future)
and (ii) if the  operating  agreement  contains a "qualified  income  offset." A
operating  agreement  contains a "qualified income offset" if it provides that a
holder who unexpectedly receives such an adjustment,  allocation or distribution
that reduces his capital account below zero will be allocated  income or gain in
an amount and manner sufficient to eliminate his deficit capital account balance
as quickly as possible.

            With respect to allocations of loss and deductions  attributable  to
nonrecourse  debt,  such  allocations  will  be  respected  under  the  Treasury
Regulations if the holders who were allocated the deductions  bear the burden of
the future  income  related  to the  previous  deductions.  In  particular,  the
following  additional  elements must be satisfied:  (i) the operating  agreement
must provide for  allocations of nonrecourse  deductions in a manner  consistent
with  allocations,  which  have  substantial  economic  effect,  of  some  other
significant  fund item  attributable  to the property  securing the  nonrecourse
liability;  and (ii) the  operating  agreement  must  contain  a  "minimum  gain
chargeback." An operating  agreement  contains a "minimum gain chargeback" if it
provides  that, if there is a net decrease in fund "minimum  gain" during a fund
taxable  year,  all holders will be allocated  items of fund income and gain for
such year (and, if  necessary,  subsequent  years) in proportion  to, and to the
extent  of, an amount  equal to the  portion of such  holder's  share of the net
decrease in fund minimum gain.  The amount of fund minimum gain is determined by
computing  the amount of gain (of  whatever  character),  if any,  that would be
realized  by the  fund  if it  disposed  of the  fund  property  subject  to the
nonrecourse liability in full satisfaction thereof.

            The Operating Agreement prohibits losses from being allocated to the
Holders that would cause  deficit  Capital  Accounts in excess of their share of
Fund Minimum Gain. Nonrecourse deductions (if any) will be allocated in the same
manner as  operating  profits and losses.  The  Operating  Agreement  contains a
minimum gain chargeback  provision and a qualified  income offset provision that
are intended to comply with the  provisions  of the Treasury  Regulations  under
Section  704(b) of the Code.  The  Operating  Agreement  provides  that  Capital
Accounts of the Holders will be maintained in accordance  with the provisions of
the Treasury  Regulations  and proceeds on  liquidation  will be  distributed in
accordance

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<PAGE>

with the  positive  Capital  Account  balances of the  Holders.  Therefore,  Tax
Counsel is of the opinion  that it is more likely than not that the  allocations
included  in the  Operating  Agreement  would not be  significantly  modified if
challenged by the Service.

            Under Section 704(b),  the economic  effect of the Fund  allocations
also must be "substantial."  Tax Counsel notes that the meaning and scope of the
substantiality  requirements  are  unclear at this time.  Based on the  existing
language of the  Treasury  Regulations,  Tax  Counsel  does not believe the Fund
allocations present any material substantiality issues. Consequently,  as stated
above,  Tax Counsel is of the  opinion  that it is more likely than not that the
allocations to the Holders would not be  significantly  modified by the Service.
However,  Tax Counsel  cautions  that no assurance can be given that the Service
will  not  interpret  the  Regulations  in  a  manner  that  could  cause  those
allocations  to be  treated  as  lacking  substantiality.  If the  Service  were
successful in  challenging  the Fund's method of allocating  profits and losses,
then this may  decrease  the  Holders'  shares of taxable  loss or increase  the
Holders' shares of taxable income.

Income Recognition

            The Fund's tax returns will be prepared  using the accrual method of
accounting. Under the accrual method, the Fund will include in income items such
as interest and rentals as and when earned by the Fund, whether or not received.
Thus, the Fund may be required to recognize income sooner than would be the case
under the cash receipts and disbursements method of accounting.

            In certain circumstances,  where a lease provides for varying rental
payments increasing in the later years of the lease (step rentals),  Section 467
of the Code  requires the lessor to take the rental  payments  into income as if
the rent accrued at a constant  level rate.  This  provision  applies to certain
sale-leaseback  transactions and certain long-term  leases.  The Manager expects
that certain of the Fund's Equipment leases may provide for rental payments that
increase  or decrease  in the later  years of such  leases,  and Section 467 may
operate to require  the Fund to accrue the rental  payments  on such leases at a
constant  level  rate.  This  could  result  in  Holders   receiving   increased
allocations of taxable income (or reduced allocations of loss) in earlier years,
without any increase in  Distributions  until  subsequent  years.  An additional
consequence  could be a  conversion  of a portion  of the Fund's  rental  income
(passive income) from any such lease to interest income (portfolio income).

Taxation of Holders of Units

            As long as the Fund is treated as a partnership  for federal  income
tax purposes,  it will not be subject to any federal  income taxes,  although it
will file federal  partnership  information  tax returns for each calendar year.
Within 75 days after the end of each  calendar  year,  Holders  will be provided
with federal income tax  information  relevant to the Fund and their own federal
income tax  returns.  Each  Holder will be required to report on his own federal
income tax return his share of Fund items of income, gain, loss,  deduction,  or
credit and, accordingly, may be subject to tax on his distributive share of Fund
income whether or not any Distribution is made to him.

            If the amount of a Distribution to a Holder for any year exceeds the
Holder's  share of the  Fund's  taxable  income for the year,  the  excess  will
constitute a return of capital.  A return of capital is applied  first to reduce
the tax basis (as  described  below) of the Holder's  Units,  and any amounts in
excess of such tax basis will  generally be taxable as a gain from the sale of a
capital asset. However, a distribution of money or property which is received by
a  Holder  in  exchange  for  an  interest  in  "inventory   items"  which  have
substantially  appreciated in value or "unrealized  receivables"  (as defined in
Code Section 751) will generally result in the receipt of ordinary income to the
extent that such  distributions  are in excess of the Holder's pro rata share of
the Fund's tax basis in such property.  The term "unrealized  receivables" under
Section 751

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includes depreciable property subject to depreciation recapture, but only to the
extent of the amount  which would be treated as  ordinary  income upon a sale of
the property. (See "Disposition of Units" below.)

Limitation on Deduction of Losses

            There  will be  certain  limitations  on the  ability of a Holder to
utilize his distributive share of losses of the Fund to offset income from other
sources: (1) losses will be limited to the extent of a Holder's tax basis in his
Units;  (2) losses  will be limited to the  amounts for which a Holder is deemed
"at risk"; (3) losses derived from  investments in "passive  activities" will be
limited to a Holder's income from such activities;  and (4) losses  attributable
to  "activities  not  engaged  in  for  profit"  will  also  be  limited.  These
limitations are described below.

            Tax Basis. Generally,  each Holder's tax basis for his Units will be
equal to the price paid therefor plus his share of those liabilities of the Fund
with  respect  to  which  none of the  Holders  nor the  Fund  has any  personal
liability. (See "Investment Objectives and Policies - Borrowing Policies.") Each
Holder will  increase (or  decrease) the tax basis of his Units by the amount of
his  allocable  share of the  Fund's  taxable  income (or loss) for any year and
reduce the tax basis of his Units by the amount of any Distributions  (including
any  reduction in his share of Fund  nonrecourse  debts) made by the Fund to him
during  such  year.  If the tax basis of a Holder's  Units  should be reduced to
zero,  the  amount  of  any  Distributions  (including  any  reduction  in  Fund
nonrecourse debts) in excess of his share of the income reported by the Fund for
any year will be  treated  as gain  from the sale or  exchange  of the  Holder's
Units.

            On his own federal income tax return each Holder may, subject to the
limitations  discussed  below,  deduct his share of the Fund's  taxable loss, if
any, to the extent of the tax basis for his Units;  Fund losses which exceed his
tax basis may be carried  over  indefinitely  and,  subject  to the  limitations
discussed  below,  deducted in any year to the extent his tax basis is increased
above zero.

            At Risk Rules.  Under Code  Section  465, the amount of losses which
may be  claimed by an  individual  investor  or a  closely-held  corporation  (a
corporation  of which more than 50% in value of its shares is owned  directly or
indirectly by not more than five individuals) in equipment leasing activities is
limited  to the amount  which the  investor  has "at risk" with  respect to such
activities.  For purposes of the at risk rules,  the amount at risk is generally
equal to the sum of money and the adjusted basis of property  contributed to the
activity plus borrowed amounts for which the taxpayer is personally liable.

            The total  amount of money paid by each Holder for his Units will be
considered at risk, but any Fund borrowings are not expected to be considered at
risk.  Accordingly,  subject to the passive loss rules discussed below, a Holder
will only be able to deduct his share of Fund  losses in an amount  equal to the
purchase  price  of  his  Units  (as  adjusted  for  Fund  income,   losses  and
Distributions). A Holder's at risk amount will be decreased by his share of Fund
losses and Distributions, and will be increased by his share of Fund income. Any
losses in excess of a Holder's at risk amount will be treated as a deduction  in
succeeding taxable years, again subject to the at risk limitations. Recapture of
previously  allowed losses will be required if a Holder's  amount at risk at the
end of the year is reduced below zero (e.g., by Distributions from the Fund).

            Under  the  Code,  the  Fund  will be  permitted  to  aggregate  its
equipment  leasing  activities only with respect to Equipment  placed in service
during the same taxable year. Therefore,  the "at risk" rules will be applied to
the net taxable income or loss resulting from leasing  Equipment which is placed
in  service  during  the same  taxable  year.  This  could  result in a Holder's
deduction for losses with respect to certain  Equipment being limited by the "at
risk"  rules,  even  though  he must  recognize  income  with  respect  to other
Equipment.


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<PAGE>


            Passive Loss Limitation.  Code Section 469 imposes a limitation (the
"passive  loss  limitation")  on the amount of losses that a taxpayer  may claim
from an activity in which the taxpayer does not  materially  participate.  Under
the passive loss  limitation,  net losses from a passive  activity,  such as the
leasing  activity of the Fund,  may not be used to offset  active  income (e.g.,
compensation) or portfolio income (e.g., interest and dividends). Passive losses
may,  however,  be used to offset passive income from any other passive activity
carried on by the taxpayer.

            The  equipment  leasing  activities  of the Fund will  constitute  a
passive activity.  As a result,  the losses incurred by the Fund will constitute
passive  losses and may thus be offset by a Holder's  passive  income from other
activities but not active or portfolio income from other activities.  Any excess
passive  losses for a particular  year will be "suspended"  and carried  forward
indefinitely.  Suspended  passive losses may be used to offset passive income in
future  years and may be  claimed in full  (even to offset  active  income) if a
Holder  disposes  of all of his  Units in a fully  taxable  transaction  and the
transferee is not a related person to the Holder.

            The  passive  loss   limitation  is  applied  after  the  "at  risk"
limitation.  Thus,  if a loss is  disallowed  under  the "at  risk"  rules for a
particular  year, it will not again be disallowed by the passive loss limitation
for such year. Rather, for the year in which the Holder becomes "at risk" in the
activity,  the suspended "at risk" loss will become  subject to the passive loss
limitation,  and, as a result,  even if a loss is permitted  under the "at risk"
rules, it may still be disallowed under the passive loss rules.

            Section  469(k)  of the Code  provides  that  income  and loss  from
"publicly traded" partnerships which are not taxable as corporations for Federal
income tax  purposes  will be treated as separate  from income and loss from any
other publicly traded  partnerships and also as separate from any income or loss
from passive  activities.  This provision should not apply to the Fund since the
Fund  should  not be  considered  to be  publicly  traded;  if it  were to be so
considered,  it would be taxable as a  corporation.  (See  "Classification  as a
'Partnership'" above.)

            Hobby  Losses.  Under Section 183 of the Code,  certain  losses from
activities  not engaged in for profit are not allowed as  deductions  from other
income.  Although one of the  objectives of the Fund is to provide  Holders with
Distributions  (see  "Investment  Objectives  and  Policies"),  there  can be no
assurance  that the Fund will be deemed to be engaged in an activity  for profit
because the applicable test is based on the facts and circumstances from time to
time. It is conceivable that the Service may assert that the Fund is not engaged
in an activity for profit, notwithstanding any "profit objective" which the Fund
purports to have.  Prospective  Holders  should  consult  their own tax advisers
regarding the impact of Code Section 183 on their particular situations.

Tax Status of Leases

            The decision as to whether a specific  lease is to be categorized as
a lease rather than as a sale for federal income tax purposes involves a factual
determination,  and, accordingly,  no assurance can be given that, upon audit by
the Service, the leases of Equipment would be treated as such for federal income
tax purposes. If they are treated as sales or financings rather than leases, the
Fund and the  Holders  would not be  entitled to  depreciation  deductions  with
respect  to such  leases.  On the  other  hand,  a portion  of the lease  rental
payments (otherwise fully taxable),  would be deemed to constitute  amortization
of such financing or sales proceeds which would not be taxable to the Fund.

            The Fund does not intend to apply to the  Service  for a ruling that
any leases of Equipment which conform to the Service  guidelines will be treated
as leases for federal income tax purposes.  However,  Service guidelines are set
forth in

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<PAGE>

Revenue Procedures 75-21,  1975-1 C.B. 715, 75-28,  1975-1 C.B. 752, 76-30,
1976-2 C.B. 647 and 79-48,  1979-2 C.B. 529,  which  provide that,  unless other
facts and circumstances  indicate a contrary intent, for advance ruling purposes
only, the Service will consider the lessor in a leveraged  lease  transaction to
be the owner of property if:

            (a)  the  lessor  has a  minimum  unconditional  investment  in  the
property  at all  times  during  the  lease of at  least  20% of the cost of the
property and can demonstrate  that the estimated  residual value of the property
is at least 20% of the cost of the property;

            (b) the  lessee  does not have an option to  purchase  the  property
(other  than at fair  market  value) and the  lessor  does not have the right to
require anyone to purchase the property;

            (c) no part of the  cost of the  property  subject  to the  lease is
furnished by the lessee other than for full consideration;

            (d) the lessee  does not lend the lessor any of the funds  necessary
to purchase the property; and

            (e) the  lessor  expects to  receive a profit  from the  transaction
apart from tax benefits.

            The Manager  has  represented  that any initial  lease of an item of
Equipment  acquired with the Net Proceeds will meet the foregoing  guidelines if
the amount of Net Proceeds  used to acquire such item exceeds an amount equal to
10% of the maximum Gross Proceeds of this offering.  Although,  as stated above,
determination of lease status is made on a case-by-case basis, Tax Counsel is of
the opinion  that any lease  satisfying  the  foregoing  guidelines  should more
likely than not qualify as a lease for federal income tax purposes.

Depreciation

            MACRS .  Under  the  "Modified  Accelerated  Cost  Recovery  System"
("MACRS"),  the cost of depreciable  personal  property  placed in service after
1986 ( so-called "recovery property") may be depreciated using certain specified
depreciation   methods  (referred  to  as  "recovery  methods")  over  specified
depreciable  lives (referred to as "recovery  periods")  generally  ranging from
three to 20 years.  Under MACRS the methods of recovery and the recovery periods
apply equally to new and used property.

            The cost of MACRS property is recovered over the applicable recovery
period  using the 200%  declining  balance  method,  except  for 15- or  20-year
recovery property for which the 150% declining balance method is utilized.

            The Code contains  "anti-churning"  provisions to prevent  taxpayers
from  utilizing  MACRS on property  placed in service  prior to January 1, 1987.
These provisions  generally  attempt to reach situations where personal property
used  during 1986 is  transferred  without a real change in the owner or user of
such property and MACRS  depreciation  would be more favorable than depreciation
under prior law. The Fund may acquire used  Equipment  which will be leased back
to the owner or continued under lease to the original lessee. If the Fund is not
able to use MACRS with respect to such Equipment,  the  depreciation  deductions
thereon will be determined under the rules in effect prior to 1987 ("ACRS").  In
such cases, depreciation deductions allowed with respect to such Equipment could
be less in the early  years and  greater in later  years  than the  depreciation
deductions  allowable under MACRS,  and the Holders' share of Fund losses in the
early years could be reduced.


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<PAGE>


     It should be noted that the amount by which the depreciation  deductions on
Equipment using the 200% declining  balance method exceeds the amount that would
have been allowed had  depreciation  deductions been  calculated  using the 150%
declining  balance method will  effectively be an item of tax  preference.  (See
"Alternative Minimum Tax.")

     Recapture.  All depreciation  deductions with respect to the Equipment will
be subject to recapture at ordinary  income  rates upon the  disposition  of the
Equipment. ( See "Sales or Exchanges of Fund Equipment.")

     Basis.  The tax  basis of the  Equipment  for  depreciation  purposes  will
include  reasonable  costs payable in  connection  with the  acquisition  of the
Equipment.

     Limitations on the Use of MACRS. Under certain  circumstances,  in addition
to those set forth above, a taxpayer is required to recover the cost of property
over a period longer than its MACRS recovery period.  The relevant  restrictions
include the use of the property  predominantly outside the United States and the
use of equipment by a foreign or  "tax-exempt"  entity.  These  limitations  are
described below.

            (1) Property Used Predominantly Outside the United States. The MACRS
provisions of the Code contain special rules for recovering the cost of personal
property  used  predominantly  outside  the United  States.  Under Code  Section
168(g),  the cost of such  property is to be recovered  using the  straight-line
method over a period equal to the property's "asset  depreciation range midpoint
life as set forth in  Treasury  Regulations  under  Code  Section  167 (the "ADR
Midpoint Life"),  utilizing a half-year  convention and no salvage value. If the
Treasury  Regulations  do not provide an ADR Midpoint  Life, a 12-year period is
used.

            Section   168(g)(4)  of  the  Code  provides  an  exception  to  the
predominant use limitation  described above.  Under this subsection of the Code,
certain types of property which are used predominantly outside the United States
will qualify for the normal MACRS cost recovery rules;  the exceptions  include,
among others,  aircraft  registered by the administrator of the Federal Aviation
Agency  which are  operated  to and from the United  States  with some degree of
frequency.

            (2)  Tax-Exempt  Leasing.  Section 168 of the Code provides that the
use of personal  property by a tax-exempt  entity (including (i) certain foreign
persons or entities,  (ii) certain  governmental  units, and (iii) certain other
tax-exempt  organizations)  will result in a reduction of the tax benefits which
would  otherwise be  available.  The portion of such  "tax-exempt  use property"
leased to a tax-exempt entity must be depreciated using the straight-line method
over the  greater  of (i) the ADR  Midpoint  Life  (12  years if there is no ADR
Midpoint Life assigned to such property), or (ii) 125% of the lease term.

            If any property  which is not otherwise  tax-exempt  use property is
owned by a fund  which has both a  tax-exempt  entity  and a person who is not a
tax-exempt entity as a holder, such tax-exempt  entity's  proportionate share of
such property is treated as tax-exempt use property  unless (i) all  allocations
to the tax-exempt entity of fund items are qualified; or (ii) the income derived
from such share of the property is subject to the unrelated business tax.

            Income derived by tax-exempt  entities  other than foreign  entities
from the Fund should be subject to the unrelated  business tax (see  "Investment
by Qualified  Plans and IRAs," below);  thus,  admission of such Qualified Plans
and IRAs as Holders should not, in and of itself,  cause any of the Equipment to
be treated as tax-exempt use property. If the Service successfully asserted that
the income of the Fund is not subject to the  unrelated  business  tax, then the
Fund  would be  required  to  maintain  separate  depreciation  systems  for its
Equipment subject to MACRS, and, as a result,  depreciation deductions available
to Holders in the early years of operations of the Fund would be reduced.


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<PAGE>

Deductibility of Management Fees

            The Fund  intends to deduct the Asset  Management  Fee for  services
performed by the Manager or its Affiliates.  It is possible that the Service may
challenge the  deductibility  of all or a portion of the Asset Management Fee on
the basis that (i) the amount  thereof is excessive,  (ii) that all or a portion
of the Asset  Management  Fee should  properly be  considered  payment for other
services  performed by, or other value  provided by, the recipient  thereof,  or
(iii) that payments for such  services  rendered are not  deductible.  If such a
challenge  by the Service were  successful,  the  asserted  deductions  could be
reduced or  eliminated.  This would  result in a  proportionate  increase in the
taxable income, or decrease in tax loss, of the Holders resulting in the Holders
being required to pay additional tax.

Tax Liabilities in Later Years

            Although none of the prior programs sponsored by the Manager and its
Affiliates have  experienced  such a situation,  it is possible that, after some
years  of  Fund   operations,   a  Holder's  tax  liabilities  may  exceed  cash
distributions  to him in  corresponding  years.  Such situations would typically
arise  at the  "cross-over  point,"  i.e.,  the  point in time  when the  Fund's
nondeductible   loan   amortization   payments  on  its  Equipment   exceed  its
depreciation  deductions.  This is principally due to (i) the short periods over
which Equipment can be depreciated  under MACRS and (ii) the annual increases in
the  amount  of   nondeductible   principal   amortization   payments   and  the
corresponding decreases in the amount of deductible interest payments which will
typically occur on level payment  obligations  secured by the Equipment.  To the
extent a Holder's tax liabilities exceed cash distributions, such excess will be
a  nondeductible   out-of-pocket  expense  to  a  Holder.  Based  on  historical
experience  with  similar  programs,   the  Manager  does  not  believe  such  a
"crossover" is likely to occur.

Sales or Exchanges of Fund Equipment

            Gain  realized by the Fund on a sale of any  Equipment  will, to the
extent of all depreciation  deductions claimed thereon,  be subject to recapture
and taxed as  ordinary  income.  Unless the Fund is a "dealer"  in the  property
sold,  any gain  realized by the Fund in excess of such  depreciation  recapture
will, generally,  be treated as long-term capital gain (if the property has been
held for more than one year) under Code Section  1231.  Any loss realized upon a
sale will  generally  be treated as an ordinary  loss (if the  property has been
held for more than one year) under Code Section 1231.

            A  "dealer"  is one  who  holds  property  "primarily  for  sale  to
customers in the ordinary  course of  business".  Under  existing  law,  whether
property is so held is a question of fact,  depending  upon all of the facts and
circumstances  of the  particular  transactions.  The Fund  intends to  purchase
Equipment for investment only, to engage in the business of owning and operating
such Equipment,  and to make such occasional  sales thereof as in the opinion of
the Manager is consistent with the Fund's  investment  objectives.  Accordingly,
the Fund does not anticipate that it will be treated as a dealer with respect to
any of its  Equipment,  although there is no assurance that the Service will not
take the contrary position.

            If the  Fund  were to sell an item of  Equipment  on an  installment
basis, all depreciation recapture income would be recognized at the time of sale
whether  or  not  payments  were  to  be  made  in  succeeding   taxable  years.
Furthermore,  if the Fund were to sell an item of  Equipment  on an  installment
basis, the "original issue discount" rules might apply to the sale.
(See "Original Issue Discount".)

            Unless the  Equipment is found to be "dealer  property" as discussed
above, and assuming the Equipment has been held for more than one year, any gain
or loss generally will be treated as "Section 1231" gain or loss,  except to the
extent of recapture of certain cost recovery or depreciation  deductions,  which
will be taxed as ordinary  income.  A Holder's  allocable  share of Fund Section
1231 gains or losses,  if any, for the  particular  year will be netted with the
Holder's other Section

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<PAGE>


1231 gains and losses;  a "net" Section 1231 loss will be treated as an ordinary
loss.  A net  Section  1231 gain will be treated as a  long-term  capital  gain,
except to the extent of the  taxpayer's  "non-recaptured"  net Section 1231 loss
(generally,  the excess of net Section  1231 losses over net Section  1231 gains
for the five preceding taxable years), to which extent the net Section 1231 gain
will be treated as ordinary income.

            Because the Fund's gain on a sale of  Equipment  will be measured by
the  difference  between  the  sales  proceeds  (including  the  amount  of  any
indebtedness  to which the property is subject)  received  upon the sale and the
Fund's  adjusted  tax basis of the  Equipment,  the  amount of tax  payable by a
Holder in respect  of his share of such Fund gain may in some  cases  exceed his
share of the cash proceeds therefrom. In the event of a foreclosure of a debt on
Equipment  owned by the Fund,  the Fund may realize  gain equal to the excess of
such indebtedness over its adjusted tax basis of the Equipment,  and the Holders
may realize taxable income although they may not receive any cash  distributions
as a result of the foreclosure.

Disposition of Units

            The  amount of gain  which a Holder  will  realize  upon the sale or
other  disposition of his Units will equal the excess, if any, of (i) the amount
realized  by the Holder for the Units  over (ii) the  Holder's  tax basis in the
Units.  The amount of any loss which a Holder will  realize on the sale or other
disposition  of the  Holder's  Units will equal the  excess,  if any, of (i) the
Holder's  tax basis  over  (ii) the  amount  realized  for the  Units.  For this
purpose,  the amount realized on the sale of the Units will include the Holder's
share of any Fund liabilities.  As a result, a sale or disposition of Units by a
Holder may result in a tax liability in excess of cash proceeds  received on the
sale or other disposition of such Units.

            Gain or loss  realized  by a Holder  on the sale of Units  generally
will  have  the  character  of  capital  gain or  loss,  and,  in the case of an
individual Holder, any such gain will be subject to tax at a maximum rate of 20%
if the Units  have been held for more than 18 months  and 28% if the Units  have
been held for more than 12 months but not more than 18 months (as opposed to the
maximum rate of 39.6% imposed on ordinary  income and short-term  capital gain).
However,  any gain  realized  on the sale or  other  disposition  of a Unit by a
Holder which is attributable to (i) unrealized  receivables,  e.g., the Holder's
share of previous Fund depreciation  deductions (computed as if the Equipment of
the Fund had been sold at its fair market  value on the date the Units are sold)
or  (ii)inventory  items,  will be taxed at ordinary income rates. A Holder must
recognize such  depreciation  recapture upon the sale or other  disposition of a
Unit in the  year  of sale or  disposition,  regardless  of the  amount  of sale
proceeds received in the year of sale or disposition.

Liquidation of the Fund

            The Operating  Agreement  provides  generally that on liquidation of
the Fund its  assets  will be sold and the  sale  proceeds  will be  distributed
pursuant to the terms of the Operating  Agreement.  The Holder will realize gain
or loss on the sale of its assets and each  Holder will report his share of such
gain or loss, together with his share of other items of Fund income,  gain, loss
and deduction for the year of liquidation.  In addition, a Holder will recognize
gain or loss under Code Section 731 measured by the difference  between the cash
he receives in liquidation  (including cash constructively  received as a result
of relief of liabilities) and the adjusted tax basis of his Units.  Gain or loss
recognized  generally will be taxable as short-term or long-term capital gain or
loss, depending on whether the Holder has held his Units for more than one year.
However,  gain attributable to the recapture of cost recovery deductions will be
taxable as ordinary  income.  See "Sales or Exchanges of Fund  Equipment." It is
anticipated that all or  substantially  all of any gains will be attributable to
such deductions and taxed as ordinary income.

                                       74

<PAGE>


            In the case of a Holder  with a taxable  year other than the taxable
year of the  Fund,  the  termination  of the  taxable  year of the Fund upon its
liquidation may result in the Holder reporting in his tax return for the year of
liquidation his share of more than twelve (12) months' taxable income or loss of
the Fund.

Original Issue Discount

            The original issue discount  ("OID") rules apply to  seller-provided
financing furnished to a purchaser of property. If the interest rate paid by the
buyer in connection  with such financing is not at least equal to an established
federal  rate,  interest will be imputed at that rate (the  "applicable  federal
rate").  In addition,  the payee of deferred  interest on an OID  obligation  is
required to recognize such interest income ratably as it accrues. The applicable
federal  rate is equal to the interest  rate of U.S.  government  securities  of
comparable maturity.

            If the Fund were to sell an item of Equipment and provide  financing
to the buyer bearing  interest at a rate less than the applicable  federal rate,
the Fund's gain on sale would be reduced by the application of that rate. Such a
reduction in gain on the sale would be offset,  in whole or in part, by interest
income  exceeding the nominal  interest  received by the Fund,  and the interest
income generally would be taxable at a higher rate.

Fund Elections

            The Code  permits  entities  such as the Fund to elect to adjust the
tax basis of fund  property upon the transfer of units by sale or exchange or on
the death of a holder,  and on the  distribution  of  property  by the fund to a
holder  (Section 754  election).  The general effect of such an election is that
transferees of the units will be treated,  for the purpose of  depreciation  and
gain, as though they had acquired a direct interest in the fund assets,  and the
fund will be treated for such purposes,  upon certain  distributions to holders,
as though it had newly  acquired an  interest  in the fund assets and  therefore
acquired a new cost basis for such assets. Any such election, once made, may not
be revoked without the consent of the Service.

            As a  result  of the  complexities  and  added  expense  of the  tax
accounting  required to implement such an election,  the Manager does not intend
to cause the Fund to make a Section 754 election.  Accordingly, upon the sale of
Equipment  subsequent  to the  transfer of a Unit,  taxable  gain or loss to the
transferee of the Unit will be measured by the  difference  between his share of
the gross  proceeds  of such sale and his share of the  Fund's  tax basis in the
Equipment (which, in the absence of a Section 754 election, will be unchanged by
the  transfer  of the Unit to him),  rather than by the  difference  between his
share of the amount realized and the portion of his purchase price for his Units
that was allocable to the Equipment.  As a consequence,  such transferee will be
subject  to tax upon a portion of the  proceeds  which,  as to such  transferee,
constitutes a return of capital,  if the purchase price of his Units exceeds his
share of the adjusted basis for all Equipment.  As a result,  any benefits which
might have been available to transferee  Holders of Units by reason of a Section
754  election  will  not be  available.  Moreover,  a Holder  may  have  greater
difficulty in selling his Units since the  purchaser  will obtain no current tax
benefits  from his  investment to the extent that the  purchaser's  cost of such
Units exceeds his allocable share of the Fund's basis in its assets.

            It is  also  important  to note  that  the  Fund  may  make  various
elections for federal tax reporting purposes which could result in various items
of income,  gain, loss,  deduction and credit being treated  differently for tax
purposes than for accounting purposes.


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<PAGE>


Treatment of Gifts of Units

            Generally,  no gain or loss is  recognized  for  federal  income tax
purposes as a result of a gift of  property.  However,  if a gift of a Unit were
made at a time  when the  Holder's  allocable  share of the  Fund's  nonrecourse
indebtedness  exceeded  the  adjusted  tax basis of his Unit,  such Holder would
realize gain for federal  income tax purposes  upon the transfer of such Unit to
the extent of such excess.  A charitable  contribution of Units by a Holder also
would  result  in  income  or gain to the  extent  that  the  Holder's  share of
nonrecourse  liabilities  exceeds the adjusted tax basis in his Units.  Gifts of
Units may also  result in gift tax  liability  pursuant  to the rules  generally
applicable to all gifts of property.

Investment by Qualified Plans and IRAs

            Qualified  pension,  profit-sharing,  stock bonus plans, Keogh Plans
(collectively,  "Qualified Plans") and Individual  Retirement  Accounts ("IRAs")
are generally exempt from taxation except to the extent that "unrelated business
taxable  income"  (determined in accordance  with Sections  511-514 of the Code)
exceeds  $1,000 during any fiscal year.  Because the Fund will be engaged in the
business of equipment leasing, each Qualified Plan's or IRA's distributive share
of the Fund's taxable income will constitute "unrelated business taxable income"
("UBTI").  Therefore,  a Qualified Plan or IRA that purchases  Units in the Fund
will be  required to report its pro rata share of the Fund's  taxable  income as
unrelated business taxable income if and to the extent that the Qualified Plan's
or IRA's  unrelated  business  taxable income from all sources exceeds $1,000 in
any taxable year.

            A  portion  of the  income  from  property  subject  to  acquisition
indebtedness  also  will be  included  in the  unrelated  business  income  of a
tax-exempt  entity. For this purpose,  indebtedness will constitute  acquisition
indebtedness  if it was incurred  directly or indirectly in connection  with the
acquisition or improvement of property.

            Except to the  extent of gain or loss  from the sale,  exchange,  or
other disposition of Equipment subject to acquisition  indebtedness,  and except
to the extent  Equipment  constitutes  inventory or property held  primarily for
sale to customers in the ordinary course of a trade or business,  gains from the
sale or exchange of Equipment generally will be excluded from unrelated business
taxable  income.  However,  any gain on the  disposition  of Equipment  which is
characterized  as ordinary  income as a result of the recapture of  depreciation
deductions in all events will constitute  unrelated  business  taxable income of
Qualified Plans and IRAs. (See "Sales or Exchanges of Fund Equipment" above.)

            If an IRA has UBTI in excess of the $1,000 exemption for any taxable
year,  the IRA is  subject  to income  tax on this  excess at the same tax rates
applicable  to trusts  and  estates.  Even if an IRA is not  subject  to federal
income tax for any  taxable  year,  if the gross  income  taken into  account in
computing UBTI exceeds $1,000, the IRA customer is still obligated to file a tax
return for such year. Generally,  this tax return must be filed with the Service
by April 15th of the following year.

            Penalties may be imposed by the Service for failing to file this tax
return when required,  and, if tax is due, additional penalties and interest may
be imposed if the tax is not paid in a timely manner.  In addition,  any tax due
should be paid directly from the IRA. Payment of the tax by the IRA customer may
have other adverse tax consequences.

            AN IRA CUSTOMER WHO MAKES AN  INVESTMENT IN HIS IRA WHICH MAY RESULT
IN THE  REALIZATION  OF UBTI IS URGED TO OBTAIN  THE ADVICE OF A  QUALIFIED  TAX
ADVISOR ON THE EFFECT OF  REALIZATION  OF UBTI BY HIS IRA AND ANY  OBLIGATION TO
FILE  INCOME TAX RETURNS AND TO PAY TAX ON SUCH UBTI.  FOR A  DISCUSSION  OF THE
ERISA  CONSIDERATIONS  OF AN INVESTMENT IN THE FUND BY A QUALIFIED  PLAN OR IRA,
SEE "ERISA CONSIDERATIONS."

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Individual Tax Rates

            General.  The highest  individual tax rate  currently is 39.6%.  The
benefits of personal  exemptions  are phased out for taxpayers  with an adjusted
gross income over certain  thresholds.  Further,  otherwise  allowable  itemized
deductions  (other  than  medical  expenses,   casualty  and  theft  losses  and
investment  interest)  are  reduced  by an  amount  equal to 3% of a  taxpayer's
adjusted gross income over certain thresholds.  In no event,  however,  are such
deductions reduced by more than 80%.

            Capital Gains and Losses.  Net capital gain (i.e., the excess of net
long-term  capital  gains  over  short-term  capital  losses)  is taxed at a 28%
maximum rate. As a general matter,  upon the sale or other  disposition of their
Units at a gain,  individual  Holders who have held their Units for more than 12
but not more than 18 months will be subject to federal income tax at the maximum
tax rate of 28% (15% for  individuals  whose  taxable  income  does not exceed a
certain  threshold).  Where an  individual  has held his  Units for more than 18
months,  the  maximum  tax  rate  on net  capital  gain  will  be 20%  (10%  for
individuals who would otherwise pay 15%).  Effective for taxable years beginning
after  December 31, 2000, the 20% rate will be reduced to 18% for Units that are
acquired after December 31, 2000 and held more than five years (and the 10% rate
will be reduced to 8% regardless of when the Units were acquired).

            In  the  case  of  noncorporate  Holders,  capital  losses,  whether
long-term or  short-term,  will only be  available to offset  $3,000 of ordinary
income in a given  taxable  year.  Any  remaining  capital  loss may be  carried
forward indefinitely.

            Two Percent Floor on Miscellaneous Itemized Deductions. Noncorporate
Holders  may  deduct  expenses  paid  or  incurred  for (a)  the  production  or
collection  of income,  (b) the  management,  conservation,  or  maintenance  of
property  held for the  production  of  income,  or (c) in  connection  with the
determination,  collection  or refund of a tax, only to the extent such expenses
exceed 2% of  adjusted  gross  income.  This rule is to apply  with  respect  to
indirect deductions through pass-through  entities (such as the Fund) of amounts
that would not be allowable  as a deduction  if paid or incurred  directly by an
individual. Although it is not anticipated that the Fund will incur any material
expenses of this nature, the 2% limit described above may cause certain expenses
allocable to Holders to be nondeductible.

Alternative Minimum Tax

            The  alternative  minimum tax ("AMT") rate for individuals is 26% of
so much of the taxable excess as does not exceed  $175,000,  plus 28% of so much
of the taxable excess as exceeds  $175,000.  For this purpose,  "taxable excess"
means the amount by which  alternative  minimum taxable income ("AMTI")  exceeds
the exemption amounts: $45,000 for married taxpayers filing jointly, $33,750 for
single  individuals  and $22,500 for married  individuals  filing  separately or
trusts.  (The foregoing  exempt amounts are reduced for taxpayers with income in
excess of certain specified  levels.) The alternative  minimum tax is imposed to
the extent that such tax exceeds the taxpayer's  "regular tax" liability for the
year.

            AMTI is computed  differently  than  taxable  income for regular tax
purposes with respect to various "tax preference" items, including,  among other
items, depreciation deductions. Deductions for depreciation of personal property
are computed using slower  depreciation  methods (i.e., a 150% declining balance
method rather than a 200% declining  balance method).  Because  depreciation for
AMT purposes is not as  front-loaded as for regular federal income tax purposes,
the basis of depreciated property for AMT purposes will be higher than its basis
for regular federal income tax purposes. Thus, upon disposition of the property,
the taxpayer may recognize  less gain for AMT purposes than for regular  federal
income tax purposes.


                                       77

<PAGE>

            The tax preference  items and adjustments that may be present in the
Fund include,  with respect to an item of Equipment,  the excess of depreciation
deductions  claimed  over  deductions  that  would be  allowable  if the item of
Equipment  were  permitted  depreciation  deductions  using  the 150%  declining
balance  method,  switching  to the  straight  line  method in later  years.  No
additional items of tax preference are expected to be generated by the Fund, but
certain items of tax preference may apply in the case of certain  Holders due to
their  particular facts and  circumstances  unrelated to the Fund. The effect of
the AMT on each Holder will depend upon each Holder's particular  circumstances.
Each prospective  Holder should therefore  consult his own tax advisor as to the
effect of the purchase of Units on his AMT liability.

Fund Tax Returns and Tax Information

            The  Manager  will file the Fund's  tax  returns  using the  accrual
method of  accounting  and will adopt the  calendar  year as the Fund's  taxable
year. The Fund will provide tax  information to the Holders within 75 days after
the close of each Fund  taxable  year.  If a Holder is  required to file its tax
return on or before  March 15, it may be  necessary  for the Holder to obtain an
extension to file if the tax  information  referred to above is not  distributed
until the end of the 75-day period.

            Holders will be required to file their returns  consistent  with the
information provided on the Fund's informational return or notify the Service of
any inconsistency.  A failure to notify the Service of an inconsistent  position
will allow the  Service  automatically  to assess and  collect  the tax, if any,
attributable to the inconsistent treatment.

            Under Section  6050K of the Code, a selling  Holder will be required
to inform the Fund of the sale or exchange of the Holder's  Units within 30 days
of the transaction or, if earlier, January 15 of the calendar year following the
calendar  year in which the  transaction  occurs.  The Fund will be  required to
inform the Service of each such transaction in connection with the filing of its
tax  information  return for the taxable year in which the  transaction  occurs.
Failure to provide these notices may result in substantial  penalties.  The Fund
will also be  required  to inform  both the seller and the buyer of Units of the
proportionate  interest of those Units in the unrealized  receivables (including
potential  depreciation  recapture)  and  inventory  items  of  the  Fund.  This
notification must be made prior to February 1 of the calendar year following the
calendar year in which the transaction occurs.

Interest and Penalties

            With certain  exceptions,  a penalty will be assessed for each month
or fraction thereof (up to a maximum of five months) that the Fund fails to file
(or files an incomplete) federal information return. In addition, a penalty will
be assessed if the Fund fails to furnish to the Holders a correct  Schedule  K-1
to the federal  income tax return for the Fund on or before the  prescribed  due
date (including any extension thereof).

            All  penalties  related  to the  accuracy  of tax  returns  will  be
consolidated  into one penalty equal to 20% of the portion of an  understatement
resulting  from  one or  more  of the  following:  negligence  or  disregard  of
applicable rules and regulations;  any substantial valuation overstatement;  and
any substantial understatement of federal income tax.

            The penalty for  underpayment  of tax  attributable  to  substantial
valuation  overstatement  applies only if (i) the value or adjusted basis of any
property  as  claimed  on an income tax  return  exceeds  200% of the  correctly
determined  amount of its value or adjusted basis and (ii) the  underpayment  of
tax attributable to the substantial overvaluation exceeds $5,000 ($10,000 in the
case of a corporation  other than an S corporation or personal holding company).
In the  event  an  underpayment  of tax is  attributable  to a  gross  valuation
misstatement,  then the penalty is increased from 20% to 40%. A gross  valuation
misstatement  occurs only if (i) the value or adjusted  basis of any property as
claimed on an income tax return exceeds 400% of the correctly  determined amount
of its value or adjusted basis and (ii) the underpayment of tax

                                       78

<PAGE>


attributable to such gross valuation misstatement exceeds $5,000 ($10,000 in the
case of a corporation, other than an S corporation or personal holding company).
All or any part of the penalty may be waived by the Service upon the  taxpayer's
showing that a reasonable basis existed for the valuation  claimed on the return
and that the claim was made in good  faith.  If the Fund were to  overstate  the
value of Equipment, a Holder might be liable for this penalty.

            There is a 20%  penalty  on the  amount  of an  underpayment  of tax
attributable  to  the  "substantial   understatement"  of  a  tax  liability.  A
substantial understatement is defined as an understatement of federal income tax
for the taxable  year that  exceeds the  greater of 10% of the  required  tax or
$5,000 ($10,000 for  corporations  other than personal  holding  companies and S
corporations).  The  penalty  can  be  avoided  either  by  (i)  disclosing  the
questionable item on the tax return and showing there was a reasonable basis for
the tax  treatement of such item by the taxpayer,  or (ii) by showing that there
was  "substantial  authority"  for  taking  the  position  on the  return.  If a
questionable  item is related to a tax shelter  (defined as any entity,  plan or
arrangement  whose  principal  purpose is the avoidance or evasion of tax),  the
understatement  penalty  can  only be  avoided  by  showing  that  the  taxpayer
reasonably  believed  that the  treatment of the item was "more likely than not"
the proper  treatment.  It should be noted that the  Manager  will not cause the
Fund to claim a deduction unless the Manager believes,  based upon the advice of
its accountants or counsel,  that  substantial  authority  exists to support the
deduction.

            All interest payable with respect to a federal income tax deficiency
will be compounded  daily.  Interest  rates are  redetermined  quarterly and are
based on the federal  short-term  interest rate (the average rate of interest on
Treasury  obligations  maturing in less than three years) for the first month of
the preceding quarter plus 3%.

Audit of Tax Returns

            An audit of the Fund's  information return may result in adjustments
to items of income, gain, deduction, loss or credit reported on such information
return. At a minimum such adjustments will result in a corresponding  adjustment
to the federal income tax returns of individual Holders.  Such an audit may also
result in a full audit of a Holder's  individual  tax return (and thereby result
in adjustments to non-Fund as well as Fund items).

            The tax treatment of items of Fund income, loss, deduction or credit
will be determined at the Fund level in a unified Fund  proceeding,  rather than
in  separate  proceedings  with  the  Holders.   Similarly,  only  one  judicial
proceeding contesting a Service determination may be filed on behalf of the Fund
and all Holders.

            Provided  that the Fund has more than 100  Holders,  in the event of
proposed tax deficiency adjustments pursuant to an administrative  proceeding at
the Fund level, in general,  each Holder (other than a Holder owning less than a
1% profits  interest  in the Fund) whose name and  address is  furnished  to the
Service (a "notice-holder")  will receive notice of the commencement of the Fund
level audit as well as notice of the final Fund administrative  adjustment.  All
Holders  will have the right to  participate  in the Fund audit  proceeding.  In
general,  each Holder will be free to negotiate  his own  settlement of the Fund
items with the Service. If the Service were to enter into a settlement agreement
with any Holder,  it would be required to offer the same settlement terms to the
other  Holders who request  settlement.  The Fund must  designate a "tax matters
partner" who may enter into a settlement on behalf of, and binding upon, Holders
owning less than a 1% profits interest in the Fund. The tax matters partner will
not be  permitted  to settle on behalf of  Holders  with less than a 1%  profits
interest if (i) an aggregate of 5% or more of such  Holders  designate  with the
Service a notice  Holder to  receive  notice  from the  Service on behalf of the
group or (ii) such Holders  notify the Service that the tax matters  partner may
not settle on their  behalf.  Except for the  above-described  settlement  power
granted the tax matters partner, any settlement entered into by any

                                       79

<PAGE>


Holder (including the tax matters partner) will not be binding on any Holder who
does not wish to be bound thereby.  However,  the tax matters partner may extend
the statute of limitations  for  assessment of a deficiency  with respect to all
Holders. The Fund has designated the Manager as the tax matters partner.

Registration Provisions

            Sections  6111 and  6112 of the Code  require  (i)  registration  of
certain  tax   shelters  and  (ii)  the   maintenance   of  lists  of  investors
participating in certain tax shelter investments, respectively.

            Under  Section  6111,  anyone who  organizes  a "tax  shelter"  must
register  such  shelter  with the Service not later than the day on which occurs
the first offering for sale of interests  therein. A "tax shelter" is defined as
any  investment  with  respect  to which a person  could  reasonably  infer from
representations  made or to be made in connection  with an offer for sale of any
interest  that,  as of the close of any of the first five years,  the ratio with
respect to any investor of (A) the sum of the  aggregate  gross  deductions  and
350% of the  credits  potentially  allowable  to (B) the  aggregate  of the cash
invested and the adjusted  basis of other  property  contributed by the investor
(reduced by any  liability to which the property is subject)  (the  "tax-shelter
ratio) is greater than two to one.

            The Manager has  determined  that,  because of the limited amount of
leverage that will be placed on the Equipment,  and because a significant amount
of the Equipment  will be "net leased" by the Fund,  the Fund is not expected to
generate  a tax  shelter  ratio  of  greater  than  two to  one.  Based  on this
determination, the Manager will not register the Fund as a tax shelter.


Miscellaneous Fund Tax Aspects

            Fees  for  the  syndication  of the  Fund  will  be  required  to be
capitalized;  Fund  organization fees will be required to be capitalized and may
be amortized  over a five-year  period.  Under Code Section 195, a taxpayer must
amortize "start-up expenditures" over a period of 60 months,  beginning with the
date on which the business begins.  Start-up  expenditures are costs incurred in
investigating  the  creation or  organization  of a  business,  or in creating a
business, which would be deductible if incurred in connection with the expansion
of an existing business.

Foreign Tax Considerations

            As noted  above,  the Fund may acquire  Equipment  which is operated
outside the United  States.  As a  consequence,  Holders may be required to file
returns  and pay taxes in foreign  jurisdictions  with  respect  to the  foreign
source income of the Fund. The income taxed by the foreign jurisdiction would in
such a case be calculated according to the tax laws of the foreign jurisdiction,
which may or may not correspond with applicable United States standards.

            Holders who have foreign tax liabilities as a result of the purchase
of Units may be entitled  to a foreign tax credit or to a deduction  for foreign
taxes paid which can be utilized to reduce their United  States tax  liabilities
or taxable  income,  respectively.  The calculation of the foreign tax credit is
quite  complex and no assurance  can be given that a credit will be available in
the amount of any foreign tax paid. In particular, prospective Holders should be
aware that  United  States  law does not  generally  allow a foreign  tax credit
greater than the  taxpayer's  United States  federal  income tax liability  with
respect to the foreign  source  income of the taxpayer  calculated  according to
United States rather than the foreign jurisdiction's tax law. Because the United
States tax rate may be lower than the tax rate imposed by a foreign country,  it
is possible that a foreign  country might impose a tax in an amount greater than
the allowable foreign credit under United states

                                       80

<PAGE>

law.  In such a case,  Holders  would be subject to a higher  effective  rate of
taxation than if no foreign tax had been imposed. Each Holder should consult his
own  tax  advisor  regarding  the  applicability  of  foreign  taxes  to his own
situation.

            Prior to the Fund entering into an  arrangement  which  contemplates
the use of Equipment  outside the United  States,  the Manager will consult with
its counsel and with  special  tax advisor  located in the foreign  jurisdiction
concerning the possibility of structuring the transaction in a manner which will
enable the  Holders to avoid  being  required  to file income tax returns in the
foreign jurisdiction. The Manager has discretion to cause the Fund to enter into
any such arrangement.

Taxation of Foreign Persons

            Special rules in the Code govern the U.S. federal income taxation of
nonresident alien individuals,  foreign  corporations,  foreign partnerships and
other  foreign  investors  ("foreign  persons").  No  attempt is made to provide
herein more than a brief summary of some of the relevant rules. Holders that are
foreign  persons  should  consult their own tax advisors to fully  determine the
impact to them of United States federal, state and local income tax laws.

            Foreign  persons who own Units will be considered to be engaged in a
trade or business in the United States because of the activities of the Fund and
such activities will be deemed to be conducted through a permanent establishment
within the meaning of potentially applicable tax treaties.  Therefore, a foreign
person who becomes a Holder of Units will  generally  be required to file United
States tax returns on an annual  basis on which he must report his  distributive
share of the Fund's items of income,  gain, loss, deduction and credit, and will
be required to pay United States taxes at regular rates on his share of any Fund
net income that is effectively connected with a United States trade or business,
whether ordinary income or capital gains.

            Because the Fund will be deemed engaged in a United States business,
it will be required to withhold with respect to a foreign Holder's  distributive
share of the Fund's  "effectively  connected" income at the maximum regular rate
applicable  to such  foreign  Holder  (currently  39.6% for  individual  foreign
Holders  and  35% for  corporate  foreign  Holders).  Amounts  withheld  will be
creditable by a foreign Holder against the foreign Holder's United States income
tax liability.  Further, if any portion of a foreign Holder's distributive share
of Fund  income  is not  effectively  connected  with a United  States  trade or
business,  such  income may,  depending  on its  character,  be subject to a 30%
United States withholding tax (or such lower rates as may be prescribed under an
applicable income tax treaty).

            Foreign  corporations  that are  Holders  will also be  subject to a
branch profits tax equal to 30% (subject to reduction or complete elimination by
an  applicable  tax treaty) of the foreign  corporation's  earnings  and profits
effectively  connected  with a United  States  business  that are  withdrawn (or
deemed withdrawn) from investment in the United States.
This tax is payable in addition to the regular United States corporate tax.

            A foreign  Holder  may also be  subject  to tax on his  distributive
share of the Fund's income and gain in his country of  nationality  or residence
or  elsewhere,  against  which  the tax paid to the  United  States  may in some
instances be creditable. The method of taxation in such jurisdictions may differ
considerably  from the  United  States tax  system  described  herein and may be
affected  by the  United  States  characterization  of the Fund and its  income.
Prospective  foreign  Holders should consult their own tax advisors with respect
to their potential tax liability in such jurisdictions, as well as in the United
States, on income derived from an investment in the Fund.

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<PAGE>

Future Federal Income Tax Changes

            Neither the Manager  nor Tax  Counsel  can predict  what  additional
legislation,  if any,  may be  proposed  by members of  Congress  by the current
administration,  or by any  subsequent  administration,  nor can either  predict
which  proposals,  if any, might  ultimately be enacted.  Moreover,  neither the
Manager  nor Tax  Counsel  can  predict  what  changes  may be made to  existing
Regulations,  or what revisions may occur in the Service's ruling policies.  Any
such changes may have a retroactive  effect.  Consequently,  no assurance can be
given that the federal  income tax  consequences  of an investment in Units will
continue to be as described in this Prospectus.

State and Local Taxes

            In  addition  to the  federal  income tax  considerations  described
above,  prospective  Holders should  consider  applicable  state and local taxes
which may be imposed by various jurisdictions.  A Holder's distributive share of
the  income,  gain or loss  of the  Fund  will be  required  to be  included  in
determining  his  reportable  income  for  state or local  tax  purposes  in the
jurisdiction  in which he is a resident.  Moreover,  California  and a number of
other  states  in which the Fund may do  business  impose  taxes on  nonresident
Holders,  determined  with  reference  to their  pro rata  share of Fund  income
derived from such states;  any tax losses  associated  with an investment in the
Fund from  operations  in one state may not be available  to offset  income from
other sources taxable in a different state.

            California  and a number of other states have adopted a  withholding
tax procedure in order to facilitate  the  collection of taxes from  nonresident
and  foreign  Holders on Fund  income  derived  from such  states.  Any  amounts
withheld would be deemed  distributed  to the  nonresident or foreign Holder and
would therefore  reduce the amount of cash actually  received by the nonresident
or foreign Holder as a result of such distribution.  Nonresidents may be allowed
a credit  for the amount so  withheld  against  any income tax  imposed by their
state of residency. The Fund cannot, at present,  estimate the percentage of its
future income that will be from states which have adopted such  withholding  tax
procedures,  and it cannot therefore  estimate the required  withholding tax, if
any. In addition, while the Fund may apply to the applicable taxing authority of
such  states for a waiver (or a partial  waiver),  if any,  of such  withholding
requirements,  no  assurance  can be given that such waiver will  ultimately  be
granted.

            To the  extent  that a  nonresident  Holder  pays  tax to a state by
virtue of Fund  operations  within that state, he may be entitled to a deduction
or credit  against tax owed to his state of  residence  with respect to the same
income.  Furthermore,  estate or  inheritance  taxes  might be  payable  in such
jurisdiction upon the death of a Holder.

            PROSPECTIVE HOLDERS SHOULD BE AWARE THAT, IN COMPUTING THEIR TAXABLE
INCOME FOR THE PURPOSE OF DETERMINING  THEIR STATE INCOME TAX LIABILITIES,  THEY
MAY BE SUBJECT TO RULES WHICH ARE LESS FAVORABLE THAN THOSE UNDER FEDERAL INCOME
TAX LAWS.

Need for Independent Advice

            The  foregoing  summary is not intended as a substitute  for careful
tax planning,  particularly  as the income tax  consequences  associated with an
investment  in the Fund are complex and certain of them will not be the same for
all  taxpayers.  ACCORDINGLY,  EACH  PROSPECTIVE  PURCHASER OF UNITS IS STRONGLY
URGED TO CONSULT HIS OWN TAX  ADVISORS  WITH  SPECIFIC  REFERENCE TO HIS OWN TAX
SITUATION.

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<PAGE>


                              ERISA CONSIDERATIONS

Prohibited Transactions Under ERISA and the Code

            Section 4975 of the Code (which  applies to all Qualified  Plans and
IRAs) and Section 406 of the Employee Retirement Income Security Act of 1974, as
amended  ("ERISA")  (which does not apply to IRAs or to certain  Qualified Plans
that are not subject to ERISA's  fiduciary  rules) prohibit  Qualified Plans and
IRAs from engaging in certain transactions  involving "plan assets" with parties
that are "disqualified  persons" under the Code.  "Disqualified persons" include
fiduciaries of the Qualified Plan or IRA, officers, directors,  shareholders and
other owners of the company  sponsoring the Qualified  Plan and natural  persons
and legal entities sharing certain family or ownership  relationships with other
"disqualified persons."

            "Prohibited transactions" include any direct or indirect transfer or
use  of a  Qualified  Plan's  or  IRA's  assets  to  or  for  the  benefit  of a
disqualified person, any act by a fiduciary that involves the use of a Qualified
Plan's  or  IRA's  assets  in the  fiduciary's  individual  interest  or for the
fiduciary's own account, and any receipt by a fiduciary of consideration for his
or her own personal account from any party dealing with a Qualified Plan or IRA.
Under ERISA, a disqualified person that engages in a prohibited transaction will
be required to disgorge any profits made in connection  with the transaction and
will be  required  to  compensate  any  Qualified  Plan  that was a party to the
prohibited  transaction for any losses sustained by the Qualified Plan.  Section
4975 of the Code imposes excise taxes on a disqualified person that engages in a
prohibited  transaction with a Qualified Plan or IRA.  Section  408(e)(2) of the
Code  provides that an IRA will cease to be an IRA and will be treated as having
immediately  distributed  all of  its  assets,  if it  engages  in a  prohibited
transaction.

Plan Assets

            If the Fund's assets were  determined  under ERISA or the Code to be
"plan assets" of Qualified Plans and/or IRAs holding Units,  fiduciaries of such
Qualified  Plans and IRAs  might  under  certain  circumstances  be  subject  to
liability for actions taken by the Manager or its Affiliates, and certain of the
transactions  described  in this  Prospectus  in which  the Fund  might  engage,
including  certain  transactions  with Affiliates of the Fund,  might constitute
prohibited  transactions under the Code and ERISA with respect to such Qualified
Plans and IRAs, even if their acquisition of Units did not originally constitute
a prohibited transaction.  Moreover,  Qualified Plans (other than IRAs) might be
deemed to have  delegated  their  fiduciary  responsibility  to the  Manager  in
violation of ERISA.

            Although  under  certain   circumstances  ERISA  and  the  Code,  as
interpreted by the Department of Labor in currently effective regulations, apply
a  "look-through"  rule under which the assets of an entity in which a Qualified
Plan or IRA  has  made an  equity  investment  may  generally  constitute  "plan
assets,"  the  applicable   regulations  except  from  the  application  of  the
"look-through"  principle  investments in entities in which equity participation
in the entity by benefit plan investors is not significant.

            In order to qualify for the exception described above, "benefit plan
investors"  must at all  times  hold  less than 25% of the value of any class of
equity  interest  in the  entity.  For this  purpose,  the  value of any  equity
interests  held by a person  (other  than a  "benefit  plan  investor")  who has
discretionary  authority  or control  with respect to the assets of an entity or
any person who provides  investment  advice for a fee (direct or indirect)  with
respect to such assets,  or any affiliate of such a person,  is  disregarded.  A
"benefit plan investor" is any of the following:  (a) any employee  benefit plan
(as  defined in  Section  3(3) of ERISA,  which  definition  includes  Qualified
Plans),  whether or not it is subject to the provisions of Title I of ERISA, (b)
any plan described in Section 4975(e)(1) of the Code (which description includes
Qualified  Plans and IRAs),  and (c) any entity (such as a common or  collective
trust fund of a bank) whose underlying assets include plan assets by reason of a
plan's  investment in the entity.  As described  above under "Who Should Invest"
and below under "Summary of the Operating Agreement - Transferability of Units,"
the sale of Units during this offering and the subsequent transfer of

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<PAGE>


Units will be  limited to the extent  that the  Manager  deems it  necessary  to
qualify for this  exception.  Therefore,  the Fund's  assets should not be "plan
assets" of any  Qualified  Plan or IRA investor;  and no prohibited  transaction
should occur based on treatment of the Fund's underlying assets as "plan assets"
of Qualified Plan or IRA investors.

Other ERISA Considerations

            In addition to the above considerations in connection with the "plan
asset"  question,  a  fiduciary's  decision to cause a Qualified  Plan or IRA to
acquire Units should involve,  among other factors,  considerations that include
whether (a) the investment is in accordance  with the documents and  instruments
governing the Qualified Plan or IRA, (b) the purchase is prudent in light of the
potential  difficulties that may exist in liquidating  Units, (c) the investment
will provide  sufficient  cash  distributions  in light of the Qualified  Plan's
likely  required  benefit  payments,  (d) after an  acquisition  of  Units,  the
Qualified Plan's investments taken as a whole are sufficiently diversified so as
to minimize the risk of large losses,  (e) the  investment is made solely in the
interests of plan  participants,  and (f) the fair market value of Units will be
sufficiently  ascertainable,  with sufficient frequency, to enable the Qualified
Plan to value its assets on an annual  basis in  accordance  with the  Qualified
Plan's rules and policies.  Prospective  Qualified  Plan  investors  should note
that, with respect to the diversification of assets requirement, the legislative
history of ERISA and a Department  of Labor  advisory  opinion  indicate that in
determining  whether  the assets of a  Qualified  Plan that has  invested  in an
entity such as the Fund are sufficiently diversified, it may be relevant to look
through the Qualified Plan's interest in the entity to the underlying  portfolio
of assets owned by the entity,  regardless  of whether the  entity's  underlying
assets are  treated as "plan  assets"  for the purpose of ERISA's and the Code's
prohibited transaction and other fiduciary duty rules.

                       SUMMARY OF THE OPERATING AGREEMENT

            The  Operating  Agreement  (attached  hereto  as  Exhibit  B) is the
governing  instrument  establishing the Fund's right under the laws of the State
of California to operate as a limited liability company,  and contains the rules
under which the Fund will be operated.  The Operating Agreement will be executed
on behalf  of each  subscriber  upon his  admission  to the Fund by the  Manager
acting  pursuant  to  the  power  of  attorney  contained  in  the  Subscription
Agreement.

            The  following  is a brief  summary  of  certain  provisions  of the
Operating  Agreement.  It does not purport to be complete and it is  recommended
that each prospective  investor review the Operating  Agreement carefully in its
entirety.  Aspects of the Operating  Agreement  relating to  allocations  of Net
Income,  Net Loss and  Distributions  to Holders  and reports to the Members are
summarized elsewhere in this Prospectus.  See "Income, Losses and Distributions"
and "Reports to Holders."

The Duties of the Manager

            ATEL  Financial  Corporation  is  Manager  of the  Fund  and has the
exclusive  management  and control of all  aspects of the  business of the Fund.
Affiliates of the Manager will perform certain Equipment  acquisition,  leasing,
management and disposition services, as well as certain administrative services,
for the Fund. In the course of its management,  the Manager may, in its absolute
discretion,  acquire,  hold title to,  sell,  re-lease or  otherwise  dispose of
Equipment and interests  therein when and upon such terms as it determines to be
in the best interest of the Fund and employ such persons,  including  Affiliates
of the Manager,  as it deems necessary for the efficient  operation of the Fund.
However,  prior to the sale or other  disposition  of  Substantially  All of the
Assets of the Fund in any single 12-month period, except upon liquidation of the
Fund,  Holders owning more than 50% of the total  outstanding Units must consent
to such sale or other disposition.

                                       84

<PAGE>

Liability of Holders

            A Holder's  capital is subject to the risks of the Fund's  business.
He is not  permitted  to take  any  part in the  management  or  control  of the
business  and he may not be required  to  contribute  additional  capital at any
time. Under the California Act, a Holder will not be liable for Fund obligations
in excess of his  unreturned  capital  contribution  and share of  undistributed
profits.  Notwithstanding the foregoing,  a Holder will be liable to the Fund in
an  amount  equal to any  Distribution  made by the Fund to such  Holder  to the
extent that,  immediately after the Distribution is made, all liabilities of the
Fund, other than liabilities to Members on account of their interest in the Fund
and  liabilities  as to which  recourse  of  creditors  is limited to  specified
property of the Fund,  exceed the fair value of the Fund assets,  provided  that
the fair  value of any  property  that is  subject  to a  liability  as to which
recourse of  creditors  is so limited is included in the Fund assets only to the
extent that the fair value of the property exceeds such liability.

Term and Dissolution

            The Fund will  continue  for a maximum  period  ending  December 31,
2019,  but may be dissolved at an earlier date if certain  contingencies  occur.
The Fund intends to liquidate  its assets and  distribute  the proceeds  thereof
beginning  after the  Reinvestment  Period expires (at the end of the sixth full
year  following  the year during which the Final Closing Date occurs) with final
liquidation  expected to occur approximately ten to eleven years after the Final
Closing Date. A Holder may not withdraw from the Fund prior to dissolution,  but
may assign his Units to others or may, under certain circumstances, request that
the Fund  repurchase  his Units.  See  "Repurchase  of Units"  below  under this
caption. The contingencies whereupon the Fund may be dissolved are as follows:

            (a) The Fund becomes insolvent or bankrupt;

            (b) The removal, adjudication of bankruptcy,  insolvency, disability
or  incompetence  or  dissolution  or death of a Manager  unless  (i) there is a
remaining Manager, and the remaining Manager, within 45 days of the date of such
event,  elects to continue  the business of the Fund or (ii) if, upon removal of
the  last  remaining  Manager,  the  Members  holding  in  excess  of 50% of the
outstanding  Units  elect a successor  Manager  prior to the  effective  date of
removal and such successor Manager elects to continue the business of the Fund;

            (c) An election to dissolve upon the vote of Members owning more 
than 50% of the total outstanding Units; or

            (d) The  disposition  of all interests in Equipment and other assets
of the Fund and the receipt by the Fund of the proceeds of such disposition.

Voting Rights of Members

            In any vote of the Members, each Member will be entitled to cast one
vote for each Unit  which  such  Member  owns as of the date  designated  as the
record  date for such vote.  Notwithstanding  the  foregoing,  Units held by the
Manager or any  Affiliate of the Manager will not be entitled to vote,  and will
not be deemed to be  "outstanding"  for purposes of any vote, upon matters which
involve a conflict between the interests of the Manager and the Fund, including,
but not  limited  to,  any vote on the  proposed  removal or  withdrawal  of the
Manager as Manager or any proposed  amendment to the Operating  Agreement  which
would expand or extend the rights,  authorities  or powers of the  Manager.  The
Members  have the right,  by vote of Members  owning  more than 50% of the total
outstanding Units, to vote upon:

            (a)    Removal or voluntary withdrawal of the Manager;

            (b)    Election of a successor Manager;

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<PAGE>


            (c)    Termination and dissolution of the Fund;

            (d) Amendment of the Operating Agreement, provided such amendment is
not for the purpose of reflecting the addition or substitution  of Members,  the
reduction of Capital  Accounts or for any other  purposes  prohibited  under the
Operating Agreement as described below;

            (e) The sale or other disposition of Substantially All of the Assets
in a single sale, or in multiple sales in the same twelve-month  period,  except
in  the  liquidation  and  winding  up of the  business  of the  Fund  upon  its
termination and dissolution; and

            (f) The extension of the term of the Fund.

            Without the consent of the Members to be  adversely  affected by the
amendment,  the  Operating  Agreement  may not be amended so as to (i) convert a
Holder  into a Manager;  (ii) modify the limited  liability  of a Holder;  (iii)
alter the interest of the Members in Net Income, Net Loss and Distributions;  or
(iv)  affect  the status of the Fund as a  partnership  for  federal  income tax
purposes.

Dissenters' Rights and Limitations on Mergers and Roll-ups

            Section  16.7  of the  Operating  Agreement  provides  that  Members
holding not less than 90% of the  outstanding  Units must  approve any  proposal
that involves an acquisition, conversion, merger or consolidation transaction in
which the Holders are issued new securities in the resulting entity.  The rights
of any  dissenting  Holders will be as provided  under Section 16.7 and Sections
17600 through 17613 of the  California  Act. Such  provisions  generally  give a
dissenting  Member the right,  subject to certain  procedural  requirements,  to
require that the company repurchase the dissenting  Member's interest at a price
equal to its fair market value.

Meetings

            The  Manager may at any time call a meeting of the Members or a vote
of the Members without a meeting, on matters on which they are entitled to vote,
and shall call such meeting or for a vote without a meeting following receipt of
a  written  request  therefore  of  Members  holding  10% or more  of the  total
outstanding  Units.  Upon such written request of Members holding 10% or more of
the total  outstanding  Units, such Members may propose a vote by all Members on
any matter on which Members are entitled to vote under the Operating Agreement.

Books of Account and Records

            The Manager is responsible  for keeping books of account and records
of the Fund reflecting all of the  contributions  to the capital of the Fund and
all of the  expenses  and  transactions  of the Fund.  Such books of account and
records will include the following:

                   (i) A current  list of the full name and last known  business
            or residence address of each Member set forth in alphabetical  order
            together with the Original Invested Capital,  the Units held and the
            share in Net Income and Net Loss of each Member;

                   (ii)  A  copy  of  the  articles  of  organization   and  all
amendments;


                                       86

<PAGE>




                   (iii)  Copies of the Fund's  federal,  state and local income
tax or information  returns and reports, if any, for the six most recent taxable
years;

                   (iv) Copies of the original of the  Operating  Agreement  and
all amendments;

                   (v) Financial  statements of the Fund for the six most recent
fiscal years; and

                   (vi) The Fund's  books and  records  for at least the current
and past three fiscal years.

            Such  books of account  and  records  will be kept at the  principal
place of  business of the Fund in the State of  California,  and each Member and
his  authorized  representatives  shall  have,  at all times  during  reasonable
business  hours,  free  access  to and the  right to  inspect  and copy at their
expense such books of account and all records of the Fund. Upon the request of a
Member,  the Manager shall promptly deliver to such Member at the expense of the
Fund a copy of the  information  described in (i),  (ii) and (iv) above.  In the
event a Member is  required  to compel  the  Manager to  produce  the  foregoing
records as a result of the  Manager's  breach of its  obligation to deliver such
information,  the Manager shall  reimburse the Member for all  reasonable  costs
actually incurred in compelling production.

Status Of Units

            Each Unit will be fully  paid and  nonassessable  and all Units have
equal voting and other rights,  except as noted above with respect to the voting
of Units held by the Manager or its Affiliates.

Transferability of Units

            The Manager may condition the effectiveness of any proposed transfer
of Units or an interest in Units on such representations,  warranties,  opinions
of counsel, and other assurances as it considers appropriate as to:

            (i)    such assignment or transfer not resulting,  in the opinion of
                   counsel for the Fund,  in the Fund being  considered  to have
                   terminated within the meaning of Section 708 of the Code;

            (ii)   the transferee not being a minor or an incompetent;

            (iii) the  transfer or  assignment  not  violating  federal or state
securities laws;

            (iv) the transferor or the transferee not holding Units representing
Original  Invested  Capital of less than $2,500  ($2,000 in the case of IRAs and
Keogh Plans);

            (v) such  assignee  or  transferee  being a  Citizen  of the  United
States;

            (vi) such  assignment or transfer not  constituting a transfer "on a
secondary market (or the substantial  equivalent thereof)" within the meaning of
Section 7704 of the Code or otherwise  adversely affecting the tax status of the
Fund;

            (vii) such  assignment  or transfer  not  causing  Fund assets to be
deemed Plan Assets under ERISA; and

            (viii)  the  transferor  filing  with the Fund a duly  executed  and
acknowledged   counterpart  of  the  instrument  effecting  such  assignment  or
transfer,  which instrument  evidences the written acceptance by the assignee or
transferee of all of the terms

                                       87

<PAGE>


and provisions of the Operating  Agreement,  contains a representation that such
assignment  or transfer  was made in  accordance  with all  applicable  laws and
regulations  (including any investor suitability  requirements) and in all other
respects is satisfactory in form and substance to the Manager.

            In connection with state  securities laws  restrictions on transfer,
Section  260.141.11 of the Rules of the California  Commissioner of Corporations
states:

                   (a) The issuer of any security  upon which a  restriction  on
            transfer has been imposed pursuant to Sections 260.102.6, 260.141.10
            or 260.534 of the Rules of the California Corporations  Commissioner
            shall cause a copy of this section to be delivered to each issuee or
            transferee of such security at the time the  certificate  evidencing
            the security is delivered to the issuee or transferee.

                   (b) It is  unlawful  for the holder of any such  security  to
            consummate  a sale or transfer  of such  security,  or any  interest
            therein,  without  the prior  written  consent  of the  Commissioner
            (until this condition is removed  pursuant to Section  260.141.12 of
            the Rules of the California Corporations Commissioner),  except: (1)
            to the  issuer;  (2)  pursuant to the order or process of any court;
            (3) to any person  described in Subdivision  (i) of Section 25102 of
            the  Corporations  Code  of  the  State  of  California  or  Section
            260.105.14 of the Rules of the California Corporations Commissioner;
            (4) to the transferor's  ancestors,  descendants,  or spouse, or any
            custodian  or  trustee  for the  account  of the  transferor  or the
            transferor's ancestors,  descendants,  or spouse; or to a transferee
            by a trustee or custodian  for the account of the  transferee or the
            transferee's  ancestors,  descendants,  or spouse; (5) to holders of
            securities of the same class of the same issuer;  (6) by way of gift
            or  donation  inter  vivos  or  on  death;   (7)  by  or  through  a
            broker-dealer  licensed under the Corporations  Code of the State of
            California (either acting as such or as a finder) to a resident of a
            foreign state, territory, or country who is neither domiciled in the
            State of  California  to the  knowledge  of the  broker-dealer,  nor
            actually  present  in the  State of  California  if the sale of such
            securities is not in violation of any  securities law of the foreign
            state,  territory,  or  country  concerned;  (8) to a  broker-dealer
            licensed under the Corporations Code of the State of California in a
            principal  transaction,  or  as  an  underwriter  or  member  of  an
            underwriting syndicate or selling group; (9) if the interest sold or
            transferred  is a pledge or other lien given by the purchaser to the
            seller  upon a  sale  of  the  security  for  which  the  California
            Corporations  Commissioner's  written  consent is obtained or is not
            required  under Section  260.141.11  of the Rules of the  California
            Corporations  Commissioner;  (10) by way of a sale  qualified  under
            Section 25111,  25112,  25113, or 25121 of the Corporations  Code of
            the  State  of  California,  of the  securities  to be  transferred,
            provided  that no order under Section  25140 or  subdivision  (a) of
            Section 25143 of the Corporations Code of the State of California is
            in effect with respect to such qualification;  (11) by a corporation
            to  a  wholly-owned   subsidiary  of  such  corporation,   or  by  a
            wholly-owned  subsidiary of a corporation to such corporation;  (12)
            by way of an exchange qualified under Section 25111, 25112, or 25113
            of the Corporations  Code of the State of California,  provided that
            no order under Section 25140 or subdivision  (a) of Section 25143 of
            the  Corporations  Code of the State of California is in effect with
            respect to such  qualification;  (13)  between  residents of foreign
            states,  territories,  or countries  who are neither  domiciled  nor
            actually present in the State of California;  (14) to the California
            State  Controller  pursuant to the Unclaimed  Property Law or to the
            administrator  of the unclaimed  property law of another  state;  or
            (15) by the California  State  Controller  pursuant to the Unclaimed
            Property Law or by the  administrator of the unclaimed  property law
            of another state if, in either such case,  such person (i) discloses
            to potential  purchasers at the sale that transfer of the securities
            is  restricted  under  Section   260.141.11  of  the  Rules  of  the
            California   Corporations   Commissioner,   (ii)  delivers  to  each
            purchaser  a  copy  of  Section  260.141.11  of  the  Rules  of  the
            California   Corporations   Commissioner,   and  (iii)  advises  the
            California Corporations  Commissioner of the name of each purchaser;
            (16) by a trustee to a successor trustee when such transfer does not
            involve  a change in the  beneficial  ownership  of the  securities;
            provided  that  any  such  transfer  is on the  condition  that  any
            certificate  evidencing the security issued to such transferee shall
            contain the legend required

                                       88

<PAGE>




            by Section  260.141.11 of the Rules of the  California  Corporations
            Commissioner;  or (17) by way of an offer  and  sale of  outstanding
            securities  in  an  issuer   transaction  that  is  subject  to  the
            qualification  requirement of Section 25110 of the Corporations Code
            but exempt from that qualification requirement by subdivision (f) of
            Section 25102.

                   (c) The certificates  representing such securities subject to
            such a  restriction  on transfer,  whether upon initial  issuance or
            upon  any  transfer  thereof,  shall  bear on their  face a  legend,
            prominently  stamped  or printed  thereon in capital  letters of not
            less than 10-point size, reading as follows:

            "IT IS UNLAWFUL TO  CONSUMMATE A SALE OR TRANSFER OF THIS  SECURITY,
            OR ANY INTEREST THEREIN,  OR TO RECEIVE ANY CONSIDERATION  THEREFOR,
            WITHOUT  THE  PRIOR   WRITTEN   CONSENT  OF  THE   COMMISSIONER   OF
            CORPORATIONS OF THE STATE OF CALIFORNIA,  EXCEPT AS PERMITTED IN THE
            COMMISSIONER'S RULES."

            Any assignment, sale, exchange or other transfer in contravention of
any of the provisions of the Operating  Agreement shall be void and ineffectual,
and shall not bind or be recognized by the Fund.

            An Assignee of Record  will be entitled to receive  allocations  and
Distributions from the Fund attributable to the Units acquired by reason of such
assignment  from and after the effective date of the assignment of such Units to
him; provided,  however,  the Fund and the Manager will be entitled to treat the
assignor of such Units as the absolute  owner thereof in all respects,  and will
incur no liability for allocations of Net Income, Net Loss or Distributions,  or
transmittal  of reports and notices  requested to be given to Holders  which are
made in good faith to such assignor until such time as the written instrument of
assignment  has been  received  by the Fund and  recorded  on its  books and the
effective  date of an assignment of Units has passed.  The effective  date of an
assignment  of Units  and the date on which  the  Assignee  shall be  deemed  an
Assignee  of Record  shall be the first day of the  first  full  fiscal  quarter
following  the  later of (i) the date set  forth on the  written  instrument  of
assignment,  or (ii) the  date on  which  the  Fund  has  actual  notice  of the
assignment.

            All costs and expenses  incurred by the Fund in connection  with the
transfer of a Unit shall be paid by the transferring Holder.

            An Assignee may only be  substituted as a Member in the place of the
assignor with the prior consent of the Manager, which consent may be withheld in
the Manager's  sole  discretion.  Any  substituted  Member must also agree to be
bound by the provisions of the Operating Agreement.  The Manager shall cause the
Operating  Agreement  to be amended to reflect  the  substitution  of Members at
least once in each fiscal quarter.

            The Manager  will,  with respect to any Units owned by it, enjoy all
of the rights, other than the right to request that the Fund repurchase any such
Units,  and be subject to all of the obligations and duties of a Member,  except
as noted above under "Voting Rights of Members."

Repurchase of Units

            In the  event a Holder  ceases  to be a  United  States  Citizen  or
Resident Alien for any reason,  he must  immediately  notify the Fund and may be
required to tender his Units to the Fund for  repurchase in order to protect the
Fund's interest in certain leases. The Fund will have the absolute right, but no
obligation,  to  repurchase  the  Units for a price  equal to the Unit  Holder's
capital account,  computed in accordance with federal tax accounting principles,
allocable  to the  repurchased  Units as of the last day of the  quarter  during
which the precipitating event occurs.


                                       89

<PAGE>




            Upon any repurchase of Units by the Fund, the Units will be canceled
and will no longer  be deemed to  represent  an  interest  in the Fund,  and the
interests of all other Unit holders  will be adjusted  accordingly.  The Manager
may, in its  discretion  and on such terms as it deems  appropriate,  repurchase
Units in the event that it deems such  repurchase  in the best  interests of the
Fund, but the Fund is in no event required to make any such repurchase.  No such
repurchase  may be effected if it would  impair the capital of the Fund or cause
the  Fund or any  remaining  Unit  holder  to  suffer  a  material  adverse  tax
consequence.

Indemnification of the Manager

            The Operating Agreement provides that the Manager and its affiliates
who perform  services for the Fund will be indemnified  against any liability or
loss  arising  out of any act or  omission  by any such  Person  when  acting in
connection with the business of the Fund,  provided that such Person  determines
in good  faith  that its  conduct  was in the  best  interest  of the Fund  and,
provided further, that its conduct did not constitute fraud, negligence,  breach
of fiduciary duty or misconduct.  The Operating Agreement also provides that, to
the  extent  permitted  by law,  the Fund will  indemnify  the  Manager  against
liability and related expenses  (including  attorneys' fees) incurred in dealing
with third parties,  provided that the conduct of the Manager is consistent with
the standards described in the preceding  sentence.  A successful claim for such
indemnification would deplete the Fund's capital assets by the amount paid.

            The Manager  will not be  indemnified  against  liabilities  arising
under  the  Securities  Act of 1933.  Furthermore,  the  Manager  has  agreed to
indemnify the Fund against any loss or liability it may incur as a result of any
violation of state or federal  securities laws by the Manager or its Affiliates.
The Fund will not pay for any insurance covering liability of the Manager or any
other  persons  for  actions  or  omissions  for  which  indemnification  is not
permitted by the  Operating  Agreement,  provided,  however,  that this will not
preclude  the naming of the  Manager or any  Affiliates  as  additional  insured
parties on  policies  obtained  for the  benefit of the Fund to the extent  that
there is no additional cost to the Fund.

            The Manager will have fiduciary responsibility for the safekeeping 
and use of all funds and assets of the Fund.  See "Fiduciary Duty of the 
Manager."

                              PLAN OF DISTRIBUTION

Distribution

            The   Units   will  be   offered   and  sold  on  a  "best   efforts
minimum/maximum"   basis  through  ATEL  Securities   Corporation  (the  "Dealer
Manager"),  a broker-dealer which is an Affiliate of the Manager (see "Conflicts
of Interest" and "Management"),  and through other participating  broker-dealers
who  are  members  of the  National  Association  of  Securities  Dealers,  Inc.
("NASD").  The Dealer Manager will manage the selling group and provide  certain
wholesaling  services.  Although  the  Dealer  Manager  may  participate  in the
offering  on the  same  basis as  other  broker-dealers,  it has not in the past
effected,  nor does it  anticipate  in this  offering  directly  effecting,  any
significant sales of the Units. The Dealer Manager is a wholly-owned  subsidiary
of ATEL formed solely to manage offerings sponsored by ATEL and its Affiliates.

            The minimum  offering  amount is $1,200,000  (120,000 Units) and the
maximum is $150,000,000 (15,000,000 Units).

            The minimum subscription is 250 Units ($2,500); provided that an IRA
or Keogh  Plan may  subscribe  for a minimum of 200 Units  ($2,000).  Additional
investments may subsequently be made in a minimum amount of 50 Units ($500), and
additional one-Unit ($10) increments.

            The  broker-dealers  are not obligated to obtain any  subscriptions,
and there is no assurance that any Units will be sold.

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<PAGE>

            Subscriptions  will be effective  only on  acceptance by the Manager
and the right is reserved to reject any  subscription  in whole or in part.  The
Subscription   Agreement   provided  to  the  investor  for  execution  must  be
accompanied by a copy of this  Prospectus,  and each subscriber has the right to
cancel his or her  subscription  during a period of five business days after the
subscriber   has   submitted   the  executed   Subscription   Agreement  to  the
broker-dealer  through  which the Units are sold.  The Fund  and/or the  selling
broker-dealer  will send each investor a written  confirmation of the acceptance
of the investor's subscription for Units upon admission to the Fund.

            The offering will  terminate on a date not later than two years from
the date of this  Prospectus.  The  offering  of Units after the end of one year
from the date hereof will be subject to renewal or  requalification in all those
jurisdictions  requiring such renewal or requalification.  However, the offering
may be terminated at any time by the Manager.  If subscriptions for a minimum of
120,000 Units have not been received and accepted  prior to a date one year from
the date hereof,  all funds received will be promptly returned together with any
interest earned thereon.

Selling Compensation and Certain Expenses

            The Dealer  Manager will receive  selling  commissions  in an amount
equal  to  9.5%  of the  Gross  Proceeds,  and  will  reallow  to  participating
broker-dealers   selling   commissions   equal  to  8%  of  the  Gross  Proceeds
attributable  to Units sold by them. Out of the 1.5% of the selling  commissions
retained by the Dealer Manager, it will pay wholesaling compensation in the form
of  salaries  and  commissions  to  its  personnel  and  certain   participating
broker-dealers, reimburse certain wholesaling expenses incurred by participating
broker-dealers  and reimburse  amounts which may be advanced by ATEL for certain
overhead expenses of the Dealer Manager and its personnel.

            The Dealer  Manager  (out of its  compensation  equal to 1.5% of the
Gross  Proceeds) or the Fund (up to a maximum  amount equal to 0.5% of the Gross
Proceeds) may pay or reimburse  participating  dealers a portion of their actual
expenses  in  connection  with this  offering  (including  expenses  incurred in
coordinating  their  sales  efforts,   training  their  personnel  and  expenses
incurred,  by such  broker-dealers  as the Dealer  Manager shall  designate,  in
performing  "wholesaling"  functions).  The  Fund  may  also  pay  or  reimburse
participating dealers for their due diligence expenses. Subject to NASD approval
and compliance with Rule  2810(b)(4)(E)  of the NASD's Conduct Rules,  the Fund,
the Manager or the Dealer Manager may establish noncash sales incentive programs
for sales representatives of participating dealers,  provided that the aggregate
value of any noncash incentive awards to any individual by the Manager or any of
its Affiliates during any year does not exceed the sum of $100. The total of all
selling  compensation,  including sales  commissions,  wholesaling  salaries and
commissions,  retail and wholesaling expense  reimbursements,  broker dealer and
investment seminar expenses,  non-cash incentive payments and any other forms of
compensation  paid to the Dealer Manager or other  participating  broker-dealers
(including any  unreimbursed  overhead  costs of the Dealer Manager  advanced by
ATEL),  will  not  exceed  10% of  the  Gross  Proceeds,  except  that  up to an
additional  0.5% of the  Gross  Proceeds  may,  in the  sole  discretion  of the
Manager,  be paid in  connection  with  accountable,  bona  fide  due  diligence
activities.

            The   Manager   has   agreed   to   indemnify   the    participating
broker-dealers,  including  the  Dealer  Manager,  against  certain  liabilities
arising under the Securities Act of 1933, as amended.

            At various times during the offering period the Manager may elect to
pay a portion of the set-up fees for IRAs which purchase Units. The Manager will
pay a maximum of $25 toward such fees for each IRA which  purchases  the minimum
number of Units or more.

            The Fund will not pay referral or similar  fees to any  accountants,
attorneys or other persons in connection with the distribution of Units.

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<PAGE>

Escrow Arrangements

            Until the  minimum  number of  subscriptions  are  received  and the
initial  subscribers are admitted to the Fund,  subscription checks will be made
payable to, and  subscription  funds will be held in an escrow  account at, U.S.
Bank, National Association,  San Francisco,  California (the "Bank"). Until such
time all participating  broker-dealers  will forward  subscription checks to the
Dealer Manager promptly but in no event later than noon of the next business day
following   receipt   thereof,   and  the  Dealer   Manager  will  forward  such
subscriptions to the bank escrow agent promptly, but in no event later than noon
of the second business day following receipt thereof by the Dealer Manager.

            Subscription proceeds held in the escrow account will be invested in
United States government securities, including Treasury bills, securities issued
or guaranteed by United States government agencies,  certificates of deposit and
time or demand  deposits in banks and savings  and loan  associations  which are
insured by United  States  government  agencies  or  deposits  in members of the
Federal Home Loan Bank System,  as directed by the Manager.  Subscribers may not
withdraw funds from the escrow  account.  Upon the earlier of termination of the
offering or satisfaction of the escrow condition,  any interest which accrues on
funds held in escrow will be distributed to subscribers and allocated among them
on the basis of the respective  amounts of the  subscriptions  and the number of
days that such amounts were on deposit in the escrow account.

            Notwithstanding   the   foregoing,   subscriptions   received   from
Pennsylvania  subscribers  will be placed in a separate  escrow account and will
not be counted toward  satisfaction  of the minimum escrow  condition.  Instead,
such Pennsylvania  subscriptions  will be released to the Fund only at such time
as  total  subscription  proceeds  received  by the Fund  from all  subscribers,
including  the  escrowed  Pennsylvania  subscriptions,  equal not less than $7.5
million in Gross Proceeds.

            The Original  Invested  Capital of the initial  subscribers  will be
transferred  from  escrow to the Fund at any time  after  subscriptions  for the
minimum of 120,000  Units have been  accepted by the Manager  and  received  and
collected by the bank escrow agent, and such subscribers will be admitted to the
Fund  within  15  days  thereafter.   Subsequent  subscribers  will  have  their
subscriptions accepted or rejected within 30 days after receipt. Investors whose
subscriptions  are  accepted  will be admitted to the Fund  promptly  after such
acceptance,  but not later than 30 days thereafter.  Rejected subscription funds
will be promptly returned.

            The Bank's sole role in this  offering is that of escrow  holder and
as  such  it has  not  reviewed  any of the  offering  materials  and  makes  no
representations  whatsoever as to the nature of this offering or its  compliance
or lack thereof with any applicable state or federal laws, rules or regulations.
The Bank neither  endorses,  recommends nor  guarantees  the purchase,  value or
repayment or any other aspect of an investment  in the Units.  The Bank does not
represent  the interests of the Members or potential  investors.  Its duties are
limited as expressly set forth in the Escrow  Agreement and  interested  parties
may request a copy of the Escrow  Agreement  from the  Manager.  Pursuant to the
terms of the Escrow  Agreement,  the Fund has directed the Bank to distribute to
the  subscribers  any interest earned on funds held in escrow as described above
under this caption.

Investments By Certain Persons

            The Manager and its Affiliates may, but do not currently  intend to,
acquire such number of Units as they determine. Except as noted below, any Units
purchased by the Manager or its  Affiliates  will be purchased on the same terms
as the other  Units  offered  hereby.  Such  Units will be  acquired  solely for
investment  and not with a view to or for  distribution.  Any Units  acquired by
such  Persons will not be applied to the  requirement  that a minimum of 120,000
Units be purchased by all subscribers.

            The Manager, the Dealer Manager or the broker-dealers engaged by the
Dealer Manager to sell the Units, or any of their  Affiliates or employees,  may
purchase  Units in this offering net of the 8% retail  selling  commissions at a
per Unit price

                                       92

<PAGE>


of $9.20.  In addition,  clients of an  investment  advisor  which is registered
under the Investment Advisors Act of 1940 and is an Affiliate of a participating
broker-dealer may also purchase Units with reduced selling commissions,  subject
to the express approval of such participating  broker-dealer  Affiliate,  if the
client (i) has been advised by such advisor over a continuous  course of time on
investments  other than the purchase of Units,  and (ii) is not being charged by
the advisor or its Affiliates,  through the payment of commissions or otherwise,
for the advice  rendered by such advisor  specifically  in  connection  with the
purchase  of Units.  In no event will the net  contribution  to the Fund by such
persons be less than $9.20 per Unit.  The Dealer  Manager may  require  that any
investor  claiming the right to purchase on the foregoing terms  demonstrate the
basis for such right through reasonable  documentation and certification.  Sales
to any such purchasers on such terms would be for investment  purposes only, and
the Fund and the Manager  would not  recognize  any  attempted  transfer of such
Units  unless the Manager is satisfied  that the original  purchase was not made
with a view to distribution of the securities and that any proposed transfer was
in compliance  with all applicable  laws and  regulations,  including the NASD's
Rules of Fair Practice.

State Requirements

            In  addition to the  investor  suitability  and  minimum  investment
standards established by the Fund and described under "Who Should Invest" above,
the securities  administrators  of certain states have imposed more  restrictive
standards on investments in Units effected within their jurisdictions.  Any such
additional  requirements  imposed  after  the  date of this  Prospectus  will be
reflected in a supplement  hereto,  and  investors  are urged to review any such
supplement to ascertain  whether more  restrictive  standards are  applicable to
their investment.

            The  following   states  have  imposed   additional   conditions  on
investments in such jurisdictions:

            Iowa.  The minimum investment for all IRAs in Iowa is $2,500 (250 
            Units).

            Maine.  The minimum amount which may be invested by a Maine investor
on any subscription, whether an initial investment or any subsequent investment,
is $2,500 (250 Units), or $2,000 (200 Units) for IRAs and Qualified Plans.

            Michigan.     An investor in Michigan may not invest in Units any 
amount in excess of 10% of the investor's net worth (exclusive of home, home 
furnishings and automobiles)

            Missouri.  Each  Missouri  investor  must (i) have an  annual  gross
income of at least $60,000 and a net worth  (exclusive of home, home furnishings
and automobiles) of at least $60,000 in excess of his Original Invested Capital;
or (ii)  have a net  worth  (determined  with the same  exclusions)  of at least
$225,000 in excess of his Original Invested Capital.

            Nebraska.     The minimum investment for all investors in Nebraska,
except IRAs and Keogh Plans, is $5,000 (500 Units).

            New Hampshire.  Each New Hampshire  investor must (i) have an annual
gross  income of at least  $50,000  and a net  worth  (exclusive  of home,  home
furnishings  and  automobiles)  of at least  $125,000 in excess of his  Original
Invested  Capital;  or (ii) a net worth (exclusive of home, home furnishings and
automobiles) of at least $250,000 in excess of his Original Invested Capital.

            North Carolina. Each North Carolina investor must (i) have an annual
gross  income of at least  $60,000  and a net  worth  (exclusive  of home,  home
furnishings  and  automobiles)  of at least  $60,000  in excess of his  Original
Invested Capital; or (ii) have a net worth (determined with the same exclusions)
of at least $225,000 in excess of his Original Invested Capital.


                                       93

<PAGE>


            Ohio.     An Ohio investor may not invest in Units an amount in 
excess of 10% of the investor's net worth.

            Pennsylvania.  In addition to the investor suitability standards set
forth under "Who Should Invest," an investor in  Pennsylvania  may not invest in
Units an  amount in excess of 10% of the  investor's  net worth  (with  such net
worth  calculated   exclusive  of  home,  home  furnishings  and   automobiles).
Furthermore, Pennsylvania subscriptions will be subject to a separate escrow and
will be  released  to the  Fund  only  when  the  Fund  has  received  aggregate
subscriptions  from all  investors  equal to not less  than  $7.5  million.  See
"Escrow Arrangements" above.


                               REPORTS TO HOLDERS

            The Fund fiscal year will be the calendar year;  provided,  however,
that the Manager may, subject to the approval of applicable taxing  authorities,
adopt another fiscal year if they deem it to be in the Fund's best interest.

             The Fund will furnish to each Holder  certain  reports,  statements
and tax information,  as set forth in Article 14 of the Operating Agreement. The
Manager shall have prepared and  distributed  at least  annually,  at the Fund's
expense,  (i) a statement of cash flow, (ii) Fund  information  necessary in the
preparation of each Holder's  federal income tax returns;  (iii) a report of the
business of the Fund;  (iv) a statement as to the  compensation  received by the
Manager  and its  Affiliates  from  the  Fund  during  the  year;  (v) a  report
identifying  the  sources  of all Fund  Distributions  for the year;  and (vi) a
special report containing an opinion of a certified public accounting firm and a
breakdown of the costs  reimbursed by the Fund to the Manager or its Affiliates.
Following the close of each taxable year of the Fund,  the Fund will  distribute
to the  Holders  copies of the annual  report and  annual  financial  statements
(balance  sheet,  statement of income or loss,  statement of members' equity and
statement  of cash  flow,  accompanied  by a report  containing  an  opinion  of
independent  certified public accountants) within 120 days thereafter,  and such
statements  will be prepared on an accrual  basis in accordance  with  generally
accepted  accounting  principals;  and all  Fund  information  necessary  in the
preparation  of their federal income tax returns within 75 days after the end of
each fiscal  year.  The Manager does not intend to cause the Fund to prepare and
distribute any reconciliation between the financial information contained in the
foregoing  reports  and the  information  furnished  to  Holders  for income tax
purposes.

            During the offering period and until the Fund is fully invested, the
Fund  will  also  furnish  to  each  Holder,  at  least  quarterly,  information
concerning the investments of the Fund.

            The  Fund  will  also  furnish  to each  Holder a  quarterly  report
covering  each of the first three  quarters of Fund  operations in each calendar
year,  including unaudited  financial  statements (each of which shall include a
balance  sheet,  statement  of  income  or loss for said  quarterly  period  and
statement of Cash from  Operations and Cash from Sales or  Refinancing  for said
quarterly period) and a statement of other pertinent  information  regarding the
Fund and its  activities  during the  quarterly  period  covered by the  report.
Copies of such statements and other pertinent  information  shall be distributed
to each Holder within 60 days after the close of the quarterly period covered by
the report of the Fund.

                           SUPPLEMENTAL SALES MATERIAL

            In  addition  to and apart  from this  Prospectus,  the Fund may use
certain  sales  material in  connection  with the offering of Units.  In certain
jurisdictions  such sales  material may not be  available.  This  material  will
include  information  relating to this offering,  the Manager and its Affiliates
and brochures and articles and publications concerning equipment leasing.


                                       94

<PAGE>




            The Fund will use only sales  material  which has been  approved  by
such appropriate regulatory bodies as may be required. The offering is made only
by means of this  Prospectus.  Although the information  contained in such sales
material  does  not  conflict  with  any of the  information  contained  in this
Prospectus,  such  material  does not purport to be complete,  and should not be
considered  as part of this  Prospectus or the  registration  statement of which
this Prospectus is a part, or as incorporated by reference in this Prospectus or
said  registration  statement  or as forming the basis of the  offering of Units
which are offered hereby.

                                 LEGAL OPINIONS

            The  legality  of the  Units has been  passed  upon by  Derenthal  &
Dannhauser,  San Francisco,  California,  and the statements  under the captions
"Income Tax Consequences" and "ERISA  Considerations"  as they relate to federal
income tax and ERISA  matters  have been  reviewed  and passed  upon by Jackson,
Tufts, Cole & Black, San Francisco, California.

                                     EXPERTS

            The  consolidated  balance sheet of ATEL Financial  Corporation  and
subsidiary  at July  31,  1998  and the  financial  statements  of ATEL  Capital
Equipment  Fund VIII,  LLC at October 7, 1998,  and for the period from July 31,
1998  (inception)  through  October  7,1998,  appearing in this  Prospectus  and
Registration  Statement  have been  audited  by Ernst & Young  LLP,  independent
auditors,  as set forth in their reports thereon appearing elsewhere herein, and
are included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.

                             ADDITIONAL INFORMATION


            The Fund has filed  with the  Securities  and  Exchange  Commission,
Washington,  D.C., a registration statement under the Securities Act of 1933, as
amended,  with respect to the Units  offered  pursuant to this  Prospectus.  For
further  information,  reference is made to the  registration  statement and the
exhibits  thereto which are available for  inspection at no fee in the principal
office of the Commission at 450 Fifth Street, Northwest, Washington, D.C. 20549.
The Fund is subject to the informational requirements of the Securities Exchange
Act of 1934 and in accordance therewith files reports and other information with
the Securities and Exchange Commission. Such reports, the registration statement
and other  information  are  available for  inspection  and copying at the above
address, and are also available to be viewed and retrieved without charge on the
Commission's  electronic  data gathering and retrieval  (EDGAR)  system,  at its
internet  web  site at  www.sec.gov.  In  addition,  photostatic  copies  of the
material  containing  this  information may be obtained from the Commission upon
paying of the fees  prescribed by the rules and  regulations of the  Commission.
This  Prospectus  contains a fair  summary  of the  material  provisions  of the
exhibits filed with the Commission.  This Prospectus does not knowingly  contain
any untrue  statement  of a  material  fact or omit to state any  material  fact
required to be stated  herein or  necessary  to make the  statements  herein not
misleading.


                                    GLOSSARY

            The following terms used in this Prospectus shall (unless  otherwise
expressly  provided  herein or unless the context  otherwise  requires) have the
following respective meanings:

            "Acquisition  Expenses"  shall  mean  expenses  including,  but  not
limited to, legal fees and expenses, travel and communication expenses, costs of
appraisals, accounting fees and expenses, and miscellaneous expenses relating to
selection and acquisition of Equipment, whether or not acquired.


                                       95

<PAGE>




            "Acquisition  Fees" shall mean the total of all fees and commissions
paid by any party in  connection  with the initial  purchase or  manufacture  of
Equipment.  Included in the computation of such fees or commissions shall be any
commission,  selection fee, financing fee,  nonrecurring  management fee, or any
fee of a similar nature, however designated.

             "Adjusted  Invested  Capital"  shall  mean,  as of  any  date,  the
Original  Invested  Capital  attributable  to the Units held by any Person on or
before such date,  as decreased  (but not below zero) by the amount by which (i)
all  Distributions  with  respect  to  such  Units  on or  before  the  date  of
determination  pursuant to any provision of the Operating  Agreement exceed (ii)
the Priority Distribution attributable to such Units for such period.

             "Affiliate"  of a Person  shall  mean (i) any  Person  directly  or
indirectly controlling,  controlled by or under common control with such Person;
(ii) any Person  owning or  controlling  10% or more of the  outstanding  voting
securities or beneficial interests of such Person, (iii) any officer,  director,
trustee  or  partner  of such  Person  and (iv) if such  Person  is an  officer,
director,  trustee, partner or holder of 10% or more of the voting securities or
beneficial  interests  of such Person,  any other  company for which such Person
acts in such  capacity.  However,  such term shall not include a Person who is a
partner in a  partnership  or joint  venture with the Fund if such Person is not
otherwise an Affiliate.

            "Asset Management Fee" shall mean the fee payable to the Manager and
its Affiliates under the provisions of Section 8.2 of the Operating Agreement. 
See "Management Compensation."

            "Asset  Management  Fee  Limit"  means  the  total  fees  calculated
pursuant to the  alternative  fee  schedule  set forth under  Section 8.3 of the
Operating  Agreement,  equal to the  aggregate of an Equipment  Management  Fee,
Incentive Management Fee, and Equipment  Resale/Re-Leasing Fee, plus the Carried
Interest, determined in the manner described therein.

              "Assignee"  shall  mean a Person  who has  acquired  a  beneficial
interest  in one  or  more  Units  from a  third  party  but  who is  neither  a
substituted Holder nor an Assignee of Record.

              "Assignee  of Record"  shall mean an Assignee  who has  acquired a
beneficial  interest in one or more Units whose  ownership  has been recorded on
the books of the Fund and which ownership is the subject of a written instrument
of assignment, the effective date of which assignment has passed.

            "ATEL" shall mean ATEL Financial Corporation, a California 
corporation.

            "California  Act" shall mean the  Beverly-Killea  Limited  Liability
Company Act, Title 2.5, Chapters 1-15, of the California  Corporations  Code, as
it may be amended from time to time.

            "Capital  Account"  shall mean,  with  respect to any  Member,  such
Member's  Capital  Account  determined  in  accordance  with  Section 6.7 of the
Operating Agreement.

            "Carried   Interest"   shall  mean  the  allocable   share  of  Fund
Distributions of Cash from Operations and Cash from Sales or Refinancing payable
to the  Manager,  as a  Member,  pursuant  to  Sections  10.4  and  10.5  of the
Agreement.

            "Cash  from  Operations"  shall  mean the  excess of Gross  Revenues
(which  excludes  revenues  from  Equipment  sales  or  refinancing)  over  cash
disbursements  (including the Equipment Management Fee and amounts reinvested by
the Fund in Equipment)  without  reduction for  depreciation and amortization of
intangibles such as organization  and underwriting  costs but after a reasonable
allowance  for cash for repairs,  replacements,  contingencies  and  anticipated
obligations, as determined by the Manager.

                                       96

<PAGE>


            "Cash  from  Reserve  Account"  shall  mean that  portion of the Net
Proceeds not utilized in the acquisition of Equipment, including cash maintained
according to the provisions of Section 9.4 of the Operating Agreement.

            "Cash from Sales or Refinancing" shall mean the net cash realized by
the Fund from the sale,  refinancing or other disposition of any Equipment after
payment of all expenses related to the transaction.

   
            "Closing  Date" shall mean such date  designated  by the Manager for
the termination of the offering of Units, but not later than  December 7,  2000.
Extension  of the offering beyond one year from the date of the Prospectus shall
be subject to the qualification  of the  offering for any such  extension  in 
those  jurisdictions which may limit the offering  period to one year.  "Initial
Closing Date" shall mean the date on which subscribers for Units, other than the
initial Holder, are first admitted to the Fund as Holders.  "Final Closing Date"
shall mean the last date on which subscribers for Units are admitted to the Fund
as Holders.
    

            "Code" shall mean the Internal Revenue Code of 1986, as amended,  or
corresponding provisions of subsequent federal revenue laws.

            "Distributions"  shall mean any cash  distributed to Holders and the
Manager arising from their respective interests in the Fund.

            "ERISA" shall mean the Employment  Retirement Income Security Act of
1974, as amended.

            "Equipment" shall mean the equipment  acquired and owned by the Fund
to be leased by the Fund to others as well as any Fund  interest  in  equipment,
including  without  limitation its rights,  whether  direct or indirect,  in all
trusts, joint ventures, leases, chattel paper, options and other contract rights
with respect to equipment.

            "Equipment Management Fee" shall mean an element of the alternative
fee schedule calculation to determine the Asset Management Fee Limit under the 
provisions of Section 8.3.2 of the Operating Agreement.  See "Management 
Compensation."

            "Equipment Re-leasing Fee" shall mean an element of the alternative
fee schedule calculation to determine the Asset Management Fee Limit under the 
provisions of Section 8.3.2 of the Operating Agreement.  See "Management 
Compensation."

            "Equipment Resale Fee" shall mean an element of the alternative fee
schedule calculation to determine the Asset Management Fee Limit under the 
provisions of Section 8.3.2 of the Operating Agreement.  See "Management 
Compensation."

            "Front-End  Fees" shall mean fees and expenses paid by any party for
any services  rendered  during the Fund's  organization  and  acquisition  phase
including  Organization and Offering Expenses,  Leasing Fees,  Acquisition Fees,
Acquisition   Expenses,   and  any  other  similar  fees,  however   designated.
Notwithstanding the foregoing,  Front-End Fees shall not include any Acquisition
Fees or Acquisition  Expenses paid by a manufacturer  of Equipment to any of its
employees unless such Persons are Affiliates of the Manager.

            "Full   Payout   Lease"   shall  mean  a  lease   under   which  the
non-cancellable  rental payments due during the initial term of the lease are at
least sufficient to cover the purchase price of the Equipment leased.

            "Fund"  shall  mean ATEL  Capital  Equipment  Fund  VIII,  LLC,  the
California limited liability company created under the Operating Agreement.


                                       97

<PAGE>




            "Fund Manager" or "Manager"  shall mean ATEL  Financial  Corporation
("ATEL"), a California corporation, or any other Person or Persons which succeed
it in such  capacity.  The Manager is referred to throughout  the  Prospectus as
"ATEL" or the "Manager."

            "Fund Minimum Gain" shall have the meaning set forth in  Regulations
Section 1.704-2(d)(1).

            "Gross  Proceeds"  shall mean the  aggregate  total of the  Original
Invested Capital of the initial and all of the additional Holders.

            "Gross Lease Revenues"  shall mean all revenues  attributable to the
Equipment other than from security  deposits paid by lessees  thereof.  The term
"Gross Revenues" shall not include revenues from the sale,  refinancing or other
disposition of Equipment.

            "High   Payout   Lease"   shall  mean  a  lease   under   which  the
noncancellable  rental payments and other payment  obligations of the lessee due
through the initial  term of the lease are equal to at least 90% of the original
purchase price paid by the Fund for the Equipment.

            "Holders"  shall  mean  owners of Units who are  either  Members  or
Assignees of Record,  and  reference to a "Holder"  shall be to any one of them.
The Manager  shall not be considered to be a Holder except to the extent it also
owns Units.

            "Incentive Management Fee" shall mean an element of the alternative
fee schedule calculation to determine the Asset Management Fee Limit under the 
provisions of Section 8.3.2 of the Operating Agreement.  See "Management 
Compensation."

            "IRA" shall mean an individual  retirement  account qualifying under
Section 408 of the Code.

            "Investment  in Equipment"  shall mean the amount of Gross  Proceeds
actually  paid or allocated  to the purchase of Equipment  acquired by the Fund,
any amount of Gross Proceeds  reserved  pursuant to Section 9.4 of the Operating
Agreement up to a maximum of 3% of Gross  Proceeds and other cash  payments such
as interest and taxes, but excluding Front-End Fees.

            "Members"  shall mean the initial  Members and any other Persons who
are admitted to the Fund as additional or  substituted  Members.  Reference to a
"Member" shall refer to any one of them.

            "Net Income" or "Net Loss" shall mean the taxable  income or taxable
loss of the Fund as  determined  for federal  income tax  purposes,  computed by
taking into account each item of Fund income,  gain,  loss,  deduction or credit
not already  included in the computation of taxable income and taxable loss, but
does not mean Distributions.

            "Net Lease  Provisions"  shall mean contractual  arrangements  under
which the lessee assumes  responsibility  for, and bears the cost of, insurance,
taxes,  maintenance,  repair  and  operation  of  the  leased  asset  and  where
non-cancellable  rental  payments  under  the lease  are  absolutely  net to the
lessor,  notwithstanding  that some minor costs or responsibilities  remain with
the Fund as lessor or that the Fund  retains the option to require and pay for a
higher  standard of care or greater level of maintenance or insurance than would
be imposed on the lessee under the terms of the lease.

            "Net Proceeds" shall mean the total Gross Proceeds less Organization
 and Offering Expenses.


                                       98

<PAGE>


            "Operating  Lease"  shall  mean a lease  under  which the  aggregate
rental  payments  due  during  the  initial  term of the lease are less than the
purchase price of the Equipment leased.

            "Operating  Revenues"  means the  total for any  period of all Gross
Lease Revenues plus all Cash from Sales or Refinancing.

            "Organization  and  Offering  Expenses"  shall mean  those  expenses
incurred in connection with preparing the Fund for registration and subsequently
offering and distributing Units to the public, including selling commissions and
all advertising  expenses except advertising  expenses related to the leasing of
Equipment.

            "Original  Invested  Capital" shall mean the original gross purchase
price of the Units contributed by each Member to the capital of the Fund for his
interest in the Fund,  which amount shall be attributed to Units in the hands of
a subsequent Holder.

            "Operating   Agreement"  or  "Agreement"   shall  mean  the  Limited
Liability Company Operating  Agreement of ATEL Capital Equipment Fund VIII, LLC,
as it may be amended from time to time.

            "Person" shall mean any natural  person,  partnership,  corporation,
association or other legal entity.

            "Priority  Distribution" shall mean a hypothetical amount determined
solely for purposes of the alternative fee schedule calculation to determine the
Asset  Management Fee Limit under the provisions of Section 8.3 of the Operating
Agreement.  Such amount will equal,  for any calendar  year or other period with
respect to the Units held by any Person,  the average Adjusted  Invested Capital
with  respect to such  Units  during  such  period  multiplied  by 10% per annum
(calculated on a cumulative  basis,  compounded  daily, from the last day of the
calendar quarter in which the capital  contribution of the initial  purchaser of
such Units was received by the Fund and pro rated for any fraction of a calendar
year for which such calculation is made).

            "Prospectus"  shall mean the final  prospectus  filed in  connection
with the  registration of the Units with the Securities and Exchange  Commission
on Form S-1, as  amended,  together  with any  supplement  thereto  which may be
subsequently filed with such Commission.

            "Purchase  Price of  Equipment"  shall  mean the price paid upon the
purchase  or sale of a  particular  item of  equipment  including  all liens and
mortgages on the equipment, but excluding points and prepaid interest.

            "Qualified Plan" shall mean employee trusts (or employer  individual
retirement  accounts),  Keogh Plans and corporate  retirement  plans  qualifying
under Section 401(a) of the Code.

            "Regulations"  or "Treasury  Regulations"  shall mean the income tax
regulations  promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).

            "Reinvestment  Period"  shall  mean the period  commencing  with the
Initial  Closing  Date and ending on a date 72 months  after the last day of the
fiscal year during which the Final Closing Date occurs.

            "Reimbursable  Administrative  Expenses"  shall  mean  the  ordinary
recurring  administration expenses incurred by the Manager and reimbursed by the
Fund.  Such  expenses  shall  not  include  interest,  depreciation,   equipment
maintenance  or  repair,  third  party  services  or  other   non-administrative
expenses.

                                       99

<PAGE>



            "Resident  Alien" shall mean a resident  alien as defined within the
Federal  Aviation Act of 1958,  as amended from time to time,  or any  successor
statute,  or any  regulations  adopted  pursuant  to such  Act or any  successor
statute.

            "Roll-Up"  shall  mean  a  transaction  involving  the  acquisition,
merger, conversion or consolidation,  either directly or indirectly, of the Fund
and the issuance of securities of a Roll-Up Entity. Such term does not include:

                   (a)    any transaction if the securities of the Fund have 
            been for at least twelve months traded through the
            National Association of Securities Dealers, Inc. Automated 
            Quotation National Market System; or

                   (b) a  transaction  involving  the  conversion  to corporate,
            trust or association  form of only the Fund, if, as a consequence of
            the transaction,  there will be no significant adverse change in any
            of the following

                   (i)    the Members voting rights;
                   (ii)   the term of existence of the Fund;
                   (iii)  the  terms  of  compensation  of the  Manager  and its
                   Affiliates;or (iv) the Fund's investment objectives.

            "Service" shall mean the United States Internal Revenue Service or 
its successor.

            "Substantially  All of the Assets"  shall  mean,  unless the context
otherwise dictates, Equipment representing 66 2/3% or more of the net book value
of all Equipment as of the end of the most recently completed fiscal quarter.

            "Unit"  shall mean the  interest in the Fund  representing  Original
Invested  Capital in the amount of $10 and shall  entitle the Holder  thereof to
the rights herein provided.

            "United States  Citizen" shall mean a "citizen of the United States"
as defined  within the Federal  Aviation  Act of 1958,  as amended  from time to
time, or any successor statute,  or any regulations adopted pursuant to such Act
or any successor statute.


                                       100

<PAGE>


                              FINANCIAL STATEMENTS

             Set forth below are the following financial statements:

                      ATEL Capital Equipment Fund VIII, LLC

Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . .F - 2
Balance Sheet, October 7, 1998 . . . . . . . . . . . . . . . . . . . . . .F - 3
Statement of Changes in Members' Capital for the Period from 
   July 31, 1998 (inception) through October 7, 1998 . . . . . . . . . . .F - 3
Statement of Cash Flows for the Period from July 31, 1998 (inception) 
   through October 7, 1998 . . . . . . . . . . . . . . . . . . . . . .  . F - 3
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . F - 4


                    ATEL Financial Corporation and Subsidiary

Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . .F - 6
Consolidated Balance Sheet, July 31, 1998 . . . . . . . . . . . . . . . . F - 7
Notes to Consolidated Balance Sheet, July 31, 1998 . . . . . . . . . . . .F - 8
















                                      F-1

<PAGE>
                         REPORT OF INDEPENDENT AUDITORS





The Members
ATEL Capital Equipment Fund VIII, LLC


We have audited the  accompanying  balance sheet of ATEL Capital  Equipment Fund
VIII,  LLC as of October  7,  1998,  and the  related  statements  of changes in
members'  capital and cash flows for the period  from July 31, 1998  (inception)
through October 7, 1998. These financial  statements are the  responsibility  of
the  Fund's  management.  Our  responsibility  is to express an opinion on these
financial statements based on our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of ATEL Capital  Equipment Fund
VIII, LLC at October 7, 1998, and its changes in members' capital and cash flows
for the period  from July 31,  1998  (inception)  through  October  7, 1998,  in
conformity with generally accepted accounting principles.



                                                               ERNST & YOUNG LLP
San Francisco, California
October 7, 1998

                                      F-2
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VIII, LLC
                        (A Development Stage Enterprise)

                                  BALANCE SHEET

                                 OCTOBER 7, 1998


                                     ASSETS

Cash                                                                    $600
                                                                       ======


                        LIABILITIES AND MEMBERS' CAPITAL


Members' capital:
     Managing Member                                                    $100
     Initial Members                                                     500
                                                                       ------
Total members' capital                                                  $600
                                                                       ======




                    STATEMENT OF CHANGES IN MEMBERS' CAPITAL

                  FOR THE PERIOD FROM JULY 31, 1998 (INCEPTION)
                             THROUGH OCTOBER 7, 1998

                              Initial Members       Managing
                              Units     Amount    Member    Total

Capital contributions            50      $500      $100      $600
                             ======= ========= =========  ========




                             STATEMENT OF CASH FLOWS

                  FOR THE PERIOD FROM JULY 31, 1998 (INCEPTION)
                             THROUGH OCTOBER 7, 1998


Financing activities:
Capital contributions received                                          $600
                                                                      -------
Net increase in cash                                                     600
                                                                      =======
Cash at end of period                                                   $600
                                                                      =======


                             See accompanying notes.

                                      F-3
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VIII, LLC
                        (A Development Stage Enterprise)

                          NOTES TO FINANCIAL STATEMENTS

                                 OCTOBER 7, 1998


1.  Organization and Limited Liability Company matters:

ATEL Capital  Equipment  Fund VIII,  LLC (a  development  stage  enterprise)(the
Fund),  was formed under the laws of the State of  California  on July 31, 1998,
for the purpose of acquiring  equipment to engage in equipment leasing and sales
activities.  The fund shall continue until December 31, 2019.  Contributions  in
the  amount  of $600  were  received  as of  October  7,  1998,  $100  of  which
represented  the  Managing  Member's  (ATEL  Financial  Corporation's)  (ATEL's)
continuing interest,  and $500 of which represented the Initial Members' capital
investment.

As of October 7, 1998,  the Fund had not commenced  operations  other than those
relating to organizational  matters.  The Fund, or the Managing Member on behalf
of the Fund, will incur costs in connection with the organization,  registration
and issuance of the Limited Liability Company Units (Units).  The amount of such
costs to be born by the Fund is limited by certain  provisions  of the Operating
Agreement.


2.  Income taxes:
 
The Fund does not provide  for income  taxes since all income and losses are the
liability  of the  individual  members  and are  allocated  to the  members  for
inclusion in their individual tax returns.


3.  Members' capital:

As of October  7,  1998,  50 Units  were  issued  and  outstanding.  The Fund is
authorized to issue up to 15,000,000 additional Units.

The Fund Net Income,  Net Losses, and Distributions are to be allocated 92.5% to
the Members and 7.5% to the Managing Member.


4. Commitments and management:

The terms of the  Operating  Agreement  provide that the Managing  Member and/or
affiliates  are entitled to receive  certain fees,  in addition the  allocations
described  above,  which are more fully  described in Section 8 of the Operating
Agreement.  The  additional  fees  to  management  include  fees  for  equipment
management and resale.




                                      F-4
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VIII, LLC
                        (A Development Stage Enterprise)

                          NOTES TO FINANCIAL STATEMENTS

                                 OCTOBER 7, 1998


5.  Impact of the Year 2000 (Unaudited)

The year 2000 issue is the result of computer  programs  being written using two
digits rather than four to define the  applicable  year.  Any computer  programs
that have time  sensitive  software may  recognize a date using "00" as the year
1900  rather  than the year  2000.  This  could  result in a system  failure  or
miscalculation causing disruptions of operations, including, among other things,
a  temporary  inability  to process  transactions  or engage in  similar  normal
business activities.

The Fund uses  primarily  third party  software  and is  communicating  with key
vendors  to ensure  that its  systems  are year 2000  compliant.  Based on these
discussions,  the Fund does not expect  that the costs  related to the year 2000
issue will be  significant.  Ultimately,  the potential  impact of the year 2000
issue  will  depend  on the way in which  the year 2000  issue is  addressed  by
businesses  and  other  entities  whose   financial   condition  or  operational
capability is important to the Fund.


                                      F-5


<PAGE>









REPORT OF INDEPENDENT AUDITORS




Board of Directors and Shareholders
ATEL Financial Corporation


We have audited the  accompanying  consolidated  balance sheet of ATEL Financial
Corporation  and  subsidiary  as of July 31,  1998.  This  balance  sheet is the
responsibility of the Company's management.  Our responsibility is to express an
opinion on this balance sheet based on our audit.

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

In our  opinion,  the  consolidated  balance  sheet  referred to above  presents
fairly, in all material  respects,  the consolidated  financial position of ATEL
Financial  Corporation at July 31, 1998 in conformity  with  generally  accepted
accounting principles.


                                                               Ernst & Young LLP

San Francisco, California
September 10, 1998



                                      F-6
<PAGE>

                    ATEL FINANCIAL CORPORATION AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEET

                                  JULY 31, 1998

                                     ASSETS

<TABLE>
<CAPTION>

<S>                                                                             <C>       
Cash and cash equivalents                                                         $855,114
Accounts receivable                                                                 92,931
Amounts due from affiliated partnerships                                         1,660,221
Investments in leases                                                            3,572,324
Cash surrender value of life insurance                                             300,000
Deferred tax asset                                                               1,629,810
Property and equipment, net of accumulated depreciation of $1,172,147              575,992
Leasehold improvements, net of accumulated amortization of $283,737                466,527
Other assets                                                                       195,405
                                                                           ----------------
                                                                                $9,348,324
                                                                           ================


                      LIABILITIES AND SHAREHOLDER'S EQUITY


Liabilities:
Non-recourse debt                                                                 $975,278
Line of credit                                                                     500,000
Amounts due to affiliated companies                                              2,522,491
Accounts payable and accrued liabilities                                           615,784
Customer deposits                                                                   22,000
Deferred liabilities and credits:
  Unearned acquisition fees                                                        245,569
  Deferred capital contributions                                                   408,568
  Deferred tax liability                                                         2,513,105
                                                                           ----------------
  Total liabilities                                                              7,802,795

Shareholder's equity:
Common stock, 100,000 shares authorized, 666.5 shares issued and outstanding         2,000
Additional paid-in capital                                                          93,855
Retained earnings                                                                1,449,674
                                                                           ----------------
  Total shareholder's equity                                                     1,545,529
                                                                           ----------------
                                                                                $9,348,324
                                                                           ================
</TABLE>
                             See accompanying notes.

                                      F-7
<PAGE>

                    ATEL FINANCIAL CORPORATION AND SUBSIDIARY

                       NOTES TO CONSOLIDATED BALANCE SHEET

                                  JULY 31, 1998


1.   Summary of significant accounting policies:

Organization and principles of consolidation:

The  consolidated   balance  sheet  includes  the  accounts  of  ATEL  Financial
Corporation (ATEL) and its wholly owned subsidiary,  ATEL Securities Corporation
(ASC). ATEL is a wholly owned subsidiary of ATEL Capital Group (ACG).

ATEL is a California  corporation formed in July 1977 to engage in the brokering
and leasing of  equipment  for its own  account  and the  account of  affiliated
partnerships. ASC was formed in November 1985 and was registered as a securities
broker/dealer in February 1986. All significant  intercompany balances have been
eliminated in consolidation.

ATEL organizes and sponsors limited partnerships (the "affiliated  partnerships"
or the "programs")  engaged in equipment leasing and sales  activities.  It also
acts as the corporate general partner in these affiliated partnerships.  Through
these programs,  ACG derives various fees and also receives  reimbursements  for
expenses incurred on behalf of these entities, of which certain fees and expense
reimbursements  are  allocated  to ATEL and the balance is  allocated to various
other affiliates.  The basis for determination of the types and amounts of these
fees and reimbursements are provided in agreements with the various programs.

In addition,  under the terms of the  partnership  agreements for certain of the
affiliated partnerships for which ATEL is a general partner, ATEL is entitled to
participate  in net cash from  operations  and sales or refinancing of equipment
owned by the  affiliated  partnerships.  A portion  of ATEL's  participation  is
subordinated  to the limited  partners' full recovery of their initial  invested
capital contributions plus a specified return on their investments.  No earnings
or  equity  interests  from such  subordinated  interests  have been  recognized
through July 31, 1998. The  shareholders  of ATEL Capital Group are also general
partners in certain of these affiliated partnerships.


Operating leases:

Assets on  operating  leases are stated at cost less  accumulated  depreciation.
Revenues  from  operating  leases are  recognized  evenly  over the terms of the
related leases.  Depreciation is provided by the  straight-line  method over the
term of the lease to an amount equal to the equipment's estimated residual value
at lease termination.

Initial direct costs:

Initial direct costs are capitalized and amortized over the terms of the related
leases.

Investment in leveraged leases:

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





                                      F-8


<PAGE>

                    ATEL FINANCIAL CORPORATION AND SUBSIDIARY

                       NOTES TO CONSOLIDATED BALANCE SHEET

                                  JULY 31, 1998


1.   Summary of significant accounting policies (continued):

Residual interests:

Residual interests represent the present value of ATEL's proportionate  interest
(calculated at the time of the  transaction) in the estimated  residual value of
equipment  originally owned by ATEL and subsequently sold to a third party where
ATEL retains an  unconditional  right to participate in such residual value upon
the expiration of the related lease.  This retained  residual value is presented
as an asset until the  ultimate  liquidation  of the  underlying  equipment  and
realization of the participation.

Acquisition fees:

Acquisition  fees  received  from  the  first  six  affiliated  partnerships  on
equipment  purchased  prior to 1995,  generally  3.5% to 4.75% of the affiliated
partnerships'  equipment  cost,  were  deferred and are  recognized as income as
services  are  provided in  connection  with the  partnerships'  acquisition  of
equipment and leases.  It is estimated that these services will be rendered over
a period of seven  years.  Beginning  in 1995 and  through  December  31,  1996,
acquisition services subject to a fee were performed by an affiliate.

Property and equipment:

Property and equipment is stated at cost.  Depreciation is calculated  using the
straight-line  method over the estimated useful lives of the respective  assets,
which range from three to seven years.

Leasehold improvements:

Leasehold improvements are stated at cost.  Amortization is calculated using the
straight-line  method over the lives of the related  leases or estimated  lives,
whichever is shorter.

Cash surrender value of life insurance

ATEL purchased two single premium  key-man life insurance  policies to cover its
two officer-shareholders. ATEL is a beneficiary under the contracts for $300,000
of cash surrender values and death benefits.  The spouses are the  beneficiaries
for amounts above $300,000.

Income taxes:

For federal and state income tax reporting, ATEL's taxable income is included in
the returns  filed by its parent.  For  financial  reporting,  ATEL's income tax
provision  is  calculated  on  a  separate  return  basis.  Deferred  taxes  are
calculated using the liability method of accounting for income taxes. Under this
method,  deferred tax assets and liabilities are determined based on differences
between the financial  reporting and tax bases of assets and liabilities and are
measured  using the  enacted  tax rates and laws that will be in effect when the
differences are expected to reverse. The ultimate realization of ATEL's deferred
tax asset is dependent upon the realization of such amount by ACG.


                                      F-9

<PAGE>

                    ATEL FINANCIAL CORPORATION AND SUBSIDIARY

                       NOTES TO CONSOLIDATED BALANCE SHEET

                                  JULY 31, 1998


1.   Summary of significant accounting policies (continued):

Credit risk:

Financial instruments which potentially subject ATEL to concentrations of credit
risk include cash and cash equivalents and accounts receivable.  ATEL places its
cash deposits and temporary cash  investments  with  creditworthy,  high quality
financial  institutions.  The  concentration of such deposits and temporary cash
investments  is not  deemed  to  create a  significant  risk to  ATEL.  Accounts
receivable  represent amounts due from lessees in various  industries related to
equipment on operating leases.

Use of estimates:

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

Investments in affiliated partnerships

ATEL accounts for its interest as a corporate  general partner in the affiliated
partnerships  at cost,  or under the equity method of  accounting,  based on the
terms of the individual affiliated partnership agreements.

     Affiliated partnerships accounted for at cost do not provide for provisions
in the partnership  agreements for general partner  distributions and hence, the
General  Partner  does not in effect  have any way to recover the amounts of its
capital  account as recorded by the  Partnership.  Upon the dissolution of these
partnerships,  a special  allocation  of income or loss is made from the general
partner to the  limited  partners in an amount  sufficient  to bring the capital
accounts to zero, based on the terms of the partnership agreements.


Affiliated  partnerships  accounted for under the equity  method of  accounting,
subject to  limitations in the respective  partnership  agreements,  provide for
general partner  distributions.  Upon dissolution of these partnerships,  if the
general partner has a deficiency in its capital account,  the general partner is
required to contribute in cash to the capital of the  affiliated  partnership an
amount equal to the lesser of the deficiency in the general partner's account or
1.01% of the original invested capital of the affiliated  partnership,  based on
the  provisions  of the  partnership  agreement.  If the  general  partner has a
positive  capital  balance upon the  dissolution of the  partnership,  a special
allocation of income is made from the general partner to the limited partners in
an amount  sufficient to bring the capital  accounts to zero, based on the terms
of the partnership agreements. Through July 31, 1998, ATEL has deferred $408,568
in  distributions  received from  affiliated  partnerships  accounted for on the
equity  method of  accounting.  Such amounts are  included in the balance  sheet
under the caption "Deferred capital contributions".

Amounts due from affiliates

Amounts due from  affiliates  represents  amounts  advanced to or received  from
affiliates  for  operations  or for income taxes to be paid by ATEL on behalf of
ACG and its subsidiaries.

                                      F-10
<PAGE>

                    ATEL FINANCIAL CORPORATION AND SUBSIDIARY

                       NOTES TO CONSOLIDATED BALANCE SHEET

                                  JULY 31, 1998


2.  Investments in leases:

Investments in leases consist of the following:

Equipment on operating leases, net of accumulated depreciation     $2,582,814
Residual interests                                                    682,227
Investment in leveraged leases                                        307,283
                                                                  ------------
                                                                   $3,572,324
                                                                  ============
Operating leases:

Equipment on operating leases consists of the following:
Electrical cogeneration plant (estimated useful life, 20 years)    $2,565,815
Concrete hauling trucks (estimated useful life, 7 years)            1,793,410
                                                                  ------------
                                                                    4,359,225
Less accumulated depreciation                                      (1,776,411)
                                                                  ------------
Equipment on operating leases, net of accumulated depreciation     $2,582,814
                                                                  ============

At July 31,  1998,  the  aggregate  amounts  of future  minimum  lease  payments
receivable from operating leases are as follows:

                                Year ending July 31,
                                                1999         $286,590
                                                2000          290,999
                                                2001          290,999
                                                2002          290,999
                                                2003          290,999
                                          Thereafter           24,250
                                                      ----------------
                                                           $1,474,836
                                                      ================

Leveraged leases:

ATEL  participates in leveraged  lease  transactions in which the cost of assets
leased to others is financed primarily by loans from financial  institutions but
ownership of property is retained by ATEL. The lessees'  rental  obligations are
assigned to the financial  institutions  and the related  property is pledged as
collateral  for the loans and are without  deficiency  liability  (non-recourse)
against  ATEL.  Equipment  under  leveraged  leases  includes  coal  mining  and
processing equipment and over-the-road tractors and trailers. The net investment
in leveraged leases is as follows:

Aggregate rentals receivable                                         $2,364,270
Aggregate principal and interest payable on non-recourse loans       (2,364,270)
Estimated residual value of leased assets                               381,000
Less unearned income                                                    (73,717)
                                                                     -----------
Investment in leveraged leases                                          307,283
Deferred tax liability, included in the accompanying balance sheet     (272,908)
                                                                     -----------
Net investment in leveraged leases                                      $34,375
                                                                     ===========

                                      F-11
<PAGE>

                    ATEL FINANCIAL CORPORATION AND SUBSIDIARY

                       NOTES TO CONSOLIDATED BALANCE SHEET

                                  JULY 31, 1998


2.  Investments in leases (continued):

General lease terms and concentration of credit risk:

Operating  and  leveraged  leases  generally  provide  that the  lessee  will be
responsible  for  maintenance,  insurance and similar costs  (referred to as net
leases).

ATEL leases equipment to lessees in diversified industries. As of July 31, 1998,
equipment  representing 19% and 12% of total assets was leased to lessees in the
machine tool and heavy construction industries, respectively. Leases are subject
to  the  Company's  credit  committee   review.   The  leases  provide  for  the
repossession of the equipment in the event of default.


3.  Non-recourse debt:

Non-recourse debt consists of a note payable to financial institution.  Interest
is at 9.6094% per year.  Concrete  hauling trucks and related leases are pledged
as collateral and payments are due in various installments through 2002.

The net book value of assets financed with  non-recourse  debt was $2,582,814 at
July 31, 1998.

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

                                 Principal         Interest          Total
         Year ending July 31,    Payments         Payments         Payments 
                        1999         $201,397          $85,193         $286,590
                        2000          226,437           64,562          290,999
                        2001          249,180           41,819          290,999
                        2002          274,207           16,792          290,999
                        2003           24,057              193           24,250
                              ---------------- ---------------- ----------------
                                     $975,278         $208,559       $1,183,837
                              ================ ================ ================


4.  Income taxes:

Deferred  income  taxes as of July  31,  1998  reflect  the net tax  effects  of
temporary differences between the carrying amounts of assets and liabilities for
financial  reporting  purposes and the amounts used for income tax purposes.  At
July 31, 1998, deferred tax assets total $1,629,810 and deferred tax liabilities
total $2,513,105.

Deferred income taxes arise primarily from differences in the reporting of lease
income,  depreciation,  acquisition fees and valuation accounts for tax purposes
as compared to their treatment for financial reporting purposes.


                                      F-12
<PAGE>

                    ATEL FINANCIAL CORPORATION AND SUBSIDIARY

                       NOTES TO CONSOLIDATED BALANCE SHEET

                                  JULY 31, 1998

5.  Line of credit:

ATEL participates  with ACG, certain other  subsidiaries of ACG and with certain
affiliated  partnerships,  in a $90,000,000  revolving  credit  agreement with a
group of financial  institutions  which expires November 28, 1998. The agreement
includes an acquisition  facility, a lease warehouse facility and a small ticket
facility which are used to provide bridge financing for assets on leases.  Draws
on the acquisition  facility by any individual borrower are secured only by that
borrower's  assets,  including  equipment and related leases.  Borrowings on the
warehouse   facility  are  recourse   jointly  to  certain  of  the   affiliated
Partnerships  and ATEL.  Borrowings on the small ticket facility are recourse to
the borrower and are  guaranteed  by ACG and certain of its  shareholders.  Also
included in this line of credit facility is $1,000,000  available for operations
and working capital.  At July 31, 1998, ATEL had $500,000 of borrowings  related
to working  capital.  At July 31, 1998,  $5,000,000 was borrowed under the small
ticket lease facility by a subsidiary of ACG relating to lease transactions.  At
July 31, 1998,  $21,017,948  was borrowed under the separate  lease  warehousing
facility by another subsidiary of ACG relating to lease  transactions.  Interest
is at the  bank's  prime  rate  (8.5% at July 31,  1998) or at LIBOR  plus 1.25%
(6.91% at July 31, 1998).

These  facilities,  when used,  are  collateralized  by (i) leases and equipment
owned by the  specific  borrower  and  financed  by the lines and (ii) all other
assets owned by the  specific  borrower  except  equipment,  lease  receipts and
residual values specifically pledged to other equipment funding sources.  ATEL's
borrowings under the facility are guaranteed by ACG and/or its shareholders.

Under the line, the affiliated partnerships have borrowed $11,865,000 as of July
31, 1998. These funds are  collateralized  by the assets owned by the affiliated
partnerships,  except equipment, lease receipts and residual values specifically
pledged to other equipment funding sources.

The credit agreement  includes certain  financial  covenants  applicable to each
borrower. ATEL was in compliance with such covenants as of July 31, 1998.


6.  Commitments and contingencies:

Office lease:

ATEL occupies office space under  operating  leases  expiring  through  December
2002.  Future  minimum  payments  for fiscal year  periods  under the leases are
$526,279  in 1999,  $536,162  in 2000,  $550,001  in 2001,  $559,886 in 2002 and
$233,286 in 2003. Office rent expense was $562,539 in 1998 and $508,747 in 1997.


                                      F-13
<PAGE>

                    ATEL FINANCIAL CORPORATION AND SUBSIDIARY

                       NOTES TO CONSOLIDATED BALANCE SHEET

                                  JULY 31, 1998


7.  Reimbursements of operating costs:

The Limited Partnership Agreements of the affiliated  partnerships allow for the
reimbursement  of  costs  incurred  by ACG and  its  subsidiaries  in  providing
administrative services to the Partnerships,  of which a portion of such amounts
is allocated  to ATEL.  Administrative  services  provided  include  partnership
accounting,   investor   relations,   legal  counsel  and  lease  and  equipment
documentation.  ACG and its  subsidiaries  are not reimbursed for services where
they are entitled to receive a separate fee as  compensation  for such services,
such as acquiring and  overseeing  the  management  of  equipment.  Reimbursable
operating  costs  incurred  by ACG and its  subsidiaries  are  allocated  to the
Partnerships based upon actual time incurred by employees working on partnership
business and an allocation of rent and other costs based on utilization studies.
Accrual and payment of reimbursable costs and management fees due from ATEL Cash
Distribution  Fund were voluntarily  suspended in May 1994. As of July 31, 1998,
$1,660,221  remained  outstanding from affiliated  partnerships for reimbursable
operating and syndication costs and management fees.


8.  Impact of the Year 2000 (Unaudited)

The year 2000 issue is the result of computer  programs  being written using two
digits rather than four to define the  applicable  year.  Any computer  programs
that have time  sensitive  software may  recognize a date using "00" as the year
1900  rather  than the year  2000.  This  could  result in a system  failure  or
miscalculation causing disruptions of operations, including, among other things,
a  temporary  inability  to process  transactions  or engage in  similar  normal
business activities.

ATEL uses primarily third party software and is  communicating  with key vendors
to ensure that its systems are year 2000 compliant.  Based on these discussions,
ATEL does not  expect  that the costs  related  to the year 2000  issue  will be
significant. Ultimately, the potential impact of the year 2000 issue will depend
on the way in which the year 2000 issue is  addressed  by  businesses  and other
entities whose  financial  condition or  operational  capability is important to
ATEL.


                                      F-14

<PAGE>



--------------------------------------------------------------------------------
                          PRIOR PERFORMANCE INFORMATION
--------------------------------------------------------------------------------

ATEL Financial Corporation ("ATEL"), the Manager of the Fund, and its affiliates
have extensive  experience in the equipment  leasing  industry,  including:  (i)
originating and financing  leveraged and single investor lease  transactions for
corporate  investors,  (ii) acting as a broker/packager  by arranging equity and
debt  participants  for  equipment  leasing  transactions  originated  by  other
companies,  (iii)  consulting on the pricing and  structuring of equipment lease
transactions for banks, leasing companies and corporations,  (iv) organizing and
offering  individual  ownership  and  limited  partnership   investment  leasing
programs and (v)  supervising  and  arranging for the  supervision  of equipment
management and marketing on leasing transactions involving total equipment costs
in excess of $1 billion. In addition to the Fund, ATEL has sponsored seven prior
public and one private  equipment  leasing  limited  partnership(s).  See "Prior
Performance Summary" for a summary of information regarding such prior programs.

The first prior partnership, ATEL Lease Income Fund 1985-A ("ALIF"), completed a
private placement of $218,500 of its limited partnership interests in April 1986
from a total of 12  investors.  ALIF had acquired a variety of equipment  with a
total purchase cost of approximately  $296,627 as of December 31, 1997. All such
equipment had been sold as of December 31, 1997 and the  partnership  has ceased
operations. See Table VI - "Sales or Disposals of Equipment" in this Exhibit A.

The second prior partnership,  ATEL Cash Distribution Fund ("ACDF"), commenced a
public  offering of up to  $10,000,000 of its limited  partnership  interests on
March 1, 1986. ACDF terminated its offering on December 18, 1987 after raising a
total of $10,000,000 in offering  proceeds from a total of  approximately  1,000
investors,  all of which proceeds have been committed to equipment acquisitions,
estimated organization and offering expenses and capital reserves. ACDF acquired
a variety of types of  equipment  with a total  purchase  cost of  approximately
$11,133,679 as of December 31, 1997. See Table V - "Acquisition  of Equipment by
Prior  Programs" in Exhibit A for further  information  concerning  the types of
equipment  acquired by ACDF. All such equipment had been sold as of December 31,
1997.  See Table VI - "Sales or  Disposals of  Equipment"  in Exhibit A. Through
December  31, 1997,  ACDF had made cash  distributions  to its  investors in the
aggregate  amount of $1,121.03  per $1,000  invested.  Of this amount a total of
$244.89  represents  investment income and $876.14 represents return of capital.
See Table III -  "Operating  Results of Prior  Programs"  in this  Exhibit A for
further information  concerning such  distributions.  See Table IV - "Results of
Completed Program" in this Exhibit A, for further information.

The third  prior  partnership,  ATEL  Cash  Distribution  Fund II  ("ACDF  II"),
commenced a public offering of up to $25,000,000 (with an option to increase the
offering to  $35,000,000)  of its limited  partnership  interests  on January 4,
1988.  ACDF II terminated  its offering on January 3, 1990 after raising a total
of  $35,000,000  in  offering  proceeds  from a  total  of  approximately  3,100
investors,  all of which proceeds have been committed to equipment acquisitions,
estimated  organization and offering expenses and capital reserves.  ACDF II had
acquired  a  variety  of  types  of  equipment  with a  total  purchase  cost of
approximately  $52,270,536  as of June 30,  1998.  See Table V  "Acquisition  of
Equipment by Prior Programs" in Exhibit A for further information concerning the
types of equipment acquired by ACDF II. Of such equipment, items representing an
original purchase cost of approximately $51,885,991 had been sold as of June 30,
1998.  See Table VI - "Sales or  Disposals of  Equipment"  in Exhibit A. Through
June 30,  1998,  ACDF II had made cash  distributions  to its  investors  in the
aggregate  amount of $1,105.70  per $1,000  invested.  Of this amount a total of
$289.71  represents  investment income and $815.99 represents return of capital.
See Table III -  "Operating  Results of Prior  Programs"  in this  Exhibit A for
further information concerning such distributions.

                                      A-1
<PAGE>

     The fourth prior partnership, ATEL Cash Distribution Fund III ("ACDF III"),
commenced a public offering of up to $50,000,000 (with an option to increase the
offering to  $75,000,000)  of its limited  partnership  interests  on January 4,
1990.  ACDF III terminated its offering on January 3, 1992 after raising a total
of  $73,855,840  in  offering  proceeds  from a  total  of  approximately  4,822
investors,  all of which proceeds have been committed to equipment acquisitions,
estimated organization and offering expenses and capital reserves.  ACDF III had
acquired  a  variety  of  types  of  equipment  with a  total  purchase  cost of
approximately  $99,629,941  as of June 30,  1998.  See Table V  "Acquisition  of
Equipment by Prior Programs" in Exhibit A for further information concerning the
types of equipment  acquired by ACDF III. Of such equipment,  items representing
an original purchase cost of approximately  $66,594,290 had been sold as of June
30, 1998. See Table VI - "Sales or Disposals of Equipment" in Exhibit A. Through
June 30,  1998,  ACDF III had made cash  distributions  to its  investors in the
aggregate  amount of $1,003.64  per $1,000  invested.  Of this amount a total of
$261.90  represents  investment income and $741.74 represents return of capital.
See Table III -  "Operating  Results of Prior  Programs"  in this  Exhibit A for
further information concerning such distributions.

The fifth  prior  partnership,  ATEL  Cash  Distribution  Fund IV  ("ACDF  IV"),
commenced a public  offering  of up to  $75,000,000  of its limited  partnership
interests on February 4, 1992.  ACDF IV  terminated  its offering on February 3,
1993 after raising a total of $75,000,000  in offering  proceeds from a total of
approximately  4,873  investors,  all of which  proceeds have been  committed to
equipment acquisitions, estimated organization and offering expenses and capital
reserves.  ACDF IV had  acquired  a variety of types of  equipment  with a total
purchase cost of  approximately  $108,734,880  as of June 30, 1998.  See Table V
"Acquisition   of  Equipment  by  Prior  Programs"  in  Exhibit  A  for  further
information  concerning  the  types of  equipment  acquired  by ACDF IV. Of such
equipment,  items  representing  an  original  purchase  cost  of  approximately
$52,871,585  had  been  sold as of June 30,  1998.  See  Table  VI -  "Sales  or
Disposals of  Equipment"  in Exhibit A. Through June 30, 1998,  ACDF IV had made
cash  distributions  to its  investors  in the  aggregate  amount of $797.87 per
$1,000 invested.  Of this amount a total of $148.05 represents investment income
and $649.82 represents return of capital.  See Table III - "Operating Results of
Prior  Programs"  in this  Exhibit A for  further  information  concerning  such
distributions.

The sixth prior partnership, ATEL Cash Distribution Fund V ("ACDF V"), commenced
a public offering of up to $125,000,000 of its limited partnership  interests on
February 22, 1993.  ACDF V terminated  its offering on November 15, 1994.  As of
that  date,   $125,000,000   of  offering   proceeds  had  been   received  from
approximately  7,217  investors.  All of the  proceeds  have been  committed  to
equipment acquisitions, estimated organization and offering expenses and capital
reserves.  ACDF V had  acquired  a variety  of types of  equipment  with a total
purchase  cost of  $186,897,181  as of June 30, 1998. Of such  equipment,  items
representing  an original  purchase cost of  approximately  $31,330,129 had been
sold  as of  June  30,  1998.  Through  June  30,  1998,  ACDF V had  made  cash
distributions  to its  investors in the  aggregate  amount of $520.97 per $1,000
invested.  Of this  amount a total of $73.79  represents  investment  income and
$447.18  represents  return of capital.  See Table III -  "Operating  Results of
Prior  Programs"  in this  Exhibit A for  further  information  concerning  such
distributions.  See Table V -  "Acquisition  of Equipment by Prior  Programs" in
Exhibit A for further information  concerning the types of equipment acquired by
ACDF V. See Table VI - "Sales or Disposals of Equipment" in Exhibit A.

                                      A-2
<PAGE>

The seventh  prior  partnership,  ATEL Cash  Distribution  Fund VI ("ACDF  VI"),
commenced a public  offering of up to  $125,000,000  of its limited  partnership
interests on November 23, 1994.  ACDF VI terminated its offering on November 22,
1996. As of that date,  $125,000,000 of offering proceeds had been received from
approximately  6,401  investors.  All of the  proceeds  have been  committed  to
equipment acquisitions, estimated organization and offering expenses and capital
reserves.  ACDF VI had  acquired  a variety of types of  equipment  with a total
purchase  cost of  $208,277,121  as of June 30, 1998. Of such  equipment,  items
representing an original purchase cost of approximately $2,677,677 had been sold
as of June 30, 1998.  Through June 30, 1998, ACDF VI had made cash distributions
to its investors in the aggregate amount of $321.36 per $1,000 invested. Of this
amount a total of $6.87  represents  investment  income and  $314.49  represents
return of capital.See Table III - "Operating  Results of Prior Programs" in this
Exhibit A for further information  concerning such distributions.  See Table V -
"Acquisition   of  Equipment  by  Prior  Programs"  in  Exhibit  A  for  further
information  concerning the types of equipment acquired by ACDF VI. See Table VI
- "Sales or Disposals of Equipment" in Exhibit A.

The eighth prior  partnership,  ATEL Capiatal  Equipment  Fund VII ("ACEF VII"),
commenced a public  offering of up to  $150,000,000  of its limited  partnership
interests  on November  29,  1996.  ACEF VII will  terminate  its offering on or
before November 29, 1998. As of June 30, 1998, $105,570,580 of offering proceeds
had been received from approximately  4,300 investors.  All of the proceeds have
been committed to equipment  acquisitions,  estimated  organization and offering
expenses  and  capital  reserves.  ACEF VII had  acquired  a variety of types of
equipment  with a total  purchase cost of  $177,566,094  as of June 30, 1998. Of
such equipment,  items  representing an original  purchase cost of approximately
$2,055,915  had been sold as of June 30, 1998.  Through June 30, 1998,  ACEF VII
had made cash  distributions to its investors in the aggregate amount of $126.79
per $1,000  invested.  Of this  amount a total of $29.74  represents  investment
income and  $97.05  represents  return of  capital.  See Table III -  "Operating
Results of Prior Programs" in this Exhibit A for further information  concerning
such  distributions.  See Table V - "Acquisition of Equipment by Prior Programs"
in Exhibit A for further information  concerning the types of equipment acquired
by ACEF VII. See Table VI - "Sales or Disposals of Equipment" in Exhibit A.

Although certain of the Prior Programs have  experienced  lessee defaults in the
ordinary  course of  business,  none of the Prior  Programs has  experienced  an
unanticipated  rate of default or major adverse business  developments which the
Fund Manager believes will impair its ability to meet its investment objectives.

All of the Prior Programs have  investment  objectives that are similar to those
of the  Fund.  It  should be noted,  however,  that the prior  privately  placed
program,  ALIF,  invested in equipment  without the use of any acquisition debt,
while Prior  Programs  ("Prior Public  Programs")  were designed to use moderate
amounts of acquisition debt, as is the Fund. In addition,  as in the case of the
Fund's portfolio  objectives,  the Prior Public Programs'  equipment  portfolios
placed greater  emphasis on relatively  low technology  equipment than did ALIF.
The  factors  considered  by the  Manager  in  determining  that the  investment
objectives  of the prior  programs were similar to those of the Fund include the
types  of  equipment  to be  acquired,  the  structure  of the  leases  to  such
equipment,  the credit criteria for lessees, the intended investment cycles, the
reinvestment policies and the investment goals of each program. Therefore all of
the  information  set  forth  in  Tables  included  in this  Exhibit  A - "Prior
Performance  Information"  may be deemed to relate to programs  with  investment
objectives similar to those of the Fund.

                                      A-3
<PAGE>

In Tables I through  III  information  is  presented  with  respect to all Prior
Programs  sponsored  by the  Manager  and  its  Affiliates  which  closed  their
offerings  within the five year period  ending June 30,  1998,  except that ACDF
closed its offering  December 18, 1987,  ACDF II closed its offering  January 3,
1990,  ACDF III  closed  its  offering  January  3, 1992 and ACDF IV closed  its
offering on  February  3, 1993.  Table VI  includes  information  regarding  all
dispositions  of equipment by prior programs  during the five year period ending
June 30, 1998.  The  following is a list of the tables set forth on this Exhibit
A:

                     TABLE I       Experience in Raising and Investing Funds

                     TABLE II      Compensation to the General Partners

                     TABLE III     Operating results of Prior Programs

                     TABLE IV      Results of Completed Programs

                     TABLE V       Acquisition of Equipment by Prior Programs

                     TABLE VI      Sales or Disposals of Equipment

ATEL will  provide to any  investor,  upon written  request and without  charge,
copies of the most recent Annual  Reports on Form 10-K filed with the Securities
and Exchange  Commission  by each Prior  Public  Program and will provide to any
investor, for a reasonable fee, copies of the exhibits to such reports.



INVESTORS IN THE PARTNERSHIP WILL HAVE NO INTEREST IN THE INVESTMENTS  DESCRIBED
IN THE FOLLOWING TABLES. PROSPECTIVE INVESTORS SHOULD NOT CONSTRUE THE INCLUSION
OF THIS INFORMATION AS INDICATIVE OF THE POSSIBLE OPERATIONS OF THE PARTNERSHIP.

In  addition  to Tables I through V, two  summary  charts  are set forth  below.
Figure 6 is a summary of cash  distributions  through  December 31, 1997 by each
Prior  Public  Program,  expressed  as a  percentage  of an  initial  investor's
original   capital   contribution   and  divided   into  the  portions  of  such
distributions  which have been  characterized  in the Prior Program's  financial
statements  as a return of  capital,  on the one hand,  and net  income,  on the
other.

(GRAPHIC OMITTED - FIGURE 6)

Figure 7 below  illustrates the disposition of equipment after expiration of the
initial lease term for equipment  coming off lease through April 1, 1998 for all
Prior Public Programs that had completed  their public  offerings as of December
31, 1995. The dispositions are  characterized  as (i) short term renewals by the
lessees  (for  terms of less than 12  months),  (ii) long term  renewals  by the
lessees  (for terms of at least 12 months),  (iii)  equipment  purchased  by the
lessee and (iv) equipment returned by the lessee to the Prior Public Program for
sale or lease to another party.

(GRAPHIC OMITTED - FIGURE 7)


                                      A-4
<PAGE>

                                     TABLE I
                    EXPERIENCE IN RAISING AND INVESTING FUNDS
                             (on a percentage basis)
                                 June 30, 1998
                                   (Unaudited)

The following Table sets forth certain information  concerning the experience of
the General  Partners in raising and investing  funds. A percentage  analysis of
the application of the proceeds raised is presented.

<TABLE>
<CAPTION>
                                                   ATEL Cash       ATEL Cash       ATEL Cash        ATEL Cash    
                                                   Distribution    Distribution  Distribution       Distribution 
                                                     Fund          Fund II         Fund III          Fund IV     
                                                     ----          --------        --------          -------     
<S>                                               <C>             <C>              <C>             <C>           
EQUITY PROCEEDS
       Dollar amount of equity
          offered                                 $10,000,000     $35,000,000      $75,000,000     $75,000,000   
       Dollar amount of equity
          raised                                  $10,000,000     $35,000,000      $73,855,840     $75,000,000   
Less:  Offering expenses:
       Selling commissions                              9.50%           9.50%            9.50%           9.50%   
       Organization and program
          expenses (1)                                  4.00%           5.00%            4.25%           4.53%   
       Reserves                                         3.00%           1.50%            1.50%           1.50%   
                                                  ------------    ------------   --------------    ------------  
Percent available for investment                       83.50%          84.00%           84.75%          84.47%   
Acquisition costs:
       Purchase price (2)                              79.00%          79.25%           80.00%          79.71%   
       Acquisition fees                                 4.50%           4.75%            4.75%           4.76%   
                                                  ------------    ------------   --------------    ------------  
                                                       83.50%          84.00%           84.75%          84.47%   
                                                  ============    ============   ==============    ============  
Percent leverage (9)                                   20.26%          40.93%(8)        43.04%(10)      43.50%   
                                                  ============    ============   ==============    ============  

Date offering commenced:                          Mar. 1, 1986    Jan. 4, 1988     Jan. 4, 1990    Feb. 4, 1992  

Length of offering                                21 Months       24 Months        24 Months       12 Months     

Months to  invest 90% of
   amount available for investment
   (measured from beginning of offering)          30 Months   (3) 27 Months  (4)   30 Months   (5) 20 Months (6) 
</TABLE>
                                      A-5
<PAGE>

<TABLE>
<CAPTION>
                                                  ATEL Cash       ATEL Cash         ATEL Capital         
                                                  Distribution     Distribution    Equipment             
                                                    Fund V         Fund VI          Fund VII             
                                                   ------         -------          --------     
EQUITY PROCEEDS                                                                                          
       Dollar amount of equity                                                                           
<S>                                              <C>             <C>              <C>                    
          offered                                $125,000,000    $125,000,000     $150,000,000           
       Dollar amount of equity                                                                           
          raised                                 $125,000,000    $125,000,000      105,570,080           
Less:  Offering expenses:                                                                                
       Selling commissions                              9.50%           9.50%            9.50%           
       Organization and program                                                                          
          expenses (1)                                  4.60%           4.70%            4.58%           
       Reserves                                         1.50%           1.50%            0.50%           
                                                 -------------   -------------    -------------          
Percent available for investment                       84.40%          84.30%           85.42%           
Acquisition costs:                                                                                       
       Purchase price (2)                              79.64%          79.80%           85.42%           
       Acquisition fees                                 4.76%           4.50%               -            
                                                 -------------   -------------    -------------          
                                                       84.40%          84.30%           85.42%           
                                                 =============   =============    =============          
Percent leverage (9)                                   35.06%          46.12%           26.17%           
                                                 =============   =============    =============          
                                                                                                         
Date offering commenced:                          Feb. 22, 1993   Nov. 23, 1994    Nov. 29, 1996         
                                                                                                         
Length of offering                                21 Months       24 Months         N/A      (12)        
                                                                                                         
Months to  invest 90% of                                                                                 
   amount available for investment                                                                       
   (measured from beginning of offering)          22 Months  (7)  24 Months (11)    N/A      (12)        
                                                         
                                                                                                         
</TABLE>
                                         
                                      A-6
<PAGE>

FOOTNOTES:

     (1) Includes organization,  legal, accounting,  printing, binding, delivery
and other costs incurred by the General Partner.

     (2)  Represents  amounts  paid to unrelated  third  parties for purchase of
equipment under leases.
 
     (3) As of December  1988,  100% of the amount  available for investment had
been
 invested.  

     (4) As of June 1990,  100% of the amount  available for investment had been
invested.

     (5) As of September 30, 1992, 100% of the amount available for
 investment had been invested.  

     (6) As of December  31,  1993,  the proceeds of the offering had been fully
invested.

     (7)  As of  November  15,  1994,  the  Partnership's  offering  of  Limited
Partnership  Units was  completed.  As of December 31, 1994, the proceeds of the
offering had been fully committed.

     (8) From January 4, 1988 through  August 31,  1994,  the maximum  amount of
leverage at the end of any quarter was 37%. This was computed as the outstanding
balance of all debt divided by the original cost of all  equipment  owned by the
partnership as of the end of each period.

     (9) The percentage leverage is calculated by dividing the initial principal
amount of debt  incurred  by the  program  through the date of this table by the
aggregate  original cost of all equipment  purchased by the program through such
date. It should be noted,  however,  that each program has acquired assets,  has
made or will make principal amortizing debt service payments and/or has disposed
or will  dispose  of  assets  over a period  of time  extending  from its  first
investment  in  equipment.  As a result,  for each program the total cost of the
assets in its portfolio and the total principal  amount of debt outstanding have
fluctuated from time to time. The percentage figure, therefore, does not reflect
the  current  leverage  ratio or the debt  ratio at any one  point in time,  but
constitutes an aggregate  ratio for the life of the program  through the date of
the table.

     (10) From January 4, 1990 through  December 31, 1997, the maximum amount of
leverage at the end of any quarter was less than 40%.  This was  computed as the
outstanding  balance of all debt divided by the original  cost of all  equipment
owned by the partnership as of the end of each period.

     (11) As of  November  22,  1996,  the  Partnership's  offering  of  Limited
Partnership  Units was completed.  As of that date, the proceeds of the offering
had been fully committed.

     (12) As of June 30, 1998, the Partnership's offering of Limited Partnership
Units had not been completed.  As of that date, the proceeds of the offering had
been fully committed.

                                      A-7
<PAGE>

                                    TABLE II
                      COMPENSATION TO THE GENERAL PARTNERS
                                 June 30, 1998
                                   (Unaudited)

     The  following  Table  sets  forth  certain   information   concerning  the
compensation derived by the General Partner.  Amounts paid are from two sources:
proceeds of the offering and gross revenues.


<TABLE>
<CAPTION>
                                                   ATEL Cash       ATEL Cash       ATEL Cash        ATEL Cash    
                                                   Distribution    Distribution  Distribution       Distribution 
                                                     Fund           Fund II        Fund III          Fund IV     

<S>                                               <C>             <C>            <C>               <C>      
Date offering commenced                           Mar. 1, 1986    Jan. 4, 1988   Jan. 4, 1990      Feb. 4, 1992  

Date offering closed                              Dec. 18, 1987   Jan. 3, 1990   Jan. 3, 1992      Feb. 3, 1993  

Dollar amount raised                              $10,000,000     $35,000,000      $73,855,840     $75,000,000   

Amounts paid to General
   Partners from proceeds of
   offering:
    Acquisition fees                                 $450,000      $1,662,500       $3,558,700      $3,575,123   
    Selling commissions                               $19,078        $230,985         $561,914        $716,296   
    Organization and program costs                   $550,000      $1,751,422       $3,135,942      $3,394,652   
Dollar amount of cumulative cash generated 
from operations before deducting payments 
to the General Partner                             $9,166,349     $38,472,108      $67,886,744     $47,294,524   
Cumulative amount paid to the
   General Partner from operations:
       Management fees                               $765,081      $2,929,971       $5,689,232      $4,685,687   
       Other operating expenses                      $475,740      $1,599,166       $2,565,217      $2,326,641   

Aggregate payments to General
   Partner: (1)
                                             1993    $221,000        $741,295       $1,383,380      $4,178,039   
                                             1994      54,739         551,300        1,339,355       2,007,562   
                                             1995           -         380,380        1,201,436       1,480,305   
                                             1996           -         290,349          967,667       1,097,106   
                                             1997           -         212,148          909,024       1,113,697   
                                             1998           -          93,950          285,987         384,365   
                                                  ------------    ------------   --------------    ------------  
                                                     $275,739      $2,269,422       $6,086,879     $10,261,074   
                                                  ============    ============   ==============    ============  
</TABLE>

                                      A-8
<PAGE>

<TABLE>
<CAPTION>
                                                   ATEL Cash       ATEL Cash         ATEL Capital         
                                                   Distribution     Distribution    Equipment             
                                                     Fund V         Fund VI          Fund VII             

<S>                                               <C>             <C>              <C>               
Date offering commenced                           Feb. 22, 1993   Nov. 23, 1994    Nov. 29, 1996          
                                                                                                          
Date offering closed                              Nov. 15, 1994   Nov. 22, 1996        N/A      (2)       
                                                                                                          
Dollar amount raised                              $125,000,000    $125,000,000     $105,570,080           
                                                                                                          
Amounts paid to General                                                                                   
   Partners from proceeds of                                                                              
   offering:                                                                                              
    Acquisition fees                                $5,956,319      $5,625,000         None               
    Selling commissions                             $1,702,822      $1,711,446       $1,345,029           
    Organization and program costs                  $5,751,177      $5,875,000       $4,831,747           
Dollar amount of cumulative cash generated                                                                
from operations before deducting payments                                                                 
to the General Partner                             $66,608,559     $57,969,330      $14,241,414           
Cumulative amount paid to the                                                                             
   General Partner from operations:                                                                       
       Management fees                              $6,829,986      $3,548,523       $1,004,567           
       Other operating expenses                     $2,706,509      $1,909,042       $1,090,828           
                                                                                                          
Aggregate payments to General                                                                             
   Partner: (1)                                                                                           
                                             1993   $8,084,815                                            
                                             1994   15,675,132                                            
                                             1995    4,067,056     $12,837,117                            
                                             1996    2,328,139      13,208,900                            
                                             1997    2,053,274       1,969,649      $10,657,867           
                                             1998      871,080         816,899        6,338,549           
                                                  -------------   -------------    -------------          
                                                   $33,079,496     $28,832,565      $16,996,416           
                                                  =============   =============    =============          
</TABLE>
                                                  





FOOTNOTES:

     (1)  As  of  June  30,  1998.   Includes   payments  of  management   fees,
reimbursements  of  syndication  costs  to  general  partner  (and  affiliates),
acquisition fees and reimbursements of administrative costs.
 
     (2) As of June 30, 1998, the offering had not been terminated. The offering
will terminate on or before November 29, 1998.



                                      A-9

<PAGE>

                                    TABLE III
                       OPERATING RESULTS OF PRIOR PROGRAMS
                                 June 30, 1998
                                   (Unaudited)

     The following  Table  summarizes  the operating  results of Prior  Programs
(ACDF,  ACDF II, ACDF III, ACDF IV, ACDF V, ACDF VI and ACEF VII). The Programs'
records  are  maintained  in  accordance  with  generally  accepted   accounting
principles for financial statement purposes.

<TABLE>
<CAPTION>
                                                                             ATEL Cash Distribution Fund
                                                                             Period Ended December 31,

                                                          1986               1987               1988               1989
Months of operations                                       2                  12                 12                 12

<S>                                                       <C>                 <C>              <C>                <C>       
Gross revenue - lease and other                              $6,257            $375,072        $1,493,794         $1,761,021
                   - gain (loss) on sales of assets               -                   -                 -             11,951
                                                     ---------------   -----------------    --------------     --------------
                                                              6,257             375,072         1,493,794          1,772,972

Less Operating Expenses: (1)
        Depreciation expense                                      -              51,965           914,188          1,215,223
        Amortization expense                                      -               7,849             7,949              7,949
        Interest expense                                      1,558              29,918            37,727             52,553
        Administrative costs and reimbursements                   -              16,288            20,978             43,990
        Legal/Professional fees                                   -              15,105            16,586             39,712
        Provision for doubtful accounts                           -                   -                 -                  -
        Supplies                                                  -              10,507             6,414                  -
        Other                                                   125              10,886            18,329             12,648
        Management fee                                            -              19,882           108,196            147,120
                                                     ---------------   -----------------    --------------     --------------
Net income - GAAP basis (2)                                  $4,574            $212,672          $363,427           $253,777
                                                     ===============   =================    ==============     ==============

Taxable income (loss) from operations                        $3,972           ($208,962)        ($414,155)         ($294,778)
                                                     ===============   =================    ==============     ==============

Cash generated by (used in) operations (3)                 $221,291            $160,581        $1,402,104         $1,521,502
Cash generated from sales                                         -                   -                 -                  -
Cash generated from refinancing                                   -                   -                 -                  -
Cash generated from other (3)                                     -             104,143           183,679            221,151
                                                     ---------------   -----------------    --------------     --------------
                                                            221,291             264,724         1,585,783          1,742,653
                                                     ---------------   -----------------    --------------     --------------
Less cash distributions to investors:
        From operating cash flow                                  -             160,581         1,215,018          1,508,226
        From sales                                                -                   -                 -                  -
        From refinancing                                          -                   -                 -                  -
        From other                                                -              93,374                 -                  -
                                                     ---------------   -----------------    --------------     --------------
        Total distributions                                       -             253,955         1,215,018          1,508,226
                                                     ---------------   -----------------    --------------     --------------
Cash generated (deficiency) after cash distributions       $221,291             $10,769          $370,765           $234,427
                                                     ===============   =================    ==============     ==============

Tax and distribution data per $1,000
   limited  partner investment:
        Federal Income Tax Results:
           Ordinary income (loss):
             Operations                                       $2.76             ($46.78)          ($41.00)           ($29.20)
             Recapture
           Capital gain (loss)

Cash distributions to investors on a GAAP basis:
        -  Investment income                                None                 $47.60            $35.98             $25.14
        -  Return of capital                                None                   9.82             85.52             125.75
                                                     ---------------   -----------------    --------------     --------------
                                                            None                  57.42            121.50             150.89
Cash available for distribution, reinvested for
     investors' accounts                                    None                  65.08             28.50               9.11
                                                     ---------------   -----------------    --------------     --------------
Total                                                       None                $122.50           $150.00            $160.00
                                                     ===============   =================    ==============     ==============
Sources (on a cash basis)
        Sales
        Refinancing
        Operations                                                               $77.46           $150.00            $160.00
        Other                                                                     45.04                 -                  -
                                                     ---------------   -----------------    --------------     --------------
        Total                                               None                $122.50           $150.00            $160.00
                                                     ===============   =================    ==============     ==============

Amount invested in program equipment (cost,
   excluding acquisition fees)                             $467,071          $4,293,800        $8,139,130         $8,989,917
Amount invested in program equipment (book value)          $488,090          $4,341,128        $7,244,935         $6,724,650
Amount remaining invested in program equipment (Cost
   of equipment owned at end of period as a percentage of
   cost of all equipment purchased by the program) (4)        4.20%              38.57%             73.10%             80.75%
</TABLE>


                         (Footnotes follow on page A-26)
                                      A-10
<PAGE>

                                    TABLE III
                 OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
                                 June 30, 1998
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                             ATEL Cash Distribution Fund
                                                                              Period Ended December 31,

                                                          1990               1991               1992               1993
Months of operations                                       12                 12                 12                 12
<S>                                                     <C>                  <C>               <C>                <C>       

Gross revenue - lease and other                          $2,201,630          $1,816,898        $1,410,396           $895,012
                   - gain (loss) on sales of assets           8,766               4,998            15,909              9,929
                                                     ---------------   -----------------    --------------     --------------
                                                          2,210,396           1,821,896         1,426,305            904,941

Less Operating Expenses: (1)
        Depreciation expense                              1,612,647           1,277,406           906,100            348,650
        Amortization expense                                  7,949               7,849                 -                  -
        Interest expense                                    176,922             144,752            72,057             25,403
        Administrative costs and reimbursements              37,163              55,293           126,664            140,984
        Legal/Professional fees                              35,231              41,141            41,459             44,256
        Provision for doubtful accounts                      96,682              42,870             5,731                  -
        Supplies                                                  -                   -                 -                  -
        Other                                                11,786              25,922            35,839             21,664
        Management fee                                      164,932             130,347            94,229             80,016
                                                     ---------------   -----------------    --------------     --------------
Net income (loss) - GAAP basis (2)                          $67,084             $96,316          $144,226           $243,968
                                                     ===============   =================    ==============     ==============

Taxable income (loss) from operations                      $150,104            $180,117        $1,105,467           $692,509
                                                     ===============   =================    ==============     ==============

Cash generated by (used in) operations (3)               $1,585,967          $1,424,425        $1,673,016           $574,077
Cash generated from sales                                    30,000             159,396           562,504          1,343,908
Cash generated from refinancing                                   -                   -                 -                  -
Cash generated from other (3)                               237,576             185,406           126,552            183,275
                                                     ---------------   -----------------    --------------     --------------
                                                          1,853,543           1,769,227         2,362,072          2,101,260
                                                     ---------------   -----------------    --------------     --------------
Less cash distributions to investors:
        From operating cash flow                          1,516,124           1,265,955         1,470,260            574,077
        From sales                                                -                   -                 -            524,806
        From refinancing                                          -                   -                 -                  -
        From other                                                -                   -                 -            183,275
                                                     ---------------   -----------------    --------------     --------------
        Total distributions                               1,516,124           1,265,955         1,470,260          1,282,158
                                                     ---------------   -----------------    --------------     --------------
Cash generated (deficiency) after cash distributions       $337,419            $503,272          $891,812           $819,102
                                                     ===============   =================    ==============     ==============

Tax  and distribution  data  per  $1,000
   limited  partner investment:
        Federal Income Tax Results:
           Ordinary income (loss):
             Operations                                      $14.88              $17.83           $109.44             $68.55
             Recapture
           Capital gain (loss)

Cash distributions to investors on a GAAP basis:
        -  Investment income                                  $6.66               $9.54            $14.30             $24.18
        -  Return of capital                                 145.17              117.24            132.94             104.22
                                                     ---------------   -----------------    --------------     --------------
                                                             151.83              126.78            147.24             128.40
                                                     ---------------   -----------------    --------------     --------------
Cash available for distribution, reinvested for
     investors' accounts                                      18.17               14.46             31.00             (21.92)
                                                     ---------------   -----------------    --------------     --------------
Total                                                       $170.00             $141.24           $178.24            $106.48
                                                     ===============   =================    ==============     ==============

Amount invested in program equipment (cost,
   excluding acquisition fees)                          $10,064,292          $8,607,852        $7,402,311         $3,620,293
Amount invested in program equipment (book value)        $5,961,158          $3,639,966        $2,147,253           $724,675
Amount remaining invested in program equipment (Cost
   of equipment owned at end of period as a percentage of
   cost of all equipment purchased by the program) (4)       90.40%             77.31%             66.49%             32.52%

                         (Footnotes follow on page A-26)
</TABLE>

                                      A-11
<PAGE>

                                    TABLE III
                 OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
                                 June 30, 1998
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                           ATEL Cash Distribution Fund
                                                                            Period Ended December 31,

                                                          1994               1995               1996               1997
Months of operations                                       12                 12                 12                 12

<S>                                                      <C>                 <C>               <C>                 <C>      
Gross revenue - lease and other                            $264,117            $374,172          $169,765           $142,272
                   - gain (loss) on sales of assets         220,266              15,106            39,095             60,838
                                                     ---------------   -----------------    --------------     --------------
                                                            484,383             389,278           208,860            203,110

Less Operating Expenses: (1)
        Depreciation expense                                 98,835              29,324            62,028             36,917
        Amortization expense                                      -                   -                 -                  -
        Interest expense                                      5,154              12,496            15,883             11,505
        Administrative costs and reimbursements              34,380                   -                 -                  -
        Legal/Professional fees                              20,391              15,443            10,606             14,959
        Provision for losses                                      -               3,768             2,088                  -
        Provision for doubtful accounts                           -                   -                 -                  -
        Supplies                                                  -                   -                 -                  -
        Other                                                20,697              17,552            16,712             14,962
        Management fee                                       20,359                   -                 -                  -
                                                     ---------------   -----------------    --------------     --------------
Net income (loss) - GAAP basis (2)                         $284,567            $310,695          $101,543           $124,767
                                                     ===============   =================    ==============     ==============

Taxable income (loss) from operations                      $745,274            $339,275          $193,822          ($311,342)
                                                     ===============   =================    ==============     ==============

Cash generated by (used in) operations (3)                 $195,123            $200,234           $93,675           $114,354
Cash generated from sales                                   622,350             112,188           212,802            263,096
Cash generated from refinancing                                   -                   -                 -                  -
Cash generated from other (3)                               119,745              79,692            79,520              1,000
                                                     ---------------   -----------------    --------------     --------------
                                                            937,218             392,114           385,997            378,450
                                                     ---------------   -----------------    --------------     --------------
Less cash distributions to investors:
        From operating cash flow                            195,123             200,234            93,675            114,354
        From sales                                          622,350             112,188           142,200            298,243
        From refinancing                                          -                   -                 -                  -
        From other                                          412,143             174,165                 -              1,000
                                                     ---------------   -----------------    --------------     --------------
        Total distributions                               1,229,616             486,587           235,875            413,597
                                                     ---------------   -----------------    --------------     --------------
Cash generated (deficiency) after cash distributions      ($292,398)           ($94,473)         $150,122           ($35,147)
                                                     ===============   =================    ==============     ==============

Tax  and distribution  data  per  $1,000
   limited  partner investment:
        Federal Income Tax Results:
           Ordinary income (loss):
             Operations                                      $73.92              $33.65            $19.22            ($30.88)
             Recapture
           Capital gain (loss)

Cash distributions to investors on a GAAP basis:
        -  Investment income                                 $28.22              $30.82            $10.07             $12.38
        -  Return of capital                                  94.96               17.91             13.55              29.06
                                                     ---------------   -----------------    --------------     --------------
                                                             123.18               48.73             23.62              41.44
                                                     ---------------   -----------------    --------------     --------------
Cash available for distribution, reinvested for
     investors' accounts                                     (23.66)             (18.63)            (3.62)             (9.44)
                                                     ---------------   -----------------    --------------     --------------
Total                                                        $99.52              $30.10            $20.00             $32.00
                                                     ===============   =================    ==============     ==============

Sources (on a cash basis)
        Sales                                                $50.37               $6.94            $12.06             $23.07
        Refinancing
        Operations                                            15.79               12.39              7.94               8.85
        Other                                                 33.36               10.77                                 0.08
                                                     ---------------   -----------------    --------------     --------------
        Total                                                $99.52              $30.10            $20.00             $32.00
                                                     ===============   =================    ==============     ==============
Amount invested in program equipment (cost,
   excluding acquisition fees)                           $2,300,024          $2,825,287        $2,296,755                  -
Amount invested in program equipment (book value)          $484,971            $552,050          $234,707                  -
Amount remaining invested in program equipment (Cost
   of equipment owned at end of period as a percentage of
   cost of all equipment purchased by the program) (4)        20.66%             25.38%             20.63%                 -
</TABLE>

                         (Footnotes follow on page A-26)
                                      A-12
<PAGE>

                                    TABLE III
                 OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
                                 June 30, 1998
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                    ATEL Cash Distribution Fund II
                                                                                      Period Ended December 31, 
                                                                             1988               1989               1990
Months of operations                                                          9                  12                 12

<S>                                                                          <C>               <C>                <C>       
Gross revenue - lease and other                                              $1,001,065        $4,190,191         $8,619,546
                   - gain (loss) on sales of assets                                   -                 -                  -
                                                                       -----------------    --------------     --------------
                                                                              1,001,065         4,190,191          8,619,546

Less Operating Expenses: (1)
        Depreciation expense                                                    531,855         2,579,866          5,253,869
        Provision for decline in value of commercial aircraft                         -                 -          1,083,834
        Provision for doubtful accounts                                               -                 -                  -
        Interest expense                                                         31,445           362,122          1,485,960
        Administrative costs and reimbursements                                  19,284           107,082             95,474
        Legal/Professional fees                                                       -            32,022             42,748
        Other                                                                     7,799            41,448             58,465
        Management fee                                                           43,721           252,159            472,064
                                                                       -----------------    --------------     --------------
Net income - GAAP basis (5)                                                    $366,961          $815,492           $127,132
                                                                       =================    ==============     ==============

Taxable income (loss) from operations                                         ($588,007)      ($3,544,620)       ($3,583,850)
                                                                       =================    ==============     ==============

Cash generated by (used in) operations (3)                                   $1,044,176        $3,639,963         $6,823,453
Cash generated from sales
Cash generated from refinancing
Cash generated from other (3)                                                   100,715           147,741            400,308
                                                                       -----------------    --------------     --------------
                                                                              1,144,891         3,787,704          7,223,761
Less cash distributions to investors:
        From operating cash flow                                                253,760         1,986,455          4,069,920
        From sales                                                                    -                 -                  -
        From refinancing                                                              -                 -                  -
        From other                                                                    -                 -                  -
                                                                       -----------------    --------------     --------------
        Total distributions                                                     253,760         1,986,455          4,069,920
                                                                       -----------------    --------------     --------------
Cash generated (deficiency) after cash distributions                           $891,131        $1,801,249         $3,153,841
                                                                       =================    ==============     ==============

Tax and distribution data per $1,000 limited partner investment:
        Federal Income Tax Results:
           Ordinary income (loss):
             Operations                                                         ($96.15)         ($158.82)          ($101.37)
             Recapture
           Capital gain (loss)

Cash distributions to investors on a GAAP basis:
        -  Investment income                                                     $41.91            $36.54              $3.60
        -  Return of capital                                                       -                53.37             112.69
                                                                       -----------------    --------------     --------------
                                                                                  41.91             89.91             116.29
Cash available for distribution, reinvested for investors' accounts               37.47             30.09              13.71
                                                                       -----------------    --------------     --------------
Total                                                                            $79.38           $120.00            $130.00
                                                                       =================    ==============     ==============

Sources (on a cash basis)
        Operations                                                               $79.38           $120.00            $130.00
        Sales                                                                         -                 -                  -
        Refinancing                                                                   -                 -                  -
        Other                                                                         -                 -                  -
                                                                       -----------------    --------------     --------------
        Total                                                                    $79.38           $120.00            $130.00
                                                                       =================    ==============     ==============

Amount invested in program equipment (cost, excluding acquisition fees)     $14,664,014       $30,309,212        $48,538,987
Amount invested in program equipment (book value)                           $14,661,074       $28,412,251        $40,154,353
Amount remaining invested in program equipment (Cost of equipment owned
   at end of period as a percentage of cost of all equipment purchased by the
   program) (4)                                                                   28.05%             57.99%             92.86%
</TABLE>

                         (Footnotes follow on page A-26)
                                      A-13
<PAGE>

                                    TABLE III
                 OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
                                 June 30, 1998
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                  ATEL Cash Distribution Fund II              
                                                                                    Period Ended December 31, 

                                                                             1991               1992               1993
Months of operations                                                          12                 12                 12
<S>                                                                         <C>               <C>                <C>        

Gross revenue - lease and other                                              $8,774,789        $8,148,565         $6,665,582
                   - gain (loss) on sales of assets                             (31,613)          111,809            184,599
                                                                       -----------------    --------------     --------------
                                                                              8,743,176         8,260,374          6,850,181

Less Operating Expenses: (1)
        Depreciation expense                                                  5,546,000         5,285,315          4,285,373
        Provision for decline in value of commercial                                  -                 -                  -
           aircraft                                                                   -                 -                  -
        Provision for doubtful accounts                                          30,400             4,064                  -
        Interest expense                                                      1,353,033         1,171,105            860,663
        Administrative costs and reimbursements                                  94,910           256,184            313,421
        Legal/Professional fees                                                  52,281            39,612             47,110
        Other                                                                    38,337            70,316             49,725
        Management fee                                                          510,416           408,421            427,874
                                                                       -----------------    --------------     --------------
Net income - GAAP basis (5)                                                  $1,117,799        $1,025,357           $866,015
                                                                       =================    ==============     ==============

Taxable income (loss) from operations                                       ($2,013,494)       $1,686,207         $2,346,733
                                                                       =================    ==============     ==============

Cash generated by (used in) operations (3)                                   $6,705,095        $6,601,157         $4,720,797
Cash generated from sales                                                       223,447           767,749          2,643,336
Cash generated from refinancing                                                       -                 -                  -
Cash generated from other (3)                                                   488,962           698,496          1,437,114
                                                                       -----------------    --------------     --------------
                                                                              7,417,504         8,067,402          8,801,247
Less cash distributions to investors:
        From operating cash flow                                              4,561,842         4,927,246          4,720,797
        From sales                                                                    -                 -                  -
        From refinancing                                                              -                 -                  -
        From other                                                                    -                 -            794,270
                                                                       -----------------    --------------     --------------
        Total distributions                                                   4,561,842         4,927,246          5,515,067

                                                                       -----------------    --------------     --------------
Cash generated (deficiency) after cash distributions                         $2,855,662        $3,140,156         $3,286,180
                                                                       =================    ==============     ==============

Tax and distribution data per $1,000 limited partner investment:
        Federal Income Tax Results:
           Ordinary income (loss):
             Operations                                                         ($56.95)           $47.69             $66.38
             Recapture
           Capital gain (loss)

Cash distributions to investors on a GAAP basis:
        -  Investment income                                                     $31.62            $29.01             $24.50
        -  Return of capital                                                      98.72            111.77             133.07
                                                                       -----------------    --------------     --------------
                                                                                 130.34            140.78             157.57
Cash available for distribution, reinvested for
   investors' accounts                                                             9.66              9.22               2.43
                                                                       -----------------    --------------     --------------
Total                                                                           $140.00           $150.00            $160.00
                                                                       =================    ==============     ==============

Sources (on a cash basis)
        Operations                                                              $140.00           $150.00            $136.96
        Sales                                                                         -                 -                  -
        Refinancing                                                                   -                 -                  -
        Other                                                                         -                 -              23.04
                                                                       -----------------    --------------     --------------
        Total                                                                   $140.00           $150.00            $160.00
                                                                       =================    ==============     ==============

Amount invested in program equipment (cost, excluding acquisition fees)     $47,181,808       $41,405,356        $36,692,677
Amount invested in program equipment (book value)                           $29,983,437       $23,667,996        $16,204,828
Amount remaining invested in program equipment (Cost of equipment owned
   at end of period as a percentage of cost of all equipment purchased by the
   program) (4)                                                                   90.26%             79.21%             70.20%
</TABLE>

                         (Footnotes follow on page A-26)
                                      A-14
<PAGE>

                                    TABLE III
                 OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
                                 June 30, 1998
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                         ATEL Cash Distribution Fund II
                                                                         December 31,
                                                                             1994               1995               1996
Months of operations                                                          12                 12                 12
<S>                                                                         <C>               <C>                <C>        

Gross revenue - lease and other                                              $5,627,738        $3,191,834         $1,994,161
                   - gain (loss) on sales of assets                              (3,239)          453,960            168,927
                                                                       -----------------    --------------     --------------
                                                                              5,624,499         3,645,794          2,163,088

Less Operating Expenses: (1)
        Depreciation expense                                                  2,963,445         1,451,193            885,426
        Provision for doubtfull accounts                                              -                 -                  -
        Provision for losses                                                     11,616            25,972             22,221
        Interest expense                                                        509,267           365,099            237,226
        Administrative costs and reimbursements                                 238,185           157,444            132,994
        Legal/Professional fees                                                  37,647            44,864             21,173
        Other                                                                    66,324            71,101             72,138
        Management fee                                                          313,115           222,936            157,355
                                                                       -----------------    --------------     --------------
Net income - GAAP basis (5)                                                  $1,484,900        $1,307,185           $634,555
                                                                       =================    ==============     ==============

Taxable income (loss) from operations                                        $4,340,559        $3,101,835         $2,079,449
                                                                       =================    ==============     ==============

Cash generated by (used in) operations (3)                                   $3,921,897        $2,788,119         $1,288,526
Cash generated from sales                                                     2,959,549         2,304,367          1,298,116
Cash generated from refinancing                                                       -                 -                  -
Cash generated from other (3)                                                 1,311,673           875,730            877,510
                                                                       -----------------    --------------     --------------
                                                                              8,193,119         5,968,216          3,464,152
Less cash distributions to investors:
        From operating cash flow                                              3,921,897         2,788,119          1,288,526
        From sales                                                              859,241         1,064,197                  -
        From refinancing                                                              -                 -                  -
        From other                                                            1,311,673           875,730            788,922
                                                                       -----------------    --------------     --------------
        Total distributions                                                   6,092,811         4,728,046          2,077,448

                                                                       -----------------    --------------     --------------
Cash generated (deficiency) after cash distributions                         $2,100,308        $1,240,170         $1,386,704
                                                                       =================    ==============     ==============

Tax and distribution data per $1,000 limited partner investment:
        Federal Income Tax Results:
           Ordinary income (loss):
             Operations                                                         $122.79            $87.76             $58.84
             Recapture
           Capital gain (loss)

Cash distributions to investors on a GAAP basis:
        -  Investment income                                                     $42.01            $36.99             $17.95
        -  Return of capital                                                     132.10             98.14              41.42
                                                                       -----------------    --------------     --------------
                                                                                 174.11            135.13              59.37
Cash available for distribution, reinvested for
   investors' accounts                                                            (4.11)           (30.13)             (7.37)
                                                                       -----------------    --------------     --------------
Total                                                                           $170.00           $105.00             $52.00
                                                                       =================    ==============     ==============

Sources (on a cash basis)
        Operations                                                              $109.43            $61.92             $32.25
        Sales                                                                     23.97             23.63                  -
        Refinancing                                                                   -                 -                  -
        Other                                                                     36.60             19.45              19.75
                                                                       -----------------    --------------     --------------
        Total                                                                   $170.00           $105.00             $52.00
                                                                       =================    ==============     ==============

Amount invested in program equipment (cost,
   excluding acquisition fees)                                              $26,755,760       $21,031,914        $16,329,599
Amount invested in program equipment (book value)                           $11,523,077        $7,459,980         $4,564,924
Amount remaining invested in program equipment (Cost
   of equipment owned at end of period as a percentage of
   cost of all equipment purchased by the program) (4)
   program) (4)                                                                   51.19%             40.24%             31.24%

</TABLE>
                         (Footnotes follow on page A-26)

                                      A-15
<PAGE>

                                    TABLE III
                 OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
                                 June 30, 1998
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                         ATEL Cash Distribution Fund II
                                                                         December 31,         June 30,
                                                                             1997               1998
Months of operations                                                          12                  6

<S>                                                                         <C>               <C>        
Gross revenue - lease and other                                              $1,189,141          $452,079
                   - gain (loss) on sales of assets                             124,594           256,886
                                                                       -----------------    --------------
                                                                              1,313,735           708,965

Less Operating Expenses: (1)
        Depreciation expense                                                    364,425           140,293
        Provision for doubtfull accounts                                         17,072                 -
        Provision for losses                                                     13,097             4,995
        Interest expense                                                        115,320            32,450
        Administrative costs and reimbursements                                 127,992            56,196
        Legal/Professional fees                                                  24,303             9,045
        Other                                                                    54,154            37,146
        Management fee                                                           84,156            37,754
                                                                       -----------------    --------------
Net income - GAAP basis (5)                                                    $513,216          $391,086
                                                                       =================    ==============

Taxable income (loss) from operations                                        $1,357,072          $750,000
                                                                       =================    ==============

Cash generated by (used in) operations (3)                                     $635,243          $303,682
Cash generated from sales                                                       778,928           435,440
Cash generated from refinancing                                                       -                 -
Cash generated from other (3)                                                   816,922            76,485
                                                                       -----------------    --------------
                                                                              2,231,093           815,607
Less cash distributions to investors:
        From operating cash flow                                                635,243           303,682
        From sales                                                                    -           435,440
        From refinancing                                                              -                 -
        From other                                                              655,877            79,193
                                                                       -----------------    --------------
        Total distributions                                                   1,291,120           818,315

                                                                       -----------------    --------------
Cash generated (deficiency) after cash distributions                           $939,973           ($2,708)
                                                                       =================    ==============

Tax and distribution data per $1,000 limited partner investment:
        Federal Income Tax Results:
           Ordinary income (loss):
             Operations                                                          $38.40            $21.22
             Recapture
           Capital gain (loss)

Cash distributions to investors on a GAAP basis:
        -  Investment income                                                     $14.52            $11.06
        -  Return of capital                                                      22.38             12.33
                                                                       -----------------    --------------
                                                                                  36.90             23.39
Cash available for distribution, reinvested for
   investors' accounts                                                            (6.90)             6.61
                                                                       =================    ==============
Total                                                                            $30.00            $30.00
                                                                       =================    ==============

Sources (on a cash basis)
        Operations                                                               $14.76            $11.13
        Sales                                                                         -             15.96
        Refinancing                                                                   -                 -
        Other                                                                     15.24              2.90
                                                                       -----------------    --------------
        Total                                                                    $30.00            $30.00
                                                                       =================    ==============

Amount invested in program equipment (cost,
   excluding acquisition fees)                                              $11,293,265       $10,304,748
Amount invested in program equipment (book value)                            $2,740,429        $2,370,652
Amount remaining invested in program equipment (Cost
   of equipment owned at end of period as a percentage of
   cost of all equipment purchased by the program) (4)                            21.61%             19.71%
</TABLE>

                         (Footnotes follow on page A-26)
                                      A-16
<PAGE>

                                    TABLE III
                 OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
                                 June 30, 1998
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                  ATEL Cash Distribution Fund III             
                                                                                     Period Ended December 31,                
                                                                             1990               1991               1992
Months of operations                                                          12                 12                 12
<S>                                                                         <C>               <C>                <C>        

Gross revenue - lease and other                                              $2,130,161        $7,760,246        $12,713,280
                   - gain (loss) on sales of assets                                   -           (17,714)         1,202,188
                                                                       -----------------    --------------     --------------
                                                                              2,130,161         7,742,532         13,915,468

Less Operating Expenses: (1)
        Depreciation expense                                                  1,278,427         4,919,605          7,739,054
        Provision for decline in value of commercial
           aircraft                                                             623,294                 -                  -
        Interest expense                                                        482,047         1,002,520          1,186,760
        Administrative costs and reimbursements                                  70,775           239,667            542,510
        Legal/Professional fees                                                   7,600            52,746             31,691
        Other                                                                    22,898            49,198             52,629
        Management fee                                                           83,245           391,494            839,909
                                                                       -----------------    --------------     --------------
Net income - GAAP basis (6)                                                   ($438,125)       $1,087,302         $3,522,915
                                                                       =================    ==============     ==============

Taxable income (loss) from operations                                       ($2,539,135)      ($6,476,596)       ($3,010,933)
                                                                       =================    ==============     ==============

Cash generated by (used in) operations (3)                                   $1,572,921        $6,288,997         $9,564,446
Cash generated from sales                                                             -                 -          4,006,080
Cash generated from refinancing                                                       -                 -                  -
Cash generated from other (3)                                                   125,093            14,587            181,746
                                                                       -----------------    --------------     --------------
                                                                              1,698,014         6,303,584         13,752,272
Less cash distributions to investors:
        From operating cash flow                                                396,751         4,185,400          9,261,560
        From sales                                                                    -                 -                  -
        From refinancing                                                              -                 -                  -
        From other                                                                    -                 -                  -
                                                                       -----------------    --------------     --------------
        Total distributions                                                     396,751         4,185,400          9,261,560
                                                                       -----------------    --------------     --------------
Cash generated (deficiency) after cash distributions                         $1,301,263        $2,118,184         $4,490,712
                                                                       =================    ==============     ==============
Tax  and distribution  data  per  $1,000
   limited  partner investment:
        Federal Income Tax Results:
           Ordinary income (loss):
             Operations                                                        ($282.13)         ($200.01)           ($40.37)
             Recapture
           Capital gain (loss)
Cash distributions to investors on a GAAP basis:
        -  Investment income                                                                       $33.58             $47.23
        -  Return of capital                                                     $44.53             96.98              78.19
                                                                       -----------------    --------------     --------------
                                                                                 $44.53           $130.56            $125.42
                                                                       =================    ==============     ==============
Sources (on a cash basis)
        Sales
        Refinancing
        Operations                                                               $44.53           $130.56            $125.42
        Other                                                                         -                 -                  -
                                                                       -----------------    --------------     --------------
        Total                                                                    $44.53           $130.56            $125.42
                                                                       =================    ==============     ==============

Amount invested in program equipment (cost,
   excluding acquisition fees)                                              $28,534,220       $52,188,848        $83,423,686
Amount invested in program equipment (book value)                           $27,475,925       $44,531,829        $64,526,606
Amount remaining invested in program equipment (Cost
   of equipment owned at end of period as a percentage of
   cost of all equipment purchased by the program) (4)
   program) (4)                                                                   28.64%             52.38%             83.73%
</TABLE>

                         (Footnotes follow on page A-26)
                                      A-17
<PAGE>

                                    TABLE III
                 OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
                                 June 30, 1998
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                  ATEL Cash Distribution Fund III             
                                                                                           Period Ended                       
                                                                                           December 31,                       

                                                                             1993               1994               1995
Months of operations                                                          12                 12                 12

<S>                                                                         <C>               <C>                <C>        
Gross revenue - lease and other                                             $13,970,227       $14,212,777        $13,378,680
                   - gain (loss) on sales of assets                            (140,513)          155,497            954,115
                                                                       -----------------    --------------     --------------
                                                                             13,829,714        14,368,274         14,332,795

Less Operating Expenses: (1)
        Depreciation expense                                                  8,984,502         9,734,408          9,037,450
        Provision for losses                                                                       36,626            826,550
        Interest expense                                                      1,456,147         1,395,276          1,064,823
        Administrative costs and reimbursements                                 468,005           340,269            300,952
        Legal/Professional fees                                                  58,809            60,552             59,237
        Other                                                                    75,289           113,411            110,637
        Management fee                                                          915,375           999,086            900,484
                                                                       -----------------    --------------     --------------
                                                                             11,958,127        12,679,628         12,300,133
                                                                       -----------------    --------------     --------------
Income before extraordinary items                                             1,871,587         1,688,646          2,032,662
Extrordinary gain on early extinguisment of debt                                      -                 -                  -
                                                                       -----------------    --------------     --------------
Net income - GAAP basis (6)                                                  $1,871,587        $1,688,646         $2,032,662
                                                                       =================    ==============     ==============

Taxable income (loss) from operations                                       ($5,122,581)         $635,990         $6,281,437
                                                                       =================    ==============     ==============

Cash generated by (used in) operations (3)                                  $11,402,915       $11,400,861        $10,333,228
Cash generated from sales                                                       269,479           682,595          3,276,705
Cash generated from refinancing                                                       -                 -                  -
Cash generated from other (3)                                                   719,701         1,317,531          1,518,191
                                                                       -----------------    --------------     --------------
                                                                             12,392,095        13,400,987         15,128,124
Less cash distributions to investors:
        From operating cash flow                                              9,594,918        10,201,485         10,333,228
        From sales                                                                    -                 -                  -
        From refinancing                                                              -                 -                  -
        From other                                                                    -                 -              4,961
                                                                       -----------------    --------------     --------------
        Total distributions                                                   9,594,918        10,201,485         10,338,189
                                                                       -----------------    --------------     --------------
Cash generated (deficiency) after cash distributions                         $2,797,177        $3,199,502         $4,789,935
                                                                       =================    ==============     ==============
Tax  and distribution  data  per  $1,000
   limited  partner investment:
        Federal Income Tax Results:
           Ordinary income (loss):
             Operations                                                         ($68.68)            $8.53             $84.28
             Recapture
           Capital gain (loss)
Cash distributions to investors on a GAAP basis:
        -  Investment income                                                     $25.09            $22.66             $27.27
        -  Return of capital                                                     104.86            115.59             112.73
                                                                       -----------------    --------------     --------------
                                                                                $129.95           $138.25            $140.00
                                                                       =================    ==============     ==============
Sources (on a cash basis)
        Sales
        Refinancing
        Operations                                                              $129.95           $138.25            $139.93
        Other                                                                         -                 -               0.07
                                                                       -----------------    --------------     --------------
        Total                                                                   $129.95           $138.25            $140.00
                                                                       =================    ==============     ==============
Amount invested in program equipment (cost, excluding
   acquisition fees)                                                        $91,612,304       $87,442,745        $79,602,818
Amount invested in program equipment (book value)                           $63,434,911       $52,479,724        $39,107,792
Amount remaining invested in program equipment (Cost
   of equipment owned at end of period as a percentage of
   cost of all equipment purchased by the program) (4)                            91.95%             87.77%             79.90%
</TABLE>
                         (Footnotes follow on page A-26)

                                      A-18

<PAGE>

                                    TABLE III
                 OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                    ATEL Cash Distribution Fund III
                                                                                             Period Ended
                                                                                    December 31,                 June 30,

                                                                             1996               1997               1998
Months of operations                                                          12                 12                  6

<S>                                                                         <C>               <C>                <C>        
Gross revenue - lease and other                                             $10,565,963        $7,610,362         $2,645,652
                   - gain (loss) on sales of assets                           1,143,807         2,823,095            (74,584)
                                                                       -----------------    --------------     --------------
                                                                             11,709,770        10,433,457          2,571,068

Less Operating Expenses: (1)
        Depreciation expense                                                  7,051,625         4,560,013          1,385,502
        Provision for losses                                                    118,023           104,335             17,173
        Interest expense                                                        630,450           319,415             77,378
        Administrative costs and reimbursements                                 245,242           248,250            109,547
        Legal/Professional fees                                                  38,522            31,985              7,767
        Other                                                                   149,613           174,046             78,650
        Management fee                                                          722,425           660,774            176,440
                                                                       -----------------    --------------     --------------
                                                                              8,955,900         6,098,818          1,852,457
                                                                       -----------------    --------------     --------------
Income before extraordinary items                                             2,753,870         4,334,639            718,611
Extrordinary gain on early extinguisment of debt                                 97,608                 -                  -
                                                                       -----------------    --------------     --------------
Net income - GAAP basis (6)                                                  $2,851,478        $4,334,639           $718,611
                                                                       =================    ==============     ==============

Taxable income (loss) from operations                                        $8,404,788       $10,406,517         $6,000,000
                                                                       =================    ==============     ==============

Cash generated by (used in) operations (3)                                   $8,435,426        $6,535,498         $2,352,452
Cash generated from sales                                                     5,335,135        10,182,310          2,799,814
Cash generated from refinancing                                                       -                 -                  -
Cash generated from other (3)                                                 1,628,837         1,047,681            448,401
                                                                       -----------------    --------------     --------------
                                                                             15,399,398        17,765,489          5,600,667
Less cash distributions to investors:
        From operating cash flow                                              8,435,426        $6,535,498         $2,352,452
        From sales                                                                    -            35,201          2,123,578
        From refinancing                                                              -                 -
        From other                                                              777,879         1,047,681            448,401
                                                                       -----------------    --------------     --------------
        Total distributions                                                   9,213,305         7,618,380          4,924,431
                                                                       -----------------    --------------     --------------
Cash generated (deficiency) after cash distributions                         $6,186,093       $10,147,109           $676,236
                                                                       =================    ==============     ==============
Tax  and distribution  data  per  $1,000
   limited  partner investment:
        Federal Income Tax Results:
           Ordinary income (loss):
             Operations                                                         $112.76           $139.66             $80.53
             Recapture
           Capital gain (loss)
Cash distributions to investors on a GAAP basis:
        -  Investment income                                                     $38.26            $58.17              $9.64
        -  Return of capital                                                      86.63             45.11              57.12
                                                                       -----------------    --------------     --------------
                                                                                $124.89           $103.28             $66.76
                                                                       =================    ==============     ==============
Sources (on a cash basis)
        Sales                                                                                       $0.48             $28.79
        Refinancing                                                                                     -                  -
        Operations                                                              $114.35             88.60              31.89
        Other                                                                     10.54             14.20               6.08
                                                                       -----------------    --------------     --------------
        Total                                                                   $124.89           $103.28             $66.76
                                                                       =================    ==============     ==============
Amount invested in program equipment (cost, excluding
   acquisition fees)                                                        $64,700,440       $43,579,341        $35,414,346
Amount invested in program equipment (book value)                           $26,203,009       $13,159,990         $8,443,803
Amount remaining invested in program equipment (Cost
   of equipment owned at end of period as a percentage of
   cost of all equipment purchased by the program) (4)                            64.94%             43.74%             35.55%
</TABLE>
                         (Footnotes follow on page A-26)
                                      A-19

<PAGE>

                                    TABLE III
                 OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
                                 June 30, 1998
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                  ATEL Cash Distribution Fund IV                
                                                                     Period Ended December 31,                  

                                                          1992               1993               1994
Months of operations                                       12                 12                 12

<S>                                                     <C>                 <C>               <C>        
Gross revenue - lease and other                          $2,123,081         $10,510,289       $13,246,145
                   - gain (loss) on sales of assets               -             (38,429)         (102,932)
                                                     ---------------   -----------------    --------------
                                                          2,123,081          10,471,860        13,143,213

Less Operating Expenses: (1)
        Depreciation and amortization expense             1,147,209           7,054,380         8,743,149
        Provision for losses                                      -                   -            34,505
        Interest expense                                     91,577              81,437         1,332,542
        Administrative costs and reimbursements             382,114             537,918           358,441
        Legal/Professional fees                              46,935              52,838            86,594
        Other                                                25,988              57,575           114,376
        Management fee                                      103,510             752,950         1,060,190
                                                     ---------------   -----------------    --------------
Net income - GAAP basis                                    $325,748          $1,934,762        $1,413,416
                                                     ===============   =================    ==============

Taxable income (loss) from operations                   ($2,034,428)        ($9,624,570)      ($8,073,869)
                                                     ===============   =================    ==============

Cash generated by (used in) operations (3)               $3,560,891          $9,021,440       $10,366,325
Cash generated from sales                                         -              98,752         5,648,425
Cash generated from refinancing                                   -                   -                 -
Cash generated from other (3)                                     -             220,258         1,522,609
                                                     ---------------   -----------------    --------------
                                                          3,560,891           9,340,450        17,537,359
Less cash distributions to investors:
        From operating cash flow                          1,936,639           8,686,491         9,653,038
        From sales                                                -                   -                 -
        From refinancing                                          -                   -                 -
        From other                                                -                   -                 -
                                                     ---------------   -----------------    --------------
        Total distributions                               1,936,639           8,686,491         9,653,038
                                                     ---------------   -----------------    --------------
Cash generated (deficiency) after cash distributions     $1,624,252            $653,959        $7,884,321
                                                     ===============   =================    ==============

Tax  and distribution  data  per  $1,000
   limited  partner investment:
        Federal Income Tax Results:
           Ordinary income (loss):
             Operations                                     ($76.67)           ($127.78)         ($106.64)
             Recapture
           Capital gain (loss)

Cash distributions to investors on a GAAP basis:
        -  Investment income                                 $12.28              $15.86            $18.67
        -  Return of capital                                  61.44              100.63            110.12
                                                     ---------------   -----------------    --------------
                                                             $73.72             $116.49           $128.79
                                                     ===============   =================    ==============

Sources (on a cash basis)
        Sales
        Refinancing
        Operations                                           $73.72             $116.49           $128.79
        Other                                                     -                   -                 -
                                                     ---------------   -----------------    --------------
        Total                                                $73.72             $116.49           $128.79
                                                     ===============   =================    ==============
Amount invested in program equipment (cost, excluding
   acquisition fees)                                    $49,603,894         $82,896,683       $88,187,291
Amount invested in program equipment (book value)       $49,801,834         $69,901,953       $65,252,553
Amount remaining invested in program equipment (Cost
   of equipment owned at end of period as a percentage of
   cost of all equipment purchased by the program) (4)        45.62%             76.24%             81.10%
</TABLE>
                         (Footnotes follow on page A-26)
                                      A-20

<PAGE>

                                    TABLE III
                 OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                  ATEL Cash Distribution Fund IV                
                                                                           Period Ended                         
                                                      December 31,                                               June 30,
                                                          1995               1996               1997               1998
Months of operations                                       12                 12                 12                  6

<S>                                                     <C>                 <C>               <C>                <C>        
Gross revenue - lease and other                         $12,973,718         $11,664,408        $8,076,530         $2,629,456
                   - gain (loss) on sales of assets         615,042           1,574,946         3,203,666             48,343
                                                     ---------------   -----------------    --------------     --------------
                                                         13,588,760          13,239,354        11,280,196          2,677,799

Less Operating Expenses: (1)
        Depreciation and amortization expense             8,740,231           7,849,010         4,846,725          1,204,112
        Provision for losses                                679,634             135,965           321,876             13,145
        Interest expense                                  1,960,823           1,858,316           971,628            251,740
        Administrative costs and reimbursements             349,663             275,778           303,642            119,085
        Legal/Professional fees                              76,365              46,419            35,746              8,369
        Other                                               110,466              98,471           156,841             59,228
        Management fee                                      872,374             821,328           810,055            265,280
                                                     ---------------   -----------------    --------------     --------------
                                                         12,789,556          11,085,287         7,446,513          1,920,959
                                                     ---------------   -----------------    --------------     --------------
Income before extraordinary items                           799,204           2,154,067         3,833,683            756,840
Extrordinary gain on early extinguisment of debt                  -             112,546                 -                  -
                                                     ---------------   -----------------    --------------     --------------
Net income - GAAP basis (6)                                $799,204          $2,266,613        $3,833,683           $756,840
                                                     ===============   =================    ==============     ==============

Taxable income (loss) from operations                   ($2,073,084)         $1,101,252       $13,539,726         $7,000,000
                                                     ===============   =================    ==============     ==============

Cash generated by (used in) operations (3)               $8,830,893          $7,511,884        $5,717,928         $2,285,163
Cash generated from sales                                 2,722,954           4,376,555        20,594,019            496,550
Cash generated from refinancing                                   -                   -                 -                  -
Cash generated from other (3)                             2,384,094           2,991,035         2,593,695          1,279,275
                                                     ---------------   -----------------    --------------     --------------
                                                         13,937,941          14,879,474        28,905,642          4,060,988
Less cash distributions to investors:
        From operating cash flow                          8,830,893           7,511,884        $5,717,928         $2,285,163
        From sales                                                -                   -         2,169,677            496,550
        From refinancing                                          -                   -                 -                  -
        From other                                          906,007           2,881,345         2,593,695          2,460,200
                                                     ---------------   -----------------    --------------     --------------
        Total distributions                               9,736,900          10,393,229        10,481,300          5,241,913
                                                     ---------------   -----------------    --------------     --------------
Cash generated (deficiency) after cash distributions     $4,201,041          $4,486,245       $18,424,342        ($1,180,925)
                                                     ===============   =================    ==============     ==============

Tax  and distribution  data  per  $1,000
   limited  partner investment:
        Federal Income Tax Results:
           Ordinary income (loss):
             Operations                                     ($27.43)             $14.56           $179.03             $92.56
             Recapture
           Capital gain (loss)                                $0.04

Cash distributions to investors on a GAAP basis:
        -  Investment income                                 $10.57              $29.97            $50.69             $10.01
        -  Return of capital                                 119.50              108.83             89.31              59.99
                                                     ---------------   -----------------    --------------     --------------
                                                            $130.07             $138.80           $140.00             $70.00
                                                     ===============   =================    ==============     ==============

Sources (on a cash basis)
        Sales                                                                                      $28.98              $6.63
        Refinancing                                                                                     -                  -
        Operations                                          $117.97             $100.32             76.38              30.52
        Other                                                 12.10               38.48             34.64              32.85
                                                     ---------------   -----------------    --------------     --------------
        Total                                               $130.07             $138.80           $140.00             $70.00
                                                     ===============   =================    ==============     ==============
Amount invested in program equipment (cost, excluding
   acquisition fees)                                    $98,547,911         $92,543,075       $60,025,398        $57,601,674
Amount invested in program equipment (book value)       $63,967,204         $52,264,526       $27,375,489        $24,524,492
Amount remaining invested in program equipment (Cost
   of equipment owned at end of period as a percentage of
   cost of all equipment purchased by the program) (4)        90.63%             85.11%             55.20%             52.97%
</TABLE>
                         (Footnotes follow on page A-26)
                                      A-21

<PAGE>

                                    TABLE III
                 OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
                                 June 30, 1998
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                ATEL Cash Distribution Fund V              
                                                                         Period Ended                      
                                                                         December 31,
                                                          1993               1994               1995
Months of operations                                       10                 12                 12

<S>                                                     <C>                <C>               <C>         
Gross revenue - lease and other                          $2,173,205         $10,806,892       $19,951,380
                   - gain (loss) on sales of assets               -               2,564           933,289
                                                     ---------------   -----------------    --------------
                                                          2,173,205          10,809,456        20,884,669

Less Operating Expenses: (1)
        Depreciation and amortization expense             1,600,628           8,135,951        14,600,474
        Provision for losses                                      -              34,158           987,013
        Interest expense                                     31,511              61,036         1,222,050
        Administrative costs and reimbursements             373,089             706,324           535,812
        Legal/Professional fees                              13,746              65,028           110,744
        Other                                                36,269             113,981           176,847
        Management fee                                      178,583           1,013,448         1,623,818
                                                     ---------------   -----------------    --------------
Net income - GAAP basis                                    ($60,621)           $679,530        $1,627,911
                                                     ===============   =================    ==============

Taxable income (loss) from operations                   ($5,061,304)       ($13,005,033)     ($11,831,759)
                                                     ===============   =================    ==============

Cash generated by (used in) operations (3)               $1,795,722         $10,053,220       $15,800,948
Cash generated from sales                                         -              22,572         6,930,477
Cash generated from refinancing                                   -                   -                 -
Cash generated from other (3)                                     -           1,513,782         2,498,923
                                                     ---------------   -----------------    --------------
                                                          1,795,722          11,589,574        25,230,348
Less cash distributions to investors:
        From operating cash flow                            922,278           8,223,081        13,101,508
        From sales                                                -                   -                 -
        From refinancing                                          -                   -                 -
        From other                                                -                   -                 -
                                                     ---------------   -----------------    --------------
        Total distributions                                 922,278           8,223,081        13,101,508
                                                     ---------------   -----------------    --------------
Cash generated (deficiency) after cash distributions       $873,444          $3,366,493       $12,128,840
                                                     ===============   =================    ==============

Tax  and distribution  data  per  $1,000
   limited  partner investment:
        Federal Income Tax Results:
           Ordinary income (loss):
             Operations                                    ($219.75)           ($152.59)          ($93.72)
             Recapture
           Capital gain (loss)

Cash distributions to investors on a GAAP basis:
        -  Investment income                                                      $8.05            $12.89
        -  Return of capital                                 $40.45               89.41             91.93
                                                     ---------------   -----------------    --------------
                                                             $40.45              $97.46           $104.82
                                                     ===============   =================    ==============
Sources (on a cash basis)
        Sales
        Refinancing
        Operations                                           $40.45              $97.46           $104.82
        Other                                                     -                   -                 -
                                                     ---------------   -----------------    --------------
        Total                                                $40.45              $97.46           $104.82
                                                     ===============   =================    ==============
Amount invested in program equipment (cost, excluding
   acquisition fees)                                    $34,699,207        $113,427,843      $161,866,626
Amount invested in program equipment (book value)       $34,246,741        $100,762,242      $131,686,535
Amount remaining invested in program equipment (Cost
   of equipment owned at end of period as a percentage of
   cost of all equipment purchased by the program) (4)        18.57%             60.69%             86.61%
</TABLE>
                         (Footnotes follow on page A-26)
                                      A-22

<PAGE>

                                    TABLE III
                 OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
                                 June 30, 1998
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                       ATEL Cash Distribution Fund V
                                                      Period Ended
                                                      December 31,                            June 30,
                                                          1996               1997               1998
Months of operations                                       12                 12                  6

<S>                                                    <C>                 <C>               <C>         
Gross revenue - lease and other                         $23,662,790         $23,092,315        10,630,964
                   - gain (loss) on sales of assets       1,325,132             345,340           127,835
                                                     ---------------   -----------------    --------------
                                                         24,987,922          23,437,655        10,758,799

Less Operating Expenses: (1)
        Depreciation and amortization expense            15,351,574          13,503,318         6,045,676
        Provision for losses                                255,294           1,801,707   (7)      55,409
        Interest expense                                  3,962,860           3,599,776         1,461,401
        Administrative costs and reimbursements             455,316             405,886           230,082
        Legal/Professional fees                             117,566              94,603            28,136
        Other                                               428,631             571,546           281,587
        Management fee                                    1,725,751           1,647,388           640,998
                                                     ---------------   -----------------    --------------
                                                         22,296,992          21,624,224         8,743,289
                                                     ---------------   -----------------    --------------
Income before extraordinary items                         2,690,930           1,813,431         2,015,510
Extrordinary gain on early extinguisment of debt            160,955                   -                 -
                                                     ---------------   -----------------    --------------
Net income - GAAP basis (6)                              $2,851,885          $1,813,431        $2,015,510
                                                     ===============   =================    ==============

Taxable income (loss) from operations                   ($7,493,824)          ($913,120)       $1,000,000
                                                     ===============   =================    ==============

Cash generated by (used in) operations (3)              $14,733,366         $16,546,120        $7,679,183
Cash generated from sales                                 5,900,451           3,136,926         2,603,881
Cash generated from refinancing                                   -                   -                 -
Cash generated from other (3)                             4,855,093           4,476,163         1,065,530
                                                     ---------------   -----------------    --------------
                                                         25,488,910          24,159,209        11,348,594
Less cash distributions to investors:
        From operating cash flow                         13,672,825          13,744,875         7,354,230
        From sales                                                -                   -                 -
        From refinancing                                          -                   -                 -
        From other                                                -                   -                 -
                                                     ---------------   -----------------    --------------
        Total distributions                              13,672,825          13,744,875         7,354,230
                                                     ---------------   -----------------    --------------
Cash generated (deficiency) after cash distributions    $11,816,085         $10,414,334        $3,994,364
                                                     ===============   =================    ==============

Tax  and distribution  data  per  $1,000
   limited  partner investment:
        Federal Income Tax Results:
           Ordinary income (loss):
             Operations                                     ($59.36)             ($7.23)            $7.92
             Recapture
           Capital gain (loss)

Cash distributions to investors on a GAAP basis:
        -  Investment income                                 $22.59              $14.51            $15.75
        -  Return of capital                                  86.81               95.48             43.10
                                                     ---------------   -----------------    --------------
                                                            $109.40             $109.99            $58.85
                                                     ===============   =================    ==============
Sources (on a cash basis)
        Sales
        Refinancing
        Operations                                          $109.40             $109.99            $58.85
        Other                                                                         -                 -
                                                     ---------------   -----------------    --------------
        Total                                               $109.40             $109.99            $58.85
                                                     ===============   =================    ==============
Amount invested in program equipment (cost, excluding
   acquisition fees)                                   $168,575,337        $163,806,646      $156,565,527
Amount invested in program equipment (book value)      $125,729,656        $104,863,156       $93,614,614
Amount remaining invested in program equipment (Cost
   of equipment owned at end of period as a percentage of
   cost of all equipment purchased by the program) (4)        90.20%             87.65%             83.77%
</TABLE>
                         (Footnotes follow on page A-26)
                                      A-23

<PAGE>

                                    TABLE III
                 OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
                                 June 30, 1998
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                       ATEL Cash Distribution Fund VI
                                                      Period Ended
                                                      December 31,                                               June 30,
                                                          1995               1996               1997               1998
Months of operations                                       12                 12                 12                  6

<S>                                                     <C>                <C>               <C>                <C>         
Gross revenue - lease and other                          $6,440,218         $25,837,343       $36,458,734        $18,338,821
                   - gain (loss) on sales of assets           3,819            (107,873)           26,431            795,189
                                                     ---------------   -----------------    --------------     --------------
                                                          6,444,037          25,729,470        36,485,165         19,134,010

Less Operating Expenses: (1)
        Depreciation and amortization expense             4,976,075          19,298,500        27,596,548         13,512,038
        Provision for losses                                 64,892             257,814           364,852             97,528
        Interest expense                                    931,651           5,773,463         7,993,746          3,452,060
        Administrative costs and reimbursements             539,009             748,745           435,759            185,529
        Legal/Professional fees                              50,962             186,724            91,625             21,752
        Other                                               121,541             612,698           807,883            366,666
        Management fee                                      362,581           1,061,856         1,492,716            631,370
                                                     ---------------   -----------------    --------------     --------------
Net income (loss) - GAAP basis                            ($602,674)        ($2,210,330)      ($2,297,964)          $867,067
                                                     ===============   =================    ==============     ==============

Taxable income (loss) from operations                  ($11,625,618)       ($27,319,391)     ($22,433,132)       ($5,000,000)
                                                     ===============   =================    ==============     ==============

Cash generated by (used in) operations (3)               $4,354,020         $13,940,220       $23,899,770        $15,775,320
Cash generated from sales                                    54,156             636,397           406,362          2,308,466
Cash generated from refinancing                                   -                   -                 -                  -
Cash generated from other (3)                               195,884             501,623           685,665            258,270
                                                     ---------------   -----------------    --------------     --------------
                                                          4,604,060          15,078,240        24,991,797         18,342,056
Less cash distributions to investors:
        From operating cash flow                          2,484,971           8,719,731        12,475,238          6,281,757
        From sales                                                -                   -                 -                  -
        From refinancing                                          -                   -                 -                  -
        From other                                                -                   -                 -                  -
                                                     ---------------   -----------------    --------------     --------------
        Total distributions                               2,484,971           8,719,731        12,475,238          6,281,757
                                                     ---------------   -----------------    --------------     --------------
Cash generated (deficiency) after cash distributions     $2,119,089          $6,358,509       $12,516,559        $12,060,299
                                                     ===============   =================    ==============     ==============

Tax  and distribution  data  per  $1,000
   limited  partner investment:
        Federal Income Tax Results:
           Ordinary income (loss):
             Operations                                    ($364.88)           ($346.74)         ($177.67)           ($39.60)
             Recapture
           Capital gain (loss)

Cash distributions to investors on a GAAP basis:
        -  Investment income                                                                                           $6.87
        -  Return of capital                                 $78.78              $92.53            $99.80              43.38
                                                     ---------------   -----------------    --------------     --------------
                                                             $78.78              $92.53            $99.80             $50.25
                                                     ===============   =================    ==============     ==============
Sources (on a cash basis)
        Sales
        Refinancing
        Operations                                           $78.78              $92.53            $99.80             $50.25
        Other                                                     -                   -                 -                  -
                                                     ---------------   -----------------    --------------     --------------
        Total                                                $78.78              $92.53            $99.80             $50.25
                                                     ===============   =================    ==============     ==============

Amount invested in program equipment (cost, excluding
   acquisition fees)                                    $98,036,611        $204,553,244      $206,090,008       $205,669,798
Amount invested in program equipment (book value)       $92,802,029        $185,510,097       158,856,251        143,475,138
Amount remaining invested in program equipment (Cost
   of equipment owned at end of period as a percentage of
   cost of all equipment purchased by the program) (4)        47.07%             98.21%             98.95%             98.75%
</TABLE>
                         (Footnotes follow on page A-26)

                                      A-24
<PAGE>

                                    TABLE III
                 OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
                                 June 30, 1998
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                        ATEL Capital Equipment Fund VII         
                                                                         Period Ended                           
                                                                         December 31,         June 30,
                                                                             1997               1998
Months of operations                                                          12                  6
<S>                                                                        <C>               <C>         

Gross revenue - lease and other                                              $7,370,229       $14,013,153
                   - gain (loss) on sales of assets                               3,752           843,793
                                                                       -----------------    --------------
                                                                              7,373,981        14,856,946

Less Operating Expenses: (1)
        Depreciation and amortization expense                                 5,847,827         8,694,006
        Provision for losses                                                     74,277            56,954
        Interest expense                                                        714,701         1,962,200
        Administrative costs and reimbursements                                 645,437           445,391
        Legal/Professional fees                                                  90,305            37,210
        Other                                                                   380,821           282,602
        Management fee                                                          358,846           645,721
                                                                       -----------------    --------------
Net income (loss) - GAAP basis                                                ($738,233)       $2,732,862
                                                                       =================    ==============

Taxable income (loss) from operations                                       ($7,867,498)     ($10,000,000)
                                                                       =================    ==============

Cash generated by (used in) operations (3)                                   $6,061,438        $8,179,976
Cash generated from sales                                                       130,413         2,330,193
Cash generated from refinancing                                                       -                 -
Cash generated from other (3)                                                   232,472           871,265
                                                                       -----------------    --------------
                                                                              6,424,323        11,381,434
Less cash distributions to investors:
        From operating cash flow                                              2,684,635         4,026,256
        From sales                                                                    -                 -
        From refinancing                                                              -                 -
        From other                                                                    -                 -
                                                                       -----------------    --------------
        Total distributions                                                   2,684,635         4,026,256
                                                                       -----------------    --------------
Cash generated (deficiency) after cash distributions                         $3,739,688        $7,355,178
                                                                       =================    ==============

Tax  and distribution  data  per  $1,000
   limited  partner investment:
        Federal Income Tax Results:
           Ordinary income (loss):
             Operations                                                        ($230.41)         ($292.86)
             Recapture
           Capital gain (loss)

Cash distributions to investors on a GAAP basis:
        -  Investment income                                                                       $29.74
        -  Return of capital                                                     $79.42            $17.63
                                                                       -----------------    --------------
                                                                                 $79.42            $47.37
                                                                       =================    ==============
Sources (on a cash basis)
        Sales
        Refinancing
        Operations                                                               $79.42            $47.37
        Other                                                                         -                 -
                                                                       -----------------    --------------
        Total                                                                    $79.42            $47.37
                                                                       =================    ==============

Amount invested in program equipment (cost, excluding
   acquisition fees)                                                       $149,409,976      $175,510,177
Amount invested in program equipment (book value)                          $101,284,861      $125,986,576
Amount remaining invested in program equipment (Cost
   of equipment owned at end of period as a percentage of
   cost of all equipment purchased by the program) (4)                            99.91%             98.84%
</TABLE>
                         (Footnotes follow on page A-26)




                                      A-25
<PAGE>

FOOTNOTES:

     (1) Operating  expenses  include  reimbursements  to the corporate  general
partner as follows:
       
<TABLE>
<CAPTION>
                          ATEL Cash      ATEL Cash     ATEL Cash     ATEL Cash     ATEL Cash     ATEL Cash     ATEL Capital
                          Distribution   Distribution  Distribution  Distribution  Distribution  Distribution  Equipment
 Year ended December 31,  Fund           Fund II       Fund III      Fund IV       Fund V        Fund VI       Fund VII
<S>                            <C>         <C>           <C>           <C>           <C>           <C>           <C>       
                    1986           $100
                    1987         15,100
                    1988         21,500        $3,000
                    1989         32,201        86,234
                    1990         37,163        95,474       $70,775
                    1991         48,195        71,289       239,667
                    1992        126,664       256,184       542,510      $382,114
                    1993        140,984       313,421       468,005       537,918      $373,089
                    1994         34,380       238,185       340,269       358,441       706,324
                    1995              -       157,444       300,952       349,663       535,812      $539,009
                    1996              -       132,994       245,242       275,778       455,316       748,745
                    1997              -       127,992       248,250       303,642       405,886       435,759      $645,437
                    1998              -        56,196       109,547       119,085       230,082       185,529       445,391
                         --------------- ------------- ------------- ------------- ------------- ------------- -------------
                               $456,287    $1,538,413    $2,565,217    $2,326,641    $2,706,509    $1,909,042    $1,090,828
                         =============== ============= ============= ============= ============= ============= =============
</TABLE>

     (2) A portion of the equipment  owned by the  Partnership  is accounted for
under the direct  financing  method.  Income  under direct  financing  leases is
reported on the financing method where the income portion of each rental payment
is calculated so as to generate a constant rate of return on the outstanding net
investment.  The effect is to  recognize  decreasing  amounts of income in later
periods as the net investment declines.  Net income was also negatively impacted
in 1990 by necessity for a provision for doubtful accounts. Prior to 1990, there
had been no such need.  The  decrease  in net income  from 1988 to 1989 and from
1989 to 1990 is due to increasing debt levels and interest expense. The decrease
from 1992 to 1993 is due to decreased lease revenues.  Revenues have declined as
equipment leases have expired and as the related assets have been sold.

     (3) Cash generated by (used in)  operations  does not include the principal
portion  of  lease  rentals  received  under  direct  financing  leases.  In the
partnerships'  statements  of cash flows (under  generally  accepted  accounting
principles), these amounts are included in the investing activities section.

     (4) The  percentage is calculated as a fraction,  the numerator of which is
the  amount  invested  in  program  equipment  (at  cost)  as of the  end of the
indicated  period and the  denominator of which is the  cumulative  total of the
cost of all  equipment  acquired  by the  program  through the end of the latest
period shown.

     (5) Net income decreased from 1989 to 1990 due to the provision for decline
value of  commercial  aircraft  ($1,083,834)  included  in net  income  in 1990.
Excluding the effect of that  provision,  net income per $1,000  invested  would
have been $34.60.  The results in 1990 are also effected by higher  depreciation
rates  used  for  more  recent  equipment  purchases,   resulting  in  increased
depreciation  expense  compared to lease revenues.  The remaining  amount of the
changes from 1988 to 1989 and from 1989 to 1990 are  primarily due to the timing
of the  acquisition of assets,  the placement of debt against certain assets and
other operating factors.

     (6) Net income increased from 1990 to 1991 due to the provision for decline
value of  commercial  aircraft  ($623,294)  included in net income in 1990.  The
remaining  amount  of the  changes  from  1990 to 1991 and from 1991 to 1992 are
primarily due to the timing of the acquisition of assets,  the placement of debt
against certain assets and other operating factors.

     (7) In January 1998, Pegasus Gold, one of the Partnership's  lessees, filed
for  reorganization  under Chapter 11 of the United States  Bankruptcy Code. The
Partnership  determined  that certain of the assets under this direct  financing
lease were impaired at December 31,1997. The Partnership's  provision for losses
and  impairments  for 1997 includes a reserve for the estimated  credit exposure
(approximately $1,200,000) related to the remaining lease assets.

                                      A-26
<PAGE>


                                    TABLE IV
                          RESULTS OF COMPLETED PROGRAMS
                               December 31, 1997
                                   (Unaudited)


Program name:                                        ATEL Cash Distribution Fund

Dollar amount of equity raised:                                 $10,000,000

Assets purchased (see Table 5 for detail listings):             $11,133,679

Date of Closing of Offering:                                   December 18, 1987

Date of first sale of property:                                      May 1, 1989

Date of final sale of property:                                December 31, 1997

Tax and distribution data per $1,000 limited  partner
   investment through December 31, 1997:
        Federal Income Tax Results:
           Ordinary income (loss):
             Operations                                             $192.40
             Recapture
           Capital gain (loss)

Cash distributions to investors on a GAAP basis:
        -  Investment income                                        $244.89
        -  Return of capital                                         876.14
                                                                ------------
                                                                   1,121.03
Cash available for distribution, reinvested for
     investors' accounts                                              89.05
                                                                ------------
Total                                                             $1,210.08
                                                                ============

Sources (on a cash basis)
        Sales                                                       $136.03
        Refinancing
        Operations                                                   969.59
        Other                                                        104.46
                                                                ------------
        Total                                                     $1,210.08
                                                                ============
                                      A-27
<PAGE>

                                     TABLE V
                            ACQUISITION OF EQUIPMENT
                                BY PRIOR PROGRAMS

     The  following  is a summary of Equipment  acquisitions  and Lessees by the
seven prior publicly-registered programs sponsored by ATEL Financial Corporation
and  its  affiliates.  Information  concerning  the  prior  programs'  Equipment
acquisition is current through June 30, 1998.

<TABLE>
<CAPTION>
                                                                                                                               Lease
                                                                  Commence      Acquisition  Acquisition Percent      Lease     Type
Lessee                         Notes  Equipment Type              Date(s) (1)    Cost (2)       Fees (3) Leverage (4)  Term (5)  (6)
ATEL Cash Distribution Fund

<S>                              <C>  <C>                         <C>         <C>                <C>         <C>     <C>      <C>   
Acushnet Company                      Office Information Systems  Jan-87         $134,246          $6,041              60       FP
Alachua General Hospital, Inc.   7    Medical                     Jan-89          628,632          28,288              36       OL
American Motors Corporation           Lift Trucks                 Oct-87 to       622,632          28,018              48       OL
                                                                    Jan-88  
Anaheim Memorial Hospital             Medical                     Jan-88          779,613          35,083    48.07%    60       FP
Campbell Soup Company                 Lift Trucks                 Mar-87          317,500          14,288              84       FP
Colour Graphics Corporation      8    Printing                    Jan-87          222,520          10,013    80.75%    84       FP
Enron Corp.                           Office Information Systems  Aug-88          244,488          11,002              36       FP
Financial News Network, Inc.     9    Studio and Broadcasting     Apr-90          909,735          26,183              36       FP
GAF Corporation                  10   Manufacturing               Oct-88          512,208          23,049              60       FP
GAF Corporation                       Lift Trucks                 Oct-87          439,866          19,794              60       OL
Galardi Group, Inc.                   Restaurant Furnitue and 
                                        Fixtures                  Jul-94          247,000               -              48       FP
Hartford Insurance Group              Communication               Mar-88           89,236           4,016              60       FP
Imperial Plastics, Inc.          11   Manufacturing               Sep-87 to       526,270          23,682    69.63%    84       FP
                                                                    Apr-88  
Martin Marietta Corporation           Communication               May-88          425,670          19,155              48       OL
Nord Kaolin Company            12, 13 Mining, Processing          Jul-87 to       358,710          16,734            60-62      FP
                                                                    Jan-88  
Nord Sil-Flo Company           12, 13 Material Handling           Aug-89 to        28,113             673    86.27%    60       FP
                                                                    Jan-88  
Polaroid Corporation                  Office Information Systems  Jan-87           36,190           1,629              59       FP
Putnam County Hospital                Medical                     May-88          110,000           4,950              60       FP
Rohr Industries, Inc.                 Motor Vehicle               Apr-88 to       327,240          14,726            36-84    FP, OL
                                                                    Oct-88  
Teledyne Industries, Inc.        14   Lift Trucks                 Jan-88 to     1,653,596          74,412            36-84    FP, OL
                                                                    Oct-89  
The Dow Chemical Company              Motor Vehicle               May-88          217,908           9,805    74.86%    50       FP
Treasure Chest Advertising       15   Printing                    Apr-87          498,746          22,444    97.79%    60       FP
     Company               
TRW, Inc.                             Communication               Apr-89          320,657          14,430              36       OL
United Technologies                   Office Information Systems  Jan-87           74,115           3,335              48       FP
     Corporation, Pratt & 
     Whitney Aircraft 
     Group          
Vista Chemical Company                Railroad Rolling Stock      Mar-88          850,000          38,250    53.45%    60       FP
Vista Chemical Company                Railroad Rolling Stock,     Apr-93          350,000               -              60       OL
                                        Improvements          
WSMP, Inc.                            Food Processing Equipment   Jul-95          208,788               -    98.47%    60       FP
                                                                          ---------------- ---------------
                               ATEL Cash Distribution Fund total:             $11,133,679        $450,000
                                                                          ================ ===============
</TABLE>
                                      A-28
<PAGE>
<TABLE>
<CAPTION>

                                                                                                                               Lease
                                                                  Commence      Acquisition  Acquisition Percent      Lease     Type
Lessee                         Notes  Equipment Type              Date(s) (1)    Cost (2)       Fees (3) Leverage (4)  Term (5)  (6)

ATEL Cash Distribution Fund II

<S>                            <C>    <C>                         <C>         <C>                <C>         <C>     <C>      <C>   
A.O. Smith Corporation                Office Information          Jul-89 to      $873,480          $5,878    11.59%  36-59      FP
                                                                     Feb-91 
                                        Systems, Lift Trucks 
Addwest Gold, Inc.               16   Mining                      Oct-88        1,100,717          52,284              60       FP
Alachua General Hospital, Inc.   7    Medical                     Jan-89        1,257,263          59,720              36       OL
American Express Company              Manufacturing               May-89          276,775          13,147              48       FP
American President Trucking      17   Tractors                    Sep-88        2,890,840         137,315              84       FP
     Co., Ltd.              
Bristol-Myers Squibb Company          Office Furniture            Jul-92          324,310               -              24       OL
Buffalo & Pittsburgh Railroad         Locomotive                  Nov-93          108,127               -              37       FP
Campbell Soup Company                 Lift Trucks                 Aug-88          350,772          16,662              84       FP
Chesebrough-Pond's Inc.               Lift Trucks                 Jun-90          201,452               -            48-50      FP
Chrysler Corporation                  Material Handling           Dec-93          103,620               -              12       OL
Colour Graphics Corporation           Computer System             Oct-88           33,805           1,606              60       FP
Cooper Tire & Rubber Company          Lift Trucks                 Jan-89          576,326          27,375              84       FP
Delnor Community Hospital             Medical                     Jul-88          449,956          21,373              36       OL
DJ Aerospace (Bermuda), Ltd.          Executive Aircraft          Jul-94          810,000               -              36       OL
Emanuel Hospital & Health             Helicopter                  Oct-88        2,247,765         106,769    79.58%   144       FP
     Center               
Financial News Network, Inc.   9, 18  Studio and Broadcasting     Apr-90          640,544          29,815              36       FP
Fingerhut Corporation                 Binding, Printing           Jan-89 to     1,441,690          68,481              60       FP
                                                                     Mar-89 
FMC Gold Company                      Material Handling           Apr-90          761,129          36,154              36       OL
GAF Corporation                       Manufacturing               Oct-88 to       682,310          32,410              60       FP
                                                                     Apr-88 
Galardi Group, Inc.                   Restaurant Furniture and    Jul-94          507,000               -              48       FP
                                        Fixtures               
General Motors Corporation            Video Projectors            Jan-94           58,644               -              36       OL
Home Life Insurance Company           Office Furniture/Lift       Dec-88          425,658          20,219              60       FP
                                        Trucks/Binding      
Hudson Foods, Inc.                    Food Processing             Dec-89        2,713,115         128,872    65.91%  57-59      FP
Inland Steel Company                  Scientific Measuring        Sep-89          417,000          19,808              54       FP
International Paper Company      19   Delivery Trucks             Jul-88        1,281,761          60,884            36-60    FP, OL
KeyCorp                               Office Furniture,           Jul-89        1,618,337          76,870    40.09%  53-55      FP
                                        Automated Teller Machines
Koppers Industries, Inc.              Material Handling           Jun-90          639,120               -              60       FP
Liggett Group, Inc.              20   Manufacturing               Dec-88          648,577          30,807              56       FP
Midway Airlines, Inc.            21   Commercial Aircraft         Jun-90        4,592,040               -    68.85%   102       FP
National Semiconductor                Manufacturing               Apr-89          728,000          34,580              56       FP
     Corporation       
National Steel Corporation            Material Handling           May-89          606,153          28,792    87.63%    81       FP
National Union Electric          22   Communication               Apr-89          459,893          21,845              60       FP
     Corporation        
Nissan Motor Corporation In USA       Office Information Systems  Jul-88          219,187          10,411              48       FP
NMCS, Inc. , d/b/a National      23   Office Furniture            Apr-88          599,001          28,452              60       FP
     Medical Group Services, 
     Inc.                   
Nord Kaolin Company              12   Drilling                    Apr-89          292,799          13,908              60       FP
Owens Corning Fiberglas               Material Handling           Jul-89 to     1,689,012          42,404    39.57%  36-84    FP, OL
                                                                     Oct-90 
     Corporation        
Quaker Coal Company              24   Tractor                     Apr-94          558,301               -              24       OL
Regents of the University of          Communication               Dec-88           80,386           3,818              60       FP
     California              
Rocky Mountain Helicopters, Inc  25   Medical Aircraft            Nov-89        2,150,000         102,125    81.86%    84       FP
Rohr Industries, Inc.                 Motor Vehicles              Jan-89 to       749,291          33,835            36-84      FP
                                                                     Jan-90 
Sebastiani Vineyards, Inc.            Production Line, Wine       Jan-90 to     2,818,067          29,362    79.98%  60-84      FP
                                                                     Jan-91 
                                        Barrels             
Shell Mining Company             26   Mining                      Jul-90        3,736,965         104,055    21.46%  60-84      FP
Sherwood Rehabilitation          27   Medical Furniture/Fixtures  Oct-90        1,814,036               -    97.36%    87       FP
     Hospital, Inc.                     & Eqt.                   
     
South Dade Nursing Home Ltd.     27   Physical Therapy &          Jul-90           36,676               -              60       FP
                                        Exercise Eqt.    
St. Luke's-Roosevelt Hospital         Medical Furniture/Fixtures

                                        & Eqt.                  
     Center                   
The Budd Company                      Material Handling           May-90 to     1,099,014               -    75.09%  55-80      FP
                                                                     Jun-90 
The Dow Chemical Company              Material Handling           Jun-88        1,532,061          72,773    74.86%    50       OL
Treasure Chest Advertising            Printing Press              Apr-93          850,000               -    95.59%    60       FP
     Company               
Treasure Chest Advertising            Printing Equipment          Feb-94          233,000               -              60       FP
     Company               
USX Corporation                       Haul Trucks                 Dec-89        2,910,766         138,261    83.41%    60       FP
                                                                          ---------------- ---------------
                   ATEL Cash Distribution Fund II total:                      $52,270,536      $1,661,498
                                                                          ================ ===============
</TABLE>
                                      A-29
<PAGE>
<TABLE>
<CAPTION>

                                                                                                                               Lease
                                                                  Commence      Acquisition  Acquisition Percent      Lease     Type
Lessee                         Notes  Equipment Type              Date(s) (1)    Cost (2)       Fees (3) Leverage (4)  Term (5)  (6)
<S>                              <C>  <C>                         <C>         <C>                <C>         <C>     <C>      <C>   

ATEL Cash Distribution Fund III

A.O. Smith Corporation                Material Handling           Feb-91         $451,902         $21,465              60       FP
Alachua General Hospital, Inc.        Medical                     Oct-92        2,074,989               -              36       OL
Alachua General Hospital, Inc.        Medical                     Apr-95           80,500               -     0.00%    18       FP
Alumina Partners of Jamaica        28 Earth Moving                Jun-93        2,057,133               -              60       FP
American President Trucking           Tractors and Trailers       Mar-90 to     4,859,181         230,811    68.08%  77-84      FP
                                                                     Aug-90
     Co., Ltd.              
AMOCO Corporation                     Trailers                    May-94          523,805               -    85.88%    66       FP
ARR, Inc.                         29, Corporate Aircraft          Oct-92        5,275,000               -              84       OL
                                  30
Barney's, Inc.                     31 Retail Store Furniture and  Oct-93        2,041,222               -    60.04%    60       FP
                                        Fixtures                 
Buffalo & Pittsburgh Railroad         Locomotives                 Nov-93          792,657               -              37       FP
     Company                  
Carrier Corporation                   Lift Trucks                 Jul-90          108,062           5,133              55       FP
Carrier Corporation                   Lift Trucks                 Jul-90 to       533,950          25,363              53       FP
                                                                     Aug-90 
Dean Foods Company                    Trailers                    Nov-90 to     1,213,190          57,627            75-84      FP
                                                                     Apr-91 
Fingerhut Corporation                 Offset Printing Press       Apr-91        1,303,078          61,896              85       FP
Fingerhut Corporation                 Printing                    Oct-91 to     2,074,915          14,464    48.47%  84-85      FP
                                                                     Oct-92 
FMC Gold Company                      Haul Truck                  Jul-90          534,828          25,404              48       OL
Fred Meyer, Inc.                      Point-of-Sale               Oct-90        6,343,897         301,335    63.93%    58       FP
General American Life                 Office Furniture            Jan-93        1,611,278          76,536              84       FP
     Insurance        
H.E. Butt Grocery Company             Tractors and Trailers       Jan-93        2,112,747               -            60-84    OL/FP
Ingersoll International, Inc.         Communication System        Dec-90          277,017          13,158              60       FP
Kelly-Springfield Tire Company        Material Handling           Apr- to         127,834           6,072              60       FP
                                                                     Jul-92 
Koppers Industries, Inc.              Material Handling           Oct-90          402,722          19,129              60       FP
Kraft General Foods, Inc.             Lift Trucks                 May-91 to     1,621,541          77,023            48-72      FP
                                                                     Nov-91 
Midway Airlines, Inc.              21 Commercial Aircraft         Jul-90        2,296,020         109,061    68.85%   102       FP
Mobil Oil Corporation                 Material Handling           Jul-92           70,256           1,173              36       OL
Mobil Oil Corporation                 Electric Golf Carts         Nov-93          280,119               -              36       OL
Nord Kaolin Company                32 Materials Processing        Sep-90          391,116          18,578              60       FP
Ohio Coal Company                  33 Mining                      Apr-92       10,630,130         504,931    84.48%  51-84    OL/FP
Pepsico, Inc., d/b/a/ PFS             Material Handling           Jul-90 to       539,330          25,618    45.63%  58-72      FP
                                                                     Sep-90 
Pilgrim's Pride Corporation           Food Processing             Nov-90        3,619,095         171,907              59       FP
Pittston Coal Group                34 Mining                      Jul-92        5,810,941         276,020    75.71%    60       FP
Portland General Electric          35 Power Generation            Jun-90        2,710,359         128,742    70.25%   101       OL
     Company              
PSI Energy, Inc.                      Earth Moving                Aug-90          842,013          39,996              72       FP
Quaker Coal Company                   Mining                      Jan-94        5,808,385               -              60       OL
Reliance Insurance Company            Office Furniture            Jul-92        1,222,297          50,135    51.90%    60       FP
Rohr Industries                       Motor Vehicle               Oct-95           37,244               -              36       OL
Shell Mining Company                  Haul Trucks                 Jan-92        3,167,443         150,454    65.64%  60-84      FP
Stone Container Corporation           Material Handling           Nov-90        2,975,000         141,313    34.40%  26-57      OL
Teledyne Industries, Inc.             Lift Trucks                 Feb-91          116,476           5,533              39       OL
Terex Corporation                     Manufacturing               Apr-91          291,455          13,845              84       FP
The Dow Chemical Company              Material Handling           Nov-90 to     4,504,918         195,358    68.68%  53-60    OL/FP
                                                                     Dec-92 
The Helen Mining Company           36 Mining Shields              Jul-91        5,270,314         250,340              60       FP
The Pillsbury Company                 Harvesting                  Jan-93        2,327,946         110,577    59.93%    60       OL
Treasure Chest Advertising            Flying High Speed Paster    Apr-93          239,171               -              87       FP
     Company               
Treasure Chest Advertising            Printing Stackers           Oct-95          139,600               -              84       FP
     Company               
Truck-Lite Company, Inc.           36 Project Line                Oct-91 to     6,875,715         308,441    81.76%  69-84      FP
                                                                     Jan-93 
USS/Kobe Steel Company             37 Lift Trucks                 Sep-19 to       408,410          19,399            36-60    OL/FP
                                                                     Nov-91 
Utilicorp United, Inc.             38 Power Generation            Sep-91        1,086,934          51,629    75.65%   105       FP
Wal-Mart, Inc.                        Trailers / Forklifts        May-94          490,255               -    95.09%  20-38    OL/FP
West Penn Power Company               Storage Tanks               Sep-91        1,057,551          50,234    97.86%    87       FP
                                                                             ------------- ---------------
                                       ATEL Cash Distribution Fund III total: $99,629,941      $3,558,700
                                                                             ============= ===============
</TABLE>

                                      A-30
<PAGE>

<TABLE>
<CAPTION>

                                                                                                                               Lease
                                                                  Commence      Acquisition  Acquisition Percent      Lease     Type
Lessee                         Notes  Equipment Type              Date(s) (1)    Cost (2)       Fees (3) Leverage (4)  Term (5)  (6)
<S>                              <C>  <C>                         <C>        <C>                 <C>         <C>     <C>      <C>   

ATEL Cash Distribution Fund IV

ARR, Inc.                        29,  Corporate Aircraft          Oct-92 to    $9,635,969        $337,259              84       OL
                                 30                                  Dec-92 
ATS, Automatic Tooling Systems        Machine Tools               Mar-95          434,904         123,410    86.98%    60       FP
ATS, Automatic Tooling Systems        Machine Tools               Mar-95          175,974           6,545    86.98%    60       FP
Barney's, Inc.                   31   Retail Store Furniture and  Oct-93        2,353,608          82,376    60.05%    60       FP
                                        Fixtures                 
Buffalo & Pittsburgh Railroad         Locomotives                 Nov-93          849,216          29,723              37       FP
Burlington Air Exress                 Materials Handling          Apr-95          622,663          21,793    78.25%    84       FP
Burlington Air Exress                 Materials Handling          Jul-95          505,325               -    80.23%    84       FP
Burlington Northern Railroad     39   Locomotives                 Jan-93        7,950,000         278,250              24       OL
     Company                 
Chrysler Corporation                  Tractors & Trailers         Dec-93        3,253,000         113,855    84.13%  71-72      FP
Clinchfield Coal Company              Drill, Endloader, Diesel    Jan-94          985,203          34,482    65.79%  73.5-
                                        Generator                                                                    91.5       FP
DJ Aerospace (Bermuda), Ltd.          Executive Aircraft          Jul-94        1,890,000          66,150              36       OL
Federal Paper Board Co., Inc.         Office Equipment            Jul-95           77,950               -              36       FP
Foodmaker, Inc.                       Restaurant Furniture and    Oct-94 to     2,651,356          92,797              60       FP
                                        Fixtures                     Jan-95 
Galardi Group, Inc.                   Restaurant Furniture and    Jul-94          546,000          19,110              48       FP
                                        Fixtures               
GE Industrial & Power Systems         Office Automation           Mar-95          138,130           4,835              36       FP
GE Industrial & Power Systems         Machine Center              Jun-95          457,670               -              84       FP
H.E. Butt Grocery  Company            Trailers                    Oct-92 to     5,709,369         199,828    72.48%  60-84    OL/FP
                                                                     Jan-93 
H.E. Butt Grocery  Company            Trailers                    Jun-93        1,404,302          49,151    75.71%    84       FP
Holston Mining, Inc.             40   Endloader, Dozer            Jan-94          584,617          20,462             91.5      FP
Kraft General Foods, Inc.             Tractors                    Dec-93          964,315          33,751    71.69%    31       FP
Liquid Carbonic Industrial/      41   Air Separation Plant        Dec-93        9,500,897         332,531    54.21%    99       FP
     Medical Corporation   
Midwest Power Systems, Inc.           Coal Hopper Cars            Jan-93        2,240,000          78,400    28.36%    36       OL
Mobil Oil Corporation                 Tractors/Construction/Earth Oct-92 to 
                                        Moving                       Apr-94     2,760,175          95,786            27-60      OL
Nabisco, Inc.                         Office Automation           Aug-95          337,594               -              36       FP
National Steel Corporation            Construction Equipment      Jan-95        2,208,510          77,298    76.55%  60-84      FP
National Steel Corporation            Construction Equipment      Apr-95        3,675,997          83,148    88.15%  85-91      FP
Omnicom Group Inc.                    Office Automation           Oct-95          901,849               -              36       FP
Omnicom Group Inc.                    Computers & Related         Aug-96           32,599               -              36       FP
                                        Equipment         
Paramount Coal Corporation       40   Drill, Dozer                Jan-94          595,800          20,853    65.79%  61.5-       FP
                                                                                                                     91.5 
Pepsico, Inc.                         Materials Handling          Jan-94          146,926           5,142            48-60    OL/FP
Pepsico, Inc.                         Materials Handling          Jul-93 to       458,017          16,031            48-60    OL/FP
                                                                     Sep-93 
Pittston Coal Group              34   Mining                      Jul-92          846,883          29,641    78.76%    60       FP
Pittston Coal Group              34   Mining                      Mar-95          819,349          28,677    65.79%    60       FP
Quaker Coal Company              24   Rail Car Mover              Nov-95          263,984               -              48       FP
Rochelle Coal Company            42   Mining                      Jan-93        6,303,701         220,630    70.34%    84       FP
Sebastiani Vineyards, Inc.            Wine Barrels                Apr-94          189,855           6,645              60       FP
Sebastiani Vineyards, Inc.            Wine Barrels                Apr-95          180,253           6,309              60       FP
Sebastiani Vineyards, Inc.            Wine Barrels                Apr-94 to       454,721          15,915              36       FP
                                                                     Jul-94 
Signature Flight Support              Air Support Equipment       Jan-95        1,142,400          39,200              84       FP
     Corporation         
Tarmac America, Inc.             43   Crawler Dozer, Wheel Loader Aug-94          385,443          13,491    75.64%  60-84      FP
Tarmac America, Inc.             43   Construction Equipment      Jan-95          210,438           7,365    80.90%    84       FP
Tarmac America, Inc.             43   Construction Equipment      Jul-95 to     1,309,300               -    79.82%    97       FP
                                                                     Aug-95 
TASC, Inc.                            Office Automation           Jan-95          131,008           4,585              36       FP
TASC, Inc.                            Office Automation           Oct-95 to       601,701               -              36       FP
                                                                     Apr-96 
The Dow Chemical Company              Material Handling, Research Dec-92        2,221,228          77,743    74.80%  60-84      FP
The Dow Chemical Company              Research                    Feb-93          102,149           3,575    87.94%    60       FP
The Dow Chemical Company              Boom Lift                   May-93           66,900           2,342    75.81%    60       FP
The Helen Mining Company         36   Mining                      Jan- to       3,816,507         133,578    32.62%    60       FP
                                                                     May-92
The Kendall Company                   Office Automation           Nov-94          166,835           5,839              36       FP
The Kendall Company                   Office Automation           Jan-95           86,108           3,014              36       FP
The Kendall Company                   Office Automation           Apr-95          434,705          15,071              36       FP
The Kendall Company                   Office Automation           Oct-95 to       568,370               -            24-36      FP
                                                                     Jan-96 
The Stop & Shop Supermarket           Bakery Labeling Machines    Feb-96          368,500               -              60       FP
     Company                
Trans Ocean Container            44   Intermodal Containers       Oct-93        3,001,930         105,068             120       FP
     Corporation      
Treasure Chest Advertising            Bin Stackers and Trimmers   Dec-93 to 
     Company                                                         Apr 94       753,419          26,370            84-86      FP
Treasure Chest Advertising            Printing Press              Dec-93        3,478,749         121,756    88.28%    84       FP
     Company               
Treasure Chest Advertising            Printing Press & Associated Aug-93        2,075,000          72,625    89.99%    66       FP
     Company                            Equipment                 
Treasure Chest Advertising            Printing Press & Associated Feb-95          511,907          17,917              84       FP
     Company                             Equipment                
Union Pacific Corporation             Intermodal                  Jan-93        1,453,096          50,858    46.85%    60       OL
Union Tank Car Company                Rail                        Sep-92 to     6,460,600         225,666    23.25%  25-51      OL
                                                                     Oct-92 
USS/Kobe Steel Company           37   Materials Handling          Jul-94           35,920           1,257              60       FP
USS/Kobe Steel Company           37   Dump Truck                  Aug-92          256,000           8,960              84       FP
USX Corporation                       Materials Handling          Jun-93        3,061,376         107,148    83.67%  54-69      FP
Xerox Corporation                     Materials Handling          Feb-95           26,092             913              44       OL
Xerox Corporation                     AKT PVD System Upgrade      Jan-97           77,518               -              54       FP
Xerox Corporation                     AKT PVD System              Jul-96        2,825,000               -    85.74%    60       FP
                                                                          ---------------- ---------------
                            ATEL Cash Distribution Fund IV total:            $108,734,880      $3,575,123
                                                                          ================ ===============
</TABLE>
                                      A-31
<PAGE>

<TABLE>
<CAPTION>
                                                                                                                               Lease
                                                                  Commence      Acquisition  Acquisition Percent      Lease     Type
Lessee                         Notes  Equipment Type              Date(s) (1)    Cost (2)       Fees (3) Leverage (4)  Term (5)  (6)
<S>                              <C>  <C>                         <C>         <C>                <C>         <C>     <C>      <C>   

ATEL Cash Distribution Fund V

Armco, Inc.                           Phone Mail System           Jan-96         $459,835         $16,094               84       FP
Armco, Inc.                           Telephone System Upgrade    Jan-97           31,932               -               72       FP
The Atchison, Topeka & Santa Fe       Containers                  Jan-95        1,926,930          67,443    62.75%     84       OL
     Railroad Company           
The Atchison, Topeka & Santa Fe       Rail Car Containers and     Jul-94        7,812,200         273,427    55.89%     84       OL
     Railroad Company                   Chassis               
The Atchison, Topeka & Santa Fe  45   Tank Containers             Nov-93          744,875          26,071               84       FP
     Railroad Company           
Barney's, Inc.                   31   Retail Store Furniture and  Oct-93        3,365,947         117,808    60.04%     60       FP
                                        Fixtures                 
BJ's Wholesale Club              46   Materials Handling          Oct-94          613,998          21,490               62       FP
BNMC Leasing, Inc.                    Over-the-road Tractors      May-94          141,540           4,954    35.62%     8        OL
Burlington Air Express                Materials Handling          Jan-95 to     1,720,008          60,200    75.87%     84       FP
                                                                    Apr-95  
Burlington Northern Railroad          Locomotives                 Jan-95       12,350,000         432,250               28       OL
Burlington Northern Railroad     47   Covered Hopper Rail Cars    Apr-96        9,344,563          60,848               21       FP
Burris Foods, Inc.                    Over-the-road Trailers      May-94          245,296           8,585    21.16%     5        OL
Canadian Pacific Limited         47   Covered Hopper Rail Cars    Apr-96        1,798,388               -               13       FP
Cargill, Inc.                    47   Covered Hopper Rail Cars    Apr-96          282,100               -               36       FP
CF Industries, Inc.              47   Covered Hopper Rail Cars    Apr-96          528,938               -               12       FP
Chrysler Corporaion                   Materials Handling          Dec-94 to     1,300,286          45,510    76.79%     60       OL
                                                                    Mar-95  
Chrysler Corporation                  Over-the-road Tractors      Dec-93        1,379,490          48,282    54.62%     60       OL
Chrysler Corporation                  Materials Handling          Apr-96            9,296               -               60       OL
Chrysler Corporation                  Forklifts                   Jul-96           25,162               -               60       OL
Chrysler Corporation                  Materials Handling          Apr-95 to       166,069           5,812    30.07%     60       OL
                                                                    Jun-95  
Chrysler Corporation                  Materials Handling          Nov-93 to     1,303,039          45,606    58.69%     60       OL
                                                                    Jan-94  
CITGO Petroleum Corp.                 Over-the-road Tractors      May-94          837,904          29,327    74.10%     36       OL
Clark Oil & Refining Corporation      Retail Store Fixtures       Jan-94        1,268,656          44,403               36       OL
Denver and Rio Grande Western         Auto Racks                  May-94        7,180,000         251,300               44     FP/OL
     Railroad                 
Emerson Electric Company              Over-the-road Trailers      May-94          237,149           8,300    27.39%     80       FP
Federal Paper Board Company, Inc.     Materials Handling          Jan-95        1,315,911          46,057               36       OL
Federal Paper Board Company, Inc.     Materials Handling          Apr-95          930,814          32,578               36       OL
Federal Paper Board Company, Inc.     Forklifts, Wheeloader       Oct-94          167,791           5,873               36       OL
Foodmaker, Inc.                       Fixtures and Fittings and   Jan-94 to     6,042,382         211,489    15.63%     60       FP
                                        Trailers                    Oct-94  
General Electric Company              Injection Molding           Feb-96        1,470,000          51,450    76.28%    120       FP
General Motors Corporation            Materials Handling          Jan-94 to     3,023,173         105,811    62.16%     60       OL
     (Service Parts Operation                                       May-94  
     Division)             
General Motors Corporation            Materials Handling          Jul-94          893,382          31,268    73.33%     60       OL
     (Truck and Bus Division) 
IBM Corporation                       Office Furniture            Aug-93        1,825,710          63,900               48       OL
Illinois Central Railroad        47   Covered Hopper Rail Cars    Apr-96        1,234,188               -             12-40      FP
     Company              
Ingersoll International, Inc.         Machine Tools               Jun-94        1,196,355          41,872               72       FP
Kaiser Cement Corporation             Tractor and Dump Truck      Oct-93          984,671          34,463               60       OL
Kraft, Inc.                           Over-the-road Trailers      May-94        1,000,353          35,012    91.49%     56       FP
McDonnell Douglas Helicopter          Office Automation           Aug-95          110,320           3,861               36       FP
     Systems                 
Minteq International, Inc.       48   Turbo Laser                 May-96          347,430               -               36       FP
Minteq International, Inc.       48   Turbo Laser                 Feb-94          461,800          16,163               60       FP
Mobil Administrative Services    49   Helicopter                  Jun-93          844,525          29,558               24       OL
     Company, Inc.            
Mobil Oil Corporation                 Environmental Ejector       Jul-93          423,000          14,805               36       OL
                                        Systems             
Mobil Oil Corporation                 Wheel Loader                Oct-93           70,200           2,457               36       OL
Mobil Oil Corporation                 Materials Handling          Jan-95          853,093          29,858               60       OL
Mobil Oil Corporation                 Liquid Petroleum Tank Cars  Oct-95 to    12,863,591         450,226    75.74%    240       FP
                                                                    Jan-96  
Montana Rail Link, Inc.          47   Covered Hopper Rail Cars    Apr-96          846,300               -               12       FP
Nabisco, Inc.                         Office Automation           Mar-95          426,420          14,925               36       OL
Nabisco, Inc.                         Office Automation           Oct-95          190,442           6,665               36       FP
National Steel Corporation            Wheel Loader                Oct-94          253,527           8,873    55.74%     60       FP
National Steel Corporation            Materials Handling          Oct-94           64,650           2,263    46.63%     49       OL
National Steel Corporation            Materials Handling          Jan-95        1,649,465          57,731    59.70%     61       OL
National Steel Corporation            Materials Handling          Jan-95           66,134           2,315    51.26%     36       OL
National Steel Corporation            Materials Handling          Apr-95          873,161          30,561    63.31%     61       OL
National Steel Corporation            Materials Handling          Apr-95          609,500          21,333    56.28%     49       OL
National Steel Corporation            Bulldozer / Crane           Oct-95        2,137,183          74,801    78.44%     90       FP
Occidental Chemical Corporation       Barges                      Aug-94        2,798,303          97,941    56.31%     16       OL
Omnicom Group, Inc.              50   Office Automation & Office  Jan-96        1,458,896          51,061             36-60      FP
                                        Furniture                
Owens Corning Fiberglas Corp.         Materials Handling          Aug-93          157,462           5,511               36       OL
Pegasus Gold Corporation         51   Surface Mining              Jan-96        7,280,747         254,826    79.77%     84       FP
Praxair, Inc.                         Over-the-road Tractors      May-94          668,114          23,384    52.77%     27       OL
Primark Corporation                   Office Automation           Jul-95 to       143,449           5,021               36       FP
                                                                    Apr-96  
PV Trucking                           Over-the-road Tractors      May-94           75,332           2,637               18       FP
Quaker Coal Company              24   Haul Truck & Crawler        Oct-94        2,626,953          91,943             24-30      OL
                                        Tractor            
Quaker Coal Company              24   Mining Equipment            Jan-95        3,000,000         105,000               24       OL
Quaker Coal Company              24   Haul Trucks & Tractor       Oct-95        2,877,672         100,719             48-60      FP
Quantum Restaurant Group, Inc.   52   Restaurant Furniture /      Jun-96          436,331               -               60       FP
                                        Fixtures / Equipment 
Quantum Restaurant Group, Inc.   52   Restaurant Furniture /      Jul-96          499,131               -               60       FP
                                        Fixtures / Equipment 
Quantum Restaurant Group, Inc.   52   Restaurant Furniture /      Sep-96          450,273               -               60       FP
                                        Fixtures / Equipment 
Quantum Restaurant Group, Inc.   52   POS System                  Sep-96           33,023               -               60       FP
Quantum Restaurant Group, Inc.   52   POS System                  Oct-96           36,185               -               60       FP
Quantum Restaurant Group, Inc.   52   Restaurant Furniture /      Oct-97          432,328          15,131               60       FP
                                        Fixtures / Equipment 
Quantum Restaurant Group, Inc.   52   Restaurant Furniture /      Oct-97          425,437          14,890               60       FP
                                        Fixtures / Equipment 
Quantum Restaurant Group, Inc.   52   Restaurant Furniture /      Oct-97          205,981           7,209               60       FP
                                        Fixtures / Equipment 
Roper Corporation                     Forklifts                   Jan-96          243,659           8,528               84       FP
Roper Corporation                     Industrial Batteries        Sep-96           30,882               -               76       FP
Schwegmann Giant Super           53   Fixtures & Equipment        Jul-95        5,058,331         176,161               60       FP
     Markets, Inc.     
Sebastiani Vineyards, Inc.            Bottling Equipment          Apr-94          113,673           3,979               48       OL
Sebastiani Vineyards, Inc.            Wine Barrels                Apr-95           95,848           3,355               36       FP
Smitty's Super Valu, Inc.        54   Retail Store Furniture &    Jan-96        4,709,326         164,826    64.27%     60       FP
                                        Fixtures               
Soo Line Railroad Company        47   Covered Hopper Rail Cars    Apr-96        1,586,813               -               12       FP
Star Enterprise                       Over-the-road Tractors      May-94          923,533          32,324    59.16%     32       OL
Tarmac America, Inc.             43   Concrete Trucks with Mixers Sep-94 to     5,937,371         207,808    76.81%     48       FP
                                                                    Oct-94  
Tarmac America, Inc.             43   Construction Equipment      Sep-95 to     1,491,348          52,197    70.16%     84       FP
                                                                    Jan-96  
Tarmac America, Inc.             43   Concrete Trucks with Mixers Sep-95 to     1,982,071          69,372    75.27%     97       FP
                                                                    Oct-95  
TASC, Inc.                            Office Automation           Jan-95          237,685           8,319               18       OL
TASC, Inc.                            Office Automation           Apr-96          522,280          16,716             18-36      FP
Texaco Trading and                    Over-the-road Tractors &    May-94        4,485,676         156,999    60.91%   32-68    FP/OL
     Transportation, Inc.               Trailers               
The Dow Chemical Company              Copiers                     Jul-94          272,809           9,548               36       OL
The Dow Chemical Company              Office Equipment            Apr-95          122,800           4,298               36       FP
The Dow Chemical Company              Office Automation           Oct-94 to       377,702          13,220               36     OL/FP
                                                                    Jan-95  
The Kendall Company                   Office Automation           Oct-96            3,735             131               36       FP
The Pillsbury Company                 Harvesting Equipment        Oct-94        1,643,101          57,509    84.91%     60     FP/OL
The Pittston Company             34   Construction & Mining       Jan-94 to    14,037,683         491,319    38.93%   49-61    OL/FP
                                        Equipment                   Dec-94  
Tom's Foods, Inc.                     Over-the-road Tractors      May-94          259,102           9,069    35.23%     9        OL
Trans Ocean Container            44   Intermodal Containers       Oct-93        5,000,683         175,024              120       OL
     Corporation      
Treasure Chest Advertising            Printing Press & Associated Oct-93        2,069,950          72,448    77.94%   60-84      FP
     Company, Inc.                      Equipment                 
Treasure Chest Advertising            Printing Press & Associated Aug-96          287,320           9,051               84       FP
     Company, Inc.                      Equipment                 
Treasure Chest Advertising            Printing Press & Associated Jul-95 to     2,325,000          81,375    46.50%     66       FP
     Company, Inc.                      Equipment                   Nov-95 
Tyson Foods, Inc.                     Tractors / Trailers         Jul-93 to     5,785,000         202,475    26.95%   36-84      OL
                                                                    Aug-93  
Union Carbide Corporation             Rail Tank Cars              Aug-95        4,835,759         140,000    39.30%   68-92      FP
USS / Kobe Steel Company         37   Wheel loader, Crane & Lift  Jan-94          603,352          21,117             60-84   FP/OL
                                        Truck                    
                                                                             ------------- ---------------
                        ATEL Cash Distribution Fund V total:                 $186,897,181      $5,956,319
                                                                             ============= ===============
</TABLE>
                                      A-32
<PAGE>

<TABLE>
<CAPTION>
                                                                                                                               Lease
                                                                  Commence      Acquisition  Acquisition Percent      Lease     Type
Lessee                         Notes  Equipment Type              Date(s) (1)    Cost (2)       Fees (3) Leverage (4)  Term (5)  (6)
<S>                              <C>  <C>                         <C>         <C>                <C>         <C>     <C>      <C>   

ATEL Cash Distribution Fund VI

A T & T Communications, Inc.     55   Printers                    Aug-95 to    $1,578,500         $46,200              36       OL
                                                                    Nov-95 
A T & T Communications, Inc.     55   Printers                    Jul-96 to     1,171,302          17,192              34       OL
                                                                    Dec-96 
A T & T Communications, Inc.     55   Printers                    Nov-97          912,252                            28-32      OL
A T & T Communications, Inc.     55   Printers                    Jun-96 to       540,181          15,752            28-34      OL
                                                                    Jul-96 
American President Trucking      17   Tractors and trailers       Nov-95          759,092          22,773    30.18%    8        OL
     Company, Ltd.          
Applid Magnetics Corporation          Manufacturing               Sep-96 to     7,435,380         223,061    71.50%    60     OL/FP
                                                                    Oct-96 
Applied Magnetics Corporation         Sputter                     Jul-96        3,274,642          98,239    78.86%    60       FP
Armco, Inc.                           Link-Belt Scrapmaster       Oct-95          388,993          11,670              36       OL
Armco, Inc.                           Data processing             Nov-95           67,829           2,035              37       FP
Armco, Inc.                           Office Automation           Jul-96          109,416           3,282              30       FP
Armco, Inc.                           Office Automation           Jan-97           60,655                              72       FP
AT&L Railroad Company            47   Covered Hopper Rail Cars    Apr-96           35,263           1,050              12       FP
Atchison, Topeka & Santa Fe           Containers                  Oct-94 to     9,196,811         298,896    60.53%    84       OL
     Railroad Company                                               Jan-95 
ATS Automation Tooling                Machine Tools               Apr-96 to       379,551          77,093              60       FP
     Systems, Inc.                                                  Oct-96 
ATS Automation Tooling                Machine Center              Oct-96 to       330,901           3,513              60       FP
     Systems, Inc.                                                  Jan-97 
BJ's Wholesale Club              46   Materials Handling          Jul-95          931,635          30,278              63       OL
Burlington Northern Railroad     47   Covered Hopper Rail Cars    Apr-96       13,223,438         396,703              21       FP
Canadian Pacific Limited         47   Covered Hopper Rail Cars    Apr-96        2,433,113          72,450              13       FP
Cargill, Inc.                    47   Covered Hopper Rail Cars    Apr-96          352,625          10,500              36       FP
Certified Grocers of California       Materials Handling          Oct-96          637,702          19,131              60       OL
CF Industries, Inc.              47   Covered Hopper Rail Cars    Apr-96          705,250          21,000              12       FP
Chrysler Corporation                  Materials Handling          Feb-96 to     1,749,200          52,476    69.99%  53-60      OL
                                                                    Jul-96 
Chrysler Corporation                  Materials Handling          Mar-95 to     5,925,384         184,233    66.83%    60       OL
                                                                    Dec-95 
Chrysler Corporation                  Materials Handling          May-96 to     2,419,598          69,832    69.93%  52-60   OL/FP
                                                                    Oct-96 
Consolidated Rail Corporation         Locomotives                 Sep-95       22,353,332         668,372    57.02%    60       OL
Consolidated Rail Corporation         Intermodal Container        Jan-96        2,502,750          75,083              60       OL
                                        Chassis            
Coors Transportation Company     56   Refrigerated Trailers       Nov-95          797,704          23,931    47.35%    21       OL
Fairmont Homes, Inc.                  Materials Handling          Apr-96          644,565          19,337              60       OL
Federal Paper Board Company           Materials Handling          Apr-96 to     1,740,861          52,226    70.43%  36-60      OL
                                                                    Jun-96 
Federal Paper Board Company           Materials Handling          Jul-95 to     5,401,765         166,124    57.05%  36-84   OL/FP
                                                                    Jan-96 
General Electric Company -            Office Filing System        Jan-97          101,685                              60       FP
     Aircraft Engines      
General Motors Corporation            Manufacturing Equipment     Jul-95          652,232          19,567              36       OL
Gerber Products Company               Materials Handling          Oct-96          197,035           5,911              60       FP
Hastings Leasing Limited         57   Trucks & Miscellaneous      Aug-96       20,242,332         607,270    90.58%    80       FP
Illinois Central Railroad        47   Covered Hopper Rail Cars    Apr-96        1,692,600          50,400            12-40      FP
     Company              
IMC Fertilizer, Inc.                  Rail Tank Cars              Sep-95        1,266,374          37,991              27       OL
Mobil Oil Corporation                 Tractor                     Jul-96           78,327           2,350              36       OL
Mobil Oil Corporation                 Materials Handling          Oct-96          185,726           5,256              36       OL
Mobil Oil Corporation                 Hydraulic Crane             Oct-96          160,773           4,823              84       OL
Mobil Oil Corporation                 Liquid Petroleum Tank Cars  Jan-96 to    16,110,807         483,324    75.44%   240       FP
                                                                    Feb-96 
Montana Rail Link, Inc.          47   Covered Hopper Rail Cars    Apr-96        1,198,925          35,700              12       FP
Nabisco, Inc.                         Office Automation           Apr-95          709,572          23,061              36       OL
National Steel Corporation            Hydraulic Shovels           Jul-96        6,245,062         187,352    69.96%    60       OL
National Steel Corporation            Steel Yard Equipemt         Jan-97          948,705          14,543            48-60   OL/FP
National Steel Corporation            Steel Yard Equipemt         Oct-96          338,674          10,160    75.58%    60       FP
National Steel Corporation            Wheel Loaders & Forklifts   Jan-96 to     4,710,131         141,304    59.68%  36-90   OL/FP
                                                                    Apr-96 
National Steel Corporation            Materials Handling,         Jul-95 to     1,525,887          49,517    66.05%  60-90   OL/FP
                                        Tractors & Trailers         Oct-95 
National Steel Corporation            Cranes & Loaders            Jul-96 to     1,099,210          32,976    72.33%  36-84   FP/OL
                                                                    Oct-96 
NEC Electronics, Inc.            58   Manufacturing               Jan-96       18,320,603                    66.67%    51     OL/FP
NVR, Inc.                             Roof Truss Assembly         Jul-96           78,484           2,355              84       FP
Omnicom Group, Inc.              50   Office Automation           Apr-95 to     2,232,559          68,290            36-60   OL/FP
                                                                    Oct-95 
Omnicom Group, Inc.              50   Television Production       Jul-96 to     1,080,056           4,819              48       FP
                                        Equipment                   Oct-96 
Overnite Transportation               Tractors                    Apr-96        2,140,643          62,961              36       OL
     Company            
Peerless Eagle Coal Company      59   Haul Trucks & Construction  Jul-95        5,184,875         168,508    59.29%    48       OL
Perdue Transportation            60   Freightliner Tractors       Nov-95          536,740          16,102    62.74%    24       OL
     Incorporated     
Quaker Coal Company              24   Wheel Loaders, Drill &      Jan-96        3,298,935          98,968              48       FP
                                        Grader               
Quantum Restaurant Group, Inc.   52   Restaurant Furniture &      Oct-96          253,676           7,610              60       FP
                                        Fixtures             
Quantum Restaurant Group, Inc.   52   POS System                  Nov-96           33,815                              60       FP
Sebastiani Vineyards, Inc.            Bottle Labeler              Feb-96          317,520           9,526              60       OL
Signature Flight Support              Fuel Trucks                 Jan-97        1,085,000                    85.01%  96-132     FP
     Corporation         
Soo Line Railroad Company        47   Covered Hopper Rail Cars    Apr-96        2,256,800          67,200              12       FP
Tarmac America, Inc.             43   Dragline                    Jul-96        1,441,764          43,253              84       FP
Tarmac America, Inc.             43   Concrete Mixer Trucks       Jul-96 to     4,787,890         143,637              96       FP
                                                                    Sep-96 
Tarmac America, Inc.             43   Construction Equipment      Oct-94 to     3,114,870         101,233    71.69%    97       FP
                                                                    Nov-94 
TASC, Inc.                            Office Automation           Jan-96 to     1,018,030          30,542              36       FP
                                                                    Jul-96 
TASC, Inc.                            Office Automation           May-95 to     1,567,339          50,413            18-36   OL/FP
                                                                    Oct-95 
TASC, Inc.                            OfficeAutomation            Oct-96 to     2,654,244          11,629              36       FP
                                                                    Jul-97 
Trans Ocean Container            44   Intermodal Containers       Jan-96        9,995,127         299,854             120       FP
     Corporation      
Tyson Foods, Inc.                     Office Automation           Jun-95          563,411          18,311              24       OL
Xerox Corporation                     Binding & Finishing 
                                        Equipment                 Feb-95 to       646,466          19,981              48       OL
                                                                    Jun-95 
Xerox Corporation                     Materials Handling          May-95 to       144,527           4,456              44       OL
                                                                    Aug-95 
                                                                           --------------- ---------------
                       ATEL Cash Distribution Fund VI total:                 $208,277,121      $5,623,585
                                                                           =============== ===============
</TABLE>
                                      A-33
<PAGE>

<TABLE>
<CAPTION>
                                                                                                                               Lease
                                                                  Commence      Acquisition  Acquisition Percent      Lease     Type
Lessee                         Notes  Equipment Type              Date(s) (1)    Cost (2)       Fees (3) Leverage (4)  Term (5)  (6)
<S>                              <C>  <C>                         <C>        <C>                 <C>         <C>     <C>      <C>   

ATEL Capital Equipment Fund VII

A.P.Moller (Maersk)              61   Intermodal Containers       Jan-98       $2,280,100                            52       OL
Alliant Techsystems, Inc.             Semiconductor  Equipment    Jan-98          138,505                            8-16     OL
Anchor Glass Container                Glass Packaging Equipment   Jan-98          371,282                    33.52%  3-6      OL
     Corporation       
Anchor Glass Container                Office Automation           Jan-98          404,995                            18       FP
     Corporation       
Applied Magnetics Corporation         Manufacturing Equipment     Jul-97        4,152,810                    85.33%  60       FP
Applied Magnetics Corporation         Wafer Fabrication Equipment Dec 97 -      7,975,841                            60-63    FP
                                                                    Jan 98 
Archer Daniels Midland Company   62   Rail Tank Cars              Jan-98           42,875                            6        OP
Atmel Corporation                     Semiconductor Manufacturing Jan-98        4,114,596                            96       FP
                                        Equipment                 
Avon Products, Inc.                   Office Automation           Jan-98           29,415                            17       FP
Blue Star Line Ltd.              61   Intermodal Containers       Jan-98        3,573,462                            60       OL
Burlington Northern Railroad     63   GE Locomotives              Dec-96        5,010,960                            13       OL
     Company                 
Cargill, Incorporated            64   Covered Hopper Railcars     Jan-97        6,534,000                            72       FP
Certified Grocers of                  Forklifts                   Jul-98          810,792                            60       OL
     California, Ltd.
Chrysler Corporation                  Material Handling Equipment Oct 96 -        982,293                            60       OL/HP
                                                                    Dec 96 
Columbus & Greenville Railway    64   Boxcars                     Jan-97          667,000                            16       FP
     Company                  
Consolidated Diesel Company           Copiers                     Jan-98           15,697                            10-13    FP
Consolidated Diesel Company           Machine Tools               Jan-98           15,161                            14       OL
Consolidated Rail Corporation         Intermodal Containers &     Sep 97 -      3,314,000                            84       HP
                                        Chassis                     Nov 97 
Costain Coal, Inc.                    Euclid Hual Trucks          Jan-98          805,181                    58.22%  12       OL
Danskin, Inc.                         Textile Manufacturing       Jan-98          255,718                            6-15     OL
                                        Equipment           
Dole Fresh Fruit Company         61   Intermodal Containers       Jan-98        3,876,170                            44       OL
Empire Blue Cross and Blue            Office Furniture and        Jan-98          696,766                            27       FP
     Shield                             Fixtures           
Exel Logistics, Inc.                  Tractors and Semi-Trailers  Jan-98          133,947                            3        OL
Far Eastern Shipping Company     61   Intermodal Containers       Jan-98        2,257,299                            75       HP
Farmland Hydro, L.P.             62   Rail Tank Cars              Jan-98          370,808                            16       OL
General Electric Company /            Blow Molding Machine        Jan-97          906,370                            24       OL
     General Electric Plastics
General Electric Company /            Trackmobile Railcar Mover   Mar-97          166,602                            60       OL
     General Electric Plastics
General Electric Company /            Spectrometers               Mar-97          306,545                            60       FP
     General Electric Plastics 
General Motors Corporation -          Forklifts                   Jan-98          352,520                            17       OL
     GM Powertrain Group     
Grand Trunk Western Railroad     65   Remanufactured High Cube    Jan-98        3,342,139                    56.64%  24       OL
     Incorporated                       Boxcars                
Great Salt Lake Minerals         62   Rail Tank Cars              Jan-98          481,261                            7        OL
     Corporation         
Hallsmith-Sysco Food Services,        Volvo Tractors              Apr-98          823,455                            84       FP
     a division of Sysco 
     Corporation               
Hallsmith-Sysco Food Services,        Trailmobile Refrigerated    May-98        1,209,055                            96       FP
     a division of Sysco                Trailers               
     Corporation               
Hambros Vendor Leasing Limited   66   Vehicles & Sanitation       Sep-97        5,381,076                    78.56%  30-66    FP
                                        Trucks              
Hartz Foods, Inc.                     Refrigeration Units         Jan-98           18,422                            9        FP
Hastings Leasing Limited         67   Medical Equipment           Oct-97        8,014,488                    91.66%  25-81    FP
Hastings Leasing Limited         67   Trucks & Miscellaneous      Oct-97       28,811,289                    88.85%  29-113   FP
Henry General Hospital                Hematology Analyzers &      Jan-98          185,700                            41       FP
                                        Upgrades             
Hughes Network Systems, Inc.          Remote Communication Device Jan-98           97,237                    54.61%  6-9      OL
Hyplains Beef,  L.C.                  Racking and Conveyor        Jan-98        1,364,007                            10       OL
                                        Equipment          
IBM Corporation                       Stereolithography Apparatus Jan-98           30,026                            7        OL
Illinois Central Railroad        64   Boxcars                     Jan-97        1,610,000                            36       FP
     Company              
International Paper Company           Trackmobile Railcar Mover   Jan-97          248,952                            60       OL
International Paper Company           CAT Wheel Loaders           Jan 97 -        417,700                            48       HP
                                                                    Feb 97 
International Paper Company           Knuckle Boom Loader         Feb-97          213,095                            72       FP
International Paper Company           Hydraulic Excavator, Lift   Jun 97 -        539,438                            60       OL
                                        Trucks, Loader              Jul 97 
International Paper Company           Knuckle Boom/ Wheel Loaders Sep 97 -        926,964                    2.84%   48-60    OL/HP
                                                                    Oct 97 
International Paper Company      68   Rail Log Cars               Oct-97        5,624,724                            51       OL
International Rectifier               Wafer Fabrication Equipment Jan-98          589,829                    8.45%   1-9      OL
     Corporation        
ITO Corporation                       Forklifts                   Jan-98          240,488                            15-31    FP
Kawasaki Kisen Kaisha,           61   Intermodal Containers       Jan-98        2,614,728                            52       OL
     Ltd. (K-Line)     
Koppers Industries, Inc.         62   Rail Tank Car               Jan-98            5,400                            6        OL
Kraft Foods, Inc.                     Steelcase Office Furniture  Nov 97 -      1,154,439                            84       FP
                                        & Fixtures                  Jan 98 
Kraft Foods, Inc.                     Telephone System            Nov 97 -        549,980                            60       FP
                                                                    Jan 98 
Louisiana Workers'                    Office Automation           Jan-98            2,199                            1        OL
     Compensation Corporation 
Maxtor Corporation               69   Electronic Test Equipment   Sep-97          533,698                            36       HP
Maxtor Corporation               69   Computer Equipment          Jan-98          241,310                            6        OL
McDonnell Douglas Helicopter          Lift Trucks                 Apr-98           96,510                            60       OL
     Company                 
Minteq International, Inc.            Geotronics Laser Measuring  Jan 97 -        689,350                            36       HP
                                        Machine                     Mar 97 
Minteq International, Inc.            Geotronics Laser Measuring  Sep 97 -      1,019,585                            36       HP
                                        Machines                    Jan 98 
Mobil Business Resources         70   Helicopters                 Nov-96        1,650,000                            36       OL
     Corporation         
Mobil Business Resources         70   Helicopter                  Oct-97        1,160,000                            36       OL
     Corporation         
Mobil Oil Corporation                 Wheel Loader                Jan-98           92,773                            36       OL
National Steel Corporation            CAT Dozer Tractors          Apr-97          734,730                    75.36%  60       HP
National Steel Corporation            CAT Dozer, Loaders          Jul-97        3,666,101                            60       OL
National Steel Corporation            Motor Grader & Front End    Oct-97        1,747,828                            60       HP
                                        Loader                 
National Steel Corporation            Crane & Wheel Loader        Jan-98          861,344                            48       OL
National Steel Corporation            Omega Forklift & Loaders    Apr-98        1,286,210                            60       HP
Nippon Yusen Kaisha  Ltd.        61   Intermodal Containers       Jan-98        8,715,760                            96       FP
     (N.Y.K.Line)         
North American Chemical Company       Mini Mag - Flow Meters      Jan-98           18,809                            5        FP
NVR, Inc.                             Tee-Lok Roller Gantry       Aug 97 -        591,046                            84       FP
                                        Systems                     Oct 97 
NVR, Inc.                             Home Manufacturing          Nov-97          137,921                            84       FP
                                        Equipment        
Omnicom Group, Inc.              71   Office Furniture            Jul-97           20,292                            60       FP
Omnicom Group, Inc.              71   Office Furniture            Jan-98        1,007,401                            60       FP
PCS Phosphate Company, Inc.      62   Rail Tank Cars              Jan-98          175,000                            25       OL
Pentagon Systems, Inc.                SMT-1200C Surface Mount     Jan-98          106,842                            35       FP
                                        Placement System      
Pioneer Chlor Alkali Company     62   Rail Tank Cars              Jan-98        1,614,144                            15-60    OL/HP
PlasmaQuest , Inc.                    Office Automation           Jan-98            6,406                            8        FP
PVS Technologies, Inc.           62   Rail Tank Cars              Jan-98          672,388                            6-24     OL
Ralphs Grocery Company                Forklifts                   Jan-98          275,385                    8.49%   2-17     FP
Riceland Foods, Inc.             62   Rail Tank Cars              Jan-98          130,032                            4        OL
Rose Acres Farms, Inc.                Food Processing Equipment   Jan-98          185,461                    62.96%  16       OL
Sarif, Inc.                           Wafer Fabrication           Jan-98          224,702                            23       FP
                                        Equipment       
Seaboard Commodity Trading       62   Rail Tank Cars              Jan-98          525,618                            6-22     OL
     Company               
Sebastiani Vineyards, Inc.            Wine Barrels                Jan-98          872,061                            36-60    HP/FP
Sebastiani Vineyards, Inc.            Wine Barrels                Jul-98          201,470                            36       HP
Sematec, Inc.                         Manufacturing Equipment     Oct-97        1,303,600                            36       HP
Sematec, Inc.                         Manufacturing Equipment     Jul-98        2,400,000                            36       OL
Sierra Pacific Power Company     68   Coal Hopper Rail Cars       Dec-97        2,600,000                            67       OL
     & Idaho Power Company   
Signature Flight Support              Fuel Trucks                 Apr-97          760,000                    89.01%  132      FP
     Corporation         
Signature Flight Support              Fuel Trucks                 Jan-98          620,000                    72.64%  96-132   FP
     Corporation         
Signature Flight Support              Fuel Truck & Deicer         Apr-98          518,997                    78.24%  96       FP
     Corporation         
Signature Flight Support              Isuzu Trucks                Jul-98          722,275                    78.53%  60       HP
     Corporation         
Sisseton Milbank Railroad,       64   Covered Hopper Railcars     Jan-97          330,000                            36       FP
     Inc.                  
Smitty's Super Valu, Inc.             Furniture and Fixtures      Jan-98          451,861                            3        OL
Sony Pictures  Entertainment,         Sony Monitors               Mar-98        1,278,900                            36       OL
     Inc.                     
Southern Illinois Railcar Co.    64   Covered Hopper Railcars     Jan-97          462,000                            48       FP
Southern Pacific                      Locomotives                 Jan-98          795,316                            9        OL
     Transportation Company   
Southwest Health Centre, Inc.         Siemens Mammographic        Jan-98           13,000                            1        OL
                                        System             
Stater Brothers Markets               Furniture and Fixtures      Jan-98           13,643                            2        FP
Tarmac America, Inc.  /          72   CAT / Michigan Loaders      Apr-97          350,000                            18       OL
     Tarmac Mid Atlantic, Inc 
Tarmac Minerals. Inc.            72   Steel Deck Barges           Jan-98        7,335,250                            60       OL
TASC, Inc.                            Office Automation           Oct 97 -      1,169,828                            36       HP/FP
                                                                    Jan 98 
TASC, Inc.                            Office Automation           Apr-98        1,146,296                            36       HP
TASC, Inc.                            Office Automation           Jul-98          848,065                            36       FP
Thompson Pipe & Steel Company         Phone System, Furniture     Jan-98           31,918                            1        OL
                                        and Fixtures          
Thomson Saginaw Ball Screw            Machine Tools               Jan-98          488,918                            16       OL
     Company               
Triad International                   Aircraft Access and Ground  Jan-98          954,125                    36.77%  3        OL
     Maintenance Corporation            Support Equipment        
Ultrabeam Lithography, Inc.      73   Technical Instrument        Dec-97          269,888                            48       HP
                                        Confocal Metrology System
Ultrabeam Lithography, Inc.      73   Manufacturing Equipment     May-98          167,220                            48       HP
Ultrabeam Lithography, Inc.      73   Manufacturing Equipment     Aug-98          220,887                            48       HP
United States Surgical                Assorted Manufacturing      Jul-98        3,747,760                            120      FP
     Corporation                        Equipment            
Wagner College                        Desktop PCs                 Jan-98           91,951                            7-9      OL
Wayne Farms,  a division of           Food Processing Equipment   Jan-98           64,686                            12       OL
     Continental Grain Company 
Wisconsin Packing Company, Inc.       Forklifts                   Jan-98           91,850                            25       HP
First Union Rail Corporation     62,  Rail Tank Cars               N/A            478,836                            N/A      N/A
                                 74  
Xerox Corporation                     FPD Inspection System       Jan-98        3,521,046                            60       HP
                                                                            -------------- ---------------
                      ATEL Capital Equipment Fund VII total:                 $177,566,094              $0                     
                                                                            ============== ===============
                                                                                                                              
                                         TOTAL OF ALL FUNDS:                 $844,509,432     $20,825,225
                                                                            ============== ===============
</TABLE>
                                      A-34
<PAGE>

                   TABLE V ACQUISITION OF EQUIPMENT FOOTNOTES

     (1) In many  cases,  a Lease  transaction  is funded  over a period of time
according  to the  Lessee's  requirements.  Therefore  "Commencement  Date  (s)"
expressed  as a  range  represents  multiple  commencement  dates  occurring  or
anticipated under the same Lease line.

     (2)  "Acquisition  Cost" includes  either amounts  committed to Lessees for
funding by the  program,  or the actual  Equipment  acquisition  cost,  less any
Acquisition Fees. All figures are rounded.

     (3)  "Acquisition  Fees"  include  fees  accrued  by the  program as of the
Preparation  Date.  For  partially  funded Lease lines,  additional  fees may be
expended by the program for future  acquisitions  made  pursuant to the terms of
the Lease.

     (4)  "Percent  Leverage"  represents  the  percent  ratio  of the  original
principal  amount  of the  debt  acquired  or  assumed  by the  program,  to the
Acquisition  Cost of the Equipment.  The Equipment may be  "leveraged"  (where a
portion of the Equipment  Acquisition Cost is financed using  non-recourse  debt
financing) at the time of, or subsequent to, the acquisition of the Equipment by
the  program.  Therefore,  actual  leverage  ratios  may be more  or  less  than
indicated due to the timing of the  acquisition  of the Equipment in relation to
the amortization of the principal amounts of the debt.

     (5) "Lease Term" is expressed in terms of months, although the actual Lease
Term may be expressed as monthly, quarterly, semiannual or annual.

     (6) A designation of "FP" indicates that the aggregate rents to be received
during  the  Lease  Term  exceed  or are  equal to the  Acquisition  Cost of the
Equipment.  A designation  of "OL"  indicates  that the aggregate  rentals to be
received during the Lease Term are less than the Acquisition Cost.

     (7) The interest in this transaction is held 1/3 by ATEL Cash  Distribution
Fund and 2/3 by ATEL Cash Distribution Fund II.

     (8) Guaranteed by both Fingerhut Corporation and by Primerica  Corporation,
as successor in interest to American Can Company.

     (9) In March 1992,  Financial News Network ("FNN"),  a lessee of ATEL Lease
Income Fund, ATEL Cash  Distribution  Fund and ATEL Cash  Distribution  Fund II,
filed for protection  under Chapter 11 of the U.S.  Bankruptcy  Act.  Subsequent
competitive  bidding between CNBC (a division of General Electric Company) and a
partnership  consisting of Dow Jones, Inc. and Group W (Westinghouse)  developed
for the purchase of FNN assets. This bidding resulted in the sale of certain FNN
assets,  principally its  subscribers,  to CNBC for $145 million in cash and the
assumption  of $9.3  million in  liabilities.  The  proceeds  from the sale were
distributed  beginning in June 1992  resulting in the recovery of  substantially
all of the programs' remaining investment in the Equipment.

     (10) A 34.41%  interest  in this  transaction  was  acquired  by ATEL  Cash
Distribution  Fund. The remaining 65.59% was acquired by ATEL Cash  Distribution
Fund II.

     (11) Guaranteed by Fingerhut Corporation.

     (12) Credit  support  provided by an  Investment  Agreement  of Nord Kaolin
Corporation and of Nord Resources Corporation.

                                      A-35
<PAGE>

     (13) These  transactions are all leveraged under one non-recourse note with
Sogelease Corporation.

     (14)  Leased  to  Teledyne  Wah  Chang  Albany,   a  division  of  Teledyne
Industries, Inc.

     (15)  ATEL  Cash  Distribution  Fund  holds  a  one-half  interest  in this
transaction,  the  remaining  half  interest  was  acquired  by  ATEL  Financial
Corporation on identical terms.

     (16) Guaranteed by Addington Resources.

     (17) Guaranteed by American President Companies.

     (18) A 97.75%  interest in  Equipment  Schedule  No. 2 was acquired by ATEL
Cash  Distribution  Fund II. The remaining  2.25%  interest in that Schedule was
acquired by ATEL Lease Income Fund.

     (19)  Lease   originally  with  Hammermill  Paper  Company  as  lessee  and
subsequently assumed by International Paper Company.

     (20) Lease  assigned  to and assumed by Liggett & Meyers  Tobacco  Company,
with recourse retained against the original Lessee.

     (21) On January 1, 1991 Midway Airlines,  Inc., the lessee of the DC9-32 in
which ATEL Cash  Distribution  Fund II and ATEL Cash Distribution Fund III owned
interests,  suspended  payments on its debt and  aircraft  leases.  On March 26,
1991,  the Lessee filed for protection  under Chapter 11 of the U.S.  Bankruptcy
Act. On  September  4, 1991,  the  non-recourse  lender,  John  Hancock  Leasing
Corporation,  exercised  its  right  to  foreclose  on  the  aircraft.  As  this
investment  represents a relatively  small portion of the programs' total equity
and anticipated  cash flow, the General Partners do not believe that the adverse
developments  with  respect to this  investment  will have a material  effect on
their  respective  operations,  cash flows or rates of cash  distributions.  The
beneficial   interest  in  the  Equipment  was  held  two-thirds  by  ATEL  Cash
Distribution Fund II and one-third by ATEL Cash Distribution Fund III.

     (22) Equipment  operated by the Eureka  Company,  a division of Lessee,  an
indirect subsidiary of AB Electrolux, Sweden.

     (23) Guaranteed by Reynolds and Reynolds.

     (24) On December 31,  1997,  this lessee  requested a  moratorium  on lease
payments  from January  through  March 1998.  ATEL Cash  Distribution  Fund V is
currently negotiating a settlement with the lessee.

     (25) On October 13,  1993 the lessee,  Rocky  Mountain  Helicopters,  Inc.,
filed for protection  under Chapter 11 of the U. S. Bankruptcy Act. The aircraft
which was the subject of the lease was delivered to ATEL Cash  Distribution Fund
II,  prior  to the  petition  for  bankruptcy  and was sold by the  lessor.  The
proceeds of the sale satisfied in full the non-recourse  debt obligation owed to
USX Credit Corporation and the excess was applied to mitigate the lessor's claim
against the lessee.  The lessor  subsequently filed and was allowed an unsecured
claim in the amount of $776,542.  Through June 30, 1997, the lessor has received
$310,617 on this claim,  representing  40% of the allowed claim.  The sum of the
proceeds from the rents,  sale of the aircraft and the claim filed in bankruptcy
has resulted in a recovery  exceeding  the lessor's  original  investment in the
aircraft.

                                      A-36
<PAGE>

     (26) Assigned to and assumed by various  subsidiaries  of Lessee.  Recourse
retained  against  Lessee.  Lessee  subsequently  changed its name to SMC Mining
Corporation.

     (27) Guaranteed by Continental Medical Systems, Inc.

     (28) An indirect subsidiary and joint venture of Kaiser Aluminum & Chemical
Corporation and Norsk Hydro.

     (29) Guaranteed by United States Surgical Corporation.

     (30)   Acquisition   Cost  represents   one-half  of  the  total  Equipment
Acquisition  Cost.  Title to this Equipment is held in an equipment  trust where
one-half  of the  beneficial  interest  in the  Equipment  is owned by ATEL Cash
Distribution Fund III and one-half by ATEL Cash Distribution Fund IV.

     (31)  On  January  10,  1996,  Barney's,   Inc.,  a  lessee  of  ATEL  Cash
Distribution Fund III, ATEL Cash Distribution Fund IV and ATEL Cash Distribution
Fund V filed for  protection  under Chapter 11 of the U. S.  Bankruptcy  Act. In
July of 1996,  the lessors sold their  unsecured  claim in the bankruptcy for an
amount  equal  to  approximately  73%  of  the  unsecured  claim,  which,  after
satisfaction of the non-recourse loan due to the CIT Group/Equipment  Financing,
Inc.  (and taking  into  account all prior  rents  received,  security  deposits
retained and loan  proceeds  previously  received),  resulted in proceeds to the
lessors in excess of their original investments in the equipment.

     (32) Guaranteed by Nord Resources  Corporation.  Subsequently the lease was
assigned without  recourse to DBK Minerals,  Inc. with a guarantee of Dry Branch
Kaolin Company.

     (33)  Lessee  indicated  is the parent of  Central  Ohio Coal  Company  and
Southern Ohio Coal Company.  The Lease  transaction  represents  three  distinct
leases with subsidiary companies. Credit support is provided by the parent, Ohio
Power Company by an Inducement Letter.

     (34) The Lessee name is indicated for convenience  only. The actual Lessees
are Paramount Coal Corporation,  Clinchfield Coal Company,  Heartland Resources,
Inc.,  Motivation Coal Company,  Elkay Mining Company,  Holston Mining, Inc. and
Meadow River Coal Company,  all subsidiaries of The Pittston Company.  The Lease
is guaranteed by The Pittston Company.

     (35) Title to the Equipment and Lease  transaction  is held by an equipment
trust.  A divisible 1/2 beneficial  interest in the equipment  trust is owned by
the program.  The remaining  divisible 1/2 beneficial  interest in the equipment
trust is owned by a non-affiliate.

     (36) Guaranteed by Quaker State  Corporation.  This lease was  subsequently
assigned to Costain  Coal  Company on a recourse  basis.  In 1996,  the assignee
defaulted on a lease payment,  which default was subsequently  cured. The lessor
is currently negotiating a settlement with the assignee, lessee and guarantor.

     (37) Lessee is a partnership  formed by United States Steel Corporation and
Kobe Steel Corporation.

     (38) Title to the Equipment and Lease  transaction  is held by an equipment
trust. Partnership owns a 17.3199% beneficial interest in the equipment trust.

     (39)  Subject  to  a   remarketing   agreement   with   General   Motors  -
Electro-Motive division.

     (40) Guaranteed by The Pittston Company.

                                      A-37
<PAGE>

     (41) Guaranteed by CBI Industries, Inc. Subsequently guaranteed by Praxair,
Inc.

     (42) Guaranteed by Peabody Holding Company, Inc.

     (43) Tarmac America,  Inc.; Tarmac Mid-Atlantic,  Inc.; and Tarmac Florida,
Inc.  are  co-lessees.  Guaranteed  by Tarmac PLC, a British  Limited  Liability
Company.


     (44) The equipment is subject to operating leases and managed by the lessee
under a pooled  management  arrangement.  Rentals are variable.  Average monthly
lease payments are estimated  based on the minimum lease payments to be received
on similar Equipment owned by a prior program.

     (45) Lessee has  limited  option to  terminate  at 36 months and 60 months,
subject to a remarketing agreement with Bond International (US), Inc.

     (46) A division of Waban, Inc.

     (47) Equipment is subject to a full payout  management  agreement with MRXX
Corporation.

     (48) Guaranteed by Mineral Technologies, Inc.

     (49) Guaranteed by Mobil Corporation.

     (50)  Guaranteed  by  Omnicom  Group,   Inc.  Actual  lessees  are  various
subsidiaries of Omnicom Group Inc.: DDB Needham Worldwide  Communications  Group
Inc.;  Griffin Bacal Inc.; DDB Needham Chicago Inc.; DDB Needham  Dallas,  Inc.;
PGC Advertising,  Inc.; The Focus Agency,  LP.; Elgin DDB Inc.; Group Management
Services; and TLP, Inc.

     (51) This lessee filed for protection under Chapter 11 of the United States
Bankruptcy  Code on January 16,  1998.  As this lease has been  leveraged  using
non-recourse  secured debt, the General Partner does not feel that the effect of
the bankruptcy  will have a material  adverse impact on the  performance of ATEL
Cash Distribution Fund V.

     (52) The lessee name  represents  the  guarantor  of the lease  obligations
(which has since  changed  its name to the  Morton's  Restaurant  Group,  Inc.).
Actual lessees are various subsidiaries of the guarantor.

     (53) This lessee  defaulted  on a portion of its lease  payments in October
1997.  ATEL  Cash  Distribution  Fund  V is  currently  negotiating  a  possible
settlement with the lessee.

     (54) Guaranteed by Smith's Food & Drug Centers.

     (55) Subject to a  remarketing/residual  sharing agreement with AT&T Credit
Corporation.

     (56) Guaranteed by Adolf Coors Company.

     (57) The end-users of the Equipment  are various  governmental  entities in
the United Kingdom.

     (58) Guaranteed by NEC Corporation.

                                      A-38
<PAGE>

     (59) Guaranteed by A.T. Massey Coal Company, Inc.

     (60) Guaranteed by Perdue Farms, Inc.

     (61) Subject to a management agreement with Transamerica Leasing, Inc.

     (62) Subject to a management agreement with First Union Rail Corporation.

     (63) Title to the  Equipment  and Lease is held by an  equipment  trust.  A
divided  beneficial  interest  in  the  trust  representing  24  of  34  of  the
diesel-electric  locomotives  is  owned by the  program.  A  divided  beneficial
interest in the trust representing the remaining 10 diesel-electric  locomotives
has been assigned to a  non-affiliate,  however,  such interest  continues to be
managed by an affiliate of the program.

     (64) The equipment is subject to a full payout  management  agreement  with
MRXX Corporation.

     (65)  Title to the  equipment  is held in a  trust.  A  divided  beneficial
interest in the trust representing 130 of 291 boxcars is owned by the program. A
divided interest in the trust  representing the remaining 161 boxcars  continues
to be  owned  by the  seller  of  the  program's  interest,  which  seller  is a
non-affiliate.

     (66)  The   underlying   leases  in  this   transaction   are  to   various
municipalities in the United Kingdom. The underlying leases are being managed by
Hambros Vendor Finance Limited and include a residual sharing agreement.

     (67)  The   underlying   leases  in  this   transaction   are  to   various
municipalities in the United Kingdom. The underlying leases are being managed by
Hastings Leasing Limited and include a residual sharing agreement.

     (68) Title to the  equipment  is held in a trust.  The  program  has a 100%
undivided beneficial interest in the trust.

     (69) Guaranteed by Hyundai Electronics Industries Co., Ltd.

     (70) Guaranteed by Mobil Corporation.

     (71)  Guaranteed  by  Omnicom  Group,   Inc.  Actual  lessees  are  various
subsidiaries  of Omnicom Group Inc.:  The DDB Needham  Worldwide  Communications
Group Inc.;  Griffin Bacal Inc.; DDB Needham Chicago,  Inc.; DDB Needham Dallas,
Inc.;  PGC  Advertising,  Inc.;  The Focus Agency,  LP.;  Elgin DDB Inc.;  Group
Management Services and TLP, Inc.

     (72) Tarmac America,  Inc.; Tarmac Mid-Atlantic,  Inc.; and Tarmac Florida,
Inc.  are  co-lessees.  Guaranteed  by Tarmac PLC, a British  Limited  Liability
Company.

     (73) Co-lessee  under the lease with  Ultratech  Stepper,  Inc.,  UltraBeam
Lithography, Inc. and Verdant Technologies, Inc. as additional co-lessees.

     (74) The lessee name  represents  the manager of the rail tank cars.  These
rail tank cars are not currently subject to a fixed term lease.

                                      A-39
<PAGE>

                                    TABLE VI

                         SALES OR DISPOSALS OF EQUIPMENT

     ATEL Lease Income Fund, ATEL Cash Distribution Fund, ATEL Cash Distribution
Fund II, ATEL Cash Distribution Fund III, ATEL Cash  Disitribution Fund IV, ATEL
Cash  Distribution  Fund V,  ATEL  Cash  Distribution  Fund VI and ATEL  Capital
Equipment Fund VII have disposed of equipment in their portfolios as of June 30,
1998.  Set forth below is a summary of equipment  sales and  dispositions  as of
such date. Sales were for  consideration  unless  otherwise noted.  Interim rent
(rent  paid  prior to formal  commencement  of a lease),  hold-over  rent  (rent
received  after  termination  of the  initial  lease  term,  but  before  formal
extension or disposition)  and extension rent (rent paid after formal  extension
of a lease)  are  included  in the  "Excess  of  Rents  Over  Expenses"  column.
"Equipment Acquisition Price" includes acquisition fees.  Dispositions are shown
on a per asset basis.

<TABLE>
<CAPTION>
                                                                                                                   Excess of
                                                                              Equipment                           Rents Over
                                                                 Acquisition  Acquisition            Sale         Expenses
Lessee                              Type of Equipment            Date (1)      Price (2)  Sale Date Price (3)        (4)       Notes

ATEL LEASE INCOME FUND 1985-A
<S>                                 <C>                          <C>          <C>           <C>       <C>          <C>           <C>
Colour Graphics                     Computer system              Feb-87           $34,500   Oct-93        $2,525       $44,483
Colour Graphics                     Office Information Systems   Jul-88            45,000   Jan-94        11,200        55,777
Educational Loan Services, Inc.     Office Information Systems   May-86            33,050   Oct-90           900        31,350
Federal Home Loan Bank of New York  Office Information Systems   May-86            39,127   Apr-90           870        36,800
Financial News Network, Inc.        Studio and Broadcasting      Feb-90            14,777   Jun-92        11,493         2,027    5
Gorham, Inc.                        Office Information Systems   May-86            38,799   Mar-90         2,300        45,180
Long Lake Staionary, Inc.           Binding Equipment            May-87             4,023   Jul-92             1         6,242
Philip Morris, U.S.A.               Office Information Systems   May-86            13,297   Jan-89         3,600        12,400
Philip Morris, U.S.A.               Office Information Systems   May-86            21,584   Aug-92             -        22,050
Polaroid Corporation                Office Information Systems   May-86            48,028   Jan-90         4,500        45,000
Rohr Industries, Inc.               Motor Vehicle                Jan-89            12,451   Apr-95         6,400        17,843
Rohr Industries, Inc.               Motor Vehicle                Apr-89             8,376   Jul-92         4,723         8,558
                                                                             -------------         -------------- -------------
                                                                                 $313,012                $48,512      $327,710
                                                                             =============         ============== =============
</TABLE>
                                      A-40
<PAGE>

<TABLE>
<CAPTION>
                                                                                                                   Excess of
                                                                              Equipment                           Rents Over
                                                                 Acquisition  Acquisition            Sale         Expenses
Lessee                              Type of Equipment            Date (1)      Price (2)  Sale Date Price (3)        (4)       Notes

ATEL CASH DISTRIBUTION FUND
<S>                                 <C>                          <C>          <C>           <C>       <C>          <C>           <C>
Acushnet Company                    Office Information Systems   Jan-87          $140,287   Dec-91        $4,545      $156,000
Alachua General Hospital            MRI Scanner                  Jan-89           641,593   Jan-95             1       699,453
Alachua General Hospital            Tractor                      Jan-89            15,327   Sep-92         9,000        15,900    6
American Motors Corporation         Lift Trucks                  Oct-87           217,066   Jun-97        57,000       229,029
American Motors Corporation         Lift Trucks                  Oct-87           109,751   Mar-93        31,800       141,636
American Motors Corporation         Lift Trucks                  Oct-87            55,579   Apr-93        15,956        71,727
American Motors Corporation         Lift Truck                   Oct-87            34,494   May-89        30,818        10,117
American Motors Corporation         Lift Trucks                  Oct-87            25,754   Sep-92         6,200        31,306
American Motors Corporation         Lift Trucks                  Oct-87            15,201   Feb-94         4,500        22,886
American Motors Corporation         Lift Trucks                  Oct-87            12,877   Jan-93         3,200        15,863
American Motors Corporation         Hoist Mill Truck             Dec-87           104,834   Mar-93        18,000       131,164
American Motors Corporation         Lift Truck                   Dec-87            29,709   Jun-97             -        21,189
American Motors Corporation         Lift Trucks                  Jan-88            45,385   Dec-92         7,000        63,268
Anaheim Memorial Hospital           CAT Scanner                  Jan-88           814,696   Apr-93        88,000       839,938
Campbell Soup Company               Reach / Walkie Trucks        Mar-87            79,248   Sep-93         2,700        89,216
Campbell Soup Company               Lift Truck Battery Chargers  Mar-87            37,127   Aug-93        12,435        38,812
Campbell Soup Company               Lift Truck                   Mar-87            34,790   Jun-90        30,000        19,575
Campbell Soup Company               Lift Truck                   Mar-87            25,668   Jul-94         5,022        31,663
Campbell Soup Company               Lift Truck                   Mar-87            19,763   Oct-95         2,000        27,283
Campbell Soup Company               Lift Truck                   Mar-87            19,491   May-95             -        25,976
Campbell Soup Company               Batteries / Chargers         Mar-87            12,417   Dec-93         4,250        13,977
Campbell Soup Company               Lift Trucks                  Mar-87            10,584   Dec-97        11,000        36,430
Campbell Soup Company               Lift Truck                   Apr-87            24,550   Apr-91        17,764        17,765
Campbell Soup Company               Lift Truck                   Apr-87             4,997   Apr-91         3,616         3,616
Campbell Soup Company               Lift Truck                   Apr-87            63,153   Dec-97        20,873        71,540
Color Graphics Corporation          645-MSS Output Scanning      Dec-86           232,533   Mar-94        20,000       303,307
                                        Station             
Enron Corp.                         Office Information Systems   Jun-88            88,364   Jun-91        17,857        90,326
Enron Corp.                         Office Information Systems   Jun-88            87,399   Feb-92        10,650        85,140
Enron Corp.                         Office Information Systems   Jun-88            79,726   Mar-92         8,000        76,968
Financial News Network, Inc.        Studio and Broadcasting      Mar-90           935,918   Jun-92       747,617       123,050    7
GAF Corporation                     Lift Trucks                  Oct-87           459,660   Nov-92        94,575       457,460
GAF Corporation                     Joy Filler                   Mar-88           535,257   Dec-97        44,525       822,498
Galardi Group                       Restaurant FF&E              Jun-94           247,000   Oct-96       147,148       173,042
Hartford Insurance Group            Communication                Jul-88            93,252   Jul-93         3,618       106,785
Imperial Plastics, Inc.             Injection Molding            Jun-87           137,247   Apr-94        67,000       147,445
Imperial Plastics, Inc.             Injection Molding            Dec-87           150,879   Apr-94        64,000       170,530
Imperial Plastics, Inc.             Injection Molding            Jan-88           194,944   Apr-94        77,000       229,797
Imperial Plastics, Inc.             Air Compressor Temperature   Mar-88            66,883   Apr-94        17,000        71,949
                                        Control Unit           
Martin Marietta Corporation         Communication                Apr-88           296,550   Aug-93           500       277,184
Martin Marietta Corporation         Communication                Apr-88           148,275   Jun-92        16,000       138,592
Nord Kaolin Company                 Hydraulic Excavator          May-87           163,490   Mar-93        45,000       184,567
Nord Kaolin Company                 Komatsu Crawler Tractor      Aug-87            50,693   Jul-96        12,000        36,492
Nord Kaolin Company                 Lift Trucks                  Sep-87            15,633   Oct-95         3,500        27,386
Nord Kaolin Company                 Magnetic Separator           Oct-87           160,669   Dec-96        25,000       150,087
Nord Kaolin Company                 Industrial Truck             Oct-89            13,745   Oct-97         3,000        20,856
Polaroid Corporation                Office Information Systems   Mar-87            37,819   Apr-92         2,475        41,005
Putnam County Hospital              Spectrum Analyzer            May-88           114,950   May-94         2,000       158,780
Rohr Industries, Inc.               Motor Vehicle                Jul-87            14,790   Feb-93         4,175        17,080
Rohr Industries, Inc.               Motor Vehicle                Jan-88             9,346   Aug-96         3,232        11,495
Rohr Industries, Inc.               Motor Vehicle                Feb-88            12,060   Aug-96         1,502        14,896
Rohr Industries, Inc.               Motor Vehicle                Mar-88            16,421   Feb-93         4,575        19,073
Rohr Industries, Inc.               Motor Vehicle                Apr-88            16,183   Aug-93         3,977        18,986
Rohr Industries, Inc.               Motor Vehicle                Apr-88            16,052   Feb-96         5,000        21,252
Rohr Industries, Inc.               Motor Vehicle                Apr-88            14,630   Apr-91         5,725        13,106
Rohr Industries, Inc.               Motor Vehicle                Apr-88            14,028   Dec-95         4,630        20,629
Rohr Industries, Inc.               Motor Vehicle                Apr-88            13,330   Oct-92         2,530        15,081
Rohr Industries, Inc.               Motor Vehicle                Apr-88            12,932   Apr-91         4,380        11,585
Rohr Industries, Inc.               Motor Vehicle                Apr-88            12,060   Apr-91         3,498        10,804
Rohr Industries, Inc.               Motor Vehicle                Apr-88            12,060   Apr-91         3,198        10,804
Rohr Industries, Inc.               Motor Vehicle                Apr-88             9,356   Aug-96         3,332        12,647
Rohr Industries, Inc.               Motor Vehicle                May-88            13,981   Sep-95         3,900        20,280
Rohr Industries, Inc.               Motor Vehicle                Jul-88            29,656   Nov-92         7,135        31,553
Rohr Industries, Inc.               Motor Vehicle                Jul-88            25,755   Mar-96         9,000        33,051
Rohr Industries, Inc.               Motor Vehicle                Jul-88            11,566   Jul-91         4,075        10,517
Rohr Industries, Inc.               Motor Vehicle                Jul-88            11,566   Jul-91         4,850        10,517
Rohr Industries, Inc.               Motor Vehicle                Jul-88            11,566   Jul-91         3,890        10,517
Rohr Industries, Inc.               Motor Vehicle                Aug-88            17,829   Nov-96         6,590        23,532
Rohr Industries, Inc.               Motor Vehicle                Aug-88            16,538   May-93         2,622        18,710
Rohr Industries, Inc.               Motor Vehicle                Aug-88            14,662   Oct-93         3,435        16,587
Rohr Industries, Inc.               Motor Vehicle                Oct-89            15,460   Dec-97         2,750        33,297
Teledyne Industries, Inc.           Lift Truck                   Oct-87           160,930   Feb-93        48,000       162,751
Teledyne Industries, Inc.           Lift Truck                   Oct-87           147,345   Nov-92        20,000       149,763
Teledyne Industries, Inc.           Lift Truck                   Oct-87            87,258   Jan-93        19,000        89,166
Teledyne Industries, Inc.           Lift Truck                   Jan-88           147,345   Nov-91        41,000       137,956
Teledyne Industries, Inc.           Lift Truck                   Jan-88            52,250   Apr-91        15,000        47,775
Teledyne Industries, Inc.           Lift Truck                   Jan-88            39,188   Apr-91        10,000        35,832
Teledyne Industries, Inc.           Lift Truck                   Feb-88           173,330   Feb-93        58,000       150,644
Teledyne Industries, Inc.           Lift Truck                   Mar-88            50,160   May-93        11,000        51,896
Teledyne Industries, Inc.           Lift Truck                   Apr-88            55,907   Feb-93        20,000        58,088
Teledyne Industries, Inc.           Lift Truck                   Jul-88           147,345   Oct-92        20,000       134,726
Teledyne Industries, Inc.           Lift Truck                   Aug-88            42,845   Jan-94         9,000        46,240
Teledyne Industries, Inc.           Lift Truck                   Nov-88            38,278   Mar-94        11,000        41,481
Teledyne Industries, Inc.           Lift Truck                   Nov-88            35,530   Jan-94        10,390        36,406
Teledyne Industries, Inc.           Lift Trucks                  Aug-89            32,771   Nov-94         7,896        33,173
Teledyne Industries, Inc.           Lift Truck                   Sep-89            68,970   Oct-92        10,000        67,300
Teledyne Industries, Inc.           Lift Truck                   Nov-89           218,133   Jan-93        44,000       204,009
Teledyne Industries, Inc.           Lift Truck                   Nov-89            58,374   Mar-94        12,500        63,256
Teledyne Industries, Inc.           Lift Truck                   Jan-90            57,487   Mar-94        13,000        55,978
Teledyne Industries, Inc.           Lift Trucks                  Jan-90            57,350   Jan-95        15,000        58,052
Teledyne Industries, Inc.           Lift Trucks                  Jan-90            57,350   Jan-95        15,000        58,052
The Dow Chemical Company            Truck                        Jul-87           111,288   Jun-93        17,500       102,367
The Dow Chemical Company            Trucks                       Jul-87            91,216   Jul-93        26,000        80,985
The Dow Chemical Company            Mack Truck                   Jul-87            25,210   Aug-92         7,500        24,846
Treasure Chest Advertising Company, Printing Press               Mar-87           521,190   Dec-92       311,844       523,950
     Inc.                           
TRW, Inc.                           Communication                Apr-89           257,130   Jul-93         8,400       235,080
TRW, Inc.                           Communication                Apr-89            77,957   May-92        19,800        70,704
United Technologies Corporation     Office Information Systems   Dec-86            77,450   Mar-91        20,000        80,985
Vista Chemical Company              Tank cars                    Mar-88         1,238,250   Dec-93       885,000     1,090,493
WSMP, Inc.                          Vacuum Pkg. Machine          Apr-95           208,788   Dec-97       150,314       129,870
                                                                             -------------         -------------- -------------
                                                                              $11,583,679             $3,768,290   $11,146,398
                                                                             =============         ============== =============
</TABLE>

                                      A-41
<PAGE>

<TABLE>
<CAPTION>
                                                                                                                   Excess of
                                                                              Equipment                           Rents Over
                                                                 Acquisition  Acquisition            Sale         Expenses
Lessee                              Type of Equipment            Date (1)      Price (2)  Sale Date Price (3)        (4)       Notes

ATEL CASH DISTRIBUTION FUND II

<S>                                   <C>                        <C>          <C>           <C>       <C>          <C>           <C>

A.O. Smith Corporation                Office Automation          Dec-90          $723,258   Sep-94       $75,017      $763,652
                                        Equipment       
A.O. Smith Corporation                Lift Truck                 Jul-89            80,717   Jun-94        34,000        81,198
A.O. Smith Corporation                Lift Truck                 Jul-89            26,910   Jun-95         6,250        51,147
A.O. Smith Corporation                Lift Truck                 Jul-89            17,616   Jul-95         1,500        23,346
A.O. Smith Corporation                Personnel Carrier          Jul-89             4,381   Jul-94           500         4,407
A.O. Smith Corporation                Machinery                  Jul-91            26,475   Jan-93        18,360        15,660
Addwest Gold, Inc.                    Portable Jaw Crusher Plant Sep-88         1,153,001   Nov-94       301,000     1,104,720
Alachua General Hospital              MRI Scanner                Jan-89         1,286,256   Jan-95             1     1,683,244
Alachua General Hospital              Tractor                    Jan-89            30,727   Sep-92        18,000        31,801    6
American Express Company              Manufacturing              May-89           289,922   May-93        10,000       293,040
American President Trucking Co., Ltd. Tractors                   Sep-88            60,326   Jan-94        15,500        55,808
American President Trucking Co., Ltd. Tractors                   Sep-88            60,326   Apr-94        16,400        61,125
American President Trucking Co., Ltd. Tractors                   Sep-88            60,326   Apr-94        16,200        61,571
American President Trucking Co., Ltd. Tractors                   Sep-88            60,326   Apr-94        16,400        55,808
American President Trucking Co., Ltd. Tractors                   Sep-88            60,325   Sep-96         7,905        69,903
American President Trucking Co., Ltd. Tractors                   Oct-88            61,513   Dec-93        16,000        52,752
American President Trucking Co., Ltd. Tractors                   Oct-88            61,513   Jan-94        16,000        60,854
American President Trucking Co., Ltd. Tractors                   Oct-88            61,513   Jan-94        16,000        58,674
American President Trucking Co., Ltd. Tractors                   Oct-88            61,513   Apr-94        17,000        59,724
American President Trucking Co., Ltd. Tractors                   Oct-88            60,326   Dec-93        15,000        51,734
American President Trucking Co., Ltd. Tractors                   Oct-88            60,326   Jan-94        15,500        56,701
American President Trucking Co., Ltd. Tractors                   Oct-88            60,326   Apr-94        16,400        58,570
American President Trucking Co., Ltd. Tractors                   Oct-88            60,326   Apr-94        16,400        58,145
American President Trucking Co., Ltd. Tractors                   Oct-88            60,326   Apr-94        19,000        58,595
American President Trucking Co., Ltd. Tractors                   Nov-88            61,513   Jun-93        45,041        47,171
American President Trucking Co., Ltd. Tractors                   Nov-88            61,513   Dec-93        15,926        59,573
American President Trucking Co., Ltd. Tractors                   Nov-88            61,513   Jan-94        16,000        59,369
American President Trucking Co., Ltd. Tractors                   Nov-88            61,513   Jan-94        16,000        56,907
American President Trucking Co., Ltd. Tractors                   Nov-88            61,513   Jun-96         8,500        71,279
American President Trucking Co., Ltd. Tractors                   Nov-88            60,326   May-93        44,172        44,957
American President Trucking Co., Ltd. Tractors                   Nov-88            60,326   Jan-94        17,461        58,772
American President Trucking Co., Ltd. Tractors                   Nov-88            60,326   Jan-94        15,500        55,808
American President Trucking Co., Ltd. Tractors                   Nov-88            60,326   Apr-94        19,000        55,809
American President Trucking Co., Ltd. Tractors                   Nov-88            60,326   Apr-94        16,400        58,570
American President Trucking Co., Ltd. Tractors                   Nov-88            60,326   Jan-96        10,350        69,903
American President Trucking Co., Ltd. Tractors                   Nov-88            60,326   Jan-96        10,282        69,903
American President Trucking Co., Ltd. Tractors                   Nov-88            60,326   Jan-96        10,350        69,903
American President Trucking Co., Ltd. Tractors                   Nov-88            60,326   Jan-96        10,350        69,903
American President Trucking Co., Ltd. Tractors                   Nov-88            60,326   Apr-96        10,565        69,903
American President Trucking Co., Ltd. Tractors                   Nov-88            60,326   May-96        10,390        69,903
American President Trucking Co., Ltd. Tractors                   Nov-88            60,326   Jun-96         9,500        69,903
American President Trucking Co., Ltd. Tractors                   Nov-88            60,326   Jul-96         9,995        69,903
American President Trucking Co., Ltd. Tractors                   Nov-88            60,326   Sep-96         7,905        69,903
American President Trucking Co., Ltd. Tractors                   Nov-88            60,326   Sep-96         7,905        69,903
American President Trucking Co., Ltd. Tractors                   Nov-88            60,326   Sep-96         7,700        69,903
American President Trucking Co., Ltd. Tractors                   Nov-88            60,326   Oct-96         7,905        69,903
American President Trucking Co., Ltd. Tractors                   Nov-88            60,326   Oct-96         7,700        69,903
American President Trucking Co., Ltd. Tractors                   Nov-88            60,326   Oct-96         7,905        69,903
American President Trucking Co., Ltd. Tractors                   Nov-88            60,326   Oct-96         7,905        69,903
American President Trucking Co., Ltd. Tractors                   Nov-88            60,326   Oct-96         7,700        69,903
American President Trucking Co., Ltd. Tractors                   Nov-88            60,326   Nov-96         7,600        69,903
American President Trucking Co., Ltd. Tractors                   Nov-88            60,325   Dec-95        11,522        69,903
American President Trucking Co., Ltd. Tractors                   Dec-88            60,326   Jun-96         9,500        69,903
American President Trucking Co., Ltd. Tractors                   Dec-88            60,326   Aug-96         7,200        69,903
American President Trucking Co., Ltd. Tractors                   Dec-88            60,326   Sep-96         7,700        69,903
American President Trucking Co., Ltd. Tractors                   Dec-88            60,326   Sep-96         7,700        69,903
American President Trucking Co., Ltd. Tractors                   Dec-88            60,326   Sep-96         7,905        69,903
American President Trucking Co., Ltd. Tractors                   Dec-88            60,326   Nov-96         7,600        69,903
American President Trucking Co., Ltd. Tractors                   Dec-88            60,326   Nov-96         7,600        69,903
American President Trucking Co., Ltd. Tractors                   Mar-89            61,513   Feb-96        10,488        71,279
Bistol-Meyers Squib                   Office furniture           Jun-92           324,310   Oct-95        89,834       340,960
Buffalo & Pittsburgh Railroad         Locomotives                Nov-93           108,127   Nov-96       103,500       109,471
Campbell Soup Company                 Lift Trucks                Jul-88           237,980   Oct-95        33,000       304,036
Campbell Soup Company                 Life plus charger          Jul-88            28,056   Aug-95         6,000        34,608
Campbell Soup Company                 Lift Truck                 Jul-88            26,604   Oct-95         2,500        33,597
Chesebrough-Pond's Inc.               Lift Trucks                May-90           109,901   Aug-94        42,000       124,236
Chesebrough-Pond's Inc.               Motorized Lowlift Walk/    May-90            38,303   Aug-94         4,800        43,452
                                        Ride Trucks                                
                                         
Chesebrough-Pond's Inc.               Lift Truck                 May-90            35,029   Aug-94        12,950        39,270
Chesebrough-Pond's Inc.               Lift Truck                 May-90            18,220   Aug-94         6,750        20,502
Chrysler Corporation                  C-Line Industrial Battery  Dec-93             7,202   Oct-97         2,221        85,182
Chrysler Corporation                  Battery Charger            Dec-93             4,798   Oct-97         1,479        56,748
Colour Graphics Corporation           Computer system            Jul-88            35,411   Oct-93         2,475        41,767
Continental Medical Systems, Inc.     Physical therapy           Jun-90            36,676   Jun-95        11,750        45,485
Cooper Tire & Rubber Company          Lift Trucks                Nov-88            33,296   Jan-96        10,600        37,698
Cooper Tire & Rubber Company          Forklifts                  Apr-89 to         87,906   Jul-96        15,760       107,895
                                                                   Jun-89  
Cooper Tire & Rubber Company          Forklifts                  Jan-89 to        482,499   Oct-96        89,200       598,468
                                                                   Mar-89  
Delnor Community Hospital             Medical                    Apr-88            89,081   Dec-91        35,000        87,406
Delnor Community Hospital             Medical                    Jul-88           263,473   Apr-91        45,000       247,586    8
Delnor Community Hospital             Medical                    Jul-88           118,775   Apr-91        17,850       106,513
DJ Aerospace Limited                  Executive Aircraft         Apr-94           810,000   Jan-97       436,309       681,820
Financial News Network, Inc.          Studio and Broadcasting    Feb-90           670,359   Jun-92       534,432       148,788
Fingerhut Corporation                 Pacesetter Saddlebinder    Dec-89           233,268   Dec-94       110,000       258,130
FMC Gold Company                      Material Handling          Apr-90           417,082   Jul-93       155,000       361,891
FMC Gold Company                      Material Handling          Apr-90           380,201   May-93       105,000       322,256
GAF Corporation                       Manufacturing              Mar-88           433,267   Jun-95             1       657,024
Galardi Group                         Restaurant FF&E            Jun-94           507,000   Oct-96       302,042       355,190
General Motors Corp.                  Video Projector            Dec-93             6,516   Jan-98             -        10,006
General Motors Corporation            Video Projectors           Dec-93            52,128   Jun-97        11,613        59,207
Hudson Foods, Inc.                    Chicken Processing         Jul-89           326,880   Aug-94       120,215       373,808
Hudson Foods, Inc.                    Waste Water Pre-treatment  Aug-89           331,070   Aug-94       121,600       377,895
                                        Plant                   
Hudson Foods, Inc.                    Chicken Processing         Dec-89         1,102,591   Sep-94       333,006     1,182,678
                                        Equipment        
Hudson Foods, Inc.                    Chicken Processing         Dec-89           890,708   Sep-94       272,280       959,784
                                        Equipment        
Hudson Foods, Inc.                    Chicken Processing         Dec-89           190,739   Sep-94        56,897       205,202
                                        Equipment        
Inland Steel Company                  Laser Measuring System     Sep-89           436,808   Apr-94       105,000       487,179
International Paper Company           Truck                      Jun-88            25,080   Nov-92        14,653        28,446
International Paper Company           Trucks                     Jul-88            32,039   Nov-91         7,412        31,840
International Paper Company           Truck                      Sep-88            42,161   Dec-95        11,120        73,774
International Paper Company           Van                        Sep-88            39,626   Nov-94        11,325        37,872
International Paper Company           Trucks                     Sep-88            37,910   May-92        17,372        33,220
International Paper Company           Truck                      Sep-88            35,302   Sep-94         8,500        36,360
International Paper Company           Trucks                     Sep-88            28,114   Dec-93         7,750        30,848
International Paper Company           Truck                      Sep-88            20,850   Dec-95        11,924        39,114
International Paper Company           Trucks                     Nov-88           165,175   Aug-91       118,185        90,831
International Paper Company           Truck with power lift      Nov-88            32,691   Dec-94        10,000        36,079
                                        gate                
International Paper Company           Truck with power lift      Nov-88            32,691   Feb-95         9,500        36,079
                                        gate                
International Paper Company           Motor Vehicle              Dec-88            13,873   Apr-97         5,500        22,610
International Paper Company           Motor Vehicle              Jan-89            33,029   Jul-96         4,000        58,146
International Paper Company           Motor Vehicle              Feb-89            41,080   Jun-97         4,250        65,533
International Paper Company           Trucks                     Mar-89            48,783   May-95        26,000        40,150
International Paper Company           Truck                      Mar-89            24,458   Apr-95        11,000        25,968
International Paper Company           Cargo Van                  Mar-89            13,910   Jan-95         2,740        16,189
International Paper Company           Trucks                     Apr-89            76,873   May-95        20,000        86,592
International Paper Company           Truck                      Jun-89            29,079   May-95         9,000        31,744
International Paper Company           Trucks                     Jun-89            27,457   Apr-94         4,500        32,538
International Paper Company           Truck                      Aug-89            27,249   Apr-96         7,000        37,622
International Paper Company           Cut-away Van               Aug-89            19,484   Dec-94         5,750        19,095
International Paper Company           Trucks                     Oct-89           116,589   May-92        83,477        63,595
International Paper Company           Cab & chassis              Oct-89            25,374   Dec-95         9,477        38,797
International Paper Company           Trucks                     Nov-89            33,587   Mar-94         9,000        34,975
International Paper Company           Trucks                     Dec-89           123,513   Apr-95        50,750       139,088
International Paper Company           Trucks                     Mar-90            76,300   May-92        54,047        34,906
KeyCorp                               Office Furniture and       Aug-89           913,120   Apr-94       245,000     1,014,508
                                        Equipment          
Keycorp                               ATM's                      Aug-89           251,385   Dec-96        23,500       287,781
KeyCorp                               ATM Machines               Aug-89           195,522   Apr-96        18,650       211,431
KeyCorp                               ATM Machines               Aug-89           139,658   Jan-94        41,250       146,802
Keycorp                               ATM's                      Aug-89           139,658   Jun-97        10,000       213,512    9
KeyCorp                               ATM Machines               Aug-89            55,864   Aug-94        14,500        66,333
Koppers Industries, Inc.              Hydraulic loader & end     Jun-90           639,120   Jun-95       317,500       793,198
                                        loader               
Midway Airlines, Inc.                 Commercial Aircraft        Jun-90         4,592,040   Sep-91     3,444,589       463,076
National Semiconductor Corporation    Wafer Processing System    Apr-89           762,580   Jan-94        82,000       869,955
National Steel Corporation            Wheel Loader               Dec-89           380,203   Jul-96       134,512       476,098
National Steel Corporation            Forklifts                  Dec-89            85,296   Jun-97        25,000       109,159
National Union Electric Corporation   Phone System               Aug-89           481,738   Mar-94       130,000       507,722
Nissan Motor Corporation In USA       Office Information         Jul-88           229,598   Jul-93         3,700       221,328
                                        Systems          
NMCS, Inc. , d/b/a National Medical   Office Furniture           Jun-88           627,453   Mar-94             1       747,640
     Group Services, Inc.           
Nord Kaolin Company                   Water Tank Trucks          Feb-89           229,795   Nov-96        31,800       191,762
Nord Kaolin Company                   Ford Truck & Truck Crane   Apr-89            76,913   Mar-97        28,000       109,219
Owens Corning Fiberglas Corp.         Automobile                 Nov-88            15,822   Apr-95         3,650        20,000
Owens Corning Fiberglas Corp.         Material Handling          Jul-89           175,098   Jul-92        41,020       154,944
Owens Corning Fiberglas Corp.         Material Handling          Oct-89           151,207   Mar-93        47,000       139,317
Owens Corning Fiberglas Corp.         Material Handling          Oct-89            56,733   Sep-94        13,000        62,760
Owens Corning Fiberglas Corp.         Material Handling          Oct-89            31,192   Sep-94         9,000        34,524
Owens Corning Fiberglas Corp.         Material Handling          Dec-89            21,331   May-96         4,100        27,834
Owens Corning Fiberglas Corp.         Material Handling          Feb-90           100,985   Oct-95        35,000       119,560
Owens Corning Fiberglas Corp.         Lift Truck                 Mar-90            18,288   Mar-95         6,500        19,851
Owens Corning Fiberglas Corp.         Material Handling          Apr-90           122,130   Apr-94        36,600       126,827
Owens Corning Fiberglas Corp.         Material Handling          Apr-90           118,092   Apr-95        44,500       128,182
Owens Corning Fiberglas Corp.         Material Handling          Apr-90           101,775   Jun-93        29,100        92,836
Owens Corning Fiberglas Corp.         Material Handling          May-90            57,956   Jun-93        13,500        62,821
Owens Corning Fiberglas Corp.         Material Handling          May-90            21,866   May-98         4,200        30,239
Owens Corning Fiberglas Corp.         Material Handling          May-90            18,972   Apr-94         4,800        20,165
Owens Corning Fiberglas Corp.         Material Handling          Jun-90           152,935   Oct-95        56,000       179,186
Owens Corning Fiberglas Corp.         Material Handling          Jun-90            16,179   Aug-96         5,000        19,670
Owens Corning Fiberglas Corp.         Forklift Truck             Jul-90            22,422   Jul-97             1        36,338
Owens Corning Fiberglas Corp.         Material Handling          Aug-90           123,102   Aug-93        41,000       113,082
Owens Corning Fiberglas Corp.         Lift Truck                 Aug-90            59,786   Dec-94        20,000        59,404
Owens Corning Fiberglas Corp.         Forklift                   Aug-90            25,601   Oct-96         5,050        31,106
Owens Corning Fiberglas Corp.         Material Handling          Aug-90            20,858   Aug-95        10,750        22,911
Owens Corning Fiberglas Corp.         Material Handling          Aug-90            20,858   Sep-95        10,750        22,911
Owens Corning Fiberglas Corp.         Forklift Truck             Aug-90            19,000   Jul-97         4,000        24,084
Owens Corning Fiberglas Corp.         Mobile Rail Car Mover      Oct-90           114,900   Sep-97        70,000       142,436
Owens Corning Fiberglas Corp.         Material Handling          Oct-90            22,750   Nov-95         7,000        29,948   10
Owens Corning Fiberglas Corp.         Material Handling          Oct-90            21,920   Oct-95        10,750        24,521
Owens Corning Fiberglas Corp.         Material Handling          Oct-90            17,235   Jan-98         2,833        22,627
Owens Corning Fiberglas Corp.         Sweeper                    Nov-90            27,592   Dec-93         6,600        26,638
Owens Corning Fiberglas Corp.         Material Handling          Nov-90            11,302   Mar-95             1        15,881
Pre Press Group                       Digital Color Scanner      Nov-88         1,276,903   Nov-97         9,000     1,529,568
Quaker Coal Company                   Crawler Dozer              Feb-94           558,301   Apr-96       255,000       356,875
Ran-Bar Corporation                   Boom lift                  Aug-93             7,950   Sep-95             1        19,152
Regents of the University of          Communication              Jan-89            84,204   Dec-93        25,500        87,434
     California              
Rocky Mountain Helicopters, Inc.      Aircraft                   Oct-89         2,252,125   Dec-93     1,472,413     1,383,000
Rohr Industries, Inc.                 Motor Vehicles             Oct-88            47,524   Aug-93        19,095        61,845
Rohr Industries, Inc.                 Motor Vehicles             Oct-88            24,450   May-93         5,534        24,406
Rohr Industries, Inc.                 Motor Vehicles             Oct-88            11,370   Dec-93         3,977        13,300
Rohr Industries, Inc.                 Motor Vehicles             Oct-88             8,742   Aug-96         3,482        12,950
Rohr Industries, Inc.                 Motor Vehicles             Dec-88            99,553   Jan-93        22,012        99,184
Rohr Industries, Inc.                 Motor Vehicles             Dec-88            15,642   Jan-95         3,077        21,521
Rohr Industries, Inc.                 Motor Vehicles             Dec-88            15,569   Dec-93         4,777        17,664
Rohr Industries, Inc.                 Motor Vehicles             Jan-89            14,990   Feb-92         3,509        12,925
Rohr Industries, Inc.                 Motor Vehicles             Jan-89            14,990   May-92         5,538        13,776
Rohr Industries, Inc.                 Motor Vehicles             Jan-89             9,532   Apr-94         3,300        12,375
Rohr Industries, Inc.                 Motor Vehicles             Feb-89             9,359   Aug-94         3,177        12,851
Rohr Industries, Inc.                 Motor Vehicles             Feb-89             8,952   Aug-96             -        14,280
Rohr Industries, Inc.                 Motor Vehicles             Apr-89            72,014   Jul-92        20,088        68,396
Rohr Industries, Inc.                 Motor Vehicles             Apr-89            36,263   Apr-89         7,667        35,328
Rohr Industries, Inc.                 Motor Vehicles             Apr-89            35,762   Apr-92         9,019        34,793
Rohr Industries, Inc.                 Motor Vehicles             Apr-89            24,343   Jul-92         5,146        23,683
Rohr Industries, Inc.                 Motor Vehicles             Apr-89            21,759   Jul-94         8,500        25,267
Rohr Industries, Inc.                 Motor Vehicles             Apr-89            12,393   Jan-92         2,313        12,086
Rohr Industries, Inc.                 Motor Vehicles             Apr-89            11,921   May-92         3,058        11,597
Rohr Industries, Inc.                 Motor Vehicles             Apr-89            11,920   Jul-92         2,973        11,597
Rohr Industries, Inc.                 Motor Vehicles             May-89            16,760   Jul-94         3,677        18,710
Rohr Industries, Inc.                 Motor Vehicles             May-89            11,920   May-93         2,772        12,955
Rohr Industries, Inc.                 Motor Vehicles             Jul-89            18,477   Feb-93        11,810        14,614
Rohr Industries, Inc.                 Motor Vehicles             Jul-89            17,801   Jul-92         3,823        15,948
Rohr Industries, Inc.                 Motor Vehicles             Aug-89            14,570   Dec-93         3,695        15,270
Rohr Industries, Inc.                 Motor Vehicle              Sep-89             8,702   Aug-96         3,979        12,557
Rohr Industries, Inc.                 Motor Vehicles             Nov-89            16,378   May-92        13,340         9,100
Rohr Industries, Inc.                 Motor Vehicle              Nov-89            15,863   Aug-96         4,422        20,605
Rohr Industries, Inc.                 Pickup Truck               Nov-89             9,652   Jan-95         4,100        10,720
Rohr Industries, Inc.                 Motor Vehicles             Mar-90            15,065   Feb-93         6,756        12,658
Sebastiani Vineyards, Inc.            Wine Barrels               Oct-88           143,804   Jun-96         6,535       188,158
Sebastiani Vineyards, Inc.            Wine Barrels               May-89            67,314   Jun-96         2,700        81,120
Sebastiani Vineyards, Inc.            Wine Barrels               May-89            33,919   Jun-94         4,340        41,682
Shell Mining Company                  Crawler Tractor            Oct-89         1,013,257   Dec-94       390,000     1,048,122
Shell Mining Company                  Miner Machine              Feb-90           640,995   Mar-95       130,000       648,032
Shell Mining Company                  Miner Machine              Feb-90           640,427   Mar-95       130,000       647,458
St. Luke's-Roosevelt Hospital Center  Medical Furniture,         Feb-90         1,126,223   Apr-93       404,654     1,116,417
                                        Fixtures & Equipment
The Budd Company                      Electric Forklifts         May-90           426,589   Sep-97        68,742       491,609
The Budd Company                      Forklifts                  May-90            90,919   Jul-97        27,600       104,777
The Budd Company                      Industrial Batteries       May-90            85,100   Oct-97             -        98,071
The Budd Company                      Industrial Batteries       May-90            70,128   Sep-97        17,190        80,817
The Budd Company                      Electric Tow Tractors      May-90            42,589   Jul-97         5,400        49,080
The Budd Company                      Electric Tuggers           May-90            22,342   Jul-97         4,000        25,747
The Budd Company                      Chargers                   May-90            19,394   Sep-97         5,441        22,350
The Budd Company                      Walkie Reach Truck         May-90            15,903   Sep-97         3,887        18,327
The Budd Company                      Electric Cart              May-90             2,793   Sep-97           682         3,218
The Budd Company                      Lift Trucks                May-90           154,260   Mar-96        29,000       158,330
The Budd Company                      Lift Trucks                Jun-90           168,998   Mar-98        28,400       242,141
The Dow Chemical Company              Material Handling          Jul-87           990,448   Aug-92       382,160       877,628
The Dow Chemical Company              Rail car Mover             Jul-87           145,822   Jan-93        43,650       125,152
The Dow Chemical Company              Lift Truck                 Jul-87            26,198   Aug-92         4,300        25,820
The Dow Chemical Company              Material Handling          May-88           294,792   Jul-93        74,300       290,517
The Dow Chemical Company              Material Handling          May-88            55,516   Sep-95             -        73,736
The Dow Chemical Company              Material Handling          May-88            33,943   Jun-94        10,900        32,539
The Dow Chemical Company              Material Handling          May-88            33,119   Jan-95        10,000        39,517
The Dow Chemical Company              Material Handling          May-88            17,045   Jan-94         5,800        16,340
Treasure Chest Advertising            Printing Press             Mar-93           850,000   Mar-98       400,000     1,017,960
USX Steel Corporation                 Haul Truck                 Dec-89         1,017,631   Dec-94       324,300     1,003,483
USX Steel Corporation                 Haul Truck                 Dec-89         1,017,631   Dec-94       324,300     1,003,483
USX Steel Corporation                 Haul Truck                 Dec-89         1,013,766   Dec-94       324,300       999,671
                                                                             -------------         -------------- -------------
                                                                              $43,344,386            $15,068,669   $40,257,416
                                                                             =============         ============== =============
</TABLE>
                                      A-42
<PAGE>
<TABLE>
<CAPTION>
                                                                                                                   Excess of
                                                                              Equipment                           Rents Over
                                                                 Acquisition  Acquisition            Sale         Expenses
Lessee                              Type of Equipment            Date (1)      Price (2)  Sale Date Price (3)        (4)       Notes

ATEL CASH DISTRIBUTION FUND III
<S>                                   <C>                        <C>          <C>           <C>       <C>          <C>           <C>

A.O. Smith Corporation                Side loaders               Nov-90          $230,591   Feb-97       $62,000      $266,272
A.O. Smith Corporation                Forklifts                  Nov-90            33,752   Feb-97         8,100        40,198
A.O. Smith Corporation                Towmotors                  Nov-90           120,865   Jan-96        44,000       124,614
A.O. Smith Corporation                Lift trucks                Nov-90            25,315   Jan-96         8,250        26,100
A.O. Smith Corporation                Lift trucks                Nov-90            22,516   Jan-96         9,000        23,215
A.O. Smith Corporation                Carton Clamps              Nov-90            22,469   Jan-96         9,000        26,166
A.O. Smith Corporation                Lift trucks                Nov-90            17,860   Mar-96         3,950        18,414
American President Trucking Co., Ltd. 1989 Utility 48'X102       Mar-90           641,594   Mar-98       210,000       743,110
                                        Curtainsider Trailer
American President Trucking Co., Ltd. 1990 Utility 48'X102       May-90           163,481   Jun-98        52,500       189,348
                                        Curtainsider Trailer 
American President Trucking Co., Ltd. Tractors                   May-90           129,021   Jul-97        24,085       183,461
American President Trucking Co., Ltd. Tractor                    Jun-90            64,510   Jul-97        12,043        71,710
American President Trucking Co., Ltd. Utility Curtainsiders      Jul-90           163,482   Aug-97        60,000       189,348
American President Trucking Co., Ltd. Tractors                   Feb-90            64,862   Nov-96        10,000        76,859
American President Trucking Co., Ltd. Tractors                   Feb-90            64,862   Nov-96        18,788        76,859
American President Trucking Co., Ltd. Tractors                   Feb-90            64,862   Nov-96        10,000        76,859
American President Trucking Co., Ltd. Tractors                   Feb-90            64,862   Nov-96        10,000        76,859
American President Trucking Co., Ltd. Tractors                   Feb-90            64,862   Nov-96        10,000        76,859
American President Trucking Co., Ltd. Tractors                   Feb-90            64,862   Dec-96        15,473        74,845
American President Trucking Co., Ltd. Tractors                   Feb-90            64,862   Dec-96        11,894        76,859
American President Trucking Co., Ltd. Tractors                   Feb-90            64,862   Dec-96         9,900        76,859
American President Trucking Co., Ltd. Tractors                   Feb-90            64,862   Feb-97        15,993        74,845
American President Trucking Co., Ltd. Tractors                   Feb-90            64,862   Feb-97        15,073        74,845
American President Trucking Co., Ltd. Tractors                   Feb-90            64,862   Feb-97        15,073        74,845
American President Trucking Co., Ltd. Tractors                   Feb-90            64,862   Feb-97        15,073        74,845
American President Trucking Co., Ltd. Tractors                   Feb-90            64,862   Feb-97        15,455        74,845
American President Trucking Co., Ltd. Tractors                   Feb-90            64,862   Feb-97        15,073        74,845
American President Trucking Co., Ltd. Tractors                   Feb-90            64,862   Feb-97        15,073        74,845
American President Trucking Co., Ltd. Tractors                   Feb-90            64,862   Feb-97        15,073        74,845
American President Trucking Co., Ltd. Tractors                   Feb-90            64,510   May-96        19,738        62,791
American President Trucking Co., Ltd. Tractors                   Feb-90            64,510   Jun-96        18,738        62,791
American President Trucking Co., Ltd. Tractors                   Feb-90            64,510   Nov-96        15,443        74,622
American President Trucking Co., Ltd. Tractors                   Feb-90            64,510   Dec-96        15,443        74,622
American President Trucking Co., Ltd. Tractors                   Feb-90            64,510   Dec-96        15,443        74,622
American President Trucking Co., Ltd. Tractors                   Feb-90            64,510   Dec-96        15,443        74,622
American President Trucking Co., Ltd. Tractors                   Feb-90            64,510   Dec-96         9,900        76,442
American President Trucking Co., Ltd. Tractors                   Feb-90            64,863   Jun-96        18,788        63,134
American President Trucking Co., Ltd. Tractors                   Mar-90            63,685   Nov-96        15,472        73,663
American President Trucking Co., Ltd. Tractors                   Mar-90            63,685   Nov-96        15,472        73,663
American President Trucking Co., Ltd. Tractors                   Mar-90            63,685   Nov-96        14,572        73,663
American President Trucking Co., Ltd. Tractors                   Mar-90            63,685   Nov-96        15,472        73,663
American President Trucking Co., Ltd. Tractors                   Mar-90            63,685   Dec-96        15,534        73,663
American President Trucking Co., Ltd. Tractors                   Mar-90            63,685   Dec-96        15,372        73,663
American President Trucking Co., Ltd. Tractors                   Mar-90            63,685   Dec-96        15,372        73,663
American President Trucking Co., Ltd. Tractors                   Mar-90            63,685   Dec-96        15,372        73,663
American President Trucking Co., Ltd. Tractors                   Mar-90            63,685   Apr-97        14,396        73,663
American President Trucking Co., Ltd. Tractors                   Mar-90            63,685   Apr-97        14,072        73,663
American President Trucking Co., Ltd. Tractors                   Mar-90            63,685   Apr-97        14,072        73,663
American President Trucking Co., Ltd. Tractors                   Mar-90            63,685   Apr-97        14,072        73,663
American President Trucking Co., Ltd. Tractors                   Mar-90            63,685   Apr-97        15,598        73,663
American President Trucking Co., Ltd. Tractors                   Mar-90            63,685   May-97        13,972        73,663
American President Trucking Co., Ltd. Tractors                   Mar-90            63,685   Jun-97        13,772        73,663
American President Trucking Co., Ltd. Tractors                   Mar-90            63,685   Jun-97        13,772        73,663
American President Trucking Co., Ltd. Tractors                   Apr-90            64,510   Nov-96        15,543        72,620
American President Trucking Co., Ltd. Tractors                   Apr-90            64,510   Dec-96        15,443        72,620
American President Trucking Co., Ltd. Tractors                   Apr-90            64,510   Dec-96        15,443        72,620
American President Trucking Co., Ltd. Tractors                   Apr-90           322,551   Jun-96        97,892       300,307
American President Trucking Co., Ltd. Tractors                   May-90            64,510   Nov-96        15,543        71,710
American President Trucking Co., Ltd. Tractors                   May-90            64,510   Nov-96        15,543        71,710
American President Trucking Co., Ltd. Tractors                   May-90            64,510   Dec-96        15,543        71,710
American President Trucking Co., Ltd. Tractors                   May-90            64,510   Feb-97        15,543        71,710
American President Trucking Co., Ltd. Tractors                   May-90            64,510   Feb-97        15,543        68,070
American President Trucking Co., Ltd. Tractors                   May-90           387,062   Jun-96       150,839       343,988
American President Trucking Co., Ltd. Tractors                   May-90           129,021   Jun-96        37,934       120,123
Barney's, Inc.                        Retail Store FF&E          Sep-93         2,009,077   Jul-96     1,033,020       967,060   11
Buffalo & Pittsburgh Railroad         Locomotives                Nov-93           792,657   Nov-96       713,100       802,504
Carrier Corporation                   Lift trucks                Jun-90           359,305   Apr-95        89,800       369,875
Carrier Corporation                   Lift trucks                Jun-90           113,195   Apr-95        27,950       114,228
Carrier Corporation                   Lift trucks                Aug-90           200,008   Apr-95        43,100       203,148
Central Ohio Coal Company             CAT Scrapers               Mar-92         2,713,694   Jul-96     1,048,730     2,580,680
Central Ohio Coal Company             160 Ton Coal Hauler        Mar-92         2,280,162   Dec-97       972,955     2,936,837
Central Ohio Coal Company             Billdozer                  Mar-92           396,549   Oct-96        53,000       392,373
Dean Foods Company                    Trailer                    Oct-90            34,996   Nov-96        20,461        35,617
Dean Foods Company                    91 Utility 48'X102 Reefer  Oct-90         1,099,749   Feb-98       390,000     1,303,590
                                        Trailer                 
FMC Gold Company                      Haul Truck                 Jun-90           560,232   Jan-94       295,000       427,663
Fred Meyer, Inc.                      Data Processing            Oct-90         3,244,649   Aug-95     1,060,276     3,608,683
Fred Meyer, Inc.                      Data Processing            Nov-90         3,340,551   Dec-92     2,715,033     2,338,583
Koppers Industries, Inc.              Material Handling          Jul-90            54,156   Sep-95        23,000        64,020
Koppers Industries, Inc.              Material Handling          Aug-90            45,485   Jan-94        33,383        31,471
Koppers Industries, Inc.              Material Handling          Dec-90           200,911   Dec-95       102,500       237,614
Koppers Industries, Inc.              Hydraulic Excavator        Mar-91           114,492   Apr-96        57,500       129,848
Kraft General Foods                   Lift Truck                 Apr-91           160,846   May-98        29,925       187,568
Kraft General Foods                   Lift Truck                 Apr-91            44,277   Apr-98        11,000        51,633
Kraft General Foods                   Lift Truck                 Apr-91            23,101   May-98         3,875        26,939
Kraft General Foods                   Lift Truck                 Apr-91            22,523   May-98         2,050        26,265
Kraft General Foods                   Lift Truck                 Apr-91            22,093   May-98         2,675        25,763
Kraft General Foods                   Lift Truck                 Apr-91            17,614   May-98         4,875        23,309
Kraft General Foods, Inc.             Material Handling          Jul-91            46,694   Aug-94        24,248        22,701
Midway Airlines, Inc.                 Commercial Aircraft        Jun-90         2,405,081   Sep-91     1,656,694       226,541   12
Mobil Oil Corporation                 Material Handling          Apr-92            35,662   Jun-95        13,040        29,673
Mobil Oil Corporation                 Material Handling          Jul-92            36,249   Jun-95        10,611        30,163
Mobil Oil Corporation                 Golf Carts                 Jun-93           142,464   Jul-97        74,800        98,983
Mobil Oil Corporation                 Golf Carts                 Jun-93           137,654   Jul-96        80,800        95,642
Nord Kaolin Company                   Lab Equipment              Aug-90           409,694   Oct-97        91,000       110,806
Pepsico, Inc.                         Material Handling          Jul-90           208,042   Sep-96        16,000       254,225
Pepsico, Inc.                         Material Handling          Sep-90           228,666   Oct-96        21,000       266,447
Pepsico, Inc.                         Material Handling          Sep-90            32,885   Sep-96         1,200        41,214
Pepsico, Inc., d/b/a/ PFS             Material Handling          Jul-90            73,050   Jun-95         8,470        52,933
Pilgrim's Pride Corporation           Chicken Processing         Dec-90         3,791,002   Oct-95     1,400,000     4,000,050
PSI Energy, Inc.                      Wheel Tractor Scraper      Jul-90           842,013   Sep-96       295,000       923,917
Reliance Insurance Company            Office Furniture           Jun-92         1,133,854   Jun-97       287,622     1,213,841
Reliance Insurance Company            Office Furniture           Sep-92           137,047   Sep-97        37,346       159,007
Reliance Insurance Company            Offset Press               Sep-92            29,780   Sep-97         8,338        35,093
Shell Mining Company                  Crawler Dozer              Oct-91           776,000   Dec-96       350,000       801,763
Southern Ohio Coal Company            Mining                     Mar-92         3,795,152   Jun-92     4,469,135       207,307
Southern Ohio Coal Company            Shuttle Cars               Mar-92           767,590   Apr-97       120,000       851,419
Southern Ohio Coal Company            Power Center               Mar-92           102,826   Apr-97        15,000       114,056
Stone Container Corp                  Forklift                   Nov-90            35,759   Mar-98         6,500        54,404
Stone Container Corp                  C50 Forklift               Nov-90            19,696   Apr-98         4,000        15,700
Stone Container Corporation           Material Handling          Nov-90           299,787   Aug-93       115,700       301,446
Stone Container Corporation           Material Handling          Nov-90           227,384   May-93        54,500       163,622
Stone Container Corporation           Material Handling          Nov-90           216,936   Jun-95        72,500       199,500
Stone Container Corporation           Material Handling          Nov-90           183,825   Jul-95       105,500       188,712
Stone Container Corporation           Tractor                    Nov-90           137,327   Mar-95        75,842       124,820
Stone Container Corporation           Material Handling          Nov-90           136,838   Jun-96        60,670       164,020
Stone Container Corporation           Material Handling          Nov-90           116,700   Jul-95        23,750       133,201
Stone Container Corporation           Material Handling          Nov-90           110,836   Jul-95        21,750       125,403
Stone Container Corporation           Material Handling          Nov-90            96,611   Jun-95        29,500       107,181
Stone Container Corporation           Forklifts                  Nov-90            83,200   Aug-97        21,555       110,823
Stone Container Corporation           Material Handling          Nov-90            68,950   Mar-96        21,500        85,665
Stone Container Corporation           Material Handling          Nov-90            63,433   Sep-95        14,000        69,970
Stone Container Corporation           Tractor                    Nov-90            53,694   Jan-95        30,500        50,456
Stone Container Corporation           Material Handling          Nov-90            51,420   Jun-95        14,500        54,541
Stone Container Corporation           Material Handling          Nov-90            50,097   Oct-94        17,735        52,700
Stone Container Corporation           Material Handling          Nov-90            49,232   Jul-95        14,500        54,618
Stone Container Corporation           Material Handling          Nov-90            46,928   May-96         8,400        57,267
Stone Container Corporation           Forklifts                  Nov-90            46,681   Jul-96        13,375        67,363
Stone Container Corporation           Material Handling          Nov-90            46,492   Mar-96        13,500        41,148
Stone Container Corporation           Material Handling          Nov-90            45,669   Apr-94        17,500        45,093
Stone Container Corporation           Material Handling          Nov-90            43,850   Apr-93         9,000        36,268
Stone Container Corporation           Material Handling          Nov-90            33,498   Mar-95        14,500        35,136
Stone Container Corporation           Forklifts                  Nov-90            32,261   Nov-96         9,100        47,409
Stone Container Corporation           Forklifts                  Nov-90            26,256   Apr-97         9,000        55,930
Stone Container Corporation           Material Handling          Nov-90            25,898   Jul-95        12,000        26,586
Stone Container Corporation           Material Handling          Nov-90            23,674   Oct-93         5,800        24,262
Stone Container Corporation           Material Handling          Nov-90            22,561   Jan-96         2,000        29,525
Stone Container Corporation           Material Handling          Nov-90            22,308   Jul-95         5,500        23,453
Stone Container Corporation           Material Handling          Nov-90            18,611   Jul-94         3,500        16,737
Stone Container Corporation           Material Handling          Nov-90            17,250   Jul-95         5,500        15,176
Stone Container Corporation           Tractor                    Nov-90            17,227   Jan-95         6,000        18,431
Stone Container Corporation           Material Handling          Nov-90            17,124   Jul-95         4,300        19,535
Stone Container Corporation           Material Handling          Nov-90            15,984   Mar-93         5,500        14,058
Stone Container Corporation           Material Handling          Nov-90            15,810   Jul-95         8,500        16,230
Stone Container Corporation           Material Handling          Nov-90            15,625   Feb-95         4,000        14,480
Stone Container Corporation           Sweeper                    Nov-90            14,203   Oct-95         2,100        10,440
Stone Container Corporation           Material Handling          Nov-90            12,949   Jul-95         6,000        13,293
Stone Container Corporation           Material Handling          Apr-91           128,314   Dec-93       117,236        59,610
Teledyne Industries, Inc.             Material Handling          Nov-90            56,635   Jan-94        13,714        52,309
Teledyne Industries, Inc.             Material Handling          Nov-90            41,301   Apr-96        15,000        42,464
Teledyne Industries, Inc.             Material Handling          Nov-90            24,073   Apr-94        11,100        22,234
Terex Corporation                     KW-KC Induction Unit       Apr-91            68,088   Aug-97        29,428        75,403
Terex Corporation                     Shape Cutting Machine      Jul-91           237,213   Aug-97        89,660       262,698
The Dow Chemical Company              Research Equipment         Apr-91           222,801   Mar-97         6,000       231,500
The Dow Chemical Company              Research Equipment         Apr-91            56,295   Oct-96        25,000        61,271
The Dow Chemical Company              Research Equipment         Apr-91           930,833   Feb-96       214,500     1,013,116
The Dow Chemical Company              Research Equipment         Oct-91           649,269   Nov-96 to    125,030       748,348
                                                                                               Dec-96
The Dow Chemical Company              Research Equipment         Oct-91            61,615   Dec-96         2,200        68,479
The Dow Chemical Company              Material Handling          Oct-91            50,478   Aug-93        12,000        47,859
The Dow Chemical Company              Research Equipment         Jan-92           937,459   Jan-97       217,000     1,031,519
The Dow Chemical Company              Research Equipment         Jan-92           468,214   Jan-97        94,875       512,287
The Dow Chemical Company              Dilor Micro Raman          Apr-92           183,312   Apr-98        24,275       221,865
                                        Spectrometer    
The Dow Chemical Company              Krypton Ion Laser          Apr-92            31,373   Apr-98         7,000        37,971
The Dow Chemical Company              Computer                   Apr-92             2,905   Apr-98             -         3,516
The Dow Chemical Company              Computer                   Apr-92             2,905   Apr-98             -         3,516
The Dow Chemical Company              Dozer                      Jul-92           158,778   Jun-97        79,389       160,540
The Helen Mining Company              Mining                     Jun-91           222,801   Aug-93        14,321       227,537   13
The Helen Mining Company              Mining Shields             Sep-93           149,536   Jan-97             -       149,536
The Kelly Springfield Tire Co.        Trackmobile                Mar-92            86,943   Mar-97        65,000        86,246
The Kelly Springfield Tire Co.        Mail Sorter                Mar-92            28,452   Mar-97         5,432        30,512
The Kelly Springfield Tire Co.        Forklifts                  May-92            18,512   Jun-97         5,000        20,139
The Pillsburry Company                Stripper Combines          May-92         1,023,718   Dec-97       428,375       857,137
The Pillsburry Company                Self Propelled Pods (3)    Jun-92         1,012,828   Dec-97       423,819       848,020
The Pillsburry Company                Corn Harvesters (3)        Jun-92           385,217   Dec-97       148,172       341,077
The Pillsburry Company                Dump Cart                  Jun-92            10,475   Dec-97         4,029         9,275
The Pillsburry Company                Poclain Motors             Jun-92             6,285   Dec-97         2,418         5,565
The Pittston Company                  MECD Conveyor System       Apr-92         1,766,809   Sep-97       116,000     1,753,821
The Pittston Company                  Simmons Rand Un-A-Hauler   Apr-92           729,550   Oct-97        75,000       724,187
The Pittston Company                  Fletcher Bolter            Apr-92           190,154   Jul-97        36,000       188,756
The Pittston Company                  Versatrack                 Apr-92           183,104   Jun-97        31,500       188,826
The Pittston Company                  Versatrack                 Apr-92           159,207   Oct-96        83,321       147,150
The Pittston Company                  Simmons Rand Scoup         Apr-92           136,531   Jun-97        18,000       141,702
The Pittston Company                  Stamler Feeder             Apr-92           131,697   Sep-97        15,000       130,729
The Pittston Company                  Personnel Carrier          Apr-92            61,549   Jun-97        12,000        63,880
The Pittston Company                  Compressor Car             Apr-92            34,253   Jun-97         7,000        35,550
The Pittston Company                  Continuous Miner           Jun-92           949,110   Feb-97       437,995       945,758
The Pittston Company                  LWPC & Controls            Jun-92           252,060   Sep-97         5,000       251,170
The Pittston Company                  Un-a-hauler                Jun-92           247,104   Jun-97        35,000       246,915
The Pittston Company                  Locomotive                 Jun-92           125,394   Jun-97        28,000       125,298
Truck-Lite Company                    Project Line Equipement    Sep-91           414,720   Jun-97       224,054       397,993
Truck-Lite Company                    Ct-20 Project Line         Sep-91         1,993,259   Apr-98       686,574     2,152,003
                                        Equipment        
Truck-Lite Company                    700 Ton Press              Sep-91           320,311   Apr-98       110,331       345,821
Truck-Lite Company                    500 Ton Press              Sep-91           245,164   Apr-98        84,446       264,690
Truck-Lite Company                    275 Ton Press              Sep-91           193,862   Apr-98        66,775       209,301
Truck-Lite Company                    150 Ton Press              Sep-91           152,248   Apr-98        52,442       164,374
Truck-Lite Company                    Electro Static Plotter     Sep-91            31,070   Apr-98        10,702        33,544
Truck-Lite Company                    Forklift Truck             Sep-91            15,384   Apr-98         5,299        16,610
Truck-Lite Company                    Forklift Truck             Sep-91            15,384   Apr-98         5,299        16,610
Truck-Lite Company                    Project Line Equipement    Dec-91           699,062   Jun-97       380,946       656,930
Truck-Lite Company                    Ct-20 Project Line         Dec-91         1,076,902   Apr-98       365,102     1,156,569
                                        Equipment        
Truck-Lite Company                    500 Ton Press              Dec-91           224,929   Apr-98        76,258       241,569
Truck-Lite Company                    275 Ton Press              Dec-91           173,702   Apr-98        58,890       186,552
Truck-Lite Company                    150 Ton Press              Dec-91           131,393   Apr-98        44,546       141,113
Truck-Lite Company                    Scissor Lift Mold Truck    Dec-91            25,011   Apr-98         8,480        26,861
Truck-Lite Company                    Ct-20 Project Line         Mar-92         1,089,540   Apr-98       380,022     1,168,223
                                        Equipment        
Truck-Lite Company                    Ct-20 Project Line         Aug-92           274,069   Apr-98        98,219       300,135
                                        Equipment        
Truck-Lite Company                    Ct-20 Project Line         Dec-92           108,149   Apr-98        38,093       119,258
                                        Equipment        
US Surgical Corp./ARR, Inc.           Falcon 50 Aircraft         Oct-92         5,275,000   Oct-97     5,200,000     4,421,201
USS/KOBE Steel Corporation            Forklift Trucks            Aug-91           197,211   Aug-97        45,700       241,284
USS/KOBE Steel Corporation            Material Handling          Nov-91            82,769   Oct-97        12,000        92,719
USS/KOBE Steel Corporation            Hyster Lift Truck          Nov-91            34,079   Nov-97         6,200        61,723
Wal-Mart Stores, Inc.                 Dryvan Trailer             Jun-94           300,624   Aug-97       248,000       337,232
Wal-Mart Stores, Inc.                 Forklifts, Trucks &        Jun-94           189,632   Jan-96       165,000       188,817
                                        Trailers          
                                                                             -------------           ------------ -------------
                                                                              $66,594,290            $31,533,234   $60,415,093
                                                                             =============           ============ =============
</TABLE>

                                      A-43
<PAGE>
<TABLE>
<CAPTION>
                                                                                                                   Excess of
                                                                              Equipment                           Rents Over
                                                                 Acquisition  Acquisition            Sale         Expenses
Lessee                              Type of Equipment            Date (1)      Price (2)  Sale Date Price (3)        (4)       Notes

ATEL CASH DISTRIBUTION FUND IV

<S>                                   <C>                        <C>          <C>           <C>       <C>          <C>           <C>

Ameriserve Food Distribution          Battery Connector/         Jan-94           $88,419   Jan-98        $5,850       $83,694
                                        Charger/Pallet Truck
Barney's, Inc.                        Retail Store FF&E          Sep-93         2,316,543   Jul-96     1,191,112     1,115,058   11
Buffalo & Pittsburgh Railroad         Locomotives                Nov-93           849,216   Nov-96       729,200       859,766
Burlington Northern Railroad          Locomotives                Dec-92         7,950,000   Dec-94     5,595,000     4,161,000
Canadian Pacific Limited              Rail Car                   Oct-92             5,704   Apr-96        21,772           520
Canadian Pacific Limited              Boxcar                     Oct-92             5,474   May-97        20,466         3,942
DJ (Aeorspace) Limited                Executive Aircraft         Apr-94         1,890,000   Jan-97     1,018,053     1,590,913
Galardi Group                         Restaurant FF&E            Jun-94           546,000   Oct-96       325,276       382,513
H. E. Butt Grocery Company            Refrigerated Trailers      Oct-92         2,128,029   Mar-97     1,174,703     1,410,730
H. E. Butt Grocery Company            Refrigerated Trailers      Nov-92         1,897,830   Mar-97     1,079,789     1,246,977
H. E. Butt Grocery Company            Refrigerated Trailers      Nov-92         1,645,554   Mar-97       610,258     1,299,522
H. E. Butt Grocery Company            Trailers                   Nov-92            37,957   Jan-96        35,624        18,607
H. E. Butt Grocery Company            Refrigerated Trailers      May-93         1,404,302   Mar-97       831,127       790,395
Kraft General Foods, Inc.             Tractors                   Dec-93           545,048   Jul-96       139,956       581,119
Kraft General Foods, Inc.             Tractors                   Dec-93           419,267   Jan-95       363,510       337,986
Midwest Power Systems, Inc.           Coal Hopper Car            Dec-92         2,222,500   Apr-96     1,730,291     1,993,170
Midwest Power Systems, Inc.           Coal Hopper Car            Dec-92            17,500   Sep-93        20,543         3,915
Mobil Oil Corporation                 John Deere Loader Rops     Apr-92            74,977   Dec-97        30,000        94,050
Mobil Oil Corporation                 Manlift                    Jul-92            67,304   Jul-97        31,000        89,177
Mobil Oil Corporation                 Bobcat Loader              Jul-92            15,289   Jul-97         9,000        20,258
Mobil Oil Corporation                 John Deer Excavator        Jul-92           139,970   Jun-98        30,000       102,073
Mobil Oil Corporation                 1993 Freightliner Tractor  Aug-92           195,915   Feb-98        59,250       174,678
Mobil Oil Corporation                 1993 Freightliner Tractor  Aug-92            65,305   Feb-98        19,750        58,226
Mobil Oil Corporation                 Tractors                   Nov-92           436,136   Sep-96       137,900       536,101
Mobil Oil Corporation                 Snorkel Uno-33E Electric   Nov-92            28,185   Jun-98         7,000        41,689
                                        Boom                   
Mobil Oil Corporation                 Snorkel/Economy 2032       Nov-92            13,533   Jun-98         2,700        20,017
                                        Scissorlifts       
Mobil Oil Corporation                 Material Handling          Dec-92            69,000   Dec-97        50,000        65,419
                                        Equipment       
Mobil Oil Corporation                 1993 Kenworth Tractor      Dec-92            63,307   Apr-98        15,750        33,901
Mobil Oil Corporation                 1993 Freightliner Tractor  Dec-92            62,080   Apr-98        15,750        55,351
Mobil Oil Corporation                 1993 Freightliner Tractor  Dec-92            62,080   Apr-98        15,750        35,882
Mobil Oil Corporation                 1993 Freightliner Tractor  Feb-93            63,060   Apr-98        15,750        56,224
Mobil Oil Corporation                 1993 Freightliner Tractor  Feb-93            63,060   Jun-98        29,458        32,161
Mobil Oil Corporation                 1993 Freightliner Tractor  Feb-93            63,060   Apr-98        15,750        56,224
Mobil Oil Corporation                 1993 Freightliner Tractor  Feb-93            63,060   Apr-98        18,500        56,224
Mobil Oil Corporation                 1993 Freightliner Tractor  Feb-93            62,055   Apr-98        17,000        55,328
Mobil Oil Corporation                 Tractor Accessories        Oct-93             3,541   Sep-96             -           979
Mobil Oil Corporation                 Accessories For Kenworth   Oct-93             5,682   Apr-98             -         5,774
                                        Tractor                
Mobil Oil Corporation                 Accessories For Tractor    Oct-93             1,982   Feb-98             -         1,703
Mobil Oil Corporation                 Accessories For Tractor    Oct-93             1,320   Apr-98             -         1,402
Mobil Oil Corporation                 Accessories For Tractor    Oct-93             1,320   Apr-98             -         1,402
Mobil Oil Corporation                 Accessories For Tractor    Oct-93             1,320   Jun-98             -         1,402
Mobil Oil Corporation                 Accessories For Tractor    Oct-93             1,320   Apr-98             -         1,402
Mobil Oil Corporation                 Motor Vehicle Accessories  Oct-93               285   Feb-98             -           245
Mobil Oil Corportion                  Tractors                   Nov-92           182,949   Jun-96        48,000       136,246
Mobil Oil Corportion                  Boom Trucks                Nov-92            69,903   Jan-94        46,026        19,329
Mobil Oil Corportion                  Tractors                   Nov-92            62,312   Jan-96        25,500        43,963
Mobil Oil Corportion                  Tractors                   Nov-92            62,312   Mar-96        25,500        43,963
Mobil Oil Corportion                  Tractors                   Dec-92            23,500   Feb-96         8,950        21,126
Nabisco, Inc.                         Computers and Related      Jul-95           211,104   Jul-97 to     63,855       100,306
                                        Equipment                                             Nov-97 
Nabisco, Inc.                         Computers and Related      Jul-95            72,622   Jul-97 to     26,909        34,506
                                        Equipment                                             Dec-97 
Nabisco, Inc.                         Computers & Related        Jul-95            43,423   Dec-96 to     34,799        21,684
                                        Equipment                                             Jun-97 
Nabisco, Inc.                         Computers & Related        Jul-95            10,447   Dec-96 to      8,590         5,071
                                        Equipment                                             Jun-97 
National Steel Corporation            Wheel Loader               Oct-94         2,180,730   May-97     1,259,019     1,080,629
National Steel Corporation            Forklift                   Oct-94            27,780   May-97        21,495        11,992
National Steel Corporation            Scrap Loader               Jan-95           242,595   May-97       193,044        92,425
National Steel Corporation            Dump Haul Trucks           Mar-95         3,433,402   May-97     2,783,959     1,145,594
Pepsico, Inc.                         Pallet Trucks and Related  Jun-93           103,258   Jul-97        10,000        97,740
                                        Equipment               
Pepsico, Inc.                         Battery Connector          Jan-94             3,352   Sep-97         2,506         2,787
Pepsico, Inc.                         Pallet Trucks and Related  Jul-93 to         31,376   Oct-97         1,950        29,700
                                                                   Aug-93  
                                        Equipment               
Rochelle Coal Company                 Haul Truck                 Nov-92         1,429,807   Jun-97       772,200     1,022,764
Rochelle Coal Company                 Loader                     Dec-92         1,988,931   Jun-97     1,074,250     1,403,767
Rochelle Coal Company                 Haul Truck                 Dec-92         1,429,807   Jun-97       772,200     1,008,524
Rochelle Coal Company                 Haul Truck                 Jan-93         1,455,158   Jun-97       800,500     1,002,462
TASC, Inc.                            Computers and Related      Oct-95             7,394   Apr-98         2,079         7,426
                                        Equipment           
TASC, Inc.                            Computers and Related      Oct-95             3,932   Apr-98         1,061         3,949
                                        Equipment           
TASC, Inc.                            Computers and Related      Dec-95             4,757   Apr-98         1,301         4,778
                                        Equipment           
TASC, Inc.                            Computers and Related      Jan-96             4,351   Apr-98         1,145         4,370
                                        Equipment           
TASC, Inc.                            Computers and Related      Jan-96             4,139   Apr-98         1,228         4,157
                                        Equipment           
TASC, Inc.                            Computers and Related      Jan-96             3,477   Apr-98           970         3,492
                                        Equipment           
The Dow Chemical Company              Varian Spectra A4400       Feb-93           102,149   Mar-98        29,500       113,385
                                        Plus System        
The Helen Mining Company              Mining                     Mar-92           333,458   Mar-92        72,385       347,258
The Helen Mining Company              Battery Locomotive         Apr-92           185,249   May-97        39,131       198,041
The Helen Mining Company              Mining                     May-92           641,854   Aug-93        44,235       679,436
The Kendall Company                   Computers                  Aug-94            21,819   Nov-97         8,184        24,926
The Kendall Company                   Computers                  Aug-94            21,581   Dec-97         3,099        24,654
The Kendall Company                   Computer Equipment         Aug-94            55,013   May-98         9,632        64,411
The Kendall Company                   Computers                  Oct-94            45,471   Nov-97        14,322        51,946
The Kendall Company                   Computers                  Oct-94            17,206   Dec-97         2,360        19,656
The Kendall Company                   Computer                   Oct-94             4,735   Dec-96         2,233         3,822
The Kendall Company                   Computers                  Dec-94            20,067   Nov-97         5,924        32,675
The Kendall Company                   Computers                  Dec-94             8,586   Dec-97         2,112        13,980
The Kendall Company                   Computer Equipment         Dec-94            57,455   May-98         7,243        95,337
The Kendall Company                   Centillion Speedswitch(s)  Mar-95            43,770   Oct-97        18,906        51,335
The Kendall Company                   Computers                  Mar-95             9,553   Dec-96         5,817         6,304
The Kendall Company                   Computer Equipment         Mar-95           346,935   May-98        25,290       472,246
The Kendall Company                   Computers                  Jun-95            11,771   Oct-97 to      5,993         9,856
                                                                                              Dec-97 
The Kendall Company                   Computers and Related      Oct-95           118,854   Jun-98         8,786       109,712
                                        Equipment           
The Kendall Company                   Computers                  Jan-95 to         34,449   Nov-97        14,009        40,403
                                                                   Mar-95 
The Pittston Company                  1992 Joy 14Cm10            Jun-92           846,883   Apr-98       127,500       916,497
                                        Continuous Miner  
The Pittston Company                  Drill                      Nov-93           387,000   Apr-97       184,092       254,059
The Pittston Company                  Wheel Loader               Nov-93           382,831   Apr-97       243,561       169,890   13
The Pittston Company                  Wheel Loader               Nov-93           381,922   Apr-97       223,879       198,841
The Pittston Company                  Drill                      Nov-93           358,831   Apr-97       203,034       203,113
The Pittston Company                  Diesel Generator           Nov-93           244,450   Apr-97       156,164       114,774
The Pittston Company                  Crawler Tractor            Nov-93           208,800   Apr-97       136,878        98,035
The Pittston Company                  Crawler Tractor            Nov-93           201,786   Apr-97       132,280        94,742
The Pittston Company                  Continuous Miner           Mar-95           819,349   Apr-97       546,207       346,748
The Stop & Shop Supermarket Co.       Bakery Labeling Machine    Dec-95             2,750   Mar-97         2,568           759
Trans Ocean Container Corporation     Intermodal Containers      Sep-93            65,073   Oct-96 to     53,512        24,637
                                                                                              Apr-97 
Trans Ocean Container Corporation     Intermodal Containers      Sep-93            23,074   Dec-97        14,130        23,576
Trans Ocean Container Corporation     Intermodal Containers      Sep-93            13,870   Dec-95        10,608         5,537
Trans Ocean Container Corporation     Intermodal Containers      Sep-93            13,223   Apr-95        12,095         3,016
Trans Ocean Container Corporation     Intermodal Containers      Sep-93            10,196   Oct-95         6,112         3,595
Trans Ocean Container Corporation     Intermodal Containers      Sep-93             6,744   Jul-94         7,398           825
Trans Ocean Container Corporation     Intermodal Containers      Sep-93             6,706   Jul-95         6,394         2,069
Trans Ocean Container Corporation     Intermodal Container - T20 Sep-93             3,372   Mar-98         1,572         2,615
Trans Ocean Container Corporation     Intermodal Container - T20 Sep-93             3,372   Mar-98         1,341         2,615
Trans Ocean Container Corporation     Intermodal Container - T20 Sep-93             3,372   Mar-98         3,248         2,615
Trans Ocean Container Corporation     Intermodal Container - T20 Sep-93             3,372   Mar-98         3,900         2,615
Trans Ocean Container Corporation     Intermodal Container - T20 Sep-93             3,372   Mar-98           600         2,615
Union Tank Car Company                Rail Car                   Oct-92         1,222,542   Jul-95     1,383,118       601,100
Union Tank Car Company                Rail Car                   Oct-92           389,367   Sep-95       441,332       203,680
Union Tank Car Company                Rail Car                   Oct-92           389,367   Oct-95       442,564       209,760
Union Tank Car Company                Rail Car                   Oct-92            26,000   Apr-96        21,695        18,920
Union Tank Car Company                Box Car                    Oct-92            25,000   Feb-95        23,158        21,678
Union Tank Car Company                Box Car                    Oct-92            13,000   Aug-97         9,829        12,805
Union Tank Car Company                Boxcar                     Oct-92            13,000   Nov-96         8,979        11,220
Union Tank Car Company                Boxcar                     Oct-92            13,000   Apr-97         9,829        12,100
Union Tank Car Company                Rail Car                   Oct-92            12,000   Apr-95        11,088        12,752
Union Tank Car Company                Rail Car                   Oct-92            12,000   Jan-96        10,371         8,202
Union Tank Car Company                Rail Car                   Dec-92            13,000   Jan-93        14,569           880
US Surgical Corp./ARR, Inc.           Falcon 50 Air Craft        Aug-92         5,275,000   Oct-97     5,200,000     4,417,201
USX Steel Company                     Material Handling          Jun-93           711,679   Oct-97       175,000       776,136
                                        Equipment       
                                                                             -------------           ------------ -------------
                                                                              $52,871,585            $33,547,640   $35,969,474
                                                                             =============           ============ =============
</TABLE>

                                      A-44
<PAGE>
<TABLE>
<CAPTION>
                                                                                                                   Excess of
                                                                              Equipment                           Rents Over
                                                                 Acquisition  Acquisition            Sale         Expenses
Lessee                              Type of Equipment            Date (1)      Price (2)  Sale Date Price (3)        (4)       Notes

ATEL CASH DISTRIBUTION FUND V
<S>                                   <C>                        <C>          <C>           <C>       <C>          <C>           <C>

Barney's, Inc                         Retail Store FF&E          Sep-93        $3,312,940   Jul-96    $1,703,435    $1,594,669   11
Burlington Northern & Santa Fe        Container - Domestic       May-94             9,787   Jan-98         8,434         4,274
Burlington Northern & Santa Fe        1995 Pines 48' Container   Oct-94             9,635   Jan-98         8,591         3,672
Burlington Northern Railroad Company  Covered Hopper Cars        Mar-96            35,000   Dec-96        22,425           619
Burlington Northern Railroad Company  Covered Hopper Cars        Mar-96            35,000   Jan-97        36,367             -
Burris Foods                          Trailers                   Apr-94           108,442   Dec-95       121,000        53,210
Canadian Pacific Railr                Jumbo Covered Hopper       Mar-96            35,263   Jun-98        29,607         7,600
                                        Railcar            
Clark Oil & Refining Corporation      Refrigeration Units        Aug-93         1,268,656   Dec-96       560,000     1,164,635
Conagra, Inc.                         Jumbo Covered Hopper       Mar-96            35,263   Jun-98        29,341        11,875
                                        Railcar            
IBM Corporation                       Office Furniture           Aug-93         1,131,815   Nov-97       431,901     1,087,248
IBM Corporation                       Office furniture           Sep-93           693,896   Jun-95       516,291       666,576
International Paper Company           Wheel Loader               Aug-94           112,054   Apr-98        45,000       110,842
International Paper Company           Utility Hand Truck         Sep-94             4,300   Nov-97         1,415         3,314
International Paper Company           Floor Sweeper/Scrubber     Sep-94             9,069   Apr-98         1,000         8,972
International Paper Company           Kotmatsu Articulated Wheel Oct-94           201,039   Apr-98        40,000       200,267
International Paper Company           Kotmatsu Articulated Wheel Oct-94           201,039   Apr-98        40,000       200,267
International Paper Company           Taylor Forklift            Oct-94            80,169   Apr-98        32,000        79,861
International Paper Company           Taylor Forklift            Oct-94            80,169   Apr-98        32,000        79,861
International Paper Company           Caterpillar 980F Wheel     Oct-94           248,304   Apr-98        70,000       247,350
                                        Loader               
International Paper Company           Caterpillar 936F Wheel     Oct-94           112,054   Apr-98        45,000       111,623
                                        Loader               
International Paper Company           Komatsu Forklift           Nov-94            28,445   Jun-98         8,400        28,335
International Paper Company           Komatsu Forklift           Nov-94            28,445   Jun-98         8,400        28,335
International Paper Company           Bolzoni Paper Roll Clamp   Nov-94            10,376   Jun-98           500        10,336
International Paper Company           Hyster Clamp Truck         Dec-94            49,672   May-98        13,000        49,481
International Paper Company           Hyster Clamp Truck         Dec-94            49,672   May-98        13,000        49,481
International Paper Company           Hyster Clamp Truck         Dec-94            49,672   May-98        13,000        49,481
International Paper Company           Bolzoni Paper Roll Clamp   Dec-94            10,376   Jun-98           500        10,336
International Paper Company           Hyster S120Xl2 Lift Truck  Feb-95            52,884   Apr-98        20,000        45,384
International Paper Company           Hyster Forklift W/Paper    Mar-95            65,584   Apr-98        30,000        56,284
                                        Roll                  
International Paper Company           Hyster Forklift W/Paper    Mar-95            52,884   Apr-98        20,000        45,384
                                        Roll                  
International Paper Company           Hyster Forklift W/Paper    Mar-95            52,884   Apr-98        20,000        45,384
                                        Roll                  
International Paper Company           Hyster Forklift W/Paper    Mar-95            52,884   May-98        20,000        45,384
                                        Roll                  
International Paper Company           Hyster Forklift W/Paper    Mar-95            52,884   May-98        20,000        45,384
                                        Roll                  
Louis Dreyfus Corporation             Jumbo Covered Hopper       Mar-96           105,788   Apr-98       107,505         4,096
                                        Railcar            
Mobil Administrative Services Company Helicopter                 Jun-93           844,525   Mar-95       920,000       308,000
Mobil Oil Corporation                 Environmental Ejector      May-93           423,000   Apr-97        88,000       458,067
                                        Systems             
Mobil Oil Corporation                 Wheel Loader               Oct-93            70,200   Oct-96        39,000        50,579
Nabisco, Inc.                         Hewlett Packard Notebook   Feb-95           357,104   Apr-98        62,807       348,386
                                        Computers             
Nabisco, Inc.                         Hewlett Packard Printers   Feb-95            39,572   Apr-98        29,370        38,610
Nabisco, Inc.                         Hewlett Packard Printers   Feb-95            29,744   Apr-98        29,370        29,016
Nabisco, Inc.                         Computers                  Aug-95 to        123,509   Aug-97 to    100,813        51,414
                                                                   Oct-95                     Nov-97 
Nabisco, Inc.                         Computers & Related        Aug-95 to         66,932   Dec-96 to     54,102        29,697
                                        Equipment                  Oct-95                     Jun-97 
Owens Corning Fiberglas Corp.         Forklifts                  Jul-93           157,462   May-97        31,800       157,273
Praxair, Inc.                         Tractors                   Jun-94           576,685   Sep-96 to    214,000       340,982
                                                                                              Apr-97 
Praxair, Inc.                         Tractors                   Jun-94            91,429   Aug-97 to     23,028        54,060
                                                                                              Sep-97 
PV Trucking                           Tractors                   Jun-94            75,333   Jan-96        50,000        36,000
Quaker Coal Company                   Mining equipment           Jun-94         1,118,880   Jun-95       930,251       347,926
Quaker Coal Company                   Crawler Dozer              Jun-94           913,073   Oct-96       425,000       732,192
Quaker Coal Company                   Mining equipment           Jun-94           595,000   Jun-95       505,775       173,253
Quaker Coal Company                   Mining equipment           Dec-94         3,000,000   Jun-95     2,696,718       794,600
Schwegmann Giant Super Markets        Fixtures & Equipment       Jun-95         1,784,722   May-98       221,893     1,043,329
Schwegmann Giant Supermarkets, Inc.   Retail Store FF&E          Jun-95           574,703   Oct-96       527,405       167,353
Schwegmann Giant Supermarkets, Inc.   Retail Store FF&E          Jun-95           309,024   Dec-96       272,109       101,701
Sebastiani Vineyards                  American Oak Barrels       Aug-94            95,848   Jun-98        20,148        87,769
Soo Line Railroad Comp                Jumbo Covered Hopper       Mar-96            35,263   Jun-98        30,551        14,688
                                        Railcar            
Star Enterprise                       Tractors                   Jun-94           887,041   Jan-97 to    331,750       649,727
                                                                                              Apr-97 
Star Enterprise                       Tractors                   Jun-94            36,492   Aug-97        12,850        26,827
TASC, Inc.                            Computers & Related        Mar-96             3,634   Feb-98           586         5,451
                                        Equipment         
TASC, Inc.                            Computers & Related        Mar-96             3,634   Feb-98           859         5,451
                                        Equipment         
TASC, Inc.                            Computers & Related        Mar-96             3,634   Feb-98           859         5,451
                                        Equipment         
TASC, Inc.                            Computers & Related        Mar-96             3,634   Feb-98           859         5,451
                                        Equipment         
TASC, Inc.                            Computers & Related        Mar-96             3,634   Feb-98           859         5,451
                                        Equipment         
TASC, Inc.                            Computers & Related        Mar-96             3,634   Feb-98           859         5,451
                                        Equipment         
TASC, Inc.                            Computers & Related        Mar-96             3,634   Feb-98           859         5,451
                                        Equipment         
TASC, Inc.                            Computers & Related        Mar-96             3,634   Feb-98           859         5,451
                                        Equipment         
TASC, Inc.                            Computers & Related        Mar-96             3,310   Feb-98           782         4,965
                                        Equipment         
TASC, Inc.                            Computers & Related        Mar-96             3,310   Feb-98           782         4,965
                                        Equipment         
TASC, Inc.                            Computers & Related        Dec-94           237,685   Jul-96        70,000       226,989
                                        Equipment         
Texaco Trading & Transportation       Tractors                   Jun-94           983,717   Jul-97 to    361,500       757,569
                                                                                              Nov-97 
Texaco Trading & Transportation       Tractors                   Jun-94           983,294   Feb-97 to    370,000       742,508
                                                                                              Jun-97 
Texaco Trading & Transportation       Tractors                   Jun-94           338,992   Aug-97 to    120,000       274,077
                                                                                              Nov-97 
Texaco Trading & Transportation       Tractors & Trailers        Jun-94           156,645   Apr-97        55,000       120,533
Texaco Trading & Transportation       Tractors                   Jun-94           138,783   Feb-97 to     59,250        94,571
                                                                                              Mar-97 
Texaco Trading & Transportation       Tank Trailers              Jun-94            73,805   Aug-97 to     25,000        59,672
                                                                                              Nov-97 
The Atchison Topeka & Santa Fe        Intermodal Containers      Apr-94             9,787   Jan-96         9,612         1,832
     Railroad Company          
The Atchison Topeka & Santa Fe        Intermodal Containers      May-94             9,787   Jan-96         9,612         1,832
     Railroad Company          
The Atchison Topeka & Santa Fe        Intermodal Containers      Jun-94             9,787   Jan-95        10,107           611
     Railroad Company          
The Atchison Topeka & Santa Fe        Intermodal Containers      Jun-94             9,787   Jan-96         9,612         1,832
     Railroad Company          
The Atchison Topeka & Santa Fe        Intermodal Containers      Oct-94             9,635   Jan-95        10,123           306
     Railroad Company          
The Burlington Northern & Santa       Intermodal Containers      May-94             9,787   Jul-96         9,337         2,548
     Fe Railway Co.             
The Burlington Northern & Santa       Intermodal Containers      Jun-94             9,787   Jul-96         9,337         2,843
     Fe Railway Co.             
The Burlington Northern & Santa       Intermodal Containers      Jun-94             9,787   Jan-97         8,991         2,843
     Fe Railway Co.             
The Burlington Northern & Santa       Intermodal Containers      Nov-94             9,634   Jul-96         9,462         1,993
     Fe Railway Co.             
The Dow Chemical Company              Copiers                    Jul-94            42,694   Jul-95        31,150        13,588
The Dow Chemical Company              Copiers                    Jul-94           195,975   Jan-96       139,400       224,830
The Dow Chemical Company              Copiers                    Oct-94           230,577   Jan-96       204,000        76,459
The Dow Chemical Company              Copiers                    Jan-95            37,493   Dec-95        20,750        12,437
The Dow Chemical Company              Copiers                    Jan-95           110,900   Jan-96        98,750        38,074
The Dow Chemical Company              Copiers                    Apr-95            13,455   Dec-95        14,080         2,199
The Dow Chemical Company              Staplers                   Apr-95           109,800   Jan-96       119,000        18,576
The Kendall Company                   Computer                   Mar-96             3,735   Jan-97         4,112           686
The Pittston Company                  1993 Cat D10N Crawler      Nov-93           857,082   Apr-98       200,000       697,459
                                        Tracter             
The Pittston Company                  1993 Cat D10N Crawler      Nov-93           857,082   Apr-98       200,000       697,459
                                        Tracter             
The Pittston Company                  1993 Cat D10N Crawler      Nov-93           531,670   Feb-98       175,000       432,652
                                        Tracter             
The Pittston Company                  1993 Cat D10N Crawler      Nov-93           531,670   Feb-98       175,000       432,652
                                        Tracter             
The Pittston Company                  1993 Cat D10N Crawler      Nov-93           531,670   Feb-98       175,000       432,652
                                        Tracter             
Tom's Food, Inc.                      Tractors                   Jun-94           197,195   Aug-96 to     77,000       181,009
                                                                                              Feb-97 
Tom's Foods, Inc.                     Tractors                   Jun-94            61,908   Feb-96        36,800        49,982
Trans Ocean Container Corporation     Intermodal Containers      Sep-93            62,100   Oct-96 to     51,749        21,640
                                                                                              Apr-97 
Trans Ocean Container Corporation     Intermodal Containers      Sep-93            53,507   Dec-95        46,560        21,970
Trans Ocean Container Corporation     Intermodal Containers      Sep-93            25,925   Apr-96        19,257        10,817
Trans Ocean Container Corporation     Intermodal Containers      Sep-93            22,868   Jul-97 to     21,673        13,976
                                                                                              Dec-97 
Trans Ocean Container Corporation     Intermodal Containers      Sep-93            18,054   Jul-94        18,898         2,371
Trans Ocean Container Corporation     Intermodal Containers      Sep-93            10,116   Apr-95         5,246         2,345
Trans Ocean Container Corporation     Intermodal Containers      Sep-93             5,814   Jul-95         5,263         1,866
Trans Ocean Container Corporation     Intermodal Containers      Sep-93             4,647   Oct-95         4,405           850
Trans Ocean Container Corporation     Intermodal Containers      Sep-93             3,372   Oct-94         3,675         1,674
Trans Ocean Container Corporation     Intermodal Containers      Sep-93             2,245   Jun-96         2,468         1,041
Trans Ocean Container Corporation     Intermodal Container - T40 Sep-93             5,693   Mar-98         2,715         3,431
Trans Ocean Container Corporation     Intermodal Container - T20 Sep-93             3,372   Mar-98           963         2,032
Trans Ocean Container Corporation     Intermodal Container - T20 Sep-93             3,372   Mar-98           923         2,032
Trans Ocean Container Corporation     Intermodal Container - T20 Sep-93             3,372   Mar-98         1,751         2,032
Trans Ocean Container Corporation     Intermodal Container - C20 Sep-93             2,245   Mar-98         2,080         1,353
Trans Ocean Container Corporation     Intermodal Container - C20 Sep-93             2,245   Mar-98         1,284         1,353
Tyson Foods, Inc.                     Tractors                   Jun-93         1,585,000   Jul-96       637,500     1,027,080
Tyson Foods, Inc.                     Tractors                   Aug-93         1,575,000   Jul-96       637,500     1,022,490
                                                                             -------------           ------------ -------------
                                                                              $31,330,129            $15,973,910   $19,988,433
                                                                             =============           ============ =============
</TABLE>

                                      A-45
<PAGE>
<TABLE>
<CAPTION>
                                                                                                                   Excess of
                                                                              Equipment                           Rents Over
                                                                 Acquisition  Acquisition            Sale         Expenses
Lessee                              Type of Equipment            Date (1)      Price (2)  Sale Date Price (3)        (4)       Notes

ATEL CASH DISTRIBUTION FUND VI
<S>                                <C>                           <C>           <C>           <C>       <C>          <C>          <C>

American President                 Tractors                      Nov-95          $759,092   Jul-96 to   $327,062      $225,942
     Trucking Co., Ltd.                                                                        Apr-97 
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   May-98         8,507         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   Apr-98         8,507         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   Apr-98         7,366         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   Jan-98         8,080         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   Apr-98         8,507         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   Mar-98         8,380         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   May-98         6,734         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   Mar-98         8,507         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   May-98         8,507         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   May-98         8,507         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   Jan-98         8,024         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   Feb-98         9,530         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   May-98         8,507         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   Feb-98         8,380         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   Jan-98         8,080         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   Jan-98         8,024         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   Jan-98         8,080         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   Apr-98         8,507         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   Apr-98         9,507         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   May-98         8,507         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   Jan-98         8,080         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   May-98         8,507         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   Mar-98         8,380         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   Mar-98         8,507         8,990
Coors Transportation Company       Utility Refrigerated Trailer  Nov-95            17,341   Jan-98         8,080         8,990
Mobil Oil Corporation              Petroleum Wax Car             Feb-96            59,953   Jan-97        64,717         3,597
Perdue Transportation Incorporated Tractors                      Nov-95            47,038   Feb-96        45,838         3,900
The Atchison Topeka & Santa Fe     Intermodal Containers         Jan-94            20,068   Jan-95        21,084           567
     Railroad Company          
The Atchison Topeka & Santa Fe     Intermodal Containers         Sep-94            10,034   Jan-95        10,446           335
     Railroad Company          
The Atchison Topeka & Santa Fe     Intermodal Containers         Sep-94            20,068   Jan-96        19,973         2,543
     Railroad Company          
The Atchison Topeka & Santa Fe     Intermodal Containers         Nov-94            10,034   Feb-95        10,446         1,159
     Railroad Company          
The Atchison Topeka & Santa Fe     Intermodal Containers         Nov-94            10,034   Jan-96        10,113           968
     Railroad Company          
The Atchison Topeka & Santa Fe     Intermodal Containers         Nov-94             9,633   Apr-96         9,588         1,240
     Railroad Company          
The Atchison Topeka & Santa Fe     Intermodal Containers         Nov-94             6,453   Apr-96         6,567           788
     Railroad Company          
The Burlington Northern & Santa    Ext. Post Container           Nov-94             9,633   Oct-97         8,767         3,379
     Fe Railway Co.             
The Burlington Northern & Santa    Intermodal Container          Sep-94            10,034   Jul-96         9,717         2,225
     Fe Railway Company         
The Burlington Northern & Santa    Intermodal Container          Nov-94            10,034   Jul-96         9,855         1,614
     Fe Railway Company         
The Burlington Northern Railroad   Utility Refrigerated          Nov-95           312,145   Sep-97 to    144,951       161,813
     Company                            Trailers                                               Dec-97 
The Burlington Northern Railroad   Covered Hopper Cars           Mar-96            70,526   Sep-97 to     67,033        10,100
     Company                                                                                   Dec-97 
The Burlington Northern Railroad   Covered Hopper Cars           Mar-96            70,000   Dec-96 to     59,553           619
     Company                                                                                   Jan-97 
Tracy Locke, Inc.                  Printers                      Mar-95            12,470   Sep-95        12,179         1,662
Trans Ocean Container Corporation  Intermodal Containers         Dec-95            17,748   Oct-96 to 
                                                                                               Jan-97     20,730         1,107
Trans Ocean Container Corporation  Intermodal Containers         Dec-95            11,063   Jul-97 to     12,070         1,986
                                                                                               Dec-97 
Trans Ocean Container Corporation  Intermodal Containers         Dec-95             9,529   Jun-96        11,167           700
Tyson Foods, Inc.                  Computers                     Jun-95           563,411   Jun-97 to     66,323       522,877
                                                                                               Nov-97 
Tyson Foods, Inc.                  Computers & Related           Jun-95           195,152   Jun-97        23,080       181,113
                                        Equipment      
                                                                             -------------            ----------- -------------
                                                                               $2,677,677             $1,179,561    $1,354,984
                                                                             =============            =========== =============
</TABLE>

                                      A-46
<PAGE>
<TABLE>
<CAPTION>
                                                                                                                   Excess of
                                                                              Equipment                           Rents Over
                                                                 Acquisition  Acquisition            Sale         Expenses
Lessee                              Type of Equipment            Date (1)      Price (2)  Sale Date Price (3)        (4)       Notes

ATEL CAPITAL EQUIPMENT FUND VII
<S>                                <C>                           <C>           <C>           <C>       <C>          <C>          <C>

Anchor Glass Container Corporation Glass Packaging Equipment     Apr-98           $45,598   Jun-98       $60,611       $10,086
Cargill, Inc.                      Railcars                      Jan-97            99,000   May-97 to     96,747         9,415
                                                                                               Oct-97
Consolidated Rail Corporation      Domestic Container            Aug-97            10,255   Jan-98        10,752         9,646
Costain Coal, Inc.                 Vme/Euclid 339Sd Rear Dump    Apr-98           805,181   Jun-98       886,985       161,683
                                        Truck                 
Exel Logistics, Inc.               1993 International 8200       Apr-98            88,610   May-98        89,307        16,341
                                        Tractor            
Exel Logistics, Inc.               1993 Monon Semi-Trailer       Apr-98            45,337   May-98        45,693         8,360
International Rectifier Corp.      Furnace/Heat Base             Apr-98           153,515   Jun-98       154,782        71,669
International Rectifier Corp.      Bdf-41 Furnace W/Attachments  Apr-98           124,193   Jun-98       125,218        57,233
International Rectifier Corp.      Wafer Cleaning System         Apr-98            86,791   Jun-98        95,000        26,672
International Rectifier Corp.      Optical Assoc.Handler         Apr-98            13,336   May-98        12,000         4,480
                                        Assy W/Kit       
International Rectifier Corp.      VSLI Critical Dim. Measure    Apr-98            12,056   May-98        16,805         1,139
                                        System                
International Rectifier Corp.      Itc5511D Energy Testing       Apr-98             9,027   Jun-98         6,000         3,518
                                        System             
Riceland Foods, Inc                23,700 Gal Uni-Temp Tank Car  Jan-98            17,594   Apr-98        17,594         1,981
Smitty'S Super Valu, Inc.          Furniture,Fixtures &          Apr-98           451,861   Jun-98       601,960       139,202
                                        Equipment       
Southwest Health Center, Inc.      Siemens Mammographic X-Ray    Apr-98            13,000   May-98        18,500         1,331
Stater Brothers Markets            Grocery Store Equipment       Apr-98            13,643   Jun-98             -        16,315
Tarmac America, Inc.               Tractors                      Mar-97            35,000   Aug-97        33,666         6,119
Thompson Pipe & Steel Company      Office Furniture & Fixtures   Apr-98            31,918   May-98        25,000         6,012
                                                                             -------------           ------------ -------------
                                                                               $2,055,915             $2,296,620      $551,202
                                                                             =============           ============ =============

                                                        TOTALS OF ALL FUNDS: $210,770,673           $103,416,436   $170,010,710
                                                                             =============           ============ =============
</TABLE>
                                      A-47
<PAGE>

               TABLE VI SALES OR DISPOSALS OF EQUIPMENT FOOTNOTES


     (1) "Acquisition  Date" is the date the Equipment was acquired by the prior
program.

     (2)  "Equipment  Acquisition  Price"  is the  actual  cost  of the  item of
Equipment,  including  Acquisition Fees, and any other expenditures  incurred by
the prior program in the acquisition of the Equipment.

     (3) "Sale  Price" is the  actual  cash  received  for the  purchase,  early
termination  or casualty of the  Equipment  upon Lease  termination,  net of any
direct out-of-pocket  closing costs incurred by the prior program as a result of
such termination.

     (4) "Excess of Rents Over Expenses" is a total amount of Lease rents,  less
any applicable direct  out-of-pocket  costs incurred by the prior program during
the term of the Lease for the particular Lease transaction.

     (5) "Sale Price" represents cash and non-cash amounts distributed by Lessee
as a result of U.S. Bankruptcy  Court-approved  Chapter 11 Reorganization  Plan.
Distributions  were as  follows:  Cash  $9,512;  Senior  Secured  Notes  $1,000;
Convertible  Subordinated  Notes $700;  Common  Stock $296  (market  value as of
7/16/92).

     (6) The  original  lease  included  a mobile  MRI unit and a  tractor.  The
tractor leased under the original lease was sold to the lessee. The MRI unit has
been leased to a third party on a 24 month term with a bargain  purchase  option
to be exercised at the end of the lease term. The Equipment  under this lease is
owned 1/3 by ATEL Cash  Distribution Fund and 2/3 By ATEL Cash Distribution Fund
II.

     (7) "Sale Price" represents cash and non-cash amounts distributed by Lessee
as a result of U.S.  Bankruptcy  Court-approved  pre-packaged  Chapter  11 Plan.
Distributions  were as follows:  Cash  $602,435;  Senior  Secured Notes $72,800;
Convertible Subordinated Notes $50,900; Common Stock $21,482 (market value as of
7/16/92).

     (8) "Sales  Price"  represents  cash and non-cash  amounts  distributed  by
Lessee as a result of U.S.  Bankruptcy  Court-approved  pre-packaged  Chapter 11
Plan.  Distributions  were as  follows:  Cash  $431,499;  Senior  Secured  Notes
$51,600;  Convertible  Subordinated Notes $36,100;  Common Stock $15,233 (market
value as of 7/16/92).

     (9) "Equipment  Acquisition Price" represents a 2/3 beneficial  interest in
the  transaction.  The  Equipment  was  foreclosed  in  September  1990  by  the
non-recourse lender, John Hancock Leasing. Actual cash/equity amount paid by the
prior program for the Equipment was  $1,430,345,  the balance of the Acquisition
Price was financed with non-recourse debt. "Sale Price" represents the amount of
the non-recourse debt written off at the time of foreclosure.

     (10) The "Sales Price" represents the sum of cash received from the sale of
the aircraft  pre-bankruptcy  petition,  plus all amounts received by the lessor
under its  unsecured  claim  filed in the  lessee's  Chapter 11  reorganization,
through the date of this table.  Through September 30, 1996, such claim payments
have amounted to 40% of the allowed claim amount of $776,542, or $310,617.

                                      A-48
<PAGE>

     (11)  On  January  10,  1996,  Barney's,   Inc.,  a  lessee  of  ATEL  Cash
Distribution Fund III, ATEL Cash Distribution Fund IV and ATEL Cash Distribution
Fund V filed for  protection  under Chapter 11 of the U. S.  Bankruptcy  Act. In
July of 1996,  the lessors sold their  unsecured  claim in the bankruptcy for an
amount  equal  to  approximately  73%  of  the  unsecured  claim,  which,  after
satisfaction of the non-recourse loan due to the CIT Group/Equipment  Financing,
Inc.  (and taking  into  account all prior  rents  received,  security  deposits
retained and loan  proceeds  previously  received),  resulted in proceeds to the
lessors in excess of their original investments in the equipment.

     (12) "Equipment  Acquisition Price" represents a 1/3 beneficial interest in
the  transaction.  The  Equipment  was  foreclosed  in  September  1990  by  the
non-recourse lender, John Hancock Leasing. Actual cash/equity amount paid by the
prior program for the Equipment  was  $715,172,  the balance of the  Acquisition
Price was financed with non-recourse debt. "Sale Price" represents the amount of
the non-recourse debt written off at the time of foreclosure.

     (13) The remaining equipment  originally leased to The Helen Mining Company
is now leased to Costain Coal. Quaker State  Corporation  continued to guarantee
payments through the original lease term. The new lease also includes a two year
extension of the lease term.

                                      A-49

<PAGE>
EXHIBIT  B


                      ATEL CAPITAL EQUIPMENT FUND VIII, LLC

                              AMENDED AND RESTATED
                            LIMITED LIABILITY COMPANY
                               OPERATING AGREEMENT


                                  December 7, 1998




<PAGE>



                      ATEL CAPITAL EQUIPMENT FUND VIII, LLC

                            LIMITED LIABILITY COMPANY
                               OPERATING AGREEMENT

                                TABLE OF CONTENTS

                                                                            Page
 1.    NAME AND PRINCIPAL PLACE OF BUSINESS.................................B-1

 2.    DEFINITIONS..........................................................B-1

 3.    BUSINESS AND PURPOSE.................................................B-7

 4.    TERM.................................................................B-8

 5.    MANAGER..............................................................B-8

 6.    INITIAL AND ADDITIONAL MEMBERS.......................................B-8
         Section 6.1  Initial Members.......................................B-8
         Section 6.2  Additional Members....................................B-8
         Section 6.3  Conditions to Admission...............................B-8
         Section 6.4  Admission as a Member.................................B-8
         Section 6.5  Limitation on Additional Insurance....................B-8
         Section 6.6  Escrow................................................B-9
         Section 6.7  Capital Account.......................................B-9

7.     LIABILITY AND STATUS OF MEMBERS......................................B-9

8.     COMPENSATION TO THE MANAGER AND/OR AFFILIATES........................B-9
         Section 8.1  General Limitation....................................B-9
         Section 8.2  Asset Management Fee..................................B-9
         Section 8.3  Asset Management Fee Limit ...........................B-9
         Section 8.4  Other Services.......................................B-11
         Section 8.5  Payment of Fees on Removal...........................B-11
         Section 8.6 Employment of Broker-Dealers..........................B-11

 9.    FUND EXPENSES AND RESERVES..........................................B-11
         Section 9.1  Reimbursement of Manager.............................B-11
         Section 9.2  Limitation on Reimbursement..........................B-12
         Section 9.3  Fund Expenses........................................B-12
         Section 9.4  Reserves.............................................B-13

10.    ALLOCATION OF INCOME, LOSS AND DISTRIBUTIONS........................B-13
         Section 10.1  Allocation of Net Income and Net
                         Loss Prior to Initial Closing Date................B-13

Atel8-1/operag6.wpd
                                       ii

<PAGE>



         Section 10.2  Allocation of Net Income and Net
                         Loss After Initial Closing Date...................B-13
         Section 10.3  Special Allocations.................................B-13
         Section 10.4  Distribution of Cash From Operations................B-15
         Section 10.5   Distribution of Cash From Sales or Refinancing.....B-15
         Section 10.6   Distributions of Cash From Reserve Account.........B-15
         Section 10.7   Determination of Amounts to be Distributed.........B-15
         Section 10.8   Consent to Allocations.............................B-16
         Section 10.9   Limitation on Distributions........................B-16
         Section 10.10  Allocation to Manager..............................B-16
         Section 10.11  Return of Unused Capital...........................B-16
         Section 10.12  Distributions in Kind..............................B-16
         Section 10.13  Withholding Taxes..................................B-17

11.    ASSIGNMENT OF FUND INTERESTS........................................B-17
         Section 11.1  Limitations on Transfer.............................B-17
         Section 11.2  Distributions and Effective Date of Transfer........B-18
         Section 11.3  Governmental Restrictions...........................B-18
         Section 11.4  Non-Complying Transfers.............................B-18
         Section 11.5  Misrepresentations and Forfeit......................B-18

12.    SUBSTITUTED MEMBERS.................................................B-19
         Section 12.1  Limitations on Substitution.........................B-19
         Section 12.2  Consent to Admission................................B-19
         Section 12.3  Amendment of Agreement..............................B-19

13.    REPURCHASE OF FUND INTERESTS........................................B-19

14.    BOOKS, RECORDS, ACCOUNTINGS AND REPORTS.............................B-20
         Section 14.1  Books of Account and Records........................B-20
         Section 14.2  Audited Annual Financial Statements.................B-21
         Section 14.3  Other Annual Reporting..............................B-21
         Section 14.4  Quarterly Reports...................................B-22
         Section 14.5  Unaudited Quarterly Financial Statements............B-22
         Section 14.6  Other Quarterly Reports.............................B-22
         Section 14.7  Tax Returns.........................................B-22
         Section 14.8  Governmental Reports................................B-23
         Section 14.9  Maintenance of Suitability Records..................B-23

15.    RIGHTS, AUTHORITY, POWERS AND RESPONSIBILITIES
             OF THE MANAGER................................................B-23
         Section 15.1  Services of the Manager.............................B-23
         Section 15.2  Authority of the Manager............................B-23
         Section 15.3  General Powers and Fiduciary Duty...................B-26
         Section 15.4  Limitations on General Partner's Authority..........B-26
         Section 15.5  Limitation on Manager's Liability...................B-29
         Section 15.6  Tax Matters Partner.................................B-29

Atel8-1/operag6.wpd
                                       iii

<PAGE>



         Section 15.7  Minimum Investment in Equipment /Maximum Front-End
                       Fees................................................B-29
         Section 15.8  Reliance on Manager's Authority.....................B-30

16.    RIGHTS, POWERS AND VOTING RIGHTS OF THE MEMBERS.....................B-31
         Section 16.1  Limitation on Member Authority......................B-31
         Section 16.2  Voting Rights.......................................B-31
         Section 16.3  Voting Procedures...................................B-31
         Section 16.4  Limitations on Member Rights........................B-32
         Section 16.5  Limitations on Power to Amend Agreement.............B-33
         Section 16.6  Member List.........................................B-33
         Section 16.7  Dissenters' Rights and Limitations on Mergers and 
                       Roll-ups............................................B-33

17.    TERMINATION OF A MANAGER AND TRANSFER OF A
         MANAGER'S INTEREST................................................B-34
         Section 17.1  Removal or Withdrawal...............................B-34
         Section 17.2  Other Terminating Events............................B-34
         Section 17.3  Election of Successor Manager; Continuation of 
                       Fund Business.......................................B-35
         Section 17.4  Admission of Successor or Additional Manager........B-35
         Section 17.5  Effect of a Terminating Event.......................B-35
         Section 17.6  Election of Additional Manager......................B-36
         Section 17.7  Assignment of General Partner's Interest............B-36
         Section 17.8  Members' Participation in Manager's Bankruptcy......B-36

18.    CERTAIN TRANSACTIONS................................................B-36

19.    TERMINATION AND DISSOLUTION OF THE FUND.............................B-37
         Section 19.1  Termination and Dissolution.........................B-37
         Section 19.2  Accounting and Liquidation..........................B-37

20.    SPECIAL POWER OF ATTORNEY...........................................B-38
         Section 20.1  Execution of Power of Attorney......................B-38
         Section 20.2  Special Power of Attorney...........................B-38

21.    INDEMNIFICATION.....................................................B-39
         Section 21.1  Indemnification of the Manager......................B-39
         Section 21.2  Limitations on Indemnification......................B-39
         Section 21.3  Insurance...........................................B-39

22.    MISCELLANEOUS.......................................................B-40
         Section 22.1  Counterparts........................................B-40
         Section 22.2  Successors and Assigns..............................B-40
         Section 22.3  Severability........................................B-40
         Section 22.4  Notices.............................................B-40
         Section 22.5  Captions............................................B-40
         Section 22.6  Number and Pronouns.................................B-40
         Section 22.7  Manager Address.....................................B-40
         Section 22.8  Member Address......................................B-40

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                                       iv

<PAGE>



         Section 22.9  Construction........................................B-40
         Section 22.10 Qualification to Do Business........................B-41



                                        v

<PAGE>




                              AMENDED AND RESTATED
                  LIMITED LIABILITY COMPANY OPERATING AGREEMENT
                    OF ATEL CAPITAL EQUIPMENT FUND VIII, LLC


THIS LIMITED LIABILITY COMPANY OPERATING  AGREEMENT (the  "Agreement"),  entered
into as of the 31st day of July, 1998, by and between ATEL Financial Corporation
("ATEL"), a California Corporation,  as the Managing Member (the "Manager"), and
Eliza Cash and Linda Batt as the initial  Members,  whereby the parties together
agreed to form a limited liability  company  pursuant to the California  Limited
Liability Company Act, is hereby amended and restated in its entirety, as of
December 7, 1998, as set forth below:

1.       NAME AND PRINCIPAL PLACE OF BUSINESS

         The name of the Fund shall be ATEL Capital  Equipment Fund VIII, LLC or
such other  name as the  Manager  shall  hereafter  designate  in writing to the
Members.  The Fund's  principal place of business shall be 235 Pine Street,  6th
Floor,  San Francisco,  California  94104,  or such other place or places in the
State of California as the Manager may hereafter determine.

2.       DEFINITIONS

         The following  terms used in this  Agreement  shall  (unless  otherwise
expressly  provided  herein or unless the context  otherwise  requires) have the
following respective meanings:

         "Acquisition  Expenses" shall mean expenses including,  but not limited
to,  legal  fees and  expenses,  travel  and  communication  expenses,  costs of
appraisals, accounting fees and expenses, and miscellaneous expenses relating to
selection and acquisition of Equipment, whether or not acquired.

         "Acquisition  Fees"  shall  mean the total of all fees and  commissions
paid by any party in  connection  with the initial  purchase or  manufacture  of
Equipment.  Included in the computation of such fees or commissions shall be any
commission,  selection fee, financing fee,  nonrecurring  management fee, or any
fee of a similar nature, however designated.

         "Adjusted  Capital  Account  Deficit"  shall mean,  with respect to any
Member,  the deficit balance if any, in such Member's  Capital Account as of the
end of the Fund taxable year, after giving effect to the following  adjustments:
(a) Crediting to such Capital Account any amounts which such Member is obligated
to  restore or is deemed to be  obligated  to restore  pursuant  to  Regulations
Sections  1.704-2(g)(1)  and  1.704-2(i)(5);  and (b) Debiting from such Capital
Account the items described in Regulations  Section  1.704-1(b)(2)(ii)(d)(4),(5)
and (6). This  definition  is intended to comply with the  provisions of Section
1.704-1(b)(2)(ii)(d)  of the Regulations  and shall be interpreted  consistently
therewith.

         "Adjusted  Invested  Capital"  shall mean, as of any date, the Original
Invested Capital  attributable to the Units held by any Person on or before such
date,  as  decreased   (but  not  below  zero)  by  the  amount  which  (i)  all
Distributions from Cash from Operations and Cash from Sales and Refinancing with
respect  to such Units on or before the date of  determination  pursuant  to any
provision of this Agreement exceed (ii) the Priority  Distribution  attributable
to such Units for such period.


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                                       B-1

<PAGE>



         "Affiliate"  of  a  Person  shall  mean  (i)  any  Person  directly  or
indirectly controlling,  controlled by or under common control with such Person;
(ii) any Person  owning or  controlling  10% or more of the  outstanding  voting
securities or beneficial interests of such Person, (iii) any officer,  director,
trustee  or  partner  of such  Person  and (iv) if such  Person  is an  officer,
director,  trustee, partner or holder of 10% or more of the voting securities or
beneficial  interests  of such Person,  any other  company for which such Person
acts in such  capacity.  However,  such term shall not include a Person who is a
partner in a  partnership  or joint  venture with the Fund if such Person is not
otherwise an Affiliate.

         "Asset  Management  Fee" shall mean the fee  payable to the Manager and
its Affiliates under the provisions of Section 8.2 of this Agreement.

         "Asset  Management Fee Limit" means the total fees calculated  pursuant
to the  alternative  fee schedule set forth under Section 8.3 of this Agreement,
equal to the aggregate of an Equipment Management Fee, Incentive Management Fee,
and  Equipment  Resale/Re-Leasing  Fee,  plus the  Manager's  Carried  Interest,
determined in the manner described herein.

         "Assignee"  shall mean a Person who has acquired a beneficial  interest
in one or more Units from a third party but who is neither a substituted  Holder
nor an Assignee of Record.

         "Assignee  of  Record"  shall  mean  an  Assignee  who has  acquired  a
beneficial  interest in one or more Units whose  ownership  has been recorded on
the books of the Fund and which ownership is the subject of a written instrument
of assignment, the effective date of which assignment has passed.

         "ATEL" shall mean ATEL Financial Corporation, a California corporation.

         "California Act" or "California  Limited  Liability  Company Act" shall
mean the Beverly-Killea Limited Liability Company Act, Title 2.5, Chapters 1-15,
of the California Corporations Code, as it may be amended from time to time.

         "Capital Account" shall mean, with respect to any Member, such Member's
Capital Account determined in accordance with Section 6.7.

         "Carried Interest" shall mean the allocable share of Fund Distributions
of Cash  from  Operations  and Cash from  Sales or  Refinancing  payable  to the
Manager, as Manager, pursuant to Sections 10.4 and 10.5 of this Agreement.

         "Cash from  Operations"  shall mean the excess of Gross  Revenues  over
cash disbursements (including the Asset Management Fee and amounts reinvested by
the Fund in Equipment in compliance with Section 15.4.18) without  reduction for
depreciation   and   amortization  of  intangibles   such  as  organization  and
underwriting  costs  but  after a  reasonable  allowance  for cash for  repairs,
replacements,  contingencies and anticipated  obligations,  as determined by the
General  Partner.  Cash from  Operations  shall not  include  Cash from Sales or
Refinancing or Cash from Reserve Account.

         "Cash from Reserve Account" shall mean that portion of the Net Proceeds
not  utilized  in  the  acquisition  of  Equipment,  including  cash  maintained
according to the provisions of Section 9.4.

         "Cash from Sales or Refinancing" shall mean the net cash realized by 
the Fund from the sale,

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                                       B-2

<PAGE>



refinancing or other disposition of any Equipment  (including insurance proceeds
or  lessee  indemnity  payments  arising  from  the loss or  destruction  of any
Equipment  through  casualty)  after  payment  of all  expenses  related  to the
transaction;  provided,  however that Cash from Sales or  Refinancing  shall not
include Cash from Reserve Account or Cash from Operations.

         "Closing  Date" shall mean such date  designated by the Manager for the
termination of the offering of Units, but not later than  December 7,  2000.
Extension of the offering beyond one year from the date of the Prospectus  shall
be subject to the  qualification of the offering for any such extension in those
jurisdictions  which may limit the offering period to one year. "Initial Closing
Date" shall mean the date on which subscribers for Units, other than the initial
Holders,  are first admitted to the Fund as Holders.  "Final Closing Date" shall
mean the last date on which  subscribers  for Units are  admitted to the Fund as
Holders.

         "Code" shall mean the Internal  Revenue  Code of 1986,  as amended,  or
corresponding provisions of subsequent federal revenue laws.

         "Distributions"  shall mean any cash,  tax  credits  or other  property
allocated  to or  distributed  to Holders  and the  Manager  arising  from their
respective interests in the Fund, but shall not include any compensation payable
to the  Manager  under the  provisions  of  Article 8 or  Article  9,  except as
otherwise provided herein.

         "ERISA" shall mean the  Employment  Retirement  Income  Security Act of
1974, as amended.

         "Equipment" shall mean the equipment  acquired and owned by the Fund to
be  leased  by the Fund to others  as well as any Fund  interest  in  equipment,
including  without  limitation its rights,  whether  direct or indirect,  in all
trusts, joint ventures, leases, chattel paper, options and other contract rights
with respect to equipment.

         "Equipment Management Fee" shall mean an element of the alternative fee
schedule  calculation  to  determine  the Asset  Management  Fee Limit under the
provisions of Section 8.3 of this Agreement as provided therein.

         "Equipment  Re-lease Fee" shall mean an element of the  alternative fee
schedule  calculation  to  determine  the Asset  Management  Fee Limit under the
provisions of Section 8.3 of this Agreement as provided therein.

         "Equipment  Resale  Fee" shall mean an element of the  alternative  fee
schedule  calculation  to  determine  the Asset  Management  Fee Limit under the
provisions of Section 8.3 of this Agreement as provided therein.

         "Front-End Fees" shall mean fees and expenses paid by any party for any
services rendered during the Fund's organization and acquisition phase including
Organization and Offering Expenses,  Leasing Fees, Acquisition Fees, Acquisition
Expenses,  and any other similar fees, however  designated.  Notwithstanding the
foregoing,  Front-End Fees shall not include any Acquisition Fees or Acquisition
Expenses paid by a manufacturer of Equipment to any of its employees unless such
Persons are Affiliates of the Manager.

         "Full Payout Lease" shall mean a lease under which the  non-cancellable
rental payments due during the initial term of the lease are at least sufficient
to cover the purchase price of the Equipment leased.

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                                       B-3

<PAGE>


         "Fund"  shall mean the limited  liability  company  created  under this
Agreement.

         "Fund  Minimum  Gain"  shall  have  the  meaning  ascribed  to the term
"partnership minimum gain" in Regulations Section 1.704-2(d)(1).

         "Gross Income" shall mean the gross income of the Fund within the 
meaning of section 61(a) of the Code.

         "Gross  Proceeds"  shall  mean  the  aggregate  total  of the  Original
Invested Capital of the initial and all of the additional Holders.


         "Gross  Lease  Revenues"  shall mean all revenues  attributable  to the
Equipment other than from security  deposits paid by lessees  thereof.  The term
"Gross Lease Revenues" shall not include revenues from the sale,  refinancing or
other disposition of Equipment.


         "High Payout  Lease" shall mean a lease under which the  noncancellable
rental  payments  and other  payment  obligations  of the lessee due through the
initial  term of the lease are  equal to at least 90% of the  original  purchase
price paid by the Fund for the Equipment.

         "Holders"  shall  mean  owners  of  Units  who are  either  Members  or
Assignees of Record,  and  reference to a "Holder"  shall be to any one of them.
The Manager  shall not be considered to be a Holder except to the extent it also
owns Units.

         "Incentive Management Fee" shall mean an element of the alternative fee
schedule  calculation  to  determine  the Asset  Management  Fee Limit under the
provisions of Section 8.3 of the Operating Agreement as provided therein.

         "Independent  Expert"  shall mean a person with no current  material or
prior  business  or  personal  relationship  with  the  Manager  or  any  of its
Affiliates  who is engaged to a substantial  extent in the business of rendering
opinions  regarding the value of assets of the type held by the Fund, and who is
qualified to perform such work.

         "IRA" shall mean an  individual  retirement  account  qualifying  under
Section 408 of the Code.

         "Investment  in  Equipment"  shall  mean the  amount of Gross  Proceeds
actually  paid or allocated  to the purchase of Equipment  acquired by the Fund,
any amount of Gross  Proceeds  reserved  pursuant  to Section 9.4 hereof up to a
maximum of 3% of Gross  Proceeds  and other cash  payments  such as interest and
taxes, but excluding Front-End Fees.

         "Leasing Fees" shall mean the total of all fees and commissions paid by
any party in  connection  with the initial  lease of  equipment  acquired by the
Fund.

         "Manager" or "Managing  Member" shall mean ATEL  Financial  Corporation
("ATEL"), a California corporation, or any other Person or Persons which succeed
it in such capacity.


Atel8-1/operag6.wpd
                                       B-4

<PAGE>



         "Members"  shall mean the  Manager,  the initial  Members and any other
Persons  who are  admitted to the Fund as  additional  or  substituted  Members.
Reference to a "Member" shall refer to any one of them.

         "Member Nonrecourse Debt" has the meaning ascribed to the term "partner
nonrecourse debt" in Regulations Section 1.704-2(b)(4).

         "Member  Nonrecourse Debt Minimum Gain" shall have the meaning ascribed
to the term  "partner  nonrecourse  debt minimum gain" in  Regulations  Sections
1.704-2(i)(2).

         "Net  Income" or "Net Loss"  shall mean the  taxable  income or taxable
loss  of the  Fund  (including  the  Fund's  share  of  income  or  loss  of any
partnership, venture or other entity which owns a particular item of Equipment),
as determined for federal  income tax purposes,  computed by taking into account
each item of Fund income,  gain, loss,  deduction or credit not already included
in the computation of taxable income and taxable loss.

         "Net Lease Provisions" shall mean contractual  arrangements under which
the lessee assumes responsibility for, and bears the cost of, insurance,  taxes,
maintenance,  repair and operation of the leased asset and where non-cancellable
rental   payments   under  the  lease  are   absolutely   net  to  the   lessor,
notwithstanding  that some minor costs or responsibilities  remain with the Fund
as lessor or that the Fund  retains  the option to require  and pay for a higher
standard of care or greater  level of  maintenance  or  insurance  than would be
imposed on the lessee under the terms of the lease.

         "Net Proceeds" shall mean the total Gross Proceeds less Organization 
and Offering Expenses.

         "Nonrecourse  Deductions" shall mean items of Fund loss,  deductions or
Code Section  705(a)(2)(B)  expenditures  which are  attributable to Nonrecourse
Liabilities.

         "Nonrecourse Liability" means a Fund liability with respect to which no
Member or Related Person bears the economic risk of loss.

         "Operating  Agreement" or "Agreement" shall mean this Limited Liability
Company Operating  Agreement of ATEL Capital Equipment Fund VIII, LLC, as it may
be amended from time to time.

         "Operating  Lease" shall mean a lease under which the aggregate  rental
payments  due during the  initial  term of the lease are less than the  purchase
price of the Equipment leased.

         "Operating  Revenues" means the total for any period of all Gross Lease
Revenues plus all Cash from Sales or Refinancing.

         "Organization and Offering Expenses" shall mean those expenses incurred
in connection with preparing the Fund for registration and subsequently offering
and  distributing  Units to the public,  including  selling  commissions and all
advertising  expenses  except  advertising  expenses  related to the  leasing of
Equipment.


         "Original  Invested  Capital"  shall mean the original  gross  purchase
price of the Units contributed by each Member to the capital of the Fund for his
interest in the Fund,  which amount shall be attributed to Units in the hands of
a subsequent Holder.


Atel8-1/operag6.wpd
                                       B-5

<PAGE>



         "Person"  shall  mean any  natural  person,  partnership,  corporation,
association or other legal entity.

         "Priority  Distribution"  shall mean a hypothetical  amount  determined
solely for purposes of the alternative fee schedule calculation to determine the
Asset  Management  Fee  Limit  under  the  provisions  of  Section  8.3 of  this
Agreement.  Such amount will equal,  for any calendar  year or other period with
respect to the Units held by any Person,  the average Adjusted  Invested Capital
with  respect to such  Units  during  such  period  multiplied  by 10% per annum
(calculated on a cumulative  basis,  compounded  daily, from the last day of the
calendar quarter in which the capital  contribution of the initial  purchaser of
such Units was received by the Fund and pro rated for any fraction of a calendar
year for which such calculation is made).

         "Prospectus"  shall mean the final  prospectus filed in connection with
the  registration  of the Units with the Securities  and Exchange  Commission on
Form  S-1,  as  amended,  together  with any  supplement  thereto  which  may be
subsequently filed with such Commission.

          "Purchase  Price of  Equipment"  shall  mean the  price  paid upon the
purchase or sale of a  particular  item of  equipment,  including  the amount of
Acquisition  Fees and all liens and  mortgages on the  equipment,  but excluding
points and prepaid interest.

         "Qualified  Plan" shall mean  employee  trusts (or employer  individual
retirement  accounts),  Keogh Plans and corporate  retirement  plans  qualifying
under Section 401(a) of the Code.

         "Regulations"  shall mean the income tax regulations  promulgated under
the Code,  as such  regulations  may be  amended  from  time to time  (including
corresponding provisions of succeeding regulations).

         "Reimbursable   Administrative   Expenses"   shall  mean  the  ordinary
recurring  administration expenses incurred by the Manager and reimbursed by the
Fund.  Such  expenses  shall  not  include  interest,  depreciation,   equipment
maintenance  or  repair,  third  party  services  or  other   non-administrative
expenses.

         "Reinvestment Period" shall mean the period commencing with the Initial
Closing  Date and  ending on a date 72 months  after the last day of the  fiscal
year during which the Final Closing Date occurs.

         "Related  Person"  means a Person having a  relationship  with a Member
that is described in Regulations Section 1.752-4(b).

         "Resident  Alien"  shall  mean a resident  alien as defined  within the
Federal  Aviation Act of 1958,  as amended from time to time,  or any  successor
statute,  or any  regulations  adopted  pursuant  to such  Act or any  successor
statute.

         "Roll-Up" shall mean a transaction  involving the acquisition,  merger,
conversion or consolidation,  either directly or indirectly, of the Fund and the
issuance of securities of a Roll-Up Entity. Such term does not include:

         (a)  any transaction if the securities of the Fund have been for at 
least twelve months traded through the National Association of Securities 
Dealers, Inc. Automated Quotation National Market System; or


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                                       B-6

<PAGE>



         (b) a  transaction  involving the  conversion  to  corporate,  trust or
association  form of only the Fund,  if, as a  consequence  of the  transaction,
there will be no significant adverse change in any of the following:

                           (i)      the Members voting rights;
                           (ii)     the term of existence of the Fund;
                           (iii)    the terms of compensation of the Manager
                                     and its Affiliates; or
                           (iv)     the Fund's investment objectives.

         "Roll-Up  Entity" means the  partnership,  trust,  corporation or other
entity that would be created or would survive after the successful completion of
a proposed Roll-Up transaction.

         "Service" shall mean the United States Internal Revenue Service or its
successor.

         "Sponsor" shall mean any Person directly or indirectly  instrumental in
organizing,  wholly  or in part,  a Program  or any  Person  who will  manage or
participate  in the  management  of a  Program,  and any  Affiliate  of any such
Person.  Sponsor  does not  include the  Program  itself or a Person  whose only
relation with the Program is that of an independent  equipment manager and whose
only compensation is as such.  Sponsor does not include wholly independent third
parties such as attorneys,  accountants and underwriters whose only compensation
is for professional services rendered in connection with the offering of Program
interests.

         "Substantially  All of the  Assets"  shall  mean,  unless  the  context
otherwise dictates, Equipment representing 66 2/3% or more of the net book value
of all Equipment as of the end of the most recently completed fiscal quarter.

         "Unit"  shall  mean  the  interest  in the Fund  representing  Original
Invested  Capital in the amount of $10 and shall  entitle the Holder  thereof to
the rights herein provided.

         "United States  Citizen" shall mean a "citizen of the United States" as
defined  within the Federal  Aviation Act of 1958, as amended from time to time,
or any successor statute, or any regulations adopted pursuant to such Act or any
successor statue.

3.       BUSINESS AND PURPOSE

         The primary  purpose of the Fund is to  purchase,  own,  lease and sell
various types of Equipment  pursuant to such  arrangements as the Manager in its
discretion  may  enter  into on behalf  of the  Fund.  The Fund may  enter  into
ventures, partnerships and other business arrangements with respect to Equipment
to the  extent  deemed  prudent by the  Manager  in order to achieve  successful
operations for the Fund,  subject to the provisions of Section 15.4.8.  The Fund
may also engage in such other lawful  activities as may be deemed by the Manager
to be  incident  to its  primary  purpose  or  prudent  and in the  Fund's  best
interest.  The  Fund's  investment  objectives  shall be those  set forth in the
Prospectus,  and the Manager may not make any material change to such investment
objectives  without first  obtaining the written  consent or approval of Members
owning more than 50% of the total outstanding Units entitled to vote.


Atel8-1/operag6.wpd
                                       B-7

<PAGE>

4.  TERM


         The Fund  commenced as of the 31st day of July 1998 and shall  continue
until the 31st day of December, 2019, unless previously terminated in accordance
with the provisions of this Agreement.


5.       MANAGER

         The Manager has  contributed  $100 in cash to the Fund and at all times
during the existence of the Fund the Manager shall have a present and continuing
interest in Net Income, Net Losses and Distributions according to the provisions
of Article 10.


6.       INITIAL AND ADDITIONAL MEMBERS

         6.1 Initial Members. Linda Batt and Eliza Cash, as the initial Members,
have each  contributed  the sum of $250 to the  capital of the Fund and each has
received 25 Units in return therefor.

         6.2 Additional  Members.  The Fund intends to sell and issue to Holders
not less than 120,000 nor more than 15,000,000  additional Units and to admit as
additional  Members the Persons who  contribute  cash to the capital of the Fund
for such Units.

         6.3 Conditions to Admission.  Subject to the provisions of Section 6.6,
each Person who acquires any such additional  Units shall become a Member in the
Fund at such time as he has: (i)  purchased 250 or more Units (200 Units in case
of an IRA or Keogh Plan),  (ii) contributed the sum of $10 in cash for each Unit
purchased (or such lesser net amount as may be provided in  accordance  with the
terms described in the Prospectus under "Plan of Distribution"),  (iii) executed
and filed with the Fund a written  instrument  which sets forth an  intention to
become a Member and requests  admission to the Fund in that  capacity,  together
with such other  instruments  as the Manager may deem  necessary or desirable to
effect such  admission,  including the written  acceptance  and adoption by such
Person of the provisions of this  Agreement,  and the execution,  acknowledgment
and delivery to the Manager of a special power of attorney,  the form, style and
content of which are more fully described  herein,  and (iv) the Manager accepts
such Person as a Member in the Fund.

         6.4 Admission as a Member.  Each Person who  subscribes for Units under
Section  6.2  shall  be  admitted  to the  Fund  promptly  after  the  Manager's
acceptance of such  subscription,  but, except as provided in Section 6.6, in no
event later than 30 days after the receipt by the Fund of such subscription.

         6.5  Limitation  on Additional  Issuance.  The Fund shall not issue any
additional Units after the Final Closing Date.

         6.6 Escrow.  All Original Invested Capital of Holders shall be received
by the Fund in trust, and shall be deposited in an escrow account with a banking
institution designated by the Manager as escrow holder for the Original Invested
Capital,  until  such time as  subscriptions  for a total of 120,000  Units,  in
addition to the Unit  purchased  by the initial  Holder,  representing  Original
Invested  Capital of $1,200,000  have been deposited  therein.  Not less than 15
days after  receipt  of a minimum  of  $1,200,000  of such  additional  Original
Invested  Capital,  the Fund will admit  subscribers into the Fund as additional
Holders.  At the time a subscriber  is admitted as a Holder,  the escrow  holder
shall transfer the  subscriber's  Original  Invested Capital to the Fund. If the
$1,200,000 minimum is not obtained on or before a date one year from the date of
the Prospectus,  all Original  Invested Capital will be promptly refunded to the
investors.  In any event, any interest earned on Original Invested Capital while
in escrow shall be paid to investors.

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                                       B-8

<PAGE>



         6.7 Capital Account.  An individual Capital Account shall be maintained
for each Member.  The Capital  Account of a Member shall consist of the Original
Invested Capital of such Member,  increased by (i) any additional  contributions
to capital and (ii) such Member's share of Fund Net Income, and decreased by (i)
Distributions  to such Member and (ii) such Member's  share of Fund Net Loss. In
the event a Member  transfers all or a portion of his Units,  the Assignee shall
succeed to the Capital  Account of the  transferor  (as  adjusted for all events
preceding the date the  transferee is deemed  admitted to the Fund under Section
10.3.1)  according  to the  number of Units,  and the  allocable  portion of the
transferor's  Capital  Account,  so  transferred.   No  Holder  shall  have  the
obligation  to restore any deficit in his Capital  Account upon  termination  or
dissolution  of the Fund.  The  foregoing  provisions  of this  Section  6.7 are
intended to comply with Regulation Section 1.704-1(b),  and shall be interpreted
and applied in a manner consistent with such Regulations.

7.       LIABILITY AND STATUS OF MEMBERS

         Holders  shall  not be bound  by,  or be  personally  liable  for,  the
expenses, liabilities or obligations of the Fund, except to the extent, but only
to the extent,  a Holder would be required to return any  Distribution  from the
Fund pursuant to Section 17254(e) of the California Act.

8.       COMPENSATION TO THE MANAGER AND/OR AFFILIATES

         8.1 General  Limitation.  The Manager and its Affiliates  shall receive
compensation   only  as  specified  by  this  Agreement.   In  addition  to  the
compensation  provided herein, the Manager will hold the Carried Interest and be
entitled  to  receive  Distributions  as  provided  in Article  10, and  receive
reimbursement  of costs and  expenses  advanced  as  provided  in Article 9. The
Manager may delegate to its Affiliates all or a portion of its management duties
hereunder,  as described in the  Prospectus,  and may assign all or a portion of
its  compensation  hereunder to one or more such  Affiliates or other parties in
its discretion.

         8.2  Asset  Management  Fee.  The Fund  will pay the  Manager  an Asset
Management Fee in an amount equal to 4.5% of Operating  Revenues as compensation
for the Manager's  services in establishing  and  supervising  management of the
Fund's portfolio of Equipment and its operations.  The Asset Management fee will
be paid on a monthly  basis.  The amount of the Asset  Management Fee payable in
any year will be reduced for that year to the extent it would  otherwise  exceed
the Asset Management Fee Limit.

         8.3 Asset  Management Fee Limit. The Asset Management Fee Limit will be
calculated  each year during the Fund's term by calculating  the total fees that
would be paid to the Manager for the year in question if the Manager  were to be
compensated on the basis of an alternative fee schedule, to include an Equipment
Management Fee, Incentive Management Fee, and Equipment  Resale/Re-Leasing  Fee,
together with the Carried  Interest,  as provided herein. To the extent that the
total  amount paid to the Manager for the year as the Asset  Management  Fee and
the Carried  Interest would exceed the aggregate  amount of fees that would have
been payable as calculated  under this  alternative  fee schedule for that year,
the Asset  Management  Fee for that year will be  reduced  to equal the  maximum
aggregate fees under the alternative fee schedule.  The limitations set forth in
this  Section  8.3 will be subject to  adjustment  pursuant  to the  limitations
imposed  under  Section 15.7  relating to the Minimum  Investment  in Equipment.
Under Section 15.7, a separate  calculation will be performed upon completion of
the  offering of Units,  final  commitment  of Net  Proceeds to  acquisition  of
Equipment and establishment of final levels of permanent portfolio debt

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encumbering such Equipment, and then annually thereafter. To the extent required
under the  provisions of Section 15.7,  the  alternative  fee schedule set forth
below will first be  adjusted  as provided  therein.  Thereafter,  the Asset Fee
Limitation,  using the alternative fee schedule as so adjusted,  will be imposed
under this Section 8.3 and applied to the total Asset Management Fee and Carried
Interest for the year. The  alternative  fee schedule to be used for calculating
the Asset Management Fee Limit shall include:

                  8.3.1 An Equipment  Management  Fee calculated for each fiscal
quarter  and in an amount  equal to (i) 3.5% of the Gross  Lease  Revenues  from
Operating  Leases,  except that if the services are  performed by  nonaffiliated
Persons under the active  supervision of the Manager or its Affiliate,  then the
amount  payable  to the  Manager  or such  Affiliate  shall  be 1% of the  Gross
Revenues from such  Operating  Leases,  and (ii) 2% of Gross  Revenues from Full
Payout Leases which contain Net Lease Provisions;

                  8.3.2 An  Equipment  Resale/Re-Leasing  Fee  calculated  in an
amount equal to the following:  for resale services, the lesser of (i) 3% of the
sales price of the Equipment,  or (ii) one-half the normal competitive equipment
sale commission charged by unaffiliated parties for such services, but in either
case  payable only after the Holders  have  received a return of their  Original
Invested Capital plus a Priority Distribution; plus, for re-leasing services, an
amount equal to the lesser of (i) the competitive  rate for comparable  services
for similar  equipment,  or (ii) 2% of gross  rental  payments  derived from the
re-lease  of such  Equipment  after the time the  re-lease is  consummated  as a
result of the recipient's efforts, payable as each rental payment is received by
the Fund over the term of the re-lease.  No such re-lease fee will be calculated
in  connection  with the  re-lease  of  Equipment  to a  previous  lessee or its
Affiliates;  and such fee will be  calculated  only to the extent the Manager or
its Affiliates have rendered substantial  re-leasing services in connection with
such re-lease;

                  8.3.3 An Incentive  Management  Fee will be  calculated  in an
amount equal to (i) 4% of all  Distributions  of Cash from Operations until such
time as the Holders have received aggregate  Distributions in an amount equal to
their  Original  Invested  Capital  plus  a  Priority  Distribution,   and  (ii)
thereafter,  in an  amount  equal  to 7.5%  of all  Distributions  of Cash  from
Operations and Cash from Sales or  Refinancing.  For the purposes of calculating
the Incentive  Management Fee for any period during which the Fund has available
both Cash from Operations and Cash from Sales or Refinancing,  Distributions  to
Holders  shall first be treated as  consisting  of Cash from  Operations  unless
specifically designated otherwise by the Manager; and

                  8.3.4 The  alternative  fee schedule  will include the Carried
Interest in Distributions provided in Article 10.

         8.4 Other Services. Except as set forth in this Article 8 and Article 9
hereof,  no other services may be performed by the Manager or its Affiliates for
the Fund except in  extraordinary  circumstances  (which  shall be defined as an
emergency  situation  requiring immediate action by the Manager or its Affiliate
and the service is not immediately  available from an unaffiliated  party).  Any
such other  services must meet the  following  criteria:  (i) the  compensation,
price or fee therefor must be comparable and competitive with the  compensation,
price or fee of any other Person who is rendering comparable services or selling
or leasing comparable goods which could reasonably be made available to the Fund
and shall be on competitive terms, (ii) the fees and other terms of the contract
shall be fully disclosed to Holders, (iii) the Manager or its Affiliates must be
previously  engaged in the  business of  rendering  such  services or selling or
leasing  such goods,  independently  of the Fund and as an ordinary  and ongoing
business and at least 75% of such  Person's  gross  revenues  from such activity
must be derived from other than Affiliates of

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                                      B-10

<PAGE>



the Manager,  and (iv) all services for which the Manager or its  Affiliates are
to receive  compensation shall be embodied in a written contract which precisely
describes  the services to be rendered and all  compensation  to be paid,  which
contract  may only be modified by a vote of the  majority of the  Holders.  Said
contract shall contain a clause allowing  termination without penalty on 60 days
notice.

         8.5 Payment of Fees on Removal.  Should the Manager be removed from the
Fund  according to  provisions  of Article 17, any portion of any fee payable to
the Manager  according to the provisions of this Article 8 which is then accrued
and due,  but not yet  paid,  shall be paid by the Fund to the  Manager  in cash
within  30 days of the date of  expulsion  as stated  in the  written  notice of
expulsion.

         8.6 Employment of Broker-Dealers.  The Fund may employ underwriters and
selected broker-dealers, including Affiliates of the Manager as set forth in the
Prospectus, for the sale of Units.

9.       FUND EXPENSES AND RESERVES

         9.1  Reimbursement  of Manager.  Except as set forth in this Article 9,
all of the Fund's expenses shall be billed directly to and paid by the Fund. The
Manager and its  Affiliates  may be reimbursed  for the following Fund expenses:
(i) Organization and Offering Expenses not in excess of 15% of Gross Proceeds up
to $25,000,000  plus 14% of all Gross  Proceeds in excess of $25,000,000  (or an
amount equal to 12% of the Gross  Proceeds if, upon  termination of the offering
of Units, the total Gross Proceeds are in an amount less than $2,000,000);  (ii)
the actual  cost of goods and  materials  used for and by the Fund and  obtained
from entities  unaffiliated with the Manager; and (iii) administrative  services
necessary to the prudent operation of the Fund, provided that such reimbursement
for administrative  services will be at the lower of (A) the actual cost of such
services,  or (B) the amount which the Fund would be required to pay independent
parties for comparable  administrative services in the same geographic location;
provided further that,  beginning with the first full year after the termination
of the  offering  of Units,  the total  amount  of  Reimbursable  Administrative
Expenses  payable  by the Fund for the  remainder  of its term may not  exceed a
cumulative  limit.  This cumulative  limit on such  Reimbursable  Administrative
Expenses will equal, as of any date, a maximum of (i) 0.5% of the Gross Proceeds
per annum if the total  Gross  Proceeds  are at least 90% of the  maximum  Gross
Proceeds; (ii) 0.75% of the Gross Proceeds per annum if the total Gross Proceeds
are at least 75%, but less than 90%, of the maximum Gross Proceeds; and (iii) 1%
of the Gross Proceeds per annum if the total Gross Proceeds are less than 75% of
the maximum  Gross  Proceeds.  In addition,  beginning  with the first full year
after  the  termination  of  the  offering  of  Units,  the  maximum  amount  of
Reimbursable  Administrative  Expenses  payable by the Fund for any single  year
shall be limited to an amount equal to 1% of the Gross Proceeds.

         9.2 Limitation on  Reimbursement.  The Manager and its Affiliates  will
not be reimbursed by the Fund for the following expenses:

                  9.2.1  Services  for which the Manager or its  Affiliates  are
entitled to  compensation  in the form of a separate  fee  pursuant to Article 8
hereof;

                  9.2.2 Rent or depreciation, utilities or capital equipment and
other administrative items of the Sponsor;

                  9.2.3   Salaries,   fringe   benefits,   travel   expenses  or
administrative  items incurred by or allocated to any Controlling  Person of the
Manager or its Affiliates. For purposes of this subparagraph,

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<PAGE>



"Controlling  Person" shall mean any person,  regardless of title,  who performs
executive  or senior  management  functions  for the  Manager or its  Affiliates
similar to those of executive management or senior management, and directors, or
those holding 5% or more equity  interest in the Manager or its  Affiliates;  or
persons  having  the power to direct or cause the  direction  of the  Manager or
Affiliates through ownership of voting securities,  by contract or otherwise. It
is not intended  that every  person who carries a title such as vice  president,
senior vice  president,  secretary,  controller  or  treasurer  be  considered a
Controlling Person;

                  9.2.4  Organization  and Offering  Expenses of the Fund to the
extent such  Organization and Offering Expenses exceed 15% of the Gross Proceeds
up to $25,000,000 plus 14% of all Gross Proceeds in excess of $25,000,000 (or an
amount equal to 12% of the Gross  Proceeds if, upon  termination of the offering
of Units, the total Gross Proceeds are in an amount less than  $2,000,000),  and
the Manager guarantees  payment of any such excess expenses,  which guarantee is
without recourse to, or reimbursement by, the Fund; and

                  9.2.5 All other  expenses  which are unrelated to the business
of the Fund.

         9.3 Fund Expenses.  Subject to Sections 9.1 and 9.2, the Fund shall pay
all  expenses  of the Fund which may  include,  but are not  limited to: (i) all
costs of personnel employed by the Fund and involved in the business of the Fund
(which  may  include  personnel  who are  employed  by a Manager  or one or more
Affiliates),  (ii) all taxes  and  assessments  on  Equipment  and  other  taxes
applicable to the Fund, (iii) legal, appraisal, audit, accounting, brokerage and
other fees,  (iv)  printing,  engraving and other expenses and taxes incurred in
connection with the issuance, distribution, transfer, registration and recording
of documents  evidencing  ownership of an interest in the Fund or in  connection
with  the  business  of the  Fund,  (v) fees and  expenses  paid to  independent
contractors, brokers and servicers, leasing agents, consultants, equipment lease
brokers,  insurance  brokers and other agents,  (vi) expenses in connection with
the  acquisition,  disposition,  replacement,  alteration,  repair,  leasing and
operation of Equipment  (including the costs and expenses of insurance premiums,
equipment  lease  brokerage and leasing  commissions  and of maintenance of such
Equipment),  (vii) the cost of  insurance  as  required in  connection  with the
business  of the  Fund,  (viii)  expenses  of  organizing,  revising,  amending,
converting,  modifying or terminating the Fund, (ix) the cost of preparation and
dissemination  of the  informational  material  and  documentation  relating  to
potential  sale or  other  disposition  of  Equipment,  (x)  costs  incurred  in
connection  with any  litigation  in which the Fund is involved,  as well as the
examination,  investigation  or other  proceedings  conducted by any  regulatory
agency,  including legal and accounting  fees incurred in connection  therewith,
(xi) costs of any computer  equipment or services used for or by the Fund, (xii)
costs of any accounting,  or statistical bookkeeping equipment necessary for the
maintenance  of the  books and  records  of the Fund,  and  (xiii)  the costs of
supervision  and expenses of  professionals  employed by the Fund in  connection
with any of the foregoing,  including  attorneys,  accountants  and  appraisers;
provided, however, that the cost of any services relating to items (vi) or (vii)
above must either be  attributable  to services  performed by Persons other than
the Manager or its  Affiliates,  be  compensated  by a specific fee described in
Article 8 (and thus  would not be  reimbursable  by the  Fund,  as  provided  in
Section  9.2.1) or comply  with the  requirements  for  compensation  for "other
services" as provided in Section 8.3.5.

         9.4  Reserves.  The Fund shall  initially  establish a cash reserve for
general working  capital  purposes in an amount equal to at least one-half of 1%
of the Gross Proceeds. Upon the disposition of each item of Equipment,  any cash
reserve  which  was  specifically  allocated  to  that  Equipment  need  not  be
maintained thereafter,  but may be applied as reserves for other Equipment.  Any
cash  reserve used as  aforesaid  need not be restored  and if restored,  may be
restored out of Gross Lease Revenues.

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<PAGE>



10.      ALLOCATION OF INCOME, LOSS AND DISTRIBUTIONS

         10.1  Allocation  of Net Income  and Net Loss Prior to Initial  Closing
Date.  From the  commencement  of the Fund until the  Initial  Closing  Date Net
Income and Net Loss shall be allocated  99% to the Manager and 1% to the initial
Holders.

         10.2  Allocation of Net Income and Net Loss After Initial Closing Date.

                  10.2.1  Commencing  with the Initial  Closing Date, Net Income
and Net Loss shall be allocated 92.5% to the Holders and 7.5% to the Manager.

                  10.2.2 Notwithstanding Section 10.2.1 of this Agreement, items
of Net Loss  arising out of the Fund's  payment of  expenditures  classified  as
syndication  expenses pursuant to Regulations section 1.709-2(b) with respect to
each Unit shall be specially allocated to the Holder who acquires such Unit.

         10.3  Special Allocations

                  10.3.1 Except as provided in section 10.3.2,  Net Income,  Net
Loss  and  Distributions  allocable  to the  Holders  shall be  determined  on a
quarterly  basis and shall be allocated  among the Holders in the ratio in which
the number of Units held by each of them bears to the total number of Units held
by all Holders as of the last day of the fiscal  quarter  with  respect to which
such Net Income, Net Loss and Distributions are attributable; provided, however,
that, with respect to Net Income, Net Loss and Distributions attributable to the
offering  period of the Units  (including the full quarter in which the offering
terminates),  such Net Income,  Net Loss and Distributions  shall be apportioned
among the  Holders  in the ratio in which (i) the  number of Units  held by each
Holder  multiplied by the number of days during such period that such Holder was
the owner of such Units bears to (ii) the amount obtained by totaling the number
of Units outstanding on each day during such period. No Net Income,  Net Loss or
Distributions   with  respect  to  any  quarter  shall  be  allocated  to  Units
repurchased by the Fund during such quarter,  and such Units shall not be deemed
to have been  outstanding  during  such  quarter for  purposes of the  foregoing
allocations.

                  10.3.2  Notwithstanding  anything  in  this  Agreement  to the
contrary,  the  following  items  of Fund  income  and loss  shall be  specially
allocated to the Members in the manner described below:


                  (i) Gain characterized as recapture income under Sections 1245
                  or 1250 of the Code shall be  allocated  to those  Members who
                  claimed the deductions giving rise to such recapture income.

                  (ii) Except as provided in Section 10.3.2(iii) and 10.3.2(iv),
                  in the event any Member unexpectedly receives any adjustments,
                  allocations   or    distributions    described   in   Sections
                  1.704-1(b)(2)(ii)(d)(4),  (5) or (6) of the Regulations or any
                  other event creates an Adjusted  Capital  Account  Deficit for
                  such Member,  items of Fund gross income and gain  (consisting
                  of a pro  rata  portion  of each  item of the  Fund's  income,
                  including  gross  income,  and gain for  such  year)  shall be
                  allocated to such Member in an amount and manner sufficient to
                  eliminate, to the extent required by Regulations, the Adjusted
                  Capital   Account   Deficit   created  by  such   adjustments,
                  allocations or distributions as quickly as possible.

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                                      B-13

<PAGE>



                  This  Section  10.3.2(ii)  is  intended  to  comply  with  the
                  qualified    income    offset     requirement    in    Section
                  1.704-1(b)(2)(ii)(d)   of  the   Regulations   and   shall  be
                  interpreted consistently therewith.

                  (iii) If there is a net  decrease in Member  Nonrecourse  Debt
                  Minimum  Gain,   each  Member  with  a  share  of  the  Member
                  Nonrecourse  Debt Minimum Gain (as  determined  in  accordance
                  with  Regulations  Section  1.704-2(i)(5))  shall be specially
                  allocated items of Fund income and gain for such year (and, if
                  necessary,  subsequent  years) in  proportion  to,  and to the
                  extent of, an amount  equal to the  portion  of such  Member's
                  share of the net decrease in Member  Nonrecourse  Debt Minimum
                  Gain during such year.  The items to be so allocated  shall be
                  determined   in   accordance    with    Regulations    Section
                  1.704-2(i)(4).  This Section 10.3.2(iii) is intended to comply
                  with  the  minimum  gain  chargeback  requirement  in  Section
                  1.704-2(i)(4)  of the  Regulations  and  shall be  interpreted
                  consistently therewith.

                  (iv) If there is a net  decrease in Fund  Minimum  Gain during
                  any  Fund  taxable  year,   each  Member  shall  be  specially
                  allocated items of Fund income and gain for such year (and, if
                  necessary,  subsequent  years) in  proportion  to,  and to the
                  extent of, an amount  equal to the  portion  of such  Member's
                  share of the net  decrease  in Fund  Minimum  Gain during such
                  year  (within  the  meaning  of Section  1.704-2(g)(2)  of the
                  Regulations). The items to be so allocated shall be determined
                  in accordance with Section 1.704-2(f) of the Regulations. This
                  Section 10.3.2(iv) is intended to comply with the minimum gain
                  chargeback  requirement contained in Section 1.704-2(f) of the
                  Regulations and shall be interpreted consistently therewith.

                  (v)  After  giving  effect  to the  allocations  set  forth in
                  Sections  10.3.2(ii),  (iii) and (iv), in the event any Member
                  receives  any  actual  or  deemed  distribution  (i.e.,  under
                  section 752 of the Code) during a taxable  year which  exceeds
                  the  adjusted tax basis of such  Member's  Units at the end of
                  such taxable year (determined immediately before giving effect
                  to such  distribution),  such  Member  shall be  allocated  an
                  amount of gross income or gain equal to such excess.

                  (vi) In the event any fee to which the Manager or an Affiliate
                  thereof is entitled is treated as a Fund  distribution  by the
                  Service,  a special  allocation  of Fund gross income shall be
                  made  annually  to the Manager or an  Affiliate  thereof in an
                  amount equal to any such  recharacterized fee for that taxable
                  year.

                  (vii) The Manager  will  specifically  allocate  items of gain
                  from the sale or other  disposition  of items of Equipment for
                  any  year in  which  the  sale or  disposition  of any item of
                  Equipment occurs (and, if necessary,  subsequent years) to any
                  Holder in such  amounts  and in such  manner so as to equalize
                  the  Capital  Account  balances  of  the  Holders;   provided,
                  however, that such allocations are reasonably consistent with,
                  and reasonably supportable under, the Code.


                  (viii) Net Loss shall not be  allocated  to any Holder if such
                  allocation would cause or increase an Adjusted Capital Account
                  Deficit for such Holder at the end of any Fund

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                                      B-14

<PAGE>



                  taxable year, and any such Net Loss shall instead be allocated
                  to the Manager.  This limitation  shall be applied on a Holder
                  by Holder basis so as to allocate the maximum  permissible Net
                  Loss to each Holder under Section  1.704-1(b)(2)(ii)(d) of the
                  Regulations.

                  (ix) To the extent an  adjustment  is made to the adjusted tax
                  basis of any Fund asset  pursuant  to Code  Section  734(b) or
                  Code Section 743(b),  the Members,  Capital  Accounts shall be
                  adjusted     as    provided     in     Regulations     Section
                  1.704-1(b)(2)(iv)(m).

                  (x)  Except  as   otherwise   provided   herein,   Nonrecourse
                  Deductions shall be allocated 92.5% to the Holders and 7.5% to
                  the Manager.

                  (xi) Any deduction  attributable  to Member  Nonrecourse  Debt
                  shall be allocated to the Members that bear the economic  risk
                  of loss for the Member Nonrecourse Debt.

         10.4  Distribution of Cash From Operations.  Cash from Operations shall
be distributed 92.5% to the Holders and 7.5% to the Manager.

         10.5 Distribution of Cash From Sales or Refinancing. Cash from Sales or
Refinancing shall be distributed 92.5% to the Holders and 7.5% to the Manager.

         Notwithstanding  anything  to the  contrary  herein,  however,  no cash
Distribution  shall be made to a Holder to the extent that,  after giving effect
to all allocations under sections 10.1, 10.2 and 10.3 which would accompany such
Distribution  (including  allocations  of gross  income and gain  under  section
10.3.2(iv)),  such Distribution would exceed the tax basis of the Holder to whom
such Distribution is otherwise payable.

         10.6 Distributions of Cash from Reserve Account.  Distributions of Cash
from Reserve  Account,  if any,  shall be distributed in the same manner as Cash
from Sales or Refinancing.

         10.7 Determination of Amounts to be Distributed. The Manager shall have
sole  discretion  in  determining  the amount of any  Distributions.  Subject to
provisions of Section 15.4.18 of this  Agreement,  the Manager may use any funds
of the Fund not distributed to Holders to purchase  additional  Equipment during
the Reinvestment  Period or otherwise as permitted by this Agreement;  provided,
however,  that the Manager will not reinvest in Equipment,  but will distribute,
subject to payment of any  obligations  of the Fund,  such  available  Cash from
Operations and Cash from Sales or Refinancing as may be necessary to cause total
Distributions  to  Holders  to equal the  following  amounts  for the  specified
periods:

                  10.7.1  Through the first full fiscal  quarter ending at least
six months after  termination  of the offering of Units,  an amount equal to the
lesser of (a) a rate of return on their original capital  contribution  equal to
3.5% over the average yield on five-year  United States  Treasury  Bonds for the
fiscal quarter immediately preceding the date of distribution, as published in a
national  financial  newspaper from time to time (with a minimum of 8% per annum
and a  maximum  of 10%  per  annum),  or (b)  90% of the  total  amount  of cash
available for distributions; and

                  10.7.2 For each quarter during the balance of the Reinvestment
Period,  an  amount  equal  to a  rate  of  return  on  their  original  capital
contribution  equal to 3.5% over the average  yield on five-year  United  States
Treasury  Bonds for the period from the  commencement  of the  offering of Units
through a


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                                      B-15

<PAGE>




date six months  following the termination  date of the offering (with a minimum
of 8% per annum and a maximum  of 10% per  annum),  as  published  in a national
financial newspaper.

                  10.7.3  Such  amounts  with  respect  to each  year  which are
sufficient  to allow a Holder in a 31%  federal  income tax  bracket  (but not a
higher  bracket) to pay the federal income taxes and state income taxes due with
respect to Net Income derived by him from the Fund for such year.


         10.8 Consent to Allocations. The methods hereinabove set forth by which
Distributions  and  allocations  of  Net  Income  and  Net  Loss  are  made  and
apportioned  are  hereby  expressly  consented  to by each  Member as an express
condition to becoming a Member.

         10.9 Limitation on Distributions.  All Distributions are subject to the
payment of Fund expenses and to maintenance and repair of Equipment.

         10.10  Allocation  to  Manager.  To the  extent  that the Fund shall be
entitled to any  deduction  for federal  income tax  purposes as a result of any
interest in Net Income or Net Loss granted to a Manager, such deduction shall be
allocated for federal income tax purposes to such Manager.

         10.11  Return of Unused  Capital.  In the event that any portion of the
Net Proceeds  received by the Fund during the first twelve months after the date
of the  Prospectus is not invested or committed for investment  within  eighteen
months of the date of the  Prospectus,  or in the event any  portion  of the Net
Proceeds  received  by the Fund  thereafter  is not  invested or  committed  for
investment within six months from the Final Closing Date (except for any amounts
used to pay Fund operating expenses, including amounts set aside for reserves as
set forth in Section 9.4), such portion of the Net Proceeds shall be distributed
to the  Holders pro rata by the Fund as a return of capital.  In  addition,  the
Manager shall  contribute to the Fund, and the Fund shall distribute pro rata to
the Holders,  the amount by which (x) the amount of unused  capital  distributed
pursuant to the foregoing  sentence,  divided by (y) the percentage of the Gross
Proceeds  which remain after  payment of all Front End Fees,  exceeds the unused
capital so  distributed.  For the purposes of this Section 10.11,  funds will be
deemed to have been  committed  to  investment  and will not be  returned to the
Holders  to  the  extent   written   agreements   in  principle  or  letters  of
understanding  were  executed  at any  time  prior  to the end of  said  period,
regardless of whether any such  investment is actually  consummated,  and to the
extent any funds have been  reserved to make  contingent  payments in connection
with any Equipment, regardless of whether any such payment is actually made.

         10.12  Distributions  in  Kind.  Distributions  in  kind  shall  not be
permitted  except  upon  dissolution  and  liquidation,   and  then  only  to  a
liquidating  trust which has been established for the purpose of the liquidation
of the assets of the Fund, and the  distribution  of cash in accordance with the
terms of the Agreement.

         10.13  Withholding Taxes.

                  10.13.1  In the event the Fund pays to any  federal,  state or
local government  authority any amount of tax, penalty,  interest,  fee or other
expenditure  which  is  attributable  to the  particular  status  of one or more
Holders including,  without limitation,  the status of a Holder as a nonresident
of California or any

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                                      B-16

<PAGE>



other  state  imposing  such a charge,  the  Manager  shall treat such tax,
penalty,  interest or fee, and in its  discretion  may treat other  related Fund
expenditures,  as a distribution  of Cash from  Operations or Cash from Sales or
Refinancing as appropriate,  to such Holders.  Such a distribution  shall reduce
the amount of Cash from  Operations or Cash from Sales or Refinancing  otherwise
payable by the Fund to such  Holders.  Such  Holders  shall be  distributed  any
refund of any such tax, penalty, interest or other amounts received by the Fund;
provided,  however,  that the  distribution due such Holders shall be reduced by
any Fund  expenses  (and such  expenses  shall be  specially  allocated  to such
Holders)  incurred in connection  with the payment or obtaining of the refund of
such taxes, penalties, interest or other amounts and the Fund shall have no duty
or  obligation to seek to obtain or collect any such refund or expend any amount
to reduce the  amount of any  withholding,  penalty,  interest  or other  amount
otherwise  payable to any government  authority.  The Manager may require from a
Holder the appropriate documentation with respect to any distribution hereunder.

                  10.13.2 As security  for any  withholding  tax or other amount
referred to in section  10.14.1 or other  liability or  obligation  to which the
Fund may be  subject  as a result of any act or status of any  Holder,  the Fund
shall have (and each Holder  hereby  grants to the Fund) a security  interest in
all Cash from Operations or Cash from Sales or Refinancing distributable to such
Holder to the extent of the amount of such withholding tax or other liability or
obligation.   The  Fund  shall  have  a  right  of  set-off   against  any  such
distributions  of Cash from  Operations or Cash from Sales or Refinancing in the
amount of such withholding tax or other liability or obligation.

11.      ASSIGNMENT OF FUND INTERESTS

         11.1 Limitations on Transfer.  A Holder may not transfer all or part of
his legal and  equitable  interest in his Units  except in  compliance  with the
provisions of this Agreement. The Manager may condition any proposed transfer on
receipt by the Fund of such representations and warranties of the transferor and
the  assignee,  opinions of counsel for the Fund and other  assurances as it may
deem necessary and appropriate to ensure that:

                  11.1.1 such  assignments  or transfers  do not result,  in the
opinion of counsel for the Fund, in the Fund being considered to have terminated
within the meaning of Section 708 of the Code;

                  11.1.2  the assignee is not a minor or an incompetent;

                  11.1.3  the transfer or assignment does not violate federal or
state securities laws;

                  11.1.4  the  transferor  or the  assignee  does not hold Units
representing  Original  Invested Capital of less than $2,500 ($2,000 in the case
of IRAs and Keogh Plans);

                  11.1.5  such assignee is a Citizen of the United States;

                  11.1.6 such  assignment  or transfer does not cause the assets
of the Fund to be deemed "plan assets" for ERISA purposes;

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                                      B-17

<PAGE>



                  11.1.7 such  assignment  or  transfer  does not  constitute  a
transfer "on a secondary market (or the substantial  equivalent thereof)" within
the meaning of Section 7704 of the Code or otherwise adversely affecting the tax
status of the Fund; and

                  11.1.8 the transferor  files with the Fund a duly executed and
acknowledged   counterpart  of  the  instrument  effecting  such  assignment  or
transfer,  which instrument  evidences the written acceptance by the assignee or
transferee  of all of the terms and  provisions  of this  Agreement,  contains a
representation  that such assignment or transfer was made in accordance with all
applicable   laws  and   regulations   (including   any   investor   suitability
requirements) and in all other respects being satisfactory in form and substance
to the Manager.

         11.2  Distributions  and  Effective  Date of  Transfer.  An Assignee of
Record shall be entitled to receive  Distributions from the Fund attributable to
the Units  acquired by reason of such  assignment  from and after the  effective
date of the assignment of such Units;  provided,  however,  that notwithstanding
anything  herein to the contrary,  the Fund and the Manager shall be entitled to
treat the assignor of such Units as the absolute  owner thereof in all respects,
and  shall  incur  no  liability  for  allocations  of Net  Income,  Net Loss or
Distributions,  or  transmittal  of reports and notices  required to be given to
Holders hereunder, which are made in good faith to such assignor until such time
as the  written  instrument  of  assignment  has been  received  by the Fund and
recorded on its books and the effective date of the  assignment has passed.  The
effective  date of such  assignment  on which  the  Assignee  shall be deemed an
Assignee  of  Record  shall be the last day of the  first  full  calendar  month
following  the  later of (i) the date set  forth on the  written  instrument  of
assignment  or (ii)  the  date on  which  the  Fund  has  actual  notice  of the
assignment of Units and has received  complete  documentation of the assignment.
Notwithstanding  anything to the contrary  contained  herein,  no  Distributions
shall be made in any calendar  quarter with respect to Units  repurchased by the
Fund during such calendar quarter.

         11.3 Governmental Restrictions. No assignment, sale, transfer, exchange
or other  disposition  of Units may be made except in  compliance  with the then
applicable  rules of any  other  applicable  governmental  authority.  All Units
originally  issued  pursuant to  qualification  under the  California  Corporate
Securities  Law of 1968 shall be subject to, and all documents of assignment and
transfer evidencing such securities shall bear, the following legend condition:

"IT IS  UNLAWFUL TO  CONSUMMATE  A SALE OR  TRANSFER  OF THIS  SECURITY,  OR ANY
INTEREST THEREIN,  OR TO RECEIVE ANY CONSIDERATION  THEREFOR,  WITHOUT THE PRIOR
WRITTEN CONSENT OF THE  COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."

No  transfer  of any such Unit shall be made  unless the  transferor  shall have
obtained,  if necessary,  the written consent of the California  Commissioner of
Corporations to such transfer.

         11.4 Non-Complying Transfers.  Any assignment,  sale, exchange or other
transfer in  contravention  of any of the provisions of this Article 11 shall be
void and shall not bind or be recognized by the Fund.

         11.5  Misrepresentation  and Forfeit.  Subject to the discretion of the
Manager,  in the event a Holder  who  originally  obtained  Units in the  Fund's
offering  misrepresented  that he was a Citizen of the United States, or that it
was not an IRA or Qualified  Plan or purchasing on behalf of an IRA or Qualified
Plan,  such  person  fails to  remain  a  Citizen  of the  United  States,  or a
subsequent transferee of Units is not

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                                      B-18

<PAGE>



or fails to remain a Citizen of the  United  States,  such  Person  may,  in the
Manager's  discretion  if it deems that the Fund will fail  certain  citizenship
requirements with respect to its Equipment, be required to forfeit such Units to
the Fund and no longer be entitled to cash  Distributions  or allocations of the
Fund,  receipt of Fund  reports and voting  privileges,  although he may realize
proceeds upon the transfer of his Units to a Citizen of the United States, which
subsequent  transferee would be entitled to the full economic benefits and other
privileges attributable to such Units.

12.      SUBSTITUTED MEMBERS

         12.1 Limitations on  Substitution.  No Assignee shall have the right to
become a substituted  Member of the Fund in place of his assignor  unless all of
the following conditions are first satisfied:

                  12.1.1 A duly executed and acknowledged  written instrument of
assignment  covering  no less than 250 Units (200 in the case of an IRA or Keogh
Plan) shall have been filed with the Fund,  which  instrument  shall specify the
number of Units being  assigned and set forth the intention of the assignor that
the Assignee succeed to the assignor's interest as a substituted Member.

                  12.1.2 The  assignor  and  Assignee  shall have  executed  and
acknowledged  such  other  instruments  as the  Manager  may deem  necessary  or
desirable to effect such  substitution,  including  the written  acceptance  and
adoption by the Assignee of the provisions of this Agreement, as the same may be
amended  and his  execution,  acknowledgment  and  delivery  to the Manager of a
special power of attorney, the form and content of which are described herein;

                  12.1.3 The written consent of the Manager to such substitution
shall have been  obtained,  the granting of which may be withheld by the Manager
in its sole discretion, and any exercise of such discretion intended to preserve
the tax consequences of Unit ownership shall presumptively be deemed reasonable;

                  12.1.4 A transfer  fee not to exceed $100 shall have been paid
to the Fund to cover all reasonable  expenses  connected with such substitution;
and

                  12.1.5  The provisions of Section 11.1 and 11.3 of this 
Agreement are complied with.

         12.2 Consent to  Admission.  By executing or adopting  this  Agreement,
each Holder  hereby  consents to the  admission  of  additional  or  substituted
Holders by the Manager and to any Assignee  becoming a  substituted  Holder,  in
accordance with the provisions herein.

         12.3 Amendment of Agreement.  The Manager shall cause this Agreement to
be amended to reflect the admission and/or substitution of Members at least once
in each fiscal quarter.

13.      REPURCHASE OF FUND INTERESTS

         13.1 In the event a Holder  ceases  to be a United  States  Citizen  or
Resident Alien for any reason whatsoever,  he may be required,  in the Manager's
discretion,  to tender  his Units to the Fund for  repurchase  as of the date of
such event.  The Fund will have the absolute  right to purchase  such Units at a
price  equal to 100% of the  Holder's  Capital  Account as of such date,  in all
cases  determined as of the last day of the quarter prior to the fiscal  quarter
during which such Units are  repurchased.  IT SHOULD BE NOTED THAT THE FUND WILL
NOT BE OBLIGATED TO PURCHASE UNITS FROM HOLDERS

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                                      B-19

<PAGE>



WHO CEASE TO BE UNITED STATES CITIZENS OR RESIDENT ALIENS.

         13.2 The Manager may  otherwise  use  available  Reserves to repurchase
Units,  in its  discretion  and on terms it determines to be  appropriate  under
given  circumstances,  in the event the Fund Manager deems such repurchase to be
in the best interest of the Fund; provided,  the Fund shall never be required to
repurchase any Units. Upon the repurchase of any Units by the Fund, the tendered
Units shall be canceled  and shall no longer be deemed to  represent an interest
in the Fund; and,  provided  further,  that any such repurchase shall not impair
the capital of the Fund,  or cause the Fund or any of its  remaining  Members to
incur an adverse tax consequence as a result of such repurchase.

         13.3 The Manager  shall cause this  Agreement  to be amended to reflect
the change in the  interests  of the Holders  (including  the person whose Units
were  repurchased) in the Net Income,  Net Loss and Distributions of the Fund at
least once in each fiscal quarter.

         13.4  Neither the Manager nor its Affiliates may request the Fund to 
repurchase any Units owned by them.

14.      BOOKS, RECORDS, ACCOUNTINGS AND REPORTS

         14.1 Books of Account and Records.  The Manager  shall,  for income tax
purposes,  keep on an accrual basis adequate books of account and records of the
Fund wherein  shall be recorded and reflected  all of the  contributions  to the
capital of the Fund and all of the expenses and transactions of the Fund.

                  14.1.1  Such books of account and  records  shall  include the
following:

                            (i) A current  list of the full name and last  known
                           business or residence address and business  telephone
                           number of each Member set forth in alphabetical order
                           together  with the  Original  Invested  Capital,  the
                           Units  held and the share in Net  Income and Net Loss
                           of each Member,  which list shall be updated at least
                           quarterly  to  reflect  changes  in  the  information
                           contained therein;

                           (ii) A copy of the Articles of  Organization  and all
                           amendments,  together  with  executed  copies  of any
                           powers of attorney  pursuant to which any certificate
                           has been executed;

                           (iii) Copies of the Fund's  federal,  state and local
                           income tax or  information  returns and  reports,  if
                           any, for the six most recent taxable years;

                           (iv) Copies of the original of this Agreement and all
                           amendments;

                           (v)Financial statements of the Fund for the six most
                           recent fiscal years; and

                           (vi) The Fund's  books and  records  for at least the
                           current and past three fiscal years.

                  14.1.2 Such books of account and records  shall be kept at the
principal  place of  business of the Fund in the State of  California,  and each
Member and his authorized representatives shall have, at all times during normal
business hours and at any other reasonable time, free access to and the right to

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                                      B-20

<PAGE>



inspect and copy at their expense such books of account and all records of the 
Fund.

                  14.1.3 Upon the request of a Member, the Manager shall mail to
such Member within ten days of the request a copy of the  information  described
in  Section  14.1.1(i),  (ii) and (iv).  The  information  described  in Section
14.1.1(i)  shall be printed in  alphabetical  order,  on white  paper,  and in a
readily  readable type size (in no event smaller than ten-point  type). The Fund
may require payment of a reasonable charge for copy work.

                  14.1.4 If the Manager neglects or refuses to exhibit,  produce
or mail a copy of the  information in Section  14.1.1(i)  above as requested and
required  under  this  Agreement,  the  Manager  shall be liable  to the  Member
requesting the information for the costs, including attorneys' fees, incurred by
the Member for compelling  production of the  information and for actual damages
suffered  by the  Member by reason of such  refusal  or  neglect.  It shall be a
defense that the actual  purpose and reason for the requests for  inspection  or
for a copy of the  information  is to  secure  the  list  of  Members  or  other
information for the purpose of selling such list or copies thereof,  or of using
the same for a commercial  purpose other than in the interest of the  requesting
person as a Member  relative to the affairs of the Fund. The Manager may require
that a Member  requesting the  information in Section  14.1.1(i) above represent
that  the  list is not  requested  for a  commercial  purpose  unrelated  to the
Member's  interest  in the Fund.  The  remedies  provided  hereunder  to Members
requesting  copies of the information in Section 14.1.1(i) above are in addition
to, and shall not in any way limit,  other remedies available to Limited Members
under federal law or the laws of any state.

                  14.1.5 Subject to any change pursuant to Section  15.2.8,  all
books and records of the Fund shall be kept on the basis of an annual accounting
period ending  December 31, except for the final  accounting  period which shall
end on the  dissolution or  termination of the Fund. All references  herein to a
"year of the Fund" are to such an annual accounting  period,  and all references
to a Fund  "quarter"  shall  refer to a calendar  quarter  unless and until such
periods are changed by an amendment hereto.  Accelerated methods of depreciation
with  respect to Fund assets and other  elections  available  to the Fund may be
used by the Fund for purposes of reporting federal or state income taxes.

         14.2  Audited  Annual  Financial  Statements.  The  Manager  shall have
prepared and  distributed  to the Holders at least  annually,  at Fund  expense,
financial statements (each of which shall include a balance sheet,  statement of
income or loss,  statement  of  Members'  equity,  and  statement  of cash flow)
prepared  in  accordance  with  generally  accepted  accounting  principles  and
accompanied  by a  report  thereon  containing  an  opinion  of  an  independent
certified  public  accounting  firm. Such opinion shall also state that reported
"Cash from Operations" is consistent with the definition of Cash from Operations
herein. Copies of such statements and report shall be distributed to each Holder
within 120 days after the close of each taxable year of the Fund.

         14.3 Other  Annual  Reporting.  The  Manager  shall have  prepared  and
distributed to the Holders at least annually,  at Fund expense:  (i) a statement
of cash flow, (ii) Fund information necessary in the preparation of the Holders'
and Assignees' federal income tax returns; (iii) a report of the business of the
Fund,  which  shall  include  for each  piece of  Equipment  which  individually
represents at least 10% of the Fund's total  investment  in Equipment,  a status
report to indicate: (a) the condition of the Equipment, (b) how the Equipment is
being used as of the end of the year (leased,  operated, held for lease, repair,
or sale), (c) the remaining term of the Equipment leases,  (d) the projected use
of  Equipment  for the next year  (renewal of lease,  re-lease,  retirement,  or
sale),  and (e)  such  other  information  relevant  to the  value or use of the
Equipment as the Manager deems  appropriate,  including the method used as basis
for

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                                      B-21

<PAGE>



valuation;  (iv) a statement as to the compensation  received by the Manager and
its Affiliates  from the Fund during the year,  which  statement shall set forth
the services  rendered or to be rendered by the Manager and its  Affiliates  and
the amount of fees received;  (v) a report identifying  Distributions  from: (a)
Cash from  Operations  for that year,  (b) Gross Revenues of prior years held in
reserves, (c) Cash from Sales or Refinancing,  and (d) Cash from Reserve Account
and other  sources;  and (vi) a special report  prepared in accordance  with the
American  Institute of  Certified  Public  Accountants  United  States  Auditing
Standards  relating to special reports,  containing an opinion of an independent
certified  public  accounting  firm,  to  report  the  breakdown  of  the  costs
reimbursed  by the Fund to the Manager or its  Affiliates.  Such special  report
shall at a minimum  provide:  (a) a review  of the time  records  of  individual
employees, the costs of whose services were reimbursed,  and (b) a review of the
specific  nature of the work  performed by each such  employee.  The  additional
costs of such  special  report  shall be  itemized  by the  auditors  among  all
programs  sponsored by the Manager and its  Affiliates  on a  program-by-program
basis and may be reimbursed to the Manager or its  Affiliates to the extent that
such reimbursement, when added to the cost for administrative services rendered,
does not  exceed the  competitive  rate for  comparable  services  performed  by
independent  parties  in the same  geographic  location.  Copies of the  reports
hereunder shall be distributed to each Holder within 120 days after the close of
each  taxable year of the Fund;  provided,  however,  that all Fund  information
necessary in the  preparation of the Holders' and Assignees'  federal income tax
returns shall be  distributed to each Holder and Assignee not later than 75 days
after the close of each taxable year of the Fund.

         14.4 Quarterly Reports.  The Manager shall have prepared quarterly,  at
Fund expense, commencing with the first full quarter after the Closing Date: (i)
a statement as to the  compensation  received by the Manager during such quarter
from the Fund which  statement  shall set forth the  services  rendered or to be
rendered by the Manager during such quarter from the Fund and the amount of fees
received,  and (ii) other relevant information.  Copies of such statements shall
be  distributed  to each Holder  within 60 days after the end of each  quarterly
period.

         14.5 Unaudited Quarterly Financial  Statements.  The Manager shall have
prepared,  at Fund expense,  a quarterly report covering each of the first three
quarters  of  Fund  operations  in  each  calendar  year,   unaudited  financial
statements (each of which shall include a balance sheet,  statement of income or
loss for said  quarterly  period and statement of Cash from  Operations and Cash
from Sales or Refinancing  for said  quarterly  period) and a statement of other
pertinent information regarding the Fund and its activities during the quarterly
period  covered by the report.  Copies of such  statements  and other  pertinent
information  shall be  distributed to each Holder within 60 days after the close
of the quarterly period covered by the report of the Fund.

         14.6 Other Quarterly Reports. The Manager shall have prepared,  at Fund
expense,  after the end of each quarter in which Equipment is acquired and until
the Net Proceeds  are fully  invested or returned to  investors,  a notice which
shall  describe  therein:  (i) a statement of the actual  purchase  price of the
Equipment,  including the terms of the  purchase,  (ii) a statement of the total
amount  of cash  expended  by the  Fund  to  acquire  such  items  of  Equipment
(including and itemizing all  commissions,  fees,  expenses and the name of each
payee), and (iii) a statement of the amount of proceeds in the Fund which remain
unexpended or  uncommitted.  Copies of such notice shall be  distributed to each
Holder within 60 days after the end of such quarter.  If deemed  appropriate  by
the  Manager  such notice may be prepared  and  distributed  to each Holder more
frequently than quarterly.

         14.7 Tax Returns. The Manager, at Fund expense,  shall cause income tax
returns  for  the  Fund  to  be  prepared  and  timely  filed  with  appropriate
authorities.

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<PAGE>



         14.8 Governmental Reports. The Manager, at Fund expense, shall cause to
be prepared and timely filed with  appropriate  federal and state regulatory and
administrative bodies, all reports required to be filed with such entities under
then current  applicable  laws,  rules and  regulations.  Such reports  shall be
prepared on the  accounting  or  reporting  basis  required  by such  regulatory
bodies. Any Holder shall be provided with a copy of any such report upon request
without expense to him.


         14.9 Maintenance of Suitability  Records. The Manager, at Fund expense,
shall maintain for a period of at least six years, a record of the  information
obtained to indicate that a Holder meets the suitability  standards set forth in
the Prospectus.


15.      RIGHTS, AUTHORITY, POWERS AND RESPONSIBILITIES OF THE MANAGER.

         15.1  Services of the Manager.  The Manager  shall be  responsible  for
providing the following services to the Fund:

                  15.1.1  Supervising  the  organization  of the  Fund  and  the
offering and sale of Units;

                  15.1.2   Supervising  Fund  management,   which  includes  (i)
establishing  policies for the  operation  of the Fund;  (ii) causing the Fund's
agents or  employees to arrange for the  provision of services  necessary to the
operation of the Fund (including Equipment  management and investor,  accounting
and legal services,  and services relating to Distributions by the Fund);  (iii)
approving actions to be taken by the Fund; (iv) providing advice,  consultation,
analysis and  supervision  with respect to the functions of the Fund as an owner
of the Equipment (including, without limitation, decisions regarding adjustments
to rental  schedules,  the sale or disposition of Equipment and compliance  with
federal, state and local regulatory requirements and procedures);  (v) executing
documents on behalf of the Fund; (vi) having a fiduciary  responsibility for the
safekeeping  and use of all funds of the Fund,  whether or not in the  Manager's
immediate possession or control; and (vii) making all decisions as to accounting
matters; and

                  15.1.3 Approval of the terms of the sale or other  disposition
of  Equipment,  including  establishing  the  terms for and  arranging  any such
transaction.

         15.2 Authority of the Manager. The conduct of the Fund's business shall
be  controlled  solely by the Manager in  accordance  with this  Agreement.  The
Manager shall have fiduciary  responsibility  for the safekeeping and use of all
funds and assets of the Fund,  whether  or not in its  immediate  possession  or
control,  and shall have all authority,  rights and powers  conferred by law and
those required or appropriate to the management of the Fund business  which,  by
way of  illustration  but not by way of limitation,  shall,  subject only to the
provisions of Section 15.4, include the right, authority and power:

                  15.2.1 To acquire, lease, sell, hold and dispose of Equipment,
interests  therein  or  appurtenances  thereto,  as well as  personal  or  mixed
property  connected  therewith,  including  the  purchase,  lease,  improvement,
maintenance, exchange, trade or sale of such Equipment, at such price, rental or
amount,  for  cash,  securities  (in  compliance  with  appropriate   securities
regulations) or other property, and upon such terms, as the Manager deems in its
sole  discretion,  to be in the best interest of the Fund;  provided that, as of
the date of the final investment of Net Proceeds and completion of the permanent
financing of the Equipment portfolio,  at least 50% of the Fund's Equipment,  by
aggregate  purchase  cost,  shall be subject to  initial  leases  which are High
Payout Leases.

                  15.2.2  To place  record  title  to,  or the right to use Fund
assets in, the name or names of a

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                                      B-23

<PAGE>



nominee or nominees, trustee or trustees for any purpose convenient or 
beneficial to the Fund;

                  15.2.3 To acquire  and enter into any  contract  of  insurance
which the Manager deems  necessary or appropriate for the protection of the Fund
and  the  Manager,  for the  conservation  of Fund  assets,  or for any  purpose
convenient or beneficial to the Fund;

                  15.2.4 To employ  Persons in the operation  and  management of
the business of the Fund  including,  but not limited to,  supervisory  managing
agents, insurance brokers and equipment lease brokers and Persons to perform, on
behalf of the Fund, the activities  enumerated in Section 15.2.1,  on such terms
and for such compensation as the Manager shall determine,  subject,  however, to
the limitations with respect thereto as set forth in Article 8; provided that no
Person is employed to provide  duplicative  services;  and provided further that
agreements  with the Manager or their  Affiliates  for the services set forth in
Article 8 shall contain the terms and limitations as to fees and expenses as set
forth  in  said  Article  8 and  any of  such  agreements  shall  be  terminable
immediately upon dissolution of the Fund under Section 19.1;

                  15.2.5 To prepare or cause to be prepared reports,  statements
and other  relevant  information  for  distribution  to Holders,  as provided in
Article 14 and as they otherwise deem appropriate;

                  15.2.6 To open accounts and deposit and maintain  funds in the
name of the Fund in banks or savings and loan associations;  provided,  however,
that the Fund funds shall not be commingled with the funds of any other Person;

                  15.2.7  To cause the Fund to make or revoke any of the 
elections referred to in the Code;

                  15.2.8 To select as the Fund's accounting year a calendar year
or such fiscal year as approved by the Service;

                  15.2.9  To determine the appropriate accounting method or 
methods to be used by the Fund;

                  15.2.10  To offer  and sell  Units  in the  Fund  directly  or
through any  licensed  Affiliate  of the Manager or  nonaffiliate  and to employ
personnel, agents and dealers for such purpose;

                  15.2.11 To amend this  Agreement  to reflect  the  addition or
substitution  of Holders,  the reduction of capital  accounts upon the return of
capital  to Members or the  change in the  interests  of the  Holders in the Net
Income, Net Loss and Distributions of the Fund after the repurchase of Units;

                  15.2.12 To require in all Fund  obligations  that the  Manager
shall not have any personal  liability  thereon but that the Person  contracting
with the Fund is to look solely to the Fund and its assets for  satisfaction  of
such obligations;  and in the event that the Manager has personal liability with
respect to any such obligation,  the Manager may require its satisfaction  prior
to  obligations  with  respect to which the Manager  has no personal  liability;
provided,  however,  that the  inclusion of the aforesaid  provisions  shall not
materially  affect the cost of the service or material  being  supplied  and all
Fund obligations are satisfied in accordance with prudent business  practices as
to the time and manner of payment;

                  15.2.13  To execute and file certificates of amendment and  
cancellation of the articles of

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                                      B-24

<PAGE>



organization, and certificates of dissolution of the Fund;

                  15.2.14  Subject to the provisions of Article 10, to determine
the amount of Cash from  Operations and Cash from Sales or  Refinancing  used to
purchase additional Equipment and to make Distributions;

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

                  15.2.16  Subject to Sections  15.4.21 and  15.4.22,  to borrow
money and,  if  security  is  required  therefor,  to  mortgage  or subject  any
Equipment to any other security device,  to obtain  replacements of any mortgage
or other  security  device,  and to  prepay,  in  whole  or in part,  refinance,
increase,  modify,  consolidate or extend any mortgage or other security device,
all of the  foregoing at such terms and in such  amounts as the Manager,  in its
sole discretion, deems to be in the best interests of the Fund;

                  15.2.17  To invest  (i) the  Gross  Proceeds  or Net  Proceeds
temporarily prior to investment in Equipment, (ii) other funds of the Fund prior
to the  investment  in  Equipment or the  distribution  to Holders and (iii) the
Fund's capital reserves, in short-term, highly liquid investments where there is
appropriate safety of principal;

                  15.2.18 In addition  to any  amendments  otherwise  authorized
herein, this Agreement may be amended from time to time by the Manager,  without
the consent of any of the Holders

                  (i) to add to the  representations,  duties or  obligations of
                  the Manager or its  Affiliates or surrender any right or power
                  granted  to the  Manager  or its  Affiliates  herein,  for the
                  benefit of the Holders;

                  (ii) to cure any  ambiguity,  to  correct  or  supplement  any
                  provision  herein  which  may be  inconsistent  with any other
                  provision herein, or to make any other provisions with respect
                  to matters or questions  arising  under this  Agreement  which
                  will not be inconsistent with the provisions of this Agreement
                  provided  that no amendment  hereunder  will change the voting
                  rights of Holders;

                  (iii)  to  delete  or add  any  provision  of  this  Agreement
                  required  to be so  deleted  or  added  by  the  staff  of the
                  Securities  and Exchange  Commission  or by a state "Blue Sky"
                  administrator  or similar  such  official,  which  addition or
                  deletion  is deemed by such  staff or  official  to be for the
                  benefit or protection of the Holders; or

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                                      B-25

<PAGE>



                  (iv) to amend the  provisions of Article 10 of this  Agreement
                  relating  to the  allocations  of Net  Income,  Net  Loss  and
                  Distributions  among Members or any other provisions hereof if
                  the Fund is advised at any time by the Fund's  accountants  or
                  legal counsel that the  allocations  or such other  provisions
                  set forth in this  Agreement  are  unlikely  to be  respected,
                  either because of promulgation  of Regulations  under Sections
                  704 or 706 of the Code or other  developments  in the law, but
                  only to the minimum extent  necessary in accordance  with such
                  advice of accountants  and/or counsel to cause such provisions
                  of  this   Agreement  to  be  respected.   Such  amendment  or
                  amendments  made by the Manager in reliance upon the advice of
                  the accountants or counsel  described above shall be deemed to
                  be made pursuant to the fiduciary obligation of the Manager to
                  the Fund and the Holders,  and no such amendment or amendments
                  shall give rise to any claim or cause of action by any Holder.

                  15.2.19  To  execute,  acknowledge  and  deliver  any  and all
instruments  to  effectuate  the  foregoing,  and to take  all  such  action  in
connection therewith as the Manager shall deem necessary or appropriate.

         15.3 General Powers and Fiduciary  Duty.  The Manager shall,  except as
otherwise  provided in this Agreement,  have all the rights and powers and shall
be subject to all the restrictions and liabilities provided for the manager of a
limited  liability company under the California Act.  Notwithstanding  any other
provision of this  Agreement,  in no event may the Manager modify or compromise,
by contract or otherwise, its fiduciary duty to the Fund or the Holders, whether
such duty is imposed under the common law or by statute.

         15.4  Limitations on Manager's Authority.  Neither the Manager nor any
Affiliate shall have the authority to:

                  15.4.1 Enter into contracts with the Fund which would bind the
Fund after the expulsion, adjudication of bankruptcy or insolvency of a Manager,
or continue the business of the Fund with Fund assets  after the  occurrence  of
such an event;

                  15.4.2  Grant to the  Manager or any  Affiliate  an  exclusive
listing for the sale of Fund assets, including Equipment;

                  15.4.3 Sell  Substantially All of the Assets in a single sale,
or in  multiple  sales in the same  twelve-month  period,  except in the orderly
liquidation  and winding up of the business of the Fund upon its termination and
dissolution;

                  15.4.4 Pledge or encumber Substantially All of the Assets in a
single transaction or in multiple  transactions in the same twelve-month  period
other than in connection  with the  acquisition  or improvement of assets or the
refinancing of existing obligations;

                  15.4.5  Alter the primary purpose of the Fund as set forth in
Article 3;

                  15.4.6   Receive   from  the  Fund  a  rebate  or  give-up  or
participate in any reciprocal  business  arrangements which would circumvent the
provisions of this  Agreement,  nor shall any such person permit any  reciprocal
business  arrangement  which would  circumvent the  restrictions  herein against
dealing with the Manager and its Affiliates;

Atel8-1/operag6.wpd
                                      B-26

<PAGE>



                  15.4.7  Sell or lease any  Equipment  to any entity in which a
Manager or any Affiliate has an interest,  other than a joint venture or similar
program which complies with the conditions set forth in Section 15.4.8 hereof;

                  15.4.8 Cause the Fund to invest in any program, partnership or
other venture unless:  (i) the other Member or joint owner is not a Manager (but
it may be an  Affiliate  of a  Manager,  provided  the  Affiliate  is formed and
operated for the primary  purpose of investment in and operation of or gain from
an interest in equipment,  and has substantially identical investment objectives
to those of the Fund);  (ii) such joint  venture  owns and  operates  particular
Equipment and the Fund or the Fund and  Affiliate,  as the case may be,  acquire
the  controlling  interest  in such  partnership,  or joint  venture;  (iii) the
agreement  of joint  venture  does not  authorize  the Fund to do  anything as a
Member or joint  venturer  with respect to the  Equipment  which the Fund,  or a
Manager, could not do directly because of the provisions of this Agreement; (iv)
the Fund's  investment is on substantially  the same terms and conditions as the
investment of any Affiliate;  (v) no compensation (other than as provided for by
this Agreement) is received in connection therewith by the Manager or any of its
Affiliates,  there are no duplicate equipment  management or any other duplicate
fees and such  investment  shall not  result in the  impairment,  abrogation  or
circumvention  of any of the terms or  provisions  of this  Agreement;  (vi) the
joint venture is in the best interest of both  co-venturers;  and (vii) in joint
venture  arrangements  with an Affiliate of a Manager,  if all of the  following
additional  conditions are met: the compensation of the Manager is substantially
identical  to that  received  by the sponsor of such  Affiliate,  the Fund has a
right of first refusal to buy, if such Affiliate wishes to sell,  equipment held
in the joint  venture,  and the joint  venture  is  established  either  for the
purpose  of  effecting  appropriate  diversification  of the  Fund's  investment
portfolio  or for the  purpose of  relieving  the Manager or its  Affiliates  or
nominees  from a  commitment  entered into  pursuant to Section  15.2.15 of this
Agreement;  for the  purposes of this  Section,  a  controlling  interest  shall
include:  (1) ownership of more than 50% of the venture's capital or profits; or
(2) provisions in the venture agreement giving the Fund effective control;

                  15.4.9 Except as provided in the Sections 15.2.15,  15.4.7 and
15.4.8,  purchase or lease Equipment from the Fund or sell or lease Equipment to
the Fund;

                  15.4.10  Cause the Fund to loan any funds or property to any 
Manager or Affiliate of a Manager;

                  15.4.11  Cause the Fund to borrow  from any of the  Manager or
its Affiliates on terms which provide for interest, financing charges or fees in
excess of the amounts  charged by unrelated  lending  institutions on comparable
loans for the same purpose,  or in excess of the ledger's cost of funds,  or, in
any  event,  to cause  the Fund to  obtain  "permanent  financing"  (defined  as
financing with a term in excess of 12 months) from any such Person;

                  15.4.12  Cause the Fund to exchange Units for property other 
than cash;

                  15.4.13 Do any action in  contravention  of this  Agreement or
which would make it impossible to carry on the ordinary business of the Fund;

                  15.4.14 Confess a judgment against the Fund in connection with
any threatened or pending legal action;

                  15.4.15  Possess any Equipment or assign the rights of the  
Fund in specific Equipment

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                                      B-27

<PAGE>



for other than a Fund purpose;

                  15.4.16 Admit a Person as a Manager except with the consent of
the Holders as provided in Article 17 hereof;

                  15.4.17  Perform any act (other  than an act  required by this
Agreement or any act taken in good faith reliance upon counsel's  opinion) which
would,  at the time such act  occurred,  subject  any Holder to  liability  as a
Manager in any jurisdiction;

                  15.4.18  Reinvest  any funds of the Fund  after the end of the
Reinvestment  Period other than to invest in Equipment  pursuant to  commitments
entered into prior to the expiration of the Reinvestment  Period or in Equipment
to be used in connection with Equipment under an existing lease, or reinvest any
funds of the Fund during the  Reinvestment  Period unless such  reinvestment  is
effected for all Holders on the same terms and is otherwise in  compliance  with
Section 10.7 hereof;

                  15.4.19  Invest any of the Gross Proceeds in Equipment which 
is non-income producing;

                  15.4.20 Employ,  or permit any Person to employ,  the funds or
assets of the Fund in any manner except for the  exclusive  benefit of the Fund;
this  provision  shall not  prohibit  the Manager  from causing Fund funds to be
deposited in a separate Fund account with a bank or other financial  institution
which  aggregates  all funds held on behalf of the Manager and its Affiliates in
calculating  qualifying balances for purposes of discounts on service charges or
other account benefits, provided that the Fund benefits on a pro rata basis from
any such discounts or other favorable  terms,  and,  provided  further,  that no
creditor of any party other than the Fund shall have any  recourse to funds held
in the Fund's separate account;

                  15.4.21 Incur any indebtedness wherein the lender will have or
acquire,  at any time as a result of making  the loan,  any  direct or  indirect
interest in the profit,  capital or property of the Fund other than as a secured
creditor;  or incur any  indebtedness  specifically  for the  purpose of funding
operating  distributions,   provided  however  that  the  Fund  may  enter  into
refinancing  transactions  with  respect to its  Equipment  and  distribute  net
proceeds from any such refinancing to the extent  consistent with its investment
objectives;

                  15.4.22 Incur aggregate Fund borrowings  which, as of the date
of the final  investment  of the Net Proceeds and,  thereafter,  on the date any
subsequent  indebtedness is incurred, are in excess of 50% of the purchase price
of all  Equipment  on a combined  basis.  "Purchase  price" for purposes of this
Section 15.4.22 shall mean the sum of the cash  downpayment and any indebtedness
incurred in connection with the acquisition of an item of Equipment by the Fund,
or to which the Equipment is taken subject,  plus any Acquisition Fees paid, but
does not include loan points, prepaid interest, or other prepaid expenses;

                  15.4.23  Commingle Fund funds with those of any other Person;

                  15.4.24 Except as otherwise provided herein, cause the Fund to
enter into any transaction with any other  partnership in which a Manager or any
of its  Affiliates  have  an  interest,  including,  but  not  limited  to,  any
transaction  involving  the sale,  lease or purchase of any Equipment to or from
the Fund,  the  rendering of services to or from the Fund, or the lending of any
monies or other property to or from the Fund;

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                                      B-28

<PAGE>



                  15.4.25 Directly or indirectly pay or award any finder's fees,
commissions or other  compensation to any Person engaged by a potential investor
for  investment  advice as an inducement to such advisor to advise the purchaser
regarding the purchase of Units;  provided,  however, that the Manager shall not
be prohibited from paying the normal sales  commissions  payable to a registered
broker-dealer or other properly-licensed Person for selling Units;

                  15.4.26  Operate the Fund in such a manner as to have the Fund
classified as an "investment company" for purposes of the Investment Company Act
of 1940;

                  15.4.27  Except as  provided  herein,  invest any of the Gross
Proceeds in units of limited partnership  interest,  junior mortgages,  deeds of
trust or other similar instruments or obligations;

                  15.4.28  Cause the Fund to enter  into any  agreements  with a
Manager or any  Affiliate  of a Manager  which are not  subject  to  termination
without  penalty  by either  party upon not more than 60 days'  written  notice,
except for  agreements  which comply with the  provisions of Section  15.2.15 or
those  which  comply  with the  provisions  of Section  15.4.8 and relate to the
purchase of Equipment by the Fund and an Affiliate as joint venturers;

                  15.4.29 Cause the Fund to acquire any single item of Equipment
that has a contract purchase price in excess of $1,000,000 unless prior to final
funding of the  acquisition it obtains a future value appraisal of the Equipment
from a qualified independent third party appraiser;

                  15.4.30  Cause the Fund to invest cash in an aggregate  amount
in excess of $30,000,000 in Equipment leased to a single lessee.

         15.5  Limitation  on  Manager's  Liability.  The Manager  shall have no
personal  liability  for the repayment of the Original  Invested  Capital of any
Holder or to repay the Fund any  portion or all of any  negative  balance in its
Capital Account, except as otherwise provided in Section 5.2.

         15.6 Tax Matters Member.  ATEL is hereby designated as the "Tax Matters
Member" in  accordance  with Section  6231(a)(7)  of the Code and, in connection
therewith  and in addition to all other  powers  given  therein,  shall have all
other powers needed to perform fully hereunder  including,  without  limitation,
the power to retain all attorneys and accountants of its choice and the right to
settle any audits without the consent of Members.  The designation  made in this
paragraph  is hereby  consented  to by each  Member as an express  condition  to
becoming a Member. The Fund hereby indemnifies ATEL from and against any damages
or losses  (including  attorney's fees) arising out of or incurred in connection
with  any  action  taken  or  omitted  to be  taken  by it in  carrying  out its
responsibilities  as tax matters Member,  subject to the same  conditions  under
which indemnification is provided the Manager in Article 21 hereof.

         15.7 Minimum  Investment  in Equipment / Maximum  Front-End  Fees.  The
Manager must commit not less than 85.875% of the Gross Proceeds to Investment in
Equipment,  with the balance thereof  available to pay Organization and Offering
Expenses  and Front  End  Fees,  however  designated.  Under the North  American
Securities  Administrators  Association,  Inc.  ("NASAA")  Statement  of  Policy
concerning Equipment Programs,  as amended through October 24, 1991 (referred to
herein as the  "NASAA  Guidelines"),  the Fund is  required  to commit a minimum
percentage of the Gross  Proceeds to Investment in Equipment,  calculated as the
greater  of: (i) 80% of the Gross  Proceeds  reduced  by 0.0625%  for each 1% of
indebtedness  encumbering  the  Fund's  Equipment;  or (ii)  75% of  such  Gross
Proceeds.  Based on the  formula  in the NASAA  Guidelines,  with 50%  portfolio
leverage the Fund's

Atel8-1/operag6.wpd
                                      B-29

<PAGE>



minimum  Investment in Equipment  would equal  76.875% of Gross  Proceeds (80% -
[50% x .0625%] = 76.875%),  and the Fund's minimum Investment in Equipment would
therefore exceed the NASAA Guideline  minimum by 9%. The NASAA Guidelines permit
the Manager and its Affiliates to receive  compensation in the form of a carried
interest  in Fund Net  Income,  Net Loss and  Distributions  equal to 1% for the
first 2.5% of excess Investment in Equipment over the NASAA Guidelines  minimum,
1% for the next 2% of such  excess,  and 1% for  each  additional  1% of  excess
Investment in Equipment.  With a minimum  Investment in Equipment of 85.875% and
50% leverage,  the Manager and its Affiliates may receive an additional  carried
interest  equal to 6.5% of Net  Profit,  Net Loss and  Distributions  under  the
foregoing  formula (2.5% + 2% + 4.5% = 9%; 1% + 1% + 4.5% = 6.5%]. At the lowest
permitted level of minimum  Investment in Equipment,  the NASAA Guidelines would
permit the Manager and its Affiliates to receive a promotional interest equal to
5% of  Distributions  of Cash from Operations and 1% of Distributions of Sale or
Refinancing  Proceeds until Members have received total  Distributions  equal to
their Original  Invested Capital plus an 8% per annum cumulative return on their
Adjusted  Invested  Capital,  and,  thereafter,  the promotional  interest could
increase  to 15% of all  Distributions.  With the  additional  carried  interest
calculated as described above, the maximum aggregate fees payable to the Manager
and Affiliates  under the NASAA  Guidelines as carried  interest and promotional
interest would equal 11.5% of Distributions of Cash from Operations (6.5% + 5% =
11.5%),  and 7.5% of Distributions of Sale or Refinancing  Proceeds (6.5% + 1% =
7.5%),   before  the  subordination   level  was  reached,   and  21.5%  of  all
Distributions thereafter. The maximum amounts to be paid under the terms of this
Agreement  are  subject to the  application  of the Asset  Management  Fee Limit
provided in Section 8.3,  which limits the annual amount  payable to the Manager
and its Affiliates as the Asset  Management  Fee and the Carried  Interest to an
aggregate  not to exceed  the total  amount of fees that would be payable to the
Manager and its  Affiliates  under the  alternative  fee  schedule  set forth in
Section 8.3. This overall limitation on annual fees will include, in addition to
the Equipment Management Fee and Equipment  Resale/Releasing  Fee, amounts equal
to 11.5% of Distributions of Cash from Operations (4% as an Incentive Management
Fee plus 7.5% as the Fund Manager's  Carried Interest) and 7.5% of Distributions
of Sale or Refinancing  Proceeds (as the Fund  Manager's 7.5% Carried  Interest)
before the Priority Return, and 15% of all Distributions  thereafter (7.5% as an
Incentive Management Fee plus 7.5% as the Carried Interest).  Upon completion of
the  offering of Units,  final  commitment  of Net  Proceeds to  acquisition  of
Equipment  and  establishment  of  final  levels  of  permanent  portfolio  debt
encumbering  such  Equipment,  the Manager shall  calculate the maximum  carried
interest  and  promotional  interest  payable to the Manager and its  Affiliates
under the NASAA Guidelines and compare such total permitted fees to the total of
the Incentive  Management Fees and Carried  Interest.  If and to the extent that
the fees calculated  under the alternative fee schedule  provided in Section 8.3
as the  Incentive  Management  Fee and the Carried  Interest  should  exceed the
maximum  promotional  interest plus carried  interest  permitted under the NASAA
Guidelines,  as  described  above,  the  fees  payable  to the  Manager  and its
Affiliates shall be reduced as described herein.  In such event,  Section 8.3 of
this Agreement shall be amended  immediately to reduce the amounts calculated as
the Incentive Management Fee and/or the Carried Interest by an amount sufficient
to cause the total of such  compensation  to comply with the  limitations in the
NASAA  Guidelines  on  the  aggregate  of  promotional   interests  and  carried
interests.  A comparison of the Front End Fees actually paid by the Fund and the
NASAA Guideline maximums shall be repeated,  and any required  adjustments shall
be made, at least annually thereafter.

         15.8  Reliance on Manager's  Authority.  The Manager  shall conduct the
business of the Fund,  devoting such time thereto as it, in its sole discretion,
shall  determine to be  necessary to manage the Fund  business and affairs in an
efficient manner.  Any Person dealing with the Fund or the Manager may rely upon
a  certificate  signed by the  Manager as  authority  with  respect  to: (i) the
identity  of  the  Manager  or  any  Holder   hereof;   (ii)  the  existence  or
non-existence of any fact or facts which constitute a condition

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                                      B-30

<PAGE>



precedent  to acts by the  Manager  or are in any other  manner  germane  to the
affairs of the Fund; (iii) the Persons who are authorized to execute and deliver
any  instrument or document on behalf of the Fund; or (iv) any act or failure to
act by the Fund as to any  other  matter  whatsoever  involving  the Fund or any
Members.

16.      RIGHTS, POWERS AND VOTING RIGHTS OF THE MEMBERS

         16.1 Limitation on Member Authority.  Members shall take no part in the
control,  conduct or  operation of the Fund and shall have no right or authority
to act for or bind the Fund except as expressly provided herein.

         16.2  Voting  Rights.  Members  shall  have the  right,  by the vote of
Members who own more than 50% of the total outstanding Units entitled to vote (a
"majority-in-interest"),  to approve the following  matters  affecting the basic
structure of the Fund:

                  16.2.1  Removal or withdrawal of a Manager;

                  16.2.2  Subject to the  further  requirements  of Article  17,
continuation  of  the  Fund  and  election  of  a  successor  Manager  upon  the
termination of a Manager;

                  16.2.3  Termination and dissolution of the Fund;

                  16.2.4 Amendment of this Agreement, provided such amendment is
not for any of the purposes set forth in Sections  16.4 or 16.5,  and  provided,
further,  that the  Members  shall have the right to approve  or  disapprove  by
separate vote each proposed amendment to this Agreement;

                  16.2.5 The pledge or  granting of a security  interest  in, or
sale of, Substantially All of the Assets in a single transaction, or in multiple
transactions  in the same  twelve-month  period,  except in the  liquidation and
winding up of the business of the Fund upon its termination and dissolution; and

                  16.2.6  The extension of the term of the Fund.

         16.3 Voting Procedures.  In any vote of the Members,  each Member shall
be  entitled  to cast one vote for each Unit which he owns as of the  designated
record date.  Notwithstanding  any other provision of this Agreement,  any Units
held by a Manager or an Affiliate of a Manager will not be entitled to vote, and
will not be considered to be "outstanding"  Units for purposes of any vote, upon
matters which  involve a conflict  between the interests of such Manager and the
Fund,  including,  but not  limited  to,  any vote on the  proposed  removal  or
withdrawal of such Manager or on any proposed  amendment to this Agreement which
would expand or extend the rights, authorities or powers of such Manager.

                  16.3.1  Meetings of the Members to vote upon any matters as to
which the Members are  authorized  to take action under this  Agreement,  as the
same may be amended from time to time,  may be called at any time by the Manager
or by one or more  Members  holding  more than 10% of the  outstanding  Units by
delivering  written  notice,  either in person or by  registered  mail,  of such
meeting to the  Manager.  Promptly,  but in any event  within 10 days  following
receipt of such  request,  the Manager shall cause a written  notice,  either in
person or by certified mail, to be given to the Members entitled to vote at such
meeting,  which  notice  shall  state that a meeting  will be held at a time and
place fixed by the Manager, which is to be convenient to the Members as a group,
and which is not less than 15 days nor more than

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                                      B-31

<PAGE>



60 days after the mailing of the notice of the meeting; provided,  however, that
such maximum  period for the giving of notice and the holding of meetings may be
extended for an additional 60 days if such  extension is necessary to obtain the
qualification with the California Commissioner of Corporations of the matters to
be acted upon at such  meeting,  the  clearance by the  Securities  and Exchange
Commission or other appropriate  governing agency of the solicitation  materials
to be  forwarded  to  Members  in  connection  with  such  meeting  or any other
administrative authorizations which may be required. Included with the notice of
a meeting  shall be a detailed  statement  of the action  proposed,  including a
verbatim statement of the wording of any resolution proposed for adoption by the
Members and of any  proposed  amendment to this  Agreement.  All expenses of the
meeting and notification shall be borne by the Fund.

                  16.3.2 In order to establish the Members of record entitled to
act upon matters by vote or written consent, the Manager or Members holding more
than 10% of the Units may fix in advance a record date (the "Record Date") which
is not more than 60 nor less than 10 days  prior to the date of the  meeting  or
the date upon which written  consents are to be delivered.  If no Record Date is
fixed in the notice of meeting or action by  written  consent,  the Record  Date
shall  be  deemed  to be at the  close  of  business  on the  business  day next
preceding the date on which notice is given. A new Record Date shall be fixed if
a meeting is adjourned  for more than 45 days from the date set for the original
meeting.

                  16.3.3 Upon adjournment of a meeting to another time or place,
notice  of the new time or place  shall be  announced  at the  meeting  at which
adjournment is taken.  If the  adjournment is for more than 45 days or if, after
the adjournment,  a new Record Date is fixed for the adjourned meeting, a notice
of the  adjourned  meeting  shall be given to each Member of record  entitled to
vote at the meeting.

                  16.3.4 Personal presence of the Members at a meeting shall not
be required,  provided that sufficient Units are represented at the meeting,  by
Members appearing in person and/or by duly executed proxies,  to take any action
proposed for a vote at such  meeting.  Attendance by a Member at any meeting and
voting in person shall revoke any proxies of such Member  submitted with respect
to action proposed to be taken at such meeting. Submission of a later proxy with
respect to any action shall  revoke an earlier one as to such  action.  Only the
votes,  whether in person or by proxy, of Members holding Units as of the Record
Date established for such meeting shall be counted.

                  16.3.5 Any matter as to which the  Members are  authorized  to
take  action  under  this  Agreement  or under  law may be taken by the  Members
without a meeting  and shall be as valid and  effective  as action  taken by the
Members at a meeting duly assembled,  if written  consents to such action by the
Members  are (i) signed by the  Members  entitled  to vote upon such action at a
meeting who held,  as of the Record Date for such  actions,  the number of Units
required to  authorize  such action and (ii)  delivered to the Manager as of the
date set for such action.  Any action taken without a meeting shall be effective
15 days after the required minimum number of Members have signed the consent and
shall be effective  immediately  if the Manager and Limited  Members  holding at
least  90% of the  outstanding  Units as of the  Record  Date  have  signed  the
consent.

                  16.3.6  In the  event  that  there  shall be no  Manager,  the
Members  may take  action  without a meeting by the  written  consent of Members
having the requisite voting power of the Members entitled to vote.

     16.4 Limitations on Member Rights.  No Holder shall have the right or power
to: (i) withdraw or reduce his contribution to the capital of the Fund except as
a result of the repurchase of the Units as

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                                      B-32

<PAGE>



provided in Article 13, the dissolution of the Fund or as otherwise  provided by
law,  (ii) bring an action  for  partition  against  the Fund,  (iii)  cause the
termination and dissolution of the Fund by court decree or otherwise,  except as
set forth in this Agreement,  or (iv) demand or receive property other than cash
in return for his  contribution.  No Holder shall have  priority  over any other
Holder either as to the return of  contributions of capital or as to Net Income,
Net Loss or  Distributions.  Other than upon the  termination and dissolution of
the Fund as provided by this  Agreement  there has been no time agreed upon when
the contribution of each Holder may be returned.

         16.5  Limitations  on Power to Amend  Agreement.  Except as provided in
Section 15.2.18, and notwithstanding  anything to the contrary contained in this
Agreement,  this  Agreement may not,  without the consent of each of the Members
who would be adversely affected thereby, be amended to:

                  16.5.1 Convert a Holder into a Manager;

                  16.5.2 Modify the limited liability of a Holder;

                  16.5.3 Alter the interest of any Member in Net Income, Net 
Loss or Distributions; or

                  16.5.4  Affect  the  status of the Fund as a  partnership  for
federal income tax purposes.

         16.6  Member  List.  Upon the  written  request of a Member and for any
non-commercial  purpose  reasonably related to the exercise of rights under this
Agreement, the Manager will furnish to such Member or his representative, at his
expense,  a list  containing the name and address of the Units held of record by
each Member, as provided in Section 14.1.3.

         16.7  Dissenters' Rights and Limitations on Mergers and Roll-ups.

                  16.7.1 Any  proposal  that the Fund enter into a Roll-Up  will
require  approval  by  Members  of not less than 90% of the  outstanding  Units.
Members who dissent with respect to a Roll-Up proposal will have the rights of a
dissenting  Member as provided under Sections  15679.1  through  15679.14 of the
California  Act. The Fund shall not reimburse the sponsor of a proposed  Roll-Up
for the costs of its proxy  contest or any other costs of the transaction in the
event the Roll-Up is not  approved by the Members as provided herein.

                  16.7.2 In connection with a proposed Roll-Up,  an appraisal of
all Fund assets shall be obtained from a competent,  independent expert (defined
as a Person with no current material or prior business or personal  relationship
with the Manager or its Affiliates who is engaged to a substantial extent in the
business of rendering opinions regarding the value of assets of the type held by
the Fund,  and who is qualified to perform such work).  If the appraisal will be
included in a Prospectus used to offer the securities of a Roll-Up  Entity,  the
appraisal  shall  be filed  with the SEC and the  states  as an  Exhibit  to the
Registration  Statement  for the  offering.  Accordingly,  an  issuer  using the
appraisal  shall be  subject to  liability  for  violation  of Section 11 of the
Securities  Act of 1933  and  comparable  provisions  under  state  laws for any
material  misrepresentations or material omissions in the appraisal. Fund assets
shall be appraised on a consistent  basis.  The  appraisal  shall be based on an
evaluation  of all  relevant  information,  and shall  indicate the value of the
Fund's assets as of a date immediately prior to the announcement of the proposed
Roll-Up  transaction.  The appraisal shall assume an orderly liquidation of Fund
assets over a 12-month  period.  The terms of the engagement of the  Independent
Expert shall  clearly  state that the  engagement is for the benefit of the Fund
and its Holders. A summary of the independent appraisal, indicating all material
assumptions  underlying  the  appraisal,  shall be  included  in a report to the
Holders

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                                      B-33

<PAGE>



in connection  with a proposed Roll-Up transaction.

                  16.7.3 In  connection  with a  proposed  Roll-Up,  the  Person
sponsoring the Roll-Up  transaction  shall offer to Holders who vote "no" on the
proposal the choice of:

                  (a)  accepting the securities offered in the proposed Roll-Up
transaction; or

                  (b)  one of the following:

                            (i)  remaining as Holders in the Fund, and 
preserving their interests therein on the same terms and conditions as existed 
previously; or

                           (ii)  receiving  cash  in  an  amount  equal  to  the
Holders' pro-rata share of the appraised value of the net assets of the Fund.

                  16.7.4 The Fund shall not participate in any proposed  Roll-Up
transaction which would result in Holders having democracy rights which are less
than those  provided  for under this  Agreement.  If the  resulting  entity is a
corporation,  the voting rights of Holders shall correspond to the voting rights
provided for in this Agreement to the greatest extent possible.

                  16.7.5 The Fund shall not participate in any proposed  Roll-Up
transaction  which includes  provisions which would operate to materially impede
or frustrate the  accumulation  of shares by any purchaser of the  securities of
the Roll-Up Entity  (except to the minimum extent  necessary to preserve the tax
status of the entity).  The Fund shall not  participate in any proposed  Roll-Up
transaction  which would  limit the  ability of a Holder to exercise  the voting
rights of the  securities  of the  Roll-Up  Entity on the basis of the number of
Units held by that Holder.

                  16.7.6 The Fund shall not participate in any proposed  Roll-Up
Transaction  in which  Holders'  rights of access to the  records of the Roll-Up
Entity will be less than those provided for under this Agreement.

17.      TERMINATION OF A MANAGER AND TRANSFER OF THE MANAGER'S INTEREST

         17.1 Removal or Withdrawal.  The following  conditions shall govern the
voluntary withdrawal or removal of the Manager:

                  17.1.1 The Manager may not voluntarily  withdraw from the Fund
without the approval of Members  holding more than 50% of the total  outstanding
Units entitled to vote.

                  17.1.2  The  Manager  may be  removed  upon a vote of  Holders
owning more than 50% of the total  outstanding  Units entitled to vote.  Written
notice of removal  of the  Manager  shall be served  either by  certified  or by
registered mail, return receipt requested,  or by personal service.  Such notice
shall set forth the date upon which the removal is to become effective.

         17.2 Other  Terminating  Events.  In the event of the  adjudication  of
bankruptcy,  filing of a certificate of  dissolution,  death or  adjudication of
insanity  or  incompetency  of the  Manager  (each  of such  events,  as well as
removal,  resignation and withdrawal of a Manager, being herein referred to as a
"Terminating  Event"), the Fund shall be dissolved and shall be liquidated under
the provisions of Article

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                                      B-34

<PAGE>



19, subject to the provisions of Section 17.3.

         17.3 Election of Successor Manager;  Continuation of Fund Business. The
following  provisions  shall  govern the  election  of a  successor  Manager and
continuation  of the business of the Fund upon the  occurrence  of a Terminating
Event with respect to a Manager (the "Retiring Manager"):

                  17.3.1 If at the time of a Terminating  Event the Fund has one
or more Managers  other than the Retiring  Manager,  any remaining  Manager or a
majority-in-interest   of  the  Limited  Members  may  elect,   within  90  days
thereafter,  to  continue  the Fund  business,  in which case the Fund shall not
dissolve. So long as there is at least one remaining Manager which so elects, or
if a  majority-in-interest  of the Members so elect and a remaining Manager does
not so elect,  any  remaining  Manager which is not willing to elect to continue
the Fund  business  will be deemed to have been removed from the Fund by vote of
the Members.

                  17.3.2  If at the time of a  Terminating  Event  the  Retiring
Manager is the sole  remaining  Manager,  the Fund shall be  dissolved  unless a
majority-in-interest  of the Members elect to continue the Fund business. In the
event of such election, the Fund business may be continued if the Members making
such  election,  within 90 days after the occurrence of the  Terminating  Event,
elect a successor Manager and continue the Fund's business on the same terms and
conditions as are contained herein, but with a name which does not include or in
any way refer to the name of any Retiring Manager.

         17.4  Admission of  Successor  or  Additional  Manager.  The  following
conditions shall be satisfied before any Person shall become a successor Manager
or an additional Manager:

                  17.4.1 Such Person shall have been elected in accordance  with
Section 17.3 or 17.6;

                  17.4.2 Such Person shall have  accepted and agreed to be bound
by all the terms and provisions of this Agreement;

                  17.4.3 If such Person is a corporation, it shall have provided
the Fund with evidence  satisfactory to counsel for the Fund of its authority to
become a Manager and to be bound by this Agreement; and

                  17.4.4 Any  amendments  and filings  required  or  appropriate
under the California Act shall have been made.

         17.5  Effect  of  a  Terminating   Event.  Upon  the  occurrence  of  a
Terminating Event, the following provisions shall be applicable:

                  17.5.1 The Retiring  Manager shall  immediately  cease to be a
Manager and shall not have any right to  participate  in the  management  of the
affairs of the Fund or to receive any fees under this Agreement not already paid
or earned;  provided,  however,  that the  Retiring  Manager  shall  receive all
amounts  then  accrued and  payable by the Fund and shall be, and shall  remain,
liable as a Manager for all  obligations  and  liabilities  incurred by the Fund
prior to the effective date of the Terminating Event, but shall be free from any
obligation or liability  incurred on account of the  activities of the Fund from
and after such time.

                  17.5.2  If the business of the Fund is continued, as 
aforesaid, the Retiring Manager shall

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                                      B-35

<PAGE>



be entitled to receive  from the Fund the then  present fair market value of its
interest in the Fund,  determined  by agreement of the Retiring  Manager and the
remaining  or new  Managers,  or,  if  they  cannot  agree,  by  arbitration  in
accordance with the then current rules of the American Arbitration  Association.
The  expense  of such  arbitration  shall be borne  equally  by the Fund and the
Retiring  Manager,  and such  arbitration  shall be conducted in San  Francisco,
California unless otherwise agreed by both parties. The Fund shall forthwith pay
to the Retiring Manager an amount equal to the then present fair market value of
the interest so determined.  If the Retiring  Manager has voluntarily  withdrawn
from the Fund, payment shall be in the form of a non-interest  bearing unsecured
promissory  note with principal  payable,  if at all, out of  Distributions  the
Retiring  Manager would  otherwise  have received  under this Agreement had such
Manager  not been  terminated.  If the  Retiring  Manager  has  been  terminated
involuntarily,  the  payment  shall  be  in  the  form  of an  interest  bearing
promissory  note  payable in equal annual  installments  over a term of not less
than five years.  Such  payment  when made shall  constitute  complete  and full
discharge of all amounts to which the Retiring Manager is entitled in respect to
such interest.

                  17.5.3  All  executory  contracts  between  the  Fund  and the
Retiring  Manager or any  Affiliate  thereof  (unless such  Affiliate is also an
Affiliate of the  remaining or new Manager or Members) may be  terminated by the
Fund  effective  upon written  notice to the party so  terminated.  The Retiring
Manager or any Affiliate  thereof (unless such Affiliate is also an Affiliate of
the remaining or new Manager or Members) may also  terminate and cancel any such
executory  contract  effective  upon  60  days'  prior  written  notice  of such
termination and  cancellation  given to the remaining or new Manager or Members,
if any, or to the Fund.

         17.6 Election of Additional Manager. Members owning in excess of 50% of
the outstanding  Units may at any time and from time to time elect an additional
Manager, and, upon satisfaction of the conditions set forth in Section 17.4, the
Person so elected  shall be admitted as an additional  Manager.  Admission of an
additional Manager shall not cause dissolution of the Fund.

         17.7 Assignment of Manager's Interest. The Manager may not transfer its
Membership in the Fund without the consent of Members owning in excess of 50% of
the total  outstanding  Units,  unless such an  assignment is to an entity which
succeeds to all of the assets of the assigning Manager and of which at least 80%
of the voting and beneficial  interest is controlled by Persons  controlling 80%
or more of the voting and  beneficial  interest of the  assigning  Manager.  Any
entity to which the  entire  interest  of a Manager in the Fund is  assigned  in
compliance  with this  Section  17.7  shall be  substituted  as a Manager by the
filing  of  appropriate  amendments  to  this  Agreement.   Notwithstanding  the
foregoing,  the  Manager  may  delegate  to  any of its  subsidiaries  or  other
Affiliates responsibility for specific services to be performed for the Fund and
may  assign  all or a  portion  of the  compensation  due  the  Manager  to such
subsidiaries or other Affiliates.

         17.8 Members'  Participation in Manager's Bankruptcy.  In the event the
Manager is subject to a voluntary or involuntary  petition for reorganization or
liquidation  under the federal  Bankruptcy  Act, the Manager will cause separate
counsel to be retained on behalf of the Fund, at Fund expense,  to represent the
Members'  interests in the bankruptcy  action. In such event, the Fund will also
bear any  reasonable  and necessary  expenses of a duly  appointed  committee of
Members  incurred  while  acting on behalf of all of the  Members  as a group in
connection with such bankruptcy action.

18.      CERTAIN TRANSACTIONS

         18.1 The Manager and its  Affiliates,  the  Holders,  any  shareholder,
officer, director, Member or

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                                      B-36

<PAGE>



employee thereof,  or any Person owning a legal or beneficial  interest therein,
may engage in or possess an interest  in any other  business or venture of every
nature and description, independently or with others, including, but not limited
to, the ownership,  financing,  leasing, operation,  management and brokerage of
equipment. Except as described in the Prospectus, and subject to their fiduciary
duties to the Fund, neither the Manager nor its Affiliates shall be obligated to
present to the Fund any particular investment opportunity, regardless of whether
such opportunity is of such character that the Fund could take advantage thereof
if it were presented to the Fund, and the Manager and its Affiliates  shall have
the right to take for their  own  accounts  (individually  or  otherwise)  or to
recommend to others any such investment opportunity.

19.      TERMINATION AND DISSOLUTION OF THE FUND

         19.1  Termination  and  Dissolution.  The Fund shall be terminated  and
dissolved upon the earliest to occur of the following:

                  19.1.1 The  withdrawal,  removal,  adjudication of bankruptcy,
insolvency, insanity or incompetency, death or dissolution of a Manager unless a
remaining Manager or a  majority-in-interest  of the Members,  within 90 days of
the date of such event,  elects to continue  the  business of the Fund,  and, if
necessary,  elects a replacement  Manager, in the manner provided in Article 17;
provided that expenses  incurred on behalf of the Manager  and/or Members in the
continuation or reformation,  or attempted  continuation or reformation,  of the
Fund hereunder shall be deemed expenses of the Fund;

                  19.1.2  The  Members   owning  more  than  50%  of  the  total
outstanding Units vote in favor of dissolution and termination of the Fund;

                  19.1.3  The term of the Fund expires; or

                  19.1.4 The Fund disposes of all interests in Equipment and its
other  assets  and  receives  final  payment  in  cash of the  proceeds  of such
dispositions.

         19.2 Accounting and  Liquidation.  Upon the dissolution and termination
of the Fund for any  reason,  the  Manager  shall take full  account of the Fund
assets and liabilities,  shall liquidate the assets as promptly as is consistent
with  obtaining  the fair value  thereof,  and shall  apply and  distribute  the
proceeds therefrom in the following order:

                  19.2.1 To the payment of creditors  of the Fund but  excluding
secured creditors whose obligations will be assumed or otherwise  transferred on
the liquidation of Fund assets;

                  19.2.2  To the repayment of any outstanding loans made by the
Manager to the Fund; and

                  19.2.3 To the  Manager and  Holders in  accordance  with their
respective  Capital  Account  balances,  after giving effect to all  allocations
described in Article 10 of this Agreement;  provided, however, that prior to any
allocation  under Section 10 of this Agreement,  Gross Income shall be specially
allocated to the Manager to the extent,  if any,  necessary to cause its Capital
Account  balance to be zero as of the close of such final  taxable  year  (after
crediting the Manager's Capital Account with the Manager's share of Fund Minimum
Gain). For purposes of making the foregoing allocation,  Net Income and Net Loss
for the final  taxable year of the Fund shall first  tentatively  be computed by
including all

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                                      B-37

<PAGE>



Gross  Income as an element  thereof;  then,  to the  extent,  if any,  that the
Capital Account balance of the Manager is negative as of the close of such final
taxable year (after giving effect to all Fund distributions), Gross Income shall
be  separately  stated and  allocated  away from the  Holders and to the Manager
pursuant to this Section 19.2.3.

                  19.2.4  Distributions in liquidation  shall be made by the end
of the taxable year in which the liquidation occurs or, if later, within 90 days
of the liquidating  event and shall otherwise  comply with  Regulations  Section
1.704-1(b).

20.      SPECIAL POWER OF ATTORNEY

         20.1 Execution of Power of Attorney. By executing this Agreement,  each
Holder is hereby granting to the Manager a special power of attorney irrevocably
making,  constituting and appointing ATEL, its duly appointed officers,  and any
one of them, as the  attorney-in-fact  for such Holder, with power and authority
to act alone in his name and on his behalf to execute,  acknowledge and swear to
the execution, acknowledgement and filing of the following documents:


                  20.1.1  This  Agreement,  the  Articles of  Organization,  any
separate  certificates,  as well as any amendments to the foregoing which, under
the laws of the State of California or the laws of any other state, are required
to be filed or which the Manager deems advisable to file;

                  20.1.2 Any other  instrument or document which may be required
to be filed  by the Fund  under  the  laws of any  state or by any  governmental
agency, or which the Manager deems advisable to file; and

                  20.1.3 Any  instrument  or  document  which may be required to
effect  the  continuation  of  the  Fund,  the  admission  of an  additional  or
substituted  Holder,  or the  dissolution  and termination of the Fund (provided
such  continuation,  admission or dissolution  and termination are in accordance
with the terms of this  Agreement),  or to reflect any  reductions  in amount of
contributions of Members.

         20.2  Special Power of Attorney.  The special power of attorney being 
granted hereby:

                  20.2.1  Is  a  special  power  of  attorney  coupled  with  an
interest,  is  irrevocable,  shall survive the death or legal  incapacity of the
granting Holder, and is limited to those matters herein set forth;

                  20.2.2 May be exercised  by the Manager  acting alone for each
Holder by a facsimile signature of such Manager or by one of its officers, or by
listing all of the Holders executing any instrument with a single signature of a
Manager, or of one of the Manager's officers, acting as attorney-in-fact; and

                  20.2.3 Shall  survive an  assignment by a Holder of all or any
portion of his Units  except  that,  where the  Assignee of the Units owned by a
Holder  has  been  approved  by the  Manager  for  admission  to the  Fund  as a
substituted  Holder, the special power of attorney shall survive such assignment
for the sole  purpose of enabling the Manager to execute,  acknowledge  and file
any instrument or document necessary to effect such substitution.


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                                      B-38

<PAGE>



21.      INDEMNIFICATION

         21.1  Indemnification  of the  Manager.  The Fund,  its receiver or its
trustee, shall indemnify, save harmless and pay all judgments and claims against
the Manager and any of its Affiliates who perform services for the Fund from any
liability,  loss or  damage  incurred  by them or the Fund by  reason of any act
performed or omitted to be performed by them when acting in connection  with the
business  of the Fund,  including  costs  and  attorneys'  fees and any  amounts
expended in the settlement of any claims or liability, loss or damage; provided,
however,  that,  if such  liability,  loss or claim  arises out of any action or
inaction of the Manager or  Affiliates  who perform  services for the Fund,  the
Manager or Affiliates who perform services for the Fund must have determined, in
good faith, that such course of conduct was in the best interest of the Fund and
did not constitute fraud, negligence,  breach of fiduciary duty or misconduct by
the  Manager or  Affiliates  who perform  services  for the Fund;  and  provided
further, that any such indemnification shall be recoverable only from the assets
of the Fund and not from the assets of the Holders.  All  judgments  against the
Fund and the  Manager,  wherein a Manager is entitled to  indemnification,  must
first be satisfied from Fund assets before such Manager may be held responsible.
Persons  entitled  to  indemnification  hereunder  shall be  entitled to receive
advances for attorney's  fees and other legal costs and expenses  arising out of
claims made against  them,  provided  that (i) no such  advances may be made for
such fees,  costs or expenses  resulting  from claims made by Holders;  and (ii)
advances  for such fees and  expenses  relating to claims made by parties  other
than Holders may only be made if the action relates to the performance of duties
or  services by the  indemnified  party on behalf of the Fund,  the  indemnified
party obtains an opinion of independent counsel that such party will be entitled
to indemnification  pursuant to this Agreement under the specific  circumstances
of the claim in question,  and the indemnified party undertakes in writing prior
to receipt of such advances that such party will repay in full any such advanced
funds  together  with  interest  thereon in the event  that,  upon the  ultimate
disposition  of the claim,  the party would not be  entitled to  indemnification
hereunder. Nothing contained herein shall constitute a waiver by a Holder of any
right  which he may have  against any party  under  federal or state  securities
laws.

         21.2 Limitations on  Indemnification.  Notwithstanding  anything to the
contrary contained in the foregoing Section 21.1, neither the Manager nor any of
its  Affiliates  performing  services  for the Fund nor any  party  acting  as a
broker-dealer  shall be indemnified from any liability,  loss or damage incurred
by them in connection with (i) any claim or settlement  involving  violations of
state or federal  securities laws by the Manager or by any Affiliate  performing
services for the Fund; or (ii) any  liability  imposed by law, such as liability
for fraud, bad faith or negligence; provided, however, that indemnification will
be allowed for settlements and related expenses of lawsuits alleging  securities
law  violations,  and for  expenses  incurred  in  successfully  defending  such
lawsuits,  provided  that a court either (x) approves the  settlement  and finds
that  indemnification  of any payment in settlement  and related costs should be
made;  or (y)  approves  indemnification  of  litigation  costs if a  successful
defense is made, or a dismissal with prejudice is obtained, as to the indemnitee
on the merits of each count involving alleged securities law violations; and (z)
the parties  seeking  indemnification  apprise the court of the positions of the
securities  law  administrators  of any state in which the Units were offered or
sold, including the Massachusetts  Securities  Division,  and the Securities and
Exchange   Commission  with  respect  to  indemnification  for  securities  laws
violations before seeking court approval for indemnification.  Furthermore,  the
Manager  shall  indemnify  the Fund against any loss or  liability  which it may
incur as a result  of the  violation  by the  Manager  or any of its  Affiliates
performing services for the Fund of any state or federal securities laws.

         21.3  Insurance.  The Fund  shall  not pay for any  insurance  covering
liability of the Manager or any of its  Affiliates  for actions or omissions for
which indemnification is not permitted hereunder;

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                                      B-39

<PAGE>



provided,  however,  that nothing  contained herein shall preclude the Fund from
purchasing and paying for such types of insurance,  including  extended coverage
liability and casualty and worker's compensation,  as would be customary for any
Person owning  comparable  Equipment  and engaged in a similar  business or from
naming the Manager  and any of its  Affiliates  as  additional  insured  parties
thereunder,  provided that such addition does not add to the premiums payable by
the Fund.

22.      MISCELLANEOUS

         22.1   Counterparts.   This   Agreement  may  be  executed  in  several
counterparts and all so executed shall constitute one Agreement,  binding on all
parties hereto, notwithstanding that all of the parties are not signatory to the
original or the same counterpart.

         22.2 Successors and Assigns. The terms and provisions of this Agreement
shall be  binding  upon and shall  inure to the  benefit of the  successors  and
assigns of the respective Members.

         22.3  Severability.  In the event any  sentence  or  paragraph  of this
Agreement  is declared by a court of  competent  jurisdiction  to be void,  such
sentence  or  paragraph  shall be  deemed  severed  from the  remainder  of this
Agreement and the balance of this Agreement shall remain in effect.

         22.4 Notices.  All notices under this Agreement shall be in writing and
shall be given to the Person entitled  thereto,  by personal service or by mail,
posted to the  address  maintained  by the Fund for such Person or at such other
address as he may specify in writing.

         22.5 Captions. Article and section titles or captions contained in this
Agreement are inserted only as a matter of convenience  and for reference.  Such
titles and  captions in no way define,  limit,  extend or describe  the scope of
this Agreement nor the intent of any provision hereof.

         22.6 Number and Pronouns.  Whenever required by the context hereof, the
singular shall include the plural,  and vice-versa;  the masculine  gender shall
include the feminine and neuter genders, and vice-versa.

         22.7  Manager Address. The address of the Manager is:


                           ATEL Financial Corporation
                           235 Pine Street, 6th Floor
                         San Francisco, California 94104

         22.8 Member Addresses.  The names,  addresses and capital contributions
of the Members are set forth on Exhibit I attached  hereto,  which exhibit shall
be maintained at the principal place of business of the Fund.

         22.9 Construction.  Notwithstanding  the place where this Agreement may
be executed by any of the parties hereto,  the parties  expressly agree that all
the terms and provisions  hereof shall be construed  under the laws of the State
of  California  and that the Fund shall be  governed by the  California  Act, as
amended, governing limited liability companies formed under California law.



Atel8-1/operag6.wpd
                                      B-40

<PAGE>



         22.10  Qualification  to Do Business.  In the event the business of the
Fund  is  carried  on or  conducted  in  states  in  addition  to the  State  of
California,  then the parties agree that this Fund shall exist under the laws of
each  state in which  business  is  actually  conducted  by the  Fund,  and they
severally  agree to execute such other and further  documents as may be required
or requested in order that the Manager may qualify the Fund to conduct  business
in such states.  The power of attorney  granted to the Manager by each Holder in
Article 20 shall constitute authority for the Manager to perform the ministerial
duty of qualifying the Fund under the laws of any state in which it is necessary
to file documents or instruments  of  qualification.  A Fund office or principal
place of business in a state may be designated from time to time by the Manager.

INITIAL MEMBERS:

ATEL FINANCIAL CORPORATION, Manager

By: /s/ A. J. Batt
    A. J. Batt, President


 /s/ Linda Batt
 Linda Batt

 /s/ Eliza Cash
 Eliza Cash








                                      B-41

<PAGE>





                                    EXHIBIT I


                               Schedule of Members


                                                              Capital
Name Address                                                  Contribution

Linda Batt                                                     $250/25 Units
 c/o ATEL Financial Corporation
 235 Pine Street
 6th Floor
 San Francisco, CA 94104

Eliza Cash                                                     $250/25 Units
 c/o ATEL Financial Corporation
 235 Pine Street
 6th Floor
 San Francisco, CA 94104

ATEL Financial Corporation                                    $100
235 Pine Street
6th Floor
San Francisco, CA 94104





Atel8-1/operag6.wpd
                                      B-42

<PAGE>


                                                                   EXHIBIT C


HOW TO INVEST
TO THE INVESTOR:

Prior to the satisfaction of the escrow condition (sale of 120,000 Units),  make
your check  payable to "U.S.  Bank - ACEF VIII  Escrow".  Thereafter,  make your
check payable to"ATEL Capital Equipment Fund VIII".  Investments must be made in
increments of $10,  minimum of $2,500 (or $2,000 for an IRA,  Keogh or qualified
plan)  in most  states.  See the  discussion  under  Plan of  Distribution-State
Requirements in the prospectus for exceptions.

IMPORTANT INSTRUCTIONS:
----------------------
Fully complete sections 1, 2, and 3 of the Subscription Agreement.

All subscribers must:
1) sign each appropriate  section where  indicated,  2) initial each appropriate
section  (sections 3A - 3D) where  indicated  on the bottom of the  subscription
agreement.

If you would  like your  distributions  sent to an  address  other than your own
(mutual fund,  bank,  etc.).  please fill in the optional check address  section
(section 6).

ADD-ON INVESTMENTS
The subscription agreement accompanying additional investments in Fund VIII must
have an  authorized  signature  of a  Broker/Dealer,  but does not  require  the
signature of the investor.  Add-on investments must bear the exact name in which
the previous  investment was registered,  or a new signed subscription form will
be required.

FOREIGN INVESTOR OPTION
As  described  in the  Prospectus,  the Manager  has  elected to permit  limited
investment  in  Units  by  nonresident  alien  investors.  In  section  1 of the
Subscription  Agreement  there are three boxes,  one of which must be checked to
indicate  whether an investor  is a resident  alien,  nonresident  alien or U.S.
citizen  residing  outside  the  United  States.  If none of the three  boxes is
checked,  the executed  Subscription  Agreement  will  constitute the investor's
representation that he or she is a U.S. citizen residing in the United States.



                                       C-1

<PAGE>



TO THE SELLING REPRESENTATIVE:

Please complete the Broker/Dealer  Information section (Box 7) using your office
address rather than the home office address.  This section must be completed for
all investments,  including add-on investments by previous  subscribers.  Please
make  sure  that the exact  same  name is used for the  registered  owner if the
investment is an additional subscription.

Please have the  subscription  document  signed by your branch  manager or other
authorized signatory.

Mail original white, pink and yellow copies
Retain blue copy for Broker/Dealer
Retain  green copy for the  investor  unless  otherwise  specified  by your home
office,  (all IRA  investments  must be submitted  directly to the custodian and
they will then forward the subscription on to ATEL) to:

ATEL SECURITIES CORPORATION
SUBSCRIPTION PROCESSING DESK
235 PINE STREET, Suite 600
SAN FRANCISCO, CA 94104
(415) 989-8800
(800) 543-ATEL
E-mail: securities@atel.com

--------------------------------------------------------------------------


The  investor  whose  signature  appears in Section 2 on the reverse side hereof
(the  "Investor")  hereby  subscribes  for the  number of Units of ATEL  Capital
Equipment  Fund  VIII,  LLC  (the  "Fund")  set  forth  in  Section  I  of  this
subscription  Agreement in the manner  described in the prospectus to which this
agreement is an exhibit (the  "Prospectus").  Prior to the  satisfaction  of the
escrow condition (sale of 120,000 Units),  there is transmitted  herewith as the
subscription  price a check  payable  to "U.S.  Bank - ACEF VIII  Escrow" in the
amount  required  to  purchase  such Units  ($10 per  Unit).  Such funds will be
promptly  transmitted  (as defined in Rule 15c2-4 under the Securities  Exchange
Act of 1934 and NASD Notice to members  84-64).  No  subscription  funds will be
released  to the Fund  unless and until  subscriptions  for a minimum of 120,000
units have been  received  and  collected by the escrow agent prior to a date 12
months after the date of the Prospectus.  After the escrow  condition of 120,000
Units sold has been satisfied, checks should be made payable to "ATEL Capital

                                       C-2

<PAGE>



Equipment Fund VIII".  Minimum initial investment is 250 Units (200 Units for
Individual Retirement Accounts or Qualified Plans).

The  Investor  agrees  that if this  subscription  is  accepted it will be held,
together with the accompanying payment, on the terms described in the Prospectus
and that, if accepted as a holder of the Units ("Holder"), the Investor shall be
bound by the  terms  and  conditions  of the  Operating  Agreement  set forth as
Exhibit B to the  Prospectus,  including the special power of attorney set forth
therein.  The subscription may be cancelled by the subscriber at any time during
a  period  of five  days  after  the  subscriber  has  submitted  this  executed
subscription agreement to the Fund.

The  assignability  and  transferability  of the Units will be  governed  by the
Agreement and all applicable  laws, and the Investor must have adequate means of
providing for his current needs and personal contingencies and must have no need
for liquidity in this investment.

The Investor may not be able to  consummate a sale or transfer of the Units,  or
any interest therein, or receive any consideration  therefor,  without the prior
written consent of the  Commissioner of Corporations of the State of California,
except as permitted in the Commissioner's  Rules, and the Units, or any document
of assignment or transfer  evidencing the Units,  will bear a legend  reflecting
the  substance  of the  foregoing  understanding  if such Units have been issued
pursuant to qualification under the California Corporate Securities Law of 1968.


The undersigned acknowledges that U.S. Bank Trust National Association is acting
only as an escrow agent in  connection  with the offering of the Units,  and has
not endorsed, recommended or guaranteed the purchase, value or repayment of such
Units.


INSTRUCTIONS  FOR COMPLETING  THE  SUBSCRIPTION  AGREEMENT  Note- Please type or
print legibly when completing the Subscription Agreement.

Section 1: Units Purchased.
-        Fill in the total dollar amount and the number of Units to be acquired.
         Please note there are no fractional Units.  All purchases must be in
         increments of $10.
-        Indicate  whether  this is an  original  investment  in the  Fund or an
         additional  investment  to an existing Fund account with the exact same
         registration by checking the  appropriate  box. Please note the minimum
         requirements. Only the dollar amount, subscriber name and broker/dealer
         information  sections of the  subscription  forms need be completed for
         additional subscriptions by the same investor.


                                       C-3

<PAGE>



Section 2: Registered Owner.
-        Fill in the name(s) and addresses for the investment as they should 
         appear in the registration.
-        Check the applicable citizen status boxes.
-        Enter  the  appropriate   taxpayer   identification   number  for  this
         investment,  depending  on the type of  ownership.  For IRAs and Keoghs
         please  include  both  the  custodian's  taxpayer   identification  and
         investor's social security number.
-        Check whether monthly or quarterly distributions are desired.
-        Please read the Subscription Agreement, then sign and date the form.
-        Single  Ownership - one signature  required
-        Joint Tenants - all parties must sign 
-        Community  Property - one  signature  required 
-        Tenants in Common - all parties must sign 
-        Tenants in Entirety - one signature required
-        In  all  other  cases,  the  custodian,  trustee,  general  partner  or
         authorized   corporate   officer   must  sign.   Where  the   documents
         establishing  such  representative   capacity  require  more  than  one
         signature for  execution of  instruments  on behalf of the  represented
         entity,  then all  signatures  required by such  documents are required
         here.

Section 3: Subscriber Confirmation of Suitability
-        Each item must be initialed.

Section 4: Legal Form of Ownership.
-        Mark only one box.  Fill in any information requested and note whose
         signature(s) is (are) required in Section 2.

Section 5:  Investor Mailing Addresses.
-        Fill in name and address if different from Section 1, as with IRAs and
         Keoghs.

Section 6:  Optional Check Addresses.
-        Complete this section only if you want your distribution  checks mailed
         to an address other than that shown in Section 2.

Section 7: Broker/Dealer Information.
-        Fill in the name of the licensed  Broker/Dealer  firm,  the name of the
         Account Executive,  and the telephone number and mailing address of the
         Account  Executive.  The name,  address and phone number of the Account
         Executive  are  required so he/she can receive  copies of all  investor
         communications.
-        An authorized Branch Manager or Registered Principal of the Broker
         

                                       C-4

<PAGE>



         /Dealer firm must sign the form.  Orders cannot be accepted without 
         Broker/Dealer authorization.

Mailing Address.
-        Mail the completed form with a check payable as indicated in Section 1
to:

ATEL Securities Corporation
Attention: Subscription Processing Desk
235 Pine Street, Suite 600
San Francisco, CA 94104

If  you  have  any  additional  questions  about  completing  this  Subscription
Agreement, please call ATEL Securities Corporation Subscription Processing
Desk at (800) 543-ATEL.
---------------------------------------------------------------------------

ATEL CAPITAL EQUIPMENT FUND VIII, LLC - SUBSCRIPTION AGREEMENT

Please type or print the following  information:  1.UNITS  PURCHASED Make checks
payable to "ATEL Capital Equipment Fund VIII" $_________ is for the purchase, as
a Holder, of _______ Units
and should be registered as indicated  in  the  Registered  Owner  section
below.

2. REGISTERED OWNER.
Name(s) and addresses will be recorded exactly as printed below.
(Include custodial address if applicable.)
___Mr.    ___Ms.    ___Mr. and Mrs.    ___Mrs.
Investor(s) Name and/or
Custodian/Nominee_________________________________________________________
Investor Name(s)__________________________________________________________
Address___________________________________________________________________
City ______________________________________State_____ZipCode______________
Investor Phone Number (____)______________E-mail__________________________
Investor Account # (if any)_______________________________________________

X______________________________________________Date_______________________
Subscriber's Signature

X______________________________________________Date_______________________
Subscriber/Custodian/Nominee or Authorized Signature


                                       C-5

<PAGE>



___INITIAL  INVESTMENT $10 per unit  ($2,500/250  Unit Minimum,  $2,000/200 Unit
Minimum for IRA or Qualified  Plan,  unless a higher  minimum is required in the
investor's state - see the Prospectus)

___ ADDITIONAL INVESTMENT ($500/50 Units, unless a higher minimum is required
in the investor's state - see the Prospectus)

___ Check if you are a resident alien.
___ Check if  you  are  a  nonresident  alien (please include W-8 form).
___ Check if you are a U.S. citizen residing outside the U.S.

TAXPAYER IDENTIFICATION NUMBER
Note: If the account is in more than one name, the  number should be that of
the first person listed.
-- --   -- -- -- -- -- -- --
Include BOTH numbers for IRAs and Keoghs.

SOCIAL SECURITY NUMBER
-- -- --   -- --   -- -- -- --

HAVE YOU INVESTED IN ANY PRIOR ATEL FUND?
___YES    ___NO

DISTRIBUTION OPTION  (check one)
___ Quarterly    ___Monthly


PRIVACY ELECTION (check if desired)


____ By  checking  this box the  undersigned  directs  the  Manager to treat all
information  concerning the undersigned as confidential,  and not to disseminate
any such information to any party, without the undersigned consent, except as 
may be required under  an  applicable  statute  or  regulation  or by the order
of a court  or governmental agency.

No  representations  should be relied  upon other than  those  contained  in the
Prospectus, as amended and/or supplemented. The subscriber represents,  warrants
and agrees as set forth on the reverse side of this signature page; further, the
undersigned  declares under penalty of perjury that to the best of his knowledge
the information supplied above is true and correct and may be relied upon by the
Manager and the Fund in connection  with his investment as a Holder in the Fund.
The  subscriber   hereby   subscribe(s)  for  the  purchase  of  fully-paid  and
nonassessable Units of the Fund as indicated.


                                       C-6

<PAGE>



3.  SUBSCRIBER  AGREES AS  FOLLOWS  (EACH ITEM MUST BE  INITIALED):  In order to
induce the Manager to accept this  subscription,  the Investor hereby represents
to you as follows (initial in the space provided): A. The Investor has (a) a net
worth of at least  $150,000 in excess of his  investment in Units,  or (b) has a
net  worth of at least  $45,000  in excess  of his  investment  in Units and had
during the last tax year or  estimates  that he will have during the current tax
year a  minimum  of  $45,000  annual  gross  income.  In all  cases net worth is
exclusive of home,  home  furnishings  and  automobiles.  The  Investor  further
represents  that he/she  satisfies  any other  minimum  income  and/or net worth
standards imposed by the jurisdiction in which he/she resides,  if any different
standards are set forth in the Prospectus or any supplement thereto.
INITIAL HERE________

B. If the undersigned is acting in a representative  capacity for a corporation,
partnership,  trust or other  entity,  or as agent for any person or entity,  he
hereby  represents  and warrants  that he has full  authority to enter into this
agreement in such capacity. INITIAL HERE________

C. If the  undersigned  is  purchasing  the  Units  subscribed  for  hereby in a
fiduciary capacity, the representations and warranties herein shall be deemed to
have been made on behalf of the person or persons for whom the undersigned is so
purchasing. INITIAL HERE________

D. Under the penalties of perjury, the undersigned certifies that (l) the number
provided herein is his correct Taxpayer Identification Number; and (2) he is not
subject to backup withholding either because he has not been notified that he is
subject to backup withholding as a result of a failure to report all interest or
dividends, or the Internal Revenue Service has notified him that he is no longer
subject to backup  withholding.  (If the  undersigned  is  currently  subject to
backup  withholding,  he has stricken the language under clause (2) above before
signing). INITIAL HERE________

4. LEGAL FORM OF  OWNERSHIP  (Check  Only One) ___  Single  Ownership  ___ Joint
Tenants With Rights of Survivorship  ___ Husband and Wife as Community  Property
___  Tenants in Common ___  Tenants in  Entirety  ___ Sep IRA ___ IRA  __regular
__rollover ___ Trust - Trust Date (Month/Day/Year) ___/___/___ ___ Custodian ___
Custodian   for___________________________________  ___  UGMA  /  UTMA  -  State
of:_______ ___ Pension Plan ___ Profit Sharing Plan

                                       C-7

<PAGE>



___ Corporation
___ Partnership
___ Non-Profit Organization
___ Other__________________

                                       C-8

<PAGE>



5. INVESTOR MAILING ADDRESS
(if different from above, as with IRAs and Keoghs)
Name________________________________________________________________________
Name________________________________________________________________________
Address_____________________________________________________________________
City__________________________________________State_____Zip Code____________
Investor Phone Number (_____)_______________________________________________

6. OPTIONAL CHECK ADDRESS If you would like your  distribution  checks mailed to
an address other than registered owner's address, please complete.
___ Designated for all Units or,
___ Designated for Partial Units ________
Receiving Entity____________________________________________________________
Address_____________________________________________________________________
City__________________________________________State_____Zip Code____________
Fund Name______________________________Account Number_______________________

7.  BROKER/DEALER  INFORMATION  The  Broker/Dealer  must sign below to  complete
order.  Broker/Dealer  hereby warrants that it is a duly licensed  Broker/Dealer
and may lawfully offer Units in the state designated as the Investor's residence
and, further,  that it has reasonable  grounds to believe,  based on information
obtained  from  the  Subscriber  concerning  his  investment  objectives,  other
investments,  financial  situation and needs and any other  information known by
the Broker/Dealer, that investment in the Fund is suitable for the Subscriber in
light  of  his/her   financial   position,   net  worth  and  other  suitability
characteristics,  and that the  Broker/Dealer  has informed the Subscriber as to
the  limited   liquidity  and   marketability  of  the  Units.  The  undersigned
Broker/Dealer   warrants  that  a  current   Prospectus  was  delivered  to  the
Subscriber.

Licensed   Firm   Name__________________________________________________________
Account Executive Name_________________________________B/D Rep #____________ A/E
Mailing         Address____________________________________________Suite#_______
City__________________________________________State_____Zip     Code____________
Telephone(____)____________________     NumberFax(____)_________________________
E-mail______________________________________________________________________

X_____________________________________________________Date__________________
Authorized signature (Branch Manager or Registered Principal).
Order cannot be accepted without signature.
This transaction, for Blue Sky purposes, took place in the State of ______.



                                       C-9

<PAGE>


ACCEPTANCE BY MANAGER
FOR MANAGER'S USE ONLY
Received and Subscription Accepted
ATEL Financial Corporation, Manager
By__________________________________________________________________________
Amount___________________________ Date______________ B/D Rep #______________

RETURN TOP 3 COPIES:  WHITE - ATEL COPY,  YELLOW - BROKER/DEALER COPY,
PINK - INVESTOR COPY

RETAIN:  BLUE - BROKER/DEALER COPY, GREEN - INVESTOR COPY

ATEL SECURITIES CORPORATION
235 PINE STREET - 6th FLOOR - SAN FRANCISCO, CA 94104
(800) 543-2835 - E-Mail: securities@atel.com

                                      C-10