Form 10-K

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                  |X| Annual report pursuant to section 13 or 15(d) of the
                      Securities Exchange Act of 1934 (fee required)
                      For the Year Ended December 31, 2004
                                       OR
                  |_| Transition report pursuant to section 13 or 15(d) of the
                      Securities Exchange Act of 1934 (no fee required)
                      For the transition period from ____ to ____

                        Commission File number 333-62477

                      ATEL Capital Equipment Fund VIII, LLC

              California                                    94-3307404
    (State or other jurisdiction of                      (I. R. S. Employer
    incorporation or organization)                       Identification No.)

        600 California Street, 6th Floor, San Francisco, California 94108
                    (Address of principal executive offices)

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

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

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

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes |_| No |X|

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

The number of Limited  Liability  Company Units  outstanding  as of December 31,
2004 was 13,570,188.


                       DOCUMENTS INCORPORATED BY REFERENCE

Prospectus  dated December 7, 1998,  filed  pursuant to Rule 424(b)  (Commission
File No. 33-62477) is hereby incorporated by reference into Part IV hereof.



                                       1
<PAGE>

                                     PART I

Item 1:  BUSINESS

General Development of Business

ATEL Capital Equipment Fund VIII, LLC (the Company) was formed under the laws of
the state of California in July 1998.  The Company was formed for the purpose of
acquiring  equipment to engage in equipment  leasing and sales  activities.  The
Managing  Member  of the  Company  is  ATEL  Financial  Services  LLC  (AFS),  a
California  limited  liability  corporation.  Prior to  converting  to a limited
liability  company   structure,   AFS  was  formerly  known  as  ATEL  Financial
Corporation.

The Company  conducted  a public  offering of  15,000,000  of Limited  Liability
Company  Units  (Units),  at a price of $10.00 per Unit.  On January  13,  1999,
subscriptions  for the minimum number of Units  (120,000,  $1,200,000)  had been
received and AFS requested  that the  subscriptions,  except those received from
Pennsylvania  investors (7,500 Units,  $75,000),  be released to the Company. On
that date, the Company  commenced  operations in its primary  business  (leasing
activities). As of November 30, 2000, the Company had received subscriptions for
13,570,188  ($135,701,880)  Units in addition to the Initial  Members' Units and
the offering was terminated.  All of the Units were issued and outstanding as of
December 31, 2004.

The Company's principal  objectives are to invest in a diversified  portfolio of
equipment  that will (i)  preserve,  protect and return the  Company's  invested
capital;  (ii)  generate  regular  distributions  to the  members  of cash  from
operations and cash from sales or refinancing,  with any balance remaining after
certain minimum distributions to be used to purchase additional equipment during
the reinvestment period  ("Reinvestment  Period"),  ending December 31, 2006 and
(iii) provide  additional  distributions  following the Reinvestment  Period and
until all  equipment  has been sold.  The  Company is  governed  by its  Limited
Liability Company Operating Agreement (Operating Agreement).

Narrative Description of Business

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

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

As of  December  31,  2004,  the Company had  purchased  equipment  with a total
acquisition price of $245,736,450.

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

During 2004, 2003 and 2002,  certain lessees generated  significant  portions of
the Company's total lease revenues as follows:

Lessee                             Type of Equipment       2004   2003   2002

TAL International Container        Tank container           11%     *      *
Overnite Transportation Company    Tractors and trailers    10%    10%    10%
GE Aircraft Engines                Manufacturing            10%     *      *
Emery Worldwide Airlines           Aircraft                  *     13%     *
*  Less than 10%

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



                                       2
<PAGE>

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

AFS will seek to limit the amount  invested in equipment to any single lessee to
not more than 20% of the aggregate purchase price of equipment owned at any time
during the Reinvestment Period.

The business of the Company is not seasonal.

The Company has no full time employees.

Equipment Leasing Activities

The Company has acquired a diversified portfolio of equipment. The equipment has
been leased to lessees in various industries. The following tables set forth the
types of  equipment  acquired by the Company  through  December 31, 2004 and the
industries  to which the assets have been  leased.  The  Company  has  purchased
certain assets subject to existing  non-recourse  debt. For financial  statement
purposes,  non-recourse  debt has been offset  against the investment in certain
direct finance leases where the right of offset exists.

                                   Purchase Price Excluding  Percentage of Total
Asset Types                             Acquisition Fees         Acquisitions
Transportation, rail                     $59,769,940                     24.32%
Manufacturing                             44,048,583                     17.93%
Aircraft                                  38,535,439                     15.68%
Transportation, other                     46,986,721                     19.12%
Gas compressors                           13,848,465                      5.64%
Materials handling                        11,018,547                      4.48%
Point of sale / office automation          8,677,566                      3.53%
Storage tanks                              6,712,090                      2.73%
Marine vessels                             3,952,500                      1.61%
Other *                                   12,186,599                      4.96%
                                      ---------------           ----------------
                                        $245,736,450                    100.00%
                                      ===============           ================

*  Individual  asset  types  included in "Other"  represent  less than 2% of the
total.

                                   Purchase Price Excluding  Percentage of Total
Industry of Lessee                      Acquisition Fees         Acquisitions
Transportation, rail                     $59,769,940                     24.31%
Transportation, air                        38,535,439                    15.68%
Manufacturing, other                       34,889,583                    14.20%
Transportation, other                      27,245,340                    11.09%
Transportation, containers                 21,228,750                     8.64%
Manufacturing, electronics                 20,901,071                     8.51%
Retail                                     18,056,010                     7.35%
Natural gas                                13,848,465                     5.64%
Other *                                    11,261,852                     4.58%
                                      ---------------           ----------------
                                        $245,736,450                    100.00%
                                      ===============           ================

* Individual lessee industries included in "Other" represent less than 2% of the
total.



                                       3
<PAGE>

Through  December 31, 2004, the Company has disposed of certain leased assets as
set forth below:

<TABLE>
<CAPTION>
                                                                            Excess of
Asset                                  Original                            Rents Over
Types                              Equipment Cost       Sale Price         Expenses *
<S>                                    <C>                <C>                <C>
Materials handling                     $ 6,748,331        $ 2,008,953        $ 6,438,521
Transportation, rail                    14,199,087         13,889,782          5,716,661
Point of sale / office automation       10,764,080          2,392,537         11,337,335
Manufacturing                           34,112,740         18,185,894         32,248,861
Transportation, other                   19,308,178          7,577,611         17,506,246
Storage tanks                            6,712,090          6,800,000          1,035,726
Aircraft                                14,123,602          3,980,000          5,829,737
Other                                    2,431,379          1,073,070          2,112,604
                                    ---------------   ----------------   ----------------
                                     $ 108,399,487       $ 55,907,847       $ 82,225,691
                                    ===============   ================   ================
</TABLE>

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

For further information  regarding the Company's equipment lease portfolio as of
December  31,  2004,  see Note 3 to the  financial  statements,  Investments  in
equipment and leases, as set forth in Part II, Item 8, Financial  Statements and
Supplementary Data.

Item 2.  PROPERTIES

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

Item 3.  LEGAL PROCEEDINGS

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

Solectron:

This is a matter  whereby  the  Company  has  declared a lessee in  default  for
failure to pay rent in a timely manner, and for other various defaults.  A claim
was filed on August 29, 2002, by AFS on behalf of the Company.  The lessee filed
a counter-claim  against the Company  asserting  unfair business  practices.  In
2003,  the  Company  elected to  dismiss  its suit and  subsequently  obtained a
corresponding dismissal of Solectron's  counter-claim.  The Company settled this
matter in 2004 for $406,348.

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

None.


                                     PART II

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

Market Information

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

Holders

As of December 31, 2004,  a total of 3,635  investors  were holders of record of
Units in the Company.

ERISA Valuation

In order to permit  ERISA  fiduciaries  who hold Units to satisfy  their  annual
reporting requirements, AFS estimated the value per Unit of the Company's assets
as of September 30, 2004. AFS calculated the estimated liquidation proceeds that
would be realized by the Company,  assuming an orderly disposition of all of the
Company's  assets as of January 1, 2005.  The estimates were based on the amount
of  remaining  lease  payments on existing  Company  leases,  and the  estimated
residual  values of the equipment  held by the Company upon the  termination  of
those  leases.  This  valuation  was based solely on AFS's  perception of market
conditions  and the types and amounts of the Company's  assets.  No  independent
valuation was sought.

                                       4
<PAGE>

After  calculating  the  aggregate  estimated  disposition  proceeds,  AFS  then
calculated  the portion of the aggregate  estimated  value of the Company assets
that would be distributed  to Unit holders on  liquidation  of the Company,  and
divided the total so  distributable  by the number of outstanding  Units.  As of
September 30, 2004, the value of the Company's assets, calculated on this basis,
was approximately  $6.10 per Unit. The foregoing  valuation was performed solely
for the ERISA purposes  described above.  There is no market for the Units, and,
accordingly,  this value does not  represent  an  estimate  of the amount a Unit
holder would  receive if he were to seek to sell his Units.  Furthermore,  there
can be no  assurance  as to the amount the Company may  actually  receive if and
when it seeks to  liquidate  its  assets,  or the amount of lease  payments  and
equipment  disposition proceeds it will actually receive over the remaining term
of the Company.

Dividends

The Company does not make dividend  distributions.  However,  the Members of the
Company are entitled to certain  distributions  as provided  under the Operating
Agreement.

AFS has sole  discretion in determining the amount of  distributions;  provided,
however, that AFS will not reinvest in equipment,  but will distribute,  subject
to  payment  of any  obligations  of  the  Company,  such  available  cash  from
operations and cash from sales or refinancing as may be necessary to cause total
distributions  to the Members for each year  during the  Reinvestment  Period to
equal an amount between $0.80 and $1.00 per Unit,  which was to be determined by
AFS. In 2001,  AFS  determined  that amount to be $0.91 per Unit.  The Company's
Reinvestment Period ends December 31, 2006.

Investors  may elect to receive  distributions  either on a monthly or quarterly
basis.

The rate for distributions  from 2004 operations was $0.0758 per Unit per month.
The  distributions  were paid in February  through  December 2004 and in January
2005. For each quarterly  distribution (paid in April, July and October 2004 and
in January  2005) the rate was  $0.2275 per Unit.  Distributions  were from 2004
cash flows from operations.

The rate for distributions  from 2003 operations was $0.0758 per Unit per month.
The  distributions  were paid in February  through  December 2003 and in January
2004. For each quarterly  distribution (paid in April, July and October 2003 and
in January  2004) the rate was  $0.2275 per Unit.  Distributions  were from 2003
cash flows from operations.

The rate for distributions  from 2002 operations was $0.0758 per Unit per month.
The  distributions  were paid in February  through  December 2002 and in January
2003. For each quarterly  distribution (paid in April, July and October 2002 and
in January  2003) the rate was  $0.2275 per Unit.  Distributions  were from 2002
cash flows from operations.

The following table presents summarized  information regarding  distributions to
members other than AFS (Other Members)

<TABLE>
<CAPTION>
                                              2004            2003            2002             2001              2000
Net income (loss) per Unit, based on
<S>                                            <C>            <C>              <C>              <C>               <C>
   weighted average Units outstanding          $ 0.3100       $ (0.6300)       $ (0.2800)       $ (0.0600)        $ (0.2900)
Return of investment                             0.6000          1.5400           1.1900           0.9700            1.2100
                                         --------------- --------------- ---------------- ----------------  ----------------
Distributions per unit                           0.9100          0.9100           0.9100           0.9100            0.9200
Differences per Unit due to timing
   of distributions                                   -               -                -           0.0050            0.0275
                                         --------------- --------------- ---------------- ----------------  ----------------

Actual distribution rates per Unit             $ 0.9100        $ 0.9100         $ 0.9100         $ 0.9150          $ 0.9475
                                         =============== =============== ================ ================  ================
</TABLE>





                                       5
<PAGE>

Item 6.  SELECTED FINANCIAL DATA

The following table presents selected  financial data of the Company at December
31, 2004, 2003, 2002, 2001 and 2000 and for the years then ended. This financial
data should be read in  conjunction  with the financial  statements  and related
notes included under Item 8 of this report.

<TABLE>
<CAPTION>
                                              2004            2003            2002             2001              2000
<S>                                        <C>              <C>             <C>              <C>               <C>
Gross revenues                             $ 28,002,368     $28,549,271     $ 32,929,975     $ 43,794,097      $ 31,047,485
Net income (loss)                           $ 5,222,252    $ (7,521,261)    $ (2,805,544)       $ 132,672      $ (2,305,631)
Weighted average Units                       13,570,188      13,570,188       13,570,188       13,570,188        10,634,792
Net income (loss) allocated to
   Other Members                            $ 4,221,097    $ (8,522,240)    $ (3,806,713)      $ (872,244)     $ (3,100,640)
Net income (loss) per Unit, based on
   weighted average Units outstanding            $ 0.31         $ (0.63)         $ (0.28)         $ (0.06)          $ (0.29)
Distributions per Unit, based on
   weighted average Units outstanding            $ 0.91          $ 0.91           $ 0.91           $ 0.91            $ 0.92
Total Assets                               $ 64,249,180    $110,222,744     $153,464,672    $ 184,421,674     $ 198,832,652
Non-recourse and Other Long-term Debt      $ 19,231,946     $46,555,335     $ 68,614,855     $ 91,383,964      $ 93,993,744
Total Members' Capital                     $ 42,188,041     $47,897,118     $ 66,526,763     $ 83,361,952     $ 101,338,501
</TABLE>


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

Statements  contained in this Item 7,  "Management's  Discussion and Analysis of
Financial Condition and Results of Operations," and elsewhere in this Form 10-K,
which  are  not  historical  facts,  may  be  forward-looking  statements.  Such
statements  are  subject  to risks and  uncertainties  that could  cause  actual
results to differ  materially  form those  projected.  In  particular,  economic
recession and changes in general economic conditions, including, fluctuations in
demand for equipment,  lease rates,  and interest rates, may result in delays in
investment and reinvestment,  delays in leasing,  re-leasing, and disposition of
equipment, and reduced returns on invested capital. The Company's performance is
subject to risks  relating to lessee  defaults and the  creditworthiness  of its
lessees.  The Fund's  performance is also subject to risks relating to the value
of  its  equipment  at the  end of its  leases,  which  may be  affected  by the
condition of the equipment,  technological  obsolescence and the markets for new
and used  quipment at the end of lease terms.  Investors  are  cautioned  not to
attribute undue certainty to these forward-looking statements,  which speak only
as of the date of this Form 10-K. We undertake no obligation to publicly release
any  revisions  to  these  forward-looking   statements  to  reflect  events  or
circumstances  after the date of this Form 10-K or to reflect the  occurrence of
unanticipated events, other than as required by law.

Capital Resources and Liquidity

The Company  commenced its offering of Units on December 7, 1998. On January 13,
1999,  the  Company  commenced  operations  in  its  primary  business  (leasing
activities). The offering was terminated on November 30, 2000. Total proceeds of
the offering was  $135,701,880.  The Company's  public  offering  provided for a
total maximum capitalization of $150,000,000.

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

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

The Company  participates  with AFS and certain of its affiliates in a financing
arrangement  (comprised  of a term loan to AFS, an  acquisition  facility  and a
warehouse facility) with a group of financial institutions that includes certain
financial  covenants.  The financial  arrangement is $75,000,000  and expires in
June 2006. The  availability  of borrowings  available to the Company under this
financing  arrangement  is reduced by the amount AFS has  outstanding  as a term
loan. As of December 31, 2004 borrowings under the facility were as follows:

<TABLE>
<CAPTION>
<S>                                                                              <C>
Total amount available under the financing arrangement                           $   75,000,000
Term loan to AFS as of December 31, 2004                                             (2,027,636)
                                                                                ----------------
Total available under the acquisition and warehouse facilities                        72,972,364

Amount borrowed by the Company under the acquisition facility - Amounts borrowed
   by affiliated partnerships and limited liability companies under the
   acquisition facility                                                             (30,500,000)
                                                                                ----------------
Total remaining available under the acquisition and warehouse facilities         $   42,472,364
                                                                                ================
</TABLE>

                                       6
<PAGE>

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 limited
partnerships and limited liability companies, the Company and AFS.

The credit agreement  includes certain  financial  covenants  applicable to each
borrower.  The Company was in  compliance  with its covenants as of December 31,
2004.

The Company  anticipates  reinvesting  a portion of lease  payments  from assets
owned in new leasing  transactions.  Such reinvestment will occur only after the
payment  of  all  obligations,   including  debt  service  (both  principal  and
interest),  the  payment  of  management  fees to AFS  and  providing  for  cash
distributions  to the  Other  Members.  At  December  31,  2004,  there  were no
commitments to purchase lease assets.

AFS or an  affiliate  may  purchase  equipment  in its own name,  the name of an
affiliate or the name of a nominee,  a trust or otherwise and hold title thereto
on a temporary or interim basis for the purpose of facilitating  the acquisition
of such  equipment or the  completion of manufacture of the equipment or for any
other purpose related to the business of the Company,  provided,  however, that:
(i) the transaction is in the best interest of the Company;  (ii) such equipment
is  purchased  by the Company for a purchase  price no greater  than the cost of
such equipment to AFS or affiliate (including any out-of-pocket carrying costs),
except for compensation permitted by the Operating Agreement;  (iii) there is no
difference  in interest  terms of the loans secured by the equipment at the time
acquired by AFS or affiliate and the time acquired by the Company; (iv) there is
no benefit  arising out of such  transaction to AFS or its affiliate  apart from
the compensation  otherwise  permitted by the Operating  Agreement;  and (v) all
income  generated by, and all expenses  associated  with,  equipment so acquired
will be treated as belonging to the Company.

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

In 1999,  the Company  established  a $70 million  receivables  funding  program
(which was subsequently  increased to $125 million) with a receivables financing
company that issues  commercial  paper rated A1 from  Standard and Poor's and P1
from Moody's Investor Services. In this receivables funding program, the lenders
received a general lien against all of the otherwise  unencumbered assets of the
Company.  The program  provided for  borrowing at a variable  interest  rate and
required  AFS on  behalf  of the  Company  to  enter  into  interest  rate  swap
agreements  with  certain  counterparties  (also rated  A1/P1) to  mitigate  the
interest rate risk  associated with a variable rate note. AFS believes that this
program  allowed  the  Company  to avail  itself  of lower  cost  debt than that
available for individual non-recourse debt transactions.  The program expired as
to new borrowings in April 2002.

See Item 7a and Note 5 to the financial statements, Other long-term debt, as set
forth in Part II, Item 8,  Financial  Statements  and  Supplementary  Data,  for
additional information regarding this program and related interest rate swaps.

 The  Company  will  continue to use its sources of  non-recourse  secured  debt
financing on a transaction basis as a means of mitigating credit risk.
AFS expects that aggregate borrowings in the future will be approximately 50% of
aggregate  equipment  cost. In any event,  the Operating  Agreement  limits such
borrowings to 50% of the total cost of equipment, in aggregate.

See Note 4 to the financial statements,  Non-recourse debt, as set forth in Part
II,  Item  8,  Financial  Statements  and  Supplementary  Data,  for  additional
information regarding non-recourse debt.

The  Company  commenced  regular   distributions,   based  on  cash  flows  from
operations,  beginning  with the  month of  January  1999.  See Item 5 and 6 for
additional information regarding distributions.

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

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



                                       7
<PAGE>

Cash Flows

2004 vs. 2003:

In 2004 and 2003,  our primary  source of cash flows was rents we received  from
operating lease  activities.  In both years, this was also our largest source of
cash flows from operating activities.

In  both  2004  and  2003,  we had two  sources  of cash  flows  from  investing
activities,  proceeds  from sales of lease  assets  and cash  flows from  direct
financing leases. Proceeds from sales of lease assets increased from $13,964,820
in 2003 to $38,125,051 in 2004, an increase of $24,160,231.  Assets sold in 2004
comprised of manufacturing, trucks and trailers, materials handling, and storage
facility,  totaling $70,370,000 in original costs. Assets sold in 2003 consisted
largely of aircraft, rail transportation and manufacturing  equipment,  totaling
$24,469,000  in  original  costs.  It was this  increase  that  gave rise to the
increase in cash flows from asset sales. Investing activities also included cash
flows from direct financing leases in both 2003 and 2004. Cash received on these
leases increased from $1,793,351 in 2003 to $1,843,290 in 2004.

There were no new sources of cash from  financing  activities  in 2004. In 2003,
our sources of cash from  financing  activities  consisted of  borrowings on the
line of credit  ($9,500,000)  and the proceeds of a new $2,563,149  non-recourse
note  payable.  The Company used cash in investing  activities  in both 2003 and
2004 to make  payments  on the  line of  credit,  non-recourse  debt  and  other
long-term debt and to make  distributions to the members.  The entire balance of
$9,500,000 on the line of credit was repaid in 2004.  An additional  $26,754,000
payment was made to reduce the long term debt in 2004. Payments of $569,389 were
made to reduce the non-recourse debt in 2004.

2003 vs. 2002:

In 2003 and 2002,  our primary  source of cash flows was rents we received  from
operating  leases. In both years, this was also our largest source of cash flows
from operating activities.

In  both  2003  and  2002,  we had two  sources  of cash  flows  from  investing
activities,  proceeds  from sales of lease  assets  and cash  flows from  direct
financing leases.  Proceeds from sales of lease assets increased from $2,403,934
in 2002 to $13,964,820 in 2003, an increase of $11,560,886.  Assets sold in 2003
consisted largely of aircraft, rail transportation and manufacturing  equipment.
Assets sold in 2002,  consisted  primarily of office  automation  equipment.  In
2002,  assets with an original cost of  approximately  $5,585,000  were sold. In
2003,  that increased to  approximately  $24,469,000.  It was this increase that
gave rise to the increase in cash flows from asset sales.  Investing  activities
also  included  cash flows from direct  financing  leases in both 2002 and 2003.
Cash received on these leases decreased from $2,134,026 in 2002 to $1,793,351 in
2003, a decrease of $340,675.

In 2002,  our  financing  sources of cash were  borrowings on the line of credit
($12,400,000)  and the proceeds of other  long-term debt  ($3,900,000).  We used
cash in  investing  activities  in 2002 to make  payments on the line of credit,
non-recourse  debt and other  long-term  debt and to make  distributions  to the
members.

Results of Operations

As of January 13,  1999,  subscriptions  for the minimum  amount of the offering
($1,200,000) had been received and accepted by the Company. As of that date, the
Company  commenced  operations  in its primary  business  (leasing  activities).
Because of the timing of the  commencement  of operations  and the fact that the
initial  portfolio  acquisitions were not been completed until 2001, the results
of operations in 2001 are not expected to be comparable to future periods.

Cost  reimbursements  to Managing  Member are based on costs  incurred by AFS in
performing  administrative  services for the Company that are  allocated to each
Company  that AFS  manages  based on certain  criteria  such as  existing or new
leases,  number of investors or equity  depending on the type of cost incurred..
AFS  believes  that the  costs  reimbursed  are the  lower of (i)  actual  costs
incurred  on behalf of the  Company  or (ii) the  amount  the  Company  would be
required to pay independent  parties for comparable  administrative  services in
the same geographic location.

As of December 31, 2004 and 2003 there were  concentrations  (defined as greater
than 10%) of equipment leased to lessees in certain  industries (as a percentage
of total equipment cost) as follows:

                                          2004            2003
      Transportation, rail                38%              20%
      Transportation, containers          17%              11%
      Transportation, air                 12%               *
      Natural gas                         11%               *
      Manufacturing, other                10%              18%
      Transportation, other                *               13%

      * Less than 10%



                                       8
<PAGE>

2004 vs. 2003:

Our operations  resulted in a net income of $5,222,252 in 2004 versus a net loss
of $7,521,261 in 2003. The change in the results were based on the contributions
of lower depreciation expenses, lower provision for impairment and losses, lower
interest expense,  and lower railcar maintenance  expense. Our primary source of
revenues in both years was rents from  operating  leases.  Rents from  operating
leases have  continued to decrease from  $26,938,424  in 2003 to  $18,125,770 in
2004, a decrease of  $8,812,654.  Our operating  lease rents have decreased as a
result of asset  sales over the last two years,  consistent  with the  Company's
maturing lease  portfolio.  Offsetting  this decline in operating lease revenues
were  recognized  gains on sale of assets in the  amount of  $8,168,151  in 2004
compared to $595,299 in 2003.

Our largest expense is depreciation of operating lease assets.  Depreciation has
decreased  from  $20,337,442  in 2003 to  $14,770,807  in 2004,  a  decrease  of
$5,566,635. This decrease is a result of the asset sales as noted above.

Railcar  maintenance  costs have declined from $1,008,874 in 2003 to $476,682 in
2004,  a decrease of  $532,192.  Most of the  decrease in 2003  related to costs
incurred in order to prepare existing rail cars to be placed on a lease that was
eventually sold in 2004.

Interest  expense has decreased from $5,270,675 in 2003 to $3,467,624 in 2004, a
decrease of $1,803,051.  The decrease resulted from scheduled  repayments of our
non-recourse  and other  long-term  debt.  The  reduction  in  interest  expense
attributable to reduced  average  outstanding  balances was partially  offset by
additional  interest charges related to prior period asset  acquisitions as more
fully described in Note 6 in the financial  statements included in Part II, Item
8 of this report.

In 2002 we provided  $475,000 for an allowance  for doubtful  accounts.  A large
portion of the  allowance  provided  for in 2002  related to the  bankruptcy  of
National  Steel  Corporation,  a lessee of the  Company.  The Company  recovered
$180,000 and $173,000 in 2004 and 2003, respectively.

Management  periodically reviews the carrying values of its assets on leases and
assets held for lease or sale. As a result of the review,  management determined
that the fair value of an aircraft  had declined in value to the extent that the
carrying value had become  impaired.  The fair value of the asset was determined
based on the sum of the discounted  estimated future cash flows of the assets. A
charge to  operations  was  recorded for the decline in value of the aircraft in
the amount of $1,050,000 for the year ended December 31, 2004.

2003 vs. 2002:

Our  operations  resulted in net losses of $7,521,261 in 2003 and  $2,805,544 in
2002.The  primary reason for the increased loss is due to additional  impairment
losses of $5,290,639 in 2003,  an increase of $3,179,046  compared to 2002.  Our
primary source of revenues in both years was rents from operating leases.  Rents
from  operating  leases have  continued to decrease from  $31,638,196 in 2002 to
$26,938,424  in 2003, a decrease of $4,699,772.  Our operating  lease rents have
decreased  as a result of asset sales over the last two years,  consistent  with
the Company's maturing lease portfolio.

Our largest expense is depreciation of operating lease assets.  Depreciation has
decreased  from  $22,784,103  in 2002 to  $20,337,442  in 2003,  a  decrease  of
$2,446,661. This decrease is a result of the asset sales we noted above.

Railcar  maintenance costs have increased from $215,009 in 2002 to $1,008,874 in
2003,  an increase of $793,865.  Most of the increase  (approximately  $722,000)
related  to costs  incurred  in order to  prepare  rail cars to be placed on new
leases.

Interest  expense has decreased from $6,148,759 in 2002 to $5,270,675 in 2003, a
decrease of $878,084.  The decrease  resulted from  scheduled  repayments of our
non-recourse  and other  long-term  debt.  The  reduction  in  interest  expense
attributable to reduced  average  outstanding  balances was partially  offset by
additional  interest charges related to prior period asset  acquisitions as more
fully described in Note 6 in the financial  statements included in Part II, Item
8 of this report.

In 2002 we provided  $475,000 for an allowance  for doubtful  accounts.  A large
portion of the  allowance  provided  for in 2002  related to the  bankruptcy  of
National  Steel  Corporation,  a lessee of the  Company.  In 2003,  we recovered
$180,000 of the amounts we had provided for in 2002.

Management  periodically reviews the carrying values of its assets on leases and
assets held for lease or sale. As a result of the review,  management determined
that the fair values of a fleet of diesel  electric  locomotives,  railroad auto
racks,  manufacturing  equipment  and an aircraft  had  declined in value to the
extent  that the  carrying  values  had become  impaired.  The fair value of the
assets was determined  based on the sum of the discounted  estimated future cash
flows of the assets.  A charge to  operations  was  recorded  for the decline in
value of those assets in the amount of  $5,679,271  for the year ended  December
31, 2003.



                                       9
<PAGE>

Derivative Financial Instruments

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standards ("SFAS") No. 133,  Accounting for Derivative
Instruments  and  Hedging  Activities,  which  established  new  accounting  and
reporting standards for derivative instruments. SFAS No. 133 has been amended by
SFAS No. 137,  issued in June 1999, by SFAS No. 138,  issued in June 2000 and by
SFAS No. 149, issued in June 2003.

SFAS No. 133, as amended,  requires the Company to recognize all  derivatives as
either assets or liabilities in the balance sheet and measure those  instruments
at fair value.  It further  provides  criteria for derivative  instruments to be
designated as fair value, cash flow, or foreign currency hedges, and establishes
accounting  standards for reporting  changes in the fair value of the derivative
instruments.

The Company adopted SFAS No. 133, as amended, on January 1, 2001. Upon adoption,
the Company recorded interest rate swap hedging instruments at fair value in the
balance sheet and  recognized  the  offsetting  gains or losses in net income or
other  comprehensive  income,  as  appropriate.  See  Note  5 to  the  financial
statements,  Other  long-term  debt, as set forth in Part II, Item 8,  Financial
Statements and Supplementary Data, for additional information.

Recent Accounting Pronouncements

On October 13, 2004, the FASB concluded that SFAS No. 123R,  Share-Based Payment
("SFAS 123R"), which requires all companies to measure compensation cost for all
share-based payments (including stock options and employee stock purchase plans)
at fair value,  will be  effective  for public  companies  for interim or annual
periods beginning after June 15, 2005.  Nonpublic  companies will be required to
adopt the new statement at the  beginning of the first annual  period  beginning
after  December 15, 2005.  The Company does not expect the adoption of SFAS 123R
to have a material impact on its financial statements.

In  January   2003,   the  FASB  issued   Interpretation   No.  46  ("FIN  46"),
"Consolidation of Variable Interest Entities,  an interpretation of ARB 51." The
primary  objectives  of  this  interpretation  are to  provide  guidance  on the
identification  of entities for which  control is achieved  through  means other
than through voting rights ("variable  interest  entities") and how to determine
when  and  which  business   enterprise  (the  "primary   beneficiary")   should
consolidate  the  variable  interest  entity.  This new model for  consolidation
applies to an entity in which  either (i) the equity  investors  (if any) do not
have a controlling  financial interest; or (ii) the equity investment at risk is
insufficient to finance that entity's  activities  without receiving  additional
subordinated  financial support from other parties. In addition, FIN 46 requires
that  the  primary  beneficiary,  as  well  as  all  other  enterprises  with  a
significant  variable  interest in a variable  interest entity,  make additional
disclosures.  Certain  disclosure  requirements  of FIN 46  were  effective  for
financial statements issued after January 31, 2003.

In  December  2003,  the  FASB  issued  FIN  No.  46  (revised  December  2003),
"Consolidation  of Variable  Interest  Entities" ("FIN 46-R") to address certain
FIN 46 implementation  issues.  The effective dates and impact of FIN 46 and FIN
46-R are as follows:

(i) Special  purpose  entities  ("SPEs")  created prior to February 1, 2003. The
company must apply either the provisions of FIN 46 or early adopt the provisions
of FIN 46-R at the end of the first  interim or annual  reporting  period ending
after December 15, 2003.

(ii)  Non-SPEs  created  prior to February  1, 2003.  The company is required to
adopt FIN 46-R at the end of the first interim or annual reporting period ending
after March 15, 2004.

(iii) All entities, regardless of whether a SPE, that were created subsequent to
January  31,  2003.  The  provisions  of FIN 46  were  applicable  for  variable
interests in entities obtained after January 31, 2003.

The Company  adopted FIN 46-R as of March 31, 2004. The adoption of FIN 46-R did
not have a material impact on the Company's  position,  results of operations or
liquidity.

Critical Accounting Policies

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



                                       10
<PAGE>

Equipment on operating leases:

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

Direct financing leases:

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

Allowances for losses on direct financing leases are typically established based
on historical charge offs and collections  experience and are usually determined
by specifically identified lessees and billed and unbilled receivables.

Direct financing leases are placed in a non-accrual status based on specifically
identified lessees.  Such leases are only returned to an accrual status based on
a case by case  review  by AFS.  Direct  financing  leases  are  charged  off on
specific identification by AFS.

Use of estimates:

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States  requires  management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting  period.  Actual  results  could  differ  from those  estimates.  Such
estimates primarily relate to the determination of residual values at the end of
the lease term.

Asset Valuation:

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

The  Company  adopted  SFAS 144 as of  January  1,  2002.  The  adoption  of the
Statement did not have a significant impact on the Company's  financial position
and results of operations.

Item 7a.  QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

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

In general,  the Company manages its exposure to interest rate risk by obtaining
fixed rate debt. The fixed rate debt is structured so as to match the cash flows
required  to service  the debt to the  payment  streams  under  fixed rate lease
receivables.  The  payments  under the leases  are  assigned  to the  lenders in
satisfaction of the debt. Furthermore, the Company has historically been able to
maintain  a stable  spread  between  its cost of funds and lease  yields in both
periods  of  rising  and  falling  interest  rates.  Nevertheless,  the  Company
frequently  funds leases with its floating rate revolving line of credit and is,
therefore, exposed to interest rate risk until fixed rate financing is arranged,
or the  floating  rate  revolving  line of credit is repaid.  As of December 31,
2004,  there was no  outstanding  amount on the floating rate  revolving line of
credit .



                                       11
<PAGE>

Also, as described in Item 7 in the caption  "Capital  Resources and Liquidity,"
the Company entered into a receivables  funding facility in 1999. Since interest
on the outstanding balances under the facility varies, the Company is exposed to
market risks associated with changing interest rates. To hedge its interest rate
risk, the Company enters into interest rate swaps that  effectively  convert the
underlying interest characteristic on the facility from floating to fixed. Under
the swap agreements, the Company makes or receives variable interest payments to
or  from  the  counterparty  based  on a  notional  principal  amount.  The  net
differential  paid or received by the Company is  recognized as an adjustment to
interest expense related to the facility  balances.  The amount paid or received
represents  the  difference  between the  payments  required  under the variable
interest  rate  facility  and the  amounts  due under the  facility at the fixed
(hedged) interest rate. As of December 31, 2004, borrowings on the facility were
$13,192,000 and the associated  variable  interest rate was 2.860%.  The average
fixed interest rate achieved with the swap agreements was 6.878% at December 31,
2004.

In general,  these swap  agreements  eliminate the Company's  interest rate risk
associated  with variable  interest  rate  borrowings.  However,  the Company is
exposed to and manages credit risk associated with the  counterparty to the swap
agreement by dealing only with institutions it considers  financially  sound. If
these agreements were not in place, based on the Company's  facility  borrowings
at  December  31,  2004,  a  hypothetical  1.00%  increase or decrease in market
interest rates would  increase or decrease the Company's 2004 variable  interest
expense by approximately $103,714.

See the Notes to the  financial  statements  as set forth in Part II, Item 8 for
additional information.

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See the Report of  Independent  Registered  Public  Accounting  Firm,  Financial
Statements and Notes to Financial Statements attached hereto at pages 13 through
31.


                                       12
<PAGE>




   REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Members
ATEL Capital Equipment Fund VIII, LLC

We have audited the accompanying  balance sheets of ATEL Capital  Equipment Fund
VIII, LLC (Company) as of December 31, 2004 and 2003, and the related statements
of operations,  changes in members' capital and cash flows for each of the three
years in the period ended December 31, 2004. These financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  We were not engaged to perform an
audit of the Company's  internal  control over  financial  reporting.  Our audit
included  consideration of internal control over financial  reporting as a basis
for designing audit  procedures that are appropriate in the  circumstances,  but
not for the  purpose  of  expressing  an  opinion  on the  effectiveness  of the
Company's internal control over financial reporting.  Accordingly, we express no
such  opinion.  An audit also  includes  examining,  on a test  basis,  evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of ATEL Capital  Equipment Fund
VIII,  LLC at December 31, 2004 and 2003,  and the results of its operations and
its cash flows for each of the three  years in the  period  ended  December  31,
2004, in conformity with U.S. generally accepted accounting principles.

                                                          /s/ ERNST & YOUNG LLP

San Francisco, California
March 9, 2005





                                       13
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VIII, LLC

                                 BALANCE SHEETS

                           DECEMBER 31, 2004 AND 2003


                                     ASSETS

                                                   2004              2003

Cash and cash equivalents                      $    2,569,911    $     508,584
Accounts receivable, net of allowance for
   doubtful accounts of$52,115 in 2004
   and $225,115 in 2003                             1,611,290         2,124,902
Other assets                                          378,264            25,000
Investments in equipment and leases                59,689,715       107,564,258
                                              ----------------  ----------------
Total assets                                     $ 64,249,180     $ 110,222,744
                                              ================  ================


                        LIABILITIES AND MEMBERS' CAPITAL


Long-term debt                                   $ 13,192,000      $ 39,946,000
Non-recourse debt                                   6,039,946         6,609,335
Line of credit                                              -         9,500,000
Accounts payable and accruals:
   Managing Member                                    613,310           889,555
   Other                                              239,038           820,799
Accrued interest payable                              105,336           115,844
Interest rate swap contracts                        1,435,454         3,207,595
Unearned operating lease income                       436,055         1,236,498
                                              ----------------  ----------------
Total liabilities                                  22,061,139        62,325,626


Members' capital:
   Accumulated other comprehensive income            (725,935)       (3,143,144)
   Members' capital                                42,913,976        51,040,262
                                              ----------------  ----------------
Total Members' capital                             42,188,041        47,897,118
                                              ----------------  ----------------
Total liabilities and Members' capital           $ 64,249,180     $ 110,222,744
                                              ================  ================




                             See accompanying notes.


                                       14
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VIII, LLC

                            STATEMENTS OF OPERATIONS

                               FOR THE YEARS ENDED
                        DECEMBER 31, 2004, 2003 AND 2002


<TABLE>
<CAPTION>
Revenues:                                                                     2004             2003              2002
Leasing activities:
<S>                                                                         <C>              <C>               <C>
      Operating leases                                                      $ 18,125,770     $ 26,938,424      $ 31,638,196
      Direct financing leases                                                  1,178,202          864,509           807,678
      Gain on sales of assets                                                  8,168,151          595,299           271,751
Interest                                                                           6,194            5,717            15,547
Other                                                                            524,051          145,322           196,803
                                                                         ---------------- ---------------- -----------------
                                                                              28,002,368       28,549,271        32,929,975
Expenses:
Depreciation of operating lease assets                                        14,770,807       20,337,442        22,784,103
Provision for losses and impairments                                           1,086,312        5,679,271         2,612,500
Interest expense                                                               3,467,624        5,270,675         6,148,759
Asset management fees to Managing Member                                       1,057,355        1,517,259         1,481,576
Railcar maintenance                                                              476,682        1,008,874           215,009
Cost reimbursements to Managing Member                                           752,161          820,571           832,539
Amortization of initial direct costs                                             217,234          356,920           378,445
Professional fees                                                                243,438          506,698           179,562
Insurance                                                                        185,193          186,393                 -
(Recovery of) provision for doubtful accounts                                   (173,000)        (180,000)          475,000
Aircraft inspection and maintenance                                                    -          137,510           211,268
Franchise fees and taxes on income                                                94,061          124,239            72,843
Other                                                                            602,249          304,680           343,915
                                                                         ---------------- ---------------- -----------------
                                                                              22,780,116       36,070,532        35,735,519
                                                                         ---------------- ---------------- -----------------
Net income (loss)                                                            $ 5,222,252     $ (7,521,261)     $ (2,805,544)
                                                                         ================ ================ =================

Net income (loss):
   Managing Member                                                           $ 1,001,155      $ 1,000,979       $ 1,001,169
   Other Members                                                               4,221,097       (8,522,240)       (3,806,713)
                                                                         ---------------- ---------------- -----------------
                                                                             $ 5,222,252     $ (7,521,261)     $ (2,805,544)
                                                                         ================ ================ =================

Net income (loss) per Limited Liability Company Unit (Other Members)              $ 0.31          $ (0.63)          $ (0.28)
Weighted average number of Units outstanding                                  13,570,188       13,570,188        13,570,188
</TABLE>











                             See accompanying notes.


                                       15
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VIII, LLC

                    STATEMENT OF CHANGES IN MEMBERS' CAPITAL

                               FOR THE YEARS ENDED
                        DECEMBER 31, 2004, 2003 AND 2002


<TABLE>
<CAPTION>
                                                                                            Accumulated
                                                                                               Other
                                                                                            Comprehensive
                                                 Other Members              Managing          Income
                                             Units           Amount          Member           (Loss)             Total
<S>              <C> <C>                     <C>            <C>               <C>            <C>               <C>
Balance December 31, 2001                    13,570,188     $88,062,574       $        -     $ (4,700,622)     $ 83,361,952
Distributions to Managing Member                                      -       (1,001,169)               -        (1,001,169)
Distributions to Other Members
   ($0.91 per Unit)                                         (12,347,756)               -                -       (12,347,756)
Unrealized increase in interest rate
   swap liability                                                     -                -         (680,720)         (680,720)
Net income (loss)                                            (3,806,713)       1,001,169                -        (2,805,544)
                                         --------------- --------------- ---------------- ----------------  ----------------
Balance December 31, 2002                    13,570,188      71,908,105                -       (5,381,342)       66,526,763
Distributions to Managing Member                                      -       (1,000,979)               -        (1,000,979)
Distributions to Other Members
   ($0.91 per Unit)                                         (12,345,603)               -                -       (12,345,603)
Unrealized decrease in interest rate
   swap liability                                                     -                -        2,173,747         2,173,747
Reclassification adjustment for
   portion of swap liability charged to
   net loss                                                           -                -           64,451            64,451
Net income (loss)                                            (8,522,240)       1,000,979                -        (7,521,261)
                                         --------------- --------------- ---------------- ----------------  ----------------
Balance December 31, 2003                    13,570,188     $51,040,262              $ -     $ (3,143,144)     $ 47,897,118
Distributions to Managing Member                                      -       (1,001,155)               -        (1,001,155)
Distributions to Other Members
   ($0.91 per Unit)                                         (12,347,383)               -                -       (12,347,383)
Unrealized decrease in interest rate
   swap liability                                                     -                -        1,772,141         1,772,141
Reclassification adjustment for
   portion of swap liability charged to
   net loss                                                           -                -          645,068           645,068
Net income                                                    4,221,097        1,001,155                -         5,222,252
                                         --------------- --------------- ---------------- ----------------  ----------------
Balance December 31, 2004                    13,570,188     $42,913,976              $ -       $ (725,935)     $ 42,188,041
                                         =============== =============== ================ ================  ================
</TABLE>


                             See accompanying notes.


                                       16
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VIII, LLC

                            STATEMENTS OF CASH FLOWS

                               FOR THE YEARS ENDED
                        DECEMBER 31, 2004, 2003 AND 2002


<TABLE>
<CAPTION>
                                                                              2004             2003              2002
Operating activities:
<S>                                                                          <C>             <C>               <C>
Net income (loss)                                                            $ 5,222,252     $ (7,521,261)     $ (2,805,544)
Adjustments to reconcile net income (loss) to cash provided by
   operating activities:
   Gain on sales of assets                                                    (8,168,151)        (595,299)         (271,751)
   Depreciation of operating lease assets                                     14,770,807       20,337,442        22,784,103
   Amortization of initial direct costs                                          217,234          356,920           378,445
   Interest rate swap contracts                                                  645,068           64,451                 -
   (Recovery of) provision for doubtful accounts                                (173,000)        (180,000)          475,000
   Provision for losses and impairments                                        1,086,312        5,679,271         2,612,500
   Changes in operating assets and liabilities:
      Accounts receivable                                                        686,612          (70,591)          907,216
      Due from Managing Member                                                         -          171,119          (171,119)
      Other assets                                                              (353,264)          30,000            30,000
      Accounts payable, Managing Member                                         (276,245)         889,555                 -
      Accounts payable, other                                                   (581,761)         123,079            48,182
      Accrued interest payable                                                   (10,508)          19,665            19,199
      Unearned lease income                                                     (800,443)        (311,315)         (200,805)
                                                                         ---------------- ----------------  ----------------
Net cash provided by operating activities                                     12,264,913       18,993,036        23,805,426
                                                                         ---------------- ----------------  ----------------

Investing activities:
Proceeds from sales of lease assets                                           38,125,051       13,964,820         2,403,934
Reduction of net investment in direct financing leases                         1,843,290        1,793,351         2,134,026
Purchases of equipment on direct financing leases                                      -                -          (293,570)
Payment of initial direct costs to Managing Member                                     -                -           (37,440)
                                                                         ---------------- ----------------  ----------------
Net cash provided by investing activities                                     39,968,341       15,758,171         4,206,950
                                                                         ---------------- ----------------  ----------------

Financing activities:
Repayments of other long-term debt                                           (26,754,000)     (22,966,000)      (26,357,000)
Repayments of line of credit                                                  (9,500,000)     (20,600,000)       (4,300,000)
Borrowings under line of credit                                                        -       19,500,000        12,400,000
Distributions to Other Members                                               (12,347,383)     (12,345,603)      (12,347,756)
Proceeds of non-recourse debt                                                          -        2,563,149                 -
Repayments of non-recourse debt                                                 (569,389)      (1,656,669)         (312,109)
Distributions to Managing Member                                              (1,001,155)      (1,000,979)       (1,001,169)
Proceeds of other long-term debt                                                       -                -         3,900,000
                                                                         ---------------- ----------------  ----------------
Net cash used in financing activities                                        (50,171,927)     (36,506,102)      (28,018,034)
                                                                        ---------------- ----------------  ----------------

Net increase (decrease) in cash and cash equivalents                           2,061,327       (1,754,895)           (5,658)
Cash and cash equivalents at beginning of year                                   508,584        2,263,479         2,269,137
                                                                         ---------------- ----------------  ----------------
Cash and cash equivalents at end of year                                     $ 2,569,911        $ 508,584       $ 2,263,479
                                                                         ================ ================  ================
</TABLE>



                                       17
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VIII, LLC

                            STATEMENTS OF CASH FLOWS
                                   (CONTINUED)

                               FOR THE YEARS ENDED
                        DECEMBER 31, 2004, 2003 AND 2002


<TABLE>
<CAPTION>
                                                            2004             2003              2002

Supplemental disclosures of cash flow information:

<S>                                                        <C>              <C>               <C>
Cash paid during the year for interest                     $ 3,478,132      $ 5,251,010       $ 6,129,560
                                                       ================ ================  ================

Schedule of non-cash transactions:

Change in fair value of interest rate swaps contracts      $ 1,772,141      $ 2,173,747        $ (680,720)
                                                       ================ ================  ================
</TABLE>






                             See accompanying notes.


                                       18
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VIII, LLC

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2004


1. Organization and Limited Liability Company matters:

ATEL Capital Equipment Fund VIII, LLC (the Company) 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,  primarily in the United
States. The Company may continue until December 31, 2019. The Managing Member of
the Company is ATEL Financial Services LLC (AFS), a California limited liability
company.  Prior to converting to a limited liability company structure,  AFS was
formerly known as ATEL Financial  Corporation.  Each Member's personal liability
for obligations of the Company  generally will be limited to the amount of their
respective  contributions and rights to undistributed  profits and assets of the
Company.

On January 13, 1999,  subscriptions  for the minimum  number of Units  (120,000,
$1,200,000) had been received. On that date, the Company commenced operations in
its primary business (leasing activities).

The Company's  business  consists of leasing  various types of equipment.  As of
December  31,  2004,  the  original  terms of the leases  ranged from one to ten
years.

Pursuant  to  the   Operating   Agreement,   AFS   receives   compensation   and
reimbursements  for services rendered on behalf of the Company (see Note 6). AFS
is required to maintain in the  Company  reasonable  cash  reserves  for working
capital, the repurchase of Units and contingencies.

The Company's principal  objectives are to invest in a diversified  portfolio of
equipment  that will (i)  preserve,  protect and return the  Company's  invested
capital;  (ii)  generate  regular  distributions  to the  members  of cash  from
operations and cash from sales or refinancing,  with any balance remaining after
certain minimum distributions to be used to purchase additional equipment during
the Reinvestment  Period,  ending December 31, 2006 and (iii) provide additional
distributions following the Reinvestment Period and until all equipment has been
sold.  The  Company is  governed  by its  Limited  Liability  Company  Operating
Agreement (Operating Agreement).


2. Summary of significant accounting policies:

Cash and cash equivalents:

Cash and cash equivalents includes cash in banks and cash equivalent investments
with original maturities of ninety days or less.

Accounts receivable:

Accounts  receivable  represent  the amounts  billed under lease  contracts  and
currently  due to the Company.  Allowances  for doubtful  accounts are typically
established  based on historical  charge offs and collection  experience and are
usually determined by specifically identified lessees and invoiced amounts.

Equipment on operating leases:

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



                                       19
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VIII, LLC

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2004


2. Summary of significant accounting policies (continued):

Direct financing leases:

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

Allowances for losses on direct financing leases are typically established based
on historical charge offs and collections  experience and are usually determined
by specifically identified lessees and billed and unbilled receivables.

Direct financing leases are placed in a non-accrual status based on specifically
identified lessees.  Such leases are only returned to an accrual status based on
a case by case  review  of AFS.  Direct  financing  leases  are  charged  off on
specific identification by AFS.

Initial direct costs:

The Company  capitalizes initial direct costs associated with the acquisition of
lease assets.  The costs are amortized  over a five year period using a straight
line method.

Income taxes:

The Company  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.

The tax basis of the  Company's  net  assets  and  liabilities  varies  from the
amounts presented in these financial statements as of December 31:

                                                    2004             2003
Financial statement basis of net assets           $ 42,188,041     $ 47,897,118
Tax basis of net assets (unaudited)                 19,582,706        2,409,944
                                               ---------------- ----------------
Difference                                        $ 22,605,335     $ 45,487,174
                                               ================ ================

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

The  following  reconciles  the net income  (loss)  reported in these  financial
statements  to the income (loss)  reported on the  Company's  federal tax return
(unaudited) for each of the years ended December 31:

<TABLE>
<CAPTION>
                                                    2004             2003              2002

<S>                                                <C>             <C>               <C>
Net income (loss) per financial statements         $ 5,222,252     $ (7,521,261)     $ (2,805,544)
Adjustment to depreciation expense                     335,960       (4,676,068)      (14,111,240)
Provisions for doubtful accounts and losses           (422,738)       5,499,271         3,087,500
Adjustments to lease revenues                       22,178,232       (1,150,757)        1,616,517
                                               ---------------- ----------------  ----------------
Net income (loss) per federal tax return          $ 27,313,706     $ (7,848,815)    $ (12,212,767)
                                               ================ ================  ================
</TABLE>



                                       20
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VIII, LLC

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2004


2. Summary of significant accounting policies (continued):

Per unit data:

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

Asset valuation:

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

The  Company  adopted  SFAS 144 as of  January  1,  2002.  The  adoption  of the
Statement did not have a significant impact on the Company's  financial position
and results of operations.

Credit risk:

Financial  instruments that potentially subject the Company to concentrations of
credit risk include cash and cash equivalents,  direct finance lease receivables
and accounts receivable. The Company places its cash deposits and temporary cash
investments  with  creditworthy,   high  quality  financial  institutions.   The
concentration  of such deposits and temporary cash  investments is not deemed to
create a significant risk to the Company.  Accounts receivable represent amounts
due from lessees in various  industries,  related to equipment on operating  and
direct financing leases.  See Note 8 for a description of lessees by industry as
of December 31, 2004 and 2003.

Derivative financial instruments:

In June 1998, the Financial  Accounting  Standards  Board (FASB) issued SFAS No.
133,  Accounting  for  Derivative  Instruments  and  Hedging  Activities,  which
established new accounting and reporting  standards for derivative  instruments.
SFAS No. 133 has been amended by SFAS No. 137,  issued in June 1999, by SFAS No.
138, issued in June 2000 and by SFAS No 149, issued in June 2003.

SFAS No. 133, as amended,  requires the Company to recognize all  derivatives as
either assets or liabilities in the balance sheet and measure those  instruments
at fair value.  It further  provides  criteria for derivative  instruments to be
designated as fair value, cash flow, or foreign currency hedges, and establishes
accounting  standards for reporting  changes in the fair value of the derivative
instruments. Upon adoption on January 1, 2001, the Company recorded its interest
rate swap hedging instruments at fair value in the balance sheet, designated the
interest rate swaps as cash flow hedges,  and recognized the offsetting gains or
losses as  adjustments  to be  reported  in net  income  or other  comprehensive
income,  as  appropriate.  For derivative  instruments not designated as hedging
instruments,  the gain or loss is  recognized  in  current  earnings  during the
period of change.  Such interest rate swaps are linked to and adjust effectively
the interest rate sensitivity of specific long-term debt.




                                       21
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VIII, LLC

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2004

2. Summary of significant accounting policies (continued):

Derivative financial instruments (continued):

The effective  portion of the change in fair value of the interest rate swaps is
recorded in Accumulated  Other  Comprehensive  Income (AOCI) and the ineffective
portion (if any)  directly in earnings.  Amounts in AOCI are  reclassified  into
earnings in a manner  consistent  with the  earnings  pattern of the  underlying
hedged  item  (generally  reflected  in interest  expense).  If a hedged item is
dedesignated prior to maturity,  previous  adjustments to AOCI are recognized in
earnings  to match the  earnings  recognition  pattern of the hedged item (e.g.,
level yield amortization if hedging an interest bearing  instruments).  Interest
income or expense  on most  hedging  derivatives  used to manage  interest  rate
exposure is recorded on an accrual  basis as an  adjustment  to the yield of the
link  exposures  over the periods  covered by the  contracts.  This  matches the
income recognition  treatment of the exposure (i.e., the liabilities,  which are
carried at historical cost, with interest recorded on an accrual basis).

Credit exposure from derivative financial instruments,  which are assets, arises
from the risk of a counterparty default on the derivative  contract.  The amount
of the loss created by the default is the replacement  cost or current  positive
fair value of the defaulted contract.

Use of estimates:

The  preparation  of financial  statements  in  conformity  with U.S.  generally
accepted  accounting   principles  require  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting  period.  Actual  results  could  differ  from those  estimates.  Such
estimates primarily relate to the determination of residual values at the end of
the lease term.

Basis of presentation:

The accompanying  financial  statements as of December 31, 2004 and 2003 and for
the three years ended  December 31, 2004 have been prepared in  accordance  with
U.S. generally accepted accounting  principles.  Certain prior year amounts have
been reclassified to conform to the current year presentation.

Recent accounting pronouncements:

On October 13, 2004, the FASB concluded that SFAS No. 123R,  Share-Based Payment
("SFAS 123R"), which requires all companies to measure compensation cost for all
share-based payments (including stock options and employee stock purchase plans)
at fair value,  will be  effective  for public  companies  for interim or annual
periods beginning after June 15, 2005.  Nonpublic  companies will be required to
adopt the new statement at the  beginning of the first annual  period  beginning
after  December 15, 2005.  The Company does not expect the adoption of SFAS 123R
to have a material impact on its financial statements.

In  January   2003,   the  FASB  issued   Interpretation   No.  46  ("FIN  46"),
"Consolidation of Variable Interest Entities,  an interpretation of ARB 51." The
primary  objectives  of  this  interpretation  are to  provide  guidance  on the
identification  of entities for which  control is achieved  through  means other
than through voting rights ("variable  interest  entities") and how to determine
when  and  which  business   enterprise  (the  "primary   beneficiary")   should
consolidate  the  variable  interest  entity.  This new model for  consolidation
applies to an entity in which  either (i) the equity  investors  (if any) do not
have a controlling  financial interest; or (ii) the equity investment at risk is
insufficient to finance that entity's  activities  without receiving  additional
subordinated  financial support from other parties. In addition, FIN 46 requires
that  the  primary  beneficiary,  as  well  as  all  other  enterprises  with  a
significant  variable  interest in a variable  interest entity,  make additional
disclosures.  Certain  disclosure  requirements  of FIN 46  were  effective  for
financial statements issued after January 31, 2003.

In  December  2003,  the  FASB  issued  FIN  No.  46  (revised  December  2003),
"Consolidation  of Variable  Interest  Entities" ("FIN 46-R") to address certain
FIN 46 implementation  issues.  The effective dates and impact of FIN 46 and FIN
46-R are as follows:

(i) Special  purpose  entities  ("SPEs")  created prior to February 1, 2003. The
company must apply either the provisions of FIN 46 or early adopt the provisions
of FIN 46-R at the end of the first  interim or annual  reporting  period ending
after December 15, 2003.



                                       22
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VIII, LLC

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2004


2. Summary of significant accounting policies (continued):

Recent accounting pronouncements (continued):

(ii)  Non-SPEs  created  prior to February  1, 2003.  The company is required to
adopt FIN 46-R at the end of the first interim or annual reporting period ending
after March 15, 2004.

(iii) All entities, regardless of whether a SPE, that were created subsequent to
January  31,  2003.  The  provisions  of FIN 46  were  applicable  for  variable
interests in entities obtained after January 31, 2003.

The Company  adopted FIN 46-R as of March 31, 2004. The adoption of FIN 46-R did
not have a material impact on the Company's  position,  results of operations or
liquidity.

3. Investments in equipment and leases:

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

<TABLE>
<CAPTION>
                                                                         Depreciation /
                                                                          Amortization
                                                                           Expense or
                                                                         Amortization of     Reclassi-
                                         December 31,      Impairment    Direct Financing  fications or     December 31,
                                              2003           Losses          Leases        Dispositions          2004
<S>                                       <C>              <C>             <C>              <C>                <C>
Net investment in operating leases         $ 87,112,340             $ -    $ (14,770,807)   $ (21,249,587)     $ 51,091,946
Net investment in direct financing leases    11,497,801         (36,312)      (1,843,290)      (6,526,128)        3,092,071
Assets held for sale or lease, net of
   accumulated depreciation of
   $16,086,674  in 2004 and $16,874,083
   in 2003                                    8,636,682      (1,050,000)               -       (2,181,185)        5,405,497
Initial direct costs, net of accumulated
   amortization of $1,389,906 in 2004 and
   $249,737 in 2003                             317,435               -         (217,234)               -           100,201
                                         --------------- --------------- ---------------- ----------------  ----------------
                                          $ 107,564,258    $ (1,086,312)   $ (16,831,331)   $ (29,956,900)     $ 59,689,715
                                         =============== =============== ================ ================  ================
</TABLE>


                                       23
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VIII, LLC

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2004


3. Investments in equipment and leases (continued):

Management  periodically reviews the carrying values of its assets on leases and
assets  held for  lease  or sale.  As a  result  of  those  reviews,  management
determined that the fair values of a fleet of diesel electric locomotives,  rail
car auto racks,  manufacturing equipment and an aircraft had, as detailed below,
declined in value to the extent that the  carrying  values had become  impaired.
The fair value of the assets was  determined  based on the sum of the discounted
estimated  future cash flows of the assets.  Charges to operations were recorded
for the  declines  in  value of  those  assets  in the  amounts  of  $1,086,312,
$5,679,271,  and  $2,612,500  for the years ended  December 31, 2004,  2003, and
2002, respectively.

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

Impairment losses are recorded as an addition to accumulated depreciation of the
impaired assets.  Depreciation expense and impairment losses on property subject
to operating  leases and assets held for sale or lease  consist of the following
for the years ended December 31:

                               2004            2003             2002
 Depreciation expense        $14,770,807     $ 20,337,442     $ 22,784,103
 Impairment losses             1,086,312        5,679,271        2,612,500
                          --------------- ---------------- ----------------
                             $15,857,119     $ 26,016,713     $ 25,396,603
                          =============== ================ ================

Due to continued  declines in markets for certain  types of assets,  during 2003
and 2004, management determined that the values of certain assets were impaired.
The Company  recorded  impairment  losses as follows for each of the years ended
December 31:

                                         2004            2003
     Aircraft                          $ 1,050,000      $ 4,401,397
     Office automation                      36,312                -
     Locomotives                                 -          760,000
     Rail car auto racks                         -          268,373
     Manufacturing equipment                     -          249,501
                                    --------------- ----------------
                                       $ 1,086,312      $ 5,679,271
                                    =============== ================

All of the property on leases was acquired in 2002, 2001, 2000 and 1999.

Operating leases:

Property on operating leases consists of the following:

<TABLE>
<CAPTION>
                                                                  Reclassi-
                               December 31,    Depreciation     fications or      December 31,
                                   2003           Expense       Dispositions          2004
<S>                            <C>             <C>              <C>               <C>
Transportation, rail             $34,295,402              $ -   $     10,852,772  $   45,148,174
Containers                        21,165,000                -                -        21,165,000
Aircraft                          15,448,037                -                -        15,448,037
Natural gas compressors           13,677,449                -         (136,146)       13,541,303
Manufacturing                     41,079,479                -      (36,479,656)        4,599,823
Transportation, other             23,302,778                -      (20,194,790)        3,107,988
Materials handling                 7,313,238                -       (6,222,959)        1,090,279
Other                             10,991,981                -       (5,678,927)        5,313,054
                              --------------- ---------------- ----------------  ----------------
                                 167,273,364                -      (57,859,706)      109,413,658
Less accumulated depreciation    (80,161,024)     (14,770,807)      36,610,119       (58,321,712)
                              --------------- ---------------- ----------------  ----------------
                               $  87,112,340   $   (14,770,807) $   (21,249,587)  $   51,091,946
                              =============== ================ ================  ================
</TABLE>


                                       24
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VIII, LLC

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2004


3. Investments in equipment and leases (continued):

Direct financing leases:

As of December 31, 2004 and 2003, investment in direct financing leases consists
of rail cars,  anhydrous  ammonia storage tanks,  office  automation  equipment,
point of sale  equipment,  refrigerated  trailers  and  laundry  equipment.  The
following lists the components of the Company's  investment in direct  financing
leases as of December 31, 2004 and 2003:


<TABLE>
<CAPTION>
                                                                  2004             2003
<S>                                                           <C>            <C>
Total minimum lease payments receivable                       $    2,399,904 $     10,461,599
Estimated residual values of leased equipment (unguaranteed)         986,704        4,496,939
                                                             ---------------- ----------------
Investment in direct financing leases                              3,386,608       14,958,538
Less unearned income                                                (294,537)      (3,460,737)
                                                             ---------------- ----------------
Net investment in direct financing leases                     $    3,092,071 $     11,497,801
                                                             ================ ================
</TABLE>

At December 31, 2004, the aggregate amounts of future minimum lease payments are
as follows:

                                  Direct
 Year ending    Operating        Financing
December 31,      Leases          Leases            Total
        2005   $   6,868,038  $     1,224,256 $      8,092,294
        2006       2,595,791          846,888        3,442,679
        2007       1,984,626          279,959        2,264,585
        2008       1,165,740           48,801        1,214,541
        2009         997,480                -          997,480
  Thereafter         651,810                -          651,810
              --------------- ---------------- ----------------
               $  14,263,485   $    2,399,904 $     16,663,389
              =============== ================ ================


4. Non-recourse debt:

At December 31, 2004,  non-recourse  debt consists of notes payable to financial
institutions.  The notes are due in varying quarterly and semi-annual  payments.
Interest on the notes is at fixed rates  ranging from 4.96% to 6.85%.  The notes
are secured by assignments of lease payments and pledges of assets.  At December
31, 2004,  the carrying value of the pledged  assets is  $10,630,160.  The notes
mature from 2004 through 2007.

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

          Year ending
          December 31,    Principal        Interest          Total
                  2005     $ 4,715,234       $ 180,430      $ 4,895,664
                  2006         646,128          57,792          703,920
                  2007         678,584          25,337          703,921
                        --------------- --------------- ----------------
                           $ 6,039,946       $ 263,559      $ 6,303,505
                        =============== =============== ================


                                       25
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VIII, LLC

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2004


5. Other long-term debt:

In 1999, the Company entered into a $70 million receivables funding program (the
Program) (which was  subsequently  increased to $125 million) with a receivables
financing  company that issues  commercial paper rated A1 by Standard and Poor's
and  P1 by  Moody's  Investor  Services.  Under  the  Program,  the  receivables
financing  company  receives  a  general  lien  against  all  of  the  otherwise
unencumbered  assets of the Company.  The Program  provides  for  borrowing at a
variable  interest rate (2.860% at December 31,  2004),  based on an index of A1
commercial  paper.  The Program  expired as to new borrowings in April 2002. The
Company had $13,192,000 outstanding under this program as of December 31, 2004.

The Program requires AFS on behalf of the Company to enter into various interest
rate swaps with a financial  institution  (also rated A1/P1) to manage  interest
rate exposure  associated  with variable rate  obligations  under the Program by
effectively  converting the variable rate debt to fixed rates. The interest rate
swaps were  designated  as cash flow hedges of the interest  payment on the long
term debt. As of December 31, 2004,  the Company  receives or pays interest on a
notional principal of $25,972,400, based on the difference between nominal rates
ranging from 4.35% to 7.72% and the variable  rate under the Program.  No actual
borrowing or lending is involved.  The termination of the swaps were to coincide
with the  maturity  of the debt.  The  differential  to be paid or  received  is
accrued as interest rates change and is recognized currently as an adjustment to
interest expense related to the debt.

During the year,  Accumulated Other  Comprehensive  Income ("AOCI") decreased by
approximately  $2,417,000 of which  approximately  $1,772,000 was related to the
decrease in the fair value of the interest rate swap and approximately  $645,000
was related to the  reclassification  of AOCI to earnings  (included in interest
expense) due to hedge  ineffectiveness  and upon the  discontinuance of the cash
flow  hedges   because  of  debt   prepayments.   The  Company   redesignated  a
proportionate  share of the interest  rate swaps as cash flow hedges in relation
to the remaining  outstanding  long-term  debt.  The change in fair value of the
portion of interest  rate swaps not  designated  as hedges will be recognized in
earnings.

Borrowings under the Program are as follows:

<TABLE>
<CAPTION>
                                                   Notional           Swap          Payment Rate
                   Original        Balance          Balance           Value          on Interest
                    Amount       December 31,    December 31,     December 31,          Swap
 Date Borrowed     Borrowed          2004            2004             2004            Agreement
<S>  <C>          <C>                <C>            <C>                <C>              <C>
  11/11/1999      $ 20,000,000       $ 902,000      $ 1,910,401        $ (50,511)       6.84%
  12/21/1999        20,000,000       7,078,000       10,716,966         (841,499)       7.41%
  12/24/1999        25,000,000         257,000        1,415,061          (57,390)       7.44%
   4/17/2000         6,500,000       1,236,000        1,591,400          (61,361)       7.45%
   4/28/2000         1,900,000          47,000          199,236           (8,633)       7.72%
   8/3/2000         19,000,000         682,000        5,930,389         (314,143)       7.50%
  10/31/2000         7,500,000       1,002,000        2,044,528          (88,478)       7.13%
   1/29/2001         8,000,000               -          525,229           (1,331)       5.91%
   6/1/2001          2,000,000               -                -                -        5.04%
   9/1/2001          9,000,000         909,000        1,639,190          (12,108)       4.35%
   1/31/2002         3,900,000       1,079,000                -                -          *
                --------------- --------------- ---------------- ----------------
                 $ 122,800,000     $13,192,000     $ 25,972,400     $ (1,435,454)
                =============== =============== ================ ================
</TABLE>


* Under the terms of the Program,  no interest rate swap  agreement was required
for this borrowing.


                                       26
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VIII, LLC

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2004


5. Other long-term debt (continued):

The long-term  debt  borrowings  mature from 2004 through 2007.  Future  minimum
principal payments of long-term debt and annual swap notional  reductions are as
follows:

<TABLE>
<CAPTION>
                    Debt            Debt                                             Rates on
Year ending      Principal       Principal                                         Interest Swap
December 31,      Swapped       Not Swapped       Interest           Total          Agreements*
<S>               <C>               <C>              <C>            <C>             <C>
         2005     $ 5,700,000       $ 973,000        $ 724,594      $ 7,397,594     6.878%-7.172%
         2006       3,362,000          60,000          377,593        3,799,593     7.338%-7.348%
         2007       3,051,000          46,000           18,932        3,115,932     7.336%-7.346%
               --------------- --------------- ---------------- ----------------
                 $ 12,113,000     $ 1,079,000      $ 1,121,119     $ 14,313,119
               =============== =============== ================ ================
</TABLE>

* Represents the range of monthly weighted average fixed interest rates paid for
amounts  maturing in the particular year. The  receive-variable  rate portion of
the swap represents commercial paper rates (2.860% at December 31, 2004).

In 2004,  2003 and  2002,  the net  effect  of the  interest  rate  swaps was to
increase   interest   expense  by  $1,801,788,   $2,780,673,   and   $1,818,380,
respectively.

6. Related party transactions:

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

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

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

Cost  reimbursements  to Managing  Member are based on costs  incurred by AFS in
performing  administrative  services for the Company that are  allocated to each
Company  that AFS  manages  based on certain  criteria  such as  existing or new
leases,  number of investors or equity  depending on the type of cost incurred..
AFS  believes  that the  costs  reimbursed  are the  lower of (i)  actual  costs
incurred  on behalf of the  Company  or (ii) the  amount  the  Company  would be
required to pay independent  parties for comparable  administrative  services in
the same geographic location.



                                       27
<PAGE>

                     ATEL CAPITAL EQUIPMENT FUND VIII, LLC

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2004


6. Related party transactions (continued):

AFS and/or affiliates earned fees,  commissions and reimbursements,  pursuant to
the Limited Liability Company Agreement as follows:

<TABLE>
<CAPTION>
                                              2004             2003              2002
<S>                                          <C>              <C>               <C>
Asset management fees to Managing Member     $ 1,057,355      $ 1,517,259       $ 1,481,576
Costs reimbursements to Managing Member          752,161          820,571           869,979
                                         ---------------- ----------------  ----------------
                                             $ 1,809,516      $ 2,337,830       $ 2,351,555
                                         ================ ================  ================
</TABLE>

The Managing  Member makes  certain  payments to third  parties on behalf of the
Company for  convenience  purposes.  During the years ended  December  31, 2004,
2003,  and 2002, the Managing  Member made such payments of $455,634,  $341,269,
and $193,851, respectively.

In 2003 it came to the Company's  attention that an affiliated company had under
billed the  Company  in a prior  year for  interest  costs  associated  with the
financing  of an asset  acquired on its behalf.  During the three  months  ended
March 31, 2003, the Company recorded  additional interest expense of $742,000 to
correct the  accounting for the  transaction.  The Company does not believe that
this amount is  material  to the periods in which it should have been  recorded,
nor that it is material to the Company's  operating  results for the year ending
December 31, 2003. The effect of the  additional  interest  expense  recorded in
2003 was to increase the loss in 2003 by $0.05 per Unit.

The Limited  Partnership  Agreement  places an annual and a cumulative limit for
cost  reimbursements  to AFS.  The  cumulative  limit  increases  annually.  Any
reimbursable  costs  incurred by AFS during the year exceeding the annual and/or
cumulative  limits  cannot be  reimbursed  in the  current  year,  though may be
reimbursable  in  future  years.  As of  December  31,  2004,  AFS had  incurred
approximately  $1,357,000  of costs that are expected to be reimbursed to AFS by
the Partnership in 2005 and 2006.

7. Members' capital:

As of December  31,  2004,  13,570,188  Units were issued and  outstanding.  The
Company is authorized  to issue up to 15,000,000  Units in addition to the Units
issued to the initial members (50 Units).

As defined in the Company's Operating  Agreement,  the Company's Net Income, Net
Losses,  and  Distributions  are to be allocated  92.5% to the Other Members and
7.5% to AFS. In accordance with the terms of the Operating Agreement, additional
allocations  of income  were made to AFS in 2004,  2003 and  2002.  The  amounts
allocated were determined so as to bring AFS's ending capital account balance to
zero at the end of each year.




                                       28
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VIII, LLC

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2004


8. Concentration of credit risk and major customers:

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

As of December 31,  2004,  2003 and 2002 there were  concentrations  (defined as
greater than 10%) of  equipment  leased to lessees in certain  industries  (as a
percentage of total equipment cost) as follows:

                                                   2004            2003

               Transportation, rail                38%              20%
               Transportation, containers          17%              11%
               Transportation, air                 12%               *
               Natural gas                         11%               *
               Manufacturing, other                10%              18%
               Transportation, other                *               13%

               * Less than 10%

During 2004,  three  customers  comprised  11%,  10%,  and 10% of the  Company's
revenues from leases.  During 2003,  two customers  comprised 13% and 10% of the
Company's  revenues.  During 2002,  one customer  comprised 10% of the Company's
revenues from leases.


9. Line of credit:

The Company  participates  with AFS and certain of its affiliates in a financing
arrangement  (comprised  of a term loan to AFS, an  acquisition  facility  and a
warehouse facility) with a group of financial institutions that includes certain
financial  covenants.  The financial  arrangement is $75,000,000  and expires in
June 2006. The  availability  of borrowings  available to the Company under this
financing  arrangement  is reduced by the amount AFS has  outstanding  as a term
loan. As of December 31, 2004 borrowings under the facility were as follows:

<TABLE>
<CAPTION>
<S>                                                                              <C>
Total amount available under the financing arrangement                           $   75,000,000
Term loan to AFS as of December 31, 2004                                             (2,027,636)
                                                                                ----------------
Total available under the acquisition and warehouse facilities                        72,972,364

Amount borrowed by the Company under the acquisition facility - Amounts borrowed
by affiliated partnerships and limited liability companies under the
     acquisition facility                                                           (30,500,000)
                                                                                ----------------
Total remaining available under the acquisition and warehouse facilities         $   42,472,364
                                                                                ================
</TABLE>

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
Companies and limited liability companies, the Company and AFS.

The Company borrowed $19,500,000 and $12,400,000 under the line of credit during
2003 and 2002, respectively. In 2004, there were no borrowings under the line of
credit.  Repayments  on the line of  credit  were  $9,500,000,  $20,600,000  and
$4,300,000  during 2004, 2003 and 2002,  respectively.  At December 31, 2004, no
amount remained  outstanding.  Interest on the line of credit is based on either
the thirty day LIBOR rate or the bank's prime rate.



                                       29
<PAGE>

                     ATEL CAPITAL EQUIPMENT FUND VIII, LLC

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2004


9. Line of credit (continued):

The credit agreement  includes certain  financial  covenants  applicable to each
borrower.  The Company was in  compliance  with its covenants as of December 31,
2004.


10. Fair value of financial instruments:

The  recorded  amounts  of the  Company's  cash and cash  equivalents,  accounts
receivable,  accounts payable and accruals at December 31, 2004 approximate fair
value because of the liquidity and short-term maturity of these instruments.

Non-recourse debt:

The fair value of the Company's  non-recourse debt is estimated using discounted
cash flow analyses,  based on the Company's current incremental  borrowing rates
for similar types of borrowing  arrangements.  The  estimated  fair value of the
Company's non-recourse debt at December 31, 2004 is $5,924,305.

Other long-term debt:

The carrying value of the Company's other long-term debt  approximates  its fair
value at December 31, 2004 as  borrowings  are at a variable  interest rate that
adjusts to current market interest rates.

Line of credit:

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

Interest rate swaps:

The fair  value of  interest  rate swaps is  estimated  by  management  based on
independent  valuations or discounting the fixed cash flows paid under each swap
using the rate at which  the  Company  could  enter  into new  swaps of  similar
maturities.  Swaps are  recorded on the balance  sheet at fair value at December
31, 2004.


11. Comprehensive loss:

For the years ended  December 31, 2004,  2003 and in 2002,  other  comprehensive
income (loss) consisted of the following:

<TABLE>
<CAPTION>
                                                                              2004             2003              2002
<S>                                                                          <C>             <C>               <C>
Net income (loss)                                                            $ 5,222,252     $ (7,521,261)     $ (2,805,544)
Other comprehensive income (loss):
     Change in value of interest rate swap contracts during the year           1,772,141        2,173,747          (680,720)
     Reclassification adjustment for portion of swap liability
        charged to net loss                                                      645,068           64,451                 -
                                                                         ---------------- ----------------  ----------------
Comprehensive income (loss)                                                  $ 7,639,461     $ (5,283,063)     $ (3,486,264)
                                                                         ================ ================  ================
</TABLE>

There were no other sources of comprehensive net loss.


                                       30
<PAGE>

                      ATEL CAPITAL EQUIPMENT FUND VIII, LLC

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2004


12. Selected quarterly data (unaudited):

<TABLE>
<CAPTION>
                                                           March 31,        June 30,       September 30,     December 31,
Quarter ended                                                 2003            2003             2003              2003

<S>                                                         <C>              <C>              <C>               <C>
Total revenues                                              $ 7,725,324      $ 7,610,699      $ 6,737,293       $ 6,475,955
Net income (loss)                                          $ (3,379,701)       $ 345,679     $ (3,372,590)     $ (1,114,649)
Net income (loss) per Limited Liability Company unit            $ (0.27)          $ 0.01          $ (0.27)          $ (0.10)
</TABLE>

<TABLE>
<CAPTION>
                                                           March 31,        June 30,       September 30,     December 31,
Quarter ended                                                 2004            2004             2004              2004

<S>                                                         <C>              <C>              <C>               <C>
Total revenues                                              $ 6,750,433      $ 7,224,091      $ 7,771,649       $ 6,256,195
Net income (loss)                                            $ (418,943)     $ 1,520,704      $ 1,125,926       $ 2,994,565
Net income (loss) per Limited Liability Company unit            $ (0.05)          $ 0.09           $ 0.06            $ 0.21
</TABLE>


13. Commitments:

At December 31, 2004, the Company had no commitments to purchase lease assets.


14. Reserves, impairment losses and provisions for doubtful accounts:

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

                                                        Allowance for
                                                          doubtful
                                        Impairments       accounts
        Balance December 31, 2001            $      -      $    41,365
        Provision                           2,612,500          475,000
        Charge offs                        (2,612,500)               -
                                       --------------- ----------------
        Balance December 31, 2002                   -          516,365
        Provision (recoveries)              5,679,271         (180,000)
        Charge offs                        (5,679,271)        (111,250)
                                       --------------- ----------------
        Balance December 31, 2003                   -          225,115
        Provision (recoveries)              1,086,312         (173,000)
        Charge offs                        (1,086,312)               -
                                       --------------- ----------------
        Balance December 31, 2004         $         -         $ 52,115
                                       =============== ================

15. Guarantees:

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



                                       31
<PAGE>

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

None.


Item 9A.  CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Under  the  supervision  and  with the  participation  of our  management  (ATEL
Financial  Services,  LLC as Managing  Member of the  registrant,  including the
chief  executive  officer and chief  financial  officer),  an  evaluation of the
effectiveness of the design and operation of the Company's  disclosure  controls
and procedures [as defined in Rules  240.13a-14(c) under the Securities Exchange
Act of 1934] was  performed  as of a date  within  ninety days before the filing
date of this annual  report.  Based upon this  evaluation,  the chief  executive
officer and the chief  financial  officer  concluded  that, as of the evaluation
date, our disclosure  controls and procedures were effective for the purposes of
recording, processing, summarizing, and timely reporting information required to
be disclosed by us in the reports that we file under the Securities Exchange Act
of 1934;  and that such  information  is  accumulated  and  communicated  to our
management in order to allow timely decisions regarding required disclosure.

Changes in internal controls

There have been no  significant  changes in our  internal  controls  or in other
factors that could  significantly  affect our disclosure controls and procedures
subsequent to the evaluation date nor were there any significant deficiencies or
material weaknesses in our internal controls.


                                    PART III

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS

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

All of the  outstanding  capital  stock  of ATEL  Financial  Services  LLC  (the
Managing Member) is held by ATEL Capital Group ("ACG"), a holding company formed
to control ATEL and affiliated  companies.  The outstanding voting capital stock
of ATEL Capital Group is owned 100% by Dean Cash.

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

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

Dean L. Cash              Chairman of the Board of Directors of ACG, AFS, ALC,
                                AEC, AIS and ASC; President and Chief Executive
                                Officer of ACG, AFS and AEC

Paritosh K. Choksi        Director, Executive Vice President, Chief Operating
                                Officer and Chief Financial Officer of ACG, AFS,
                                ALC, AEC and AIS

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

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

Dean L. Cash,  age 54, joined ATEL as director of marketing in 1980 and has been
a vice president since 1981,  executive vice president since 1983 and a director
since 1984.  He has been  President  and CEO since April 2001.  Prior to joining
ATEL,  Mr.  Cash was a  senior  marketing  representative  for  Martin  Marietta
Corporation, data systems division, from 1979 to 1980. From 1977 to 1979, he was
employed  by  General  Electric  Corporation,   where  he  was  an  applications
specialist in the medical systems division and a marketing representative in the
information  services division.  Mr. Cash was a systems engineer with Electronic
Data Systems from 1975 to 1977, and was involved in  maintaining  and developing
software  for  commercial  applications.  Mr.  Cash  received  a B.S.  degree in
psychology and mathematics in 1972 and an M.B.A.  degree with a concentration in
finance in 1975 from Florida State  University.  Mr. Cash is an arbitrator  with
the American Arbitration Association.



                                       32
<PAGE>

Paritosh K.  Choksi,  age 51,  joined  ATEL in 1999 as a  director,  senior vice
president  and its  chief  financial  officer.  He  became  its  executive  vice
president  and COO in April 2001.  Prior to joining  ATEL,  Mr. Choksi was chief
financial officer at Wink  Communications,  Inc. from 1997 to 1999. From 1977 to
1997, Mr. Choksi was with Phoenix American  Incorporated,  a financial  services
and management  company,  where he held various positions during his tenure, and
was senior vice president, chief financial officer and director when he left the
company.  Mr.  Choksi was involved in all  corporate  matters at Phoenix and was
responsible  for Phoenix's  capital  market needs.  He also served on the credit
committee  overseeing  all  corporate  investments,  including its venture lease
portfolio.  Mr. Choksi was a part of the executive  management team which caused
Phoenix's  portfolio to increase  from $50 million in assets to over $2 billion.
Mr. Choksi  received a bachelor of technology  degree in mechanical  engineering
from the Indian Institute of Technology,  Bombay; and an M.B.A.  degree from the
University of California, Berkeley.

Donald E. Carpenter, age 56, joined ATEL in 1986 as controller. Prior to joining
ATEL, Mr. Carpenter was an audit supervisor with Laventhol & Horwath,  certified
public accountants in San Francisco, California, from 1983 to 1986. From 1979 to
1983,  Mr.  Carpenter  was an  audit  senior  with  Deloitte,  Haskins  & Sells,
certified public accountants,  in San Jose,  California.  From 1971 to 1975, Mr.
Carpenter was a Supply Corp officer in the U. S. Navy. Mr. Carpenter  received a
B.S. degree in mathematics  (magna cum laude) from California State  University,
Fresno in 1971 and completed a second major in accounting in 1978. Mr. Carpenter
has been a California certified public accountant since 1981.

Vasco H. Morais, age 46, joined ATEL in 1989 as general counsel to provide legal
support in the  drafting  and  reviewing  of lease  documentation,  advising  on
general corporate law matters, and assisting on securities law issues. From 1986
to 1989,  Mr.  Morais was  employed  by the  BankAmeriLease  Companies,  Bank of
America's  equipment leasing  subsidiaries,  providing in-house legal support on
the  documentation  of  tax-oriented  and non-tax  oriented direct and leveraged
lease transactions, vendor leasing programs and general corporate matters. Prior
to the BankAmeriLease  Companies,  Mr. Morais was with the Consolidated  Capital
Companies in the corporate and securities legal department  involved in drafting
and reviewing  contracts,  advising on corporate law matters and  securities law
issues.  Mr.  Morais  received  a B.A.  degree  in 1982 from the  University  of
California in Berkeley,  a J.D.  degree in 1986 from Golden Gate  University Law
School and an M.B.A.  (Finance) in 1997 from Golden Gate University.  Mr. Morais
has been an active member of the State Bar of California since 1986.

Audit Committee

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

Code of Ethics

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


Item 11.  EXECUTIVE COMPENSATION

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

Set forth hereinafter is a description of the nature of remuneration paid and to
be paid to AFS and its Affiliates. The amount of such remuneration paid in 2004,
2003 and 2001 is set forth in Item 8 of this report under the caption "Financial
Statements and Supplementary Data - Notes to the Financial  Statements - Related
party transactions," at Note 6 thereof, which information is hereby incorporated
by reference.

Asset Management Fee

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



                                       33
<PAGE>

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

Asset Management Fee Limit:

The Asset Management Fee is subject to the Asset Management Fee Limit. The Asset
Management  Fee Limit is  calculated  each year  during  the  Company's  term by
calculating  the  total  fees  that  would  be  paid  to AFS if AFS  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 AFS's Carried  Interest,  as described below. To the extent that the amount
paid to AFS 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 is 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 AFS 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 AFS upon liquidation.

Alternative Fee Schedule:

For purposes of the Asset  Management  Fee Limit,  the Company 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 AFS 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 Company from such re-lease.

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

See Note 6 to the financial  statements  included in Part II, Item 8 for amounts
paid.

Managing Member's Interest in Operating Proceeds

As defined in the Limited Liability Company Operating  Agreement,  the Company's
Net Income,  Net Losses,  and  Distributions  are to be  allocated  92.5% to the
Members  and  7.5% to AFS.  In  accordance  with the  terms of the of  Operating
Agreement,  additional  allocations of income were made to AFS in 2004, 2003 and
2002.  The amounts  allocated  were  determined  to bring AFS's  ending  capital
account  balance  to  zero at the end of each  year.  See  financial  statements
included in Item 8, Part I of this report for amounts  allocated to AFS in 2004,
2003 and 2002.




                                       34
<PAGE>

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
            MANAGEMENT

Security Ownership of Certain Beneficial Owners

At December 31, 2004, no investor is known to hold  beneficially more than 5% of
the issued and outstanding Units.

Security Ownership of Management

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

<TABLE>
<CAPTION>
(1)                                           (2)                              (3)                                (4)
                                              Name and Address of              Amount and Nature of             Percent
     Title of Class                             Beneficial Owner               Beneficial Ownership            of Class

<S>                                      <C>                             <C>                                        <C>
Limited Liability Company Units            Dean Cash                        Initial Limited Liability               0.0002%
                                         600 California Street, 6th Floor         Company Units
                                            San Francisco, CA 94108      25 Units ($250)
                                                                                 (owned by wife)
</TABLE>

Changes in Control

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

AFS may at any time  call a  meeting  of the  Members  or a vote of the  Members
without a meeting, on matters on which they are entitled to vote, and shall call
such  meeting  or for vote  without a  meeting  following  receipt  of a written
request  therefore  of  Limited  Partners  holding  10% or  more  of  the  total
outstanding Limited Liability Company Units.

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

Item 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

During the most recent two years, the Company incurred audit, audit related, tax
and other fees with its principal auditors as follows:

                                           2004            2003
       Audit fees                      $     177,899   $       70,025
       Audit related fees                          -                -
       Tax fees                               23,219           33,700
       Other                                       -                -
                                      --------------- ----------------
                                           $ 201,118        $ 103,725
                                      =============== ================

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




                                       35
<PAGE>

                                     PART IV

Item 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
               ON FORM 8-K

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

          Report of Independent Registered Public Accounting Firm

          Balance Sheets at December 31, 2004 and 2003

          Statements of Operations for the years ended  December 31, 2004,  2003
          and 2002

          Statements of Changes in Members' Capital for the years ended December
          31, 2004, 2003 and 2002

          Statements of Cash Flows for the years ended  December 31, 2004,  2003
          and 2002

Notes to Financial Statements

  2.     Financial Statement Schedules

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

  (b)    Reports on Form 8-K for the fourth quarter of 2004 None

  (c)Exhibits

          (3) and (4)  Agreement  of  Limited  Liability  Company,  included  as
          Exhibit B to Prospectus,  is  incorporated  herein by reference to the
          report on Form 10K for the period ended December 31, 1998 (File Number
          333-62477) (Exhibit 28.1)

          (14.1) Code of Ethics

          (31.1)  Certification  of Paritosh K. Choksi

          (31.2) Certification of Dean L. Cash

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

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



                                       36
<PAGE>

                                   SIGNATURES


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



Date:    3/29/2005

                      ATEL Capital Equipment Fund VIII, LLC
                                  (Registrant)


       By: ATEL Financial Services LLC,
           Managing Member of Registrant



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





       By:  /s/ Paritosh K. Choksi
            ------------------------------------------------
            Paritosh K. Choksi
            Executive Vice President of ATEL Financial Services
            LLC (Managing Member)








                                       37
<PAGE>

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


        SIGNATURE                        CAPACITIES                      DATE



      /s/ Dean Cash       President, Chairman and Chief Executive      3/29/2005
-------------------------  Officer of ATEL Financial Services LLC
        Dean Cash



 /s/ Paritosh K. Choksi   Executive Vice President and director of     3/29/2005
-------------------------  ATEL Financial Services LLC, Principal
   Paritosh K. Choksi      financial officer of registrant; principal
                           financial officer and director of ATEL
                           Financial Services LLC



 /s/ Donald E. Carpenter  Principal accounting officer of registrant;  3/29/2005
-------------------------  principal accounting officer of ATEL
   Donald E. Carpenter     Financial Services LLC







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



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<PAGE>