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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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Form 10-KSB



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

For the year ended December 31, 2006



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

For the transition period from              to

Commission File number 000-33103



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ATEL Capital Equipment Fund
VIII, LLC

(Exact name of registrant as specified in its charter)



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

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

(Address of principal executive offices)

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

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

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



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

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

Check if
there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.    x

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

Large accelerated filer ̈Accelerated filer ̈Non-accelerated
filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).    Yes ̈No  x State the
issuers revenues for the most recent fiscal year: $14,581,271.

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

The number of Limited Liability Company Units outstanding as of June 30, 2007 was 13,560,188.

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.

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



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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 on July 31, 1998. The Company was formed for
the purpose of acquiring equipment to engage in equipment leasing, lending and sales activities. The Managing Member of the Company is ATEL Financial Services, LLC (AFS), a California limited liability company. The Company may continue
until December 31, 2019. 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 asset of the Company.

The Company conducted a public offering of 15,000,000 Limited Liability Company Units (Units), at a price of $10 per Unit. On January 13, 1999,
subscriptions for the minimum number of Units (120,000, representing $1,200,000) had been received (excluding subscriptions from Pennsylvania investors) and AFS requested that the subscriptions be released to the Company. On that date the Company
commenced operations in its primary business (leasing and lending activities). Total gross contributions in the amount of $135,701,880 (13,570,188 units) were received as of November 30, 2000, $500 of which represented the Initial Members
capital investment, $100 of which represented AFS capital investment and $135,701,380 of which represented continuing interest of Other Members. The offering was terminated on November 30, 2000.

As of December 31, 2006, 13,560,188 Units were issued and outstanding.

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), as amended.

The Company has incurred debt to finance the purchase of a portion of its equipment portfolio. The amount of borrowings in connection with any equipment acquisition
transaction will be determined by, among other things, the credit of the leases, the terms of the lease, the nature of the equipment and the condition of the money market. There is no limit on the amount of debt that may be incurred in connection
with any single acquisition of equipment. However the Company may not incur aggregate outstanding indebtedness in excess of 50% of the total cost of all equipment as of the date of the final commitment of the offering proceeds and, thereafter, as of
the date of any subsequent indebtedness is incurred. The Company has borrowed amounts within such maximum debt level in order to fund a portion of its equipment acquisitions, although there can be no assurance that such financing will continue to be
available to the Company in the future. As of December 31, 2006, all such equipment acquisition debt had been repaid.

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.



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

From inception through December 31, 2006, the Company had purchased equipment with a total acquisition price of $247,335,253.

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 average
credit rating by Moodys Investor Service, Inc. of Baa or better, or the credit equivalent as determined by AFS, with the average rating weighted to account for the original equipment cost for each item leased or (ii) are established
hospitals with histories of profitability or municipalities. The 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 average credit rating of Baa or better or to such hospitals or municipalities, as
described in (ii) above.

During 2006 and 2005, certain lessees generated significant portions of the Companys operating lease revenues as
follows:



|                             |  |                   |  |                                    |   |  |      |  
|---------------------------- |  | ----------------- |  | ---------------------------------- | - |  | ---- | -
|                             |  |                   |  | Percentage of Total Lease Revenues |  
|Lessee                       |  | Type of Equipment |  | 2006                               |   |  | 2005 |  
|Tal International Container  |  | Railcars          |  | 34                                 | % |  | 18   | %
|Bartlett Grain Company, L.P. |  | Railcars          |  | 14                                 | % |  | *    |  
|Sea Mar Management LLC       |  | Marine Vessel     |  | 11                                 | % |  | *    |  
|* Less than 10%              |  |                   |  |                                    |   |  |      |  

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

The equipment leasing industry is highly competitive. Equipment manufacturers, corporations, partnerships and others offer users an alternative to the purchase of most
types of equipment with payment terms that vary widely depending on the lease term and type of equipment. The ability of the Company to keep the equipment leased and/or operating and the terms of the reinvestments, leases and dispositions of
equipment depends on various factors (many of which are not in the control of AFS or the Company), such as raw material costs to manufacture equipment as well 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. AFS employees and affiliates
provide the services the Company requires to effectively operate. The cost of these services is reimbursed by the Company to AFS and affiliates per the Operating Agreement.



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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, 2006 and the industries to which the assets have been leased:



|                                  |  |                                           |             |                                  |        |  
|--------------------------------- |  | ----------------------------------------- | ----------- | -------------------------------- | ------ | -
|Asset Types                       |  | Purchase Price Excluding Acquisition Fees |             | Percentage of Total Acquisitions |       
|Transportation, rail              |  | $                                         | 60,311,038  |                                  | 24.38  | %
|Manufacturing                     |  |                                           | 44,048,583  |                                  | 17.81  | %
|Aircraft                          |  |                                           | 38,535,439  |                                  | 15.58  | %
|Transportation, other             |  |                                           | 47,259,370  |                                  | 19.11  | %
|Gas compressors                   |  |                                           | 13,848,465  |                                  | 5.60   | %
|Material handling                 |  |                                           | 11,018,547  |                                  | 4.45   | %
|Point of sale / office automation |  |                                           | 8,677,566   |                                  | 3.51   | %
|Storage tanks                     |  |                                           | 6,712,090   |                                  | 2.71   | %
|Marine vessels                    |  |                                           | 4,737,556   |                                  | 1.92   | %
|Other                             |  |                                           | 12,186,599  |                                  | 4.93   | %
|                                  |  |                                           |             |                                  |        |  
|                                  |  | $                                         | 247,335,253 |                                  | 100.00 | %
|                                  |  |                                           |             |                                  |        |  



|                           |  |                                           |             |                                  |        |  
|-------------------------- |  | ----------------------------------------- | ----------- | -------------------------------- | ------ | -
|Industry of Lessee         |  | Purchase Price Excluding Acquisition Fees |             | Percentage of Total Acquisitions |       
|Transportation, rail       |  | $                                         | 60,311,038  |                                  | 24.38  | %
|Transportation, air        |  |                                           | 38,535,439  |                                  | 15.58  | %
|Manufacturing, other       |  |                                           | 34,889,583  |                                  | 14.11  | %
|Transportation, other      |  |                                           | 27,532,136  |                                  | 11.14  | %
|Transportation, containers |  |                                           | 21,228,750  |                                  | 8.58   | %
|Manufacturing, electronics |  |                                           | 20,901,071  |                                  | 8.45   | %
|Retail                     |  |                                           | 18,056,010  |                                  | 7.30   | %
|Natural gas                |  |                                           | 13,848,465  |                                  | 5.60   | %
|Other                      |  |                                           | 12,032,761  |                                  | 4.86   | %
|                           |  |                                           |             |                                  |        |  
|                           |  | $                                         | 247,335,253 |                                  | 100.00 | %
|                           |  |                                           |             |                                  |        |  

Through December 31, 2006, the Company has disposed of certain leased assets as set forth below:



|                                  |  |                                                    |             |            |   |                                |  |   |            
|--------------------------------- |  | -------------------------------------------------- | ----------- | ---------- | - | ------------------------------ |  | - | -----------
|Asset Types                       |  | Original Equipment Cost Excluding Acquisition Fees |             | Sale Price |   | Excess of Rents Over Expense
*
|Manufacturing                     |  | $                                                  | 42,495,961  |            | $ | 19,495,181                     |  | $ | 43,611,215 
|Aircraft                          |  |                                                    | 38,535,439  |            |   | 8,666,648                      |  |   | 16,856,254 
|Transportation, other             |  |                                                    | 20,529,738  |            |   | 7,577,611                      |  |   | 18,462,655 
|Transportation, rail              |  |                                                    | 36,290,692  |            |   | 26,967,981                     |  |   | 14,857,734 
|Point of sale / office automation |  |                                                    | 12,161,640  |            |   | 2,392,541                      |  |   | 13,086,353 
|Photo processing equipment        |  |                                                    | 10,781,578  |            |   | 6,555,101                      |  |   | 9,617,910  
|Material handling                 |  |                                                    | 6,844,832   |            |   | 2,015,654                      |  |   | 6,559,021  
|Storage tanks                     |  |                                                    | 6,818,340   |            |   | 6,824,797                      |  |   | 1,123,326  
|Other                             |  |                                                    | 9,282,515   |            |   | 3,163,070                      |  |   | 10,947,102 
|                                  |  |                                                    |             |            |   |                                |  |   |            
|                                  |  | $                                                  | 183,740,735 |            | $ | 83,658,584                     |  | $ | 135,121,570
|                                  |  |                                                    |             |            |   |                                |  |   |            

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

Proceeds from sales of lease assets are not expected to be consistent from one period to another. The Company is a finite life equipment leasing fund, which will acquire leasing transactions during the period ending
six years after completion of its public offering. On the termination of leases, assets may be re-leased or sold. Sales of assets are not scheduled and are created by opportunities within the marketplace. The Company will seek to acquire and lease a
wide variety of assets and to enter into leases on a variety of terms. Some assets will be expected to have little or no value for re-lease or sale upon termination of the initial leases, and the anticipated residual values are a key factor in
pricing and terms structured for each lease. The Companys goal is to seek maximum return on its leased assets and will determine when and under what terms to dispose of such assets during the course of its term.



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For further information regarding the Companys equipment lease portfolio as of December 31, 2006, see footnote
5 to the financial statements, Investments in equipment and leases, net, as set forth in Part II, Item 7, Financial Statements and Supplementary Data.

The Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 131 Disclosures about Segments of an Enterprise and Related Information. SFAS No. 131 establishes annual and
interim standards for operating segments of a company. It also requires entity-wide disclosures about the products and services an entity provides, the material countries in which it holds assets and reports revenue, and its major customers. Certain
of the Companys lessee customers have international operations. In these instances, the Company is aware that certain equipment, primarily rail and transportation, may periodically exit the country. However, these lessee customers are
US-based, and it is impractical for the Company to track, on an asset-by-asset day-by-day basis, where these assets are deployed. For further information regarding the Company geographic revenues and assets and major customers, see footnote 2 to the
financial statements, Summary of significant accounting policies, as set forth in Part II, Item 7, Financial Statements and Supplementary Data.



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

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



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

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



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

None.



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

Market Information

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

Holders

As of December 31, 2006, a total of 3,376 investors were record holders 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 December 31, 2006. 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, 2007. 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.



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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 December 31, 2006 the value of the Companys
assets, calculated on this basis, was approximately $2.88 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.

Distributions

The record holders of Units 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 commenced regular distributions, based on cash flows from operations, beginning with the month of January 1999.

The rate for monthly distributions from 2006 operations was $0.0758 per Unit for January through December. During 2006, the Company made twelve distributions
beginning in January and ending in December 2006 compared to thirteen distributions in 2005. The distributions were paid in February through December 2006 and in January 2007. The rate for quarterly distribution paid in April, July and October 2006
and in January 2007 was $0.2275 per Unit. Distributions were from 2006 cash flows from operations.

The rate for monthly distributions from 2005 operations
was $0.0758 per Unit for January through December. The distributions were paid in February through December 2005 and in January 2006. During 2005, the Company declared thirteen distributions beginning in February and ending in December 2005 compared
to twelve distributions in 2004. The rate for quarterly distribution paid in April, July and October 2005 and in January 2006 was $0.2275 per Unit. Distributions were from 2005 cash flows from operations.

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



|                                                                                          |  |      |      |      |   |       |  
|----------------------------------------------------------------------------------------- |  | ---- | ---- | ---- | - | ----- | -
|                                                                                          |  | 2006 |      | 2005 |  
|Net income (loss) per Unit, based on weighted average Unit outstanding                    |  | $    | 0.32 |      | $ | (0.15 | )
|Return of investment                                                                      |  |      | 0.59 |      |   | 1.16  |  
|                                                                                          |  |      |      |      |   |       |  
|Distributions declared per Unit, based on weighted average Other Member Units outstanding |  |      | 0.91 |      |   | 1.01  |  
|Differences due to timing of distributions                                                |  |      |     |      |   | (0.10 | )
|                                                                                          |  |      |      |      |   |       |  
|Actual distributions paid per Unit                                                        |  | $    | 0.91 |      | $ | 0.91  |  
|                                                                                          |  |      |      |      |   |       |  



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

Statements contained in this Item 6, Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) and elsewhere in this Form 10-KSB, which are not
historical facts, may be forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. In particular, economic recession and changes in general economic
conditions, including fluctuations in demand for equipment, lease rates, and interest rates, may result in delays in investment and reinvestment, delays in leasing, re-leasing, and disposition of equipment, and reduced returns on invested capital.
The Companys performance is subject to risks relating to lessee defaults and the creditworthiness of its lessees. The Companys performance is also subject to risks relating to the value of its equipment at the end of its leases, which
may be affected by the condition of the equipment, technological obsolescence and the markets for new and used equipment at the end of lease terms. Investors are cautioned not to attribute undue certainty to these forward-looking statements, which
speak only as of the date of this Form 10-KSB. We undertake no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Form 1 0-KSB 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). As of November 30, 2000, the offering was concluded. Total proceeds of the offering were $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 has and is expected to continue having contractual obligations with a diversified group of lessees for fixed lease terms at fixed rental amounts. As initial lease terms expire, the Company
re-leases or sells the equipment. The future liquidity beyond the contractual minimum rentals will depend on the Companys success in re-leasing or selling the equipment as it comes off lease.

Throughout the Reinvestment Period ending December 31, 2006, the Company reinvested a portion of lease payments from assets owned in new leasing transactions. Such
reinvestment occurred only after the payment of all current obligations, including debt service (both principal and interest), the payment of management fees to AFS and providing for cash distributions to the Other Members.

The Company has participated with AFS and certain of its affiliates, as defined in the Operating Agreement, in a financing arrangement (the Master Terms
Agreement). The Master Terms Agreement is comprised of: (1) a working capital term loan facility to AFS, (2) an acquisition facility, (3) a warehouse facility to AFS, and (4) a venture facility available to an affiliate.
The Master Terms Agreement is with a group of financial institutions and includes certain financial and non-financial covenants. The Master Terms Agreement totals $75,000,000 and expires in June 2007. The availability of borrowings to the Company
under the Master Terms Agreement was reduced by the amount outstanding on any of the above mentioned facilities. As of December 31, 2006, the Company had not borrowings under the acquisition facility and was removed as a party to the agreement
on January 31, 2007.

As of December 31, 2006 borrowings under the Master Terms Agreement were as follows:



|                                                                                                                           |  |   |             |  
|-------------------------------------------------------------------------------------------------------------------------- |  | - | ----------- | -
|Total available under the financing facility                                                                               |  | $ | 75,000,000  |  
|Amount borrowed by the Company under the acquisition facility                                                              |  |   |            |  
|Amounts borrowed by affiliated partnerships and limited liability companies under the acquisition and warehouse facilities |  |   | (26,561,475 | )
|                                                                                                                           |  |   |             |  
|Total remaining available under the acquisition and warehouse facilities                                                   |  | $ | 48,438,525  |  
|                                                                                                                           |  |   |             |  

The Company was contingently liable for principal payments under the warehouse facility as borrowings were
recourse jointly and severally to the extent of the pro-rata share of the Companys net worth as compared to the aggregate net worth of certain of the affiliated partnerships and limited liability companies of the Company and including AFS and
ATEL



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Leasing Corporation (ALC) (which latter two entities are 100% liable). The Company and its affiliates paid an annual commitment fee to have
access to this line of credit. As of December 31, 2006, borrowings of $3,061,475 were outstanding under the warehouse facility. The Companys maximum obligation on the outstanding warehouse balance at December 31, 2006 was
approximately $316,876.

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

Draws on the acquisition facility by any individual borrower are secured only by that borrowers assets, including but
not limited to equipment and related leases.

To manage the warehousing facility for the holding of assets prior to allocation to specific investor
programs, a Warehousing Trust Agreement has been entered into by the Company, AFS, ALC, and certain of the affiliated partnerships and limited liability companies. The warehousing facility is used to acquire and hold, on a short-term basis, certain
lease transactions that meet the investment objectives of each of such entities. Each of the leasing programs sponsored by AFS and ALC currently in its acquisition stage is a pro rata participant in the Warehousing Trust Agreement, as described
below. When a program no longer has a need for short term financing provided by the warehousing facility, it is removed from participation, and as new leasing investment entities are formed by AFS and ALC and commence their acquisition stages, these
new entities will be added. As of December 31, 2006, the investment program participants were ATEL Capital Equipment Fund VII, L.P., the Company, ATEL Capital Equipment Fund IX, LLC, ATEL Capital Equipment Fund X, LLC and ATEL Capital Equipment
Fund XI, LLC. Pursuant to the Warehousing Trust Agreement, the benefit of the lease transaction assets, and the corresponding liabilities under the warehouse borrowing facility, inure to each of such entities based upon each entitys pro-rata
share in the warehousing trust estate. The pro-rata share is calculated as a ratio of the net worth of each entity over the aggregate net worth of all entities benefiting from the warehouse trust estate, excepting that the trustees, AFS
and ALC, are both liable for their pro-rata shares of the obligations based on their respective net worth, and jointly liable for the pro rata portion of the obligations of each of the affiliated partnerships and limited liability companies
participating under the borrowing facility. Transactions are financed through this warehousing facility only until the transactions are allocated to a specific program for purchase or are otherwise disposed by AFS and ALC. When a determination is
made to allocate the transaction to a specific program for purchase by the program, the purchaser repays the debt associated with the asset, either with cash or by means of the acquisition facility financing, the asset is removed from the warehouse
facility collateral, and ownership of the asset and any debt obligation associated with the asset are assumed solely by the purchasing entity. As of January 31, 2007, the Company and ATEL Capital Equipment Fund VII, L.P. ceased to be
participants in the Warehousing Trust Agreement as both funds went into liquidation and have no further need for short term financing provided by the warehousing facility.

The credit agreement includes certain financial and non-financial covenants applicable to each borrower. The Company and affiliates were not in compliance with a non-financial covenant as of December 31, 2006.
The Managing Member, on behalf of all borrowers, requested and received a waiver of this covenant from the lenders until July 15, 2007. The borrowing facility was repaid before the waiver expired and the Fund was removed as a party to the
agreement on January 31, 2007.

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

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

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



8



---

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. For detailed information on the Companys debt
obligations, see footnotes 7 through 9 to the financial statements in Item 7.

Additionally, in 1999, the Company established a $40 million
receivables funding program (which was subsequently increased to a maximum of $125 million in July 2000) 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 requires 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 January 2002. The receivables funding program terminated in January 2007.

In order to maintain the availability of the receivables funding program, the Company was required to make standby payments. These fees totaled $6,818 and $40,593 in 2006 and 2005, respectively, and are included in
interest expense in the Companys statement of operations.

Finally, the Company has access to certain sources of non-recourse debt financing, which
the Company uses on a transaction basis as a means of mitigating credit risk. The non-recourse debt financing consists of a note payable to a financial institution. The notes are due in varying monthly and semi-annual payments. Interest on the notes
is fixed at 4.96% and 6.90%. The notes are secured by an assignment of lease payments and pledges of assets. At December 31, 2006, the carrying value of the pledged assets is $3,427,119. The notes mature through 2010.

The Operating Agreement limits such borrowings to 50% of the total cost of equipment, in the aggregate.

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

At December 31, 2006, the Company had no commitments to purchase leased assets.

Cash Flows

2006 vs. 2005

During 2006 and 2005, the Companys primary source of cash from operations was rents from operating leases. In addition, the Companys cash flows are impacted by changes in certain assets and liabilities.
Cash flows from operations decreased by $2,704,798 from $8,149,041 in 2005 to $5,444,243 in 2006. The decrease was primarily a result of a reduction in operating lease revenue as well as increases in (1) costs to maintain vessels and railcars
under operating leases, (2) professional fees and (3) taxes on income and franchise fees. Additionally, cash flow from operations decreased due to increased levels of accounts receivable, including amounts due from an affiliate, and
payments made against accounts payable and accrued liabilities. Operating lease revenue decreased by $1,209,303 from 11,254,546 in 2005 to $10,045,243 in 2006, due primarily to run-off and sales of equipment under operating leases. In 2006, the cash
outflow related to maintenance costs, professional fees and taxes on income and franchise fees totaled $2,321,463 compared to $757,651 in 2005. Also in 2006, cash flow decreased by $479,421 and $133,305 as a result of the increases in (1) payments
made against accounts payable and accrued liabilities and (2) accounts receivable when compared to 2005.

During 2006 and 2005, the main sources of
cash flow from investing activities were proceeds from sales of lease assets and payments received on the Companys investment in direct financing leases. Cash provided by investing activities totaled $11,323,388 and $16,630,944 for 2006 and
2005, respectively. The $5,307,556 decrease was primarily due to a decline in proceeds from sales of lease assets. In 2006, proceeds from sales of lease assets generated cash of $11,359,696 compared to $16,392,017 in 2005.

During the 2006 and 2005, the main source of cash from financing activities has been borrowings on the Companys



9



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various credit facilities. The main uses of cash in financing activities during the same timeframe have been the repayment of debt and distributions to both
Managing Member and Other Members. Net cash used in financing activities totaled $17,525,269 and $24,734,589 for 2006 and 2005, respectively. Cash flow increased as the Company used significantly less cash to repay debt in 2006 compared to 2005. The
Company repaid $7,219,855 and $19,386,179 of its debt during 2006 and 2005, respectively, and borrowed $2,869,897 and $8,000,000 for the same respective periods. Distributions to Other Members were $12,342,947 and $12,347,286 for 2006 and 2005,
while distributions to the Managing Member were $787,848 and $1,001,124 for the same respective periods.

Results of Operations

Cost reimbursements to the 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.

As of
December 31, 2006, 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:



|                           |  |      |   |  |      |  
|-------------------------- |  | ---- | - |  | ---- | -
|                           |  | 2006 |   |  | 2005 |  
|Transportation, rail       |  | 40   | % |  | 54   | %
|Transportation, containers |  | 35   | % |  | 28   | %

The Company had a nominal amount of equipment purchases on operating leases during 2006. Below is a table that
summarizes utilization percentages for leased assets during the years ended December 31, 2006 and 2005:



|                      |  |      |   |  |      |  
|--------------------- |  | ---- | - |  | ---- | -
|                      |  | 2006 |   |  | 2005 |  
|Equipment Utilization |  | 94   | % |  | 89   | %

2006 versus 2005

The Company had net income of $5,103,584 for the year ended December 31, 2006 compared to a net loss of $863,470 for the year ended December 31, 2005. The increase was primarily due to a $5,707,534 decline in operating expenses
and a $925,002 increase in total revenues, partially offset by a $665,482 decrease in other income.

During 2006 and 2005, the Companys revenues were
primarily derived from income on its operating lease portfolio and gains recognized on sales of leases. Total revenues were $14,581,271 and $13,656,269 for the year ended December 31, 2006 and 2005, respectively. The growth was driven primarily
by increased sales of lease assets offset, in part, by a decline in operating lease revenue resulting from run-off of leases due to termination and sales of equipment. During 2006, the Company recognized gains of $4,369,744 on sales of lease
equipment compared to gains of $2,173,324 in 2005, an increase of $2,196,420. Operating lease revenue decreased by $1,209,303 to $10,045,243 for the year ended December 31, 2006 from $11,254,546 for 2005.

Total expenses were $9,781,576 and $15,489,110 for the years ended December 31, 2006 and 2005, respectively. The decrease in total expenses was primarily due to
declines in provision for losses, depreciation, and interest expense partially offset by increases in maintenance expenses and professional fees.

The
biggest decline in expense was in the provision for impaired assets as the Company had no such expense in 2006 compared to a $3,580,245 expense in 2005 that was related to a decline in the value of a certain aircraft and manufacturing equipment.

The Companys largest expense during 2006 and 2005 was depreciation, which is directly related to its acquisition of operating lease assets during
its initial acquisition phase. Depreciation decreased by $2,623,058 from $7,578,618 in 2005 to $4,955,560 in 2006 primarily due to the run-off of the Companys lease portfolio.

Interest expense decreased by $958,628 from $1,837,613 in 2005 to $878,985 in 2006, reflecting the decline in outstanding debt balances of approximately $4,349,958 since December 31, 2005.

The decreases in depreciation and interest expense were partially offset by increases in maintenance expenses and professional fees. The Company incurred expenses
totaling $1,366,974 during 2006 related to repairs and maintenance of railcars and vessels under operating leases, an increase of $927,837 compared to 2005 expense of $439,137.



10



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Professional fees increased $455,694 from $205,514 in 2005 to $661,208 in 2006. The increase reflected costs related to
the Companys restatement effort and the audit of prior period financial statements.

Other income for 2006 and 2005 was solely comprised of
unrealized gains on interest rate swap contracts and totaled $303,889 and 969,371 for 2006 and 2005, respectively.

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. If derivative financial instruments are utilized, the Company will be required to record derivative instruments at fair value in the balance sheet and recognize the offsetting gains or losses as
adjustments to net income or other comprehensive income, as appropriate.

The Company records 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 footnote 9 to the financial statements in Item 7, Receivables funding program, for additional information.

Recent Accounting Pronouncements

In February 2007, the
Financial Accounting Standards Board (FASB) issued Statement No.159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115. This Statement permits entities to
choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related
assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Boards long-term measurement objectives for
accounting for financial instruments. SFAS 159 is effective as of the beginning of an entitys first fiscal year that begins after November 15, 2007, with early adoption permitted as of the beginning of a fiscal year that begins on or
before November 15, 2007, provided the entity also elects to apply the provisions of FASB Statement No. 157, Fair Value Measurements. The Company does not presently anticipate any significant impact on its financial position,
results of operations or cash flows.

During September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin
(SAB) No. 108. This Bulletin provides the Staffs views on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. The guidance in SAB
No. 108 is effective for financial statements of fiscal years ending after November 15, 2006. Adoption of this guidance did not materially impact the Companys financial statements.

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards No. 157, Fair Value Measurements
(FAS 157). This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. FAS 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. As of December 31, 2006, the Fund does not believe the adoption of FAS 157 will impact the amounts reported in
the financial statements, however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain of the measurements reported in the statement of operations for a fiscal period.

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FAS 109, Accounting for
Income Taxes (FIN 48), to create a single model to address accounting for uncertainty in tax positions. FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is



11



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required to meet before being recognized in the financial statements. FIN 48 also provides guidance on deregulation, measurement, classification, interest
and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company will adopt FIN 48 as of January 1, 2007, as required. The cumulative effect of
adopting FIN 48 will be recorded in retained earnings and other accounts as applicable. The Company has not determined the effect, if any, the adoption of FIN 48 will have on the Companys financial position and results of operations.

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

Use of estimates:

The
preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 relate primarily to the
determination of residual values at the end of the lease term and expected future cash flows used for impairment analysis purposes and determination of the allowance for doubtful accounts.

Equipment on operating leases and related revenue recognition:

Equipment subject to operating leases is stated at cost. Depreciation is being recognized on a straight-line method over the terms of the related leases to the equipments estimated residual values at the end of the leases.

Operating lease revenue is recognized on a straight-line basis over the term of the underlying leases. The initial lease terms will vary as to the type of equipment
subject to the leases, the needs of the lessees and the terms to be negotiated, but initial leases are generally be from 24 to 120 months. The difference between rent received and rental revenue recognized is recorded as unearned operating
lease income on the balance sheet.

Direct financing leases and related revenue recognition:

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

Allowances for losses on direct financing leases are typically established based on historical charge offs and collections experience and are usually determined by
specifically identified lessees and billed and unbilled receivables. Direct financing leases are written-off to the allowance as they are deemed uncollectible.

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



12



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Initial direct costs:

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

Asset valuation:

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



|Item 7. | FINANCIAL STATEMENTS
|------- | --------------------

See the Report of Independent Registered
Public Accounting Firm, Financial Statements and Notes to Financial Statements attached hereto at pages 14 through 31.



13



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Members

ATEL Capital Equipment Fund VIII, LLC

We have audited the accompanying balance sheet of ATEL Capital Equipment Fund VIII, LLC (the Company) as of December 31, 2006, and the related statements
of operations, changes in members capital, and cash flows for the year then ended. These financial statements are the responsibility of the Companys Managing Member. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit 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.
An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ATEL Capital Equipment Fund
VIII, LLC as of December 31, 2006, and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.



/s/ Moss Adams LLP


San Francisco, California

July 23, 2007



14



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Report of Independent Registered Public Accounting Firm

The Members

ATEL Capital Equipment Fund VIII, LLC

We have audited the accompanying statements of operations, changes in members capital, and cash flows of ATEL Capital Equipment Fund VIII, LLC (the Company) for the
year ended December 31, 2005. 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 audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and the cash flows of ATEL Capital Equipment Fund VIII, LLC for the year ended
December 31, 2005, in conformity with U.S. generally accepted accounting principles.



/s/ Ernst & Young LLP


San Francisco, California

April 2, 2007



15



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ATEL CAPITAL EQUIPMENT FUND VIII, LLC

BALANCE SHEET

DECEMBER 31, 2006



|                                                                                                                |  |      |           
|--------------------------------------------------------------------------------------------------------------- |  | ---- | ----------
|                                                                                                                |  | 2006
|ASSETS                                                                                                          |  |      |           
|                                                                                                                | 
|Cash and cash equivalents                                                                                       |  | $    | 1,857,669 
|Accounts receivable, net of allowance for doubtful accounts of $130,578                                         |  |      | 949,320   
|Due from Affiliates                                                                                             |  |      | 72,000    
|Prepaids and other assets                                                                                       |  |      | 75,769    
|Investments in equipment and leases, net of accumulated depreciation and impairment loss reserve of $42,754,263 |  |      | 22,451,946
|                                                                                                                |  |      |           
|Total assets                                                                                                    |  | $    | 25,406,704
|                                                                                                                |  |      |           
|LIABILITIES AND MEMBERS CAPITAL                                                                                |  |      |           
|                                                                                                                | 
|Accounts payable and accrued liabilities:                                                                       |  |      |           
|Managing Member                                                                                                 |  | $    | 1,072,815 
|Accrued distributions to Other Members                                                                          |  |      | 1,304,381 
|Other                                                                                                           |  |      | 701,455   
|Accrued interest payable                                                                                        |  |      | 28,692    
|Non-recourse debt                                                                                               |  |      | 3,495,809 
|Interest rate swap contracts                                                                                    |  |      | 162,193   
|Unearned operating lease income                                                                                 |  |      | 91,701    
|                                                                                                                |  |      |           
|Total liabilities                                                                                               |  |      | 6,857,046 
|                                                                                                                | 
|Commitments (Note 10)                                                                                           |  |      |          
|                                                                                                                | 
|Members capital:                                                                                               |  |      |           
|Managing Member                                                                                                 |  |      |          
|Other Members                                                                                                   |  |      | 18,549,658
|                                                                                                                |  |      |           
|Total Members capital                                                                                          |  |      | 18,549,658
|                                                                                                                |  |      |           
|Total liabilities and Members capital                                                                          |  | $    | 25,406,704
|                                                                                                                |  |      |           

See accompanying notes.



16



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ATEL CAPITAL EQUIPMENT FUND VIII, LLC

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005



|                                                                     |  |      |            |      |   |            |  
|-------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | -
|                                                                     |  | 2006 |            | 2005 |  
|Revenues:                                                            |  |      |            |      |   |            |  
|Leasing activities:                                                  |  |      |            |      |   |            |  
|Operating leases                                                     |  | $    | 10,045,243 |      | $ | 11,254,546 |  
|Direct financing leases                                              |  |      | 87,732     |      |   | 176,456    |  
|Gain on sales of assets                                              |  |      | 4,369,744  |      |   | 2,173,324  |  
|Interest                                                             |  |      | 47,003     |      |   | 39,490     |  
|Other revenue                                                        |  |      | 31,549     |      |   | 12,453     |  
|                                                                     |  |      |            |      |   |            |  
|Total revenues                                                       |  |      | 14,581,271 |      |   | 13,656,269 |  
|                                                                     |  |     
|Expenses:                                                            |  |      |            |      |   |            |  
|Depreciation of operating lease assets                               |  |      | 4,955,560  |      |   | 7,578,618  |  
|Provision for losses and impairments                                 |  |      |           |      |   | 3,580,245  |  
|Interest expense                                                     |  |      | 878,985    |      |   | 1,837,613  |  
|Asset management fees to Managing Member                             |  |      | 506,338    |      |   | 447,641    |  
|Vessel maintenance                                                   |  |      | 685,858    |      |   |           |  
|Railcar maintenance                                                  |  |      | 681,116    |      |   | 439,137    |  
|Cost reimbursements to Managing Member                               |  |      | 678,509    |      |   | 731,264    |  
|Amortization of initial direct costs                                 |  |      | 24,096     |      |   | 75,552     |  
|Professional fees                                                    |  |      | 661,208    |      |   | 205,514    |  
|Insurance                                                            |  |      | 95,552     |      |   | 55,996     |  
|Provision for doubtful accounts                                      |  |      | 62,479     |      |   | 50,068     |  
|Taxes on income and franchise fees                                   |  |      | 293,281    |      |   | 113,000    |  
|Other                                                                |  |      | 258,594    |      |   | 374,462    |  
|                                                                     |  |      |            |      |   |            |  
|                                                                     |  |      | 9,781,576  |      |   | 15,489,110 |  
|                                                                     |  |      |            |      |   |            |  
|Net income (loss) from operations                                    |  |      | 4,799,695  |      |   | (1,832,841 | )
|Other income, net                                                    |  |      | 303,889    |      |   | 969,371    |  
|                                                                     |  |      |            |      |   |            |  
|Net income (loss)                                                    |  | $    | 5,103,584  |      | $ | (863,470   | )
|                                                                     |  |      |            |      |   |            |  
|Net income (loss):                                                   |  |      |            |      |   |            |  
|Managing Member                                                      |  | $    | 787,848    |      | $ | 1,106,992  |  
|Other Members                                                        |  |      | 4,315,736  |      |   | (1,970,462 | )
|                                                                     |  |      |            |      |   |            |  
|                                                                     |  | $    | 5,103,584  |      | $ | (863,470   | )
|                                                                     |  |      |            |      |   |            |  
|Net income (loss) per Limited Liability Company Unit (Other Members) |  | $    | 0.32       |      | $ | (0.15      | )
|Weighted average number of Units outstanding                         |  |      | 13,566,736 |      |   | 13,570,188 |  

See accompanying notes.



17



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ATEL CAPITAL EQUIPMENT FUND VIII, LLC

STATEMENTS OF CHANGES IN MEMBERS CAPITAL

FOR THE YEARS ENDED

DECEMBER 31, 2006 AND 2005



|                                                                   |       |               |   |        |                |             |   |                                     |   |            |       |  |   |          |   |  |   |             |  
|------------------------------------------------------------------ | ----- | ------------- | - | ------ | -------------- | ----------- | - | ----------------------------------- | - | ---------- | ----- |  | - | -------- | - |  | - | ----------- | -
|                                                                   |       | Other Members |   |        | ManagingMember |             |   | Accumulated Other ComprehensiveLoss |   |            | Total | 
|                                                                   | Units |               |   | Amount |                |             |   |                                    
|Balance December 31, 2004                                          |       | 13,570,188    |   |        | $              | 42,244,840  |   |                                     | $ |           |       |  | $ | (725,935 | ) |  | $ | 41,518,905  |  
|Distributions to Other Members ($1.01 per Unit)                    |       |              |   |        |                | (13,652,993 | ) |                                     |   |           |       |  |   |         |   |  |   | (13,652,993 | )
|Distributions to Managing Member                                   |       |              |   |        |                |            |   |                                     |   | (1,106,992 | )     |  |   |         |   |  |   | (1,106,992  | )
|Reclassification for portion of swap liability charged to net loss |       |              |   |        |                |            |   |                                     |   |           |       |  |   | 585,993  |   |  |   | 585,993     |  
|Net (loss) income                                                  |       |              |   |        |                | (1,970,462  | ) |                                     |   | 1,106,992  |       |  |   |         |   |  |   | (863,470    | )
|                                                                   |       |               |   |        |                |             |   |                                     |   |            |       |  |   |          |   |  |   |             |  
|Balance December 31, 2005                                          |       | 13,570,188    |   |        |                | 26,621,385  |   |                                     |   |           |       |  |   | (139,942 | ) |  |   | 26,481,443  |  
|Distributions to Other Members ($0.91 per Unit)                    |       |              |   |        |                | (12,342,947 | ) |                                     |   |           |       |  |   |         |   |  |   | (12,342,947 | )
|Recissions of capital contributions, net                           |       | (10,000       | ) |        |                | (44,516     | ) |                                     |   |           |       |  |   |         |   |  |   | (44,516     | )
|Distributions to Managing Member                                   |       |              |   |        |                |            |   |                                     |   | (787,848   | )     |  |   |         |   |  |   | (787,848    | )
|Reclassification for portion of swap liability charged to net loss |       |              |   |        |                |            |   |                                     |   |           |       |  |   | 139,942  |   |  |   | 139,942     |  
|Net income                                                         |       |              |   |        |                | 4,315,736   |   |                                     |   | 787,848    |       |  |   |         |   |  |   | 5,103,584   |  
|                                                                   |       |               |   |        |                |             |   |                                     |   |            |       |  |   |          |   |  |   |             |  
|Balance December 31, 2006                                          |       | 13,560,188    |   |        | $              | 18,549,658  |   |                                     | $ |           |       |  | $ |         |   |  | $ | 18,549,658  |  
|                                                                   |       |               |   |        |                |             |   |                                     |   |            |       |  |   |          |   |  |   |             |  

See accompanying notes.



18



---

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005



|                                                                                    |  |      |             |   |      |   |             |  
|----------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                                                    |  | 2006 |             |   | 2005 |  
|Operating activities:                                                               |  |      |             |   |      |   |             |  
|Net income (loss)                                                                   |  | $    | 5,103,584   |   |      | $ | (863,470    | )
|Adjustment to reconcile net income (loss) to cash provided by operating activities: |  |      |             |   |      |   |             |  
|Gain on sales of assets                                                             |  |      | (4,369,744  | ) |      |   | (2,173,324  | )
|Depreciation of operating lease assets                                              |  |      | 4,955,560   |   |      |   | 7,578,618   |  
|Amortization of initial direct costs                                                |  |      | 24,096      |   |      |   | 75,552      |  
|Interest rate swap contracts                                                        |  |      | 139,942     |   |      |   | 585,993     |  
|Change in fair value of interest rate swap contracts                                |  |      | (303,889    | ) |      |   | (969,371    | )
|Provision for doubtful accounts                                                     |  |      | 62,479      |   |      |   | 50,068      |  
|Provision for losses and impairments                                                |  |      |            |   |      |   | 3,580,245   |  
|Changes in operating assets and liabilities:                                        |  |      |             |   |      |   |             |  
|Accounts receivable                                                                 |  |      | 29,605      |   |      |   | 90,910      |  
|Accounts receivable from affiliates                                                 |  |      | (72,000     | ) |      |   |            |  
|Prepaids expenses and other assets                                                  |  |      | (17,217     | ) |      |   | (10,950     | )
|Accounts payable, Managing Member                                                   |  |      | 54,331      |   |      |   | 251,726     |  
|Accounts payable, accrued distributions to Other Members                            |  |      | (1,327      | ) |      |   |            |  
|Accounts payable, other                                                             |  |      | (9,283      | ) |      |   | 271,416     |  
|Accrued interest payable                                                            |  |      | (31,587     | ) |      |   | (94,325     | )
|Unearned operating lease income                                                     |  |      | (120,307    | ) |      |   | (224,047    | )
|                                                                                    |  |      |             |   |      |   |             |  
|Net cash provided by operating activities                                           |  |      | 5,444,243   |   |      |   | 8,149,041   |  
|                                                                                    |  |      |             |   |      |   |             |  
|Investing activities:                                                               |  |      |             |   |      |   |             |  
|Proceeds from sales of lease assets                                                 |  |      | 11,359,696  |   |      |   | 16,392,017  |  
|Reduction of net investment in direct financing leases                              |  |      | 759,155     |   |      |   | 1,047,805   |  
|Purchases of equipment on operating leases                                          |  |      | (795,463    | ) |      |   | (803,340    | )
|Additions and adjustment to initial direct costs                                    |  |      |            |   |      |   | (5,538      | )
|                                                                                    |  |      |             |   |      |   |             |  
|Net cash provided by investing activities                                           |  |      | 11,323,388  |   |      |   | 16,630,944  |  
|                                                                                    |  |      |             |   |      |   |             |  
|Financing activities:                                                               |  |      |             |   |      |   |             |  
|Borrowings under acquisition facility                                               |  |      |            |   |      |   | 8,000,000   |  
|Repayments under acquisition facility                                               |  |      | (2,000,000  | ) |      |   | (6,000,000  | )
|Repayments under receivables funding program                                        |  |      | (4,524,000  | ) |      |   | (8,668,000  | )
|Proceeds of non-recourse debt                                                       |  |      | 2,869,897   |   |      |   |            |  
|Repayments of non-recourse debt                                                     |  |      | (695,855    | ) |      |   | (4,718,179  | )
|Rescissions of capital contributions                                                |  |      | (44,516     | ) |      |   |            |  
|Distributions to Other Members                                                      |  |      | (12,342,947 | ) |      |   | (12,347,286 | )
|Distributions to Managing Member                                                    |  |      | (787,848    | ) |      |   | (1,001,124  | )
|                                                                                    |  |      |             |   |      |   |             |  
|Net cash used in financing activities                                               |  |      | (17,525,269 | ) |      |   | (24,734,589 | )
|                                                                                    |  |      |             |   |      |   |             |  
|Net (decrease) increase in cash and cash equivalents                                |  |      | (757,638    | ) |      |   | 45,396      |  
|Cash and cash equivalents at beginning of year                                      |  |      | 2,615,307   |   |      |   | 2,569,911   |  
|                                                                                    |  |      |             |   |      |   |             |  
|Cash and cash equivalents at end of year                                            |  | $    | 1,857,669   |   |      | $ | 2,615,307   |  
|                                                                                    |  |      |             |   |      |   |             |  
|Supplemental disclosures of cash flow information:                                  |  |      |             |   |      |   |             |  
|Cash paid during the year for taxes                                                 |  | $    | 293,281     |   |      | $ | 293,214     |  
|                                                                                    |  |      |             |   |      |   |             |  
|Cash paid during the year for interest                                              |  | $    | 909,769     |   |      | $ | 1,345,945   |  
|                                                                                    |  |      |             |   |      |   |             |  
|Schedule of non-cash transactions:                                                  |  |      |             |   |      |   |             |  
|Distributions declared to Managing Member at year end                               |  | $    | 83,258      |   |      | $ | 105,868     |  
|                                                                                    |  |      |             |   |      |   |             |  
|Distributions declared to Other Members at year end                                 |  | $    | 1,304,381   |   |      | $ | 1,305,708   |  
|                                                                                    |  |      |             |   |      |   |             |  

See accompanying notes.



19



---

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS

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. The Company
was formed for the purpose of acquiring equipment to engage in equipment leasing, lending and sales activities. The Managing Member of the Company is ATEL Financial Services, LLC (AFS), a California limited liability company. The Company
may continue until December 31, 2019. 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 asset of the Company.

The Company conducted a public offering of 15,000,000 Limited Liability Company Units (Units), at a price of $10 per Unit. On January 13,
1999, subscriptions for the minimum number of Units (120,000, representing $1,200,000) had been received (excluding subscriptions from Pennsylvania investors) and AFS requested that the subscriptions be released to the Company. On that date the
Company commenced operations in its primary business (leasing and lending activities). Total gross contributions in the amount of $135,701,880 (13,570,188 units) were received as of November 30, 2000, $500 of which represented the Initial
Members capital investment, $100 of which represented AFS capital investment and $135,701,380 of which represented continuing interest of Other Members. The offering was terminated on November 30, 2000.

As of December 31, 2006, 13,560,188 Units were issued and outstanding.

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, which ended 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), as amended.

The Company, or AFS on behalf of the Company, has incurred costs in connection with the organization, registration and issuance of the Limited Liability
Company Units (Note 6). The amount of such costs to be borne by the Company is limited by certain provisions of the Companys Operating Agreement. The Company will pay AFS and affiliates of AFS substantial fees which may result in a conflict of
interest. The Company will pay substantial fees to AFS and its affiliates before distributions are paid to investors even if the Company does not produce profits. Therefore, the financial position of the Company could change significantly.

2. Summary of significant accounting policies:

Basis of presentation:

The accompanying financial statements as of December 31, 2006, and for the years ended December 31, 2006
and 2005 have been prepared in accordance with accounting principles generally accepted in the Unites States (GAAP).

Certain prior period
amounts have been reclassified to conform to the current period presentation.

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 relate primarily to the determination of residual values at the end of the lease term and expected future cash flows used for impairment analysis purposes and determination of the allowance
for doubtful accounts.



20



---

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS



2. Summary of significant accounting policies (continued):



Cash and cash equivalents:

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

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 and, therefore, believes that such 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.

Accounts receivable:

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

Direct financing leases and related revenue recognition:

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

Allowances for losses on direct financing leases are typically established based on historical charge offs and collections experience and are usually determined by
specifically identified lessees and billed and unbilled receivables. Direct financing leases are charged off to the allowance as they are deemed uncollectible.

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

Equipment on operating leases and related revenue recognition:

Equipment subject to operating leases is stated at cost. Depreciation is
being recognized on a straight-line method over the terms of the related leases to the equipments estimated residual values at the end of the leases.

Operating lease revenue is recognized on a straight-line basis over the term of the underlying leases. The initial lease terms will vary as to the type of equipment subject to the leases, the needs of the lessees and the terms to be
negotiated, but initial leases are generally from 24 to 120 months. The difference between rent received and rental revenue recognized is recorded as unearned operating lease income on the balance sheet.



21



---

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS



2. Summary of significant accounting policies (continued):



Initial direct costs:

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

Asset valuation:

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

Segment
reporting:

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

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

Certain of the Companys lessee customers have international operations. In these instances, the Company is aware that certain equipment, primarily rail and
transportation, may periodically exit the country. However, these lessee customers are US-based, and it is impractical for the Company to track, on an asset-by-asset day-by-day basis, where these assets are deployed.

Derivative financial instruments:

In September 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 September 1999, by SFAS No. 138, issued in September 2000 and by SFAS No. 149, issued in September 2003.



22



---

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS



2. Summary of significant accounting policies (continued):



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.

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 de-designated 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). See footnote 9, Receivables funding program, for further information regarding interest rate swaps.

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.

Unearned operating lease income:

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

Income taxes:

The Company is treated as a partnership for federal income tax purposes. Pursuant to the provisions of Section 701 of the Internal Review Code, a partnership is not subject to federal income taxes. Accordingly, the Company has provided
current income taxes for only those states, which levy income taxes on partnerships. For the years ended December 31, 2006 and 2005, the current provision for state income taxes was approximately $293,281 and $113,000, respectively.

The tax bases of the Companys net assets and liabilities vary from the amounts presented in these financial statements at December 31, 2006.



|                                        |  |   |           
|--------------------------------------- |  | - | ----------
|Financial statement basis of net assets |  | $ | 18,549,658
|Tax basis of net assets (unaudited)     |  |   | 12,791,342
|                                        |  |   |           
|Difference                              |  | $ | 5,758,316 
|                                        |  |   |           

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



23



---

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS



2. Summary of significant accounting policies (continued):



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



|                                              |  |      |            |      |   |           |  
|--------------------------------------------- |  | ---- | ---------- | ---- | - | --------- | -
|                                              |  | 2006 |            | 2005 |  
|Net income (loss) per financial statements    |  | $    | 5,103,584  |      | $ | (863,470  | )
|Tax adjustments (unaudited):                  |  |      |            |      |   |           |  
|Adjustment to depreciation expense            |  |      | 1,667,219  |      |   | 1,429,651 |  
|Provision for losses and doubtful accounts    |  |      | 792,867    |      |   | 3,580,245 |  
|Adjustments to revenues                       |  |      | 4,904,146  |      |   | 1,378,944 |  
|Other                                         |  |      |           |      |   | 1,718,501 |  
|                                              |  |      |            |      |   |           |  
|Net income per federal tax return (unaudited) |  | $    | 12,467,816 |      | $ | 7,243,871 |  
|                                              |  |      |            |      |   |           |  

Other income (loss), net:

Other income (loss) is comprised of fair value adjustments on interest rate swap contracts.

Per unit data:

Net income (loss) and distributions per unit are based upon the weighted average number of Other Members Units outstanding during the year.

Recent accounting pronouncements:

In February 2007,
the Financial Accounting Standards Board (FASB) issued Statement No.159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115. This Statement permits entities to
choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related
assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Boards long-term measurement objectives for
accounting for financial instruments. SFAS 159 is effective as of the beginning of an entitys first fiscal year that begins after November 15, 2007, with early adoption permitted as of the beginning of a fiscal year that begins on or
before November 15, 2007, provided the entity also elects to apply the provisions of FASB Statement No. 157, Fair Value Measurements. The Company does not presently anticipate any significant impact on its consolidated
financial position, results of operations or cash flows.

During September 2006, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 108. This Bulletin provides the Staffs views on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment.
The guidance in SAB No. 108 is effective for financial statements of fiscal years ending after November 15, 2006. Adoption of this guidance did not materially impact the Companys financial statements.

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards No. 157, Fair Value Measurements
(FAS 157). This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. FAS 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. As of December 31, 2006, the Fund does not believe the adoption of FAS 157 will impact the amounts reported in
the financial statements, however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain of the measurements reported in the statement of operations for a fiscal period.

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FAS 109, Accounting for
Income Taxes (FIN 48), to create a single model to address accounting for uncertainty in tax positions. FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to
meet before being recognized in the financial statements. FIN 48 also provides guidance on deregulation,



24



---

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS



2. Summary of significant accounting policies (continued):



measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning
after December 15, 2006. The Company will adopt FIN 48 as of January 1, 2007, as required. The cumulative effect of adopting FIN 48 will be recorded in retained earnings and other accounts as applicable. The Company has not determined the
effect, if any, the adoption of FIN 48 will have on the Companys financial position and results of operations.

3. Concentration of credit risk
and major customers:

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

As of December 31, 2006, there
were concentrations (greater than 10% as a percentage of total equipment cost) of equipment leased to lessees and/or financial borrowers in certain industries as follows:



|                           |  |    |  
|-------------------------- |  | -- | -
|Transportation, rail       |  | 40 | %
|Transportation, containers |  | 35 | %

During 2006, three customers comprised 59% of the Companys revenues from leases. During 2005, one customer
comprised 18% of the Companys revenues from leases.

4. 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 (see footnote 5 for further discussion on impairment
loss):



|                          |  |                                    |            |   |                                 |   |         |  
|------------------------- |  | ---------------------------------- | ---------- | - | ------------------------------- | - | ------- | -
|                          |  | Reserve for Losses and Impairments |            |   | Allowance for Doubtful Accounts |  
|Balance December 31, 2004 |  | $                                  |           |   |                                 | $ | 52,115  |  
|Provision                 |  |                                    | 3,580,245  |   |                                 |   | 50,068  |  
|Charge offs               |  |                                    | (2,306,328 | ) |                                 |   | (34,084 | )
|                          |  |                                    |            |   |                                 |   |         |  
|Balance December 31, 2005 |  |                                    | 1,273,917  |   |                                 |   | 68,099  |  
|Provision                 |  |                                    |           |   |                                 |   | 62,479  |  
|Charge offs               |  |                                    | (611,629   | ) |                                 |   |        |  
|                          |  |                                    |            |   |                                 |   |         |  
|Balance December 31, 2006 |  | $                                  | 662,288    |   |                                 | $ | 130,578 |  
|                          |  |                                    |            |   |                                 |   |         |  

5. Investments in equipment and leases, net:

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



|                                                                                                                         |  |                          |            |                                             |   |            |                                                             |  |   |                          |   |  |   |           
|------------------------------------------------------------------------------------------------------------------------ |  | ------------------------ | ---------- | ------------------------------------------- | - | ---------- | ----------------------------------------------------------- |  | - | ------------------------ | - |  | - | ----------
|                                                                                                                         |  | Balance December 31,2005 |            | Reclassifications & Additions
/Dispositions |   |            | Depreciation/ Amortization Expense
orAmortization of Leases |  |   | Balance December 31,2006
|Net investment in operating leases                                                                                       |  | $                        | 29,966,084 |                                             | $ | (3,971,247 | )                                                           |  | $ | (4,810,849               | ) |  | $ | 21,183,988
|Net investment in direct financing leases                                                                                |  |                          | 2,044,266  |                                             |   | (652,536   | )                                                           |  |   | (759,155                 | ) |  |   | 632,575   
|Assets held for sale or lease, net                                                                                       |  |                          | 2,335,407  |                                             |   | (1,570,706 | )                                                           |  |   | (144,711                 | ) |  |   | 619,990   
|Initial direct costs, net of accumulated amortization of $259,354 at December 31, 2006 and $408,154 at December 31,
2005 |  |                          | 39,489     |                                             |   |           |                                                             |  |   | (24,096                  | ) |  |   | 15,393    
|                                                                                                                         |  |                          |            |                                             |   |            |                                                             |  |   |                          |   |  |   |           
|Total                                                                                                                    |  | $                        | 34,385,246 |                                             | $ | (6,194,489 | )                                                           |  | $ | (5,738,811               | ) |  | $ | 22,451,946
|                                                                                                                         |  |                          |            |                                             |   |            |                                                             |  |   |                          |   |  |   |           



25



---

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS



5. Investments in equipment and leases, net (continued):



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

Management periodically reviews the carrying values of its assets on leases and assets held for lease or sale. No impairment loss has been recognized for the year ended
December 31, 2006. The Company recorded impairment losses as follows for the year ended December 31, 2005.



|                        |  |          
|----------------------- |  | ---------
|                        |  | 2005     
|Aircraft                |  | 2,306,328
|Manufacturing equipment |  | 1,273,917
|                        |  |          
|                        |  | 3,580,245
|                        |  |          

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:



|                                       |  |      |           |      |   |           
|-------------------------------------- |  | ---- | --------- | ---- | - | ----------
|                                       |  | 2006 |           | 2005
|Depreciation of operating lease assets |  | $    | 4,955,560 |      | $ | 7,578,618 
|Impairment losses                      |  |      |          |      |   | 3,580,245 
|                                       |  |      |           |      |   |           
|Total                                  |  | $    | 4,955,560 |      | $ | 11,158,863
|                                       |  |      |           |      |   |           

All of the property on lease was acquired during the period 1999 through 2002.

Operating leases:

Property on operating leases consists of the
following:



|                              |  |                           |             |   |           |   |            |                                   |  |   |                           |   |  |   |             |  
|----------------------------- |  | ------------------------- | ----------- | - | --------- | - | ---------- | --------------------------------- |  | - | ------------------------- | - |  | - | ----------- | -
|                              |  | Balance December 31, 2005 |             |   | Additions |   |            | Reclassifications or Dispositions |  |   | Balance December 31, 2006 |  
|Transportation, rail          |  | $                         | 40,880,181  |   |           | $ | 508,667    |                                   |  | $ | (17,534,483               | ) |  | $ | 23,854,365  |  
|Containers                    |  |                           | 21,101,250  |   |           |   |           |                                   |  |   | (106,250                  | ) |  |   | 20,995,000  |  
|Natural gas compressors       |  |                           | 2,676,446   |   |           |   |           |                                   |  |   | (154,343                  | ) |  |   | 2,522,103   |  
|Manufacturing                 |  |                           | 1,494,658   |   |           |   |           |                                   |  |   | (353,833                  | ) |  |   | 1,140,825   |  
|Transportation, other         |  |                           | 3,914,747   |   |           |   | 286,796    |                                   |  |   | 3,519,480                 |   |  |   | 7,721,023   |  
|Material handling             |  |                           | 1,090,279   |   |           |   |           |                                   |  |   | (49,269                   | ) |  |   | 1,041,010   |  
|Other                         |  |                           | 5,313,054   |   |           |   |           |                                   |  |   | (2,263,274                | ) |  |   | 3,049,780   |  
|                              |  |                           |             |   |           |   |            |                                   |  |   |                           |   |  |   |             |  
|                              |  |                           | 76,470,615  |   |           |   | 795,463    |                                   |  |   | (16,941,972               | ) |  |   | 60,324,106  |  
|Less accumulated depreciation |  |                           | (46,504,531 | ) |           |   | (4,810,849 | )                                 |  |   | 12,175,262                |   |  |   | (39,140,118 | )
|                              |  |                           |             |   |           |   |            |                                   |  |   |                           |   |  |   |             |  
|Total                         |  | $                         | 29,966,084  |   |           | $ | (4,015,386 | )                                 |  | $ | (4,766,710                | ) |  | $ | 21,183,988  |  
|                              |  |                           |             |   |           |   |            |                                   |  |   |                           |   |  |   |             |  

Direct financing leases:

As of December 31, 2006, investment in direct financing leases consists of rail cars, anhydrous ammonia storage tanks, office automation equipment, point of sale equipment and, refrigerated trailers. The
following lists the components of the Companys investment in direct financing leases as of December 31, 2006:



|                                                             |  |      |         |  
|------------------------------------------------------------ |  | ---- | ------- | -
|                                                             |  | 2006 |        
|Total minimum lease payments receivable                      |  | $    | 328,760 |  
|Estimated residual values of leased equipment (unguaranteed) |  |      | 334,163 |  
|                                                             |  |      |         |  
|Investment in direct financing leases                        |  |      | 662,923 |  
|Less unearned income                                         |  |      | (30,348 | )
|                                                             |  |      |         |  
|Net investment in direct financing leases                    |  | $    | 632,575 |  
|                                                             |  |      |         |  



26



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ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS



5. Investments in equipment and leases, net (continued):



At December 31, 2006, the aggregate amounts of future minimum lease payments receivable
are as follows:



|                         |  |                 |            |                       |   |         |  |   |           
|------------------------ |  | --------------- | ---------- | --------------------- | - | ------- |  | - | ----------
|Year ending December 31, |  | OperatingLeases |            | DirectFinancingLeases |   | Total  
|2007                     |  |                 | 6,375,236  |                       |   | 279,959 |  |   | 6,655,195 
|2008                     |  |                 | 5,110,962  |                       |   | 48,801  |  |   | 5,159,763 
|2009                     |  |                 | 2,606,966  |                       |   |        |  |   | 2,606,966 
|2010                     |  |                 | 1,249,645  |                       |   |        |  |   | 1,249,645 
|2011                     |  |                 | 756,985    |                       |   |        |  |   | 756,985   
|Thereafter               |  |                 | 547,643    |                       |   |        |  |   | 547,643   
|                         |  |                 |            |                       |   |         |  |   |           
|                         |  | $               | 16,647,437 |                       | $ | 328,760 |  | $ | 16,976,197
|                         |  |                 |            |                       |   |         |  |   |           

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



|                        |  |           
|----------------------- |  | ----------
|Equipment category      |  | UsefulLife
|Transportation, rail    |  | 30 - 35   
|Manufacturing           |  | 10 - 20   
|Construction            |  | 7 - 10    
|Material handling       |  | 7 - 10    
|Natural gas compressors |  | 7 - 10    
|Transportation, other   |  | 7 - 10    

6. Related party transactions:

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

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

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 fund that AFS manages based on criteria such as existing or new leases, number of investors or equity depending on the type of cost incurred.



27



---

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS



6. Related party transactions (continued):



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



|                             |  |      |           |      |   |          
|---------------------------- |  | ---- | --------- | ---- | - | ---------
|                             |  | 2006 |           | 2005
|Equipment management fees    |  | $    | 506,338   |      | $ | 447,641  
|Partnership administration   |  |      | 678,509   |      |   | 678,510  
|Non-admin cost reimbursement |  |      |          |      |   | 52,754   
|                             |  |      |           |      |   |          
|                             |  | $    | 1,184,847 |      | $ | 1,178,905
|                             |  |      |           |      |   |          

The Managing Member makes certain payments to third parties on behalf of the Company for convenience purposes.
During the years ended December 31, 2006 and 2005, the Managing Member made payments of $1,381,401 and $367,076, respectively.

7. Non-recourse
debt:

At December 31, 2006, non-recourse debt consists of notes payable to a financial institution. The notes are due in monthly or semi-annual
installments. Interest on the notes is fixed at 4.96% and 6.90%. The notes are secured by assignments of lease payments and pledges of assets. At December 31, 2006, the carrying value of the pledged assets is $3,427,119. The notes mature
through 2010.

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



|                         |  |           |           |          |   |         |  |   |          
|------------------------ |  | --------- | --------- | -------- | - | ------- |  | - | ---------
|Year ending December 31, |  | Principal |           | Interest |   | Total  
|2007                     |  | $         | 1,563,377 |          | $ | 191,403 |  | $ | 1,754,780
|2008                     |  |           | 778,603   |          |   | 107,317 |  |   | 885,920  
|2009                     |  |           | 755,915   |          |   | 56,005  |  |   | 811,920  
|2010                     |  |           | 397,914   |          |   | 8,046   |  |   | 405,960  
|                         |  |           |           |          |   |         |  |   |          
|                         |  | $         | 3,495,809 |          | $ | 362,771 |  | $ | 3,858,580
|                         |  |           |           |          |   |         |  |   |          

8. Borrowing facilities:

The Company participates with AFS and certain of its affiliates in a financing arrangement ((the Master Terms Agreement) comprised of a working capital facility to AFS, an acquisition facility and a
warehouse facility to AFS, the Company and affiliates and a venture facility available to an affiliate) with a group of financial institutions that includes certain financial and non-financial covenants. The financial arrangement is $75,000,000 and
expires in June 2007. The availability of borrowings available to the Company under this financing arrangement is reduced by the amount outstanding on any of the above mentioned facilities.

As of December 31, 2006, borrowings under the facility were as follows:



|                                                                                                                           |  |   |             |  
|-------------------------------------------------------------------------------------------------------------------------- |  | - | ----------- | -
|Total available under the financing facility                                                                               |  | $ | 75,000,000  |  
|Amount borrowed by the Company under the acquisition facility                                                              |  |   |            |  
|Amounts borrowed by affiliated partnerships and limited liability companies under the acquisition and warehouse facilities |  |   | (26,561,475 | )
|                                                                                                                           |  |   |             |  
|Total remaining available under the acquisition and warehouse facilities                                                   |  | $ | 48,438,525  |  
|                                                                                                                           |  |   |             |  

The Company is contingently liable for principal payments under the warehouse facility as borrowings are recourse
jointly and severally to the extent of the pro-rata share of the Companys net worth as compared to the aggregate net worth of certain of the affiliated partnerships and limited liability companies of the Company and including AFS and ALC
(which latter two entities are 100% liable). The Company and its affiliates pay an annual commitment fee to have access to this line of credit. As of December 31, 2006, borrowings of $3,061,475 were outstanding under the warehouse facility. The
Companys maximum obligation on the outstanding warehouse balance at December 31, 2006 was approximately $316,876.



28



---

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS



8. Borrowing facilities (continued):



The interest rate on the Master Terms Agreement is based on either the LIBOR/Eurocurrency rate of one, two, three, or nine month maturities
plus a lender designated spread, or the banks prime rate (i.e., reference rate), which re-prices daily. Principal amounts of loans made under the Master Terms Agreement that are repaid may be re-borrowed on the terms and subject to the
conditions set forth under the Master Terms Agreement.

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

To manage the
warehousing facility for the holding of assets prior to allocation to specific investor programs, a Warehousing Trust Agreement has been entered into by the Company, AFS, ALC, and certain of the affiliated partnerships and limited liability
companies. The warehousing facility is used to acquire and hold, on a short-term basis, certain lease transactions that meet the investment objectives of each of such entities. Each of the leasing programs sponsored by AFS and ALC currently in its
acquisition stage is a pro rata participant in the Warehousing Trust Agreement, as described below. When a program no longer has a need for short term financing provided by the warehousing facility, it is removed from participation, and as new
leasing investment entities are formed by AFS and ALC and commence their acquisition stages, these new entities will be added. As of December 31, 2006, the investment program participants were ATEL Capital Equipment Fund VII, L.P., the Company,
ATEL Capital Equipment Fund IX, LLC, ATEL Capital Equipment Fund X, LLC and ATEL Capital Equipment Fund XI, LLC. Pursuant to the Warehousing Trust Agreement, the benefit of the lease transaction assets, and the corresponding liabilities under the
warehouse borrowing facility, inure to each of such entities based upon each entitys pro-rata share in the warehousing trust estate. The pro-rata share is calculated as a ratio of the net worth of each entity over the aggregate net
worth of all entities benefiting from the warehouse trust estate, excepting that the trustees, AFS and ALC, are both liable for their pro-rata shares of the obligations based on their respective net worth, and jointly liable for the pro rata portion
of the obligations of each of the affiliated partnerships and limited liability companies participating under the borrowing facility. Transactions are financed through this warehousing facility only until the transactions are allocated to a specific
program for purchase or are otherwise disposed by AFS and ALC. When a determination is made to allocate the transaction to a specific program for purchase by the program, the purchaser repays the debt associated with the asset, either with cash or
by means of the acquisition facility financing, the asset is removed from the warehouse facility collateral, and ownership of the asset and any debt obligation associated with the asset are assumed solely by the purchasing entity.

As of December 31, 2006, the Company had no amounts outstanding under the acquisition facility and was removed as a party to the agreement on January 31, 2007.

9. Receivables funding program:

In 1999, the Company
established a $40 million receivables funding program (which was subsequently increased to a maximum of $125 million in July 2000) 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 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 January 2002. The receivables funding program terminated in January 2007.

The receivables funding program provides for borrowing at a variable interest rate and requires the Company, to enter into interest rate swap agreements with certain
hedge counterparties (also rated A1/P1) to mitigate the interest rate risk associated with a variable interest rate note. The Company anticipates that this program will allow a more cost effective means of obtaining debt financing than available for
individual non-recourse debt transactions.

As of December 31, 2006, the Company receives or pays interest on a notional principal of $8,740,261,
based on the



29



---

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS



9. Receivables funding program (continued):



difference between nominal rates ranging from 4.35% to 7.72% and the variable rate under the Program of 5.76% at December 31, 2006. No actual borrowing
or lending is involved. The termination of swaps was 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. Through the swap agreements, the interest rates on the borrowings have been effectively fixed. 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. The interest rate swaps are carried at fair value on the balance sheet with unrealized gain/loss included in the statement of operations in other income or loss.

The interest rate swaps were originally designated as cash flow hedges of the interest payment on the long term debt. During August 2004, an additional repayment of debt was made under the receivables funding program.
As a result of this payment and subsequent additional repayments, the swaps were deemed to be ineffective and the Company de-designated the original hedge relationships effective September 30, 2004. Prior to this de-designation, changes in the
fair value of the swaps were recognized in accumulated other comprehensive loss (AOCL). Subsequent to this de-designation, changes in fair value of the swaps were reflected in the statement of operations in other income/loss, net. In
addition, amounts remaining in AOCL subsequent to the de-designation of the swaps are to be reclassified into earning in a manner consistent with the earnings pattern of the previously hedged expected interest payments. During the years ended
December 31, 2006 and 2005, AOCL decreased by $139,942 and $585,993, respectively, related to the reclassification of AOCL to earnings (included in interest expense).

In 2006, the receivable funding program was repaid. In order to maintain the availability of the program, the Company is required to make payments of standby fees. These fees totaled $6,818 and $40,593 in 2006 and
2005, respectively, and are included in interest expense in the Companys statement of operations.

Borrowings under the program are as follows:



|              |  |                          |             |                           |   |                                   |  |                              |           |  |                                         |          |   |  |      |  
|------------- |  | ------------------------ | ----------- | ------------------------- | - | --------------------------------- |  | ---------------------------- | --------- |  | --------------------------------------- | -------- | - |  | ---- | -
|Date Borrowed |  | Original Amount Borrowed |             | Balance December 31, 2006 |   | Notional BalanceDecember 31, 2006 |  | Swap Value December 31, 2006 |           |  | Payment Rate On Interest Swap Agreement |         
|11/11/99      |  | $                        | 20,000,000  |                           | $ |                                  |  | $                            |          |  | $                                       |         |   |  | 6.84 | %
|12/21/1999    |  |                          | 20,000,000  |                           |   |                                  |  |                              | 6,033,791 |  |                                         | (144,319 | ) |  | 7.41 | %
|12/24/1999    |  |                          | 25,000,000  |                           |   |                                  |  |                              | 79,498    |  |                                         | (452     | ) |  | 7.44 | %
|4/17/2000     |  |                          | 6,500,000   |                           |   |                                  |  |                              | 58,918    |  |                                         | (397     | ) |  | 7.45 | %
|4/28/2000     |  |                          | 1,900,000   |                           |   |                                  |  |                              | 20,686    |  |                                         | (70      | ) |  | 7.72 | %
|8/3/2000      |  |                          | 19,000,000  |                           |   |                                  |  |                              | 1,698,819 |  |                                         | (18,096  | ) |  | 7.50 | %
|10/31/2000    |  |                          | 7,500,000   |                           |   |                                  |  |                              | 478,033   |  |                                         | (2,748   | ) |  | 7.13 | %
|1/29/2001     |  |                          | 8,000,000   |                           |   |                                  |  |                              |          |  |                                         |         |   |  | 5.91 | %
|6/1/2001      |  |                          | 2,000,000   |                           |   |                                  |  |                              |          |  |                                         |         |   |  | 5.04 | %
|9/1/2001      |  |                          | 9,000,000   |                           |   |                                  |  |                              | 370,516   |  |                                         | 3,889    |   |  | 4.35 | %
|1/31/2002     |  |                          | 3,900,000   |                           |   |                                  |  |                              |          |  |                                         |         |   |  | *    |  
|              |  |                          |             |                           |   |                                   |  |                              |           |  |                                         |          |   |  |      |  
|              |  | $                        | 122,800,000 |                           | $ |                                  |  | $                            | 8,740,261 |  | $                                       | (162,193 | ) |  |      |  
|              |  |                          |             |                           |   |                                   |  |                              |           |  |                                         |          |   |  |      |  

The receivables funding program discussed above includes certain financial and non-financial covenants applicable
to each borrower. The Company and affiliates were not in compliance with certain non-financial covenants as of December 31, 2006. The Managing Member, on behalf of all borrowers, requested and received a waiver of this covenant from the
lenders.

10. Commitments:

At December 31, 2006,
the Company had no commitments to purchase lease assets.

11. Guarantees:

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



30



---

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS



11. Guarantees (continued):



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

12. Members capital:

As of December 31, 2006, 13,560,188
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 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 2006 and 2005. The amounts allocated were determined so as to bring AFSs ending capital account balance to zero at the end of the year.

The Managing Member voluntarily reduced the carried interest percentage to 6.0% for 2006. The rate was reset to 7.5% beginning at January 31, 2007. If the Managing Member had received payments based on a 7.5%
carried interest rate, it would have received $1,000,779 in distributions instead of $787,848.



31



---

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

As reported on Form 8-K dated February 9, 2007, the Company dismissed Ernst & Young LLP (E&Y) as its independent registered public accounting firm effective February 5, 2007. E&Y continues to
be engaged by the Company to perform tax services.

E&Ys report on the Companys financial statements for the year ended December 31, 2005,
the Companys most recent fiscal year for which an independent accountants report has been issued on its financial statements, did not contain an adverse opinion or disclaimer of opinion, nor was it qualified or modified as to
uncertainty, audit scope or accounting principles. During the Companys fiscal years ended December 31, 2005 and 2006, and the subsequent interim period through February 5, 2007, the date of E&Ys dismissal, there were no disagreements
with E&Y on any matters of accounting principles or practices, financial statement disclosure or auditing scope or procedure.

Also effective as of
February 5, 2007, the Board approved the engagement of, and appointed, the firm of Moss Adams LLP as independent registered public accounting firm for its fiscal year ended December 31, 2006.



|Item 8A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

Evaluation of disclosure controls
and procedures

The Companys Managing Members Chief Executive Officer, and Executive Vice President and Chief Financial and Operating
Officer evaluated the effectiveness of the Companys disclosure controls and procedures (as defined in Rules 13a-15(d) and 15(e) under the Securities Exchange Act of 1934) during and as of the period covered by this report. Based on this
evaluation, the Chief Executive Officer and Executive Vice President and Chief Financial and Operating Officer concluded that at December 31, 2006, certain controls were ineffective and thus there was a material weakness in the Companys
internal control over financial reporting.

The Company does not control the financial reporting process, and is dependent on the Managing Member, who is
responsible for providing the Company with financial statements in accordance with generally accepted accounting principles. The Managing Members disclosure controls and procedures over the: a) application of generally accepted accounting
principles for leasing transactions (specifically, timely identification and recording of impairment of leased assets, accumulating and capitalizing costs for initiating leases (IDC), and properly amortizing costs associated with the
initiation of a lease); b) allocation of cost reimbursements to Managing Member; c) process of identifying and estimating liabilities in the correct period; and d) financial statement close process; and evaluating the relative significance of
misstatements, were determined to be ineffective and constitute material weaknesses in internal control over financial reporting.

Changes in
internal control

The Managing Member has reviewed the material weaknesses and has taken the following steps to address the above mentioned issues:

With regard to the timely identification and recording of impairment of leased assets, the Managing Member has strengthened its quarterly impairment
analysis through additional management review of the analysis.

With regard to IDC, the accounting guidance has been reviewed, and a standard cost model
(the Model) has been developed that includes quarterly reviews from management. Information from the model drives the rates to be capitalized on a lease by lease basis. IDC is amortized over the term of the lease based on a straight-line
basis for operating leases and on the effective interest method for financing transactions.

With regard to the allocations of costs and expenses incurred
by the Managing Member, the allocation process has been reviewed and the costs and expenses have been properly allocated in accordance with the Operating Agreement.

With regard to identifying and estimating liabilities in the correct period the Managing Member has performed a detailed review to identify and record the liabilities, in the correct period. A standardized quarterly
review process has been implemented to ensure the identification and estimation of the liabilities.

The Managing Member has taken the following steps to
mitigate the weakness regarding its financial statement close process: a Chief Accounting Officer and an SEC reporting manager have been hired, and the controller position has been split into two separate roles to ensure proper management of the
Managing Member and the managed Funds accounting operations. Controls and job functions are being redesigned to increase the documentation of processes and transparency of procedures going forward.



32



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PART III



|Item 9. | DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
|------- | ------------------------------------------------------------------------------------------------------------------

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

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

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

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



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

Dean L. Cash, age 56, joined ATEL as director of marketing in 1980 and has been a vice president since 1981,
executive vice president since 1983 and a director since 1984. He has been President and CEO since April 2001. Prior to joining ATEL, Mr. Cash was a senior marketing representative for Martin Marietta Corporation, data systems division, from
1979 to 1980. From 1977 to 1979, he was employed by General Electric Corporation, where he was an applications specialist in the medical systems division and a marketing representative in the information services division. Mr. Cash was a
systems engineer with Electronic Data Systems from 1975 to 1977, and was involved in maintaining and developing software for commercial applications. Mr. Cash received a B.S. degree in psychology and mathematics in 1972 and an M.B.A. degree
with a concentration in finance in 1975 from Florida State University. Mr. Cash is an arbitrator with the American Arbitration Association.

Paritosh
K. Choksi, age 54, joined ATEL in 1999 as a director, senior vice president and its chief financial officer. He became its executive vice president and CFO/COO in April 2001. Prior to joining ATEL, Mr. Choksi was chief financial officer at Wink
Communications, Inc. from 1997 to 1999. From 1977 to 1997, Mr. Choksi was with Phoenix American Incorporated, a financial services and management company, where he held various positions during his tenure, and was senior vice president, chief
financial officer and director when he left the company. Mr. Choksi was involved in all corporate matters at Phoenix and was responsible for Phoenixs capital market needs. He also served on the credit committee overseeing all corporate
investments, including its venture lease portfolio. Mr. Choksi was a part of the executive management team which caused Phoenixs portfolio to increase from $50 million in assets to over $2 billion. Mr. Choksi is a member of the board
of directors of Syntel, Inc. Mr. Choksi received a bachelor of technology degree in mechanical engineering from the Indian Institute of Technology, Bombay; and an M.B.A. degree from the University of California, Berkeley.

Vasco H. Morais, age 48, 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



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from the University of California in Berkeley, a J.D. degree in 1986 from Golden Gate University Law School and an M.B.A. (Finance) in 1997 from Golden Gate
University. Mr. Morais has been an active member of the State Bar of California since 1986.

Audit Committee

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

Section 16(a) Beneficial Ownership Reporting Compliance

Based solely on a review of Forms 3, 4, and 5, the Company is not aware of any failures to file reports of beneficial ownership required to be filed during or for the year ended December 31, 2006.

Code of Ethics

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



|Item 10. | EXECUTIVE COMPENSATION
|-------- | ----------------------

The registrant has no officers or
directors.

Set forth hereinafter is a description of the nature of remuneration paid and to be paid to ATEL and its Affiliates. The amount of such
remuneration paid in 2006 is set forth in Item 7 of this report under the caption Financial Statements and Supplementary DataNotes to the Financial StatementsRelated party transactions, at Note 7 thereof, which
information is hereby incorporated by reference.

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

AFS 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



34



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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 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.

An Equipment Re-Leasing Fee, in connection with the releasing of Equipment to lessees other than previous lessees or their affiliates, will
be calculated 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.

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.

Managing Members Interest in Operating Proceeds

As defined in the Limited Liability Company Operating Agreement (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 Operating Agreement, additional allocations of income were made to AFS in 2006 and 2005. 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 7, Part I of this report for amounts allocated to AFS in 2006 and 2005.



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

Security Ownership of Certain Beneficial Owners

At December 31, 2006, no investor is known to hold
beneficially more than 5% of the issued and outstanding Units.

Security Ownership of Management

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



|                                |  |                                                                             |  |                                                                         |  |                     
|------------------------------- |  | --------------------------------------------------------------------------- |  | ----------------------------------------------------------------------- |  | --------------------
|(1) Title of Class              |  | (2) Name and Address of Beneficial Owner                                    |  | (3) Amount and Nature of Beneficial Ownership                           |  | (4) Percent of Class
|Limited Liability Company Units |  | ATEL Capital Group 600 California Street, 6th Floor San Francisco, CA 94108 |  | Initial Limited Liability Company Units 25 Units ($250) (owned by wife) |  | 0.0002%             

Changes in Control

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

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



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

The responses to
Item 1 of this report under the caption Equipment Leasing Activities, Item 7 of this report under the caption Financial Statements and Supplemental DataNotes to the Financial StatementsRelated party
transactions at Note 6 thereof, and Item 10 of this report under the caption Executive Compensation, are hereby incorporated by reference.



|Item 13. | EXHIBITS
|-------- | --------

The following exhibits are included with or incorporated
into this report:



|              |  |                                                                       
|------------- |  | ----------------------------------------------------------------------
|ExhibitNumber |  | Description of Exhibit                                                
|14.1          |  | Code of Ethics                                                        
|              | 
|31.1          |  | Rule 13a-14(a)/ 15d-14(a) Certification of Dean L. Cash               
|              | 
|31.2          |  | Rule 13a-14(a)/ 15d-14(a) Certification of Paritosh K. Choksi         
|              | 
|32.1          |  | Certification Pursuant to 18 U.S.C. section 1350 of Dean L. Cash      
|              | 
|32.2          |  | Certification Pursuant to 18 U.S.C. section 1350 of Paritosh K. Choksi



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

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



|                   |  |      |         |      |   |        
|------------------ |  | ---- | ------- | ---- | - | -------
|                   |  | 2006 |         | 2005
|Audit fees         |  | $    | 131,466 |      | $ | 162,033
|Audit related fees |  |      | 179,503 |      |   |       
|Tax fees           |  |      |        |      |   | 27,242 
|                   |  |      |         |      |   |        
|                   |  | $    | 310,969 |      | $ | 189,275
|                   |  |      |         |      |   |        

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.



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SIGNATURES

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

Date: July 23, 2007



|    |  |                                                    |  |     |  |                                                                                                                     
|--- |  | -------------------------------------------------- |  | --- |  | --------------------------------------------------------------------------------------------------------------------
|    |  | ATEL Capital Equipment Fund VIII, LLC (Registrant)
|By: |  | ATEL Financial Corporation                         |  |     |  |                                                                                                                     
|    |  | 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 and Chief Financial and Operating Officer of ATEL Financial Services, LLC (Managing Member)

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



|                                          |  |                                                                                                                      |  |              
|----------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------- |  | -------------
|SIGNATURE                                 |  | CAPACITIES                                                                                                           |  | DATE         
|                                          |  |                                                                                                                     
|/s/ Dean L. Cash Dean Cash                |  | President and Chief Executive Officer of ATEL Financial Services, LLC (Managing Member)                              |  | July 23, 2007
|                                          |  |                                                                                                                     
|/s/ Paritosh K. Choksi Paritosh K. Choksi |  | Executive Vice President and Chief Financial and Operating Officer of ATEL Financial Services, LLC (Managing Member) |  | July 23, 2007

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



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