**United      States**

**SECURITIES      AND EXCHANGE COMMISSION**

**FORM      10-K**

**ANNUAL      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934**

**TRANSITION      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934**

**LEASE      EQUITY APPRECIATION FUND II, L.P.**

| Delaware                                                                      |   | 20-1056194                                          |
|-------------------------------------------------------------------------------|--------|-----------------------------------------------------|
| (State                or other jurisdiction of incorporation or organization) |   | (I.R.S.                Employer Identification No.) |

**Securities      registered pursuant to Section 12 (b) of the Act:**

| Title                of Each Class |   | Name                of Each Exchange on Which Registered |
|------------------------------------|--------|----------------------------------------------------------|
| None                          |   | Not                applicable                            |

**Securities      registered pursuant to Section 12 (g) of the Act:**

**Title      of Each Class**

**DOCUMENTS      INCORPORATED BY REFERENCE**

----

Back          to Index

**LEASE      EQUITY APPRECIATION FUND II, L.P.**

**INDEX      TO ANNUAL REPORT**** **

**ON      FORM 10-K**

|                                                                                                                                                                                                                                                     |                       |                                                                                                                                        | **Page**                                        |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------|
| **PART                I**                                                                                                                                                                                                                                |                       |                                                                                                                                        |                                            |
|                                                                                                                                                                                                                                                     | ITEM                1:     | Business                                                                                                                                    |                      3 |
|                                                                                                                                                                                                                                                     | ITEM                1A:    | Risk                Factors                                                                                                                 |                      9 |
|                                                                                                                                                                                                                                                     | ITEM                2:     | Properties                                                                                                                                  |     19                      |
|                                                                                                                                                                                                                                                     | ITEM                3:     | Legal                Proceedings                                                                                                            |     19                      |
|                                                                                                                                                                                                                                                     | ITEM                4:     | Submission                of Matters to a Vote of Security                Holders                                                           |     19                      |
| **PART                II**                                                                                                                                                                                                                               |                       |                                                                                                                                        |                                            |
|                                                                                                                                                                                                                                                     | ITEM                5:     | Market                for Registrant's Common Equity and Related Stockholder Matters                                                        |     20                      |
|                                                                                                                                                                                                                                                     | ITEM                6:     | Selected                Financial Data                                                                                                      |     21                      |
|                                                                                                                                                                                                                                                     | ITEM                7:     | Management’s                Discussion and Analysis of Financial Condition and Results                of Operation                    |     22                      |
|                                                                                                                                                                                                                                                     | ITEM                7A:    | Quantitative                and Qualitative Disclosures about Market                Risk                                                    |     26                      |
|                                                                                                                                                                                                                                                     | ITEM                8:     | Financial                Statements and Supplementary                Data                                                                   |     27                      |
|                                                                                                                                                                                                                                                     | ITEM                9:     | Changes                in and Disagreements with Accountants on Accounting and                Financial Disclosure                          |     42                      |
|                                                                                                                                                                                                                                                     | ITEM                9A:    | Controls                and Procedures                                                                                                      |     42                      |
|                                                                                                                                                                                                                                                     | ITEM                9B:    | Other                Information                                                                                                            |     42                      |
| **PART                III**                                                                                                                                                                                                                              |                       |                                                                                                                                        |                                            |
|                                                                                                                                                                                                                                                     | ITEM                10:    | Directors                and Executive Officers of the                Registrant                                                            |     42                      |
|                                                                                                                                                                                                                                                     | ITEM                11:    | Executive                Compensation                                                                                                       |     44                      |
|                                                                                                                                                                                                                                                     | ITEM                12:    | Security                Ownership of Certain Beneficial Owners and                Management and                Related Unit Holder Matters |     44                      |
|                                                                                                                                                                                                                                                     | ITEM                13:    | Certain                Relationships and Related                Transactions                                                                |     45                      |
|                                                                                                                                                                                                                                                     | ITEM                14:    | Principal                Accountant Fees and Services                                                                                       |     45                      |
| **PART                IV**                                                                                                                                                                                                                               |                       |                                                                                                                                        |                                            |
|                                                                                                                                                                                                                                                     | ITEM                15:    | Exhibits,                Financial Statement Schedules                                                                                      |     46                      |
| **SIGNATURES**                                                                                                                                                                                                                                           |     47 |
| Supplemental                Information to be Furnished With Reports Filed Pursuant to Section                15(d)                of the Act by Registrants Which Have Not Registered Securities to                Section                12 of the Act |                       |

----

Back          to Index

**Forward-Looking      Statements**

**THE      FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS REGARDING EVENTS AND      FINANCIAL TRENDS WHICH MAY AFFECT THE REGISTRANT’S FUTURE OPERATING RESULTS AND      FINANCIAL POSITION. SUCH STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES      THAT      COULD CAUSE THE REGISTRANT’S ACTUAL RESULTS AND FINANCIAL POSITION TO DIFFER      MATERIALLY FROM THOSE ANTICIPATED IN SUCH STATEMENTS. FOR A MORE COMPLETE      DISCUSSION OF THE RISKS AND UNCERTAINTIES TO WHICH THE REGISTRANT IS SUBJECT;      SEE ITEM 1A “RISK FACTORS.”**

**PART      I**

**ITEM      1 − BUSINESS**

| ·   | 500                or fewer employees; |
|--------------------|----------------------------------------|
| ·   | $1                billion or less in total assets; or |
|--------------------|-------------------------------------------------------|
| ·   | $100                million or less in total annual                sales. |
|--------------------|---------------------------------------------------------------------------|

----

Back          to Index

**Our      Lease Portfolio **

| **Direct                  Financing Leases and Notes** |   |                                   |    |           |   |
|--------------------------------------------------------|--------|----------------------------------------|---------|----------------|--------|
|                                                   |   | **December                  31, 2006** |    |           |   | **December                  31, 2005** |   |
| **Type                  of Equipment**                 |   | **Net                  Investment**    |    | **Percentage** |   | **Type                  of Equipment** |   | **Net                  Investment** |   |  **Percentage** |   |
| Computers                                              |   | $                                      | 70,412  |           |   | 22.9 | % |   | Computers |   | $ | 12,975 |   |   | 34.2 | % |
| Medical                  Equipment                     |   |                                   | 69,632  |           |   | 22.6 |   |   | Medical                  Equipment |   |   | 6,794 |   |   | 17.9 |   |
| Industrial                  Equipment                  |   |                                   | 60,046  |           |   | 19.5 |   |   | Industrial                  Equipment |   |   | 6,087 |   |   | 16.1 |   |
| Office                  Equipment                      |   |                                   | 20,814  |           |   | 6.8 |   |   | Office                  Equipment |   |   | 2,789 |   |   | 7.4 |   |
| Garment                  Care                          |   |                                   | 19,463  |           |   | 6.3 |   |   | Software |   |   | 2,536 |   |   | 6.7 |   |
| Restaurant                  Equipment                  |   |                                   | 16,761  |           |   | 5.5 |   |   | Building                  systems |   |   | 1,877 |   |   | 5.0 |   |
| Software                                               |   |                                   | 14,334  |           |   | 4.7 |   |   | Restaurant                  Equipment |   |   | 1,570 |   |   | 4.1 |   |
| Communications                                         |   |                                   | 11,614  |           |   | 3.8 |   |   | Garment                  Care |   |   | 1,469 |   |   | 3.9 |   |
| Building                  systems                      |   |                                   | 9,930   |           |   | 3.2 |   |   | Communications |   |   | 980 |   |   | 2.6 |   |
| Other                                                  |   |                                   | 14,547  |           |   | 4.7 |   |   | Agriculture |   |   | 812 |   |   | 2.1 |   |
|                                                   |   | $                                      | 307,553 |           |   | 100.0 | % |   |   |   | $ | 37,889 |   |   | 100.0 | % |

| **Operating                Leases**  |   |                                 |   |                 |   |                                 |   |
|--------------------------------------|--------|--------------------------------------|--------|----------------------|--------|--------------------------------------|--------|
|                                 |   | **December                31, 2006** |   |                 |   | **December                31, 2005** |   |
| **Type                of Equipment** |   | **Net                Investment**    |   |  **Percentage** |   | **Type                of Equipment** |   | **Net                Investment** |   |  **Percentage** |   |
| Computers                            |   | $                                    | 4,254  |                 |   | 29.4                                 | %      |   | Communications |   | $ | 1,248 |   |   | 28.6 | % |
| Industrial                Equipment  |   |                                 | 3,667  |                 |   | 25.4                                 |   |   | Office                Equipment |   |   | 1,111 |   |   | 25.5 |   |
| Communications                       |   |                                 | 2,780  |                 |   | 19.3                                 |   |   | Industrial                Equipment |   |   | 1,070 |   |   | 24.5 |   |
| Office                Equipment      |   |                                 | 2,247  |                 |   | 15.6                                 |   |   | Computers |   |   | 646 |   |   | 14.8 |   |
| Medical                Equipment     |   |                                 | 858    |                 |   | 5.9                                  |   |   | Medical                Equipment |   |   | 255 |   |   | 5.9 |   |
| Restaurant                Equipment  |   |                                 | 237    |                 |   | 1.6                                  |   |   | Building                systems |   |   | 29 |   |   | 0.7 |   |
| Building                systems      |   |                                 | 154    |                 |   | 1.1                                  |   |   | Agriculture |   |   | − |   |   | − |   |
| Garment                Care          |   |                                 | 69     |                 |   | 0.5                                  |   |   |   |   | $ | 4,359 |   |   | 100.0 | % |
| Software                             |   |                                 | 25     |                 |   | 0.2                                  |   |   |   |   |   |   |   |   |   |   |
| Other                                |   |                                 | 148    |                 |   | 1.0                                  |   |   |   |   |   |   |   |   |   |   |
|                                 |   | $                                    | 14,439 |                 |   | 100.0                                | %      |   |   |   |   |   |   |   |   |   |

----

Back          to Index

| **Direct                Financing Leases and Notes** |   |                                 |    |                 |   |
|------------------------------------------------------|--------|--------------------------------------|---------|----------------------|--------|
|                                                 |   | **December                31, 2006** |    |                 |   | **December                31, 2005** |   |
| **Type                of Business**                  |   | **Net                Investment**    |    |  **Percentage** |   | **Type                of Business** |   | **Net                Investment** |   |  **Percentage** |   |
| Services                                             |   | $                                    | 167,652 |                 |   | 54.5 | % |   | Services |   | $ | 21,398 |   |   | 56.4 | % |
| Retail                Trade                          |   |                                 | 41,493  |                 |   | 13.5 |   |   | Retail                Trade |   |   | 4,543 |   |   | 12.0 |   |
| Manufacturing                                        |   |                                 | 31,312  |                 |   | 10.2 |   |   | Manufacturing |   |   | 2,900 |   |   | 7.7 |   |
| Agriculture/Forestry/Fishing                         |   |                                 | 12,958  |                 |   | 4.2 |   |   | Wholesale                Trade |   |   | 2,087 |   |   | 5.5 |   |
| Transportation/Communication/Energy                  |   |                                 | 11,386  |                 |   | 3.7 |   |   | Finance/Insurance/Real                Estate |   |   | 1,458 |   |   | 3.8 |   |
| Construction                                         |   |                                 | 11,169  |                 |   | 3.6 |   |   | Transportation/Communication/Energy |   |   | 1,430 |   |   | 3.8 |   |
| Wholesale                Trade                       |   |                                 | 10,232  |                 |   | 3.3 |   |   | Construction |   |   | 1,218 |   |   | 3.2 |   |
| Finance/Insurance/Real                Estate         |   |                                 | 9,533   |                 |   | 3.1 |   |   | Public                Administration |   |   | 912 |   |   | 2.4 |   |
| Public                Administration                 |   |                                 | 1,248   |                 |   | 0.4 |   |   | Agriculture/Forestry/Fishing |   |   | 865 |   |   | 2.3 |   |
| Other                                                |   |                                 | 10,570  |                 |   | 3.5 |   |   | Other |   |   | 1,078 |   |   | 2.9 |   |
|                                                 |   | $                                    | 307,553 |                 |   | 100.0 | % |   |   |   | $ | 37,889 |   |   | 100.0 | % |

| **Operating                Leases**          |   |                                 |   |                 |   |
|----------------------------------------------|--------|--------------------------------------|--------|----------------------|--------|
|                                         |   | **December                31, 2006** |   |                 |   | **December                31, 2005** |   |
| **Type                of Business**          |   | **Net                Investment**    |   |  **Percentage** |   | **Type                of Business** |   | **Net                Investment** |   |  **Percentage** |   |
| Services                                     |   | $                                    | 6,371  |                 |   | 44.1 | % |   | Services |   | $ | 1,664 |   |   | 38.1 | % |
| Construction                                 |   |                                 | 3,940  |                 |   | 27.3 |   |   | Construction |   |   | 977 |   |   | 22.4 |   |
| Manufacturing                                |   |                                 | 1,613  |                 |   | 11.2 |   |   | Manufacturing |   |   | 683 |   |   | 15.7 |   |
| Public                Administration    |   |                                 | 621    |                 |   | 4.3 |   |   | Mining |   |   | 281 |   |   | 6.5 |   |
| Wholesale                Trade               |   |                                 | 494    |                 |   | 3.4 |   |   | Finance/Insurance/Real                Estate |   |   | 264 |   |   | 6.1 |   |
| Finance/Insurance/Real                Estate |   |                                 | 481    |                 |   | 3.3 |   |   | Retail                Trade |   |   | 215 |   |   | 4.9 |   |
| Transportation/Communication/Energy          |   |                                 | 414    |                 |   | 2.9 |   |   | Wholesale                Trade |   |   | 105 |   |   | 2.4 |   |
| Retail                Trade                  |   |                                 | 327    |                 |   | 2.3 |   |   | Public                Administration |   |   | 92 |   |   | 2.1 |   |
| Agriculture/Forestry/Fishing                 |   |                                 | 113    |                 |   | 0.8 |   |   |   |   |   |   |   |   |   |   |
| Other                                   |   |                                 | 65     |                 |   | 0.4 |   |   | Transportation/Communication/Energy |   |   | 78 |   |   | 1.8 |   |
|                                         |   | $                                    | 14,439 |                 |   | 100.0 | % |   |   |   | $ | 4,359 |   |   | 100.0 | % |

----

Back          to Index

|                                                                         |   | **December                31,** |      |
|------------------------------------------------------------------------------|--------|---------------------------------|-----------|
|                                                                         |   | **2006**                        |      | **2005** |   |
| Balance                at beginning of year                                  |   | $                               | 130,000   |   | $ | − |   |
| Provision                for credit losses                                   |   |                            | 1,028,886 |   |   | 130,000 |   |
| Allowance                for possible losses, in connection with acquisition |   |                            | 920,000   |   |   | − |   |
| Net                write-offs                                                |   |                            | (957,586  | ) |   | − |   |
| Balance                at end of year                                        |   | $                               | 1,121,300 |   | $ | 130,000 |   |

**Debt      Facilities**

----

Back            to Index

**Agreements      with our General Partner**

|   | · | our                General Partner has a partnership interest equal to 1% of all of                our                taxable income, losses and cash distributions. Cash distributions                paid to                our General Partner in the year ended December 31, 2006 and the period                ended December 31, 2005 were $26,277 and $3,327,                respectively; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our                General Partner receives an organization and offering expense allowance                of                3% of offering proceeds to reimburse it for expenses incurred in                preparing                us for registration or qualification under federal and state securities                laws and subsequently offering and selling our units. This expense                allowance does not cover underwriting fees or sales commissions,                but does                cover reimbursement of bona fide accountable due diligence expenses                of                selling dealers to a maximum of 1/2 of 1% of offering proceeds.                Organization and offering expenses reimbursed to the General Partner                for                the year ended December 31, 2006 and period ended December 31, 2005                were                $1,675,926 and $419,268,                respectively; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our                General Partner receives fees for acquiring our equipment of 2% of                the                purchase price we pay, including debt we incur or assume in connection                with the acquisition. Fees for acquiring our equipment paid to our                General                Partner for the year ended December 31, 2006 and the period ended                December                31, 2005 were $2,648,001 and $870,122, respectively; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our                General Partner receives a subordinated annual asset management fee                of                either 4% of gross rental payments on our operating leases or 2%                of gross                rental payments on our full payout leases and notes. During the five-year                reinvestment period, the management fee will be subordinated to the                payment to limited partners of a cumulative annual distribution of                8% of                their capital contributions, as adjusted by distributions deemed                to be a                return of capital. Asset management fees paid to the General Partner                for                the year ended December 31, 2006 and the period ended December 31,                2005                were $1,592,389 and $140,001,                respectively; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our                General Partner will receive a subordinated commission equal to one-half                of a competitive commission, to a maximum of 3% of the contract sales                price, for arranging the sale of our equipment after the expiration                of a                lease. This commission will be subordinated to the return to our                Limited                Partners of the purchase price of their units plus a cumulative annual                distribution, compounded daily, of 8% of their capital contributions,                as                adjusted by distributions deemed to be a return of capital. No commissions                were paid in the year ended December 31, 2006 and the period ended                December 31, 2005; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our                General Partner will receive a commission equal to the lesser of                a                competitive rate or 2% of gross rental payments derived from any                re-lease                of equipment, payable as we receive rental payments from re-lease.                We will                not, however, pay a re-lease commission if the re-lease is with the                original lessee or its affiliates. No re-lease commissions were paid                in                the year ended December 31, 2006 and the period ended December 31,                2005; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our                General Partner is reimbursed for operating and administrative expenses,                subject to limitations contained in our partnership agreement. Reimbursed                administrative expenses paid to our General Partner for the year                ended                December 31, 2006 and the period ended December 31, 2005 were $871,074                and                $339,926, respectively; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Back          to Index

|   | · | Anthem                Securities, Inc., (“Anthem Securities”) which was the dealer-manager for                the offering of our units and an affiliate of our General Partner,                received an underwriting fee of 3% of the offering proceeds for obtaining                and managing the group of broker-dealers who sold the units in this                offering. From this fee, Anthem Securities may reimburse selling                broker-dealers up to 1% of the proceeds of each unit sold by them                for                marketing expenses. Anthem Securities received sales commissions                of 7% of                the proceeds of each unit sold by it. Underwriting fees paid to Anthem                Securities for the year ended December 31, 2006 and the period ended                December 31, 2005 were $1,404,932 and $358,707, respectively. Anthem                Securities did not directly sell any units to investors and did not                retain                sale commissions for the year ended December 31, 2006 and the period                ended                December 31, 2005. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Competition**

|   | · | a                large number of national, regional and local banks, savings banks,                leasing                companies and other financial institutions; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | captive                finance and leasing companies affiliated with major equipment                manufacturers; and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------|

|   | · | other                sources of equipment lease financing, including other publicly- offered                partnerships. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|

**Employees**

----

Back          to Index

**ITEM      1A - RISK FACTORS**

*This      report does not constitute an offer to sell our units or a solicitation of      an      offer to buy our units.*

*Units      of limited partner interest are inherently different from capital stock of      a      corporation, although *
*many      of the business risks to which we are subject are similar to those that would      be      faced by a *
*corporation      engaged in a similar business. You should consider the following risk factors      together with all of the other information included in this report in evaluating      the likelihood that we can attain our investment objectives. If any of the      *
*following      risks actually occurs, our business, financial condition or results of      operations could be materially adversely affected. In that case, our limited      partners may lose some or all of their investment. *

**We      may not return all of our limited partners’ investment or any rate of return on      their investment. **

**Our      **
**General      Partner will manage us and our business and may make decisions with which our      limited partners do not agree.**

**Because      the composition of our investment portfolio changes from time to time, our      limited partners cannot evaluate **
**our      entire portfolio at any given time **

**Higher      than expected equipment lease defaults may result in losses.**

|   | · | we                may experience difficulties and delays in recovering the                equipment from the defaulting                lessee; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                equipment may be returned in poor condition;                and |
|--------|--------|------------------------------------------------------------------------------------|

----

Back          to Index

|   | · | we                may be unable                to enforce important lease provisions against an insolvent lessee,                including the contract provisions that require the lessee to return                the                equipment in good condition. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | enforcing                the lessee's obligations under the                lease; |
|--------|--------|-----------------------------------------------------------------------------------|

|   | · | recovering                equipment on                a lessee's default; |
|--------|--------|---------------------------------------------------------------------------|

|   | · | transporting,                storing, and repairing the equipment; and |
|--------|--------|------------------------------------------------------------------------|

|   | · | finding                a new lessee or purchaser for the equipment. |
|--------|--------|---------------------------------------------------------------------|

**If      we are unable to realize the residual value of our equipment, we may incur      losses. **

|   | · | whether                the original lessee wants to keep the                equipment; |
|--------|--------|----------------------------------------------------------------------------------------|

|   | · | the                cost of comparable new equipment; |
|--------|--------|------------------------------------------------------|

|   | · | the                obsolescence or poor condition of the leased equipment;                and |
|--------|--------|-----------------------------------------------------------------------------------------------|

|   | · | the                existence of a secondary market for the type of used                equipment. |
|--------|--------|---------------------------------------------------------------------------------------------------|

**Using      “leverage” to build our portfolio subjects us to the risk that our revenues may      not be sufficient **
**to      cover our operating costs plus debt service and, consequently, may result in      losses. **

----

Back          to Index

**Cost      reimbursements and significant fees we pay to our General Partner, and reserves      our General Partner establishes, reduce our cash available for distribution.      **

**Our      limited partners’ ability to dispose of their investment in us is limited.**

| ·   | remaining                portion of the                five year reinvestment period; and |
|--------------------|-------------------------------------------------------------------------------------------|
| ·   | a                subsequent period of approximately three years during which we will                liquidate our assets. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------|

**Our      limited partners have very limited voting rights and ability to control our      business. **

----

Back          to Index

**Our      General Partner may be subject to various conflicts of interest arising out      of      its relationship to us. **

**Despite      our name, our leases will not have any equity appreciation and we must rely      on      lease payments from our lessees and any residual value of the equipment under      our operating leases to achieve our investment objectives.**

**Our      short operating history decreases our limited partners’ ability to evaluate      their investment. **

**If      we do not generate sufficient cash, we will not be able to pay our limited      partners 8% annual distributions or reinvest a portion of our revenues in      additional leases during the reinvestment period. **

----

Back          to Index

**Our      limited partners may not receive cash distributions from this investment in      an      amount sufficient to return their investment to them or provide a return on      their investment and the intended cash distributions may be reduced or delayed.      **

|   | · | demand                for equipment leases we provide; |
|--------|--------|--------------------------------------------------------|

|   | · | profitability                of our operations; |
|--------|--------|-------------------------------------------------|

|   | · | required                principal and interest payments on the debt we                incur; |
|--------|--------|----------------------------------------------------------------------------------------------|

|   | · | equipment                lease defaults; |
|--------|--------|------------------------------------------|

|   | · | prevailing                economic conditions; and |
|--------|--------|----------------------------------------------------|

|   | · | government                regulations. |
|--------|--------|----------------------------------------|

**If      a limited partner chooses to redeem his units he may receive much less than      if      he kept his units.**

**Our      success will be subject to risks inherent in the equipment leasing business,      any      of which may affect **
**our      ability to operate profitably. **

|   | · | changes                in economic conditions, including fluctuations in demand for equipment,                interest rates and inflation                rates; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                quality of the equipment we acquire and                lease; |
|--------|--------|----------------------------------------------------------------------------------|

|   | · | the                continuing strength of the equipment                manufacturers; |
|--------|--------|---------------------------------------------------------------------------------------|

|   | · | the                timing of equipment purchases and our ability to forecast technological                advances; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------|

|   | · | technological                and economic obsolescence; |
|--------|--------|---------------------------------------------------------|

|   | · | defaults                by lessees or borrowers; and |
|--------|--------|------------------------------------------------------|

|   | · | increases                in our expenses, including labor, tax and insurance expenses. |
|--------|--------|----------------------------------------------------------------------------------------|

**Interest      rate changes may reduce the value of our portfolio and our returns on it.**

----

Back          to Index

**Competition      from other equipment lessors could delay investment of our capital, reduce      the      creditworthiness of potential lessees or borrowers to which we have access,      or      decrease our yields.**

|   | · | a                large number of national, regional and local banks, savings banks,                leasing                companies and other financial                institutions; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | captive                finance and leasing companies affiliated with major equipment                manufacturers; and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------|

|   | · | other                sources of equipment lease financing, including other publicly-offered                partnerships. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------|

|   | · | delay                investment of our capital; |
|--------|--------|-------------------------------------------------|

|   | · | reduce                the creditworthiness of potential lessees or borrowers to which we                have                access; or |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | decrease                our yields. |
|--------|--------|-------------------------------------|

**Poor      economic conditions may adversely affect our ability to build our portfolio.      **

|   | · | reduce                our income or our distributions; |
|--------|--------|--------------------------------------------------------|

|   | · | increase                the delinquencies or defaults on our leases;                and |
|--------|--------|-----------------------------------------------------------------------------------------|

|   | · | reduce                our ability to obtain financing, or “leverage,” to build our                portfolio. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------|

**Resignation      or removal of our **
**General      Partner, or loss of key management personnel from our General      Partner**
**,      could adversely affect our ability to conduct our business or make      distributions. **

----

Back          to Index

**Our      General Partner's operating systems could be damaged or disrupted by events      beyond its control, which could interfere with our ability to conduct our      business and make us less attractive to customers as a source of equipment      leases.**

|   | · | power                loss; |
|--------|--------|----------------------------|

|   | · | telecommunications                failure; |
|--------|--------|--------------------------------------------|

|   | · | computer                intrusions; and |
|--------|--------|-----------------------------------------|

|   | · | viruses                and similar adverse events. |
|--------|--------|----------------------------------------------------|

**Our      inability to obtain insurance for certain types of losses means we must bear      the      cost of any losses from the non-insurable risks. **

**The      ability to evaluate the results of**
**      certain**
**      prior programs sponsored by our General Partner is limited, because the cash      distributions in those programs cannot be allocated between proceeds from      operations and proceeds from sales or refinancings**
**.**

**Our      limited partners could be liable for our obligations if they participate in      the      control of our business; our limited partners may be **
**required      to return improperly received distributions. **

|   | · | to                remove our General Partner; |
|--------|--------|-----------------------------------------------|

|   | · | to                approve some amendments to the partnership agreement;                or |
|--------|--------|-------------------------------------------------------------------------------------------|

|   | · | to                take other action under the partnership agreement; |
|--------|--------|----------------------------------------------------------------------|

----

Back          to Index

**Our      limited partners’ ability to begin an action against our General Partner is      limited by our partnership **
**agreement.      **

**If      we are, or become, subject to usury laws, it could result in reduced revenues      or, possibly, loss on our **
**investment.      **

**Participation      with third-parties in joint ventures may require us to pay additional costs      or      incur losses because of actions taken by the third-parties.**

|   | · | the                possibility that our co-venturer may become bankrupt or otherwise                fail to                meet its financial obligations, thereby causing us to pay our                co-venturer’s share of the joint venture’s debts, since each co-venturer                generally must guarantee all of the joint venture’s                debts; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our                co-venturer may have business or economic objectives or interests                that are                inconsistent with                ours and it may want to manage the joint venture in ways that do                not                maximize our return; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | actions                by a co-venturer might subject equipment leases owned by the joint                venture                to liabilities greater than those we contemplate;                and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | when                more than one person owns property, there may be a stalemate                on                decisions, including decisions regarding a proposed sale or other                transfer                of the assets. Although                our partnership agreement requires that any joint venture arrangement                in                which we participate must contain provisions permitting us                to                buy the assets from the other co-venturer in the case of a sale,                we may                not have the resources to                do so. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Our      limited partners may be required to pay taxes on income from us even if they      do      not receive commensurate cash distributions. **

----

Back          to Index

**Our      lack of an advance ruling from the IRS as to our classification as a partnership      or as to any other federal tax consequence of an investment in us may result      in      unforeseen tax consequences and increased tax liability. **

**If      the IRS classifies us as a corporation, our limited partners will lose tax      benefits. **

|   | · | losses                realized by us would not pass through to our limited                partners; |
|--------|--------|-----------------------------------------------------------------------------------------------------|

|   | · | we                would be taxed at income tax rates applicable to corporations, reducing                distributions to our limited partners;                and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our                limited partners’ distributions would be taxed as dividend income to the                extent of our current and accumulated earnings and                profits |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**We      could lose cost recovery or depreciation deductions if the IRS treats our      operating leases as sales or **
**financings.      **

**There      are limitations on the ability of our limited partners to deduct losses we      may      generate. **

----

Back          to Index

**Our      limited partners will likely be subject to state and local taxes as a result      of      purchasing our units. **

**An      audit of our information return by the IRS may result in adjustments to our      limited partners’ personal income tax returns and, possibly, an audit of their      returns. **

**The      investment in us may cause our limited partners to pay alternative minimum      tax.**

**A      portion of our distributions may not be treated as a return of capital for      federal income tax purposes.**

----

Back          to Index

**Tax-exempt      organizations will have unrelated business taxable income from their**
**investment.      **

**Foreign      investors will be subject to **
**U.S.      **
**tax      withholding and may be required to file **
**U.S.      **
**tax      returns. **

**Changes      in the law may reduce certain tax benefits of our limited partners’ investment      in us.**

**ITEM      2 − PROPERTIES**

**ITEM      3 − LEGAL PROCEEDINGS **

**ITEM      4 − SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

----

Back          to Index

**PART      II**

**ITEM      5 − MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**

| Offering                proceeds                        |   | $      | 59,863,676 |   |
|--------------------------------------------------------------|--------|--------|------------|--------|
| Expenses:                                                    |   |   |       |   |
| Sales                commissions (1)                    |   |   | 4,067,175  |   |
| Underwriting                fees (1)                    |   |   | 1,763,639  |   |
| Organization                and offering expenses (2)   |   |   | 2,095,194  |   |
| Public                offering expenses                 |   |   | 7,926,008  |   |
|                                                         |   |   |       |   |
| Net                offering proceeds                    |   |   | 51,937,668 |   |
| Reserves                                                |   |   | 519,377    |   |
| Total                proceeds available for investment  |   | $      | 51,418,291 |   |
|                                                         |   |   |       |   |
| Use                of proceeds for investment (estimated):   |   |   |       |   |
| Used                in operations (3)                   |   | $      | 2,943,390  |   |
| Acquisition                of lease portfolios (4)      |   | $      | 45,998,047 |   |
| Working                capital                          |   | $      | 2,476,854  |   |

----

| (1) | Paid                to Anthem Securities an affiliate of our General Partner which then                remitted all of the sales commissions and a portion of the underwriting                fees to third parties. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Paid                to the General Partner.                                                                                                                                                                          |
| (3) | The                General Partner was reimbursed $1,211,000 for operating expenses                and asset                management fees of $1,732,390.                                                           |
| (4) | Included                are asset acquisition fees of $3,518,123 that were paid to our General                Partner.                                                                                               |

----

Back          to Index

**ITEM      6 − SELECTED FINANCIAL DATA **

|                                                                                                                                 |   | **Year                Ended December 31, 2006** |       | **Period                Ended December 31, 2005** |   |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|------------|---------------------------------------------------|--------|
| Revenues                                                                                                                             |   | $                                               | 14,887,820 |                                              | $      | 1,193,648 |   |
| Expenses                                                                                                                             |   | $                                               | 14,756,416 |                                              | $      | 1,631,546 |   |
| Net                income (loss)                                                                                                     |   | $                                               | 131,404    |                                              | $      | (437,898 | ) |
| Distributions                to Partners                                                                                             |   | $                                               | 2,624,147  |                                              | $      | 332,280 |   |
| Weighted                average number of limited partnership units outstanding during                the year                       |   |                                            | 370,349    |                                              |   | 51,053 |   |
| Net                income (loss) per weighted limited partnership unit − basic and                fully                diluted |   | $                                               | 0.35       |                                              | $      | (8.49 | ) |

|                                                               |   | **As                of December 31,** |        |
|--------------------------------------------------------------------|--------|---------------------------------------|-------------|
|                                                               |   | **2006**                              |        | **2005** |   | **2004** |   |
| Total                assets                                        |   | $                                     | 346,342,332 |   | $ | 44,720,022 |   | $ | 1,001 |   |
| Net                investment in direct financing leases and notes |   | $                                     | 306,431,395 |   | $ | 37,758,767 |   | $ | − |   |
| Equipment                under operating leases (net)              |   | $                                     | 14,438,652  |   | $ | 4,359,371 |   | $ | − |   |
| Debt                                                               |   | $                                     | 291,117,763 |   | $ | 34,511,800 |   | $ | − |   |
| Partners’                capital                             |   | $                                     | 50,478,790  |   | $ | 9,772,873 |   | $ | 1,001 |   |

----

Back          to Index

**ITEM      7 − MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION      AND RESULTS OF OPERATIONS AND ANALYSIS OF FINANCIAL      CONDITION**

**General**

|   | · | 500                or fewer employees; |
|--------|--------|----------------------------------------|

|   | · | $1.0                billion or less in total assets; or |
|--------|--------|---------------------------------------------------------|

|   | · | $100.0                million or less in total annual                sales. |
|--------|--------|-----------------------------------------------------------------------------|

----

Back          to Index

**Results      of Operations**

*Year      Ended December 31, 2006 Compared to the Period Ended December 31,      2005*

|   | · | interest                income increased to $9,876,417 for the year ended December 31, 2006                as                compared to $861,534 for the period ended December 31, 2005, an increase                of $9,014,883 (1046.4%). This increase is due to an increase in our                equipment financing assets to $306,431,395 at December 31, 2006 as                compared to $37,758,767 at December 31, 2005, an increase of $268,672,628                (711.6%). This growth was driven by our General Partner’s increased sales                to us and marketing efforts supported by lines of financing and in                addition to the purchase of a lease portfolio from Merrill                Lynch. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | rental                income increased to $3,795,913 in the year ended December 31, 2006                as                compared to $289,841 for the period ended December 31, 2005, an increase                of $3,506,072 (1209.7%). This growth was driven by our General Partner’s                increased sales to us and marketing efforts supported by lines of                financing and in addition to the purchase of Merrill Lynch                portfolio. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | interest                expense increased to $7,256,123 for the year ended December 31, 2006                as                compared to $583,833 for the period ended December 31, 2005, an increase                of $6,672,290 (1142.8%). This increase is due to our increase in                debt                incurred to acquire equipment financing assets. Debt increased to                $291,117,763 at December 31, 2006 as compared to $34,511,800 at December                31, 2005, an increase of $256,605,963                (743.5%). |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | provision                for credit losses increased to $1,028,886 in the year ended December                31,                2006 as compared to $130,000 for the period ended December 31, 2005,                an                increase of $898,886 (691.5%). The increase in our provision for                credit                losses is principally a result of the growth of our lease portfolio                which                was within our expectations. We provide for bad debts when losses                are                likely to occur based on a migration analysis of past due payments                and                economic conditions. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | management                fees increased to $1,592,389 in the year ended December 31, 2006                as                compared to $140,001 for the period ended December 31, 2005, an increase                of $1,452,388 (1037.4%). This increase is directly attributable to                our                growth in equipment financing assets, since management fees are paid                based                on lease payments received. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | depreciation                expense increased to $3,132,619 in the year ended December 31, 2006                as                compared to $247,080 in the period ended December 31, 2005, an increase                of                $2,885,539 (1167.9%). This increase is due to increase in our assets                under                operating leases. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Back          to Index

**Liquidity      and Capital Resources **

|                                                     |   | **Year                Ended December 31, 2006** |         | **Period                Ended December 31, 2005** |   |
|----------------------------------------------------------|--------|-------------------------------------------------|--------------|---------------------------------------------------|--------|
| Net                cash used in operating activities     |   | $                                               | (239,823     | )                                                 | $      | (475,877 | ) |
| Net                cash used in investing activities     |   |                                            | (106,543,068 | )                                                 |   | (42,349,049 | ) |
| Net                cash provided by financing activities |   |                                            | 119,959,428  |                                              |   | 43,857,864 |   |
| Increase                in cash                          |   | $                                               | 13,176,537   |                                              | $      | 1,032,938 |   |

----

Back          to Index

**Contractual      Obligations and Commercial Commitments**

|                            |   | Total |        | Less                  than                  1 Year |   | 1-3                  Years |   | 4-5                  Years |        | After                  5 years |   |
|---------------------------------|--------|-------|-------------|----------------------------------------------------|--------|----------------------------|--------|----------------------------|-------------|--------------------------------|--------|
| Long                  term debt |   | $     | 291,117,763 |                                               | $      | 93,721,241                 |   | $                          | 136,334,635 |                           | $      | 50,862,230 |   | $ | 10,199,657 |   |

**Recently      Issued Accounting Pronouncements**

*      ,*

**Critical      Accounting Policies **

*Revenue      Recognition*

----

Back          to Index

*Direct      Financing Leases. *

*Operating      Leases. *

*Notes      Receivable.*

*Derivative      Instruments and Hedging Activities. *

**ITEM      7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET      RISKS**

----

Back          to Index

**ITEM      8 − FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

**REPORT        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

----

Back          to Index

**LEASE      EQUITY APPRECIATION FUND II, L.P.**

**CONSOLIDATED      BALANCE SHEETS**

**DECEMBER      31, 2006 AND 2005**

|                                                                                                                      |   | **December                31,** |        |
|---------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|-------------|
|                                                                                                                      |   | **2006**                        |        | **2005** |   |
| **ASSETS**                                                                                                                |   |                            |        |   |   |
| Cash                                                                                                                      |   | $                               | 14,210,476  |   | $ | 1,033,939 |   |
| Restricted                cash                                                                                            |   |                            | 2,573,694   |   |   | 379,120 |   |
| Accounts                receivable                                                                                        |   |                            | 475,063     |   |   | 52,455 |   |
| Due                from lockbox                                                                                           |   |                            | 4,565,311   |   |   | 669,524 |   |
| Investment                in direct financing leases and notes, net                                                       |   |                            | 306,431,395 |   |   | 37,758,767 |   |
| Investment                in operating leases (net of accumulated depreciation of $3,577,319                and $244,903) |   |                            | 14,438,652  |   |   | 4,359,371 |   |
| Fair                value of interest rate swaps                                                                          |   |                            | 1,803,043   |   |   | 158,569 |   |
| Other                assets                                                                                               |   |                            | 1,844,698   |   |   | 308,277 |   |
|                                                                                                                      |   | $                               | 346,342,332 |   | $ | 44,720,022 |   |
|                                                                                                                      |   |                            |        |   |   |   |   |
| **LIABILITIES                AND PARTNERS’ CAPITAL**                                                                |   |                            |        |   |   |   |   |
| **Liabilities:**                                                                                                          |   |                            |        |   |   |   |   |
| Debt                                                                                                                      |   | $                               | 291,117,763 |   | $ | 34,511,800 |   |
| Accounts                payable and accrued expenses                                                                      |   |                            | 1,081,879   |   |   | 214,530 |   |
| Security                deposits                                                                                          |   |                            | 3,020,135   |   |   | 150,873 |   |
| Due                to related parties, net                                                                                |   |                            | 643,765     |   |   | 69,946 |   |
| Total                liabilities                                                                                          |   |                            | 295,863,542 |   |   | 34,947,149 |   |
| **Partners’                Capital**                                                                           |   |                            | 50,478,790  |   |   | 9,772,873 |   |
|                                                                                                                      |   | $                               | 346,342,332 |   | $ | 44,720,022 |   |

----

Back          to Index

**LEASE        EQUITY APPRECIATION FUND II, L.P.**

**CONSOLIDATED        STATEMENTS OF OPERATIONS**

**FOR        THE YEARS ENDED DECEMBER 31, 2006 AND 2005 AND**

**FOR        THE PERIOD FROM MARCH 30, 2004 (DATE OF FORMATION) TO DECEMBER 31,        2004**

|                                                                                                             |   | **Year                  Ended December 31,** |       | **Period                  from****March                  30, 2004 (Date of Formation) to December 31,** |   |
|------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|------------|---------------------------------------------------------------------------------------------------------|--------|
|                                                                                                             |   | **2006**                                     |       | **2005**                                                                                                |   | **2004** |   |
| **Income:**                                                                                                      |   |                                         |       |                                                                                                    |   |   |   |
| Interest                  on equipment financings                                                                |   | $                                            | 9,876,417  |                                                                                                    | $      | 861,534 |   | $ | − |   |
| Rental                  income                                                                                   |   |                                         | 3,795,913  |                                                                                                    |   | 289,841 |   |   | − |   |
| Gain                  (loss) on sale of equipment and lease dispositions,                  net                   |   |                                         | 457,861    |                                                                                                    |   | (4,704 | ) |   | − |   |
| Other                                                                                                            |   |                                         | 757,629    |                                                                                                    |   | 46,977 |   |   | − |   |
|                                                                                                             |   |                                         | 14,887,820 |                                                                                                    |   | 1,193,648 |   |   | − |   |
|                                                                                                             |   |                                         |       |                                                                                                    |   |   |   |   |   |   |
| **Expenses:**                                                                                                    |   |                                         |       |                                                                                                    |   |   |   |   |   |   |
| Interest                  expense                                                                                |   |                                         | 7,256,123  |                                                                                                    |   | 583,833 |   |   | − |   |
| Depreciation                  on operating leases                                                                |   |                                         | 3,132,619  |                                                                                                    |   | 247,080 |   |   | − |   |
| Provision                  for credit losses                                                                     |   |                                         | 1,028,886  |                                                                                                    |   | 130,000 |   |   | − |   |
| Management                  fee to related party                                                                 |   |                                         | 1,592,389  |                                                                                                    |   | 140,001 |   |   | − |   |
| Administrative                  expense reimbursed to related party                                              |   |                                         | 871,074    |                                                                                                    |   | 339,926 |   |   | − |   |
| General                  and administrative expenses                                                             |   |                                         | 875,325    |                                                                                                    |   | 190,706 |   |   | − |   |
|                                                                                                             |   |                                         | 14,756,416 |                                                                                                    |   | 1,631,546 |   |   | − |   |
| Net                  income (loss)                                                                               |   | $                                            | 131,404    |                                                                                                    | $      | (437,898 | ) | $ | − |   |
|                                                                                                             |   |                                         |       |                                                                                                    |   |   |   |   |   |   |
| Weighted                  average number of limited partner units outstanding                  during the period |   |                                         | 370,349    |                                                                                                    |   | 51,053 |   |   | − |   |
| Net                  income (loss) per weighted average limited partner unit                                     |   | $                                            | 0.35       |                                                                                                    | $      | (8.49 | ) | $ | − |   |

----

Back          to Index

**LEASE        EQUITY APPRECIATION FUND II, L.P.**

**CONSOLIDATED        STATEMENT OF CHANGES IN PARTNERS’ CAPITAL**

**AND        COMPREHENSIVE INCOME (LOSS) **

**FOR          THE YEARS ENDED DECEMBER 31, 2006 AND 2005 AND**

**FOR          THE PERIOD FROM MARCH 30, 2004 (DATE OF FORMATION) TO DECEMBER 31,          2004**

|                                                                                             |   | **General                  Partner** |    | **Limited                  Partners** |   | **Accumulated                  Other Comprehensive** |   |   **Partners’                  Capital** |       | **Comprehensive                  (Loss) Income** |   |
|--------------------------------------------------------------------------------------------------|--------|--------------------------------------|---------|---------------------------------------|--------|------------------------------------------------------|--------|----------------------------------------------------------|------------|--------------------------------------------------|--------|
|                                                                                             |   | **Amount**                           |    | **Units**                             |   | **Amount**                                           |   | **Income                  (Loss)**                       |       | **Total**                                        |   | **Total** |   |
| Balance                  at March 30, 2004                                                  |   | $                                    | − |                                  |   | −                                              |   | $                                                        | −    |                                             | $      | − |   | $ | − |   |   |   |   |
| General                  Partner Capital contribution                                            |   |                                 | 1,000   |                                  |   | −                                              |   |                                                     | −    |                                             |   | − |   |   | 1,000 |   |   |   |   |
| Initial                  Limited Partner contribution                                       |   |                                 | − |                                  |   | −                                              |   |                                                     | 1          |                                             |   | − |   |   | 1 |   |   |   |   |
| Balance                  at December 31, 2004                                               |   |                                 | 1,000   |                                  |   | −                                              |   |                                                     | 1          |                                             |   | − |   |   | 1,001 |   |   |   |   |
| Limited                  Partners’ contribution                                            |   |                                 | − |                                  |   | 120,015                                              |   |                                                     | 11,979,445 |                                             |   | − |   |   | 11,979,445 |   |   |   |   |
| Offering                  costs related to the saleof                  Limited Partnership units |   |                                 | − |                                  |   | −                                              |   |                                                     | (1,595,963 | )                                                |   | − |   |   | (1,595,963 | ) |   |   |   |
| Cash                  distributions paid                                                         |   |                                 | (3,327  | )                                     |   | −                                              |   |                                                     | (328,953   | )                                                |   | − |   |   | (332,280 | ) |   |   |   |
| Redemption                  of initial LimitedPartnership                  units                 |   |                                 | − |                                  |   | −                                              |   |                                                     | (1         | )                                                |   | − |   |   | (1 | ) |   |   |   |
| Net                  loss                                                                        |   |                                 | (4,378  | )                                     |   | −                                              |   |                                                     | (433,520   | )                                                |   | − |   |   | (437,898 | ) | $ | (437,898 | ) |
| Unrealized                  gain on hedging derivative                                           |   |                                 | − |                                  |   | −                                              |   |                                                     | −    |                                             |   | 158,569 |   |   | 158,569 |   |   | 158,569 |   |
| Balance                  at December 31, 2005                                               |   |                                 | (6,705  | )                                     |   | 120,015                                              |   |                                                     | 9,621,009  |                                             |   | 158,569 |   |   | 9,772,873 |   | $ | (279,329 | ) |
| Limited                  Partners’ contribution                                            |   |                                 | − |                                  |   | 479,985                                              |   |                                                     | 47,884,231 |                                             |   | − |   |   | 47,884,231 |   |   |   |   |
| Offering                  costs related to the saleof                  Limited Partnership units |   |                                 | − |                                  |   | −                                              |   |                                                     | (6,330,045 | )                                                |   |   |   |   | (6,330,045 | ) |   |   |   |
| Cash                  distributions paid                                                         |   |                                 | (26,277 | )                                     |   | −                                              |   |                                                     | (2,597,870 | )                                                |   | − |   |   | (2,624,147 | ) |   |   |   |
| Net                  income                                                                      |   |                                 | 1,314   |                                  |   | −                                              |   |                                                     | 130,090    |                                             |   | − |   |   | 131,404 |   | $ | 131,404 |   |
| Unrealized                  gain on hedging derivative                                           |   |                                 | − |                                  |   | −                                              |   |                                                     | −    |                                             |   | 1,644,474 |   |   | 1,644,474 |   |   | 1,644,474 |   |
| Balance                  at December 31, 2006                                               |   | $                                    | (31,668 | )                                     |   | 600,000                                              |   | $                                                        | 48,707,415 |                                             | $      | 1,803,043 |   | $ | 50,478,790 |   | $ | 1,775,878 |   |

----

Back          to Index

**LEASE        EQUITY APPRECIATION FUND II, L.P.**

**CONSOLIDATED        STATEMENTS OF CASH FLOWS**

**FOR          THE YEARS ENDED DECEMBER 31, 2006 AND 2005 AND**

**FOR          THE PERIOD FROM MARCH 30, 2004 (DATE OF FORMATION) TO DECEMBER 31,          2004**

|                                                                                                           |   | **Year                  Ended December 31,** |         | **Period                  from****March                  30, 2004 (Date of Formation) to December 31,** |   |
|----------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|--------------|---------------------------------------------------------------------------------------------------------|--------|
|                                                                                                           |   | **2006**                                     |         | **2005**                                                                                                |   | **2004** |   |
| **Cash                  flows from operating activities:**                                                     |   |                                         |         |                                                                                                    |   |   |   |
| Net                  income (loss)                                                                             |   | $                                            | 131,404      |                                                                                                    | $      | (437,898 | ) | $ | − |   |
| Adjustments                  to reconcile net loss to net cash used in operating                  activities:  |   |                                         |         |                                                                                                    |   |   |   |   |   |   |
| (Gain)                  loss on sale of equipment and lease dispositions net                              |   |                                         | (457,861     | )                                                                                                       |   | 4,704 |   |   | − |   |
| Depreciation                                                                                                   |   |                                         | 3,132,619    |                                                                                                    |   | 247,080 |   |   | − |   |
| Provision                  for credit losses                                                                   |   |                                         | 1,028,886    |                                                                                                    |   | 130,000 |   |   | − |   |
| Amortization                  of deferred financing costs                                                      |   |                                         | 70,885       |                                                                                                    |   | 23,287 |   |   | − |   |
| Changes                  in operating assets and liabilities:                                                  |   |                                         |         |                                                                                                    |   |   |   |   |   |   |
| Accounts                  receivable                                                                           |   |                                         | (422,608     | )                                                                                                       |   | (52,455 | ) |   | − |   |
| Due                  from lockbox                                                                              |   |                                         | (3,895,787   | )                                                                                                       |   | (669,524 | ) |   | − |   |
| Other                  assets                                                                                  |   |                                         | (1,268,529   | )                                                                                                       |   | (5,547 | ) |   | − |   |
| Accounts                  payable and accrued expenses                                                         |   |                                         | 867,349      |                                                                                                    |   | 214,530 |   |   | − |   |
| Due                  to related parties, net                                                                   |   |                                         | 573,819      |                                                                                                    |   | 69,946 |   |   | − |   |
| Net                  cash used in operating activities                                                         |   |                                         | (239,823     | )                                                                                                       |   | (475,877 | ) |   | − |   |
| **Cash                  flows from investing activities:**                                                     |   |                                         |         |                                                                                                    |   |   |   |   |   |   |
| Investment                  in direct financing leases and notes                                               |   |                                         | (146,381,503 | )                                                                                                       |   | (38,982,715 | ) |   | − |   |
| Investment                  in equipment under operating leases                                                |   |                                         | (13,228,502  | )                                                                                                       |   | (4,606,451 | ) |   | − |   |
| Proceeds                  from direct financing leases, net of earned income                                   |   |                                         | 50,360,319   |                                                                                                    |   | 1,089,244 |   |   | − |   |
| Security                  deposits, net                                                                        |   |                                         | 2,706,618    |                                                                                                    |   | 150,873 |   |   | − |   |
| Net                  cash used in investing activities                                                         |   |                                         | (106,543,068 | )                                                                                                       |   | (42,349,049 | ) |   | − |   |
| **Cash                  flows from financing activities:**                                                     |   |                                         |         |                                                                                                    |   |   |   |   |   |   |
| Proceeds                  from debt                                                                            |   |                                         | 124,688,780  |                                                                                                    |   | 36,266,280 |   |   | − |   |
| Repayment                  of debt                                                                             |   |                                         | (41,126,040  | )                                                                                                       |   | (1,754,480 | ) |   | − |   |
| Increase                  in restricted cash                                                                   |   |                                         | (2,194,574   | )                                                                                                       |   | (379,120 | ) |   | − |   |
| Increase                  in deferred financing costs                                                          |   |                                         | (338,777     | )                                                                                                       |   | (326,017 | ) |   | − |   |
| General                  Partner capital contribution                                                          |   |                                         | −      |                                                                                                    |   | − |   |   | 1,000 |   |
| Limited                  Partners’ capital contributions                                                 |   |                                         | 47,884,231   |                                                                                                    |   | 11,979,445 |   |   | 1 |   |
| Payment                  of offering costs incurred for the sale of limited partnership                  units |   |                                         | (6,330,045   | )                                                                                                       |   | (1,595,963 | ) |   | − |   |
| Partners’** **distributions                                                                         |   |                                         | (2,624,147   | )                                                                                                       |   | (332,280 | ) |   | − |   |
| Redemption                  of initial limited partner units                                                   |   |                                         | −      |                                                                                                    |   | (1 | ) |   | − |   |
| Net                  cash provided by financing activities                                                     |   |                                         | 119,959,428  |                                                                                                    |   | 43,857,864 |   |   | 1,001 |   |
| Increase                  in cash                                                                         |   |                                         | 13,176,537   |                                                                                                    |   | 1,032,938 |   |   | 1,001 |   |
| Cash,                  beginning of year                                                                  |   |                                         | 1,033,939    |                                                                                                    |   | 1,001 |   |   | − |   |
| Cash,                  end of year                                                                        |   | $                                            | 14,210,476   |                                                                                                    | $      | 1,033,939 |   | $ | 1,001 |   |

----

Back          to Index

**LEASE      EQUITY APPRECIATION FUND II, L.P.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**December      31, 2006 **

**NOTE      1 **
**-**
**      ORGANIZATION AND NATURE OF BUSINESS**

**NOTE      2 **
**-**
**      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**Basis      of Presentation**

**Classification      **

----

Back          to Index

**LEASE      EQUITY APPRECIATION FUND II, L.P.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)**

**December      31, 2006 **

**NOTE      2 **
**-**
**      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)**

**Use      of Estimates**

**Concentration      of Credit Risk**

----

Back          to Index

**LEASE      EQUITY APPRECIATION FUND II, L.P.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)**

**December      31, 2006 **

**NOTE      2 **
**-**
**      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)**

**Revenue        Recognition**

*Direct      Financing Leases. *

*Operating      Leases. *

*Notes      Receivable.*

**Income      Taxes**

----

Back          to Index

**LEASE      EQUITY APPRECIATION FUND II, L.P.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)**

**December      31, 2006 **

**NOTE      2 **
**-**
**      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)**

**Supplemental      Disclosure of Cash Flow Information**

|                                                                                                                 |   | **2006** |        | **2005** |   |
|----------------------------------------------------------------------------------------------------------------------|--------|----------|-------------|----------|--------|
| **Cash                paid for:**                                                                                    |   |     |        |     |   |
| Interest                                                                                                             |   | $        | 6,685,604   |     | $      | 508,317 |   |
| **Non-cash                activities:**                                                                              |   |     |        |     |   |   |   |
| Purchase                of financing assets from Merrill Lynch Equipment Finance                                     |   | $        | 173,043,223 |     | $      | − |   |
| Borrowings                under revolving line of credit Merrill Lynch Commercial Finance                Corporation |   | $        | 173,043,223 |     | $      | − |   |

**Transfers      of Financial Assets**

**Fair      Value of Financial Instruments**

**NOTE            3 - RESTRICTED CASH**

----

Back          to Index

**LEASE      EQUITY APPRECIATION FUND II, L.P.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)**

**December      31, 2006 **

**NOTE        4 − DUE FROM LOCKBOX**

**NOTE        5 **
**-**
**        INVESTMENT IN LEASES AND NOTES**

|                                          |   | **December                31,** |        |
|-----------------------------------------------|--------|---------------------------------|-------------|
|                                          |   | **2006**                        |        | **2005** |   |
| Direct                financing leases        |   | $                               | 264,711,293 |   | $ | 34,567,490 |   |
| Notes                receivable               |   |                            | 42,841,402  |   |   | 3,321,277 |   |
|                                          |   | $                               | 307,552,695 |   | $ | 37,888,767 |   |
| Allowance                for possible losses. |   |                            | (1,121,300  | ) |   | (130,000 | ) |
|                                          |   | $                               | 306,431,395 |   | $ | 37,758,767 |   |

|                                                      |   | **December                31,** |        |
|-----------------------------------------------------------|--------|---------------------------------|-------------|
|                                                      |   | **2006**                        |        | **2005** |   |
| Total                future minimum lease payments        |   | $                               | 292,943,721 |   | $ | 37,102,220 |   |
| Unearned                rental income                     |   |                            | (34,892,029 | ) |   | (4,360,607 | ) |
| Residuals,                net of unearned residual income |   |                            | 6,659,601   |   |   | 1,825,877 |   |
|                                                      |   | $                               | 264,711,293 |   | $ | 34,567,490 |   |

|                                                                         |   | **Year                Ended December 31, 2006** |      | **Year Ended                December 31, 2005** |   |
|------------------------------------------------------------------------------|--------|-------------------------------------------------|-----------|------------------------------------------------------|--------|
| Allowance                for possible losses, beginning of period            |   | $                                               | 130,000   |                                                 | $      | − |   |
| Provision                for credit losses                                   |   |                                            | 1,028,886 |                                                 |   | 130,000 |   |
| Allowance                for possible losses, in connection with acquisition |   |                                            | 920,000   |                                                 |   | − |   |
| Net                write-offs                                                |   |                                            | (957,586  | )                                                    |   | − |   |
| Allowance                for possible losses, end of period                  |   | $                                               | 1,121,300 |                                                 | $      | 130,000 |   |

----

Back          to Index

**LEASE      EQUITY APPRECIATION FUND II, L.P.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)**

**December      31, 2006 **

**NOTE      5 **
**-**
**      INVESTMENT IN LEASES AND NOTES − (Continued)**

| **Annual Years                Ending****December                31,** |   | **Direct****Financing                Leases** |        | **Notes** |   | **Operating                Leases** |   | **Total** |       |
|----------------------------------------------------------------------------|--------|-----------------------------------------------|-------------|-----------|--------|-------------------------------------|--------|-----------|------------|
| 2007                                                                  |   | $                                             | 105,999,824 |      | $      | 7,716,930                           |   | $         | 5,733,427  |   | $ | 119,450,181 |   |
| 2008                                                                  |   |                                          | 83,357,716  |      |   | 8,084,316                           |   |      | 4,092,088  |   |   | 95,534,120 |   |
| 2009                                                                  |   |                                          | 56,163,765  |      |   | 8,145,984                           |   |      | 2,209,906  |   |   | 66,519,655 |   |
| 2010                                                                  |   |                                          | 30,105,384  |      |   | 7,572,546                           |   |      | 1,135,894  |   |   | 38,813,824 |   |
| 2011                                                                  |   |                                          | 10,829,724  |      |   | 5,843,118                           |   |      | 273,287    |   |   | 16,946,129 |   |
| Thereafter                                                            |   |                                          | 6,487,308   |      |   | 5,478,508                           |   |      | 12,778     |   |   | 11,978,594 |   |
|                                                                       |   | $                                             | 292,943,721 |      | $      | 42,841,402                          |   | $         | 13,457,380 |   | $ | 349,242,503 |   |

**NOTE      6 − OTHER ASSETS**

**NOTE      7 − EQUIPMENT FINANCE PORTFOLIO ACQUISTION**

----

Back          to Index

**LEASE      EQUITY APPRECIATION FUND II, L.P.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)**

**December      31, 2006 **

**NOTE      8 **
**-**
**      DEBT**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | **December                31,** |        |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|-------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | **2006**                        |        | **2005** |   |
| WestLB                AG, New York Branch revolving line of credit, with an aggregate borrowing                limit of $150 million collateralized by specific leases and notes                receivables and related equipment, with a 1% credit reserve of the                outstanding line of credit. Interest on this facility is calculated                at                LIBOR plus .95% per annum. To mitigate fluctuations in interest rates                the                Fund has entered into interest rate swap agreements. The interest                rate                swap agreements terminate on various dates ranging from December                2010 to                November 2013. As of December 31, 2006, the interest rate swap agreements                fix the interest rate on the outstanding balance at 6.08% on a weighted                average basis. Interest and principal are due monthly. The line of                credit                is renewable for one year periods in 2007 and 2008. The terms of                the                Fund’s credit facility with WestLB include financial covenants related                to                the Fund’s net worth and leverage used. |   | $                               | 99,730,540  |   | $ | 34,511,800 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                            |        |   |   |   |   |
| Merrill                Lynch Commercial Finance Corporation revolving line of credit, with                an                aggregate borrowing limit of $200 million collateralized by specific                leases and notes receivables and related equipment. Interest on this                facility is calculated at LIBOR plus .95% per annum. To mitigate                fluctuations in interest rates the Fund has entered into interest                rate                swap agreements. The interest rate swap agreements terminate on various                dates ranging from June 2013 to January 2014. As of December 31,                2006, the                interest rate swap agreements fix the interest rate on the outstanding                balance at 5.45%. Interest and principal are due monthly. The line                of                credit expires in June 2007.                                                                                                                                                                                                                                                                                                                                                   |   |                            | 191,387,223 |   |   | − |   |
| Total                outstanding debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | $                               | 291,117,763 |   | $ | 34,511,800 |   |

| 2007       |   | $      | 93,721,241  |
|------------|--------|--------|-------------|
| 2008       |   |   | 79,158,911  |
| 2009       |   |   | 57,175,724  |
| 2010       |   |   | 34,992,703  |
| 2011       |   |   | 15,869,527  |
| Thereafter |   |   | 10,199,657  |
|       |   | $      | 291,117,763 |

----

Back          to Index

**LEASE      EQUITY APPRECIATION FUND II, L.P.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)**

**December      31, 2006 **

**NOTE      9 **
**-**
**      DERIVATIVE INSTRUMENTS**

**NOTE      10 − TRANSACTIONS WITH AFFILIATES**

**(**

----

Back          to Index

**LEASE      EQUITY APPRECIATION FUND II, L.P.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)**

**December      31, 2006 **

**NOTE      10 − TRANSACTIONS WITH AFFILIATES − (Continued)**

|                                              |   | **Year                Ended December 31, 2006** |      | **Year                Ended December 31, 2005** |   |
|---------------------------------------------------|--------|-------------------------------------------------|-----------|-------------------------------------------------|--------|
| Acquisition                fees                   |   | $                                               | 2,648,001 |                                            | $      | 870,122 |   |
| Asset                management fees              |   | $                                               | 1,592,389 |                                            | $      | 140,001 |   |
| Organization                and offering expenses |   | $                                               | 1,675,926 |                                            | $      | 419,268 |   |
| Reimbursed                administrative expenses |   | $                                               | 871,074   |                                            | $      | 339,926 |   |
| Underwriting                fees                  |   | $                                               | 1,404,932 |                                            | $      | 358,707 |   |

----

Back          to Index

**LEASE      EQUITY APPRECIATION FUND II, L.P.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)**

**December      31, 2006 **

**NOTE      11 **
**-**
**      ALLOCATION OF PARTNERSHIP INCOME, LOSS AND CASH      DISTRIBUTIONS**

**NOTE      12 − COMPREHENSIVE INCOME (LOSS)**

**NOTE      13 − NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT**

----

Back          to Index

**ITEM      9. - CHANGES IN AND DISAREEMENTS WITH ACCOUNTANTS ON      ACCOUNTING AND FINANCIAL DISCLOSURE**

**ITEM      9A - CONTROLS AND PROCEDURES**

*Evaluation      of Disclosure Controls and Procedures *

**ITEM      9B -OTHER INFORMATION**

**NONE**

**PART      III**

**ITEM      10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT**

| **Name**                               | **Age** | **Position**                                                                  |
|----------------------------------------|---------|-------------------------------------------------------------------------------|
| Crit                S. DeMent          | 54      | Chairman                of the Board of Directors and Chief Executive Officer |
| Miles                Herman            | 47      | President,                Chief Operating Officer and Director                |
| Jonathan                Z. Cohen       | 36      | Director                                                                      |
| Alan                D. Schreiber, M.D. | 65      | Director                                                                      |
| Linda                Richardson        | 59      | Director                                                                      |
| Robert                K. Moskovitz     | 50      | Chief                Financial Officer and Treasurer                          |
| David                H. English        | 57      | Executive                Vice President                                       |
| Darshan                V. Patel        | 36      | General                Counsel and Secretary                                  |
| Daniel                G. Courtney      | 44      | Senior                Vice President - Investment                Programs     |

----

Back          to Index

**CRIT      S. DEMENT**

**MILES      HERMAN**

**JONATHAN      Z. COHEN**

**ALAN      D. SCHREIBER, M.D.**

**LINDA      RICHARDSON**

**ROBERT      K. MOSKOVITZ**

**DAVID      H. ENGLISH**

----

Back          to Index

**DARSHAN      V. PATEL**

**DANIEL      G. COURTNEY**

**Code      of Business Conduct and Ethics**

**ITEM      11 - EXECUTIVE COMPENSATION **

**ITEM      12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS****AND      MANAGEMENT AND**

**                RELATED UNIT HOLDER MATTERS**

|   | (a) | The                Fund had approximately 1,419 limited partners as of December 31,                2006. |
|--------|-----|----------------------------------------------------------------------------------------------------------|

|   | (b) | In                2004, the Fund’s General Partner contributed $1,000 to its capital as the                General Partner and received its General Partner interest in the                Fund. As                of December 31, 2006, the Fund’s General Partner owned 9,453 of the Fund’s                limited partner units. These purchases of limited partner units by                the                Fund’s General Partner and its affiliates were at a price discounted by                the 7% sales commission which was paid by most of the Fund’s other limited                partners. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | The                Fund knows of no arrangements that would, at any date subsequent                to the                date of this report, result in a change in control of                us. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Back          to Index

**ITEM      13 - CERTAIN RELATIONSHIPS AND RELATED      TRANSACTIONS**

**ITEM      14 - PRINCIPAL ACCOUNTANT FEES AND      SERVICES**

**Audit      Fees. **

**Audit-Related      Fees.**

**Tax      Fees.**

**All      Other Fees. **

*Procedures      for Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services      of      Independent Auditor.*

----

Back          to Index

**PART      IV**

**ITEM      15 - EXHIBITS, FINANCIAL STATEMENT      SCHEDULES**

|   | **1.** | **Financial                Statements** |
|--------|--------|-----------------------------------------|

|   | **2.** | **Financial                Statement Schedules** |
|--------|--------|--------------------------------------------------|

**3.**
**Exhibits**

|   | **Exhibit                No.** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------|--------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 3.1                            | Certificate                of Limited Partnership for Lease Equity Appreciation Fund II, L.P.                (1)                                                                                                                                                                                                                                                                                                                                  |
|   | 3.2                            | Amended                Certificate of Limited Partnership for Lease Equity Appreciation                Fund II,                L.P.(2)                                                                                                                                                                                                                                                                                                            |
|   | 3.3                            | Amended                and Restated Agreement of Limited Partnership for Lease Equity                Appreciation Fund II, L.P. (4)                                                                                                                                                                                                                                                                                                               |
|   | 4.1                            | Forms                of letters sent to limited partners confirming their                investment(1)                                                                                                                                                                                                                                                                                                                                            |
|   | 10.1                           | Origination                & Servicing Agreement among LEAF Financial Corporation, Lease Equity                Appreciation Fund II, L.P. and LEAF Funding, Inc. dated April 15,                2005                (3)                                                                                                                                                                                                                       |
|   | 10.3                           | Secured                Loan Agreement dated as of June 1, 2005 with LEAF II, LLC as Borrower,                LEAF Funding, Inc. as Originator, Lease Equity Appreciation Fund                II, L.P.                as Seller, LEAF Financial Corporation as Servicer, U.S. Bank National                Association, as Collateral Agent and Securities Intermediary and                WestLB                AG, New York Branch as Lender (3) |
|   | 10.4                           | First                Amendment to WestLB AG Secured Loan Agreement (5)                                                                                                                                                                                                                                                                                                                                                                            |
|   | 10.4(a)                        | Second                Amendment to WESTLB AG Secured Loan Agreement (6)                                                                                                                                                                                                                                                                                                                                                                           |
|   | 10.6                           | Assignment,                Assumption and Amendment Agreement among LEAF Equity Appreciation                Fund II,                L.P. and Merrill Lynch Equipment Finance LLC, dated September 29,                2006.                (7)                                                                                                                                                                                                     |
|   | 10.6(a)                        | amendment                Agreement,                dated                as of January 29, 2007, among Equity Appreciation Fund II, L.P. and                Merrill Lynch Commercial Finance Corp.                                                                                                                                                                                                                                                 |
|   | 31.1                           | Certification                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley                Act of 2002.                                                                                                                                                                                                                                                                                                                 |
|   | 31.2                           | Certification                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley                Act of 2002.                                                                                                                                                                                                                                                                                                                 |
|   | 32.1                           | Certification                of Chief Executive Officer pursuant to Section 1350 18 U.S.C., as                adopted                pursuant to Section 906 of the Sarbanes-Oxley Act of                2002..                                                                                                                                                                                                                                   |
|   | 32.2                           | Certification                of Chief Financial Officer pursuant to Section 1350 18 U.S.C., as                adopted                pursuant to Section 906 of the Sarbanes-Oxley Act of                2002..                                                                                                                                                                                                                                   |

----

|   | (1) | Filed                previously on June 17, 2004 as an exhibit to our Registration Statement                and by this reference incorporated                herein. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Filed                previously on September 8, 2004 in Pre-Effective Amendment No. 1                as an                exhibit to our Registration Statement and by this reference incorporated                herein. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | Filed                previously on August 15, 2005 as an exhibit to our Form 10-Q for                the                quarter ended June 30, 2005 and by this reference incorporated                herein. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | Filed                previously on December 27, 2005 in Post-Effective Amendment No. 1                to our                Registration Statement as Appendix A to the prospectus and by this                reference incorporated herein. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | Filed                previously on March 30, 2006 as an exhibit to our Annual Report on                Form                10-K for the fiscal year ended December 31, 2005 and by this reference                incorporated herein. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6) | Filed                previously on May 15, 2006 as an exhibit to our Quarterly Report                on Form                10-Q for the quarter ended June 30, 2006 and by this reference                incorporated herein. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (7) | Filed                previously on November 14, 2006 as an exhibit to our Quarterly Report                on                Form 10-Q for the quarter ended September 30, 2006 and by this reference                incorporated herein. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Back          to Index

**SIGNATURES**

|                                                            |                                                     |                                              |
|-----------------------------------------------------------------|----------------------------------------------------------|---------------------------------------------------|
|                                                            | **LEASE              EQUITY APPRECIATION FUND II, L.P.** |
|                                                       |                                                |                                         |
| Date: March              30,              2007   | By:                                            | /s/ CRIT              S.              DEMENT |
|                                                            | CRIT              S. DEMENT                              |
|                                                            | Chairman              and Chief Executive Officer        |

| /s/                Crit S. DeMentCRIT                S. DEMENT                   | Chairman                of the Board, Chief Executive Officer of the General                Partner  | March                30,                2007 |
|----------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------|----------------------------------------------|
|                                                                             |                                                                                                 |                                         |
|                                                                             |                                                                                                 |                                         |
| /s/                Miles Herman MILES                HERMAN                 | President,                Chief Operating Officer and Director of the General                Partner | March                30,                2007 |
|                                                                             |                                                                                                 |                                         |
|                                                                             |                                                                                                 |                                         |
| /s/                Robert K. MoskovitzROBERT                K. MOSKOVITZ         | Chief                Financial Officer, Treasurer of                the General Partner              | March                30,                2007 |
|                                                                             |                                                                                                 |                                         |
|                                                                             |                                                                                                 |                                         |
| /s/                Jonathan Z. CohenJONATHAN                Z. COHEN             | Director                of the General Partner                                                       | March                30,                2007 |
|                                                                             |                                                                                                 |                                         |
|                                                                             |                                                                                                 |                                         |
| /s/                Alan D. Schreiber, M.D.ALAN                D. SCHREIBER, M.D. | Director                of the General Partner                                                       | March                30,                2007 |
|                                                                             |                                                                                                 |                                         |
|                                                                             |                                                                                                 |                                         |
| /s/                Linda RichardsonLINDA                RICHARDSON               | Director                of the General Partner                                                       | March                30,                2007 |

**Supplemental      Information to be Furnished With Reports Filed Pursuant to Section 15(d) of      the**

**Act      by Registrants Which Have Not Registered Securities Pursuant to Section 12      of      the Act”**

----

Back          to Index