##### 



United States
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 333-116595
 LEASE EQUITY APPRECIATION FUND II, L.P.
  Delaware
    
    20-1056194(State or other jurisdiction of incorporation
    
    (I.R.S. Employer Identification No.)or organization)
 
 
 Securities registered pursuant to Section 12 (b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredNone
    
    Not applicable
 Securities registered pursuant to Section 12 (g) of the Act:
  o þ
 o þ
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer   þ
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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LEASE EQUITY APPRECIATION FUND II, L.P.
INDEX TO ANNUAL REPORT
ON FORM 10-K
 PagePART
IITEM 1:
    
    Business
    
    
    3ITEM 1A:
    
    Risk Factors
    
    
    8ITEM 2:
    
    Properties
    
    
    14ITEM 3:
    
    Legal
Proceedings
    
    
    14ITEM 4:
    
    Submission of
Matters to a Vote of Security Holders
    
    
    14PART
IIITEM 5:
    
    Market for
Registrants Common Equity and Related Stockholder
Matters
    
    
    14ITEM 6:
    
    Selected
Financial Data
    
    
    14ITEM 7:
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operation
    
    
    15ITEM 7A:
    
    Quantitative and
Qualitative Disclosures about Market Risk
    
    
    19ITEM 8:
    
    Financial
Statements and Supplementary Data
    
    
    20ITEM 9:
    
    Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
    
    
    35ITEM 9A:
    
    Controls and
Procedures
    
    
    35ITEM 9B:
    
    Other
Information
    
    
    35PART
IIIITEM 10:
    
    Directors and
Executive Officers of the Registrant
    
    
    35ITEM 11:
    
    Executive
Compensation
    
    
    37ITEM 12:
    
    Security Ownership of Certain Beneficial Owners and Management
and Related Unit Holder Matters
    
    
    37ITEM 13:
    
    Certain
Relationships and Related Transactions
    
    
    38ITEM 14:
    
    Principal
Accountant Fees and Services
    
    
    38PART
IVITEM
15:
    
    Exhibits,
Financial Statement Schedules
    
    
    39SIGNATURES
    
    
    40Supplemental 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
 2




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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.
   3




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##### 



Our Lease Portfolio
  Direct Financing Leases and Notes
 December 31, 2007NetType of Equipment
    
    Investment
    
    
    PercentageIndustrial Equipment
    
    $
    96,100
    
    
    
    28.8
    %Medical Equipment
    
    
    69,545
    
    
    
    20.8Computers
    
    
    53,590
    
    
    
    16.1Office Equipment
    
    
    20,097
    
    
    
    6.0Restaurant Equipment
    
    
    19,553
    
    
    
    5.9Garment Care
    
    
    16,837
    
    
    
    5.0Communications
    
    
    15,788
    
    
    
    4.7Software
    
    
    13,992
    
    
    
    4.2Building systems
    
    
    9,538
    
    
    
    2.9Other
    
    
    18,542
    
    
    
    5.6$
    333,582
    
    
    
    100.0
    %
 December 31, 2006NetType of Equipment
    
    Investment
    
    
    PercentageComputers
    
    $
    70,412
    
    
    
    22.9
    %Medical Equipment
    
    
    69,632
    
    
    
    22.6Industrial Equipment
    
    
    60,046
    
    
    
    19.5Office Equipment
    
    
    20,814
    
    
    
    6.8Software
    
    
    19,463
    
    
    
    6.3Building systems
    
    
    16,761
    
    
    
    5.5Restaurant Equipment
    
    
    14,334
    
    
    
    4.7Garment Care
    
    
    11,614
    
    
    
    3.8Communications
    
    
    9,930
    
    
    
    3.2Other
    
    
    14,543
    
    
    
    4.7$
    307,552
    
    
    
    100.0
    %
 Operating Leases
 December 31, 2007NetType of Equipment
    
    Investment
    
    
    PercentageIndustrial Equipment
    
    $
    3,476
    
    
    
    29.7
    %Computers
    
    
    2,514
    
    
    
    21.5Communications
    
    
    2,378
    
    
    
    20.3Office Equipment
    
    
    2,030
    
    
    
    17.4Building systems
    
    
    419
    
    
    
    3.6Agriculture
    
    
    360
    
    
    
    3.1Medical Equipment
    
    
    262
    
    
    
    2.2Restaurant Equipment
    
    
    197
    
    
    
    1.7Garment Care
    
    
    43
    
    
    
    0.4Software
    
    
    14
    
    
    
    0.7$
    11,693
    
    
    
    100.0
    %
 December 31, 2006NetType of Equipment
    
    Investment
    
    
    PercentageCommunications
    
    $
    4,254
    
    
    
    29.4
    %Office Equipment
    
    
    3,667
    
    
    
    25.4Industrial Equipment
    
    
    2,780
    
    
    
    19.3Computers
    
    
    2,247
    
    
    
    15.6Medical Equipment
    
    
    858
    
    
    
    5.9Building systems
    
    
    237
    
    
    
    1.6Agriculture
    
    
    154
    
    
    
    1.1Garment Care
    
    
    69
    
    
    
    0.5Software
    
    
    25
    
    
    
    0.2Other
    
    
    148
    
    
    
    1.0$
    14,439
    
    
    
    100.0
    %
 4




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##### 



Direct Financing Leases and Notes
 December 31, 2007NetType of Business
    
    Investment
    
    
    PercentageServices
    
    $
    153,981
    
    
    
    46.1
    %Retail Trade
    
    
    38,120
    
    
    
    11.4Manufacturing
    
    
    36,334
    
    
    
    10.9Agriculture/Forestry/
Fishing
    
    
    27,260
    
    
    
    8.2Transportation/
Communication/Energy
    
    
    20,820
    
    
    
    6.2Construction
    
    
    19,219
    
    
    
    5.8Wholesale Trade
    
    
    15,240
    
    
    
    4.6Finance/Insurance/
Real Estate
    
    
    9,981
    
    
    
    3.0Public Administration
    
    
    949
    
    
    
    0.3Other
    
    
    11,678
    
    
    
    3.5$
    333,582
    
    
    
    100.0
    %
 December 31, 2006NetType of Business
    
    Investment
    
    
    PercentageServices
    
    $
    167,652
    
    
    
    54.5
    %Retail Trade
    
    
    41,493
    
    
    
    13.5Manufacturing
    
    
    31,312
    
    
    
    10.2Wholesale Trade
    
    
    12,958
    
    
    
    4.2Finance/Insurance/
Real Estate
    
    
    11,386
    
    
    
    3.7Transportation/
Communication/Energy
    
    
    11,169
    
    
    
    3.6Construction
    
    
    10,232
    
    
    
    3.3Public Administration
    
    
    9,533
    
    
    
    3.1Agriculture/Forestry/
Fishing
    
    
    1,248
    
    
    
    0.4Other
    
    
    10,569
    
    
    
    3.5$
    307,552
    
    
    
    100.0
    %
 Operating Leases
 December 31, 2007NetType of Business
    
    Investment
    
    
    PercentageServices
    
    $
    4,558
    
    
    
    39.0
    %Construction
    
    
    3,692
    
    
    
    31.6Manufacturing
    
    
    1,303
    
    
    
    11.1Finance/Insurance/
Real Estate
    
    
    622
    
    
    
    5.3Wholesale Trade
    
    
    424
    
    
    
    3.6Retail Trade
    
    
    333
    
    
    
    2.9Transportation/
Communication/Energy
    
    
    273
    
    
    
    2.3Retail Trade
    
    
    267
    
    
    
    2.3Public Administration
    
    
    183
    
    
    
    1.6Other
    
    
    38
    
    
    
    0.3$
    11,693
    
    
    
    100.0
    %
 December 31, 2006NetType of Business
    
    Investment
    
    
    PercentageServices
    
    $
    6,371
    
    
    
    44.1
    %Construction
    
    
    3,940
    
    
    
    27.3Manufacturing
    
    
    1,613
    
    
    
    11.2Mining
    
    
    621
    
    
    
    4.3Finance/Insurance/
Real Estate
    
    
    494
    
    
    
    3.4Retail Trade
    
    
    481
    
    
    
    3.3Wholesale Trade
    
    
    414
    
    
    
    2.9Public Administration
    
    
    327
    
    
    
    2.3Agriculture/Forestry/
Fishing
    
    
    113
    
    
    
    0.8Transportation/
Communication/Energy
    
    
    65
    
    
    
    0.4$
    14,439
    
    
    
    100.0
    %
 5




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##### 



December 31,2007
    
    
    2006Balance at beginning of year
    
    $
    1,121
    
    
    $
    130Provision for credit losses
    
    
    5,847
    
    
    
    1,029Allowance for credit losses, in connection with acquisition
    
    
    
    
    
    
    920Net write-offs
    
    
    (5,008
    )
    
    
    (958
    )Balance at end of year
    
    $
    1,960
    
    
    $
    1,121
 Debt Facilities
      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 years ended December 31, 2007 and 2006 were $48,000 and $26,000, 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 was $1.7 million. The offering period
ended in October 2006;
 6




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##### 




    
    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 years ended
December 31, 2007 and 2006 were $2.6 million and $2.7 million, 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
years ended December 31, 2007 and 2006 were $3.7 million and $1.6 million,
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 years ended December 31, 2007 and 2006;
    
    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 years ended December 31, 2007 and, 2006;
    
    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 years ended December 31, 2007 and 2006
were $1.5 million and $871,000, respectively;
    
    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. Underwriting fees paid to Anthem
Securities for the year ended December 31, 2006 was $1.4 million. 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 it sells. Anthem Securities did not directly sell
any units to investors and did not retain sale commissions for the years ended December
31, 2007, 2006 and 2005. The offering ended in October 2006.
 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.
  7




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Employees
  
 ITEM 1A  RISK FACTORS
 We May
Not Return All of Our Limited Partners
Investment or Any Rate of Return on Their Investment
  Higher Than Expected Equipment Lease and Secured Loan Defaults May Result in Losses
   
    
    we may experience difficulties and delays in recovering the equipment from the
defaulting party;
    
    the equipment may be returned in poor condition; and
 8




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##### 




    
    we may be unable to enforce important contract provisions against the insolvent
party, including the contract provisions that require the equipment to be returned to
us in good condition.
  
    
    enforcing a lessees or borrowers contract obligations;
    
    recovering equipment from the defaulting party;
    
    transporting, storing, and repairing the equipment; and
    
    finding a new lessee or purchaser for the equipment.
   Poor Economic Conditions May Adversely Affect Our Ability to Build Our Portfolio
   If We Are Unable to Realize the Residual Value of Our Equipment Under Our Operating Leases, We May
Incur Losses
  
    
    whether the original lessee wants to keep the equipment;
    
    the cost of comparable new equipment;
 9




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##### 




    
    whether the leased equipment is obsolete or in poor condition; and
    
    whether there is 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
    Cost Reimbursements and Significant Fees We Pay to Our General Partner and Its Affiliates, and
Reserves Our General Partner Establishes, Reduce Our Cash Available
for Distribution to Our Limited Partners
    Our
Limited Partners Ability to Dispose of Their Investment in Us Is Limited
    
    
    an offering period of up to two years;
    
    an additional five-year operating period; and
 10




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##### 




    
    a subsequent maturity period of approximately two years, during which our leases and
secured loans will either mature or be sold and we will liquidate our other assets.
  Our
Limited Partners have Very Limited Voting Rights and Ability to Control Our Business
  Our General Partner May Be Subject To Various Conflicts of Interest Arising Out of Its Relationship
to Us
  Our General Partners Investment Committee is Not Independent
  
    
    which program has been seeking investments for the longest period of time;
    
    whether the program has the cash required for the investment;
    
    whether the amount of debt to be incurred with respect to the investment is
acceptable for the program;
    
    the effect the investment would have on the programs cash flow;
    
    whether the investment would further diversify, or unduly concentrate, the programs
investments in a particular lessee, class or type of equipment, location, industry,
etc.; and
    
    whether the term of the investment is within the term of the program.
   11




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##### 



Our General Partner May Have Difficulty Managing Its Growth, Which May Divert Its Resources and
Limit Its Ability to Expand Its Operations Successfully
  If We Do Not Generate Sufficient Cash, We Will Not Be Able to Pay Monthly Annual
Distributions to Our Limited Partners or Reinvest a Portion of Our Net Revenues in Additional Investments During the Operating Period
  Our Cash Distributions May Not
Return Our Limited Partners Investment or Provide a Return on Their Investment, and
May Be Reduced or Delayed
  
    
    the demand for the equipment leases and secured loans we provide;
    
    our ability to obtain financings or leverage, including securitizations, on
acceptable terms to build our equipment portfolio;
    
    required principal and interest payments on the debt we intend to incur;
    
    profitability of our operations;
    
    equipment lease and secured loan defaults;
    
    prevailing economic conditions; and
    
    government regulations.
 Our Success Is Subject to Risks Inherent in the Equipment Leasing and Finance 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 or finance;
    
    the continuing strength of equipment manufacturers;
    
    the timing of our equipment purchases and our ability to forecast technological
advances;
 12




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##### 




    
    technological and economic obsolescence of the equipment we acquire;
    
    our ability to obtain financings or leverage, including securitizations, on
acceptable terms, to build our equipment portfolio;
    
    defaults by our 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
   Our Inability to Obtain Insurance For Certain Types of Losses Means We Must Bear the Cost of Any
Losses From the Non-Insurable Risks
  Participation With Affiliated Programs or 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.
 13




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ITEM 2  PROPERTIES
  
 ITEM 3  LEGAL PROCEEDINGS
  
 ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5 
    
    MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
  Number of Partnersas ofTitle of Class
    
    December 31, 2007Limited Partnership units
    
    
    1,415General Partnership units
    
    
    1
  
 ITEM 6  SELECTED FINANCIAL DATA
  Years Ended December 312007
    
    
    2006
    
    
    2005Revenues
    
    $
    34,864
    
    
    $
    14,888
    
    
    $
    1,194Expenses
    
    $
    36,752
    
    
    $
    14,756
    
    
    $
    1,632Net (loss) income
    
    $
    (1,888
    )
    
    $
    132
    
    
    $
    (438
    )Distributions to Partners
    
    $
    4,843
    
    
    $
    2,624
    
    
    $
    332Weighted average number of limited partnership units outstanding during the year
    
    
    599,095
    
    
    
    370,349
    
    
    
    51,053Net (loss) income per weighted limited partnership unit
    
    $
    (3.12
    )
    
    $
    0.35
    
    
    $
    (8.49
    )
 As of December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004Total assets
    
    $
    377,388
    
    
    $
    346,342
    
    
    $
    44,720
    
    
    $
    1,001Net investment in direct financing leases and notes
    
    $
    331,622
    
    
    $
    306,431
    
    
    $
    37,759
    
    
    $
    Equipment under operating leases, net
    
    $
    11,693
    
    
    $
    14,439
    
    
    $
    4,359
    
    
    $
    Debt
    
    $
    324,170
    
    
    $
    291,118
    
    
    $
    34,512
    
    
    $
    Partners capital
    
    $
    37,142
    
    
    $
    50,479
    
    
    $
    9,773
    
    
    $
    1,001
 14




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##### 



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.
    15




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##### 



Results of Operations
 Year Ended December 31, 2007 Compared to the Year Ended December 31, 2006
  
    
    Interest income on equipment financings increased to $24.9 million for the year
ended December 31, 2007 as compared to $9.9 million for the year ended December 31,
2006 an increase of $15.0 million (152%). Our average investment in direct financing
leases and notes increased to $319.0 million for the year ended December 31, 2007 as
compared to $172.1 million for the year ended December 31, 2006, an increase of $146.9
million (85%) This increase is principally due to our acquisition of a portfolio of
leases, loans and related assets for approximately $191.7 million, from a subsidiary of
Merrill Lynch at September 30, 2006. In addition the growth was driven by our General
Partners increased sales to us, marketing efforts supported by lines of financing, and
to the purchase of a lease portfolio from Pacific Capital Bank of $31.1 million at June
30, 2007.
    
    Rental income increased to $5.7 million for the year ended December 31, 2007 as
compared to $3.8 million for the year ended December 31, 2006, an increase of $1.9
million (51%). Our average investment in operating leases increased to $13.1 million
for the year ended December 31, 2007 as compared to $9.4 million for the year ended
December 31, 2006, an increase of $3.7 million (39%).
    
    Gain on sale of equipment and lease dispositions increased to $1.8 million for the
year ended December 31, 2007 as compared to $458,000 for the year ended December 31,
2006, an increase of $1.3 million (294%). Gains and losses from equipment and lease
dispositions may vary significantly from period to period.
    
    Other income increased to $2.5 million for the year ended December 31, 2007 as
compared to $758,000 for the year ended December 31, 2006, an increase of $1.7 million
(224%). Other income consists primarily of late fee income. Late fee income has
increased due to the increase of the equipment financing portfolio coupled with an
increase in payment collection efforts. Our average investment in direct financing
leases and notes increased to $319.0 million for the year ended December 31, 2007 as
compared to $172.1 million for the year ended December 31, 2006, an increase of $146.9
million (85%).
  
    
    Interest expense increased to $18.6 million for the year ended December 31, 2007 as
compared to $7.3 million for the year ended December 31, 2006, an increase $11.3
million (156%). This increase is primarily due to the increase in average debt
outstanding. Out average debt increased to $307.6 million as of December 31, 2007 as
compared to $162.8 million as of December 31, 2006, an increase of $144.8 million
(89%). This increase is principally due to our acquisition of a portfolio of leases,
loans and related assets for approximately $191.7 million, from a subsidiary of Merrill
Lynch at September 30, 2006. Generally interest rates on all our
debt facilities are based on one month LIBOR and fluctuate with
changes in LIBOR.
    
    Depreciation on operating leases increased to $4.8 million for the year ended
December 31, 2007 as compared to $3.1 million for the year ended December 31, 2006, an
increase of $1.7 million (53%). Our average investment in operating leases increased to
$13.1 million for the year ended December 31, 2007 as compared to $9.4 million for the
year ended December 31, 2006, an increase of $3.7 million (39%)
    
    Our provision for credit losses increased to $5.8 million for the year ended
December 31, 2007 as compared to $1.0 million for the year ended December 31, 2006, an
increase of $4.8 million (468%). As our portfolio increases and ages, we expect that
our provision for credit losses will increase. This increase was within our
expectation. 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 $3.7 million for the year ended December 31, 2007 as
compared to $1.6 million for the year ended December 31, 2006, an increase of $2.1
million (131%). This increase is
 16




---



##### 



directly attributable to our higher receipts of
payments on lease assets, since management fees are paid based on lease payments
received.
    
    Administrative expenses reimbursed to related party increased to $1.5 million for
the year ended December 31, 2007 as compared to $871,000 for the year ended December
31, 2006, an increase of $630,000 (72%). This increase is due to the increase in our
portfolio of equipment financing assets
    
    General and administrative expenses increased to $2.4 million for the year ended
December 30, 2007 as compared to $875,000 for the year ended December 31, 2006, an
increase of $1.5 million (173%). This increase is primarily attributable to an
increase in legal costs associated with increased collection efforts. We expect the
increase in legal costs will result in future recoveries of credit losses.
   Liquidity and Capital Resources
   Years Ended December 31,2007
    
    
    2006
    
    
    2005Net cash provided by (used in) operating activities
    
    $
    12,934
    
    
    $
    (240
    )
    
    $
    (476
    )Net cash used in investing activities
    
    
    (29,157
    )
    
    
    (106,543
    )
    
    
    (42,349
    )Net cash provided by financing activities
    
    
    2,272
    
    
    
    119,959
    
    
    
    43,858(Decrease) increase in cash
    
    $
    (13,951
    )
    
    $
    13,176
    
    
    $
    1,033
    17




---



##### 



Contractual Obligations and Commercial Commitments
  LessTotal
    
    
    than 1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    After 5 yearsLong term debt
    
    $
    324,170
    
    
    $
    109,291
    
    
    $
    153,248
    
    
    $
    54,000
    
    
    $
    7,631
 Recently Issued Accounting Pronouncements
   Critical Accounting Policies
 Revenue Recognition
  Direct Financing Leases.
 18




---



##### 



Operating Leases.
 Notes Receivable.
  Derivative Instruments and Hedging Activities.
 
 ITEM 7A  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
   19




---



##### 



ITEM 8  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
 20




---



##### 



LEASE EQUITY APPRECIATION FUND II, L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands)
 December 31,2007
    
    
    2006ASSETSCash
    
    $
    259
    
    
    $
    14,210Restricted cash
    
    
    27,997
    
    
    
    2,574Accounts receivable
    
    
    297
    
    
    
    475Due from lockbox
    
    
    1,445
    
    
    
    4,565Investment in direct financing leases and notes, net
    
    
    331,622
    
    
    
    306,431Investment in operating leases (net of accumulated depreciation of
$7,885 and $3,577)
    
    
    11,693
    
    
    
    14,439Fair value of interest rate swaps
    
    
    
    
    
    
    1,803Other assets
    
    
    4,075
    
    
    
    1,845$
    377,388
    
    
    $
    346,342LIABILITIES AND PARTNERS CAPITALLiabilities:Debt
    
    $
    324,170
    
    
    $
    291,118Accounts payable and accrued expenses
    
    
    1,256
    
    
    
    1,081Security deposits
    
    
    5,143
    
    
    
    3,020Fair value of interest rate swaps
    
    
    6,623
    
    
    
    Due to related parties
    
    
    3,054
    
    
    
    644Total liabilities
    
    
    340,246
    
    
    
    295,863Partners Capital
    
    
    37,142
    
    
    
    50,479$
    377,388
    
    
    $
    346,342
  21




---



##### 



LEASE EQUITY APPRECIATION FUND II, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
 Years Ended December 31,2007
    
    
    2006
    
    
    2005Income:Interest on equipment financings
    
    $
    24,852
    
    
    $
    9,876
    
    
    $
    862Rental income
    
    
    5,747
    
    
    
    3,796
    
    
    
    290Gain (loss) on sale of equipment and lease dispositions, net
    
    
    1,806
    
    
    
    458
    
    
    
    (5
    )Other
    
    
    2,459
    
    
    
    758
    
    
    
    4734,864
    
    
    
    14,888
    
    
    
    1,194Expenses:Interest expense
    
    
    18,545
    
    
    
    7,256
    
    
    
    584Depreciation on operating leases
    
    
    4,794
    
    
    
    3,133
    
    
    
    247Provision for credit losses
    
    
    5,847
    
    
    
    1,029
    
    
    
    130Management fees to related party
    
    
    3,680
    
    
    
    1,592
    
    
    
    140Administrative expenses reimbursed to related party
    
    
    1,501
    
    
    
    871
    
    
    
    340General and administrative expenses
    
    
    2,385
    
    
    
    875
    
    
    
    19136,752
    
    
    
    14,756
    
    
    
    1,632Net (loss) income
    
    $
    (1,888
    )
    
    $
    132
    
    
    $
    (438
    )Weighted average number of limited partner units
outstanding during the period
    
    
    599,095
    
    
    
    370,349
    
    
    
    51,053Net (loss) income per weighted average limited partner unit
    
    $
    (3.12
    )
    
    $
    0.35
    
    
    $
    (8.49
    )
  22




---



##### 



LEASE EQUITY APPRECIATION FUND II, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(in thousands, except unit data)
 AccumulatedGeneral
    
    
    
    
    
    
    
    
    
    
    OtherPartner
    
    
    Limited Partners
    
    
    Comprehensive
    
    
    Total Partners
    
    
    ComprehensiveAmount
    
    
    Units
    
    
    Amount
    
    
    Income (Loss)
    
    
    Capital
    
    
    (Loss) IncomeBalance at December 31, 2004
    
    $
    1
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1Limited Partners contribution
    
    
    
    
    
    
    120
    
    
    
    11,979
    
    
    
    
    
    
    
    11,979Offering costs related to the sale
of Limited Partnership units
    
    
    
    
    
    
    
    
    
    
    (1,596
    )
    
    
    
    
    
    
    (1,596
    )Cash distributions paid
    
    
    (3
    )
    
    
    
    
    
    
    (329
    )
    
    
    
    
    
    
    (332
    )Redemption of initial Limited
Partnership units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    (5
    )
    
    
    
    
    
    
    (433
    )
    
    
    
    
    
    
    (438
    )
    
    $
    (438
    )Unrealized gain on hedging
derivative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    159
    
    
    
    159
    
    
    
    159Balance at December 31, 2005
    
    
    (7
    )
    
    
    120
    
    
    
    9,621
    
    
    
    159
    
    
    
    9,773
    
    
    $
    (279
    )Limited Partners contribution
    
    
    
    
    
    
    480
    
    
    
    47,884
    
    
    
    
    
    
    
    47,884Offering costs related to the sale
of Limited Partnership units
    
    
    
    
    
    
    
    
    
    
    (6,330
    )
    
    
    
    
    
    
    (6,330
    )Cash distributions paid
    
    
    (26
    )
    
    
    
    
    
    
    (2,598
    )
    
    
    
    
    
    
    (2,624
    )Net income
    
    
    1
    
    
    
    
    
    
    
    131
    
    
    
    
    
    
    
    132
    
    
    $
    132Unrealized gain on hedging
derivative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,644
    
    
    
    1,644
    
    
    
    1,644Balance at December 31, 2006
    
    
    (32
    )
    
    
    600
    
    
    
    48,708
    
    
    
    1,803
    
    
    
    50,479
    
    
    $
    1,776Cash distributions paid
    
    
    (48
    )
    
    
    
    
    
    
    (4,795
    )
    
    
    
    
    
    
    (4,843
    )Redemption of initial Limited
Partnership units
    
    
    
    
    
    
    (2
    )
    
    
    (189
    )
    
    
    
    
    
    
    (189
    )Net loss
    
    
    (19
    )
    
    
    
    
    
    
    (1,869
    )
    
    
    
    
    
    
    (1,888
    )
    
    $
    (1,888
    )Unrealized loss on hedging derivative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,194
    )
    
    
    (6,194
    )
    
    
    (6,194
    )Amortization of gain on financial
derivative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (223
    )
    
    
    (223
    )
    
    
    (223
    )Balance at December 31, 2007
    
    $
    (99
    )
    
    
    598
    
    
    $
    41,855
    
    
    $
    (4,614
    )
    
    $
    37,142
    
    
    $
    (8,305
    )
  23




---



##### 



LEASE EQUITY APPRECIATION FUND II, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 Years Ended December 31,2007
    
    
    2006
    
    
    2005Cash flows from operating activities:Net (loss) income
    
    $
    (1,888
    )
    
    $
    132
    
    
    $
    (438
    )Adjustments to reconcile net (loss) income to net cash
provided by (used in)
operating activities:(Gain) loss on sale of equipment and lease dispositions net
    
    
    (1,806
    )
    
    
    (458
    )
    
    
    5Depreciation
    
    
    4,794
    
    
    
    3,133
    
    
    
    247Provision for credit losses
    
    
    5,847
    
    
    
    1,029
    
    
    
    130Amortization of deferred financing costs
    
    
    323
    
    
    
    71
    
    
    
    23Amortization of gain on financial derivative
    
    
    (223
    )
    
    
    
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    179
    
    
    
    (423
    )
    
    
    (52
    )Due from lockbox
    
    
    3,121
    
    
    
    (3,896
    )
    
    
    (670
    )Other assets
    
    
    2
    
    
    
    (1,269
    )
    
    
    (6
    )Accounts payable and accrued expenses
    
    
    175
    
    
    
    867
    
    
    
    215Due to related parties, net
    
    
    2,410
    
    
    
    574
    
    
    
    70Net cash provided by (used in) operating activities
    
    
    12,934
    
    
    
    (240
    )
    
    
    (476
    )Cash flows from investing activities:Investment in direct financing leases and notes
    
    
    (149,176
    )
    
    
    (146,382
    )
    
    
    (38,983
    )Investment in equipment under operating leases
    
    
    (1,533
    )
    
    
    (13,228
    )
    
    
    (4,606
    )Proceeds from direct financing leases, net of earned
income
    
    
    119,429
    
    
    
    50,360
    
    
    
    1,089Security deposits, net
    
    
    2,123
    
    
    
    2,707
    
    
    
    151Net cash used in investing activities
    
    
    (29,157
    )
    
    
    (106,543
    )
    
    
    (42,349
    )Cash flows from financing activities:Proceeds from borrowings
    
    
    155,229
    
    
    
    124,689
    
    
    
    36,266Repayment of debt
    
    
    (122,177
    )
    
    
    (41,126
    )
    
    
    (1,754
    )Increase in restricted cash
    
    
    (25,423
    )
    
    
    (2,195
    )
    
    
    (379
    )Increase in deferred financing costs
    
    
    (2,557
    )
    
    
    (339
    )
    
    
    (326
    )Proceeds from termination of financial derivatives
    
    
    2,232
    
    
    
    
    
    
    
    Limited Partners capital contributions
    
    
    
    
    
    
    47,884
    
    
    
    11,979Payment of offering costs incurred for the sale of limited
partnership units
    
    
    
    
    
    
    (6,330
    )
    
    
    (1,596
    )Partners distributions
    
    
    (4,843
    )
    
    
    (2,624
    )
    
    
    (332
    )Redemption of limited partner units
    
    
    (189
    )
    
    
    
    
    
    
    Net cash provided by financing activities
    
    
    2,272
    
    
    
    119,959
    
    
    
    43,858(Decrease) increase in cash
    
    
    (13,951
    )
    
    
    13,176
    
    
    
    1,033Cash, beginning of year
    
    
    14,210
    
    
    
    1,034
    
    
    
    1Cash, end of year
    
    $
    259
    
    
    $
    14,210
    
    
    $
    1,034
  24




---



##### 



LEASE EQUITY APPRECIATION FUND II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007
 NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS
     NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
  25




---



##### 



LEASE EQUITY APPRECIATION FUND II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)
 Use of Estimates
      Concentration of Credit Risk
   26




---



##### 



LEASE EQUITY APPRECIATION FUND II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)
 Revenue Recognition
  Direct Financing Leases.
 Operating Leases.
 Notes Receivable.
  Income Taxes
  27




---



##### 



LEASE EQUITY APPRECIATION FUND II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)
 Supplemental Disclosure of Cash Flow Information
  2007
    
    
    2006
    
    
    2005Cash paid for:Interest
    
    $
    17,874
    
    
    $
    6,686
    
    
    $
    508Non-cash activities:Purchase of financing assets from Merrill Lynch Equipment Finance
    
    $
    
    
    
    $
    173,043
    
    
    $
    Borrowings under revolving line of credit Merrill Lynch Commercial Finance
Corporation
    
    $
    
    
    
    $
    (173,043
    )
    
    $
    Borrowings under 2007-1 Term Securitization
    
    $
    (267,237
    )
    
    $
    
    
    
    $
    Repayment of Merrill Lynch and WestLB line of credit
    
    $
    267,237
    
    
    $
    
    
    
    $
    
 Recently Issued Accounting Pronouncements
  ,
 Transfers of Financial Assets
  Fair Value of Financial Instruments
   28




---



##### 



LEASE EQUITY APPRECIATION FUND II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 NOTE 3  RESTRICTED CASH
  NOTE 4  DUE FROM LOCKBOX
  NOTE 5 - INVESTMENT IN LEASES AND NOTES
  December 31,2007
    
    
    2006Direct financing leases
    
    $
    268,983
    
    
    $
    264,711Notes receivable
    
    
    64,599
    
    
    
    42,841333,582
    
    
    
    307,552Allowance for credit losses
    
    
    (1,960
    )
    
    
    (1,121
    )$
    331,622
    
    
    $
    306,431
  December 31,2007
    
    
    2006Total future minimum lease payments
    
    $
    301,449
    
    
    $
    292,944Unearned rental income
    
    
    (35,846
    )
    
    
    (34,892
    )Residuals, net of unearned residual income
    
    
    3,380
    
    
    
    6,659$
    268,983
    
    
    $
    264,711
  Years Ended December 312007
    
    
    2006Allowance for credit losses, beginning of period
    
    $
    1,121
    
    
    $
    130Provision for credit losses
    
    
    5,847
    
    
    
    1,028Allowance for credit losses, in connection with acquisition (see Note 7)
    
    
    
    
    
    
    920Net write-offs
    
    
    (5,008
    )
    
    
    (957
    )Allowance for credit losses, end of period
    
    $
    1,960
    
    
    $
    1,121
 29




---



##### 



LEASE EQUITY APPRECIATION FUND II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 NOTE 5 - INVESTMENT IN LEASES AND NOTES  (Continued)
  Years Ending
    
    DirectDecember 31,
    
    Financing Leases
    
    
    Notes
    
    
    Operating Leases
    
    
    Total2008
    
    $
    118,208
    
    
    $
    14,142
    
    
    $
    4,950
    
    
    $
    137,3002009
    
    
    86,560
    
    
    
    14,593
    
    
    
    2,843
    
    
    
    103,9962010
    
    
    55,153
    
    
    
    13,711
    
    
    
    1,496
    
    
    
    70,3602011
    
    
    28,191
    
    
    
    11,410
    
    
    
    466
    
    
    
    40,0672012
    
    
    9,121
    
    
    
    7,486
    
    
    
    82
    
    
    
    16,689Thereafter
    
    
    4,216
    
    
    
    3,257
    
    
    
    22
    
    
    
    7,495$
    301,449
    
    
    $
    64,599
    
    
    $
    9,859
    
    
    $
    375,907
 NOTE 6  OTHER ASSETS
  NOTE 7  EQUIPMENT FINANCE PORTFOLIO ACQUISTION
  30




---



##### 



LEASE EQUITY APPRECIATION FUND II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 NOTE 8 - DEBT
  December 31,2007
    
    
    2006In September 2007, the Fund closed a $276.8 million
term securitization (Series 2007-1 Notes). In
connection with the Series 2007-1 transaction, four
tranches of notes were issued to investors in the
form of $84 million Class A-1 notes, $77 million
Class A-2 notes, $101.3 million Class A-3 notes and
$14.5 million Class B notes. Interest rates and
maturities on the four tranches are as follows: Class
A-1 5.38%, maturing in September 2008; Class
A-2 one month LIBOR plus 0.12%, maturing in January
2010; Class A-3 one month LIBOR plus 0.20%,
maturing in July 2010 and Class B 6.65%, maturing
in July 2010. To mitigate fluctuations in interest
rates on Class A-2 and Class A-3 notes the Fund has
entered into interest rate swap agreements. The
interest rate swap agreements terminate at various
dates ranging from January 2010 to July 2012 (See
Note 9). As of December 31, 2007, the interest
rate swap agreements fix the interest rate on Class
A-2 and Class A-3 notes at 5.40% on a weighted
average basis
    
    $
    214,653
    
    
    $
    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 August 2013
to November 2014. As of December 31, 2007, the
interest rate swap agreements fix the interest rate
on the outstanding balance at 6.13% on a weighted
average basis. Interest and principal are due
monthly. The line of credit is renewable for a one
year period in 2008
    
    
    109,517
    
    
    
    99,731Merrill 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 had entered
into interest rate swap agreements. The interest
rate swap agreements terminated in June 2007 (See
Note 9) The line of credit was satisfied in June
2007
    
    
    
    
    
    
    191,387Total outstanding debt
    
    $
    324,170
    
    
    $
    291,118
   31




---



##### 



LEASE EQUITY APPRECIATION FUND II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 NOTE 8 - DEBT (continued)
  2008
    
    $
    109,2912009
    
    
    89,5952010
    
    
    63,6532011
    
    
    37,6162012
    
    
    16,384Thereafter
    
    
    7,631$
    324,170
 NOTE 9 - DERIVATIVE INSTRUMENTS
       32




---



##### 



LEASE EQUITY APPRECIATION FUND II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 NOTE 10  TRANSACTIONS WITH AFFILIATES
         Years Ended December 312007
    
    
    2006
    
    
    2005Acquisition fees
    
    $
    2,587
    
    
    $
    2,648
    
    
    $
    870Asset management fees
    
    $
    3,680
    
    
    $
    1,592
    
    
    $
    140Organization and offering expenses
    
    $
    
    
    
    $
    1,676
    
    
    $
    419Reimbursed administrative expenses
    
    $
    1,501
    
    
    $
    871
    
    
    $
    340Underwriting fees
    
    $
    
    
    
    $
    1,405
    
    
    $
    359
  33




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##### 



LEASE EQUITY APPRECIATION FUND II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 NOTE 11 - ALLOCATION OF PARTNERSHIP INCOME, LOSS AND CASH DISTRIBUTIONS
   NOTE 12  COMPREHENSIVE INCOME (LOSS)
  NOTE 13  NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT
  34




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##### 



ITEM 9  CHANGES IN AND DISAREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 NONE
 
 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
    
    
    PositionCrit S. DeMent
    
    
    55
    
    
    Chairman of the Board of Directors and Chief Executive OfficerMiles Herman
    
    
    48
    
    
    President, Chief Operating Officer and DirectorJonathan Z. Cohen
    
    
    37
    
    
    DirectorAlan D. Schreiber, M.D.
    
    
    66
    
    
    DirectorLinda Richardson
    
    
    60
    
    
    DirectorRobert K. Moskovitz
    
    
    51
    
    
    Chief Financial Officer and TreasurerDavid H. English
    
    
    57
    
    
    Executive Vice PresidentDaniel G. Courtney
    
    
    45
    
    
    Executive Vice President  Investment ProgramsRobert Hunter
    
    
    42
    
    
    Chief Marketing Officer and Executive Vice President
 35




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##### 



CRIT S. DEMENT
 MILES HERMAN
 JONATHAN Z. COHEN
 ALAN D. SCHREIBER, M.D.
 LINDA RICHARDSON
 ROBERT K. MOSKOVITZ
 DAVID H. ENGLISH
 36




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##### 



DANIEL G. COURTNEY
 ROBERT J. HUNTER
 Code of Business Conduct and Ethics
 th
 
 ITEM 11  EXECUTIVE COMPENSATION
  
 ITEM 12  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED UNIT
                    HOLDER MATTERS
 (a)
    
    The Fund had approximately 1,415 limited partners as of December 31, 2007.(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, 2007, 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.
 37




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##### 



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.
  38




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##### 



PART IV
 
 ITEM 15  EXHIBITS, FINANCIAL STATEMENT SCHEDULES
  1.
    
    Financial StatementsThe financial statements required by this Item are set forth in Item 8 
Financial Statements and Supplementary Data.2.
    
    Financial Statement SchedulesNo schedules are required to be presented in this report under Regulation S-X
promulgated by the SEC.3.
    
    Exhibits
 Exhibit No.
    
    Description3.1
    
    
    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)10.2
    
    
    Third Amendment to Secured Loan Agreement dated as of December 21, 2007 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 Lender10.3
    
    
    First Amendment to WestLB AG Secured Loan Agreement (5)10.3
    (a)
    
    Second Amendment to WESTLB AG Secured Loan Agreement (6)10.4
    
    
    Assignment, Assumption and Amendment Agreement among LEAF Equity Appreciation Fund II, L.P.
and Merrill Lynch Equipment Finance LLC, dated September 29, 2006. (7)10.5
    
    
    Amendment Agreement, dated as of January 29, 2006, 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. 39




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##### 



SIGNATURES
  LEASE EQUITY APPRECIATION FUND II, L.P.March  31, 2008
    By:
    /s/ CRIT S. DEMENTCRIT S. DEMENTChairman and Chief Executive Officer  /s/ Crit S. DeMent

CRIT S. DEMENT
    
    Chairman of the Board and Chief
Executive Officer of the General
Partner
    
    March 31, 2008/s/ Miles Herman

MILES HERMAN
    
    President, Chief Operating Officer
and Director of the General Partner
    
    March 31, 2008/s/ Robert K. Moskovitz

ROBERT K. MOSKOVITZ
    
    Chief Financial Officer and Treasurer
of the General Partner
    
    March 31, 2008/s/ Jonathan Z. Cohen
    
    Director of the General Partner
    
    March 31, 2008JONATHAN Z. COHEN/s/ Alan D. Schreiber, M.D.
    
    Director of the General Partner
    
    March 31, 2008ALAN D. SCHREIBER, M.D./s/ Linda Richardson
    
    Director of the General Partner
    
    March 31, 2008LINDA RICHARDSON
 40