##### Table of Contents



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 333-137734
 LEAF EQUIPMENT LEASING INCOME FUND III, L.P.
  Delaware
    
    20-5455968(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 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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##### 



LEAF EQUIPMENT LEASING INCOME FUND III, L.P.
INDEX TO ANNUAL REPORT
ON FORM 10-K
 PagePART IITEM 1:
    
    Business
    
    
    3ITEM 1A:
    
    Risk Factors
    
    
    7ITEM 1B:
    
    Unresolved Staff Comments
    
    
    13ITEM 2:
    
    Properties
    
    
    13ITEM 3:
    
    Legal Proceedings
    
    
    13ITEM 4:
    
    Submission of Matters to a Vote of Security Holders
    
    
    13PART IIITEM 5:
    
    Market for Registrants Common Equity and Related Stockholder
Matters
    
    
    14ITEM 6:
    
    Selected Financial Data
    
    
    15ITEM 7:
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operation
    
    
    16ITEM 7A:
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    20ITEM 8:
    
    Financial Statements and Supplementary Data
    
    
    21ITEM 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
    
    
    
    
    40
  
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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;
    
    $1.0 billion or less in total assets; or
    
    $100.0 million or less in total annual sales.
     3




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Our Lease Portfolio
  Direct Financing Leases and Notes
 December 31, 2007Type of Equipment
    
    Net Investment
    
    
    PercentageIndustrial Equipment
    
    $
    209,286
    
    
    
    42.1
    %Water Purification
    
    
    69,832
    
    
    
    14.1Office Equipment
    
    
    63,703
    
    
    
    12.8Computers
    
    
    43,407
    
    
    
    8.8Medical Equipment
    
    
    35,037
    
    
    
    7.1Restaurant Equipment
    
    
    20,474
    
    
    
    4.1Communications
    
    
    13,420
    
    
    
    2.7Building Systems
    
    
    10,517
    
    
    
    2.1General Business Loans
    
    
    10,187
    
    
    
    2.0Other
    
    
    21,089
    
    
    
    4.2$
    496,952
    
    
    
    100.0
    %
 Operating Leases
 December 31, 2007Type of Equipment
    
    Net Investment
    
    
    PercentageIndustrial Equipment
    
    $
    4,915
    
    
    
    76.1
    %Office Equipment
    
    
    626
    
    
    
    9.7Communications
    
    
    299
    
    
    
    4.6Agricultural Equipment
    
    
    288
    
    
    
    4.5Computers
    
    
    188
    
    
    
    2.9Building Systems
    
    
    144
    
    
    
    2.2$
    6,460
    
    
    
    100.0
    %
 4




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Direct Financing Leases and Notes
 December 31, 2007Type of Business
    
    Net Investment
    
    
    PercentageServices
    
    $
    174,218
    
    
    
    35.1
    %Manufacturing
    
    
    60,352
    
    
    
    12.1Transportation/Communication/ Energy
    
    
    59,737
    
    
    
    12.0Retail Trade
    
    
    56,494
    
    
    
    11.4Construction
    
    
    43,356
    
    
    
    8.7Wholesale Trade
    
    
    30,502
    
    
    
    6.1Finance/Insurance/Real Estate
    
    
    28,664
    
    
    
    5.8Agricultural/Forestry/Fishing
    
    
    27,300
    
    
    
    5.5Public Administration
    
    
    4,114
    
    
    
    0.8Other
    
    
    12,215
    
    
    
    2.5$
    496,952
    
    
    
    100.0
    %
 Operating Leases
 December 31, 2007Type of Business
    
    Net Investment
    
    
    PercentageServices
    
    $
    3,217
    
    
    
    49.8
    %Transportation/Communication/Energy
    
    
    1,336
    
    
    
    20.7Construction
    
    
    975
    
    
    
    15.1Manufacturing
    
    
    317
    
    
    
    4.9Agriculture/Forestry/Fishing
    
    
    266
    
    
    
    4.1Wholesale Trade
    
    
    225
    
    
    
    3.5Finance/Insurance/Real Estate
    
    
    105
    
    
    
    1.6Retail Trade
    
    
    19
    
    
    
    0.3$
    6,460
    
    
    
    100.0
    %
   December 31,2007Balance at beginning of year
    
    $
    Provision for credit losses
    
    
    1,428Net write-offs
    
    
    (128
    )Balance at end of year
    
    $
    1,300
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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
during the period from March 13, 2007 (Commencement of Operations) to December 31, 2007
was $23,000;
    
    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 during the period
from March 13, 2007 (Commencement of Operations) to
December 31, 2007 was $2.2 million;
    
    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 during the period from
March 13, 2007 (Commencement of Operations) to December 31, 2007 was $11.1 million;
    
    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 8.5% of their capital contributions, as adjusted by distributions
deemed to be a return of capital. Asset management fees paid to the General Partner
during the period from March 13, 2007 (Commencement of Operations) to December 31, 2007
was $2.0 million;
    
    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 8.5% of their capital
contributions, as adjusted by distributions deemed to be a return of capital. No
commissions were paid during the period from March 13, 2007
(Commencement of Operations) to December 31, 2007;
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
    
    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 during the period from March 13, 2007 (Commencement of
Operations) to December 31, 2007;
    
    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 during the period from March 13, 2007
(Commencement of Operations) to December 31, 2007 was $743,000;
    
    our General Partner and Chadwick Securities, Inc. (Chadwick), receive 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, Chadwick may
reimburse selling broker-dealers up to 1% of the proceeds of each unit it sells them
for marketing expenses. Chadwick also receives sales commissions of 7% of the proceeds
of each unit sold by it. Underwriting fees paid to Chadwick for during the period from
March 13, 2007 (Commencement of Operations) to December 31, 2007 was $7.3 million.
Chadwick did not directly sell any units to investors and did not retain sales
commissions through December 31, 2007.
 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
  
 ITEM 1A  RISK FACTORS
 We May
Not Return All of Our Limited Partners Investment or Any Rate
of Return on Their Investment
  7




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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
    
    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
  8




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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;
    
    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
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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
    
    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
  10




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
    
    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.
   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;
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
    
    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;
    
    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
  12




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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.
 
 ITEM
1B  UNRESOLVED STAFF COMMENTS
  
 ITEM 2
 PROPERTIES
  
 ITEM 3
 LEGAL PROCEEDINGS
  
 ITEM 4
 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  13




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ITEM 5
 MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS AND                 ISSUER PURCHASES OF EQUITY SECURITITES.
    Offering proceeds
    
    $
    74,008,838Expenses:Sales commissions (1)
    
    $
    5,112,272Underwriting fees (1)
    
    
    2,152,665Organization and offering expenses (2)
    
    
    2,220,265Public offering expenses
    
    
    9,485,202Net offering proceeds
    
    
    64,523,636Reserves
    
    
    645,236Total proceeds available for investment
    
    $
    63,878,400Use of proceeds for investment (estimated):Used in operations (3)
    
    $
    4,703,309Acquisition of lease portfolios (4)
    
    
    54,296,640Working capital
    
    
    4,878,451
 
 (1)
    
    Paid to an affiliate of the general partner which is then remitted to third parties.(2)
    
    Paid to our general partner.(3)
    
    Our general partner was reimbursed $743,303 for operating expenses and asset management fees of $1,991,690.(4)
    
    Included are asset acquisition fees of $11,106,855 that were paid to our general partner. 14




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ITEM 6
 SELECTED FINANCIAL DATA
  2007Revenues
    
    $
    15,816Expenses
    
    $
    16,184Net loss
    
    $
    (368
    )Distributions to Partners
    
    $
    2,304Weighted average number of limited partnership units outstanding
during the year
    
    
    384,672Net loss per weighted limited partnership unit  basic and
fully diluted
    
    $
    (0.95
    )
 2007
    
    2006Total assets
    
    $
    538,850
    
    
    $
    1Net investment in direct financing leases and notes
    
    $
    495,652
    
    
    $
    Equipment under operating leases, net
    
    $
    6,460
    
    
    $
    Debt
    
    $
    467,625
    
    
    $
    Partners capital
    
    $
    55,050
    
    
    $
    1
 15




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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 General
   
    
    500 or fewer employees;
    
    $1.0 billion or less in total assets; or
    
    $100.0 million or less in total annual sales.
   16




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Results of Operations
  Revenues  Period from March 13, 2007 (Commencement of Operations) to December 31, 2007.
  
    
    Our interest and rental income was $13.9 million, for the period from March 13, 2007
(commencement of operations) to December 31, 2007. We expect our revenues to increase as
we continue to acquire equipment finance assets from our General Partner. Our investments
in financing assets increased to $502.1 million as of December 31, 2007.
    
    Other income was $1.3 million, for the period from March 13, 2007 (commencement of
operations) to December 31, 2007. Other income consists primarily of late fee income. We
expect late fee income to increase as we continue to acquire equipment finance assets from
our General Partner.
 Expenses  Period from March 13, 2007 (Commencement of Operations) to December 31, 2007.
  
    
    Interest expense was $10.9 million for the period from March 13, 2007 (commencement of
operations) to December 31, 2007. We expect that interest expense will increase as we
continue to acquire equipment finance assets from our General Partner. As of December 31,
2007, we had outstanding debt of $467.6 million. Generally interest rates on all our debt
facilities are based on one month LIBOR and fluctuate with changes in LIBOR.
    
    Depreciation on operating leases was $646,000 for the period from March 13, 2007
(commencement of operations) to December 31, 2007. Our investment in operating leases
increased to $6.4 million as of December 31, 2007. We expect depreciation expense to
increase as we continue to purchase operating leases from our General Partner.
    
    Our provision for credit losses was $1.4 million for the period from March 13, 2007
(commencement of operations) to December 31, 2007. We expect that the provision for credit
losses will increase along with the increase in our leasing portfolio
    
    Management fees to related party are based on payments of financings assets processed by
our General Partner. The management fees charged by our General Partner were $2.0 million
for the period from March 13, 2007 (commencement of operations) to December 31, 2007.
    
    Our administrative expenses reimbursed to related party was $743,000 for the period from
March 13, 2007 (commencement of operations) to December 31,
2007. Administrative expenses
represents reimbursements made to our General Partner for expenses incurred for managing
us.
    
    The general and administrative expenses of $426,000 for the period from March 13, 2007
(commencement of operations) to December 31, 2007, represent costs we incurred to operate
on a daily basis.
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Liquidity and Capital Resources
   Net cash used in operating activities
    
    $
    (5,132
    )Net cash used in investing activities
    
    
    (501,135
    )Net cash provided by financing activities
    
    
    511,849Increase in cash
    
    $
    5,582
      18




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Contractual Obligations and Commercial Commitments
  LessTotal
    
    than 1 Year
    
    1-3 Years
    
    4-5 Years
    
    After 5 yearsLong term debt
    
    $
    467,625
    
    
    $
    263,140
    
    
    $
    144,980
    
    
    $
    52,219
    
    
    $
    7,286
 Recently Issued Accounting Pronouncements
  ,
 Critical Accounting Policies
 Revenue Recognition
  Direct Financing Leases.
 19




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Operating Leases.
 Notes Receivable.
  Derivative Instruments and Hedging Activities.
 
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  20




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ITEM 8
 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
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LEAF EQUIPMENT LEASING INCOME FUND III, L.P.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
(in thousands)
 2007
    
    
    2006ASSETSCash
    
    $
    5,583
    
    
    $
    1Restricted cash
    
    
    15,885
    
    
    
    Accounts receivable
    
    
    197
    
    
    
    Due from lockbox
    
    
    12,940
    
    
    
    Investment in direct financing leases and notes, net
    
    
    495,652
    
    
    
    Investment in operating leases, (net of accumulated depreciation of $646)
    
    
    6,460
    
    
    
    Other assets
    
    
    2,133
    
    
    
    $
    538,850
    
    
    $
    1LIABILITIES AND PARTNERS CAPITALLiabilities:Debt
    
    $
    467,625
    
    
    $
    Accounts payable and accrued expenses
    
    
    6,725
    
    
    
    Fair value of interest rate swap
    
    
    6,803
    
    
    
    Security deposits
    
    
    2,408
    
    
    
    Due to related party
    
    
    239
    
    
    
    Total liabilities
    
    
    483,800
    
    
    
    Partners Capital
    
    
    55,050
    
    
    
    1$
    538,850
    
    
    $
    1
  22




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LEAF EQUIPMENT LEASING INCOME FUND III, L.P.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2007
(in thousands, except unit data)
 Income:Interest on equipment financing
    
    $
    13,079Rental income
    
    
    793Gain on sale of equipment and lease dispositions, net
    
    
    643Other
    
    
    1,30115,816Expenses:Interest expense
    
    
    10,949Depreciation on operating leases
    
    
    646Provision for credit losses
    
    
    1,428Management fees to related party
    
    
    1,992Administrative expenses reimbursed to related party
    
    
    743General and administrative expenses
    
    
    42616,184Net loss
    
    $
    (368
    )Weighted average number of limited partner units
outstanding during the period
    
    $
    384,672Net loss attributed to limited partners per unit
    
    $
    (0.95
    )
  23




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LEAF EQUIPMENT LEASING INCOME FUND III, L.P.
CONSOLIDATED STATEMENT OF PARTNERS CAPITAL
AND COMPREHENSIVE LOSS
FOR THE YEAR ENDED DECEMBER 31, 2007
(in thousands, except unit data)
 AccumulatedGeneral
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    Partners'Partner
    
    
    Limited Partners
    
    
    Comprehensive
    
    
    Capital
    
    
    ComprehensiveAmount
    
    
    Units
    
    
    Amount
    
    
    Loss
    
    
    Total
    
    
    Loss TotalBalance, January 1, 2007
    
    $
    1
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1Limited Partners contributions
    
    
    
    
    
    
    742,272
    
    
    
    74,009
    
    
    
    
    
    
    
    74,009Offering costs related to the
sale of Limited Partnership units
    
    
    
    
    
    
    
    
    
    
    (9,485
    )
    
    
    
    
    
    
    (9,485
    )Cash distributions paid
    
    
    (23
    )
    
    
    
    
    
    
    (2,281
    )
    
    
    
    
    
    
    (2,304
    )Net loss
    
    
    (4
    )
    
    
    
    
    
    
    (364
    )
    
    
    
    
    
    
    (368
    )
    
    $
    (368
    )Unrealized loss on hedging derivative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,803
    )
    
    
    (6,803
    )
    
    
    (6,803
    )Balance,
December 31, 2007
    
    $
    (26
    )
    
    
    742,272
    
    
    $
    61,879
    
    
    $
    (6,803
    )
    
    $
    55,050
    
    
    $
    (7,171
    )
  24




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##### Table of Contents



LEAF EQUIPMENT LEASING INCOME FUND III, L.P.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED
DECEMBER 31, 2007
(in thousands)
 Cash flows from operating activities:Net loss
    
    $
    (368
    )Adjustments
to reconcile net loss to net cash used in operating activities:Gain on sale of equipment, net
    
    
    (643
    )Depreciation
    
    
    646Provision for credit losses
    
    
    1,428Amortization of deferred financing costs
    
    
    164Changes in operating assets and liabilities:Accounts receivable
    
    
    (197
    )Due from lockbox
    
    
    (12,940
    )Accounts payable and accrued expenses
    
    
    6,725Other assets
    
    
    (186
    )Due to related parties, net
    
    
    239Net cash used in operating activities
    
    
    (5,132
    )Cash flows from investing activities:Investment in direct financing leases and notes
    
    
    (574,177
    )Investment in equipment under operating leases, net
    
    
    (7,106
    )Proceeds from direct financing leases, net of earned income
    
    
    77,740Security deposits, net
    
    
    2,408Net cash used in investing activities
    
    
    (501,135
    )Cash flows from financing activities:Proceeds from debt
    
    
    564,779Repayment of debt
    
    
    (97,154
    )Increase in restricted cash
    
    
    (15,885
    )Deferred financing costs
    
    
    (2,111
    )Limited Partners capital contributions
    
    
    74,009Payment of offering costs incurred for the sale of partnership units
    
    
    (9,485
    )Cash distributed to partners
    
    
    (2,304
    )Net cash provided by financing activities
    
    
    511,849Increase in cash
    
    
    5,582Cash,
beginning of year
    
    
    1Cash, end of
year
    
    $
    5,583
  25




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##### Table of Contents



LEAF EQUIPMENT LEASING INCOME FUND III, 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
  26




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##### Table of Contents



LEAF EQUIPMENT LEASING INCOME FUND III, 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
   Revenue Recognition
  27




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##### Table of Contents



LEAF EQUIPMENT LEASING INCOME FUND III, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 NOTE 2
- SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
 (Continued)
 Revenue
Recognition  (Continued)
 Direct Financing Leases.
 Operating Leases.
 Notes Receivable.
  Income Taxes
  Supplemental Disclosure of Cash Flow Information
  Cash paid for:Interest
    
    $
    9,447
 28




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##### Table of Contents



LEAF EQUIPMENT LEASING INCOME FUND III, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 NOTE 2
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)
 Recently Issued Accounting Pronouncements
   Fair Value of Financial Instruments
   NOTE 3
 RESTRICTED CASH
  NOTE 4
 DUE FROM LOCKBOX
  29




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##### Table of Contents



LEAF EQUIPMENT LEASING INCOME FUND III, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 NOTE 5 - INVESTMENT IN LEASES AND NOTES
  December 31,2007Direct financing leases
    
    $
    413,196Notes receivable
    
    
    83,756$
    496,952Allowance for credit losses
    
    
    (1,300
    )$
    495,652
  December 31,2007Total future minimum lease payments
    
    $
    463,369Unearned rental income
    
    
    (56,879
    )Residuals, net of unearned residual income
    
    
    6,706$
    413,196
  Period EndedDecember 31,2007Allowance for credit losses, beginning of period
    
    
    Provision for credit losses
    
    $
    1428Net write offs
    
    
    (128
    )Allowance for credit losses, end of period
    
    $
    1,300
  Annual Years Ending
    
    DirectDecember 31,
    
    Financing Leases
    
    
    Notes
    
    
    Operating Leases
    
    
    Total2008
    
    $
    180,942
    
    
    $
    18,660
    
    
    $
    1,983
    
    
    $
    201,5852009
    
    
    135,949
    
    
    
    18,660
    
    
    
    1,863
    
    
    
    156,4722010
    
    
    87,867
    
    
    
    17,572
    
    
    
    1,330
    
    
    
    106,7692011
    
    
    44,168
    
    
    
    14,818
    
    
    
    447
    
    
    
    59,4332012
    
    
    13,379
    
    
    
    7,800
    
    
    
    82
    
    
    
    21,261Thereafter
    
    
    1,064
    
    
    
    6,246
    
    
    
    5
    
    
    
    7,315$
    463,369
    
    
    $
    83,756
    
    
    $
    5,710
    
    
    $
    552,835
 30




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##### Table of Contents



LEAF EQUIPMENT LEASING INCOME FUND III, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 NOTE 6
 OTHER ASSETS
  NOTE 7 - DEBT
  December 31, 2007WestLB AG, New York Branch revolving line of credit,
with an aggregate borrowing limit of $250.0 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 one month 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 January 2013 to December 2014. As of
December 31, 2007, the interest rate swap agreements fix
the interest rate on the outstanding balance at 6.33% on
a weighted average basis. Interest and principal are
due monthly. The line of credit expires in September
2010.
    
    $
    165,390Merrill Lynch Bank USA, secured loan agreement, with an
aggregate borrowing limit of $200.0 million,
collateralized by specific lease receivables and related
equipment. Interest on this facility is calculated at
one month LIBOR plus 0.80% 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 December 2017. As of December 31, 2007, the
interest rate swap agreements fix the interest rate on
the outstanding balance at 6.18% on a weighted average
basis. Interest and principal are due monthly. The
secured loan is renewable for one year periods on June
28, 2008, 2009 and 2010.
    
    
    145,035National City Bank, revolving line of credit, with an
aggregate borrowing limit of $160.0 million collateralized
by specific leases and notes receivables and related
equipment. Interest on this facility is calculated at
one month LIBOR plus 1.75% per annum. To mitigate
fluctuations in interest rates the Fund has entered into
interest rate swap agreements. The interest rate swap
agreement terminates in June 2013. As of December 31,
2007, the interest rate swap agreements fix the interest
rate on the outstanding balance at 6.29% on a weighted
average basis. Interest and principal are due monthly.
The line of credit expires in May 2008.
    
    
    157,200Total outstanding debt
    
    $
    467,625
 31




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##### Table of Contents



LEAF EQUIPMENT LEASING INCOME FUND III, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 NOTE 7 - DEBT- (Continued)
   2008
    
    $
    263,1402009
    
    
    83,8702010
    
    
    61,1102011
    
    
    36,8432012
    
    
    15,376Thereafter
    
    
    7,286$
    467,625
 NOTE 8 - DERIVATIVE INSTRUMENTS
      32




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##### Table of Contents



LEAF EQUIPMENT LEASING INCOME FUND III, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 NOTE 9  TRANSACTIONS WITH AFFILIATES
          Period EndedDecember 31, 2007*Acquisition fees
    
    $
    11,107Asset management fees
    
    
    1,992Reimbursed administrative expenses
    
    
    743Organization and offering expense allowance
    
    
    2,220Underwriting fees
    
    
    7,265
 
 *
    
    Operations commenced March 13, 2007  33




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##### Table of Contents



LEAF EQUIPMENT LEASING INCOME FUND III, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 NOTE 10 - ALLOCATION OF PARTNERSHIP INCOME, LOSS AND CASH DISTRIBUTIONS
   NOTE
11  COMPREHENSIVE LOSS
  NOTE
12  NET LOSS PER LIMITED PARTNERSHIP UNIT
  34




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##### Table of Contents



ITEM
9.  CHANGES IN AND DISAGREEMENTS 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, Director, and SecretaryJonathan Z. Cohen
    
    
    37
    
    
    DirectorSteven J. Kessler
    
    
    65
    
    
    DirectorRobert K. Moskovitz
    
    
    51
    
    
    Chief Financial Officer, Treasurer, and Assistant SecretaryDavid H. English
    
    
    57
    
    
    Executive Vice President and Chief Investment OfficerDaniel G. Courtney
    
    
    45
    
    
    Executive Vice President  Investment Programs
  
    
    the approximate amount of an individuals professional time devoted to the
business and affairs of our general partner, LEAF Financial and LEAF Funding have
been aggregated, because there is no reasonable method for them to distinguish their
activities among the companies; and
 35




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##### Table of Contents




    
    for those individuals who also hold senior positions with other affiliates of our
general partner, if it is stated that they devote approximately 100% of their
professional time to the business and affairs of our general partner, LEAF Financial
and LEAF Funding, it is because either the other affiliates are not currently
active, the individuals are not required to devote a material amount of their
professional time to those affiliates, or there is no reasonable method to
distinguish their activities between their professional time devoted to the business
and affairs of our general partner, LEAF Financial and LEAF Funding, on the one
hand, and their professional time devoted to the business and affairs of our general
partners other affiliates, such as, for example, another affiliated investment
program or Chadwick Securities.
 Crit S. DeMent
 Miles Herman
 Jonathan Z. Cohen
 Steven J. Kessler
 Robert K. Moskovitz
 36




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##### Table of Contents



David H. English
 Daniel G. Courtney
 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 1625 limited partners as of December 31, 2007.(b)
    
    In 2006, 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 10,753 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.
 37




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##### Table of Contents



(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.
 
 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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##### Table of Contents



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
    
    Amended and Restated Agreement
of Limited Partnership of LEAF Equipment Leasing Income Fund III,
L.P. (1)3.2
    
    Certificate of Limited
Partnership. (1)4
    
    Forms of letters sent to limited
partners confirming their investment. (1)10.1
    
    Amendment to Secured Loan Agreement dated as of September 24, 2007,
among WestLB AG, New York Branch as the Lenders, U.S. Bank National
Association as the collateral agent and Securities Intermediary and
LEAF Equipment Leasing Income Fund III, L.P. as the seller, LEAF
Financial Corporation as the servicer. LEAF Funding, Inc. as the
originator and LEAF Fund III LLC as the borrower.10.2
    
    Amendment to Secured Loan Agreement dated as of December 21, 2007
among WESTLB AG, New York Branch as the Lender, U.S. Bank National
Association as the collateral agent and Securities Intermediary and
LEAF Equipment Leasing Income Fund III, L.P. as the seller, LEAF
Financial Corporation as the servicer, LEAF Funding, Inc. as the
Originator and LEAF Fund III LLC as the borrower.10.3
    
    Amendment to credit documents dated November 30, 2007 by and between
LEAF Equipment Leasing Income Fund III, L.P. as the borrower and
National City Bank as the sole lender and as administrative agent and
collateral agent for the lender.10.4
    
    Credit Agreement by and between
LEAF Equipment Leasing Income Fund III, L.P. and various Financial Institutions and Other Persons from Time to Time and National City
Bank, dated March 30, 2007
(2)10.5
    
    Secured Loan Agreement between
LEAF Equipment Leasing Income Fund III, L.P. as seller and wholly-owned subsidiary,
LEAF III A SPE, LLC as borrower, and Zane Funding, LLC as CP rate lender and Merrill
Lynch Bank U.S.A as administrative agent dated July 2, 2007
(3)10.6
    
    Origination and Servicing
Agreement among LEAF Equipment Leasing Income Fund III, L.P., LEAF
Financial Corporation and LEAF Funding Inc., dated February 12,
2007. (1)31.1
    
    Rule 13a-14(a)/Rule 15d-14(a) Certification of Chief Executive Officer.31.2
    
    Rule 13a-14(a)/Rule 15d-14(a) Certification of Chief Financial Officer.32.1
    
    Certification of Chief Executive Officer pursuant to Section 1350 of
Chapter 63 of Title 18 of the United States Code.32.2
    
    Certification of Chief Financial Officer pursuant to Section 1350 of
Chapter 63 of Title 18 of the United States Code.
 
 (1)
    
    Filed previously as an exhibit to our Registration Statement
on Form S-1 filed on October 2, 2006 and by this reference
incorporated herein.(2)
    
    Filed previously as an exhibit to our Quaterly Report on Form
10-Q for the quarter ended March 31, 2007 and by this reference
incorporated herein.(3)
    
    Filed previously as an exhibit to our Quaterly Report on Form
10-Q for the quarter ended September 30, 2007 and by this reference
incorporated herein. 39




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##### Table of Contents



SIGNATURES
  LEAF EQUIPMENT LEASING INCOME FUND III, L.P.
A Delaware Limited PartnershipBy:
    LEAF Asset Management, LLC, its General PartnerBy: /s/
CRIT S. DEMENTMarch 31, 2008
    CRIT S. DEMENTChairman and Chief Executive OfficerPursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in capacities and on the
dates indicated./s/ Crit S. DeMentMarch 31, 2008
    CRIT S. DEMENTChairman and Chief Executive Officer of the General Partner/s/ Miles HermanMarch 31, 2008
    MILES HERMANPresident, Chief Operating Officer
and Director of the General Partner/s/ Robert K. MoskovitzMarch 31, 2008
    ROBERT K. MOSKOVITZChief Financial Officer and Treasurer of the General Partner/s/ Jonathan Z. CohenMarch 31, 2008
    JONATHAN Z. COHENDirector of the General Partner/s/ Steven J. KesslerMarch 31, 2008
    STEVEN J. KESSLERDirector of  the General Partner 40