**United
      States**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-Q**





**(Mark
      One)**





x **QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES**


**EXCHANGE
      ACT OF 1934**




For
      the
      quarterly period ended June 30, 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.**


(Exact
      Name of Registrant as Specified in Its Charter)




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




110
      South
      Poplar Street, Suite 101, Wilmington Delaware 19801


(Address
      of principal executive offices)




(800)
      819-5556


(Registrant's
      telephone number, including area code)




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




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





Large
                accelerated filer  ̈
            Accelerated
                filer  ̈
            Non-accelerated
                filer x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).  ̈
      Yes x No




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          to Index)*


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


**INDEX
      TO QUARTERLY REPORT**


**ON
      FORM 10-Q**





**PAGE****PART
                I**
            **FINANCIAL
                INFORMATION**ITEM
                1.
            Financial
                StatementsConsolidated
                Balance Sheets – June 30, 2007 (unaudited) and
                December 31, 2006
            3Consolidated
                Statements of Operations Three and Six Months Ended June 30, 2007
                and 2006(unaudited)
            4Consolidated
                Statement of Partners’ Capital and
                Comprehensive( Loss) Income
              For
                the Six
                Months Ended June 30, 2007 (unaudited)
            5Consolidated
                Statements of Cash Flows
              For
                the Six
                Months Ended June 30, 2007 and 2006 (unaudited)
            6Notes
                to Consolidated Financial Statements – June 30, 2007
                (unaudited)
            7ITEM
                2.
            Management’s
                Discussion and Analysis of Financial Conditionand
                Results of Operations
            16ITEM
                3.
            Quantitative
                and Qualitative Disclosures about Market
                Risk
            22ITEM
                4.
            Controls
                and Procedures
            22**PART
                II**
            **OTHER
                INFORMATION**ITEM
                6.
            Exhibits
            22**SIGNATURES**
            23





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          to Index)*


**PART
      I.                      FINANCIAL
      INFORMATION**





**Item
      1.                 Financial
      Statements**





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


**CONSOLIDATED
      BALANCE SHEETS**


**(in
      thousands)**





**June
                30,**
            
            
            **December
                31,****2007**
            
            
            **2006**(unaudited)
            
            
            (audited)**ASSETS**Cash
            
            $
            2,680
            
            
            $
            14,210Restricted
                cash
            
            
            25,301
            
            
            
            2,574Accounts
                receivable
            
            
            388
            
            
            
            475Due
                from lockbox
            
            
            1,086
            
            
            
            4,565Investment
                in direct financing leases and notes, net
            
            
            337,057
            
            
            
            306,431Investment
                in operating leases (net of accumulated depreciation of $5,679 and$3,577)
            
            
            12,991
            
            
            
            14,439Fair
                value of financial derivatives
            
            
            −
            
            
            
            1,803Other
                assets
            
            
            3,743
            
            
            
            1,845$
            383,246
            
            
            $
            346,342**LIABILITIES
                AND PARTNERS’ CAPITAL****Liabilities:**Debt
            
            $
            328,371
            
            
            $
            291,118Accounts
                payable and accrued
                expenses
            
            
            1,319
            
            
            
            1,081Security
                deposits
            
            
            4,020
            
            
            
            3,020Fair
                value of financial
                derivatives
            
            
            324
            
            
            
            −Due
                to related parties,
                net
            
            
            1,838
            
            
            
            644Total
                liabilities
            
            
            335,872
            
            
            
            295,863**Partners’
                Capital**
            
            
            47,374
            
            
            
            50,479$
            383,246
            
            
            $
            346,342




The
      accompanying notes are an integral part of these consolidated financial
      statements.




3
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**LEASE
      EQUITY APPRECIATION FUND II, L.P.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(in
      thousands, except unit data)**


**(unaudited)**








**Three
                Months Ended**
              **June
                  30,**
            
            
            **Six
                Months Ended**
              **June
                  30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006****Income:**Interest
                on equipment financings
            
            $
            5,811
            
            
            $
            1,355
            
            
            $
            11,597
            
            
            $
            2,308Rental
                income
            
            
            1,456
            
            
            
            834
            
            
            
            2,907
            
            
            
            1,404Gain
                on sale of equipment and lease dispositions, net
            
            
            345
            
            
            
            7
            
            
            
            402
            
            
            
            37Other
            
            
            455
            
            
            
            111
            
            
            
            960
            
            
            
            1978,067
            
            
            
            2,307
            
            
            
            15,866
            
            
            
            3,946**Expenses:**Interest
                expense
            
            
            4,362
            
            
            
            976
            
            
            
            8,593
            
            
            
            1,672Depreciation
                on operating leases
            
            
            1,218
            
            
            
            687
            
            
            
            2,441
            
            
            
            1,172Provision
                for credit losses
            
            
            587
            
            
            
            266
            
            
            
            1,702
            
            
            
            283Management
                fee to related party
            
            
            847
            
            
            
            179
            
            
            
            1,789
            
            
            
            322Administrative
                expense reimbursed to related party
            
            
            388
            
            
            
            160
            
            
            
            790
            
            
            
            291General
                and administrative expenses
            
            
            617
            
            
            
            151
            
            
            
            1,294
            
            
            
            2318,019
            
            
            
            2,419
            
            
            
            16,609
            
            
            
            3,971Net
                income (loss)
            
            $
            48
            
            
            $
            (112
            )
            
            $
            (743
            )
            
            $
            (25
            )Weighted
                average number of limited partner units outstanding during theperiod
            
            
            600,000
            
            
            
            265,980
            
            
            
            600,000
            
            
            
            210,872Net
                income (loss) attributed to limited partner unitsunit
            
            $
            0.08
            
            
            $
            (0.42
            )
            
            $
            (1.23
            )
            
            $
            (0.12
            )







The
      accompanying notes are an integral part of these consolidated financial
      statements.




4
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          to Index)*




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


**CONSOLIDATED
      STATEMENT OF PARTNERS’ CAPITAL**


**AND
      COMPREHENSIVE (LOSS) INCOME**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2007**


**(in
      thousands, except unit data)**


**(unaudited)**





**General
                Partner**
            
            
            **Limited
                  Partners**
            
            
            **Accumulated
                Other Comprehensive**
            
            
            **Partners’
                Capital**
            
            
            **Comprehensive**
              **(Loss)
                Income****Amount**
            
            
            **Units**
            
            
            **Amount**
            
            
            **Income
                  (Loss)**
            
            
            **Total**
            
            
            **Total**Balance,
                January 1, 2007
            
            $
            (32
            )
            
            
            600,000
            
            
            $
            48,708
            
            
            $
            1,803
            
            
            $
            50,479Cash
                distributions
                paid
            
            
            (24
            )
            
            
            
            
            
            
            (2,437
            )
            
            
            
            
            
            
            (2,461
            )Net
                loss
            
            
            (7
            )
            
            
            
            
            
            
            (736
            )
            
            
            
            
            
            
            (743
            )
            
            $
            (743
            )Unrealized gain on financial
              derivatives
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            127
            
            
            
            127
            
            
            
            127Amortization
                of gain on
                financial
              derivatives
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (28
            )
            
            
            (28
            )
            
            
            (28
            )Balance,
                June 30, 2007
            
            $
            (63
            )
            
            
            600,000
            
            
            $
            45,535
            
            
            $
            1,902
            
            
            $
            47,374
            
            
            $
            (644
            )






The
      accompanying notes are an integral part of these consolidated financial
      statements.




5
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**LEASE
      EQUITY APPRECIATION FUND II, L.P.**


**CONSOLIDATED
      STATEMENTS OFCASH FLOWS**


**(in
      thousands)**


**(unaudited)**





**Six
                  Months Ended**
                **June
                  30,****2007**
            
            
            **2006****Cash
                flows from operating activities:**Net
                loss
            
            $
            (743
            )
            
            $
            (25
            )Adjustments
                to reconcile net
                loss to net cash provided byoperating
                activities:Gain
                on sale of equipment and
                lease dispositions net
            
            
            (402
            )
            
            
            −Depreciation
            
            
            2,441
            
            
            
            1,172Provision
                for credit
                losses
            
            
            1,702
            
            
            
            283Amortization
                of deferred
                financing costs
            
            
            71
            
            
            
            22Amortization
                of gain on
                financial derivative
            
            
            (28
            )
            
            
            −Changes
                in operating assets and
                liabilities:Accounts
                receivable
            
            
            87
            
            
            
            (128
            )Due
                from
                lockbox
            
            
            3,479
            
            
            
            269Other
                assets
            
            
            317
            
            
            
            7Accounts
                payable and accrued
                expenses
            
            
            238
            
            
            
            422Due
                to related parties,
                net
            
            
            1,194
            
            
            
            323Net
                cash provided by operating
                activities
            
            
            8,356
            
            
            
            2,345**Cash
                flows from investing activities:**Investment
                in direct financing
                leases and notes
            
            
            (87,637
            )
            
            
            (55,914
            )Investment
                in equipment under
                operating lease
            
            
            (994
            )
            
            
            (7,732
            )Proceeds
                from direct financing
                leases net of earned income
            
            
            55,712
            
            
            
            6,902Security
                deposits,
                net
            
            
            1,000
            
            
            
            442Net
                cash used in investing
                activities
            
            
            (31,919
            )
            
            
            (56,302
            )**Cash
                flows from financing activities:**Proceeds
                from term
                securitization
            
            
            276,849
            
            
            
            −Repayment
                of term
                securitization
            
            
            (8,052
            )
            
            
            −Proceeds
                from
                debt
            
            
            85,139
            
            
            
            57,315Repayment
                of
                debt
            
            
            (316,683
            )
            
            
            (8,511
            )Increase
                in restricted
                cash
            
            
            (22,727
            )
            
            
            (401
            )Increase
                in deferred financing
                costs
            
            
            (2,286
            )
            
            
            (255
            )Proceeds
                from financial
                derivatives
            
            
            2,254
            
            
            
            −Limited
                Partners’ capital
                contribution
            
            
            −
            
            
            
            21,716Payment
                of offering costs
                incurred for the sale of limited partnership units
            
            
            −
            
            
            
            (2,825
            )Cash
                distributed to
                partners
            
            
            (2,461
            )
            
            
            (702
            )Net
                cash provided by financing
                activities
            
            
            12,033
            
            
            
            66,337(Decrease)
                increase in cash
            
            
            (11,530
            )
            
            
            12,380Cash,
                beginning of period
            
            
            14,210
            
            
            
            1,034Cash,
                end of period
            
            $
            2,680
            
            
            $
            13,414





The
      accompanying notes are an integral part of these consolidated financial
      statements.




6
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          to Index)*




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


**NOTESTO
      CONSOLIDATED FINANCIAL STATEMENTS**


**June
      30, 2007**


**(unaudited)**





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





Lease
      Equity Appreciation Fund II, L.P.
      (the “Fund”), a Delaware limited partnership, was formed on March 30, 2004 by
      LEAF Financial Corporation (the “General Partner”) and commenced operations on
      April 14, 2005.  The General Partner is a subsidiary of Resource
      Leasing, Inc., which is a wholly owned subsidiary of Resource America, Inc.
      (“RAI”).  RAI is a publicly-traded company (Nasdaq: REXI) operating in
      the financial fund management, real estate and commercial finance
      sectors.





The
      Fund seeks to acquire a diversified
      portfolio of equipment to finance to end users throughout the United
      States.  The Fund also seeks to acquire existing portfolios of
      equipment subject to existing financings from other equipment finance companies,
      primarily its General Partner.  The primary objective of the Fund is
      to generate regular cash distributions to its partners from its equipment
      finance portfolio over the life of the Fund.





The
      General Partner and the initial
      limited partner capitalized the Fund.  The General Partner contributed
      $1,000 to the Fund for a 1% partnership interest and the initial limited partner
      contributed $1 to the Fund for a 99% limited partnership
      interest.  The Fund is managed by the General Partner.  The
      offering began on December 28, 2004 and the Fund broke escrow on April 14,
      2005
      (commencement of operations).  Upon the Fund breaking escrow on April
      14, 2005, the initial limited partner withdrew as a limited partner and its
      capital contribution was returned.  On October 13, 2006 the Fund
      reached its maximum subscription of 600,000 Limited Partners units ($59.9
      million).





The
      General Partner owns a 1% general
      partnership interest, and the limited partners own a 99% limited partnership
      interest.  Cash distributions, if available, are made
      monthly.  The cash distributions are allocated 99% to the limited
      partners and 1% to the General Partner.  Net income and net losses are
      allocated 99% to the limited partners and 1% to the General
      Partner.  As of June 30, 2007, in addition to its 1% General
      Partnership interest, the General Partner also owns a 1.6% limited partnership
      interest in the Fund.  The Fund shall terminate on December 31, 2029,
      unless sooner dissolved or terminated as provided in the Limited Partnership
      Agreement.





The
      consolidated financial statements
      and notes thereto for the three and six months ended on June 30, 2007 are
      unaudited.  Certain information and footnote disclosures normally
      included in financial statements prepared in accordance with accounting
      principles generally accepted in the United States of America have been
      condensed or omitted pursuant to the rules and regulations of the Securities
      and
      Exchange Commission.  However, in the opinion of management, these
      interim financial statements include all the necessary adjustments to fairly
      present the results of the interim period presented.  The unaudited
      interim consolidated financial statements should be read in conjunction with
      the
      audited consolidated financial statements included in the Fund’s Annual Report
      on Form 10-K for the year ended December 31, 2006.  The results of
      operations for the three and six months ended June 30, 2007 may not necessarily
      be indicative of the results of operations for the full year ending December
      31,
      2007.





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





**Basis
      of Presentation**





The
      consolidated financial statements
      include the accounts of the Fund and its wholly-owned
      subsidiaries.  All intercompany accounts and transactions have been
      eliminated in consolidation.  All dollar amounts presented are in
      thousands unless otherwise indicated.





**Classification**





Management
      believes that, consistent
      with the financial statement presentation of other equipment leasing companies,
      it is more appropriate to present the Fund’s consolidated balance sheets on a
      non-classified basis, which does not segregate assets and liabilities into
      current and non-current categories.





7
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**LEASE
      EQUITY APPRECIATION FUND II, L.P.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2007**


**(unaudited)**





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





**Use
      of Estimates**





Preparation
      of financial statements in
      conformity with accounting principles generally accepted in the United States
      of
      America (“U.S. GAAP”) requires management to make estimates and assumptions that
      affect the reported amounts of assets and liabilities and the disclosure of
      contingent assets and liabilities as of the date of the financial statements
      and
      the reported amounts of revenues and expenses during the reporting
      period.  Significant estimates include the estimated unguaranteed
      residual values of leased equipment, the allowance for possible losses and
      impairment of long-lived assets.  Actual results could differ from
      those estimates.





Unguaranteed
      residual value represents
      the estimated amount to be received at lease termination from lease extensions
      or ultimate disposition of the leased equipment.  The estimates of
      residual values are based upon the General Partner’s history with regard to the
      realization of residuals, available industry data and the General Partner’s
      senior management’s experience with respect to comparable
      equipment.  The estimated residual values are recorded as a component
      of investments in leases on a net present value basis.  Residual
      values are reviewed periodically to determine if the current estimate of the
      equipment’s fair market value appears to be below its recorded
      estimate.  If required, residual values are adjusted downward to
      reflect adjusted estimates of fair market values.  In accordance with
      U.S. GAAP, upward adjustments to residual values are not permitted.





The
      Fund’s allowance for possible
      losses is primarily based on factors which include the General Partner’s
      historical loss experience on equipment finance portfolios it manages, an
      analysis of contractual delinquencies, economic conditions and trends, industry
      statistics and equipment finance portfolio characteristics.  The
      Fund’s policy is to charge off to the allowance those financings which are in
      default and for which management has determined the probability of collection
      to
      be remote.





The
      Fund reviews its long-lived assets
      for impairment whenever events or circumstances indicate that the carrying
      amount of such assets may not be recoverable.  If it is determined
      that estimated undiscounted future cash flows derived from long-lived assets
      will not be sufficient to recover their carrying amounts, an impairment charge
      will be recorded if the carrying amount of the assets exceed their estimated
      fair values.





Interest
      rate swaps are recorded at
      fair value based on market quotes from the swap counterparty
      bank.  There can be no assurance that the Fund’s hedging strategies or
      techniques will be effective, that profitability will not be adversely affected
      during any period of change in interest rates or that the costs of hedging
      will
      not exceed the benefits.





**Concentration
      of Credit Risk**





Financial
      instruments which potentially
      subject the Fund to concentrations of credit risk consist of excess
      cash.  The Fund deposits its excess cash in high-quality financial
      institutions.  As of June 30, 2007, the Fund had deposits in one bank
      totaling $2.78 million of which $2.68 million was over the insurance limit
      of
      the Federal Deposit Insurance Corporation.  No losses have been
      experienced on such deposits.





**Revenue
      Recognition**





The
      Fund’s investment in financing
      assets consists of direct financing leases, notes and operating
      leases.  Leases are recorded in accordance with Statement of Financial
      Accounting Standards (“SFAS”) No. 13, “Accounting for Leases,” and its various
      amendments and interpretations.




8
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**LEASE
      EQUITY APPRECIATION FUND II, L.P.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2007**


**(unaudited)**





**NOTE
      2 − SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES –
(Continued)**




**Revenue
        Recognition  - (Continued)**
  *****Direct
        Financing Lease.*Certain of the
        Fund’s
        lease transactions are accounted for as direct financing leases (as
        distinguished from operating leases).  Such leases transfer
        substantially all benefits and risks of equipment ownership to the
        customer.  The Fund’s investment in direct financing leases and notes
        consists of the sum of the total future minimum contracted payments receivable
        and the estimated unguaranteed residual value of leased equipment, less unearned
        finance income.  Unearned finance income, which is recognized as
        revenue over the term of the financing by the effective interest method,
        represents the excess of the total future minimum lease payments plus the
        estimated unguaranteed residual value expected to be realized at the end
        of the
        lease term over the cost of the related equipment.





*Operating
      Leases.*Leases not meeting any of the criteria to be classified
      as direct financing leases are deemed to be operating leases.  Under
      the accounting for operating leases, the cost of the leased equipment, including
      acquisition fees associated with lease placements, is recorded as an asset
      and
      depreciated on a straight-line basis over the equipment’s estimated useful life,
      generally up to seven years.  Rental income consists primarily of
      monthly periodic rental payments due under the terms of the
      leases.  The Fund recognizes rental income on a straight-line
      basis.  Generally, during the lease terms of existing operating
      leases, the Fund will not recover all of the cost and related expenses of its
      rental equipment and, therefore, it is prepared to remarket the equipment in
      future years.  The Fund’s policy is to review, on a quarterly basis,
      the expected economic life of its rental equipment in order to determine the
      recoverability of its undepreciated cost.  In accordance with U.S.
      GAAP, the Fund writes down its rental equipment to its estimated net realizable
      value when it is probable that its carrying amount exceeds such value and the
      excess can be reasonably estimated; gains are only recognized upon actual sale
      of the rental equipment.  There were no write-downs of equipment
      during the three and six months ended June 30, 2007 and 2006.





*Notes
      Receivable.*  The Fund’s investment in notes receivable consists
      of the sum of the total future minimum loan payments receivable less unearned
      finance income.  Unearned finance income, which is recognized as
      revenue over the term of the financing by the effective interest method,
      represents the excess of the total future minimum contracted payments term
      over
      the cost of the related equipment.





The
      Fund generally discontinues the
      recognition of revenue for leases and notes for which payments are more than
      90
      days past due.  Fees from delinquent payments are recognized when
      received and are included in other income.





**Income
      Taxes**





Federal
      and state income tax laws
      provide that the income or losses of the Fund are reportable by the Partners
      on
      their individual income tax returns.  Accordingly, no provision for
      such taxes has been made in the accompanying financial statements.





**Supplemental
      Disclosure of Cash Flow Information**





Information
      for the six months ended
      June 30, 2007 and 2006, respectively, is as follows (in thousands):





**2007**
            
            
            **2006****Cash
              paid for:**Interest
            
            $
            8,395
            
            
            $
            1,603**Non-cash
                activities:**Purchase
                of direct financing
                leases from the General Partner
            
            $
            −
            
            
            $
            12,338Note
                payable to General
                Partner
            
            $
            −
            
            
            $
            12,338Investments
                purchased, not
                settled
            
            $
            −
            
            
            $
            8,024





9
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**LEASE
      EQUITY APPRECIATION FUND II, L.P.**


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


**JUNE
      30, 2007**


**(unaudited)**





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





**Recently
      Issued Accounting Pronouncements**





In
      February 2007, the Financial
      Accounting Standards Board (“FASB”) issued SFAS 159, "The Fair Value Option for
      Financial Assets and Financial Liabilities - Including an Amendment of SFAS
      115"
      (“SFAS 159”), which permits entities to choose to measure many financial
      instruments and certain other items at fair value.  The fair value
      option established by this Statement permits all entities to choose to measure
      eligible items at fair value at specified election dates.  A business
      entity is required to report unrealized gains and losses on items for which
      the
      fair value option has been elected in earnings at each subsequent reporting
      date.  Adoption is required for fiscal years beginning after November
      15, 2007.  The Fund is currently evaluating the expected effect of
      SFAS 159 on its consolidated financial statements.





In
      September 2006, the FASB issued SFAS
      157, “Fair Value Measurements” (“SFAS 157”)*,* which provides guidance on
      measuring the fair value of assets and liabilities.  SFAS 157 will
      apply to other accounting pronouncements that require or permit assets or
      liabilities to be measured at fair value but does not expand the use of fair
      value to any new circumstances.  This standard will also require
      additional disclosures in both annual and quarterly reports.  SFAS 157
      will be effective for financial statements issued for fiscal years beginning
      after November 15, 2007 and will be adopted by the Fund in the first quarter
      of
      its fiscal year 2008.  The Fund is currently determining the effect,
      if any, the adoption of SFAS 157 will have on its financial
      statements.




**Transfers
      of Financial Assets**





In
      connection with establishing its
      revolving line of credit with WestLB AG, and the term securitization, the Fund
      formed two bankruptcy remote special purpose entities through which the
      financing is arranged.  Under SFAS No. 140, “Accounting for Transfers
      and Servicing of Financial Assets and Extinguishments of Liabilities,” the
      Fund’s transfers of assets to the special purpose entities do not qualify for
      sales accounting treatment due to certain call provisions that the Fund
      maintains.  Accordingly, assets and related debt of the special
      purpose entities are included in the Fund’s consolidated balance
      sheets.  The Fund’s leases and restricted cash are assigned as
      collateral for these borrowings and there is no further recourse to the general
      credit of the Fund.  Collateral in excess of these borrowings
      represents the Fund’s maximum loss exposure.





**Fair
      Value of Financial Instruments**





For
      cash, the carrying amounts
      approximate fair values because of the short maturity of these
      instruments.  The carrying value of debt approximates fair market
      value since interest rates approximate current market rates.  The
      interest rate swaps discussed in Note 9 are recorded at fair value based on
      market quotes from the swaps counterparty banks.





It
      is not practicable for the Fund to
      estimate the fair value of the Fund’s notes receivables.  They
      comprise a large number of transactions with commercial customers in different
      businesses, and may be secured by liens on various types of equipment and may
      be
      guaranteed by third parties and cross-collateralized.  Any difference
      between the carrying value and fair value of each transaction would be affected
      by a potential buyer's assessment of the transaction's credit quality,
      collateral value, guarantees, payment history, yield, term, documents and other
      legal matters, and other subjective considerations.  Value received in
      a fair market sale of a transaction would be based on the terms of the sale,
      the
      Fund’s and the buyer's views of economic and industry conditions, the Fund’s and
      the buyer's tax considerations, and other factors.





**NOTE
      3 – RESTRICTED CASH**





Restricted
      cash consists primarily of
      the cash reserve and cash held by the trustees related to the Fund’s debt
      facilities.





10
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          to Index)*


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


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


**JUNE
      30, 2007**


**(unaudited)**





**NOTE
      4 − DUE FROM LOCKBOX**





Customer
      payments are deposited into a
      lockbox shared with our General Partner and other entities serviced by the
      Fund’s General Partner.  The lockbox is in the name of U.S. Bank NA as
      trustee under an inter-creditor agreement amongst our General Partner, the
      other
      entities and their respective lenders.  Amounts recorded as due from
      lockbox on the accompanying Balance Sheets, represent customer payments received
      by the lockbox, applied to the respective customer’s accounts, but not
      transferred to the Fund’s bank account.





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





The
      Fund’s direct financing leases are
      generally for initial lease terms ranging from 24 to 84
      months.  Unguaranteed residuals for direct financing leases represent
      the estimated amounts recoverable at lease termination from lease extensions
      or
      disposition of the equipment.  The interest rates on notes receivable
      generally range from 7% to 12%.  As of June 30, 2007 and December 31,
      2006, the average initial term of the Fund’s financings was 54 months and 53
      months, respectively.  As of June 30, 2007 and December 31, 2006, 15%
      of the Fund’s equipment was located in California.  The following
      table sets forth investment in direct financing leases and notes (in
      thousands):





**June
                30,**
            
            
            **December
                31,****2007**
            
            
            **2006**Direct
                financing leases
            
            $
            285,010
            
            
            $
            264,711Notes
                receivable
            
            
            53,465
            
            
            
            42,841$
            338,475
            
            
            $
            307,552Allowance
                for possible losses
            
            
            (1,418
            )
            
            
            (1,121
            )$
            337,057
            
            
            $
            306,431





The
      components of the net investment in
      direct financing leases for the periods indicated are as follows (in
      thousands):





**June
                30,**
            
            
            **December
                31,****2007**
            
            
            **2006**Total
                future minimum lease payments
            
            $
            316,934
            
            
            $
            292,944Unearned
                rental income
            
            
            (38,544
            )
            
            
            (34,893
            )Residuals,
                net of unearned residual income
            
            
            6,620
            
            
            
            6,660$
            285,010
            
            
            $
            264,711





The
      following is a summary of the
      Fund’s allowance for possible losses for the periods indicated (in
      thousands):





**Six
                  Months Ended**
                **June
                  30,****2007**
            
            
            **2006**Allowance
                for possible losses, beginning of period
            
            $
            1,418
            
            
            $
            130Provision
                for credit losses
            
            
            1,702
            
            
            
            283Net
                write offs
            
            
            (1,702
            )
            
            
            (213
            )Allowance
                for possible losses, end of period
            
            $
            1,418
            
            
            $
            200





**NOTE
      6 − OTHER ASSETS**





As
      of June 30, 2007 and December 31,
      2006, other assets include $2.8 million and $571,000, respectively, of
      unamortized deferred financing costs which are being amortized over the terms
      of
      the related debt.  Accumulated amortization as of June 30, 2007 and
      December 31, 2006 is $165,000 and $94,000 respectively.  Amortization
      expense for each of the five succeeding twelve month periods ending June 30,
      are
      $444,000, $444,000, $444,000, $444,000, and $444,000, respectively.





11
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          to Index)*


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


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


**June
      30, 2007**


**(unaudited)**





**NOTE
      7 -
      DEBT**





The
      table below summarizes the Fund’s
      debt as of June 30, 2007 and December 31, 2006 (in thousands):





**June
                  30, 2007**
            
            
            **December
                  31, 2006**WestLB
                AG, New York Branch revolving line of credit, with an aggregate borrowing
                limit of $150 million collateralized by specific leases and notes
                receivables and related equipment, with a 1% credit reserve of the
                outstanding line of credit.  Interest on this facility is
                calculated at LIBOR plus .95% per annum.  To mitigate
                fluctuations in interest rates the Fund has entered into interest
                rate
                swap agreements.  The interest rate swap agreements terminate on
                various dates ranging from December 2010 to March 2014.  As of
                June 30, 2007, the interest rate swap agreements fix the interest
                rate on
                the outstanding balance at 6.41% on a weighted average
                basis.  Interest and principal are due monthly.  The
                line of credit is renewable for a one year period in June
                2008.  The terms of the Fund's credit facility with WestLB
                includes financial covenants related to the Fund’s net worth and leverage
                used.  As of June 30, 2007, the Fund is in compliance with all
                such covenants
            
            $
            59,573
            
            
            $
            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 was calculated at one month LIBOR plus .95% per
                annum.  To mitigate fluctuations in interest rates the Fund had
                entered into an interest rate swap agreement.  In June 2007, all
                interest rate swap agreements for this facility were terminated and
                the
                facility was paid in full in connection with the Fund entering into
                a term
                securitization.
            
            
            −
            
            
            
            191,387In
                June 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 ClassA-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 June 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 March
                2009 to
                July 2012.  As of June 30, 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.
            
            
            268,798
            
            
            
            −Total
                outstanding
                debt
            
            $
            328,371
            
            
            $
            291,118





The
      debt
      maturity for each of the succeeding twelve month periods ending June 30, and
      thereafter, are as follows (in thousands):





2008
            
            $
            104,1792009
            
            
            89,4682010
            
            
            66,0392011
            
            
            39,0162012
            
            
            23,295Thereafter
            
            
            6,374$
            328,371







12
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          to Index)*


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


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


**JUNE
      30, 2007**


**(unaudited)**





**NOTE
      8 − EQUIPMENT FINANCE PORTFOLIO ACQUISTION**





On
      June
      19, 2007 the Fund purchased a portfolio of leases and loans in conjunction
      with
      the Fund’s General Partner, for approximately $31.1 million, from the leasing
      division of Pacific Capital Bank N.A. The purchase was funded with $28.2 million
      of debt borrowed from West LB.  The purchase price was recorded at the
      Fund’s cost which is equal to the estimated fair value of the assets
      acquired.





**NOTE
      9 - DERIVATIVE
      INSTRUMENTS**





The
      majority of the Fund’s assets and
      liabilities are financial contracts with fixed and variable rates. Any mismatch
      between the repricing and maturity characteristics of the Fund’s assets and
      liabilities exposes it to interest rate risk when interest rates
      fluctuate.  For example, the Fund’s assets are structured on a
      fixed-rate basis, but since funds borrowed through bank debt are obtained on
      a
      floating-rate basis, the Fund is exposed to a certain degree of risk if interest
      rates rise which in turn will increase the Fund’s borrowing costs.  In
      addition, when the Fund originates assets, it bases its pricing in part on
      the
      spread it expects to achieve between the interest rate it charges its customers
      and the effective interest cost the Fund will pay when it funds those
      loans.  Increases in interest rates that increase the Fund’s permanent
      funding costs between the time the assets are originated and the time they
      are
      funded could narrow, eliminate or even reverse this spread.





To
      manage interest rate risk, the Fund
      employs a hedging strategy using derivative financial instruments such as
      interest rate swaps, which are generally designated as cash flow
      hedges.  The Fund does not use derivative financial instruments for
      trading or speculative purposes.  The Fund manages the credit risk of
      possible counterparty default in these derivative transactions by dealing
      exclusively with counterparties with investment grade ratings.





Before
      entering into a derivative
      transaction for hedging purposes, the Fund determines that a high degree of
      initial effectiveness exists between the change in the value of the hedged
      item
      and the change in the value of the derivative from a movement in interest
      rates.  High effectiveness means that the change in the value of the
      derivative will be effectively offset by the change in the value of the hedged
      asset or liability.  The Fund measures the effectiveness of each hedge
      throughout the hedge period.  Any hedge ineffectiveness, as defined by
      U.S. GAAP is recognized in the  consolidated statements of
      operations.





There
      can be no assurance that the
      Fund’s hedging strategies or techniques will be effective, that profitability
      will not be adversely affected during any period of change in interest rates
      or
      that the costs of hedging will not exceed the benefits.





The
      Fund terminated interest rate swap
      agreements with WestLB and Merrill Lynch with total underlying notional amounts
      of $298.8 million in connection with the term securitization (See Note 7).
      The
      Fund terminated these agreements simultaneously with the 2007 term
      securitization resulting in a gain of $2.3 million which is recorded in other
      comprehensive income at June 30, 2007.  The Fund will amortize the
      gain to interest expense over the remaining term of the terminated swap
      agreements.  As of June 30, 2007 and December 31, 2006, $28,000 and
      $0, respectively, was recognized into interest expense.





At
      June 30, 2007 and December 31, 2006,
      the notional amounts of the designated interest rate swaps were $235.5 million
      and $287.1 million, respectively.  For the six months ended June 30,
      2007, the Fund had an unrealized gain of $99,000 on these designated interest
      rate swaps which is included in accumulated other comprehensive
      income.  The Fund recognized no gain or loss during the six months
      ended June 30, 2007 for hedge ineffectiveness.  Assuming market rates
      remain constant with the rates of June 30, 2007, $99,000 of the $1.9 million
      in
      accumulated other comprehensive income is expected to be recognized in earnings
      over the next 12 months.




13
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          to Index)*


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


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


**JUNE
      30, 2007**


**(unaudited)**





**NOTE
      10 − TRANSACTIONS WITH AFFILIATES**





The
      General Partner receives a fee for
      assisting the Fund in acquiring equipment for lease and portfolios of equipment
      subject to existing equipment leases equal to 2% of the purchase price the
      Fund
      pays for the equipment or portfolios of equipment subject to existing equipment
      financing.





The
      General Partner is entitled to
      receive a subordinated annual asset management fee equal to 4% of gross rental
      payments for operating leases, as defined in the partnership agreement, or
      2% of
      gross rental payments for full payout leases, or a competetive fee, whichever
      is
      less.  An operating lease is one in which the aggregate noncancellable
      rental payments during the initial term of the lease, on a net present value
      basis, are not sufficient to recover the purchase price of the
      equipment.  A full payout lease is one in which the gross rental
      payments, on a net present value basis, are at least sufficient to recover
      the
      purchase price of the equipment. During the Fund’s five-year investment period,
      the management fee will be subordinated to the payment to the Fund’s limited
      partners of a cumulative annual distribution of 8% of their capital
      contributions, as adjusted by distributions deemed to be a return of
      capital.





The
      General Partner is entitled to
      receive a subordinated commission equal to one-half of a competitive commission,
      up to a maximum of 3% of the contract sales price, for arranging the sale of
      the
      Fund’s equipment after the expiration of a lease.  This commission is
      subordinated to the payment to the limited partners of a cumulative 8% annual
      return on their capital contributions, as adjusted by distributions deemed
      to be
      returns of capital.   No commissions were paid during the six
      months ended June 30, 2007 and 2006.





The
      General Partner and its parent
      company are reimbursed by the Fund for certain costs of services and materials
      used by or for the Fund except those items covered by the above-mentioned
      fees.





The
      General Partner is entitled to
      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 the Fund
      receives rental payments from re-lease.  The Fund will not, however,
      pay a re-lease commission if the re-lease is with the original lessee or its
      affiliates.  No equipment was re-leased and, therefore, no re-lease
      commissions were paid during the six months ended June 30, 2007 and
      2006.





The
      following is a summary of fees and
      costs of services and materials charged by the General Partner or its affiliates
      during the periods indicated (in thousands):





**Three
                Months Ended**
              **June
                  30,**
            
            
            **Six
                Months Ended**
              **June
                  30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Acquisition
                fees
            
            $
            940
            
            
            $
            627
            
            
            $
            1,494
            
            
            $
            1,353Asset
                management fees
            
            
            847
            
            
            
            179
            
            
            
            1,789
            
            
            
            322Reimbursed
                administrative expenses
            
            
            388
            
            
            
            160
            
            
            
            790
            
            
            
            291








Due
      to related parties, net as of June
      30, 2007 and December 31, 2006 represents amounts due to the General Partner
      for
      management fees, reimbursed expenses and other advances.





14
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          to Index)*


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


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


**JUNE
      30, 2007**


**(unaudited)**





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





Cash
      available for distributions, if
      any, are made monthly as follows: 99% to the Limited Partners and 1% to the
      General Partner until the Limited Partners have received an amount equal to
      their unpaid cumulative return (8% of their adjusted capital contribution)
      and
      thereafter, to investment and reinvestment in investments or, if the General
      Partner elects not to invest or reinvest such distributable cash, 99% to the
      Limited Partners and 1% to the General Partner.





Net
      income for any fiscal period during
      the reinvestment period (the period commencing April 14, 2005 and ending
      December 12, 2011) is allocated 99% to the Limited Partners and 1% to the
      General Partner.  Income during the liquidation period, as defined in
      the Partnership Agreement, will be allocated first to the Partners in proportion
      to and to the extent of the deficit balances, if any, in their respective
      capital accounts.  Thereafter, net income will be allocated 99% to the
      Limited Partners and 1% to the General Partner.





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





Comprehensive
      loss includes net loss
      and all other changes in the equity of a business during a period from non-owner
      sources.  These changes, other than net income (loss), are referred to
      as “other comprehensive income” and for the Fund, only include changes in the
      fair value of unrealized hedging derivatives.





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





Net
      income (loss) per limited
      partnership unit is computed by dividing net income (loss) allocated to the
      Fund’s Limited Partners by the weighted average number of limited partnership
      units outstanding during the period.  The weighted average number of
      limited partnership units outstanding during the period is computed based on
      the
      number of limited partnership units issued during the period weighted for the
      days outstanding during the period.  Basic income (loss) per limited
      partnership unit equals dilutive net income (loss) per limited partnership
      unit
      because there are no potential dilutive units.





15
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          to Index)*




**ITEM
      2.              MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION** **AND
      RESULTS OF OPERATIONS (unaudited)**





**When
      used in this Form 10-Q, the words
“believes” “anticipates,” “expects” and similar expressions are intended to
      identify forward-looking statements.  Such statements are subject to
      certain risks and uncertainties more particularly described in Item 1A, under
      the caption “Risks Inherent in Our Business,” in our annual report on Form 10-K
      for fiscal 2006.  These risks and uncertainties could cause actual
      results to differ materially.  Readers are cautioned not to place
      undue reliance on these forward-looking statements, which speak only as of
      the
      date hereof.  We undertake no obligation to publicly release the
      results of any revisions to forward-looking statements which we may make to
      reflect events or circumstances after the date of this Form 10-Q or to reflect
      the occurrence of unanticipated events.**





**OVERVIEW**





We
      are Lease Equity Appreciation Fund
      II, L.P. (the "Fund"), a Delaware limited partnership formed on March 30,
      2004.  Our general partner is LEAF Financial Corporation (“the General
      Partner” or “LEAF”).  LEAF is a subsidiary of Resource Leasing, Inc.,
      a wholly owned subsidiary of Resource America, Inc., which is a publicly-traded
      company (Nasdaq: REXI) operating in the financial fund management, real estate
      and commercial finance sectors.  We received our minimum subscription
      proceeds of $2.0 million (20,000 units), excluding Iowa and Pennsylvania
      residents and units sold to the original limited partner and our general partner
      or its officers, directors, employees or other affiliates, required to begin
      operations and we broke escrow on April 14, 2005.  On October 13,
      2006, the Fund reached its maximum subscription of 600,000 limited partner
      units
      ($59.9 million).





We
      seek to acquire a diversified
      portfolio of new, used or reconditioned equipment that is financed to third
      parties.  We also acquire portfolios of equipment subject to existing
      leases from other equipment lessors.  In addition, as an accommodation
      to our end user customers, up to 20% of our funds available for investment
      at
      any given time may be used to make secured loans to the end users to finance
      their purchase of equipment.  We attempt to structure our secured
      loans so that, in an economic sense, there, is no difference to us between
      a
      secured loan and a full payout equipment lease.  The equipment we
      finance includes computers, medical equipment, copiers, furniture, heating,
      ventilation and air conditioning equipment, telecommunications equipment and
      industrial equipment.  We focus on the small to mid-size business
      market, which generally includes businesses with:




·
            500
                or fewer employees;




·
            $1.0
                billion or less in total assets; or




·
            $100.0
                million or less in total annual
                sales.





We
      expect that the per unit equipment
      cost for leases and notes we originate generally will be between $20,000 and
      $2.0 million.  Our principal objective is to generate regular cash
      distributions to our limited partners.





Our
      leases consist of direct financing
      and operating leases as defined by U.S. GAAP.  Under the direct
      financing method of accounting, interest income (the excess of the aggregate
      future rentals and estimated unguaranteed residuals upon expiration of the
      lease
      over the related equipment cost) is recognized over the life of the lease using
      the interest method.  Under the operating method, the cost of the
      leased equipment, including acquisition fees associated with lease placements,
      is recorded as an asset and depreciated on a straight-line basis over its
      estimated useful life.  Rental income on operating leases consists
      primarily of monthly periodic rentals due under the terms of the
      leases.  Generally, during the lease terms of existing operating
      leases, we will not recover all of the costs and related expenses of rental
      equipment and, therefore, we are prepared to remarket the equipment in future
      years.  When a direct financing lease or note is 90 days or more
      delinquent, the lease or note is classified as being on non-accrual and we
      do
      not recognize interest income on that lease or note until the lease or note
      become less than 90 days delinquent.


16
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            to Index)*


Our
      offering began on December 22, 2004
      and we broke escrow on April 14, 2005 (commencement of
      operations).  As of June 30, 2007, our portfolio contained 11,544
      equipment leases with 10,101 individual end users located in 50 states as well
      as the District of Columbia and Puerto Rico.  No individual end user
      or single piece of equipment accounted for more than 2% of our portfolio based
      on original cost of the equipment.  As of June 30, 2007, we had a net
      investment of $13 million in equipment under operating leases and a net
      investment of $337.0 million in direct financing leases and notes for a total
      investment in equipment financing assets of $350.0 million.  Our
      average original equipment cost per equipment financing transaction was $44,000
      and $42,000, as of June 30, 2007 and December 31, 2006,
      respectively.  As of June 30, 2007 and December 31, 2006, the average
      initial term of our financings was 54 months and 53 months,
      respectively.  As of June 30, 2007 and December 31, 2006, 15% of our
      equipment was located in California.  No other state accounted for
      more than 10% of our equipment portfolio.





We
      utilize debt in addition to our
      equity to fund the acquisitions of lease portfolios.  As of June 30,
      2007, our outstanding debt was $328.4 million.





**Our
      Lease Portfolio**





The
      following schedules detail the
      type, net investment (before allocating the allowance for possible losses)
      and
      percentage of the various types of equipment leased by us under operating
      leases, direct financing leases and notes as of June 30, 2007 and December
      31,
      2006 (dollars in thousands):





**Direct
      Financing Leases and Notes**





**June
                  30, 2007**
            
            
            **December
                  31, 2006****Type
                  of Equipment**
            
            **Net
                  Investment**
            
            
            **Percentage**
            
            
            **Net
                  Investment**
            
            
            **Percentage**Industrial
                Equipment
            
            
            87,246
            
            
            
            25.8
            
            
            
            60,046
            
            
            
            19.5Medical
                Equipment
            
            $
            78,442
            
            
            
            23.2
            %
            
            $
            69,631
            
            
            
            22.6
            %Computers
            
            
            61,444
            
            
            
            18.2
            
            
            
            70,412
            
            
            
            22.9Office
                Equipment
            
            
            20,037
            
            
            
            5.9
            
            
            
            20,814
            
            
            
            6.8Restaurant
                Equipment
            
            
            19,439
            
            
            
            5.7
            
            
            
            16,761
            
            
            
            5.5Garment
                Care
            
            
            18,562
            
            
            
            5.5
            
            
            
            19,463
            
            
            
            6.3Communications
            
            
            13,886
            
            
            
            4.1
            
            
            
            11,614
            
            
            
            3.8Software
            
            
            13,220
            
            
            
            3.9
            
            
            
            14,334
            
            
            
            4.7Building
                systems
            
            
            9,846
            
            
            
            2.9
            
            
            
            9,930
            
            
            
            3.2Other
            
            
            16,353
            
            
            
            4.8
            
            
            
            14,547
            
            
            
            4.7$
            338,475
            
            
            
            100.0
            %
            
            $
            307,552
            
            
            
            100.0
            %





**Operating
      Leases**





**June
                  30, 2007**
            
            
            **December
                  31, 2006****Type
                  of Equipment**
            
            **Net
                  Investment**
            
            
            **Percentage**
            
            
            **Net
                  Investment**
            
            
            **Percentage**Industrial
                Equipment
            
            
            3,595
            
            
            
            27.7
            
            
            
            3,667
            
            
            
            25.4Computers
            
            $
            3,446
            
            
            
            26.5
            %
            
            $
            4,254
            
            
            
            29.4
            %Communications
            
            
            2,570
            
            
            
            19.8
            
            
            
            2,780
            
            
            
            19.3Office
                Equipment
            
            
            2,240
            
            
            
            17.2
            
            
            
            2,247
            
            
            
            15.6Building
                systems
            
            
            306
            
            
            
            2.4
            
            
            
            154
            
            
            
            1.1Medical
                Equipment
            
            
            274
            
            
            
            2.1
            
            
            
            858
            
            
            
            5.9Restaurant
                Equipment
            
            
            220
            
            
            
            1.7
            
            
            
            237
            
            
            
            1.6Garment
                Care
            
            
            56
            
            
            
            0.4
            
            
            
            69
            
            
            
            0.5Software
            
            
            16
            
            
            
            0.1
            
            
            
            25
            
            
            
            0.2Other
            
            
            268
            
            
            
            2.1
            
            
            
            148
            
            
            
            1.0$
            12,991
            
            
            
            100.0
            %
            
            $
            14,439
            
            
            
            100.0
            %





17
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The
      following schedules detail the type
      of business (before allocating the allowance for possible losses) by standard
      industrial classification that lease our equipment as of June 30, 2007 and
      December 31, 2006 (dollars in thousands):




**Direct
      Financing Leases and Notes**





**June
                  30, 2007**
            
            
            **December
                  31, 2006****Type
                  of Business**
            
            **Net
                  Investment**
            
            
            **Percentage**
            
            
            **Net
                  Investment**
            
            
            **Percentage**Services
            
            $
            172,035
            
            
            
            50.8
            %
            
            $
            167,651
            
            
            
            54.5
            %Retail
                Trade
            
            
            40,509
            
            
            
            12.0
            
            
            
            41,493
            
            
            
            13.5Manufacturing
            
            
            37,092
            
            
            
            11.0
            
            
            
            31,312
            
            
            
            10.2Transportation/Communication/Energy
            
            
            17,986
            
            
            
            5.3
            
            
            
            11,386
            
            
            
            3.7Construction
            
            
            17,209
            
            
            
            5.1
            
            
            
            11,169
            
            
            
            3.6Agriculture/Forestry/Fishing
            
            
            16,283
            
            
            
            4.8
            
            
            
            12,958
            
            
            
            4.2Wholesale
                Trade
            
            
            12,601
            
            
            
            3.7
            
            
            
            10,232
            
            
            
            3.3Finance/Insurance/Real
                Estate
            
            
            10,223
            
            
            
            3.0
            
            
            
            9,533
            
            
            
            3.1Public
                Administration
            
            
            892
            
            
            
            0.3
            
            
            
            1,248
            
            
            
            0.4Other
            
            
            13,645
            
            
            
            4.0
            
            
            
            10,570
            
            
            
            3.5$
            338,475
            
            
            
            100.0
            %
            
            $
            307,552
            
            
            
            100.0
            %





**Operating
      Leases**





**June
                  30, 2007**
            
            
            **December
                  31, 2006****Type
                  of Business**
            
            **Net
                  Investment**
            
            
            **Percentage**
            
            
            **Net
                  Investment**
            
            
            **Percentage**Services
            
            $
            5,401
            
            
            
            41.5
            %
            
            $
            6,371
            
            
            
            44.1
            %Construction
            
            
            3,760
            
            
            
            28.9
            
            
            
            3,940
            
            
            
            27.3Manufacturing
            
            
            1,542
            
            
            
            11.9
            
            
            
            1,613
            
            
            
            11.2Finance/Insurance/Real
                Estate
            
            
            519
            
            
            
            4.0
            
            
            
            481
            
            
            
            3.3Wholesale
                Trade
            
            
            477
            
            
            
            3.7
            
            
            
            494
            
            
            
            3.4Retail
                Trade
            
            
            378
            
            
            
            2.9
            
            
            
            327
            
            
            
            2.3Public
                Administration
            
            
            360
            
            
            
            2.8
            
            
            
            621
            
            
            
            4.3Transportation/Communication/Energy
            
            
            340
            
            
            
            2.6
            
            
            
            414
            
            
            
            2.9Agriculture/Forestry/Fishing
            
            
            115
            
            
            
            0.9
            
            
            
            113
            
            
            
            0.8Other
            
            
            99
            
            
            
            0.8
            
            
            
            65
            
            
            
            0.4$
            12,991
            
            
            
            100.0
            %
            
            $
            14,439
            
            
            
            100.0
            %





In
      evaluating our allowance for
      possible uncollectible accounts, we consider our contractual delinquencies,
      economic conditions and trends, industry statistics, lease portfolio
      characteristics and our General Partner's prior experience with similar lease
      assets.  As of June 30, 2007 and December 31, 2006, our credit
      evaluation indicated the need for an allowance for possible losses of our
      commercial finance assets of $1.4 million and $1.1 million,
      respectively.




18
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**Results
      of Operations**





*Three
      Months Ended June 30, 2007 Compared to the Three Months Ended June 30,
      2006*





Total
      revenues increased to $8.1
      million for the three months ended June 30, 2007 as compared to $2.3 million
      for
      the three months ended June 30, 2006, an increase of $5.8 million
      (252%).  The increase in revenues for the three months ended June 30,
      2007 as compared to the three months ended June 30, 2006 was a result of the
      following:




·
            Interest
                income on equipment financings increased to $5.8 million for the
                three
                months ended June 30, 2007 as compared to $1.4 for the three months
                ended
                June 30, 2006 an increase of $4.4 million (314%).  Our net
                investment in direct financing leases and notes increased to $337.1
                million as of June 30, 2007 as compared to $94.7 million as of June
                30,
                2006, an increase of $242.4 million (256%).  This growth was
                driven by our General Partner’s increased sales to us and marketing
                efforts supported by lines of financing, in addition to the purchase
                of a
                lease portfolio from Pacific Capital Bank of $31.1
                million.




·
            Rental
                income increased to $1.5 million for the three months ended June
                30, 2007
                as compared to $834,000 for the three months ended June 30, 2006,
                an
                increase of $666,000 (80%).  This increase is directly related
                to our increase in operating
                leases.




·
            Gain
                on sale of equipment increased to $345,000 for the three months ended
                June
                30, 2007 as compared to a gain of $7,000 for the three months ended
                June
                30, 2006, an increase of $338,000 (4,829%).  Gains and losses on
                sales of equipment may vary significantly from period to
                period.




·
            Other
                income increased to $455,000 for the three months ended June 30,
                2007 as
                compared to $111,000 for the three months ended June 30, 2006, an
                increase
                of $344,000 (310%).  Other income consists primarily of late fee
                income.  Late fee income has increased due to the increase of
                our equipment financing portfolio coupled with an increase in payment
                collection efforts.





Total
      expenses increased to $8.0
      million for the three months ended June 30, 2007 as compared to $2.4 million
      for
      the three months ended June 30, 2006, an increase of $5.6 million
      (233%).  This increase resulted from the following:




·
            Interest
                expense increased to $4.4 million for the three months ended June
                30, 2007
                as compared to $976,000 for the three months ended June 30, 2006,
                an
                increase of $3.4 million (348%) due to our increase in average debt
                outstanding.  Our average debt increased to $244.3 million for
                the three months ended June 30, 2007 as compared to $65.6 million
                for the
                three months ended June 30, 2006, an increase of $178.7 million
                (272%).




·
            Depreciation
                on operating leases increased to $1.2 million for the three months
                ended
                June 30, 2007 as compared to $687,000 for the three months ended
                June 30,
                2006, an increase of $513,000 (75%).  This increase is directly
                related to our increase in operating
                leases.




·
            Our
                provision for credit losses increased to $587,000 million for the
                three
                months ended June 30, 2007 as compared to $266,000 for the three
                months
                ended June 30, 2006, an increase of $321,000 million (121%).  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 $847,000 for the three months ended June 30, 2007
                as
                compared to $179,000 for the three months ended June 30, 2006, an
                increase
                of $668,000 (373%).  This increase is directly attributable to
                the increase in our portfolio of equipment financing assets, since
                management fees are paid based on lease payments
                received.




·
            Administrative
                expenses reimbursed to related party increased to $388,000 for the
                three
                months ended June 30, 2007 as compared to $160,000 for the three
                months
                ended June 30, 2006, an increase of $228,000 (143%).  This
                increase is due to the increase in our portfolio of equipment financing
                assets.




·
            General
                and administrative expenses increased to $617,000 for the three months
                ended June 30, 2007 as compared to $151,000 for the three months
                ended
                June 30, 2006, an increase of $466,000 (309%).  This increase is
                principally related to increased legal costs associated with collection
                efforts.




19
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Our
      net income (loss) for the three
      months ended June 30, 2007 and 2006 was $48,000 and ($112,000),
      respectively.  The net income (loss) per limited partnership unit,
      after the loss allocated to our General Partner for the three months ended
      June
      30, 2007 and 2006 was $0.08 and $(0.42), respectively, based on a weighted
      average number of limited partnership units outstanding of 600,000 and 265,980
      respectively.





*Six
      Months Ended June 30, 2007 compared to Six Months Ended June 30,
      2006*





Total
      revenues increased to $15.9 million for the six months ended June 30, 2007
      as
      compared to  $3.9 million for the six months ended June 30, 2006, an
      increase of $12.0 million  (308%).  This increase was
      primarily attributable to increases in other income and gain on sale of
      equipment and lease dispositions.  This resulted in the
      following:




·
            Interest
                income on equipment financings increased to $11.6 million for the
                six
                months ended June 30, 2007 as compared to $2.3 for the six months
                ended
                June 30, 2006 an increase of $9.3 million (404%).  Our net
                investment in direct financing leases and notes increased to $337.1
                million as of June 30, 2007 as compared to $94.7 million as of June
                30,
                2006, an increase of $242.4 million (256%).  This growth was
                driven by our General Partner’s increased sales to us and marketing
                efforts supported by lines of financing, in addition to the purchase
                of a
                lease portfolio from Pacific Capital Bank of $31.1
                million.




·
            Rental
                income increased to $2.9 million for the six months ended June 30,
                2007 as
                compared to $1.4 million for the six months ended June 30, 2006,
                an
                increase of $1.5 million (107 %). This increase is directly related
                to our
                increase in operating leases.




·
            Gain
                on sale of equipment and lease dispositions increased to $402,000
                for the
                six months ended June 30, 2007 as compared to $37,000 for the six
                months
                ended June 30, 2006, an increase of $365,000 (986%).  Gains and
                losses from equipment and lease dispositions may vary significantly
                from
                period to period.




·
            Other
                income increased to $960,000 for the six months ended June 30, 2007
                as
                compared to $197,000 for the six months ended June 30, 2006, an increase
                of $763,000 (387%).  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.





Total
      expenses increased to $16.6 million for the six months ended June 30, 2007
      as
      compared to $4.0 million for the six months ended June 30, 2006, an increase
      of
      $12.6 million (315 %). This increase was a result of the following:




·
            Interest
                expense increased to $8.6 million for the six months ended June 30,
                2007
                as compared to $1.7 million for the six months ended June 30, 2006,
                an
                increase $6.9 million (406%). This increase is primarily due to the
                increase of our debt incurred to acquire equipment financing assets.
                Debt
                increased to $328.4 million as of June 30, 2007 as compared to $83.3
                million as of June 30, 2006, an increase of $245.1 million
                (294%).




·
            Our
                provision for credit losses increased to $1.7 million for the six
                months
                ended June 30, 2007 as compared to $283,000 for the six months ended
                June
                30, 2006, an increase of $1.4 million (495%).  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.




·
            Administrative
                expenses reimbursed to related party increased to $790,000 for the
                six
                months ended June 30, 2007 as compared to $291,000 for the six months
                ended June 30, 2006, an increase of $499,000 (172%). This increase
                is due
                to our growth in commercial financing
                assets.




·
            Management
                fees increased to $1.8 million for the six months ended June 30,
                2007 as
                compared to $322,000 for the six months ended June 30, 2006 , an
                increase
                of $1.5 million (466%).  This increase is directly attributable
                to our continuing receipt of payments on lease assets, since management
                fees are paid based on lease payments
                received.




·
            General
                and administrative expenses increased to $1.3 million for the six
                months
                ended June 30, 2007 as compared to $ 231,000 for the six months ended
                June
                30, 2006, an increase of $1.1 million (476%).  This increase is
                principally related to increased legal costs associated with collection
                efforts.




·
            Depreciation
                on operating leases increased to $2.4 million for the six months
                ended
                June 30, 2007 as compared to $ 1.2 million for the six months ended
                June
                30, 2006, an increase of $1.2 million (100 %).  This increase is
                directly related to our increase in operating
                leases.





Our
      net
      loss for the six months ended June 30, 2007 and 2006 was $ 743,000 and $25,000,
      respectively.  The net loss per limited partnership unit, after the
      loss allocated to our General Partner for the six months ended June 30, 2007
      and
      2006 was $1.24 and $0.12, respectively, based on a weighted average number
      of
      limited partnership units outstanding of 600,000 and 210,872, during each
      period.





Partners’ distributions paid for the six months periods ended June 30, 2007 and
      2006 were $2.5 million and $702,000, respectively.  Distributions to
      limited partners were 8% of invested capital.





20
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**Liquidity
      and Capital Resources**





Our
      major sources of liquidity have
      been obtained by the sale of partnership units and bank debt.  Our
      primary cash requirements, in addition to normal operating expenses, are for
      debt service, investment in leases and distributions to partners.  In
      addition to cash generated from operations, we plan to meet our cash
      requirements through our credit facilities.





The
      following table sets forth our
      sources and uses of cash for the period indicated (in thousands):









**June
                  30,****2007**
            
            
            **2006**Net
                cash provided by operating activities
            
            $
            8,356
            
            
            $
            2,345Net
                cash used in investing activities
            
            
            (31,919
            )
            
            
            (56,302
            )Net
                cash provided by financing activities
            
            
            12,033
            
            
            
            66,337(Decrease)
                increase in cash
            
            $
            (11,530
            )
            
            $
            12,380





Our
      liquidity is affected by our
      ability to leverage our portfolio through expansion of our credit
      facilities.  In June 2007 we entered into a term securitization of
      $276.8 million, the proceeds of which were used to payoff the Merrill Lynch
      facility and paid down the WestLB facility by $40.2 million.  At June
      30, 2006, $268.7 million of Merrill Lynch term notes were
      outstanding.  The term notes are divided into $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.  By entering into term note securitization, we
      reduce outstanding borrowings under our revolving line of credit, which
      increases the amounts available to us under these facilities to fund additional
      lease originations.





Changes
      in interest rates will affect
      the market value of our portfolio and our ability to obtain
      financing.  In general, the market value of an equipment lease will
      change in inverse relation to an interest rate change where the lease has a
      fixed rate of return.  Accordingly, in a period of rising interest
      rates, the market value of our equipment leases will decrease.  A
      decrease in the market value of our portfolio will adversely affect our ability
      to obtain financing against our portfolio or to liquidate it.  In
      addition, the terms of our credit facilities include financial
      covenants.  As of June 30, 2007, we were in compliance with all such
      covenants.  If we do not meet the requirements of the covenants in the
      future, a default could occur that would have an adverse effect on our
      operations and could force us to liquidate our portfolio.  In the
      event that any of our credit facilities are not renewed when they expire in
      the
      coming year, we would seek to obtain an alternative credit facility with
      comparable terms.  The Fund meets regularly with  various
      sources of capital in to ensure adequate, competitively priced capital is
      available.





Our
      liquidity could also be affected by
      higher than expected equipment lease defaults.  Higher than expected
      equipment lease defaults will result in a loss of anticipated
      revenues.  These losses may adversely affect our ability to make
      distributions to partners and, if the level of defaults is sufficiently large,
      may result in our inability to fully recover our investment in the underlying
      equipment.  In evaluating our allowance for possible losses on
      uncollectible leases, we consider our contractual delinquencies, economic
      conditions and trends, industry statistics, lease portfolio characteristics
      and
      our General Partner's management's prior experience with similar lease
      assets.  As of June 30, 2007 and June 30, 2006, our credit evaluation
      indicated the need for an allowance for possible losses of $1.4 million and
      $200,000, respectively.  As our lease portfolio increases and ages, we
      anticipate the allowance for possible losses will increase.





During
      the six months ended June 30,
      2007, we acquired $88.6 million in leases and notes which were funded by $81.5
      million of debt.





Net
      cash provided in operations
      increased by $6.0 million for the six months ended June 30, 2007 as compared
      to
      six months ended June 30, 2006. The increase was primarily due to increase
      in
      amounts due from lockbox of $ 3.2 million, and an increase of $871,000 amounts
      due to related parties.





Net
      cash used by our investing
      activities decreased by $24.4 million for the six months ended June 30, 2007
      as
      compared to six months ended June 30, 2006.  This was the result of
      the reinvestment into new equipment financings, from the cash derived from
      the
      run-off of existing equipment financings.





Net
      cash provided by financing
      activities decreased by $54.3 million for the six months ended June 30, 2007.
      The decrease is primarily due to an increase in restricted cash of $22.3 million
      in our collection account for our West LB facility, and $21.7 million decrease
      in capital contributed by limited partners.




21
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**ITEM
      3.                     QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**





At
      June 30, 2007, our outstanding debt
      totaled $328.4 million, which consists of variable rate debt of $237.9 and
      fixed
      rate debt of $90.5 million.




To
      mitigate interest rate risk we
      employ a hedging strategy using derivative financial instruments such as
      interest rate swaps, which fix the interest rates on the WestLB credit facility
      and term securitization at 6.41% and 5.40%, on a weighted average basis,
      respectively.  At June 30, 2007 and June 30, 2006, the notional
      amounts of the interest rate swaps were $235.5 million and $287.1 million,
      respectively.  The interest rate swap agreements terminate on various
      dates ranging from March 2009 to March 2014.





**ITEM
      4.                     CONTROLS
      AND PROCEDURES**





We
      maintain disclosure controls and
      procedures that are designed to ensure that information required to be disclosed
      in our periodic reports under the Securities Exchange Act of 1934, as amended,
      is recorded, processed, summarized and reported within the time periods
      specified in the U.S. Securities and Exchange Commission’s rules and forms, and
      that such information is accumulated and communicated to our management,
      including our General Partner’s Chief Executive Officer and Chief Financial
      Officer, as appropriate, to allow timely decisions regarding required
      disclosure.  In designing and evaluating the disclosure controls and
      procedures, our management recognized that any controls and procedures, no
      matter how well designed and operated, can provide only reasonable assurance
      of
      achieving the desired control objectives, and our management necessarily was
      required to apply its judgment in evaluating the cost-benefit relationship
      of
      possible controls and procedures.





Under
      the supervision of our General
      Partner’s Chief Executive Officer and Chief Financial Officer, we have carried
      out an evaluation of the effectiveness of our disclosure controls and procedures
      as of the end of the period covered by this report.  Based upon that
      evaluation, our General Partner’s Chief Executive Officer and Chief Financial
      Officer concluded that our disclosure controls and procedures are effective
      at
      the reasonable assurance level.





There
      have been no significant changes
      in our internal controls over financial reporting during the three months ended
      June 30, 2007 that has materially affected, or are reasonably likely to
      materially affect, our internal control over financial reporting.





**PART
      II – OTHER INFORMATION**





**ITEM
      6.                             EXHIBITS**





Exhibit
                No.
            
            Description3.1
            
            Amended
                and Restated Agreement of Limited Partnership (1)3.2
            
            Certificate
                of Limited Partnership (2)4.1
            
            Forms
                of letters sent to limited partners confirming their investment (2)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 Appendix A to our Post-Effective Amendment No. 3 to
                our
                Registration Statement on Form S-1, filed on January 24, 2004 and
                by this reference incorporated
                herein..




(2)
            Filed
                previously as an Exhibit to Amendment No. 1 to our Registration Statement
                on Form S-1 filed on June 7, 2002 and
                by this reference incorporated
                herein..




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**SIGNATURES**





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








**LEASE
                EQUITY APPRECIATION FUND II, L.P.**A
                Delaware Limited PartnershipBy:  LEAF
                Financial Corporation, its General PartnerAugust
                14, 2007
            /s/
                Crit DeMentCRIT
                DEMENTChairman
                and Chief Executive Officer of the General PartnerAugust
              14, 2007
            /s/
              Robert K. MoskovitzROBERT
                K. MOSKOVITZChief
                Financial Officer and Treasurer of the General Partner


23