**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      D.C. 20549**

**FORM      10-Q**

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

**OR**

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

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

| Delaware                                                                                   20-1056194(State                of                Organization)                                                                                                                                                                                                             (I.R.S.                Employer Identification No.) |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

**INDEX      TO QUARTERLY REPORT**

**ON      FORM 10-Q**

|                       |                                                                                                                                                                                                     | **PAGE**                             |
|----------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------|
|                       |                                                                                                                                                                                                     |                                 |
| **PART                I**  | **FINANCIAL                INFORMATION**                                                                                                                                                                 |                                 |
| Item                1.     | Financial                Statements                                                                                                                                                                      |                                 |
|                       | Consolidated                Balance Sheets - March 31, 2006 and December 31, 2005                                                                                                                   | 3                                    |
|                       | Consolidated                Statement of Operations Three Months Ended March 31, 2006                                                                                                               | 4                                    |
|                       | Consolidated                Statement of Partners’ Capital and Comprehensive Income For                the Three Months Ended     March                31,                2006 | 5                                    |
|                       | Consolidated                Statement of Cash Flows For                the Three Months Ended March 31, 2006                                                                                             | 6                                    |
|                       | Notes                to Consolidated Financial Statements - March 31, 2006                                                                                                                          | 7                -                13 |
| ITEM                2.     | Management’s                Discussion and Analysis of Financial Condition and                Results of Operations                                                                                | 14−19                          |
| ITEM                3.     | Quantitative                and Qualitative Disclosures about Market                Risk                                                                                                                 | 20                                   |
| ITEM                4.     | Controls                and Procedures                                                                                                                                                                   | 20                                   |
| **PART                II** | **OTHER                INFORMATION**                                                                                                                                                                     |                                 |
| ITEM                2.     | Unregistered                Sales of Equity Securities and Use of                Proceeds                                                                                                                | 21                                   |
| ITEM                6.     | Exhibits                                                                                                                                                                                                 | 21                                   |
| **SIGNATURES**             | 22                                                                                                                                                                                                       |

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**PART      I.**
**FINANCIAL      INFORMATION**

**Item      1.**
**Financial      Statements**

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

**CONSOLIDATED      BALANCE SHEETS**

|                                                                                                                    |   | **March                31,** |       | **December                31,** |   |
|-------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|------------|---------------------------------|--------|
|                                                                                                                    |   | **2006**                     |       | **2005**                        |   |
|                                                                                                                    |   | (Unaudited)                  |       | (Audited)                       |   |
| **ASSETS**                                                                                                              |   |                         |       |                            |   |
| Cash                                                                                                                    |   | $                            | 3,411,252  |                            | $      | 1,033,939 |   |
| Restricted                cash                                                                                          |   |                         | 681,666    |                            |   | 379,120 |   |
| Accounts                receivable                                                                                      |   |                         | 103,371    |                            |   | 52,455 |   |
| Due                from lockbox                                                                                         |   |                         | 377,010    |                            |   | 669,524 |   |
| Investment                in direct financing leases and notes, net                                                     |   |                         | 68,023,481 |                            |   | 37,758,767 |   |
| Investment                in operating leases (net of accumulated depreciation of $728,939                and $244,903) |   |                         | 7,201,072  |                            |   | 4,359,371 |   |
| Fair                value of interest rate swap                                                                         |   |                         | 501,439    |                            |   | 158,569 |   |
| Other                assets                                                                                             |   |                         | 298,397    |                            |   | 308,277 |   |
|                                                                                                                    |   | $                            | 80,597,688 |                            | $      | 44,720,022 |   |
|                                                                                                                    |   |                         |       |                            |   |   |   |
| **LIABILITIES                AND PARTNERS’ CAPITAL**                                                              |   |                         |       |                            |   |   |   |
| **Liabilities:**                                                                                                        |   |                         |       |                            |   |   |   |
| Debt                                                                                                                    |   | $                            | 62,043,447 |                            | $      | 34,511,800 |   |
| Accounts                payable and accrued expenses                                                                    |   |                         | 509,730    |                            |   | 214,530 |   |
| Due                to related parties, net                                                                              |   |                         | 168,749    |                            |   | 69,946 |   |
| Security                deposits                                                                                        |   |                         | 586,909    |                            |   | 150,873 |   |
| Total                liabilities                                                                                   |   |                         | 63,308,835 |                            |   | 34,947,149 |   |
| **Partners’                Capital**                                                                         |   |                         | 17,288,853 |                            |   | 9,772,873 |   |
|                                                                                                                    |   | $                            | 80,597,688 |                            | $      | 44,720,022 |   |

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

**CONSOLIDATED      STATEMENT OF OPERATIONS**

**FOR      THE THREE MONTHS ENDED MARCH 31, 2006**

**(unaudited)**

| **Income:**                                                                                                  |   |   |      |
|--------------------------------------------------------------------------------------------------------------|--------|--------|-----------|
| Interest                on equipment financings                                                              |   | $      | 952,569   |   |
| Rental                income                                                                                 |   |   | 570,305   |   |
| Gain                on sale of equipment and lease dispositions, net                                    |   |   | 30,233    |   |
| Other                                                                                                        |   |   | 86,050    |   |
|                                                                                                         |   |   | 1,639,157 |   |
|                                                                                                         |   |   |      |   |
| **Expenses:**                                                                                                |   |   |      |   |
| Interest                expense                                                                              |   |   | 695,712   |   |
| Depreciation                on operating leases                                                              |   |   | 484,644   |   |
| Provision                for credit losses                                                                   |   |   | 16,974    |   |
| Management                fee to related party                                                               |   |   | 142,579   |   |
| Administrative                expense reimbursed to related party                                            |   |   | 131,019   |   |
| General                and administrative expenses                                                           |   |   | 80,602    |   |
|                                                                                                         |   |   | 1,551,530 |   |
| Net                income                                                                                    |   | $      | 87,627    |   |
|                                                                                                         |   |   |      |   |
| Weighted                average number of limited partner units outstanding during the                period |   |   | 153,818   |   |
| Net                income attributed to limited partners per unit                                            |   | $      | 0.56      |   |

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

**CONSOLIDATED      STATEMENT OF PARTNERS’ CAPITAL**

**AND      COMPREHENSIVE INCOME**

**FOR      THE THREE MONTHS ENDED MARCH 31, 2006**

**(unaudited)**

|                                                                                                                                                    |   | **General                Partner** |    | **Limited                Partners** |   | **Accumulated                Other Comprehensive** |   |   **Partners’                Capital** |       | **Comprehensive                Income** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|---------|-------------------------------------|--------|----------------------------------------------------|--------|--------------------------------------------------------|------------|-----------------------------------------|--------|
|                                                                                                                                                    |   | **Amount**                         |    | **Units**                           |   | **Amount**                                         |   | **Income**                                             |       | **Total**                               |   | **Total** |   |
| Balance,                December 31, 2005                                                                                                          |   | $                                  | (6,705  | )                                   |   | 120,015                                            |   | $                                                      | 9,621,009  |                                    | $      | 158,569 |   | $ | 9,772,873 |   |   |   |   |
| Limited                Partners’ contributions                                                                                                    |   |                               | − |                                |   | 84,720                                             |   |                                                   | 8,455,347  |                                    |   | − |   |   | 8,455,347 |   |   |   |   |
| Offering                costs related to the sale                of                        Limited Partnership units |   |                               | − |                                |   | −                                            |   |                                                   | (1,119,296 | )                                       |   | − |   |   | (1,119,296 | ) |   |   |   |
| Cash                distributions paid                                                                                                                  |   |                               | (2,506  | )                                   |   | −                                            |   |                                                   | (248,062   | )                                       |   | − |   |   | (250,568 | ) |   |   |   |
| Net                income                                                                                                                               |   |                               | 876     |                                |   | −                                            |   |                                                   | 86,751     |                                    |   | − |   |   | 87,627 |   | $ | 87,627 |   |
| Unrealized                gain on hedging derivative                                                                                                    |   |                               | − |                                |   | −                                            |   |                                                   | −    |                                    |   | 342,870 |   |   | 342,870 |   |   | 342,870 |   |
| Balance,                March 31, 2006                                                                                                             |   | $                                  | (8,335  | )                                   |   | 204,735                                            |   | $                                                      | 16,795,749 |                                    | $      | 501,439 |   | $ | 17,288,853 |   | $ | 430,497 |   |

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

**CONSOLIDATED      STATEMENT OF CASH FLOWS**

**FOR      THE THREE MONTHS ENDED MARCH 31, 2006**

**(unaudited)**

| **Cash                flows from operating activities:**                                                        |   |   |        |
|-----------------------------------------------------------------------------------------------------------------|--------|--------|-------------|
| Net                income                                                                                       |   | $      | 87,627      |   |
| Adjustments                to reconcile net income to net cash provided by operating                activities: |   |   |        |   |
| Depreciation                                                                                                    |   |   | 484,644     |   |
| Provision                for credit losses,                                                                     |   |   | 16,974      |   |
| Amortization                of deferred financing costs                                                         |   |   | 10,945      |   |
| Changes                in operating assets and liabilities:                                                     |   |   |        |   |
| Accounts                receivable                                                                              |   |   | (50,916     | ) |
| Due                from lockbox                                                                                 |   |   | 292,514     |   |
| Other                assets                                                                                     |   |   | 4,047       |   |
| Accounts                payable and accrued expenses                                                            |   |   | 295,200     |   |
| Due                to related parties, net                                                                      |   |   | 98,803      |   |
| Net                cash provided by operating activities                                                        |   |   | 1,239,838   |   |
|                                                                                                            |   |   |        |   |
| **Cash                flows from investing activities:**                                                        |   |   |        |   |
| Investment                in direct financing leases and notes                                                  |   |   | (32,990,473 | ) |
| Investment                in equipment under operating leases                                                   |   |   | (3,326,345  | ) |
| Proceeds                from direct financing leases, net of earned income                                      |   |   | 2,871,430   |   |
| Security                deposits, net                                                                           |   |   | 273,391     |   |
| Net                cash used in investing activities                                                            |   |   | (33,171,997 | ) |
|                                                                                                            |   |   |        |   |
| **Cash                flows from financing activities:**                                                        |   |   |        |   |
| Increase                in restricted cash                                                                      |   |   | (302,546    | ) |
| Increase                in deferred financing costs                                                             |   |   | (5,112      | ) |
| Proceeds                from debt                                                                               |   |   | 30,654,796  |   |
| Repayment                of debt                                                                                |   |   | (3,123,149  | ) |
| Limited                Partners’ capital contributions                                                    |   |   | 8,455,347   |   |
| Partners’** **distributions                                                                          |   |   | (250,568    | ) |
| Payment                of offering costs incurred for the sale of limited partnership                units      |   |   | (1,119,296  | ) |
| Net                cash provided by financing activities                                                        |   |   | 34,309,472  |   |
|                                                                                                            |   |   |        |   |
| Increase                in cash                                                                            |   |   | 2,377,313   |   |
| Cash,                beginning of period                                                                   |   |   | 1,033,939   |   |
| Cash,                end of period                                                                         |   | $      | 3,411,252   |   |

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

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2006**

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

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

**Basis      of Presentation**

**Classification      **

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

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

**MARCH      31, 2006**

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

**Use        of Estimates**

**Concentration      of Credit Risk**

**Revenue      Recognition**

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

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

**MARCH      31, 2006**

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

**Revenue      Recognition − (Continued)**

*Direct        Financing Leases. *

*Operating      Leases. *

*Notes      Receivable.*

**Income      Taxes**

**Supplemental      Disclosure of Cash Flow Information**

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

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

**MARCH      31, 2006**

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

**Transfers        of Financial Assets**

*Accounting        for Transfers and Servicing of Financial Assets and Extinguishments of        Liabilities,*

**Fair      Value of Financial Instruments**

**NOTE      3 - RESTRICTED CASH**

**NOTE      4 − DUE FROM LOCKBOX**

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

|                                         |   | **March                31,** |       | **December                31,** |   |
|----------------------------------------------|--------|------------------------------|------------|---------------------------------|--------|
|                                         |   | **2006**                     |       | **2005**                        |   |
| Direct                financing leases       |   | $                            | 60,035,562 |                            | $      | 34,567,490 |   |
| Notes                receivable              |   |                         | 8,127,919  |                            |   | 3,321,277 |   |
|                                         |   |                         | 68,163,481 |                            |   | 37,888,767 |   |
| Allowance                for possible losses |   |                         | 140,000    |                            |   | 130,000 |   |
|                                         |   | $                            | 68,023,481 |                            | $      | 37,758,767 |   |

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

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

**MARCH      31, 2006**

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

|                                                        |   | **March                  31,** |       | **December                  31,** |   |
|-------------------------------------------------------------|--------|--------------------------------|------------|-----------------------------------|--------|
|                                                        |   | **2006**                       |       | **2005**                          |   |
| Total                  future minimum lease payments        |   | $                              | 66,781,750 |                              | $      | 37,102,220 |   |
| Unearned                  rental income                     |   |                           | (9,176,159 | )                                 |   | (4,360,607 | ) |
| Residuals,                  net of unearned residual income |   |                           | 2,429,971  |                              |   | 1,825,877 |   |
|                                                        |   | $                              | 60,035,562 |                              | $      | 34,567,490 |   |

|                                                              |   | **For                the****Three                Months Ended****March                31,** |    |
|-------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------|---------|
|                                                              |   | **2006**                                                                                    |    |
| Allowance                for possible losses, beginning of period |   | $                                                                                           | 130,000 |   |
| Provision                for credit losses                        |   |                                                                                        | 16,974  |   |
| Net                write offs                                     |   |                                                                                        | (6,974  | ) |
| Allowance                for possible losses, end of period       |   | $                                                                                           | 140,000 |   |

| **Years                Ending****March                31,** |   | **Direct****Financing                Leases** |       | **Notes** |   | **Operating                Leases** |   | **Total** |      |
|-------------------------------------------------------------|--------|-----------------------------------------------|------------|-----------|--------|-------------------------------------|--------|-----------|-----------|
| 2007                                                   |   | $                                             | 21,849,721 |      | $      | 1,330,022                           |   | $         | 2,485,935 |   | $ | 25,665,678 |   |
| 2008                                                   |   |                                          | 18,391,540 |      |   | 1,374,069                           |   |      | 2,259,939 |   |   | 22,025,548 |   |
| 2009                                                   |   |                                          | 13,266,081 |      |   | 1,351,076                           |   |      | 1,263,292 |   |   | 15,880,449 |   |
| 2010                                                   |   |                                          | 8,300,611  |      |   | 1,344,981                           |   |      | 747,542   |   |   | 10,393,134 |   |
| 2011                                                   |   |                                          | 3,655,349  |      |   | 1,213,852                           |   |      | 254,688   |   |   | 5,123,889 |   |
| Thereafter                                                  |   |                                          | 1,318,448  |      |   | 1,513,919                           |   |      | 24,915    |   |   | 2,857,282 |   |
|                                                        |   | $                                             | 66,781,750 |      | $      | 8,127,919                           |   | $         | 7,036,311 |   | $ | 81,945,980 |   |

**NOTE      6 − OTHER ASSETS**

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

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

**MARCH      31, 2006**

**NOTE        7 **
**-**
**        DEBT**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | **March                    31, 2006** |       | **December                    31, 2005** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|------------|------------------------------------------|--------|
| WestLB                    AG, New York Branch revolving line of credit, with an aggregate                    borrowing                    limit of $75.0 million collateralized by specific lease receivables                    and                    related equipment, with a 1% credit reserve of the outstanding                    line of                    credit. Interest on this facility is calculated at LIBOR plus                    1.10% 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 January                    2013. The                    interest rate swap agreements fix the interest rate on this facility                    at                    5.87% on a weighted average basis. Interest and principal are                    due monthly.                    The line of credit is renewable for one year periods on 2007                    and 2008. The                    terms of the Funds’ credit facility with WestLB includes financial                    covenants related to the Funds net worth and leverage used. As                    of March                    31, 2006, the Fund is in compliance with all such                    covenants |   | $                                     | 62,043,447 |                                     | $      | 34,511,800 |   |

| 2007       |   | $      | 20,722,224 |   |
|------------|--------|--------|------------|--------|
| 2008       |   |   | 16,031,738 |   |
| 2009       |   |   | 11,775,168 |   |
| 2010       |   |   | 7,868,880  |   |
| 2011       |   |   | 3,729,289  |   |
| Thereafter |   |   | 1,916,148  |   |
|       |   | $      | 62,043,447 |   |

**NOTE      8 **
**-**
**      DERIVATIVE INSTRUMENTS**

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

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

**MARCH      31, 2006**

**NOTE          8-          DERIVATIVE INSTRUMENTS - (Continued)**

**NOTE      9 − TRANSACTIONS WITH AFFILIATES**

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

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

**MARCH      31, 2006**

**NOTE      9 − TRANSACTIONS WITH AFFILIATES − (Continued)**

|                                                         |   | **Three                  Months Ended March 31,** |    |
|--------------------------------------------------------------|--------|---------------------------------------------------|---------|
|                                                         |   | **2006**                                          |    |
| Acquisition                  fees                            |   | $                                                 | 726,336 |   |
| Asset                  management fees                       |   | $                                                 | 142,579 |   |
| Organization                  and offering expense allowance |   | $                                                 | 295,937 |   |
| Reimbursed                  administrative expenses          |   | $                                                 | 131,019 |   |
| Underwriting                  fees                           |   | $                                                 | 823,359 |   |

**NOTE      10 **
**-**
**      ALLOCATION OF PARTNERSHIP INCOME, LOSS AND CASH      DISTRIBUTIONS**

**NOTE      11 − COMPREHENSIVE INCOME **

**NOTE      12 − NET INCOME PER LIMITED PARTNERSHIP UNIT**

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**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 2005. 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**

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

| ·   | $1                billion or less in total assets; or |
|--------------------|-------------------------------------------------------|

| ·   | $100                million or less in total annual                sales. |
|--------------------|---------------------------------------------------------------------------|

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**Our      Lease Portfolio **

**Direct      Financing Leases and Notes**

|                                 |   | **March                31, 2006** |   |           |   | **December                31, 2005** |   |
|--------------------------------------|--------|-----------------------------------|--------|----------------|--------|--------------------------------------|--------|
| **Type                of Equipment** |   | **Net                Investment** |   | **Percentage** |   | **Type                of Equipment** |   | **Net                Investment** |   | **Percentage** |   |
| Computers                            |   | $                                 | 19,549 |           |   | 28.7                                 | %      |   | Computers |   | $ | 12,975 |   |   | 34.2 | % |
| Medical                Equipment     |   |                              | 19,085 |           |   | 28.0                                 |   |   | Medical                Equipment |   |   | 6,794 |   |   | 17.9 |   |
| Industrial                Equipment  |   |                              | 10,497 |           |   | 15.4                                 |   |   | Industrial                Equipment |   |   | 6,087 |   |   | 16.1 |   |
| Office                Equipment      |   |                              | 4,112  |           |   | 6.0                                  |   |   | Office                Equipment |   |   | 2,789 |   |   | 7.4 |   |
| Software                             |   |                              | 4,027  |           |   | 5.9                                  |   |   | Software |   |   | 2,536 |   |   | 6.7 |   |
| Restaurant                Equipment  |   |                              | 2,770  |           |   | 4.1                                  |   |   | Building                systems |   |   | 1,877 |   |   | 5.0 |   |
| Garment                Care          |   |                              | 2,405  |           |   | 3.5                                  |   |   | Restaurant                Equipment |   |   | 1,469 |   |   | 3.9 |   |
| Building                systems      |   |                              | 2,277  |           |   | 3.3                                  |   |   | Garment                Care |   |   | 1,570 |   |   | 4.1 |   |
| Communications                       |   |                              | 1,759  |           |   | 2.6                                  |   |   | Communications |   |   | 980 |   |   | 2.6 |   |
| Agriculture                          |   |                              | 1,682  |           |   | 2.5                                  |   |   | Agriculture |   |   | 812 |   |   | 2.1 |   |
|                                 |   | $                                 | 68,163 |           |   | 100.0                                | %      |   |   |   | $ | 37,889 |   |   | 100.0 | % |

**Operating      Leases**

|                                 |   | **March                31, 2006** |   |           |   | **December                31, 2005** |   |
|--------------------------------------|--------|-----------------------------------|--------|----------------|--------|--------------------------------------|--------|
| **Type                of Equipment** |   | **Net                Investment** |   | **Percentage** |   | **Type                of Equipment** |   | **Net                Investment** |   | **Percentage** |   |
| Communications                       |   | $                                 | 1,781  |           |   | 24.7                                 | %      |   | Communications |   | $ | 1,248 |   |   | 28.6 | % |
| Office                Equipment      |   |                              | 1,230  |           |   | 17.1                                 |   |   | Office                Equipment |   |   | 1,111 |   |   | 25.5 |   |
| Computers                            |   |                              | 2,680  |           |   | 37.2                                 |   |   | Industrial                Equipment |   |   | 1,070 |   |   | 24.5 |   |
| Industrial                Equipment  |   |                              | 1,220  |           |   | 16.9                                 |   |   | Computers |   |   | 646 |   |   | 14.8 |   |
| Medical                Equipment     |   |                              | 230    |           |   | 3.2                                  |   |   | Medical                Equipment |   |   | 255 |   |   | 5.9 |   |
| Agriculture                          |   |                              | 32     |           |   | 0.5                                  |   |   | Building                Systems |   |   | 29 |   |   | 0.7 |   |
| Building                Systems      |   |                              | 28     |           |   | 0.4                                  |   |   | Agriculture |   |   | − |   |   | − |   |
|                                 |   | $                                 | 7,201  |           |   | 100.0                                | %      |   |   |   | $ | 4,359 |   |   | 100.0 | % |

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**Direct      Financing Leases and Notes**

|                                         |   | **March                31, 2006** |   |           |   | **December                31, 2005** |   |
|----------------------------------------------|--------|-----------------------------------|--------|----------------|--------|--------------------------------------|--------|
| **Type                of Business**          |   | **Net                Investment** |   | **Percentage** |   | **Type                of Business**  |   | **Net                Investment** |   | **Percentage** |   |
| Services                                     |   | $                                 | 39,680 |           |   | 58.2                                 | %      |   | Services |   | $ | 21,398 |   |   | 56.4 | % |
| Retail                Trade                  |   |                              | 8,205  |           |   | 12.0                                 |   |   | Retail                Trade |   |   | 4,543 |   |   | 12.0 |   |
| Manufacturing                                |   |                              | 5,090  |           |   | 7.4                                  |   |   | Manufacturing |   |   | 2,900 |   |   | 7.7 |   |
| Public                Administration         |   |                              | 3,066  |           |   | 4.5                                  |   |   | Wholesale                Trade |   |   | 2,087 |   |   | 5.5 |   |
| Construction                                 |   |                              | 2,795  |           |   | 4.1                                  |   |   | Finance/Insurance/Real                Estate |   |   | 1,458 |   |   | 3.8 |   |
| Wholesale                Trade          |   |                              | 2,608  |           |   | 3.8                                  |   |   | Transportation/                   Communication/Energy |   |   | 1,430 |   |   | 3.8 |   |
| Transportation/Communication/Energy          |   |                              | 2,496  |           |   | 3.7                                  |   |   | Construction             |   |   | 1,218  |   |   | 3.2  |   |
| Finance/Insurance/Real                Estate |   |                              | 2,152  |           |   | 3.2                                  |   |   | Other |   |   | 1,021 |   |   | 2.7 |   |
| Agriculture/Forestry/Fishing                 |   |                              | 1,705  |           |   | 2.5                                  |   |   | Public                Administration |   |   | 912 |   |   | 2.4 |   |
| Other                                        |   |                              | 335    |           |   | 0.5                                  |   |   | Agriculture/Forestry/Fishing |   |   | 865 |   |   | 2.3 |   |
| Mining                                       |   |                              | 51     |           |   | 0.1                                  |   |   | Mining |   |   | 57 |   |   | 0.2 |   |
|                                         |   | $                                 | 68,163 |           |   | 100.0                                | %      |   |   |   | $ | 37,889 |   |   | 100.0 | % |

**Operating      Leases**

|                                                        |   | **March                31, 2006** |   |           |   | **December                31, 2005** |   |
|-------------------------------------------------------------|--------|-----------------------------------|--------|----------------|--------|--------------------------------------|--------|
| **Type                of Business**                         |   | **Net                Investment** |   | **Percentage** |   | **Type                of Business**  |   | **Net                Investment** |   | **Percentage** |   |
| Services                                                    |   | $                                 | 3,029  |           |   | 42.1                                 | %      |   | Services |   | $ | 1,664 |   |   | 38.1 | % |
| Construction                                                |   |                              | 1,178  |           |   | 16.4                                 |   |   | Construction |   |   | 977 |   |   | 22.4 |   |
| Mining                                                      |   |                              | 791    |           |   | 11.0                                 |   |   | Manufacturing |   |   | 683 |   |   | 15.7 |   |
| Manufacturing                                               |   |                              | 707    |           |   | 9.8                                  |   |   | Mining |   |   | 281 |   |   | 6.5 |   |
| Public                Administration                        |   |                              | 526    |           |   | 7.3                                  |   |   | Finance/Insurance/Real                Estate |   |   | 264 |   |   | 6.1 |   |
| Finance/Insurance/Real                Estate                |   |                              | 299    |           |   | 4.1                                  |   |   | Retail                Trade |   |   | 215 |   |   | 4.9 |   |
| Retail                Trade                                 |   |                              | 261    |           |   | 3.6                                  |   |   | Wholesale                Trade |   |   | 105 |   |   | 2.4 |   |
| Wholesale                Trade                              |   |                              | 211    |           |   | 2.9                                  |   |   | Public                Administration |   |   | 92 |   |   | 2.1 |   |
| Transportation/    Communication/Energy |   |                              | 199    |           |   | 2.8                                  |   |   | Transportation/                    Communication/Energy |   |   | 78 |   |   | 1.8 |   |
|                                                        |   | $                                 | 7,201  |           |   | 100.0                                | %      |   |   |   | $ | 4,359 |   |   | 100.0 | % |

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**Results      of Operations **

*Revenues      − Three Months Ended March 31, 2006*

*Expenses      − Three Months Ended March 31, 2006*

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**Liquidity      and Capital Resources**

|                                                     |   | **Three                Months Ended** |        |
|----------------------------------------------------------|--------|---------------------------------------|-------------|
|                                                     |   | **March                31,**          |        |
|                                                     |   | **2006**                              |        |
| Net                cash provided by operating activities |   | $                                     | 1,239,838   |   |
| Net                cash used in investing activities     |   |                                  | (33,171,997 | ) |
| Net                cash provided by financing activities |   |                                  | 34,309,472  |   |
| Increase                in cash                          |   | $                                     | 2,377,313   |   |

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

**ITEM      4.**
**CONTROLS      AND PROCEDURES**

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**PART      II - OTHER INFORMATION**

**ITEM****2.** **UNREGISTERED      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

| Offering                proceeds                        |   | $      | 20,434,792 |   |
|--------------------------------------------------------------|--------|--------|------------|--------|
| Expenses:                                                    |   |   |       |   |
| Sales                commissions (1)                    |   | $      | 1,394,339  |   |
| Underwriting                fees (1)                    |   |   | 605,715    |   |
| Organization                and offering expenses (2)   |   |   | 715,205    |   |
| Public                offering expenses                 |   |   | 2,715,259  |   |
|                                                         |   |   |       |   |
| Net                offering proceeds                    |   |   | 17,719,533 |   |
| Reserves                                                |   |   | 177,195    |   |
| Total                proceeds available for investment  |   | $      | 17,542,338 |   |
|                                                         |   |   |       |   |
| Use                of proceeds for investment (estimated):   |   |   |       |   |
| Used                in operations (3)                   |   |   | 753,525    |   |
| Acquisition                of lease portfolios (4)      |   |   | 12,984,888 |   |
| Working                capital                          |   |   | 3,803,925  |   |

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|   |                                                                                                                                                   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    | Paid                to an affiliate of the general partner which is then remitted to                third                parties.                      |
| (2)    | Paid                to the general partner.                                                                                                            |
| (3)    | The                general partner was reimbursed $470,945 for operating expenses and                asset                management fees of $282,580. |
| (4)    | Included                are asset acquisition fees of $1,596,458 that were paid to our general                partner.                                 |

**ITEM      6.** **EXHIBITS**

| Exhibit                No. |   | Description                                                                                                                                                         |
|----------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 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. |

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**SIGNATURES**

|                        | **LEASE                EQUITY APPRECIATION FUND II, L.P.**                     |
|-----------------------------|--------------------------------------------------------------------------------|
|                        | A                Delaware Limited Partnership                                  |
|                        | By:                LEAF Financial Corporation, its General Partner             |
|                        |                                                                           |
| May                15, 2006 | /s/                Crit DeMent CRIT                DEMENT                 |
|                        | Chairman                and Chief Executive Officer of the General Partner     |
|                        |                                                                           |
| May                15, 2006 | /s/                Robert K. Moskovitz ROBERT                K. MOSKOVITZ |
|                        | Chief                Financial Officer, Treasurer of the General Partner       |
|                        |                                                                           |

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