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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q







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

For the quarterly period ended September 30, 2010

OR



| ̈ | 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 333-84730





LEASE EQUITY APPRECIATION FUND I, L.P.

(Exact Name of Registrant as Specified in Its Charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 68-0492247                          
|(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 has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).     ̈  Yes     ̈  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller Reporting Company |  | x

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

There is no public market for the Registrants securities.









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LEASE EQUITY APPRECIATION FUND I, L.P.

INDEX TO QUARTERLY REPORT

ON FORM 10-Q



|           |  |                                                                                                             |    |      |    | 
|---------- |  | ----------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|           |  |                                                                                                             |    | PAGE |   
|PART I     |  | FINANCIAL INFORMATION                                                                                       |    |      |    | 
|ITEM 1.    |  | Financial Statements                                                                                        |    |      |    | 
|           |  | Consolidated Balance Sheets  September 30, 2010 and December 31, 2009
(Unaudited)                          |    |      | 3  | 
|           |  | Consolidated Statements of Operations  Three and Nine Months Ended September 30, 2010 and 2009 (Unaudited) |    |      | 4  | 
|           |  | Consolidated Statement of Changes in Partners Deficit  Nine Months Ended September 30, 2010 (Unaudited)   |    |      | 5  | 
|           |  | Consolidated Statements of Cash Flows  Nine Months Ended September 30, 2010 and 2009
(Unaudited)           |    |      | 6  | 
|           |  | Notes to Consolidated Financial Statements  September 30, 2010 (Unaudited)                                 |    |      | 7  | 
|ITEM 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations                       |    |      | 14 | 
|ITEM 3.    |  | Quantitative and Qualitative Disclosures about Market Risk                                                  |    |      | 21 | 
|ITEM 4.    |  | Controls and Procedures                                                                                     |    |      | 21 | 
|           |  |                                                                                                            
|PART II    |  | OTHER INFORMATION                                                                                           |    |      |    | 
|ITEM 6.    |  | Exhibits                                                                                                    |    |      | 22 | 
|           | 
|SIGNATURES |  |                                                                                                             | 23 |     



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PART 1. FINANCIAL INFORMATION

ITEM I  FINANCIAL STATEMENTS

LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY

Consolidated Balance Sheets

(In thousands)

(Unaudited)



|                                        |  |                   |        |   |                  |   |        |  
|--------------------------------------- |  | ----------------- | ------ | - | ---------------- | - | ------ | -
|                                        |  | September 30,2010 |        |   | December 31,2009 |  
|ASSETS                                  |  |                   |        |   |                  |   |        |  
|Cash                                    |  | $                 | 27     |   |                  | $ | 162    |  
|Restricted cash                         |  |                   | 4,176  |   |                  |   | 3,998  |  
|Accounts receivable                     |  |                   | 23     |   |                  |   | 26     |  
|Investment in leases and loans, net     |  |                   | 33,115 |   |                  |   | 56,918 |  
|Deferred financing costs, net           |  |                   | 192    |   |                  |   | 367    |  
|Other assets                            |  |                   | 88     |   |                  |   | 237    |  
|                                        |  |                   |        |   |                  |   |        |  
|Total assets                            |  | $                 | 37,621 |   |                  | $ | 61,708 |  
|                                        |  |                   |        |   |                  |   |        |  
|                                        |  |                  
|LIABILITIES AND PARTNERS DEFICIT       |  |                   |        |   |                  |   |        |  
|Liabilities:                            |  |                   |        |   |                  |   |        |  
|Bank debt                               |  | $                 | 32,782 |   |                  | $ | 54,343 |  
|Accounts payable and accrued expenses   |  |                   | 84     |   |                  |   | 212    |  
|Other liabilities                       |  |                   | 131    |   |                  |   | 205    |  
|Derivative liabilities at fair value    |  |                   | 1,390  |   |                  |   | 1,987  |  
|Due to affiliates                       |  |                   | 7,902  |   |                  |   | 7,416  |  
|                                        |  |                   |        |   |                  |   |        |  
|Total liabilities                       |  |                   | 42,289 |   |                  |   | 64,163 |  
|                                        |  |                   |        |   |                  |   |        |  
|                                        |  |                  
|Commitments and contingencies           |  |                   |        |   |                  |   |        |  
|                                        |  |                  
|Partners Deficit:                      |  |                   |        |   |                  |   |        |  
|General partner                         |  |                   | (181   | ) |                  |   | (152   | )
|Limited partners                        |  |                   | (3,097 | ) |                  |   | (316   | )
|Accumulated other comprehensive loss    |  |                   | (1,390 | ) |                  |   | (1,987 | )
|                                        |  |                   |        |   |                  |   |        |  
|Total partners deficit                 |  |                   | (4,668 | ) |                  |   | (2,455 | )
|                                        |  |                   |        |   |                  |   |        |  
|Total liabilities and partners' deficit |  | $                 | 37,621 |   |                  | $ | 61,708 |  
|                                        |  |                   |        |   |                  |   |        |  

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



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LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY

Consolidated Statements of Operations

(In thousands, except unit and per unit data)

(Unaudited)



|                                                                               |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|------------------------------------------------------------------------------ |  | ------------------------------- | ------- | - | ------------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                               |  | Three Months EndedSeptember 30, |         |   | Nine Months EndedSeptember 30, |  
|                                                                               |  | 2010                            |         |   | 2009                           |   |         | 2010 |  |   | 2009    |  
|Revenues:                                                                      |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Interest on equipment financings                                               |  | $                               | 813     |   |                                | $ | 1,526   |      |  | $ | 2,770   |   |  | $ | 5,372   |  
|Rental income                                                                  |  |                                 | 91      |   |                                |   | 130     |      |  |   | 276     |   |  |   | 401     |  
|(Losses) gains on sales of equipment and lease dispositions, net               |  |                                 | (81     | ) |                                |   | 64      |      |  |   | 196     |   |  |   | 359     |  
|Other                                                                          |  |                                 | 112     |   |                                |   | 183     |      |  |   | 602     |   |  |   | 517     |  
|                                                                               |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|                                                                               |  |                                 | 935     |   |                                |   | 1,903   |      |  |   | 3,844   |   |  |   | 6,649   |  
|                                                                               |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|                                                                               |  |                                 |         |  
|Expenses:                                                                      |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Interest expense                                                               |  |                                 | 523     |   |                                |   | 962     |      |  |   | 1,844   |   |  |   | 3,236   |  
|Depreciation on operating leases                                               |  |                                 | 75      |   |                                |   | 105     |      |  |   | 223     |   |  |   | 322     |  
|Provision for credit losses                                                    |  |                                 | 721     |   |                                |   | 1,605   |      |  |   | 2,990   |   |  |   | 2,700   |  
|General and administrative expenses                                            |  |                                 | 175     |   |                                |   | 341     |      |  |   | 585     |   |  |   | 1,108   |  
|Administrative expenses reimbursed to affiliate                                |  |                                 | 143     |   |                                |   | 244     |      |  |   | 553     |   |  |   | 870     |  
|Management fees to affiliate                                                   |  |                                 |        |   |                                |   | (179    | )    |  |   |        |   |  |   | 390     |  
|                                                                               |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|                                                                               |  |                                 | 1,637   |   |                                |   | 3,078   |      |  |   | 6,195   |   |  |   | 8,626   |  
|                                                                               |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Net loss                                                                       |  | $                               | (702    | ) |                                | $ | (1,175  | )    |  | $ | (2,351  | ) |  | $ | (1,977  | )
|                                                                               |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Net loss allocated to limited partners                                         |  | $                               | (695    | ) |                                | $ | (1,163  | )    |  | $ | (2,327  | ) |  | $ | (1,957  | )
|                                                                               |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|                                                                               |  |                                 |         |  
|Weighted average number of limited partner units outstanding during the period |  |                                 | 171,696 |   |                                |   | 171,696 |      |  |   | 171,696 |   |  |   | 171,696 |  
|                                                                               |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Net loss per weighted average limited partner unit                             |  | $                               | (4.05   | ) |                                | $ | (6.78   | )    |  | $ | (13.56  | ) |  | $ | (11.40  | )
|                                                                               |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  

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



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LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY

Consolidated Statement of Changes in Partners Deficit

(In thousands, except unit data)

(Unaudited)



|                                       |  |                      |       |   |                  |        |         |                                            |  |   |                        |   |  |                            |        |   |  |   |        |   |  |   |        |  
|-------------------------------------- |  | -------------------- | ----- | - | ---------------- | ------ | ------- | ------------------------------------------ |  | - | ---------------------- | - |  | -------------------------- | ------ | - |  | - | ------ | - |  | - | ------ | -
|                                       |  | GeneralPartnerAmount |       |   | Limited Partners |        |         | AccumulatedOtherComprehensiveIncome (Loss) |  |   | TotalPartners
Deficit |   |  | ComprehensiveIncome
(Loss) |       
|                                       |  |                      |       |  
|                                       |  |                      | Units |   |                  | Amount |         |                                            |  |  
|Balance, January 1, 2010               |  | $                    | (152  | ) |                  |        | 171,696 |                                            |  | $ | (316                   | ) |  | $                          | (1,987 | ) |  | $ | (2,455 | ) |  |   |        |  
|Cash distributions                     |  |                      | (5    | ) |                  |        |        |                                            |  |   | (454                   | ) |  |                            |       |   |  |   | (459   | ) |  |   |        |  
|Net loss                               |  |                      | (24   | ) |                  |        |        |                                            |  |   | (2,327                 | ) |  |                            |       |   |  |   | (2,351 | ) |  | $ | (2,351 | )
|Unrealized gain on hedging derivatives |  |                      |      |   |                  |        |        |                                            |  |   |                       |   |  |                            | 597    |   |  |   | 597    |   |  |   | 597    |  
|                                       |  |                      |       |   |                  |        |         |                                            |  |   |                        |   |  |                            |        |   |  |   |        |   |  |   |        |  
|Balance, September 30, 2010            |  | $                    | (181  | ) |                  |        | 171,696 |                                            |  | $ | (3,097                 | ) |  | $                          | (1,390 | ) |  | $ | (4,668 | ) |  | $ | (1,754 | )
|                                       |  |                      |       |   |                  |        |         |                                            |  |   |                        |   |  |                            |        |   |  |   |        |   |  |   |        |  

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



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LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



|                                                                                |  |                                |         |   |      |   |         |  
|------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                                                |  | Nine Months EndedSeptember 30, |        
|                                                                                |  | 2010                           |         |   | 2009 |  
|Cash flows from operating activities:                                           |  |                                |         |   |      |   |         |  
|Net loss                                                                        |  | $                              | (2,351  | ) |      | $ | (1,977  | )
|                                                                                |  |                               
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                                |         |   |      |   |         |  
|Gains on sales of equipment and lease dispositions, net                         |  |                                | (196    | ) |      |   | (359    | )
|Depreciation on operating leases                                                |  |                                | 223     |   |      |   | 322     |  
|Provision for credit losses                                                     |  |                                | 2,990   |   |      |   | 2,700   |  
|Amortization of deferred financing costs                                        |  |                                | 175     |   |      |   | 258     |  
|Changes in operating assets and liabilities:                                    |  |                                |         |   |      |   |         |  
|Accounts receivable                                                             |  |                                | 3       |   |      |   | 5       |  
|Other assets                                                                    |  |                                | 149     |   |      |   | (26     | )
|Accounts payable and accrued expenses and other liabilities                     |  |                                | (202    | ) |      |   | (54     | )
|Due to affiliates                                                               |  |                                | 486     |   |      |   | 221     |  
|                                                                                |  |                                |         |   |      |   |         |  
|Net cash provided by operating activities                                       |  |                                | 1,277   |   |      |   | 1,090   |  
|                                                                                |  |                                |         |   |      |   |         |  
|                                                                                |  |                               
|Cash flows from investing activities:                                           |  |                                |         |   |      |   |         |  
|Purchases of leases and loans                                                   |  |                                |        |   |      |   | (3,657  | )
|Proceeds from leases and loans                                                  |  |                                | 21,050  |   |      |   | 28,801  |  
|Security deposits (returned) collected                                          |  |                                | (264    | ) |      |   | (472    | )
|                                                                                |  |                                |         |   |      |   |         |  
|Net cash provided by investing activities                                       |  |                                | 20,786  |   |      |   | 24,672  |  
|                                                                                |  |                                |         |   |      |   |         |  
|                                                                                |  |                               
|Cash flows from financing activities:                                           |  |                                |         |   |      |   |         |  
|Borrowings of bank debt                                                         |  |                                |        |   |      |   | 4,145   |  
|Repayment of bank debt                                                          |  |                                | (21,561 | ) |      |   | (32,209 | )
|Decrease in restricted cash                                                     |  |                                | (178    | ) |      |   | 3,066   |  
|Increase in deferred financing costs                                            |  |                                |        |   |      |   | (2      | )
|Cash distributions to partners                                                  |  |                                | (459    | ) |      |   | (866    | )
|                                                                                |  |                                |         |   |      |   |         |  
|Net cash used in financing activities                                           |  |                                | (22,198 | ) |      |   | (25,866 | )
|                                                                                |  |                                |         |   |      |   |         |  
|                                                                                |  |                               
|Decrease in cash                                                                |  |                                | (135    | ) |      |   | (104    | )
|Cash, beginning of period                                                       |  |                                | 162     |   |      |   | 275     |  
|                                                                                |  |                                |         |   |      |   |         |  
|Cash, end of period                                                             |  | $                              | 27      |   |      | $ | 171     |  
|                                                                                |  |                                |         |   |      |   |         |  
|                                                                                |  |                               
|Supplemental cash flow disclosure:                                              |  |                                |         |   |      |   |         |  
|Cash paid for interest                                                          |  | $                              | 1,701   |   |      | $ | 3,029   |  
|                                                                                |  |                                |         |   |      |   |         |  

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



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LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY

Notes To Consolidated Financial Statements

September 30, 2010

(Unaudited)

NOTE 1  ORGANIZATION AND NATURE OF BUSINESS

Lease Equity Appreciation Fund I, L.P. (the Fund) is a Delaware limited partnership formed on January 31, 2002 by its General Partner, LEAF Financial Corporation (the General
Partner). The General Partner manages the Fund. The General Partner is a subsidiary of Resource America, Inc. (RAI). RAI is a publicly-traded company (NASDAQ: REXI) that uses industry specific expertise, to evaluate, originate,
service and manage investment opportunities through its commercial finance, real estate and financial fund management segments. Through its offering termination date of August 15, 2004, the Fund raised $17.1 million by selling 171,746 of its
limited partner units. The Fund commenced operations in March 2003.

The Fund is expected to have a nine-year life, consisting
of an offering period of up to two years, a five-year reinvestment period and a subsequent maturity period of two years, during which the Funds leases and secured loans will either mature or be sold. The Funds five-year reinvestment
period has ended and the Fund entered the maturity period in August 2009. In the event the Fund is unable to sell its leases and loans during the maturity period, the Fund expects to continue to return capital to its partners as those leases and
loans mature. Substantially all of the Funds leases and loans mature by the end of 2013. The Fund will terminate on December 31, 2027, unless sooner dissolved or terminated as provided in the Limited Partnership Agreement.

The Fund acquired diversified portfolios of equipment to finance to end users throughout the United States as well as the District of
Columbia and Puerto Rico. The Fund also acquired existing portfolios of equipment subject to existing financings from other equipment finance companies, primarily an affiliate of 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.

As of
September 30, 2010 and December 31, 2009, in addition to its 1% general partnership interest, the General Partner also had invested $0.8 million for a 6% limited partnership interest in the Fund.

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include the
accounts of the Fund and its wholly-owned subsidiary, LEAF Fund I, LLC. All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited financial statements reflect all adjustments that are, in the opinion of management, of a normal and recurring nature and necessary for a fair statement of the Funds
financial position as of September 30, 2010, and the results of its operations and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2010 are not necessarily indicative of
results of the Funds operations for the 2010 fiscal year. The Fund has evaluated subsequent events through the date the financial statements were issued. The financial statements have been prepared pursuant to the rules and regulations of the
U.S. Securities and Exchange Commission (SEC). Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP)
have been condensed or omitted pursuant to those rules and regulations. These interim financial statements should be read in conjunction with the Funds financial statements and notes thereto presented in the Funds Annual Report on Form
10-K for the year ended December 31, 2009, as filed with the SEC on April 1, 2010.

Reclassification

A reclassification has been made to the 2009 consolidated financial statements to conform to the 2010 presentation. In the statement of
operations, renewal income of approximately $5 thousand for the third quarter and $10 thousand for the nine months ended September 30, 2009, that was previously included in Interest on equipment financings has been reclassified to
(Losses) gains on sales of equipment and lease dispositions, net. This corresponding reclassification has also been made in the 2009 statement of cash flows.

Significant Accounting Policies

Investments in Leases and Loans

The Funds investments in leases and loans consist of direct financing leases, operating leases and loans.

Direct Financing Leases. 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 consists of the sum of the total future minimum lease
payments receivable plus the estimated unguaranteed residual value of leased equipment, less unearned finance income. Unearned finance income, which is



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recognized as revenue over the term of the financing by the effective interest method, represents the excess of the total future minimum contracted payments plus the estimated unguaranteed
residual value over the cost of the related equipment.

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 Fund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. 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. Upward adjustments to residual values are
not permitted.

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. 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 for the three and nine months ended September 30, 2010, and 2009.

Loans. For term loans, the investment in loans 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 loan payments over the cost of the related equipment. For all other loans, interest income is recorded at the
stated rate on the accrual basis to the extent that such amounts are expected to be collected.

Allowance for Credit
Losses. The Fund evaluates the adequacy of the allowance for credit losses (including investments in leases and loans) based upon, among other factors, managements historical experience on the portfolios it manages, an analysis of
contractual delinquencies, economic conditions and trends and equipment finance portfolio characteristics, adjusted for expected recoveries. In evaluating historic performance, the Fund performs a migration analysis, which estimates the likelihood
that an account progresses through delinquency stages to ultimate charge-off. After an account becomes 180 or more days past due, any remaining balance is fully-reserved less an estimated recovery amount. Generally, the account is then charged-off
and referred to our internal recovery group consisting of a team of credit specialists and collectors. The group utilizes several resources in an attempt to maximize recoveries on charged-off accounts including: 1) initiating litigation against the
end user customer and any personal guarantor, 2) referring the account to an outside law firm or collection agency and/or 3) repossessing and remarketing the equipment through third parties. 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 discontinues the recognition of revenue for leases and loans for which payments are more than 90 days past due. As of
September 30, 2010 and December 31, 2009, the Fund had $2.6 million and $5.8 million, respectively, of leases and loans on non-accrual status. Fees from delinquent payments are recognized when received and are included in other income.

Recent Accounting Standards

Accounting Standard Issued But Not Yet Effective

Disclosure about the Credit Quality of Financing Receivables and the Allowance for Credit Losses In July 2010, the Financial Accounting Standards Board (FASB) issued guidance that will
require SEC filers to provide more information about the credit quality of their financing receivables in the disclosures to financial statements including, but not limited to, significant purchases and sales of financing receivables, aging
information and credit quality indicators. The guidance is effective for the Fund as of December 15, 2010. The Fund does not anticipate that adoption will have a significant effect on its consolidated financial statements.

Newly Adopted Accounting Principles

The Fund adopted the following accounting guidance during the nine months ended September 30, 2010:

Subsequent Events.In February 2010, FASB issued guidance which removes the requirement for an SEC filer to disclose a date through which subsequent events have been evaluated in both issued and
revised financial statements. Revised financial statements include financial statements revised as a result of either a correction of error or retrospective application of U.S. GAAP. This



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guidance was effective upon issuance.The adoption of this guidance did not have a material effect on the Funds consolidated financial statements.

Fair Value Measurements. In January 2010, the FASB issued guidance that requires new disclosures and clarifies some existing
disclosure requirements about fair value measurements. The new pronouncement requires a reporting entity: (1) to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the
reasons for the transfers; and (2) to present separately information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements using significant unobservable inputs. In addition, it clarifies the
requirements of the following existing disclosures: (1) for purposes of reporting fair value measurement for each class of assets and liabilities, a reporting entity needs to use judgment in determining the appropriate classes of assets and
liabilities, and (2) a reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. The new guidance is effective for interim and
annual reporting periods beginning after December 15, 2009. The adoption of this guidance did not have a material effect on the Funds consolidated financial statements.

Transfers of financial assets.In June 2009, the FASB issued guidance for accounting for transfers of financial assets. The
guidance eliminates the concept of a qualifying special-purpose entity, changes the requirements for derecognizing financial assets and requires greater transparency of related disclosures. This statement is effective for fiscal
years beginning after November 15, 2009. Adoption of this statement did not have a material impact on the Funds consolidated financial statements.

NOTE 3  INVESTMENT IN LEASES AND LOANS

The Funds investment in
leases and loans, net, consists of the following (in thousands):



|                            |  |                   |        |   |                  |   |        |  
|--------------------------- |  | ----------------- | ------ | - | ---------------- | - | ------ | -
|                            |  | September 30,2010 |        |   | December 31,2009 |  
|Direct financing leases (a) |  | $                 | 27,702 |   |                  | $ | 48,563 |  
|Loans (b)                   |  |                   | 6,827  |   |                  |   | 11,911 |  
|Operating leases            |  |                   | 476    |   |                  |   | 854    |  
|                            |  |                   |        |   |                  |   |        |  
|                            |  |                   | 35,005 |   |                  |   | 61,328 |  
|Allowance for credit losses |  |                   | (1,890 | ) |                  |   | (4,410 | )
|                            |  |                   |        |   |                  |   |        |  
|                            |  | $                 | 33,115 |   |                  | $ | 56,918 |  
|                            |  |                   |        |   |                  |   |        |  



|(a) | The Funds direct financing leases are for initial lease terms generally ranging from 24 to 84 months.
|--- | ------------------------------------------------------------------------------------------------------

|(b) | The interest rates on loans generally range from 6% to 14%.
|--- | -----------------------------------------------------------

The components of direct financing leases and loans are as follows (in thousands):



|                                               |  |                   |        |   |                  |   |       |        |  |   |        |   |  |   |        |  
|---------------------------------------------- |  | ----------------- | ------ | - | ---------------- | - | ----- | ------ |  | - | ------ | - |  | - | ------ | -
|                                               |  | September 30,2010 |        |   | December 31,2009 |  
|                                               |  | Leases            |        |   | Loans            |   |       | Leases |  |   | Loans  |  
|Total future minimum lease payments            |  | $                 | 29,796 |   |                  | $ | 7,856 |        |  | $ | 53,931 |   |  | $ | 14,165 |  
|Unearned income                                |  |                   | (2,727 | ) |                  |   | (892  | )      |  |   | (6,042 | ) |  |   | (2,056 | )
|Residuals, net of unearned residual income (a) |  |                   | 969    |   |                  |   |      |        |  |   | 1,214  |   |  |   |       |  
|Security deposits                              |  |                   | (336   | ) |                  |   | (137  | )      |  |   | (540   | ) |  |   | (198   | )
|                                               |  |                   |        |   |                  |   |       |        |  |   |        |   |  |   |        |  
|                                               |  | $                 | 27,702 |   |                  | $ | 6,827 |        |  | $ | 48,563 |   |  | $ | 11,911 |  
|                                               |  |                   |        |   |                  |   |       |        |  |   |        |   |  |   |        |  



|(a) | Unguaranteed residuals for direct financing leases represent the estimated amounts recoverable at lease termination from lease extensions or disposition of the
equipment.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Funds investment in operating leases, net, consists of the following (in
thousands):



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|                         |  |                   |       |   |                  |   |       |  
|------------------------ |  | ----------------- | ----- | - | ---------------- | - | ----- | -
|                         |  | September 30,2010 |       |   | December 31,2009 |  
|Equipment                |  | $                 | 1,328 |   |                  | $ | 1,820 |  
|Accumulated depreciation |  |                   | (850  | ) |                  |   | (964  | )
|Security deposits        |  |                   | (2    | ) |                  |   | (2    | )
|                         |  |                   |       |   |                  |   |       |  
|                         |  | $                 | 476   |   |                  | $ | 854   |  
|                         |  |                   |       |   |                  |   |       |  

The following is a summary of the Funds allowance for credit losses (in thousands):



|                                                 |  |                                 |       |   |                                |   |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------ |  | ------------------------------- | ----- | - | ------------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                 |  | Three Months EndedSeptember 30, |       |   | Nine Months EndedSeptember 30, |  
|                                                 |  | 2010                            |       |   | 2009                           |   |        | 2010 |  |   | 2009   |  
|Allowance for credit losses, beginning of period |  | $                               | 1,760 |   |                                | $ | 1,780  |      |  | $ | 4,410  |   |  | $ | 1,750  |  
|Provision for credit losses                      |  |                                 | 721   |   |                                |   | 1,605  |      |  |   | 2,990  |   |  |   | 2,700  |  
|Charge-offs                                      |  |                                 | (737  | ) |                                |   | (1,097 | )    |  |   | (5,745 | ) |  |   | (2,208 | )
|Recoveries                                       |  |                                 | 146   |   |                                |   | 42     |      |  |   | 235    |   |  |   | 88     |  
|                                                 |  |                                 |       |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Allowance for credit losses, end of period       |  | $                               | 1,890 |   |                                | $ | 2,330  |      |  | $ | 1,890  |   |  | $ | 2,330  |  
|                                                 |  |                                 |       |   |                                |   |        |      |  |   |        |   |  |   |        |  

NOTE 4  DEFERRED FINANCING COSTS

As of September 30, 2010 and December 31, 2009, deferred financing costs include $192,000 and $367,000, respectively, of unamortized deferred financing costs which are being amortized over the
estimated useful life of the related debt. Accumulated amortization as of September 30, 2010 and December 31, 2009 was $960,000 and $785,000, respectively. Estimated amortization expense of the Funds existing deferred financing costs
for the years ending September 30 is as follows (in thousands):



|     |  |   |     | 
|---- |  | - | --- | 
|2011 |  | $ | 128 | 
|2012 |  |   | 52  | 
|2013 |  |   | 11  | 
|2014 |  |   | 1   | 
|     |  |   |     | 
|     |  | $ | 192 | 
|     |  |   |     | 

NOTE 5  BANK DEBT

The Fund has a secured term loan agreement with WestLB AG, New York Branch which is collateralized by specific lease receivables and related equipment.

As of September 30, 2010 and December 31, 2009, the outstanding balance under this financing arrangement was $32.8 million and
$54.3 million, respectively. Interest and principal are due as payments are received on the underlying leases and loans pledged as collateral, with any remaining balance due in March, 2014. Interest on this facility is calculated at London Interbank
Offered Rate (LIBOR) plus 0.95% per annum. To mitigate fluctuations in interest rates, the Fund has entered into interest rate swap agreements which fix the interest rate on this facility at 5.3%. The interest rate swap agreements
terminate at various dates ranging from December 2010 to June 2015. Recourse under this facility is limited to the amount of collateral pledged. As of September 30, 2010, $33.2 million of leases and loans and $2.3 million of restricted cash
were pledged as collateral under this facility. As of September 30, 2010, the Fund is in compliance with all covenants under this agreement.



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Debt repayments.Estimated annual principal payments on the Funds aggregate borrowings ending September 30, are as follows (in thousands):



|     |  |   |        | 
|---- |  | - | ------ | 
|2011 |  | $ | 15,842 | 
|2012 |  |   | 9,308  | 
|2013 |  |   | 4,270  | 
|2014 |  |   | 3,362  | 
|     |  |   |        | 
|     |  | $ | 32,782 | 
|     |  |   |        | 

NOTE 6  DERIVATIVE INSTRUMENTS

Since the Funds assets are structured on a fixed-rate basis, and funds borrowed through bank debt are obtained on a floating-rate basis, the Fund is exposed to interest rate risk if rates rise
because it will increase the Funds borrowing costs. In addition, when the Fund acquires 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 designated as cash flow hedges. For derivatives designated and qualifying as cash flow hedges, the effective portion of changes in fair value of those derivatives are recorded in accumulated other comprehensive loss and
are subsequently reclassified into earnings when the hedged forecasted interest payments are recognized in earnings. 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 primarily with counterparties with investment grade ratings. The Fund has agreements with certain of its derivative counterparties that contain a provision where if the Fund
defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Fund could also be declared in default on its derivative obligations. The Fund has agreements
with certain of its derivative counterparties that incorporate the loan covenant provisions of the Funds indebtedness with a lender affiliate of the derivative counterparty. Failure to comply with the loan covenant provisions would result in
the Fund being in default on any derivative instrument obligations covered by the agreement. As of September 30, 2010, the Fund has not posted any collateral related to these agreements. If the Fund had breached any of these provisions at
September 30, 2010, it could be required to settle its obligations under the agreements at their termination value of $1.4 million.

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 forecasted
transactions 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 is expected to provide a high degree of offset against changes in the value of the
hedged forecasted transactions caused by changes in interest rate risk. The Fund measures the effectiveness of each cash flow hedge throughout the hedge period. Any hedge ineffectiveness on cash flow hedging relationships, as defined by U.S. GAAP,
is recognized in the consolidated statements of operations.



11



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The following tables
present the fair value of the Funds derivative financial instruments as well as their classification on the consolidated balance sheets as of September 30, 2010:



|                                              |  |                |        |  |                        |                                      |            |   |        |  
|--------------------------------------------- |  | -------------- | ------ |  | ---------------------- | ------------------------------------ | ---------- | - | ------ | -
|                                              |  | NotionalAmount |        |  | Balance Sheet Location |                                      | Fair Value |  
|Derivatives designated as hedging instruments |  |                |        |  |                        |                                      |           
|Interest rate swap contracts                  |  | $              | 32,877 |  |                        | Derivative liabilities at fair value |            | $ | (1,390 | )



|                                                          |  |                                                                             |      |   |                                                                                                         |   |                                 |   |  |                  |  |   |        |   |  |   |        |  
|--------------------------------------------------------- |  | --------------------------------------------------------------------------- | ---- | - | ------------------------------------------------------------------------------------------------------- | - | ------------------------------- | - |  | ---------------- |  | - | ------ | - |  | - | ------ | -
|Derivatives designated as Cash Flow Hedging
Relationships |  | Amount of Gain or
(Loss)Recognized in OCI on Derivatives(Effective Portion) |      |   | Location and Amount of Gain or (Loss) Reclassified fromAccumulated OCI into 
Income (Effective Portion) |  
|                                                          |  | Three Months EndedSeptember 30,                                             |      |   |                                                                                                         |   | Three Months EndedSeptember 30, |  
|                                                          |  | 2010                                                                        |      |   | 2009                                                                                                    |   |                                 |   |  | 2010             |  |   | 2009   |  
|Interest Rate Products                                    |  | $                                                                           | (197 | ) |                                                                                                         | $ | (461                            | ) |  | Interest expense |  | $ | (357   | ) |  | $ | (658   | )
|                                                          |  | Nine Months EndedSeptember 30,                                              |      |   |                                                                                                         |   | Nine Months EndedSeptember 30,  |  
|                                                          |  | 2010                                                                        |      |   | 2009                                                                                                    |   |                                 |   |  | 2010             |  |   | 2009   |  
|Interest Rate Products                                    |  | $                                                                           | (675 | ) |                                                                                                         | $ | (754                            | ) |  | Interest expense |  | $ | (1,272 | ) |  | $ | (2,177 | )

For the three and nine
months ended September 30, 2010 and 2009, the Fund recognized no gain or loss for hedge ineffectiveness. Assuming market rates remain constant with those at September 30, 2010, $832,000 of the $1.4 million in accumulated other
comprehensive loss is expected to be charged to earnings over the next 12 months.

In the fourth quarter of 2010, the Fund
made an election to discontinue the use of hedge accounting for its derivative financial instruments. While this change may create future volatility in the Funds reported income statement results, it is not expected to have any impact on the
Funds future cash flows.

NOTE 7  FAIR VALUE MEASUREMENT

For cash, receivables and payables, the carrying amounts approximate fair values because of the short term maturity of these instruments.
The carrying value of debt approximates fair market value since interest rates approximate current market rates.

It is not
practicable for the Fund to estimate the fair value of the Funds leases and loans. They are comprised of 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.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market for the
asset or liability at the measurement date (exit price). U.S. GAAP establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The fair
value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). The level in the fair value hierarchy within which the
fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the measurement in its entirety.



| |  |  | Level 1  Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the
measurement date.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 2  Observable inputs other than quoted prices included within Level 1, such as quoted prices for similar assets or liabilities in
active markets or quoted prices for identical assets or liabilities in inactive markets.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3  Unobservable inputs that reflect the entitys own assumptions about the assumptions that market participants would use in
the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Fund employs a hedging strategy to manage exposure to the effects of changes in market interest rates. All derivatives are recorded on the consolidated balance sheets at their fair value as either
assets or liabilities. Because the Funds derivatives are not listed on an exchange, these instruments are valued by a third-party pricing agent using an income approach and utilizing models that use as their primary basis readily observable
market parameters. This valuation process considers factors including interest rate yield curves, time value, credit factors and volatility factors. Although the Fund has determined that the majority of the inputs used to value



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its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current
credit spreads to evaluate the likelihood of default by itself and its counterparties. However, the Fund has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and
has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Fund has determined that its derivative valuations in their entirety are classified in Level 2 of the
fair value hierarchy.

Assets and (liabilities) measured at fair value on a recurring basis included the following (in
thousands):



|                                          |  |                               |   |  |                           |   |        |         |  |   |   |  |  |   |        |  
|----------------------------------------- |  | ----------------------------- | - |  | ------------------------- | - | ------ | ------- |  | - | - |  |  | - | ------ | -
|Liabilities:                              |  | Fair Value Measurements Using |   |  | LiabilitiesAt 
Fair Value |  
|                                          |  | Level 1                       |   |  | Level 2                   |   |        | Level 3 |  |  
|Interest Rate Swaps at September 30, 2010 |  | $                             |  |  |                           | $ | (1,390 | )       |  | $ |  |  |  | $ | (1,390 | )
|Interest Rate Swaps at December 31, 2009  |  | $                             |  |  |                           | $ | (1,987 | )       |  | $ |  |  |  | $ | (1,987 | )

NOTE 8  CERTAIN RELATIONSHIPS AND
TRANSACTIONS WITH AFFILIATES

The Fund relies on the General Partner and its affiliates to manage the Funds
operations and pays the General Partner or its affiliates fees to manage the Fund. The following is a summary of fees and costs of services and materials charged by the General Partner or its affiliates (in thousands):



|                          |  |                                 |     |  |                                |   |      |      |  |   |      |  |  |   |     | 
|------------------------- |  | ------------------------------- | --- |  | ------------------------------ | - | ---- | ---- |  | - | ---- |  |  | - | --- | 
|                          |  | Three Months EndedSeptember 30, |     |  | Nine Months EndedSeptember 30, |  
|                          |  | 2010                            |     |  | 2009                           |   |      | 2010 |  |   | 2009 | 
|Acquisition fees          |  | $                               |    |  |                                | $ |     |      |  | $ |     |  |  | $ | 77  | 
|Management (credits) fees |  | $                               |    |  |                                | $ | (179 | )    |  | $ |     |  |  | $ | 390 | 
|Administrative expenses   |  | $                               | 143 |  |                                | $ | 244  |      |  | $ | 553  |  |  | $ | 870 | 

Acquisition
Fees. The General Partner is paid a fee for assisting the Fund in acquiring equipment subject to existing equipment leases equal to 2% of the purchase price the Fund pays for the equipment or portfolio of equipment subject to existing equipment
financing.

Administrative Expenses. The General Partner and its affiliates are reimbursed by the Fund for
administrative services reasonably necessary to operate which dont exceed the General Partners cost of those fees or services.

Management Fees. The General Partner is paid a subordinated annual asset management fee equal to 3% or 2% of gross rental payments for operating leases or full payout leases, respectively, or a
competitive fee, whichever is less. During the reinvestment period, management fees are subordinated to the payment of distributions to the Funds limited partners of a cumulative annual return of 8% on their capital contributions, as adjusted by
distributions deemed to be a return of capital. The General Partner waived asset management fees of $193,000 and $555,000 for the three and nine months ended September 30, 2010. It is expected that the General Partner will also waive all future
management fees.

Due to Affiliates. Due to affiliates includes amounts due to the General Partner related to acquiring
and managing portfolios of equipment from its General Partner, management fees and reimbursed expenses.

NOTE 9  COMMITMENTS AND
CONTINGENCIES

The Fund is party to various routine legal proceedings arising in the ordinary course of its business.
Management believes that none of these actions, individually or in the aggregate, will have a material adverse effect on the Funds financial condition or results of operations.



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ITEM 2
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 other documents filed with Securities and Exchange Commission. 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.

The following discussion provides an analysis of our operating results, an overview
of our liquidity and capital resources and other items related to us. The following discussion and analysis should be read in conjunction with (i) the accompanying interim financial statements and related notes and (ii) Our consolidated
financial statements, related notes, and managements discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2009.

As used herein, the terms we, us, or our refer to Lease Equity Appreciation Fund I, L.P. and
Subsidiary.

Business

We are a Delaware limited partnership formed on January 31, 2002 by our General Partner, LEAF Financial Corporation (the General Partner), which manages us. Our General Partner is a
subsidiary of Resource America, Inc. (RAI). RAI is a publicly-traded company (NASDAQ: REXI) that uses industry specific expertise, to evaluate, originate, service and manage investment opportunities through its commercial finance, real
estate and financial fund management segments. Through our offering termination date of August 15, 2004, we raised $17.1 million by selling 171,746 of our limited partner units. We commenced operations in March 2003.

We are expected to have a nine-year life, consisting of an offering period of up to two years, a five year reinvestment period and a
subsequent maturity period of two years, during which our leases and secured loans will either mature or be sold. Our five year reinvestment period has ended and we entered the maturity period in August 2009. In the event we are unable to sell our
remaining leases and secured loans during the maturity period, we expect to continue to return capital to our partners as those leases and loans mature. Substantially all of our leases and loans mature by the end of 2013. We will terminate on
December 31, 2027, unless sooner dissolved or terminated as provided in the Limited Partnership Agreement.

We acquired a
diversified portfolio of new, used or reconditioned equipment that we lease to third-parties. We also acquired portfolios of equipment subject to existing leases from other equipment lessors. Our financings were typically acquired from our General
Partner. In addition, we may have made secured loans to 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. We finance business-essential equipment including, but not limited to, computers, copiers, office furniture, water filtration systems, machinery used in manufacturing and construction, medical equipment and telecommunications
equipment. We focus on the small to mid-size business market, which generally includes businesses with:



| |  | 500 or fewer employees;
|- |  | -----------------------



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



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

Our principal objective is to generate regular cash distributions to our limited partners.

Our leases consist of direct financing leases and operating leases as defined by generally accepted accounting principles in the United States (US 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 cost and related expenses of rental equipment and, therefore, we are
prepared to remarket the equipment in future years. We discontinue the recognition of revenue for leases and loans for which payments are more that 90 days past due. These assets are classified as non-accrual.



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Fund Summary

When we commenced operations in 2003, the United States economy was experiencing strong growth, an abundance of liquidity in the debt
markets and historically low credit losses. It is widely believed that the United States economy over the past few years, has suffered through the worst economic recession in over 75 years. The recession has been severe and its consequences broadly
felt. Many well-known major financial institutions failed and others had to be bailed out. Unemployment soared to generational highs and has remained at such levels. Bank lending was severely reduced and became more expensive. In recent years, banks
became much more reluctant to lend, and when they did, it became more expensive to borrow. If existing loans came up for renewal and were extended, they were written for reduced amounts and at higher interest rates. Also, lenders insisted on
ever-tighter covenants around delinquencies and write-offs that made it more difficult to remain in compliance. In March of 2009, we faced such a renewal negotiation with our lender. Although we were able to convince our lender to leave the interest
rate the same, it would not permit any more borrowings and required that all the excess cash above a 4% distribution to our limited partners be applied to principal - paying down the loan more rapidly and forgoing the last six months of reinvestment
opportunity for us. The recession caused increased delinquencies and losses greater than we have projected, requiring us to repay our lender the amounts borrowed against delinquent leases in addition to anticipated principal pay down.

We negotiated with our lender to prevent them from foreclosing on any collateral, or requiring a fire sale of leases that would have
badly impaired capital. Additionally, our General Partner has deferred payment of fees and reimbursement of expenses totaling approximately $7.9 million from inception through September 30, 2010 in order to preserve our cash. We entered our
maturity phase in August 2009, and are prohibited under the Partnership Agreement from acquiring new leases.

To date, limited
partners have received total distributions ranging from approximately 46% to 60% of their original amount invested, depending upon when the investment was made. Our General Partner is working to maximize the amount that can be distributed to our
limited partners in the future. The July 2010 distribution was made at the 4.0% rate that has been in effect since 2009. However, beginning in August 2010, distributions were lowered to 2.0% in order to pay down our bank loan faster in order to
reduce cash payments for interest as we liquidate the lease and loan portfolio over the next few years.

We continued to be
impacted by market uncertainties in the third quarter of 2010 as further discussed in Finance Receivables and Asset Quality and in Liquidity and Capital Resources.

Economic Overview

For
the first six months of 2010, our lease and loan portfolio performance continued to be negatively impacted by the recession. Our lease and loan customers are typically small and mid-size companies that are especially sensitive to macro-economic
trends. Several trends in particular: unemployment, housing sales and prices, and bankruptcies continued to be problematic in the recent period.



| |  |  | As reported by the U.S. Bureau of Labor Statistics, the national unemployment rate peaked in the second half of 2009 but has continued to remain at a
high level since that time exceeding 9%, and staying above 9.4% for the past fifteen months. High unemployment results in reduced demand for goods and services which leads to decreased revenues for the small business customers in our portfolio
thereby impacting their ability to repay loan or lease obligations.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The National Association of Realtors reports that existing home sales fell 27.2% in July 2010 as compared to June 2010, and the July 2010 sales have
fallen 25.5% from one year earlier in July 2009. The S&P/Case-Shiller Home Price Report released in July 2010 shows that as a result of the decline in house prices caused by the recession, U.S. home prices are still at 2003 levels. The
continuing housing problem, both home sales and home prices, affects the small to mid-size business community in two ways: 1) the lack of new construction has eliminated an important source of business activity for small business; and 2) home equity
that historically has provided credit availability to small business owners has either disappeared or become scarce.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Nationwide, as reported by the Administrative Office of the U.S. courts, business bankruptcies rose 20% in the twelve month period ending June 30,
2010 as compared to the twelve month period ending June 30, 2009. Among those bankruptcies, the most severe Chapter 7 liquidation bankruptcies, increased even faster at 25%. Increased bankruptcies affect our performance in two ways: 1) small
business customers in the portfolio may default due to bankruptcy and 2) good performing small business customers may face reduced revenues due to bankruptcies among their customers thereby impacting their ability to repay loan or lease obligations.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Since the start of the
recession these national economic problems have manifested themselves in our portfolio performance. Beginning in 2008, as the recession took hold of the economy delinquencies began to rise in our portfolio. Delinquencies are a precursor to losses.
However, the timing of losses will trail behind the timing of delinquencies, and the recession related losses are now being felt in our portfolio.

We are seeing delinquency trends in our portfolio that are consistent with delinquency trends reported by industry groups that track lease and loan portfolio performance. The recent delinquency trend in
our portfolio is that delinquency has stabilized, particularly in the early stage delinquency categories. This stabilizing trend is also seen in the Monthly Lease and Finance Index published by the Equipment Lease and Finance Association, and the
Thomson Reuters/PayNet Small Business Lending Index. However, despite these trends, the economy is still unsettled and periodic swings in performance may still be expected.

Finance Receivables and Asset Quality

Information about our portfolio of
leases and loans is as follows (dollars in thousands):



|                                                                              |  |                   |        |   |                  |   |        |  
|----------------------------------------------------------------------------- |  | ----------------- | ------ | - | ---------------- | - | ------ | -
|                                                                              |  | September 30,2010 |        |   | December 31,2009 |  
|Investment in leases and loans, net                                           |  | $                 | 33,115 |   |                  | $ | 56,918 |  
|                                                                              |  |                  
|Number of contracts                                                           |  |                   | 7,100  |   |                  |   | 8,800  |  
|Number of individual end users(a)                                             |  |                   | 6,400  |   |                  |   | 8,000  |  
|Average original equipment cost                                               |  | $                 | 16.1   |   |                  | $ | 19.0   |  
|Average initial term (in months)                                              |  |                   | 57     |   |                  |   | 53     |  
|                                                                              |  |                  
|States accounting for more than 10% of lease and loan portfolio:              |  |                   |        |   |                  |   |        |  
|California                                                                    |  |                   | 10     | % |                  |   | 11     | %
|                                                                              |  |                  
|Types of equipment accounting for more than 10% of lease and loan portfolio:  |  |                   |        |   |                  |   |        |  
|Medical Equipment                                                             |  |                   | 23     | % |                  |   | 21     | %
|Industrial Equipment                                                          |  |                   | 22     | % |                  |   | 22     | %
|Office Equipment                                                              |  |                   | 16     | % |                  |   | 14     | %
|Water Purification                                                            |  |                   | 13     | % |                  |   | 12     | %
|                                                                              |  |                  
|Types of businesses accounting for more than 10% of lease and loan portfolio: |  |                   |        |   |                  |   |        |  
|Services                                                                      |  |                   | 50     | % |                  |   | 49     | %
|Retail Trade                                                                  |  |                   | 11     | % |                  |   | 13     | %
|Manufacturing                                                                 |  |                   | 11     | % |                  |   | 9      | %



|(a) | Located in the 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 4% of our
portfolio based on original cost of the equipment.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Historically, we have primarily utilized debt facilities to
fund the acquisitions of lease portfolios. As of September 30, 2010 and December 31, 2009, our outstanding debt was $32.8 million and $54.3 million, respectively.



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The performance of our
lease and loan portfolio is a measure of our General Partners underwriting and collection standards, skills, policies and procedures and is an indication of asset quality. The table below provides information about our finance receivables
including non-performing assets, which are those assets that are not accruing income due to non-performance or impairment (dollars in thousands):



|                                                                                                    |  |                                                  |        |   |                                             |   |        |        |  |   |         |   |  |  |     |    |  |   |        |  
|--------------------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ------ | - | ------------------------------------------- | - | ------ | ------ |  | - | ------- | - |  |  | --- | -- |  | - | ------ | -
|                                                                                                    |  | As of and for theNine Months Ended
September 30, |        |   | As of and for theYear EndedDecember 31,2009 |  
|                                                                                                    |  |                                                  |        |   |                                             |   |        | Change |  |  
|                                                                                                    |  | 2010                                             |        |   | 2009                                        |   |        | $      |  |   | %       |   | 
|Investment in leases and loans before allowance for credit losses                                   |  | $                                                | 35,005 |   |                                             | $ | 70,827 |        |  | $ | (35,822 | ) |  |  | (51 | )% |  | $ | 61,328 |  
|Less: allowance for credit losses                                                                   |  |                                                  | 1,890  |   |                                             |   | 2,330  |        |  |   | (440    | ) |  |  | (19 | )% |  |   | 4,410  |  
|                                                                                                    |  |                                                  |        |   |                                             |   |        |        |  |   |         |   |  |  |     |    |  |   |        |  
|Investment in leases and loans, net                                                                 |  | $                                                | 33,115 |   |                                             | $ | 68,497 |        |  | $ | (35,382 | ) |  |  | (52 | )% |  |   | 56,918 |  
|                                                                                                    |  |                                                  |        |   |                                             |   |        |        |  |   |         |   |  |  |     |    |  |   |        |  
|                                                                                                    |  |                                                  |        |   |                                            
|Weighted average investment in direct financing leases and loans before allowance for credit losses |  | $                                                | 47,877 |   |                                             | $ | 84,162 |        |  | $ | (36,285 | ) |  |  | (43 | )% |  | $ | 79,469 |  
|Non-performing assets                                                                               |  | $                                                | 2,584  |   |                                             | $ | 5,488  |        |  | $ | (2,904  | ) |  |  | (53 | )% |  | $ | 5,810  |  
|Charge-offs, net of recoveries                                                                      |  | $                                                | 5,510  |   |                                             | $ | 2,120  |        |  | $ | 3,390   |   |  |  | 160 | %  |  | $ | 3,072  |  
|As a percentage of finance receivables:                                                             |  |                                                  |        |   |                                             |   |        |        |  |   |         |   |  |  |     |    |  |   |        |  
|Allowance for credit losses                                                                         |  |                                                  | 5.40   | % |                                             |   | 3.29   | %      |  |   |         |   |  |  |     |    |  |   | 7.19   | %
|Non-performing assets                                                                               |  |                                                  | 7.38   | % |                                             |   | 7.75   | %      |  |   |         |   |  |  |     |    |  |   | 9.47   | %
|As a percentage of weighted average finance receivables:                                            |  |                                                  |        |   |                                             |   |        |        |  |   |         |   |  |  |     |    |  |   |        |  
|Charge-offs, net of recoveries                                                                      |  |                                                  | 11.51  | % |                                             |   | 2.52   | %      |  |   |         |   |  |  |     |    |  |   | 3.87   | %

We manage our credit risk
by adhering to strict credit policies and procedures, and closely monitoring our receivables. Our General Partner, the servicer of our leases and loans, responded to the current economic recession in part, by implementing early intervention
techniques in collection procedures.

Our allowance for credit losses is our estimate of losses inherent in our commercial
finance receivables. The allowance is based on factors which include our historical loss experience on equipment finance portfolios we manage, an analysis of contractual delinquencies, current economic conditions and trends and equipment finance
portfolio characteristics, adjusted for recoveries. In evaluating historic performance, we perform a migration analysis, which estimates the likelihood that an account progresses through delinquency stages to ultimate charge-off. Our 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. Substantially all of our assets are collateral for our debt and, therefore, significantly greater
delinquencies than anticipated will have an adverse impact on our cash flow and distributions to our partners.

The equipment
we finance includes computers, copiers, office furniture, water filtration systems, machinery used in manufacturing and construction, medical equipment and telecommunications equipment. We focus on financing equipment used by small to mid-sized
businesses. The current economic recession in the US has made it more difficult for some of our customers to make payments on their financings with us on a timely basis, which has adversely affected our operations in the form of higher
delinquencies. These higher delinquencies may continue until the US economy recovers. The increase in delinquencies, as well as the current economic trends, has caused us to conclude that a greater allowance for credit loss is necessary. Our
non-performing assets as a percentage of finance receivables has declined slightly from 7.75% at September 30, 2009 to 7.38% at September 30, 2010, primarily due to the increase in charge-offs in the current year.

Our net charge-offs increased in the three and nine months ended September 30, 2010 compared to the three and nine month ended
September 30, 2009 due to the aging of our portfolio of leases and loans as well as the current economic recession as discussed above.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The
preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and cost and expenses, and related disclosure of contingent assets and liabilities. On an
on-going basis, we evaluate our estimates, including the allowance for credit losses, the estimated unguaranteed residual values of leased equipment, impairment of long-lived assets and the fair value and effectiveness of interest rate swaps. We
base our estimates on historical experience, current economic conditions and on various other assumptions that we believe reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.



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For a complete
discussion of our critical accounting policies and estimates, see our annual report on Form 10-K for fiscal 2009 under Managements Discussion and Analysis of Financial Condition and Results of Operations  Critical Accounting
Policies and Estimates. There have been no material changes to those policies through September 30, 2010.

Results of Operations

Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009



|                                                                 |  |      |       |   |                     |   |        |   |  |   |        |   |  |  |      |   
|---------------------------------------------------------------- |  | ---- | ----- | - | ------------------- | - | ------ | - |  | - | ------ | - |  |  | ---- | --
|                                                                 |  |      |       |   | Increase (Decrease) |  
|                                                                 |  | 2010 |       |   | 2009                |   |        | $ |  |   | %      |  
|Revenues:                                                        |  |      |       |   |                     |   |        |   |  |   |        |   |  |  |      |   
|Interest on equipment financings                                 |  | $    | 813   |   |                     | $ | 1,526  |   |  | $ | (713   | ) |  |  | (47  | )%
|Rental income                                                    |  |      | 91    |   |                     |   | 130    |   |  |   | (39    | ) |  |  | (30  | )%
|(Losses) gains on sales of equipment and lease dispositions, net |  |      | (81   | ) |                     |   | 64     |   |  |   | (145   | ) |  |  | (227 | )%
|Other                                                            |  |      | 112   |   |                     |   | 183    |   |  |   | (71    | ) |  |  | (39  | )%
|                                                                 |  |      |       |   |                     |   |        |   |  |   |        |   |  |  |      |   
|                                                                 |  |      | 935   |   |                     |   | 1,903  |   |  |   | (968   | ) |  |  | (51  | )%
|                                                                 |  |      |       |   |                     |   |        |   |  |   |        |   |  |  |      |   
|                                                                 |  |      |       |  
|Expenses:                                                        |  |      |       |   |                     |   |        |   |  |   |        |   |  |  |      |   
|Interest expense                                                 |  |      | 523   |   |                     |   | 962    |   |  |   | (439   | ) |  |  | (46  | )%
|Depreciation on operating leases                                 |  |      | 75    |   |                     |   | 105    |   |  |   | (30    | ) |  |  | (29  | )%
|Provision for credit losses                                      |  |      | 721   |   |                     |   | 1,605  |   |  |   | (884   | ) |  |  | (55  | )%
|General and administrative expenses                              |  |      | 175   |   |                     |   | 341    |   |  |   | (166   | ) |  |  | (49  | )%
|Administrative expenses reimbursed to affiliate                  |  |      | 143   |   |                     |   | 244    |   |  |   | (101   | ) |  |  | (41  | )%
|Management fees to affiliate                                     |  |      |      |   |                     |   | (179   | ) |  |   | 179    |   |  |  |      |   
|                                                                 |  |      |       |   |                     |   |        |   |  |   |        |   |  |  |      |   
|                                                                 |  |      | 1,637 |   |                     |   | 3,078  |   |  |   | (1,441 | ) |  |  | (47  | )%
|                                                                 |  |      |       |   |                     |   |        |   |  |   |        |   |  |  |      |   
|Net loss                                                         |  | $    | (702  | ) |                     | $ | (1,175 | ) |  | $ | 473    |   |  |  |      |   
|                                                                 |  |      |       |   |                     |   |        |   |  |   |        |   |  |  |      |   
|Net loss allocated to limited partners                           |  | $    | (695  | ) |                     | $ | (1,163 | ) |  | $ | 468    |   |  |  |      |   
|                                                                 |  |      |       |   |                     |   |        |   |  |   |        |   |  |  |      |   

The decrease in total revenues was primarily attributable to the following:



| |  |  | A significant decrease in our weighted average net investment in financing assets to $39.9 million for the three months ended September 30, 2010
as compared to $75.3 million for the three months ended September 30, 2009, a decrease of $35.4 million or 47% as we entered our maturity phase in August 2009. We have not acquired additional leases and loans since the first quarter of 2009.
Therefore, our revenues are expected to continue to decline as our weighted average net investment in financing assets declines.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The decrease in total expenses was primarily attributable to the following:



| |  |  | A decrease in interest expense primarily due to the decrease in our bank debt caused by the ongoing maturities of the portfolio of lease and loans.
Outstanding borrowings were $32.8 million at September 30, 2010 as compared to $63.0 million at September 30, 2009. Borrowings for the three months ended September 30, 2010 and 2009 were at an effective interest rate of 5.8% and 5.7%,
respectively. We amended our debt facility effective March 6, 2009, such that it is now a term facility which is contractually repaid over time. As a result, our interest expense is expected to continue to decrease.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Beginning May 1, 2009, the General Partner waived asset management fees and reversed certain management fee accruals recorded previously in 2009.
Approximately $193,000 of management fees were waived for the three months ended September 30, 2010. It is expected that the General Partner will also waive all future management fees.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A significant decrease in our provision for credit losses. We provide for credit losses when losses are likely to occur based on a migration analysis
of past due payments and economic conditions. This decrease is consistent with the decline in the portfolio equipment financed assets.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The net loss per limited partner unit, after the net loss allocated to our General Partner, for the three months ended September 30, 2010 and 2009 was $4.05 and $6.78, respectively, based on a
weighted average number of limited partner units outstanding of 171,696 for both periods.



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##### Table of Contents



Nine Months Ended
September 30, 2010 Compared to Nine Months Ended September 30, 2009



|                                                        |  |      |        |   |                     |   |        |   |  |   |        |   |  |  |      |   
|------------------------------------------------------- |  | ---- | ------ | - | ------------------- | - | ------ | - |  | - | ------ | - |  |  | ---- | --
|                                                        |  |      |        |   | Increase (Decrease) |  
|                                                        |  | 2010 |        |   | 2009                |   |        | $ |  |   | %      |  
|Revenues:                                               |  |      |        |   |                     |   |        |   |  |   |        |   |  |  |      |   
|Interest on equipment financings                        |  | $    | 2,770  |   |                     | $ | 5,372  |   |  | $ | (2,602 | ) |  |  | (48  | )%
|Rental income                                           |  |      | 276    |   |                     |   | 401    |   |  |   | (125   | ) |  |  | (31  | )%
|Gains on sales of equipment and lease dispositions, net |  |      | 196    |   |                     |   | 359    |   |  |   | (163   | ) |  |  | (45  | )%
|Other                                                   |  |      | 602    |   |                     |   | 517    |   |  |   | 85     |   |  |  | 16   | % 
|                                                        |  |      |        |   |                     |   |        |   |  |   |        |   |  |  |      |   
|                                                        |  |      | 3,844  |   |                     |   | 6,649  |   |  |   | (2,805 | ) |  |  | (42  | )%
|                                                        |  |      |        |   |                     |   |        |   |  |   |        |   |  |  |      |   
|                                                        |  |      |        |  
|Expenses:                                               |  |      |        |   |                     |   |        |   |  |   |        |   |  |  |      |   
|Interest expense                                        |  |      | 1,844  |   |                     |   | 3,236  |   |  |   | (1,392 | ) |  |  | (43  | )%
|Depreciation on operating leases                        |  |      | 223    |   |                     |   | 322    |   |  |   | (99    | ) |  |  | (31  | )%
|Provision for credit losses                             |  |      | 2,990  |   |                     |   | 2,700  |   |  |   | 290    |   |  |  | 11   | % 
|General and administrative expenses                     |  |      | 585    |   |                     |   | 1,108  |   |  |   | (523   | ) |  |  | (47  | )%
|Administrative expenses reimbursed to affiliate         |  |      | 553    |   |                     |   | 870    |   |  |   | (317   | ) |  |  | (36  | )%
|Management fees to affiliate                            |  |      |       |   |                     |   | 390    |   |  |   | (390   | ) |  |  | (100 | )%
|                                                        |  |      |        |   |                     |   |        |   |  |   |        |   |  |  |      |   
|                                                        |  |      | 6,195  |   |                     |   | 8,626  |   |  |   | (2,431 | ) |  |  | (28  | )%
|                                                        |  |      |        |   |                     |   |        |   |  |   |        |   |  |  |      |   
|Net loss                                                |  | $    | (2,351 | ) |                     | $ | (1,977 | ) |  | $ | (374   | ) |  |  |      |   
|                                                        |  |      |        |   |                     |   |        |   |  |   |        |   |  |  |      |   
|Net loss allocated to limited partners                  |  | $    | (2,327 | ) |                     | $ | (1,957 | ) |  | $ | (370   | ) |  |  |      |   
|                                                        |  |      |        |   |                     |   |        |   |  |   |        |   |  |  |      |   

The decrease in total revenues was primarily attributable to the following:



| |  |  | A significant decrease in our weighted average net investment in financing assets to $47.9 million for the nine months ended September 30, 2010 as
compared to $ 84.2 million for the nine months ended September 30, 2009, a decrease of $36.3 million or 43% as we entered our maturity phase in August 2009. We have not acquired additional leases and loans since the first quarter of 2009.
Therefore, our revenues are expected to continue to decline as our weighted average net investment in financing assets declines.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A decrease in gains on sales of equipment and lease dispositions. Gains and losses on sales of equipment may vary significantly from period to period.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

The decrease in total expenses was primarily attributable to the following:



| |  |  | A decrease in interest expense primarily due to the decrease in our bank debt caused by the ongoing maturities of the portfolio of lease and loans.
Outstanding borrowings were $32.8 million at September 30, 2010 as compared to $63.0 million at September 30, 2009. Borrowings for the nine months ended September 30, 2010 and 2009 were at an effective interest rate of 5.7% and 5.5%,
respectively. We amended our debt facility effective March 6, 2009, such that it is now a term facility which is contractually repaid over time. As a result, our interest expense is expected to continue to decrease.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A decrease in management fees to affiliate attributable to the decrease in our portfolio of equipment financing assets, since management fees are paid
based on lease payments received. Beginning May 1, 2009, the General Partner waived asset management fees. Approximately $555,000 of management fees were waived for the nine months ended September 30, 2010. It is expected that the General
Partner will also waive all future management fees.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

These decreases in expenses were partially offset by
the following:



| |  |  | An increase in our provision for credit losses. We provide for credit losses when losses are likely to occur based on a migration analysis of past due
payments and economic conditions. Our provision for credit losses has increased due to the impact of the economic recession in the United States on our customers ability to make payments on their leases and loans.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The net loss per limited partner unit, after the net loss allocated to our General Partner, for the nine months ended September 30,
2010 and 2009 was $13.56 and $11.40, respectively, based on a weighted average number of limited partner units outstanding of 171,696 for both periods.



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##### Table of Contents



Liquidity and Capital Resources

General

Our major source of liquidity is excess cash derived from the collection of lease payments, after payment of debt principal and interest
on debt. Our other cash requirements, in addition to debt service, are for normal operating expenses and distributions to partners. We plan to fund our other cash requirements for operating expenses and distributions to partners, from cash remaining
after payments for debt service.

As noted previously, we entered the maturity phase in August 2009. Accordingly, we will not
be purchasing any new leases or loans. We have not made any purchases of leases or loans since the first quarter of 2009. As more fully discussed below, in the first quarter of 2009, we renegotiated our revolving debt facility into a term facility
that will be repaid as payments are received on the correlating portfolio of leases and loans with any remaining balance due March 14, 2014. In summary, in return for agreeing to a term loan that accelerates the repayment of the loan, the
lender agreed to remove all financial covenants from the loan agreement. The remaining covenants are non-financial in nature.

We believe that our future net cash inflows can be estimated as the total scheduled future payments to be received from leases and loans
less our debt service payments. At September 30, 2010, the total future minimum lease payments scheduled to be received was $37.7 million which excludes the $1.9 million allowance for credit losses. The outstanding principal balance owed on our
debt facility was $32.8 million. We believe that future net cash inflows will be sufficient and borrowing from the General Partner will not be necessary to either finance operations or meet debt service payments. The following table sets forth our
sources and uses of cash for the periods indicated (in thousands):



|                                          |  |                                |         |   |      |   |         |  
|----------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                          |  | Nine Months EndedSeptember 30, |        
|                                          |  | 2010                           |         |   | 2009 |  
|Net cash provided by operating activities |  | $                              | 1,277   |   |      | $ | 1,090   |  
|Net cash provided by investing activities |  |                                | 20,786  |   |      |   | 24,672  |  
|Net cash used in financing activities     |  |                                | (22,198 | ) |      |   | (25,866 | )
|                                          |  |                                |         |   |      |   |         |  
|Decrease in cash                          |  | $                              | (135    | ) |      | $ | (104    | )
|                                          |  |                                |         |   |      |   |         |  

Cash decreased by $135,000 primarily due to a debt repayment of $21.6 million and distributions to our
partners of $459,000, offset by net proceeds from leases and loans of $20.8 million. As a result of increased delinquencies, the amount of borrowing availability against our leases and loans was eliminated, resulting in a net debt repayment in the
first nine months of 2010.

As of September 30, 2010, $32.8 million was outstanding under our secured term loan agreement
with WestLB. No further borrowings are available under the secured term loan agreement. This facility is secured by the pledging of eligible leases and loans. Recourse under this facility is limited to the amount of collateral pledged. As of
September 30, 2010, $33.2 million of leases and loans and $2.3 million of restricted cash were pledged as collateral under this facility. Interest on this facility is calculated at LIBOR plus 0.95% per annum. Interest rate swap agreements
fix the interest rate on this facility at 5.3%. Interest and principal are due as payments are received on the underlying leases and loans pledged as collateral, with any remaining balance due in March 2014. As of September 30, 2010, we were in
compliance with all covenants contained in this agreement.

Partners distributions paid during the nine months ended
September 30, 2010 and 2009 were $459,000 and $866,000, respectively. In April 2009, and again in August of 2010, the limited partners monthly distribution were reduced to 4% and 2%, respectively, per annum of invested capital. Cumulative
partner distributions paid from our inception to September 30, 2010 were approximately $9.0 million.

Future cash
distributions are dependent on our performance and are impacted by a number of factors which include lease and loan defaults by our customers and prevailing economic conditions. Due to the prolonged economic recession, we continue to see higher than
expected lease and loan defaults resulting in poorer fund performance than projected.

The General Partner waived management
fees beginning May 1, 2009. Accordingly, we did not record any management fee expense for the nine months ended September 30, 2010. It is expected that the General Partner will also waive all future management fees. The cash savings on
management fees and distributions is expected to be used to pay down our liabilities.

As discussed above, our liquidity has
been and may continue to be adversely affected by higher than expected equipment lease defaults, which result in a loss of anticipated revenues. These losses affect our ability to make distributions to our partners and, if the level of defaults is
sufficiently large, result in our inability to fully recover our investment in the underlying equipment. In evaluating our allowance for losses on uncollectible leases, we consider our contractual delinquencies, economic conditions and trends, lease
portfolio characteristics and our General Partners managements prior experience with similar lease assets. At September 30, 2010, our credit evaluation indicated a need for an allowance for credit losses of $1.9 million. As our
lease portfolio ages, and if the economy in the United States deteriorates even further or the recession continues for a substantial period of time, we anticipate the need to increase our allowance for credit losses.



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##### Table of Contents



ITEM 3
 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of losses arising from changes
in values of financial instruments. We are exposed to market risks associated with changes in interest rates and our earnings may fluctuate with changes in interest rates. The lease assets we originate are almost entirely fixed-rate. Accordingly, we
seek to finance these assets with fixed interest rate debt. At September 30, 2010, our outstanding debt totaled $32.8 million of variable rate debt. To mitigate interest rate risk on the variable rate debt, we employ a hedging strategy using
derivative financial instruments such as interest rate swaps, which fixes the interest rates at 5.3% for the WestLB debt facility. At September 30, 2010, the notional amounts of the 39 interest rate swaps were $32.9 million. The interest rate
swap agreements terminate on various dates ranging from December 2010 to June 2015 which generally coincide with the maturity period of our portfolio of lease and loans.

The following sensitivity analysis table shows, at September 30, 2010, the estimated impact on the fair value of our interest rate-sensitive investments and liabilities of changes in interest rates,
assuming rates instantaneously fall 100 basis points or rise 100 basis points (dollars in thousands):



|                                  |  |                                    |        |   |           |   |        |                                    |  |   |        |   
|--------------------------------- |  | ---------------------------------- | ------ | - | --------- | - | ------ | ---------------------------------- |  | - | ------ | --
|                                  |  | Interest ratesfall 100 basispoints |        |   | Unchanged |   |        | Interest ratesrise 100 basispoints | 
|Hedging instruments               |  |                                    |        |   |           |   |        |                                    |  |   |        |   
|Fair value                        |  | $                                  | (1,679 | ) |           | $ | (1,390 | )                                  |  | $ | (1,100 | ) 
|Change in fair value              |  | $                                  | (289   | ) |           |   |       |                                    |  | $ | 290    |   
|Change as a percent of fair value |  |                                    | 21     | % |           |   |       |                                    |  |   | (21    | )%

It is important to note
that the impact of changing interest rates on fair value can change significantly when interest rates change beyond 100 basis points from current levels. Therefore, the volatility in the fair value of our assets could increase significantly when
interest rates change beyond 100 basis points from current levels. In addition, other factors impact the fair value of our interest rate-sensitive investments and hedging instruments, such as the shape of the yield curve, market expectations as to
future interest rate changes and other market conditions. Accordingly, in the event of changes in actual interest rates, the change in the fair value of our assets would likely differ from that shown above and such difference might be material and
adverse to our partners.

ITEM 4  CONTROLS AND PROCEDURES

Disclosure Controls

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, or the Exchange Act, is recorded, processed, summarized
and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and our 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 discussed above.

Changes in Internal Control over
Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the
three months ended September 30, 2010 that has materially affected, or is reasonable likely to materially affect, our internal control over financial reporting.



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PART II.
OTHER INFORMATION

ITEM 6  EXHIBITS



|           |  |                                                                                                                                                                                                                                     
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description                                                                                                                                                                                                                         
|3.1        |  | 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)                                                                                                                                                           
|           | 
|10.1       |  | Origination and Servicing Agreement among LEAF Financial Corporation, Lease Equity Appreciation Fund I, L.P. and LEAF Funding, Inc., dated April 4, 2003 (4)                                                                        
|           | 
|10.2       |  | Secured Loan Agreement dated as of December 31, 2004 among LEAF Fund I, LLC, LEAF Funding, Inc., Lease Equity Appreciation Fund I, L.P., LEAF Financial Corporation, U.S. Bank
National Association, and WestLB, New York Branch (3)
|           | 
|10.3       |  | First Amendment to WestLB AG, New York Branch, Secured Loan Agreement (6)                                                                                                                                                           
|           | 
|10.4       |  | Third Amendment to WestLB AG , New York Branch, Secured Loan Agreement (7)                                                                                                                                                          
|           | 
|10.5       |  | Fourth Amendment to WestLB AG, New York Branch, Secured Loan Agreement (5)                                                                                                                                                          
|           | 
|10.6       |  | Fifth Amendment to WestLB AG, New York Branch, Secured Loan Agreement (8)                                                                                                                                                           
|           | 
|10.7       |  | Seventh Amendment WestLB AG, New York Branch, Secured Loan Agreement (9)                                                                                                                                                            
|           | 
|10.8       |  | Eighth Amendment to WestLB AG, New York Branch, Secured Loan Agreement (10)                                                                                                                                                         
|           | 
|31.1       |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                  
|           | 
|31.2       |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                  
|           | 
|32.1       |  | Certification of Chief Executive Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                   
|           | 
|32.2       |  | Certification of Chief Financial Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                   



|(1) | Filed previously as Appendix A to our Post-Effective Amendment No. 3 to our Registration Statement on Form S-1, filed on January 26, 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.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Filed previously as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2004 and by this reference incorporated herein.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Filed previously on Form 8-K, filed on September 19, 2003 and by this reference incorporated herein.
|--- | ----------------------------------------------------------------------------------------------------

|(5) | File previously as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 and by this reference incorporated herein.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Filed previously as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2005 and by this reference incorporated herein.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------

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

|(8) | Filed previously as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2007 and by this reference incorporated herein.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Filed previously as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 and by this reference incorporated herein.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | Filed previously as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2008 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 I, L.P. |  |                                     
|                  |  | Delaware Limited Partnership           |  |                                     
|                  |  | By:                                    |  | LEAF Financial Corporation           |  | 
|                  |  |                                        | 
|November 15, 2010 |  | By:                                    |  | /s/ CRIT S. DEMENT                   |  | 
|                  |  |                                        |  | CRIT S. DEMENT                       |  | 
|                  |  |                                        |  | Chairman and Chief Executive Officer |  | 
|                  |  |                                        | 
|November 15, 2010 |  | By:                                    |  | /s/ ROBERT K. MOSKOVITZ              |  | 
|                  |  |                                        |  | ROBERT K. MOSKOVITZ                  |  | 
|                  |  |                                        |  | Chief Financial Officer              |  | 



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