Filed Pursuant to Rule 424(b)(4)
Registration No. 333-137734

LEAF EQUIPMENT LEASING INCOME FUND III, L.P.

Units of Limited Partner Interests at $100.00 per Unit

Minimum Investment – 50 Units ($5,000)

We are LEAF Equipment Leasing Income Fund III, L.P., a Delaware limited partnership. Our general partner is LEAF Asset Management, LLC. We are offering a minimum of 20,000 units ($2 million), and a maximum of 1,200,000 units ($120 million). We will acquire a diversified portfolio of equipment to lease to end users. We will also acquire portfolios of equipment subject to existing leases from other third-party equipment lessors. We expect that approximately 80% of the proceeds of this offering will be available for investment, after deducting all front-end fees and expenses, reserves and funds provided by any financing we obtain. Our principal objective is to generate regular cash distributions to you and our other investors. We cannot assure you, however, that we will meet our objective. We anticipate that during our initial years of operation our distributions will be substantially tax-deferred due primarily to depreciation deductions on a portion of our equipment and operating losses.

This investment involves a high degree of risk. You should purchase these securities only if you can afford a complete loss of your investment. You should read “Risk Factors,” beginning on page 9 of this prospectus, for a discussion of factors you should consider before buying our units. Among the most prominent of these risks are the following:

• A substantial portion, and possibly all, of the cash distributions you receive from us will be a return of capital.

• You must rely on our general partner to manage us.

• We have not specifically identified our investments. As a result, you cannot evaluate the risks of, or potential returns from, any of our investments.

• Our performance will be subject to the risk of lease and secured loans defaults.

• Our success will depend in part on our ability to realize residual value from a portion of our equipment once the leases on that equipment terminate.

• We will borrow to buy equipment to increase the size of our portfolio. This increases our risk of loss if our revenues are insufficient to pay our debt service and other expenses.

• Our general partner will receive substantial compensation from us, which will reduce distributions to you.

• There is no readily available public market for your units and your units will be subject to substantial transfer restrictions. If you hope to sell your units, the price you receive will likely be at a substantial discount to the price you paid.

• You will have very limited voting rights.

• We will engage in transactions with affiliates.

	Per Unit		Minimum		Maximum
Public Offering Price (1)	$	100.00	$	2,000,000	$	120,000,000
Dealer-manager fee, sales commissions, accountable reimbursements for permissible non-cash compensation, and accountable due diligence reimbursements	$	10.50	$	210,000	$	12,600,000
Proceeds, before expenses, to us	$	89.50	$	1,790,000	$	107,400,000

(1) There is a reduced price for units purchased under our distribution investment plan as discussed in the “How to Subscribe” section of this prospectus.

Our general partner, its officers, directors and affiliates, investors who buy units through the officers and directors of our general partner, registered investment advisors and their clients, and the dealer-manager, selling dealers and their registered representatives and principals, may purchase units at a price reduced by the sales commissions, which will not be paid for those sales. Our general partner and its affiliates currently intend to acquire not less than 10,000 units ($1 million), and may purchase up to approximately 5% of the total units sold, if greater. In addition, our general partner will receive a 1% interest in all of our income, losses and cash distributions in return for a $1,000 capital contribution, instead of paying the public offering price set forth in the table above, which will further dilute your investment in us. Our general partner anticipates that it will be our single largest investor, although the total subscriptions of you and the other investors, as a group, will be greater.

The units will be offered on a “best efforts” “minimum-maximum” basis. This means the broker/dealers must sell at least 20,000 units and receive subscription proceeds of at least $2 million in order for this offering to close, and they must use only their best efforts to sell our remaining units.

Our subscription proceeds will be held in an interest bearing escrow account until $2 million has been received. This offering will not extend beyond February 6, 2009. If the minimum subscription proceeds are not received by February 6, 2008, then your subscription will be promptly returned to you from the escrow account with interest earned, if any, and without deduction for any fees.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

Prospectus dated February 7, 2007

Chadwick Securities, Inc. – Dealer-Manager

THE USE OF FORECASTS IN THIS OFFERING IS PROHIBITED. ANY REPRESENTATIONS TO THE CONTRARY AND ANY PREDICTIONS, WRITTEN OR ORAL, AS TO THE AMOUNT OR CERTAINTY OF ANY PRESENT OR FUTURE CASH BENEFIT WHICH MAY FLOW FROM AN INVESTMENT IN THIS PROGRAM IS NOT PERMITTED.

TABLE OF CONTENTS

QUESTIONS AND ANSWERS	iv
SUMMARY OF THE OFFERING	1
LEAF Equipment Leasing Income Fund III, L.P.	1
The Offering	8
RISK FACTORS	10
We May Not Return All of Your Investment or Any Rate of Return on Your Investment	10
Our General Partner Will Manage Us and Our Business and May Make Decisions With Which You Do Not Agree	10
Because We Do Not Know What the Composition of Our Investment Portfolio Will Be, You Cannot Evaluate Our Portfolio At the Time You Invest	10
Higher Than Expected Equipment Lease and Secured Loan Defaults May Result in Losses	10
If We Are Unable to Realize the Residual Value of Our Equipment, We May Incur Losses	11
Using Leverage to Build Our Portfolio Subjects Us to the Risk That Our Revenues May Not Be Sufficient to Cover Our Operating Costs Plus Debt Service and, Consequently, May Result in Losses	11
Cost Reimbursements and Significant Fees We Will Pay to Our General Partner, and Reserves Our General Partner Will Establish, Will Reduce Our Cash Available for Distribution	12
Your Ability to Dispose of Your Investment in Us Will Be Limited	12
You Will Have Very Limited Voting Rights and Ability to Control Our Business	13
Our General Partner May Be Subject to Various Conflicts of Interest Arising Out of Its Relationship to Us	13
Our General Partner’s Investment Committee is Not Independent	13
Our Lack of Operating History Decreases Your Ability to Evaluate Your Investment	13
Our General Partner May Have Difficulty Managing Its Growth, Which May Divert Its Resources and Limit Its Ability to Expand Its Operations Successfully	14
If We Do Not Generate Sufficient Cash, We Will Not Be Able To Pay Your 8.5% Annual Distributions or Reinvest a Portion of Our Revenues in Additional Leases During the Reinvestment Period	14
You May Not Receive Cash Distributions From This Investment In An Amount Sufficient to Return Your Investment or Provide a Return on Your Investment, and the Intended Cash Distributions May Be Reduced or Delayed	14

If You Choose to Redeem Your Units You May Receive Much Less Than If You Kept Your Units	14
Our Success Will Be Subject to Risks Inherent in the Equipment Leasing Business, Any of Which May Affect Our Ability to Operate Profitably	15
Interest Rate Changes May Reduce the Value of Our Portfolio and Our Returns On It	15
Spreading the Risks of Equipment Leasing and Secured Loans By Diversifying Our Investments Will Be Reduced If We Raise Only the Minimum Offering Amount	15
Competition From Other Equipment Lessors Could Delay Investment of Our Capital, Reduce the Creditworthiness of Potential Lessees or Borrowers to Which We Have Access, or Decrease Our Yields	16
Poor Economic Conditions May Adversely Affect Our Ability to Build Our Portfolio	16
Resignation or Removal of Our General Partner, or Loss of Key Management Personnel of Our General Partner, Could Adversely Affect Our Ability to Conduct Our Business or Make Distributions	16
Our General Partner’s Operating Systems Could Be Damaged or Disrupted By Events Beyond Its Control, Which Could Interfere With Our Ability to Conduct Our Business and Make Us Less Attractive to Customers as a Source of Equipment Leases and Secured Loans	17
Our Inability to Obtain Insurance For Certain Types of Losses Means We Must Bear the Cost of Any Losses From the Non-Insurable Risks	17
Lack of Independent Counsel or Independent Underwriter May Reduce the Due Diligence Review of Us and Our General Partner	17
You Could Be Liable for Our Obligations if You Participate in the Control of Our Business, and You May Be Required to Return Improperly Received Distributions	17
Your Ability to Begin an Action Against Our General Partner is Limited By Our Partnership Agreement	18
If We Are, or Become, Subject to Usury Laws, It Could Result in Reduced Revenues or, Possibly, Loss on Our Investment	18
Participation With Third-Parties in Joint Ventures May Require Us to Pay Additional Costs or Incur Losses Because of Actions Taken By the Third-Parties	18
Your Interests May Be Diluted	18
You May Be Required to Pay Taxes on Income From Us, Even If You Do Not Receive Commensurate Cash Distributions From Us	18
We Will Not Apply for an Advance Ruling from the IRS as to Any Federal Tax Consequence of an Investment in Us, and if the IRS Classifies Us as a Corporation You Will Lose Tax Benefits	19
We Could Lose Cost Recovery or Depreciation Deductions if the IRS Treats Our Operating Leases as Sales or Financings	19

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TABLE OF CONTENTS

You Need Passive Income in Order to Deduct Any Tax Losses We May Generate	19
You Will Likely Be Subject to State and Local Taxes as a Result of Purchasing Our Units	19
An IRS Audit of Our Annual Federal Information Tax Return May Result in Adjustments to, or An Audit of, Your Personal Income Tax Returns	20
Your Investment in Us May Cause You to Pay Alternative Minimum Tax	20
Your Tax Benefits From an Investment In Us Are Not Contractually Protected	20
Tax-Exempt Organizations Will Have Unrelated Business Taxable Income from an Investment in Us	20
Foreign Investors In Us Will Be Subject to U.S. Tax Withholding and May Be Required to File U.S. Tax Returns	20
Changes in the Law May Reduce the Tax Benefits of Investing in Us	20
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS	20
USE OF PROCEEDS	21
MANAGEMENT COMPENSATION	24
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITIES	30
Conflicts of Interest	30
In General	30
Our General Partner’s Compensation is Not the Result of Arm’s Length Negotiation	31
Actions Taken By Our General Partner Will Affect the Amount of Cash Available for Distribution to Limited Partners and Our General Partner’s Compensation	31
Our General Partner and Its Affiliates Will Engage in Activities That Compete With Us	31
We May Enter into Joint Ventures With Affiliated Programs	32
We Do Not Have any Employees and Rely on the Employees of Our General Partner and Its Affiliates	32

We Must Reimburse Our General Partner and Its Affiliates for Expenses	32
We Have Not Retained Separate Counsel or Other Professionals	33
Lack of Independent Underwriter and Due Diligence Investigation in This Offering	33
Conflicts Regarding Redemption of Units	33
Our General Partner Also is Our Tax Matters Partner	33
Our General Partner and Its Affiliates Will Purchase Units as Investors	33
General Restrictions	34
Fiduciary Duty of Our General Partner	35
MANAGEMENT	36
Our General Partner	36
LEAF Financial Corporation	38
Investment Committee	40
Code of Business Conduct and Ethics	40
Organizational Diagram	40
Compensation	41
Security Ownership of Certain Beneficial Owners	41
Change in Partnership Management	41
Affiliated Company	41
OTHER PROGRAMS MANAGED BY OUR GENERAL PARTNER OR ITS AFFILIATES	41
INVESTMENT OBJECTIVES AND STRATEGIES	43
Principal Investment Objectives	43
Leasing – A Possible Portfolio Diversification Solution	45
Equipment for Lease to End Users	45
Equipment Already Subject to Lease	46
Types of Equipment	46
Market	47
Leasing Strategies	48
Origination – leasing at the right rate and cost	48
Underwriting – obtaining the right kind of business	49
Residual realization – maximizing returns at the end of a lease	50
Collections – assuring portfolio performance	51
Systems automation – controlling costs and providing enhanced service with automated solutions	51
Lease provisions	51
Portfolio acquisition strategies	52
Transaction approval policies	53
Borrowing	54
Origination and Servicing Agreement	55
Changes in Investment Objectives and Policies	55
INCOME, LOSSES AND DISTRIBUTIONS	56
Allocations of Net Income, Net Loss and Distributions Among Investors	56
Timing of Distributions	56
Federal Income Tax Deferral	56
Reinvestment of Our Revenues in Additional Leases and Secured Loans	56
Return of Unused Capital	57
Cash from Reserve Account	57
Election to Reinvest Cash Distributions in Units During the Offering Period	58
FEDERAL INCOME TAX CONSEQUENCES	58
Special Counsel’s Tax Opinion Letter	58
Partnership Classification	60
Flow Through of Taxable Income	61
Treatment of Distributions	61
Basis of Units Limitation on Deductions	62
“At Risk” Limitation on Deductions	62
Passive Activity Limitations on Losses	63
Limitations on Interest Deductions	64
Partnership Income Tax Withholding	64

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TABLE OF CONTENTS

Organization and Offering Expenses and Start-Up Costs	64
Business Expenses	64
Tax Treatment of Leases	65
Depreciation	65
Sale or Other Disposition of Partnership Property	66
Sale or Other Disposition of Units	67
Consequence of No Section 754 Election	68
Tax Treatment of Our Termination	69
Possible IRS Audits	69
Alternative Minimum Tax	69
Profit Motive, IRS Anti-Abuse Rule and Judicial Doctrines Limitations on Deductions	71
Interest and Penalties	72
State and Local Taxation	73
Social Security Benefits and Self-Employment Tax	74
Estate and Gift Taxation	74
Federal Tax Treatment of Foreign Investors	74
Federal Taxation of Employee Benefit Plans and Other Tax-Exempt Organizations	74
Changes in the Law	74
INVESTMENT BY QUALIFIED PLANS	74
Fiduciaries under ERISA	74
Prohibited Transactions	75
Plan Assets	76
Other ERISA Considerations	76
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION	76
SUMMARY OF OUR PARTNERSHIP AGREEMENT	77
General	77
Capital Contributions	77
Powers of our General Partner	77
Liability of Our General Partner	78
Limited Liability of Limited Partners	78
Withdrawal or Removal of Our General Partner	78
Consequences of Withdrawal or Removal of Our General Partner	78
Liability of Withdrawn or Removed General Partner	78
Transfer of Units	79
Redemption of Units	80
Books and Records	80
Meetings of Limited Partners	80
Voting Rights of Limited Partners	80
Amendment by Limited Partners Without Our General Partner’s Concurrence	81
Amendment by Our General Partner Without the Consent of the Limited Partners	81
Events Causing Dissolution	81
Liquidation	82
Roll-Up Transactions	82
REDEMPTION OF UNITS	83
Redemption Price of Units	83
Procedure for Redemption of Units	83
Restrictions on Redemption of Units	83
Consequences of Redemption of Units	84
REPORTS TO LIMITED PARTNERS	84
Tax Reports	84
Annual Reports	84
Quarterly Reports	85
Reports to State Securities Laws Administrators	85
PLAN OF DISTRIBUTION	85
Commissions	85
Indemnification	88
INVESTOR SUITABILITY	88
General	88
Basic Investor Suitability	89
Different Basic Investor Suitability for Residents of Certain States	89
Additional State Requirements	89
Who Should Invest	90
THE OFFERING	90
Terms of this Offering and the Offering Period	90
Escrow Arrangements	91
HOW TO SUBSCRIBE	92
SUPPLEMENTAL SALES LITERATURE	92
LEGAL MATTERS	93
EXPERTS	93
FORECASTS	94
WHERE YOU CAN FIND MORE INFORMATION	94
INDEX TO FINANCIAL STATEMENTS	94

Appendix A	Amended and Restated Agreement of Limited Partnership of LEAF Equipment Leasing Income Fund III, L.P.
Appendix B	Prior Performance Tables
Appendix C	Instructions for Completing the Subscription Agreement in LEAF Equipment Leasing Income Fund III, L.P.

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Questions and Answers

LEAF Equipment Leasing Income Fund III, L.P.

Q-1. What is LEAF Equipment Leasing Income Fund III, L.P. (“LEAF III”)?

A-1. LEAF III is a form of investment opportunity that is commonly referred to as an Equipment Leasing and Finance Fund. These funds provide investors with access to equipment leases and loans to businesses that usually are made only by large financial institutions and banks. These funds may be considered a nontraditional (or alternative) asset class because their assets are not correlated to traditional assets such as stocks and bonds. Thus, these funds may offer benefits associated with diversification and asset allocation. LEAF III also is a limited partnership and its general partner is LEAF Asset Management, LLC, which will manage all aspects of LEAF III and its business.

As LEAF III raises investor funds and borrows money, and after paying fees and expenses and making required distributions to you and the other investors, which are not guaranteed, LEAF III will use its capital to acquire a diversified portfolio of business essential equipment to lease to third-party businesses known as lessees. The general partner believes that borrowing funds will allow LEAF III to increase the size and diversification of its portfolio of equipment leases. The third-party lessee will be obligated under the lease to make non-cancelable interest and rental payments to LEAF III for the use of the equipment during the lease term, although there is a risk that it may fail to do so. For a more detailed discussion of LEAF III’s investment objectives and strategies, please refer to the “INVESTMENT OBJECTIVES AND STRATEGIES” section of the prospectus beginning on page 42.

Q-2. Are there different types of equipment leases?

A-2. Yes. Depending on the type of lease, the lessee may purchase the equipment for a nominal fee at the end of the lease term, or return the equipment to LEAF III. The general partner expects that approximately 65% to 75% of LEAF III’s equipment leases will be full payout leases, which are leases under which the rental payments during the initial term of the lease, on a present value basis, will be sufficient to return an amount equal to LEAF III’s purchase price of the leased equipment, plus an appropriate return, without consideration of the residual value of the leased equipment at the end of the lease. Under the full payout leases, the lessee may purchase the equipment at the end of the lease term for a nominal fee. Thus, LEAF III does not need to sell or re-lease the equipment to recover its invested capital in the equipment under a full payout lease. The general partner further expects that approximately 25% to 35% of LEAF III’s equipment leases will be operating leases, which are leases under which the total rental payments during the original term of the lease, on a net present value basis, are not sufficient to recover the purchase price of the equipment leased under the lease. Under the operating lease, the lessee would be required to return the equipment to LEAF III at the end of the lease term. Thus, LEAF III would need to sell or re-lease the equipment after the end of the operating lease to either the initial lessee or another party in order to recover its full purchase price for the equipment, plus an appropriate return on the lease. See the “INVESTMENT OBJECTIVES AND STRATEGIES – LEASING STRATEGIES – RESIDUAL REALIZATION – MAXIMIZING RETURNS AT THE END OF A LEASE” section of the prospectus beginning on page 49 for a more detailed discussion of LEAF III’s strategies to recover the residual value of equipment it leases to others under operating leases.

LEAF III expects that the cost per unit of the equipment it finances will range from $20,000 to $2 million, and the average per unit cost of its leases will be between $50,000 and $100,000. In addition, up to 30% of LEAF III’s capital available for investment from time to time may be used to provide secured loans to end users to acquire business essential equipment.

For a more detailed discussion of the lease types anticipated in LEAF III, please refer to the “INVESTMENT OBJECTIVES AND STRATEGIES” section of the prospectus beginning on page 42.

Q-3. What are the investor suitability requirements for this investment?

A-3. In general, you must have either a net worth of at least $45,000, plus$45,000 of annual gross income; ora net worth of at least $150,000. Some states impose higher suitability requirements. Also, the minimum investment amount for most investors is $5,000 (50 units). An investment in LEAF III is illiquid, and there is no readily available public market for its units. You should invest in LEAF III only if you are prepared to hold your units for at least nine years, and possibly longer.

For a more detailed discussion of investor suitability requirements in particular states, please refer to the “INVESTOR SUITABILITY” section of the prospectus beginning on page 87.

iv

Q-4. Who is LEAF III’s General Partner, LEAF Asset Management, LLC?

A-4. LEAF Asset Management, LLC is a recently formed limited liability company that will serve as the general partner of investor programs. It is based in Philadelphia, Pennsylvania, and is an indirect wholly-owned subsidiary of Resource America, Inc. (NASDAQ:REXI).

Headquartered in Philadelphia and New York, Resource America was founded over 40 years ago. Resource America is a specialized asset management company with more than $12.1 Billion in assets under management (as of September 30, 2006) through its subsidiaries that operate in three primary business segments: Equipment Finance, Real Estate and Structured Financial Products.

Equipment Leasing and Finance	Real Estate	Structured Financial Products

LEAF Asset Management’s senior management team has substantial experience in the equipment leasing and finance industries. Also, as of September 2006, the general partner’s affiliate, LEAF Financial Corporation, which will act as the servicer of LEAF III’s leases and secured loans, had over $600 million in assets under management through over 14,600 individual leases and loans. LEAF Financial has over two decades of experience in equipment leasing and is one of the largest independent Equipment Finance/Leasing Companies in the U.S. with over $600 million in assets under management based on 2005 net assets as of September 2006. According to the June 2006 issue of the Monitor 100, a publication for the Equipment Leasing industry, LEAF Financial Corporation was ranked #74 based on 2005 net assets with growth of 104.7% from the prior year. In addition, LEAF Financial Corporation serves as the general partner for Lease Equity Appreciation Fund I, L.P. (“LEAF I”) and Lease Equity Appreciation Fund II, L.P. (“LEAF II”), which are prior equipment leasing and finance programs sponsored by it since 2002.

For information concerning certain operating results of LEAF I and LEAF II as of September 30, 2006, see the “Prior Performance Tables” in Appendix B to the prospectus. LEAF I and LEAF II also file periodic reports with the SEC. See the “WHERE YOU CAN FIND MORE INFORMATION” section on page 92 of the prospectus to learn how to obtain copies of those filings from the SEC’s public reference room or its website.

LEAF Asset Management and its affiliates currently intend to acquire a minimum of $1 million of limited partner units in LEAF III, and they may purchase up to approximately 5% of the total units sold in this offering, if greater. The general partner anticipates that it will be the single largest investor in LEAF III, although the total investments of you and the other investors in LEAF III, as a group, will be greater. For a more detailed discussion of the general partner, please refer to the “MANAGEMENT” section of the prospectus beginning on page 35.

Q-5. What are the primary investment objectives of LEAF III?

A-5. LEAF III’s principal objectives are to invest in a diversified portfolio of equipment for lease to end users, or to acquire equipment subject to existing leases, or on a limited basis to finance the purchase of equipment by end users, in order to:

• preserve, protect and return your invested capital;

• generate regular cash distributions to you and the other investors during the period beginning on the initial closing date in this offering and ending five years after the offering period terminates (the “reinvestment period”);

• reinvest revenues in purchases of additional equipment during the reinvestment period, after paying its expenses, establishing appropriate reserves and making specified distributions to you and the other investors; and

• provide additional cash distributions to you after the end of the reinvestment period and until all of its equipment leases and secured loans have either matured and terminated or been sold.

v

For a more detailed discussion of LEAF III’s investment objectives, please refer to the “INVESTMENT OBJECTIVES AND STRATEGIES” section of the prospectus beginning on page 42.

Q-6. What types of equipment will LEAF III finance?

A-6. LEAF III intends to focus on investing in equipment that is essential for businesses to conduct their operations so the end users will be highly motivated to make the required monthly payments in order to keep the equipment in place. However, LEAF III has not specifically identified its investments. As a result, you cannot evaluate the risks of, or potential returns from, any of its investments at the time you invest. The general partner expects that LEAF III will focus on business essential equipment such as:

•  general office equipment, including office machinery, furniture, telephone systems, computer systems and software;

• medical and dental practice equipment for diagnostic and treatment use;

• energy and climate control systems; and

• light industrial and construction equipment, including small lift trucks, small earth moving equipment and tractors, manufacturing, material handling and electronic diagnostic systems.

This equipment will generally be leased by LEAF III to small to mid-sized businesses, which the general partner generally categorizes as businesses with 500 or fewer employees, $1 billion or less in total assets; or $100 million or less in total annual sales. For a more detailed discussion of the types of equipment the fund will finance, please refer to the “INVESTMENT OBJECTIVES AND STRATEGIES – EQUIPMENT FOR LEASE TO END USERS” section of the prospectus beginning on page 44.

Q-7. What can I expect to happen after I invest in LEAF III and when can I expect to receive distributions?

A-7. Once the general partner has accepted your subscription, you will receive a confirmation letter indicating LEAF III’s acceptance of your investment and a copy of your fully executed subscription agreement. Generally, LEAF III intends to begin making monthly cash distributions in the month following the first full month of operations after it sells the minimum number of units in this offering and has its initial closing. Monthly distributions, however, are not guaranteed. Also, in addition to your initial purchase of not less than 50 units in LEAF III, you may elect on your subscription agreement to use any cash distributions that you receive from us during the offering period following your initial investment to purchase additional units in us on the same terms as you purchased your initial units, to the extent units are available for sale, except that there is no minimum number of additional units that must be purchased and the subscription price for the units purchased with your distributions from us will be the “Distribution Investment Unit Price” of $89.50 per unit, which is our gross unit price of $100 per unit reduced by an amount equal to the dealer-manager fee, the sales commission and the selling dealer’s reimbursements for bona fide accountable due diligence expenses, which will not be paid for those sales. In addition, unless you are a resident of Massachusetts, Minnesota or Ohio, if you previously invested in LEAF I or LEAF II, you may elect on your subscription agreement to use any cash distributions you receive from either or both of those programs to purchase our units during the offering period, to the extent units are available for sale, on the same terms as our units are being offered to our other investors, except that there is no minimum number of units that must be purchased and the subscription price for our units purchased with your distributions from LEAF I and/or LEAF II will be the Distribution Investment Unit Price.

During the Fund’s remaining five year reinvestment period following the up to two year offering period, no new investors will be accepted by LEAF III. During this period LEAF III intends to invest its net revenues from its leases and secured loans in additional leases and secured loans after making certain required distributions to you and the other investors.

During LEAF III’s liquidation period (which the general partner anticipates will be approximately two years), LEAF III will not invest its revenues in additional leases or secured loans. Instead, it intends to distribute all of its available net cash to its partners as its leases mature and its remaining equipment is sold.

For a more detailed discussion of LEAF III’s distributions to you, please refer to the “INCOME, LOSSES AND DISTRIBUTIONS” section of the prospectus beginning on page 54.

vi

Q-8. Are there tax benefits and consequences of investing in LEAF III?

A-8. LEAF III, as a limited partnership, will not pay income taxes itself. Instead, all of its taxable income or losses and other tax items will be passed through to you and its other partners. The general partner anticipates that during LEAF III’s early years income taxes on distributions to you and the other investors will be substantially tax-deferred by operating losses and depreciation deductions available from the portion of its equipment leased to third-party end users under its operating leases, but not under its full payout leases or equipment serving as security for its secured loans. Also, the passive activity rules under the Internal Revenue Code will apply to natural persons and most other types of investors in LEAF III. Thus, you should anticipate that your share of LEAF III’s net income or net loss in each of its taxable years generally will be characterized as passive activity income or loss.

Employee benefit plans, such as qualified pension and profit sharing plans, Keogh plans and IRAs, generally are exempt from federal income tax, except that any unrelated business taxable income (“UBTI”) that exceeds $1,000 in any taxable year is subject to an unrelated business income tax. Other charitable and tax exempt organizations are also subject to tax on UBTI. Most of LEAF III’s net income, if any, in a given year will constitute UBTI.

For a more detailed discussion, please refer to the “FEDERAL INCOME TAX CONSEQUENCES” section of the prospectus beginning on page 57. You are urged to seek advice based on your individual circumstances from an independent tax advisor with respect to the tax consequences to you of an investment in LEAF III.

Q-9. Can I sell my units in LEAF III?

A-9. You should invest in LEAF III only if you are prepared to hold your units for at least nine years. Although you may request LEAF III to redeem some or all of your units at any time, LEAF III has no obligation to redeem any of your units and it will not maintain a cash reserve for this purpose. Also, in any calendar year, LEAF III is limited as to the number of units it may redeem so that it will not be treated as a publicly traded partnership for tax purposes. In addition, the redemption price for your units is unlikely to reflect the fair market value of your units at the time of redemption, particularly during the liquidation period. You may realize a greater return by holding on to your units for the duration of LEAF III’s term.

For a more detailed discussion, please refer to the “REDEMPTION OF UNITS” section of the prospectus beginning on page 82.

Q-10. Where can I get more information?

A-10. LEAF III has filed a registration statement on Form S-1 with the SEC regarding the units it offers by this prospectus and it will file periodic reports and other information with the SEC. These documents are available at the SEC’s web site at http://www.sec.gov. After you are an investor in LEAF III, you may contact LEAF Asset Management’s Investor Relations department regarding your account information. The telephone number is 1-866-323-0241. You are urged to thoroughly discuss an investment in LEAF III with your financial, tax and legal advisors.

For a more detailed discussion, please refer to the “WHERE YOU CAN FIND MORE INFORMATION” section of the prospectus beginning on page 92.

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vii

SUMMARY OF THE OFFERING

Because this is only a summary, it does not contain all of the information that may be important to you. You should read this entire prospectus, including the “Risk Factors” section, before deciding to invest in our units. Throughout this prospectus when there is a reference to you it is a reference to you as a potential investor or limited partner in us. Also, certain capitalized terms used throughout this prospectus are defined in Section 1.1 of our partnership agreement, which is attached as Appendix A to this prospectus.

LEAF Equipment Leasing Income Fund III, L.P.

The Fund	We are a Delaware limited partnership that will acquire a diversified portfolio of equipment that we will lease to third-parties. We will also acquire equipment subject to existing leases from other third-party equipment lessors. In addition, we may use up to 30% of our total funds available for investment at any given time to make secured loans to end users to finance their purchase of equipment.
	The equipment we acquire for lease or financing to others generally will be:
	•         new, used or reconditioned;
	•         business-essential equipment, such as computers, general office equipment, medical and dental practice equipment, software, energy and climate control systems, light construction and industrial equipment;
	•         intended for 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; and
	•         have a per unit equipment cost generally between $20,000 and $2 million, with an average per unit cost of $50,000 to $100,000.
	We have not identified any investments as of the date of this prospectus. For a more complete discussion, you should read the “Investment Objectives and Strategies” section of this prospectus. Our principal office in Delaware is at 110 S. Poplar Street, Suite 101, Wilmington, Delaware 19801, and our telephone number is (800) 819-5556.
Management	We will be managed by LEAF Asset Management, LLC, which will also be our general partner. The principal office of LEAF Asset Management is at 1818 Market Street, 9th Floor, Philadelphia, Pennsylvania 19103, and its telephone number is (215) 569-1844. The management team of our general partner and its affiliate, LEAF Financial Corporation (“LEAF Financial”), which will service our leases and secured loans, has substantial experience in the finance and equipment leasing industries. Its members have held senior executive and risk management positions with financial institutions such as CitiCapital Vendor Finance, CoreStates Bank, N.A., Fidelity Leasing, Inc. and Tokai Financial Services, Inc. LEAF Financial’s core executive team, consisting of Crit DeMent, Miles Herman, Nick Capparelli and David English, and other senior staff members, were key members of management teams that built two equipment leasing operations which were acquired by international financial institutions. Most recently they were key members of a management team that, in 1996, began an equipment leasing business focused on the small to mid-sized business market for Resource America, Inc. (“Resource America”), the indirect corporate parent of our general partner, that by June 30, 2000 had grown into an operation that managed over $600 million in equipment leasing assets. This business was sold to European American Bank, a subsidiary of ABN AMRO Bank, N.V., in 2000 for $564.8 million, including the assumption of $431 million in third-party debt. We describe the background and experience of our general partner’s management team in the “Management” section of this prospectus.

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Fund Objectives	Our investment objectives are to:
	•         preserve, protect and return your invested capital;
	•         generate regular cash distributions to you during the period beginning on our initial closing date and ending five years after this offering terminates (the “reinvestment period”);
	•         during the reinvestment period, enter into or purchase equipment leases and secured loans using our net offering proceeds from this offering, and borrow funds to increase the diversification of our portfolio, and reinvesting our revenues after paying our expenses, establishing appropriate reserves and making certain distributions to you and our other investors; and
	•         provide additional cash distributions to you after the end of the reinvestment period and until all of our equipment leases and secured loans have either matured and terminated or been sold (the “liquidation period”).
	We expect to begin making distributions in the month following the first full month of operations after we sell the minimum number of units in this offering and have our initial closing. We also expect that, during the early years of our operations, our distributions will be substantially tax-deferred. We cannot assure you, however, as to the timing or specific level of your distributions, or whether we will achieve any of our objectives.
	•         We describe our investment objectives and strategies in the “Investment Objectives and Strategies” section of this prospectus.
	•         We describe our distribution policies in the “Income, Losses and Distributions” section of this prospectus.
Risk Factors	An investment in our units involves risks, including the following:
	•         A substantial portion, and possibly all, of the cash distributions you receive from us will be a return of capital. The portion of your total distributions that is a return of capital and the portion that is investment income will depend on a number of factors in our operations and cannot be determined until all of our equipment leases and secured loans have either matured and terminated or been sold.
	•         Our general partner will have all management authority over us and our business.
	•         We will not specifically identify the equipment we will acquire or the persons to whom we will lease our equipment until we are ready to invest our funds. As a result, you cannot evaluate the risks of, or potential returns from, any of our investments at the time you invest.

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	•         Higher than expected lease and secured loan defaults may result in our inability to fully recover our investment or expected income from the affected equipment and could reduce our cash distributions to you and our other limited partners.
	•         We anticipate that approximately 25% to 35% of our leases will be operating leases under which the rental payments we receive will return approximately 80% to 85% of the purchase price we paid for the equipment. If we are unable to realize the residual value of approximately 15% to 20% of the purchase price we paid for that equipment after the operating leases terminate, by either re-leasing or selling the equipment, then we may lose any profit or even a portion of our investment in that equipment.
	•         We will borrow to buy equipment for leases and secured loans, which will require a pledge of most or all of our equipment to the creditors. If our returns on these investments are insufficient to pay our debt service and other expenses, typically as a result of defaults on a portion of our leases or secured loans, then we may incur a loss and could lose some or all of the pledged equipment.
	•         Our general partner and its affiliates will receive substantial compensation from us, which will reduce our cash distributions to you and our other limited partners. Some of these fees will be paid without regard to the amount of our cash distributions to you and our other limited partners and regardless of the profitability of our operations.
	•         You will probably not be able to resell your units since they will not be listed on any stock exchange or interdealer quotation system, and there are significant restrictions in our partnership agreement on your ability to transfer your units. We do not intend to assist in the development of any secondary market for, or provide qualified matching services for purchasers and sellers of, our units. Any sale that you may be able to arrange for your units, including the redemption of the units by us, which is at our sole discretion, is likely to be at a substantial discount to your investment, partnership equity per unit or other measures of value.
	•         You and our other limited partners will have very limited voting rights and ability to control our business. Also, your voting power will be diluted because our general partner and its affiliates currently intend to purchase at least 10,000 units ($1 million) and may purchase up to approximately 5% of the total units sold, if greater. However, our general partner and its affiliates may not participate in any vote by you and our other limited partners to remove our general partner as the general partner or regarding any transaction between us and our general partner or any of its affiliates.
	For a more complete discussion of the risks relating to an investment in our units, you should read the “Risk Factors” section of this prospectus.
Leverage	We intend to finance a significant portion of the cost of the equipment we acquire through borrowings, including financings provided through securitizations. A “securitization” means, in general, a transfer of a portion of our equipment leases and secured loans to a special purpose entity that is wholly-owned by us and is bankruptcy-remote, which in turn pledges those assets to a trust that issues debt securities backed by the cash flow from those assets. Our securitizations are accounted for on our balance sheet as debt. We believe that, under current market conditions, on full investment and assuming we sell the maximum number of units, our borrowings will be approximately 80% of the aggregate acquisition costs of our investments. However, we do not have a required minimum or maximum amount of financing, and the amount of financing we actually use may be more or less than 80%. We describe our borrowing and securitization policies in the “Investment Objectives and Strategies – Borrowing” section of this prospectus.

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Income, Losses, and Distributions	Our income, losses and distributions will be allocated 99% to you and our other limited partners and 1% to our general partner. We describe our allocation of income, losses, and distributions in the “Income, Losses and Distributions” section of this prospectus.
Fees of Our General Partner and Its Affiliates	Our general partner and its affiliates will receive substantial fees and other compensation from us, as follows:
	•         Our general partner will have a partnership interest equal to 1% of all of our income, losses and cash distributions.
	•         Our general partner will receive an organization and offering expense allowance of 3% of offering proceeds to reimburse it for expenses incurred in preparing us for registration or qualification under federal and state securities laws and subsequently offering and selling our units. This expense allowance does not cover dealer-manager fees, sales commissions, or reimbursement to the selling dealers of up to a maximum of .5% of our offering proceeds for their bona fide accountable due diligence expenses.
	•         We expect to acquire all of our leases and secured loans through LEAF Funding, Inc. (“LEAF Funding”), an affiliate of our general partner, which will originate and hold the leases and secured loans on a temporary basis in order to facilitate their acquisition by us. The purchase price that we will pay LEAF Funding for those leases and secured loans will not exceed LEAF Funding’s net cost for acquiring and holding the leases and secured loans until we purchase them, which will include the cost to LEAF Funding of origination fees it pays to certain of its employees for their efforts in locating and facilitating the acquisition of the leases and secured loans on our behalf, in amounts typically ranging from 1% to 3% of LEAF Funding’s cost for the leases and secured loans to the extent those fees qualify as initial direct costs of the assets purchased by us under United States general accepted accounting principles (“GAAP”).
	•         Our general partner will receive a fee of 2% of the purchase price we pay to acquire our equipment for leasing or financing to others or to purchase existing equipment leases or secured loans. The purchase price we pay will include the debt we incur or assume in connection with the acquisition. Our general partner will pay its out-of-pocket expenses, related to its acquisition activities on our behalf, but not origination fees incurred by LEAF Funding as described in the above bullet, such as costs of credit reports and travel and communication expenses, and it will not receive any reimbursement from us for those expenses except through this fee.

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•         Our general partner will receive a subordinated asset management fee for managing each type of investment described below equal to the lesser of the amount, for each type of lease or financing arrangement described below, that is reasonable, competitive, and would customarily be paid to non-affiliated third-parties rendering similar services in the same geographic location and for similar types of investments or:

•         for our operating leases managed by third-parties under our general partner’s supervision – 1% of gross rental payments;

•         for our operating leases managed by our general partner or its affiliates – 4% of gross rental payments;

•         for our full payout leases which contain net lease provisions – 2% of gross rental payments; and

•         for our secured loans – 2% of gross principal and interest payments.

During the reinvestment period, the management fees will be subordinated to the payment to you and our other limited partners of a cumulative annual distribution of 8.5% of your capital contributions, as adjusted by certain distributions made to you which are deemed to be a return of capital as described in the “Income, Losses and Distributions – Reinvestment of Our Revenues in Additional Leases and Secured Loans” section of this prospectus.

•         Our general partner will receive a subordinated commission equal to one-half of a competitive commission, up to a maximum of 3% of the contract sales price, for arranging the sale of our equipment after the expiration of a lease. This commission will be subordinated to the return to our limited partners of the purchase price of their units plus a cumulative annual distribution, compounded daily in this case only, of 8.5% of their capital contributions, as adjusted by our distributions to them that are deemed a return of capital.

•         Our general partner will receive a re-leasing fee equal to the lesser of a competitive rate or 2% of gross rental payments derived from any re-lease of equipment, payable as we receive rental payments from the re-lease. We will not, however, pay a re-leasing fee to our general partner if the re-lease is with the original lessee or its affiliates.

•         Our general partner will be reimbursed for operating and administrative expenses incurred by it on our behalf, subject to limitations contained in our partnership agreement and as described in the “Management Compensation” section of this prospectus.

•         Our general partner’s affiliate, Chadwick Securities, Inc. (“Chadwick Securities”), which is the dealer-manager for this offering of our units, will receive a dealer-manager fee of 3% of our offering proceeds for obtaining and managing the group of selling dealers that will sell our units in this offering. From this dealer-manager fee, Chadwick Securities, Inc. may pay the selling dealers an amount of up to 1% of the offering proceeds of each unit sold by them as a marketing fee and use a portion or all of the remainder of the dealer-manager fee for other underwriting expenses, including permissible non-cash compensation, as described in the “Plan of Distribution” section of this prospectus. In addition, Chadwick Securities, Inc. will receive up to .5% of the offering proceeds as reimbursement for the bona fide accountable due diligence expenses incurred by the selling dealers in this offering, all of which it will reallow to the selling dealers. Chadwick Securities, Inc. also will receive sales commissions of 7% of the offering proceeds, all of which it will reallow to the selling dealers except for units sold by it. However, Chadwick Securities, Inc. does not anticipate that it will directly sell a material number of units.

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	For a more complete description of the fees and other compensation payable to our general partner and its affiliates, you should read the “Management Compensation” section of this prospectus.
Our General Partner’s Relationship with Us May Be Conflicted	Our general partner may be subject to conflicts of interest because of its relationship to us. These potential conflicts include:
	•         There were no arm’s-length negotiations in determining our general partner’s compensation.
	•         Actions taken by our general partner will affect the amount of our general partner’s compensation and the amount of cash available for distribution to you and our other limited partners.
	•         Our general partner and its affiliates may engage in activities that compete with us.
	•         We do not have any employees and rely on employees of our general partner and its affiliates.
	For a more complete description of the conflicts of interest to which our general partner may be subject, you should read the “Conflicts of Interest and Fiduciary Responsibilities” section of this prospectus.
Use of Proceeds	We expect to invest approximately 80% of our offering proceeds in:
	•         equipment that we lease to end users;
	•         equipment that is already subject to existing leases; and
	•         loans to end users to purchase equipment that also serves as collateral for the repayment of the loans.
	We will use the balance of our offering proceeds to pay dealer-manager fees, sales commissions, bona fide accountable due diligence expense reimbursements, organization and offering expenses and acquisition fees, and to establish a working capital reserve. We describe our expected use of the offering proceeds in the “Use of Proceeds” section of this prospectus.
Partnership Agreement	You and the other purchasers of our units will be our limited partners. Our partnership agreement will govern the following:
	•         our activities;

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•         the relationships among you and the other limited partners; and

•         the relationship between our general partner and you and our other limited partners.

The following is a brief summary of some of the principal provisions of our partnership agreement, apart from the income, loss and distribution allocation provisions and the fees of our general partner and its affiliates described previously in this summary. For a more complete description, you should read the “Summary of Our Partnership Agreement” section of this prospectus. In addition, the form of our amended and restated partnership agreement is included as Appendix A to this prospectus.

•         Voting rights: You will have one vote for each unit you purchase. You and our other limited partners are entitled to vote on specified fundamental matters, such as:

•         amendments to our partnership agreement;

•         removal of our general partner;

•         our merger with another entity;

•         the sale of all, or substantially all, of our assets; or

•         our dissolution.

Otherwise, you and our other limited partners have no participation in determining our operations or policies.

•         Meetings: Our general partner, or our limited partners holding 10% or more of our outstanding units, may call a meeting of the limited partners on matters on which they are entitled to vote.

•         Limited liability: So long as you do not participate in the control of our business and otherwise act in conformity with our partnership agreement, your liability as a limited partner will be limited to the amount of your invested capital, plus your share of any of our undistributed profits and assets.

•         Transferability of units: Our partnership agreement restricts the transfer of units so that we will not be treated as a “publicly traded partnership” for federal income tax purposes and will not be taxed as a corporation. As a result of these restrictions, you probably will not be able to transfer your units if or when you want to.

•         Removal of general partner: Our general partner may be removed only on a vote of limited partners holding a majority of our outstanding units. Neither our general partner nor any of its affiliates may participate in any vote by you and our other limited partners to remove our general partner as general partner.

•         Amendment of partnership agreement: Our partnership agreement generally may be amended by the vote of limited partners holding a majority of our outstanding units. However, no amendment may be made that would change any partner’s interest in distributions or partnership income or losses without the consent of all affected partners.

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•         Term: We will terminate as a partnership on December 31, 2031, unless sooner terminated as set forth in our partnership agreement. Our partnership agreement does not provide for renewal or extension of the partnership term, which may only be done by amendment of our partnership agreement by limited partners owning more than 50% of our units.

The Offering

Securities Offered	A minimum of 20,000 units and a maximum of 1,200,000 units.
Minimum Investment	You must purchase a minimum of 50 units for $5,000. However, there is no minimum investment for certain investors as described in “– Distribution Investments,” below.
Distribution Investments	In addition to your initial purchase of not less than 50 units as described in “– Minimum Investment,” above, you may elect on your subscription agreement to use any cash distributions that you receive from us during the offering period following your initial investment to purchase additional units in us on the same terms as you purchased your initial units, to the extent units are available for sale, except that there is no minimum number of additional units that must be purchased and the subscription price for the units purchased with your distributions from us will be the “Distribution Investment Unit Price,” of $89.50 per unit, which is our gross unit price of $100 per unit reduced by an amount equal to the dealer-manager fee, the sales commission and the selling dealer’s reimbursements for bona fide accountable due diligence expenses, which will not be paid for those sales, as described in the “How to Subscribe” section of this prospectus.

Also, unless you are a resident of Massachusetts, Minnesota or Ohio, if you previously invested in Lease Equity Appreciation Fund I, L.P. (“LEAF I”) or Lease Equity Appreciation Fund II, L.P. (“LEAF II”), which are prior equipment leasing programs sponsored by LEAF Financial Corporation, an affiliate of our general partner, you may elect on your subscription agreement to use any cash distributions you receive from either or both of those programs to purchase our units during the offering period, to the extent units are available for sale, on the same terms as our units are being offered to our other investors, except that there is no minimum number of units that must be purchased and the subscription price for our units purchased with your distributions from LEAF I and/or LEAF II will be the Distribution Investment Unit Price, as described in the “How to Subscribe” section of this prospectus.

Offering Period	Until February 6, 2009. After February 6, 2008, the states or other jurisdictions may require renewal, requalification or other consents for this offering. This offering will terminate if we do not receive and accept subscriptions for the minimum offering amount of $2 million by February 6, 2008.
Escrow	We will deposit your investment in an interest-bearing escrow account until we have received the minimum offering amount of $2 million or until February 6, 2008, whichever is earlier. If we have not received the minimum offering amount by then, all of your funds will be returned to you with any interest earned, and without deduction for any fees. If we receive the minimum offering amount on or before February 6, 2008, however, then:
	•         you will be admitted as a limited partner;

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	•         your escrowed subscription proceeds will be delivered to us for use as described in this prospectus; and
	•         the interest earned on your escrowed subscription funds, if any, will be paid to you.
	Pennsylvania Investors. Because the minimum closing amount is less than $12 million, you are cautioned to carefully evaluate our ability to fully accomplish our stated objectives and to inquire as to the current dollar volume of Fund subscriptions.
	Also, if you are a Pennsylvania or Iowa resident, we must hold your subscription proceeds in escrow until we receive and accept subscriptions for at least 60,000 units ($6 million) including your subscription. In addition, we must offer you the opportunity to rescind your subscription if we have not received subscriptions for $6 million within 120 days of the date the escrow agent receives your subscription proceeds. We must repeat this offer to you every 120 days after that during the period of this offering until we have received and accepted subscriptions for 60,000 units.
Subscription Procedure	You must fill out and sign a subscription agreement, the form of which is attached to this prospectus as Appendix C, in order to purchase our units. You should send your subscription agreement and a check for the purchase price of your units as instructed in the subscription agreement. Wire transfer instructions are available on request.
Closings	We will hold the initial closing of this offering when we receive subscription proceeds of at least $2 million, excluding subscription proceeds from Pennsylvania and Iowa residents and from our general partner and its affiliates. At that time, we will admit investors as limited partners and receive the escrowed subscription proceeds from the escrow agent. After the initial closing, we will hold weekly closings until we have sold all of the units or this offering terminates, whichever comes first.

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RISK FACTORS

Units of limited partner interest are inherently different from capital stock of a corporation, although many of the business risks we will be subject to are similar to those that would be faced by a corporation engaged in a similar business. You should consider the following risk factors together with all of the other information included in this prospectus in evaluating the purchase of our units. If any of the following risks actually occurs, our business, financial condition or results of operations could be materially adversely affected. In that case, you may lose some or all of your investment.

We May Not Return All of Your Investment or Any Rate of Return on Your Investment

A substantial portion, and possibly all, of the cash distributions you receive from us will be a return of capital. The portion of your total distributions that is a return of capital and the portion that is investment income will depend on a number of factors in our operations and cannot be determined until all of our leases and secured loans have matured and terminated or been sold. At that time you will be able to compare the total amount of all cash distributions received by you to your total capital invested in us, and determine your investment income.

Our General Partner Will Manage Us and Our Business and May Make Decisions With Which You Do Not Agree

Our general partner will have all management authority over us and our business. Therefore, you should not purchase our units unless you are willing to entrust all aspects of our management to our general partner. See “– You Will Have Very Limited Voting Rights and Ability to Control Our Business,” below.

Because We Do Not Know What the Composition of Our Investment Portfolio Will Be, You Cannot Evaluate Our Portfolio At the Time You Invest

We are what is typically referred to as a blind pool offering because we have not specifically identified the equipment we will lease or finance or the persons with whom we will enter into leases or secured loans. We will begin to develop our portfolio once we are ready to invest our funds. Our general partner, however, anticipates that our portfolio of equipment leases and secured loans will be similar to those of the previous equipment leasing funds sponsored by our general partner’s affiliate, LEAF Financial, although a greater portion of our portfolio may be invested in secured loans, since LEAF Financial’s first fund did not provide for investments in secured loans and its second fund imposed a cap of 20% on secured loans, compared to our 30% cap on secured loans. See “Appendix B – Prior Performance Tables.” For a description of the strategies we intend to apply in developing our portfolio, you should read the “Investment Objectives and Strategies” section of this prospectus.

The composition of our investment portfolio will depend on national and local economic conditions and the markets for equipment and equipment leases at the time we acquire the equipment. As a result, you cannot evaluate the risks of, or potential returns from, our portfolio at the time you invest.

Higher Than Expected Equipment Lease and Secured Loan Defaults May Result in Losses

We expect that our average per unit cost of the equipment subject to our leases and secured loans will be between $50,000 and $100,000, and we intend to focus our leases and secured loans on the small to mid-size market, which may have greater risks of default than if we had a larger average per unit cost and focused on larger customers. For example, few small to mid-sized private businesses have audited financial statements, which increases the risk that the financial statements of those companies may be inaccurate or incomplete, or that our credit evaluations of our customers may not accurately reflect the risk of their potential defaults on our leases and secured loans. Although our general partner and its affiliates have developed credit evaluation systems designed to address this situation as discussed in more detail in the “Investment Objectives and Strategies” section of this prospectus, their systems may not identify all of the risks involved in the financial statements submitted to us by potential lessees or borrowers. Higher than expected equipment lease or secured loan defaults will result in a loss of anticipated revenues. These losses may adversely affect our ability to make distributions to you and our other limited partners and, if the level of defaults is sufficiently large, may result in our inability to fully recover our investment.

While we will seek to repossess and re-lease or sell the equipment that is subject to a defaulted lease or secured loan, we may not be able to do so on advantageous terms. In some cases, the cost of repossessing the equipment subject to a defaulted lease or secured loan may make trying to recover the equipment impractical. Also, if a lessee or borrower under files for protection under the bankruptcy laws, then:

• we may experience difficulties and delays in recovering the equipment from the defaulting party;

• the equipment may be returned in poor condition; and

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•  we may be unable to enforce important contract provisions against the insolvent party, including the contract provisions that require the equipment to be returned to us in good condition.

In addition, we may suffer a loss or our ability to make distributions may be adversely affected by the high costs of:

• enforcing a lessee’s or borrower’s contract obligations;

• recovering equipment from the defaulting party;

• transporting, storing, and repairing the equipment; and

• finding a new lessee or purchaser for the equipment.

Also, if a lessee or borrower defaults on a lease or secured loan, respectively, that we acquired using borrowed funds or subsequently financed, which generally will be the case with respect to all of our leases and secured loans, the entire proceeds from the re-leased or sold equipment will typically first be applied to payment of the financing and only after full repayment to our creditor would we be entitled to any remaining proceeds. In these circumstances, we may lose some or all of our investment in the equipment.

If We Are Unable to Realize the Residual Value of Our Equipment, We May Incur Losses

We expect that approximately 25% to 35% of our lease portfolio will be “operating leases,” under which the net present value of aggregate rental payments during the initial lease term generally is structured to result in our recovery of 80% to 85% of the purchase price of the equipment. Thus, our ability to recover the full purchase price of the equipment and our expected return in connection with an operating lease depends on the potential value of the equipment once the primary lease term expires. We call this the “residual value.” The residual value will depend on numerous factors beyond our control, including:

• whether the original lessee wants to keep the equipment;

• the cost of comparable new equipment;

• the obsolescence or poor condition of the leased equipment; and

• the existence of a secondary market for the type of used equipment.

For a description of the strategies we intend to use in realizing residual value, you should read the “Investment Objectives and Strategies – Leasing Strategies – Residual Realization – Maximizing Returns At the End of a Lease” section of this prospectus.

Using Leverage to Build Our Portfolio Subjects Us to the Risk That Our Revenues May Not Be Sufficient to Cover Our Operating Costs Plus Debt Service and, Consequently, May Result in Losses

We expect to “leverage” the acquisition costs of our equipment through borrowings, including securitization financing. For a description of the borrowing and securitization financing strategies we intend to use, you should read the “Investment Objectives and Strategies – Borrowing” section of this prospectus. We anticipate that our borrowings and securitization financings will be approximately 80% of the aggregate acquisition costs of our equipment. However, we are not limited as to the amount of debt or securitization financing that we may incur. As a result, the amount of our debt and securitization financing may be significantly more or less than 80%. The actual amount will depend on our general partner’s assessment of the availability of funds on acceptable terms and on the composition of our investment portfolio.

While leverage can enhance our return on invested capital, if the return on investments we finance fails to cover the cost of the financings, or if the return is negative, our ability to make distributions to you and our other limited partners will be impaired and the value of our net assets will decline more rapidly than would be the case in the absence of leverage.

Our general partner anticipates that we will pledge most, if not all, of our portfolio as collateral for our financings. If we are unable to pay our debt service because of the failure of our lessees or borrowers to make timely payments, or due to other factors, we may lose the pledged collateral. Also, lenders or securitizers may require covenants that could restrict our flexibility in making business and financing decisions in the future, and in order to repay our financing, we may be required to dispose of our assets at a time we would otherwise not do so.

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Cost Reimbursements and Significant Fees We Will Pay to Our General Partner, and Reserves Our General Partner Will Establish, Will Reduce Our Cash Available for Distribution

Before making any distributions to you and our other limited partners, we will reimburse our general partner for expenses incurred by it on our behalf during the related period as described in the “Management Compensation” section of this prospectus. The amount of these expenses will be determined by our general partner subject to limitations set forth in our partnership agreement. In addition, our general partner and its affiliates, including Chadwick Securities, Inc., LEAF Funding and LEAF Financial, will provide services to us for which we will be charged substantial fees as described in “Management Compensation.”

Some fees will be paid without regard to the amount of our cash distributions to you and our other limited partners, and regardless of the success or profitability of our operations. For example, after we receive our minimum required offering proceeds and begin operations our general partner and its affiliates will be entitled to certain fees and expense reimbursements as described in the “Management Compensation” section of this prospectus. Some of those fees and expense reimbursements will be required to be paid at the time of the initial closing in this offering or as we begin to acquire our portfolio, and we may pay other expenses, such as accounting and interest expenses, costs for supplies, etc., even though we have not yet begun to receive revenues from our leases and secured loans. This lag between the time when we must pay fees and expenses and the time when we begin to receive revenues may result in losses to us during our early years, which our general partner believes is typical for a start-up company such as us in the equipment leasing business.

The compensation and fees of our general partner and its affiliates were established by our general partner and are not based on arm’s-length negotiations. Approximately 21.27% of our offering proceeds will be used to pay organization, offering and equipment acquisition fees to our general partner and its affiliates, including sales commissions and certain other offering expenses paid to our general partner’s affiliate, Chadwick Securities, Inc., a portion or all of which will be reallowed by Chadwick Securities, Inc. to the selling dealers. Also, our general partner will determine the amount of cash reserves that we will maintain for future expenses, contingencies or investments. The reimbursement of expenses, payment of fees or creation of reserves could adversely affect our ability to make distributions to you and our other limited partners.

Your Ability to Dispose of Your Investment in Us Will Be Limited

We do not anticipate that a public market will develop for our units, and our partnership agreement imposes significant restrictions on your right to transfer your units. For a description of these restrictions you should read the “Summary of Our Partnership Agreement – Transfer of Units” section of this prospectus.

We have established these restrictions to comply with federal and state securities laws and so that we will not be considered to be a publicly traded partnership that is taxed as a corporation for federal income tax purposes. Thus, you probably will not be able to sell or otherwise liquidate your units in the event of an emergency and if you were able to arrange a sale, the price you would receive for your units would likely be at a substantial discount to the price you paid for your units. Also, your units probably will not be readily acceptable as collateral for loans.

You should invest in us only if you are prepared to hold your units for at least nine years, which is the period consisting of:

• an offering period of up to two years;

• an additional five-year reinvestment period; and

• a subsequent liquidation period of approximately two years, during which our leases and secured loans will either mature and terminate or be sold and we will liquidate our other assets.

As a result, you should view your investment in us as illiquid and should not purchase our units unless you have no need for the funds you invest. You should also consider that our anticipated term as a partnership of nine years as described above could be more than nine years if we encounter unexpected difficulties in liquidating our investments.

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You Will Have Very Limited Voting Rights and Ability to Control Our Business

Unlike a holder of common stock in a corporation, as a limited partner you will have only limited voting rights on matters affecting our business. For example you will have no right to elect our general partner on an annual or other continuing basis. Instead, our general partner may be removed only on the vote of limited partners holding a majority of our outstanding units. In this regard, our general partner and its affiliates currently intend to purchase not less than 10,000 units ($1 million) and may purchase up to approximately 5% of the total units sold, if greater, as limited partners. These units will not be included in the minimum offering proceeds required for us to begin operations, but they will dilute your voting power. Under our partnership agreement, however, neither our general partner nor any of its affiliates may participate in any vote by the limited partners to remove our general partner as general partner. For a description of the voting rights of you and our other limited partners, you should read the “Summary of Our Partnership Agreement – Meetings of Limited Partners” and “– Voting Rights of Limited Partners” sections of this prospectus.

Our General Partner May Be Subject To Various Conflicts of Interest Arising Out of Its Relationship to Us

We will not employ our own full-time officers, directors or employees. Instead, the officers, directors and employees of our general partner and its affiliates will supervise and control our business affairs, as well as the affairs of their other businesses. Therefore, they will devote to us and our business only the amount of time that they think is necessary to conduct our business. For a further discussion of conflicts of interest between our general partner and you and our other limited partners, you should read the “Conflicts of Interest and Fiduciary Responsibilities – Conflicts of Interest” section of this prospectus. In addition, the terms of this offering and the partnership agreement, and the compensation and fees of our general partner and its affiliates, are established by our general partner and are not based on arm’s length negotiations.

Our General Partner’s Investment Committee is Not Independent

Any conflicts in determining and allocating investments between us and our general partner, or between us and another program managed by our general partner or its affiliates, will be resolved by our general partner’s investment committee, which also will serve as LEAF Financial’s investment committee as discussed in the “Management – Investment Committee” section of this prospectus. Since all of the members of our general partner’s investment committee are officers of our general partner or its affiliates, and are not independent, matters determined by the investment committee, including conflicts of interest between us and our general partner and its affiliates involving investment opportunities, may not be as favorable to you and the investors as they would be if independent members were on the committee. Generally, if an investment is appropriate for more than one program our general partner and its investment committee will allocate the investment to a program (which includes us) after taking into consideration at least the following factors:

• which program has been seeking investments for the longest period of time;

• whether the program has the cash required for the investment;

• whether the amount of debt to be incurred with respect to the investment is acceptable for the program;

• the effect the investment would have on the program’s cash flow;

• whether the investment would further diversify, or unduly concentrate, the program’s investments in a particular lessee, class or type of equipment, location, industry, etc.; and

• whether the term of the investment is within the term of the program.

Notwithstanding the foregoing, our general partner and its investment committee may make exceptions to these general policies when, in our general partner’s judgment, other circumstances make application of these policies inequitable or uneconomic.

Also, our partnership agreement does not prohibit our general partner or its affiliates from investing in or acquiring equipment, equipment leases and secured loans and they can engage in equipment acquisitions, financing, refinancing, leasing and releasing opportunities on their own behalf or on behalf of other partnerships. Our general partner could be confronted with decisions whereby it would have an economic incentive to place its interests above ours. Any conflicts in determining and allocating investments between us and our general partner, or between us and another program managed by our general partner or its affiliates, will be resolved by the investment committee of our general partner which will evaluate the suitability of all prospective lease acquisitions and financing transactions for investment by us.

Our Lack of Operating History Decreases Your Ability to Evaluate Your Investment

Our general partner was formed in August 2006 and we were formed in September, 2006 by our general partner. As a new limited partnership, we have no prior operations which you can use to help evaluate the desirability of purchasing our units. Also, we cannot predict whether our intended operations will meet our stated investment objectives.

In addition, our general partner has no prior experience in managing funds such as us, although our general partner’s management team and its affiliate, LEAF Financial, have that experience. However, Lease Equity Appreciation Fund I, L.P. and Lease Equity Appreciation Fund II, L.P., which are prior equipment leasing funds sponsored by LEAF Financial, an affiliate of our general partner, have been in existence for approximately 3.5 and 1.5 years, respectively. Thus, our general partner’s affiliate has only a short history in managing funds similar to us for you to evaluate. See “Appendix B – Prior Performance Tables,” to this prospectus. Although LEAF Financial previously sponsored eight public equipment leasing programs in the late 1980’s and early 1990’s when it had a different name and was under different ownership and management, we have not included any information regarding those prior programs in this prospectus for the reasons set forth in the “Other Programs Managed by Our General Partner or Its Affiliates” section of this prospectus.

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Our General Partner May Have Difficulty Managing Its Growth, Which May Divert Its Resources and Limit Its Ability to Expand Its Operations Successfully

Although our general partner is a recently-formed entity, the amount of assets that its affiliates manage has grown substantially, and our general partner intends to continue to sponsor funds similar to us, which may be concurrent with us, and anticipates that it will experience growth in its assets under management. Our general partner’s future success will depend on the ability of its officers and key employees to implement and improve its operational, financial and management controls, reporting systems and procedures, and manage a growing number of assets and investment funds. Our general partner, however, may not implement improvements to its management information and control systems in an efficient or timely manner and it may discover deficiencies in its existing systems and controls. Thus, our general partner’s anticipated growth may place a strain on its administrative and operations infrastructure, which could increase its costs and reduce its efficiency.

If We Do Not Generate Sufficient Cash, We Will Not Be Able to Pay Your 8.5% Annual Distributions or Reinvest a Portion of Our Revenues in Additional Leases During the Reinvestment Period

During the period ending five years after the completion of this offering, we have the right to reinvest our revenues above the amounts necessary to pay you 8.5% annual distributions on your adjusted capital contribution, if any, in additional equipment leases and secured loans. Under our partnership agreement your “adjusted capital contribution” at any given time is the purchase price of your units reduced by certain distributions made to you which are deemed to be a return of capital as described in the “Income, Losses and Distributions – Reinvestment of Our Revenues in Additional Leases and Secured Loans” section of this prospectus. However, for the reasons described in this “Risk Factors” section, you should not assume that we will be able to generate cash for reinvestment in additional equipment leases and secured loans or even that we will generate cash sufficient to pay you all or any part of an 8.5% annual distribution.

You May Not Receive Cash Distributions From This Investment In An Amount Sufficient to Return Your Investment or Provide a Return on Your Investment, and the Intended Cash Distributions May Be Reduced or Delayed

We cannot predict the amount of cash we will generate and, as a result, the amount of distributions we may pay you, if any. The actual amounts of cash we generate will depend on numerous factors relating to our business which may be beyond our control and may reduce or delay our cash distributions to you and our other limited partners, including:

• the demand for the equipment leases and secured loans we provide;

• our ability to obtain financings or leverage, including securitizations, to build our equipment portfolio;

• required principal and interest payments on the debt we intend to incur;

• profitability of our operations;

• equipment lease and secured loan defaults;

• prevailing economic conditions; and

• government regulations.

If You Choose to Redeem Your Units You May Receive Much Less Than If You Kept Your Units

At any time after you have been admitted as one of our limited partners, you may request us to redeem some or all of your units. However, the redemption of your units is subject to the following:

• we have no obligation to redeem any of your units;

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• we will not maintain a cash reserve for this purpose;

• in any given year our total unit transfers, including redemptions of units by us, may not exceed 2% of our total capital or profits interests; and

• the redemption price has been unilaterally set and is described in the “Redemption of Units” section of this prospectus.

If we do agree to redeem your units, the redemption price may provide you a much lower value than the value you would realize if you kept your shares for the duration of our term. Depending on when you request redemption, the redemption price may be less than the unreturned amount of your investment.

Our Success Will Be Subject to Risks Inherent in the Equipment Leasing Business, Any of Which May Affect Our Ability to Operate Profitably

A number of factors may affect our ability to operate profitably. These include:

• changes in economic conditions, including fluctuations in demand for equipment, interest rates and inflation rates;

• the quality of the equipment we acquire and lease or finance;

• the continuing strength of the equipment manufacturers;

• the timing of equipment purchases and our ability to forecast technological advances;

• technological and economic obsolescence;

• our ability to obtain financings or leverage, including securitizations, to build our equipment portfolio;

• defaults by lessees or borrowers; and

• increases in our expenses, including labor, tax and insurance expenses.

Interest Rate Changes May Reduce the Value of Our Portfolio and Our Returns On It

Changes in interest rates will affect the market value of our portfolio. In general, the market value of an equipment lease or secured loan will change in inverse relation to an interest rate change when the equipment lease or secured loan has a fixed rate of return. Thus, in a period of rising interest rates, the market value of our equipment leases and secured loans will decrease. A decrease in the market value of our portfolio will adversely affect our ability to obtain financing against our portfolio or to liquidate it.

Interest rate changes will also affect the return we obtain on new equipment leases or secured loans. For example, during a period of declining rates, our gross revenues may be reduced because our reinvestment of rental and loan payments may be at lower rates than we obtained in prior equipment leases or secured loans, or the existing equipment leases or secured loans may be prepaid by the lessee or the borrower. Also, when we obtain financing (i.e., borrowings or securitizations) an increase in interest rates will not necessarily be reflected in increased rates of return on the equipment leases or secured loans funded through that debt, which would adversely affect our net return on the equipment leases and secured loans. Thus, interest rate changes may materially affect our revenues, which in turn may affect the amount we are able to distribute to you and our other limited partners. For a discussion of the possible effects interest rate changes may have on us, you should read the “Management’s Discussion and Analysis of Financial Condition” section of this prospectus.

Spreading the Risks of Equipment Leasing and Secured Loans By Diversifying Our Investments Will Be Reduced If We Raise Only the Minimum Offering Amount

We may begin operations if we sell a minimum of 20,000 units, excluding units subscribed for by Pennsylvania and Iowa residents and by our general partner and its affiliates. We estimate that this will result in net offering proceeds available to us of approximately $1,554,582 (77.73%) for investment, after deducting organization and offering expenses, as described in the “Use of Proceeds” section of this prospectus, which will reduce our ability to acquire a diversified portfolio.

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Iowa and Pennsylvania investors: Because the minimum offering amount is less than 1,200,000 units ($12 million), you are cautioned to carefully evaluate our ability to fully accomplish our stated objectives and to inquire as to the current dollar volume of our subscriptions.

Competition From Other Equipment Lessors Could Delay Investment of Our Capital, Reduce the Creditworthiness of Potential Lessees or Borrowers to Which We Have Access, or Decrease Our Yields

The equipment leasing business is highly fragmented and competitive. We will compete with:

• a large number of national, regional and local banks, savings banks, leasing companies and other financial institutions;

• captive finance and leasing companies affiliated with major equipment manufacturers; and

• other sources of equipment lease financing, including other publicly-offered partnerships.

Some of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than either we or our general partner and its affiliates will have, even if we sell the maximum number of units in this offering. Competition with these entities may:

• delay investment of our capital;

• reduce the creditworthiness of potential lessees or borrowers to which we have access; or

• decrease our yields.

For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. A lower cost of funds could enable a competitor to offer leases or secured loans at rates which are less than ours, potentially forcing us to lower our rates or lose potential lessees or borrowers.

Poor Economic Conditions May Adversely Affect Our Ability to Build Our Portfolio

A general economic slowdown in the United States during the first several years after we begin operations could adversely affect our ability to invest the proceeds of this offering as quickly as we would like to if businesses aggressively seek to reduce their costs. If this happens, our distributions to you and our other limited partners during the initial period of our operations may be less than if our offering proceeds were fully invested in accordance with our timetable. An economic slowdown might also reduce interest rates, which could reduce the returns we can obtain on our leases and secured loans and, as a consequence, the distributions we can make to you and our other limited partners.

An economic slowdown in the United States may:

• reduce our income or our distributions;

• increase the delinquencies or defaults on our leases and secured loans; and

• reduce our ability to obtain financing or leverage, including securitizations, to build our equipment portfolio.

Resignation or Removal of Our General Partner, or Loss of Key Management Personnel of Our General Partner, Could Adversely Affect Our Ability to Conduct Our Business or Make Distributions

Our future success depends to a significant degree on the continued service of our general partner and its senior management team and, in particular, Mr. Crit DeMent, our general partner’s chairman of its board of directors and chief executive officer. Although our general partner’s affiliate, LEAF Financial, has entered into an employment agreement with Mr. DeMent, it does not have any current plans to execute employment agreements with any of its other officers or employees, and our general partner has not, and does not intend to, enter into any employment agreement with Mr. DeMent or any of its other officers or other employees. As a result, our general partner may be unable to retain employees or attract and retain new employees, either of which could materially and adversely affect our ability to conduct our business and make distributions to you and our other limited partners. Neither we, our general partner, nor LEAF Financial maintain key man life insurance with respect to Mr. DeMent.

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Our General Partner’s Operating Systems Could Be Damaged or Disrupted By Events Beyond Its Control, Which Could Interfere With Our Ability to Conduct Our Business and Make Us Less Attractive to Customers as a Source of Equipment Leases and Secured Loans

Our ability to originate leases and secured loans, manage our operations and realize residual values from our equipment leases and secured loans depends on the operating systems of our general partner. In particular, this includes its computer and telecommunications and related equipment, and its ability to protect those systems against damage or disruptions from such contingencies as:

• power loss;

• telecommunications failure;

• computer intrusions; and

• viruses and similar adverse events.

Although our general partner will implement security and protective measures, our general partner’s systems could still be vulnerable. Any damage or disruption to these systems could make us less attractive to customers as a source of equipment leases and secured loans.

Our Inability to Obtain Insurance For Certain Types of Losses Means We Must Bear the Cost of Any Losses From the Non-Insurable Risks

While our equipment leases and secured loans will generally require lessees or borrowers to have comprehensive insurance on the equipment under lease or financed and to assume the risk of loss, some losses may be either uninsurable or not economically feasible to insure, such as losses from war, earthquakes or terrorist acts. Furthermore, we can neither anticipate nor obtain insurance against all possible contingencies that may affect the equipment. If an event occurs for which we have no insurance, we could lose some or all of our investment in the affected equipment.

Lack of Independent Counsel or Independent Underwriter May Reduce the Due Diligence Review of Us and Our General Partner

The legal counsel that represents our general partner and the dealer-manager, Chadwick Securities, Inc., also represents us. You and our other limited partners, as a group, have not been represented by separate legal counsel, and Chadwick Securities, Inc.’s due diligence examination of us and this offering cannot be considered to be independent. See the “Conflicts of Interest and Fiduciary Responsibilities – Conflicts of Interest” section of this prospectus.

You Could Be Liable For Our Obligations If You Participate in the Control of Our Business, and You May Be Required to Return Improperly Received Distributions

In general, limited partners are not liable for the obligations of a limited partnership unless they participate in the control of the limited partnership’s business. What constitutes participating in the control of a limited partnership’s business has not been clearly established in all states. If it were determined that any of the following rights, or the exercise of those rights by the limited partners as a group, constituted participation in the control of our business, then you could be held liable for our obligations to the same extent as a general partner:

• the right to remove our general partner;

• the right to approve some amendments to our partnership agreement; or

• the right to take other specified actions under our partnership agreement.

As of the date of this prospectus, however, we are not aware that limited partners in any state have been held liable under any law or by any court to the same extent as general partners as the result of the limited partner rights, or the exercise of those rights, listed above.

This means that you could be held personally liable for our losses beyond the amount you paid for your units. In addition, you may be required to return to us any distribution you received from us if you knew at the time the distribution was made that it was improper because it rendered us insolvent. For a further discussion of your liabilities as a limited partner, you should read the “Summary of Our Partnership Agreement – Limited Liability of Limited Partners” section of this prospectus.

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Your Ability to Begin an Action Against Our General Partner is Limited By Our Partnership Agreement

Our partnership agreement provides that neither our general partner nor any of its affiliates will have any liability to us for any loss we suffer arising out of any action or inaction of our general partner or an affiliate if the general partner or affiliate determined, in good faith, that the course of conduct was in our best interests and did not constitute negligence or misconduct. As a result of these provisions in our partnership agreement, your right to begin an action against our general partner may be more limited than it would be without these provisions. For a discussion of these provisions of our partnership agreement, you should read the “Conflicts of Interest and Fiduciary Responsibilities – Fiduciary Duty of Our General Partner” section of this prospectus.

If We Are, or Become, Subject to Usury Laws, It Could Result in Reduced Revenues or, Possibly, Loss on Our Investment

Equipment leases have sometimes been deemed to be loan transactions subject to state usury laws. These laws impose maximum interest rates that may be charged on loans as well as penalties for violation, including restitution of any excess interest received and declaring the debt to be unenforceable. We will seek to structure our equipment leases so that they will not be deemed to be loans and violate state usury laws. However, uncertainties in the application of some laws may result in inadvertent violations which could result in reduced investment returns or, possibly, loss on our investment in the affected equipment. Also, we may use up to 30% of our total funds available for investment at any given time to make secured loans to end users to finance their purchase of equipment. These loans will be subject to the same risks and uncertainties discussed above.

Participation With Third-Parties in Joint Ventures May Require Us to Pay Additional Costs or Incur Losses Because of Actions Taken By the Third-Parties

Our partnership agreement permits us to invest in joint ventures. Investing in joint ventures involves risks not present when directly investing in equipment to lease to end users. These risks include:

• the possibility that our co-venturer may become bankrupt or otherwise fail to meet its financial obligations, thereby causing us to pay our co-venturer’s share of the joint venture’s debts, since each co-venturer generally must guarantee all of the joint venture’s debts;

• our co-venturer may have business or economic objectives or interests that are inconsistent with ours and it may want to manage the joint venture in ways that do not maximize our return;

• actions by a co-venturer might subject equipment leases owned by the joint venture to liabilities greater than those we contemplate; and

• when more than one person owns property, there may be a stalemate on decisions, including decisions regarding a proposed sale or other transfer of the assets. Although our partnership agreement requires that any joint venture arrangement in which we participate must contain provisions permitting us to buy the assets from the other co-venturer in the case of a sale, we may not have the resources to do so.

Your Interests May Be Diluted

Some investors, including the general partner and its officers and directors, may purchase our units at discounted prices as described in the “Plan of Distribution” and “How to Subscribe” sections of this prospectus, and generally will share in our revenues and distributions based on the number of units purchased by each investor, rather than the subscription price paid by the investor for his units. Thus, investors who pay discounted prices for their units will receive higher returns on their investments in us as compared to investors who pay the entire $100 per unit.

You May Be Required to Pay Taxes on Income From Us, Even If You Do Not Receive Commensurate Cash Distributions From Us

You will be required to pay federal income taxes, and probably state and local income taxes, on your share of our taxable income, whether or not you receive cash distributions from us. For example, your share of our taxable income could exceed the amount of cash that we distribute to you if we repay the principal of any debt we incur with rental income or proceeds from the sale of one of our investments. This could happen because repaying the principal amount of a debt reduces the amount of cash available for distribution to you and our other limited partners, but is not tax deductible. Thus, your cash distributions from us may not equal your share of our taxable income or even equal your tax liability resulting from that income. See the “Federal Income Tax Consequences – Flow Through of Taxable Income” section of this prospectus.

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We Will Not Apply for an Advance Ruling from the IRS as to Any Federal Tax Consequence of an Investment in Us, and if the IRS Classifies Us as a Corporation You Will Lose Tax Benefits

We will not apply for an advance ruling from the IRS as to whether we will be treated as a partnership for federal tax purposes or with respect to any tax consequence to you of an investment in us. Instead, we intend to rely on the opinion of our special tax counsel. See the “Federal Income Tax Consequences – Special Counsel’s Tax Opinion Letter” section of this prospectus. If the IRS were to successfully contend that we should be treated as a “publicly traded partnership,” then we would be treated as a corporation for federal income tax purposes rather than a partnership. This would have the following principal consequences to you:

• tax losses realized by us would not pass through to you;

• instead of not paying any income tax as a partnership, we would be taxed at income tax rates applicable to corporations, which would reduce our cash distributions to you; and

• our distributions to you would be taxable to you as dividend income to the extent of our current and accumulated earnings and profits.

To reduce the possibility that the IRS could successfully contend that our units are “publicly-traded,” Section 13.2(c) of our partnership agreement places substantial restrictions on your ability to transfer your units. With respect to our tax status as a partnership, see the “Federal Income Tax Consequences – Partnership Classification” section of this prospectus.

We Could Lose Cost Recovery or Depreciation Deductions if the IRS Treats Our Operating Leases as Sales or Financings

We intend to claim cost recovery or depreciation deductions on the equipment subject to our operating leases, but not the equipment subject to our full payout leases or secured loans. In this regard, we anticipate that approximately 65% to 75% of our leases will be full payout leases and approximately 25% to 35% of our leases will be operating leases. In addition, up to 30% of our equipment at any given time may be financed for others under secured loans. If the IRS were to successfully contend that our operating leases were actually sales or financings rather than leases, we would not be entitled to cost recovery or depreciation deductions with respect to the equipment covered by those leases. See the “Investment Objectives and Strategies – Equipment for Lease to End Users” section of this prospectus. The IRS could also challenge our method of calculating our cost recovery or depreciation deductions, or our other deductions, and the amount of our deductions could be reduced if we were audited. See the “Federal Income Tax Consequences – Tax Treatment of Leases,” “– Depreciation,” and “– Limitations on Interest Deductions” sections of this prospectus.

You Need Passive Income in Order to Deduct Any Tax Losses We May Generate

Because our operations generally must be treated as passive activities by you and our other limited partners, your share of any tax losses we generate will be passive losses which you can use on your personal federal income tax returns only to offset passive income you receive from us or from other passive activities (other than publicly-traded partnerships) in which you invest, if any, in calculating your personal federal income tax liability. For example, you cannot use a passive loss from us to offset any “active” (i.e., non-passive) income, such as your salary, on your personal federal income tax returns. Also, passive losses may not be used to offset “portfolio” income such as interest income on our secured loans or other nonpassive income you may receive from us or from other passive investments in which you invest, if any.

In addition, a portion of your share of our gross income might be treated for federal income tax purposes as portfolio income and gross income that is not from a passive activity, which means that it cannot be offset by passive losses, instead of passive income. See the “Federal Income Tax Consequences – Passive Activity Limitations on Losses,” and “– Tax Treatment of Leases” sections of this prospectus.

You Will Likely Be Subject to State and Local Taxes as a Result of Purchasing Our Units

You will likely be subject to state and local taxes imposed by the various jurisdictions in which we do business or own property. Initially, we will own assets and do business in Delaware, which currently imposes a personal income tax. It is your responsibility to file all of your personal federal, state and local tax returns. Our special tax counsel has not given any opinion on the state or local tax consequences of an investment in us. We urge you to seek advice based on your particular circumstances from an independent tax advisor with respect to the state and local tax consequences of purchasing our units. See the “Federal Income Tax Consequences – State and Local Taxation” section of this prospectus.

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An IRS Audit of Our Annual Federal Information Tax Return May Result in Adjustments to, or an Audit of, Your Personal Income Tax Returns

We anticipate incurring tax losses during at least our early years due primarily to depreciation of equipment leased to others under our operating leases, operating expenses and the interest deductions related to the borrowings we intend to incur as described in the “Investment Objectives and Strategies – Borrowing,” section of this prospectus. Also, we may be required to file disclosure reports with the IRS and its Office of Tax Shelter Analysis if the tax results of our intended activities cause us to be a “reportable transaction” under the Internal Revenue Code and the Treasury Regulations. Our anticipated tax losses and reportable transaction reports to the IRS, if any, would increase the risk of an IRS audit of our federal information income tax returns, which could result in an IRS audit of your personal federal income tax returns. Also, any adjustments to our returns required by the IRS could require you to make corresponding adjustments on your personal federal income tax returns. In addition, an IRS audit of your personal federal income tax return could include an examination by the IRS of your returns for prior years, and could cover items unrelated to your investment in us. See the “Federal Income Tax Consequences – Interest and Penalties” section of this prospectus.

Your Investment In Us May Cause You to Pay Alternative Minimum Tax

You may have to pay alternative minimum tax as a result of your investment in us, because you will be allocated a share of our alternative minimum tax preference and adjustment items. For example, depreciation or cost recovery deductions of equipment subject to our operating leases are computed differently for regular federal income tax purposes than for purposes of the alternative minimum tax. This would increase your alternative minimum taxable income, as compared to your regular taxable income, during the early years of the applicable cost recovery or depreciation period of the equipment subject to our operating leases. See the “Federal Income Tax Consequences – Alternative Minimum Tax” section of this prospectus.

Your Tax Benefits from an Investment In Us Are Not Contractually Protected

You have no contractual protection against the possibility that a portion or all of the intended tax benefits of your investment in us will be disallowed by the IRS. No one provides any insurance, tax indemnity or similar agreement for the tax treatment of your investment in us. You have no right to rescind your investment in us, or to receive a refund of any of your investment in us, if a portion or all of the intended tax benefits of your investment in us are ultimately disallowed by the IRS or the courts. Also, none of the fees paid by us to our general partner, its affiliates or independent third-parties (including our special tax counsel) are refundable or contingent on whether the intended tax benefits of your investment in us are ultimately sustained if challenged by the IRS.

Tax-Exempt Organizations Will Have Unrelated Business Taxable Income from an Investment in Us

Tax-exempt organizations are subject to tax on unrelated business taxable income (“UBTI”). Most of our net income, if any, in a given year will constitute UBTI. See the “Federal Income Tax Consequences – Federal Taxation of Employee Benefit Plans and Other Tax-Exempt Organizations” and “Investment by Qualified Plans” sections of this prospectus.

Foreign Investors In Us Will Be Subject to U.S. Tax Withholding and May Be Required to File U.S. Tax Returns

We generally will be required to withhold federal income tax at the highest applicable rate under the Internal Revenue Code on the income we allocate to units owned by foreign investors, whether or not any corresponding cash distributions are made to them. If too much tax is withheld, foreign investors will have to file U.S. income tax returns to seek a refund. See the “Federal Income Tax Consequences – Federal Tax Treatment of Foreign Investors” section of this prospectus.

Changes in the Law May Reduce the Tax Benefits of Investing in Us

The present federal income tax treatment of an investment in us may be modified by legislative, judicial or administrative action at any time and the changes may be retroactive. Any future revisions in federal income tax laws and their interpretations could reduce or eliminate the tax advantages to you of your investment in us. See the “Federal Income Tax Consequences – Changes in the Law” section of this prospectus.

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

Certain statements included in this prospectus and its exhibits address activities, events or developments that we and our general partner anticipate, as of the date of this prospectus, will or may occur in the future. For example, the words “believes,” “anticipates,” and “expects” are intended to identify forward-looking statements. These forward-looking statements include such things as:

• investment objectives;

• references to future operating results and financial success;

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• business strategy;

• estimated future capital expenditures;

• competitive strengths and goals; and

• other similar matters.

These statements are based on certain assumptions and analyses made by us and our general partner in light of our experience and our perception of historical trends, current conditions, and expected future developments. However, whether actual results will conform with these expectations is subject to a number of risks and uncertainties, many of which are beyond our control, including, but not limited to:

•  changes in economic conditions, including fluctuations in demand for equipment, interest rates and inflation rates;

• the quality of the equipment we acquire and lease or finance;

• the continuing strength of the equipment manufacturers;

• the timing of equipment purchases and our ability to forecast technological advances;

• technological and economic obsolescence;

• defaults by lessees or borrowers; and

• increases in our expenses, including labor, tax and insurance expenses.

Thus, all of the forward-looking statements made in this prospectus and its exhibits are qualified by these cautionary statements. You are urged not to place undue reliance on these forward-looking statements, because actual results may differ materially from those anticipated by us and our general partner. For a more complete discussion of the risks and uncertainties to which we are subject, see the “Risk Factors” section of this prospectus.

USE OF PROCEEDS

The tables below set forth information about our expected use of the proceeds from this offering, assuming we pay the maximum compensation, fees and expense reimbursements permitted under our partnership agreement. Because we have not yet acquired any of our investments, we cannot precisely calculate some of the expenses referred to in the tables below, so the amounts may vary materially. We expect to use approximately 80% of our offering proceeds to acquire equipment to lease to, or finance for, end users, or to acquire equipment subject to existing leases or secured loans.

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	Minimum offering of units			Fees and expenses as a percent of offering proceeds (1)
Offering proceeds (2)(3)	$	2,000,000		100	%
Maximum offering expenses based on the amount of the offering proceeds shown in the table:
Sales commissions and related fees (4)(5)(6)		(140,000	)	7.00	%
Dealer-Manager fees (4)(5)(6)		(60,000	)	3.00	%
Reimbursement for accountable due diligence expenses (4)(5)(6)		(10,000	)	0.50	%
Organization expenses (4)(5)(6)		(60,000	)	3.00	%
Total public offering and organization expenses (4)(5)(6)		(270,000	)	13.50	%
Net offering proceeds		1,730,000		86.50	%
Acquisition fees (2)		(155,418	)	7.77	%
Reserves (7)		(20,000	)	1.00	%
Total offering proceeds available for investment	$	1,554,582		77.73	%
Fees and expenses as a percentage of offering proceeds				21.27	%

	Maximum offering of units			Fees and expenses as a percent of offering proceeds (1)
Offering proceeds (2)(3)	$	120,000,000		100	%
Maximum offering expenses based on the amount of the offering proceeds shown in the table:
Sales commissions and related fees (4)(5)(6)		(8,400,000	)	7.00	%
Dealer-Manager fees (4)(5)(6)		(3,600,000	)	3.00	%
Reimbursement for accountable due diligence expenses (4)(5)(6)		(600,000	)	0.50	%
Organization expenses (4)(5)(6)		(3,600,000	)	3.00	%
Total public offering and organization expenses (4)(5)(6)		(16,200,000	)	13.50	%
Net offering proceeds		103,800,000		86.50	%
Acquisition fees (2)		(9,327,491	)	7.77	%
Reserves (7)		(1,200,000	)	1.00	%
Total offering proceeds available for investment	$	93,272,509		77.73	%
Fees and expenses as a percentage of offering proceeds				21.27	%

(1) The percentages in this column were calculated by dividing the corresponding dollar amount in the first column by the amount of offering proceeds set forth in the table.

(2)       The amount of our general partner’s acquisition fees shown in the table equals 2% of the estimated total purchase price of our equipment, including debt relating to the acquisition and out-of-pocket acquisition expenses incurred by our general partner, based on our general partner’s assumption that we will borrow, on average, 80% of the cost of the equipment we acquire. Based on this assumption, our borrowings will be approximately $6.2 million if we receive the minimum subscription proceeds of $2 million and $373 million if we receive the maximum subscription proceeds of $120 million. Assuming 80% leverage, our total funds available for investment, consisting of both our net offering proceeds and the funds we intend to raise through debt financing as described above, less the reserves, acquisition fees and public offering and organization expenses shown in the tables above, will be approximately $7,770,909 if we receive the minimum subscription proceeds of $2 million, and approximately $466,374,546 if we receive the maximum subscription proceeds of $120 million. See the “Investment Objectives and Strategies – Borrowing” section of this prospectus. Our use of leverage, by increasing the amount we can invest in our equipment, also increases the amount of acquisition fees we will pay to our general partner from our offering proceeds. In addition, we expect to acquire all of our leases and secured loans through LEAF Funding, an affiliate of our general partner, which will originate and hold the leases and secured loans on a temporary basis in order to facilitate their acquisition by us. The purchase price we pay LEAF Funding for our leases and secured loans will not exceed LEAF Funding’s cost for acquiring and holding the leases and secured loans until we purchase them. Under United States generally accepted accounting principles (“GAAP”), LEAF Funding’s “cost” will include origination fees it pays to certain of its employees for their efforts in locating and facilitating the acquisition of the leases and secured loans by LEAF Funding on our behalf, in amounts typically ranging from 1% to 3% of LEAF Funding’s cost for the leases and secured loans, that qualify as initial direct costs under GAAP. Our use of leverage, by increasing the amount we can invest in equipment, also increases the amount of our general partner’s acquisition fees and the amount of the purchase price we pay to LEAF Funding for our leases and secured loans as described above.

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(3) Excludes $1,000 contributed to us by our general partner at the time of our formation.

(4)

We will pay the selling dealers a sales commission of 7% per unit sold. However, we will not pay the 7% sales commissions with respect to units sold to our general partner, its officers, directors and affiliates, registered investment advisors or their clients, the dealer-manager, selling dealers and their registered representatives and principals and investors who buy units through the officers and directors of our general partner. Also, we will not pay the 7% sales commissions with respect to units purchased with distributions from either us, or LEAF I or LEAF II, our affiliated equipment leasing programs, as described in the “Plan of Distribution” and “How to Subscribe” sections of this prospectus.

(5)

We will pay an amount equal to 3% of our offering proceeds to Chadwick Securities, Inc. for acting as the dealer-­manager of a group of selling dealers that will be selected to sell our units. However, we will not pay the 3% dealer-manager fee with respect to units purchased with distributions from either us, or LEAF I or LEAF II, our affiliated equipment leasing programs, as described in the “Plan of Distribution” and “How to Subscribe” sections of this prospectus. Out of the dealer-manager fee received by Chadwick Securities, Inc., it may pay the selling dealers up to 1% per unit as a marketing fee and use a portion or all of the remainder of the dealer-manager fee for other underwriting expenses, including permissible non-cash compensation, as described in the “Plan of Distribution” section of this prospectus. This permissible non-cash compensation may be deemed to be additional sales compensation to the selling dealers. Chadwick Securities, Inc. also will receive reimbursement of the selling dealers’ bona fide accountable due diligence expenses of up to .5% of our offering proceeds, all of which will be reallowed by it to the selling dealers, except that we will not pay the up to .5% reimbursement of the selling dealers’ bona fide accountable due diligence expenses with respect to units purchased with distributions from either us, or LEAF I or LEAF II, our affiliated equipment leasing programs, as described in the “Plan of Distribution” and “How to Subscribe” sections of this prospectus.

(6) Our organization expenses do not include sales commissions, dealer-manager fees, and reimbursements of bona fide accountable due diligence expenses of the selling dealers of up to .5% of our offering proceeds that Chadwick Securities, Inc. will receive and reallow to the selling dealers as described in the “Plan of Distribution” and “How to Subscribe” sections of this prospectus. Our organization expenses, however, do include legal, accounting and escrow fees, printing costs, filing and qualification fees, certain overhead costs of our general partner in organizing us and preparing us for the offer and sale of our units and similar fees and expenses. To the extent that our actual organization expenses exceed our general partner’s 3% organization and offering expense allowance to pay for those expenses, the excess must be paid by our general partner without any reimbursement from our offering proceeds.

(7)       Initially, we intend to establish reserves equal to approximately 1% of our offering proceeds for working capital purposes. The amount of our reserves may vary from time to time as our general partner determines the appropriate amount of reserves for our operations. The amount of reserves our general partner establishes will depend on its analysis of:

• the timing and amount of lease and secured loan payments we receive;

• our debt service payments on our borrowings and securitizations;

• our costs and expenses and other existing liabilities;

• our general partner’s expectations regarding our potential future liabilities, if any; and

• whether our general partner determines a reserve is needed for our future investment acquisitions.

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MANAGEMENT COMPENSATION

The following table sets forth our estimate of the maximum amounts of all compensation and other payments that our general partner and its affiliates will receive, directly or indirectly, from us. This compensation was not determined by arm’s-length negotiation. Our partnership agreement does not permit our general partner or its affiliates to receive more than the maximum fees or expenses stated for each type of compensation by reclassifying those items under a different category.

Offering Stage (1)

Entity receiving compensation	Type and method of compensation	Estimated amount
Chadwick Securities, Inc.	Dealer -manager fee of 3% of the offering proceeds for acting as the dealer-manager for a group of selling broker dealers.	$60,000 if we sell the minimum offering amount; $3.6 million if we sell the maximum offering amount. From this amount, Chadwick Securities, Inc., an affiliate of our general partner, may pay the selling dealers up to 1% of the proceeds of each unit sold by them as a marketing fee and use a portion or all of the remaining dealer-manager fee for other underwriting expenses, including permissible non-cash compensation, as described in the “Plan of Distribution” section of this prospectus.
Chadwick Securities, Inc.	Sales commissions of 7% of the proceeds of each unit sold by it.	Not determinable at this time. We do not anticipate that Chadwick Securities, Inc. will sell a material number of units. If all units were sold by Chadwick Securities, Inc., it would receive $140,000 for the minimum offering amount and $8.4 million for the maximum offering amount.
Chadwick Securities, Inc.	Bona fide accountable due diligence expenses.	This amount includes reimbursements paid to Chadwick Securities, Inc. of up to .5% of our offering proceeds, all of which will be reallowed by it to the selling dealers for their bona fide accountable due diligence expenses.
General partner and its affiliates	Organization and offering expense allowance of 3% of the offering proceeds.	$60,000 if we sell the minimum offering amount; $3.6 million if we sell the maximum offering amount. To the extent, if any, the organization and offering expense allowance exceeds our actual, reasonable organization and offering expenses, the excess will be additional compensation to our general partner.

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Operational Stage

Entity receiving compensation	Type and method of compensation	Estimated amount
General partner and its affiliates	Acquisition fee equal to 2% of the purchase price we pay to the seller for equipment we purchase to lease to third-parties, equal to 2% of the purchase price we pay to the seller for equipment subject to existing leases that we acquire, and equal to 2% of the purchase price we pay to the seller for equipment we purchase to finance for third-parties pursuant to our secured loans.	Total acquisition fees, assuming our anticipated use of financing of 80%, on average, of the cost of the equipment we acquire, would be approximately 7.8% of our offering proceeds. Thus, the total acquisition fees would be approximately $155,818 if we sell the minimum offering amount and $9,327,491 if we sell the maximum offering amount as set forth in the “Use of Proceeds” section of this prospectus.
	LEAF Asset Management, our general partner, is an affiliate of Chadwick Securities, Inc., which serves as the dealer-manager of this offering, LEAF Funding, Inc., which will originate our equipment leases and secured loans, and LEAF Financial Corporation, which will service our equipment leases and secured loans. See the “Management – Organizational Diagram,” “Investment Objectives and Strategies – Origination and Servicing Agreement,” and “Plan of Distribution” sections of this prospectus. The purchase price of our equipment or existing leases on which our general partner’s acquisition fees are based, include amounts attributable to debt or securitization financing we incur or assume in connection with the equipment, leases or secured loans. Our general partner will pay its out-of-pocket expenses related to its acquisition activities on our behalf, but not the acquisition expenses incurred by its affiliate, LEAF Funding, as discussed below, and our general partner will not be reimbursed by us for those expenditures other than through its receipt of these acquisition fees, although it will receive reimbursements for certain operating expenses we incur as described below. Notwithstanding, the acquisition expenses will be included in the purchase price of the equipment and leases, or the principal amount of the secured loans, on which our general partner’s 2% acquisition fee is based. In addition, we expect to acquire all of our leases and secured loans through LEAF Funding, an affiliate of our general partner, which will originate and hold the leases and secured loans on a temporary basis in order to facilitate their acquisition by us. The purchase price we pay LEAF Funding for our leases and secured loans will not exceed LEAF Funding’s cost for acquiring and holding the leases and secured loans until we purchase them. Under United States general accepted accounting principles (“GAAP”), LEAF Funding’s “cost” will include origination fees it pays to certain of its employees for their efforts in locating and facilitating the acquisition of the leases and secured loans by LEAF Funding on our behalf, in amounts typically ranging from 1% to 3% of LEAF Funding’s cost for the leases and secured loans, that qualify as initial direct costs under GAAP. Our use of leverage, by increasing the amount we can invest in equipment, also increases the amount of our general partner’s acquisition fees and the amount of the purchase price we pay to LEAF Funding for our leases and secured loans as described above. (2)

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Operational Stage

Entity receiving compensation	Type and method of compensation	Estimated amount
General partner and its affiliates	Subordinated asset management fee for managing each type of investment described below equal to the lesser of the amount, for each type of lease or financing arrangement described below, that is reasonable, competitive, and would customarily be paid to non–affiliated third–parties rendering similar services in the same geographic location and for similar types of investments or: •         for our operating leases managed by third–parties under our general partner’s supervision – 1% of gross rental payments;	Not determinable at this time. During the period ending five years after this offering terminates, we will subordinate and defer payment of the management fees to the receipt by you and our other limited partners of annual cash distributions equal to 8.5% of your capital contributions, as adjusted by certain distributions made to you which are deemed to be a return of capital, on a cumulative basis as described in the “Income, Losses and Distributions – Reinvestment of Our Revenues in Additional Leases and Secured Loans” section of this prospectus.
	•         for our operating leases managed by our general partner or its affiliates – 4% of gross rental payments; •         for our full payout leases which contain net lease provisions – 2% of gross rental payments; and/or •         for our secured loans – 2% of gross principal and interest payments.

General partner and its affiliates	Subordinated remarketing fee for arranging the sale of any investment equal to the lesser of: •         3% of the contract sales price; or •         one–half the competitive commission charged by independent third–parties for comparable services. (5)	Not determinable at this time. We will not accrue or pay a subordinated remarketing fee for any portion of sales proceeds which we reinvest. We will subordinate and defer payment of the remarketing fees to the receipt by you and our other limited partners of cash distributions equal to the purchase price of your units plus annual cash distributions equal to 8.5%, compounded daily, of your capital contributions, as adjusted by certain distributions made to you which are deemed to be a return of capital, on a cumulative basis as described in the “Income, Losses and Distributions – Reinvestment of Our Revenues in Additional Leases and Secured Loans” section of this prospectus.
General partner and its affiliates	Re-leasing fee for arranging the re-lease of equipment equal to the lesser of: •         2% of gross rental payments derived from the re-lease; or •         the competitive rate for comparable services for similar equipment. (5)	Not determinable at this time. Re-leasing fees are subject to the following limitations: •         we will pay the re-leasing fees only if our general partner maintains adequate staff to provide re-leasing services; •         we will pay re-leasing fees only as we receive the related lease payments; •         we will not pay re-leasing fees if the re-lease is to the original lessee or its affiliates; •         we will pay re-leasing fees only if our general partner has rendered substantial re-leasing services; and •         we will pay re-leasing fees only if our general partner is compensated for rendering equipment management services, whether or not the asset management fee is then subordinated.
General partner and its affiliates	Partnership interest equal to 1% of all of our income, losses and cash distributions.	Not determinable at this time.

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Operational Stage

Entity receiving compensation	Type and method of compensation	Estimated amount
General partner and its affiliates	Reimbursement for our operating expenses paid on our behalf, including the actual cost of goods and materials obtained from unaffiliated third-parties, and also including reimbursement for our general partner’s administrative services reasonably necessary or advisable in its discretion to our prudent operation (e.g. legal and accounting expenses), provided that the reimbursement may not exceed the lesser of: •         the actual cost of the services; or •         the amount we would be charged by independent third-parties for comparable services. Also, there is no reimbursement for these services if they are already covered by a separate fee, and our general partner and its affiliates will not be reimbursed for the following expenses: •         salaries, fringe benefits, travel expenses or other overhead costs incurred by any controlling person of our general partner or its affiliates (6); or •         rent, depreciation, utilities, capital equipment or other similar overhead costs.	Not determinable at this time.

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Liquidation Stage

Entity receiving compensation	Type and method of compensation	Estimated amount
General partner and its affiliates	Our general partner’s and its affiliates’ compensation during the liquidation period generally is the same as set forth in “– Operational Stage,” above, except that no fees or expense reimbursements associated with new investments will be paid since no revenues may be reinvested in purchases of additional equipment during the liquidation period. The liquidation period begins five years after the last closing date on which we admit subscribers for units as limited partners. It ends when all of our assets have been sold, our creditors have been paid, the remaining proceeds have been distributed to our partners and a certificate of termination has been filed.	See “– Operational Stage,” above.

(1)     If you choose to use your cash distributions from your initial investment in us to purchase additional units during the offering period or, if you are not a resident of Massachusetts, Minnesota or Ohio, your cash distributions from your prior investments, if any, in LEAF I or LEAF II, which are previous equipment leasing funds sponsored by LEAF Financial, an affiliate of our general partner, then the units will be purchased on the same terms as our other units are being offered except that the subscription price will be the Distribution Investment Unit Price, and except that there is no minimum amount of units that must be purchased using distributions from us, LEAF I or LEAF II. Also, there is a discounted subscription price for certain other investors as described in the “Plan of Distribution” section of this prospectus.

(2)     Acquisition fees include our general partner’s out-of-pocket expenses in connection with our acquisition of equipment, leases and secured loans, but do not include fees to unaffiliated finders and brokers. Acquisition fees also do not include origination fees paid by LEAF Funding to certain of its employees in connection with their efforts in locating equipment, leases and secured loans and facilitating their acquisition on our behalf, that qualify under GAAP as initial direct costs and are included in LEAF Funding’s cost to temporarily acquire the equipment, leases and secured loans we purchase from LEAF Funding. Our general partner will reduce or refund acquisition fees if our investment in equipment, including equipment leases and secured loans, is less than the greater of:

•  80% of the offering proceeds reduced by .0625% for each 1% of financing encumbering our investments; or

• 75% of the offering proceeds.

For example, if we had no financing, we would invest at least 80% of our offering proceeds in our investments. If we had 80% financing, we would invest at least 75% of our offering proceeds in our investments, computed as follows:

80% x .0625% = 5%

80% - 5% = 75%

(3) An operating lease is one in which the aggregate noncancellable rental payments during the initial term of the lease, on a net present value basis, are not sufficient to recover the purchase price of the equipment. A full payout lease is one in which the gross rental payments, on a net present value basis, are at least sufficient to recover the purchase price of the equipment. Typically, rental payments under a full payout lease also include an appropriate return.

(4) We will pay the asset management fee monthly, subject to its subordination. This fee is for our general partner’s services in:

• establishing our portfolio, including obtaining financing;

• collecting lease revenues;

• monitoring compliance by lessees with the lease terms;

• assuring that equipment is being used in accordance with all contractual arrangements;

• arranging for necessary maintenance and repair of equipment if a lessee fails to do so;

• monitoring property, sales and use tax compliance; and

• preparing operating and financial data reports.

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(5)       A “Competitive” commission is one which is reasonable, customary and competitive in light of the size, type and location of the equipment.

(6) Our partnership agreement defines a “controlling person” of our general partner or any of its affiliates as its chairmen, directors, presidents, or other executive or senior officers, any holder of a 5% or greater interest in our general partner or any such affiliate or any person having the power to cause the direction of our general partner or any such affiliate, whether through ownership of voting securities, by contract or otherwise.

We estimate that the total amount of expenses we reimburse to our general partnerand its affiliates during our first full year of operations, assuming we sell the maximum number of units, will be approximately $900,000, as set forth in the following table.

Estimate of Our Expense Reimbursements to Our General Partner During Our First Full Year of
Operations

	2007
Accounting/Information Technology	$	510,300
Customer Service	$	299,700
Investor Services	$	90,000

TOTAL: $ 900,000

(1) These expense reimbursements are expected to consist of labor expenses of employees, excluding their respective chairmen, directors, presidents, or other executive or senior officers, of LEAF Financial and its affiliates for services, and are based on the employees’ time records.

In addition, Lease Equity Appreciation Fund I, L.P. (“LEAF I”), which was initially sponsored by LEAF Asset Management, Inc., a wholly-owned subsidiary of our general partner that merged into LEAF Financial, an affiliate of our general partner, in June 2004, began operations March 3, 2003 and closed its offering of units on August 15, 2004, with offering proceeds of $17,060,774. As of September 30, 2006, see the table below, our general partner and its affiliates had received cumulative expense reimbursements of $2,051,711 (unaudited) from LEAF I. Lease Equity Appreciation Fund II, L.P. (“LEAF II”), which was sponsored by LEAF Financial, an affiliate of our general partner, began operations April 14, 2005 and had its final closing date on October 13, 2006. As of September 30, 2006, see the table below, our general partner and its affiliates had received cumulative expense reimbursements of $833,588 (unaudited) from LEAF II. Also, see the “Other Programs Managed by Our General Partner or its Affiliates” section of this prospectus regarding the other programs sponsored by LEAF Financial before it was acquired by Resource America and new management installed.

The following is a tabular presentation of the expenses reimbursed to LEAF Financial, as general partner, including reimbursements to LEAF Asset Management, Inc. before it was merged into LEAF Financial, and its affiliates by LEAF I and LEAF II as discussed above.

Summary of Expense Reimbursements of

Lease Equity Appreciation Fund I, L.P. as of September 30, 2006 (unaudited) (1)(2)

	2006			2005			2004		2003
Accounting/Information Technology	$	240,284		$	333,259		$	145,588	$	265,939
Customer Service	$	179,652		$	221,351		$	271,920	$	306,450
Investor Services			(3)			(3)	$	64,673	$	22,596

TOTAL: $ 419,936 $ 554,611 $ 482,180 $ 594,985

(1) These expense reimbursements consist of labor expenses of employees of LEAF Financial and its affiliates, excluding their respective chairmen, directors, presidents, or other executive or senior officers, for services to, or on behalf of LEAF I, and are based on the employees’ time records.

(2) Lease Equity Appreciation Fund I, L.P. did not conduct any operations or reimburse any expenses to LEAF Financial, its general partner, in 2002, because it had not yet reached its minimum subscriptions.

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(3) During this period expenses for investor services were not, and will not be, reimbursed to LEAF Financial and its affiliates due to a transition in LEAF Financial’s method of tracking investor services and allocating the expenses described in footnote (1).

Summary of Expense Reimbursements of Lease Equity

Appreciation Fund II, L.P. as of September 30, 2006 (unaudited) (1)(2)

	2006			2005
Accounting/Information Technology	$	311,089		$	226,676
Customer Service	$	182,574		$	113,249
Investor Services			(3)			(3)

TOTAL: $ 493,663 $ 339,926

(1) These expense reimbursements consist of labor expenses of employees of LEAF Financial and its affiliates, excluding their respective chairmen, directors, presidents, or other executive or senior officers, for services to, or on behalf of LEAF I, and are based on the employees’ time records.

(2) Lease Equity Appreciation Fund II, L.P., which was formed in 2004, did not conduct any operations or reimburse any expenses to LEAF Financial, its general partner, in 2004, because it had not yet reached its minimum subscriptions.”

(3) During this period expenses for investor services were not, and will not be, reimbursed to LEAF Financial and its affiliates due to a transition in LEAF Financial’s method of tracking investor services and allocating the expenses described in footnote (1).

CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITIES

Conflicts of Interest

In General

Our general partner may be subject to various conflicts of interest arising out of its relationship to us. Because of our general partner’s organizational and operational control over us, these conflicts will not be resolved through arms-length negotiations but, rather, through the exercise of our general partner’s judgment consistent with its fiduciary responsibilities to you and us. Some provisions of our partnership agreement are designed to protect the interests of you and our other limited partners if conflicts arise. In this regard, you should read Article IX of our partnership agreement and, in particular, Sections 9.2 and 9.5. These sections do the following:

• limit the actions our general partner may take on our behalf;

• limit the compensation and fees we will pay our general partner and its affiliates; and

• limit the expenses for which we will reimburse our general partner and its affiliates.

Further, our general partner depends on its indirect parent company, Resource America, for management and administrative functions and financing for capital expenditures. Neither our partnership agreement nor any other agreement requires Resource America to pursue a future business strategy that favors us. Resource America’s directors and officers have a fiduciary duty to make decisions in the best interests of the stockholders of Resource America. Our general partner’s management, administrative and financial dependence on Resource America has the effect of creating a conflict of interest with us. Notwithstanding this conflict of interest, our general partner must uphold its fiduciary duties to us as described in “– Fiduciary Duty of Our General Partner,” below.

However, our partnership agreement does not necessarily directly respond to each potential conflict, and there will be no established mechanism to resolve these conflicts. In these situations, our general partner will rely solely on its judgment, subject to its fiduciary duties, to resolve the conflict. The potential conflicts include those set forth below.

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Our General Partner’s Compensation is Not the Result of Arm’s Length Negotiation

Our general partner has unilaterally determined the compensation that we will pay it and its affiliates, including Chadwick Securities, Inc., LEAF Funding and LEAF Financial. However, our general partner believes that the amount of compensation is consistent with practices in the industry and applicable offering guidelines in effect on the date of this prospectus.

Actions Taken By Our General Partner Will Affect the Amount of Cash Available For Distribution to Limited Partners and Our General Partner’s Compensation

The amount of cash we have available for distribution to you and our other limited partners will be affected by decisions of our general partner regarding various matters, including:

• the amount and timing of equipment purchases and sales;

• cash expenditures;

• financing; and

• the creation, reduction or increase of reserves.

We intend to increase the amount of equipment we can acquire and lease by obtaining financing to provide approximately 80% of the aggregate cost of all of the equipment we acquire. The actual amount of borrowings we incur, however, may be higher or lower than that amount. In addition, using financing to increase the amount of equipment we acquire will also increase our general partner’s acquisition and management fees, which are directly based on the total amount of our assets, and the purchase price of the equipment, leases and secured loans we purchase from LEAF Funding at its cost, which includes the origination fees it pays to certain of its employees that qualify as initial direct costs of LEAF Funding under GAAP. See the “Management Compensation” section of this prospectus.

Our general partner will be liable for our obligations to the extent that they exceed our assets. As a result, our general partner has the right to cause us to establish and maintain cash reserves that it believes are necessary to meet our obligations. Because our general partner may be exposed to liability to our creditors if our reserves are insufficient to pay our contingent liabilities, our general partner may have a conflict of interest in allocating our cash flow between distributions to you and our other limited partners or to our reserve accounts. To the extent that our general partner increases the amount of cash it allocates to reserves, the amount of cash available for distributions to you and our other limited partners will decrease and our general partner’s exposure to our contingent liabilities may be lessened.

Our General Partner and Its Affiliates Will Engage in Activities That Compete With Us

Our partnership agreement does not prohibit our general partner or its affiliates from investing in, acquiring or leasing equipment, and they will continue to engage in acquisitions, financing, refinancing, leasing and re-leasing opportunities on their own behalf or on behalf of other partnerships or entities. Neither our general partner nor its affiliates may, however, publicly offer for sale interests in more than one equipment leasing program simultaneously unless the programs:

• have different investment objectives; or

• are specified equipment programs, as defined under relevant securities regulations or guidelines.

Our general partner and its affiliates have the right to take for their own accounts, or to recommend to any program they manage, any particular investment opportunity, subject to the limitations set forth in our partnership agreement.

Any conflicts in determining and allocating investments between us and our general partner, or between us and another program managed by our general partner or its affiliates, will be resolved by our general partner’s investment committee, which also will serve as LEAF Financial’s investment committee as discussed in the “Management – Investment Committee” section of this prospectus. Generally, if an investment is appropriate for more than one program our general partner and its investment committee will allocate the investment to a program (which includes us) after taking into consideration at least the following factors:

• which program has been seeking investments for the longest period of time;

• whether the program has the cash required for the investment;

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• whether the amount of debt to be incurred with respect to the investment is acceptable for the program;

• the effect the investment would have on the program’s cash flow;

• whether the investment would further diversify, or unduly concentrate, the program’s investments in a particular lessee, class or type of equipment, location, industry, etc.; and

• whether the term of the investment is within the term of the program.

Notwithstanding the foregoing, our general partner and its investment committee may make exceptions to these general policies when, in our general partner’s judgment, other circumstances make application of these policies inequitable or uneconomic.

We May Enter Into Joint Ventures With Affiliated Programs

We may invest in joint ventures with other programs that are sponsored by our general partner or its affiliates. These investments may result in conflicts of interest resulting from the differing financial positions of the co-venturers. For example, it may be in the interest of one entity to sell jointly-held equipment while it may be in the interest of the other entity to continue holding the equipment. However, we will not participate in a joint venture unless:

• we and the other program have similar investment objectives;

• we and the other program invest on substantially the same terms;

• there are no duplicate fees;

• our general partner’s compensation in us and the other program is substantially the same;

• we have the right of first refusal to buy any investment the other program wants to sell; and

• the joint venture is entered into either for the purpose of effecting appropriate diversification for us and the other program, or for the purpose of relieving our general partner or its affiliates from a commitment entered into for the purposes of:

• facilitating our acquisition of equipment or equipment leases or secured loans;

• borrowing money or otherwise obtaining financing for us; or

• any other lawful purpose related to our business.

Notwithstanding, there may be an impasse on joint venture decisions since neither we nor the other program will have complete control over the joint venture’s equipment and, although we will have the right to buy the equipment from the other joint venturer in the event of a sale, we may not have the resources do so.

We Do Not Have Any Employees and Rely on the Employees of Our General Partner and Its Affiliates

We do not have any officers or employees and will rely solely on the officers and employees of our general partner and its affiliates to manage us and our business. Our general partner and its affiliates will conduct business activities of their own in which we will have no economic interest. The officers and employees of our general partner and its affiliates who provide services to us are not required to work full time on our affairs and will devote significant time to the affairs of our general partner and its affiliates and will be compensated by our general partner and its affiliates for those services. There may be significant conflicts between us and our general partner and its affiliates regarding the availability of these officers and employees to provide services to us.

We Must Reimburse Our General Partner and Its Affiliates for Expenses

We must reimburse our general partner and its affiliates for costs incurred by them in managing and operating us, including specified costs incurred by them in providing corporate staff and support services properly allocable to us. See the “Management Compensation” section of this prospectus.

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We Have Not Retained Separate Counsel or Other Professionals

The legal counsel that represents our general partner and the dealer-manager, Chadwick Securities, Inc., also represents us. You and our other limited partners, as a group, have not been represented by legal counsel. Counsel has not acted on behalf of you and other prospective investors in us, nor has counsel conducted a review or investigation of us, our general partner or this offering on your behalf. Therefore, none of the agreements and arrangements between us and our general partner, including our partnership agreement, or between us and our general partner’s affiliates, including Chadwick Securities, Inc., LEAF Funding and LEAF Financial, was negotiated on an arm’s length basis.

The attorneys, accountants and other experts who perform services for us will also perform services for our general partner, its affiliates and for other partnerships or ventures that our general partner or its affiliates may sponsor. However, should a dispute arise between us and our general partner, we will retain separate legal counsel to represent us in the matter.

Lack of Independent Underwriter and Due Diligence Investigation in This Offering

The dealer-manager for this offering is Chadwick Securities, Inc., an affiliate of our general partner. Although Chadwick Securities, Inc. will receive a reimbursement of up to .5% of our offering proceeds for the bona fide accountable due diligence expenses of the selling dealers, except for units sold to certain investors as described in the “Plan of Distribution” and “How to Subscribe” sections of this prospectus, all of which it will reallow to the selling dealers, its review and due diligence investigation of us and the information provided in this prospectus cannot be deemed to be independent.

Conflicts Regarding Redemption of Units

You and our other investors may present your units to us for redemption at any time. This creates the following conflicts of interest between you and our general partner.

• We have no obligation to redeem your units at any time for any reason. Our general partner may decline your redemption request in its sole discretion. For example, if our general partner determines that we do not have the necessary cash flow, taking into account future distributions to our other partners and foreseeable investments, reinvestments, and operating expenses, your request may be declined. In addition, our general partner may conclude that the redemption might cause our total unit transfers in the year to exceed 2% of our total capital or profits interests, which is not permitted under our partnership agreement. See Appendix A to this prospectus. All of these determinations are subjective and will be made in our general partner’s sole discretion.

• Our general partner will also determine the redemption price based on provisions set forth in our partnership agreement. To the extent the formula for arriving at the redemption price has any subjective determinations, they will fall within the discretion of our general partner.

See the “Redemption of Units” section of this prospectus.

Our General Partner Also is Our Tax Matters Partner

Our general partner will serve as our tax matters partner and represent us before the IRS and all other taxing authorities. As tax matters partner, our general partner will have broad authority to act on behalf of you and our other investors in any administrative or judicial proceeding involving the IRS, and this authority may involve conflicts of interest. For example, a potential conflict would include whether to contest or settle a proposed adjustment by the IRS to the amount of our depreciation deductions under our operating leases, which are allocated 99% to you and our other investors. While our general partner will take into account the interests of you and our other investors as a whole, there is no assurance that any settlement would be in the best interest of you or any other particular investor given your or his particular tax situation.

Our General Partner and Its Affiliates Will Purchase Units as Investors

Our general partner and its affiliates currently intend to purchase not less than 10,000 units ($1 million) and may acquire up to approximately 5% of the total units sold in this offering, if greater. These subscriptions will not be included in the minimum number of units required for us to begin operations, but the price of their units will be reduced by 7% as described in the “Plan of Distribution” section of this prospectus. Thus, even though they pay a reduced price for their units, these investors generally will:

• share in our income, losses and distributions on the same basis as you and our other investors as described in the “Income, Losses and Distributions” section of this prospectus; and

• have the same voting rights, except that they are prohibited from voting on the removal of our general partner as general partner.

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The purchase of units by our general partner, its officers, directors, or other affiliates as limited partners will dilute the voting rights of you and our other investors and there may be a conflict with respect to certain matters. See the “Summary of Our Partnership Agreement – Voting Rights of Limited Partners” section of this prospectus.

General Restrictions

To reduce, but not eliminate, certain conflicts of interest we will not:

• issue any units after this offering terminates or issue units in exchange for property;

• make loans to our general partner or its affiliates;

• receive loans from our general partner or its affiliates unless the loan has a term of 12 months or less from the date on which it was made and any interest or other financing charges or fees we pay do not exceed the lower of the following:

• if our general partner borrowed to make the loan, the rate of interest and other amounts paid or payable by our general partner or its affiliate in connection with the borrowing; or

• if our general partner did not borrow to make the loan, the rate of interest and other amounts paid or payable in an arm’s-length borrowing that we could obtain, without reference to our general partner’s or its affiliate’s financial abilities or guarantees;

• invest in or underwrite the securities of other partnership programs;

• operate in a manner that would cause us to be classified as an “investment company” for purposes of the Investment Company Act of 1940;

• grant our general partner or any of its affiliates exclusive listing rights to sell our investments or other assets;

• except as described in this prospectus, permit our general partner or any of its affiliates to receive a fee or commission in connection with the reinvestment of our cash from sales or operations, or the resale, re-lease, exchange or refinancing of equipment, except as permitted by our partnership agreement and as described in this prospectus;

• grant our general partner or any of its affiliates any rebates or give-ups or participate in any reciprocal business arrangements with them that would circumvent the restrictions in our partnership agreement, including the restrictions applicable to transactions with affiliates of our general partner;

• permit our general partner, directly or indirectly, to pay or award any commissions or other compensation to any person engaged by a potential investor for investment advice as an inducement to the advisor to advise the purchaser of our units; but this does not prohibit the normal sales commissions payable to the selling dealers as described in the “Plan of Distribution” section of this prospectus;

• purchase or lease any equipment from, or sell or lease equipment to, our general partner or its affiliates or any investment program in which they have an interest. However, if the conditions set forth below are met, we expect that we will acquire all of our equipment, leases and secured loans from LEAF Funding, an affiliate of our general partner, and that LEAF Funding will first acquire the equipment on a temporary or interim basis in order to facilitate our acquisition of the equipment or our financing needs. The conditions referred to above are the following:

• our general partner or its affiliate, including LEAF Funding, holds the equipment only on an interim basis, generally not longer than six months, for purposes of facilitating the acquisition of the equipment by us, borrowing money or obtaining financing for us or for other purposes related to our business;

• our general partner determines that the acquisition of the equipment is in our best interest;

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• we acquire the equipment at a price no greater than the cost to our general partner or its affiliates, as determined under GAAP and as adjusted for intervening operations, plus compensation permitted under our partnership agreement and described in this prospectus;

• there is no difference in interest terms of any financing secured by the equipment at the time acquired by our general partner or its affiliates and the time acquired by us; and

• our general partner or its affiliates do not benefit from the transaction apart from compensation permitted under our partnership agreement and described in this prospectus. See the “– We May Enter Into Joint Ventures With Affiliated Programs,” above, and the “Investment Objectives and Strategies – Origination and Servicing Agreement” section of this prospectus.

Also, except as permitted under the Origination and Servicing Agreement and our partnership agreement, our general partner may not enter into any agreements, contracts or arrangements on our behalf with itself or any of its affiliates.

Fiduciary Duty of Our General Partner

Our general partner is accountable to us as a fiduciary. Under Delaware law, this generally means that our general partner has duties of due care and fair dealing in acting for us and handling our affairs. Our partnership agreement does not excuse our general partner from liability or provide it with any defenses for breach of its fiduciary duty. However, our partnership agreement does permit our general partner and its affiliates to have business interests or activities that may conflict with ours, and includes provisions to resolve conflicts in allocating investment opportunities among us and other programs that may be sponsored by our general partner and its affiliates.

The fiduciary duty owed by a general partner is analogous to the fiduciary duty owed by directors to a corporation and its stockholders and is subject to the same rule, commonly referred to as the “business judgment rule.” Under this rule, directors are not liable for mistakes made in the good faith exercise of honest business judgment or for losses incurred in the good faith performance of their duties when performed with such care as an ordinarily prudent person would use. Under the terms of our partnership agreement our general partner and its affiliates have limited their liability to us and to you and our other investors for any loss suffered by us or by you and our other investors that arises out of any action or inaction on their part if:

• they determined in good faith that the course of conduct was in our best interest;

• they were acting on behalf of, or performing services for, us; and

• their course of conduct did not constitute negligence or misconduct.

In addition, as permitted by Delaware law, we will indemnify our general partner and its affiliates against any loss of the kind described in the preceding sentence to the extent of our own assets, but without any additional obligation on the part of you and our other limited partners. However, we will not indemnify our general partner or its affiliates for any violation, or alleged violation, of federal or state securities laws unless:

• there has been a judgment on the merits in favor of our general partner and its affiliates or the claims were dismissed on the merits by the court;

• the court has been advised by us of the position of the SEC and applicable state securities law authorities on the issue of indemnification for securities law violations; and

• the court approves the indemnification of litigation and/or settlement costs.

The effect of the foregoing provisions may be to limit your recourse to our general partner. However, you should be aware that, in the SEC’s opinion, the indemnification for liabilities under the Securities Act of 1933, as amended, is contrary to public policy and therefore unenforceable.

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The Delaware Revised Uniform Limited Partnership Act provides that a limited partner may institute legal action (a “derivative” action) on a partnership’s behalf to recover damages from a third-party when the general partner refuses to institute the action or where an effort to cause the general partner to do so is not likely to succeed. In addition, the statutory or case law may permit a limited partner to institute legal action on behalf of himself and all other similarly situated limited partners (a “class action”) to recover damages from a general partner for violations of its fiduciary duties to the limited partners. In addition, we will not incur the cost of that portion of any insurance that insures any party against any liability the indemnification of which is prohibited under our partnership agreement; provided, however, that with respect to public liability insurance obtained by us in connection with any of our equipment, equipment leases, secured loans or business operations, our general partner is permitted to add itself as an additional insured thereunder so long as, and to the extent that, our general partner pays for the incremental premium costs resulting from its being added as an additional insured. For this purpose, “public liability insurance” includes insurance that would cover damage to property or personal injury to non-affiliated persons incurred during the performance of services related to us and our operations.

MANAGEMENT

Our General Partner. Our general partner is LEAF Asset Management, LLC, a Delaware limited liability company with offices at 1818 Market Street, 9^th Floor, Philadelphia, Pennsylvania 19103. Our general partner was formed in August 2006 to act as the general partner and manager of equipment leasing and financing partnerships, and its executive officers and directors will be responsible for selecting, managing and disposing of our equipment, leases and secured loans. In this regard, after we receive the minimum offering proceeds and hold our initial closing, we intend to enter into the Origination and Servicing Agreement under which LEAF Funding, a wholly-owned subsidiary of LEAF Financial and an affiliate of our general partner, will originate leases and secured loans for us and LEAF Financial, an affiliate of our general partner, will service our portfolio of leases and secured loans. LEAF Financial has more than 100 individuals, including LEAF Funding’s field sales force and telephone sales force that are dedicated to originating leasing assets. LEAF Financial also uses a complete technology platform that enables automated lease applications, credit scoring, customer relationship management, asset tracking, collection management, and document generation. See the “Investment Objectives and Strategies” section of this prospectus for a more detailed discussion of the services LEAF Financial and LEAF Funding will provide to us.

In addition, our general partner depends on its indirect parent company, Resource America, for management and administrative functions and financing for capital expenditures. Resource America is a publicly-traded specialized asset management company (Nasdaq: REXI) that uses industry-specific expertise to generate and administer investment opportunities for its own account and for outside investors in the structured finance, equipment leasing and financing and real estate sectors.

Equipment Finance	Real Estate	Structured Financial Products

As of the date of this prospectus, the officers and directors of our general partner are as follows:

Name	Age	Position
Crit S. DeMent	54	Chairman of the Board of Directors and Chief Executive Officer
Miles Herman	46	President, Chief Operating Officer and Director
Jonathan Z. Cohen	36	Director
Steven J. Kessler	62	Director
Robert K. Moskovitz	49	Chief Financial Officer and Treasurer
David H. English	55	Executive Vice President and Chief Investment Officer
Daniel G. Courtney	43	Senior Vice President – Investment Programs
Darshan V. Patel	36	General Counsel and Secretary

With respect to the biographical information set forth below:

• the approximate amount of an individual’s professional time devoted to the business and affairs of our general partner, LEAF Financial and LEAF Funding have been aggregated, because there is no reasonable method for them to distinguish their activities among the companies; and

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• for those individuals who also hold senior positions with other affiliates of our general partner, if it is stated that they devote approximately 100% of their professional time to the business and affairs of our general partner, LEAF Financial and LEAF Funding, it is because either the other affiliates are not currently active, or the individuals are not required to devote a material amount of their professional time to those affiliates, or there is no reasonable method to distinguish their activities between their professional time devoted to the business and affairs of our general partner, LEAF Financial and LEAF Funding, on the one hand, and their professional time devoted to the business and affairs of our general partner’s other affiliates, such as, for example, another affiliated investment program or Chadwick Securities, Inc.

Crit S. DeMent has been Chairman of the Board of Directors and Chief Executive Officer of LEAF Asset Management since it was formed in August 2006. Mr. DeMent also serves as Chairman of the Board of Directors and Chief Executive Officer of LEAF Financial since November 2001, Chairman of the Board of Directors of LEAF Funding since March 2003, a Senior Vice President of Resource America since 2005 and Senior Vice President – Equipment Leasing of Resource Capital Corp. since March 2005. Before that, he was President of Fidelity Leasing, Inc. and its successor, the Technology Finance Group of Citi-Capital Vendor Finance from 1998 to 2001. Mr. DeMent was Vice President of Marketing for Tokai Financial Services from 1987 through 1996. Mr. DeMent expects to devote approximately 75% of his professional time to the business and affairs of our general partner, LEAF Financial and LEAF Funding.

Miles Herman has been President, Chief Operating Officer and a Director of LEAF Asset Management since it was formed in August 2006. Mr. Herman also serves as President, Chief Operating Officer and a Director of LEAF Financial since January 2002, and Senior Vice President and a Director of LEAF Funding since January 2004. Mr. Herman held various senior operational offices with Fidelity Leasing, Inc. and its successor from 1998 to 2001, ending as Senior Vice President. From 1990 to 1998, he held various operational, marketing, program management, business development and sales positions with Tokai Financial, most recently as Director as Capital Markets. Before that, he served as Vice President, Operations and Sales at LSI Leasing Services, Inc. from 1989 to 1990, and as a manager of operations at Master Lease Corporation from 1984 to 1989. Mr. Herman expects to devote approximately 100% of his professional time to the business and affairs of our general partner, LEAF Financial and LEAF Funding.

Jonathan Z. Cohen has been a Director of LEAF Asset Management since it was formed in August 2006. Mr. Cohen also serves, or has served, in the following positions with Resource America: President since 2003, Chief Executive Officer since 2004, a Director since 2002, Chief Operating Officer from 2002 to 2004, Executive Vice President from 2001 to 2003, and Senior Vice President from 1999 to 2001. In addition, Mr. Cohen serves as Vice Chairman of the Managing Board of Atlas Pipeline Partners GP, LLC since its formation in 1999, Vice Chairman and a Director of Atlas America, Inc. since its formation in 2000, Trustee and Secretary of RAIT Investment Trust (a publicly-traded real estate investment trust) since 1997, Vice Chairman of RAIT since 2003, and Chairman of the Board of The Richardson Company (a sales consulting company) since 1999.

Steven J. Kessler has been a director of LEAF Asset Management since it was formed in August 2006. Mr. Kessler also serves, or has served, in the following positions with Resource America: Executive Vice President since 2005, Chief Financial Officer since 1997, and Senior Vice President from 1997 to 2005. Before joining Resource America, Mr. Kessler was Vice President-Finance and Acquisitions at Kravco Company (a national shopping center developer and operator) from 1994 to 1997. From 1983 to 1993, Mr. Kessler worked for Strouse Greenberg & Co., a regional full service real estate company, ending as Chief Financial Officer and Chief Operating Officer. Prior to 1993, Mr. Kessler was a Partner at Touche Ross & Co. (now Deloitte & Touche LLP), independent public accountants. Mr. Kessler also serves as Trustee of GMH Communities Trust (a publicly-traded specialty housing real estate investment trust) since 2004.

Robert K. Moskovitz has been Chief Financial Officer, Chief Accounting Officer and Treasurer of LEAF Asset Management since it was formed in August 2006. Mr. Moskovitz also serves as Chief Financial Officer and Chief Accounting Officer of LEAF Financial since February 2004, and Treasurer of LEAF Financial since September 2004, and Chief Financial Officer of LEAF Funding since May 2004. He has over twenty years of experience as the Chief Financial Officer of both publicly and privately owned companies. From 2002 to 2004, Mr. Moskovitz was an independent consultant on performance management initiatives, primarily to the financial services industry. From 2001 to 2002 he was Executive Vice President and Chief Financial Officer of ImpactRx, Inc., which provides advanced sales and marketing intelligence to pharmaceutical companies. From 1999 to 2001, he was the Chief Financial Officer of Breakthrough Commerce LLC, a holding company that provided seed capital and management to technology start-ups. From 1983 to 1997 Mr. Moskovitz held senior financial positions with several high growth public and privately held companies. He began his professional career with Deloitte & Touche (formerly Touche Ross & Co). Mr. Moskovitz is a Certified Public Accountant and holds a B.S. degree in Business Administration from Drexel University. Mr. Moskovitz expects to devote approximately 100% of his professional time to the business and affairs of our general partner, LEAF Financial and LEAF Funding.

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David H. English has been Executive Vice President and Chief Investment Officer of LEAF Asset Management since it was formed in August 2006. Mr. English also serves as Executive Vice President of LEAF Financial since April 2003 and President and a Director of LEAF Funding since May 2003. From 1996 until joining LEAF Financial, Mr. English was the Senior Vice President-Risk Management for Citi-Capital Vendor Finance’s Technology Finance Group, and its predecessor, Fidelity Leasing, Inc., where he held a similar position. From 1991 to 1996 Mr. English held various credit and operational management positions with Tokai Financial Services, Inc., including Director of Credit for the small ticket leasing division. Mr. English served in credit management positions with the Commercial Finance Division of General Electric Capital Corporation from 1990 to 1991 and with Equitable Life Leasing Corporation from 1985 through 1990. Mr. English began his career with Household Finance Corporation in 1974. Mr. English is a 1975 graduate of the University of Pittsburgh with a B.S. degree in Mathematics. Mr. English expects to devote approximately 100% of his professional time to the business and affairs of our general partner, LEAF Financial and LEAF Funding.

Daniel G. Courtney has been Senior Vice President, Investment Programs of LEAF Asset Management since it was formed in August 2006, and serves as Senior Vice President, Investment Programs of LEAF Financial since October 2005. Mr. Courtney also is registered with Chadwick Securities, Inc., an affiliate of our general partner and the dealer-manager of this offering. Mr. Courtney was Senior Vice President with ATEL Capital Group, a San Francisco-based sponsor of leasing limited partnerships from October 2003 to October 2005. From April 2000 to October 2003 Mr. Courtney was Vice President of Marketing and Business Development for BridgeSpan, Inc., which provided technology and financial services to banks and insurance companies. From 1984 to 2000 Mr. Courtney served in various sales and marketing management roles for various fund sponsors of real estate and equipment leasing programs and as a registered representative with Stifel Nicolaus & Company in St. Louis. Mr. Courtney is a General Securities Principal and holds various NASD securities licenses. Mr. Courtney received a B.S. degree in Business Administration from Southeast Missouri State University. Mr. Courtney expects to devote approximately 100% of his professional time to the business and affairs of our general partner, LEAF Financial and LEAF Funding.

Darshan V. Patel has been General Counsel and Secretary of LEAF Asset Management since it was formed in August 2006. Mr. Patel also serves as President of Chadwick Securities, Inc., the dealer-manager of this offering and an affiliate of our general partner, as General Counsel and Secretary of LEAF Financial since August 2001 and as Secretary of LEAF Funding since March 2003. In addition, Mr. Patel serves as Associate General Counsel of Resource America, a position he has held since 2001. From 1998 to 2001, Mr. Patel was associated with the law firm of Berman, Paley, Goldstein & Kannry, New York, NY. From 1996 to 1998, Mr. Patel was associated with the law firm of Glynn & Associates, Flemington, NJ. Mr. Patel expects to devote approximately 25% of his professional time to the business and affairs of our general partner, LEAF Financial and LEAF Funding.

LEAF Financial Corporation

As of the date of this prospectus, the officers and directors of LEAF Financial are as follows:

Name	Age	Position
Crit S. DeMent	54	Chairman of the Board of Directors and Chief Executive Officer
Miles Herman	47	President, Chief Operating Officer and Director
Jonathan Z. Cohen	36	Director
Alan D. Schreiber, M.D.	63	Director
Linda Richardson	59	Director
David H. English	55	Executive Vice President
Darshan V. Patel	36	General Counsel and Secretary
Robert K. Moskovitz	49	Chief Financial Officer and Treasurer
Daniel G. Courtney	44	Senior Vice President – Investment Programs
Nicholas R. Roberto	44	General Manager - Commercial
Sherryl B. Hughes	56	Vice President – Credit
Frank J. Monzo	48	Vice President of Portfolio Administration
James Grant	45	Vice President of Portfolio Servicing Operations
Gregory Kalescky	44	Vice President of Credit – Healthcare
Patrick McGahren	46	Vice President of Sales – Healthcare
William J. Conway	51	Vice President of Credit – Technology

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See “– Our General Partner,” above, for biographical information on certain of these individuals who are also officers of our general partner. Biographical information on the other officers is set forth below. Biographical information on the other directors will be provided by our general partner on request.

Nicholas R. Roberto joined LEAF Financial in January 2007 as the General Manager of its Industrial Business Unit. Prior to LEAF Financial, Mr. Roberto was a Vice President and Operations Manager with Financial Federal Credit Inc., a commercial finance company specializing in financing and leasing equipment in the construction, transportation, and waste management industries. For over 22 years, Mr. Roberto has held a variety of positions in the commercial finance industry, including serving as Vice President, Credit and Operations for American Express Business Finance Corporation from 1998 to 2000 and Vice President, Credit and Portfolio Quality for AT&T Capital Leasing Services from 1993 to 1998. Mr. Roberto holds an M.B.A. degree in Management and Finance from the University of Connecticut and a B.A. degree in Economics and Business from Lafayette College.

James Grant has been Vice President of Portfolio Management of LEAF Financial since February 2006. Prior to joining LEAF Financial, Mr. Grant was employed as Assistant Vice President at Financial Federal Credit, Inc. from April 2001 to February 2006. Before that, he was employed in senior level management capacities at several commercial finance institutions including Financial Federal Credit Inc., CNH Capital Corporation, Rockford Industries/American Express Business Finance Corporation, SEQUA Capital Corporation and Credit Alliance/Leasing Service Corporation.

Gregory Kalescky has been Vice President of Credit – Healthcare of LEAF Financial since April 2006. Prior to joining LEAF Financial, Mr. Kalescky was employed as a First Vice President with MBNA America (Delaware) N.A., a healthcare financial services institution, from October 2003 until March 2006. Prior to MBNA, Mr. Kalescky was Director of Healthcare Risk Management with DeLage Langden Financial Services from September 2000 through August 2001 and Director of Credit Diagnostic Imaging from October 2001 through August 2003. Mr. Kalescky holds a B.A. degree in Economics from Columbia University.

Frank J. Monzo has been Vice President of Portfolio Administration of LEAF Financial since November 2005. Mr. Monzo was Vice President of Finance for ExcellaDerm Corporation, a medical device manufacturer based in Rancho Santa Margarita, California, from October 2001 to October 2005. For 20 years prior to joining ExcellaDerm, Mr. Monzo held a variety of positions in the commercial finance industry, most recently as Vice President and Portfolio Manager for Finova Capital Corporation’s Corporate Finance division. Mr. Monzo holds a B.S. degree in Business Administration from LaSalle College.

Sherryl B. Hughes has been Vice President – Credit of LEAF Financial since June 2002. From 1999 to 2002, Ms. Hughes was a Vice President of Credit/Operations for Court Square Leasing Corporation. From 1997 to 1999 she was the Director of Credit and Portfolio Management at American Business Leasing, Inc. Ms. Hughes was the Corporate Credit Manager for Master Lease Corporation from 1983 until it was acquired by Tokai Bank. Following the acquisition, she held various managerial positions in Credit and Operations with Tokai Financial Services, Inc., until 1997.

Patrick McGahren has been LEAF Financial’s Vice President of Sales – Healthcare since April 2006. Prior to joining LEAF Financial, Mr. McGahren was a principal and the President of Unicyn Financial Companies, specializing in Healthcare Financing from September 2004 until April 2006. Prior to being named as President, Mr. McGahren held the Sr. V.P. Sales position at Unicyn from October 1999 to September 2004. From 1987 to 1999, Mr. McGahren held various sales and marketing positions at Unicyn and Coronet Funding Inc. Mr. McGahren holds a B.A. degree in Business Administration and Marketing from Rutgers University.

William J. Conway has been LEAF Financial’s Vice President of Credit – Technology since January 2007. Mr. Conway previously served LEAF Financial as Director of Credit from November 2005 to December 2007. From September 1991 to October 2005 Mr. Conway was the Credit Manager for NEC Financial Services Inc. From 1984 to 1990 Mr. Conway worked for Master Lease Corporation, which was acquired in 1988 by Tokai Financial Services, Inc., the equipment leasing subsidiary of the Tokai Bank of Japan, as Credit Officer, Corporate Training Director, and Middle Ticket Pricing Specialist. Mr. Conway holds a B.S. degree in Business Administration from Drexel University and a Masters Degree in Business Administration from Saint Joseph’s University.

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Investment Committee. Our general partner and its affiliate, LEAF Financial, have agreed that LEAF Financial’s investment committee also will serve as our general partner’s investment committee. The investment committee will review all significant transactions involving us, including any potential conflicts of interest regarding the acquisition of an investment by us and another affiliated program as discussed in “Conflicts of Interest – Our General Partner and its Affiliates Will Engage in Activities That Compete With Us.” The current members of LEAF Financial’s and our general partner’s investment committee are the following:

• Mr. Crit S. DeMent;

• Mr. Miles Herman; and

• Mr. David H. English.

See “– Our General Partner,” above, for biographical information on Crit S. DeMent, Miles Herman and David H. English. The investment committee will consult with the appropriate Business Unit Vice President of Credit (Messrs. Conway and Kalesky and Ms. Hughes) or Mr. Roberto on an as needed basis, depending on the type of transaction being considered. See “– LEAF Financial Corporation,” above, for biographical information on Messrs. Conway, Kalesky and Roberto and Ms. Hughes. In addition, other management members of LEAF Financial and Resource America may be called on to provide advice to the management committee on an as needed basis.

See the “Investment Objectives and Strategies” section of this prospectus for various discussion of the services the investment committee will provide on behalf of us and our general partner.

Code of Business Conduct and Ethics. Because we do not directly employ any persons, we rely on a Code of Business Conduct and Ethics adopted by Resource America that applies to the principal executive officer, principal financial officer and principal accounting officer of our general partner, as well as to persons performing services for us generally. You may request a copy of this code of ethics from our general partner at LEAF Asset Management, LLC, 1818 Market Street, 9^th Floor, Philadelphia, Pennsylvania 19103.

Organizational Diagram (1)

This organizational diagram does not include all of the subsidiaries of Resource America.

(1) After we receive our minimum offering proceeds and begin operations we will enter into an Origination and Servicing Agreement with LEAF Financial, an affiliate of our general partner, acting as a third-party servicer of our leases and secured loans, and LEAF Funding, another affiliate of our general partner, acting as a third-party originator of our leases and secured loans. See the “Investment Objectives and Strategies – Origination and Servicing Agreement” section of this prospectus.

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Compensation. We do not pay the officers or directors of our general partner or the officers and directors of its affiliates any compensation. However, we will pay our general partner and its affiliates fees and reimburse certain of their expenses incurred on our behalf as described in the “Management Compensation” section of this prospectus. These expense reimbursements include reimbursing our general partner and its affiliates for certain costs incurred on our behalf, including the cost of personnel, other than controlling persons of our general partner, who will perform administration, accounting, secretarial, transfer and other services required by us. These individuals also will perform similar services for our general partner and its affiliates and other investment programs, including LEAF Financial’s two prior equipment leasing programs, as well as investment programs to be formed in the future by our general partner or its affiliates. Our partnership agreement provides that expense reimbursements paid by us to our general partner or its affiliates must be limited to the lesser of their:

• actual cost; or

• the cost of comparable services from third-parties.

We expect that we will allocate the cost of employee and officer compensation and benefits, excluding those allocable to controlling persons of our general partner, based on the amount of their business time spent on our business.

Security Ownership of Certain Beneficial Owners. Resource America owns 100% of the common stock of Resource Asset Management, Inc., which owns 100% of our general partner, LEAF Asset Management, LLC, as its sole member and equity owner.

Change in Partnership Management. Our general partner may withdraw as general partner, or be removed as general partner by our limited partners, under the circumstances described in the “Summary of Our Partnership Agreement – Withdrawal or Removal of Our General Partner” section of this prospectus.

Affiliated Company. Chadwick Securities, Inc., the dealer-manager for this offering, is a Pennsylvania corporation and an indirect wholly-owned subsidiary of Resource America. It is registered as a broker-dealer with the SEC and is a member of the NASD and the Securities Investor Protection Corporation.

OTHER PROGRAMS MANAGED BY OUR

GENERAL PARTNER OR ITS AFFILIATES

Lease Equity Appreciation Fund I, L.P. (“LEAF I”) was initially sponsored by LEAF Asset Management, Inc. beginning in 2002. In June 2004, LEAF Asset Management, Inc. which was a wholly-owned subsidiary of LEAF Financial Corporation, was merged into LEAF Financial. Currently, LEAF Financial serves as the general partner of LEAF I, which had its final closing on August 15, 2004, with total offering proceeds of $17,056,225 from 436 investors, and as the general partner of Lease Equity Appreciation Fund II, L.P. (“LEAF II”), which was sponsored by LEAF Financial and had its final closing on October 13, 2006, with total offering proceeds of $59,864,085.60 from 1,421 investors.

Set forth below for both LEAF I and LEAF II are charts of their respective equipment portfolios broken out by equipment type and by business type as of September 30, 2006. These allocations will vary from time to time in each of those programs. The most recent breakouts of these programs can be found in their most recent Form 10-K or Form 10-Q filings with the SEC as discussed below. The charts below combine operating leases and full payout leases and notes for summary purposes.

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Further information concerning LEAF I and LEAF II and their respective results of operations can be found in Appendix B to this prospectus. You also may obtain each program’s most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q by requesting the Form 10-K or Form 10-Q from LEAF Financial Corporation, 1818 Market Street, 9^th Floor, Philadelphia, Pennsylvania 19103.

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In addition, before LEAF Financial was acquired by Resource America, it had sponsored eight public equipment leasing programs between 1984 and 1990, which were known as the Fidelity Income Funds. Following LEAF Financial’s acquisition by Resource America, and under new management installed by Resource America, all eight of those programs have now been liquidated. We have not provided any information concerning those prior programs in Appendix B to this prospectus, because we believe that those prior programs are not comparable to us for the following reasons:

• the change in LEAF Financial’s management after Resource America acquired the company;

• the prior programs engaged in the direct lease of computer and computer peripheral equipment to large corporations;

• the prior programs did not use leverage; and

• the prior programs began between 1984 and 1990 when markets, leasing strategies, interest rates, equipment, etc. were much different from what they are now.

Unlike those prior programs, we anticipate that our asset base will encompass a broader range of equipment and we will use vendor and other third-party marketing channels rather than direct leasing. Also, we will focus on the small to mid-size business market, instead of large corporations, and we anticipate using extensive leverage to finance a substantial portion of our investment portfolio. You may request additional information concerning its previous liquidated programs from LEAF Financial Corporation, 1818 Market Street, 9^th Floor, Philadelphia, Pennsylvania 19103.

INVESTMENT OBJECTIVES AND STRATEGIES

Principal Investment Objectives

Our principal objectives are to invest in a diversified portfolio of equipment for lease to end users, or to acquire equipment subject to existing leases, or on a limited basis to finance the purchase of equipment by end users, in order to:

• preserve, protect and return your invested capital;

• generate regular cash distributions to you during the period beginning on our initial closing date and ending five years after this offering terminates (the “reinvestment period”);

• during the reinvestment period, enter into or purchase equipment leases and secured loans using our net offering proceeds from this offering, and borrow funds to increase diversification of our portfolio, and reinvesting our revenues after paying our expenses, establishing appropriate reserves and making certain distributions to you and our other investors; and

• provide additional cash distributions to you after the end of the reinvestment period until all of our equipment leases and secured loans have either matured and terminated or been sold (the “liquidation period”).

We sometimes refer to the process of marketing, selecting and acquiring equipment for lease to end users, equipment already subject to leases or funding loans secured by equipment as the “origination” of the investment. We have not identified or originated any investments as of the date of this prospectus.

We intend to structure each of our equipment investments at a price that we determine will provide a present value return to us, including the estimated residual value of the equipment in the case of an operating lease, which may or may not be fully realized by us as discussed below under “– Leasing Strategies – Residual Realization – Maximizing Returns At the End of a Lease,” that will achieve our investment objectives as described above, including the return of our invested capital and an appropriate return on our investment. In structuring our equipment investments, we will take into account our operating expenses, including the costs of using leverage to increase our portfolio diversification. See the “Risk Factors – Using Leverage to Build Our Portfolio Subjects Us to the Risk That Our Revenues May Not Be Sufficient to Cover Our Operating Costs Plus Debt Service and, Consequently, May Result in Losses” section of this prospectus. However, we may not be successful in achieving our investment objectives. See the “Risk Factors” section of this prospectus.

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We will make distributions to you and our other limited partners only if we have cash available after paying our obligations, including paying administrative expenses, fees and debt service and making allowance for necessary reserves. We expect to begin distributions in the month following the first full month of operations after we obtain the minimum offering proceeds and hold the initial closing in this offering. We also expect that, during the early years of our operations our distributions to you and our other limited partners will be substantially tax-deferred. However, we cannot assure you of the following:

• that our distributions to you and our other limited partners will be in any specific amount; or

• when our distributions to you and our other limited partners will be made.

Leasing – A Possible Portfolio Diversification Solution

The following table demonstrates that the addition of multiple asset classes to a portfolio can result in a reduction of overall investment risk, although this is not guaranteed, as illustrated in the chart below.

This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results. This image depicts the relationship between portfolio volatility, measured by standard deviation, and the number of asset classes included in a portfolio. Diversification does not eliminate the risk of experiencing investment losses.

In addition to stocks and bonds, many financial planners recommend an allocation to non-traditional or alternative investments as part of a diversified investment portfolio. An investment in equipment leasing and us can be viewed as an alternative investment designed to help reduce overall portfolio risk. However, we have not specifically identified our investments. As a result, you cannot evaluate the risks of, or potential returns from, any of our investments.

Investors may choose to invest in equipment leasing funds for various reasons, including:

• portfolio diversification;

• principal protection;

• regular cash distributions, which are not guaranteed and may constitute a return of capital; and

• tax advantages.

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An example of a conservative allocation of assets in an investment portfolio presented by “Business Week” is set forth in the following table. The table is only an example of how asset diversification in an investment portfolio can be achieved. You should not consider the asset allocations in the table appropriate for you without first consulting an independent financial advisor.

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Source: “Business Week” June2005

Equipment for Lease to End Users

We will purchase equipment for lease to end users. The cost per unit of the equipment we purchase for lease generally ranges from $20,000 to $2 million, and we expect the average per unit cost to be between $50,000 and $100,000. Due to this relatively small average per unit cost, we anticipate spreading the risk of lessee default over a large number of different end users.

We will enter into operating leases and full payout leases.

• Operating Leases are leases under which the aggregate noncancellable rental payments during the original term of the lease, on a net present value basis, are not sufficient to recover the purchase price of the equipment leased under the lease.

• Full payout leases are leases in which the rent over the term of the lease will return our invested capital plus an appropriate return without consideration of the residual, and where the lessee may acquire the equipment at the end of the lease term for a nominal amount.

We expect that approximately 65% to 75% of our leases will be full payout leases, with the remainder being operating leases. However, we are not limited as to type of leases we may enter into and, as a result, either operating leases or full payout leases possibly could constitute most of our portfolio.

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Also, we may use up to 30% of our total funds available for investment at any given time to finance the end user’s purchase of the equipment by providing a secured loan. A secured loan allows the end user to purchase the equipment and pay the purchase price over a period of time with the equipment and, if we determine prudent or necessary, other assets such as the borrower’s accounts receivable or personal guarantee, serving as collateral for the repayment of the loan. Our secured loans may be made to the same types of customers and cover the same types of equipment as our loans. For example, we may provide practice acquisition financing for dentists through our secured loans. This type of financing would be comprehensive as to the type of property financed through it in order to enable a new dentist to acquire all of the equipment and other tangible personal property he needs to set up a new practice, such as specialized dental equipment, furniture, filing cabinets, a telephone system, a copier, computers, software, etc. This type of secured loan also could be used by an established dentist to upgrade or expand his practice in the same manner as described above. These types of secured loans generally would be collateralized by the borrower’s accounts receivable and his personal guarantee, in addition to the equipment and furniture covered by the financing.

In addition, 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 lease. For example, all customers who receive secured loans from us must meet the same underwriting criteria as the customers that lease equipment from us. See “– Leasing Strategies – Underwriting – Obtaining the Right Kind of Business,” below. Before funding any secured loan, we will review the equipment that the end user proposes to purchase to ensure that we agree with the end user that the equipment has a fair market value equal to or greater than the proposed principal amount of the secured loan requested from us by the end user to acquire that equipment. Also, if our general partner, in its discretion, deems it advisable based on the above, we will either:

• reject the secured loan;

• reduce the principal amount of the secured loan; or

• require the end user to provide us additional collateral for the loan such as a guarantee, a pledge of the end user’s receivables, etc.

Equipment Already Subject to Lease

We also may acquire portfolios of equipment subject to existing leases or secured loans from third-parties. We anticipate that at the end of this offering, acquired equipment subject to existing leases or secured loans probably will not exceed 40% of our investments. While the per unit cost range and average per unit cost for the equipment will depend on the portfolios we may identify for acquisition, we anticipate that these costs may be less, and possibly materially less, than the cost of equipment for leases we originate.

Types of Equipment

We expect that we will focus on equipment to lease or finance that is essential for businesses to conduct their operations so that the end users will be highly motivated to make the required monthly payments in order to keep the equipment in place. We will particularly focus on business-essential equipment in the following areas:

• computers, including related software and hardware such as printers;

• medical and dental practice equipment for diagnostic and treatment use, including MRI and X-ray;

• industrial equipment, including manufacturing, material handling and electronic diagnostic systems;

• general office equipment, such as office machinery, furniture and telephone systems;

• energy and climate control systems; and

• light construction equipment, including small lift trucks and earth moving equipment and tractors.

We are not limited in the amount we may invest in any particular equipment category. The amount we invest in any one category will depend on the entities to which we lease or finance equipment and their equipment needs, neither of which can be accurately predicted by us as of the date of this prospectus. We anticipate, however, that we will lease a wide variety of equipment to a wide variety of end users who will be engaged in a wide variety of industries and be located in a wide variety of geographic locations. Within these categories, the equipment we lease or finance will generally meet the following criteria:

• standard production designs, rather than designs conforming to customer specifications;

• stable secondary market pricing history;

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• not subject to rapid obsolescence due to technology changes; and

• principally new equipment we purchase from manufacturers or vendors, although we may also purchase used or reconditioned equipment if the equipment is then owned by the entity which will be the lessee or if a particular lessee specifically wants to lease used equipment.

Equipment we purchase from third-parties subject to existing leases or secured loans will typically already be in use by the lessee or borrower at the time we acquire the equipment.

Market

Equipment leasing is a commercial financing product that provides businesses with an alternative source of cash to acquire equipment that is essential to their operations. Businesses may choose leasing over other financing options because of the following:

• the preservation of working capital;

• increased cash flow;

• tax benefits; and

• the opportunity and flexibility to protect against either changes in the business or technical obsolescence.

According to the Equipment Leasing and Finance Association’s website on November 9, 2006, see the address below, 80% of all U.S. businesses lease all or some of their equipment. The following figures from the Equipment Leasing Association represent the total amount of business investment in computers and equipment in the last five years and the amount of that total that is leased.

Year	Business Investment in Equipment (Billions)	Equipment Leasing Volume (Billions)	Percentage of Leased Equipment (Percent)
2001	697	216	31.0%
2002	620	205	33.1%
2003	629	182	28.9%
2004	670	185	27.6%
2005	733	203	27.7%
2006*	794	220	27.7%

Note: *2006 data are estimates.

U.S. Dept. of Commerce, Economics and Statistics Administration, Bureau of Economic Analysis, and Equipment Leasing Association of America. Estimates by Financial Institutions Consulting. Source: Equipment Leasing and Finance Association website at www.elaonline.org/research/trends.cfm on 11/04/06.

Of the estimated $850 billion spent by businesses on equipment in 2006, $229 billion (27%) is estimated to have been acquired by American businesses through leasing. *

* Source: Equipment Leasing and Finance Association “Overview of the Equipment Leasing & Finance Industry,” as of November 4, 2006 on its website at www.elaonline.org/research/overview.cfm.

We group domestic lease providers into the four major categories set forth below.

• Banks – companies that are either majority owned by, or affiliated with, a bank.

• Industrial – companies that are majority owned by an industrial or non-financial services parent company.

• Independent – public or privately owned and operated finance companies that offer leases directly to businesses and are not affiliated with any particular manufacturer or dealer.

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• Captive – companies that are primarily engaged in supporting the financing or leasing of a parent company’s products.

We will seek to provide our lease financing to the small to mid-size business market, generally businesses with:

• 500 or fewer employees;

• $1 billion or less in total assets; or

• $100 million or less in total annual sales.

We believe that this market niche is one whose equipment financing needs are not met in an organized fashion by traditional banks, commercial lenders or other financial services companies. We believe that many of these lenders are hindered in dealing with this market because:

• their overhead costs, regulatory structure, marketing efforts, operating systems or size make originating and processing relatively small transactions impractical;

• credit decisions using the standard financial analysis techniques employed by these lenders are impractical, if not unworkable, since few small to mid-sized private businesses have audited financial statements, and few traditional lenders have developed commercial credit scoring systems or risk rating tools that deal with the behavioral predictors and credit capacity evaluation necessary for informed lending to small and mid-size private businesses; and

• traditional commercial lenders often lack expertise for collateral evaluations on small and mid-size private business assets.

Thus, we believe that this market is only sporadically served by local, regional and national providers, with each confined to its own niche, product or locale.

Leasing Strategies

We believe the key factors in establishing and maintaining our lease portfolio are as follows:

• Origination – leasing at the right rate and cost. We expect that LEAF Funding, an affiliate of our general partner, will originate all of our equipment leases and secured loans. See “– Origination and Servicing Agreement,” below. LEAF Funding’s strategy for originating our leases and secured loans will involve marketing to direct sales organizations that will offer our leases as part of their equipment marketing package. By developing and maintaining these programs, LEAF Funding will be able to use the sales forces of these organizations, and those of their distributors, dealers and resellers, to market our leasing products and services to the highly dispersed population of small to mid-sized businesses. We anticipate that LEAF Funding’s programs will allow us to provide equipment financing to businesses without the need for us, our general partner or LEAF Funding to maintain a large field sales force and thus provide us with cost-efficient marketing.

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* Industries and vendors listed are from prior LEAF Funds. Although representative of the type of industries and vendors intended to be in this Fund, the Fund may acquire interests in equipment in different industries and from different vendors than depicted herein.

• Underwriting – obtaining the right kind of business.We anticipate that LEAF Financial, an affiliate of our general partner, will service all of our equipment leases and secured loans. See “– Origination and Servicing Agreement,” below. LEAF Financial, an affiliate of our general partner, has developed credit evaluation systems designed to address the inability of most small to mid-sized businesses to provide audited financial statements. Key elements of LEAF Financial’s systems include:

• automatic extraction of credit information from online data bases;

• credit scoring for smaller transactions; and

• credit analyst review only of larger transactions and transactions where credit scoring does not provide a clear acceptance or rejection.

LEAF Financial’s credit scoring systems, which were developed for it in part by Fair Isaac Corporation, operate by assigning point values to various factors such as business longevity, type of business, payment history, bank account balances, lawsuits, judgments, liens and credit ratings. Fair Isaac (NYSE: FIC) is a leading provider of credit management solutions and is the developer of the well known and widely used FICO® scores, the standard measure of credit risk for consumer lending by banks, credit card issuers, insurers and retailers. The credit scoring system uses data obtained from Dun & Bradstreet, Experian, Equifax and TransUnion. The system weighs these point values based on their correlation to default predictiveness, and then adds them to arrive at a credit score for the applicant. The system either grants or declines approval, or refers the application to a credit analyst, based on thresholds established from statistical correlations between scores and payment performance using industry and other data. Our general partner expects to make approximately 70% of our credit decisions, measured by number of applications, through credit scoring.

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LEAF Financial, however, generally will use traditional financial analysis in the event we underwrite transactions of more than $100,000. Also, to measure our actual loss performance versus what we anticipate, LEAF Financial will use a cumulative loss curve that indicates when, during the lifecycle of a pool of leases, the losses may occur. The cumulative loss timing curve was developed from an analysis of diversified lease and loan pools representing tens of thousands of leases and loans to small and medium size businesses. Because lease transactions are not all originated at the same time or in the same amount, the loss curve is weighted by amount originated and averaged by the duration of transactions.

•	Residual realization – maximizing returns at the end of a lease. Our general partner does not generally take aggressive residual positions, and the equipment types that we target generally will not warrant a large residual position. We anticipate that approximately 25% to 35% of our leases will be operating leases under which the rental payments we receive will return approximately 80% to 85% of the purchase price we paid for the equipment. Thus, based on the past experience of its senior management team, our general partner believes that both the number of our leases and their estimated residual values which might entail aggressive residual positions will not be material based on our total equipment investments. We plan to realize residual income on our operating leases using the following four methods:
	•	Automatic billing extension – Our lease documentation will require the lessee to provide 60 days notice before lease termination in order to arrange for disposition of the equipment. If the lessee does not provide this notice, then we will automatically bill the lessee on a month-to-month basis.
	•	Re-leasing to lessee – We anticipate that a significant amount of our equipment will be re-leased to the current lessee at the end of the initial lease term.
	•	Sold in place to lessee – We anticipate that we will sell the majority of our equipment in place to the original lessee at the end of its lease, re-lease or automatic billing extension period.
	•	Resale market – We expect to sell equipment that is not sold in place to the lessee at the end of its lease, re-leased or automatic billing extension period either to the original vendor or to a variety of used equipment dealers.
	We believe successful realization of residuals at the end of a lease term depends on an accurate residual value assessment at the beginning. LEAF Financial, as servicer of our leases, will make residual value assessments on our behalf using information from a number of sources, including:
	•	secondary market publications;
	•	interviews with manufacturers and used equipment dealers;

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•	auction sales guides;
•	historical sales data;
•	industry organizations;
•	valuation companies; and
•	the prior experience of our general partner’s management as to propensity to re-lease or be sold in place.
Based on its analysis of this information, LEAF Financial will establish a residual value for the end of each lease term for each type of equipment. As a result, the residual value will equal the depreciated book value at the end of a lease term. However, as to any particular piece of equipment, LEAF Financial may not be able to re-lease or sell the equipment on our behalf at the end of the equipment’s lease term at a rate or price that will provide us the residual value LEAF Financial estimated on that equipment.

•	Collections – assuring portfolio performance.LEAF Financial’s collection department will be supported by an automated collection tracking system that accesses all account-related information stored on its main computers. The tracking system will:
	•	prioritize and queue delinquent accounts by age and dollar amount;
	•	permit collectors to record all correspondence and discussions with lessees and borrowers; and
	•	generate management reports which will allow us to assess the quality and quantity of collections by individual service representatives, supervisory units and the collection department as a whole.
	LEAF Financial’s collections policy is designed to identify payment problems early enough to permit it to address delinquencies in our leases or secured loans quickly and, when necessary, to act on our behalf to preserve our interest in the equipment.

• Systems automation – controlling costs and providing enhanced service with automated solutions.LEAF Financial will use five functionally integrated systems that will provide fully automated, low cost processing of our leases and secured loans:

• a management system that allows LEAF Financial to establish leasing program relationships with direct sales organizations without having to develop new software for each new program developed;

• an application management system that is capable of processing high volumes of lease applications;

• a credit scoring model that automates the task of evaluating high volumes of lease applications;

• a contract management system that provides LEAF Financial with a stable, fully automated array of portfolio management tools, including electronic invoice generation, payment posting technologies and extensive collections and customer service screens, enabling efficient portfolio servicing of our leases and secured loans; and

• an accounting and financial management system that will provide accurate and efficient financial and investor reporting.

• Lease provisions. The terms and provisions of each equipment lease will vary depending on a number of factors, including:

• the type and intended use of the equipment;

• the business, operations and financial condition of the lessee;

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	•	any regulatory considerations; and
	•	the tax consequences and accounting treatment of the lease transaction.
	Certain terms and provisions, however, generally will be included in all of our equipment leases. For example, we anticipate that each equipment lease will hold the lessee responsible for:
	•	paying rent without deduction or offset of any kind;
	•	bearing the risk of equipment loss and maintaining both casualty and liability insurance on the equipment;
	•	paying sales, use or similar taxes relating to the lease or other use of the equipment;
	•	paying all miscellaneous charges such as documentation fees, late charges, charges for returned checks and similar fees and costs;
	•	indemnifying us against any liability resulting from any act or omission of the lessee or its agents related to the equipment;
	•	maintaining the equipment in good working order and condition during the term of the equipment lease;
	•	notifying us and obtaining our approval for moving the equipment; and
	•	requiring our prior written consent before assigning or subleasing the equipment.
	Our equipment leases will usually have terms ranging from 12 to 84 months. We anticipate that the average lease term over our aggregate lease portfolio will range from 48 to 60 months. We also anticipate that most of our leases will not be cancelable during their initial terms. However, we may agree to allow cancellation of a lease if the lessee pays enough compensation so that the cancellation will not prevent us from achieving our objectives. At the end of each lease term, the lessee may have the option to buy the equipment or renew the lease, either at set prices or at prices tied to current fair market value.
•	Portfolio acquisition strategies. We may purchase portfolios of equipment subject to existing leases and secured loans. We anticipate that the principal sources for these portfolios will be:
	•	small company equipment lessors;
	•	international leasing institutions;
	•	regional and national commercial banks; and
	•	captive finance companies of large manufacturers.
	In evaluating a portfolio acquisition, we expect to consider the following factors:
	•	the business objectives of the seller in selling the portfolio;
	•	the amount of the equipment and the number of leases in the portfolio;
	•	how the leases were originated, whether directly with the end-user or through vendors or brokers;
	•	the portfolio characteristics, including geographic and lessee concentrations, equipment cost range, types of leases and the original and remaining terms of the leases;
	•	the seller’s credit decision process;
	•	the seller’s lease documentation and any material variations from industry practices;

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• the seller’s servicing policies; and

• the portfolio’s aging, performance and default history, including the default history of other portfolios sold by the seller.

We will also consider other elements such as:

• who the seller is and its overall industry reputation;

• the performance of other portfolios we may have acquired from the seller;

• the effect of the acquisition on our own portfolio; and

• credit enhancements available from the seller, such as guarantees or additional security.

Based on the number of transactions and the portfolio characteristics, LEAF Financial will credit score a sampling of the lessees in the portfolio as well as the lessees having the largest positions in the portfolio. If we then decide to pursue the portfolio acquisition, LEAF Financial will do a credit analysis of the entire portfolio, or a larger sampling, through credit scoring, financial analysis or other appropriate procedures. The results of LEAF Financial’s analysis will be presented to our general partner’s investment committee, which also serves as LEAF Financial’s investment committee as discussed in the “Management – Investment Committee” section of this prospectus, which will decide which portfolios, if any, we will make an offer to acquire and the terms of our offer.

In acquiring portfolios of equipment subject to existing leases, we will seek portfolios that will be consistent with the types of credit, industries and equipment we will focus on in our direct equipment leasing activities. However, because a portfolio is often sold only in its entirety, it is possible that a material portion of the equipment and the related leases in a portfolio offered to us will not conform to these criteria. We will consider a portfolio for acquisition only when:

• at least two-thirds of the equipment leases, by book value, conform to our equipment type and market criteria; or

• our general partner believes that the lessees are creditworthy.

Once we acquire a portfolio of equipment subject to existing leases, it will become part of our overall assets and subject to LEAF Financial’s normal administrative processes and procedures as the servicer of our leases and secured loans.

• Transaction approval policies. Our general partner’s investment committee, which also serves as LEAF Financial’s investment committee as discussed in the “Management – Investment Committee” section of this prospectus, will set and may revise, from time to time, standards and procedures for the review and approval of our equipment acquisitions and leases of that equipment. The investment committee will:

• supervise and approve significant individual transactions or portfolio purchases;

• supervise and approve transactions that vary from standard credit criteria and policies; and

• resolve conflicts, if any, that may arise in the allocation of investments between us and our general partner or among us and other programs managed by our general partner or its affiliates as described in the “Conflicts of Interest and Fiduciary Responsibilities – Conflicts of Interest – Our General Partner and Its Affiliates Will Engage in Activities That Compete With Us” section of this prospectus.

The investment committee will make decisions by majority vote and will promptly complete a written report of all actions taken.

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Borrowing

We expect to augment the proceeds of this offering with borrowings, including financings through securitizations as described below, in order to finance a significant portion of the cost of the equipment we acquire. This will allow us to increase the size and diversification of our equipment lease portfolio. We are not limited in the amount of debt, including financings through securitizations of our equipment leases, we may incur. We anticipate that our financings, as a percent of our aggregate portfolio of equipment, on full investment and assuming we sell the maximum number of units in this offering, will be approximately 80%. Our ability to obtain financing will, however, depend on our general partner’s assessment of whether funds are available at rates and on terms that are economically advantageous to us. As a result, the amount of our financings may vary significantly from our expectations. We have not obtained any commitments, or entered into any arrangements for financing from any potential lenders, as of the date of this prospectus.

We will seek to establish a “warehouse” credit facility to provide short-term funding for our investments. This short-term financing will be provided by a bank and will be secured by our receivables from our equipment leases and secured loans. Generally, we plan to repay warehouse borrowings from the proceeds of various third-party commercial paper (“CP”) conduit securitization financing facilities we will seek to obtain. We anticipate that we will continue to service all of the leases or secured loans we securitize, for which we will receive a fee. In this regard, we may securitize our secured loans in the same manner as our leases as described below.

In a CP conduit transaction, we sell to a special purpose entity only that amount of lease receivables and interests in the related equipment and leases that is needed to accomplish the particular borrowing or financing we are seeking. Typically, the special purpose entity will be our wholly-owned subsidiary, and the assets we sell to it will be managed by us through our general partner. Thus, our general partner will receive the same fees with respect to those assets that it would receive with respect to any other assets of ours that may be subject to a loan from a bank. See the “Management Compensation” section of this prospectus. We will use a special purpose entity in the CP conduit securitization so that the assets backing the securitization will be “bankruptcy remote” from us. This means that in the event of our bankruptcy our creditors, other than holders of our securitization notes, cannot use the securitized assets as a source of payment of amounts owed to them until the securitization notes have been paid. The special purpose entity, in turn, securitizes the lease receivables by pledging its interest in them and in the related equipment and leases to another entity, known as a CP conduit, that is owned by an unrelated third-party. The CP conduit funds the securitization by issuing commercial paper secured by the assets pledged to it and payable from the pledged lease receivables, which generally is short-term financing.

When one of our CP conduit facilities reaches its capacity, we will seek to either obtain additional CP conduit facilities or reduce the amount outstanding under our existing facilities by a refinancing through a term note securitization. We also may enter into a term note securitization if longer term financing is desired. In a term note securitization, the pledge of the equipment, equipment leases and lease receivables will be released by the CP conduit and the assets will be repledged by us to a trust that issues term notes to unaffiliated third-party investors which are paid from the lease receivables and secured by the related leases and equipment. Thus, CP conduit securitizations and term note securitizations are alternatives, which never exist simultaneously on the same assets. Again, since term note securitizations are financings, we will have the same control over the pledged assets that we would have had if, instead, we had obtained a bank loan.

We intend to structure our securitization transactions as financings, and will account for them as financings. This means that our balance sheet will carry the securitizations as our debt, and our operating statements will recognize interest expense on that debt. Also, our general partner will not receive a fee when commercial paper or term notes are issued based on the amount of those securitization financings.

In each securitization transaction, we will receive cash equal to a substantial percentage of the aggregate present value of the adjusted future cash flows from the securitized equipment leases. In addition, we will retain an undivided interest in the remaining future cash flow from the securitized equipment leases after all obligations to securitization lenders have been paid, including equipment residual values. In the experience of our general partner’s management, we will typically retain approximately 10% to 12% of the present value of the aggregate future cash flows from the securitized equipment leases in CP conduit securitizations and approximately 6% of the present value of the aggregate future cash flows from the securitized equipment leases in term note securitizations.

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Over the life of a securitized lease pool, we will be entitled to receive the excess cash flow attributable to our retained interest. The excess cash flow will equal the amount by which lease payments and collections on equipment residuals received, net of defaults, exceeds the sum of:

• servicing, backup servicing, trustee, custodial and insurance and credit enhancement fees, if any, and other securitization and sale expenses; and

• amounts of principal, interest or other payments due to the noteholders or other providers of securitization financing.

As a result, our retained interest in our securitized leases, including equipment residual values, if any, will be effectively subordinated. Consequently, to the extent of our retained interest, we will bear the credit losses incurred on the securitized portfolio. Relatively small fluctuations between estimated and actual chargeoff rates could be material in relation to our retained interest and could have an adverse effect on our ability to realize our recorded basis in the retained interest.

Origination and Servicing Agreement

After we receive our minimum offering proceeds and begin operations we will enter into an Origination and Servicing Agreement with LEAF Financial and LEAF Funding, two of our general partner’s affiliates. Under this agreement, in order to facilitate the acquisition of equipment, leases and secured loans by us, LEAF Funding will:

• temporarily acquire equipment from third-parties on our behalf;

• originate secured loans with third-parties on our behalf; and

• originate equipment leases with third-parties on our behalf, including equipment directly leased to end users and equipment already subject to leases.

We expect to purchase all of our equipment, leases and secured loans from LEAF Funding at its cost, including its related initial direct costs under generally accepted accounting principles (“GAAP”), as described in the “Management Compensation” section of this prospectus.

This agreement further provides that LEAF Financial will service our equipment leases and secured loans, including but not limited to:

• underwriting;

• receivables management;

• re-leasing or selling the equipment after the termination of a lease; and

• marketing our services.

The compensation of LEAF Financial and LEAF Funding for providing these services will be from the fees and reimbursements described in the “Management Compensation” section of this prospectus. The form of Origination and Servicing Agreement is included as an exhibit to the registration statement of which this prospectus is a part. See the “Where You Can Find More Information” section of this prospectus.

Changes in Investment Objectives and Policies

You and our other limited partners will have no right to vote on the establishment or implementation of our investment objectives and policies, all of which are the responsibility of our general partner. However, our general partner cannot make any material changes in our investment objectives and policies without the consent of limited partners owning a majority of the total outstanding units entitled to vote. Any material change proposed by our general partner, or any non-material change made by our general partner, will be subject to our general partner’s duty to act in our best interests. In proposing a material change, our general partner will consider whether the proposed change will be beneficial to our ability to preserve, protect and return your capital or make distributions.

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INCOME, LOSSES AND DISTRIBUTIONS

Our taxable income, taxable loss and cash distributions will be allocated 99% to you and our other investors, as a group, and 1% to our general partner.

Allocations of Net Income, Net Loss and Distributions Among Investors

For any fiscal period, we will apportion net income, net loss and cash distributions allocable to you and our other investors, as a group, including our general partner and its affiliates to the extent they purchase units, in the ratio that the number of units held by each investor, multiplied by the number of days during the period the investor owned the units, bears to the amount obtained by totaling the number of units outstanding on each day during that period.

We will not make distributions in kind, that is, of our non-cash assets, except on our liquidation, and then only to a liquidating trust.

Timing of Distributions

Generally, we will make cash distributions on a monthly basis, beginning in the month following our first full month of operations after we receive the minimum amount of offering proceeds and hold the initial closing in this offering. We anticipate that the monthly cash distributions, provided funds are available, will be made approximately 15 days after the end of each month. Since monthly cash distributions are subject to the availability of funds, any anticipated monthly distributions may not be made.

Federal Income Tax Deferral

We anticipate that income taxes on a portion of our distributions will be deferred during our early years due primarily to operating losses and cost recovery or depreciation deductions available from the portion of our equipment leased to third-party end users under our operating leases, but not equipment subject to our full payout leases or our secured loans, and interest deductions on borrowings, including securitizations, we enter into to help increase the size and diversification of our investment portfolio.

Reinvestment of Our Revenues in Additional Leases and Secured Loans

We have the right to invest our revenues during the period beginning with the initial closing date of this offering and ending five years after this offering terminates (the “reinvestment period”). Before we can reinvest our revenues, however, we must, at a minimum, distribute to you and our other investors an amount which satisfies both of the following requirements:

• the amount distributed includes an amount of net proceeds from sales and refinancings of our equipment investments sufficient for you and our other investors to pay your federal, state and local income taxes, if any, resulting from those sales, based on our assumption that you and our other investors are in a 30% tax bracket; and

• for each month after the end of the offering period for this offering and until the end of the reinvestment period, the amount distributed equals a cumulative, noncompounded (except when calculating “payout” for the subordinated remarketing fee discussed in the “Management Compensation” section of this prospectus), annual rate of return of 8.5% on your adjusted capital contribution (the “8.5% return”).

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Under our partnership agreement, your capital contribution is the purchase price you paid for your units. Thus, initially your 8.5% return is determined by multiplying your capital contribution by 8.5%. Thereafter, your 8.5% return is determined by multiplying your “adjusted” capital contribution by 8.5%. Your “adjusted capital contribution” is your original capital contribution, reduced, but not below zero, from time to time by the following distributions made to you, but only to the extent the distributions exceed your 8.5% return on a cumulative basis at the time they are made:

• distributions of distributable cash to you during the period from the initial closing date until five years after the final closing date of this offering (the “reinvestment period”);

• if you purchased your units before we received our minimum offering proceeds, interest distributed to you that was earned while your subscription funds were held in an escrow account;

• any portion of your capital contribution returned to you because we did not invest all of our net offering proceeds; and

• your share of our liquidating distributions.

In addition, your capital contribution will be reduced, but not below zero, without first reducing your unpaid 8.5% return, if any, by the total amount of all payments made to you, if any, in redemption of a portion or all of your units. Thus, your 8.5% return is calculated on a decreasing base of your capital contribution. For example, on a $100 investment, a $10 distribution in year one would result in a $1.50 reduction in your capital contribution. The $1.50 reduction consists of $1.50 in distributions in excess of the $8.50 that was required to satisfy the 8.5% return in year one. This leaves a $98.50 adjusted capital contribution on which the 8.5% return would be calculated in year two.

Return of Unused Capital

We will distribute to you and our other investors, without interest, any of your subscription funds (net offering proceeds, including sales commissions) allocable to your units that we do not commit to investment within 24 months after the beginning of this offering or that are not required as reserves.

•  “Net offering proceeds” means our gross offering proceeds minus the organization and offering expense allowance and dealer-manager fees, sales commissions and due diligence expenses payable by us.

Funds will be considered committed for investment, and need not be returned, to the extent we have written agreements in principle, commitment letters, letters of intent, option agreements or similar contracts. We must complete investments under those agreements within a further period of 12 months or return the uninvested funds to you and our other investors, except that investments using funds from Ohio investors must be completed within a three month period or those funds must be returned.

Cash from Reserve Account

Our partnership agreement requires us initially to establish a cash reserve for general working capital purposes of not less than 1% of our offering proceeds. Any cash reserves used need not be restored, but if they are restored they may be restored from our operating revenues. We may distribute to you and our other limited partners any cash reserves that our general partner determines are no longer required for our operations. However, our general partner intends to make distributions only out of our:

• cash from operations; and

• cash from sales or refinancings; and

We will not borrow for the purpose of making distributions, nor will we make distributions out of offering proceeds we are holding pending investment or capital reserves, unless our general partner determines the reserve is no longer required.

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Election to Invest Cash Distributions in Units During the Offering Period

In addition to your initial purchase of not less than 50 units ($5,000), you may elect on your subscription agreement to use any cash distributions that you receive from us during the offering period to purchase additional units, to the extent units are available for purchase, on the same terms as you purchased your initial units except as described below.

Also, unless you are a resident of Massachusetts, Minnesota and Ohio, if you previously invested in Lease Equity Appreciation Fund I, L.P. (“LEAF I”) or Lease Equity Appreciation Fund II, L.P. (“LEAF II”), which are prior equipment leasing and financing programs sponsored by LEAF Financial, an affiliate of our general partner, you may elect on your subscription agreement to use any cash distributions you receive from either or both of those programs to purchase our units during the offering period, to the extent units are available for purchase, on the same terms as our units are offered to our other investors except as described below.

All units purchased by you with distributions from us LEAF I or LEAF II, if you previously invested in one or both of those programs (unless you are a resident of Massachusetts, Minnesota and Ohio), will be purchased on the same terms as our other units are being offered, except that your subscription price for units purchased with distributions from us will be the Distribution Investment Unit Price and there is no minimum number of units (or additional units) that you must purchase, as described in the “How to Subscribe” section of this prospectus.

We will use your distributions to purchase your units not later than 30 days from the applicable distribution date, to the extent that units are then available for purchase. You may choose to reinvest your distributions at any time during the offering period by making the appropriate election on your subscription agreement, which is Appendix C to this prospectus. If you wish to change the election you made on a previously submitted subscription agreement, you may do so by written notice to our general partner as described in Appendix C.

Notice to Massachusetts, Minnesota and Ohio residents: Massachusetts, Minnesota and Ohio investors may not elect to have their distributions from LEAF I or LEAF II, invested in our units, but if they make an initial investment of 50 units in us, they may elect to have any distributions from us during our offering period with respect to those units in us invested in additional units in us as described above, subject to availability of the units.

FEDERAL INCOME TAX CONSEQUENCES

Special Counsel’s Tax Opinion Letter

We have not requested a ruling from the IRS with respect to any federal tax consequence to you of an investment in us. Instead, we have obtained and will rely on a tax opinion letter from Kunzman & Bollinger, Inc., our special counsel for this offering. You are encouraged to read the tax opinion letter, which has been filed as Exhibit 8.1 to the registration statement of which this prospectus is a part. See the “Where You Can Find More Information” section of this prospectus for information on how you can obtain a copy of the tax opinion letter.

The following discussion covers all of the material and any significant federal income tax issues related to purchasing, holding and disposing of our units that may be relevant to a “typical limited partner.” We consider a typical limited partner to be a natural person who is a citizen of the United States and purchases units in this offering. However, the tax consequences of investing in us may not be the same for all typical limited partners. This is because the practical utility of the tax aspects of any investment depends largely on each limited partner’s particular income tax position in the year in which items of income, gain, loss, deduction or credit are properly taken into account in computing his or her federal income tax liability. In addition, the tax consequences of an investment in us by certain investors, such as tax-exempt entities, corporations, trusts, partnerships, foreign persons or other investors that may be subject to special treatment under federal income tax laws, may be different from those discussed below and special counsel’s tax opinions may not be applicable to those investors.

Our special counsel’s tax opinion letter includes the following disclosures:

• The tax opinion letter was written to support the promotion or marketing of units in us to potential limited partners, and our special counsel has helped our general partner organize and document this offering of our units.

• The tax opinion letter is not confidential. There are no limitations on the disclosure by us or by any of our limited partners to any other person of the tax treatment or tax structure of us or an investment in us.

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• Our limited partners have no contractual protection against the possibility that a portion or all of their intended tax benefits from an investment in us ultimately are not sustained if challenged by the IRS. See the “Risk Factors – Your Tax Benefits from an Investment In Us Are Not Contractually Protected” section of this prospectus.

• Each potential limited partner is urged to seek advice based on his particular circumstances from an independent tax advisor with respect to the federal tax consequences to him of an investment in us.

This discussion and special counsel’s tax opinion letter are based in part on the current federal income tax laws. Future changes in existing law, which may take effect retroactively, may cause the actual tax consequences of an investment in us to vary substantially from those discussed below and could render special counsel’s tax opinions inapplicable. Special counsel’s tax opinions also are based in part on statements made in this prospectus by us and our general partner concerning us and our proposed activities, including forward-looking statements. See the “Forward-Looking Statements and Associated Risks” section of this prospectus. In addition, our general partner has made certain representations to our special counsel relating to us and our proposed activities, which are set forth in special counsel’s tax opinion letter. Any material inaccuracy in this prospectus or our general partner’s representations may render special counsel’s tax opinions inapplicable.

In giving its opinions, special counsel made the principal assumptions that any amount borrowed by you to purchase your units will not be borrowed from any other limited partner or anyone related to another limited partner, and you will be severally, primarily, and personally liable for the borrowed amount. In this regard, our general partner and its affiliates will not make or arrange financing for you or our other limited partners to use to purchase our units. Also, in giving its opinions special counsel assumed that you will not be protected from losing the amount you paid for your units through nonrecourse financing, guarantees, stop loss agreements or other similar arrangements.

Special counsel believes that its tax opinion letter addresses all of the material and any significant federal tax issues associated with an investment in us by a typical limited partner. Although special counsel’s tax opinions express what it believes a court would probably conclude if presented with those issues, its opinions are only predictions, and are not guarantees, of the outcome of the particular tax issues being addressed. The IRS could challenge our special counsel’s tax opinions and the challenge could be sustained in the courts and cause adverse tax consequences to you and our other limited partners. Taxpayers bear the burden of proof to support claimed deductions, and opinions of counsel are not binding on the IRS or the courts.

Subject to the foregoing, special counsel has given the following opinions with respect to the proper federal tax treatment of an investment in us by a typical limited partner:

(1) We will be classified as a partnership for federal income tax purposes, and not as a corporation.

(2) We will not be treated as a publicly traded partnership under the Code.

(3) The passive activity limitations on losses and credits under §469 of the Code will apply to our typical limited partners.

(4) Our business expenses, including payments for personal services actually rendered in the taxable year in which accrued, which are reasonable, ordinary and necessary and do not include amounts for items such as the acquisition costs of Equipment, Leases, Secured Loans or Equipment subject to Existing Leases, Organization and Offering Costs and other items that are required to be capitalized under the Code, are currently deductible.

• Potential Limitations on Deductions. Your ability in any taxable year to use your share of these deductions from us on your individual federal income tax returns may be reduced, eliminated or deferred by the following limitations:

• your personal tax situation, such as the amount of your regular taxable income, alternative minimum taxable income, losses, itemized deductions, personal exemptions, etc., which are not related to your investment in us;

• the amount of your adjusted tax basis in your units at the end of our taxable year;

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• your “at risk” amount in us at the end of our taxable year; and

• the passive activity limitations on losses.

(5) Our reasonable purchase price for equipment that we are deemed to own under the Code that is leased to independent third-party lessees under operating leases (but not equipment leased under full payout leases or equipment that is subject to secured loans), which cannot be deducted immediately, will be eligible for cost recovery deductions under the Modified Accelerated Cost Recovery System (“MACRS”) beginning in the taxable year the equipment is placed in service by us.

Your ability in any taxable year to use your share of these deductions from us on your personal federal income tax returns may be reduced, eliminated or deferred by the “Potential Limitations on Deductions” set forth in opinion (4), above.

(6) As a limited partner, your initial tax basis in your units will be the purchase price of your units.

(7) As a limited partner, your initial “at risk” amount in us will be the purchase price of your units.

(8) The allocations of income, gain, loss and deduction, or items thereof, set forth in our partnership agreement will govern your share of those items to the extent the allocations do not cause or increase deficit balances in your capital account in us.

(9) We will possess the requisite profit motive under §183 of the Code. Also, the IRS anti-abuse rule in Treas. Reg. §1.701-2 and potentially relevant judicial doctrines will not have a material adverse effect on the federal tax consequences of an investment in us by a typical limited partner as described in special counsel’s tax opinions.

(10) Our special counsel’s overall conclusion is that the federal income tax benefits, in the aggregate, which are a significant feature of an investment in us by a typical limited partner will be realized as contemplated by this prospectus. This opinion is based in part on special counsel’s conclusion that substantially more than half of our material federal income tax benefits, in terms of their financial impact on a typical limited partner, will be realized if challenged by the IRS and litigated.

Our special counsel’s tax opinions are limited to those set forth above. The following is a summary discussion of the material federal income tax consequences of an investment in us.

Partnership Classification

Because we were formed as a limited partnership, under current Treasury Regulations we will automatically be treated as a partnership for federal income tax purposes unless we elect to be taxed as a corporation, which we will not do, or we are deemed to be a publicly traded partnership under the Code. A publicly traded partnership is a partnership whose interests are traded on an established securities market or are readily tradable on either a secondary market or the substantial equivalent of a secondary market. Also, if a publicly traded partnership derives less than 90% of its gross income from certain passive sources such as interest, dividends, rents from real property and gains from the sale of real property, the publicly traded partnership will be taxed as a corporation. Since we will derive less than 90% of our gross income from those sources of income, our units must not be “publicly traded” as defined by the Code or we will be taxed as a corporation.

In this regard, we do not intend to list our units for trading in any securities market, exchange, or interdealer quotation system. Therefore, we will be a publicly traded partnership only if our units become readily tradable on a secondary securities market or on the substantial equivalent of a secondary market. Our units will not become readily tradable merely because we may provide information to you and our other limited partners regarding another limited partner’s desire to buy or sell units, or occasionally arrange transfers between our limited partners.

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Also, Treas. Reg. §1.7704-1 provides certain “safe harbors” under which certain types of transfers of partnership interests are not counted as trades on a secondary market or the substantial equivalent of a secondary market. These safe harbors include the following:

• Private Transfers. Private transfers are not counted. Private transfers include, but are not limited to the following:

• transfers at death;

• transfers between family members; and

• transfers from qualified retirement plans and IRA’s.

• Qualified Matching Services. Transfers of our units made through a qualified matching service are not counted. However, we and our affiliates will not sponsor or operate, either formally or informally, a qualified matching service for our units. See the “Summary of the Offering – Risk Factors” section of this prospectus.

• Lack of Actual Trading. In addition, we will not be treated as a publicly traded partnership under the regulations if the total of all of our units transferred during any taxable year, other than private transfers and transfers through a qualified matching service as described above, do not represent more than 2% of the total interests in our capital or profits in that taxable year.

Although units redeemed by a partnership under a qualified redemption agreement will not count against the 2% limitation, the redemption provisions in Section 13.5 of our partnership agreement have not been structured to meet the requirements of a qualified redemption plan under Treas. Reg. §1.7704-1. Since any units redeemed by us must be counted within the 2% limitation in our taxable year in which the redemption is made, Section 13.5 of our partnership agreement provides that we will not redeem any units in a calendar year that, together with all other units transferred in that calendar year, would exceed the 2% limitation set forth above.

In addition, Section 13.2(c) of our partnership agreement provides that our general partner will not permit the transfer of any of our units (including redemptions of units) in any taxable year that do not fall within at least one of the “safe harbors” set forth in Treasury Regulations, including those described above, so long as, in the opinion of our legal counsel, there are adverse federal income tax consequences from being treated as a “publicly traded partnership.” Based on this provision, our units should not be deemed to be readily tradable on a secondary market or the substantial equivalent of a secondary market. Thus, we should not be treated as a publicly traded partnership that is taxable as a corporation under the Code. Instead, our special counsel has given its opinion that we will be classified as a partnership for federal income tax purposes.

Flow Through of Taxable Income

Although we will file annual federal information income tax returns, we will not pay any federal income taxes as a partnership. Instead, you and our other limited partners will be required to report on your personal income tax returns your respective share of our income, gains, losses and deductions without regard to whether we make cash distributions to you. Consequently, the amount of taxable income we allocate to you in any taxable year may exceed the amount of cash we distribute to you in that taxable year. In that event, you would have to pay any resulting tax liability in excess of your cash distributions from us in that taxable year with your personal funds.

Treatment of Distributions

Our cash distributions to you and our other investors generally will not be taxable for federal income tax purposes except to the extent that they exceed the amount of your adjusted tax basis in your units immediately before the distribution. The excess distributions to you, if any, generally would be considered to be gain from the sale or exchange of your units, and would be taxable to you under the rules described in “– Sale or Other Disposition of Units,” below. Also, your share of our liabilities for which no partner, including our general partner, bears the economic risk of loss, which are known as “nonrecourse liabilities,” will increase your adjusted tax basis in your units. However, if your share of our nonrecourse liabilities is reduced, the amount of the reduction of your share of our nonrecourse liabilities will be treated the same as a distribution of cash from us to you. Also, to the extent, if any, that our distributions to you , including any reductions in your share of our nonrecourse liabilities, cause your “at risk” amount in us to be less than zero at the end of any taxable year, you will be required to recapture as income any losses that we allocated to you in previous years that you deducted on your personal income tax returns. See “– ‘At Risk’ Limitation on Deductions,” below.

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When we issue additional units to existing or new limited partners during the offering period of this offering, your percentage ownership interest in us will decrease, which will also result in a corresponding decrease in your share of our nonrecourse liabilities. This decrease in your share of our nonrecourse liabilities will be deemed a distribution of cash to you and may be taxable as described above. Also, a non-pro rata distribution of money or property to you and our other limited partners may result in ordinary income to you, regardless of your adjusted tax basis in your units, if the distribution reduces your share of our “unrealized receivables,” including depreciation recapture, or substantially appreciated “inventory items.” These terms are defined in Section 751 of the Code, and are known as “Section 751 assets.” In that event, you would be treated as having been distributed your proportionate share of our Section 751 assets and having exchanged those assets with us in return for the non-pro rata portion of the actual distribution made to you. This generally would result in your realization of ordinary income under Section 751(b) of the Code in an amount that would equal the excess of:

• the non-pro rata portion of that distribution to you; over

• your tax basis for the share of our Section 751 assets deemed relinquished by you in the exchange.

Basis of Units Limitation on Deductions

Your deduction on your personal income tax returns of your share of our losses cannot exceed your adjusted tax basis in your units at the end of our taxable year. Your initial tax basis for your units will be the amount of money that you paid for your units. Subsequently, your initial tax basis in your units will be:

• increased by:

• your share of our income; and

• your share of our nonrecourse liabilities, which will change from time to time; and

• decreased, but not below zero, by:

• our distributions to you;

• your share of our losses;

• any decreases in your share of our nonrecourse liabilities, which will change from time to time; and

• your share of our expenditures that are not deductible in computing taxable income and are not required to be capitalized.

Your adjusted tax basis in your units, however, will not be increased or decreased by any debt of ours for which our general partner is liable, if, for example, it has either guaranteed the loan or because of its general liability for our obligations under applicable state law as our general partner. Also, on the sale or other taxable disposition of a unit by you, any gain you recognize cannot be offset by any of your losses that were previously suspended by the basis limitation discussed above. Should a cash distribution from us to you exceed your adjusted tax basis in your units immediately before the distribution, taxable gain would result to you to the extent of the excess as discussed in “– Treatment of Distributions,” above.

“At Risk” Limitation on Deductions

Your ability to deduct your share of our losses generally will be limited to the amount for which you are “at risk” with respect to our activities at the end of our taxable year, if that amount is less than the amount of your adjusted tax basis in your units at the end of our taxable year. In general, you will be at risk to the extent of the adjusted tax basis of your units, reduced by:

• any portion of your adjusted tax basis in your units that is attributable to your share of our nonrecourse liabilities; and

• any amount of money that you borrowed to buy your units if the lender of those borrowed funds is another of our limited partners, is related to another of our limited partners, or can look only to your units for repayment.

Thus, your at risk amount in us will increase or decrease as the adjusted tax basis of your units increases or decreases, other than increases or decreases attributable to your share of our nonrecourse liabilities. Also, you will not be at risk for the amount you paid for your units if that amount is protected from loss through nonrecourse financing, guarantees, stop loss agreements or other similar arrangements.

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You must recapture losses deducted by you in previous years to the extent, if any, that our distributions to you cause your at risk amount to be less than zero at the end of any taxable year. Losses disallowed or recaptured as a result of the “at risk” limitation will carry forward and will be allowable in subsequent taxable years to the extent that your tax adjusted basis or your at risk amount in us, whichever is the limiting factor, subsequently increases.

Passive Activity Limitations on Losses

The passive activity rules under §469 of the Code allow taxpayers to deduct their passive activity losses only against their passive activity income. Under these rules, taxpayers generally must separate their income and loss into three categories:

(1) active trade or business income or loss, such as ordinary income from a salary and other types of compensation for personal services;

(2) passive income or loss, such as income or loss from an investment in a limited partnership as a limited partner; and

(3) portfolio income or loss, which generally consists of:

• interest, dividends and royalties that are not received in the ordinary course of a trade or business; and

• gain or loss that is not derived in the ordinary course of a trade or business on the sale of property that generates portfolio income or is held for investment.

The passive activity rules apply to individuals, estates, trusts, personal service corporations and some closely-held corporations, including S corporations.

A passive activity involves the conduct of a trade or business in which the taxpayer does not materially participate. Rental activities, however, generally are treated as passive activities whether or not the taxpayer materially participates in the activity. In addition, as set forth above, since limited partners generally do not materially participate in the management or activities of their limited partnership, limited partner interests in limited partnerships generally are treated as passive activities. Accordingly, as a limited partner, you generally must treat your investment in us as an investment in a passive activity. As a passive activity, interest earned on our funds before their investment in equipment will be treated as portfolio income that cannot be offset with passive losses.

Also, a portion of your share of our gross income might be treated for federal income tax purposes as portfolio income and gross income that is not from a passive activity, which means that it cannot be offset by passive losses, instead of passive income.

As a limited partner, you can deduct passive losses against your passive income, if any, to reduce your overall income tax liability, but you cannot offset active (i.e., non-passive) income or portfolio income with passive losses. Thus, your ability to use your share of our passive losses will be limited by the amount of your passive income in any given tax year from us, plus your net passive income from any other passive activities (other than publicly traded partnerships as discussed below) in which you may have invested. This means that if your share of our passive loss in any taxable year is greater than the total of your net passive income from all other sources in that taxable year, you cannot deduct the excess loss in the year you incurred it. You can, however, carry the suspended passive loss forward indefinitely to offset any passive income you may derive in future years to the extent of the suspended passive loss, whether your passive income is derived from us or from another passive activity (other than a publicly traded partnership as discussed below) in which you may invest. Also, any suspended passive losses generally may be deducted against your non-passive income if you sell all of your units to a third-party in a taxable transaction.

Losses from a publicly traded partnership that is taxed as a partnership are treated as passive activity losses that may only be used to offset income subsequently generated by the same publicly traded partnership. The IRS generally treats income from a publicly traded partnership as portfolio income, unless it is used to offset previous losses from the same publicly traded partnership. We have been structured to avoid being classified as a publicly traded partnership; however, these rules mean that your share of our passive income or passive losses cannot be used to offset any losses or income you may derive as a limited partner in any publicly traded partnership in which you may have invested.

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Limitations on Interest Deductions

The amount of a noncorporate taxpayer’s investment interest deduction is generally limited to the amount of the taxpayer’s net investment income. For purposes of this limitation, investment interest does not include any interest that is taken into account under §469 of the Code in computing income or loss from a passive activity. Thus, your share of our passive interest expense that we use in computing our net passive income or passive loss will not be limited by the investment interest limitation. However, your share of our portfolio income and related expenses will be treated as investment income and investment expenses.

Also, we may enter into transactions involving the prepayment of interest or the payment of points, commitment fees, and loan origination or brokerage fees. In general, prepaid interest, points, and similar costs cannot be deducted currently, but must be capitalized and amortized over the life of the related loan.

Partnership Income Tax Withholding

If we are required, or elect, in our general partner’s discretion, under applicable law to pay any federal, state or local income tax on behalf of you or our other limited partners, our general partner or any former limited partner, we are authorized under our partnership agreement to pay those taxes from our funds. That payment, if made, will be treated as a distribution of cash from us to the person on whose behalf the payment was made. If the payment is made on behalf of a person whose identity cannot be determined, we are authorized under our partnership agreement to treat the payment as a distribution to all of our current limited partners and our general partner.

Organization and Offering Expenses and Start-Up Costs. We cannot deduct the costs of organizing us as a limited partnership or our start-up costs, in the year we incur them. Instead, we must capitalize and amortize our organization expenses and start-up costs over a 180-month period. Also, we can deduct our syndication expenses, if at all, only on our liquidation, and then only as a capital loss. Syndication expenses include the following:

• brokerage fees such as the dealer-manager fee and sales commissions paid in this offering;

• registration and filing fees with the SEC, the NASD and each state in which our units are offered for sale;

• our legal fees for securities and tax advice concerning this prospectus;

• accounting fees for the preparation of information to be used in this offering; and

• printing and reproduction costs of this prospectus and our sales literature, and other selling or promotional expenses we may incur in connection with this offering.

The proper classification of a portion of these expenses may not be clear, and it is possible that the IRS may seek to recharacterize a portion of our organization costs as nonamortizable syndication costs. Since the determination of this issue is inherently factual, and the nature of the expenses that might be at issue is not currently known, special counsel cannot express any opinion on this issue.

Business Expenses. Ordinary and necessary business expenses, including reasonable compensation for services rendered, are currently deductible expenses. In this regard, our general partner has represented, based on the experience and knowledge of industry practices of its management, that the amounts we will pay to our general partner and its affiliates under our partnership agreement for services rendered by them to us, or on our behalf, are reasonable amounts that ordinarily would be paid for similar services in similar transactions between persons having no affiliation and dealing with each other “at arms’ length.” The fees we pay to our general partner and its affiliates, however, will not be currently deductible to the extent it is determined by the IRS or the courts that those fees are:

• in excess of reasonable compensation;

• properly characterized as syndication expenses or other capital costs, such as equipment costs; or

• not “ordinary and necessary” business expenses.

In the event of an IRS audit of our annual federal information income tax return, payments by us to our general partner and its affiliates will be scrutinized by the IRS to a greater extent than payments to an unrelated party.

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Although a portion of our activities might otherwise qualify for the “U.S. production activities deduction,” you and our other limited partners will not be entitled to this deduction with respect to our activities, because the deduction cannot exceed 50% of the IRS Form W-2 wages paid by a taxpayer for a tax year, and neither we, nor you and our other limited partners, will pay any Form W-2 wages with respect to our activities since we will not have any employees. Instead, we will rely on our general partner and its affiliates to manage us and our business. See the “Management” section of this prospectus.

Tax Treatment of Leases

Your cost recovery or depreciation deductions with respect to any item of our equipment depends, in part, on whether the lease agreement covering the equipment is treated under the Code as a “true lease,” which means that we retain ownership of the equipment after it is leased. Cost recovery and depreciation deductions are not available if a purported lease agreement is classified by the IRS or the courts as a sale or a financing or refinancing arrangement under which the ownership of the equipment shifts to a purchaser. See “– Depreciation,” below.

Whether we are the owner of any particular item of equipment, and whether our leases will be treated as true leases for federal income tax purposes, depends on both factual and legal considerations. The IRS has published guidelines on the tax treatment of leveraged leases. These guidelines do not purport to be substantive rules of law and are not supposed to be applied by the IRS in audits, although that has happened in a number of instances. Whether our leases will meet the relevant requirements to be characterized as true leases and, in the case of our operating leases, whether we will be treated for tax purposes as the owner of the equipment subject to the operating leases, will depend on the specific facts surrounding each lease. Since these facts cannot be determined now with regard to leases that will be entered into in the future, special counsel cannot render an opinion on this issue.

Also, both the lessor and the lessee in a deferred rental agreement must accrue the rent and interest annually. A deferred rental agreement is a lease of tangible property for more than $250,000 that either provides for increasing rental payments or provides that some rent for the use of the property in a calendar year is payable after the close of the following calendar year. In general, the amount of rent that must be allocated to a tax year will be determined by the terms of the lease. If we enter into a transaction that meets the definition of a deferred rental agreement, then we will recognize income before we receive the corresponding cash.

On a limited basis we may finance end users’ acquisition of equipment by providing them with secured loans. We will not be entitled to any depreciation or cost recovery deductions with respect to the equipment involved in those transactions. See “– Depreciation,” below. Whether or not we will be deemed to be in the trade or business of lending money with respect to any secured loans we may make, whether or not our income and expenses (including interest expense) allocable to those secured loans ultimately will be treated as passive or as portfolio under the passive activity rules, and whether or not a portion of our gross income from our secured loans will be treated as income that is not from a passive activity, are inherently factual determinations on which special counsel cannot render an opinion. See “– Passive Activity Limitations on Losses,” above.

Depreciation

We will be entitled to depreciation or cost recovery deductions under the Modified Accelerated Cost Recovery System (“MACRS”) on equipment that we are treated as owning under the Code. Generally, we expect to be eligible to claim cost recovery deductions on equipment subject to our operating leases, but not on equipment subject to our full payout leases or our secured loans. Our depreciable equipment generally will have either three, five or seven year cost recovery periods under the Code, depending primarily on the type of equipment, during which time we can recover our cost of the equipment through cost recovery deductions. The amount deductible in each year generally is calculated for regular federal income tax purposes using the 200% declining-balance depreciation method, switching to the straight-line method at a time that maximizes the deduction. Cost recovery deductions are calculated differently for purposes of the alternative minimum tax. See “– Alternative Minimum Tax,” below.

We intend to allocate all or a portion of the acquisition fees we pay to our general partner for the selection and purchase of equipment subject to our operating leases to the cost basis of the equipment. The IRS may not agree that cost recovery deductions calculated on a cost basis that includes our general partner’s acquisition fees are properly allowable. The IRS might assert that the acquisition fees are attributable to items other than the equipment, or are not subject to cost recovery at all. If the IRS were successful in making that claim, the cost recovery deductions available to us, as well as your respective share of those deductions, would be reduced accordingly. Because the determination of this issue depends in part on the magnitude and type of services performed by our general partner in return for the acquisition fees, which are presently undeterminable and may vary for each piece of equipment acquired by us, special counsel is unable to render an opinion as to whether or not our decision to include a portion or all of our general partner’s acquisition fees for equipment acquired by us and leased to others under operating leases in the amount of cost recovery deductions we intend to claim for equipment subject to our operating leases would be upheld by the courts if challenged by the IRS.

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In addition, we may enter into operating leases with “tax-exempt” entities which, in this context, includes governmental bodies and tax-exempt governmental instrumentalities, tax-exempt organizations, foreign persons and entities, and some international organizations. If we do, we must use the straight-line depreciation method for the equipment subject to our operating leases, which is then called “tax-exempt use property” for depreciation purposes. The depreciation period for tax-exempt use property is the longer of:

• the equipment’s asset depreciation range class life, which generally is longer than the three, five and seven year cost recovery periods discussed above; or

• 125% of the term of the operating lease, including all options to renew as well as some successor leases to the original operating lease.

Also, if our total deductions (other than interest expense) directly allocable to equipment treated as tax-exempt use property, plus our deductions for interest expense properly allocable to the equipment, exceed our income from the operating lease, then the excess deductions, which are referred to as “tax-exempt use losses” are not allowed, subject to certain exceptions, and must be carried forward to the next tax year.

In addition, we anticipate that many of our limited partners will be tax-exempt entities, including, in addition to those listed above, employee benefit plans such as qualified pension and profit sharing plans, Keogh plans and individual retirement accounts (“IRAs”). The proportionate share of these tax-exempt limited partners in our equipment also will be treated as tax-exempt use property, which will affect our depreciation deductions as described above with respect to all of our partners, unless our tax-exempt limited partners are subject to federal unrelated business income tax on their share of our taxable income. In this regard, most, if not all, of their taxable income from us will probably be treated as unrelated business taxable income in the hands of employee benefit plans and our other tax-exempt investors. See “– Federal Taxation of Employee Benefit Plans and Other Tax-Exempt Organizations,” below. Also, our taxable income will be treated as United States source business income in the hands of foreign limited partners if no exemption from United States’ taxation is available to them. See “– Federal Tax Treatment of Foreign Investors,” below. However, any adjustments in our cost recovery deductions, as well as any suspended tax-exempt use losses, as discussed above, because we have tax-exempt limited partners, will be specially allocated under our partnership agreement to those tax-exempt limited partners only. Also, our general partner has represented that it will ensure that participation by certain tax-exempt entities in us will be limited at all times to less than 25% of our total units sold, excluding units purchased by our general partner and its affiliates. This, in turn, will limit the amount of our equipment that could potentially be treated as tax-exempt use property because our units have been sold to tax-exempt limited partners. See the “Investment by Qualified Plans – Plan Assets” section of this prospectus. For these reasons, our general partner anticipates that the sale of our units to tax-exempt limited partners will have no adverse effect on the depreciation or cost recovery deductions we allocate to our limited partners who are not tax-exempt entities.

Although we do not currently anticipate entering into operating leases for equipment that will be used predominantly outside the United States, it is possible that we may do so in the future. If we do, we must use the straight line method of depreciation over a period corresponding to the equipment’s asset depreciation range class life, which generally is longer than the three, five and seven year cost recovery periods discussed above.

Sale or Other Disposition of Partnership Property

Because the income tax rates for noncorporate taxpayers on ordinary income generally are much higher than the income tax rates on capital gains, the Code has many rules classifying income as either ordinary income or capital gains, and distinguishing between long-term and short-term capital gains and losses. The distinction between ordinary income and capital gains is relevant for other purposes as well. For example, there are limits on the amount of capital losses that an individual may offset against ordinary income in any taxable year.

On a sale or other taxable disposition of any of our assets, we will realize a gain or loss equal to the difference between our basis in the asset at the time of disposition and the price we receive for it. Also, any foreclosure on assets we have pledged as collateral for our borrowings would be considered a taxable disposition of the pledged assets by us. We would realize gain on the foreclosure to the extent that the face amount of the debt being discharged was greater than our tax basis in those assets, even though we would receive no cash. Also, your respective share of any capital gain that we may realize on the disposition of our assets generally may also be treated by you as capital gain on your individual federal income tax returns, subject, however, to recapture rules that may require a portion or all of the gain to be treated as ordinary income as discussed below.

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Before any gain that we may realize on the sale of an asset can be treated as capital gain, the asset must be a capital asset in our hands. In this regard, capital assets do not include property held by a taxpayer primarily for sale to customers in the ordinary course of its business. We expect to acquire and dispose of many assets many times throughout our term. Whether we can treat any gains on these sales as capital gains will depend on the facts and circumstances at the time of each sale. Because this is an inherently factual determination which depends, in part, on how many times we sell our equipment investments, special counsel is unable to express an opinion on this issue. Even if the equipment sold was a capital asset in our hands, since equipment is tangible personal property all cost recovery or depreciation deductions we previously have taken with respect to the equipment sold will be recaptured as ordinary income to the extent we realize gain on the sale. Recapture means that we must treat as ordinary income a portion or all of any gain we may realize from the sale of our equipment that otherwise would be treated under the Code as capital gain. Recapture cannot be avoided by holding the equipment for any specified period of time. In addition, if we sell property on an installment basis, we must recognize all depreciation and cost recovery recapture as ordinary income at the time of sale, even though we receive the payments in later taxable years.

Also, certain gains and losses are grouped together under the Code to determine their tax treatment. For example, gain on the sale or exchange of certain assets, including equipment used in a trade or business and held for more than one year, is added to gain from certain compulsory or involuntary conversions of property. If these gains exceed the losses from the sales, exchanges, and conversions of the equipment, the excess gains will be taxed as capital gains, subject to the general rules of recapture of cost recovery and depreciation deductions as ordinary income, as described above, and a special recapture rule described below. If the losses exceed the gains, however, the excess losses will be treated as ordinary losses.

Under a special recapture rule, any net gain will be treated as ordinary income rather than as capital gain if we have non-recaptured net losses from the five preceding taxable years. Based on our intended activities and the recapture rules discussed above, you should anticipate that substantially all, if not all, of any gain we realize on the sale or other taxable disposition of our equipment will be treated as ordinary income for income tax purposes, rather than capital gain.

Sale or Other Disposition of Units

We do not anticipate that a public market will develop for our units, and our partnership agreement imposes significant restrictions on your right to transfer your units. For a description of these restrictions you should read the “Summary of Our Partnership Agreement – Transfer of Units” section of this prospectus. We have established these restrictions to comply with federal and state securities laws and so that we will not be considered to be a publicly traded partnership that is taxed as a corporation for federal income tax purposes. Thus, you probably will not be able to sell or otherwise liquidate your units in the event of an emergency and if you were able to arrange a sale, the price you would receive for your units would likely be at a substantial discount to the price you paid for your units. Also, you units probably will not be readily acceptable as collateral for loans. You should invest in us only if you are prepared to hold your units for at least nine years, which is the period consisting of:

• an offering period of up to two years;

• an additional five-year reinvestment period; and

• a subsequent liquidation period of approximately two years, during which our leases and secured loans will either mature and terminate or be sold and we will liquidate our other assets.

As a result, you should view your investment in us as illiquid and should not purchase our units unless you have no need for the funds you invest. You should also consider that our anticipated term as a partnership of nine years as described above could be more than nine years if we encounter unexpected difficulties in liquidating our investments.

Your gain or loss on the sale or other taxable disposition of your units (including our redemption of any of your units) generally will equal the difference between the amount you realize from the sale and your adjusted tax basis in the units sold. Different tax rules will apply, however, if we were to redeem all of your units. The amount you realize from a sale of your units includes the cash or other consideration you receive from the purchaser, as well as your share of our nonrecourse liabilities. This gain or loss, except as noted below, will be taxed as either long-term or short-term capital gain or loss, depending on how long you have held your units, assuming that the units qualify as capital assets in your hands. Because the Code deems the amount realized from the sale to include your share of our nonrecourse liabilities, for which you will receive no cash, the gain you ma y realize on a sale of your units could result in a tax liability to you in excess of the cash, if any, you receive from the sale.

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Also, the portion of your gain, if any, attributable to our Section 751 assets, which includes inventory and unrealized receivables, will be treated as ordinary income, rather than capital gain. Section 751 assets include, among other items, assets that are subject to recapture of depreciation or cost recovery deductions, determined as if your proportionate share of our properties is sold at the time you sell your units. Thus, a substantial portion, if not most, of any gain you realize on the sale of your units may be treated as ordinary income depending primarily on how long you have held your units and the amount of cost recovery or depreciation deductions you have claimed on our equipment that we lease to our customers under operating leases.

You must promptly notify us of any sale or exchange of your units. Once we are notified, we are required to inform the IRS, the buyer and you of the fair market value of the allocable share of our unrealized receivables and appreciated inventory attributable to the units you sold or exchanged, which must be treated as ordinary income as discussed above. Our written report to you and the buyer must be made by January 31 following the calendar year of the sale. If you fail to timely notify us of the sale or other transfer of your units, the IRS will penalize you $50 per sale.

Generally, no gain or loss for income tax purposes is recognized on the gift of property, although gift taxes may be owed. However, a gift of your units may be treated as a part sale to the extent of your share of our nonrecourse liabilities. Thus, you may be required to recognize gain in an amount equal to the difference between your share of our nonrecourse debt and, in the case of a charitable contribution, the portion of your basis in your units allocable to the deemed sale transaction. In the case of a non-charitable gift, the amount of your share of our nonrecourse debt is offset by your entire basis in your units. Also, charitable contribution deductions for the fair market value of your units would be reduced by the amounts involved in any deemed partial sale of your units and may be reduced in certain cases by the amount of gain which would have been taxed as ordinary income if the units had been sold. Also, interests in different partnerships do not qualify for tax-free like-kind exchanges.

Consequences of No Section 754 Election

Section 754 of the Code permits a partnership to elect to adjust the basis of partnership property on the transfer of an interest in the partnership by sale or exchange or on the death of a partner, and on the distribution of property by the partnership to a partner. The general effect of this election is that transferees of the partnership interests are treated, for purposes of depreciation and gain, as though they had acquired a direct interest in the partnership assets and the partnership is treated for these purposes, on certain distributions to its partners, as though it had newly acquired an interest in the partnership assets and therefore acquired a new cost basis for the assets. The election, once made, may not be revoked without the consent of the IRS. Due to the complexities and added expense of the tax accounting required to implement a Section 754 election to adjust the basis of our property when units are sold, taking into account the limitations under our partnership agreement on the sale of our units, we do not intend to make the election, although we reserve the right to do so. Even if we do not make the Section 754 election, however, the basis adjustment described above is mandatory under the Code with respect to the transferee partner only, if at the time a unit is transferred by sale or exchange, or on the death of a partner, our adjusted basis in our property exceeds the fair market value of the property by more than $250,000 immediately after the transfer of the unit. Similarly, a basis adjustment is mandatory under the Code if a partnership distributes property in-kind to a partner (which we will not do), and the sum of the partner’s loss on the distribution and the basis increase to the distributed property is more than $250,000.

Accordingly, except in the special circumstances described above where basis adjustments to our property would be mandatory, if we sell property after a limited partner transfers a unit, taxable gain or loss to the transferee of the unit will be measured by the difference between the transferee’s share of the amount realized by us on the sale of the property and his or her share of our tax basis in the property (which, in the absence of a Section 754 election, will be unchanged by the transfer of the unit), rather than by the difference between his or her share of the amount realized by us on the sale of the property and the portion of his or her purchase price for the unit that was allocable to the property. As a consequence, the transferee of the unit will be subject to tax on a portion of our proceeds from the sale of the property which, as to the transferee, may constitute a return of capital if the purchase price paid by the transferee for the unit exceeded his or her share of our adjusted basis for all of our properties. Therefore, you and our other limited partners may have even greater difficulty in attempting to sell your units, since the transferee of your units would obtain no current tax benefits from purchasing your units to the extent that the purchase price exceeds your allocable share of our basis in our assets.

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Tax Treatment of Our Termination

If we terminate as a partnership, we must sell our assets, use the sales proceeds and our other funds to repay our liabilities, and distribute any remaining funds to our partners. Sales and other dispositions of our assets would have the tax consequences described in “– Sale or Other Disposition of Partnership Property,” above. Any liquidating cash distributions we make that exceed the tax basis of a unit generally would be taxable as capital gain, but also would be subject to recapture as ordinary income as described in “– Sale or Other Disposition of Units,” above, assuming the units constitute capital assets in a limited partner’s hands. Cash distributions in amounts less than a limited partner’s basis in his or her units may result in a loss, generally a capital loss, that would be subject to the general limitations on deducting losses and capital losses.

Possible IRS Audits

We have not sought any rulings from the IRS with respect to any tax issues involving our intended operations as described in this prospectus, nor with respect to the purchase, ownership, redemption or sale of our units by you and our other limited partners. Thus, the IRS may audit our federal information income tax returns and it may not agree with some or all of our tax positions. An audit of our federal information income tax return in any taxable year may result in:

• an increase in our income;

• the disallowance of our deductions;

• the reallocation of income and deductions among our partners;

• an audit of the personal income tax returns of you and our other limited partners;

• adjustments of items on your personal income tax returns that are unrelated to this investment; and/or

• additional federal income taxes and penalty or interest liabilities to you and our other limited partners.

You and our other limited partners must report your share of our income, losses, gains, deductions, and credits (if any) on your personal federal income tax returns in a manner that is consistent with our federal information income tax returns, unless you file a statement with the IRS identifying the inconsistency.

Generally, the federal tax treatment of our income, gains, losses, deductions, and credits (if any) will be determined at the partnership level in a unified partnership proceeding, rather than at the partner level in separate proceedings with you and the our other limited partners. In any audit of us, the IRS will deal with our general partner, serving as our “tax matters partner.” Only limited partners owning at least a 1% interest in us will be entitled to receive a separate notice from the IRS of any audit of our federal information income tax return and the results of the audit. However, groups of our limited partners who together own a 5% or greater interest in us may, by giving notice to the IRS, become a “notice group” and designate a member of their group to receive IRS notices. All of our limited partners have the right to participate in any audit of us at their own expense. We are required to keep you and our other limited partners informed of any administrative and judicial proceedings involving our tax matters. Also, we will keep you and our other limited partners advised of any significant audit activities by the IRS involving us.

Any tax controversy could result in substantial legal and accounting expenses to us, even if the outcome is favorable. Our general partner will participate as our tax matters partner and general partner in all audits, examinations, hearings, actions and other proceedings by tax authorities relating to us at our expense. As our tax matters partner, our general partner may enter into settlement agreements with the IRS that are binding on our limited partners who own less than a 1% interest in us, except limited partners who are members of a notice group, as described above, or who have filed a statement with the IRS stating that our general partner does not have authority to enter into settlement agreements that are binding on them.

Alternative Minimum Tax

With limited exceptions, taxpayers must pay an alternative minimum tax if it exceeds the taxpayer’s regular federal income tax for the year. For noncorporate taxpayers, the alternative minimum tax is imposed on alternative minimum taxable income (“AMTI”) that is above an exemption amount. AMTI generally is taxable income, plus or minus various adjustments, plus tax preference items. The tax rate for noncorporate taxpayers is 26% for the first $175,000, $87,500 for married individuals filing separately, of a taxpayer’s AMTI in excess of the exemption amount; and additional AMTI is taxed at 28%. However, the regular tax rates on capital gains also will apply for purposes of the alternative minimum tax. For tax years beginning in 2006, the exemption amounts for individuals under the “Tax Increase Prevention and Reconciliation Act of 2005 (“TIPRA”) are the following amounts:

• married individuals filing jointly and surviving spouses, $62,550, less 25% of AMTI exceeding $150,000 (zero exemption when AMTI is $400,200);

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• unmarried individuals, $42,500, less 25% of AMTI exceeding $112,500 (zero exemption when AMTI is $282,500); and

• married individuals filing separately, $31,275, less 25% of AMTI exceeding $75,000 (zero exemption when AMTI is $200,100). Also, AMTI of married individuals filing separately is increased by the lesser of $31,275 or 25% of the excess of AMTI (without regard to the exemption reduction) over $200,100.

As of the date of this prospectus, the exemption amounts for alternative minimum tax purposes for individuals in 2007 and subsequent years will be substantially reduced from the exemption amounts set forth above unless Congress and the President take action to prevent that reduction in the exemption amounts.

Some of the principal adjustments to taxable income that are used to determine AMTI are summarized below.

• Depreciation deductions may not exceed deductions computed using the 150% declining balance method and, for property placed in service before January 1, 1999, using an extended recovery period.

• Miscellaneous itemized deductions are not allowed.

• Medical expenses are deductible only to the extent they exceed 10% of adjusted gross income.

• State and local property taxes and income taxes (or, at the taxpayer’s election, sales and use taxes) are not deductible.

• Interest deductions are restricted.

• The standard deduction and personal exemptions are not allowed.

• Only some types of operating losses are deductible.

• Different rules under the Code apply to incentive stock options that may require earlier recognition of income.

The principal tax preference items that must be added to taxable income for alternative minimum tax purposes include certain excess intangible drilling costs and tax-exempt interest earned on certain private activity bonds.

The principal partnership tax items that may have an impact on your and our other limited partners’ AMTI as a result of investing in us are cost recovery deductions on the portion of our equipment leased to others under operating leases, which generally will be computed for regular federal income tax purposes using the 200% declining balance method, rather than the 150% declining balance method used for alternative minimum tax purposes and deductions relating to our interest expenses on borrowings we expect to obtain to increase our portfolio of equipment, leases and secured loans. See “– Depreciation,” above, and the following table.

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Illustration of How Cost Recovery Adjustments Under an

Equipment Leasing Program’s Operating Leases

Can Affect an Investor’s AMTI (“Alternative Minimum Taxable Income”)

(See the footnotes to the following table for the principal assumptions)

Cost Recovery Period	Deduction for Regular Tax		Deduction for AMT		Increase or (Decrease) in Investor’s AMTI Compared to Investor’s Regular Tax Taxable Income
Year 1	$	14,290	$	10,710	$	3,580
Year 2	$	24,490	$	19,130	$	5,360
Year 3	$	17,490	$	15,030	$	2,460
Year 4	$	12,490	$	12,250	$	240
Year 5	$	8,930	$	12,250		($3,320	)
Year 6	$	8,920	$	12,250		($3,330	)
Year 7	$	8,930	$	12,250		($3,320	)
Year 8	$	4,460	$	6,130		($1,670	)
Total	$	100,000	$	100,000		-0	-

Thus, the investor’s share of the program’s depreciation deductions for alternative minimum tax purposes is:

• less than those deductions for regular tax purposes during the first four years; but

• greater than those deductions for regular tax purposes during the last four years.

The above table assumes that:

(1) the program’s only cost recovery deductions for the taxable year are for general office equipment that is classified as 7-year property for both regular tax and alternative minimum tax purposes:

(2) the program’s purchase price for the property is $10 million (which includes leverage);

(3) the investor made a $100,000 (1% of the program’s total capital) investment;

(4) the investor’s allocable 1% share of the program’s basis (i.e., purchase price) in the property is $100,000;

(5) the program has a full taxable year of 12 months; and

(6) the mid-year convention is used, which has the effect of adding another year to the 7-year cost recovery period.

The rules relating to the alternative minimum tax for corporations are different from those discussed above. Also, all prospective limited partners contemplating purchasing our units are urged to seek advice based on their particular circumstances from an independent tax advisor as to the likelihood of them incurring or increasing any alternative minimum tax liability because of an investment in us, and any changes in the law relating to the alternative minimum tax since the date of this prospectus.

Profit Motive, IRS Anti-Abuse Rule and Judicial Doctrines Limitations on Deductions

Your ability to deduct your share of our tax losses could be lost if we lack the appropriate profit motive. There is a presumption under §183 of the Code that an activity is engaged in for profit if, in any three of five consecutive taxable years, the gross income derived from the activity exceeds the deductions attributable to the activity. Thus, if we fail to show a profit in at least three out of five consecutive years this presumption will not be available and the possibility that the IRS could successfully challenge your share of our tax losses would be substantially increased. The fact that the possibility of ultimately obtaining profits is uncertain, standing alone, does not appear to be sufficient grounds for the denial of losses.

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Also, if a principal purpose of a partnership is to reduce substantially its partners’ federal income tax liability in a manner that is inconsistent with the intent of the partnership rules of the Code, based on all the facts and circumstances, the IRS is authorized under Treas. Reg. §1.701-2, which we refer to as the “IRS anti-abuse rule,” to remedy the abuse. Our special counsel considered the IRS anti-abuse rule, as well as the possible application to us and our intended activities of potentially relevant judicial doctrines, including the step transaction, business purpose, economic substance, substance over form, and sham transaction doctrines, which, if applicable to us, would deny or limit our tax deductions and tax losses. Under these judicial doctrines, for example, tax deductions and losses from a transaction or investment generally will be disallowed if the transaction or investment has no economic substance apart from tax benefits. Special counsel, however, has expressed the opinion that we will possess the requisite profit motive under §183 of the Code, and the IRS anti-abuse rule in Treas. Reg. §1.701-2 and the potentially relevant judicial doctrines listed above will not have a material adverse effect on the tax consequences of an investment in us by a typical limited partner as described in special counsel’s opinions. In this regard, special counsel’s opinions are based in part on:

• our general partner’s representation that our principal purpose is to conduct our business as described in this prospectus on a profitable basis to you and our other limited partners, apart from tax benefits; and

• the abilities and experience of our general partner’s management. See the “Management” section of this prospectus and “Appendix B – Prior Performance Tables,” to this prospectus.

Interest and Penalties

Taxpayers must pay interest on underpayments of federal income taxes and the Code contains various penalties, including a penalty under §6662 of the Code equal to 20% of the amount of a substantial understatement of federal income tax liability. There is a substantial understatement of federal income taxes by a noncorporate taxpayer if the correct income tax, as finally determined, exceeds the income tax actually shown on his or her tax return by the greater of 10% of the correct tax or $5,000. A noncorporate taxpayer may avoid this penalty if the understatement was not attributable to a “tax shelter,” as that term is defined below, and there is or was substantial authority for the taxpayer’s tax treatment of the item that caused the understatement, or if the relevant facts were adequately disclosed on the taxpayer’s tax return and the taxpayer had a reasonable basis for the tax treatment of that item. However, in the case of an understatement that is attributable to a “tax shelter,” as that term is defined below, which may include us for this purpose, the penalty may be avoided only if there was reasonable cause for the underpayment and the taxpayer acted in good faith, or there is or was substantial authority for the taxpayer’s treatment of the item and the taxpayer reasonably believed that his or her tax treatment of the item was more likely than not the proper treatment. For purposes of this penalty, the term “tax shelter” includes a partnership if a “significant” purpose of the partnership is the avoidance or evasion of federal income tax. In this regard, because the IRS has not explained what a “significant” purpose of avoiding or evading federal income taxes means, our special counsel cannot express an opinion as to whether we are a “tax shelter” as defined by the Code for purposes of this penalty.

In addition, there is a 20% penalty under §6662A of the Code for a reportable transaction understatement of federal income taxes on a taxpayer’s personal federal income tax return for any tax year. This penalty is increased from 20% to 30%, and a “reasonable cause” exception to the penalty is not available, if the taxpayer fails to properly disclose his participation in a reportable transaction to the IRS, whether or not there actually is an understatement of federal taxes on the taxpayer’s return with respect to the reportable transaction. A reportable transaction understatement generally is the amount of the increase (if any) in taxable income resulting from the proper tax treatment of a tax item instead of the taxpayer’s treatment of the tax item on the taxpayer’s tax return, multiplied by the highest applicable income tax rate. A tax item is subject to these rules if it is attributable to:

• any listed transaction (a transaction is a listed transaction if it is the same as, or substantially similar to, a transaction that the IRS has publicly determined is a tax avoidance transaction); and

• any of four other types of reportable transactions, if a “significant” purpose of the transaction is federal income tax avoidance or evasion. As discussed above, because of a lack of clear legal authorities, special counsel is unable to render an opinion as to whether or not we would be deemed to have a significant purpose of tax avoidance.

One of the four types of reportable transactions noted above that are in addition to listed transactions, is a “loss transaction,” if a significant purpose of the transaction is federal income tax avoidance or evasion. Under Treas. Reg. §1.6011-4, a loss transaction, subject to certain exceptions, is any investment resulting in a partnership or any noncorporate partner of a partnership claiming:

• a loss under §165 of the Code of at least $2 million in any single taxable year; or

• $4 million in aggregate §165 losses in the taxable year that the investment is entered into and the five succeeding taxable years combined.

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For this purpose, a §165 loss includes certain amounts deductible under any provision of the Code that treats a transaction as a sale or other disposition or otherwise results in a deduction under §165. Losses under §165 from fire, storm or other casualty, theft or a compulsory or involuntary conversion are not taken into account in determining whether a transaction is a loss transaction. With respect to our intended activities, under IRS rulings a loss under §165 from the sale or exchange of our equipment, leases or secured loans would not be taken into account in determining whether we are a loss transaction type of reportable transaction if the asset we sold at a loss had not been separated from any portion of the income it generated and the basis of the asset (for purposes of determining the loss) was a qualifying basis. In this regard, our basis in our equipment, leases and secured loans (less adjustments for any allowable depreciation, amortization, or casualty loss) will be a qualifying basis if it is equal to, and is determined solely by reference to, the amount paid in cash by us for the asset. However, because we intend to securitize a significant portion of our equipment portfolio, any losses from the eventual sale of our equipment assets may not qualify for this exclusion from §165 losses for purposes of the reportable transaction rules if the securitization is treated by the IRS for this purpose as separating from a portion of the income they generated, as discussed above. Generally, an amount we paid in cash would not be disregarded merely because we issued a debt instrument to obtain the cash. However, if we issued a debt instrument to the person (or a related party) who sold the asset to us or assumed a debt instrument (or took an asset subject to a debt instrument) issued by the person (or a related party) who sold the asset to us, we would be treated as having paid cash for the asset only if the debt instrument was secured by the asset and all amounts due under the debt instrument were paid in cash no later than the time we sold the asset for which the loss was claimed.

Depending primarily on the dollar amount we have invested in our equipment portfolio (including the amounts of our borrowings and securitizations), the types of equipment investments and the sales or other dispositions we make of our equipment portfolio, it is possible (although not anticipated by us) that we could realize a §165 loss, or aggregate §165 losses, that would meet one or both of the dollar amount thresholds described above. Becoming a reportable transaction would not, by itself, mean that our tax treatment of our activities was improper or that there was a reportable transaction understatement of our taxable income or of the federal income taxes owed by you or our other limited partners on our taxable income. It would, however, increase the likelihood that the IRS would audit our annual information income tax returns. See the “Risk Factors – An IRS Audit of Our Annual Federal Information Tax Return May Result in Adjustments to, or An Audit of, Your Personal Income Tax Returns,” section of this prospectus. In each taxable year, if any, in which we determined we were a reportable transaction, we would be required to file an information return with the IRS. In addition, each material advisor to a reportable transaction, which would include our general partner if we ever determine that we are, or are reasonably likely to become, a reportable transaction, must maintain a list that identifies you and our other investors, and provides any other information required by the IRS concerning our limited partners’ investments in us. No filing by you and our other limited partners would be required unless your allocable share of our §165 losses separately met either the $2 million or the $4 million threshold amounts described above, or we become a reportable transaction for some reason other than §165 losses and you were deemed under the Code and the Treasury Regulations to have participated in us as a reportable transaction. Again, however, merely disclosing participation in a reportable transaction to the IRS when required to do so has no effect on the legal determination of whether any tax position we have taken is proper or improper. For individuals there is a $10,000 penalty for failing to disclose participation in a reportable transaction (other than a listed transaction for which the penalties are much greater) when required to do so, even if it is ultimately found by the IRS or the courts that there was no understatement of federal taxes with respect to the reportable transaction.

State and Local Taxation

Your share of our taxable income or loss generally must be included in determining your reportable income for state or local tax purposes in the jurisdiction where you reside, and other states in which we do business may require you and our other limited partners to file state income tax returns and may impose taxes on your pro rata share of our income derived from that state. In addition, we may be required to withhold state and local taxes on your share of our income or assets, regardless of whether we make cash distributions to you. Any tax losses generated by our operations in one state may not be available to offset income from our operations in other states. To the extent that you pay tax to a state by virtue of our operations within that state, you may be entitled to a deduction or credit against tax owed to your state of residence with respect to the same income. Your payment of these state and local taxes may be deductible by you for regular federal income tax purposes if you itemize your deductions (which will be offset to the extent of any refunds you receive of those taxes that you deducted in a prior year), but not for alternative minimum tax purposes. See “– Alternative Minimum Tax,” above.

Your personal federal, state and local income tax returns are your responsibility. It is not practical for our special counsel to evaluate the many different state and local tax laws that may affect you and our other limited partners as a result of our doing business in those states and localities, and our special counsel’s tax opinion letter does not include any opinion with respect to your potential liability for state and local taxes or tax return filing requirements. You are urged to seek advice based on your particular circumstances from an independent tax advisor to determine the effect state and local taxes, including gift and death taxes as well as income taxes and tax return filing requirements, may have on you in connection with this investment.

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Social Security Benefits and Self-Employment Tax

As a limited partner, your share of our income or loss will not be subject to self-employment tax. In addition, you will not earn any increased benefits under the Social Security Act by investing in us and if you are currently receiving Social Security benefits, your share of our taxable income will not be taken into account in determining any reduction in your Social Security benefits because of “excess earnings.”

Estate and Gift Taxation

There is no federal tax on lifetime or testamentary transfers of property between spouses. The gift tax annual exclusion amount is $12,000 per donee in 2007, which will be adjusted in subsequent years for inflation. Under the Economic Growth and Tax Relief Reconciliation Act of 2001 (the “2001 Tax Act”), the maximum estate and gift tax rate is 45% from 2007 through 2009. Estates of $2.0 million or less in 2007 and 2008, which increases to estates of $3.5 million or less in 2009, are not subject to federal estate tax to the extent those exemption amounts (i.e., unified credit equivalents) were not previously used, in whole or in part, by the decedent to reduce federal gift taxes on any lifetime gifts in excess of the applicable annual exclusion amount for gifts. Under the 2001 Tax Act, the federal estate tax will be repealed in 2010, and the maximum gift tax rate in 2010 will be 35%. In 2011, however, the federal estate and gift taxes are scheduled to be reinstated under the rules in effect before the 2001 Tax Act was enacted, which would decrease the unified credit and increase the tax rates.

Federal Tax Treatment of Foreign Investors

Our income generally will be subject to U.S. taxation in the hands of foreign investors, and foreign investors may be required to file a U.S. federal income tax return to report their respective shares of our income, gains, losses, and deductions. Additionally, we are required to withhold tax on each foreign investor’s share of our income, whether or not any cash distributions are made. We will deduct any amount required to be withheld from distributions otherwise payable to the foreign investor, and the foreign investor will be liable to repay us for any withholdings in excess of the distributions to which he or she is otherwise entitled. Foreign investors are urged to seek advice based on their particular circumstances from an independent tax advisor regarding the applicability of these rules and the other tax consequences of an investment in us.

Federal Taxation of Employee Benefit Plans and Other Tax-Exempt Organizations

Employee benefit plans, such as qualified pension and profit sharing plans, Keogh plans and individual retirement accounts (“IRAs”), generally are exempt from federal income tax. However, any unrelated business taxable income (“UBTI”) received by an otherwise tax-exempt entity, plan or trust that exceeds $1,000 in any taxable year is subject to an unrelated business income tax. Other charitable and tax-exempt organizations in addition to those listed above, may also be subject to tax on UBTI. If a tax-exempt entity purchases our units, most of its share of our net income, if any, in a given year will be UBTI. In addition, if a charitable remainder trust has any UBTI, then all of its otherwise non-taxable income will be subject to tax. We urge tax-exempt entities considering the purchase of our units to seek advice based on their particular circumstances from an independent tax advisor regarding the tax consequences to them of investing in us, including the likelihood of their incurring or increasing any UBTI.

Changes in the Law

Your investment in us may be affected by changes in the tax laws. For example, in 2003 the top four federal income tax brackets for individuals were reduced through December 31, 2010, including reducing the top bracket to 35% from 38.6%. The lower federal income tax rates will reduce to some degree the amount of taxes you can save by virtue of your share of our deductions and losses in any taxable year. On the other hand, the lower federal income tax rates also will reduce the amount of federal income tax liability incurred by you on your share of our net income in any taxable year. However, the federal income tax brackets discussed above may be changed again, even before 2011, and other changes in the tax laws could be made that would have an adverse effect on your anticipated tax benefits from an investment in us.

You are urged to seek advice based on your particular circumstances from an independent tax advisor with respect to the impact of recent legislation on your investment in us and the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in us.

INVESTMENT BY QUALIFIED PLANS

Fiduciaries under ERISA

Under the federal law commonly known as ERISA, fiduciaries of qualified plans must act solely for the benefit of the plan’s participants and beneficiaries. A fiduciary must:

• perform its duties with the skill, prudence and diligence of a prudent person;

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• diversify the plan’s investments so as to minimize the risk of large losses; and

• act in accordance with the plan’s governing documents.

Fiduciaries include anyone who exercises any control over the management or the funds or other property of the plan. In addition, a plan participant who exercises control over his or her individual account in the qualified plan under a self-directed investment arrangement will generally be held responsible for the consequences of his or her investment decisions. Also, some qualified plans of sole proprietorships, partnerships and closely-held corporations are generally not subject to ERISA’s fiduciary duty rules, although they, as well as IRAs and self-directed accounts, are subject to the IRS’s prohibited transaction rules, which are discussed below. IRAs generally are not subject to ERISA’s fiduciary duty rules.

We urge each potential investor in us who is subject to ERISA’s fiduciary duty rules with respect to a qualified plan to consider those rules in the context of the particular circumstances of the qualified plan before making an investment in us.

Prohibited Transactions

ERISA and the Code prohibit qualified plans and IRAs from engaging in certain transactions involving assets of the qualified plan or IRA, which are referred to as “prohibited transactions,” with certain parties, which are referred to as “disqualified persons.” Disqualified persons include:

• fiduciaries of the qualified plan or IRA;

• officers, directors and certain shareholders and other owners of the company sponsoring the qualified plan; and

• persons and legal entities sharing certain family or ownership relationships with other disqualified persons.

In addition, the beneficiary of an IRA is generally considered to be a disqualified person for purposes of the prohibited transaction rules. Types of prohibited transactions include:

• direct or indirect transfers of a qualified plan’s or IRA’s assets to a disqualified person;

• the use of a qualified plan’s or IRA’s assets by a fiduciary for his or her personal benefit; and

• a fiduciary receiving cash or other consideration for his or her own benefit from a third-party in connection with a transaction involving the assets of the qualified plan or the IRA.

Under ERISA, a disqualified person that engages in a prohibited transaction must return any profits to the plan and pay back any losses to the plan. Also, the Code imposes excise taxes on a disqualified person that engages in a prohibited transaction with a qualified plan or IRA. These prohibited transactions generally must be undone by the disqualified person to avoid additional penalties. In addition, if a taxpayer engages in a prohibited transaction with an IRA in which he or she is a beneficiary, the IRA will cease being an IRA and all of its assets will be treated as if they had been distributed to the taxpayer in the year in which the prohibited transaction occurred.

Subject to the rules discussed below, in order to avoid the occurrence of a prohibited transaction under the Code or ERISA, our units may not be purchased by a qualified plan or an IRA with funds or other assets for which we or any of our affiliates are fiduciaries.

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Plan Assets

In some circumstances, ERISA applies a look-through rule under which the assets of an entity in which a qualified plan or IRA has invested are deemed to be the assets of the qualified plan or the IRA itself. If our assets were determined to be plan assets, then fiduciaries of the qualified plans and IRAs that purchased our units might be subject to liability for actions that we take. In addition, some of the transactions described in this prospectus in which we might engage, including transactions with our affiliates, may be prohibited transactions, even if the original purchase of our units by the plan or IRA was not a prohibited transaction. Moreover, fiduciaries of qualified plans or IRAs subject to ERISA’s fiduciary duty rules might be deemed to have improperly delegated their fiduciary responsibilities to us by investing in us. ERISA, however, exempts certain investments from the look-through rule. Under the Department of Labor’s current regulations, our assets will not be treated as plan assets of our qualified plan or IRA limited partners if:

• our units a re publicly offered, which means that our units must be “freely transferable,” as that term is defined by ERISA;

• less than 25% of our units are owned by qualified plans, IRAs, and certain other employee benefit plans; or

• we are an operating company.

We cannot be certain that our units will be deemed to be freely transferable, or that we will be deemed to be an operating company, because those issues involve factual determinations. Therefore, we will rely on the “less than 25%” ownership exemption, and we will ensure that qualified plans, IRAs, and certain other employee benefit plan investors at all times own less than 25% of the total number of our outstanding units. In making this determination, we will, as provided in the Department of Labor’s regulations, disregard the value of any units held by our general partner, any person who provides investment advice for a fee with respect to our assets, and any affiliate of those persons.

Other ERISA Considerations

In addition to the considerations described above in connection with the “plan asset” issue, a fiduciary’s decision to cause a qualified plan or IRA to purchase our units should involve, among other factors, considerations that include whether:

• the purchase is prudent in light of the illiquid nature of our units and potential minimum required distributions from the plan or IRA, see the “Risk Factors – Your Ability to Dispose of Your Investment in Us Will Be Limited” section of this prospectus;

• the investment will provide sufficient cash distributions in light of the qualified plan’s likely required benefit payments and other needs for liquidity;

• the evaluation of the investment has properly taken into account the potential costs of determining and paying any amounts of federal income tax that may be owed on unrelated business taxable income derived from us; and

• the fair market value of our units will be sufficiently ascertainable, and with sufficient frequency, to enable the qualified plan or IRA to value its assets in accordance with the rules and policies applicable to the qualified plan or IRA.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION

We have not yet begun operations and will depend on the proceeds of this offering of our units to carry on our proposed activities. We intend to use the offering proceeds, after paying dealer-manager fees, sales commissions, the bona fide accountable due diligence reimbursements, the organization and offering expense allowance and other permitted fees and establishing a working capital reserve, to purchase and lease equipment, finance secured loans and purchase portfolios of equipment subject to existing leases. We will seek to finance approximately 80% of the purchase price of our equipment by borrowing funds through warehouse loan and CP conduit facilities as well as through term note securitizations. However, as of the date of this prospectus we have no arrangements with, or commitments from, any lender to provide financing to us. To the extent that our offering proceeds are less than the maximum, or we are unable to obtain warehouse or CP conduit financing or engage in term note securitization financings, our ability to diversify our investments will be reduced, which could reduce the return on your investment in us.

Initially, we intend to establish working capital reserves of approximately 1% of our offering proceeds, which we believe will be sufficient to satisfy our liquidity requirements. However, our operating costs will adversely affect our liquidity and to the extent that our working capital reserves are insufficient to satisfy our cash requirements, we will be required to obtain additional funds through third-party financing, which may not be available on terms acceptable to us or at the times when we need it.

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Fluctuations in prevailing interest rates will affect us, because the cost of capital as reflected in interest rates is a significant factor in determining the market rate for our equipment leases and secured loans and the cost of the funds we intend to borrow to increase the size of our portfolio. Higher interest rates will:

• increase our borrowing costs;

• reduce our yield on leveraged investments;

• reduce the amount of financing we may be able to obtain because of a reduction in value of our fixed-rate equipment leases and secured loans; and

• possibly, reduce the desirability of using leverage to increase the size of our portfolio.

Interest rate changes generally will result in corresponding changes in rates on new equipment leases and secured loans as well as variable rate financing or new financing. Except as discussed above, interest rate fluctuations would generally have little or no effect on existing equipment leases as their rates would generally be fixed.

We expect that our warehouse and CP conduit borrowings will have variable interest rates and that some or all of any term note securitizations we may obtain will also have variable rates. Because warehouse debt is short-term, we do not believe it carries material interest rate risk. However, we will seek to manage interest rate risk in any CP conduit or variable rate term note securitization by engaging in hedging transactions that would have the effect of fixing our interest rate on those obligations.

SUMMARY OF OUR PARTNERSHIP AGREEMENT

The following is a brief summary of the material provisions of our amended and restated agreement of limited partnership that are not covered elsewhere in this prospectus. The partnership agreement sets out the terms and conditions on which we will conduct our business and affairs, including the rights and obligations of you and our other limited partners. A copy of our partnership agreement is included as Appendix A to this prospectus. You should study the entire partnership agreement carefully before purchasing our units.

General

We are a limited partnership formed under the Delaware Revised Uniform Limited Partnership Act with LEAF Asset Management, LLC as our general partner. Our registered office and principal place of business in Delaware is 110 S. Poplar Street, Suite 101, Wilmington, Delaware 19801. Our general partner’s principal place of business is 1818 Market Street, 9th Floor, Philadelphia, Pennsylvania 19103. We may change our principal place of business by written notice to you.

Our term began when we filed a certificate of limited partnership with the Delaware Department of State in May 2006. Under our partnership agreement, we will terminate at midnight on December 31, 2031, or earlier if a dissolution event occurs as described in “– Events Causing Dissolution,” below. However, our general partner anticipates that our actual term before we cease operations as a limited partnership and liquidate our assets will be much shorter, approximately 9 years after the date of this prospectus. See the “Risk Factors – Your Ability to Dispose of Your Investment in Us Will Be Limited,” section of this prospectus.

Capital Contributions

Our general partner contributed $1,000 in cash as its capital contribution to us in exchange for a 1% interest in our income, losses and cash distributions. Each limited partner will contribute $100 to our capital for each unit purchased, other than the original limited partner and the limited partners (including our general partner and its affiliates) who purchase units with the price discounts described in the “Plan of Distribution” and “How to Subscribe” sections of this prospectus. You and our other limited partners are not obligated to make additional capital contributions to us, except as described below under

“– Limited Liability of Limited Partners.”

Powers of our General Partner

Except as otherwise specifically provided in our partnership agreement, our general partner will have complete and exclusive discretion in the management of our business. You will not be permitted to participate in our management. Except to the extent limited by Delaware law, our general partner may delegate any or all of its duties under the partnership agreement to another person, including any of its affiliates. The partnership agreement designates our general partner as our tax matters partner and authorizes and directs it to represent us and you and our other limited partners in connection with all examinations of our affairs by tax authorities and any resulting administrative or judicial proceedings, and to expend our funds in doing so.

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Liability of Our General Partner

Our general partner will be liable for all of our general obligations to the extent we do not pay them. However, our general partner will not have any personal liability for:

• obligations that are specifically nonrecourse to us; or

• the repayment of your capital contribution.

Limited Liability of Limited Partners

Our units are not assessable, and you will not have any personal liability for any of our obligations or liabilities. You will only be liable for our obligations and liabilities to the extent of your capital contribution and your pro rata share of our undistributed profits and other assets. However, if you participate in the management or control of our affairs, you may be deemed to be acting as a general partner and you may lose your limited liability as against third-parties who reasonably believe, in doing business with us, that you are a general partner. In addition, Delaware law provides that you may be liable to us for a distribution we make to you if, after giving effect to the distribution, our liabilities exceed the fair value of our assets.

Withdrawal or Removal of Our General Partner

Our general partner may not voluntarily withdraw as our general partner without:

• 60 days’ advance written notice to you and our other limited partners;

• obtaining an opinion of counsel that the withdrawal will not cause our termination as a limited partnership or materially and adversely affect our federal tax status as a partnership; and

• the selection of a substitute general partner, and the acceptance of its appointment as our substitute general partner by limited partners owning a majority of our units.

Our general partner may be removed by limited partners owning a majority of our units. Neither our general partner nor any of its affiliates may participate in any vote by our limited partners to remove our general partner as general partner.

Consequences of Withdrawal or Removal of Our General Partner

On the withdrawal or removal of our general partner, we must pay our general partner the fair market value of its partnership interest, plus or minus, as the case may be, accrued but unpaid fees owed to our general partner by us and the difference between any other amounts owed to our general partner by us and amounts owed to us by our general partner. The method of payment must be fair and protect our solvency and liquidity. The method of payment is deemed fair if:

•  in a voluntary withdrawal, it provides for a non-interest bearing unsecured promissory note with principal payable only from distributions our general partner otherwise would have received; or

• in an involuntary removal, it provides for a rate of interest equal to the lesser of the rate we would obtain from an unrelated bank lender for an unsecured 60-month loan or the “Prime Rate” of interest published in the Money Rates section of the Wall Street Journal, plus 4%, and provides for payment of principal and interest in 60 equal monthly installments.

Liability of Withdrawn or Removed General Partner

After the withdrawal or removal of our general partner as our general partner, it will remain liable for all obligations and liabilities incurred by it or by us while it was acting as our general partner and for which it was liable as our general partner. Our general partner will be free of any obligation or liability arising from our activities after the time its withdrawal or removal becomes effective.

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Transfer of Units

There is no public or secondary market for our units, and we do not expect that a market will develop. Generally, you may transfer or assign your units to any person, whom we call an assignee, only if you satisfy the following conditions:

• you and the assignee sign a document that our general partner reasonably determines satisfies the following:

• states your intention that the assignee is to become a substitute limited partner, if that is the case;

• shows that there is a legal transfer and binds the assignee to all of the terms and provisions of our partnership agreement;

• includes a representation by both you and the assignee that the assignment or transfer complies with all applicable laws, including the applicable minimum investment and investor suitability requirements under state securities laws; and

• the assignee pays us a fee that will not exceed $150 for our expenses.

Also, unless our general partner consents, no units may be assigned:

• to a minor or incompetent unless a guardian, custodian or conservator has been appointed for the person;

• to any person if, in our counsel’s opinion, the assignment would terminate our taxable year or adversely affect our status as a limited partnership for federal income tax purposes;

• to any person if, in our counsel’s opinion, the assignment would affect our existence or qualification as a limited partnership under Delaware law or the laws of any other jurisdiction in which we conduct business;

• to any person not permitted, in our counsel’s opinion, to be an assignee under applicable law, including federal and state securities laws;

• if the assignment is for less than 50 units unless the assignment is for all of your units;

• if the assignment would result in your keeping a portion of your units that is less than the greater of:

• 50 units; or

• the minimum number of units required to be purchased under the minimum investment standards applicable under the state securities laws to your initial purchase of units; or

• if, in our counsel’s opinion, the effect of the assignment would be to cause the equity participation in us by certain benefit plan investors to equal or exceed 25% of our total outstanding units at any time.