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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the period ended December 31, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________ to ______________
Commission file number 333-116595
LEASE EQUITY APPRECIATION FUND II, L.P.
(Exact name of registrant as specified in its charter)
Delaware 20-1056194
(State of Organization) (I.R.S. Employer Identification No.)
110 South Poplar Street, Suite 101, Wilmington Delaware 19801
(Address of principal executive offices) (Zip Code)
(215) 574-1636
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:
Title of Each Class Name of Each Exchange on Which Registered
None. Not applicable.
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
None.
TITLE OF CLASS
Not applicable.
Check whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [X] Yes [ ]No
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act). [ ] Yes [X] No
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was last sold, or the average bid and asked price of such common
equity, as of the last business day of the registrant's most recently completed
second fiscal quarter.
There were no outstanding Limited Partner units of the Registrant at
December 31, 2004. Also, there is no public market for these securities.
DOCUMENTS INCORPORATED BY REFERENCE
None.
EXHIBIT INDEX
The Exhibit Index is located on page 14.
1
LEASE EQUITY APPRECIATION FUND II, L.P.
INDEX TO ANNUAL REPORT
ON FORM 10-K
Page
----
PART I
ITEM 1: Business...................................................................... 3
ITEM 2: Properties.................................................................... 3
ITEM 3: Legal Proceedings............................................................. 4
ITEM 4: Submission of Matters to a Vote of Security Holders........................... 4
PART II
ITEM 5: Market for Registrant's Common Equity and Related Stockholder Matters......... 4
ITEM 6: Selected Financial Data....................................................... 4
ITEM 7: Management's Discussion and Analysis of Financial Condition and
Results of Operation....................................................... 4
ITEM 7A: Quantitative and Qualitative Disclosures about Market Risk.................... 5
ITEM 8: Financial Statements and Supplementary Data................................... 6-9
ITEM 9: Changes in and Disagreements with Accountants on Accounting and
and Financial Disclosure..................................................... 10
ITEM 9A: Controls and Procedures....................................................... 10
PART III
ITEM 10: Directors and Executive Officers of the Registrant............................ 10-13
ITEM 11: Executive Compensation........................................................ 13
ITEM 12: Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.......................................................... 13
ITEM 13: Certain Relationships and Related Transactions................................ 13
ITEM 14: Principal Accountant Fees and Services........................................ 13
PART IV
ITEM 15: Exhibits, Financial Statement Schedules and Reports on Form 8-K............... 14
SIGNATURES ......................................................................................... 15
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY
REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES TO SECTION 12 OF THE ACT 15
2
FORWARD-LOOKING STATEMENTS
THE DISCUSSIONS CONTAINED IN THIS REPORT INCLUDE FORWARD-LOOKING STATEMENTS
REGARDING EVENTS AND FINANCIAL TRENDS WHICH MAY AFFECT THE REGISTRANT'S FUTURE
OPERATING RESULTS AND FINANCIAL POSITION. SUCH STATEMENTS ARE SUBJECT TO RISKS
AND UNCERTAINTIES THAT COULD CAUSE THE REGISTRANT'S ACTUAL RESULTS AND FINANCIAL
POSISION TO DIFFER MATERIALLY FROM THOSE ANTICIPATED IN SUCH STATEMENTS.
PART I
ITEM 1 - BUSINESS
Lease Equity Appreciation Fund II, L.P. (the "Fund"), a Delaware limited
partnership, was formed on March 30, 2004. The Fund's general partner is LEAF
Financial Corporation. See Note 1 in Notes to Balance Sheet in Item 8 -
"Financial Statements and Supplementary Data." The Fund was capitalized by
contributions of $1,000 and $1 by the General Partner and the original Limited
Partner, respectively. The Fund is currently in the offering stage and will
break escrow upon meeting its minimum required subscriptions of $2 million
(20,000 units), excluding Iowa and Pennsylvania residents and units sold to the
original Limited Partner and the General Partner or its officers, directors,
employees or other affiliates. The Fund's maximum subscriptions are $60 million
(600,000 units). The offering of the Fund's units will end no later than
December 21, 2006. As of December 31, 2004, the Fund had sold subscriptions for
1,250 Limited Partner units ($125,000), which were held in the Fund's escrow
account pending receipt of the minimum required subscriptions.
The Fund will acquire a diversified portfolio of new, used or
reconditioned equipment that will be leased to third parties. The Fund may also
acquire portfolios of such equipment subject to existing leases from other
equipment lessors. In addition, as an accommodation to the Fund's end users, up
to 20% of its funds available for investment at any given time may be used to
make secured loans to the end users to finance their purchase of such equipment.
The Fund intends to structure any secured loans so that, in an economic sense,
there is no difference to the Fund between a secured loan and an equipment
lease. The Fund expects that the equipment will be principally general office
equipment, medical and dental practice equipment, energy and climate control
systems and industrial equipment. Also, the Fund intends to focus on the small
to mid-size business market, which generally includes businesses with:
o 500 or fewer employees;
o $1 billion or less in total assets; or
o $100 million or less in total annual sales.
The Fund expects that the per unit equipment cost for leases it originates
generally will be between $20,000 and $2 million, but no investments had been
identified as of December 31, 2004. The principal objective of the Fund is to
generate regular cash distributions to the Fund's Limited Partners.
ITEM 2 - PROPERTIES
The Fund had not commenced operations as of December 31, 2004, because
its minimum required subscriptions had not been received as of that date.
Therefore, there are no properties to report under this item.
3
ITEM 3 - LEGAL PROCEEDINGS
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) The Fund's Limited Partner units are not publicly traded. There
is no market for the Fund's Limited Partner units and it is
unlikely that any will develop.
(b) Number of Equity Security Holders:
NUMBER OF PARTNERS
TITLE OF CLASS AS OF DECEMBER 31, 2004
------------------------- -----------------------
Limited Partner Units (1) 1
General Partner Units 1
- ----------
(1) This is the Fund's original Limited Partner who contributed $1.00 in cash in
exchange for the original 10 Limited Partner units. When the Fund receives its
minimum required subscriptions and admits additional Limited Partners, the
original Limited Partner's contribution will be returned to him and the original
10 Limited Partner units will be retired.
ITEM 6 - SELECTED FINANCIAL DATA
The Fund had not commenced operations as of December 31, 2004. See Item
2 - "Properties."
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS AND ANALYSIS OF FINANCIAL CONDITION
The Fund is currently in its offering period. Since its formation on
March 30, 2004 through December 31, 2004, the Fund has had no operations to
report. The sole activity of the Fund during this period consisted of the
organization of the Fund and the offering of its units to potential Limited
Partners.
The Fund intends to use the offering proceeds, after paying organization
and offering expenses and permitted fees and establishing a working capital
reserve, to conduct the business activities described in Item 1 - "Business."
The Fund will seek to finance a substantial portion of the cost of its
equipment, existing leases and secured loans. However, currently the Fund has no
arrangements with, or commitments from, any lender to provide financing to it.
To the extent that the offering proceeds are less than the maximum, or the Fund
is unable to obtain financing, its ability to diversify its investments will be
reduced, which could reduce the return on its Limited Partners' investment.
Initially, the Fund intends to establish working capital reserves of
approximately 1% of the offering proceeds, which it believes will be sufficient
to satisfy its liquidity requirements until it obtains its intended financing
and operating revenues. However, the Fund's operating costs will adversely
affect its liquidity and to the extent that its working capital reserves are
insufficient to satisfy its cash requirements, the Fund will be
4
required to obtain additional funds through third-party financing. The Fund may
not be able to obtain financing when it needs it.
Fluctuations in prevailing interest rates will affect the Fund. The cost
of capital reflected in interest rates is a significant factor in determining
market lease rates and the pricing of financing. Higher interest rates will:
o affect the Fund's cost of financing;
o reduce the Fund's yield on leveraged investments;
o reduce the amount of financing the Fund may be able to obtain
because of a reduction in value of its fixed-rate assets; and
o possibly, reduce the desirability of leverage.
Interest rate changes generally will result in corresponding changes in
rates on new leases as well as variable rate financing or new financing. Except
as discussed below, interest rate fluctuations would generally have little or no
effect on existing leases acquired by the Fund as their rates would generally be
fixed.
The Fund expects that some or all of any financing arrangements it
enters into will have variable interest rates. Because some of the Fund's
expected financing will be short-term, the Fund does not believe that financing
carries material interest rate risk. However, the Fund will seek to manage
interest rate risk in certain long-term variable rate financings or
securitizations it expects to enter into by engaging in hedging transactions
that would have the effect of fixing the Fund's interest rate on those
obligations.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Not Applicable.
5
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Partners
Lease Equity Appreciation Fund II, L.P.
We have audited the accompanying balance sheet of Lease Equity
Appreciation Fund II, L.P. (a development stage enterprise) as of December 31,
2004. This financial statement is the responsibility of the Fund's management.
Our responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
balance sheet is free of material misstatement. The Fund is not required to
have, nor were we engaged to perform an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the balance sheet, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of the balance sheet provides a
reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in
all material respects, the financial position of Lease Equity Appreciation Fund
II, L.P. (a development stage enterprise) at December 31, 2004 in conformity
with accounting principles generally accepted in the United States of America.
/s/ Grant Thornton LLP
Cleveland, Ohio
March 9, 2005
6
LEASE EQUITY APPRECIATION FUND II, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
December 31, 2004
-----------------
ASSETS
Cash................................................. $ 1,001
=======
LIABILITIES AND PARTNERS' CAPITAL
Partners' Capital
General Partner................................. $ 1,000
Limited Partner................................. 1
-------
$ 1,001
=======
The accompanying notes are an integral part of this financial statement
7
LEASE EQUITY APPRECIATION FUND II, L.P.
(a development stage enterprise)
NOTES TO BALANCE SHEET
December 31, 2004
NOTE 1 - ORGANIZATION AND BUSINESS OPERATIONS
Lease Equity Appreciation Fund II, L.P. (the Fund), a Delaware limited
partnership, was formed on March 30, 2004 by LEAF Financial Corporation (the
General Partner). The Fund's Fiscal Year ends on December 31. LEAF Financial
Corporation is a wholly owned subsidiary of Resource Leasing, Inc., a wholly
owned subsidiary of Resource America, Inc. Resource America, Inc. ("RAI") is a
publicly-traded company (NASDAQ: REXI) operating in the energy, real estate,
financial services, and equipment leasing sectors.
The General Partner and the initial limited partner capitalized the
Fund. Upon the consummation of the public offering, the initial limited partner
will withdraw, its capital contribution will be refunded and the units will be
retired. The General Partner contributed $1,000 to the Fund for a 1% partnership
interest and the initial limited partner contributed $1 to the Fund for a 99%
partnership interest. The Fund will be managed by the General Partner.
The General Partner will own a 1% general partnership interest, and the
limited partners will own a 99% limited partnership interest. If available, cash
distributions will be made monthly. The distributions will be allocated 99% to
the limited partners and 1% to the General Partner. Net income and net losses
will also be allocated 99% to the limited partners and 1% to the General
Partner.
The Fund is considered to be a development stage enterprise and its sole
activity through December 31, 2004 consisted of the organization and start-up of
the Fund. Accordingly, no statement of operations is presented.
The Fund will acquire a diversified portfolio of equipment that will be
leased to end users. The Fund will also acquire existing portfolios of equipment
subject to existing leases from other equipment lessors. The primary objective
of the Fund is to invest the net proceeds raised from the sale of limited
partnership units in equipment leases and portfolios of existing equipment
leases in order to generate regular cash distributions to the limited partners
over the life of the Fund.
The Fund shall terminate on December 31, 2029, unless sooner disolved or
terminated as provided in the Partnership Agreement.
NOTE 2 - PUBLIC OFFERING OF LIMITED PARTNERSHIP UNITS
The Fund filed a registration statement for the sale of its Limited
Partner units. The General Partner or its affiliate will receive an organization
and offering expense allowance of 3.5% of the offering proceeds with respect to
expenses incurred in organizing the Fund and offering the units. This expense
allowance does not cover underwriting fees or sales commissions, but does cover
reimbursement to the selling dealers of up to a maximum of .5% of offering
proceeds for their bona fide accountable due diligence expenses.
As of December 31, 2004, the Fund raised $ 125,000 through the sale of
1250 Limited Partner units. These proceeds are maintained in an escrow account
and will be moved to the Fund's operating account upon the Fund meeting its
minimum offering requirement of $2,000,000 or 20,000 units.
8
LEASE EQUITY APPRECIATION FUND II, L.P.
(a development stage enterprise)
NOTES TO BALANCE SHEET - (Continued)
December 31, 2004
NOTE 3 - TRANSACTIONS WITH AFFILIATES
The General Partner will receive a fee for assisting the fund in
acquiring equipment for lease and portfolios of equipment subject to existing
equipment leases equal to 2% of the purchase price the Fund pays for the
equipment or portfolios of equipment subject to existing equipment leases,
including in each instance any debt incurred or assumed in connection with the
purchases.
The General Partner will receive a subordinated annual asset management
fee equal to 4% of gross rental payments for operating leases, or 2% of gross
rental payments for full payout leases, or a competetive fee, whichever is less.
An operating lease, as defined in the partnership agreement, is one in which the
aggregate noncancellable rental payments during the initial term of the lease,
on a net present value basis, are not sufficient to recover the purchase price
of the equipment. A full payout lease is one in which the gross rental payments,
on a net present value basis, are at least sufficient to recover the purchase
price of the equipment.
During the Fund's five-year investment period, the management fee will
be subordinated to the payment to the Fund's Limited Partners of a cumulative
annual distribution of 8% of their capital contributions, as adjusted by
distributions deemed to be a return of capital.
The General Partner 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 the Fund's equipment after the expiration
of a lease. This commission will be subordinated to the payment to the Limited
Partners of a cumulative 8% annual return on their capital contributions, as
adjusted by distributions deemed to be returns of capital.
The General Partner and its affiliate, Anthem Securities, Inc. ("Anthem
Securities"), a subsidiary of Resource America, Inc., receive an organization
and offering allowance of 3.5% of the offering proceeds raised. This amount
includes reimbursement to Anthem Securities to use the selling dealers' bona
fide accountable due diligence expenses of up to .5% of the proceeds of each
unit sold by them. These charges are recorded by the Fund as offering costs
incurred for the sale of Limited Partnership units on the Statements of
Partners' Capital.
The General Partner will receive a commission equal to the lesser of a
competitive rate or 2% of gross rental payments derived from any re-lease of
equipment, payable as the Fund receives rental payments from re-lease. The Fund
will not, however, pay a re-lease commission if the re-lease is with the
original lessee or its affiliates.
The General partner will also be reimbursed for operating and
administrative expenses, subject to limitations contained in the Fund's
partnership agreement.
Anthem Securities will receive an underwriting fee of up to 3% of the
offering proceeds for obtaining and managing the group of selling broker-dealers
who will sell the units in the offering. Anthem Securities will also receive
sales commissions of 7% of the proceeds of each unit sold by it, although it is
not anticipated that it will sell a material number of units.
9
ITEM 9. CHANGES IN AND DISAREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of the General Partner's
management, including the General Partner's chief executive officer and chief
financial officer, the General Partner has evaluated the effectiveness of the
design and operation of its disclosure controls and procedures (as defined in
Exchange Act Rule 13a-14(e)) as of December 31, 2004, with respect to the Fund
and, based on their evaluation, the chief executive officer and the chief
financial officer have concluded that these disclosure controls and procedures
are effective in all material respects, including those to ensure that
information concerning the Fund which is required to be disclosed in reports
filed or submitted under the Securities Exchange Act is recorded, processed,
summarized, and reported by the Fund within the time periods specified in the
SEC's rules and forms, and is accumulated and communicated to the General
Partner's management, including the General Partner's chief executive officer
and chief financial officer, as appropriate to allow for timely disclosure.
There have been no significant changes in the General Partner's internal
controls or in other factors with respect to the Fund that could significantly
affect these controls in the fourth quarter of 2004 and subsequent to the date
of their evaluation.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The General Partner manages the Fund and its activities. Although the
Fund's Limited Partners have limited voting rights under the Partnership
Agreement, they do not directly or indirectly participate in the Fund's
management or day-to-day operations, nor do they have any authority to enter
into contracts on the Fund's behalf or to otherwise bind the Fund. The General
Partner will be liable, as General Partner, for all of the Fund's debts and
obligations to the extent they are not paid by the Fund, except to the extent
that any debt or other obligation incurred by the Fund is specifically with
recourse only to the Fund's assets (i.e., "nonrecourse liabilities"). Whenever
possible, the General Partner intends to make all of the Fund's debts or other
obligations nonrecourse liabilities.
As is common in the case of limited partnerships, the Fund does not
directly employ any of the persons responsible for its management or day-to-day
activities. Instead, LEAF Financial Corporation's personnel will manage and
operate the Fund and its business. Also, officers of the General Partner will
spend a substantial amount of time managing the business and affairs of LEAF
Financial Corporation and its other affiliates, and there may be a conflict of
interest regarding the allocation of their time between the Fund's affairs and
business and the affairs and business of its other affiliates, including
activities for its own account.
The following table sets forth information with respect to the directors
and executive officers of our General Partner.
10
NAME AGE POSITION
- ---- --- --------
Crit S. DeMent 52 Chairman of the Board of Directors and Chief
Executive Officer
Miles Herman 45 President, Chief Operating Officer and Director
Jonathan Z. Cohen 34 Director
Alan D. Schreiber, M.D. 61 Director
Linda Richardson 57 Director
Robert K. Moskovitz 48 Chief Financial Officer and Treasurer
David H. English 55 Executive Vice President
Nicholas Capparelli 45 Vice President - Sales
Darshan V. Patel 34 General Counsel and Secretary
Sherryl B. Hughes 54 Vice President - Credit
Scott A. Smith 45 Vice President - Direct Participation Programs
CRIT S. DEMENT has been Chairman of the Board of Directors and Chief Executive
Officer since he joined LEAF Financial Corporation in November 2001. Mr. DeMent
was Chairman of the Board of Directors and Chief Executive Officer of LEAF Asset
Management from January 2002 until June 2004. 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.
MILES HERMAN has been President, Chief Operating Officer and a Director of LEAF
Financial Corporation since January 2002. Mr. Herman was President, Chief
Operating Officer and a Director of LEAF Asset Management from January 2002
until June 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 of 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.
JONATHAN Z. COHEN has been a Director of LEAF Financial Corporation since
January 2002, and was a Director of LEAF Asset Management from January 2002
until June 2004. Mr. Cohen has been President of Resource America, Inc. since
2003, Chief Executive Officer since 2004 and a Director since 2002. He was Chief
Operating Officer of Resource America, Inc. from 2002 to 2004, Executive Vice
President from 2001 to 2003 and Senior Vice President from 1999 to 2001. He also
has been Vice Chairman of the Managing Board of Atlas Pipeline Partners GP since
its formation in 1999, Vice Chairman of Atlas America, Inc. since its formation
in 2000, a Trustee and Secretary of RAIT Investment Trust (a publicly-traded
real estate investment trust) since 1997, Vice Chairman of RAIT Investment Trust
since 2003, and Chairman of the Board of The Richardson Company (a sales
consulting company) since 1999.
ALAN D. SCHREIBER, M.D. has been a director of LEAF Financial Corporation since
April 2003. Dr. Schreiber has been a Professor of Medicine since 1984, and the
Assistant Dean for Research since 1994, at the University of Pennsylvania School
of Medicine. In addition, Dr. Schreiber has been Scientific Founder and Chairman
of the Scientific Advisory Board of InKine Pharmaceutical Co. Inc. for five
years. Before that, he had been Scientific Founder and Chief Scientific Officer
at CorBec Pharmaceutical Co., Inc. for four years, and Founder and Scientific
Chairman of ZaBeCor Pharmaceutical Co., LLC for one year. Dr. Schreiber was also
a member of the Resource America, Inc. Board of Directors from December 1994 to
April 2003.
LINDA RICHARDSON has been a Director of LEAF Financial Corporation since August
2002. Ms. Richardson has also been the President and Chief Executive Officer of
The Richardson Group, a sales
11
consulting company, since 1978 and a faculty member of the Wharton School,
University of Pennsylvania since 1988.
ROBERT K. MOSKOVITZ, has been Chief Financial Officer of LEAF Financial
Corporation since February 2004, and Treasurer since September 2004, and he also
serves as its chief accounting officer. Mr. Moskovitz was Chief Financial
Officer of LEAF Asset Management from February 2004 until June 2004. From 2002
to 2004, Mr. Moskovitz was an independent management consultant. From 2001 to
2002, Mr. Moskovitz was Executive Vice President and Chief Financial Officer of
ImpactRx, Inc. From 1999 to 2001, Mr. Moskovitz was Chief Financial Officer of
Breakthrough Commerce LLC. From 1983 to 1997, Mr. Moskovitz held senior
financial positions with several high growth public and privately owned
companies. Mr. Moskovitz is a Certified Public Accountant and began his career
with Deloitte & Touche LLP (formerly Touche Ross & Co).
DAVID H. ENGLISH has been Executive Vice President of LEAF Financial Corporation
since April 2003. Mr. English was Executive Vice President and Chief Investment
Officer of LEAF Asset Management from April 2003 until June 2004. From 1996
until joining the Fund's General Partner, 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.
NICHOLAS CAPPARELLI has been Vice President - Sales of LEAF Financial
Corporation since January 2002, and he was Vice President - Sales of LEAF Asset
Management from January 2002 until June 2004. Before joining LEAF Financial
Corporation and LEAF Asset Management in January 2002, Mr. Capparelli had been,
since 1998, a Senior Vice President for Fidelity Leasing and its successor,
responsible for sales and training. From 1995 to August 2000, Fidelity Leasing
was a subsidiary of Resource America, Inc. Mr. Capparelli also served as the
general manager of JLA Leasing Corporation, an equipment lessor, following its
acquisition by Fidelity Leasing in 1999.
DARSHAN V. PATEL has been General Counsel and Secretary of LEAF Financial since
August 2001. Mr. Patel also was General Counsel and Secretary of LEAF Asset
Management from January 2002 until June 2004. In addition, Mr. Patel serves as
Associate General Counsel of Resource America, Inc., 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.
SHERRYL B. HUGHES has been Vice President - Credit of LEAF Financial Corporation
since May 2002. Ms. Hughes was Vice President - Credit of LEAF Asset Management
from May 2004 until June 2004. Ms. Hughes is responsible for all credit
underwriting, documentation and asset review. 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 she left in 1997.
SCOTT A. SMITH has been Vice President - Direct Participation Programs of LEAF
Financial Corporation since June 2004. He joined LEAF Financial Corporation in
July 2002 as director of sales for its syndications group. For the three months
before joining LEAF Financial Corporation, Mr. Smith worked in a consultative
capacity as a performance improvement specialist with Team Builders Plus, and
the year before that he was the director of sales training for Fidelity Leasing
and its successor. From 1993 to 2000 he held various sales and marketing
management positions with Advanta Leasing Corporation, ending as their director
of training and development.
12
CODE OF BUSINESS CONDUCT AND ETHICS
Because the Fund does not directly employ any persons, it relies on a
Code of Business Conduct and Ethics adopted by Resource America, Inc. that
applies to the principal executive officer, principal financial officer and
principal accounting officer of the General Partner, as well as to persons
performing services for the Fund generally. You may obtain a copy of this code
of ethics by a request to the Fund's General Partner at LEAF Financial
Corporation, 1845 Walnut Street, Suite 1000, Philadelphia, Pennsylvania 19103.
ITEM 11. EXECUTIVE COMPENSATION
The Fund does not have, and does not expect to have, any employees as
discussed in Item 10 - "Directors and Executive Officers of the Registrant."
Instead, the management and day-to-day activities of the Fund will be provided
by the employees of the General Partner and its affiliates. No officer or
director of the General Partner will receive any direct remuneration from the
Fund. Those persons will receive compensation solely from the General Partner or
its affiliates other than the Fund.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) The Fund was in its offering period, and no Limited Partners had
been admitted to the Fund as of December 31, 2004.
(b) In 2004, the General Partner contributed $1,000 to the capital
of the Fund as its General Partner and received its General
Partner interest in the Fund. As of December 31, 2004, the Fund
had not issued any Limited Partner units and the General Partner
did not own any of the Fund's Limited Partner units. However,
the General Partner currently intends to acquire, as a Limited
Partner, Limited Partner units equal to approximately 5% of the
Fund's total Limited Partner units and its affiliates currently
intend to purchase up to an additional 1% of the Fund's total
Limited Partner units. These purchases of Limited Partner units
by the General Partner and its affiliates will be at a price
discounted by the 7% sales commission which will be paid by most
of the Fund's other Limited Partners.
(c) There are no arrangements known to the Fund that would, at any
date subsequent to the date of this report, result in a change
in control of the Fund.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
AUDIT FEES. None.
AUDIT-RELATED FEES. None.
TAX FEES. None.
ALL OTHER FEES. None.
13
Procedures for Audit Committee Pre-Approval of Audit and Permissible
Non-Audit Services of Independent Auditor.
The General Partner's audit committee is the audit committee for its
parent, Resource America, Inc., which reviews and approves in advance any audit
and any permissible non-audit engagement or relationship between the Fund and
its independent auditors.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report
on Form 10-K:
1. FINANCIAL STATEMENTS
The financial statements required by this Item are set
forth in Item 8 - "Financial Statements and
Supplementary Data."
2. FINANCIAL STATEMENT SCHEDULES
No schedules are required to be presented in this report
under Regulation S-X promulgated by the SEC.
3. As of December 31, 2004, the Fund has not filed any
reports on Form 8-K.
4. EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- ----------------------------------------------------------------
3.1 Certificate of Limited Partnership for Lease Equity Appreciation
Fund II, L.P.
3.2 Amended Certificate of Limited Partnership for Lease Equity
Appreciation Fund II, L.P.
3.3 Amended and Restated Agreement of Limited Partnership for Lease
Equity Appreciation Fund II, L.P.
31.1 Rule 13a-14(a)/15d-14(a) Certifications
31.2 Rule 13a-14(a)/15d-14(a) Certifications
31.3 Rule 13a-14(a)/15d-14(a) Certifications
32.1 Section 1350 Certifications
32.2 Section 1350 Certifications
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934 the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
LEASE EQUITY APPRECIATION FUND II, L.P.
A Delaware Limited Partnership
By: LEAF Financial Corporation
March 31, 2005 By: /s/ CRIT DEMENT
------------------------------------
CRIT DEMENT
Chairman and Chief Executive Officer
of the General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Crit Dement Chairman of the Board and March 31, 2005
- ----------------------- Chief Executive Officer of the
CRIT S. DEMENT General Partner
/s/ Miles Herman President, Chief Operating Officer March 31, 2005
- ----------------------- and Director of the General Partner
MILES HERMAN
/s/ Robert K. Moskovitz Chief Financial Officer (and chief March 31, 2005
- ----------------------- accounting officer) and Treasurer of
ROBERT K. MOSKOVITZ the General Partner
/s/ Jonathan Z. Cohen Director of the General Partner March 31, 2005
- -----------------------
JONATHAN Z. COHEN
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
TO SECTION 12 OF THE ACT
Since the Fund had no Limited Partner investors and conducted no
business operations during its fiscal year ended December 31, 2004, no annual
report will be furnished to its Limited Partners covering that time period.
15