LEAF Equipment Finance Fund 4 10-K 2013 FY Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2013

£ 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 000-53667

LEAF EQUIPMENT FINANCE FUND 4, L.P.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	61-1552209
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

110 South Poplar Street, Suite 101, Wilmington Delaware 19801

(Address of principal executive offices)

(800) 819-5556

(Registrant’s telephone number, including area code)

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:

Limited Partner Units

Title of Class

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. £ Yes   R No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. £ Yes   R No

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  R Yes £ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§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. R

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). £ Yes   R 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 is no public market for the Registrant’s securities.

DOCUMENTS INCORPORATED BY REFERENCE

None

ANNUAL REPORT ON FORM 10-K

EXPLANATORY NOTE

As noted in the Form 8-K filed with the Securities and Exchange Commission on April 25, 2014, the previously filed consolidated financial statements as of and for the quarters ended March 31, 2012 through September 30, 2013 should not be relied upon.  In this Form 10-K, we are restating our consolidated balance sheet as of December 31, 2012, and the related consolidated statement of operations, changes in partners’ (deficit) capital, and cash flows for the year ended December 31, 2012, including the applicable notes.  We have also included in this report restated unaudited consolidated financial information for quarterly periods ended March, June, and September of 2012 and 2013.

We do not plan to file an amendment to our Annual Report on Form 10-K for the year ended December 31, 2012, nor do we plan to file amendments to our quarterly reports on Forms 10-Q for the quarterly periods ended March, June, and September of 2012 and 2013.  Thus, you should not rely on any of the previously filed annual or quarterly reports relating to the foregoing periods, since they are superseded by this report.

For more detailed information about the restatement, please see Note 2, “Restatement of Consolidated Financial Statements for the Year Ended December 31, 2012” and Note 12, “Unaudited Quarterly Financial Data and Restatement of Interim Financial Statements” in the notes to the consolidated financial statements and the “Restatement of Previously Issued Financial Results” in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this Annual Report.

Management has considered the effect of the restatement on our prior conclusions as to the effectiveness of our disclosure controls and procedures and internal control over financial reporting and has concluded that we have a material weakness in our internal control over financial reporting, as of December 31, 2013, relating to the valuation of our allowance for loan losses.  As described in more detail in Item 9A of this Annual Report, we have identified the causes of this material weakness and are implementing measures designed to remedy them.

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LEAF EQUIPMENT FINANCE FUND 4, L.P.

INDEX TO ANNUAL REPORT

ON FORM 10-K

		PAGE
PART I
ITEM 1	Business	4
ITEM IA	Risk Factors	6
ITEM 2	Properties	6
ITEM 3	Legal Proceedings	6
PART II
ITEM 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	6
ITEM 6	Selected Financial Data	6
ITEM 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	7
ITEM 7A	Quantitative and Qualitative Disclosures about Market Risk	15
ITEM 8	Financial Statements and Supplementary Data	16
ITEM 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	38
ITEM 9A	Controls and Procedures	38
ITEM 9B	Other Information	39
PART III
ITEM 10	Directors and Executive Officers of the Registrant	40
ITEM 11	Executive Compensation	41
ITEM 12	Security Ownership of Certain Beneficial Owners and Management and Related Unit Holder Matters	41
ITEM 13	Certain Relationships and Related Transactions	42
ITEM 14	Principal Accountant Fees and Services	42
PART IV
ITEM 15	Exhibits, Financial Statement Schedules	43
SIGNATURES		44

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The information contained in this Annual Report on Form 10-K (this “Report”) includes “forward-looking statements.” Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expects,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “will” and “would” or the negative of these terms or other comparable terminology.

Forward-looking statements contained in this Report are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us or are within our control. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. Forward-looking statements we make in this Report are subject to various risks and uncertainties that could cause actual results to vary from our forward-looking statements, including:

• changes in our industry, interest rates or the general economy;

• increased rates of default and/or decreased recovery rates on our investment in leases and loans;

• availability, terms and deployment of debt funding;

• general volatility of the debt markets;

• the timing of cash flows, if any, from our investments in leases and loans and payments for debt service; and

• the degree and nature of our competition.

We caution you not to place undue reliance on these forward-looking statements which speak only as of the date of this Report. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable law or regulation, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this filing or to reflect the occurrence of unanticipated events.

As used herein, the terms “we,” “us,” or “our” refer to LEAF Equipment Finance Fund 4, L.P. and subsidiaries.

PART I

ITEM 1 – BUSINESS

General

We are a Delaware limited partnership formed on January 25, 2008 by our general partner, LEAF Asset Management, LLC (the “General Partner”), which manages us. Our General Partner is a Delaware limited liability company and a subsidiary of Resource America, Inc. (“RAI”). RAI is a publicly-traded company (NASDAQ: REXI) that uses industry specific expertise to evaluate, originate, service and manage investment opportunities through its commercial finance, real estate and financial fund management segments. Our offering period began on August 12, 2008. Through our offering termination date of October 30, 2009 we raised $125.7 million by selling 1.2 million of our limited partner units. We commenced operations in September 2008.

We are expected to have a nine-year life, consisting of an offering period of up to two years, a five year reinvestment period and a subsequent maturity period of two years, during which our leases and secured loans will either mature or be sold.  In the event we are unable to sell our leases and loans during the maturity period, we expect to continue to return capital to our partners as those leases and loans mature.  All of our leases and loans mature by the end of 2032.  The Fund is not actively marketing the lease and loan portfolio for sale.  We expect to enter our liquidation period beginning in October 2014.  We will terminate on December 31, 2032, unless sooner dissolved or terminated as provided in our Limited Partnership Agreement.

We generally acquire a diversified portfolio of new, used, or reconditioned equipment that have been financed for third parties. We also acquire portfolios of existing leases and secured loans from other finance companies. Through December 31, 2013, we have acquired $635.3 million in leases and secured loans which have amortized down to $32.5 million as of December 31, 2013.  Our financings are typically acquired from LEAF Financial Corporation (“LEAF Financial”), an affiliate of our General Partner and a subsidiary of RAI. In addition, we may make secured loans to end users to finance their purchase of equipment. We attempt to structure our secured loans so that, in an economic sense, there is no difference to us between a secured loan and a full payout equipment lease. We also invest in equipment, leases and secured loans through joint venture arrangements with our General Partner’s affiliated investment programs. We typically finance business-essential equipment, including, but not limited to, computers, copiers, office furniture, water filtration systems, machinery used in manufacturing and construction, medical equipment and telecommunications equipment. We focus on the small to mid-size business market, which generally includes businesses with:

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• 500 or fewer employees;

• $1.0 billion or less in total assets; or

• $100.0 million or less in total annual sales.

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

Our leases consist of direct financing and operating leases as defined by accounting principles generally accepted in the United States of America (“U.S. GAAP”). Under the direct financing method of accounting, interest income (the excess of the aggregate future rentals and estimated unguaranteed residuals upon expiration of the lease over the related equipment cost) is recognized over the life of the lease using the interest method. Under the operating method, the cost of the leased equipment, including acquisition fees associated with lease placements, is recorded as an asset and depreciated on a straight-line basis over its estimated useful life. Rental income on operating leases consists primarily of monthly periodic rentals due under the terms of the leases. Generally, during the lease terms of existing operating leases, we will not recover all of the cost and related expenses of rental equipment and, therefore, we are prepared to remarket the equipment in future years. We discontinue the recognition of revenue for leases and loans for which payments are more than 90 days past due, or in case of future payment card receivables, when no payments have been received in 60 days. These assets are classified as non-accrual.

As discussed further in ITEM 7, the lingering effects of the economic recession in the United States has adversely affected our operations as a result of higher delinquencies and may continue to do so as the economy recovers.

Available Information

We file annual, quarterly and current reports and other information with the SEC. The public may read and copy information we file with the SEC, at the SEC’s public reference room at 100 F Street, NE, Washington, D.C. 20549, on official business days during the hours of 10:00 am and 3:00 pm. The public may obtain information on the operations of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The internet address of the SEC site is http://www.sec.gov. Our General Partner’s internet address is http://www.LEAFFinancial.com. We make our SEC filings available free of charge on or through our General Partner’s internet website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. We are not incorporating by reference in this report any material from our General Partner’s website.

Agreements with our General Partner

We do not directly employ any persons to manage or operate our business. These functions are provided by our General Partner and employees of our General Partner and/or its affiliates. We reimburse our General Partner and/or its affiliates for all direct and indirect costs of services provided, including the cost of employees and benefits properly allocable to us and all other expenses necessary or appropriate to the conduct of our business. Our General Partner and its affiliates receive fees and other compensation from us.

Competition

The equipment leasing business is highly fragmented and competitive. We acquire equipment from our General Partner and its affiliates. Our General Partner and its affiliates 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.

Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we have. Competition with these entities may reduce the creditworthiness of potential lessees or borrowers to whom 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 loans at rates which are less than ours, potentially forcing us to lower our rates or lose origination volume.

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Employees

As is commonly the case with limited partnerships, we do not directly employ any of the persons responsible for our management or operations. Rather, the personnel of our General Partner and/or its affiliates manage and operate our business. Officers of our General Partner may spend a substantial amount of time managing the business and affairs of our General Partner and its affiliates and may face a conflict regarding the allocation of their time between our business and affairs and their other business interests. The officers of our General Partner who provide services to us are not required to work full time on our affairs. These officers may devote significant time to the affairs of our General Partner’s affiliates and be compensated by these affiliates for the services rendered to them. There may be significant conflicts between us and affiliates of our General Partner regarding the availability of these officers to manage us.

ITEM 1A – RISK FACTORS

Risk factors have been omitted as permitted under rules applicable to smaller reporting companies.

ITEM 2 – PROPERTIES

We do not own or lease any real property.

ITEM 3 – LEGAL PROCEEDINGS

We are not subject to any pending material legal proceedings.

PART II

ITEM 5 – MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Our limited partner units are not publicly traded. There is no market for our limited partner units and it is unlikely that any will develop. The following table shows the number of equity security holders:

Title of Class	Number of Partners as of December 31, 2013
Limited Partners		2,796
General Partner		1

Total distributions paid to limited partners for the years ended December 31, 2013 and 2012 were $5.1 million each period. These distributions were paid on a monthly basis to our limited partners at a rate of approximately 4% of their original capital contribution to us in 2013 and 2012.  As the cash flows and liquidity of the Fund could no longer support a 4% monthly distribution, beginning with the February 2014 distribution, received in March, monthly distributions were reduced to 3%.  Going forward, the April and May 2014 distributions, received in May and June respectively, will be lowered to 2%.  Distributions for June 2014, received and July, and beyond will be lowered to 1% and continue for as long as the Fund can support them.

ITEM 6 – SELECTED FINANCIAL DATA

Not applicable.

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ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion provides an analysis of our operating results, an overview of our liquidity and capital resources and other items related to us.  This discussion and analysis should be read in conjunction with Item 1 and the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for the year ended December 31, 2013.

As used herein, the terms “we,” “us,” or “our” refer to LEAF Equipment Finance Fund 4, L.P. and its subsidiaries (the “Fund”).

Restatement of Previously Issued Financial Results

The Fund is restating its consolidated balance sheet as of December 31, 2012, and the related consolidated statement of operations, changes in partners’ (deficit) capital, and cash flows for the year ended December 31, 2012, including the applicable notes, as well as its unaudited consolidated financial information for the quarterly periods ended March, June, and September of 2012 and 2013, to correct the valuation of its allowance for loan losses.  In particular, in evaluating a loan receivable for impairment as of December 31, 2013, it was determined that the Fund did not properly value the collateral securing the loan, which was held by LEAF Commercial Finance Fund LLC, a consolidated subsidiary, because it had not appropriately applied the terms of an agreement entered into in January 2012.  As a result, an increase in the provision for credit losses of $4.0 million should have been recorded in 2012 and not 2013.  The correction increased the Fund’s provision for credit losses for the year ended 2012 by approximately $4.0 million.

For more information about the restatement, please see the Explanatory Note to this report and Notes 2 and 12, “Restatement of Consolidated Financial Statements for the Year Ended December 31, 2012” and “Unaudited Quarterly Financial Data and Restatement of Interim Financial Statements” in the notes to the consolidated financial statements, respectively.  The following discussion and analysis of the Fund’s financial condition and results of operations incorporate the restated amounts.

Fund Summary

As discussed in more detail in Item 1, we generally acquire a diversified portfolio of new, used or reconditioned equipment that have been financed for third parties. We also acquire portfolios of existing leases and secured loans from other finance companies.  Through December 31, 2013, we have acquired $635.3 million in leases and loans which have been amortized down to $32.5 million as of December 31, 2013.  Our financings are typically acquired from our General Partner. In addition, we may make secured loans to end users to finance their purchase of equipment.

Since our commencement in September 2008, the United States has suffered through the worst economic recession in over 75 years.  The ongoing economic slowdown has impacted, and will continue to impact, our performance.  While the recession began before we were launched, its magnitude and duration have been severe and the consequences broadly felt.  In particular, the recession led to a “credit crisis” that impacted us directly (through the amount and terms of credit available to us) and indirectly (through the impact on the small and mid-sized businesses that make up our lease and loan borrowers).

Banks became reluctant to lend, and when they did it became more expensive to borrow.  This happened very quickly and severely.  In fact, shortly after our launch, we were able to obtain a new credit facility and we were hopeful that we would be able to continue to do so.  However, availability and terms got much worse – not better.  Interest rates increased; fees were imposed and/or increased; the lengths of extensions were shortened and the amount that lenders would advance as a percentage of the leases being financed was significantly decreased.

As we sought new debt facilities and our existing facilities matured or needed modifications, we had to accept these new terms and our costs increased.  Most significantly, we have not been able to maintain debt at the same levels.  The additional investment requirement reduced the amount of assets that we could purchase, and accordingly reduced our cash flow.  The lenders’ higher fees and costs also had to be paid from funds that were then unavailable to re-invest in new leases.  Because we have less debt, over time, we will pay our lenders less interest expense but current cash flow is negatively impacted. As we saw these conditions fail to improve, we recognized that we would not be able to obtain enough financing on favorable terms to operate at our proposed size, and we closed to new investments approximately ten months ahead of schedule.

The combination of higher interest rates, lower levels of available credit, increased fees, losses that are slightly higher than originally projected and the inability to use excess cash flow to pay for some of these costs created a “perfect storm” that is making it difficult to execute the business plan. We have worked to minimize the effects of these conditions.  We sought new forms of capital, and were able to arrange debt for us at a time when lenders were not generally providing new facilities. Additionally we have refinanced all of our existing debt facilities by completing three term securitizations (two in 2010 and the third in January 2011) totaling approximately $360 million.

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We can continue to acquire leases until we enter our maturity phase in October 2014, at which time we will be prohibited, under the partnership agreement, from acquiring new leases.

To date, limited partners have received total distributions ranging from approximately 19% to 29% of their original amount invested, depending upon when the investment was made.  Management is working to maximize the amount that can be distributed to limited partners in the future.  Distributions were made at a rate of 4% in both 2013 and 2012.  As the cash flows and liquidity of the Fund could no longer support a 4% monthly distribution, beginning with the February 2014 distribution, received in March, monthly distributions were reduced to 3%.  Going forward, the April and May 2014 distributions, received in May and June respectively, will be lowered to 2%.  Distributions for June 2014, received and July, and beyond will be lowered to 1% and continue for as long as the Fund can support them.  Future cash distributions are not guaranteed and are solely dependent on our performance and are impacted by a number of factors which include lease and loan defaults by our customers, accelerated principal payments on our debt facilities required per our agreements, and prevailing economic conditions. In order to reduce our ongoing cash requirements, the General Partner waived management fees in August 2010 and subsequently waived all future management fees.

We continued to be impacted by market uncertainties during the year ended December 31, 2013 as further discussed in “Finance Receivables and Asset Quality” and in “Liquidity and Capital Resources.”

General Economic Overview

For the quarter ended December 31, 2013 U. S. economic activity showed overall growth and improvement in many sectors of the economy.  These improvements provided the background and support for the Federal Reserve to announce that it would begin the highly anticipated tapering of asset purchases under the Quantitative Easing program, recognition of economic improvement and stability. Still looming over the economy is the debate over the debt ceiling and the implementation of the Affordable Care Act and the impact of each on economic activity which is likely to be felt in the beginning of 2014.

Some specific key economic indicators and reports that were released in the fourth quarter of 2013 that have specific relevance to small to medium size business performance are summarized below.  The indicators show overall positive trends in the economy. These indicators have especially important relevance to the LEAF Funds as loans and leases to small to medium size businesses comprise the majority of the LEAF Funds portfolios.

· The December 2013 Thomson Reuters/PayNet Small Business Lending Index which measures the volume of lending to small businesses rose 5% as compared to the year earlier period and increased 6% as compared to the prior month.  At the same time the Thomson Reuters/PayNet Small Business Delinquency Index for December 2013 showed a 13% drop in the delinquency rate as compared to the year earlier period.

· The National Federation of Independent Business reported that its Small Business Optimism Index increased in December 2013.  While the Index remains below pre-recession levels the December 2013 increase continues a yearlong positive trend. The Index measures ten different items including small business sentiment about business expansion, hiring, and sales trends.  Notably there was evidence of significant increases in capital spending.

· The Monthly Confidence Index reported by The Equipment Leasing & Finance Foundation was 55.8 (over 50 is considered positive) which was a slight decline from the previous month, however, new business volume reported in December 2013 showed month over month and year over year increases.

· The National Association of Realtors reported that in the Fourth Quarter of 2013 all measures of home sales and housing starts showed increases from the prior year period.  These increases included Existing Home Sales, New Single Family Sales, Housing Starts, Single Family and Multifamily Units.  Housing is an important economic activity indicator for small businesses as many small businesses including construction related companies and retail businesses rely on housing activity as a significant part of their revenues.

· The S&P Case-Shiller Home Price Indices (another important and widely-used indicator of housing sector activity) released in December 2013 for the 10- and 20-City Composites showed 13.6% increases year-over-year for the last 12 months.

· The National Association of Credit Management Index (“CMI”) for December 2013 measured 55.64 (any number over 50 shows an expanding economy). The factors comprising the CMI include activities like credit extended, credit approval rates, delinquencies and bankruptcies. The CMI stayed over 50 through 2013 and ended the year higher (55.6) than it started (54.9).

· The December 2013 Institute of Supply Management reported its PMI Index on the manufacturing sector.  The PMI Index showed expansion for the seventh straight month and the PMI index registered 57 (any number over 50 indicates growth) which is the second highest reading for 2013 and  reflected growth in new orders, production and employment in the manufacturing sector which is home to many small to medium size businesses.

· In December 2013 the unemployment rate dropped to 7.0% from 7.3% in September 2013. As most new employment creation comes from small to  medium size businesses this is again another indication of  improving conditions in that segment of the economy.

Taken altogether, these indicators point to an economy that is continuing to grow steadily but slowly which is positive for the small to medium size businesses that comprise the majority of the LEAF Funds’ portfolios.

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Finance Receivables and Asset Quality

Information about our portfolio of commercial finance assets is as follows (dollars in thousands):

	December 31,
	2013			2012
				(restated) (b)
Investment in leases and loans, net	$	32,494		$	85,302
Number of contracts		4,500			6,700
Number of individual end users (a)		4,100			6,100
Average original equipment cost	$	63		$	61
Average initial lease term (in months)		59			58
Average remaining lease term (in months)		16			18
States accounting for more than 10% of lease and loan portfolio:
New York		29	%		15	%
California		9	%		11	%
Types of assets accounting for more than 10% of lease and loan portfolio:
Asset-backed secured loans		24	%		11	%
Medical equipment		28	%		23	%
Restaurant equipment		15	%		13	%
Industrial equipment		8	%		19	%
Types of businesses accounting for more than 10% of lease and loan portfolio:
Services		42	%		43	%
Finance/Insurance/Real Estate		28	%		22	%
Retail trade		17	%		17	%

(a) Located in the 50 states as well as the District of Columbia and Puerto Rico. No individual end user accounted for more than 10% of our portfolio.

(b) Due to the aforementioned adjustment to the 2012 amounts, the net investment in leases and loans decreased by $4.0 million from the previously filed $89.3 million.  In addition, as the portfolio balance changed, so did the related state, asset-type, and business-type concentration percentages.

We utilize debt, in addition to our equity, to fund the acquisitions of lease and loan portfolios. Our leases and loans are generally assigned as collateral for borrowings. As of December 31, 2013 and 2012, our outstanding debt was $25.9 million and $72.7 million, respectively.

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Portfolio Performance

The table below provides information about our commercial finance assets including non-performing assets, which are those assets that are not accruing income due to non-performance or impairment (dollars in thousands):

	As of and for the
	Years Ended December 31,
							Change
	2013			2012			$			%
				(restated) (a)
Investment in leases and loans before allowance for credit losses	$	40,544		$	94,222		$	(53,678	)		(57	)%
Less: allowance for credit losses		(8,050	)		(8,920	)		(870	)		(10	)%
Investment in leases and loans, net	$	32,494		$	85,302		$	(52,808	)		(62	)%
Weighted average investment in direct financing leases and loans before allowance for credit losses	$	62,596		$	134,094		$	(71,498	)		(53	)%
Non-performing assets	$	9,232		$	16,102		$	(6,870	)		(43	)%
Charge-offs, net of recoveries	$	6,482		$	13,549		$	(7,067	)		(52	)%
As a percentage of finance receivables:
Allowance for credit losses		19.85	%		9.47	%
Non-performing assets		22.77	%		17.09	%
As a percentage of weighted average finance receivables:
Charge-offs, net of recoveries		10.36	%		10.10	%

(a) Due to the aforementioned 2012 adjustment, the gross and net investment in leases and loans, weighted average investment in direct financing leases and loans, non-performing assets, and charge-offs net of recoveries changed from the previously filed $98.2 million, $89.3 million, $135.3 million, $20.1 million, and $9.5 million respectively, which changed the previously filed percentages from 9.08%, 20.47%, and 7.06%, respectively.

We manage our credit risk by adhering to strict credit policies and procedures, and closely monitoring our receivables. Our General Partner, the servicer of our leases and loans, responded to the recent economic recession in part, by implementing early intervention techniques in collection procedures. Our General Partner has also increased its credit standards and limited the amount of business we do with respect to certain industries, geographic locations and equipment types. Because of the recent scarcity of credit available to small and mid-size businesses, we have been able to increase our credit standards without reducing the interest rate we charge on our leases and loans.

Our allowance for credit losses is our estimate of losses inherent in our commercial finance receivables. The allowance is based on factors which include our historical loss experience on equipment finance portfolios we manage, an analysis of contractual delinquencies, current economic conditions and trends and equipment finance portfolio characteristics, adjusted for recoveries. In evaluating historic performance of our leases and loans, we perform a migration analysis, which estimates the likelihood that an account progresses through delinquency stages to ultimate charge-off unless individually reviewed for impairment. In an individual review for impairment we consider the loans performance, probability of repayment, and general and local economic conditions when assessing whether impairment is necessary. Substantially all of our leases and loans evaluated for impairment on an individual basis include an analysis of the market values of underlying collateral values, as adjusted for estimated selling and other closing costs. Our policy is to charge off to the allowance those financings for which it is probable management will be unable to collect all amounts contractually owed. Substantially all of our assets are collateral for our debt and, therefore, significantly greater delinquencies than anticipated will have an adverse impact on our cash flow and distributions to our partners.

We focus on financing equipment used by small to mid-sized businesses. The lingering effects of the recent economic recession in the United States have made it more difficult for some of our customers to make payments on their financings with us on a timely basis, which has adversely affected our operations in the form of higher delinquencies. As a result, our allowance for credit losses as a percentage of finance receivables increased from 2012 to 2013.  Also, in 2013, our non-performing assets as a percentage of finance receivables increased from 2012 to 2013, primarily due to certain non-performing loans that are systematically current, but that are on the cost recovery method due to continued uncertainty as to future collectability.  Included in the non-performing assets is one secured loan obligation totaling $1.1 million.  The obligor of this loan is another finance company that is no longer operating.  Collateral for the loan is a pool of loans to construction companies and developers.  The Fund has been in the process of monetizing the underlying collateral for the loan via sale.  The Fund has written the loan down to the net realizable value of the underlying collateral.

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Critical Accounting Policies

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

We have identified the following policies as critical to our business operations and the understanding of our results of operations.

Investments in Commercial Finance Assets

Our investments in commercial finance assets consist of direct financing leases, operating leases, and loans.

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

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

Operating Leases. Leases not meeting any of the criteria to be classified as direct financing leases are deemed to be operating leases. Under the accounting for operating leases, the cost of the leased equipment, including acquisition fees associated with lease placements, is recorded as an asset and depreciated on a straight-line basis over the equipment’s estimated useful life, generally up to seven years. Rental income consists primarily of monthly periodic rental payments due under the terms of the leases. We recognize rental income on a straight line basis.

A review for impairment of operating leases is performed whenever events or changes in circumstances indicate that the carrying amount of the operating leases may not be recoverable.  We write down our rental equipment to its estimated net realizable value when it is probable that its carrying amount exceeds its fair value and the excess can be reasonably estimated; gains are only recognized upon actual sale of the rental equipment.

Loans. For term loans, the investment in loans consists of the sum of the total future minimum loan payments receivable less unearned finance income. Unearned finance income, which is recognized as revenue over the term of the financing by the effective interest method, represents the excess of the total future minimum contracted loan payments over the cost of the loan. For all other loans, interest income is recorded at the stated rate on the accrual basis to the extent that such amounts are expected to be collected.

Allowance for Credit Losses. We evaluate the adequacy of the allowance for credit losses (including investments in leases and loans) based upon, among other factors, management’s historical experience on the portfolios it manages, an analysis of contractual delinquencies, economic conditions and trends and equipment finance portfolio characteristics, adjusted for expected recoveries.  In evaluating historic performance of our leases and loans, we perform a migration analysis, which estimates the likelihood that an account progresses through delinquency stages to ultimate charge-off unless individually reviewed for impairment.  In an individual review for impairment we consider the loans performance, probability of repayment, and general and local economic conditions when assessing whether impairment is necessary.  Substantially all of the Fund’s leases and loans evaluated for impairment on an individual basis include an analysis of the market values of underlying collateral values, as adjusted for estimated selling and other closing costs.  After an account becomes 180 or more days past due, any remaining balance is fully-reserved less an estimated recovery amount. Generally, past due accounts are referred to our internal recovery group consisting of a team of credit specialists and collectors. The group utilizes several resources in an attempt to maximize recoveries on charged-off accounts including: 1) initiating litigation against the end user customer and any personal guarantor, 2) referring the account to an outside law firm or collection agency and/or 3) repossessing and remarketing the equipment through third parties.

11

Our policy is to charge off to the allowance those financings which are in default and for which it is probable management will be unable to collect all amounts contractually owed.  We discontinue the recognition of revenue for leases and loans for which payments are more than 90 days past due.  As of December 31, 2013 and 2012, we had $9.2 million and $16.1 million, respectively, of leases and loans on non-accrual status.  Payments received while leases and loans are on non-accrual status are recorded as a reduction of principal.  Generally income recognition resumes when a lease or loan becomes less than 90 days delinquent, unless certain factors specific to those leases or loans continue to raise concerns as to future collectability.

Results of Operations

Year Ended December 31, 2013 compared to Year Ended December 31, 2012

The following summarizes our results of operations for the years ended December 31, 2013 and 2012 (dollars in thousands):

							Increase (Decrease)
	2013			2012			$			%
				(restated) (a)
Revenues:
Interest on equipment financings	$	4,319		$	8,974		$	(4,655	)		(52	)%
Rental income		460			1,263			(803	)		(64	)%
Gains on sales of equipment and lease dispositions, net		551			1,170			(619	)		(53	)%
Gain on extinguishment of debt		16			–			16			100	%
Other income		357			902			(545	)		(60	)%
		5,703			12,309			(6,606	)		(54	)%
Expenses:
Interest expense		6,688			12,304			(5,616	)		(46	)%
Depreciation on operating leases		168			812			(644	)		(79	)%
Provision for credit losses		5,612			18,059			(12,447	)		(69	)%
General and administrative expenses		968			1,222			(254	)		(21	)%
Administrative expenses reimbursed to affiliate		532			1,217			(685	)		(56	)%
		13,968			33,614			(19,646	)		(58	)%
Net loss		(8,265	)		(21,305	)		13,040
Add:  Net loss attributable to the noncontrolling interest		209			185			24
Net loss attributable to LEAF 4 partners	$	(8,056	)	$	(21,120	)	$	13,064
Net loss allocated to LEAF 4's limited partners	$	(7,975	)	$	(20,909	)	$	12,934

(a) Due to the aforementioned adjustment to the 2012 amounts, the provision for credit losses increased by $4.0 million from the previously filed $14.059 million which increased the total expenses, net loss, and other amounts accordingly.

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

· A decrease in interest on equipment financings and rental income. Our weighted average net investment in financing assets decreased to $62.6 million for the year ended December 31, 2013 as compared to $134.1 million for the year ended December 31, 2012, a decrease of $71.5 million or 53%.  As noted previously, this decrease was primarily due to the continued runoff of our portfolio of leases and loans, as higher than anticipated defaults resulted in excess cash being used to settle debt obligations and support distributions to our partners, rather than be reinvested in new leases and loans.

· Gains on the sale of equipment and lease dispositions decreased $619,000 to $551,000 for the year ended December 31, 2013 compared to $1.1 million for the year ended December 31, 2012.  Gains and losses on sales of equipment may vary significantly from period to period.

· A decrease in other income primarily due to a reduction in late fee income. The decrease is due to the reduction in the size of our portfolio at December 31, 2013 compared to December 31, 2012.

12

The decrease in total expenses was primarily a result of the following:

· A decrease in interest expense due to a decrease in our average debt outstanding.  Average borrowings for the years ended December 31, 2013 and 2012 were $47.4 million and $111.5 million, respectively, at an effective interest rate of 14.1% and 11.0%, respectively.

· A decrease in depreciation on operating leases related to the decrease in our investment in operating leases.

· A decrease in our provision for credit losses principally reflects the decrease of our equipment financing portfolio and the diminishing impact of the recession.

· A decrease in general and administrative expenses occurred and administrative expenses reimbursed to affiliates due to the reduction in the size of our portfolio.

The net loss per limited partner unit, after the net loss allocated to our General Partner, for the years ended December 31, 2013 and 2012 was $6.33 and $16.60, respectively, based on the weighted average number of limited partner units outstanding of 1,259,537 each period.

Liquidity and Capital Resources

Our major source of liquidity is from the collection of lease and loan payments.  Our primary cash requirements, in addition to normal operating expenses, are for debt service, investments in leases and loans, and distributions to our partners.

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

	Years Ended December 31,
	2013			2012
Net cash provided by operating activities	$	3,943		$	5,787
Net cash provided by investing activities		46,561			80,371
Net cash used in financing activities		(50,313	)		(86,525	)
Increase (decrease) in cash	$	191		$	(367	)

Cash increased approximately $200,000 primarily due to debt repayments of $48.6 million ($3.4 million of which was repaid by restricted cash) and $5.1 million of distributions to partners, offset by net cash provided by operating activities of $3.9 million and net proceeds received on our investments in leases and loans of approximately $46.6 million.

Partner’s distributions paid for the years ended December 31, 2013 and 2012 were $5.1 million each period. Distributions to limited partners were paid at a rate of 4% of original capital invested for both the years ended December 31, 2013 and 2012. As the cash flows and liquidity of the Fund could no longer support a 4% monthly distribution, beginning in February 2014, monthly distributions were reduced to 3%.  Future cash distributions are not guaranteed and are solely dependent on our performance and are impacted by a number of factors which include lease and loan defaults by our customers, accelerated principal payments on our debt facilities required per our agreements, and prevailing economic conditions. Cumulative partner distributions paid from our inception to December 31, 2013 were approximately $29.9 million.

Future cash distributions are not guaranteed and are solely dependent on our performance and are impacted by a number of factors which include lease and loan defaults by our customers, accelerated principal payments on our debt facilities required per our agreements, and prevailing economic conditions.

The General Partner has waived its management fees. Accordingly, we did not record any management fee expense for the years ended December 31, 2013 or 2012. The cash savings on management fees and distributions is expected to be used to pay down our liabilities. Approximately $1.0 million of management fees were waived for the year ended December 31, 2013 and $7.4 million have been waived on a cumulative basis.

As discussed above, our liquidity has been and may continue to be adversely affected by higher than expected equipment lease defaults, which result in a loss of anticipated revenues. These losses affect our ability to make distributions to our partners and, if the level of defaults is sufficiently large, result in our inability to fully recover our investment in the underlying equipment. In evaluating our allowance for losses on uncollectible leases, we consider our contractual delinquencies, economic conditions and trends, lease portfolio characteristics and our General Partner’s management’s prior experience with similar lease assets. As our lease portfolio ages, and if the economic recovery in the United States stalls or reverses, we anticipate the need to increase our allowance for credit losses.

13

Our borrowing relationships each require the pledging of eligible leases and loans to secure amounts advanced. Borrowings outstanding under our debt facilities as of December 31, 2013 were as follows (in thousands):

	Type	Amount Outstanding (1)		Amount of Collateral (2)
2011-1 Term Securitization	Term	$	12,322	$	13,579
2010-1 Term Securitization	Term		3,009		7,265
2010-3 Term Securitization	Term		10,539		17,259
		$	25,870	$	38,103

(1) The outstanding borrowings are presented net of unamortized original issue discount of $1.4 million at December 31, 2013.

(2) These borrowings are collateralized by specific leases and loans and restricted cash. As of December 31, 2013, $30.0 million of leases and loans and $8.1 million of restricted cash were pledged as collateral under the Fund’s term securitizations. Recourse under these securitizations is limited to the amount of collateral pledged.

Series 2011-1 Term Securitization.  In January 2011, we issued the 2011-1 Term Securitization (The “2011-1 Term Securitization”) in which six classes of asset-backed notes were issued that have varying maturity dates ranging from December 2018 to December 2023. The asset-backed notes totaled $96.0 million and bear interest at fixed, stated rates ranging from 1.7% to 5.5% and were issued at an original discount of approximately $6.2 million.

Series 2010-1 Term Securitization.  In May 2010, three classes of asset-backed notes were issued (The “2010-1 Term Securitization”), one that matures in October 2016 and two that mature in September 2018, respectively. The asset-backed notes total $92.7 million and bear interest at a fixed, stated rate of 5% and were issued at an original discount of $6.5 million.

Series 2010-3 Term Securitization.  In August 2010, five classes of asset-backed notes were issued (The “2010-3 Term Securitization”), one that matures in June 2016 and four that mature in February 2022, respectively. The asset-backed notes total $171.4 million and bear interest at fixed, stated rates ranging from 3.5% to 5.5% and were issued at an original discount of $3.7 million.

Our securitizations are serviced by an affiliate of our General Partner (the “Servicer”).  If the Servicer of our portfolio does not comply with certain requirements, then the noteholders have the right to replace the Servicer.  The servicing agreements were amended effective July 31, 2013 to increase the cumulative net loss percentages, as the portfolio had exceeded the allowed cumulative net loss amount.  In addition, the servicing agreements and the indentures on these facilities were amended to establish an additional reserve account to be funded by cash flows on leases and loans that will be used by the trustee as additional collateral.  The 2011-1 Term Securitization was similarly amended in February 2013. The portfolio was in compliance with the financial covenants of these agreements as of December 31, 2013.

These events do not constitute an event of default on the 2010-1 Term Securitization or the 2010-3 Term Securitization.  Additionally, we are not, nor have been, delinquent on any payments owed to the noteholders.  In April 2014, the 2010-1 and 2010-3 term securitizations were paid off with proceeds from the sale of a portion of our portfolio.

In addition to the above borrowings, LEAF Commercial Finance Fund, LLC (“LCFF”), a subsidiary of LEAF Funds JV2, has $9.3 million of 8.25% secured subordinated promissory notes (the “Notes”) outstanding, which are recourse to LCFF only. The Notes were issued to private investors and require interest only payments until their maturity in February 2015.  LCFF may call or redeem the Notes, in whole or in part, at any time during the interest only period.

The Notes are subject to various covenants as set forth in their indenture, including an interest coverage ratio test, which LCFF was not in compliance with as of December 31, 2013.  LCFF has notified the Trustee of this breach.  As a result, the noteholders have the right to declare an event of default.  If the noteholders would declare an event of default they have various rights and remedies available to them including (1) the right to declare all amounts currently outstanding under the Notes as immediately due and payable; (2) the right to take immediate possession of the assets of LCFF; and (3) the right to sell or otherwise dispose of the assets of LCFF in their current condition.  If the noteholders choose to repossess and sell LCFF’s assets, such a sale of a portfolio could be at prices lower than its carrying value, which could result in losses to us.

Notwithstanding the foregoing, LCFF is not, nor has been, delinquent on any payments of interest owed to the noteholders.

14

Legal Proceedings

We are a party to various routine legal proceedings arising out of the ordinary course of our business. Our General Partner believes that none of these actions, individually or in the aggregate, will have a material adverse effect on our financial condition or results of operations.

Recently Issued Accounting Pronouncements

See Note 2 in the Notes to Consolidated Financial Statements for a description of certain new accounting pronouncements that will or may affect our consolidated financial statements.

ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and Qualitative Disclosures about Market Risk have been omitted as permitted under rules applicable to smaller reporting companies.

15

ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Partners

LEAF Equipment Finance Fund 4, L.P.

We have audited the accompanying consolidated balance sheets of LEAF Equipment Finance Fund 4, L.P. (a Delaware Limited Partnership) and subsidiaries (the “Fund”) as of December 31, 2013 and 2012, and the related consolidated statements of operations, changes in partners’ (deficit) capital, and cash flows for each of the two years in the period ended December 31, 2013. These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits 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 financial statements are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits 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 financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of LEAF Equipment Finance Fund 4, L.P. and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 2, the 2012 consolidated financial statements have been restated to correct an error.

/s/ GRANT THORNTON LLP

Philadelphia, Pennsylvania

May 16, 2014

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LEAF EQUIPMENT FINANCE FUND 4, L.P. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands)

	December 31,
	2013			2012
				(restated)
ASSETS
Cash	$	229		$	38
Restricted cash		8,147			11,552
Investment in leases and loans, net		32,494			85,302
Deferred financing costs, net		625			1,322
Other assets		50			92
Total assets	$	41,545		$	98,306
LIABILITIES AND PARTNERS’ (DEFICIT) CAPITAL
Liabilities:
Debt	$	25,870		$	72,701
Subordinated notes payable		9,295			9,355
Due to affiliates		6,284			2,472
Accounts payable, accrued expenses, and other liabilities		1,052			1,380
Total liabilities		42,501			85,908
Commitments and contingencies (Note 11)
Partners’ (Deficit) Capital:
General partner		(1,110	)		(978	)
Limited partners		67			13,080
Total partners' (deficit) capital		(1,043	)		12,102
Noncontrolling interest		87			296
Total (deficit) capital		(956	)		12,398
Total liabilities and capital	$	41,545		$	98,306

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

17

LEAF EQUIPMENT FINANCE FUND 4, L.P. AND SUBSIDIARIES

Consolidated Statements of Operations

(In thousands, except unit and per unit data)

	Years Ended December 31,
	2013			2012
				(restated)
Revenues:
Interest on equipment financings	$	4,319		$	8,974
Rental income		460			1,263
Gains on sales of equipment and lease dispositions, net		551			1,170
Other income		373			902
		5,703			12,309
Expenses:
Interest expense		6,688			12,304
Depreciation on operating leases		168			812
Provision for credit losses		5,612			18,059
General and administrative expenses		968			1,222
Administrative expenses reimbursed to affiliate		532			1,217
		13,968			33,614
Net loss		(8,265	)		(21,305	)
Add:  Net loss attributable to the noncontrolling interest		209			185
Net loss attributable to LEAF 4 partners	$	(8,056	)	$	(21,120	)
Net loss allocated to LEAF 4's limited partners	$	(7,975	)	$	(20,909	)
Weighted average number of limited partner units outstanding during the period		1,259,537			1,259,537
Net loss per weighted average limited partner unit	$	(6.33	)	$	(16.60	)

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

18

LEAF EQUIPMENT FINANCE FUND 4, L.P. AND SUBSIDIARIES

Consolidated Statements of Changes in Partners’ (Deficit) Capital

(In thousands, except unit data)

	General Partner Amount			Limited Partners					Total Partners’ (Deficit) Capital			Non-Controlling Interest			Total (Deficit) Capital
				Units		Amount
	(restated)					(restated)			(restated)						(restated)
Balance, at January 1, 2012	$	(716	)		1,259,537	$	39,027		$	38,311		$	481		$	38,792
Cash distributions paid		(51	)		-		(5,038	)		(5,089	)		-			(5,089	)
Net loss, as restated		(211	)		-		(20,909	)		(21,120	)		(185	)		(21,305	)
Balance, at December 31, 2012, as restated		(978	)		1,259,537		13,080			12,102			296			12,398
Cash distributions paid		(51	)		-		(5,038	)		(5,089	)		-			(5,089	)
Net loss		(81	)		-		(7,975	)		(8,056	)		(209	)		(8,265	)
Balance, December 31, 2013	$	(1,110	)		1,259,537	$	67		$	(1,043	)	$	87		$	(956	)

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

19

LEAF EQUIPMENT FINANCE FUND 4, L.P. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

	Years Ended December 31,
	2013			2012
				(restated)
Cash flows from operating activities:
Net loss	$	(8,265	)	$	(21,305	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation on operating leases		168			812
Amortization of discount on debt		1,724			3,804
Amortization of deferred charges		1,745			2,943
Provision for credit losses		5,612			18,059
Gain on extinguishment of subordinated note payable		(16	)		-
Gains on sales of equipment and lease dispositions, net		(551	)		(1,170	)
Changes in operating assets and liabilities:
Other assets		42			125
Due to affiliates		3,812			2,282
Accounts payable, accrued expenses, and other liabilities		(328	)		237
Net cash provided by operating activities		3,943			5,787
Cash flows from investing activities:
Purchases of leases and loans		–			(384	)
Proceeds from leases and loans		47,324			82,570
Security deposits returned, net of collections		(763	)		(1,815	)
Net cash provided by investing activities		46,561			80,371
Cash flows from financing activities:
Repayment of debt		(48,555	)		(89,013	)
Redemption of subordinated note payable		(44	)		-
Decrease in restricted cash		3,405			7,650
Increase in deferred financing costs		(30	)		(73	)
Cash distributions to partners		(5,089	)		(5,089	)
Net cash used in financing activities		(50,313	)		(86,525	)
Increase (decrease) in cash		191			(367	)
Cash, beginning of period		38			405
Cash, end of period	$	229		$	38
Cash paid for interest	$	3,279		$	5,637

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

20

LEAF EQUIPMENT FINANCE FUND 4, L.P. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

December 31, 2013 and 2012

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

LEAF Equipment Finance Fund 4, L.P. (the “Fund”), a Delaware limited partnership, was formed on January 25, 2008 by its general partner, LEAF Asset Management, LLC (the “General Partner”), which manages the Fund. The General Partner is a Delaware limited liability company and a subsidiary of Resource America, Inc. (“RAI”). RAI is a publicly traded company (NASDAQ: REXI) that uses industry specific expertise to evaluate, originate, service and manage investment opportunities through its commercial finance, real estate and financial fund management segments. Through its offering termination date of October 30, 2009, the Fund raised $125.7 million by selling 1.2 million of its limited partner units. It commenced operations in September 2008.

The Fund is expected to have a nine-year life, consisting of an offering period of up to two years, a five-year reinvestment period and a subsequent maturity period of two years, during which the Fund’s leases and secured loans will either mature or be sold. In the event the Fund is unable to sell its leases and loans during the maturity period, the Fund expects to continue to return capital to its partners as those leases and loans mature. All of the Fund’s leases and loans mature by the end of 2032. The Fund expects to enter its maturity period beginning in October 2014.  The Fund will terminate on December 31, 2032, unless sooner dissolved or terminated as provided in the Limited Partnership Agreement.

The Fund has acquired a diversified portfolio of equipment leases and secured loans to end users throughout the United States as well as the District of Columbia and Puerto Rico. The Fund also acquires existing portfolios from other equipment finance companies.  Through December 31, 2013, we have acquired $635.3 million in leases and secured loans which have amortized down to $32.5 million as of December 31, 2013.  The primary objective of the Fund is to generate regular cash distributions to its partners from its equipment finance portfolio over the life of the Fund.

In addition to its 1% general partnership interest, the General Partner has also invested $1.0 million for a 0.85% limited partnership interest in the Fund.

NOTE 2 – RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012

In April 2014, the general partner of the Fund made a determination to restate the Fund’s previously filed consolidated financial statements as of and for the quarter ended March 31, 2012 and that had a continuing impact through the quarters ended September 30, 2013, to correct the valuation of its provision and allowance for loan losses.  In particular, it was determined that in evaluating a loan receivable from a loan held by a consolidated subsidiary, LEAF Commercial Finance Fund LLC, for impairment, the Fund did not properly value the collateral securing the loan because it had not appropriately applied the terms of an agreement entered into in January 2012.   The correction increased the Fund’s provision for credit losses for the year ended 2012 by approximately $4.0 million.

See the restated consolidated statement of operations below for the effects of the restatement on net loss for the year ended December 31, 2012.  In addition, see Note 12, “Unaudited Quarterly Financial Data and Restatement of Interim Financial Statements” for the effects of the restatement on net loss for the quarters in 2012 and 2013 for which interim financial statements were issued.

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LEAF EQUIPMENT FINANCE FUND 4, L.P. AND SUBSIDIARIES

Notes To Consolidated Financial Statements - (Continued)

December 31, 2013 and 2012

The following sets forth the effect of the restatement on the applicable line items on the Company’s consolidated balance sheet for the year ended December 31, 2012 (in thousands):

	Year Ended December 31, 2012
	2012			Restatement Adjustments			2012
	(as filed)						(restated)
ASSETS
Cash	$	38		$	−		$	38
Restricted cash		11,552			−			11,552
Investment in leases and loans, net		89,302			(4,000	)		85,302
Deferred financing costs, net		1,322			−			1,322
Other assets		92			−			92
Total assets	$	102,306		$	(4,000	)	$	98,306
LIABILITIES AND PARTNERS’ (DEFICIT) CAPITAL
Liabilities:
Debt	$	72,701		$	−		$	72,701
Subordinated notes payable		9,355			−			9,355
Due to affiliates		2,472			−			2,472
Accounts payable, accrued expenses, and other liabilities		1,380			−			1,380
Total liabilities		85,908			−			85,908
Commitments and contingencies
Partners’ (Deficit) Capital:
General partner		(938	)		(40	)		(978	)
Limited partners		17,040			(3,960	)		13,080
Total partners' (deficit) capital		16,102			(4,000	)		12,102
Noncontrolling interest		296			−			296
Total (deficit) capital		16,398			(4,000	)		12,398
Total liabilities and capital	$	102,306		$	(4,000	)	$	98,306

22

LEAF EQUIPMENT FINANCE FUND 4, L.P. AND SUBSIDIARIES

Notes To Consolidated Financial Statements - (Continued)

December 31, 2013 and 2012

The following sets forth the effect of the restatement on the applicable line items in the Company’s consolidated statement of operations for the year ended December 31, 2012 (in thousands, except unit and per unit data):

	Year Ended December 31, 2012
	2012			Restatement Adjustments			2012
	(as filed)						(restated)
Revenues:
Interest on equipment financings	$	8,974		$	-		$	8,974
Rental income		1,263			-			1,263
Gains on sales of equipment and lease dispositions, net		1,170			-			1,170
Other income		902			-			902
		12,309			-			12,309
Expenses:
Interest expense		12,304			-			12,304
Depreciation on operating leases		812			-			812
Provision for credit losses		14,059			4,000			18,059
General and administrative expenses		1,222			-			1,222
Administrative expenses reimbursed to affiliate		1,217			-			1,217
		29,614			4,000			33,614
Net loss		(17,305	)		(4,000	)		(21,305	)
Add:  Net loss attributable to the noncontrolling interest		185			-			185
Net loss attributable to LEAF 4 partners	$	(17,120	)	$	(4,000	)	$	(21,120	)
Net loss allocated to LEAF 4's limited partners	$	(16,949	)	$	(3,960	)	$	(20,909	)
Weighted average number of limited partner units outstanding during the period		1,259,537						1,259,537
Net loss per weighted average limited partner unit	$	(13.45	)	$	(3.15	)	$	(16.60	)

23

LEAF EQUIPMENT FINANCE FUND 4, L.P. AND SUBSIDIARIES

Notes To Consolidated Financial Statements - (Continued)

December 31, 2013 and 2012

The following sets forth the effect of the restatement on the applicable line items in the Company’s consolidated statement of cash flows for the year ended December 31, 2012 (in thousands):

	Year Ended December 31, 2012
	2012			Restatement Adjustments			2012
	(as filed)						(restated)
Cash flows from operating activities:
Net loss	$	(17,305	)	$	(4,000	)	$	(21,305	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation on operating leases		812			-			812
Amortization of discount on debt		3,804			-			3,804
Amortization of deferred charges		2,943			-			2,943
Provision for credit losses		14,059			4,000			18,059
Gain on extinguishment of subordinated note payable		-			-			-
Gains on sales of equipment and lease dispositions, net		(1,170	)		-			(1,170	)
Changes in operating assets and liabilities:
Other assets		125			-			125
Due to affiliates		2,282			-			2,282
Accounts payable, accrued expenses, and other liabilities		237			-			237
Net cash provided by operating activities	$	5,787		$	-		$	5,787

24

LEAF EQUIPMENT FINANCE FUND 4, L.P. AND SUBSIDIARIES

Notes To Consolidated Financial Statements - (Continued)

December 31, 2013 and 2012

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include the accounts of the Fund and its wholly owned subsidiary LEAF Receivables Funding 4, LLC. The consolidated financial statements also include LEAF Funds Joint Venture 2, LLC (“LEAF Funds JV2”) and its subsidiaries LEAF Commercial Finance Fund, LLC (LCFF) and LEAF Receivables Funding 6, LLC, as well as LEAF Funding, LLC (“LEAF Funds JV1”) and its wholly owned subsidiaries LEAF Capital Funding III, LLC and LEAF Receivables Funding II, LLC. The Fund maintains a 98%, and 96% ownership interest in LEAF Funds JV2 and LEAF Funds JV1, respectively. All intercompany accounts and transactions have been eliminated in consolidation.

The Fund reflects the participation of LEAF Equipment Leasing Income Fund III, L.P. (“LEAF III”) in the net assets and in the income or losses of LEAF Funds JV1 and LEAF Funds JV2 as noncontrolling interests in the consolidated balance sheets and statements of operations. Noncontrolling interest adjusts the Fund’s consolidated operating results to reflect only the Fund’s share of the earnings or losses of LEAF Funds JV1 and LEAF Funds JV2.

Use of Estimates

Preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the allowance for credit losses and the estimated unguaranteed residual values of leased equipment. The Fund bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Restricted Cash

The Fund had restricted cash of approximately $8.1 million and $11.6 million as of December 31, 2013 and 2012, respectively.  Restricted cash as of December 31, 2013 included cash being held in reserve by the Fund’s lenders of approximately $8.072 million and $75,000 of customer payments deposited into a lockbox shared with the General Partner and other entities serviced by the Fund’s General Partner. The lockbox is in the name of U.S. Bank NA as trustee under an inter-creditor agreement amongst LEAF Financial, the other entities and their respective lenders. These amounts represent customer payments received by the lockbox, applied to the respective customer’s accounts, but not yet transferred to the Fund’s bank account.

Concentration of Credit Risk

As of December 31, 2013, 29% of the Fund’s leases and loans were located in New York.  No other state accounted for more than 10% of the Fund’s leases and loans as of December 31, 2013.  Also, as of December 31, 2013, 42%, 28%, and 17% of the Fund’s leases and loans were in the services, finance/insurance/real estate, and retail trade types of business, respectively.  No other type of business accounted for more than 10% of the Fund’s leases and loans as of December 31, 2013.  In addition, no individual end user accounted for more than 10% of the Fund’s leases and loans as of December 31, 2013.

25

LEAF EQUIPMENT FINANCE FUND 4, L.P. AND SUBSIDIARIES

Notes To Consolidated Financial Statements - (Continued)

December 31, 2013 and 2012

Investments in Commercial Finance Assets

The Fund’s investments in commercial finance assets consist of direct financing leases, operating leases, loans and future payment card receivables.

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

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

Operating Leases. Leases not meeting the criteria to be classified as direct financing leases are deemed to be operating leases. Under the accounting for operating leases, the cost of the leased equipment, including acquisition fees associated with lease placements, is recorded as an asset and depreciated on a straight-line basis over the equipment’s estimated useful life, generally up to seven years. Rental income consists primarily of monthly periodic rental payments due under the terms of the leases. The Fund recognizes rental income on a straight line basis.

Generally, during the lease terms of existing operating leases, the Fund will not recover all of the cost and related expenses of its rental equipment and, therefore, it is prepared to remarket the equipment in future years. The Fund’s policy is to review, on a quarterly basis, the expected economic life of its rental equipment in order to determine the recoverability of its undepreciated cost. The Fund writes down its rental equipment to its estimated net realizable value when it is probable that its carrying amount exceeds such value and the excess can be reasonably estimated; gains are only recognized upon actual sale of the rental equipment.

Loans. For term loans, the investment in loans consists of the sum of the total future minimum loan payments receivable less unearned finance income. Unearned finance income, which is recognized as revenue over the term of the financing by the effective interest method, represents the excess of the total future minimum contracted loan payments over the cost of the loan. For all other loans, interest income is recorded at the stated rate on the accrual basis to the extent that such amounts are expected to be collected.

Allowance for Credit Losses. The Fund evaluates the adequacy of the allowance for credit losses (including investments in leases and loans) based upon, among other factors, management’s historical experience on the portfolios it manages, an analysis of contractual delinquencies, economic conditions and trends and equipment finance portfolio characteristics, adjusted for expected recoveries.  In evaluating historic performance of the Fund’s leases and loans, the Fund performs a migration analysis, which estimates the likelihood that an account progresses through delinquency stages to ultimate charge-off unless individually reviewed for impairment.  In an individual review for impairment the Fund considers the loans performance, probability of repayment, and general and local economic conditions when assessing whether impairment is necessary.  Substantially all of the Fund’s leases and loans evaluated for impairment on an individual basis include an analysis of the market values of underlying collateral values, as adjusted for estimated selling and other closing costs. After an account becomes 180 or more days past due, any remaining balance is fully-reserved less an estimated recovery amount. Generally, past due accounts are referred to our internal recovery group consisting of a team of credit specialists and collectors. The group utilizes several resources in an attempt to maximize recoveries on charged-off accounts including: 1) initiating litigation against the end user customer and any personal guarantor, 2) referring the account to an outside law firm or collection agency and/or 3) repossessing and remarketing the equipment through third parties.

The Fund’s policy is to charge off to the allowance those financings which are in default and for which it is probable management will be unable to collect all amounts contractually owed. The Fund discontinues the recognition of revenue for leases and loans for which payments are more than 90 days past due. As of December 31, 2013 and, 2012, the Fund had $9.2 million and $16.1 million, respectively, of leases and loans on non-accrual status. Payments received while leases and loans are on non-accrual status are recorded as a reduction of principal. Generally income recognition resumes when a lease or loan becomes less than 90 days delinquent, unless certain factors specific to those leases or loans continue to raise concerns as to future collectability.

.

26

LEAF EQUIPMENT FINANCE FUND 4, L.P. AND SUBSIDIARIES

Notes To Consolidated Financial Statements - (Continued)

December 31, 2013 and 2012

Income Taxes

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

Transfers of Financial Assets

In connection with establishing its debt facilities with its banks, the Fund has formed bankruptcy remote special purpose entities through which the financings are arranged. The Fund’s transfers of assets to these special purpose entities do not qualify for sales accounting treatment due to certain call provisions that the Fund maintains. Accordingly, assets and related debt of the special purpose entities are included in the Fund’s consolidated balance sheets. The Fund’s leases and restricted cash are assigned as collateral for these borrowings and there is no further recourse to the general credit of the Fund. Collateral in excess of these borrowings represents the Fund’s maximum loss exposure.

Comprehensive Income (Loss)

Comprehensive income (loss) includes net income (loss) and all other changes in the equity of a business during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income (loss) for the Fund was equal to net income (loss) for the years ended December 31, 2013 and 2012.

Allocation of Partnership Income, Loss, Cash Distributions, and Net Loss Per Limited Partner Unit

The Fund allocates net income, net loss, and cash distributions as follows:  99% to the limited partners and 1% to the general partner.

Net loss per limited partner unit is computed by dividing net loss allocated to limited partners by the weighted average number of limited partner units outstanding during the period. The weighted average number of limited partner units outstanding during the period is computed based on the number of limited partner units issued during the period weighted for the days outstanding during the period.

Recent Accounting Standards

Accounting Standards Recently Adopted

In April 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-07, Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting (ASU 2013-07 or the Update). The Update provides clarification and guidance regarding:

• When an entity should apply the liquidation basis of accounting,

• The recognition and measurement of assets and liabilities, and

• Financial statement presentation and disclosure requirements.

Entities with a limited life (i.e., certain partnerships) are expected to liquidate at a specified time and in an orderly manner as disclosed in their governing documents. If a limited life fund ceases its operations and liquidates its assets and liabilities in accordance with its original plan for liquidation, the entity is not required to adopt the liquidation basis of accounting in accordance with the Update.  While the Update is effective for entities with annual reporting periods beginning after December 15, 2013 (and interim periods therein), the Fund has early adopted the Update in 2013 with no impact to the financial statements.

27

LEAF EQUIPMENT FINANCE FUND 4, L.P. AND SUBSIDIARIES

Notes To Consolidated Financial Statements - (Continued)

December 31, 2013 and 2012

NOTE 4 – INVESTMENT IN LEASES AND LOANS

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

	December 31,
	2013			2012
				(restated)
Direct financing leases (1)	$	6,908		$	25,970
Loans (2)		33,531			67,907
Operating leases		105			345
		40,544			94,222
Allowance for credit losses		(8,050	)		(8,920	)
	$	32,494		$	85,302

(1) The Fund’s direct financing leases are for initial lease terms generally ranging from 24 to 180 months.

(2) The interest rates on loans generally range from 5% to 18%.

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

	December 31,
	2013						2012
	Leases			Loans			Leases			Loans
										(restated)
Total future minimum lease payments	$	5,620		$	35,227		$	24,873		$	74,448
Unearned income		(303	)		(1,295	)		(1,280	)		(5,271	)
Residuals, net of unearned residual income (1)		1,676			-			2,591			-
Security deposits		(85	)		(401	)		(214	)		(1,270	)
	$	6,908		$	33,531		$	25,970		$	67,907

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

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

	December 31,
	2013			2012
Equipment	$	1,487		$	2,723
Accumulated depreciation		(1,382	)		(2,378	)
	$	105		$	345

28

LEAF EQUIPMENT FINANCE FUND 4, L.P. AND SUBSIDIARIES

Notes To Consolidated Financial Statements - (Continued)

December 31, 2013 and 2012

At December 31, 2013, the future payments scheduled to be received on non-cancelable commercial finance assets for each of the five succeeding annual periods ending December 31, and thereafter, are as follows (in thousands):

	Direct
	Financing				Operating
	Leases		Loans (1)		Leases (2)		Totals
2014	$	4,183	$	11,810	$	12	$	16,005
2015		878		6,789		–		7,667
2016		300		4,549		–		4,849
2017		179		2,520		–		2,699
2018		51		943		–		994
Thereafter		29		603		–		632
	$	5,620	$	27,214	$	12	$	32,846

(1) Loans are presented exclusive of approximately $8.013 million related to certain loans for which the timing of collectability is unknown.

(2) Operating lease amounts as shown are net of the residual value, if any, at the end of the lease term.

NOTE 5 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY

The following table is an age analysis of the Fund’s receivables from leases and loans, presented gross of allowance for credit losses of $8.1 million and $8.9 million as of December 31, 2013 and 2012, respectively (in thousands):

	December 31,
	2013					2012
Age of receivable	Investment in leases and loans		%			Investment in leases and loans		%
						(restated)		(restated)
Current (a)	$	38,339		95	%	$	90,489		96	%
Delinquent:
31 to 91 days past due		1,351		3	%		2,848		3	%
Greater than 91 days (b)		854		2	%		885		1	%
	$	40,544		100	%	$	94,222		100	%

(a) Included in this category are approximately $8.378 million and $15.217 million as of December 31, 2013 and December 31, 2012, respectively, of certain loans which are systematically current but are on the cost recovery method due to continued uncertainty as to collectability of future payments due.  This secured loan obligation totals $1.1 million.  The obligor of this loan is another finance company that is no longer operating.  Collateral for the loan is a pool of loans to construction companies and developers.  The Fund has been in the process of monetizing the underlying collateral for the loan via sale.  The Fund has written the loan down to the net realizable value of the underlying collateral.

(b) All leases and loans are individually or collectively evaluated for impairment.

The Fund had $9.2 million and $16.1 million of leases and loans on non-accrual status as of December 31, 2013 and 2012, respectfully. The credit quality of the Fund’s investment in leases and loans is as follows (in thousands):

	December 31,
	2013		2012
			(restated)
Performing	$	31,312	$	78,120
Nonperforming		9,232		16,102
	$	40,544	$	94,222

29

LEAF EQUIPMENT FINANCE FUND 4, L.P. AND SUBSIDIARIES

Notes To Consolidated Financial Statements - (Continued)

December 31, 2013 and 2012

The Company’s investment in non-performing leases and loans as of December 31, 2013 and 2012 was collectively evaluated for impairment, except for certain asset backed loans that were individually evaluated for impairment (see above for more information).  The following table summarizes the annual activity in the allowance for credit losses (in thousands):

	Years Ended December 31,
	2013			2012
				(restated)
Allowance for credit losses, beginning of year	$	8,920		$	4,410
Provision for credit losses		5,612			18,059
Charge-offs		(7,975	)		(14,605	)
Recoveries		1,493			1,056
Allowance for credit losses end of year	$	8,050		$	8,920
Allowance for credit losses:
Ending balance, individually evaluated for impairment	$	7,230		$	8,080
Ending balance, collectively evaluated for impairment		820			840
Balance, end of year	$	8,050		$	8,920
Recorded investment  in leases and term loans:
Ending balance, individually evaluated for impairment	$	8,378		$	15,217
Ending balance, collectively evaluated for impairment		32,166			79,005
Balance, end of year	$	40,544		$	94,222

NOTE 6 – DEFERRED FINANCING COSTS

As of December 31, 2013 and 2012, deferred financing costs include $625,000 and $1.3 million, respectively, of unamortized deferred financing costs which are being amortized over the terms of the estimated useful life of the related debt. Accumulated amortization as of December 31, 2013 and 2012 was $5.2 million and $4.5 million, respectively.

NOTE 7 –DEBT

The Fund’s debt consists of the following, net of original issue discount of $1.4 million and $3.2 million at December 31, 2013 and 2012, respectively (in thousands):

	December 31, 2013					December 31, 2012
		Outstanding			Interest rate per	Outstanding
	Type	Balance (1)			annum	Balance
2011-1 Term Securitization	Term	$	13,239		1.7% to 5.5%	$	29,446
2010-1 Term Securitization	Term		3,311		5.0%		9,330
2010-3 Term Securitization	Term		10,766		3.5% to 5.5%		37,095
		$	27,316			$	75,871
Less:  Unamortized Original Issue Discount			(1,446	)			(3,170	)
		$	25,870			$	72,701

(1) These borrowings are collateralized by specific leases and loans and restricted cash. As of December 31, 2013, $30.0 million of leases and loans and $8.1 million of restricted cash were pledged as collateral under the Fund’s term securitizations. Recourse under these securitizations is limited to the amount of collateral pledged.

Series 2011-1 Term Securitization.  In January 2011, a previous lender was paid-off with the proceeds from the 2011-1 Term Securitization (The “2011-1 Term Securitization”) in which six classes of asset-backed notes were issued that have varying maturity dates ranging  from December 2018 to December 2023. The asset-backed notes totaled $96.0 million, bear interest at fixed, stated rates ranging from 1.7% to 5.5%, and were issued at an original discount of approximately $6.2 million.

30

LEAF EQUIPMENT FINANCE FUND 4, L.P. AND SUBSIDIARIES

Notes To Consolidated Financial Statements - (Continued)

December 31, 2013 and 2012

Series 2010-1 Term Securitization.  In May 2010, three classes of asset-backed notes were issued (The “2010-1 Term Securitization”), one that matures in October 2016 and two that mature in September 2018, respectively. The asset-backed notes total $92.7 million and bear interest at a fixed, stated rate of 5% and were issued at an original discount of $6.5 million.

Series 2010-3 Term Securitization.  In August 2010, five classes of asset-backed notes were issued (The “2010-3 Term Securitization”), one that matures in June 2016 and four that mature in February 2022, respectively. The asset-backed notes total $171.4 million and bear interest at fixed, stated rates ranging from 3.5% to 5.5% and were issued at an original discount of $3.7 million.

Covenants:  The Fund’s securitizations are serviced by an affiliate of the Fund’s General Partner (the “Servicer”).  If the Servicer of the Fund’s portfolio does not comply with certain requirements, then the noteholders have the right to replace the Servicer.  The servicing agreements were amended in 2013 to increase the cumulative net loss percentages as the portfolio has exceeded the allowed cumulative net loss amount. In addition, the servicing agreements and the indentures on these facilities were amended to establish an additional reserve account to be funded by cash flows on leases and loans that will be used by the trustee as additional collateral.  These events do not constitute events of default.  The portfolio has not been in compliance with the cumulative net loss percentage trigger level on the 2011-1 term securitization since October 31, 2013, of which the trustee, rating agency, and investors are aware.

Additionally, the Fund is not, nor has been, delinquent on any payments owed to the noteholders.

Debt Repayments: Estimated annual principal payments on the Fund’s aggregate borrowings (presented gross of original issue discount of $1.4 million at December 31, 2013) over the next five years ended December 31, and thereafter, are as follows (in thousands):

December 31, 2014	$	11,356
December 31, 2015		7,602
December 31, 2015		4,168
December 31, 2017		2,688
December 31, 2018		960
Thereafter		542
	$	27,316

NOTE 8 – SUBORDINATED NOTES PAYABLE

LEAF Commercial Finance Fund, LLC (“LCFF”), a subsidiary of LEAF Funds JV2, has $9.3 million of 8.25% secured promissory notes (the “Notes”) outstanding, which are recourse to LCFF only. The Notes have a six-year term and require interest only payments until their maturity in February 2015.  LCFF may call or redeem the Notes, in whole or in part, at any time during the interest only period.

Noteholders may request, in writing, the redemption of all or a portion of the Notes at any time as long as it does not materially impair the capital or operations of the Company or its ability to repay its remaining Note obligations.  Any Note redeemed by the Company shall be deemed to be paid in full upon payment to the noteholder.  During the second quarter of 2013, a $60,000 note was redeemed by a noteholder for $44,500, and a gain of $15,500 was recognized in the consolidated statement of operations.

Covenants:  The Notes are subject to various covenants as set forth in their indenture, including an interest coverage ratio test, which LCFF was not in compliance with through 2013.  LCFF notified the Trustee and noteholders of this breach.  As a result, the noteholders have the right to declare an event of default, which to date has not occurred.  If the noteholders would declare an event of default, they have various rights and remedies available to them including (1) the right to declare all amounts currently outstanding under the Notes as immediately due and payable; (2) the right to take immediate possession of the assets of LCFF; and (3) the right to sell or otherwise dispose of the assets of LCFF in their current condition.  If the noteholders choose to repossess and sell LCFF’s assets, such a sale of a portfolio could be at prices lower than its carrying value, which could result in losses to the Fund. At December 31, 2013, LCFF had approximately $17.7 million in commercial finance assets, of which $13.6 million had been pledged as collateral on the 2011-1 Term Securitization.

Notwithstanding the foregoing, LCFF is not, nor has been, delinquent on any payments of interest owed to the noteholders.

31

LEAF EQUIPMENT FINANCE FUND 4, L.P. AND SUBSIDIARIES

Notes To Consolidated Financial Statements - (Continued)

December 31, 2013 and 2012

NOTE 9 – FAIR VALUE MEASUREMENT

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

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

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

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

Subsequent to the 2011-1 Term Securitization, all of the funds debt was on as fixed rate basis and the funds interest rate swaps were terminated. Accordingly, there were no assets or liabilities measured at fair value at December 31, 2013 or 2012.

The Fund is also required to disclose the fair value of financial instruments not measured at fair value for which it is practicable to estimate that value.  For cash, restricted cash, receivables, and payables, the carrying amounts approximate fair value because of the short term maturity of these instruments.

The methods used to estimate the fair value on bank debt that is not measured at fair value, the level within the fair value hierarchy that those fair value measurements are categorized, and the carrying value of the Fund’s debt at December 31, 2013 is as follows (in thousands):

	Carrying Value		Fair Value Measurements Using						Liabilities At Fair Value
			Level 1		Level 2		Level 3
Debt	$	25,870	$	−	$	24,094	$	−	$	24,094

The fair value of the debt at December 31, 2013 was determined using quoted prices from a broker-dealer as of the measurement date.

NOTE 10 – CERTAIN RELATIONSHIPS AND TRANSACTIONS WITH AFFILIATES

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

	Years Ended December 31,
	2013		2012
Administrative expenses	$	532	$	1,217

Management Fees. The General Partner was paid a subordinated annual asset management fee equal to 4% of gross rental payments for operating leases or 2% for full payout leases or a competitive fee, whichever was less. However, the General Partner waived approximately $1.0 million and $1.8 million of management fees for the years ended December 31, 2013 and 2012, respectively, and $7.4 million have been waived on a cumulative basis. The General Partner has waived all future management fees.

Administrative Expenses. The Fund reimburses the General Partner and its affiliates for certain costs of services and materials used by or for the Fund except those items covered by the above-mentioned fees.

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

32

LEAF EQUIPMENT FINANCE FUND 4, L.P. AND SUBSIDIARIES

Notes To Consolidated Financial Statements - (Continued)

December 31, 2013 and 2012

Distributions. The General Partner owns a 1% general partner interest and 0.85% limited partner interest in the Fund. The General Partner was paid cash distributions of $51,000 for its general partner interests for each year ended December 31, 2013 and 2012, respectively, and $43,000 for its limited partner interests for each year ended December 31, 2013 and 2012, respectively.

NOTE 11 – COMMITMENTS AND CONTINGENCIES

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

NOTE 12 – UNAUDITED QUARTERLY FINANCIAL DATA AND RESTATEMENT OF INTERIM FINANCIAL STATEMENTS

The aforementioned adjustment occurring in January 2012 impacted the previously reported balance sheet as of March 31, 2012, with a continuing impact through each subsequent quarter in 2012 and 2013, and the previously reported consolidated statements of operations and cash flows for the three, six, and nine months ended March 31, 2012, June 30, 2012, and September 30, 2012, respectively.  The previously reported consolidated statements of operations and cash flows for the three months ended June 30, 2012 and September 30, 2012 remain unchanged, in addition to the related quarter-to-date and year-to-date previously reported statements of operations and cash flows for the periods ended March 31, 2013, June 30, 2013, and September 30, 2013.  The effects of this adjustment on each of these previously issued unaudited interim financial statements is seen below.

As the adjustment occurred during Q1 2012, the net investment in leases and loans and equity balances decreased by $4.0 million, which carried through to each subsequent quarter.  The following sets forth the effect of the restatement on the applicable line items on the Company’s consolidated balance sheet for the quarters in 2012 for which interim financial statements were issued (in thousands):

	2012
	As of
	March 31			Adjustment			March 31			June 30			September 30
	(as filed)						(restated)			(restated)			(restated)
ASSETS
Cash	$	66		$	−		$	66		$	229		$	214
Restricted cash		14,084			−			14,084			12,984			12,319
Investment in leases and loans, net		158,016			(4,000	)		154,016			129,618			108,254
Deferred financing costs, net		2,256			−			2,256			1,927			1,571
Other assets		226			−			226			116			88
Total assets	$	174,648		$	(4,000	)	$	170,648		$	144,874		$	122,446
LIABILITIES AND PARTNERS’ (DEFICIT) CAPITAL
Liabilities:
Debt	$	129,783		$	−		$	129,783		$	108,473		$	90,405
Subordinated notes payable		9,355			−			9,355			9,355			9,355
Due to affiliates		522			−			522			834			1,436
Accounts payable, accrued expenses, and other liabilities		1,199			−			1,199			1,513			1,050
Total liabilities		140,859			−			140,859			120,175			102,246
Commitments and contingencies
Partners’ (Deficit) Capital:
General partner		(766	)		(40	)		(806	)		(858	)		(900	)
Limited partners		34,123			(3,960	)		30,163			25,172			20,772
Total partners’ capital		33,357			(4,000	)		29,357			24,314			19,872
Noncontrolling interest		432			−			432			385			328
Total capital		33,789			(4,000	)		29,789			24,699			20,200
Total liabilities and capital	$	174,648		$	(4,000	)	$	170,648		$	144,874		$	122,446

33

LEAF EQUIPMENT FINANCE FUND 4, L.P. AND SUBSIDIARIES

Notes To Consolidated Financial Statements - (Continued)

December 31, 2013 and 2012

As the aforementioned adjustment occurred in January 2012, only the statement of operations for the quarter ended March 31, 2012 was affected (i.e., the quarter-to-date amounts for the three months ended June 30, 2012 and September 30, 2012 are correct and can be relied upon as previously filed).  However, the year-to-date amounts for the six months ended June 30, 2012 and the nine months ended September 30, 2012 were affected as seen below by increasing the provision for credit losses by $4.0 million, which increased the net loss and other amounts accordingly.  The quarter-to-date and year-to-date statements of operations for the quarters in 2013 for which interim financial statements were issued were not affected by the January 2012 adjustment, and as such, can be relied upon as previously filed.  The following sets forth the effect of the restatement on the applicable line items on the Company’s year-to-date consolidated statement of operations for the quarters in 2012 for which interim financial statements were issued (in thousands, except unit and per unit data):

	2012
	Three Months Ended									Six Months Ended			Nine Months Ended
	March 31			Adjustment			March 31			June 30			September 30
	(as filed)						(restated)			(restated)			(restated)
Revenues:
Interest on equipment financings	$	2,610		$	−		$	2,610		$	5,070		$	7,214
Rental income		452			−			452			806			1,081
Gains on sales of equipment and lease dispositions, net		482			−			482			741			958
Other income		338			−			338			574			718
		3,882			−			3,882			7,191			9,971
Expenses:
Interest expense		3,631			−			3,631			6,789			9,880
Depreciation on operating leases		353			−			353			607			730
Provision for credit losses		2,941			4,000			6,941			9,944			12,252
General and administrative expenses		298			−			298			678			891
Administrative expenses reimbursed to affiliate		389			−			389			720			993
		7,612			4,000			11,612			18,738			24,746
Net loss		(3,730	)		(4,000	)		(7,730	)		(11,547	)		(14,775	)
Add:  Net loss attributable to the noncontrolling interest		49			−			49			96			153
Net loss attributable to LEAF 4 partners	$	(3,681	)	$	(4,000	)	$	(7,681	)	$	(11,451	)	$	(14,622	)
Net loss allocated to LEAF 4’s limited partners	$	(3,644	)	$	(3,960	)	$	(7,604	)	$	(11,336	)	$	(14,476	)
Weighted average number of limited partner units outstanding during the period		1,259,537			−			1,259,537			1,259,537			1,259,537
Net loss per weighted average limited partner unit	$	(2.89	)	$	(3.15	)	$	(6.04	)	$	(9.00	)	$	(11.49	)

34

LEAF EQUIPMENT FINANCE FUND 4, L.P. AND SUBSIDIARIES

Notes To Consolidated Financial Statements - (Continued)

December 31, 2013 and 2012

As the aforementioned adjustment occurred in January 2012, only the statement of cash flows for the quarter ended March 31, 2012 was affected (i.e., the quarter-to-date amounts for the three months ended June 30, 2012 and September 30, 2012 were not affected).  However, the year-to-date amounts for the six months ended June 30, 2012 and the nine months ended September 30, 2012 were affected as seen below by increasing the net loss and the provision for credit losses by $4.0 million, which had no effect on net cash provided by operating activities in total.  As no other line items on the consolidated statements of cash flows were affected by the misstatement, they can be relied upon as previously filed.  Also, the quarter-to-date and year-to-date statements of cash flows for the quarters in 2013 for which interim financial statements were issued were not affected by the January 2012 adjustment, and as such, can be relied upon as previously filed.  The following sets forth the effect of the restatement on the applicable line items on the Company’s year-to-date consolidated statement of cash flows for the quarters in 2012 for which interim financial statements were issued (in thousands):

	2012
	Three Months Ended									Six Months Ended			Nine Months Ended
	March 31			Adjustment			March 31			June 30			September 30
	(as filed)						(restated)			(restated)			(restated)
Cash flows from operating activities:
Net loss	$	(3,730	)	$	(4,000	)	$	(7,730	)	$	(11,547	)	$	(14,775	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation on operating leases		353			−			353			607			730
Amortization of discount on debt		1,099			−			1,099			2,044			3,122
Amortization of deferred charges		878			−			878			1,630			2,348
Provision for credit losses		2,941			4,000			6,941			9,944			12,252
Gains on sales of equipment and lease dispositions, net		(482	)		−			(482	)		(741	)		(958	)
Changes in operating assets and liabilities:
Other assets		(9	)		−			(9	)		101			129
Due to affiliates		332			−			332			644			1,246
Accounts payable, accrued expenses, and other liabilities		56			−			56			370			(93	)
Net cash provided by operating activities	$	1,438		$	−		$	1,438		$	3,052		$	4,001

35

LEAF EQUIPMENT FINANCE FUND 4, L.P. AND SUBSIDIARIES

Notes To Consolidated Financial Statements - (Continued)

December 31, 2013 and 2012

Due to the aforementioned adjustment, the $4.0 million decrease in the net investment in leases and loans and equity balances carried through to each subsequent quarter. The following sets forth the effect of the restatement on the applicable line items on the Company’s consolidated balance sheet for the quarters in 2013 for which interim financial statements were issued (in thousands):

	2013
	As of
	March 31			June 30			September 30
	(restated)			(restated)			(restated)
ASSETS
Cash	$	64		$	237		$	217
Restricted cash		11,268			10,058			9,699
Investment in leases and loans, net		68,763			54,847			41,236
Deferred financing costs, net		1,112			926			762
Other assets		92			92			125
Total assets	$	81,299		$	66,160		$	52,039
LIABILITIES AND PARTNERS’ (DEFICIT) CAPITAL
Liabilities:
Debt	$	58,393		$	45,547		$	35,118
Subordinated notes payable		9,355			9,295			9,295
Due to affiliates		2,376			3,829			5,021
Accounts payable, accrued expenses, and other liabilities		1,415			913			788
Total liabilities		71,539			59,584			50,222
Commitments and contingencies
Partners’ (Deficit) Capital:
General partner		(1,004	)		(1,036	)		(1,082	)
Limited partners		10,570			7,459			2,769
Total partners’ capital		9,566			6,423			1,687
Noncontrolling interest		194			153			130
Total capital		9,760			6,576			1,817
Total liabilities and capital	$	81,299		$	66,160		$	52,039

36

LEAF EQUIPMENT FINANCE FUND 4, L.P. AND SUBSIDIARIES

Notes To Consolidated Financial Statements - (Continued)

December 31, 2013 and 2012

NOTE 13 – SUBSEQUENT EVENTS

In April 2014, the Company sold a pool of leases with a net investment of approximately $5.7 million to a third party for proceeds totaling approximately $5.9 million.  A portion of the proceeds from the sale were used to pay off in full the 2010-1 and 2010-3 Term Securitizations.  As a result of this transaction, the related unamortized original issue discount of $426,000 and unamortized deferred financing costs of $149,000 were written down.

The Fund has evaluated its December 31, 2013 financial statements for subsequent events through the date the financial statements were issued.  The Fund is not aware of any subsequent events, other than the third party sale and related debt payoffs noted above, which would require recognition or disclosure in the financial statements.

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ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A – CONTROLS AND PROCEDURES

Background

In preparing the financial statements for the year ended December 31, 2013, an error was discovered in the financial statements for the year ended December 31, 2012 in that while evaluating a loan receivable from a loan held by a consolidated subsidiary, LEAF Commercial Finance Fund LLC, for impairment, the Fund did not properly value the collateral securing the loan because it had not appropriately applied the terms of an agreement entered into in January 2012.  The correction resulted in an increase to the Fund’s provision for credit losses for the year ended 2012 by approximately $4.0 million.

Due to the error noted above, the financial statements previously filed for the year ended December 31, 2012 and for the quarter ended March 31, 2012 through the quarter ended September 30, 2013 should no longer be relied upon and should be restated. Our general partner discussed this matter with the independent auditors and board of directors, who agreed with this conclusion.

In connection with the general partner’s review of this matter, we assessed the effectiveness of our internal control over financial reporting and identified a material weakness in such control.  We identified and reported this weakness to both our general partner and Grant Thornton LLP, our independent registered public accounting firm.  The nature of the material weakness is described as part of management’s report on internal control over financial report, as seen below.

Disclosure Controls and Procedures

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

Under the supervision of our General Partner’s chief executive officer and chief financial officer, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report.  Based upon that evaluation, our General Partner’s chief executive officer and chief financial officer concluded that there was a control deficiency in our internal control over financial reporting which constituted a material weakness.  Due to this material weakness, our disclosure controls and procedures were not effective as of December 31, 2013.  We discuss this material weakness and the steps that we have taken to remedy the weakness in management’s report on internal control over financial reporting, as seen below.

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Management’s Report on Internal Control over Financial Reporting

Our General Partner’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The general partner has assessed the effectiveness of our internal control over financial reporting as of December 31, 2013.  In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in the 1992 Internal Control – Integrated Framework.  As a result of this assessment, the general partner identified a material weakness in internal control over financial reporting as of December 31, 2013.  A material weakness, as defined under standards established by the Public Company Accounting Oversight Board’s Auditing Standard No. 5, is a control deficiency, or a combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of annual or interim financial statements would not be prevented or detected.  Because of this material weakness, management concluded that, as of December 31, 2013, our internal control over financial reporting was not effective based on the 1992 COSO framework.  We describe the material weakness in the following paragraph.  Notwithstanding the existence of the material weakness, our general partner’s management has concluded that the consolidated financial statements in this report present fairly, in all material respects, our financial position and the results of our operations and cash flows as of the dates and for the periods presented, in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Material Weakness in Internal Financial Control

We did not maintain effective controls in connection with the valuation of our allowance for loan losses.  We have an asset valuation policy applicable to the evaluation and recordation of impairment related to a loan receivable from a loan held by a consolidated subsidiary, LEAF Commercial Finance Fund LLC.  This policy requires us to assess and record any potential impairment based upon various criteria.  In the preparation of the financial statements for the year ended December 31, 2012, we failed to sufficiently review an agreement entered into in January 2012, and as such, incorrectly applied the terms of the agreement.  This weakness has resulted in misstatements of our assets, net loss, and partner’s (deficit) capital for the year ended December 31, 2012 and for the quarter ended March 31, 2012, with a continuing impact through the quarter ended September 30, 2013.  For information concerning the effects of these misstatements, see notes 2 and 12 to our consolidated financial statements included in this annual report.

Remediation of Weakness

We have corrected all errors discovered during our review process for the year ended December 31, 2012 and for the quarters included in the years ended December 31, 2012 and 2013, and have restated our annual and quarterly financial statements for such periods as further described in Notes 2 and 12 to our consolidated financial statements included in this report.  In addition, we have reviewed the policies related to the valuation of our allowance for loan losses and have properly applied the terms of the agreement entered into in January 2012 to value the collateral securing the loan held by our consolidated subsidiary.  In order to reduce the potential occurrence of similar errors in the future, management has made changes to its review process to include a greater emphasis on non-recurring, unusual, or unique transactions.  The material weakness in our internal control over financial reporting as of December 31, 2013 is expected to be remediated during the quarter ended June 30, 2014.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the three month period ended December 31, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

ITEM 9B – OTHER INFORMATION

None.

39

PART III

ITEM 10 – DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Our General Partner manages our activities. Although our limited partners have limited voting rights under our partnership agreement, they do not directly or indirectly participate in our management or operations or have actual or apparent authority to enter into contracts on our behalf or to otherwise bind us. Our General Partner will be liable, as General Partner, for all of our debts to the extent not paid, except to the extent that indebtedness or other obligations incurred by it are specifically with recourse only to our assets. Whenever possible, our General Partner intends to make any of our indebtedness or other obligations with recourse only to our assets.

As is commonly the case with limited partnerships, we do not directly employ any of the persons responsible for our management or operation. Rather, our General Partner’s personnel manage and operate our business. Officers of our General Partner may spend a substantial amount of time managing the business and affairs of our General Partner and its affiliates and may face a conflict regarding the allocation of their time between our business and affairs and their other business interests.

The following table sets forth information with respect to the directors and executive officers of our General Partner:

Name	Age	Position
Crit S. DeMent	61	Chief Executive Officer
Robert K. Moskovitz	57	Chief Financial Officer
Jonathan Z. Cohen	43	Director
Jeffrey F. Brotman	50	Director

Crit S. DeMent was Chairman of the Board of Directors and Chief Executive Officer of LEAF Financial since November 2001 until December 14, 2011. Mr. DeMent also serves as Chairman of the Board of Directors and Chief Executive Officer of LEAF Asset Management since it was formed in August 2006, Chairman of the Board of Directors and Chief Executive Officer 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. Beginning January 1, 2011, Mr. DeMent serves as the Chairman of the Board of Directors and Chief Executive Officer of LEAF Commercial Capital, Inc.  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 serves as the Chairman of the Board of Directors of the Equipment Leasing and Finance Association.

Robert K. Moskovitz has been Chief Financial Officer of LEAF Financial since February 2004, Treasurer of LEAF Financial from September 2004 until April 2009 and Assistant Secretary of LEAF Financial since June 2007. Mr. Moskovitz also serves as Chief Financial Officer and Assistant Secretary of LEAF Asset Management since it was formed in August 2006, and Chief Financial Officer and a Director of LEAF Funding since May 2004. Beginning January 1, 2011, Mr. Moskovitz serves as the Chief Financial Officer of LEAF Commercial Capital, Inc.  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 1983 to 2001 Mr. Moskovitz held senior executive level 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 holds a B.S. degree in Business Administration from Drexel University.

Jonathan Z. Cohen has been a Director of LEAF Financial Corporation since January 2002 and 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: a Director since 2002, President since 2003, Chief Executive Officer since 2004, 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 Chief Executive Officer, President and a Director of Resource Capital Corp. (a publicly-traded real estate investment trust) since its formation in 2005. Mr. Cohen also serves as Vice Chairman of the Managing Board of Atlas Pipeline Partners GP, LLC (the general partner of Atlas Pipeline Partners, L.P., a publicly-traded oil and gas pipeline limited partnership) since its formation in 1999, Chairman of the Board of Directors of Atlas Energy GP, LLC (the general partner of Atlas Energy, L.P. (f/k/a Atlas Pipeline Holdings, L.P.), a publicly-traded oil and gas limited partnership) and Vice Chairman of the Board of Directors of Atlas Resource Partners GP, LLC (the general partner of Atlas Resource Partners, L.P., a publicly-traded oil and gas E&P limited partnership) since February 2013.  Mr. Cohen was also Vice Chairman of the Board of Directors of Atlas Energy, Inc. ((f/k/a Atlas America, Inc.) a publicly-traded oil and gas company) from September 2000 until February 2011 and Vice Chairman of Atlas Energy Resources, LLC from June 2006 until February 2011.

40

Jeffrey F. Brotman has been a Director of LEAF Financial since April 2008 and a Director of LEAF Asset Management since 2010. Mr. Brotman has also been Executive Vice President of Resource America since June 2007. Mr. Brotman was a co-founder of Ledgewood, P.C. (a Philadelphia-based law firm) and was affiliated with the firm from 1992 until June 2007, serving as its managing partner from 1995 until March 2006. Mr. Brotman is also a non-active Certified Public Accountant and an Adjunct Professor at the University of Pennsylvania Law School. Mr. Brotman was Chairman of the Board of Directors of TRM Corporation (a publicly-traded consumer services company) from September 2006 until September 2008 and was its President and Chief Executive Officer from March 2006 through June 2007.

The board of directors of our General Partner has not adopted specific minimum qualifications for service on the board, but rather seeks a mixture of skills that are relevant to our business. The following presents a brief summary of the attributes of each director that led to the conclusion that such person should serve as a director:

Mr. Cohen has extensive financial and operational experience, including as the chief executive officer of our general partner’s publicly traded parent company.

Mr. Brotman has significant experience in finance, as an attorney, and as the chief executive officer of a public company.

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, Inc. 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 obtain a copy of this code of ethics by a request to our General Partner at LEAF Asset Management, LLC, One Commerce Square, 2005 Market Street, 14th Floor, Philadelphia Pennsylvania 19103.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, which we refer to as the Exchange Act, requires the directors and executive officers of our General Partner, our General Partners, and holders greater than 10% of our limited partnership interests to file reports with the SEC. SEC regulations require us to identify anyone who filed a required report late during the most recent fiscal year.  Based on our review of these reports, we believe that the filing requirements for all of these reporting persons were complied with during 2013.

ITEM 11 – EXECUTIVE COMPENSATION

We do not have, nor do we expect to have, any employees as discussed in Item 10 — “Directors and Executive Officers of the Registrant.” Instead, our management and day-to-day activities are provided by the employees of our General Partner and its affiliates. No officer or director of our General Partner will receive any direct remuneration from us. Those persons will receive compensation solely from our General Partner or its affiliates other than us.

ITEM 12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED UNIT HOLDER MATTERS

(a) We had approximately 2,796 limited partners as of December 31, 2013.

(b) In 2008, our General Partner contributed $1,000 to our capital as our General Partner and received its General Partner interest in us. As of December 31, 2013, our General Partner owned 10,753, or 0.85%, of our limited partner units. These purchases of limited partner units by our General Partner and its affiliates were at a price discounted by the 7% sales commission which was paid by most of our other limited partners.

(c) We know of no arrangements that would, at any date subsequent to the date of this report, result in a change in control of us.

(d) Our General Partner’s name and address is LEAF Asset Management, LLC, One Commerce Square, 2005 Market Street, 14th Floor, Philadelphia, Pennsylvania 19103.

41

ITEM 13 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We rely on our General Partner and its affiliates to manage our operations and pay the General Partner or its affiliates fees to manage us. The following is a summary of fees and costs of services and materials charged by the General Partner or its affiliates (in thousands):

	Years Ended December 31,
	2013		2012
Administrative expenses	$	532	$	1,217

Management Fees. The General Partner was paid a subordinated annual asset management fee equal to 4% of gross rental payments for operating leases or 2% for full payout leases or a competitive fee, whichever was less. However, the General Partner waived approximately $1.0 million and $1.8 million of management fees for the years ended December 31, 2013 and 2012, respectively, and $7.4 million have been waived on a cumulative basis. The General Partner has waived all future management fees.

Administrative Expenses. The Fund reimburses the General Partner and its affiliates for certain costs of services and materials used by or for the Fund except those items covered by the above-mentioned fees.

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

Distributions. The General Partner owns a 1% general partner interest and 0.85% limited partner interest in the Fund. The General Partner was paid cash distributions of $51,000 for its general partner interests for each year ended December 31, 2013 and 2012, respectively, and $43,000 for its limited partner interests for each year ended December 31, 2013 and 2012, respectively.

Because we are not listed on any national securities exchange or inter-dealer quotation system, we have elected to use the Nasdaq National Stock Market’s definition of “independent director” in evaluating whether any of our General Partner’s directors are independent. Under this definition, the board of directors of our General Partner has determined that our General Partner does not have any independent directors, nor are we required to have any.

ITEM 14 – PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees. The aggregate fees billed by our independent auditors, Grant Thornton, LLP related to quarterly reviews and the year-end audit was approximately $196,000 and $153,000 for the years ended December 31, 2013 and 2012, respectively.

Audit-Related Fees. We did not incur fees in 2013 and 2012 for other services not included above.

Tax Fees. We did not incur fees in 2013 and 2012 for other services not included above.

All Other Fees. Our auditors, Grant Thornton, LLP, billed us for professional services rendered related to sales tax filings of approximately $23,000 for each of the years ended December 31, 2013 and 2012.

Procedures for Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditor.

Our General Partner’s Board of Directors reviews and approves in advance any audit and any permissible non-audit engagement or relationship between us and our independent auditors.

42

PART IV

ITEM 15 – EXHIBITS, FINANCIAL STATEMENT SCHEDULES

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. Exhibits

Exhibit
No.	Description
3.1	Certificate of Limited Partnership (1)
3.2	Amended and Restated Agreement of Limited Partnership (2)
3.3	Amendment No. 1 to Amended and Restated Agreement of Limited Partnership of LEAF Equipment Finance Fund 4, L.P. (7)
4.1	Forms of letters sent to limited partners confirming their investment (1)
10.1	Form of Origination and Servicing Agreement Among LEAF Financial Corporation, LEAF Equipment Finance Fund 4, LP and LEAF Funding, Inc. (1)
10.2	Indenture by and between LEAF Commercial Finance Fund, LLC and U.S. Bank National Association (3)
10.3	Amended and Restated Limited Liability Company Agreement of LEAF Commercial Finance Fund, LLC(3)
10.4	Limited Liability Company Agreement of LEAF Funds Joint Venture 2, LLC (3)
10.5	Indenture between LEAF Receivables Funding 2, LLC and U.S. Bank National Association dated as of May 1, 2010 (4)
10.6	Indenture between LEAF Receivables Funding 4, LLC and U.S. Bank National Association dated as of July 4, 2010 (5)
10.7	Indenture between LEAF Receivables Funding 6, LLC and U.S. Bank National Association dated as of January 6, 2011 (6)
10.8	First Amendment dated as of September 28, 2013 to the Indenture between LEAF Receivables Funding 2, LLC and U.S. Bank National Association (8)
10.9	First Amendment dated as of October 15, 2013 to the Indenture between LEAF Receivables Funding 4, LLC and U.S. Bank National Association (8)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	Interactive data file containing the following financial statements formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets at December 31, 2013 and December 31, 2012; (ii) the Consolidated Statements of  Operations for the years ended December 31, 2013 and 2012; (iii) the Consolidated Statements of Comprehensive Income for the years ended December 31, 2013 and 2012; (iv) the Consolidated Statements of Changes in Partners’ (Deficit) Capital for the years ended December 31, 2013 and 2012; (iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012; and, (iv) the Notes to Consolidated Financial Statements.
(1)	Filed previously as an exhibit to our Registration Statement on Form S-1 filed on March 24, 2008 and by this reference incorporated herein.
(2)	Filed previously as an exhibit to Form 8-K on May 8, 2009 and by this reference incorporated herein.
(3)	Filed previously on May 12, 2009 in Post-Effective Amendment No. 1 as an exhibit to our Registration Statement and by this reference incorporated herein.
(4)	Filed previously as an exhibit to our Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2010 and by this reference incorporated herein.
(5)	Filed previously as an exhibit to our Quarterly Report on Form 10-Q/A for the quarter ended September 30, 2010 and by this reference incorporated herein.
(6)	Filed previously as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 and by this reference incorporated herein.
(7)	Filed previously as an exhibit to form 8-K on October 20, 2011 and by this reference incorporated herein.
(8)	Filed previously as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2012 and by this reference incorporated herein.

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SIGNATURES

Pursuant to the requirements 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.

	LEAF EQUIPMENT FINANCE FUND 4, L.P.
	A Delaware Limited Partnership
	By:	LEAF Asset Management, LLC, the General Partner
May 16, 2014	By:	/s/ CRIT S. DEMENT
		Crit S. Dement
		Chief Executive Officer
May 16, 2014	By:	/s/ ROBERT K. MOSKOVITZ
		Robert K. Moskovitz
		Chief Financial Officer

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 capacities and on the dates indicated.

/s/ CRIT S. DEMENT	Chief Executive Officer of the General Partner	May 16, 2014
Crit S. Dement	(Principal Executive Officer)
/s/ ROBERT K. MOSKOVITZ	Chief Financial Officer of the General Partner	May 16, 2014
Robert K. Moskovitz	(Principal Accounting and Financial Officer)
/s/ JONATHAN Z. COHEN	Director of the General Partner	May 16, 2014
Jonathan Z. Cohen
/s/ JEFFREY F. BROTMAN	Director of the General Partner	May 16, 2014
Jeffrey F. Brotman

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