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Article by DailyStocks_admin    (06-21-08 09:20 AM)

Resource America Inc. CEO JONATHAN Z COHEN bought 166667 shares on 06-18-2008 at $9

BUSINESS OVERVIEW

General

We are a specialized asset management company that uses industry specific expertise to generate and administer investment opportunities in the commercial finance, real estate and financial fund management sectors. As a specialized asset manager, we seek to develop investment funds for outside investors for which we provide asset management services. We typically maintain an investment in the investment vehicles we sponsor. As of September 30, 2007, we managed $16.7 billion of assets. As of November 30, 2007, we managed $17.3 billion of assets.

We limit our fund development and asset management services to asset classes in which we have specific expertise. We believe this strategy enhances the return on investment we can achieve for our funds. In our commercial finance operations, we focus on originating small and middle-ticket equipment leases and commercial notes secured by business-essential equipment, including technology, commercial and industrial equipment and medical equipment. In our real estate operations, we concentrate on investments in multi-family and commercial real estate and real estate mortgage loans including whole loans, first priority interests in commercial mortgage loans, known as A notes, subordinated interests in first mortgage loans, known as B notes, and mezzanine loans. In our financial fund management operations, we concentrate on trust preferred securities of banks, bank holding companies, insurance companies and other financial companies, bank loans, asset-backed securities.

We have greatly expanded all three sectors since 2003 and assets under management have grown from $2.1 billion, excluding our former energy subsidiary, at September 30, 2003 to $16.7 billion at September 30, 2007. We distribute our products through numerous channels including a highly proprietary large broker dealer/financial planner network.

We attract investment funds through the sponsorship of investment vehicles, which historically have included public and private investment partnerships, TIC programs, a REIT and CDO issuers. We arrange for the funding of these vehicles through short, medium and longer-term bank financing, equity investments and, historically, CDOs. We believe that we have developed a unique combination of origination channels to provide such funding, including a network of international and national banks and investment banks both for our short, medium and longer-term debt financing (including, historically, our CDOs) and for equity financing of RCC, and a national network of independent broker-dealers for our investment partnerships and TIC programs.

We believe that current credit market conditions have created opportunities for us, principally in our commercial finance business. In commercial finance, we acquired the equipment leasing division of Pacific Capital Bank in June 2007 and, subsequent to our 2007 fiscal year end, acquired the equipment leasing division of NetBank from the Federal Deposit Insurance Corporation, or the FDIC, out of receivership, and the equipment finance subsidiary of Lehman Brothers Bank, FSB. The two acquisitions subsequent to our fiscal year end increased our commercial finance assets under management by $0.6 billion, to approximately $1.7 billion as of November 30, 2007. The equipment leases and notes were acquired on behalf of our investment partnerships. In real estate, we acquired a real estate property management group on October 1, 2007, that will allow us to directly manage properties held by the real estate investment programs we manage. We also, on behalf of an institutional joint venture partner, purchased a portfolio of mortgage loans from the U.S. Department of Housing and Urban Development, or HUD, at a substantial discount. In our third sector, financial fund management, we completed five collateralized debt obligation, or CDO, issuances in the second half of fiscal 2007. In addition, one CDO priced subsequent to fiscal 2007 year end and we expect it to close in December 2007. Of these six CDOs, three were collateralized loan obligation, or CLO issuances, including the one we expect to close in December 2007. Due to the current state of the credit markets we believe that the CDO market in general will slow substantially in 2008 limiting our ability to generate additional assets under management through this channel, although, we believe that current market conditions have had less effect on our ability to sponsor CLOs and, consequently, we may be able to sponsor CLO vehicles in 2008. Even under current market conditions, we expect that our financial fund management sector will provide us with a continuing stream of fee income from existing CDOs and funds we manage.

Commercial Finance

General. Through our commercial finance subsidiary, LEAF Financial Corporation, or LEAF, we focus our commercial finance operations on equipment leases and secured loans to small and mid-sized companies. Our equipment lease financing is generally for “business-essential” equipment including technology, commercial, industrial and medical equipment, with a primary financed transaction size of under $2.0 million and an average size of between $50,000 to $100,000. LEAF generates equipment leases and loans through both direct originations and portfolio acquisitions which we discuss “− LEAF Acquisitions,” below. LEAF’s strategy for direct originations involves marketing to direct sales organizations which offer financing by LEAF as part of their marketing package. Some of these direct origination companies include Textron, Dell, 3M, Gateway, Respironics, Sullivan-Schein and Smurfit-Stone. Our secured loans are generally used by borrowers to acquire professional practices, such as dental or veterinary practices, and business franchises.

During fiscal 2007, we originated $779.2 million in commercial finance assets (based on book value). As of September 30, 2007, we managed a commercial finance portfolio totaling $1.1 billion, including $756.0 million on behalf of three public limited partnerships we sponsored, $243.0 million for our own account, $83.0 million on behalf of RCC and $11.0 million pursuant to an arrangement with a subsidiary of Merrill Lynch, Pierce, Fenner & Smith Incorporated, or Merrill Lynch, pursuant to which we originate, service and manage equipment leases with tax-exempt entities. The partnerships have raised a total of $130.0 million and $143.0 million through September 30 and November 30, 2007, respectively

LEAF Acquisitions. On November 30, 2007, LEAF acquired the business of Dolphin Capital Corp., an equipment finance subsidiary of Lehman Brothers Bank, FSB. The total purchase price of $170.5 million included a portfolio of small ticket leases acquired by LEAF and an investment partnership managed by LEAF. In addition, LEAF retained the Dolphin lease origination and management platform as well as the small ticket leasing team including senior management, origination and operations personnel.

On November 7, 2007, LEAF acquired at a discount substantially all of the assets of NetBank Business Finance, a division of NetBank, from the Federal Deposit Insurance Corporation for $412.5 million. LEAF acquired the portfolio on behalf of investment partnerships that it manages. LEAF intends to sell the assets acquired in this transaction to our investment partnerships by June 30, 2008. The portfolio included over 10,000 leases and loans to small businesses throughout the United States. In addition, LEAF intends to continue the lease origination and management platform in Columbia, South Carolina and to retain its small ticket leasing team.

In June 2007, LEAF acquired substantially all of the assets of the leasing division of Pacific Capital Bank N.A., or PCB, principally a portfolio of small ticket leases and notes, at a total cost of $282.2 million. LEAF's investment partnerships acquired $269.5 million of the PCB portfolio, of which $201.7 million were acquired during the quarter ended June 30, 2007. LEAF retained the PCB lease origination and management platform as well as its small ticket leasing team including senior management, originations, and operations personnel.

Including the acquisitions described above, LEAF’s assets under management have increased to approximately $1.7 billion at November 30, 2007.

We receive acquisition fees, management fees and reimbursements of our operating and administrative expenses incurred from the leasing partnerships we manage. Acquisition fees range from 1% to 2%. Servicing fees range from 1% to 4% of gross rental payments.

Merit Capital Advance. LEAF started a new joint venture, Merit Capital Advance, or Merit, an indirect subsidiary of LEAF, in March 2007 with a financial institution to provide capital advances to small companies based on factoring their future credit card receipts. The Merit operations had finance revenues of $516,000 and expenses of $1.8 million, which reduced LEAF’s operating income by $1.3 million.

Real Estate

General. Our real estate operations involve:





the sponsorship and management of real estate investment partnerships and TIC programs;





the management, solely for RCC, of general investments in commercial real estate debt. These investments may include first mortgage debt, whole loans, mortgage participations, subordinate notes, mezzanine debt and related commercial real estate securities;





the acquisition, in September 2007 of a portfolio of real estate loans at a discount from the HUD on behalf of an institutional partner, through a joint venture; and





to a lesser extent, the management and resolution of a legacy portfolio of real estate loans and property interests that we acquired at various times between 1991 and 1999.

Real Estate Investment Partnerships and TIC Programs. Since 2003, we have sponsored seven real estate investment funds, six of which have commenced operations (one was still in the startup phase) and seven TIC programs in which investors acquire undivided fractional interests in real properties through a tenant-in-common structure. The partnerships and TIC programs have raised a total of $205.2 million comprised of $129.3 million and $75.9 million, respectively. These partnerships and TIC programs have acquired interests in 31 multi-family apartment complexes comprising 8,432 units. The combined acquisition cost of the real estate controlled by all programs is $511.6 million, including interests owned by third parties. We receive acquisition, debt placement, and bridge equity fees from the partnerships and TIC programs in their acquisition stage. These fees, in the aggregate, have ranged from 1.75% to 2% of the acquisition costs of the properties or the debt financing, in the case of debt placement fees. In their operational state, we receive property management fees of 5% of gross revenues and partnership or program management fees of 1% on our partnership and TIC interests. We typically subcontract our property management obligations to third party property managers, who are paid 3% to 4% of gross revenues.

Resource Property Manager. Effective October 1, 2007, we established a new property management division, Resource Real Estate Management, Inc., or RREM, based in Omaha, Nebraska to facilitate the management of the majority of the real estate in our investment programs. To the fullest extent practicable, all new property acquisitions will be managed by RREM and the property management of existing properties will be assumed during the first quarter of fiscal year 2008. We believe that the ability to manage our own properties will enhance property performance for our limited partners and lead to increasing profitability for us.

Distressed Real Estate Opportunities. We sponsored and are managing, a partnership that acquired a pool of eleven mortgages from the HUD. This portfolio was acquired at an overall discount of 51% to face value of approximately $75.0 million. We intend to resolve these loans through a combination of foreclosures, modifications, restructurings and sales. We are pursuing other opportunities to add assets to this venture and other distress real estate opportunities.

Resource Capital Corp. As of September 30, 2007, we managed approximately $921.5 million of commercial real estate loan assets on behalf of RCC, including $762.9 million held in CDOs we sponsored in which RCC holds the equity interests. We discuss RCC in more detail in “Resource Capital Corp.,” below.

Legacy Portfolio of Loan and Property Interests. In addition to our real estate investment partnerships, TIC programs and RCC’s commercial loan portfolio, we have a legacy portfolio of real estate loans and property interests. Between fiscal 1991 and 1999, our real estate operations focused on the purchase of commercial real estate loans at discounts to their outstanding loan balances and the appraised value of their underlying properties. As a result of our ownership, management and resolution of some of these loans, we have acquired direct and indirect property interests. Since fiscal 1999, we have focused on managing and resolving our existing portfolio. During fiscal 2007, the number of loans in this portfolio remained at nine through the sale of one loan and the addition of one loan. In addition, we sold a partial interest in a real estate venture and received net proceeds of $2.9 million. However, we may sell, purchase or originate portfolio loans or real property investments in the future as part of our management process or as opportunities arise.

In applying Financial Accounting Standards Board Interpretation 46, “Consolidation of Variable Interest Entities,” as revised, or FIN 46-R, our real estate operations consolidates certain variable interest entities, or VIEs, to which we have determined that we are the primary beneficiary. The assets, liabilities, revenues and costs and expenses of the VIEs that are included in our consolidated financial statements are not ours. The liabilities of the VIEs will be satisfied from the cash flows of the respective VIE’s consolidated assets, not from our assets, since we have no legal obligation to satisfy those liabilities.

Financial Fund Management

General . We focus our financial fund management operations on the sponsorship and management of CDO issuers and the management of RCC. We conduct our financial fund management operations through five principal subsidiaries:





Trapeza Capital Management, LLC, or Trapeza, a joint venture between us and an unrelated third party, which originates, structures, finances and manages investments in trust-preferred securities and senior debt securities of banks, bank holding companies, insurance companies and other financial companies.





Apidos Capital Management, LLC, or Apidos, which finances, structures and manages investments in bank loans.





Ischus Capital Management, LLC, or Ischus, which finances, structures and manages investments in asset-backed securities or ABS, including residential mortgage-backed securities, or RMBS, and commercial mortgage-backed securities, or CMBS.





Resource Europe, which finances, structures and manages investments in international bank loans.





Resource Financial Institutions Group, Inc., or RFIG, which serves as the general partner for four company-sponsored affiliated partnerships which invest in financial institutions.

CDOs . Historically, through September 30, 2007, we have focused our financial fund management operations on the sponsorship of CDO issuers whose notes are backed by assets purchased through Trapeza, Apidos, Ischus and Resource Europe and the management of their assets. In general, CDOs are issued by special purpose entities, or CDO issuers, that hold portfolios of debt obligations. A CDO issuer typically issues two or more series of notes of different seniority, as well as equity (sometimes referred to as “preference shares”) to fund the purchase of a portfolio of assets. The series of notes are typically rated based on portfolio quality, diversification and, among the series of notes being issued. The equity issued by the CDO issuer is the “first loss” piece of the CDO issuer’s capital structure, but is also generally entitled to all residual amounts available for payment after the CDO issuer’s obligations to the holders of the notes have been satisfied. In a typical CDO transaction, we acquire assets for the CDO issuer principally in transactions with the issuers of those assets, and are responsible for the evaluation of assets proposed for inclusion in the CDO issuer’s portfolio. We analyze the creditworthiness of the issuers of the portfolio assets, the assets themselves and the asset servicers through a credit committee made up of individuals with expertise in the targeted asset class. In general, CDOs must be rated by one or more rating agencies in order for them to be eligible for many of the institutional investors to whom they are marketed; accordingly, we apply rating agency standards when evaluating assets for inclusion in a CDO issuer’s portfolio. We typically fund the initial acquisition of a CDO issuer’s portfolio assets through a secured warehouse credit facility prior to the CDO closing. At closing, the warehouse facility is refinanced through the issuance of various tranches of liabilities. Recently, global credit markets have been subject to substantial volatility and reduced liquidity which has significantly limited opportunities to obtain CDO funding. Although from July 1, 2007 to November 30, 2007 we priced two CDOs (one of which we closed), we cannot assure you that, in the future, we will be able to sponsor CDOs on acceptable terms, or at all, which would limit the growth of our assets under management in, and the management fees we earn from our financial fund management operations.

We derive revenues from our financial fund management operations through management and administration fees. We also receive distributions on amounts we invest directly in CDOs or in limited partnerships we form that purchase equity in our CDO issuers. Management fees vary by CDO issuers but, excluding CDO issuers managed on behalf of RCC, have ranged from an annual fee of between 0.08% and 0.75% of the par value of the CDO issuer’s portfolio assets. For the Trapeza CDO issuers we manage, we share these fees with our co-sponsors. For CDO issuers managed on behalf of RCC, we receive fees directly from RCC pursuant to our management agreement in lieu of asset management fees from the CDO issuers. We describe the management fees we receive from RCC in “− Resource Capital Corp” below. CDO fees are payable monthly, quarterly or semi-annually, as long as we continue to manage portfolio assets on behalf of the CDO issuer. Our interest in distributions from the CDO issuers varies with the amount of our equity interest. We have earned incentive distribution interests in four partnerships in which we have invested that hold equity interests in CDO issuers.

Resource Capital Corp.

RCC, a publicly-traded (NYSE:RSO) REIT that we sponsored in fiscal 2005, invests in a diversified portfolio of whole loans, B notes, CMBS and other real estate-related loans and commercial finance assets. At September 30, 2007, we owned 2.0 million shares of RCC common stock, or about 7.8% of RCC’s outstanding common stock and held options to acquire 2,166 shares (at an average price per share of $15.00) and warrants to acquire an additional 100,088 shares (at $15.00 per share).

We manage RCC through Resource Capital Manager, Inc., or RCM, an indirect wholly-owned subsidiary. At September 30, 2007, we managed approximately $2.4 billion of assets on behalf of RCC (see “ − General.”) Under our management agreement with RCC, RCM receives a base management fee, incentive compensation and a reimbursement for out-of-pocket expenses. The base management fee is 1/12 th of 1.50% of RCC’s equity per month. The management agreement defines “equity” as, essentially, shareholder’s equity, subject to adjustment for non-cash equity compensation expense and non-recurring changes to which the parties agree. The incentive compensation is 25% of the amount by which RCC’s quarterly net income exceeds an amount equal to the weighted average issuance price of RCC’s common shares, multiplied by the greater of 2% or 0.50% plus one-fourth of the ten-year treasury rate. RCM receives at least 25% of our incentive compensation in additional shares of RCC common stock and has the option to receive more of our incentive compensation in stock under the management agreement. We also receive an acquisition fee of 1% of the carrying value of the commercial finance assets we sell to RCC. In fiscal 2007, the management, incentive and acquisition fees we received from RCC were $9.0 million, or 7% of our consolidated revenues. These fees have been reported as revenues through our operating segments.

Credit Facilities

Through our subsidiaries, we have access to five separate credit facilities, which we describe in this section. We also have arranged three credit facilities for our CDO issuers relating to their accumulation of U.S. and European bank loans for which we are a guarantor. The aggregate amount of losses guaranteed under these facilities, which we describe in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Contractual Obligations and Other Commercial Commitments” was $26.8 million at September 30, 2007.

Financial fund management – Secured warehouse credit facilities.

In July 2007, a $300.0 million facility was opened with affiliates of Morgan Stanley Bank, or Morgan Stanley. The associated CDO is anticipated to close in fiscal 2008. The interest rate is the London Inter-Bank Offered Rate, or LIBOR, plus 75 basis points. The facility provides for a guarantee by us of $6.0 million, and is secured by an escrow deposit of $3.0 million at September 30, 2007. As of September 30, 2007, the balance outstanding was $48.6 million, net of $2.0 million of loans sold not settled.

In January 2007, a EUR 400.0 million (approximately $570.9 million at September 30, 2007) facility was opened with Morgan Stanley. We anticipate that the associated CDO will close in fiscal 2008. The interest rate is European LIBOR plus 75 basis points. The facility provides for a guarantee by us of $11.6 million and is secured by an escrow deposit of $4.3 million at September 30, 2007. As of September 30, 2007, the balance outstanding was $73.8 million, net of $149.7 million of loans sold not settled.

In August 2006, a facility was opened with affiliates of Credit Suisse Securities (USA) LLC, or Credit Suisse, for up to $400.0 million. The associated CDO priced on November 20, 2007 and is anticipated to close on December 19, 2007. We will provide the equity of $21.3 million for this investment and it is anticipated that we will syndicate all or a portion of this investment in the future. The interest rate is LIBOR plus 62.5 basis points. The facility provides for a guarantee by us as well as an escrow deposit. As of September 30, 2007, the balance outstanding was $164.4 million, net of $1.0 million of loans sold not settled.

Commercial finance - Secured revolving credit facilities

In June 2007, a $100.0 million short-term revolving credit facility was entered into with a commercial bank with an original maturity date of August 2007 which was extended to and expired on October 31, 2007. Interest is charged at one of three rates: (i) LIBOR plus 1.75%, (ii) one-month LIBOR divided by the sum of 1 minus the LIBOR reserve percent, plus 1.75%; and (iii) the higher of the lender’s base rate or the federal funds rate plus 50 basis points. As of September 30, 2007, there were no outstanding borrowings on this facility.

In December 2006, a $250.0 million line of credit with Morgan Stanley was assumed from RCC by LEAF. As part of the agreement, LEAF reimbursed RCC $125,000 for the commitment fees it had paid and assumed a liability for an additional $725,000 of commitment fees and other costs. The facility is non-recourse to LEAF and expires in October 2009. The underlying equipment being leased or financed collateralizes the borrowings. Interest is charged at one of two rates based on the utilization of the facility: (i) one-month LIBOR plus 60 basis points on borrowings up to $100.0 million and (ii) one-month LIBOR plus 75 basis points on borrowings in excess of $100.0 million. Interest and principal payments are due monthly. We use interest rate swap agreements to mitigate fluctuations in LIBOR. The swap agreements terminate at various dates ranging from November 2011 to November 2020. As of September 30, 2007, the borrowings outstanding on this facility were $137.6 million.

In July 2006, LEAF entered into a $150.0 million revolving warehouse credit facility with a group of banks led by National City Bank that expires on July 31, 2009. Interest is charged at one of two rates: (i) LIBOR plus 150 basis points, or (ii) the prime rate. In September 2007, LEAF entered into an interest rate swap agreement for $75.0 million for this facility in order to mitigate fluctuations in LIBOR. The swap agreement terminates in September 2009. The underlying equipment being leased or financed collateralizes the borrowings. Outstanding borrowings as of September 30, 2007 were $83.9 million.

CEO BACKGROUND

Carlos C. Campbell , 70, has been a member of our Board of Directors since 1990. President of C.C. Campbell and Company (a management consulting firm) since 1985. Director of PICO Holdings, Inc. (a publicly-traded diversified holding company) since 1998. Director of Herley Industries, Inc. (a publicly-traded RF/Microwave Solutions company) since 2005.

Edward E. Cohen , 68, has been a member of our Board of Directors since 1988. Chairman of our Board since 1990. Chief Executive Officer from 1988 to 2004. President from 2000 to 2003. Chairman of the Board of Resource Capital Corp. (a publicly-traded real estate investment trust managed by us) since its formation in 2005. Chairman of the Managing Board of Atlas Pipeline Partners GP, LLC (general partner of Atlas Pipeline Partners, L.P., a publicly-traded natural gas pipeline limited partnership) since its formation in 1999. Chairman, Chief Executive Officer and President of Atlas America, Inc. (a publicly-traded energy company formerly owned by us) since its formation in 2000. Chairman and Chief Executive Officer of Atlas Pipeline Holdings GP, LLC (a wholly-owned subsidiary of Atlas America that is the general partner of Atlas Pipeline Holdings, L.P., a publicly-traded limited partnership owns Atlas Pipeline Partners GP, LLC) since its formation in 2006. Chairman and Chief Executive Officer of Atlas Energy Resources, LLC (a publicly-traded energy company) since its formation in 2006. Chairman of the Board of Brandywine Construction & Management, Inc. (a property management company) since 1994.

Hersh Kozlov, 60, has been a member of our Board of Directors since January 2007. Partner at Wolf, Block, Schorr and Solis-Cohen LLP (a law firm) since 2001. Presidential appointee to national Advisory Committee for Trade Policy and Negotiations from 2002 to 2004.

Continuing Directors to Serve until the 2009 Annual Meeting :

Jonathan Z. Cohen , 37, has been a member of our Board of Directors since 2002. President since 2003 and Chief Executive Officer since 2004. Chief Operating Officer from 2002 to 2004. Executive Vice President from 2001 to 2003. Senior Vice President from 1999 to 2001. Chief Executive Officer, President and a Director of Resource Capital Corp. since its formation in 2005. Vice Chairman of the Managing Board of Atlas Pipeline Partners GP, LLC since its formation in 1999. Vice Chairman of Atlas America, Inc. since its formation in 2000. Vice Chairman of Atlas Pipeline Holdings GP, LLC since its formation in 2006. Vice Chairman of Atlas Energy Resources, LLC since its formation in 2006.

Kenneth A. Kind , 54, has been a member of our Board of Directors since 2004. Vice President of Medi-Promotions, Inc. (a healthcare advertising company) since 1991. Director of Van Ameringen Foundation (a private charitable foundation) since 1995.

John S. White , 67, has been a member of our Board of Directors since 1993. Executive Director of the Investment Program Association (a national trade association) since 2007. Consultant in the financial services industry from 2006 to 2007. Senior Vice President of Royal Alliance Associates, Inc. (an independent broker/dealer and a wholly-owned subsidiary of American International Group, Inc.) from 2002 to 2006. Chief Executive Officer and President of DCC Securities Corporation (a securities brokerage firm) from 1989 to 2002. Director of TRM Corporation (a publicly-traded consumer services company) since 2007. Mr. White is also a certified public accountant.

Michael J. Bradley , 63, has been a member of our Board of Directors since 2005. Co-owner and Managing Director of BF Healthcare, Inc. (a supplier of physician services to hospitals and assisted living facilities) since 1999. Director of The Bancorp, Inc. (a publicly-traded bank holding company) since 2005. Managing Board Member of Atlas Pipeline Partners GP, LLC from 2004 to 2005. Chairman of the Board of First Executive Bank from 1988 to 1998. Vice Chairman of First Republic Bank from 1998 to 2003.

Andrew M. Lubin , 61, has been a member of our Board of Directors since 1994. President of Delaware Financial Group, Inc. (a private investment firm) since 1990.

Jeffrey F. Brotman , 44, Executive Vice President since June 2007. Co-founder of Ledgewood, P.C. (a Philadelphia-based law firm) and affiliated with the firm from 1992 until June 2007, serving as 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 has also been Chairman of the Board of Directors of TRM Corporation since September 2006 and was its President and Chief Executive Officer from March 2006 through June 2007.

Thomas C. Elliott , 34, Senior Vice President – Finance and Operations since 2006. Senior Vice President–Finance from 2005 to 2006. Vice President – Finance from 2001 to 2005. Chief Financial Officer of Resource Financial Fund Management, Inc. (our wholly-owned asset management subsidiary) since 2004. Chief Financial Officer, Chief Accounting Officer and Treasurer of Resource Capital Corp. from 2005 to 2006 and Senior Vice President – Finance and Operations since 2006. From 1997 to 2001, Mr. Elliott held various financial positions at Fidelity Leasing, Inc., our former subsidiary, including Manager of Financial Planning, Director of Asset Securitization and Treasurer.

Alan F. Feldman , 44, Senior Vice President since 2002. Chief Executive Officer of Resource Real Estate, Inc. (our wholly-owned real estate subsidiary) since 2004. Vice President at Lazard Freres & Co. (an investment bank) from 1998 to 2002. Executive Vice President at PREIT-Rubin, Inc. (the management subsidiary of Pennsylvania Real Estate Investment Trust, a publicly-traded real estate investment trust) and its predecessor, The Rubin Organization, from 1992 to 1998.

Steven J. Kessler , 64, Executive Vice President since 2005 and Chief Financial Officer since 1997. Senior Vice President from 1997 to 2005. Senior Vice President ? Finance of Resource Capital Corp. since 2005. Vice President-Finance and Acquisitions at Kravco Company (a national shopping center developer and operator) from 1994 to 1997. From 1983 to 1993, Mr. Kessler was employed by Strouse Greenberg & Co. (a regional full service real estate company) ending as Chief Financial Officer and Chief Operating Officer. Prior thereto, Partner at Touche Ross & Co. (now Deloitte & Touche LLP), independent public accountants. Trustee of GMH Communities Trust (a publicly-traded specialty housing real estate investment trust) since 2004.

Arthur J. Miller , 48, Vice President, Corporate Controller and Chief Accounting Officer since 2004. Chief Accounting Officer at Mothers Work, Inc. (a national retailer/manufacturer of maternity wear) from 1999 to 2004. Vice President, Controller and Chief Accounting Officer of CAI Wireless Systems, Inc. (a wireless telecommunications company) from 1995 to 1999. Mr. Miller started his financial career with Arthur Anderson LLP, independent public accountants. Mr. Miller is a certified public accountant.

Michael S. Yecies , 40, Senior Vice President since 2005 and Chief Legal Officer and Secretary since 1998. Vice President from 1998 to 2005. Senior Vice President since 2007 and Chief Legal Officer and Secretary of Resource Capital Corp. since 2005. Attorney at Duane Morris LLP (an international law firm) from 1994 to 1998.

MANAGEMENT DISCUSSION FROM LATEST 10K

Overview

We are a specialized asset management company that uses industry specific expertise to generate and administer investment opportunities in the commercial finance, real estate and financial fund management sectors. As a specialized asset manager, we seek to develop investment funds for outside investors for which we provide asset management services. We typically maintain an investment in the investment vehicles we sponsor. As of September 30, 2007, we managed $16.7 billion of assets. As of November 30, 2007, we managed $17.3 billion of assets.

We limit our fund development and asset management services to asset classes in which we have specific expertise. We believe this strategy enhances the return on investment we can achieve for ourselves and for the investors in our funds. In our commercial finance operations, we focus on originating small and middle-ticket equipment leases and commercial notes secured by business-essential equipment, including technology, commercial and industrial equipment and medical equipment. In our real estate operations, we concentrate on investments in multi-family and commercial real estate and real estate mortgage loans including whole loans, first priority interests in commercial mortgage loans, known as A notes, subordinated interests in first mortgage loans, known as B notes, and mezzanine loans. In our financial fund management operations, we concentrate on trust preferred securities of banks, bank holding companies, insurance companies and other financial companies, bank loans, asset-backed securities

We have greatly expanded all three sectors since 2003 and assets under management have grown from $2.1 billion, excluding our former energy subsidiary, at September 30, 2003 to $16.7 billion at September 30, 2007. We distribute our products through numerous channels including a highly proprietary large broker-dealer/financial planner network.

As a specialized asset manager, we are affected by conditions in the financial markets and, in particular, have been affected by the recent volatility and reduction in liquidity in the global credit markets. These conditions have resulted in our recording the following:





a $7.6 million charge, net of tax, to reflect the other-than-temporary impairment of certain investments, primarily equity investments in a portfolio of asset-backed securities managed by us;





a $2.6 million charge, net of tax, to reflect losses from the sale of loans held for investment taken in order to reduce exposure to corporate bank loans, principally in Europe; and





a charge of $2.9 million, net of tax, related to a European real estate investment fund that did not close due to the unfavorable market conditions.

Principally as a result of these charges, our net income in fiscal 2007 decreased significantly from our net income for fiscal 2005 and 2006.

We attract investment funds through the sponsorship of investment vehicles, which historically have included public and private investment partnerships, TIC programs, a REIT and CDO issuers. We arrange for the funding of these vehicles through short, medium and longer-term bank financing, equity investments and, historically, CDOs. We believe that we have developed a unique combination of origination channels to provide such funding, including a network of international and national banks and investment banks both for our short, medium and longer-term debt financing (including, historically, our CDOs) and for equity financing of RCC, and a national network of independent broker-dealers for our investment partnerships and TIC programs.

We believe that current credit market conditions have created opportunities for us, principally in our commercial finance business. In commercial finance, we acquired the equipment leasing division of Pacific Capital Bank in June 2007 and, subsequent to our 2007 fiscal year end, acquired the equipment leasing division of NetBank from the FDIC, out of receivership, and the equipment finance subsidiary of Lehman Brothers Bank, FSB. The two acquisitions subsequent to our fiscal year end increased our commercial finance assets under management by $0.6 billion, to approximately $1.7 billion as of November 30, 2007. In real estate, we acquired a real estate property management group on October 1, 2007, that will allow us to directly manage properties held by the real estate investment programs we manage. We also, on behalf of an institutional joint venture partner, purchased a portfolio of mortgage loans from HUD, at a substantial discount. In our third sector, financial fund management, we completed five collateralized debt obligation, or CDO, issuances in the second half of fiscal 2007. In addition, one CDO priced subsequent to fiscal 2007 year end and we expect it to close in December 2007. Of these six CDOs, three were collateralized loan obligation, or CLO issuances, including the one we expect to close in December 2007. Due to the current state of the credit markets we believe that the CDO market in general will slow substantially in 2008 limiting our ability to generate additional assets under management through this channel, although, we believe that current market conditions have had less effect on our ability to sponsor CLOs and, consequently, we may be able to sponsor CLO vehicles in 2008. Even under current market conditions, we expect that our financial fund management sector will provide us with a continuing stream of fee income from existing CDOs and funds we manage.

Assets Under Management

We increased our assets under management by $4.6 billion to $16.7 billion at September 30, 2007 from $12.1 billion at September 30, 2006. The growth in our assets under management was the result of:





an increase in the financial fund management assets we manage on behalf of individual and institutional investors and RCC, both in the United States and in Europe;





an increase in real estate assets managed on behalf of RCC and limited partnerships and TIC property interests that we sponsor; and





an increase in commercial finance assets managed on behalf of the limited partnerships we sponsor, and RCC.

The revenues in each of our business segments are generated by the fees we earn for structuring and managing the investment vehicles we sponsor on behalf of individual and institutional investors, RCC and Merrill Lynch and the income produced by the assets and investments we manage for our own account.

Results of Operations: Commercial Finance

During fiscal 2007, we continued to expand our commercial finance operations by increasing assets under management by $480.0 million (78%) to $1.1 billion for fiscal 2007. During fiscal 2007, we increased originations of new equipment financing by $355.6 million (84%) to $779.2 million from $423.6 million in fiscal 2006. Our growth in originations was driven by our June 2007 acquisition of substantially all of the assets of the leasing division of Pacific Capital, N.A., or PCB, our continued growth in new and existing vendor programs, the introduction of new commercial finance products and the expansion of our sales staff. As of September 30, 2007, we managed approximately 29,000 leases and notes that had an average original finance value of $50,000 with an average term of 51 months.

The PCB acquisition included a portfolio of small ticket leases and loans, customer lists, lease origination team and business platform and other intangibles. The total purchase price of $282.2 million included $269.5 million of equipment leases and notes, of which $201.7 million were assigned and subsequently acquired by our investment partnerships.

During fiscal 2007, we earned acquisition fees on $577.6 million in commercial financing assets acquired for our investment entities as compared to $254.3 million for fiscal 2006, an increase of $323.3 million (127%). Fiscal 2007 includes $4.0 million of acquisition fees earned on the leases and notes sold to the funds in the PCB acquisition.

In March 2007, we entered a new line of business, Merit Capital Advance, LLC, or Merit, to provide capital to small businesses through a credit card receipt advance program. As of September 30, 2007, Merit had originations of $6.9 million.

In December 2006, LEAF Equipment Leasing Income Fund III, or LEAF III, an equipment leasing partnership we sponsor, began a public offering of up to $120.0 million of limited partnership interests.

Revenues − Fiscal 2007 Compared to Fiscal 2006

Revenues increased $16.9 million (71%) to $40.7 million for fiscal 2007 from $23.8 million for fiscal 2006. We attribute these increases primarily to the following:





a $7.9 million (87%) increase in commercial finance revenues due to the growth in lease originations and our decision to hold more direct financing leases and notes on our balance sheet. We increased our commercial finance assets by $134.0 million to $243.0 million at September 30, 2007 and increased our lease originations $355.6 million (84%), including $268.0 million from PCB;





a $4.7 million (81%) increase in asset acquisition fees resulting from the increase in leases sold. Sales of leases increased by $323.3 million to $577.6 million for fiscal 2007, principally related to the PCB leases and notes acquired by our investment partnerships;





a $3.7 million (48%) increase in fund management fees resulting from an increase in assets under management to $1.1 billion at September 30, 2007 from $612.7 million at September 30, 2006; and





a $607,000 (45%) increase in other income, reflecting gains on dispositions which may vary significantly from period to period.

Costs and Expenses − Fiscal 2007 Compared to Fiscal 2006

LEAF costs and expenses increased $3.5 million (24%) for fiscal 2007, primarily related to increased wages and benefits of $2.8 million to support its expanded operations. The number of LEAF employees increased by 123 (105%) to 240 at September 30, 2007, of which 28 were related to the new Merit operations, 20 were hired in conjunction with the PCB acquisition, 46 were additional sales personnel, and 29 were additional credit, operations and servicing staff.

Merit, which began operating in fiscal 2007, incurred costs and expenses of $1.8 million, of which $871,000 were related to wages and benefits.

Revenues − Fiscal 2006 Compared to Fiscal 2005

Revenues in our commercial finance operations increased $10.5 million (78%) to $23.8 million in fiscal 2006 as compared to fiscal 2005. We attribute the increase to the following:





a $4.0 million increase in finance revenues primarily due to an increase of $172.8 million in lease and note originations and the increase in our revolving credit facility which allowed us to hold more finance assets on our balance sheet;





a $4.3 million increase in fund management fees directly related to our increase in assets under management; and





a $1.5 million increase in asset acquisition fees. Our increase in lease originations supported our increased sales to our affiliated partnerships, RCC and Merrill Lynch for which we receive acquisition fees.

Costs and Expenses − Fiscal 2006 Compared to Fiscal 2005

Costs and expenses from our commercial finance operations increased $5.6 million (63%) for fiscal 2006 as compared to fiscal 2005. We attribute this increase to the following:





a $3.9 million increase in wages and benefits. Our full-time employees increased to 117 as of September 30, 2006 from 81 as of September 30, 2005 to support the expansion of our operations; and





a $1.6 million increase in general and administrative expenses principally due to the following:



-

a $710,000 increase in professional fees directly related to the overall expansion of our operations;



-

a $410,000 increase in rent due to the relocation of LEAF to its new headquarters in November 2005; and



-

a $307,000 increase in travel and entertainment expenses resulting from the expansion of our business development activities.

Results of Operations: Real Estate

In real estate, we manage four classes of assets:





commercial real estate debt, principally A notes, whole loans, mortgage participations, B notes, mezzanine debt and related commercial real estate securities;





real estate investment limited partnerships, limited liability companies and TIC property interests;





real estate loans, owned assets and ventures, known collectively as our legacy portfolio; and





a portfolio of real estate loans, acquired at a discount from the U.S. Department of Housing and Urban Development, or HUD.




the continued development of our commercial real estate debt platform; and





growth in our real estate business through the sponsorship of real estate investment partnerships and the sponsorship of TIC property interests.

We support our real estate investment partnerships by making long-term limited partnership investments. In addition, from time to time, we make bridge investments in the underlying partnerships and TIC property interests to facilitate acquisitions. We record losses on these equity method investments primarily as a result of depreciation and amortization expense recorded by the partnerships and TIC property interests. As additional investors are admitted to the partnerships and TIC programs, we transfer our bridge investment to new investors at our original cost and recognize a gain approximately equal to the previously recognized loss.

Gains on resolution of loans, FIN 46-R assets and other real estate assets (if any) and the amount of fees received (if any) vary from transaction to transaction. There have been in the past, and we expect that in the future there will be, significant period-to-period variations in our gains on resolution and fee income. Moreover, it is anticipated that gains on resolution will likely decrease in the future as we complete the resolution of our legacy portfolio.

In the twelve months ended September 30, 2007, we resolved a loan with a book value of $2.7 million, realizing $3.0 million in net proceeds and recognized a gain of $305,000. The number of loans in our portfolio remains at nine through the sale of one loan and the addition of one loan. In addition, we sold a partial interest in a real estate venture and received net proceeds of $2.9 million. As a result of the accretion of income on one loan, the face value of loans receivable that we manage in our legacy portfolio increased to $77.2 million at September 30, 2007 from $76.1 million at September 30, 2006.

Revenues − Fiscal 2007 Compared to Fiscal 2006

Revenues decreased $89,000 to $23.0 million for fiscal 2007 from $23.1 million in fiscal 2006. We attribute the decrease primarily to the following:





a $1.8 million decrease in fee income related to the lower volume of TIC program activity. We closed $18.3 million in TIC investments in fiscal 2007 compared to $44.1 million in fiscal 2006;





a $4.0 million increase in management fees from RCC reflecting an increase of $508.0 million in the commercial real estate debt assets we managed to $948.0 million at September 30, 2007;





a $786,000 decrease in property management fees, including a $405,000 discount recorded in connection with property management fees we expect to receive in the future;





a $1.7 million decrease in gain on property resolutions, principally related to the partial sales of a real estate venture. During 2007 and 2006, we sold 15% and 20% of our interests for $2.9 million and $4.0 million, respectively, and recorded gains of $2.7 million and $4.5 million, respectively, from those sales;





a $1.4 million increase in equity income due to the reallocation of partnership income from this real estate venture; and





a $1.2 decrease in net gains on sale of TIC property interests due to the lower volume of TIC program activity.

Costs and Expenses − Fiscal 2007 Compared to Fiscal 2006

Costs and expenses increased by $1.7 million (14%) to $13.2 million for fiscal 2007 from $11.5 million in fiscal 2006. General and administrative expenses increased by $1.4 million, primarily due to increased wages and benefits corresponding to our expanded real estate operations, principally the commercial real estate debt that we manage for RCC.

Revenues − Fiscal 2006 Compared to Fiscal 2005

Revenues from our real estate operations increased $5.3 million (30%) from $17.8 million in fiscal 2005 to $23.1 million in fiscal 2006. We attribute the increase to the following:





a $5.5 million increase in fee income related to the purchase and third party financing of properties through the sponsorship of real estate investment partnerships and TIC property interests;





a $604,000 increase in management fees from RCC, reflecting an increase of $352.8 million in commercial real estate debt assets we managed to $440.0 million at September 30, 2006;





a $655,000 decrease in FIN 46-R revenues and rental property income, reflecting our foreclosure on a hotel property in fiscal 2005 on which we included two months of operating income.





a $1.1 million increase in management fees from the additional properties acquired by our investment funds subsequent to September 30, 2005;





a $407,000 decrease in interest and accreted discount income resulting from the cessation of accretion on one loan offset by the interest accrued on three new loans acquired during fiscal 2006 as a result of asset resolutions;





a $3.5 million decrease in gains on resolutions of loans and other property interests. In fiscal 2006, we received $4.0 million plus a $200,000 note receivable from the sale of 19.99% of our 50% interest in a real estate venture, resulting in a gain of $4.2 million. Additionally, we resolved one loan with a book value of $2.5 million, recognizing a gain of $82,000. During fiscal 2005, a partnership in which we had owned a 50% equity interest (a 30% interest in fiscal 2006) refinanced its mortgage. We received net proceeds from the refinancing of $13.6 million, which was $6.3 million in excess of the recorded value of our interest. We recognized the $6.3 million as a gain. In addition, during fiscal 2005, we foreclosed on a loan that was classified as a FIN 46-R asset. In connection with the foreclosure, we acquired a note payable for $540,000 that was recorded as a FIN 46-R liability in the amount of $1.6 million; as a result, we recognized a gain of $1.0 million. We also recognized an aggregate gain of $792,000 on the sale of two investments in our real estate investment partnerships during fiscal year 2005;




a $1.3 million decrease in our share of the operating losses of our unconsolidated real estate investments accounted for on the equity method due principally to a prepayment penalty on the refinancing of an investment property recorded in fiscal 2005; and





a $1.4 million increase in net gains (including $1.7 million of previously recorded losses) recognized on our sale of TIC property interests in fiscal 2006. There were no sales of TIC property interests in fiscal 2005.

Costs and Expenses – Fiscal 2006 Compared to Fiscal 2005

Costs and expenses of our real estate operations were $11.5 million for fiscal 2006, an increase of $1.6 million (16%) as compared to fiscal 2005. We attribute the increase to the following:





a $2.8 million increase in general and administrative expenses primarily due to the following:



-

a $2.1 million increase in wages and benefits as a result of the addition of personnel primarily to support the development of our debt management platform and the combined growth of our investment partnerships and TIC programs; and



-

a $757,000 net increase in commission expense and offering and organizational reimbursements due to the higher level of sales of real estate investment programs.

This increase was partially offset by:





a $1.2 million decrease in FIN 46-R operating expenses primarily related to the foreclosed hotel property and the resulting additional two months of operating expenses in fiscal 2005.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Overview of the Three and Six Months Ended March 31, 2008 and 2007

We are a specialized asset management company that uses industry specific expertise to generate and administer investment opportunities in the commercial finance, real estate and financial fund management sectors. As a specialized asset manager, we seek to develop investment funds for outside investors for which we provide asset management services. We typically maintain an investment in the investment vehicles we sponsor. As of March 31, 2008, we managed $17.7 billion of assets.

We limit our services to asset classes in which we have specific expertise. We believe this strategy enhances the return on investment we can achieve. In our commercial finance operations, we focus on originating small and middle-ticket equipment leases and commercial notes secured by business-essential equipment, including technology, commercial and industrial equipment and medical equipment. In our real estate operations, we concentrate on investments in distressed real estate loans, ownership operation and management of multi-family and commercial real estate, and originating or purchasing real estate mortgage loans including whole loans, first priority interests in commercial mortgage loans (known as A notes) and, to a lesser extent, subordinated interests in first mortgage loans, known as B notes, and mezzanine loans. In our financial fund management operations, we concentrate on trust preferred securities of banks, bank holding companies, insurance companies and other financial companies, bank loans and asset-backed securities.

We have continued to develop our existing operations with the sponsorship of new investment funds and have expanded the distribution of our products through a large broker/dealer/financial planner network that we have developed. Additionally, we have undertaken several initiatives to further expand the scope of our asset management operations, in particular through the sponsorship of RAI Acquisition Corp., a specialty purpose acquisition corporation formed for the purpose of acquiring one or more businesses.

During the later half of 2007 and continuing in 2008, credit markets in the United States and throughout much of the rest of the world have been extremely volatile and challenging. We believe that such credit market conditions have created opportunities for us, principally in our commercial finance and real estate businesses, as demonstrated by the four acquisitions we have made since June 30, 2007 totaling $938.2 million.

Due to the current status of global credit markets, we continue to believe that the CDO markets will slow substantially in 2008, limiting our ability to generate additional assets under management through this channel. Our CDO vehicles have been significantly affected by these conditions and, in particular, have been impacted by continued credit market turbulence and reduction in global liquidity. Specifically, two secured warehouse credit facilities which we consolidated under FIN 46-R were impacted. Accordingly, we determined to end these facilities on their expiration dates in January 2008. We had provided limited guarantees totaling $18.8 million under these facilities which were supported by escrow deposits of $14.8 million. The expiration of these facilities necessitated the sale of the loans securing them in late January and early February 2008 which resulted in a reclassification and caused us to record a $10.5 million charge, net of tax, in the quarter ended December 31, 2007 which triggered our guarantee. As a result, our escrow deposits were retained by the warehouse lenders and we paid an additional $4.6 million to cover our guarantee in February 2008. As of March 31, 2008, we have no further commitments under these credit facilities.

In addition, the five Trapeza partnerships of which we own $8.4 million or 8% of the limited partner interests and are a 50% owner of the general partner were adversely impacted by the credit market turbulence and reduction in global liquidity which affected market spreads and impacted underlying issuers. This resulted in a reduction in revenues from limited and general partners’ interests of $1.0 million and $7.2 million in the three and six months ended March 31, 2008, respectively. The after tax impact of these credit market conditions was to reduce net income by $417,000 in the three months ended March 31, 2008 and to increase the net loss by $4.6 million in the six months ended March 31, 2008. We expect that the turbulence in the credit markets may continue to impact our future operating results.

Assets Under Management

We increased our assets under management by $3.0 billion to $17.7 billion at March 31, 2008 from $14.7 billion at March 31, 2007. The growth in our assets under management was the result of:





an increase in the financial fund management assets we manage on behalf of individual and institutional investors, RCC and us, both in the United States and in Europe;





an increase in real estate assets managed on behalf of RCC and limited partnerships and TIC property interests that we sponsor; and





an increase in commercial finance assets managed on behalf of the limited partnerships we sponsor, and RCC.

Employees

As of March 31, 2008, we employed 797 (1) full-time workers, an increase of 484 (1) , or 155% (1) , from 313 employees at March 31, 2007. The following table summarizes our employees by operating segment:

Revenues

The revenues in each of our business segments are generated by the fees we earn for structuring and managing the investment vehicles we sponsor on behalf of individual and institutional investors, RCC and ML and the income produced by the assets and investments we manage for our own account.

Results of Operations: Commercial Finance

During the three and six months ended March 31, 2008, our commercial finance operations increased assets under management to $1.7 billion as compared to $737.0 million at March 31, 2007, an increase of $1.0 billion (131%). Originations of new equipment financing for the three and six months ended March 31, 2008 were $168.9 million and $899.0 million, respectively, as compared to $129.9 million and $259.0 million for the three and six months ended March 31, 2007, an increase of $39.0 million (30%) and $640.0 million (247%), respectively. Our growth was driven by our first quarter 2008 acquisitions of the net business assets of Dolphin Capital Corp and NetBank Business Finance, our continued growth in new and existing vendor programs, the introduction of new commercial finance products and the expansion of our sales staff. As of March 31, 2008, we managed approximately 93,000 leases and notes that had an average original finance value of $24,500 with an average term of 49 months.

The November 2007 acquisition of Dolphin Capital Corp., an equipment finance subsidiary of Lehman Brothers Bank, significantly expanded our commercial finance operations origination capability and assets under management. The total purchase price of $170.5 million included a $169.0 million portfolio of small ticket leases acquired directly by LEAF Equipment Leasing Income Fund III, L.P., or LEAF III. In addition, we retained Dolphin Capital Corp.’s team of 70 highly experienced personnel, including senior management, origination and operations.

In November 2007, we also acquired a $412.5 million portfolio, at a discount, comprised of over 10,000 leases and small business loans originated by NetBank Business Finance, the equipment leasing division of NetBank which was being operated in receivership by the FDIC. In addition, we hired approximately 70 of the former NetBank Business Finance employees in Columbia, South Carolina. These employees have further expanded our third party funding business unit which we established with our June 2007 acquisition of the leasing division of Pacific Capital Bank. Financing for this acquisition was provided principally by Morgan Stanley Bank. We completed the sale of the NetBank portfolio to LEAF Fund III in April 2008. Until then, we carried the leases and loans and related debt on our consolidated balance sheets, thereby increasing our investment in commercial finance assets, borrowings, finance revenues, interest expense and provision for credit losses.

During the three and six months ended March 31, 2008, we earned acquisition fees on $462.4 million and $767.2 million, respectively, in commercial financing assets acquired for our investment entities as compared to $74.8 million and $139.6 million for the three and six months ended March 31, 2007, an increase of $387.6 million (518%) and $627.6 million (450%), respectively .

CONF CALL

Jonathan Cohen

Thank you. And thank you for joining the Resource America second quarter conference call. This is Jonathan Cohen, President and CEO of Resource America. I would like to welcome you to our call. Before I begin, I will ask Purvi Kamdar, our Director of Investor Relations to read the Safe Harbor statement. Purvi?

Purvi Kamdar

Thank you. When used in this conference call, the words believe, anticipates, expects and similar expressions are intended to identify forward-looking statements. Although the company believes that these forward-looking statements are based on reasonable assumptions, such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from these contained in the forward-looking statements. These risks and uncertainties are discussed in the company's reports filed with the SEC, including its reports in the Form 8-K, 10-Q, and 10-K, and in particular Item 1 on the Form 10-K report under the title 'Risk Factors.' Listeners are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The company undertakes no obligations to update any of these forward-looking statements.

And with that, I will turn it back to Jonathan.

Jonathan Cohen

Thanks. Again, this is Jonathan Cohen, and I thank you for joining our call. Our second quarter, which ended March 31, 2008, was very successful. But we had some difficulties. Our successes came largely from, first, the growth at LEAF Financial, our leasing and asset management subsidiary, which had a record $8.7 million pre-tax income for the quarter. Second, growth at Resource Real Estate. And certainly importantly, from a GAAP perspective, returning to profitability, albeit slight. However, we also addressed difficulties with the additional write down of our Resource Financial Fund Management equity due to the deterioration of the credit markets.

We are dedicated to increasing our successes and focus on decreasing our difficulties over the next few quarters. The nature of our accomplishments gives us great confidence that we are well positioned for the current environment, which remains challenging. In particular, we continue to raise significant capital through our proprietary fund raising channels, and this was most evidenced by our ability, since January 1, 2008, to raise over $71 million of equity for our leasing, real estate, and bank private equity programs.

I want to emphasize that during the financial market dislocations of the past several months, our ability to raise funds through those channels was never significantly impacted and we see this ability as a big strength. And remember, this equity and the corresponding assets that we purchased with it, on behalf of our limited partners, we get to manage for up to 10 years.

We are well on our way to raising over the $200 million of equity just through this channel alone this year. In addition, we have add institutional partners for real estate investing, and are in talks with others to capitalize on our platform, experience, and capabilities to take advantage of the opportunities available in CMBS, real estate, and bank trust preferreds. We look forward to announcing additional partnerships and ventures in the near future.

Now, I would like to dive deeper in to the three divisions. LEAF Financial continued to performance at the highest level. LEAF now manages $1.7 billion, and had an income before taxes and minority interest of $8.7 million for the quarter, and $16.2 million for the six months ended March 31, 2008. LEAF successfully sold the remaining asset from its 2007 acquisitions, just to remind you, NetBank, Dolphin, Pacific Capital, down to its managed funds. This, by the way, reduced assets by $323 million and debt by $315 million if you look from the March 31, Resource America consolidated balance sheet, and will lower our resource debt at the parent level on our corporate facility since March 31.

Lease credit at the Partnership level remains strong and on track. The acquisition completed in the first fiscal quarter helped to further diversify the portfolio in all key categories, by industry, equipment type, and location, further mitigating the risk related to a downturn in a particular sector or part of the country. For example, other than California, at 15%, no other state makes up more than 7.5% of the portfolio.

In anticipation of continued economic slowdown, LEAF has taken steps to maintain acceptable delinquency levels by adding collectors and accelerating the collection process. Write-offs as well continued to be within our projected levels as they remain 25 basis points below our targeted static pool loss of 2.5% on a weighted average basis. Also strengthening our portfolio is the enhanced profitability of the new business we are putting on the books today. The spread over two-year swaps for business originated in March 2008 was 681 basis points or 200 basis points higher than that originated in March 2007.

We are pleased with LEAF's progress, and see huge opportunity in the small to middle ticket leasing business – small to middle ticket leasing and business loan segment due to the issues that many of you know at some of the more established players and banks. We see our ability to add quality vendor programs to our arsenal over the next two years as an important long-term builder of value. For example, we have added many, many significant corporate programs, such as Sage, Cartier [ph], Mattel [ph], Sophis [ph] as well as significantly expanded our relationships with Dell and Solivant Shine [ph].

As Resource Real Estate, they continued to do great work and see great opportunity. First, managing the – they do great work managing the resource capital, RSO, on the New York Stock Exchange, their debt portfolio. Second, growing their private fund business, where we expect to close Resource Real Estate Investor VI Limited Partner, which will be fully subscribed at $35 million of equity sometime this week. Third, growing their institutional real estate business, where they have just reached agreement with an institution to commit capital to their multi-family business, and another institution to partner on other real estate businesses.

And also, importantly, fourth, moving forward on selling non-core real estate at very attractive prices, and we look forward to announcing this in the near future. In fact, we expect this process to continue in the June 30, 2008 quarter, and this will allow us to take assets that net us close to zero in terms of GAAP earnings and use the proceeds to pay down corporate debt and to invest in our business. We believe that our overall real estate business will be a driver going forward.

Now, to Resource Financial Fund Management. We continue to work through the credit crisis, and have started to see some life the securitized marketplaces, although, I must admit, minimal. Our assets under management as of March, 31, 2008 in this segment was $14.3 billion, and we expect it to remain fairly constant for the near term with a specific exception. We continue to receive substantial fees from managing this business and expect to add assets in our Apidos Capital Management business segment over the next week to the tune of approximately $1.6 billion through the absorption of another bank loan manager and their corresponding deals. We are very excited about this and we expect to issue a press release announcing it when it is complete.

In our Trapeza business segment, we remain watchful as commercial banks around the country continue to be under pressure. For the most part, however, we just continue to try to outperform our peers in terms of performance and continue to manage our portfolios. On the investment side, as many of you know, we had direct equity investments in our CDOs of approximately $24 million and then own the equity in whole of Apidos CDO VI. As most of this equity is tied to the bank loan market, we continue to benefit from the great performance of our team, led by Gretchen Bergstresser. We have had very little in terms of defaults, and we have been able to buy higher-rated names at discount over the past six months, essentially building par in our vehicles.

I would like to comment on the 8-K filed yesterday, which said that we will be restating some of our previous reported results. I will try to summarize the information in the 8-K, but I urge all interested parties to read the 8-K in its entirety. We will be restating quarterly information for the years ended September 30, '07, '06, '05, and retained earnings for '04. The cumulative effect is a reduction in (inaudible) income for all the years of 3.2 million. Steve Kessler will go into greater detail.

And with that, I will ask Steve Kessler to walk us through the financial highlights.

Steve Kessler

Thank you very much, Jonathan. The corrections that John just referred to related to the financial statements of the Trapeza partnerships, which we formed back in 2002 and 2003, of which we own about $8.4 million, or 8% of the limited partnership interest, and are a 50% owner of the general partner. The adjustment related to the application of valuation procedures applied to privately issued trust-preferred securities, held by the CDO issuers, in which the Trapeza perspectives hold the equity. I would add that we received $6.7 million in the last year in fee income and partnership distributions on those – from those partnerships, a pretty significant return on $8.4 million.

Let me now address our balance sheet, liquidity, and cash flow. Our balance sheet assets increased from $970 million at September 30, 2007, to $1.1 billion at March 31, 2008, an increase of $174 million. Our borrowings increased to $884 million at March 31, 2008, from $706 million at September 30, '07, an increase of $177.8 million.

Let me now explain some of the significant increases. There are two categories of loans shown on our balance sheet at September 30, '07- loans sold not settled, and loans held for investment net. The loans sold not settled are the remnants of the loans sold in the September quarter. They settled in January 2008, and are totally gone now at March. The loans held for investment at September 30, 2007, are the warehouse lines, which we terminated in January 2008, and they are gone.

The loans held for investment at March 31, 2008, of $227.7 million are the securitization of the bank loans, which we refer to as Apidos VI that we closed in December 2007. The investments in our commercial finance assets increased to $620.2 million at March 31, 2008, from $243 million at September 30, 2007, an increase of $377 million.

The major reason for the increase was the $412 million acquisition by LEAF of NetBank in November of 2007. The NetBank assets, which were approximately $323 million at March 31, 2008, were sold to LEAF III, one of the LEAF fund partnerships, in April 2008, and therefore come off of our balance sheet, and that would leave us down to about a little under $300 million, which I think is kind of where we want to be carrying the LEAF's commercial finance assets, going forward.

Let me now review the borrowings. At March 31, 2008, the company had total borrowings, as I said before, of $884 million. After adjusting for the April transfer of the $315 million of non-recourse bridge loans at LEAF the financed – the NetBank acquisition, the borrowings outstandings would be about $569 million, and this includes $213 million of net liabilities consolidated under FIN 46R as to which the company has no resource and relate to the Apidos VI loan assets that I previously referred to.

There is an additional $269 million of non-recourse revolving credit facilities at LEAF, and this is what LEAF does to fund the assets they have on their balance sheet until they sell them down to the funds. And then there is $70 million of corporate debt – corporate-level debt, which is revolving debt, and about $16 million or $17 million of other debt, which is principally mortgage debts on our hotel property in Savannah, Georgia.

As far as book value, at March 31, 2008, the company's GAAP book value per common share was $8.91. Total stockholders' equity was $156.1 million at March 31, 2008, as compared to $185 million at September '07. There were about 17.4 million common shares outstanding at September '07.

Adjusted book value per common share outstanding, a non-GAAP measure, was $9.33. Adjusted book value was computed by adding back the GAAP book value, the unrealized loss on swap transactions associated with the NetBank portfolio that were transferred to LEAF III in April 2008, and by adjusting the unrealized losses related to the company's investment in Resource Capital Corp., which is RSO on the New York Stock Exchange, utilizing the closing price at May 7, 2008. A reconciliation of the company's reported net book value to adjusted book value, a non-GAAP measure, is included in Schedule III to the release.

Let me now go to the cash flow statement. Net cash provided by operating activities of continuing operations, as adjusted, was $35.2 million for the six months ended March 31, 2008, an increase of $24.3 million as compared to net cash provided by operating activities, as adjusted, of $10.8 million in the six months ended March '07. Please see Schedule II to the press release that reconciled the net cash provided by – used in operating activities of continuing operations to net cash provided by operating activities of continuing operations as adjusted.

Just a little aside, you'll see in this press release, there are Schedules IV, V, and VI to the press release. And these schedules set forth the support for the restated balance sheet at September 30, 2007, the income statements for the three and six months ended March 31, 2007, and the cash flow statement for the six months ended March 31, 2007.

We also stated in yesterday's 8-K filing that the company expects to file a Form 12b-25 to request a five-day automatic extension with respect to its quarterly reports on Form 10-Q for the quarter ended March 31, '08 and expects to file a 2007 Form 10-KA, as amended, and a December 31, 2007 Form 10-QA, and it's March 31, 2008 10-Q with the SEC on or before May 19, 2008.

I'll turn it back to Jonathan.

Jonathan Cohen

Thank you, Steve. Looking forward, we are excited about the possibilities for LEAF, as well, but we are also excited about our ability to exploit cheaper assets in the marketplace for our managed funds at Resource Financial Fund Management as well as for our real estate partnerships and joint ventures. We will work hard to get back in growth mode here and to create shareholder value in the near future.

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