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ICON LEASING FUND TWELVE, LLC - 10-K - Manager's Discussion and Analysis of Financial Condition and Results of Operations

Our Manager's Discussion and Analysis of Financial Condition and Results of
Operations relates to our consolidated financial statements and should be read
in conjunction with our consolidated financial statements and notes thereto
appearing elsewhere in this Annual Report on Form 10-K.  Statements made in this
section may be considered forward-looking. These statements are not guarantees
of future performance and are based on current expectations and assumptions that
are subject to risks and uncertainties.  Actual results could differ materially
because of these risks and assumptions, including, among other things, factors
discussed in "Part I. Forward-Looking Statements" and "Item 1A. Risk Factors"
located elsewhere in this Annual Report on Form 10-K.



Overview



We operated as an equipment leasing and finance program in which the capital our
members invested was pooled together to make investments, pay fees and establish
a small reserve. We primarily acquired equipment subject to lease, purchased
equipment and leased it to third-party end users or financed equipment for third
parties and, to a lesser degree, acquired ownership rights to items of leased
equipment at lease expiration.  Some of our equipment leases were acquired for
cash and were expected to provide current cash flow, which we refer to as
"income" leases.  For our other equipment leases, we financed the majority of
the purchase price through borrowings from third parties.  We refer to these
leases as "growth" leases.  These growth leases generated little or no current
cash flow because substantially all of the rental payments we received from the
lessee were used to service the indebtedness associated with acquiring or
financing the lease.  For these leases, we anticipated that the future value of
the leased equipment would exceed our cash portion of the purchase price.



Our Manager manages and controls our business affairs, including, but not limited to, our equipment leases and other financing transactions, under the terms of our LLC Agreement.




Our offering period ended on April 30, 2009 and our operating period commenced
on May 1, 2009. During our offering period, we raised total equity of
$347,686,947. Our operating period ended on April 30, 2014 and our liquidation
period commenced on May 1, 2014. During our liquidation period, we have sold and
will continue to sell our assets and/or let our investments mature in the
ordinary course of business.  If our Manager believes it would benefit our
members to reinvest the proceeds received from investments in additional
investments during the liquidation period, our Manager may do so. Our Manager is
not paid acquisition fees or management fees for additional investments
initiated during the liquidation period, although management fees continue to be
paid for investments that were part of our portfolio prior to the commencement
of the liquidation period.



Current Business Environment



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Recent trends indicate that domestic and global equipment financing volume is
correlated to overall business investments in equipment, which are typically
impacted by general economic conditions. As the economy slows or builds
momentum, the demand for productive equipment generally slows or builds and
equipment financing volume generally decreases or increases, depending on a
number of factors. These factors include the availability of liquidity to
provide equipment financing and/or provide it on terms satisfactory to
borrowers, lessees, and other counterparties, as well as the desire to upgrade
equipment and/or expand operations during times of growth, but also in times of
recession in order to, among other things, seize the opportunity to obtain
competitive advantage over distressed competitors and/or increase business as
the economy recovers.



Our Manager believes the 
U.S.
 economy's recovery is likely to slow down in 2016,
primarily due to a weakness in foreign growth and the strong dollar causing net
exports to deteriorate and a reduction of domestic demand. The price decline of
energy and other commodities has had a negative impact on the operating results
of not only energy and mining companies but also other manufacturing companies
with exposure to such end markets. As a result of these and other factors, we
have recorded credit losses and/or impairment charges on certain of our
investments (see "Significant Transactions" below). Our Manager believes that
these factors may continue to have an impact on the performance of some of our
portfolio companies and related assets.



Significant Transactions


We engaged in the following significant transactions during the years ended December 31, 2015, 2014 and 2013:



Telecommunications Equipment



      From July 15, 2010 through March 31, 2011, we purchased telecommunications
equipment for $5,025,434 and simultaneously leased the equipment to Broadview
Networks Holdings, Inc. and Broadview Networks Inc. (collectively,
"Broadview").  The base term of the four leases was for a period of 36 months,
which commenced between August 1, 2010 and April 1, 2011.  On August 22, 2012,
Broadview commenced a voluntary Chapter 11 proceeding in the Bankruptcy Court in
the Southern District of 
New York
.  On November 14, 2012, Broadview completed a
prepackaged restructuring, emerged from bankruptcy and affirmed all of our
leases. During 2013, upon the expiration of three leases, Broadview purchased
telecommunications equipment subject to the leases from us for an aggregate
purchase price of $460,725. On March 31, 2014, upon the expiration of the fourth
lease, Broadview purchased telecommunications equipment subject to the lease
from us for $293,090. No gain or loss was recorded as a result of these sales.



Coal Drag Line



     On July 9, 2012, Patriot Coal Corporation ("Patriot Coal") and
substantially all of its subsidiaries, including Magnum Coal Company, LLC
("Magnum"), commenced a voluntary Chapter 11 proceeding in the Bankruptcy Court
in the Southern District of 
New York
. On March 11, 2013, we amended our lease
with Magnum to expire on August 1, 2015. The terms of the amendment resulted in
the reclassification of the lease from an operating lease to a finance lease. On
May 12, 2015, Patriot Coal commenced a voluntary Chapter 11 proceeding in the
Bankruptcy Court for the Eastern District of Virginia. On July 24, 2015, Patriot
Coal notified us that it was terminating the lease prior to its expiration date
and that it would not be making the balloon payment of $4,866,000 due at the end
of the lease term. After extensive negotiations, we agreed with Patriot Coal to
extend the term of the lease by one month with an additional lease payment of
$150,000 and to reduce the balloon payment to $700,000, subject to the
bankruptcy court's approval. As a result, the finance lease was placed on
non-accrual status and a credit loss of $4,151,594 was recorded during the three
months ended June 30, 2015. After obtaining the bankruptcy court's approval, our
bankruptcy claim against Patriot Coal was strengthened from an unsecured to an
administrative claim. In August 2015, title to the leased equipment was
transferred to Patriot Coal upon our receipt of the additional lease payment and
the reduced balloon payment. For the years ended December 31, 2015, 2014 and
2013, we recognized finance income of $159,694 (of which $150,000 was recognized
on a cash basis), $46,057 and $53,332, respectively. No gain or loss was
recognized as a result of the sale of leased equipment.



Marine Vessels and Equipment




During 2009, we purchased three barges, the Leighton Mynx, the Leighton Stealth
and the Leighton Eclipse, and a pipelay barge, the Leighton Faulkner
(collectively, the "Leighton Vessels"), and simultaneously leased the Leighton
Vessels to an affiliate of Leighton Offshore Pte. Ltd. ("Leighton") for a period
of 96 months that were scheduled to expire between June 2017 and January 2018.



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     On May 16, 2013, Leighton provided notice to us that it was exercising its
purchase options on the Leighton Vessels. On August 23, 2013, Leighton, in
accordance with the terms of a bareboat charter scheduled to expire on June 25,
2017, exercised its option to purchase the Leighton Mynx from us for
$25,832,445, including payment of swap-related expenses of $254,719. In
addition, Leighton paid all break costs and legal fees incurred by us with
respect to the sale of the Leighton Mynx. As a result of the termination of the
lease and the sale of the vessel, we recognized additional finance income of
$562,411. A portion of the proceeds from the sale of the Leighton Mynx were used
to repay Leighton's seller's credits of $7,335,000 related to our original
purchase of the barge as well as to satisfy third-party non-recourse debts
related to the barge by making a payment of $13,290,982. As part of the
repayment, the interest rate swaps related to the debts were terminated and a
loss on derivative financial instruments of $210,779 was recognized. On April 3,
2014, Leighton, in accordance with the terms of three bareboat charters
scheduled to expire between 2017 and 2018, exercised its options and purchased
the three remaining Leighton Vessels from us for an aggregate price of
$155,220,900, including payment of swap-related expenses of $720,900. As a
result of the termination of the leases and the sale of the three remaining
Leighton Vessels, we recognized additional finance income of $57,248,440. A
portion of the aggregate purchase price due from the exercise of the purchase
options was used to satisfy the Leighton seller's credits of $47,421,000 related
to our original purchase of the three Leighton Vessels as well as to satisfy our
non-recourse debt obligations with Standard Chartered of $38,425,536.



On June 25, 2009, we purchased marine diving equipment from Swiber Engineering
Ltd. ("Swiber") for $10,000,000. Simultaneously, we entered into a 60-month
lease with Swiber, which commenced on July 1, 2009. Subsequent to the expiration
of the lease, on November 14, 2014, we sold the diving equipment to a subsidiary
of Swiber Holdings Limited ("Swiber Holdings") for $4,000,000 net, after
deducting the $2,000,000 seller's credit owed to Swiber.



On March 29, 2011, we and ICON Equipment and Corporate Infrastructure Fund
Fourteen, L.P. ("Fund Fourteen"), an entity also managed by our Manager, entered
into a joint venture owned 25% by us and 75% by Fund Fourteen for the purpose of
acquiring two aframax tankers and two VLCCs. Our contribution to the joint
venture was $12,166,393.  The aframax tankers were each acquired for $13,000,000
and simultaneously bareboat chartered to AET Inc. Limited ("AET") for a period
of three years.  The VLCCs were each acquired for $72,000,000 and simultaneously
bareboat chartered to AET for a period of 10 years. On April 14, 2014 and May
21, 2014, upon expiration of the leases with AET, the joint venture sold the
aframax tankers, the Eagle Otome and the Eagle Subaru, to third-party purchasers
for an aggregate price of $14,821,890. As a result, the joint venture recognized
an aggregate gain on sale of assets of $2,229,932. Our share of such gain was
$557,483, which is included within income from investment in joint ventures on
our consolidated statement of comprehensive (loss) income.



     On May 22, 2013, we entered into a termination agreement with AET whereby
AET returned the aframax tanker, the Eagle Centaurus, to us prior to the
scheduled charter termination date of November 13, 2013. AET paid an early
termination fee of $1,400,000 and the balance of the charter hire through the
end of the original charter term of $1,487,375. On June 5, 2013, the Eagle
Centaurus was sold to a third party for $6,688,955. We recognized a net gain of
$197,087 from the transactions, comprised of a gain on lease termination of
$2,887,375 and a loss on sale of assets of $2,690,288.  Simultaneously with the
sale, we used the proceeds from the sale of the Eagle Centaurus to satisfy the
remaining third-party debt obligations of $9,728,740 that were related to the
Eagle Centaurus and the Eagle Auriga. As part of the repayment, the interest
rate swaps related to the debt were terminated and a loss on derivative
financial instruments of $128,630 was recognized.



     On July 2, 2013, Lily Shipping Ltd. ("Lily Shipping"), in accordance with
the terms of a bareboat charter scheduled to expire on October 29, 2014,
exercised its option to purchase the product tanker, the Ocean Princess, from us
for $5,790,000. In addition, we collected the charter hire of $553,500 for the
period July 1, 2013 through November 1, 2013. As a result of the termination of
the lease and the sale of the product tanker, we recognized additional finance
income of $115,786, comprised of a gain on lease termination of $553,500 and a
loss on sale of assets of $437,714. A portion of the proceeds from the sale of
the vessel were used to repay Lily Shipping a seller's credit of $4,300,000
related to our original purchase of the vessel.



     On August 6, 2013, we entered into a termination agreement with AET whereby
AET returned the aframax tanker, the Eagle Auriga, to us prior to the scheduled
charter termination date of November 14, 2013. AET paid an early termination fee
of $1,400,000 and the balance of the charter hire through the end of the
original charter term of $1,505,625. On August 15, 2013, the Eagle Auriga was
sold to a third party for $5,578,716. We recognized a net gain of $157,385 from
the transactions, comprised of a gain on lease termination of $2,905,625 and a
loss on sale of assets of $2,748,240.



     On October 17, 2013, two joint ventures owned 64.3% by us and 35.7% by ICON
Income Fund Ten Liquidating Trust, an entity in which our Manager acted as
Managing Trustee, entered into two termination agreements with AET whereby AET
returned two aframax tankers, the Eagle Carina and the Eagle Corona, to us prior
to the scheduled charter termination date of November 14, 2013 and paid early
termination fees of $2,800,000. On November 7, 2013, the Eagle Carina and the
Eagle

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Corona were sold to third parties for $12,568,944. The joint ventures recognized
total net gains of $1,777,046 from the transactions, comprised of gains on lease
terminations of $3,034,010 and losses on sale of assets of $1,256,964.



     During the year ended December 31, 2013, several potential counterparties
with whom our Manager was discussing re-leasing opportunities for the Eagle
Carina, the Eagle Corona, the Eagle Auriga and the Eagle Centaurus
(collectively, the "Eagle Vessels") terminated negotiations, which was an
indicator that the Eagle Vessels' carrying value may be further impaired.
Consequently, we performed impairment testing on the Eagle Vessels based on the
contractual cash flows for the remaining term of the lease and the estimated
residual value of each vessel. As a result, we recognized an aggregate
impairment loss of $1,770,529 for the year ended December 31, 2013. Projected
future scrap rates were a critical component of these analyses.



     In connection with our annual impairment review for the year ended December
31, 2013, our Manager concluded that the carrying values of two containership
vessels, the Aegean Express and the Arabian Express, were not recoverable and
determined that an impairment existed as of December 31, 2013. That
determination was based on a forecast of undiscounted contractual cash flows for
the remaining terms of the leases and non-contractual cash flows based on a
weighted average probability of alternate opportunities of re-leasing or
disposing of the two containership vessels. Projected future scrap rates were a
critical component of those analyses as well as negotiated rates related to
re-leasing the two vessels. Based on our Manager's review, the net book values
of the Aegean Express and the Arabian Express exceeded the estimated
undiscounted cash flows and exceeded the fair values and, as a result, we
recognized an aggregate impairment loss of $13,020,226 for the year ended
December 31, 2013.



On April 1, 2014, the Aegean Express and the Arabian Express were returned to us
in accordance with the terms of the charters. Upon redelivery, the bareboat
charters were terminated and we assumed the underlying time charters for the
vessels. As we assumed operational responsibility of the vessels, we
simultaneously contracted with Fleet Ship Management Inc. ("Fleet Ship") to
manage the vessels on our behalf. Accordingly, these vessels have been
reclassified to Vessels on our consolidated balance sheets. The time charters
for the Aegean Express and the Arabian Express are scheduled to expire on March
30, 2016 and July 13, 2016, respectively.



During the year ended December 31, 2015, based on (i) the upcoming time charter
expirations with no expectation that such charters would be renewed or timely
replaced with new longer-term charter agreements and (ii) current low time
charter rates in the market, our Manager performed impairment analyses and
concluded that the carrying values of the Aegean Express and the Arabian Express
were not recoverable and that impairment existed. Our Manager estimated the fair
market values of the vessels based on third-party valuations using a sales
comparison approach. Based upon our Manager's assessment, the net book values of
the Aegean Express and the Arabian Express exceeded their estimated undiscounted
cash flows and their fair values and, as a result, we recognized an aggregate
impairment loss of $11,149,619 for the year ended December 31, 2015.



On March 21, 2014, a joint venture owned 75% by us, 12.5% by Fund Fourteen and
12.5% by ICON ECI Fund Fifteen, L.P. ("Fund Fifteen"), an entity also managed by
our Manager, through two indirect subsidiaries, entered into memoranda of
agreement to purchase the SIVA Vessels from Siva Global Ships Limited ("Siva
Global") for an aggregate purchase price of $41,600,000. The EPIC Bali and the
EPIC Borneo were delivered on March 28, 2014 and April 8, 2014, respectively.
The SIVA Vessels were bareboat chartered to an affiliate of Siva Global for a
period of eight years upon the delivery of each respective vessel. The SIVA
Vessels were each acquired for approximately $3,550,000 in cash, $12,400,000 of
financing through a senior secured loan from DVB Group Merchant Bank (Asia) Ltd.
("DVB") and $4,750,000 of financing through a subordinated, non-interest-bearing
seller's credit.



On June 12, 2014, a joint venture owned 75% by us, 12.5% by Fund Fourteen and
12.5% by Fund Fifteen purchased an offshore supply vessel from Pacific Crest
Pte. Ltd. ("Pacific Crest") for $40,000,000. Simultaneously, the vessel was
bareboat chartered to Pacific Crest for ten years. The vessel was acquired for
approximately $12,000,000 in cash, $26,000,000 of financing through a senior
secured loan from DVB and $2,000,000 of financing through a subordinated,
non-interest-bearing seller's credit.



Manufacturing Equipment



     On May 16, 2011, we entered into an agreement to sell auto parts
manufacturing equipment subject to lease with Sealynx Automotive Transieres SAS
("Sealynx") for €3,000,000. The purchase price was scheduled to be paid in three
installments and bore interest at 5.5% per year. We would retain title to the
equipment until the final payment was received, which was due on June 1, 2013.
On April 25, 2012, Sealynx filed for Redressement Judiciaire, a proceeding under
French law similar to a Chapter

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11 reorganization under the

U.S.
Bankruptcy Code. On July 8, 2013, Sealynx satisfied the terms of its finance lease by making a final payment of €1,189,636 (US $1,527,680) to us, at which time, we transferred title to the equipment subject to the finance lease to Sealynx.
     During 2008, ICON EAR, LLC ("ICON EAR"), a joint venture owned 55% by us
and 45% by ICON Leasing Fund Eleven, LLC ("Fund Eleven"), an entity also managed
by our Manager, purchased and simultaneously leased semiconductor manufacturing
equipment to EAR for $15,729,500, of which our share was $8,651,225.  The lease
term commenced on July 1, 2008 and was scheduled to expire on June 30, 2013. As
additional security for the lease, ICON EAR received mortgages on certain
parcels of real property located in 
Jackson Hole, Wyoming
.



     In October 2009, certain facts came to light that led our Manager to
believe that EAR was perpetrating a fraud against EAR's lenders, including ICON
EAR. On October 23, 2009, EAR filed a petition for reorganization under Chapter
11 of the 
U.S.
 Bankruptcy Code.



     On June 7, 2010, ICON EAR received judgments in the New York State Supreme
Court against two principals of EAR who had guaranteed EAR's lease obligations.
ICON EAR has had the New York State Supreme Court judgments recognized in
Illinois
, where the principals live, but does not currently anticipate being
able to collect on such judgments.



     On October 21, 2011, the Chapter 11 bankruptcy trustee for EAR filed an
adversary complaint against ICON EAR seeking the recovery of the lease payments
that the trustee alleged were fraudulently transferred from EAR to ICON EAR. The
complaint also sought the recovery of payments made by EAR to ICON EAR during
the 90-day period preceding EAR's bankruptcy filing, alleging that those
payments constituted a preference under the 
U.S.
 Bankruptcy Code. Additionally,
the complaint sought the imposition of a constructive trust over certain real
property and the proceeds from the sale that ICON EAR received as security in
connection with its investment. Our Manager filed an answer to the complaint
that included certain affirmative defenses. Since that time, substantial
discovery was completed. Our Manager still believes these claims are unsupported
by the facts, but given the risks, costs and uncertainty surrounding litigation
in bankruptcy, our Manager would engage in prudent settlement discussions to
resolve this matter expeditiously. At this time, we are unable to predict the
outcome of this action or loss therefrom, if any; however, an adverse ruling or
settlement may have a material impact on our consolidated financial position or
results of operations.



   Subsequent to the filing of the bankruptcy petition, EAR disclaimed any right
to its equipment and such equipment became the subject of an Illinois State
Court proceeding. The equipment was subsequently sold as part of the 
Illinois

State Court proceeding. On March 6, 2012, one of the creditors in the 
Illinois

State Court proceeding won a summary judgment motion filed against ICON EAR,
thereby dismissing ICON EAR's claims to the proceeds resulting from the sale of
the EAR equipment. ICON EAR appealed this decision. On September 16, 2013, the
lower court's ruling was affirmed by the Illinois Appellate Court. On October
21, 2013, ICON EAR filed a Petition for Leave to Appeal with the Supreme Court
of Illinois appealing the decision of the Illinois Appellate Court, which
petition was denied on January 29, 2014. During the year ended December 31,
2014, ICON EAR sold its only remaining asset consisting of the real property for
$207,937. No material gain or loss was recorded as a result of this sale. Prior
to the sale, ICON EAR recognized an impairment charge of $70,412 based on the
then estimated fair value less cost to sell the real property.



   On January 4, 2012, MW Universal, Inc. ("MWU") and certain of its
subsidiaries satisfied their obligations relating to two of the three lease
schedules. On August 20, 2012, we sold the automotive manufacturing equipment
subject to lease with LC Manufacturing, LLC, a wholly owned subsidiary of MWU
("LC Manufacturing"), and terminated warrants issued to us for aggregate
proceeds of $8,300,000. As a result, based on our 93.67% ownership interest in
ICON MW, LLC ("ICON MW"), our joint venture with Fund Eleven, we received
proceeds in the amount of $7,774,610 and recognized a loss on the sale of
$88,786. In addition, our Manager evaluated the collectability of the personal
guaranty of a previous owner of LC Manufacturing and, based on the findings,
ICON MW recorded a credit loss of $5,411,484, of which our portion was
$5,068,937. In February 2013, ICON MW commenced an action against the guarantor.
On October 5, 2015, ICON MW received summary judgment against the guarantor on
the issue of liability. A hearing to determine damages is scheduled for May
2016.



On October 7, 2013, a joint venture owned 45% by us and 55% by Fund Eleven, upon
the expiration of the lease with Pliant Corporation ("Pliant"), sold the plastic
processing and printing equipment to Pliant for $7,000,000. Our share of the
gain on sale of assets was $1,078,335.



Mining Equipment



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     On September 12, 2013, a joint venture owned by us, Fund Eleven and ICON
ECI Fund Sixteen ("Fund Sixteen"), an entity also managed by our Manager,
purchased mining equipment for $15,106,570. The equipment was subject to a
24-month lease with Murray Energy Corporation and certain of its affiliates
(collectively, "Murray"). On December 1, 2013 and February 1, 2014, Fund Sixteen
contributed capital of $933,678 and $1,725,517, respectively, to the joint
venture, inclusive of acquisition fees. Subsequent to Fund Sixteen's second
capital contribution, the joint venture was owned 13.2% by us, 67% by Fund
Eleven and 19.8% by Fund Sixteen.  As a result, we received corresponding
returns of capital.  The lease was scheduled to expire on September 30, 2015,
but was extended for one month with an additional lease payment of $635,512. On
October 29, 2015, Murray purchased the equipment pursuant to the terms of the
lease for $2,991,400. As a result, a gain on sale of assets of $448,710 was
recognized by the joint venture, of which our share was $59,230. Pursuant to a
remarketing agreement with a third party, the joint venture paid an aggregate
remarketing fee of $766,466 as part of the transaction.

On March 4, 2014, a joint venture owned 60% by us, 15% by Fund Fourteen, 15% by
Fund Fifteen and 10% by Fund Sixteen purchased mining equipment from an
affiliate of Blackhawk Mining, LLC ("Blackhawk"). Simultaneously, the mining
equipment was leased to Blackhawk and its affiliates for four years. The
aggregate purchase price for the mining equipment of $25,359,446 was funded by
$17,859,446 in cash and $7,500,000 of non-recourse long-term debt with People's
Capital and Leasing Corp. ("People's Capital"). The loan bears interest at a
rate of 6.5% per year and matures on February 1, 2018.  On October 27, 2015, the
joint venture amended the lease with Blackhawk to waive Blackhawk's breach of a
financial covenant during the nine months ended September 30, 2015 in
consideration for a partial prepayment of $3,502,514, which included an
amendment fee of $75,000. In addition, corresponding amendments were made to
certain payment and repurchase provisions of the lease to account for the
partial prepayment.  On December 8, 2015, the joint venture further amended the
lease with Blackhawk to add and revise certain financial covenants. The joint
venture received an additional amendment fee of $75,000.



On September 18, 2014, a joint venture owned 55.817% by us and 44.183% by Hardwood Partners, LLC ("Hardwood") purchased mining equipment for $6,789,928. The equipment is subject to a 36-month lease with Murray, which expires on September 30, 2017.




Trucks and Trailers



On March 28, 2014, a joint venture owned 60% by us, 27.5% by Fund Fifteen and
12.5% by Fund Sixteen purchased trucks, trailers and other equipment from
subsidiaries of D&T Holdings, LLC ("D&T") for $12,200,000. Simultaneously, the
trucks, trailers and other equipment were leased to D&T and its subsidiaries for
57 months. On September 15, 2014, the lease agreement with D&T was amended to
allow D&T to increase its capital expenditure limit. In consideration for
agreeing to such increase, lease payments of $1,480,000 that were scheduled to
be paid in 2018 were paid by October 31, 2014.  In addition, the joint venture
received an amendment fee of $100,000, which was to be recognized as finance
income throughout the remaining lease term.



Gas Compressors


On July 15, 2011, a joint venture owned 49.54% by us, 40.53% by Fund Fourteen
and 9.93% by Hardwood amended the master lease agreement with Atlas Pipeline
Mid-Continent, LLC ("APMC"), an affiliate of Atlas Pipeline Partners, L.P.,
requiring APMC to purchase eight gas compressors it leased from the joint
venture upon lease termination. The joint venture received an amendment fee of
$500,000 and the leases were reclassified from operating leases to finance
leases. On September 14, 2011, the joint venture financed future receivables
related to the leases by entering into a non-recourse loan agreement with Wells
Fargo Equipment Finance, Inc. ("Wells Fargo") in the amount of $10,628,119.
Wells Fargo received a first priority security interest in the gas compressors,
among other collateral. The loan bore interest at 4.08% per year and was
scheduled to mature on September 1, 2013. On May 30, 2013, the joint venture, in
accordance with the terms of the lease, sold the eight gas compressors to APMC
for $7,500,000. As a result, we recognized a gain on sale of $384,433.
Simultaneously with the sale, the joint venture prepaid and satisfied its
non-recourse debt obligation with Wells Fargo for $7,500,000. As a result, we
recognized a loss on extinguishment of debt of $85,970, which is included in
interest expense on the consolidated statements of comprehensive (loss) income.



Notes Receivable

On June 29, 2009, we and Fund Fourteen entered into a joint venture for the
purpose of making secured term loans in the aggregate amount of $20,000,000 to
INOVA Rentals Corporation (f/k/a ARAM Rentals Corporation) and INOVA Seismic
Rentals Inc. (f/k/a ARAM Seismic Rental Inc.) (collectively, the "INOVA
Borrowers"), which were scheduled to mature on August 1, 2014. In 2011, we
exchanged our 52.09% ownership interest in the joint venture for our
proportionate share of the notes receivable owned by the joint venture, which
was subsequently deconsolidated and then terminated. The loans bore

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interest at 15% per year and were secured by a first priority security interest
in all analog seismic system equipment owned by the INOVA Borrowers, among other
collateral. On January 31, 2014, the INOVA Borrowers satisfied their obligation
in connection with these loans by making a prepayment of $1,671,858. No material
gain or loss was recorded as a result of this transaction.



On June 30, 2010, we made two secured term loans in the aggregate amount of
$9,600,000, one to Ocean Navigation 5 Co. Ltd. and one to Ocean Navigation 6 Co.
Ltd. (collectively, "Ocean Navigation"), as part of a $96,000,000 term loan
facility. The loans were funded between July 2010 and September 2010 and
proceeds from the facility were used by Ocean Navigation to purchase two aframax
tanker vessels, the Shah Deniz and the Absheron, which were valued in the
aggregate at $115,700,000 on the date the transaction occurred. The loans bore
interest at 15.25% per year and were for a period of six years maturing between
July and September 2016. The loans were secured by a second priority security
interest in the vessels. On April 15, 2014, we sold all our interest in the
loans with Ocean Navigation to Garanti Bank International, N.V. for $9,600,000.
As a result, we wrote off the remaining initial direct costs associated with the
notes receivable of $455,420 as a charge against finance income.



On September 1, 2010, we made a secured term loan to EMS Enterprise Holdings,
LLC, EMS Holdings II, LLC, EMS Engineered Materials Solutions, LLC, EMS CUP, LLC
and EMS EUROPE, LLC (collectively, "EMS") in the amount of $3,200,000. The loan
bore interest at 13% per year and was scheduled to mature on September 1, 2014.
The loan was secured by a first priority security interest in metal cladding and
production equipment. On September 3, 2013, EMS satisfied their obligation in
connection with the loan by making a prepayment of $1,423,462, comprised of all
outstanding principal, accrued and unpaid interest, and prepayment fees of
$72,500. As a result, we recognized additional finance income of $72,423.



On February 29, 2012, we made a secured term loan in the amount of $2,000,000 to
VAS Aero Services, LLC ("VAS") as part of a $42,755,000 term loan facility. The
loan bore interest at variable rates ranging between 12% and 14.5% per year and
matured on October 6, 2014. The loan was secured by a second priority security
interest in all of VAS's assets. During the year ended December 31, 2014, VAS
experienced financial hardship resulting in its failure to make the final
monthly payment under the loan as well as the balloon payment due on the
maturity date. Our Manager engaged in discussions with VAS, VAS's owners, the
senior creditor and other second lien creditors in order to put in place a
viable restructuring or refinancing plan. In December 2014, this specific plan
to restructure or refinance fell through. While discussions on other options
were still ongoing, our Manager determined that we should record a credit loss
reserve based on an estimated liquidation value of VAS's inventory and accounts
receivable. As a result, the loan was placed on non-accrual status and a credit
loss reserve of $631,986 was recorded during the year ended December 31, 2014
based on our pro-rata share of the liquidation value of the collateral. The
value of the collateral was based on a third-party appraisal using a sales
comparison approach. As of December 31, 2014, the net carrying value of the loan
was $966,359. In March 2015, the 90-day standstill period provided for in the
loan agreement ended without a viable restructuring or refinancing plan agreed
upon. In addition, the senior lender continued to charge VAS forbearance fees.
Although discussions among the parties were still ongoing, these factors
resulted in our Manager making a determination to record an additional credit
loss reserve of $362,665 during the three months ended March 31, 2015 to reflect
a potential forced liquidation of the collateral. The forced liquidation value
of the collateral was primarily based on a third-party appraisal using a sales
comparison approach. On July 23, 2015, we sold all of our interest in the loan
to GB Loan, LLC ("GB") for $268,975. As a result, we recorded an additional
credit loss of $334,719 during the three months ended June 30, 2015 prior to the
sale. No gain or loss was recognized as a result of the sale. In addition, we
wrote off the credit loss reserve and corresponding balance of the loan of
$1,329,370 during the year ended December 31, 2015. No finance income was
recognized since the date the loan was considered impaired. Accordingly, no
finance income was recognized for the year ended December 31, 2015. Finance
income recognized on the loan prior to recording the credit loss reserve was
$197,741 and $256,209 for the years ended December 31, 2014 and 2013,
respectively.



On July 24, 2012, we made a secured term loan in the amount of $500,000 to
affiliates of Frontier Oilfield Services, Inc. (collectively, "Frontier") as
part of a $5,000,000 term loan facility. The loan bore interest at 14% per year
and was for a period of 66 months. The loan was secured by, among other things,
a first priority security interest in Frontier's saltwater disposal wells and
related equipment and a second priority security interest in Frontier's other
assets, including real estate, machinery and accounts receivable, which were
valued at approximately $38,925,000 on the date the transaction occurred. On
October 11, 2013, Frontier made a partial prepayment of $86,524, which included
a prepayment fee of $8,924 that was recognized as additional finance income. On
December 30, 2014, we sold all of our interest in the loan to Frontier Expansion
and Development, LLC for $375,000. As a result, we recognized a loss and wrote
off the remaining initial direct costs associated with the notes receivable
totaling $62,365 as a charge against finance income.



On September 10, 2012, we made a secured term loan in the amount of $4,080,000
to Superior Tube Company, Inc. and Tubes Holdco Limited (collectively,
"Superior") as part of a $17,000,000 term loan facility. The loan bore interest
at 12% per

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year and was for a period of 60 months. The loan was secured by, among other
things, a first priority security interest in Superior's assets, including tube
manufacturing and related equipment and a mortgage on real property, and a
second priority security interest in Superior's accounts receivable and
inventory. On January 30, 2015, Superior satisfied its obligations in connection
with the loan by making a prepayment of $4,191,328, comprised of all outstanding
principal, accrued interest and a prepayment fee of $122,038. As a result, we
recognized additional finance income of $50,550.



On November 28, 2012, we made a secured term loan in the amount of $4,050,000 to
SAExploration, Inc., SAExploration Seismic Services (US), LLC and NES, LLC
(collectively, "SAE") as part of an $80,000,000 term loan facility. The loan
bore interest at 13.5% per year and was for a period of 48 months. The loan was
secured by, among other things, a first priority security interest in all
existing and thereafter acquired assets, including seismic testing equipment, of
SAE and its parent company, SAExploration Holdings, Inc. ("SAE Holdings"), and a
pledge of all the equity interests in SAE and SAE Holdings.  In addition, we
acquired warrants, exercisable until December 5, 2022, to purchase 0.051% of the
outstanding common stock of SAE Holdings. On October 31, 2013, we entered into
an amendment to the loan agreement with SAE to amend certain provisions and
covenant ratios. As a result of the amendment, we received an amendment fee of
$30,687. On July 2, 2014, SAE satisfied its obligation in connection with the
loan by making a prepayment of $4,591,523, comprised of all outstanding
principal, accrued interest and prepayment fees of $449,389. The prepayment fees
were recognized as additional finance income. On July 21, 2014, we exercised the
warrants and received net cash proceeds of $14,208, which resulted in a loss of
$43,126 that was recorded in loss on derivative financial instruments.



On February 12, 2013, we made a secured term loan in the amount of $2,700,000 to
NTS Communications, Inc. and certain of its affiliates (collectively, "NTS") as
part of a $6,000,000 facility. On March 28, 2013, NTS borrowed $765,000 and on
June 27, 2013, NTS drew down the remaining $1,935,000 from the facility. The
loan bore interest at 12.75% per year and was scheduled to mature on July 1,
2017. The loan was secured by a first priority security interest in all
equipment and assets of NTS. On June 6, 2014, NTS satisfied their obligations in
connection with the loan by making a prepayment of $2,701,212, comprised of all
outstanding principal, accrued interest and a prepayment fee of $102,600. The
prepayment fee was recognized as additional finance income.



On April 5, 2013, we made a secured term loan in the amount of $3,870,000 to LSC
as part of an $18,000,000 facility. The loan bears interest at 13.5% per year
and matures on August 1, 2018. The loan is secured by, among other things, a
second priority security interest in LSC's liquid storage tanks, blending lines,
packaging equipment, accounts receivable and inventory, which were valued in the
aggregate at approximately $52,030,000 on the date the transaction occurred. On
December 11, 2013, LSC made a partial prepayment of $1,354,500, which included a
prepayment fee of $64,500 that was recognized as additional finance income.



On December 22, 2011, a joint venture owned 25% by us and 75% by Fund Fourteen
made a $20,124,000 subordinated term loan to JAC as part of a $171,050,000 term
loan facility. The loan initially bore interest at rates ranging between 12.5%
and 15% per year and matures in January 2021. The loan is secured by a second
priority security interest in all of JAC's assets, which include, among other
things, all equipment, plant and machinery associated with a condensate splitter
and aromatics complex.



On May 15, 2013, a joint venture owned 21% by us, 39% by Fund Eleven and 40% by
Fund Fifteen purchased a portion of a $208,038,290 subordinated credit facility
for JAC from Standard Chartered for $28,462,500. The subordinated credit
facility initially bore interest at rates ranging between 12.5% and 15% per year
and matures in January 2021. The subordinated credit facility is secured by a
second priority security interest in all of JAC's assets, which include, among
other things, all equipment, plant and machinery associated with a condensate
splitter and aromatics complex. Our initial contribution to the joint venture
was $6,456,034.



As of March 31, 2015, JAC was in technical default of the loan and facility as a
result of its failure to provide certain financial data to the joint ventures.
In addition, JAC realized lower than expected operating results caused in part
by a temporary shutdown of its manufacturing facility due to technical
constraints that have since been resolved. As a result, JAC failed to make the
expected payments that were due to the joint ventures during the three months
ended March 31, 2015. Although these delayed payments did not trigger a payment
default under the loan and facility agreements, the interest rate payable by JAC
under the loan and facility increased from 12.5% to 15.5%. During the three
months ended June 30, 2015, an expected tolling arrangement did not commence and
JAC's stakeholders were unable to agree upon a restructuring plan. As a result,
the manufacturing facility had not yet resumed operations and JAC continued to
experience liquidity constraints. Accordingly, our Manager determined that there
was doubt regarding the joint ventures' ultimate collectability of the loan and
facility. Our Manager visited JAC's facility and engaged in discussions with
JAC's other stakeholders to agree upon a

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restructuring plan. Based upon such discussions, which included a potential
conversion of a portion of the loan and facility to equity and/or a
restructuring of the loan and facility, our Manager believed that the joint
ventures may potentially not be able to recover approximately $13,500,000 to
$47,300,000 of the outstanding balance due from JAC under the loan and facility
as of June 30, 2015. During the three months ended June 30, 2015, the joint
ventures recognized a total credit loss of $33,264,710, which our Manager
believed was the most likely outcome based upon the negotiations at the time.
Our share of the total credit loss for the three months ended June 30, 2015 was
$7,834,118. During the three months ended June 30, 2015, the joint ventures
placed the loan and facility on non-accrual status and no finance income was
recognized.



During the three months ended September 30, 2015, JAC continued to be
non-operational and therefore not able to service interest payments under the
loan and facility. Discussions between the senior lenders and certain other
stakeholders of JAC ended as the senior lenders did not agree to amendments to
their credit facilities as part of the broader restructuring that was being
contemplated. As a result, JAC entered receivership on September 28, 2015. At
September 30, 2015, our Manager reassessed the collectability of the loan and
facility by considering the following factors: (i) what a potential buyer may be
willing to pay to acquire JAC based on a comparable enterprise value derived
from EBITDA multiples and (ii) the average trading price of unsecured distressed
debt in comparable industries. Our Manager also considered the proposed plan of
converting a portion of the loan and facility to equity and/or restructuring the
loan and facility in the event that JAC's stakeholders recommenced discussions.
Based upon such reassessment, our Manager believed that the joint ventures may
potentially not be able to recover approximately $41,200,000 to $51,000,000 of
the outstanding balance due from JAC under the loan and facility prior to
recording the initial total credit loss. During the three months ended September
30, 2015, the joint ventures recognized a total credit loss of $16,856,310,
which our Manager believed was the most likely outcome derived from its
reassessment. Our share of the total credit loss for the three months ended
September 30, 2015 was $3,856,928. In January 2016, our Manager engaged in
further discussions with JAC's other subordinated lenders and the Receiver
regarding a near term plan for JAC's manufacturing facility. Based upon such
discussions, our Manager anticipates that a one-year tolling arrangement with
JAC's suppliers will be implemented during the first half of 2016 to allow JAC's
facility to recommence operations. Although our Manager believes that the
marketability of JAC's facility should improve if and when the facility
recommences operations, our Manager does not anticipate that JAC will make any
payments to the joint ventures while operating under the expected tolling
arrangement. Our Manager updated the collectability analysis under the loan and
facility as of December 31, 2015 and determined that comparable enterprise
values derived from EBITDA multiples and trading prices of unsecured distressed
debt in comparable industries each decreased. In addition, our Manager
considered that, as of December 31, 2015, (i) a tolling arrangement with JAC's
suppliers did not commence as originally anticipated; (ii) no further
discussions occurred between JAC, the joint ventures, the senior lenders and
certain other stakeholders of JAC regarding a restructuring plan and (iii) JAC's
manufacturing facility continues to be non-operational. Based upon these
factors, our Manager believes that the joint ventures' ultimate collectability
of the loan and facility may result in less of a recovery from its prior
estimate. As a result, our Manager determined to record an additional total
credit loss of $10,137,863, which our Manager believes is the most likely
outcome derived from its reassessment as of December 31, 2015. Our share of the
total credit loss for the three months ended December 31, 2015 was $2,319,835.
An additional credit loss may be recorded in future periods based upon future
developments of the receivership process or if the joint ventures' ultimate
collectability of the loan and facility results in less of a recovery from their
current estimate. Our Manager has also assessed impairment under the equity
method of accounting for our investment in the joint ventures and concluded that
they are not impaired. For the years ended December 31, 2015, 2014 and 2013, the
joint ventures recognized finance income of $2,136,688, $7,356,011 and
$5,202,278, respectively, prior to the loan and the facility being placed on
non-accrual status. As of December 31, 2015 and 2014, the total net investment
in notes receivable held by the joint ventures was $10,137,863 and $67,340,800,
respectively, and our total investment in the joint ventures was $2,324,885 and
$15,838,805, respectively.



On September 16, 2013, we made a secured term loan in the amount of $11,000,000
to Cenveo Corporation ("Cenveo"). The loan bore interest at the London Interbank
Offered Rate ("LIBOR"), subject to a 1% floor, plus 11.0% per year, and was for
a period of 60 months. The loan was secured by a first priority security
interest in specific equipment used to produce, print, fold, and package printed
commercial envelopes, which was valued at approximately $29,123,000 on the date
the transaction occurred. On October 31, 2013, we borrowed $7,150,000 of
non-recourse long-term debt from NXT Capital, LLC ("NXT") secured by our
interest in the loan to and collateral from Cenveo. The non-recourse long-term
debt was scheduled to mature on October 1, 2018 and bore interest at LIBOR plus
6.5% per year. On July 7, 2014, Cenveo made a partial prepayment of $1,111,912
in connection with the loan, which included a net prepayment fee of $11,912.
Simultaneously, we partially paid down our non-recourse long-term debt with NXT
by making a payment of $702,915.  On September 30, 2015, Cenveo satisfied its
obligations in connection with the loan by making a prepayment of $6,936,875,
comprised of all outstanding principal, accrued interest and a prepayment fee of
$132,000. The prepayment fee was recognized as additional finance income. As a
result of the prepayment by Cenveo, we satisfied our non-recourse long-term debt
obligations with NXT by making a prepayment of $4,223,432.



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On November 26, 2013, we, Fund Fifteen and a third-party creditor made a
superpriority, secured term loan in the amount of $30,000,000 to Green Field
Energy Services, Inc. and its affiliates (collectively, "Green Field"), of which
our share was $7,500,000. The loan bore interest at LIBOR plus 10% per year and
was scheduled to mature on August 26, 2014. The loan was secured by a
superpriority security interest in all of Green Field's assets. On March 18,
2014, Green Field satisfied its obligation in connection with the loan by making
a prepayment of $7,458,047, comprised of all outstanding principal and accrued
interest. No material gain or loss was recorded as a result of this transaction.



On June 17, 2014, we and Fund Fourteen entered into a secured term loan credit
facility agreement with SeaChange Projects LLC ("SeaChange") to provide a credit
facility of up to $7,000,000, of which our commitment was $6,300,000. On June
20, 2014 and August 20, 2014, we funded $4,050,000 and $2,250,000, respectively.
The facility was used to partially finance SeaChange's acquisition and
conversion of a containership vessel to meet certain time charter specifications
of the Military Sealift Command of the Department of the United States Navy. The
facility bore interest at 13.25% per year and was scheduled to mature on
February 15, 2018. The facility was secured by, among other things, a first
priority security interest in and earnings from the vessel and the equity
interests of SeaChange. Due to SeaChange's inability to meet certain
requirements of the Department of the United States Navy, which resulted in the
cancellation of the time charter, SeaChange was required to repay all
outstanding principal and accrued interest under the facility in accordance with
the loan agreement. On September 24, 2014, SeaChange satisfied its obligation by
making a prepayment of $6,475,894, comprised of all outstanding principal and
accrued interest.



On July 14, 2014, we, Fund Fourteen and Fund Fifteen (collectively, "ICON")
entered into a secured term loan credit facility agreement with TMA to provide a
credit facility of up to $29,000,000 (the "ICON Loan"), of which our commitment
of $21,750,000 was funded on August 27, 2014 (the "TMA Initial Closing Date").
The facility was used by TMA to acquire and refinance two platform supply
vessels. At inception, the loan bore interest at LIBOR, subject to a 1% floor,
plus a margin of 17%.  Upon the acceptance of both vessels by TMA's
sub-charterer on September 19, 2014, the margin was reduced to 13%. On November
24, 2014, ICON entered into an amended and restated senior secured term loan
credit facility agreement with TMA pursuant to which an unaffiliated third party
agreed to provide a senior secured term loan in the amount of up to $89,000,000
(the "Senior Loan", and collectively with the ICON Loan, the "TMA Facility") to
acquire two additional vessels. The TMA Facility has a term of five years from
the TMA Initial Closing Date. As a result of the amendment, the margin for the
ICON Loan increased to 15% and repayment of the ICON Loan became subordinated to
the repayment of the Senior Loan. The TMA Facility is secured by, among other
things, a first priority security interest in the four vessels and TMA's right
to the collection of hire with respect to earnings from the sub-charterer
related to the four vessels. The amendment qualified as a new loan under 
U.S.

generally accepted accounting principles ("
U.S.
 GAAP") and therefore, we wrote
off the initial direct costs and deferred revenue associated with the ICON Loan
of $674,014 as a charge against finance income. As a condition to the amendment
and increased size of the TMA Facility, TMA was required to have all four
platform supply vessels under contract by March 31, 2015. Due to TMA's failure
to meet such condition, TMA has been in technical default and in payment default
while available cash has been swept and applied to the Senior Loan in accordance
with the loan agreement. Interest on the ICON Loan is currently being
capitalized. While our note receivable has not been paid in accordance with the
loan agreement, our collateral position has been strengthened as the principal
balance of the Senior Loan was paid down at a faster rate. In January 2016, the
remaining two previously unchartered vessels had commenced employment. As a
result, our Manager is currently engaged in discussions with the senior lender
and TMA to amend the TMA Facility and expects that payments to us will
recommence in the near future. Based on, among other things, TMA's payment
history and the collateral value as of December 31, 2015, our Manager continues
to believe that all contractual interest and outstanding principal payments
under the ICON Loan are collectible. As a result, we continue to account for our
net investment in note receivable related to TMA on an accrual basis despite a
portion of the outstanding balance being over 90 days past due.



On September 24, 2014, we, Fund Fourteen, Fund Fifteen and Fund Sixteen entered
into a secured term loan credit facility agreement with Premier Trailer to
provide a credit facility of up to $20,000,000, of which our commitment of
$10,000,000 was funded on such date. The loan bears interest at LIBOR, subject
to a 1% floor, plus 9% per year, and is for a period of six years. The loan is
secured by a second priority security interest in all of Premier Trailer's
assets, including, without limitation, its fleet of trailers, and the equity
interests of Premier Trailer. Premier Trailer's assets, including its fleet of
trailers, were valued at approximately $64,088,000 (only a portion of which
secures our loan) on the date the transaction occurred.



On November 13, 2014, we and Fund Fourteen made secured term loans in the
aggregate amount of $15,000,000 to NARL Marketing Inc. and certain of its
affiliates (collectively, "NARL") as a part of a $30,000,000 senior secured term
loan credit facility, of which our commitment was $12,000,000. The loan bore
interest at 10.75% per year and was for a period of three years. The loan was
secured by a first priority security interest in all of NARL's existing and
thereafter acquired assets including, but not limited to, its retail and
wholesale fuel equipment, including pumps and storage tanks, and a mortgage on
certain real properties. On May 7, 2015, NARL made a partial prepayment on the
loan of $827,333 pursuant to the excess cash

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sweep provision of the loan agreement. On July 15, 2015, NARL made a voluntary
partial prepayment on the loan of $6,296,859, which included a prepayment fee of
$270,000. The prepayment fee was recognized as additional finance income. On
August 6, 2015, NARL satisfied its obligations in full by making a prepayment of
$4,319,854 pursuant to the excess cash sweep provision of the loan agreement,
comprised of all outstanding principal and unpaid interest.



Acquisition Fees


In connection with the transactions that we entered into during the years ended
December 31, 2015, 2014 and 2013, we paid acquisition fees to our Manager of $0,
$3,884,570 and $1,975,062, respectively.



Subsequent Event



On January 15, 2016, D&T satisfied its remaining lease obligations by making a
prepayment of $8,000,000. In addition, D&T exercised its option to repurchase
all assets under the lease for $1, upon which title was transferred.



Recent Accounting Pronouncements




In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting
Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers
("ASU 2014-09"), requiring revenue to be recognized in an amount that reflects
the consideration expected to be received in exchange for goods and services.
This new revenue standard may be applied retrospectively to each prior period
presented, or retrospectively with the cumulative effect recognized as of the
date of adoption. In August 2015, FASB issued ASU No. 2015-14, Revenue from
Contracts with Customers - Deferral of the Effective Date ("ASU 2015-14"), which
defers implementation of ASU 2014-09 by one year. Under such deferral, the
adoption of ASU 2014-09 becomes effective for us on January 1, 2018, including
interim periods within that reporting period. Early adoption is permitted, but
not before our original effective date of January 1, 2017. We are currently in
the process of evaluating the impact of the adoption of ASU 2014-09 on our
consolidated financial statements.

In August 2014, FASB issued ASU No. 2014-15, Presentation of Financial
Statements - Going Concern: Disclosure of Uncertainties about an Entity's
Ability to Continue as a Going Concern ("ASU 2014-15"), which provides guidance
about management's responsibility to evaluate whether there is substantial doubt
about an entity's ability to continue as a going concern and to provide related
footnote disclosures. The adoption of ASU 2014-15 becomes effective for us on
our fiscal year ending December 31, 2016, and all subsequent annual and interim
periods. Early adoption is permitted. The adoption of ASU 2014-15 is not
expected to have a material effect on our consolidated financial statements.

In January 2015, FASB issued ASU No. 2015-01, Income Statement - Extraordinary
and Unusual Items: Simplifying Income Statement Presentation by Eliminating the
Concept of Extraordinary Items  ("ASU 2015-01"), which simplifies income
statement presentation by eliminating the concept of extraordinary items.  The
adoption of ASU 2015-01 becomes effective for us on January 1, 2016, including
interim periods within that reporting period.  Early adoption is permitted. 

The

adoption of ASU 2015-01 is not expected to have a material effect on our consolidated financial statements.


In February 2015, FASB issued ASU No. 2015-02, Consolidation - Amendments to the
Consolidation Analysis("ASU 2015-02"), which modifies the evaluation of whether
limited partnerships and similar legal entities are variable interest entities
or voting interest entities, eliminates the presumption that a general partner
should consolidate a limited partnership, and affects the consolidation analysis
by reducing the frequency of application of related party guidance and excluding
certain fees in the primary beneficiary determination. The adoption of ASU
2015-02 becomes effective for us on January 1, 2016, including interim periods
within that reporting period. Early adoption is permitted. The adoption of ASU
2015-02 is not expected to have a material effect on our consolidated financial
statements.

In April 2015, FASB issued ASU No. 2015-03, Interest - Imputation of Interest:
Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03"), which
requires debt issuance costs related to a recognized debt liability to be
presented in the balance sheet as a direct deduction from the carrying amount of
such debt liability, consistent with debt discounts. ASU 2015-03 will be applied
on a retrospective basis. The adoption of ASU 2015-03 becomes effective for us
on January 1, 2016, including interim periods within that reporting
period. Early adoption is permitted. The adoption of ASU 2015-03 is not expected
to have a material effect on our consolidated financial statements. Upon
adoption of ASU 2015-03, debt issuance costs associated with non-recourse
long-term debt will be reclassified in our consolidated balance sheets from
other non-current assets to non-recourse long-term debt, less current portion.

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In January 2016, FASB issued ASU No. 2016-01, Financial Instruments - Overall:
Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU
2016-01"), which provides guidance related to accounting for equity investments,
financial liabilities under the fair value option, and the presentation and
disclosure requirements for financial instruments. In addition, FASB clarified
guidance related to the valuation allowance assessment when recognizing deferred
tax assets resulting from unrealized losses on available-for-sale debt
securities. The adoption of ASU 2016-01 becomes effective for us on January 1,
2018, including interim periods within that reporting period. We are currently
in the process of evaluating the impact of the adoption of ASU 2016-01 on our
consolidated financial statements.



In February 2016, FASB issued ASU No. 2016-02, Leases ("ASU 2016-02"), which
requires lessees to recognize assets and liabilities for leases with lease terms
greater than twelve months on the balance sheet and disclose key information
about leasing arrangements. ASU 2016-02 implements changes to lessor accounting
focused on conforming with certain changes made to lessee accounting and the
recently released revenue recognition guidance. The adoption of ASU 2016-02
becomes effective for us on January 1, 2019. Early adoption is permitted. We are
currently in the process of evaluating the impact of the adoption of ASU 2016-02
on our consolidated financial statements.



In March 2016, FASB issued ASU No. 2016-07, Investments - Equity Method and
Joint Ventures: Simplifying the Transition to the Equity Method of Accounting
("ASU 2016-07"), which eliminates the retroactive adjustments to an investment
upon it qualifying for the equity method of accounting as a result of an
increase in the level of ownership interest or degree of influence by the
investor. ASU 2016-07 requires that the equity method investor add the cost of
acquiring the additional interest in the investee to the current basis of the
investor's previously held interest and adopt the equity method of accounting as
of the date the investment qualifies for equity method accounting. The adoption
of ASU 2016-07 becomes effective for us on January 1, 2017, including interim
periods within that reporting period. Early adoption is permitted. The adoption
of ASU 2016-07 is not expected to have a material effect on our consolidated
financial statements.


We do not believe any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our consolidated financial statements.

Critical Accounting Policies


An understanding of our critical accounting policies is necessary to understand
our financial results. The preparation of financial statements in conformity
with 
U.S.
 GAAP requires our Manager to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenue and expenses during the reporting
period. Significant estimates primarily include the determination of credit loss
reserves, impairment losses, estimated useful lives and residual values.  Actual
results could differ from those estimates. We applied our critical accounting
policies and estimation methods consistently in all periods presented.  We
consider the following accounting policies to be critical to our business:



†        Lease classification and revenue recognition;

†        Asset impairments;

†        Depreciation;

†        Notes receivable and revenue recognition;

† Credit quality of notes receivable and finance leases and credit loss reserve; and

† Derivative financial instruments.

Lease Classification and Revenue Recognition


Each equipment lease we enter into is classified as either a finance lease or an
operating lease, based upon the terms of each lease.  The estimated residual
value is a critical component of and can directly influence the determination as
to whether a lease is classified as an operating or a finance lease.



Our Manager has an investment committee that approves each new equipment lease
and other financing transaction. As part of its process, the investment
committee determines the estimated residual value, if any, to be used once the
investment has been approved.  The factors considered in determining the
residual value include, but are not limited to, the creditworthiness of the
potential lessee, the type of equipment considered, how the equipment is
integrated into the potential lessee's business, the length of the lease and the
industry in which the potential lessee operates.  Residual values are reviewed
for impairment in accordance with our impairment review policy.



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The residual value assumes, among other things, that the asset is utilized
normally in an open, unrestricted and stable market. Short-term fluctuations in
the marketplace are disregarded and it is assumed that there is no necessity
either to dispose of a significant number of the assets, if held in quantity,
simultaneously or to dispose of the asset quickly.  The residual value is
calculated using information from various external sources, such as trade
publications, auction data, equipment dealers, wholesalers and industry experts,
as well as inspection of the physical asset and other economic indicators.



For finance leases, we capitalize, at lease inception, the total minimum lease
payments receivable from the lessee, the estimated unguaranteed residual value
of the equipment at lease termination and the initial direct costs related to
the lease, less unearned income.  Unearned income represents the difference
between the sum of the minimum lease payments receivable, plus the estimated
unguaranteed residual value, minus the cost of the leased equipment.  Unearned
income is recognized as finance income over the term of the lease using the
effective interest rate method.



For operating leases, rental income is recognized on a straight-line basis over
the lease term.  Billed operating lease receivables are included in accounts
receivable until collected or written off. We record a reserve if we deem any
receivable not collectible. The difference between the timing of the cash
received and the income recognized on a straight-line basis is recognized as
either deferred revenue or other assets, as appropriate. Initial direct costs
are capitalized as a component of the cost of the equipment and depreciated over
the lease term.



For time charters, the vessels are stated at cost. Expenditures subsequent to
the acquisition of such vessels for conversions and major improvements are
capitalized when such expenditures appreciably extend the life, increase the
earning capacity or improve the efficiency or safety of such vessels. We
recognize revenue ratably over the period of such charters. Vessel operating
expenses, repairs and maintenance are charged to expense as incurred and are
included in vessel operating expenses in our consolidated statements of
comprehensive (loss) income.



Asset Impairments


The significant assets in our portfolio are periodically reviewed, no less
frequently than annually or when indicators of impairment exist, to determine
whether events or changes in circumstances indicate that the carrying value of
an asset may not be recoverable. An impairment loss will be recognized only if
the carrying value of a long-lived asset is not recoverable and exceeds its fair
market value.  If there is an indication of impairment, we will estimate the
future cash flows (undiscounted and without interest charges) expected from the
use of the asset and its eventual disposition. Future cash flows are the future
cash inflows expected to be generated by an asset less the future outflows
expected to be necessary to obtain those inflows. If an impairment is determined
to exist, the impairment loss will be measured as the amount by which the
carrying value of a long-lived asset exceeds its fair value and recorded in the
consolidated statements of comprehensive (loss) income in the period the
determination is made.



The events or changes in circumstances that generally indicate that an asset may
be impaired are (i) the estimated fair value of the underlying asset is less
than its carrying value or (ii) the lessee is experiencing financial
difficulties and it does not appear likely that the estimated proceeds from the
disposition of the asset will be sufficient to satisfy the residual position in
the asset and, if applicable, the remaining obligation to the non-recourse
lender. Generally in the latter situation, the residual position relates to
equipment subject to third-party non-recourse debt where the lessee remits its
rental payments directly to the lender and we do not recover our residual
position until the non-recourse debt is repaid in full. The preparation of the
undiscounted cash flows requires the use of assumptions and estimates, including
the level of future rents, the residual value expected to be realized upon
disposition of the asset, estimated downtime between re-leasing events and the
amount of re-leasing costs. Our Manager's review for impairment includes a
consideration of the existence of impairment indicators including third-party
appraisals, published values for similar assets, recent transactions for similar
assets, adverse changes in market conditions for specific asset types and the
occurrence of significant adverse changes in general industry and market
conditions that could affect the fair value of the asset.



Depreciation


We record depreciation expense on equipment when the lease is classified as an
operating lease or vessel.  In order to calculate depreciation, we first
determine the depreciable base, which is the equipment cost less the estimated
residual value at lease termination.  Depreciation expense is recorded on a
straight-line basis over the lease term.



Notes Receivable and Revenue Recognition

Notes receivable are reported in our consolidated balance sheets at the outstanding principal balance, plus costs incurred to originate the loans, net of any unamortized premiums or discounts on purchased loans. We use the effective interest rate method

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to recognize finance income, which produces a constant periodic rate of return
on the investment. Unearned income, discounts and premiums are amortized to
finance income in our consolidated statements of comprehensive (loss) income
using the effective interest rate method. Interest receivable related to the
unpaid principal is recorded separately from the outstanding balance in our
consolidated balance sheets. Upon the prepayment of a note receivable, any
prepayment penalties and unamortized loan origination, closing and commitment
fees are recorded as part of finance income in our consolidated statements of
comprehensive (loss) income. Our notes receivable may contain a paid-in-kind
("PIK") interest provision. Any PIK interest, if deemed collectible, will be
added to the principal balance of the note receivable and is recorded as income.



Credit Quality of Notes Receivable and Finance Leases and Credit Loss Reserve


Our Manager monitors the ongoing credit quality of our financing receivables by
(i) reviewing and analyzing a borrower's financial performance on a regular
basis, including review of financial statements received on a monthly, quarterly
or annual basis as prescribed in the loan or lease agreement, (ii) tracking the
relevant credit metrics of each financing receivable and a borrower's compliance
with financial and non-financial covenants, (iii) monitoring a borrower's
payment history and public credit rating, if available, and (iv) assessing our
exposure based on the current investment mix. As part of the monitoring process,
our Manager may physically inspect the collateral or a borrower's facility and
meet with a borrower's management to better understand such borrower's financial
performance and its future plans on an as-needed basis.



As our financing receivables, generally notes receivable and finance leases, are
limited in number, our Manager is able to estimate the credit loss reserve based
on a detailed analysis of each financing receivable as opposed to using
portfolio-based metrics. Our Manager does not use a system of assigning internal
risk ratings to each of our financing receivables. Rather, each financing
receivable is analyzed quarterly and categorized as either performing or
non-performing based on certain factors including, but not limited to, financial
results, satisfying scheduled payments and compliance with financial covenants.
A financing receivable is usually categorized as non-performing only when a
borrower experiences financial difficulties and has failed to make scheduled
payments. Our Manager then analyzes whether the financing receivable should be
placed on a non-accrual status, a credit loss reserve should be established or
the financing receivable should be restructured. As part of the assessment,
updated collateral value is usually considered and such collateral value can be
based on a third party industry expert appraisal or, depending on the type of
collateral and accessibility to relevant published guides or market sales data,
internally derived fair value. Material events would be specifically disclosed
in the discussion of each financing receivable held.



Financing receivables are generally placed in a non-accrual status when payments
are more than 90 days past due. Additionally, our Manager periodically reviews
the creditworthiness of companies with payments outstanding less than 90 days
and based upon our Manager's judgment, these accounts may be placed in a
non-accrual status.



In accordance with the cost recovery method, payments received on non-accrual
financing receivables are applied to principal if there is doubt regarding the
ultimate collectability of principal. If collection of the principal of
non-accrual financing receivables is not in doubt, interest income is recognized
on a cash basis. Financing receivables in non-accrual status may not be restored
to accrual status until all delinquent payments have been received, and we
believe recovery of the remaining unpaid receivable is probable.



When our Manager deems it is probable that we will not be able to collect all
contractual principal and interest on a non-performing financing receivable, we
perform an analysis to determine if a credit loss reserve is necessary. This
analysis considers the estimated cash flows from the financing receivable,
and/or the collateral value of the asset underlying the financing receivable
when financing receivable repayment is collateral dependent. If it is determined
that the impaired value of the non-performing financing receivable is less than
the net carrying value, we will recognize a credit loss reserve or adjust the
existing credit loss reserve with a corresponding charge to earnings.  We then
charge off a financing receivable in the period that it is deemed uncollectible
by reducing the credit loss reserve and the balance of the financing receivable.



Derivative Financial Instruments


We may enter into derivative transactions for purposes of hedging specific
financial exposures, including movements in foreign currency exchange rates and
changes in interest rates on our non-recourse long-term debt. We enter into
these instruments only for hedging underlying exposures. We do not hold or issue
derivative financial instruments for purposes other than hedging, except for
warrants, which are not hedges. Certain derivatives may not meet the established
criteria to be designated as qualifying accounting hedges, even though we
believe that these are effective economic hedges.



We recognize all derivative financial instruments as either assets or liabilities on the consolidated balance sheets and measure those instruments at fair value. Changes in the fair value of such instruments are recognized immediately in earnings

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unless certain criteria are met. These criteria demonstrate that the derivative
is expected to be highly effective at offsetting changes in the fair value or
expected cash flows of the underlying exposure at both the inception of the
hedging relationship and on an ongoing basis and include an evaluation of the
counterparty risk and the impact, if any, on the effectiveness of the
derivative. If these criteria are met, which we must document and assess at
inception and on an ongoing basis, we recognize the changes in fair value of
such instruments in accumulated other comprehensive income (loss) ("AOCI"), a
component of equity on the consolidated balance sheets. Changes in the fair
value of the ineffective portion of all derivatives are recognized immediately
in earnings.


Results of Operations for the Years Ended December 31, 2015 ("2015") and 2014 ("2014")


The following percentages are only as of a stated period and are not expected to
be comparable in future periods.  Further, these percentages are only
representative of the percentage of the carrying value of such assets, finance
income or rental income as of each stated period, and as such are not indicative
of the concentration of any asset type or customer by the amount of equity
invested or our investment portfolio as a whole.



Financing Transactions

The following tables set forth the types of assets securing the financing transactions in our portfolio:



                                                                December 31,
                                                    2015                               2014
                                           Net         Percentage of          Net         Percentage of
                                         Carrying        Total Net         Carrying         Total Net
             Asset Type                   Value        Carrying Value        Value        Carrying Value
  Tanker vessels                      $ 36,760,303          41%         $  37,998,931          29%
  Platform supply vessels               21,002,939          23%            21,589,043          16%
  Mining equipment                      13,935,435          15%            22,184,672          17%
  Trailers                               9,842,336          11%             9,809,033           7%
  Transportation                         6,515,755           7%             8,360,217           6%
  Lubricant manufacturing equipment      2,668,887           3%             2,703,292           2%
  Energy equipment                               -           -             11,473,409           9%
  Printing equipment                             -           -              8,086,659           6%
  Coal drag line                                 -           -              5,741,902           4%
  Tube manufacturing equipment                   -           -              4,092,215           3%
  Aircraft engines                               -           -                966,359           1%
                                      $ 90,725,655          100%        $ 133,005,732          100%




The net carrying value of our financing transactions includes the balance of our
net investment in notes receivable and our net investment in finance leases as
of each reporting date.


During 2015 and 2014, certain customers generated significant portions (defined as 10% or more) of our total finance income as follows:

                                                                                         Percentage of Total Finance Income
                   Customer                                 Asset Type                       2015                  2014
  Técnicas Maritimas Avanzadas, S.A. de C.V.   Platform supply vessels                       24%                    1%
  Siva Global Ships Limited                    Tanker vessels                                22%                    3%
  Blackhawk Mining, LLC                        Mining equipment                              17%                    3%
  D&T Holdings, LLC                            Transportation                                11%                    2%
  Leighton Holdings Limited                    Offshore oil field services
equipment          -                    85%
                                                                                             74%                   94%




Interest income and prepayment fees from our net investment in notes receivable
and finance income from our net investment in finance leases are included in
finance income in our consolidated statements of comprehensive (loss) income.

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Non-performing Assets within Financing Transactions


As of December 31, 2014, the net carrying value of our impaired loan related to
VAS was $966,359. The loan was considered impaired during the three months ended
December 31, 2014. During 2015, we recorded an additional credit loss of
$697,384 prior to the sale of our interest in the loan to GB for $268,975 on
July 23, 2015. No gain or loss was recognized as a result of the sale. No
finance income was recognized since the date the loan was considered impaired.
Accordingly, no finance income was recognized in 2015. Finance income recognized
on the loan prior to recording the credit loss was $197,741 in 2014 (see
"Significant Transactions" above).



On May 12, 2015, Patriot Coal commenced a voluntary Chapter 11 proceeding in the
Bankruptcy Court for the Eastern District of Virginia. On July 24, 2015, Patriot
Coal notified us that it was terminating the lease and that it would not be
making the balloon payment of $4,866,000 due at the end of the lease term. After
extensive negotiations, we agreed with Patriot Coal to extend the term of the
lease by one month with an additional lease payment of $150,000 and to reduce
the balloon payment to $700,000, subject to the bankruptcy court's approval. As
a result, the finance lease was placed on non-accrual status and a credit loss
of $4,151,594 was recorded during 2015. In August 2015, title to the leased
equipment was transferred to Patriot Coal upon our receipt of the additional
lease payment and the reduced balloon payment. During 2015 and 2014, we
recognized finance income of $159,694 (of which $150,000 was recognized on a
cash basis) and $46,057, respectively. No gain or loss was recognized during
2015 as a result of the sale of leased equipment (see "Significant Transactions"
above).


Operating Lease Transactions


The following tables set forth the types of equipment subject to operating
leases in our portfolio:

                                                                    December 31,
                                                       2015                              2014
                                               Net         Percentage of         Net         Percentage of
                                             Carrying        Total Net     

Carrying Total Net

               Asset Type                     Value        Carrying Value   

Value Carrying Value

  Offshore oil field services equipment   $ 60,964,665          85%         $ 66,356,257          73%
  Vessels                                    5,720,000           8%           18,266,677          20%
  Mining equipment                           4,778,814           7%            6,395,518           7%
                                          $ 71,463,479          100%        $ 91,018,452          100%



The net carrying value of our operating lease transactions represents the balance of our leased equipment at cost and our vessels as of each reporting date.

Impaired Assets within Operating Lease Transactions




During 2015, we recognized an aggregate impairment loss of $11,149,619 on our
vessels related to the Aegean Express and the Arabian Express based on
impairment analyses performed by our Manager, which concluded that the carrying
values of the Aegean Express and the Arabian Express were not recoverable and
that impairment existed. As of December 31, 2015 and 2014, the net carrying
value of such vessels was $5,720,000 and $18,266,677, respectively. During 2015
and 2014, we recognized time charter revenue of $5,361,706 and $4,132,289,
respectively (see "Significant Transactions" above).



During 2015 and 2014, certain customers generated significant portions (defined as 10% or more) of our total rental income as follows:

Percentage of Total Rental Income

          Customer                           Asset Type                      2015                 2014
  Swiber Holdings Limited       Offshore oil field services equipment         52%                  65%
  Pacific Crest Pte. Ltd.       Offshore oil field services equipment         33%                  19%
  Murray Energy Corporation     Mining equipment                              15%                  4%
  Vroon Group B.V.              Marine - container vessels                     -                   12%
                                                                             100%                 100%


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Revenue and other income for 2015 and 2014 is summarized as follows:



                                                      Years Ended December 31,
                                                          2015            2014           Change
  Finance income                                    $   13,646,291   $ 68,225,836   $ (54,579,545)
  Rental income                                         14,128,629     13,911,707          216,922
  Time charter revenue                                   5,361,706      4,132,289        1,229,417

(Loss) income from investment in joint ventures (12,010,760) 3,271,192 (15,281,952)

  Loss on lease termination                                      -       (18,800)           18,800
  Gain on sale of assets, net                                    -      

1,737,983 (1,737,983)

      Total revenue and other income                $   21,125,866   $ 91,260,207   $ (70,134,341)




Total revenue and other income for 2015 decreased $70,134,341, or 76.9%, as
compared to 2014. The decrease was primarily attributable to (i) a decrease in
finance income related to the gain on exercise of purchase options associated
with three of the Leighton Vessels by Leighton during 2014 with no comparable
gain in 2015, (ii) our share of the loss from investment in joint ventures
related to JAC due to the credit loss reserve recorded during 2015 (see
"Significant Transactions" above) and (iii) a gain recognized in 2014 from the
sale of marine diving equipment with no comparable gain in 2015. These decreases
were partially offset by an increase in time charter revenue related to the
Aegean Express and the Arabian Express as we commenced operating such vessels in
April 2014.


Expenses for 2015 and 2014 are summarized as follows:



                                               Years Ended December 31,
                                                   2015           2014          Change
  Management fees                            $   1,404,272   $  1,918,023   $   (513,751)

Administrative expense reimbursements 1,744,189 4,785,387

  (3,041,198)
  General and administrative                     2,692,895      3,066,828       (373,933)
  Interest                                       4,009,417      5,289,185     (1,279,768)
  Depreciation                                   8,405,354      7,127,975       1,277,379
  Credit loss, net                               4,848,978        634,803       4,214,175
  Impairment loss                               11,149,619         70,412      11,079,207
  Vessel operating                               4,402,857      4,334,167          68,690
  Loss on derivative financial instruments               -        372,316       (372,316)
       Total expenses                        $  38,657,581   $ 27,599,096   $  11,058,485




Total expenses for 2015 increased $11,058,485, or 40.1%, as compared to 2014.
The increase was primarily attributable to (i) impairment losses recorded
related to the Aegean Express and the Arabian Express during 2015, (ii) the
credit loss recorded related to Patriot Coal during 2015 and (iii) an increase
in depreciation expense due to entering into two new operating leases during
2014. These increases were partially offset by a decrease in administrative
expense reimbursements primarily due to costs incurred on our behalf by our
Manager in connection with a proposed sale of our assets during our liquidation
period in 2014 and lower costs incurred in 2015 as compared to 2014 as a result
of the decrease in size of our investment portfolio during our liquidation
period. These increases were also partially offset by decreases in (a) interest
expense primarily as a result of the repayment of our non-recourse long-term
debt associated with three of the Leighton Vessels that were sold in 2014, (b)
general and administrative expenses primarily due to higher legal fees incurred
during 2014 related to EAR and other various matters as compared to 2015 and (c)
management fees primarily due to the sale of three of the Leighton Vessels in
2014 and prepayments on our financing receivables, which included the sale of
our interest in the loans with Ocean Navigation and the prepayment by SAE during
2014.


Net Income Attributable to Noncontrolling Interests

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Net income attributable to noncontrolling interests increased $401,200, from $3,780,780 in 2014 to $4,181,980 in 2015. The increase was primarily due to additional consolidated joint ventures that we entered into during 2014.

Other Comprehensive Income


Other comprehensive income decreased $629,587, from $629,587 in 2014 to $0 in
2015. The decrease was primarily due to (i) the termination or maturity of all
our designated interest rate swaps in April 2014, which resulted in the
reclassification from AOCI to interest expense and loss on derivative financial
instruments during 2014 and (ii) the change in fair value of our designated
interest rate swaps during 2014.



Net (Loss) Income Attributable to Fund Twelve


As a result of the foregoing factors, net (loss) income attributable to us for
2015 and 2014 was $(21,713,695) and $59,880,331, respectively. Net (loss) income
attributable to us per weighted average additional Share outstanding for 2015
and 2014 was $(61.71) and $170.19, respectively.



Results of Operations for the Years Ended December 31, 2014 ("2014") and 2013 ("2013")


The following percentages are only as of a stated period and are not expected to
be comparable in future periods.  Further, these percentages are only
representative of the percentage of the carrying value of such assets, finance
income or rental income as of each stated period, and as such are not indicative
of the concentration of any asset type or customer by the amount of equity
invested or our investment portfolio as a whole.



Financing Transactions

The following tables set forth the types of assets securing the financing transactions in our portfolio:



                                                                     December 31,
                                                        2014                               2013
                                                Net         Percentage of          Net         Percentage of
                                             Carrying         Total Net         Carrying         Total Net
               Asset Type                      Value        Carrying Value        Value        Carrying Value
  Tanker vessels                          $  37,998,931          29%         $           -           -
  Mining equipment                           22,184,672          17%                     -           -
  Platform supply vessels                    21,589,043          16%                     -           -
  Energy equipment                           11,473,409           9%                     -           -
  Trailers                                    9,809,033           7%                     -           -
  Transportation                              8,360,217           6%                     -           -
  Printing equipment                          8,086,659           6%            10,961,912           7%
  Coal drag line                              5,741,902           4%             7,495,844           5%
  Tube manufacturing equipment                4,092,215           3%             4,152,432           3%
  Lubricant manufacturing equipment           2,703,292           2%             2,737,695           2%
  Aircraft engines                              966,359           1%             1,687,232           1%
  Offshore oil field services equipment               -           -         

93,951,371 63%

  Marine - crude oil tanker                           -           -             10,102,586           7%
  On-shore oil field services equipment               -           -              8,017,099           6%
  Seismic imaging equipment                           -           -              4,128,632           3%
  Telecommunications equipment                        -           -              3,168,851           2%
  Analog seismic system equipment                     -           -              1,878,037           1%
                                          $ 133,005,732          100%        $ 148,281,691          100%




The net carrying value of our financing transactions includes the balance of our
net investment in notes receivable and our net investment in finance leases as
of each reporting date.


During 2014 and 2013, one customer generated a significant portion (defined as 10% or more) of our total finance income as follows:

Percentage of Total Finance Income

          Customer                         Asset Type                       2014                  2013
  Leighton Holdings Limited   Offshore oil field services equipment         85%                   63%


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Interest income and prepayment fees from our net investment in notes receivable
and finance income from our net investment in finance leases are included in
finance income in our consolidated statements of comprehensive (loss) income.



Non-performing Assets within Financing Transactions


As of December 31, 2014, the net carrying value of our impaired loan related to
VAS was $966,359. No finance income was recognized since the date the loan was
impaired during 2014. We recognized $197,741 and $256,209 of finance income
related to VAS during 2014 and 2013, respectively, prior to the loan being
impaired. As of December 31, 2013, the net carrying value of the loan related to
VAS was $1,687,232 (see "Significant Transactions" above).



Operating Lease Transactions


The following tables set forth the types of equipment subject to operating
leases in our portfolio:



                                                                        December 31,
                                                           2014                                2013
                                                   Net         Percentage of          Net         Percentage of
                                                Carrying         Total Net         Carrying         Total Net
                  Asset Type                      Value        Carrying

Value Value Carrying Value

     Offshore oil field services equipment   $  66,356,257          73%         $  35,135,234          64%
     Vessels                                    18,266,677          20%                     -           -
     Mining equipment                            6,395,518           7%                     -           -
     Marine - container vessels                          -           -             20,071,331          36%
                                             $  91,018,452          100%        $  55,206,565          100%


The net carrying value of our operating lease transactions represents the balance of our leased equipment at cost and our vessels as of each reporting date.




The Aegean Express and the Arabian Express were reclassified from leased
equipment at cost to vessels on our consolidated balance sheets upon termination
of the bareboat charters in April 2014. The net carrying value of the Aegean
Express and the Arabian Express represent the balance of our vessels as of
December 31, 2014. In addition, these vessels generated all of our time charter
revenue for 2014 presented on our consolidated statements of comprehensive
(loss) income.



Impaired Assets within Operating Lease Transactions




During 2013, we recognized an impairment charge of $14,790,755 on the leased
equipment at cost, of which $13,020,226 was related to the Aegean Express and
the Arabian Express. As of December 31, 2014 and 2013, the net carrying value of
such vessels was $18,266,677 and $20,071,331, respectively. As of December 31,
2014 and 2013, these vessels were classified as vessels and leased equipment at
cost, respectively, on our consolidated balance sheets. Time charter
revenue/rental income of $5,816,081 and $6,735,168 was recognized with respect
to these vessels during 2014 and 2013, respectively (see "Significant
Transactions" above).



During 2014 and 2013, certain customers generated significant portions (defined as 10% or more) of our total rental income as follows:

Percentage of Total Rental Income

         Customer                        Asset Type                      2014                 2013

Swiber Holdings Limited Offshore oil field services equipment 65%

                  28%
  Pacific Crest Pte. Ltd.   Offshore oil field services equipment         19%                   -
  Vroon Group B.V.          Marine - container vessels                    12%                  21%
  AET Inc. Limited          Marine - crude oil tanker                      -                   51%
                                                                          96%                 100%




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Revenue and other income for 2014 and 2013 is summarized as follows:



                                               Years Ended December 31,
                                                  2014           2013            Change
  Finance income                             $ 68,225,836   $  16,811,076   $   51,414,760
  Rental income                                13,911,707      32,785,533     (18,873,826)
  Time charter revenue                          4,132,289               -        4,132,289

Income from investment in joint ventures 3,271,192 4,061,317

(790,125)

  (Loss) gain on lease termination               (18,800)       8,827,010   

(8,845,810)

  Gain (loss) on sale of assets, net            1,737,983     (6,695,492)        8,433,475
      Total revenue and other income         $ 91,260,207   $  55,789,444   $   35,470,763




Total revenue and other income for 2014 increased $35,470,763, or 63.6%, as
compared to 2013. The increase in finance income was primarily related to three
of the Leighton Vessels, of which $57,248,440 was recognized as finance income,
related to the gain on the exercise of a purchase option for such Leighton
Vessels during 2014. This gain was offset by a reduction of $7,643,794 in
finance income earned from the leases related to the Leighton Vessels in 2014
compared to 2013. The increase in time charter revenue was related to the Aegean
Express and the Arabian Express as we commenced operating such vessels in April
2014. The increase was partially offset by a decrease in rental income, which
was primarily due to the termination or expiration of the leases related to the
Eagle Vessels during 2013. In 2013, we had a net gain of $2,131,518 on the lease
termination and subsequent sale of the Eagle Vessels, comprised of a gain on
lease termination of $8,827,010 and a net loss on sale of the vessels of
$6,695,492, as compared to a smaller gain on sale of assets of $1,737,983
primarily from the sale of marine diving equipment in 2014.



Expenses for 2014 and 2013 are summarized as follows:



                                                          Years Ended December 31,
                                                              2014           2013           Change
  Management fees                                       $   1,918,023   $  3,247,710   $  (1,329,687)
  Administrative expense reimbursements                     4,785,387      2,284,264        2,501,123
  General and administrative                                3,066,828      3,169,333        (102,505)
  Interest                                                  5,289,185      8,677,154      (3,387,969)
  Depreciation                                              7,127,975     29,824,603     (22,696,628)
  Credit loss, net                                            634,803              -          634,803
  Impairment loss                                              70,412     14,790,755     (14,720,343)
  Vessel operating                                          4,334,167              -        4,334,167
  Loss on disposition of assets of foreign investment               -      

1,447,361 (1,447,361)

  Loss on derivative financial instruments                    372,316        188,534          183,782
        Total expenses                                  $  27,599,096   $ 63,629,714   $ (36,030,618)




Total expenses for 2014 decreased $36,030,618, or 56.6%, as compared to 2013.
The decrease in depreciation was primarily due to the sale of the Eagle Vessels
during 2013. The decrease in impairment loss was due to the recognition of
impairment losses in connection with the Eagle Vessels, the Aegean Express and
the Arabian Express of $14,790,755 during 2013, compared to an impairment loss
of $70,412 recognized on real property held by ICON EAR during 2014. The
decrease in interest was primarily due to the repayment of our non-recourse
long-term debt associated with the sale of multiple vessels and certain
equipment during or subsequent to 2013, partially offset by three additional
borrowings of non-recourse long-term debt during 2014. In addition, we incurred
a loss on disposition of assets of foreign investment as a result of the
reclassification of the accumulated loss on currency translation adjustment out
of AOCI due to the sale of a foreign investment during 2013, with no comparable
loss incurred in 2014. These decreases were partially offset by vessel operating
expenses incurred during 2014 related to the Aegean Express and the Arabian
Express as we commenced operating such vessels in April 2014 and an increase in
administrative expense reimbursements, primarily due to increased costs incurred
on our behalf by our Manager in connection with a proposed sale of our assets
during our liquidation period in 2014. Our Manager may continue to incur

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additional professional fees and costs on our behalf as it continues to pursue the sale of our assets in one or more strategic transactions.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests increased $2,243,581, from $1,537,199 in 2013 to $3,780,780 in 2014. The increase was primarily due to additional consolidated joint ventures that we entered into during 2014.

Other Comprehensive Income


Other comprehensive income decreased $3,005,965, from $3,635,552 in 2013 to
$629,587 in 2014. The decrease was primarily due to the termination or
expiration of derivative financial instruments related to the debt associated
with three of the Leighton Vessels, the Aegean Express and the Arabian Express
subsequent to 2013. In addition, we reclassified the accumulated loss on
currency translation adjustment out of AOCI to a loss on disposition of assets
of foreign investment due to the sale of a foreign investment during 2013, with
no comparable reclassification in 2014.

Net Income (Loss) Attributable to Fund Twelve


As a result of the foregoing factors, net income (loss) attributable to us for
2014 and 2013 was $59,880,331 and $(9,377,469), respectively. Net income (loss)
attributable to us per weighted average additional Share outstanding for 2014
and 2013 was $170.19 and $(26.65), respectively.



Financial Condition

This section discusses the major balance sheet variances at December 31, 2015 compared to December 31, 2014.

Total Assets


Total assets decreased $78,637,259, from $267,429,193 at December 31, 2014 to
$188,791,934 at December 31, 2015. The decrease was primarily the result of the
use of existing cash and cash generated from our investments to (a) pay
distributions to our members and noncontrolling interests, (b) repay our
non-recourse long-term debt and (c) repay liabilities due to our Manager for
expenses incurred in connection with a proposed sale of our assets during our
liquidation period in 2014. The decrease was also due to (i) our share of losses
from our investment in joint ventures as a result of the total credit loss
recorded by the joint ventures, (ii) the impairment loss recognized on the
Aegean Express and the Arabian Express, (iii) depreciation on our leased
equipment at cost and vessels, and (iv) the credit loss recorded on our finance
lease with Patriot Coal.



Current Assets

Current assets decreased $12,232,532, from $34,655,589 at December 31, 2014 to
$22,423,057 at December 31, 2015. The decrease was primarily due to (i)
distributions paid to our members and noncontrolling interests, (ii) scheduled
repayments on our non-recourse long-term debt during 2015 and (iii) the credit
loss recorded on our finance lease with Patriot Coal, which was included in
current portion of net investment in finance leases as of December 31, 2014.
These decreases were partially offset by cash generated from operations and
several prepayments on our long-term financing receivables.



Total Liabilities


Total liabilities decreased $13,445,593, from $76,549,257 at December 31, 2014
to $63,103,664 at December 31, 2015. The decrease was primarily due to the
repayment of our non-recourse long-term debt and the repayment of liabilities
due to our Manager for expenses incurred in connection with a proposed sale of
our assets during our liquidation period in 2014. Our Manager may continue to
incur additional professional fees and costs on our behalf as it continues to
pursue the sale of our assets in one or more strategic transactions.



Current Liabilities


Current liabilities decreased $3,878,188, from $12,240,238 at December 31, 2014
to $8,362,050 at December 31, 2015. The decrease was primarily due to the
repayment of liabilities due to our Manager for expenses incurred in connection
with a proposed sale of our assets during our liquidation period in 2014 and the
satisfaction of our non-recourse debt related to Cenveo.



Equity

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Equity decreased $65,191,666, from $190,879,936 at December 31, 2014 to $125,688,270 at December 31, 2015. The decrease was primarily due to distributions to our members and noncontrolling interests during 2015 and our net loss during 2015.

Liquidity and Capital Resources

Summary


At December 31, 2015 and 2014, we had cash and cash equivalents of $8,404,092
and $15,410,563, respectively. Pursuant to the terms of our offering, we
established a cash reserve in the amount of 0.5% of the gross offering
proceeds.  As of December 31, 2015, the cash reserve was $1,738,435. During our
operating period, our main source of cash was typically from operating
activities and our main use of cash was in investing and financing activities.
During our liquidation period, which commenced on May 1, 2014, we expect our
main sources of cash will be from the collection of income and principal on our
notes receivable and finance leases and proceeds from the sale of assets held
directly by us or indirectly by our joint ventures and our main use of cash will
be for distributions to our members and noncontrolling interests. Our liquidity
will vary in the future, increasing to the extent cash flows from investments
and proceeds from the sale of our investments exceed expenses and decreasing as
we meet our debt obligations, pay distributions to our members and
noncontrolling interests and to the extent that expenses exceed cash flows from
operations and proceeds from the sale of our investments.



We anticipate being able to meet our liquidity requirements into the foreseeable
future through the expected results of our operating activities, as well as cash
received from our investments at maturity. However, our ability to generate cash
in the future is subject to general economic, financial, competitive, regulatory
and other factors that affect us and our lessees' and borrowers' businesses that
are beyond our control. See "Item 1A. Risk Factors."



Cash Flows


The following table sets forth summary cash flow data:



                                                                       Years Ended December 31,
                                                                 2015             2014             2013

Net cash provided by (used in):

    Operating activities                                   $   26,170,007   $   26,783,311   $   31,200,193
    Investing activities                                       25,629,739       34,192,057       16,677,549
    Financing activities                                     (58,806,217)  

(59,550,112) (64,873,321)

    Effects of exchange rates on cash and cash equivalents              -                -              110

Net (decrease) increase in cash and cash equivalents $ (7,006,471) $ 1,425,256 $ (16,995,469)

Note: See the Consolidated Statements of Cash Flows included in "Item 8. Consolidated Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for additional information.

Operating Activities


Cash provided by operating activities decreased $613,304, from $26,783,311 in
2014 to $26,170,007 in 2015.  The decrease was primarily due to a decrease in
the collection of finance income as a result of the termination or expiration of
certain finance leases as well as the timing of payments of certain of our
liabilities. This decrease was partially offset by higher operating cash flows
in 2015 generated by two new operating leases we entered into in 2014.



Investing Activities


Cash provided by investing activities decreased $8,562,318, from $34,192,057 in
2014 to $25,629,739 in 2015. The decrease was primarily due to (i) proceeds
received from the exercise of purchase options related to three of the Leighton
Vessels during 2014, (ii) less principal received on notes receivable primarily
due to several prepayments during 2014 and (iii) lower distributions from our
investment in joint ventures during 2015. These decreases were partially offset
by no new investments made during 2015.



Financing Activities

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Cash used in financing activities decreased $743,895, from $59,550,112 in 2014
to $58,806,217 in 2015.  The decrease was primarily due to (a) a larger
repayment on our non-recourse long-term debt during 2014 as a result of the sale
of three of the Leighton Vessels, (b) no payments of debt financing costs and
(c) no repayments of seller's credit during 2015, partially offset by (i) less
investments made by noncontrolling interests, (ii) less proceeds received from
our non-recourse long-term debt and (iii) higher distributions paid to our
members and noncontrolling interests.



Financings and Borrowings

Non-Recourse Long-Term Debt

We had non-recourse long-term debt obligations at December 31, 2015 and 2014 of
$48,049,520 and $59,195,786, respectively. All of our non-recourse long-term
debt obligations consist of notes payable in which the lender has a security
interest in the underlying assets. If the borrower were to default on the
underlying loan or lease, resulting in our default on the non-recourse long-term
debt, the assets could be foreclosed upon and the proceeds would be remitted to
the lender in extinguishment of that debt. As of December 31, 2015 and 2014, the
total carrying value of assets subject to non-recourse long-term debt was
$87,131,546 and $107,226,456, respectively.



As a result of the partial prepayment by Cenveo, on July 7, 2014, we partially
paid down our non-recourse long-term debt with NXT that was secured by our
interest in the loan to and collateral from Cenveo by making a prepayment of
$702,915. On September 30, 2015, as a result of the prepayment by Cenveo, we
satisfied our non-recourse long-term debt obligations with NXT by making a
prepayment of $4,223,432.



At December 31, 2015, we were in compliance with all covenants related to our non-recourse long-term debt.

Revolving Line of Credit, Recourse


We entered into an agreement with California Bank & Trust ("CB&T") for a
revolving line of credit through March 31, 2015 of up to $10,000,000 (the
"Facility"), which was secured by all of our assets not subject to a first
priority lien. Amounts available under the Facility were subject to a borrowing
base that was determined, subject to certain limitations, by the present value
of future receivables under certain loans and lease agreements in which we had a
beneficial interest.



The interest rate for general advances under the Facility was CB&T's prime
rate.  We could have elected to designate up to five advances on the outstanding
principal balance of the Facility to bear interest at LIBOR plus 2.5% per year.
In all instances, borrowings under the Facility were subject to an interest rate
floor of 4.0% per year.  In addition, we were obligated to pay an annualized
0.50% fee on unused commitments under the Facility. On February 28, 2014 and
March 31, 2014, we drew down $3,000,000 and $7,000,000, respectively, under the
Facility. On November 6, 2014, we repaid the $10,000,000.



On December 22, 2014, the Facility with CB&T was terminated. There were no obligations outstanding as of the date of termination.

Distributions


We, at our Manager's discretion, paid monthly distributions to each of our
additional members beginning with the first month after each such member's
admission through the end of our operating period, which was April 30, 2014. We
paid distributions to our additional members of $37,944,866, $25,257,603 and
$25,953,936 for the years ended December 31, 2015, 2014 and 2013, respectively.
We paid distributions to our Manager of $383,282, $255,127 and $262,158 for the
years ended December 31, 2015, 2014 and 2013, respectively. We paid
distributions to our noncontrolling interests of $9,390,629, $7,079,452 and
$7,182,576 for the years ended December 31, 2015, 2014 and 2013, respectively.
During our liquidation period, we have paid and will continue to pay
distributions in accordance with the terms of our LLC Agreement. We expect that
distributions paid during the liquidation period will vary, depending on the
timing of the sale of our assets and/or the maturity of our investments, and our
receipt of rental, finance and other income from our investments.



Commitments and Contingencies and Off-Balance Sheet Transactions

Commitments and Contingencies


At the time we acquire or divest of our interest in an equipment lease or other
financing transaction, we may, under very limited circumstances, agree to
indemnify the seller or buyer for specific contingent liabilities.  Our Manager
believes that any liability of ours that may arise as a result of any such
indemnification obligations will not have a material adverse effect on our
consolidated financial condition or results of operations taken as a whole.

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At December 31, 2015, we had non-recourse long-term debt and seller's credit.
Each lender has a security interest in the majority of the assets
collateralizing each non-recourse debt instrument and an assignment of the
rental payments under the lease associated with the assets.  In such cases, the
lender is being paid directly by the lessee. In other cases, we receive the
rental payments and pay the lender. If the lessee defaults on the lease, the
assets could be foreclosed upon and the proceeds would be remitted to the lender
in extinguishment of the non-recourse debt. At December 31, 2015, our
outstanding non-recourse long-term indebtedness and seller's credit totaled
$60,797,253.



Principal and interest maturities of our debt, seller's credit and related interest consisted of the following at December 31, 2015:


                                                        Payments Due by 

Period

                                  Total         1 Year       2 - 3 Years    

4 - 5 Years Thereafter

  Non-recourse debt           $ 48,049,520   $ 6,205,639   $  11,528,881   

$ 9,400,000 $ 20,915,000

  Seller's credit               16,500,000             -       5,000,000               -     11,500,000

Non-recourse debt interest* 10,625,237 2,598,169 4,088,507

2,952,356 986,205

                              $ 75,174,757   $ 8,803,808   $  20,617,388   

$ 12,352,356 $ 33,401,205

*Based on fixed or variable rates in effect at December 31, 2015.

In connection with certain debt obligations, we are required to maintain restricted cash accounts with certain banks. At December 31, 2015, we had restricted cash of $2,068,709, which is presented within other non-current assets in our consolidated balance sheets.




During 2008, a joint venture, ICON EAR, owned 55% by us and 45% by Fund Eleven,
purchased and simultaneously leased semiconductor manufacturing equipment to EAR
for $15,729,500.  On October 23, 2009, EAR filed a petition for reorganization
under Chapter 11 of the 
U.S.
 Bankruptcy Code.  On October 21, 2011, the Chapter
11 bankruptcy trustee for EAR filed an adversary complaint against ICON EAR
seeking the recovery of the lease payments that the trustee alleged were
fraudulently transferred from EAR to ICON EAR. The complaint also sought the
recovery of payments made by EAR to ICON EAR during the 90-day period preceding
EAR's bankruptcy filing, alleging that those payments constituted a preference
under the 
U.S.
 Bankruptcy Code. Additionally, the complaint sought the
imposition of a constructive trust over certain real property and the proceeds
from the sale that ICON EAR received as security in connection with its
investment. Our Manager filed an answer to the complaint that included certain
affirmative defenses. Since that time, substantial discovery was completed. Our
Manager still believes these claims are unsupported by the facts, but given the
risks, costs and uncertainty surrounding litigation in bankruptcy, our Manager
would engage in prudent settlement discussions to resolve this matter
expeditiously. At this time, we are unable to predict the outcome of this action
or loss therefrom, if any; however, an adverse ruling or settlement may have a
material impact on our consolidated financial position or results of operations.



Subsequent to the filing of the bankruptcy petition, EAR disclaimed any right to
its equipment and such equipment became the subject of an Illinois State Court
proceeding. The equipment was subsequently sold as part of the Illinois State
Court proceeding. On March 6, 2012, one of the creditors in the Illinois State
Court proceeding won a summary judgment motion filed against ICON EAR, thereby
dismissing ICON EAR's claims to the proceeds resulting from the sale of the EAR
equipment. ICON EAR appealed this decision. On September 16, 2013, the lower
court's ruling was affirmed by the Illinois Appellate Court. On October 21,
2013, ICON EAR filed a Petition for Leave to Appeal with the Supreme Court of
Illinois appealing the decision of the Illinois Appellate Court, which petition
was denied on January 29, 2014. On December 24, 2014, ICON EAR sold the real
property for $207,937.


Off-Balance Sheet Transactions

None.



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Inflation and Interest Rates

The potential effects of inflation on us are difficult to predict. If the
general economy experiences significant rates of inflation, however, it could
affect us in a number of ways. We do not currently have or expect to have rent
escalation clauses tied to inflation in our leases and most of our notes
receivable contain fixed interest rates. The anticipated residual values to be
realized upon the sale or re-lease of equipment upon lease termination (and thus
the overall cash flow from our leases) may increase with inflation as the cost
of similar new and used equipment increases.



If interest rates increase or decrease significantly, our leases and notes receivable already in place would generally not be affected.

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Source: Equities.com News (March 29, 2016 - 10:25 PM EDT)

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