This report contains certain forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by terms such as "anticipate," "believe," "could," "estimate," "expects," "intend," "may," "plan," "potential," "project," "should," "will" and "would" or the negative of these terms or other comparable terminology. Such statements are subject to the risks and uncertainties more particularly described in Item 1A, under the caption "Risk Factors," in our Annual Report on Form 10-K for the period ended September 30, 2008. These risks and uncertainties could cause actual results to differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances after the date of this report, except as may be required under applicable law.

Overview of the Three and Six Months Ended March 31, 2009 and 2008

We are a specialized asset management company that uses industry specific expertise to evaluate, originate, service and manage investment opportunities through the commercial finance, real estate and financial fund management sectors. As a specialized asset manager, we seek to develop investment funds for outside investors for which we provide asset management services, typically under long-term management arrangements either through a contract with, or as the manager or general partner of, our sponsored investment funds. We typically maintain an investment in the funds we sponsor. As of March 31, 2009, we managed $16.7 billion of assets.

We limit our fund development and management services to asset classes in which we have specific expertise. We believe this strategy enhances the return on investment we can achieve for our funds. In our commercial finance operations, we focus on originating small and middle-ticket equipment leases and commercial loans secured by business-essential equipment, including technology, commercial and industrial equipment and medical equipment. In our real estate operations, we concentrate on the ownership, operation and management of multifamily and commercial real estate and the ownership of real estate loans including whole mortgage loans, first priority interests in commercial mortgage loans, known as A notes, subordinated interests in first mortgage loans, known as B notes, mezzanine loans, investments in discounted and distressed real estate loans, and investments in "value-added" properties (properties which, although not distressed, need substantial improvements to reach their full investment potential). In our financial fund management operations, we manage trust preferred securities of banks, bank holding companies, insurance companies and other financial companies, bank loans, and asset-backed securities, or ABS.

As a specialized asset manager, we are affected by conditions in the financial markets and, in particular, the continued volatility and reduction in liquidity in the global credit markets which have reduced our revenues from, and the values of, many of the types of financial assets which we manage or own and reduced our ability to access debt financing for our operations. For the balance of fiscal 2009, given the constraints imposed by current economic and market conditions, we expect to focus on (i) managing our existing assets which provides us with substantial fee income and (ii) raising funds through our retail broker channel for investment programs in our commercial finance and real estate businesses. We also expect to begin to realize the cost savings primarily resulting from our reductions in force which we initiated in prior quarters. In our commercial finance segment, we have scaled back our originations to accommodate the limited availability of debt financing. In our real estate segment, we expect to continue to acquire multifamily apartments through our investment partnerships, and additionally, are focusing efforts towards acquiring distressed assets where we possess significant experience in managing and resolving such assets using our existing real estate platform of highly skilled professionals. In financial fund management, we continue to manage and receive fees from the collateralized debt obligation, or CDO, issuers that we had previously formed and sponsored, but do not expect to sponsor any new CDO issuers.

For the first half of fiscal 2009, the effect of the current economic conditions resulted in us recording the following charges.

During the three months ended March 31, 2009:

· an $8.7 million loss, net of tax, from the sale of our interest in Apidos CDO VI, a CDO issuer, that invested in secured bank loans;

· a $1.5 million charge, net of minority interest and tax, from the other-than-temporary impairment of certain investments in CDO issuers, primarily those with investments in financial institutions ($868,000) and bank loans ($596,000);

· a $638,000 provision for credit losses, net of tax, which impacted our commercial finance business segment; and

· a $381,000 charge, net of tax, to reflect our equity interest in the unrealized depreciation in the book value of securities held by investment partnerships we have sponsored and manage.

During the six months ended March 31, 2009:

· a $7.7 million charge, net of tax, from the sale of our interest in Apidos CDO VI;

· a $4.2 million charge, net of minority interest and tax, to reflect the other-than-temporary impairment of certain investments in CDO issuers with investments in bank loans ($3.3 million, including $1.3 million in Europe) and financial institutions ($937,000);

· a $3.0 million provision for credit losses, net of tax, which impacted our business segments as follows: commercial finance ($1.9 million), real estate ($20,000) and financial fund management ($1.1 million); and

· a $1.0 million charge, net of tax, to reflect our equity losses in the unrealized depreciation in the book value of securities held by our investment partnerships.

Principally as a result of these charges, we recorded a net loss of $11.6 million and $14.9 million, respectively, for the three and six months ended March 31, 2009.

We have reduced the amount of assets and borrowings reflected on our balance sheet. As of March 31, 2009, total assets decreased by $421.8 million to $336.6 million and borrowings decreased by $395.2 million to $158.8 million from comparable balances at September 30, 2008. This reduction results largely from the sale of all or part of our interests in two entities that we had previously consolidated. In March 2009, we entered into an agreement to sell our equity interest in Apidos CDO VI and thereby removed from our balance sheet $219.7 million of loans it held for investment and $213.3 million of its senior notes, net. We also sold a portion of our interest in a LEAF subsidiary, LEAF Commercial Finance Fund, LLC, or LCFF, and accordingly, our balance sheet no longer consolidates $195.0 million of commercial finance assets together with $187.6 million of debt financing ($143.8 million outstanding at September 30, 2008). In both cases, the debt removed had been non-recourse to us. Additionally, we reduced outstanding borrowings on our commercial finance revolving warehouse credit facility by $31.2 million and our Sovereign revolving line of credit by $6.4 million.

Assets Under Management

Our assets under management decreased by $1.0 billion to $16.7 billion at March
31, 2009 from $17.7 billion at March 31, 2008.  The following table sets forth
information relating to our assets under management by operating segment (in
millions) (1):

                               As of March 31,             Increase (Decrease)
                              2009         2008        Amount           Percentage
Financial fund management   $ 13,476     $ 14,285     $    (809 )  (2)      (6)%
Real estate                    1,693        1,688             5               -
Commercial finance             1,504        1,705          (201 )  (3)      (12)%
                            $ 16,673     $ 17,678     $  (1,005 )           (6)%

(2) Reduction primarily due to the sale of Apidos CDO VI and a decrease in the collateral base of our ABS portfolio resulting from defaults and rating agency downgrades.

(3) Reduction primarily reflects the sale of LCFF and reduction in new originations.

Our assets under management are primarily managed through various investment vehicles including CDOs, public and private limited partnerships, tenant-in-common, or TIC, property interest programs, a real estate investment trust, or REIT, and other investment funds. All of our operating segments manage assets on behalf of Resource Capital Corp., or RCC, a REIT we sponsored and manage. The following table sets forth the number of entities we manage by operating segment:

                                                                                   Other
                                         Limited           TIC Property         Investment
                            CDOs      Partnerships       Interest Programs         Funds
As of March 31, 2009
Financial fund management     34             13                       -                 1
Real estate                     2              8                      7                 5
Commercial finance              -              4                      -                 1
                              36             25                       7                 7
As of March 31, 2008
Financial fund management     31             12                       -                 -
Real estate                     2              6                      7                 2
Commercial finance              -              3                      -                 1
                              33             21                       7                 3

As of March 31, 2009 and 2008, we managed $16.7 billion and $17.7 billion of assets, respectively, for the accounts of institutional and individual investors and RCC and for our own account in the following asset classes (in millions):

                                                                                                       As of
                                                                                                      March 31,
                                                       As of March 31, 2009                             2008
                                   Institutional and
                                      Individual
                                       Investors             RCC         Company         Total          Total
Trust preferred securities (1)    $             4,729     $       -     $        -     $   4,729     $     5,077
Bank loans (1)                                  3,070           960              -         4,030           3,086
Asset-backed securities (1)                     4,357           295              -         4,652           6,043
Real properties (2)                               667             -              -           667             572
Mortgage and other real
estate-related loans (2)                            -           869            157         1,026           1,116
Commercial finance assets (3)                   1,300            96            108         1,504           1,705
Private equity and hedge fund
assets (1)                                         65             -              -            65              79
                                  $            14,188     $   2,220     $      265     $  16,673     $    17,678

(1) We value financial fund management assets at their amortized cost.

(2) We value real estate assets as the sum of (a) the amortized cost of our commercial real estate loans; (b) the book value of real estate and other assets held by our real estate investment partnerships and tenant-in-common, or TIC, property interests; (c) the amount of our outstanding legacy loan portfolio; and (d) the book value of our interests in real estate.

(3) We value commercial finance assets as the sum of the book value of the equipment, leases and loans and future payment card receivables financed by us.

Employees

As of March 31, 2009, excluding our property management team, we employed 490
full-time workers, a decrease of 89, or 15%, from 579 employees at March 31,
2008. The following table summarizes all of our employees by operating segment:

                                                  Financial
                                                     Fund                            Commercial       Corporate/
                                    Total         Management       Real Estate        Finance           Other
March 31, 2009
Investment professionals               126              36               26               62                 2
Other                                  364              16               16               295               37
                                       490              52               42               357               39
Property management                    313               -               313                 -              -
Total                                  803              52               355              357               39

March 31, 2008
Investment professionals               187              42               30               113                2
Other                                  392              19               15               320               38
                                       579              61               45               433               40
Property management                    218               -               218                 -              -
Total                                  797              61               263              433               40

Revenues

The revenues in each of our reporting segments are generated by the fees we earn
for structuring and managing the investment vehicles we sponsor on behalf of
individual and institutional investors, RCC and the income produced by the
assets and investments we manage for our own account. The following table sets
forth certain information related to the revenues we have recognized in each of
these revenue categories (in thousands):

                                              Three Months Ended           Six Months Ended
                                                  March 31,                    March 31,
                                              2009          2008          2009          2008
Fund management revenues
(1)                                        $   13,241     $  19,935     $  29,452     $  34,178
RCC management fees                               986           574         2,477         2,945
Finance and rental revenues (2)                11,970        25,407        25,845        50,819
Gain on resolution of loans and other
property interests (3)                            678         1,633           678         1,633
Net gain on the sale of TIC property
interests (4)                                       -           202             -           373
Other (5)                                         330         2,629           946         4,491
                                           $   27,205     $  50,380     $  59,398     $  94,439

(2) Includes interest and rental income from our commercial finance operations, interest income on bank loans from our financial fund management operations, interest and accreted discount income from our real estate operations and revenues from certain real estate assets.

(3) Includes the resolution of loans we hold in our real estate segment.

(4) Reflects gains, net of losses, recognized by our real estate segment on the sale of TIC property interests to outside investors.

(5) Includes the equity compensation earned in connection with the formation of RCC and the disposition of leases and loans as well as other charges in our commercial finance operations.

A detailed description of the revenues generated by each of our business segments can be found under "Results of Operations: Commercial Finance," ":Real Estate" and ":Financial Fund Management."

Results of Operations: Commercial Finance

During the quarter, we focused our efforts on improving our financial condition by monetizing investments and reducing borrowings. In March 2009, two of our investment partnerships, LEAF Equipment Leasing Income Fund III, L.P., or LEAF III and LEAF Equipment Finance Fund 4, L.P., or LEAF 4, two public equipment leasing partnerships, formed a joint venture, LEAF Funds Joint Venture 2, LLC, or JV2. LEAF III and LEAF 4 invested $10.0 million into JV2, which in turn acquired a portion of our interest in LCFF, an investment fund that we formed to acquire and finance leases and loans we originate, and repaid us for amounts due to us from LCFF. We continue to maintain voting control of LCFF. As a result of the transaction, LCFF became a VIE for which JV2 was determined to be the primary beneficiary and, therefore, we no longer consolidate LCFF as of March 1, 2009. Accordingly, a total of $195.0 million of commercial finance assets and $187.6 million of debt financing were effectively transferred to JV2. As a result of this deleveraging and the reduction in our warehouse borrowings, the commercial finance assets we managed for our own account at March 31, 2009 decreased $512.0 million (83%) to $108.0 million as compared to $620.0 million at March 31, 2008. The assets we managed for others increased by $311.0 million (29%) to $1.4 billion at March 31, 2009 as compared to $1.1 billion at March 31, 2008.

As of March 31, 2009, our commercial finance assets under management decreased $201.0 million (12%) to $1.5 billion as compared to $1.7 billion million at March 31, 2008. Originations of new equipment financing for the three and six months ended March 31, 2009 were $89.3 million and $237.7 million, respectively, as compared to $168.9 million and $899.0 million for the three and six months ended March 31, 2008, a decrease of $79.6 million (47%) and $661.3 million (74%), respectively. Originations for the six months ended March 31, 2008 included $581.5 million related to our November 2007 acquisitions of the Dolphin Capital Corp. and NetBank portfolios of leases and loans. Excluding these acquisitions, originations for the three and six months ended March 31, 2008 were $168.9 million and $317.5 million, respectively, as compared to $89.3 million and $237.7 million for the three and six months ended March 31, 2009. Our originations have been and we expect they will continue to be impacted by the state of the credit markets and the ability of our funds to obtain financing to acquire portfolios of leases and loans from us.

In August 2008, we commenced the $200.0 million public offering of limited partnership interests in LEAF 4, which broke escrow and commenced operations in September 2008. Through May 8, 2009, we had raised $62.7 million in LEAF 4. In addition, through February 2009, we sold subordinated notes in LCFF. This offering closed in February 2009 having raised $9.4 million.

As of March 31, 2009, we managed approximately 106,000 leases and loans that had an average original finance value of $24,000 with an average term of 53 months as compared to approximately 93,000 leases and loans that had an average original finance value of $24,500 with an average term of 49 months as of March 31, 2008.

The following table sets forth information related to commercial finance assets we manage (1) (in millions):

                                            As of March 31,
                                            2009        2008
LEAF                                      $    102     $   472 (1)
LCFF (2)                                         -         125
Merit Capital Advance, or Merit                  6          23
Managed for our own account                    108         620

Lease Equity Appreciation Fund I, L.P.          89         109
Lease Equity Appreciation Fund II, L.P.        245         336
LEAF III                                       655         536
LEAF 4                                          65           -
LCFF (2)                                       207           -
RCC                                             96          94
Other                                           39          10
Managed for others                           1,396       1,085
                                          $  1,504     $ 1,705

(2) As of March 1, 2009, LCFF is no longer a consolidated entity.

The revenues from our commercial finance operations consist primarily of (a) finance revenues from leases and loans held by us prior to being sold, (b) acquisition fees which we earn when we sell commercial finance assets to one of our investment partnerships, and (c) asset management fees earned over the life of the lease or loan after we sell it. The following table sets forth certain information relating to the revenues recognized and costs and expenses incurred in our commercial finance operations (in thousands):

                                         Three Months Ended          Six Months Ended
                                              March 31,                  March 31,
                                          2009          2008         2009         2008
      Revenues: (1)
      Finance revenues - LEAF          $    6,675     $ 17,230     $ 13,609     $ 31,489
      Finance revenues - Merit                595        2,108        1,518        4,276
      Acquisition fees                      1,831        5,749        3,186       11,453
      Fund management fees                  3,996        4,820        9,598        8,817
      Other                                   324        2,758          894        4,595
                                       $   13,421     $ 32,665     $ 28,805     $ 60,630

      Costs and expenses:
      Wage and benefit costs - LEAF    $    3,232     $  6,462     $  6,435     $ 11,411
      Wage and benefit costs - Merit          279          667          665        1,259
                                            3,511        7,129        7,100       12,670
      Other costs and expenses:
      LEAF                                  3,129        4,198        6,717        7,239
      Merit                                   134          754          406        1,553
                                            3,263        4,952        7,123        8,792
                                       $    6,774     $ 12,081     $ 14,223     $ 21,462

Revenues - Three and Six Months Ended March 31, 2009 as Compared to the Three and Six Months Ended March 31, 2008

Revenues decreased $19.2 million (59%) and $31.8 million (52%) for the three and six months ended March 31, 2009, respectively, as compared to three and six months ended March 31, 2008. We attribute these decreases to the following:

· a $10.6 million (61%) and $17.9 million (57%) decrease in commercial finance revenues for the three and six months ended March 31, 2009, respectively. The portfolio of commercial finance assets held by us at March 31, 2009 was $108.0 million compared to $620.0 million at March 31, 2008, a decrease of $512.0 million (83%). In fiscal 2008, we held a significantly higher than normal portfolio of leases and loans as a result of the $412.0 million NetBank portfolio acquired in November 2007 and held by us until being completely sold to LEAF III in April 2008. As a result of the sale, our finance revenues decreased significantly; however, we are earning ongoing fund management fees;

· a $1.5 million (72%) and $2.8 million (64%) decrease in commercial finance revenues for the three and six months ended March 31, 2009, respectively, attributable to the operations of Merit. Due to current economic conditions, we have reduced our originations for the Merit business;

· a $3.9 million (68%) and $8.3 million (72%) decrease, respectively, in asset acquisition fees resulting from the decrease in leases sold to our funds and RCC by $357.9 million (77%) and $586.4 million (76%) to $104.4 million and $180.7 million for the three and six months ended March 31, 2009, respectively. The decrease reflects the assets sold to our investment entities in fiscal 2008 related to the NetBank and Dolphin Capital Corp. portfolio acquisitions;

· an $824,000 (17%) decrease in fund management fees for the three months ended March 31, 2009. Management fees include fees received to service our portfolios, offering fees earned when we are raising capital in our investment entities and capitalized loan origination costs. For the three months ended March 31, 2009, management fees earned to service leases increased by $283,000 (9%). This increase was more than offset by decreased offering fees of $327,000 (42%) related to the time between the closing of LEAF III (April 2008) and the commencement of LEAF 4 (August 2008). Equity sales volume is typically greater at the end of a fund's offering than it is in the beginning. In addition, net capitalized loan origination costs decreased by . . .