SEMELE GROUP INC, PRES14A, 2000-01-21

SEMELE GROUP INC
PRES14A, 2000-01-21
REAL ESTATE INVESTMENT TRUSTS

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SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934

Filed by the Registrant /x/

Filed by a Party other than the Registrant / /

Check the appropriate box:

/x/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

Semele Group Inc.

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(Name of Registrant as Specified in Its Charter)

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(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/x/ No fee required.

/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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/ / Fee paid previously with preliminary materials.

/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.

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(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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[SEMELE LETTERHEAD]

_____________ __, 2000

Dear Stockholder:

You are cordially invited to attend a Special Meeting of the
Stockholders of Semele Group Inc. (the "Company") in lieu of the 1998 Annual
Meeting, to be held at the Holiday Inn Select, 700 Main Street, Stamford,
Connecticut, on Friday, February 17, 2000, at 10:00 a.m., local time.

On December 22, 1999, the Company purchased 85% of the outstanding
Capital Stock of Equis II Corporation from Gary D. Engle, James A. Coyne and
certain trusts for the benefit of Mr. Engle's children. The purchase price
was approximately $19.6 million. Equis II Corporation has a controlling
interest in four Delaware business trusts: AFG Investment Trust A, AFG
Investment Trust B, AFG Investment Trust C, and AFG Investment Trust D.
Historically, the business of the trusts has been acquiring capital equipment
and leasing it to third parties. More recently, the trusts have begun to
invest in other assets, and intend to continue to do so. The Company has an
option to purchase, and Messrs. Engle and Coyne and the Engle family trusts
have an option to sell to the Company, the remaining 15% of Equis II. The
purchase price for the remaining 15% is 510,000 shares of the Company's
Common Stock.

At the Meeting, stockholders of record as of January 10, 2000, will be
asked to approve the issuance of 510,000 shares of the Company's Common Stock in
the event that the purchase/sale option is exercised. At the Meeting,
stockholders will also be asked to elect two directors of the Company. Details
of all the proposals to be presented to the stockholders at the Meeting are
contained in the enclosed Proxy Statement, which you are encouraged to read
carefully.

Whether or not you plan to attend the Meeting, please complete, sign
and date the enclosed proxy card and return it in the enclosed prepaid envelope.
You may revoke your proxy in the manner described in the Proxy Statement at any
time before it has been voted at the Meeting. If you attend the Meeting, you may
vote in person, even if you have previously returned your proxy card. Your
prompt cooperation will be greatly appreciated. This solicitation is authorized
by and is made on behalf of the Company's Board of Directors.

Sincerely,

SEMELE GROUP INC.

James A. Coyne
President and Chief
Operating Officer

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SEMELE GROUP INC.
ONE CANTERBURY GREEN
201 BROAD STREET
STAMFORD, CONNECTICUT 06901
(203) 363-0853

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
IN LIEU OF ANNUAL MEETING

To the Stockholders of Semele Group Inc.:

Notice is hereby given that a Special Meeting of Stockholders of Semele
Group Inc., a Delaware corporation, in lieu of Annual Meeting will be convened
at the Holiday Inn Select, 700 Main Street, Stamford, Connecticut, on February
17, 2000, at 10:00 a.m., local time. All stockholders of the Company are
entitled to attend the Meeting, which will be held for the following purposes:

1. To elect two directors to hold office until the 2002 Annual Meeting of
Stockholders, or otherwise as provided in the Company's By-Laws;

2. To consider and vote upon a proposal to issue 510,000 shares of the
Company's Common Stock in connection with the possible purchase by the
Company of the remaining 15% of Equis II Corporation from Gary D.
Engle, James A. Coyne and certain trusts for the benefit of Mr. Engle's
children;

3. To concur in the selection of Ernst & Young LLP as the Company's
independent auditor for the fiscal year ending December 31, 1999; and

4. To transact any other business as may properly come before the Meeting,
or any adjournment or postponement thereof.

Only stockholders of record at the close of business on January 10,
2000, are entitled to receive notice of and to vote at the Meeting or any
adjournment or postponement of the Meeting. A list of these stockholders will be
available for inspection at the Company's offices for at least ten days prior to
the Meeting.

A Proxy Statement and form of proxy are enclosed. Also enclosed are the
Company's 1998 annual report on Form 10-KSB and its most recent quarterly report
on Form 10-QSB. Whether or not you expect to attend the Meeting, it is important
that you fill in, sign, date and mail in the proxy in the enclosed envelope so
that your shares may be voted for you.

By order of the Board of Directors:

Craig D. Mills
Secretary

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TABLE OF CONTENTS
<TABLE>
<CAPTION>

PAGE NO.

<S> <C>
PRINCIPAL HOLDERS OF SEMELE COMMON STOCK..................................................................................6

MATTERS TO BE CONSIDERED BY STOCKHOLDERS..................................................................................8
PROPOSAL 1: ELECTION OF DIRECTORS.....................................................................................8
Nominees...............................................................................................................8
Continuing Directors...................................................................................................9
Recommendation of the Board...........................................................................................10
PROPOSAL 2: TO CONSIDER AND VOTE UPON A PROPOSAL TO ISSUE 510,000 SHARES OF THE COMPANY'S COMMON STOCK IN
CONNECTION WITH THE POSSIBLE PURCHASE BY THE COMPANY OF 15% OF EQUIS II CORPORATION...................................10
What Stockholders are being Asked to Approve..........................................................................10
The Transaction.......................................................................................................10
Background; Reasons for the Transaction...............................................................................11
Interests of Messrs. Engle and Coyne in the Transaction...............................................................12
Voting Trust..........................................................................................................13
Source of Funds.......................................................................................................13
Investment Company Act................................................................................................14
Related Transaction...................................................................................................15
Opinion of Financial Advisor..........................................................................................15
Representations and Warranties........................................................................................18
Resale of Company Common Stock Issued in the Transaction; Registration Rights.........................................19
Accounting Treatment..................................................................................................19
Federal Income Tax Considerations.....................................................................................19
Expenses and Fees.....................................................................................................21
Regulatory Approvals..................................................................................................21
Pro Forma Combined Financial Statements...............................................................................21
Business of the Company...............................................................................................25
Business of Equis II..................................................................................................26
Equis II - Selected Financial Data....................................................................................27
Equis II - Management's Discussion and Analysis of Financial Condition And Results of Operations......................28
Consolidated Financial Statements of Equis II -December 31, 1998......................................................32
Consolidated Financial Statements of Equis II -September 30, 1999.....................................................50
Recommendation of the Board...........................................................................................63
PROPOSAL 3: SELECTION OF INDEPENDENT AUDITOR.........................................................................64
Recommendation of the Board...........................................................................................64

EXECUTIVE OFFICERS.......................................................................................................64

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS.........................................................................65
Director Compensation.................................................................................................65
Executive Compensation................................................................................................65
Executive and Director Stock Option Plan..............................................................................68
Certain Relationships and Related Transactions........................................................................68

STOCKHOLDER PROPOSALS....................................................................................................69

OTHER MATTERS............................................................................................................69

</TABLE>

5
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PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS OF
SEMELE GROUP INC.

IN LIEU OF ANNUAL MEETING
________________, 2000

This Proxy Statement is furnished to the holders of shares of the
Common Stock, par value $.10, of Semele Group Inc., a Delaware corporation (the
"Company"), in connection with the solicitation of proxies by the Company's
Board of Directors for use at a Special Meeting of Stockholders in lieu of
Annual Meeting. The Meeting will be convened on February 17, 2000, at
approximately 10:00 a.m., local time, and any adjournment or postponement of the
Meeting will be announced at the Meeting. Copies of this Proxy Statement, and
the enclosed form of proxy, were first sent or given to stockholders on or about
________________, 2000. Stockholders who wish to attend the Meeting should
contact the Company at (203) 363-0853 so that arrangements can be made.

Shares represented by properly executed proxies in the enclosed form
received by the Board of Directors prior to the Meeting will be voted at the
Meeting. Shares not represented by properly executed proxies will not be voted.
If a stockholder specifies a choice with respect to any proposal to be acted
upon, the shares represented by that proxy will be voted as specified. If a
stockholder does not specify a choice, in an otherwise properly executed proxy,
with respect to any proposal to be acted upon, the shares represented by that
proxy will be voted with respect to that proposal in accordance with the
recommendation of the Board of Directors as described in this Proxy Statement. A
stockholder who signs and returns a proxy in the enclosed form may revoke it by:
(i) giving written notice of revocation to the Company before the proxy is voted
at the Meeting; (ii) executing and delivering a later-dated proxy before the
proxy is voted at the Meeting; or (iii) attending the Meeting and voting the
shares in person. Merely attending the meeting will not be sufficient to revoke
a proxy.

The Company will bear all costs in connection with the solicitation of
proxies, including the cost of preparing, printing and mailing this Proxy
Statement. In addition to the use of the mails, proxies may be solicited by the
Company's directors and officers and by employees of Equis Financial Group
Limited Partnership, which provides administrative services to the Company. None
of these individuals will be additionally compensated, but they may be
reimbursed for out-of-pocket expenses in connection with the solicitation.
Arrangements will also be made with brokerage houses, banks and other
custodians, nominees and fiduciaries for the forwarding of proxies and proxy
material to the beneficial owners of the Common Stock held of record by those
persons, and the Company may reimburse those custodians, nominees and
fiduciaries for their expenses in so doing. Further, the Company has retained
the services of Corporate Investor Communications, Inc., to assist in the
solicitation of proxies for the Meeting at a fee payable by the Company of
$5,000, plus expenses.

The close of business on January 10, 2000, has been fixed as the date
for determining those stockholders entitled to notice of and to vote at the
Meeting (the "Record Date"). At the Record Date, the Company had 1,189,788
shares outstanding, each of which entitles the holder to one vote at the
Meeting. Only stockholders of record at the Record Date will be entitled to vote
at the Meeting. The presence of a majority of the outstanding shares of Common
Stock, represented in person or by proxy at the Meeting, will constitute a
quorum. For the proposal to elect directors, the two nominees receiving the
greatest number of votes cast by holders of the Company's Common Stock present
in person or by proxy at the Meeting and entitled to vote will be elected as
directors of the Company. Each of the remaining proposals requires the
affirmative vote of a majority of the shares present in person or by proxy at
the Meeting and entitled to vote on the matter. Abstentions, withheld votes and
broker non-votes (i.e., shares held by brokers that are present but not voted
because the brokers are prohibited from exercising discretionary authority) will
be counted in calculating the number of shares present in person or by proxy at
the Meeting for purposes of establishing a quorum for the transaction of
business. Abstentions will be counted in calculating the number of shares
entitled to vote on a matter, whereas broker non-votes will be excluded.

PRINCIPAL HOLDERS OF SEMELE COMMON STOCK

The following table sets forth certain information regarding beneficial
owners of Common Stock at the Record Date by: (i) each person or entity who is
known by the Company to own more than 5% of the Common Stock (together with such
person's address); (ii) each director and each executive officer of the Company
named in the executive compensation table; and (iii) all current directors and
officers as a group. Share amounts and percentages shown for each person or
entity are

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adjusted to give effect to shares of Common Stock that are not outstanding but
may be acquired by that person or entity upon exercise of all options and
warrants exercisable by that person or entity within 60 days of the Record Date.
However, those shares of Common Stock are not deemed to be outstanding for the
purpose of computing the percentage of outstanding shares beneficially owned by
any other person or entity.

Percent of
Name of Person or Entity Number of Shares Total Shares
- ------------------------ ---------------- ------------
<S> <C> <C>
AFG Hato Arrow Limited Partnership 198,700 (1) 16.7%
AFG Dove Arrow Limited Partnership
AIP/Larkfield Limited Partnership
c/o Equis Financial Group
88 Broad Street
Boston, Massachusetts 02110

Gary D. Engle, Chairman, Chief Executive 255,706 (2) 21.5%
Officer, Director

James A. Coyne, President, Chief Operating 58,905 (3) 5%
Officer, Director

Walter E. Auch, Sr., Director 6,600 (4) Less than 1%

Joseph W. Bartlett, Director 5,000 (4) Less than 1%

Robert M. Ungerleider, Director 5,000 (4) Less than 1%

All Directors and Officers of the Company 331,811 27.5%
as a group (seven persons)

</TABLE>

(1) Based upon reports filed with the Securities and Exchange Commission
(the "SEC") by certain affiliates of Equis Financial Group Limited
Partnership ("EFG") pursuant to Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), indicating
ownership of 5% or more of the outstanding Common Stock. At the Record
Date: (i) AFG Hato Arrow Limited Partnership owns 63,544 shares,
amounting to 5.37% of the outstanding Common Stock; (ii) AFG Dove Arrow
Limited Partnership owns 61,673 shares, amounting to 5.22% of the
outstanding Common Stock; and (iii) AIP/Larkfield Limited Partnership
owns 73,483 shares, amounting to 6.21% of the outstanding Common Stock.
Gary D. Engle, Chairman, Chief Executive Officer and a director of the
Company, has effective control over the operation of each of these
limited partnerships.

(2) Includes 1,100 shares owned directly and 55,906 shares owned by the
trustee of a rabbi trust for the benefit of Mr. Engle over which Mr.
Engle has voting control. The shares held by such trustee represent
salary deferred by Mr. Engle through the Record Date pursuant to the
Company's Incentive Compensation Plan. Because Mr. Engle has effective
control over AFG Hato Arrow Limited Partnership, AFG Dove Arrow Limited
Partnership and AIP/Larkfield Limited Partnership, he is also deemed to
beneficially own the 198,700 shares owned by those partnerships.

(3) Includes 3,000 shares owned directly and 55,905 shares owned by the
trustee of a rabbi trust for the benefit of Mr. Coyne over which Mr.
Coyne has voting control. The shares held by such trustee represent
salary deferred by Mr. Coyne through the Record Date pursuant to the
Company's Incentive Compensation Plan.

(4) Includes 5,000 shares underlying currently-exercisable options granted
under the Company's 1994 Executive and Director Stock Option Plan.

The Company is not aware of any other person who, alone or as part of a
group, beneficially owns more than 5% of the outstanding shares of Common Stock
at the Record Date. The Company is not aware of any arrangements, the operation
of which may at a subsequent date result in a change of control of the Company.

Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file initial statements of beneficial ownership
(Form 3), and

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statements of changes in beneficial ownership (Forms 4 or 5), of Common Stock
and other equity securities of the Company with the SEC and the National
Association of Securities Dealers, Inc. (the "NASD"). The SEC requires officers,
directors and greater than 10% stockholders to furnish the Company with copies
of all these forms filed with the SEC or the NASD.

To the Company's knowledge, based solely on its review of the copies of
these forms received by it, or written representations from certain reporting
persons that no additional forms were required for those persons, the Company
believes that all filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were complied with during 1998 and 1999.

MATTERS TO BE CONSIDERED BY STOCKHOLDERS

PROPOSAL 1: ELECTION OF DIRECTORS

Two individuals will be elected at the Meeting to serve as directors of
the Company for a three-year term expiring at the 2002 Annual Meeting. The
nominees for the class whose term will expire at the 2002 Annual Meeting are
Joseph W. Bartlett and Robert M. Ungerleider, both of whom are being nominated
for re-election. Unless instructions to the contrary are given, the persons
named as proxy voters in the enclosed proxy, or their substitutes, will vote for
Mr. Bartlett and Mr. Ungerleider for director with respect to all proxies
received by the Company. If a nominee should become unavailable for any reason,
the votes for that nominee will be cast for a substitute nominee designated by
the Board of Directors. The directors have no reason to believe that Mr.
Bartlett or Mr. Ungerleider will be unable to serve if elected.

NOMINEES.

The nominees for director are as follows:

Year During Which
Individual First
Name Age Became a Director Other Principal Occupation(s) During Past 5 Years
- ---- --- ----------------- -------------------------------------------------

<S> <C> <C> <C>
Joseph W. Bartlett 66 1997 Mr. Bartlett has been a partner in the law firm
of Morrison & Foerster LLP since March 1996.
From July 1991 until March 1996 he was a partner
in the law firm of Mayer, Brown & Platt. Mr.
Bartlett is also a director of Cyrk, Inc., which
designs, manufactures and distributes products
for promotional programs and custom-designed
sports apparel and accessories.

Robert M. 58 1987 Mr. Ungerleider is of counsel to the law firm of
Ungerleider Lane Felcher Kurlander & Fox. Mr. Ungerleider
has founded, developed and sold a number of
startup ventures including Verifone Finance, an
equipment leasing company, Smartpage, a paging
service company, and Financial Risk Underwriting
Agency, Inc., an insurance firm specializing in
financial guarantee transactions. Prior to that,
Mr. Ungerleider practiced real estate and
corporate law in New York City for ten years.
Mr. Ungerleider is also a director of Legend
Properties, Inc. (f/k/a Banyan Mortgage
Investment Fund).

</TABLE>

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CONTINUING DIRECTORS.

The continuing directors of the Company are as follows:

Year During Which
Individual First
Name Age Became a Director Other Principal Occupation(s) During Past 5 Years
- ---- --- ----------------- -------------------------------------------------

<S> <C> <C> <C>
Walter E. Auch, Sr. 76 1987 Prior to retiring, Mr. Auch was the Chairman and
Chief Executive Officer of the Chicago Board
Options Exchange. Prior to that time, Mr. Auch
was Executive Vice President, director and a
member of the executive committee of
PaineWebber. Mr. Auch is a director of Pimco
Advisors L.P., Smith Barney Concert Series Funds,
Smith Barney Trak Fund, The Brinson Partners
Funds and Nicholas Applegate Funds. He is also a
trustee of Hillsdale College and the Arizona
Heart Institute. Mr. Auch is also a trustee of
Banyan Strategic Realty Trust and a director of
Legend Properties, Inc. (f/k/a Banyan Mortgage
Investment Fund). Mr. Auch's term expires at the
2000 Annual Meeting.

James A. Coyne 39 1997 Mr. Coyne has been President and Chief Operating
Officer of the Company since 1997. Mr. Coyne is
Executive Vice President/Capital Markets of Equis
Corporation, the general partner of EFG, and is
also Vice President of AFG Realty Inc., an
affiliate of EFG. He is responsible for EFG's
real estate activities in both the United States
and Australia. Mr. Coyne joined EFG in 1989,
remained until May 1993, and rejoined EFG in
November 1994. From 1993 through November 1994
he was with the Raymond Company, a private
investment firm, where he was responsible for
obtaining financing for corporate and real estate
acquisitions. Mr. Coyne's term expires at the
2001 Annual Meeting.

Gary D. Engle 51 1997 Mr. Engle has been Chairman and Chief Executive
Officer of the Company since November 1997. Mr.
Engle is President and Chief Executive Officer of
EFG, which he joined in 1990 as Executive Vice
President. Mr. Engle purchased a controlling
interest in EFG in December 1994. He is also
President of AFG Realty, Inc. From 1987 to 1990,
Mr. Engle was a principal and co-founder of Cobb
Partners Development, Inc., a real estate and
mortgage banking company, with principal offices
in Florida. From 1980 to 1987, Mr. Engle served
in various capacities with Arvida Disney Company,
a large-scale community real estate development
company owned by the Walt Disney Company with
real estate development projects worldwide. Mr.
Engle's term expires at the 2000 Annual Meeting.

</TABLE>

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The Board is required to meet at least four times each year either in
person or by telephonic conference. The Board met five times in 1998. The
directors have established a compensation committee, which is composed of
Messrs. Bartlett and Ungerleider and which met two times during 1998, and an
audit committee, which is composed of Messrs. Auch, Bartlett and Ungerleider and
which met once during 1998. The directors have not established a nominating
committee or other committee performing a similar function.

RECOMMENDATION OF THE BOARD.

The Board hereby recommends and nominates the following nominees for
election as a director of the Company by the stockholders at the Meeting to
serve until the 2002 Annual Meeting of Stockholders: Joseph W. Bartlett and
Robert M. Ungerleider.

VOTE REQUIRED. The two nominees receiving the highest vote totals
will be elected as directors of the Company.

PROPOSAL 2: TO CONSIDER AND VOTE UPON A PROPOSAL TO ISSUE 510,000 SHARES OF THE
COMPANY'S COMMON STOCK IN CONNECTION WITH THE POSSIBLE PURCHASE BY THE COMPANY
OF 15% OF EQUIS II CORPORATION.

WHAT STOCKHOLDERS ARE BEING ASKED TO APPROVE.

The Company is seeking stockholder approval of the issuance and
delivery of 510,000 shares of Common Stock of the Company to Gary D. Engle,
James A. Coyne and certain trusts for the benefit of Mr. Engle's children in
order to satisfy the requirements of the National Association of Securities
Dealers (the "NASD") for continued listing of the Company's Common Stock on the
Nasdaq Small-Cap Market. In particular, under rules promulgated by the NASD, the
Company is required to seek stockholder approval prior to issuing shares in
connection with the acquisition of the stock of another company if any director,
officer or substantial stockholder of the Company has a 5% or greater interest
(or these persons collectively have a 10% or greater interest) in the company to
be acquired. As described more fully below, the Company acquired 85% of Equis II
Corporation ("Equis II") on December 22, l999, for approximately $19.6 million,
paid by the issuance of promissory notes, and may acquire the remaining 15% for
a purchase price of 510,000 shares of the Company's Common Stock if the Company
or the selling Equis II stockholders exercise a purchase/sale option. Messrs.
Engle and Coyne are each directors and officers of the Company, and Mr. Engle
beneficially owns a substantial interest in the Company. Messrs. Engle and Coyne
also have a 5% or greater interest in Equis II. Thus, stockholder approval is
required before the Company can issue the 510,000 shares of Common Stock that is
the purchase price for the remaining 15% of Equis II.

THE TRANSACTION.

On December 22, 1999, the Company purchased 85% of the stock of Equis
II, a Delaware corporation, for approximately $19.6 million. The Company paid
the entire purchase price by issuing promissory notes to the selling
stockholders. Prior to the purchase, Equis II was owned entirely by Gary D.
Engle, James A. Coyne and certain trusts for the benefit of Mr. Engle's children
for which Mr. Engle's brother serves as trustee. Messrs. Engle and Coyne and the
Engle family trusts continue to own the remaining 15% of Equis II. In connection
with the purchase, the Company entered into an agreement with Messrs. Engle and
Coyne and the Engle family trusts, which gives the Company the right to
purchase, and gives these stockholders the right to sell to the Company, the
remaining 15% of Equis II for 510,000 shares of the Company's Common Stock. A
special committee of the Board of Directors of the Company, consisting of
Messrs. Auch, Bartlett and Ungerleider, the Company's independent directors,
unanimously approved the purchase by the Company of 85% of Equis II and the
agreement regarding the purchase of the remaining 15%.

The purchase/sale option agreement's rights can only be exercised if
stockholder approval for payment in shares is obtained. If stockholder
approval is not obtained before December 31, 2000, the agreement terminates.
If stockholder approval for payment in shares is obtained at the Meeting, the
rights can be exercised until February 17, 2001. At September 30, 1999, and
at the Record Date, 510,000 shares of Common Stock of the Company had a value
of $2,773,125 and $2,836,875, respectively, based on a closing price of
$5.4375 per share and $5.5625 per share, respectively, on the Nasdaq
Small-Cap Market, where the Company's Common Stock is traded. The high and
low sales prices for a share of Common Stock of the Company on the Nasdaq
Small-Cap Market on December 16, 1999, the day preceding public announcement
of the agreement to purchase 85% of Equis II and the potential purchase of
the 15% balance, were both $5.5625.

Equis II has an interest in four Delaware business trusts, consisting
of (i) 100% ownership of a Delaware corporation that is the Managing Trustee of
the four trusts and (ii) 99% of the Class B Subordinated Beneficiary Interests
of each of the trusts, comprising approximately 62% of the voting interests of
each of the trusts. The special committee of the Board also approved acquisition
by the Company on November 18, 1999, of an additional interest in each of the
trusts, known as the Special Beneficiary Interest, from Equis Financial Group
Limited Partnership ("EFG"), which is controlled by Mr. Engle. See "Related
Transaction." Two of the trusts have scheduled termination dates of December 31,
2003, one of the trusts has a scheduled termination date of December 31, 2004,
and one of the trusts has a scheduled termination date of December 31, 2006. The
shares of the Managing Trustee and the Class B Interests owned by Equis II are
subject to a voting

<PAGE>

trust, which gives Mr. Engle, who is the trustee of the voting trust, the right
to vote the Class B Interests and the shares of the Managing Trustee owned by
Equis II. See "Voting Trust." Historically, the business of the trusts has been
acquiring capital equipment and leasing it to third parties. More recently, the
trusts have begun to invest in other assets, and intend to continue to do so.
For example, the trusts have acquired interests in companies that own developed
and undeveloped real estate, and one of the trusts has an indirect interest,
through AFG Hato Arrow Limited Partnership, in 20,969 shares of Common Stock of
the Company and through the same partnership has an indirect interest in a
portion of a note from the Company that aggregates $4,419,500, of which the
trust's portion is $462,353. See "Business of Equis II - The Trusts." The four
trusts are public reporting companies, filing quarterly and annual reports with
the Securities and Exchange Commission. At September 30, 1999, the assets of the
four trusts totaled approximately $166 million offset by indebtedness and other
liabilities totaling approximately $72 million.

BACKGROUND; REASONS FOR THE TRANSACTION.

The purpose of the purchase of 85% Equis II was to provide the Company
with access to additional capital, to diversify the Company's asset base and to
provide it with a larger asset base over which it could amortize its fixed
costs. The purchase of the remaining 15% would enhance these objectives.

Management was concerned that too much of the Company's capital was
concentrated on one or two assets. For example, of the approximately $36 million
of assets shown on the Company's balance sheet at September 30, 1999, the Rancho
Malibu property accounted for approximately $10 million, or approximately 28% of
those assets. Because the Company had limited capital available for new
investments (approximately $5 million at September 30, 1999), it could only make
a series of small investments or possibly one significant investment. Management
believed that making a series of small investments has not efficient, because
the management attention necessary to manage a number of small investments (and
therefore the cost) is far greater than if the Company were to make a single
investment. Management also believed, however, that committing most of the
Company's available resources to one investment was not consistent with the
Company's goal of diversifying its asset base. Equis II, through its investment
in the four business trusts, has an interest in a number of different assets.
Thus, the Board believed that the Equis II purchase would help to diversify the
Company's asset base. The trusts also have significant cash available for
investment. Management anticipates that the Company will be able to make joint
investments with the trusts, thereby increasing the size and number of the
Company's assets. The Board believed that the Company would have to issue a
significant number of new equity securities in order to raise the additional
capital that it would need to achieve the same result. There was no assurance
that the Company could raise this additional capital. Further, the Company's
ability to use its net operating loss carryforwards could be negatively impacted
if a significant number of new equity securities were issued. As of December 31,
1998, the Company's net operating loss carryforward was approximately $84
million.

Because Equis II was owned primarily by Messrs. Engle and Coyne and was
controlled by Mr. Engle, the Company's Board formed a special committee
consisting of its independent directors to consider the acquisition of Equis II
and the related acquisition of the Special Beneficiary Interests in the four
business trusts (see "Related Transaction"). The special committee retained
counsel, Shefsky & Froelich Ltd., and a financial adviser, Josephthal & Co. Inc.
("Josephthal"), to assist it in evaluating the transaction. The special
committee, which met several times from June through December 1999, evaluated
management's objective to diversify the Company's asset base and spread its
fixed costs over more assets, and considered management's belief that in order
for the Company to derive a benefit from its net operating loss carryforward, it
would require additional capital. The committee noted that raising a meaningful
amount of capital through the issuance of stock was unlikely, because such an
issuance would restrict the ability of the Company to use its net operating loss
carryforward. The committee reviewed other acquisitions that management had
actively pursued during 1998 and 1999.

<PAGE>

The Company acting alone had been able to complete only one of the potential
acquisitions, however, because of the Company's limited capital and the
significant costs that it expected to incur in the future on its Rancho Malibu
project. The committee reviewed the acquisitions during 1998 and 1999 that the
Company did complete and noted that the Kettle Valley and Kirkwood acquisitions
in 1999 were made in joint ventures with the four Delaware business trusts in
which Equis II has an interest and that the Ariston acquisition in 1998, in
which the Company acted alone, was acquired with significant seller financing.

The special committee also consulted with its counsel and with
Josephthal. Josephthal delivered an opinion to the committee regarding the
fairness of the acquisition of Equis II and the related acquisition the Special
Beneficiary Interests in the four business trusts, which is attached as Appendix
A to this Proxy Statement (see "Opinion of Financial Advisor"). Shefsky &
Froelich delivered an opinion to the committee regarding certain tax matters in
connection with the acquisition. Based upon its review of the documents referred
to in its opinion, the representations of the Board of Directors of the Company
regarding the business purposes of the acquisition and subject to the
qualifications and exceptions set forth in its opinion, it is the opinion of
Shefsky & Froelich that it is more likely than not that the acquisition of Equis
II will not, in itself, cause the Company to be limited in the use of its net
operating loss carryforwards under Section 382 of the Internal Revenue Code.

INTERESTS OF MESSRS. ENGLE AND COYNE IN THE TRANSACTION.

The purchase price for 85% of the stock of Equis II was allocated among
the selling Equis II stockholders in proportion to their ownership interest in
85% of Equis II, as follows:

Principal Amount of
Name Promissory Notes
---- ----------------

<S> <C>
Gary D. Engle $11,033,447

James A. Coyne 6,593,953

Wayne Ellis Engle, Trustee Staci 489,650
Albury Trust u/i/t dated July 21, 1998 (1)

Wayne Ellis Engle, Trustee, Kristen 489,650
Engle Trust u/i/t dated July 21, 1998 (1)

Wayne Ellis Engle, Trustee, Sydney 489,650
Peyton Engle Trust u/i/t dated July 21, 1998
(1)

Wayne Ellis Engle, Trustee, Zoe P. 489,650
Engle Trust u/i/t dated July 21, 1998 (1) -----------

TOTAL $19,586,000
-----------
-----------

</TABLE>

(i) Wayne Ellis Engle is Gary D. Engle's brother, and each trust is for the
benefit of one of the children of Gary D. Engle.

Assuming exercise of the purchase/sale option for the remaining 15% of
Equis II, the 510,000 shares of Common Stock of the Company will be distributed
to the selling Equis II stockholders in proportion to their ownership interest
in 15% of Equis II, as follows:

<PAGE>

Shares of Semele
Name Common Stock
---- ------------

<S> <C>
Gary D. Engle 287,300

James A. Coyne 171,700

Wayne Ellis Engle, Trustee Staci 12,750
Albury Trust u/i/t dated July 21, 1998 (1)

Wayne Ellis Engle, Trustee, Kristen 12,750
Engle Trust u/i/t dated July 21, 1998 (1)

Wayne Ellis Engle, Trustee, Sydney 12,750
Peyton Engle Trust u/i/t dated July 21, 1998 (1)

Wayne Ellis Engle, Trustee, Zoe P. 12,750
Engle Trust u/i/t dated July 21, 1998 (1) -------

TOTAL 510,000
-------
-------

</TABLE>

(1) Wayne Ellis Engle is Gary D. Engle's brother, and each trust is for the
benefit of one of the children of Gary D. Engle.

If the Company purchases the 15% balance of Equis II, Mr. Engle will
own or otherwise control approximately 35% of the Company's Common Stock, and
Mr. Coyne will own approximately 13.6% of the Company's Common Stock, following
the closing of that purchase based on their ownership of shares on the Record
Date.

VOTING TRUST.

The interests owned by Equis II in the four Delaware business trusts
are subject to a voting trust dated December 16, 1999, of which Gary D. Engle is
the sole trustee. The voting trust gives Mr. Engle the authority to vote all the
Class B Subordinated Beneficiary Interests owned by Equis II, which represent
approximately 62% of the outstanding voting beneficial interests in each trust.
The voting trust also gives Mr. Engle the authority to vote all the shares of
AFG ASIT Corporation, the Managing Trustee of each of the trusts, which are
owned by Equis II. As a result, although Equis II (and indirectly the Company)
owns a controlling interest in each of the trusts, Mr. Engle has voting control
on most matters which require the consent of the beneficiaries of the trusts
(see "Business of Equis II - Legal Proceedings"), and he has management control
of each of the trusts through his voting control of AFG ASIT Corporation.

The voting trust may be terminated at any time by the agreement of
Equis II and Mr. Engle and will automatically terminate when approximately $19.6
million of promissory notes delivered by the Company in connection with the
purchase of 85% of Equis II have been paid in full. The voting trust will also
automatically terminate if Mr. Engle ceases to be trustee of the voting trust
for any reason.

SOURCE OF FUNDS.

The Company purchased 85% of the outstanding Common Stock of Equis II
by delivering promissory notes to the selling Equis II stockholders having a
total principal value of $19,586,000. In connection with the acquisition,
Messrs. Engle and Coyne delivered back to the Company, and the Company canceled,
the options that each of them owned to purchase 40,000 shares of Common Stock of
the Company at an exercise price of $9.25 per share that were granted to them on
December 30, 1997. Of the $19,586,000 of notes, notes having an aggregate
principal amount of $14,600,000 mature on October 31, 2005, and bear interest at
the annual rate of 7%, of which 3% is due and payable on a current quarterly
basis and 4% accrues to the maturity date. Principal payments of $3,600,000,
$4,000,000, $4,000,000 and $3,000,000 are due and payable on May 31, 2000,
October 31, 2002, May 31, 2003, and the maturity date, respectively. The
$14,600,000 of notes are prepayable without penalty. The Company anticipates
using distributions that it receives from Equis II's interests in the four
Delaware business trusts to pay the principal and interest due. The Company
believes, based on estimates of cash flows prepared by management, that these
distributions will be sufficient to pay this principal and interest and
ultimately to provide

<PAGE>

the Company with additional capital to make new investments. If these
distributions are insufficient to pay principal and interest, the Company will
have to consider other alternatives.

The balance of the promissory notes issued to the Equis II stockholders
in connection with the purchase of 85% of Equis II, which have a total principal
value of $4,986,000, have terms identical to the terms of promissory notes
payable by Messrs. Engle and Coyne to Equis II ($1,901,000) and to Old North
Capital Limited Partnership ($3,085,000). The Company, through its subsidiary
Ariston Corporation, has a 98% limited partnership interest in Old North Capital
Limited Partnership. Of the $4,986,000 of promissory notes issued by the Company
to the selling Equis II stockholders, promissory notes having a total principal
value of $1,901,000 have terms identical to promissory notes payable to Equis II
from Messrs. Engle ($1,262,264) and Coyne ($638,736). These notes bear interest
at the annual rate of 7.5% payable quarterly, and all outstanding principal and
interest is due on August 8, 2007. The $3,085,000 balance of the promissory
notes issued by the Company to the selling Equis II stockholders have terms
identical to a promissory note payable to Old North Capital Limited Partnership
from Messrs. Engle ($2,048,440) and Coyne ($1,036,560), which bears interest at
the annual rate of 11.5% and is payable on demand. The Company intends to make
the payments on the $4,986,000 of promissory notes from the proceeds of payments
made by Messrs. Engle and Coyne on their indebtedness to Equis II and Old North
Capital Limited Partnership. If either individual fails to make timely payments,
the Company will be relieved of its obligations on the $4,986,000 of notes until
the default is cured.

The $19,586,000 of promissory notes are general obligations of the
Company secured by a pledge to the selling Equis II stockholders of the shares
of Equis II owned by the Company. In the case of the $14,600,000 of promissory
notes, those notes issued to Mr. Engle and to the Engle family trusts are
immediately due and payable if Mr. Engle ceases to be the Chief Executive
Officer and a director of the Company, except if he resigns voluntarily or is
terminated for cause, and those notes issued to Mr. Coyne are immediately due
and payable if Mr. Coyne ceases to be the President and a director of the
Company, except if he resigns voluntarily or is terminated for cause, as cause
is defined in his employment agreement with the Company. See "Compensation of
Directors and Executive Officers - Executive Compensation."

The Company may in the future purchase the 15% of the outstanding
Common Stock of Equis II that it does not currently own by issuing 510,000
shares of Common Stock of the Company to the selling Equis II stockholders in
payment for the 15% balance, but only if stockholder approval for payment in
shares is obtained. The Company is seeking this approval at the Meeting. If
stockholder approval is not obtained before December 31, 2000, the put and call
agreement with respect to the purchase of the 15% balance terminates.

INVESTMENT COMPANY ACT.

Following the Company's acquisition of 85% of Equis II, the Company's
interest in Equis II represents more than 40% of the value of the Company's
total assets on an unconsolidated basis (excluding cash). Moreover, as long as
the voting trust discussed above remains in effect, the Company's interest in
Equis II constitutes "investment securities" within the meaning of the
Investment Company Act of l940, and the Company falls within the definition of
an investment company under that Act. As a result, absent an exemption or a
change in the composition of the Company's assets, the Company would be required
to register with the Securities and Exchange Commission as an investment company
and be subject to a variety of procedural and substantive restrictions with
respect to its operations. There are, however, provisions under the Investment
Company Act and the related regulations that are designed to address
circumstances in which a company falls within the statutory definition of an
investment company but reasonably expects to be excluded from the definition in
the future. Companies in this position generally have a one-year grace period
before they become subject to the Act. The Company does not intend to be an
investment company and accordingly will, as soon as is reasonably possible,
rearrange its business activities so as not to be within the definition of an
investment company under the Investment Company Act.

One way for the Company to rearrange its business activities so as not
to be within the definition of an investment company would be for it to
terminate the voting trust and take control of the business of the trusts. To
terminate the voting trust, Mr. Engle and Equis II would have to agree to the
termination or the Company would have to pay in full the $19,586,000 of
promissory notes delivered by the Company in connection with the purchase of 85%
of Equis II. Alternatively, the Company could acquire one or more other
companies that the Company would actively manage, or it could directly purchase
additional assets that were not deemed to be investment securities. The acquired
companies or assets would have to add aggregate assets of approximately $19
million to the Company's balance sheet as of September 30, 1999, and any
acquired company could not itself be an investment company.

<PAGE>

RELATED TRANSACTION.

On November 18, 1999, the Company purchased from EFG, which is
controlled by Gary D. Engle, the Special Beneficiary Interests in the four
Delaware business trusts. The Special Beneficiary Interests represent an 8.25%
ownership interest in all cash available for distribution by the trusts. The
purchase price paid by the Company was $9,652,500, which was paid by delivery to
EFG of a promissory note. The note has a 10-year term and bears interest at the
annual rate of 7%. Prior to the maturity date of the note, interest and
principal are payable only out of, and to the extent of, distributions of cash
received by the Company from the trusts on account of the Special Beneficiary
Interests. If the total amount of distributions to the Company exceed $1,000,000
in any calendar quarter, however, the Company can retain the amount in excess of
$1,000,000, subject to an aggregate cap of $1,100,000 on excess amounts retained
over the life of the loan. Payments of interest and principal are due within 15
days of receipt by the Company of the applicable trust distribution. In no event
will the total amount of principal and interest payable to EFG during the term
of the note exceed the total amount of cash distributions received by the
Company from the trusts on account of the Special Beneficiary Interests.
Accordingly, the note will be retired at maturity even if the cash distributions
received by the Company during the term of the note are not sufficient to pay
the total amount of principal and interest payable to EFG under the note.

The $9,652,500 promissory note is secured by a pledge to EFG of the
Special Beneficiary Interests purchased by the Company. The note is immediately
due and payable if Mr. Engle ceases to be the Chief Executive Officer and a
director of the Company, except if he resigns voluntarily or is terminated for
cause as defined in his employment agreement with the Company. See "Compensation
of Directors and Executive Officers - Executive Compensation."

OPINION OF FINANCIAL ADVISOR.

On September 1, 1998, the Company retained Josephthal to act as its
financial advisor in connection with evaluating the purchase of the entire
equity interest in Equis II and the Special Beneficiary Interests in the four
trusts and opine on the fairness from a financial point of view to the Company
of the consideration to be paid by the Company. Josephthal delivered its initial
written opinion to the Board that, as of September 22, 1999, the consideration
to be paid by the Company to acquire Equis II and the Special Beneficiary
Interests is fair to the Company from a financial point of view. On December 16,
1999, Josephthal delivered an updated opinion confirming the fairness of the
transaction. The full text of the Opinion, which contains a description of the
assumptions and qualifications made and matters considered, is attached as
Appendix A to this Proxy Statement. The Company's stockholders are urged to read
the Opinion in its entirety. Josephthal's Opinion is directed only to the
fairness from a financial point of view as of the date of each Opinion of the
transactions to the Company and does not constitute a recommendation to any
stockholder of the Company as to how a stockholder should vote at the Meeting on
the issuance of Common Stock of the Company in connection with the purchase of
the stock of Equis II.

Josephthal was not requested to, and did not, express any opinion as to
the ability of the Company or its management to successfully realize the
benefits that the Company believes will result from the two acquisitions nor
does Josephthal's Opinion address the likelihood or timing of distributions from
the trusts, the adequacy of funds or the availability of financing. Also,
Josephthal makes no representations as to the Company's or Equis II's use of
proceeds or as to any issues of fairness with respect to Equis II or its
stockholders. Josephthal does not provide legal, tax or accounting services or
render such advice.

In conducting its analyses and arriving at its Opinion, Josephthal
reviewed such materials and considered such financial and other factors as it
deemed relevant under the circumstances, including, among others, the following:
(i) certain historical financial, operating and other data that were publicly
available or were furnished to Josephthal by the Company regarding the two
acquisitions including, but not limited to: (a) projections and consolidated
financials prepared by management; (b) Form 10-KSB for the year ended 12/31/98
and Form 10-QSB for the periods ended 3/31/99, 6/30/99 and 9/30/99 for the
Company; Offering Prospectus dated 6/10/97, Form 10-K for the year ended
12/31/98 and Form 10-Q for the periods ended 3/31/99, 6/30/99 and 9/30/99 for
AFG Investment Trust A; Offering Prospectus dated 6/10/97, Form 10-K for the
year ended 12/31/98 and Form 10-Q for the periods ended 3/31/99, 6/30/99 and
9/30/99 for AFG Investment Trust B; Offering Prospectus dated 6/10/97, Form 10-K
for the year ended 12/31/98 and Form 10-Q for the periods ended 3/31/99, 6/30/99
and 9/30/99 for AFG Investment Trust C; and Offering Prospectus dated 6/10/97,
Form 10-K for the period ended 12/31/98 and Form 10-Q for the periods ended
3/31/99, 6/30/99 and 9/30/99 for AFG Investment Trust D; and the financial
statements for the year ended 12/31/98 and the for the periods ended 3/31/99,
6/30/99 and 9/30/99 for Equis II; (c) internally generated operating reports
prepared by management of Equis II and the Company; (ii) publicly available
financial, operating and stock market data for companies engaged in business
deemed comparable to the Company and Equis II; (iii) real estate and equipment
valuations prepared by management of Equis II and the Company for each of the
assets; (iv)

<PAGE>

Acquisition Credit Agreement among Equis II and Fleet Bank dated July 17, 1997,
as amended; (v) promotional brochures and other descriptive material including
projections and a limited appraisal report prepared by a third-party appraiser
dated June 21, 1999, for Kettle Valley; (vi) an August 1, 1997, appraisal
conducted by a third-party appraiser of the Boeing 767-300ER plane owned by AFG
Investment Trusts C and D related to the Kettle Valley real estate project;
(vii) Financing Request Memorandum including business plan, industry information
and projections for Kirkwood Associates, Inc., prepared by EFG and others;
(viii) Operating Agreement of EFG/Kirkwood Capital LLC as of May 1, 1999; (ix)
the audited financial statements for the year ended April 30, 1999, for Kirkwood
Associates Inc. and Subsidiary prepared by its independent accountants; and (x)
such other factors as Josephthal deemed appropriate. Josephthal has met with
senior officers of the Company and Equis II to discuss the prospects for the
Company, both pre and post the acquisitions, and such other matters as
Josephthal believed relevant. The Opinion was necessarily based on economic,
financial and market conditions as they existed and could be evaluated as of the
dates of each Opinion.

In connection with its review and analyses and in arriving at the
Opinion, Josephthal has assumed and relied upon the accuracy and completeness of
the financial and other information provided to it or which is public, and has
not attempted to verify independently any such information. Josephthal has
relied solely on the information and estimates provided by management of the
Company and Equis II and has neither made nor obtained any independent
appraisals of any properties, other assets or facilities of Equis II and/or the
Company. With respect to certain financial information, including financial
analyses and projections, relating to the business or prospects of Equis II
and/or the Company provided to Josephthal by management of the Company and Equis
II, Josephthal has assumed that the financial information has been reasonably
prepared and that the financial projections present management's best currently
available estimates and judgments as to the future financial performance of
Equis II. Further, the Company has represented and warranted to Josephthal the
accuracy and completeness of the information it provided to Josephthal.
Josephthal was not requested to, nor did it, inspect any of the assets of the
Company and/or Equis II.

In connection with preparing and rendering the Opinion, Josephthal
performed a variety of valuation, financial and comparative analyses. The
summary of such analyses, as set forth below, does not purport to be a complete
description of the analyses underlying the Opinion. The preparation of a
fairness opinion is a complex process and is not necessarily susceptible to
summary description. Josephthal believes that its analyses must be considered as
a whole, and that selecting portions of its analyses and the factors considered
by it, without considering all such factors and analyses, could create an
incomplete view of the processes underlying the Opinion. Moreover, the estimates
contained in such analyses are not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or less
favorable than those suggested by such analyses. In addition, analyses relating
to the value of businesses or securities do not purport to be appraisals or
necessarily reflect the prices at which businesses or securities actually may be
sold. Accordingly, such estimates are inherently subject to substantial
uncertainties.

In evaluating the fairness of the consideration to be paid by the
Company in acquiring all of the outstanding capital stock of Equis II,
Josephthal began by evaluating the fair market value of Equis II and then, using
this value, imputing a value to the shares of the Company's Common Stock to be
issued in the acquisition. Josephthal then compared this imputed value to the
values for the shares derived from three different approaches to value, all
described below. To arrive at an imputed value for the 510,000 shares of Common
Stock of the Company issuable on exercise of the purchase/sale option,
Josephthal subtracted from the value of Equis II the aggregate principal amount
of notes totaling approximately $19.6 million issuable in the transaction.
Subtracting notes totaling approximately $19.6 million, Josephthal arrived at a
range of imputed values for the 510,000 shares of the Company's Common Stock.

Josephthal estimated values for the Company and Equis II using various
techniques, including (1) projecting proceeds that would be generated in an
orderly liquidation of the entity's assets; (2) analyzing the trading prices of
publicly-traded companies deemed comparable to each entity; (3) evaluating
valuation multiples of transactions completed by publicly-traded companies
deemed comparable to the proposed transaction; and (4) performing discounted
cash flow analyses for Equis II.

(i) LIQUIDATION ANALYSIS. Josephthal first analyzed the value of
the Company by estimating the net proceeds that might be realized from an
orderly liquidation of the Company's assets. To do so, Josephthal separately
analyzed the value of the Company's four assets; Rancho Malibu, Ariston, Kettle
Valley and Kirkwood. In each case Josephthal reviewed and relied on management
projections to estimate net proceeds for each asset, or in the case of Ariston,
the underlying assets owned by Ariston. In the case of Rancho Malibu, Josephthal
estimated that after completing zoning and entitlements, the Company would sell
a total of 44 homes over time periods ranging from 6.25 to 9.25 years.
Josephthal then discounted the net cash flows generated from these home sales
using discount rates ranging from 15% to 25%. To estimate the value of

<PAGE>

Ariston, Josephthal reviewed and relied on management projections estimating net
proceeds from the sale of Ariston's underlying assets comprised of a 99%
interest as a limited partner in a partnership owning a diversified pool of
lease contracts and a 98% interest as a limited partner in a limited partnership
which owns interests in equipment leases and real estate. Management projected
that the sale process would take approximately five years. With respect to the
Company's interests in Kettle Valley and Kirkwood, Josephthal evaluated
management projections of the cash flows to the Company from each investment and
discounted these cash flows at various discount rates. For Kettle Valley,
Josephthal assumed that the Canadian dollar was worth US $.67 based on the
exchange rate at the time of valuation. In the case of Kirkwood, Josephthal
estimated that the value of the Company's interest in this asset was equal to
the amount that the Company invested in the project in May 1999. Josephthal
attributed no value to the Company's net operating loss carryforwards in its
analysis of liquidation value. After adding the Company's cash per share to, and
subtracting outstanding liabilities per share from, the individual asset values,
Josephthal estimated that the Company's liquidation value ranged from $5.54 per
share to $8.46 per share (an average of $7.00) or approximately $6.5 million to
approximately $10.0 million. The liquidation analysis did not include an
estimate of transaction or liquidation costs or the cost of maintaining the
Company through the liquidation process. All of the costs would further reduce
the Company's estimated value on liquidation.

Josephthal also estimated a liquidation value of Equis II in a similar
fashion. In particular, Josephthal reviewed and analyzed a series of projected
cash flows prepared by management of Equis II. These projected cash flows
essentially represent the distributions that management anticipates receiving in
respect of Equis II's interest in the four trusts assuming liquidation of the
trusts' assets. For purposes of this analysis, no value was attributed to the
trusts' Managing Trustee owned by Equis II. After subtracting the amount of
Equis II's liabilities, Josephthal projected a liquidation value of
approximately $15.1 million for Equis II.

(ii) COMPARABLE PUBLIC COMPANY ANALYSIS. Josephthal estimated the
value of the Company by comparing certain ratios and multiples of the Company to
the corresponding ratios and multiples of certain publicly-traded companies that
management and Josephthal believed were generally comparable to the Company (the
"Comparable Companies"). The Comparable Companies were chosen because they have
general business, operating and financial characteristics similar to those of
the Company. However, Josephthal noted that no company used in the analysis is
identical to the Company. Accordingly, Josephthal did not rely solely on the
mathematical results of the analysis, but also made qualitative judgments
concerning differences in financial and operating characteristics of the Company
and the Comparable Companies and other factors that could affect the values of
each. The Comparable Companies used in Josephthal's analysis were Host Funding,
Inc., Thackeray Corporation, Heartland Partners, LP, California Coastal
Communities, Inc. and Milestone Properties. Josephthal compared the relative
valuations of each Comparable Company to the Company by comparing trading
multiples of the last twelve months of revenue, book value, earnings before
interest, taxes, depreciation and amortization ("EBITDA"), earnings before
interest and taxes ("EBIT") and net income. Josephthal then applied the median,
average, minimum and maximum multiples to the Company's revenue and net income
for the last twelve months, book value, EBITDA and EBIT. This analysis yielded a
value for the Company ranging from $1.13 per share to $6.24 per share or
approximately $1.3 million to approximately $7.4 million or an average value of
approximately $4.35 million or $3.68 per share.

Josephthal performed a similar Comparable Company analysis for Equis
II. The Comparable Companies to Equis II identified by Josephthal were
Aerocentury Corp., PDS Financial Corp., Capital Associates, Inc., International
Aircraft Investors, Willis Lease Finance Corp., LINC Capital, T&W Financial,
Interpool, Inc., PLM International, First Sierra Financial and Neff Corp.
Josephthal compared the trading multiples of the last twelve months of revenue
and EBITDA for these companies and looked at the median, average, minimum and
maximum multiples. This analysis produced estimated values ranging from
approximately $23.4 million to approximately $69.9 million with an average value
of approximately $40.3 million.

Management and Josephthal chose these companies because they have
general business, operating and financial characteristics similar to those of
Equis II. However, Josephthal noted that no company used in the foregoing
analysis is identical to Equis II. Accordingly, Josephthal did not rely solely
on the mathematical results of the analysis, but also looked at qualitative
factors concerning differences in financial and operating characteristics of
Equis II and these companies and other factors that could affect the values of
each.

(iii) COMPARABLE TRANSACTIONS ANALYSIS. Josephthal estimated the
value of the Company by reviewing publicly-available financial information
relating to nine transactions completed over the prior two years that it deemed
generally comparable to the acquisitions of Equis II and the Special Beneficiary
Interests by the Company (the "Comparable Transactions"). For each of the
Comparable Transactions, Josephthal reviewed publicly available financial
information for the acquired company and analyzed the relative transaction
multiples. This analysis yielded a range of values for the

<PAGE>

Company of approximately $0.2 to $2.3 million or $0.17 to $1.96 per share with
an average value of $1.25 million or $1.06 per share.

Josephthal also compiled a Comparable Transaction analysis for Equis
II. Josephthal reviewed publicly available financial information related to five
transactions completed over the prior two years that it deemed generally
comparable to the acquisition of Equis II and the Special Beneficiary Interests
by the Company. For each of the Comparable Transactions, Josephthal reviewed
certain publicly available financial information and transaction multiples for
the acquired companies. This analysis produced estimated values (adjusted for
the impact of minority interests) ranging from approximately $25.5 million to
approximately $39.2 million with an average value of approximately $33.0
million.

(iv) DISCOUNTED CASH FLOW ANALYSIS. Josephthal performed a
discounted cash flow analysis using cash flow projections prepared by the
management of Equis II. The analysis detailed the cash flows projected from each
of the trusts taking into account all debt service payments. Next, Josephthal
added the projected cash flow from the Special Beneficiary Interests as well as
the Managing Trustee's interest in all distributions to arrive at a total cash
flow. To this result, Josephthal then added the net present value of the
Managing Trustee's management fees. In each case, Josephthal used discount rates
of 10%, 15% and 20%. This analysis produced values ranging from approximately
$20.1 million to approximately $31.2 million.

The special committee of the Board of Directors of the Company engaged
Josephthal as its financial advisor based on Josephthal's general expertise and
its familiarity with the Company and its assets. Josephthal is an
internationally recognized investment banking firm that has substantial
experience in the real estate and equipment leasing industries and expertise in
transactions similar to the acquisitions.

Josephthal, as part of its investment banking business, is regularly
engaged in the valuation of businesses and securities in connection with mergers
and acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporations, estates and other purposes. The selection of
Josephthal was based upon several factors, including experience, reputation and
price. The Company will pay Josephthal a fee of $275,000 for its services in
connection with the transaction, including delivery of the Opinion. In addition,
the Company reimbursed Josephthal $3,365 for its out-of-pocket expenses and
agreed to indemnify Josephthal against certain liabilities arising out of
Josephthal's engagement.

Josephthal has, in the past, provided financial advisory services to
the Company and has received fees for rendering such services. Josephthal
advised the Company and the Board in the 1997 transaction whereby AFG Hato Arrow
Limited Partnership, AFG Dove Arrow Limited Partnership and AIP/Larkfield
Limited Partnership became stockholders of the Company and Messrs. Engle and
Coyne became involved with the Company. Josephthal also advised the Company and
the Board in the 1998 acquisition of Ariston Corporation from EFG, which Gary D.
Engle controls. Further, the Company and the Board of Directors are aware that
Josephthal is advising eleven partnerships, whose limited partner interests are
registered under Section 12(g) of the Securities Exchange Act, in connection
with the consolidation of the partnerships into a single corporation. Mr. Engle
controls the general partners of the partnerships, EFG is a participant in the
proposed consolidation and Messrs. Engle and Coyne will be directors and
officers of the consolidated company if the transaction is completed.

In addition, in the ordinary course of business, Josephthal may
actively trade Common Stock of the Company for its own account and for the
accounts of customers, and, accordingly, may at any time hold a long or short
position in such securities.

REPRESENTATIONS AND WARRANTIES.

The purchase agreement between the Company and the selling Equis II
stockholders relating to the purchase of 85% of Equis II contains various
representations and warranties of the selling stockholders and the Company.
These include representations and warranties: (1) by the stockholders as to the
(a) ownership of shares sold to the Company and authority of the stockholder to
enter into and enforceability of the purchase agreement, (b) organization and
good standing of Equis II, (c) compliance with agreements and laws by Equis II
and absence of any conflict between the purchase agreement and any other
instrument applicable to Equis II, (d) capitalization of Equis II, (e)
subsidiaries and other interests of Equis II, (f) filings with the Securities
and Exchange Commission made by the Delaware business trusts controlled by Equis
II, (g) accuracy of financial statements and absence of undisclosed material
liabilities of Equis II, (h) absence of any material adverse change in the
business of Equis II, (i) payment of taxes by Equis II, (j) material contracts
of Equis II, (k) absence of undisclosed litigation against Equis II, (l) absence
of the need (except as specified) for third party consents to the transaction
and

<PAGE>

(m) accuracy and completeness of information supplied by the selling Equis II
stockholders; and (2) by the Company as to its (a) organization and good
standing and (b) authority to enter into and the enforceability of the purchase
agreement.

The selling Equis II stockholders have agreed to indemnify the Company
for any loss, liability or damage (including reasonable legal fees and costs)
that the Company may incur as a result of any breach of any of the
representations, warranties, covenants or agreements made by them in the
purchase agreement, provided that the Company makes a claim for any such loss
liability or damage within 18 months of the closing of the transaction (other
than the representations and warranties as to the shares of Equis II and certain
tax matters, which survive indefinitely). The Company has agreed to indemnify
the selling stockholders of Equis II for any loss, liability or damage
(including reasonable legal fees and costs) that the stockholders may incur as a
result of any breach of the representations, warranties, covenants or agreements
made by the Company in the purchase agreement. The Company may elect to offset
any actual liability of the stockholders to the Company against future payments
due from the Company to the stockholders under the notes delivered by the
Company in payment of the purchase price for 85% of the shares of Equis II.

RESALE OF COMPANY COMMON STOCK ISSUED IN THE TRANSACTION; REGISTRATION RIGHTS.

Any shares of Common Stock of the Company issued to the selling Equis
II stockholders will be issued pursuant to exemptions from the registration
requirements of federal and state securities laws. These shares may, therefore,
be resold without registration only as provided for by Rule 144 under the
Securities Act or as otherwise provided under the Securities Act.

A registration rights agreement entered into in connection with the
purchase agreement obligates the Company, upon the request of stockholders who
hold in the aggregate at least 50% of the shares of Common Stock of the Company
acquired in connection with the sale of Equis II and at the Company's expense,
to prepare and file an appropriate registration statement under the Securities
Act covering some or all of the shares of Common Stock issued to them in the
transaction. The Company is not obligated to file a registration statement in
response to a request received before the one-year anniversary of the closing of
the purchase of 85% of Equis II or to file more than one registration statement
at the request of the stockholders. The registration rights agreement also
provides that if the Company proposes to file a registration statement under the
Securities Act, the stockholders have the right, subject to certain limitations,
to require the Company to include in the registration statement some or all of
their shares of Common Stock of the Company received in connection with the sale
of Equis II.

ACCOUNTING TREATMENT.

The Company's investment in Equis II will be recorded at cost and
accounted for under the equity method of accounting until such time as the
voting trust referred to above (see "Voting Trust") is terminated. The
Special Beneficiary Interests will be recorded using the equity method of
accounting and the carrying balance reduced by the amount of future cash
distributions received from the trusts. Those receipts will be used to pay
down the Company's purchase price indebtedness for this asset. See "Pro Forma
Combined Financial Statements."

FEDERAL INCOME TAX CONSIDERATIONS.

GENERAL. The following discussion addresses the material federal income
tax considerations to the Company of the acquisition 85% of the stock of Equis
II in consideration of the Company's delivery of its promissory notes, the
possible acquisition of the remaining 15% of such stock in consideration of the
Company's delivery of 510,000 shares of its Common Stock, and the related
acquisition of the Special Beneficiary Interests in consideration of the
Company's delivery of its promissory notes. This discussion is based on legal
authorities in existence as of the date hereof. No assurance can be given that
future legislation, regulations, administrative pronouncements or court
decisions will not significantly change the law and materially effect the
conclusions expressed herein. Any such change, even though made after the
consummation of the transaction, could be applied retroactively.

ACQUISITION OF STOCK OF EQUIS II. The Company has acquired 85% of the
outstanding stock of Equis II and may in the future acquire the remaining 15% of
such stock on the terms and for the consideration set forth under the headings
"The Transaction" and "Source of Funds." Accordingly, Equis II is currently an
85%-owned subsidiary of the Company and may become a wholly-owned subsidiary of
the Company. The following tax consequences should result:

<PAGE>

1. The Company will have a tax basis in the stock of Equis II
equal to its cost of acquisition of such stock. With respect to 85% of such
stock, such basis consists of the $19,586,000 paid in connection with the
acquisition pursuant to promissory notes bearing interest at a rate in excess of
the applicable federal rate required under the Internal Revenue Code. If the
remaining 15% of the stock of Equis II is acquired, the Company's basis in such
stock will consist of the value of the 510,000 shares of Common Stock of the
Company delivered in connection with the acquisition.

2. Interest paid with respect to the promissory notes will be
deductible when properly accrued by the Company.

3. Pursuant to Section 1032 of the Internal Revenue Code, the
Company will not recognize any gain or loss in connection with the delivery of
its Common Stock as payment of the purchase price for 15% of the stock of Equis
II.

4. The Company's holding period with regard to the 85% of the
stock of Equis II acquired on December 22, 1999, began on such date. If the
purchase/sale option is exercised, the Company's holding period for the
remaining 15% of the stock of Equis II will commence on the date of acquisition
of such stock.

5. Equis II, which was formerly a small business corporation
which had elected to be taxed under Subchapter S of the Internal Revenue Code,
lost its S corporation status upon the acquisition by the Company of 85% of its
stock and, if the Company acquires the remaining 15% of its stock, will become a
wholly-owned subsidiary of the Company.

6. The Company and Equis II will file consolidated federal income
tax returns commencing with the date of the acquisition by the Company of 85% of
the stock of Equis II, and any income earned by Equis II subsequent to such
date, whether derived from its interests in the four Delaware business trusts or
otherwise, will be reportable on the consolidated federal income tax return of
the Company and its affiliated corporations under Section 1501 of the Internal
Revenue Code.

7. The Company will be entitled to use its existing net operating
losses against future income generated by Equis II through the remainder of the
carryforward period for such net operating losses, provided that the Company
does not suffer an ownership change within the meaning of Section 382(g) of the
Internal Revenue Code. Any such ownership change would result in a substantial
reduction in the Company's ability to utilize its net operating loss
carryforwards.

8. The use of Common Stock of the Company in effecting the
acquisition of 15% of the stock of Equis II will not, in and of itself, cause
the Company to suffer an ownership change within the meaning of Section 382 of
the Internal Revenue Code, and, accordingly, in the absence of any other
transactions affecting ownership of the Company's Common Stock, the full amount
of the Company's net operating loss carryforwards will be available to offset
future income of Equis II.

ACQUISITION OF SPECIAL BENEFICIARY INTERESTS. The Company acquired the
Special Beneficiary Interests representing an 8.25% ownership interest in the
four Delaware business trusts on the terms and for the consideration set forth
under the heading "Related Transaction." The following tax consequences should
result from such acquisition:

1. The Company has a tax basis in the Special Beneficiary
Interests equal to its cost of acquisition of such Special Beneficiary
Interests, which was $9,652,500. The purchase price was paid with a promissory
note bearing interest at a rate in excess of the applicable federal rate
required under the Internal Revenue Code. Although this note is without recourse
to the Company, it is secured by a pledge to EFG of the Special Beneficiary
Interests and should be treated as BONA FIDE indebtedness of the Company.

2. Interest paid with respect to this promissory note will be
deductible when properly accrued by the Company.

3. The Company's holding period with regard to the Special
Beneficiary Interests commenced on the date of the acquisition of the Special
Beneficiary Interests.

4. A ratable share of the income earned by the Delaware business
trusts, which are treated as partnerships for federal income tax purposes, will
be allocated to the Company as an owner thereof, and will be reported on the
federal income tax return of the Company.

<PAGE>

5. The Company will be entitled to use its existing net operating
losses against future income generated by the Special Beneficiary Interests
through the remainder of the carryforward period for such net operating losses,
provided that the Company does not suffer an ownership change within the meaning
of Section 382(g) of the Internal Revenue Code. Any such ownership change would
result in a substantial reduction in the Company's ability to utilize its net
operating loss carryforwards.

CONSEQUENCES TO STOCKHOLDERS OF THE COMPANY. Other than the effects on
the Company set forth above in this Section, the acquisition by the Company of
the stock of Equis II and the Special Beneficiary Interests will not have any
direct impact on the federal income tax considerations applicable to
shareholders of the Company.

EXPENSES AND FEES.

Whether or not the purchase of Equis II is completed, all out-of-pocket
expenses incurred in connection with the transaction will be paid by the party
incurring such costs and expenses. The Company will pay a fee of $275,000 plus
expenses to Josephthal for its financial advisory services in connection with
the transaction, including the rendering of a fairness opinion. See "Opinion of
Financial Advisor."

REGULATORY APPROVALS.

On November 23, 1999, in accordance with the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, the Company and Gary D. Engle each filed a
Premerger Notification and Report Form and certain supplementary materials with
the Federal Trade Commission and the Antitrust Division of the Department of
Justice in connection with the purchase and sale of Equis II. The Company
received notice on December 8, 1999, that early termination of the
30-calendar-day waiting period under the Act had been granted. The Company and
Equis II are not aware of any other governmental approvals or actions that are
required for completion of the transaction.

PRO FORMA COMBINED FINANCIAL STATEMENTS.

PRO FORMA CONSOLIDATED BALANCE SHEET (Unaudited)
September 30, 1999

E
SEMELE GROUP INC.
<TABLE>
<CAPTION>

Adjustments Pro Forma
ASSETS Semele and Eliminations Consolidated
------ ---------------- ------------

<S> <C> <C> <C>
Cash and cash equivalents $ 5,198,924 $ -- $ 5,198,924
Rents receivable 89,517 -- 89,517
Accounts receivable - affiliates 11,401 -- 11,401
Interest receivable - affiliates 359,829 -- 359,829
Notes receivable - affiliates 2,725,695 -- 2,725,695
Foreclosed real estate held for sale, net 10,024,793 -- 10,024,793
Investment in Kirkwood 750,000 -- 750,000
Investments in partnerships and trusts 3,603,999 -- 3,603,999
Land 1,929,000 -- 1,929,000
Building, net of accumulated depreciation 10,846,022 -- 10,846,022
Other assets 453,952 -- 453,952
Special Beneficiary interests -- 9,652,500 (2) 9,652,500
Investment in Equis II Corporation 19,586,000 (1)
-- 2,773,125 (1) 22,359,125
----------------- ----------------- -----------------

Total assets $ 35,993,132 $ 32,011,625 $ 68,004,757
================= ================= =================

LIABILITIES, MINORITY INTEREST AND
STOCKHOLDERS' EQUITY

</TABLE>

<PAGE>

<TABLE>

<S> <C> <C> <C>
Notes payable $ 6,695,193 $ -- $ 6,695,193
9,652,500 (2)
Notes payable - affiliates 14,869,500 19,586,000 (1) 44,108,000
Accrued interest 58,919 -- 58,919
Accrued liabilities 895,917 -- 895,917
Accrued liabilities - affiliate 71,118 -- 71,118
Deferred rental income 28,614 -- 28,614
Cash distributions payable 45,342 -- 45,342
----------------- ----------------- -----------------

Total liabilities 22,664,603 29,238,500 51,903,103
----------------- ----------------- -----------------

Minority interest 3,779,262 -- 3,779,262
----------------- ----------------- -----------------

Total Minority interest 3,779,262 -- 3,779,262
----------------- ----------------- -----------------

Stockholders' equity (deficit):
Common stock, $0.10 par value,
5,000,000 shares authorized,
2,080,185 issued before the acquisition of Equis II
2,590,185 issued after the acquisition of Equis II 170,663,365 2,773,125 (1) 173,436,490

Accumulated deficit (144,905,123) -- (144,905,123)
Deferred compensation, 101,183 shares (1,720,104) -- (1,720,104)
Treasury stock at cost, 901,025 shares (14,488,871) -- (14,488,871)
------------------ ----------------- ------------------

Total stockholders' equity 9,549,267 2,773,125 12,322,392
----------------- ----------------- -----------------

$ 35,993,132 $ 32,011,625 $ 68,004,757
================= ================= =================

Book value per share, 1,179,160 shares outstanding
before the acquisition of Equis II and 1,689,160
shares outstanding after the acquisition of Equis II $ 8.10 $ 7.29
================= =================

</TABLE>

<PAGE>

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited) for the nine months ended September 30, 1999

SEMELE GROUP INC.

Adjustments Pro Forma
Semele and Eliminations Consoldiated
------ ---------------- ------------
<S> <C> <C> <C>
INCOME

Equipment activities:
Lease revenue $ 895,957 $ -- $ 895,957
Gain on sale of equipment 17,250 -- 17,250
----------------- ----------------- -----------------

Total, equipment activities 913,207 -- 913,207
----------------- ----------------- -----------------

Lending and investing activities:
Income on investments 215,814 -- 215,814
Interest on loans to affiliates 234,447 -- 234,447
----------------- ----------------- -----------------

Total, lending and investing activities 450,261 -- 450,261
----------------- ----------------- -----------------

Income from Equis II Corporation -- 834,296 (1) 834,296
Other income 19,132 -- 19,132
----------------- ----------------- -----------------

Total other income 19,132 834,296 853,428
----------------- ----------------- -----------------

Total income 1,382,600 834,296 2,216,896
----------------- ----------------- -----------------

EXPENSES

Net loss from operations of foreclosed real estate
held for sale 473,163 -- 473,163

Depreciation and amortization 405,839 -- 405,839
General and administrative 812,836 -- 812,836
General and administrative - affiliate 113,842 -- 113,842
Interest expense 407,596 -- 407,596
Interest expense - affiliates 879,179 1,646,268 (3) 2,525,447
Recovery of losses on loans,
notes and interest receivable (77,120) -- (77,120)
----------------- ----------------- -----------------

Total expenses 3,015,335 1,646,268 4,661,603
----------------- ----------------- -----------------

Net income (loss) $ (1,632,735) $ (811,972) $ (2,444,707)
================= ================== =================

Net loss per share of common stock basic (Based on the
weighted average number of shares outstanding during
the period, 1,156,074; 1,666,074 after the
Acquisition of Equis II) $ (1.41) $ (1.47)
=============== ================

</TABLE>

<PAGE>

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited) for the year ended December 31, 1998

SEMELE GROUP INC.

Adjustments Pro Forma
Semele and Eliminations Consolidated
------ ---------------- ------------

INCOME
<S> <C> <C> <C>
Equipment activities:
Lease revenue $ 395,163 $ -- $ 395,163
Gain on sale of equipment 7,000 -- 7,000
----------------- ----------------- -----------------

Total, equipment activities 402,163 -- 402,163
----------------- ----------------- -----------------

Lending and investing activities:
Income on investments 382,282 -- 382,282
Interest on loans to third parties 269,000 -- 269,000
Interest on loans to affiliates 104,771 -- 104,771
----------------- ----------------- -----------------

Total, lending and investing activities 756,053 -- 756,053
----------------- ----------------- -----------------

Other income -- -- --
----------------- ----------------- -----------------

Total income 1,158,216 -- 1,158,216
----------------- ----------------- -----------------

EXPENSES

Net loss from operations of foreclosed real
estate held for sale 730,249 -- 730,249

Depreciation and amortization 251,815 -- 251,815
General and administrative 994,185 -- 994,185
General and administrative - affiliate 152,201 -- 152,201
Interest expense 187,006 -- 187,006
Interest expense - affiliates 685,783 2,195,025 (3) 2,880,808
Recovery of losses on loans,
notes and interest receivable (383,176) -- (383,176)
Loss from Equis II Corporation -- 1,203,030 (1) 1,203,030
----------------- ----------------- -----------------

Total expenses 2,618,063 3,398,055 6,016,118
----------------- ----------------- -----------------

Net loss $ (1,459,847) $ (3,398,055) $ (4,857,902)
================= ================= =================

Net loss per share of common stock basic (Based
on the weighted average number of shares outstanding
during the period, 1,182,810; 1,692,810 after the $ (1.23) $ (2.87)
acquisition of Equis II) =============== ===============

<PAGE>

NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

SEMELE GROUP INC.

The accompanying pro forma consolidated financial statements of Semele Group
Inc. (the "Company") have been prepared to give effect to the Company's purchase
of the Special Beneficiary interests and Equis II Corporation. The purchase of
the Special Beneficiary interests will be recorded at cost and accounted for
under the equity method of accounting; the carrying balance will be reduced by
the amount of any future cash distributions received from the Trusts. Those
receipts will be used to pay down the Company's purchase price indebtedness for
this asset. (The debt obligation is non-recourse to the extent that future cash
receipts are insufficient to amortize the entire debt obligation.) The Company's
investment in Equis II will be recorded at cost and accounted for under the
equity method of accounting until such time that the voting trust agreement
(referred to under the section captioned "Voting Trust" herein) is terminated.
In order to prepare the pro forma consolidated financial statements, certain
assumptions and adjustments were made that are described in the notes below.

For purposes of preparing the pro forma consolidated balance sheet, it was
assumed that the purchase transaction occurred on September 30, 1999.

For purposes of preparing the pro forma consolidated statements of operations,
it was assumed that the purchase transaction occurred on January 1, 1998.

NOTES TO THE PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30,
1999 AND PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1999 AND THE YEAR ENDED DECEMBER 31, 1998

1. To record the Company's purchase of Equis II Corporation for notes totaling
$19,586,000 and 510,000 shares of common stock having a closing market
value of $2,773,125 at September 30, 1999.

The purchase of Equis II Corporation is recorded at cost and accounted for
under the equity method of accounting. The 510,000 shares of common stock
expected to be issued in connection with the acquisition is recorded using
the closing price of the stock as reported on the Nasdaq National Market on
September 30, 1999 ($5.4375 per share, $2,773,125 in total). Under the
equity method of accounting, the carrying amount of the Company's
investment is (i) increased to reflect the Company's share of income of the
investee and (ii) reduced to reflect the Company's share of losses of and
cash distributions from the investee. For the nine months ended September
30, 1999, the Company would have recognized income of $834,296 from its
investment in Equis II Corporation. For the year ended December 31, 1998,
the Company would have recognized a net loss of $1,203,030 from its
investment in Equis II Corporation.

2. To record the Company's purchase of the Special Beneficiary interests.

The purchase of the Special Beneficiary interests are recorded at cost and
accounted for using the equity method of accounting and represent an 8.25%
carried interest in the Trusts. The carrying balance of this investment
will be reduced by the amount of any future cash distributions received
from the Trusts. Those receipts will be used to amortize the Company's
purchase price indebtedness for this asset. (The debt obligation is
non-recourse to the extent that future cash receipts are insufficient to
amortize the entire debt obligation.) For the nine months ended September
30, 1999, the Trusts declared cash distributions payable to the Special
Beneficiary of $784,509. For the year ended December 31, 1998, the Trusts
declared cash distributions payable to the Special Beneficiary of
$1,118,001. These amounts would have reduced the Company's investment
balance in the Special Beneficiary interests when received.

3. To record interest expense associated with purchase price indebtedness.

BUSINESS OF THE COMPANY.

GENERAL. The Company is a Delaware corporation organized in 1987. The
Company has an ownership interest in a 274 acre land parcel in Southern
California known as the Rancho Malibu property. The Company also owns Ariston
Corporation, a holding company having two investments; (i) a 99% limited
partnership interest in AFG Eireann Limited Partnership, which has an interest
in a diversified pool of lease contracts owned by an institutional investor, and
(ii) a 98%

<PAGE>

limited partnership interest in Old North Capital Limited Partnership, which has
investments in cash and notes, equipment leases and limited partnerships that
are engaged in either equipment leasing or real estate. The Company on November
18, 1999, purchased the Special Beneficiary Interests in four Delaware business
trusts, representing an 8.25% ownership interest in all cash available for
distribution by the trusts. See "Related Transaction." The Company's business
plan contemplates making additional acquisitions or other investments. The
executive offices of the Company are located at One Canterbury Green, Stamford,
Connecticut 06901, telephone number 203-363-0849. The Company's 1998 annual
report on Form 10-KSB and its quarterly report on Form 10-QSB for the quarter
ended September 30, 1999, are enclosed with this Proxy Statement and are
incorporated into this Proxy Statement by reference.

BUSINESS OF EQUIS II.

GENERAL. Equis II is a Delaware corporation organized in 1997. The
Company owns (i) AFG ASIT Corporation ("AFG ASIT"), a Delaware corporation that
is the Managing Trustee of four Delaware business trusts, and (ii) 99% of the
Class B Subordinated Beneficiary Interests of each of the trusts, comprising
approximately 62% of the voting interests of each of the trusts. As Managing
Trustee, AFG ASIT has a 1% ownership interest in each of the trusts and has
significant influence over their operations. AFG ASIT is also entitled to a 1%
management fee based on the value of securities, debt and other non-equipment
investments of the trusts (excluding cash and cash equivalents). The Class B
Interests owned by Equis II entitle Equis II as a Class B beneficiary to
approximately 37% of the total capital distributed by the trusts before the
trusts distribute a fixed "payout" amount and to approximately 20% after the
payout amount has been distributed. The payout amount is the total amount paid
by the Class B beneficiaries for their Class B Interests plus 10% per annum. The
Class B beneficiaries paid $39,969,280 for their Class B Interests, of which
Equis II paid $39,900,695. The Class B beneficiaries have received approximately
$22,294,815 of Class B distributions through September 30, 1999, of which Equis
II received $22,238,318. Currently, Equis II receives quarterly distributions
from the four trusts of approximately $915,753 in the aggregate.

At September 30, 1999, Equis II owed approximately $19.6 million to an
institutional lender and it owed approximately $3.8 million to EFG. These loans
were repaid in full on January __, 2000. At September 30, 1999, Messrs. Engle
and Coyne owed Equis II approximately $1.9 million. These loans bear interest at
the annual rate of 7.5% and are payable on August 8, 2007. The purchase price
for Equis II includes notes payable by the Company to the Equis II stockholders
that mirror in principal amount and terms these Equis II loans to Messrs. Engle
and Coyne. See "Source of Funds." The executive offices of Equis II are located
at 88 Broad Street, Boston, Massachusetts 02110, telephone number (617)
854-5800.

THE TRUSTS. The four Delaware business trusts are AFG Investment Trust
A, AFG Investment Trust B, AFG Investment Trust C and AFG Investment Trust D.
The Class A Beneficiary Interests in the trusts are registered under Section
12(g) of the Securities Exchange Act of 1934 and accordingly the trusts file
quarterly and annual reports with the Securities and Exchange Commission.

The trusts own an interest in approximately $150 million of assets,
largely comprised of equipment on lease to major industrial companies, but also
including real estate, securities and cash. Equipment types include commercial
aircraft, an ocean-going vessel, materials handling, construction and mining,
manufacturing, computers and peripherals and retail store fixtures. The trusts'
real estate assets are interests in two companies that own developed and
undeveloped real estate in California and British Columbia, respectively. One of
the trusts has an indirect interest, through AFG Hato Arrow Limited Partnership,
in 20,969 shares of Common Stock of the Company, and through the same
partnership has an indirect interest in a $462,353 note from the Company which
bears interest at the annual rate of 10% and matures on April 30, 2000. During
the term of the note, payments of principal are due if and to the extent that
net proceeds are received by the Company from the sale or refinancing of the
Company's Rancho Malibu property. See "Security Ownership of Certain Beneficial
Owners and Management" and "Compensation of Directors and Executive Officers -
Certain Relationships and Related Transactions." Two of the four trusts have
scheduled termination dates as of December 31, 2003, one has a scheduled
termination date of December 31, 2004, and one has a scheduled termination date
of December 31, 2006. Each trust has entered into an agreement with EFG under
which EFG provides management services, covering all aspects of acquisition,
management and sale of equipment. The trusts pay EFG an acquisition fee of 1% of
the asset price paid by the trusts for equipment assets and a management fee of
2% or 5% (depending on the nature of the lease and when it was entered into) of
gross lease rental revenue received by the trusts from equipment assets. For
non-equipment assets other than cash, AFG ASIT receives an annualized management
fee of 1%.

<PAGE>

LEGAL PROCEEDINGS. A class action lawsuit involving the trusts was
settled in May 1999. The suit was instituted in January 1998 on behalf of a
class of investors in 28 equipment leasing programs sponsored by EFG, including
the trusts. The defendants in the suit were EFG and a number of its affiliates,
including AFG ASIT as Managing Trustee and Gary D. Engle. As a result of the
settlement, the trusts declared special distributions totaling $4 million,
including legal fees paid to lawyers for the plaintiffs. The distribution was
made out of the remaining proceeds raised from the sale of the Class B
Interests. In accordance with the terms of the settlement, Equis II did not
participate in this distribution, and would otherwise have been entitled to
distributions in this amount. In addition, Equis II agreed to forgo a capital
distribution equal to $9,000,000. In the absence of this agreement, Equis II
would also have been entitled to distributions in this amount.

As part of the settlement, the trust agreements of the trusts were
amended to require Equis II, Mr. Engle and their affiliates, to vote their Class
B Interests in accordance with the votes of the majority of all Class A
Interests voted, where beneficiary consent is necessary, with respect to all
interested transactions, which are transactions concerning the compensation of
the Managing Trustee, the extension of the life of any trust or any transaction
between any trust and the Managing Trustee, with the exception of any votes
concerning the withdrawal or the removal of the Managing Trustee or the entering
into of transactions that are permitted by the trust agreements. Mr. Engle as
trustee of the voting trust that entitles him to vote the Class B Interests
owned by Equis II (see "Proposal 2 - Voting Trust") is subject to these
provisions, and following the termination of the voting trust, Equis II will be
subject to them.

EQUIS II - SELECTED FINANCIAL DATA.

The following tables set forth unaudited selected financial data on a
pro forma basis for the Company assuming its purchase of 100% of Equis II and
the Special Beneficiary Interests in the trusts and on a historical basis for
Equis II. The table should be read in conjunction with the unaudited pro forma
financial statements of the Company and Management's Discussion and Analysis of
Financial Condition and Results of Operations and the financial statements of
Equis II.

The following unaudited pro forma operating data for the Company has
been prepared to reflect the acquisitions of 100% of Equis II and the Special
Beneficiary Interests in the trusts as if they had occurred on January 1, 1998.
The unaudited pro forma balance sheet data has been prepared assuming these
acquisitions occurred on September 30, 1999. See "Accounting Treatment."

SEMELE GROUP INC.

Nine Months
Year Ended Ended
December 31, 1998 September 30, 1999
----------------- -----------------
<S> <C> <C>
PRO FORMA SUMMARY OF OPERATIONS
- -------------------------------
Operating revenues $402,163 $913,207
Net loss $(4,857,902) $(2,444,707)
Net loss per share $(2.87) $(1.47)

PRO FORMA FINANCIAL POSITION
- ----------------------------
N/A $68,004,757

Total assets
Total long term obligations N/A $50,803,193

</TABLE>

<PAGE>

EQUIS II CORPORATION

Period from
July 17, 1997
(commencement of Nine Months
operations) to Year Ended Ended
December 31, 1997 December 31, 1998 September 30, 1999
----------------- ----------------- ------------------
<S> <C> <C> <C>
SUMMARY OF OPERATIONS
- ---------------------
Operating revenues $21,870,648 $41,603,663 $25,959,163
Net income (loss) $(2,224,537) $(1,203,030) $834,296
Net income (loss) per share $(742) $(401) $278

FINANCIAL POSITION
- ------------------
Total assets $207,260,568 $177,546,435 $168,821,093
Total long-term obligations $122,660,437 $93,179,009 $85,729,189

</TABLE>

EQUIS II - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

Certain statements in this Proxy Statement that are not historical fact
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 and are subject to a variety of risks
and uncertainties. There are a number of important factors that could cause
actual results to differ materially from those expressed in any forward-looking
statements made herein. These factors include, but are not limited to, the
collection of future contracted rents, the realization of residual proceeds for
equipment, and future economic conditions.

Equis II is a special purpose S-corporation that was organized in the
State of Delaware in 1997 for the purpose of acquiring and holding Class B
Interests in four Delaware business trusts sponsored by an affiliate, EFG. The
four trusts are AFG Investment Trust A (822,863 interests), AFG Investment Trust
B (997,373 interests), AFG Investment Trust C (3,019,220 interests) and AFG
Investment Trust D (3,140,683 interests).

Equis II owns approximately 62% of the outstanding voting interests in
each of the trusts and has voting control on most matters upon which the
beneficiaries of the trusts may vote. The Class B Interests were purchased by
Equis II from EFG at a cost of $5 per Class B Interest for an aggregate purchase
price of $39,900,695. Equis II borrowed all of the funds necessary to purchase
the interests as follows: $35,910,625 under a demand note from an institutional
lender and $3,990,070 under a demand note from Old North Capital Limited
Partnership ("ONC"), an affiliate of EFG and Equis II. The ONC demand note was
assumed by Gary D. Engle and James A. Coyne, partners of ONC and stockholders of
Equis II, on December 31, 1997. At September 30, 1999, the principal balance of
Equis II's institutional indebtedness pertaining to the Class B Interests was
$19,540,000 and the balance of the ONC indebtedness was $3,085,524, including
accrued interest. In addition, Equis II owns the Managing Trustee of the trusts,
AFG ASIT Corporation, which it purchased from EFG in 1997 for a subordinated
note equal to $1,100,000. Principal and interest outstanding under that note was
$1,382,868 at September 30, 1999. Equis II also has borrowed $2,394,277 from EFG
to partially fund debt payments to its institutional lender in connection with
its financing of the Class B Interests.

Equis II commenced operations on July 17, 1997, and has no significant
operations of its own other than its ownership interests in the trusts. The
trusts commenced operations in 1992. Pursuant to the trust agreements, Trusts A
and B are scheduled to be dissolved by December 31, 2003, and Trusts C and D are
scheduled to be dissolved by December 31, 2004, and December 31, 2006,
respectively. The trusts were nominal defendants in a class action lawsuit that
was settled, with respect to the trusts and certain affiliates, in May 1999. See
Note 8 to the accompanying financial statements.

The accompanying consolidated financial statements of Equis II include
the trusts. Accordingly, in the discussion that follows, Equis II refers to the
consolidated company, including the trusts. In certain instances, the trusts or
Equis II are referred to individually in order to provide additional detail.

<PAGE>

YEAR 2000 ISSUE.

The Year 2000 Issue generally refers to the capacity of computer
programming logic to correctly identify the calendar year. Many companies
utilize computer programs or hardware with date sensitive software or embedded
chips that could interpret dates ending in "00" as the year 1900 rather than the
year 2000. In certain cases, such errors could result in system failures or
miscalculations that disrupt the operations of the affected businesses. Equis II
uses information systems provided by EFG and has no information systems of its
own. EFG has adopted a plan to address the Year 2000 Issue that consists of four
phases: assessment, remediation, testing, and implementation and has elected to
utilize principally internal resources to perform all phases. EFG has completed
its Year 2000 project at an aggregate cost of less than $50,000 and at a de
minimus cost to the Company. All costs incurred in connection with EFG's Year
2000 project have been expensed as incurred.

EFG's primary information software was coded by a third party at the
point of original design to use a four digit field to identify calendar year.
All of Equis II's lease billings, cash receipts and equipment remarketing
processes are performed using this proprietary software. In addition, EFG has
gathered information about the Year 2000 readiness of significant vendors and
third party servicers and continues to monitor developments in this area. All of
EFG's peripheral computer technologies, such as its network operating system and
third-party software applications, including payroll, depreciation processing,
and electronic banking, have been evaluated for potential programming changes
and have required only minor modifications to function properly with respect to
dates in the year 2000 and thereafter. EFG understands that each of its and
Equis II's significant vendors and third-party servicers are in the process, or
have completed the process, of making their systems Year 2000 compliant.
Substantially all parties queried have indicated that their systems are Year
2000 compliant.

Presently, EFG is not aware of any outside customer with a Year 2000
Issue that would have a material effect on Equis II's results of operations,
liquidity, or financial position. Equis II's equipment leases were structured as
triple net leases, meaning that the lessees are responsible for, among other
things, (i) maintaining and servicing all equipment during the lease term, (ii)
ensuring that all equipment functions properly and is returned in good
condition, normal wear and tear excepted, and (iii) insuring the assets against
casualty and other events of loss. Non-compliance with lease terms on the part
of a lessee, including failure to address Year 2000 Issues could result in lost
revenues and impairment of residual values of Equis II's equipment assets under
a worst-case scenario.

EFG believes that its Year 2000 compliance plan will be effective in
resolving all material Year 2000 risks in a timely manner and that the Year 2000
Issue will not pose significant operational problems with respect to its
computer systems or result in a system failure or disruption of its or Equis
II's business operations. However, EFG has no means of ensuring that all
customers, vendors and third-party servicers will conform ultimately to Year
2000 standards. The effect of this risk to the Company is not determinable.

NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 1998:

RESULTS OF OPERATIONS.

For the nine months ended September 30, 1999, Equis II recognized lease
revenue of $21,205,448 compared to $30,325,076 for the same period in 1998. The
decrease in lease revenue from 1998 to 1999 resulted principally from lease term
expirations and the sale of equipment. The level of lease revenue to be
recognized by Equis II in the future may be impacted by future reinvestment;
however, the extent of such impact cannot be determined at this time.

Interest income for the nine months ended September 30, 1999, was
$2,109,936 compared to $2,008,282 for the same period in 1998. Generally,
interest income is generated from the temporary investment of rental receipts
and equipment sale proceeds in short-term instruments. Interest income in 1999
and 1998 also includes interest earned on unexpended capital contributions
received by the trusts from the issuance of Class B Interests. In addition,
interest income in 1999 and 1998 includes interest earned by Trust A on a note
receivable from the Company which is reflected as interest income - affiliates
on the accompanying Consolidated Statements of Operations ($34,582 in each
year). See also Note 4 to the accompanying financial statements. In 1999,
interest income - affiliates also includes $98,168 of interest from loans to
Equis II's shareholders.

Equis II received $1,044,464 in 1999 as a breakage fee from a
third-party seller in connection with a transaction for new investments that was
canceled by the seller in the first quarter of 1999. This amount is the
principal component of other income on the accompanying Consolidated Statement
of Operations for the nine months ended September 30, 1999.

<PAGE>

During the nine months ended September 30, 1999, and 1998, Equis II
sold equipment having a net book value of $11,270,036 and $4,734,051,
respectively, to existing lessees and third parties. These sales resulted in a
net gain, for financial statement purposes, of $3,618,718 and $2,590,805 in 1999
and 1998, respectively.

It cannot be determined whether future sales of equipment will result
in a net gain or a net loss to Equis II, as such transactions will be dependent
upon the condition and type of equipment being sold and its marketability at the
time of sale. In addition, the amount of gain or loss reported for financial
statement purposes is partly a function of the amount of accumulated
depreciation associated with the equipment being sold.

The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including EFG's ability to sell and re-lease
equipment. Changing market conditions, industry trends, technological advances,
and many other events can converge to enhance or detract from asset values at
any given time. EFG attempts to monitor these changes in order to identify
opportunities which may be advantageous to Equis II and which will maximize
total cash returns for each asset.

The total economic value realized for each asset is comprised of all
primary lease term revenue generated from that asset, together with its residual
value. The latter consists of cash proceeds realized upon the asset's sale in
addition to all other cash receipts obtained from renting the asset on a
re-lease, renewal or month-to-month basis. Such residual rental payments are
classified as lease revenue. Consequently, the amount of gain or loss reported
in the financial statements is not necessarily indicative of the total residual
value achieved from leasing the equipment.

Equis II, through the trusts, owns a portfolio of equipment assets that
are depreciated. In addition, Equis II records amortization expense pertaining
to capitalized financing costs associated with its acquisition of the Class B
Interests in 1997. The latter is being amortized over the life of the
indebtedness. Depreciation and amortization expense for the nine months ended
September 30, 1999, was $11,840,283 compared to $19,585,289 for the same period
in 1998. For financial reporting purposes, to the extent that an asset is held
on primary lease term, Equis II depreciates the difference between (i) the cost
of the asset and (ii) the estimated residual value of the asset on a
straight-line basis over such term. For purposes of this policy, estimated
residual values represent estimates of equipment values at the date of primary
lease expiration. To the extent that an asset is held beyond its primary lease
term, Equis II continues to depreciate the remaining net book value of the asset
on a straight-line basis over the asset's remaining economic life.

Interest expense results from indebtedness associated with a number of
the trusts' equipment assets and Equis II's acquisition indebtedness pertaining
to the Class B Interests. Interest expense was $5,833,559 and $7,753,312 during
the nine months ended September 30, 1999, and 1998, respectively, including
interest due to affiliates of $259,020 and $176,221, respectively. Management
fees were $1,070,079 for the nine months ended September 30, 1999, compared to
$1,386,624 for the same period in 1998. Management fees are based on 5% of gross
lease revenue generated by operating leases and 2% of gross lease revenue
generated by full payout leases. Management fees also include a 1% management
fee on non-equipment investments, excluding cash.

Operating expenses consist principally of administrative charges,
professional service costs, such as audit and legal fees, as well as printing,
distribution and remarketing expenses. Operating expenses were $2,320,079 during
the nine months ended September 30, 1999, compared to $1,715,433 during the same
period in 1998. Operating expenses were higher in 1999 than in 1998 principally
as a result of costs incurred of approximately $397,000 related to the repair
and remarketing of an aircraft formerly leased to Alaska Airlines, Inc., in
which Trusts A, B and C held an interest. (See further discussion below.) In
addition, operating expenses were higher in 1999 as a result of legal fees
related to the investment in Kettle Valley and Kirkwood by Trusts C and D.
Operating expenses in 1999 also include an adjustment for 1998 actual
administrative and third-party costs of approximately $229,000. Operating
expenses in 1998 included legal expenses accrued related to the class action
lawsuit described in Note 8 to the accompanying financial statements. Minority
interest expense, which represents the amount of net income attributable to
Equis II's third-party equity participants, was $6,170,803 and $4,140,232 in
1999 and 1998, respectively.

LIQUIDITY AND CAPITAL RESOURCES AND DISCUSSION OF CASH FLOWS.

Equis II has no business interests other than its investment in the
trusts. Accordingly, the cash flows of Equis II have been and continue to be
dependent upon activities within the trusts. The trusts were organized as
limited life entities. Historically, the trusts' principal operating activities
have focused on asset rental transactions and their principal sources

<PAGE>

of cash from operations have been provided by the collection of periodic rents.
These cash inflows have been used to satisfy debt service obligations associated
with leveraged leases, and to pay management fees and operating costs.

Operating activities generated net cash inflows of $5,810,225 and
$17,551,182 for the nine months ended September 30, 1999, and 1998,
respectively. The decline from year to year was attributable primarily to lower
lease revenues in 1999 compared to 1998. Future renewal, re-lease and equipment
sale activities will cause a decline in Equis II's primary-term lease revenues
and corresponding sources of operating cash, except to the extent that Equis II
pursues future reinvestment activities. Overall, expenses associated with rental
activities, such as management fees, and net cash flow from operating activities
will decline as Equis II experiences a higher frequency of remarketing events.

Equis II's equipment is leased by a number of creditworthy,
investment-grade companies and, to date, the Company has not experienced any
material collection problems and has not considered it necessary to provide an
allowance for doubtful accounts. Notwithstanding a positive collection history,
there is no assurance that all future contracted rents will be collected or that
the credit quality of Equis II's lessees will be maintained. Collection risk
could increase in the future, particularly as equipment is remarketed and, in
some instances, re-leased to different lessees. The Company continues to
evaluate and monitor its experience in collecting accounts receivable to
determine whether a future allowance for doubtful accounts may become
appropriate.

Cash expended for asset acquisitions and cash realized from asset
disposal transactions are reported under investing activities on the
accompanying Consolidated Statements of Cash Flows. During the nine months ended
September 30, 1999, Trusts C and D expended $6,204,347 to acquire an investment
in Kettle Valley. In connection with this investment, Trusts C and D were paid
$3,013,206 for a residual interest in an aircraft in which they own an interest
(see Note 3 to the accompanying financial statements). Also during the nine
months ended September 30, 1999, the trusts collectively expended $6,060,000 to
acquire an investment in Kirkwood (see Note 5 to the accompanying financial
statements). In addition, Trusts A and D expended $194,756 to acquire equipment
during the nine months ended September 30, 1998, and, also in 1998, Trust D
expended $725,000 to acquire an interest in a real estate partnership. (See Note
7 to the accompanying financial statements.) During the nine months ended
September 30, 1999, the trusts realized net cash proceeds from asset disposals
of $14,888,754 compared to $7,324,856 for the same period in 1998. Sale proceeds
in 1999 for Trusts A, B and C include $10,402,965 related to their 89.16%
interest in a McDonnell Douglas MD-82 aircraft formerly leased to Alaska
Airlines, Inc., which was sold in January 1999. Future inflows of cash from
asset disposal transactions will vary in timing and amount and will be
influenced by many factors including, but not limited to, the frequency and
timing of lease expirations, the type of equipment being sold, its condition and
age, and future market conditions.

In accordance with Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities, marketable
equity securities classified as available-for-sale are required to be carried at
fair value. During the nine months ended September 30, 1999, Equis II purchased
marketable equity securities having a cost of $321,322 and recorded an
unrealized gain on available-for-sale securities of $48,376.

The trusts obtained long-term financing in connection with certain
equipment leases. The repayment of such indebtedness is reported as a component
of financing activities on the accompanying Consolidated Statements of Cash
Flows. Generally, each note payable is recourse only to the specific equipment
financed and to the minimum rental payments contracted to be received during the
debt amortization period (which period generally coincides with the lease rental
term). As rental payments are collected, a portion or all of the rental payment
is used to repay the associated indebtedness. In the near-term, the amount of
cash used to repay debt obligations may increase due to the financing of other
newly acquired assets. In addition, the trusts collectively have a balloon
payment obligation totaling $1,129,684 at the expiration of a lease term related
to their interest in an aircraft leased to Reno Air, Inc. Furthermore, Trusts C
and D have balloon payment obligations of $40,450,000 and $4,117,864 at the
expiration of lease terms related to an aircraft leased to Scandinavian Airlines
System and certain rail equipment, respectively. During 1999, Trusts C and D
obtained financing of $2,633,153 in connection with their investment in Kettle
Valley that will be amortized over 34 months (see Note 3 to the accompanying
financial statements). Equis II also incurred indebtedness to purchase the Class
B Interests, which debt is amortized principally from cash distributions paid by
the trusts. At September 30, 1999, Equis II owed $19,540,000 in connection with
that financing, excluding amounts owed to affiliates.

At September 30, 1999, Equis II was due aggregate future minimum lease
payments of $33,682,536 from contractual lease agreements (see Note 1 to the
financial statements), a portion of which will be used to amortize the principal
balance of notes payable (other than Equis II's indebtedness pertaining to the
Class B Interests) of $66,189,189. In total, the Company has debt service
obligations to third-party lenders of $85,729,189 (See Note 6 to the
accompanying

<PAGE>

financial statements).

As a holder of Class B Interests in the trusts, Equis II is entitled to
receive cash distributions from the trusts. Moreover, Equis II's principal
source of cash is derived from these equity interests. In addition, Equis II
receives cash distributions as Managing Trustee of the trusts. (AFG ASIT
Corporation, which is the Managing Trustee of the trusts, is a subsidiary of the
Equis II.) During the nine months ended September 30, 1999, and 1998, Equis II
received $2,747,258 and $16,502,306, respectively, from the trusts for Class B
Interest distributions and $95,092 and $103,818, respectively, for Managing
Trustee distributions. These payments were treated as intercompany transactions
on the accompanying consolidated financial statements and therefore were
eliminated in consolidation.

Pursuant to terms of settling the class action lawsuit referred to in
Note 8 to the accompanying financial statements, Equis II agreed to permit the
trusts to invest $13,000,000 of Equis II's Class B Interest Capital
Contributions for general operating purposes. Accordingly, the trusts
reclassified $13,000,000 from restricted cash to unrestricted cash in 1999. A
portion of these funds, or $4,000,000, was distributed to the trusts' Class A
Interest holders as a special distribution, including $215,000 paid to
Plaintiff's counsel.

In the future, Equis II's cash flows will continue to be closely tied
to the trusts. The trusts' operations and principal cash flows gradually will
shift from rental receipts to equipment sale proceeds as the trusts mature and
change as a result of potential new investments other than equipment
acquisitions. As this occurs, the trusts' cash flows resulting from equipment
investments may become more volatile in that certain of the trusts' equipment
leases will be renewed and certain of their assets will be sold. In some cases,
the trusts may be required to expend funds to refurbish or otherwise improve the
equipment being remarketed in order to make it more desirable to a potential
lessee or purchaser. Accordingly, as Equis II's lease assets mature and become
available for remarketing, the cash flows of Equis II could become less
predictable. In addition, Equis II will have cash needs to satisfy debt service
obligations and to pay management fees and operating expenses. Several factors,
including month-to-month lease extensions, lessee defaults, equipment casualty
events, and the results of new investments could alter Equis II's anticipated
cash flows either positively or negatively as described herein and in the
accompanying financial statements.

In accordance with the trust agreements of the trusts, upon the
dissolution of the trusts the Managing Trustee (which is a subsidiary of Equis
II) will be required to contribute to the trusts an amount equal to any negative
balance which may exist in the Managing Trustee's tax capital account. At
December 31, 1998, the Managing Trustee had positive tax capital account
balances in Trusts A and B and negative tax capital account balances totaling
$70,410 and $303,603 in Trusts C and D, respectively.

CONSOLIDATED FINANCIAL STATEMENTS OF EQUIS II - DECEMBER 31, 1998.

REPORT OF INDEPENDENT AUDITORS

To the stockholders of Equis II Corporation:

We have audited the accompanying consolidated balance sheets of Equis II
Corporation as of December 31, 1998 and 1997 and the related consolidated
statements of operations, changes in stockholders' equity (deficit), and cash
flows for the year ended December 31, 1998 and the period from July 17, 1997
(commencement of operations) to December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

<PAGE>

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Equis II Corporation at
December 31, 1998 and 1997, and the consolidated results of its operations and
its cash flows for the year ended December 31, 1998 and the period from July 17,
1997 (commencement of operations) to December 31, 1997 in conformity with
generally accepted accounting principles.

As described in Note 1, the accompanying consolidated financial statements of
the Company for the period from inception (July 17, 1997) through December 31,
1997, have been restated to include the accounts of certain Trusts controlled by
the Company.

Ernst & Young LLP

Boston, Massachusetts
June 30, 1999

<PAGE>

EQUIS II CORPORATION

CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997

Restated (See Note 1)
1998 1997
---- ----
<S> <C> <C>
ASSETS
- ------
Cash and cash equivalents $ 35,941,223 $ 20,357,737
Restricted cash 13,000,000 26,006,553
Cash held in escrow -- 3,017,318
Rents receivable 3,086,824 4,162,290
Accounts receivable - affiliate 1,300,208 2,067,853
Interest receivable - affiliates 52,500 --
Notes receivable - affiliates 2,212,353 462,353
Investment securities - affiliate 86,497 157,270
Investment - affiliate 699,626 --
Equipment at cost, net of accumulated depreciation 120,838,330 150,605,602
Other assets, net 328,874 423,592
----------------- -----------------

$ 177,546,435 $ 207,260,568
================= =================

LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY (DEFICIT)
- -----------------------------------------------------------------
Notes payable $ 93,179,009 $ 122,660,437
Note payable - affiliate 1,100,000 1,100,000
Accrued interest 743,813 976,997
Accrued interest - affiliate 321,412 70,123
Accrued liabilities 905,000 54,700
Accrued liabilities - affiliate 1,798,734 834,549
Deferred rental income 914,414 281,324
Other liabilities 197,950 --
Cash distributions payable 899,201 913,243
----------------- -----------------

Total liabilities 100,059,533 126,891,373
----------------- -----------------

Minority interest 78,075,183 79,869,334
----------------- -----------------

Stockholders' equity (deficit):
Common stock, $0.01 par value, 3,000 shares authorized
and issued 30 30
Additional paid in capital 4,207,129 4,207,129
Accumulated deficit (4,795,440) (3,592,410)
Net unrealized losses -- (114,888)
----------------- -----------------

Total stockholders' equity (deficit) (588,281) 499,861
----------------- -----------------

$ 177,546,435 $ 207,260,568
================= =================

</TABLE>

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

<PAGE>

EQUIS II CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS for
the year ended December 31, 1998 and the period July 17, 1997
(commencement of operations) to December 31, 1997

Restated (See Note 1)
Period from July 17,
1997 (commencement
of operations) to
December 31,
1998 1997
---- ---------------------
<S> <C> <C>
Income:

Lease revenue $ 38,730,887 $ 23,268,420

Interest income 2,561,342 1,402,495

Interest income - affiliates 98,735 --

Gain (loss) on sale/exchange of equipment 2,872,776 (1,397,772)
------------------ ------------------

Total income 44,263,740 23,273,143
------------------ ------------------

Expenses:

Depreciation and amortization 24,052,618 16,495,596

Write-down of investment securities - affiliate 186,105 --

Interest expense 9,676,338 4,915,321

Interest expense - affiliate 251,288 287,212

Equipment management fees

- affiliate 1,772,762 1,052,202

Operating expenses - affiliate 2,241,486 1,334,299

Minority interest 7,286,173 1,413,050
------------------ ------------------

Total expenses 45,466,770 25,497,680
------------------ ------------------

Net loss $ (1,203,030) $ (2,224,537)
================== ==================

</TABLE>

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

<PAGE>

EQUIS II CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
for the year ended December 31, 1998 and the period July 17, 1997
(commencement of operations) to December 31, 1997

Restated (See Note 1)
Period from July 17,
1997 (commencement
of operations) to
December 31,
1998 1997
-------------------------- ----------------------------------------
<S> <C> <C>
Common Stock:

Balance at beginning of period $ 30 $ --

Common stock issued (3,000 shares in 1997) -- 30
------------------ ------------------

Balance at end of period $ 30 $ 30
------------------ ------------------

Additional Paid in Capital:

Balance at beginning of period $ 4,207,129 $ --

Assumption of debt by stockholders -- 4,207,129
------------------ ------------------

Balance at end of period $ 4,207,129 $ 4,207,129
------------------ ------------------

Accumulated Deficit:

Balance at beginning of period $ (3,592,410) $ --

Net loss (1,203,030) (1,203,030) (2,224,537) (2,224,537)

Deemed distribution to affiliate -- (1,100,000)

Accumulated deficit - ASIT Corp. -- (267,873)
------------------ ------------------

Balance at end of period $ (4,795,440) $ (3,592,410)
------------------ ------------------

Unrealized Loss on Investment Securities - Affiliate:

Balance at beginning of period $ (114,888) $ --

Unrealized loss on investment securities (70,502) (70,502) (114,888) (114,888)

Reclassification adjustment for write-down 185,390 185,390 --
of investment securities - affiliate ------------------ ------------------

Balance at end of period $ -- $ (114,888)
================== -------------- ================== -------------

</TABLE>

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

<PAGE>

<TABLE>

<S> <C> <C>
Comprehensive loss for the period $ (1,088,142) $ (2,339,425)
============== ==============

</TABLE>

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

<PAGE>

EQUIS II CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
for the year ended December 31, 1998 and the period July 17, 1997
(commencement of operations) to December 31, 1997

Restated (See Note 1)
Period from July 17,
1997 (commencement
of operations) to
December 31,
1998 1997
-------------- --------------------
<S> <C> <C>
Cash flows from (used in) operating activities:

Net loss $ (1,203,030) $ (2,224,537)
Adjustments to reconcile net loss to net cash
from operating activities:
Depreciation and amortization 24,052,618 16,495,596
(Gain) loss on sale/exchange of equipment (2,872,776) 1,397,772
Write-down of investment securities - affiliate 186,105 --
Minority interest (1,808,637) (16,425,013)

Changes in assets and liabilities:
Decrease (increase) in:
Cash held in escrow 3,017,318 (3,017,318)
Rents receivable 1,075,466 3,759,630
Accounts receivable - affiliate 767,645 (660,218)
Interest receivable - affiliates (52,500) --
Notes receivable - affiliates (1,750,000) --
Other assets -- (469,825)
Increase (decrease) in:
Accrued interest (233,184) (123,448)
Accrued interest - affiliates 251,289 70,123
Accrued liabilities 850,300 (6,525)
Accrued liabilities - affiliate 964,185 545,865
Deferred rental income 633,090 (291,770)
Other liabilities 197,950 --
Net cash from (used in) operating activities ---------------- ----------------
24,075,839 (949,668)
---------------- ----------------

Cash flows from (used in) investing activities:
Dividend received -- 41,939
Purchase of equipment (194,756) (68,016,808)
Proceeds from equipment sales 8,876,904 3,348,239
Investment - affiliate (699,626) --
Net cash from (used in) investing activities ---------------- ----------------
7,982,522 (64,626,630)
---------------- ----------------

Cash flows from (used in) financing activities:
Proceeds from capital contributions -- 4,275,744
Restricted cash 13,006,553 (26,006,553)
Proceeds from notes payable -- 92,904,129
Principal payments - notes payable (29,481,428) (19,196,213)
Net cash from (used in) financing activities ---------------- ----------------
(16,474,875) 51,977,107
---------------- ----------------

Net increase (decrease) in cash and cash equivalents 15,583,486 (13,599,191)

Cash and cash equivalents at beginning of period 20,357,737 33,956,928
---------------- ----------------

</TABLE>

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

<PAGE>

<TABLE>

<S> <C> <C>
Cash and cash equivalents at end of period $ 35,941,223 $ 20,357,737
================ ================

Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 9,909,521 $ 5,038,769
================ ================

</TABLE>

Supplemental disclosure of non-cash activities:
Purchase of AFG ASIT Corporation by indebtedness to an affiliate of
$1,100,000 in 1997.

During 1997, a Trust sold equipment to third parties which assumed related
debt and interest of $2,624,639 and $13,998, respectively.

See Notes 1, 2 and 3 to the financial statements.

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

<PAGE>

EQUIS II CORPORATION

Notes to the Consolidated Financial Statements

December 31, 1998

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND OWNERSHIP

Equis II Corporation (the "Company") is a special purpose S-corporation
that was organized in the State of Delaware in 1997 for the purpose of acquiring
and holding certain beneficiary interests in four Delaware Business Trusts (the
"Trusts") sponsored by an affiliate, Equis Financial Group Limited Partnership
("EFG"). The operations of the Company commenced on July 17, 1997. On July 18,
1997, EFG purchased newly issued Class B Subordinated Interests in AFG
Investment Trust A (822,863 interests), AFG Investment Trust B (997,373
interests), AFG Investment Trust C (3,019,220 interests), and AFG Investment
Trust D (3,140,683 interests) (collectively, the "Interests"). The purchase of
the Interests resulted in EFG having voting control of each of the Trusts. The
Interests were initially purchased by EFG at a cost of $5 per Interest for an
aggregate purchase price of $39,900,695. EFG borrowed all of the funds necessary
to purchase the Interests as follows: $35,910,625 under a Demand Note from an
institutional lender and $3,990,070 under a Demand Note from Old North Capital
Limited Partnership ("ONC"), an affiliate of EFG and the Company. The
acquisition of the Interests was accounted for by EFG under the purchase method
of accounting. On the same day, EFG sold and transferred all of the Interests to
the Company at EFG's cost. The Company also borrowed the funds necessary to
purchase the Interests by entering into an Acquisition Credit Agreement with the
aforementioned institutional lender for $35,910,625 and assuming the ONC Demand
Note. The ONC Demand Note and accrued interest of $3,990,070 and $217,059,
respectively, were assumed by Gary D. Engle and James A. Coyne, partners of ONC
and stockholders of the Company, on December 31, 1997.

On July 17, 1997, the Company acquired AFG ASIT Corporation, the
Managing Trustee of the Trusts, from EFG in exchange for a Demand Note of
$1,100,000. The acquisition, which was between related parties, was recorded at
historical cost. The difference between the face amount of the demand note and
the net amount of assets and liabilities assumed was reflected as a deemed
distribution in the consolidated statement of stockholders' equity for the
period ended December 31, 1997. As Managing Trustee of the Trusts, AFG ASIT
Corporation has a 1% carried ownership interest in the Trusts and significant
influence over the operations of the Trusts.

The Company has two stockholders, Gary D. Engle, President, and James
A. Coyne, Vice President.

BASIS OF PRESENTATION

As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income. Statement 130
establishes new rules for the reporting and the display of comprehensive income
and its components; however, the adoption of this statement had no impact on the
Company's net income or stockholders' equity. Statement 130 requires unrealized
gains or losses on the Company's available-for-sale securities, which prior to
adoption were reported separately in stockholders' equity, to be included in
comprehensive income (loss). At December 31, 1997, the cumulative amount of
other comprehensive losses was $114,888.

PRIOR PERIOD ADJUSTMENT - The accompanying consolidated financial
statements of the Company for the period from inception (July 17, 1997) through
December 31, 1997, have been restated to include the accounts of the Trusts,
which are controlled by the Company, and which were excluded in error from the
previously issued consolidated financial statements of the Company.

<PAGE>

EQUIS II CORPORATION

Notes to the Consolidated Financial Statements

(Continued)

OTHER ASSETS

Other assets, consisting of capitalized borrowing costs, are amortized
using the straight-line method over the related debt amortization period of 5
years. Accumulated amortization at December 31, 1998 and 1997 amounted to
$140,951 and $46,983, respectively.

USE OF ESTIMATES

The preparation of the financial statements in conformity with
generally accepted accounting principles requires the use of estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

STATEMENT OF CASH FLOWS AND RESTRICTED CASH

The Company and its affiliates consider liquid investment instruments
purchased with a maturity of three months or less to be cash equivalents. From
time to time, the Company and its affiliates invest excess cash with large
institutional banks in federal agency discount notes and reverse repurchase
agreements with overnight maturities. Under the terms of the agreements, title
to the underlying securities passes to the Company or its affiliates. The
securities underlying the agreements are book entry securities. At December 31,
1998, the Company and its affiliates had $43,255,000 invested in federal agency
discount notes and reverse repurchase agreements secured by U.S. Treasury Bills
or interests in U.S. Government securities. Cash of $13,000,000 was restricted
as to its use pending the outcome of the Class Action Lawsuit described in Note
6. See also Note 8 regarding settlement of the Class Action Lawsuit.

INCOME TAXES

No provision or benefit from income taxes is included in the
accompanying financial statements. The stockholders are responsible for
reporting their proportionate share of the Company's taxable income or loss and
other tax attributes on their individual tax returns.

REVENUE RECOGNITION

Rents are payable to the Trusts monthly, quarterly or semi-annually and
no significant amounts are calculated on factors other than the passage of time.
The leases are accounted for as operating leases and are noncancellable. Rents
received prior to their due dates are deferred. Future minimum rents of
$51,858,158 are due as follows:

<TABLE>

<S> <C> <C>
For the year ending December 31, 1999 $ 23,680,520
2000 16,512,899
2001 5,674,087
2002 4,479,006
2003 1,364,837
Thereafter 146,809
---------------

Total $ 51,858,158
===============

</TABLE>

EQUIPMENT ON LEASE

<PAGE>

EQUIS II CORPORATION

Notes to the Consolidated Financial Statements

(Continued)

All equipment is owned by the Trusts and was acquired from EFG, one of
its affiliates or from third-party sellers. Equipment at cost means the actual
cost paid by the Trusts to acquire the equipment, including acquisition fees.
Where equipment was acquired from EFG or an affiliate, equipment at cost
reflects the actual price paid for the equipment by EFG or the affiliate plus
all actual costs incurred by EFG or the affiliate while carrying the equipment,
including all liens and encumbrances, less the amount of all primary term rents
earned by EFG or the affiliate prior to selling the equipment. Where the seller
of the equipment was a third party, equipment at cost reflects the seller's
invoice price.

DEPRECIATION AND AMORTIZATION

The Trusts' depreciation policy is intended to allocate the cost of
equipment over the period during which it produces economic benefit. The
principal period of economic benefit is considered to correspond to each asset's
primary lease term, which term generally represents the period of greatest
revenue potential for each asset. Accordingly, to the extent that an asset is
held on primary lease term, the Trusts depreciate the difference between (i) the
cost of the asset and (ii) the estimated residual value of the asset on a
straight-line basis over such term. For purposes of this policy, estimated
residual values represent estimates of equipment values at the date of primary
lease expiration. To the extent that an asset is held beyond its primary lease
term, the Trusts continue to depreciate the remaining net book value of the
asset on a straight-line basis over the asset's remaining economic life.
Periodically, the Managing Trustee, AFG ASIT Corporation, evaluates the net
carrying value of equipment to determine whether it exceeds estimated net
realizable value. For purposes of this comparison, "net carrying value"
represents, at a given date, the net book value (equipment cost less accumulated
depreciation for financial reporting purposes) of the Trusts equipment and "net
realizable value" represents, at the same date, the aggregate undiscounted cash
flows resulting from future contracted lease payments plus the estimated
residual value of the Trusts' equipment. AFG ASIT Corporation evaluates
significant equipment assets, such as aircraft and vessels, individually. All
other assets are evaluated collectively by equipment type unless AFG ASIT
Corporation learns of specific circumstances, such as a lessee default,
technological obsolescence, or other market developments, which could affect the
net realizable value of particular assets. Adjustments to reduce the net
carrying value of equipment are recorded in those instances where estimated net
realizable value is considered to be less than net carrying value. To the extent
that such adjustments were recorded, they are reflected separately on the
accompanying Statement of Operations as Write-Down of Equipment.

The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including EFG's ability to sell and re-lease
equipment. Changing market conditions, industry trends, technological advances,
and many other events can converge to enhance or detract from asset values at
any given time. EFG attempts to monitor these changes in order to identify
opportunities which may be advantageous to the Trusts and which will maximize
total cash returns for each asset.

ACCRUED LIABILITIES - AFFILIATE

Unpaid fees and operating expenses paid by EFG on behalf of the Company
or its affiliates and accrued but unpaid administrative charges and management
fees are reported as accrued liabilities - affiliate on the accompanying
Consolidated Balance Sheets.

MINORITY INTEREST

The Company owns approximately 60% of the Trusts' outstanding voting
securities in addition to all of the common stock of the Trusts' Managing
Trustee, AFG ASIT Corporation. Accordingly, the accompanying financial
statements consolidate the results of the Trusts. The Company owns approximately
21% and 32% of the Trusts' partners' capital at December 31, 1998 and 1997,
respectively. The outside investors' interests in the Trusts are reflected on
the accompanying Consolidated Balance Sheets as minority interest and their
share of the respective income is reflected as minority interest on the
Consolidated Statements of Operations.

42
<PAGE>

EQUIS II CORPORATION

Notes to the Consolidated Financial Statements

(Continued)

NOTE 2 - EQUIPMENT

At the date of the Company's acquisition of the Interests, July 17,
1997, the book value of the Trusts' equipment was approximately $104,500,000 and
approximated fair value. At December 31, 1998, the Trusts' historical equipment
cost and accumulated depreciation was $229,925,445 and $109,087,115,
respectively.

The Trusts are engaged in the business of leasing equipment to third
parties and own a diversified portfolio of assets for such purpose. Equipment
types include commercial aircraft, ocean-going vessels, materials handling,
construction and mining, manufacturing, computers and peripherals, and retail
store fixtures, among others. As equipment is sold to third parties, or
otherwise disposed of, the Trusts recognize a gain or loss equal to the
difference between the net book value of the equipment at the time of sale or
disposition and the proceeds realized upon sale or disposition. The ultimate
realization of estimated residual value in the equipment is dependent upon,
among other things, EFG's ability to maximize proceeds from selling or
re-leasing the equipment upon the expiration of the primary lease terms. At
December 31, 1998, approximately 90% of the Trusts' aggregate equipment was
subject to lease agreements and approximately 10% was held for sale or re-lease
or being rented on a month-to-month basis. Equipment held for sale or re-lease
included a McDonnell Douglas MD-82 aircraft formerly leased to Alaska Airlines,
Inc. having a cost and net book value of $15,275,446 and $9,346,384,
respectively (see Note 8 - Subsequent Events) and a SAAB SF340A aircraft
formerly leased to Comair, Inc. having a cost and net book value of $4,421,116
and $1,415,736, respectively. AFG ASIT Corporation is actively seeking the sale
of the SAAB SF 340A aircraft and the sale or re-lease of all other equipment not
on lease. In the opinion of EFG, the acquisition cost of the Trusts' equipment
did not exceed its fair market value.

During August 1997, one of the Trusts exchanged certain locomotives for
a proportionate interest in certain other locomotives. The Trust's original
locomotives had a cost and a net book value of $4,819,218 and $3,151,503,
respectively, and had associated indebtedness of $1,235,989 at the time of the
exchange. The replacement locomotives were recorded at their estimated fair
value of $4,574,485 and the Trust assumed associated debt of $3,120,127. The
exchange resulted in the recognition of a net loss, for financial statement
purposes, of $461,156.

Certain of the Trusts' equipment and related lease payment streams were
used to secure term loans with third-party lenders. At December 31, 1998, the
Trusts' equipment included leveraged equipment having an original cost of
approximately $138,280,000 and a net book value of approximately $102,306,000.

Generally, the costs associated with maintaining, insuring and
operating the Trusts' equipment are incurred by the respective lessees pursuant
to terms specified in their individual lease agreements with the Trusts.

NOTE 3 - INVESTMENT SECURITIES - AFFILIATE / NOTE RECEIVABLE - AFFILIATE

As a result of an asset exchange in 1997, one of the Trusts obtained
20,969 common shares of an affiliate, Semele Group Inc. ("Semele"), and has a
beneficial interest in a Note from Semele (the "Semele Note") of $462,353. The
Semele Note bears an annual interest rate of 10% and will be amortized over
three years with mandatory principal reductions, if and to the extent that net
proceeds are received by Semele from the sale or refinancing of its principal
real estate asset consisting of an undeveloped 274-acre parcel of land near
Malibu, California ("Rancho Malibu"). The Trust recognized interest income of
$46,235 related to the Semele Note during the year ended December 31, 1998.

In accordance with Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities, marketable
equity securities classified as available-for-sale are required to be carried at
fair value. During the year ended December 31, 1998, the Trust decreased the
carrying value of its investment in Semele common stock to $4.125 per share (the
quoted price of the Semele stock on NASDAQ at December 31, 1998) resulting in an
unrealized loss

<PAGE>

EQUIS II CORPORATION

Notes to the Consolidated Financial Statements

(Continued)

in 1998 of $70,773. At December 31, 1998, AFG ASIT Corporation determined that
the decline in market value of the Semele common stock was other-than-temporary.
As a result, the Trust wrote down the cost of the Semele stock to $4.125 per
share (the quoted price of the Semele stock on NASDAQ at December 31, 1998) for
a total realized loss of $186,105 in 1998. At December 31, 1998, the carrying
value of the Semele stock was $86,497.

NOTE 4 - NOTES PAYABLE

To finance the Company's investment in the Interests, the Company
borrowed $35,910,625 under an Acquisition Credit Agreement from an institutional
lender and assumed $3,990,070 under the ONC Demand Note from EFG. The term note
with the institutional lender bears a fluctuating interest rate based on either
LIBOR plus 4.5% or Prime plus 2%, the applicable rate being selected at the
discretion of the Company. The term note is secured by the general assets and
stock of the Company. In addition, EFG has pledged its Special Beneficiary
Interests in the Trusts as security for the term loan. Repayment of principal
and interest on the term loan is governed by terms specified in the Acquisition
Credit Agreement. At December 31, 1998, the term loan had a principal balance
outstanding of $21,395,000.

Notes payable at December 31, 1998 also consisted of installment notes
of $71,784,009 payable to banks and institutional lenders. The notes bear
interest rates ranging between 5.69% and 14.46%, except for one note, which
bears a fluctuating interest rate based on LIBOR (5.54% at December 31, 1998)
plus a margin. All of the installment notes are non-recourse, and are
collateralized by the equipment and assignment of the related lease payments.
Generally, the installment notes will be fully amortized by noncancellable
rents. However, the Trusts have balloon payment obligations of $40,450,000,
$4,117,864 and $1,129,684 at the expiration of certain lease terms (those
related to an SAS Aircraft, certain rail equipment and an MD-87 jet aircraft
leased by Reno Air, Inc., respectively). During 1998, pursuant to the lease
agreement, SAS exercised its option to extend the term of the existing lease for
a period of two years, beginning December 30, 1998. As a result of SAS
exercising the renewal lease option, the balloon payment has been postponed
until the termination of the two-year extension period.

Future principal payments due in connection with the above debt obligations are
as follows:

<TABLE>

<S> <C>
For the year ending December 31, 1999 $ 14,513,779
2000 52,704,824
2001 6,241,897
2002 17,149,191
2003 2,424,949
2004 and thereafter 144,369
-------------------

Total $ 93,179,009
===================

</TABLE>

The Company issued a Demand Note in the amount of $1,100,000 (the "EFG
Note") to acquire AFG ASIT Corporation from EFG. The note bears an annual
interest rate of 11.5% and repayments thereof are subordinate to the Company's
institutional indebtedness. The EFG Note is recorded as note payable - affiliate
on the consolidated balance sheet. The carrying amount of the Company's
indebtedness approximates fair value at December 31, 1998.

NOTE 5 - RELATED PARTY TRANSACTIONS

<PAGE>

EQUIS II CORPORATION

Notes to the Consolidated Financial Statements

(Continued)

and has deferred collection of distributions it is entitled to receive as
Special Beneficiary in the Trusts until such time as the institutional
indebtedness of the Company has been satisfied. Accordingly, EFG entered into a
Pledge and Security Agreement (the "Pledge Agreement") with the Company's
institutional lender. In consideration for EFG's pledge, the Company created a
note in favor of EFG which accrues the equivalent of all amounts absorbed by the
Company as a result of the Pledge Agreement. The accumulated debt balance to EFG
accrues interest at the rate of 11.5% per annum and is subordinate to the
Company's institutional indebtedness. At December 31, 1998, the Company owed EFG
$1,617,295 for such amounts loaned pursuant to the Pledge Agreement. In
addition, the Company owes EFG $30,014 for liabilities of AFG ASIT Corporation
which existed at the date of the Company's acquisition of AFG ASIT Corporation.
These liabilities are recorded as accrued liabilities - affiliate on the
accompanying Consolidated Balance Sheet.

At December 31, 1998, the Company had accrued interest of $321,412
related to the EFG Note (see Note 4) and amounts loaned by EFG pursuant to the
Pledge Agreement. This amount is recorded as accrued interest - affiliate on the
Consolidated Balance Sheet. The collection of such amount is deferred until such
time as the institutional indebtedness of the Company has been satisfied.

On August 8, 1998, the Company extended a loan of $1,750,000 to Mr.
Engle and Mr. Coyne. The corresponding note receivable bears an interest rate of
7.5% and is payable on August 8, 2007.

All operating expenses incurred by the Trusts are paid by EFG on behalf
of the Trusts and EFG is reimbursed at its actual cost for such expenditures.
Fees and other costs incurred during the year ended December 31, 1998 and the
period ended December 31, 1997, which were paid or accrued by the Trusts to EFG
or its Affiliates, are as follows:

1998 1997
--------------- --------------

<S> <C> <C>
Equipment acquisition fees $ 5,378 $ 1,958,975
Equipment management fees 1,772,762 1,052,202
Offering costs -- 399,693
Administrative charges 309,732 158,698
Reimbursable operating
expenses due to third parties 1,884,662 1,167,051
--------------- ---------------

Total $ 3,972,534 $ 4,736,619
=============== ===============

</TABLE>

EFG and its Affiliates were reimbursed for their out-of-pocket offering costs
incurred on behalf of the Trusts in an amount equal to 1% of the gross proceeds
of the four trusts which sold Class B Interests, pursuant to the Registration
Statement on Form S-1.

As provided under the terms of the Trust Agreement, EFG is compensated
for its services to the Trusts. Such services include all aspects of
acquisition, management and sale of equipment. For acquisition services, EFG was
compensated by an amount equal to .28% of Asset Base Price paid by the Trusts
for each asset acquired for the Trusts' initial asset portfolio. For
reinvestment acquisitions during the Trusts' initial reinvestment periods, EFG
was compensated by an amount equal to 3% of Asset Base Price paid by the Trusts.
For subsequent reinvestment activity, EFG is compensated by an amount equal to
1% of asset base price paid by the Trusts. For management services, EFG is
compensated by an amount equal to (i) 5% of gross operating lease rental revenue
and 2% of gross full payout lease rental revenue received by the Trusts with
respect to assets acquired on or prior to the expiration of their initial
reinvestment periods or (ii) 2% of gross lease rental revenue received by the
Trusts for equipment acquisitions subsequent to the initial reinvestment
periods. Both of these fees are subject to certain limitations defined in the
Trust Agreements. For non-equipment investments other than cash, AFG ASIT
Corporation receives an annualized management fee of 1%.

<PAGE>

EQUIS II CORPORATION

Notes to the Consolidated Financial Statements

(Continued)

All equipment was purchased from EFG, one of its Affiliates, or
directly from third-party sellers. The Trusts' purchase price is determined by
the method described in Note 1, Equipment on Lease.

All rents and proceeds from the sale of equipment are paid by the
lessees directly to either EFG or to a lender. EFG temporarily deposits
collected funds in a separate interest-bearing escrow account prior to
remittance to the Trusts. At December 31, 1998, the Trusts were owed $1,300,208
by EFG for such funds and the interest thereon. These funds were remitted to the
Trusts in January 1999.

During 1998, one of the Trusts purchased limited partnership units (the
"Units") in AFG International Limited Partnership (the "Partnership"), a real
estate limited partnership sponsored by EFG that owns two commercial buildings
leased to an investment-grade educational institution. The Trust purchased 7.25
Units at a cost of $100,000 per unit for an aggregate purchase price of
$725,000. As a result of the purchase of the Units, the Trust owns approximately
22.5% of the Partnership. The Trust accounts for its investment in the
Partnership under the equity method of accounting. As such, the carrying value
of the Trust's investment in the Partnership is increased or decreased by an
amount equal to the Trust's share of the Partnership's income or losses,
respectively, and decreased for any distributions received from the Partnership.
At December 31, 1998, this investment had a carrying balance of $699,626 and is
reflected as Investment - affiliate on the accompanying Consolidated Balance
Sheet.

NOTE 6 - LEGAL PROCEEDINGS

On or about January 15, 1998, certain plaintiffs (the "Plaintiffs")
filed a class and derivative action, captioned LEONARD ROSENBLUM, ET AL. V.
EQUIS FINANCIAL GROUP LIMITED PARTNERSHIP, ET AL., in the United States District
Court for the Southern District of Florida (the "Court") on behalf of a proposed
class of investors in 28 equipment leasing programs sponsored by EFG, including
the Trusts (collectively, the "Nominal Defendants"), against EFG and a number of
its affiliates, including AFG ASIT Corporation, as defendants (collectively, the
"Defendants"). Certain of the Plaintiffs, on or about June 24, 1997, had filed
an earlier derivative action, captioned LEONARD ROSENBLUM, ET AL. V. EQUIS
FINANCIAL GROUP LIMITED PARTNERSHIP, ET AL., in the Superior Court of the
Commonwealth of Massachusetts on behalf of the Nominal Defendants against the
Defendants. Both actions are referred to herein collectively as the "Class
Action Lawsuit."

The Plaintiffs have asserted, among other things, claims against the
Defendants on behalf of the Nominal Defendants for violations of the Securities
Exchange Act of 1934, common law fraud, breach of contract, breach of fiduciary
duty, and violations of the partnership or trust agreements that govern each of
the Nominal Defendants. The Defendants have denied, and continue to deny, that
any of them have committed or threatened to commit any violations of law or
breached any fiduciary duties to the Plaintiffs or the Nominal Defendants.

On July 16, 1998, counsel for the Defendants and the Plaintiffs
executed a Stipulation of Settlement setting forth terms pursuant to which a
settlement of the Class Action Lawsuit is intended to be achieved and which,
among other things, is expected to reduce the burdens and expenses attendant to
continuing litigation. The Stipulation of Settlement was based upon and
superseded a Memorandum of Understanding between the parties dated March 9, 1998
which outlined the terms of a possible settlement. The Stipulation of Settlement
was filed with the Court on July 23, 1998 and was preliminarily approved by the
Court on August 20, 1998 when the Court issued its "Order Preliminarily
Approving Settlement, Conditionally Certifying Settlement Class and Providing
for Notice of, and Hearing on, the Proposed Settlement" (the "August 20 Order").
On March 15, 1999, counsel for the Plaintiffs and the Defendants entered into an
amended stipulation of settlement (the "Amended Stipulation") which was filed
with the Court on March 15, 1999. The Amended Stipulation

<PAGE>

EQUIS II CORPORATION

Notes to the Consolidated Financial Statements

(Continued)

was preliminarily approved by the Court by its "Modified Order Preliminarily
Approving Settlement, Conditionally Certifying Settlement Class and Providing
For Notice of, and Hearing On, the Proposed Settlement" dated March 22, 1999
(the "March 22 Order"). The Amended Stipulation, among other things, divided the
Class Action Lawsuit into two separate sub-classes that can be settled
individually. See Note 8 - Subsequent Events.

In addition to the foregoing, the Trusts are parties to other lawsuits
that have arisen out of the conduct of its business, principally involving
disputes or disagreements with lessees over lease terms and conditions. The
following action had not been finally adjudicated at December 31, 1998:

ACTION INVOLVING NATIONAL STEEL CORPORATION

EFG, on behalf of the Trusts and certain affiliated investment programs
(collectively, the "Plaintiffs"), filed an action in the Commonwealth of
Massachusetts Superior Court, Department of the Trial Court in and for the
County of Suffolk on July 27, 1995, for damages and declaratory relief against a
lessee of the Trusts, National Steel Corporation ("National Steel"). The
Complaint seeks reimbursement from National Steel of certain sales and/or use
taxes paid to the State of Illinois in connection with equipment leased by
National Steel from the Plaintiffs and other remedies provided under the Master
Lease Agreement ("MLA"). On August 30, 1995, National Steel filed a Notice of
Removal, which removed the case to United States District Court, District of
Massachusetts. On September 7, 1995, National Steel filed its Answer to the
Plaintiff's Complaint along with Affirmative Defenses and Counterclaims and
sought declaratory relief, alleging breach of contract, implied covenant of good
faith and fair dealing, and specific performance. The Plaintiffs filed an Answer
to National Steel's Counterclaims on September 29, 1995. The parties discussed
settlement with respect to this matter for some time; however, the negotiations
were unsuccessful. The Plaintiffs filed an Amended and Supplemental Complaint
alleging further default under the MLA and filed a motion for Summary Judgment
on all claims and Counterclaims. The Court held a hearing on the Plaintiff's
motion in December 1997 and later entered a decision dismissing certain of
National Steel's Counterclaims, finding in favor of the Plaintiffs on certain
issues and in favor of National Steel on other issues. In March 1999, the
Plaintiffs obtained payment for certain of the disputed items and have resumed
settlement discussions to resolve remaining issues. AFG ASIT Corporation does
not believe that the resolution of the remaining claims will have a material
effect on the Trusts' financial position or results of operations. See Note 8 -
Subsequent Events.

NOTE 7 - YEAR 2000 (UNAUDITED)

The Year 2000 Issue generally refers to the capacity of computer
programming logic to correctly identify the calendar year. Many companies
utilize computer programs or hardware with date sensitive software or embedded
chips that could interpret dates ending in "00" as the year 1900 rather than the
year 2000. In certain cases, such errors could result in system failures or
miscalculations that disrupt the operations of the affected businesses. The
Company uses information systems provided by EFG and has no information systems
of its own. EFG has adopted a plan to address the Year 2000 Issue that consists
of four phases: assessment, remediation, testing, and implementation and has
elected to utilize principally internal resources to perform all phases. EFG has
completed substantially all of its Year 2000 project at an aggregate cost of
less than $50,000 and at a di minimus cost to the Company. All costs incurred in
connection with EFG's Year 2000 project have been expensed as incurred.

EFG's primary information software was coded by a third party at the
point of original design to use a four digit field to identify calendar year.
All of the Company's and the Trusts' lease billings, cash receipts and equipment
remarketing processes are performed using this proprietary software. In
addition, EFG has gathered information about the Year 2000 readiness of
significant vendors and third party servicers and continues to monitor
developments in this area. All of EFG's peripheral computer technologies, such
as its network operating system and third-party software applications, including
payroll and electronic banking, have been evaluated for potential programming
changes and have required only minor modifications to function properly with
respect to dates in the year 2000 and thereafter. EFG understands that each of
its, the Company's and the Trusts' significant vendors and third-party servicers
are in the process, or have completed the process, of

<PAGE>

EQUIS II CORPORATION

Notes to the Consolidated Financial Statements

(Continued)

making their systems Year 2000 compliant. Substantially all parties queried
indicated that their systems would be Year 2000 compliant by the end of 1998.

Presently, EFG is not aware of any outside customer with a Year 2000
Issue that would have a material effect on the Company's or Trusts' results of
operations, liquidity, or financial position. The Company's and Trusts'
equipment leases were structured as triple net leases, meaning that the lessees
are responsible for, among other things, (i) maintaining and servicing all
equipment during the lease term, (ii) ensuring that all equipment functions
properly and is returned in good condition, normal wear and tear excepted, and
(iii) insuring the assets against casualty and other events of loss.
Non-compliance with lease terms on the part of a lessee, including failure to
address Year 2000 Issues, could result in lost revenues and impairment of
residual values of the Company's equipment assets under a worst-case scenario.

EFG believes that its Year 2000 compliance plan will be effective in
resolving all material Year 2000 risks in a timely manner and that the Year 2000
Issue will not pose significant operational problems with respect to its
computer systems or result in a system failure or disruption of its, the
Company's or the Trusts' business operations. However, EFG has no means of
ensuring that all customers, vendors and third-party servicers will conform
ultimately to Year 2000 standards. The effect of this risk to the Company is not
determinable.

NOTE 8 - SUBSEQUENT EVENTS

EQUIPMENT

In January 1999, certain Trusts sold a McDonnell Douglas MD-82 aircraft
formerly leased to Alaska Airlines, Inc. The Trusts received sale proceeds of
$10,402,965. At December 31, 1998, the net carrying value of this aircraft to
the Trusts was $9,346,384.

INVESTMENT IN KETTLE VALLEY

On March 1, 1999, certain Trusts (collectively, the "Buyers") formed
EFG/Kettle Development LLC, a Delaware limited liability company, for the
purpose of acquiring a 49.9% indirect ownership interest (the "Interest") in a
real estate development in Kelowna, British Columbia called Kettle Valley.
EFG/Kettle Development LLC, upon receiving the Buyers' equity investment,
purchased the Interest from a special purpose company ("SPC") whose subsidiaries
own a 99.9% limited partnership interest in Kettle Valley Development Limited
Partnership ("KVD LP"). The SPC and its subsidiaries were established by the
seller, in part, for income tax purposes and have no business interests other
than the development of Kettle Valley. KVD LP is a Canadian Partnership that
owns the property, consisting of approximately 280 acres of land. The project,
which is in the early stages of being marketed to home buyers, is zoned for
1,000 residential units in addition to commercial space that, currently, is
being constructed. The seller is an unaffiliated third-party company and has
retained the remaining 50.1% ownership interest in the SPC. A newly organized
Canadian affiliate of EFG replaced the original general partner of KVD LP on
March 1, 1999.

The Trusts' ownership share in EFG/Kettle Development LLC had a cost of
$8,750,000, which was funded with cash of $6,116,847 and a non-recourse note for
$2,633,153. The note bears interest at an annualized rate of 7.5% and will be
fully amortized over 34 months commencing April 1, 1999. The note is secured
only by the Trusts' stock interests in the SPC. In addition, the seller
purchased a residual sharing interest in a Boeing 767-300 owned by the Buyers
and leased to Scandinavian Airlines System. The seller paid $3,013,206 to the
Buyers for the residual interest, which is subordinate to

<PAGE>

EQUIS II CORPORATION

Notes to the Consolidated Financial Statements

(Continued)

certain preferred payments to be made to the Buyers in connection with the
aircraft. Payment of the residual interest is due only to the extent that the
Trusts receive net residual proceeds from the aircraft. The residual interest is
non-recourse to the Buyers.

ACTION INVOLVING NATIONAL STEEL

On May 10, 1999, EFG, on behalf of the Trusts and certain affiliated
investment programs, entered into an agreement with National Steel to settle all
outstanding matters of dispute.

CLASS ACTION LAWSUIT

On May 26, 1999, the Court entered an Order and Final Judgment
approving settlement of the Trust Class and the transactions contemplated
thereby, finding that the settlement is in all respects, fair, reasonable and
adequate. The second action, not involving the Trusts, remains pending.

<PAGE>

CONSOLIDATED FINANCIAL STATEMENTS OF EQUIS II - SEPTEMBER 30, 1999.

EQUIS II CORPORATION

CONSOLIDATED BALANCE SHEETS
September 30, 1999 and December 31, 1998

(Unaudited)

September 30, December 31,
1999 1998
------------- ------------
ASSETS

<S> <C> <C>
Cash and cash equivalents $ 50,015,579 $ 35,941,223
Restricted cash -- 13,000,000
Marketable securities 391,540 --
Marketable securities - affiliate 114,019 86,497
Rents receivable 927,721 3,086,824
Accounts receivable - affiliate 1,027,181 1,300,208
Loan receivable - Kettle Valley 100,000 --
Investment in Kettle Valley 8,837,500 --
Interest receivable - affiliates 150,668 52,500
Notes receivable - affiliates 2,212,353 2,212,353
Investment in Kirkwood 6,060,000 --
Investment - affiliate 668,813 699,626
Equipment at cost, net of accumulated depreciation 97,853,953 120,838,330
Other assets, net 461,766 328,874
----------------- -----------------

$ 168,821,093 $ 177,546,435
================= =================

LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY (DEFICIT)

Notes payable $ 85,729,189 $ 93,179,009
Note payable - affiliate 1,100,000 1,100,000
Accrued interest 663,205 743,813
Accrued interest - affiliates 580,431 321,412
Accrued liabilities 160,092 905,000
Accrued liabilities - affiliate 2,272,775 1,798,734
Deferred rental income 265,066 914,414
Other liabilities 3,013,206 197,950
Cash distributions payable 899,201 899,201
----------------- -----------------

Total liabilities 94,683,165 100,059,533
----------------- -----------------

Minority interest 73,843,537 78,075,183
----------------- -----------------

</TABLE>

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

<PAGE>

<TABLE>

<S> <C> <C>
Stockholders' equity (deficit):
Common stock, $0.01 par value, 3,000 shares authorized
and issued 30 30
Additional paid in capital 4,207,129 4,207,129
Accumulated deficit (3,961,144) (4,795,440)
Net unrealized gains 48,376 --
----------------- -----------------

Total stockholders' equity (deficit) 294,391 (588,281)
----------------- -----------------

$ 168,821,093 $ 177,546,435
================= =================

</TABLE>

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

<PAGE>

EQUIS II CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
for the nine months ended September 30, 1999 and 1998

(Unaudited)

1999 1998
------------------ -----------
<S> <C> <C>
Income:

Lease revenue $ 21,205,448 $ 30,325,076

Interest income 1,977,186 1,973,700

Interest income - affiliates 132,750 34,582

Gain on sale of equipment 3,618,718 2,590,805

Management fee income 80,238 --

Other income 1,054,759 --
------------------ ------------------

Total income 28,069,099 34,924,163
------------------ ------------------

Expenses:

Depreciation and amortization 11,840,283 19,585,289

Interest expense 5,574,539 7,577,091

Interest expense - affiliates 259,020 176,221

Equipment management fees - affiliate 1,070,079 1,386,624

Operating expenses - affiliate 2,320,079 1,715,433

Minority interest 6,170,803 4,140,232
------------------ ------------------

Total expenses 27,234,803 34,580,890
------------------ ------------------

Net income $ 834,296 $ 343,273
================== ==================

</TABLE>

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

<PAGE>

EQUIS II CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'
EQUITY (DEFICIT) for the nine months ended
September 30, 1999

(Unaudited)

<TABLE>

<S> <C>
Common Stock:

Balance at beginning of period $ 30

Common stock issued --

Balance at end of period $ 30
------------------

Additional Paid in Capital:

Balance at beginning of period $ 4,207,129

Common stock issued --

Balance at end of period $ 4,207,129
------------------

Accumulated Deficit:

Balance at beginning of period $ (4,795,440)

Net income 834,296 834,296
------------------

Balance at end of period $ (3,961,144)
------------------

Unrealized Gain on Marketable Securities:

Balance at beginning of period $ --

Unrealized gain on marketable securities 48,376 48,376
------------------

Balance at end of period $ 48,376
================== --------------

Comprehensive income for the period $ 882,672
==============

</TABLE>

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

<PAGE>

EQUIS II CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1999 and 1998

(Unaudited)

1999 1998
---------------- ----------------
<S> <C> <C>
Cash flows from (used in) operating activities:

Net income $ 834,296 $ 343,273

Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 11,840,283 19,585,289
Gain on sale of equipment (3,618,718) (2,590,805)
Minority interest (4,281,010) (2,732,304)

Changes in assets and liabilities:
Decrease (increase) in:
Cash held in escrow -- (56,891)
Rents receivable 2,159,103 2,591,220
Accounts receivable - affiliate 273,027 600,210
Loan receivable - Kettle Valley (100,000) --
Interest receivable - affiliates (98,168) --
Other assets (258,834) --
Increase (decrease) in:
Accrued interest (80,608) (125,678)
Accrued interest - affiliates 259,019 176,221
Accrued liabilities (744,908) 631,583
Accrued liabilities - affiliate 474,041 777,689
Deferred rental income (649,348) 101,375
Other liabilities (197,950) --
Notes receivable - affiliates -- (1,750,000)
---------------- ----------------

Net cash from operating activities 5,810,225 17,551,182
---------------- ----------------

Cash flows from (used in) investing activities:
Investment in Kettle Valley (6,204,347) --
Investment in Kirkwood (6,060,000) --
Purchase of marketable securities (321,322) --
Other liabilities 3,013,206 --
Purchase of equipment -- (194,756)
Proceeds from equipment sales 14,888,754 7,324,856
Investment - affiliate 30,813 (712,313)
---------------- ----------------

Net cash from investing activities 5,347,104 6,417,787
---------------- ----------------

Cash flows from (used in) financing activities:
Principal payments - notes payable (10,082,973) (26,027,586)
Restricted cash 13,000,000 13,082,834
---------------- ----------------

Net cash from (used in) financing activities 2,917,027 (12,944,752)
---------------- ----------------

</TABLE>

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

<PAGE>

<TABLE>

<S> <C> <C>
Net increase in cash and cash equivalents 14,074,356 11,024,217

Cash and cash equivalents at beginning of period 35,941,223 20,357,737
---------------- ----------------

Cash and cash equivalents at end of period $ 50,015,579 $ 31,381,954
================ ================

Supplemental disclosure of cash flow information:

Cash paid during the period for interest $ 5,655,148 $ 7,702,769
================ ================

</TABLE>

Supplemental disclosure of non-cash activities:

See Note 3 to the financial statements.

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

<PAGE>

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND OWNERSHIP

The Company has two stockholders, Gary D. Engle, President, and James
A. Coyne, Vice President.

BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts
of the Company, its wholly-owned subsidiary, AFG ASIT Corporation and the
accounts of the Trusts. The Trusts have been consolidated as a result of the
Company's ownership of the Interests, which represent a majority of the Trusts'
outstanding voting interests. All intercompany balances have been eliminated in
consolidation. In the opinion of management, all adjustments (consisting of
normal and recurring adjustments) considered necessary to present fairly the
financial position for the nine month periods ended September 30, 1999 and 1998
have been made and are reflected.

OTHER ASSETS

Other assets, consisting of capitalized borrowing costs, are amortized
using the straight-line method over the related debt amortization period of 5
years. Accumulated amortization at September 30, 1999 and December 31, 1998
amounted to $266,893 and $140,951, respectively.

USE OF ESTIMATES

<PAGE>

CASH EQUIVALENTS AND MARKETABLE SECURITIES

The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. Marketable securities
consist of equity securities which are classified as available-for-sale.
Available-for-sale securities are carried at fair value, with unrealized gains
and losses reported as a separate component of stockholders' equity. The Company
recorded an unrealized gain on available-for-sale securities of $48,376 during
the nine months ended September 30, 1999 that is included as a separate
component of stockholders' equity.

INCOME TAXES

REVENUE RECOGNITION

<TABLE>

<S> <C>
For the year ending September 30, 2000 $ 17,954,302
2001 7,753,574
2002 5,850,035
2003 1,831,007
2004 293,618
-------------------

Total $ 33,682,536
===================

</TABLE>

EQUIPMENT ON LEASE

DEPRECIATION AND AMORTIZATION

<PAGE>

given time. EFG attempts to monitor these changes in order to identify
opportunities which may be advantageous to the Trusts and which will maximize
total cash returns for each asset.

ACCRUED LIABILITIES - AFFILIATE

MINORITY INTEREST

The Company owns approximately 60% of the Trusts' outstanding voting
securities in addition to all of the common stock of the Trusts' Managing
Trustee, AFG ASIT Corporation. Accordingly, the accompanying financial
statements consolidate the results of the Trusts. The Company owns approximately
22% and 21% of the Trusts' partners' capital at September 30, 1999 and December
31, 1998, respectively. The outside investors' interests in the Trusts are
reflected on the accompanying Consolidated Balance Sheets as minority interest
and their share of income is reflected as minority interest on the Consolidated
Statements of Operations.

NOTE 2 - EQUIPMENT

At September 30, 1999, the Trusts' historical equipment cost and
accumulated depreciation was $184,715,418 and $86,861,465, respectively.

The Trusts are engaged, among other things, in the business of leasing
equipment to third parties and own a diversified portfolio of assets for such
purpose. Equipment types include, but are not limited to, commercial aircraft,
ocean-going vessels, materials handling, construction and mining, manufacturing,
computers and peripherals, and retail store fixtures. As equipment is sold to
third parties, or otherwise disposed of, the Trusts recognize a gain or loss
equal to the difference between the net book value of the equipment at the time
of sale or disposition and the proceeds realized upon sale or disposition. The
ultimate realization of estimated residual value in the equipment is dependent
upon, among other things, EFG's ability to maximize proceeds from selling or
re-leasing the equipment upon the expiration of the primary lease terms. At
September 30, 1999, approximately 96% of the Trusts' aggregate equipment was
subject to lease agreements and approximately 4% was held for sale or re-lease
or being rented on a month-to-month basis. Equipment held for sale or re-lease
included a SAAB SF340A aircraft formerly leased to Comair, Inc. having a cost
and net book value of $4,421,116 and $1,231,246, respectively. AFG ASIT
Corporation is actively seeking the sale of the SAAB SF340A aircraft and the
sale or re-lease of all other equipment not on lease. In the opinion of EFG, the
acquisition cost of the Trusts' equipment did not exceed its fair market value.

NOTE 3 - INVESTMENT IN KETTLE VALLEY

<PAGE>

1999.

The Buyer's ownership share in EFG/Kettle Development LLC had a cost of
$8,750,000, which was funded with cash of $6,116,847 and a non-recourse note for
$2,633,153. The note bears interest at an annualized rate of 7.5% and will be
fully amortized over 34 months commencing April 1, 1999. The note is secured
only by the Buyer's stock interests in the SPC. In addition, the seller
purchased a residual sharing interest in a Boeing 767-300 owned by the Buyers
and leased to Scandinavian Airlines System. The seller paid $3,013,206 to the
Buyers for the residual interest, which is subordinate to certain preferred
payments to be made to the Buyers in connection with the aircraft. Payment of
the residual interest is due only to the extent that the Buyers receive net
residual proceeds from the aircraft. The residual interest is non-recourse to
the Buyers and is reflected as Other Liabilities on the accompanying Balance
Sheet at September 30, 1999. Investment in Kettle Valley at September 30, 1999
represents actual cost paid by the Trusts plus a 1% acquisition fee.

NOTE 4 - INVESTMENT SECURITIES - AFFILIATE / NOTE RECEIVABLE - AFFILIATE

As a result of an asset exchange in 1997, one of the Trusts owns 20,969
common shares of an affiliate, Semele Group Inc. ("Semele"), and has a
beneficial interest in a Note from Semele (the "Semele Note") of $462,353. The
Semele Note matures in April, 2000 and bears an annual interest rate of 10% with
mandatory principal reductions, if and to the extent that net proceeds are
received by Semele from the sale or refinancing of its principal real estate
asset consisting of an undeveloped 274-acre parcel of land near Malibu,
California ("Rancho Malibu"). The Trust recognized interest income of $34,582
related to the Semele Note during the nine months ended September 30, 1999.

In accordance with Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities, marketable
equity securities classified as available-for-sale are required to be carried at
fair value. During the nine months ended September 30, 1999, the Trust increased
the carrying value of its investment in Semele common stock to $5.4375 per share
(the quoted price on the NASDAQ SmallCap market at September 30, 1999),
resulting in an unrealized gain of $27,522.

NOTE 5 - INVESTMENT IN KIRKWOOD

On May 1, 1999, the Trusts and Semele formed EFG/Kirkwood Capital LLC
("EFG/Kirkwood") for the purpose of acquiring preferred and common stock
interests in Kirkwood Associates Inc. ("KAI"). The Trusts purchased Class A
Interests in EFG/Kirkwood and Semele purchased Class B Interests in
EFG/Kirkwood. Generally, the Class A Interest holders are entitled to certain
preferred returns prior to distribution payments to the Class B Interest
holders. KAI owns a ski resort, a local public utility, and land which is held
for development. The resort is located in Kirkwood, California and is
approximately 30 miles from South Lake Tahoe, Nevada. The Trusts' ownership
interest in EFG/Kirkwood had a cost of $6,060,000, including a 1% acquisition
fee ($60,000) paid to EFG.

NOTE 6 - NOTES PAYABLE

To finance the Company's investment in the Interests, the Company
borrowed $35,910,625 under an Acquisition Credit Agreement from an institutional
lender and assumed $3,990,070 under the ONC Demand Note from EFG. The term note
with the institutional lender bears a fluctuating interest rate based on either
LIBOR plus 4.5% or Prime plus 2%, the applicable rate being selected at the
discretion of the Company. The term note is secured by the general assets and
stock of the Company. In addition, EFG has pledged its Special Beneficiary
Interests in the Trusts as security for the term loan. Repayment of principal
and interest on the term loan is governed by terms specified in the Acquisition
Credit Agreement. At September 30, 1999, the term loan had a principal balance
outstanding of $19,540,000.

<PAGE>

Notes payable at September 30, 1999 also consisted of installment notes
of $66,189,189 payable to banks and institutional lenders. The notes bear
interest rates ranging between 6.76% and 14.46%, except for one note, which
bears a fluctuating interest rate based on LIBOR (5.38% at September 30, 1999)
plus a margin. All of the installment notes are non-recourse, and are
collateralized by the equipment and assignment of the related lease payments.
Generally, the installment notes will be fully amortized by noncancellable
rents. However, the Trusts have balloon payment obligations of $40,450,000,
$4,117,864 and $1,129,684 at the expiration of certain lease terms (those
related to an SAS Aircraft, certain rail equipment and an MD-87 jet aircraft
leased by Reno Air, Inc., respectively).

Future principal payments due in connection with the above debt
obligations are as follows:

<TABLE>

<S> <C>
For the year ending September 30, 2000 $ 16,311,082
2001 47,857,819
2002 6,487,508
2003 14,786,441
2004 286,339
-------------------

Total $ 85,729,189
===================

</TABLE>

The Company issued a Demand Note in the amount of $1,100,000 (the "EFG
Note") to acquire AFG ASIT Corporation from EFG. The note bears an annual
interest rate of 11.5% and repayments thereof are subordinate to the Company's
institutional indebtedness. The EFG Note is recorded as note payable - affiliate
on the Consolidated Balance Sheet. The carrying amount of the Company's
indebtedness approximates fair value at September 30, 1999.

NOTE 7 - RELATED PARTY TRANSACTIONS

The Company purchased the Interests and acquired AFG ASIT Corporation
from EFG (see Note 1). Mr. Engle, a stockholder in the Company, owns and
controls the general partner of EFG and is a limited partner in EFG. Mr. Coyne,
also a stockholder in the Company, is an officer of EFG. EFG holds an 8.25%
Special Beneficiary Interest in each of the Trusts and has deferred collection
of certain distributions it is entitled to receive as Special Beneficiary in the
Trusts until such time as the institutional indebtedness of the Company has been
satisfied. Accordingly, EFG entered into a Pledge and Security Agreement (the
"Pledge Agreement") with the Company's institutional lender. In consideration
for EFG's pledge, the Company created a note in favor of EFG which accrues the
equivalent of all amounts absorbed by the Company as a result of the Pledge
Agreement. The accumulated debt balance to EFG accrues interest at the rate of
11.5% per annum and is subordinate to the Company's institutional indebtedness.
At September 30, 1999, the Company owed EFG principal of $2,096,714 for such
amounts loaned pursuant to the Pledge Agreement.

At September 30, 1999, the Company had accrued interest of $580,431
related to the EFG Note (see Note 6) and amounts loaned by EFG pursuant to the
Pledge Agreement. This amount is recorded as accrued interest - affiliates on
the accompanying Consolidated Balance Sheet. The collection of such amount is
deferred until such time as the institutional indebtedness of the Company has
been satisfied.

On August 8, 1998, the Company extended a loan of $1,750,000 to Mr.
Engle and Mr. Coyne. The corresponding note receivable bears an interest rate of
7.5% and is payable on August 8, 2007.

All operating expenses incurred by the Trusts are paid by EFG on behalf
of the Trusts and EFG is reimbursed at its actual cost for such expenditures.
Fees and other costs incurred during the nine months ended September 30, 1999
and 1998, which were paid or accrued by the Trusts to EFG or its Affiliates, are
as follows:

<PAGE>

<TABLE>

1999 1998
--------------- ---------------

<S> <C> <C>
Equipment acquisition fees $ 63,212 $ 2,556
Equipment management fees 1,070,079 1,386,624
Administrative charges 481,256 232,299
Reimbursable operating
expenses due to third parties 1,818,916 1,441,218
--------------- ---------------

Total $ 3,433,463 $ 3,062,697
=============== ===============

</TABLE>

Administrative charges represent amounts owed to EFG, pursuant to
Section 10.4(c) of the Trust Agreement, for persons employed by EFG who are
engaged in providing administrative services to the Trusts. Reimbursable
operating expenses due to third parties represent costs paid by EFG on behalf of
the Trusts which are reimbursed to EFG at actual cost. Administrative charges
and reimburseable operating expenses for the nine months ended September 30,
1999 include adjustments for 1998 actual costs of approximately $133,000 and
$96,000, respectively.

All equipment was purchased from EFG, one of its Affiliates, or
directly from third-party sellers. The Trusts' purchase price is determined by
the method described in Note 1, Equipment on Lease.

All rents and proceeds from the sale of equipment are paid by the
lessees directly to either EFG or to a lender. EFG temporarily deposits
collected funds in a separate interest-bearing escrow account prior to
remittance to the Trusts. At September 30, 1999, the Trusts were owed $1,027,181
by EFG for such funds and the interest thereon. These funds were remitted to the
Trusts in October 1999.

During 1998, one of the Trusts purchased limited partnership units (the
"Units") in AFG International Limited Partnership (the "Partnership"), a real
estate limited partnership sponsored by EFG that owns two commercial buildings
leased to an investment-grade educational institution. The Trust purchased 7.25
Units at a cost of $100,000 per unit for an aggregate purchase price of
$725,000. As a result of the purchase of the Units, the Trust owns approximately
22.5% of the Partnership. The Trust accounts for its investment in the
Partnership under the equity method of accounting. As such, the carrying value
of the Trust's investment in the Partnership is increased or decreased by an
amount equal to the Trust's share of the Partnership's income or losses,
respectively, and decreased for any distributions received from the Partnership.
At September 30, 1999, this investment had a carrying balance of $668,813 and is
reflected as Investment - affiliate on the accompanying Consolidated Balance
Sheet.

NOTE 8 - LEGAL PROCEEDINGS

<PAGE>

States District Court for the Southern District of Florida (the "Court") on
behalf of a proposed class of investors in 28 equipment leasing programs
sponsored by EFG, including the Trusts (collectively, the "Nominal Defendants"),
against EFG and a number of its affiliates, including AFG ASIT Corporation, as
defendants (collectively, the "Defendants"). Certain of the Plaintiffs, on or
about June 24, 1997, had filed an earlier derivative action, captioned LEONARD
ROSENBLUM, ET AL. V. EQUIS FINANCIAL GROUP LIMITED PARTNERSHIP, ET AL., in the
Superior Court of the Commonwealth of Massachusetts on behalf of the Nominal
Defendants against the Defendants. Both actions are referred to herein
collectively as the "Class Action Lawsuit." The Class Action Lawsuit was divided
into two sub-classes on March 22, 1999.

On May 26, 1999, the Court issued its Order and Final Judgment
approving settlement of the Class Action Lawsuit with respect to claims asserted
by the Plaintiffs on behalf of the sub-class that includes the Trusts. Claims
involving the second sub-class, not including the Trusts, remain pending. As a
result of the settlement, the Trusts declared a special cash distribution of
$4,000,000, including legal fees for Plaintiffs' counsel of $215,000, that was
paid in July 1999. In addition, the Company agreed to commit $9,000,000 of its
Class B Capital Contributions (paid in connection with its purchase of Class B
Interests in July 1997) to the Trusts for the Trusts' investment purposes. In
the absence of this commitment, the Company would have been entitled to receive
a Class B Capital Distribution for this amount pursuant to the Trust Agreement,
as amended.

In addition to the foregoing, the Trusts are parties to other lawsuits
that have arisen out of the conduct of their business, principally involving
disputes or disagreements with lessees over lease terms and conditions. The
following action was resolved during the nine months ended September 30, 1999:

ACTION INVOLVING NATIONAL STEEL CORPORATION

EFG, on behalf of the Trusts and certain affiliated investment programs
(collectively, the "Plaintiffs"), filed an action in the Commonwealth of
Massachusetts Superior Court, Department of the Trial Court in and for the
County of Suffolk on July 27, 1995, for damages and declaratory relief against a
lessee of the Trusts, National Steel Corporation ("National Steel"). The
Complaint sought reimbursement from National Steel of certain sales and/or use
taxes paid to the State of Illinois in connection with equipment leased by
National Steel from the Plaintiffs and other remedies provided under the Master
Lease Agreement ("MLA"). On August 30, 1995, National Steel filed a Notice of
Removal, which removed the case to United States District Court, District of
Massachusetts. On September 7, 1995, National Steel filed its Answer to the
Plaintiff's Complaint along with Affirmative Defenses and Counterclaims and
sought declaratory relief, alleging breach of contract, implied covenant of good
faith and fair dealing, and specific performance. The Plaintiffs filed an Answer
to National Steel's Counterclaims on September 29, 1995. The parties discussed
settlement with respect to this matter for some time; however, the negotiations
were unsuccessful. The Plaintiffs filed an Amended and Supplemental Complaint
alleging further default under the MLA and filed a motion for Summary Judgment
on all claims and Counterclaims. The Court held a hearing on the Plaintiff's
motion in December 1997 and later entered a decision dismissing certain of
National Steel's Counterclaims, finding in favor of the Plaintiffs on certain
issues and in favor of National Steel on other issues. On May 11, 1999, the
parties executed a comprehensive settlement agreement to resolve all outstanding
issues, including reimbursement to the Trusts for the disputed sales tax items
referenced above. This matter did not have a material effect on the Trusts'
financial position or results of operations.

NOTE 9 - YEAR 2000 ISSUE

The Year 2000 Issue generally refers to the capacity of computer
programming logic to correctly identify the calendar year. Many companies
utilize computer programs or hardware with date sensitive software or embedded
chips that could interpret dates ending in "00" as the year 1900 rather than the
year 2000. In certain cases, such errors could result in system failures or
miscalculations that disrupt the operations of the affected businesses. The
Company uses information systems provided by EFG and has no information systems
of its own. EFG has adopted a plan to address the Year 2000 Issue that consists
of four phases: assessment, remediation, testing, and implementation and has
elected to utilize principally internal resources to perform all

<PAGE>

phases. EFG has completed its Year 2000 project at an aggregate cost of less
than $50,000 and at a di minimus cost to the Company. All costs incurred in
connection with EFG's Year 2000 project have been expensed as incurred.

EFG believes that its Year 2000 compliance plan will be effective in
resolving all material Year 2000 risks in a timely manner and that the Year 2000
Issue will not pose significant operational problems with respect to its
computer systems or result in a system failure or disruption of its, the
Company's or the Trusts' business operations. However, EFG has no means of
ensuring that all customers, vendors and third-party servicers will conform
ultimately to Year 2000 standards. The effect of this risk to the Company is not
determinable.

NOTE 10 - SUBSEQUENT EVENT

In October 1999, certain Trusts sold a Boeing 747 aircraft formerly
leased to British Airways PLC that had been fully depreciated. The Trusts
received sale proceeds of $2,000,000.

RECOMMENDATION OF THE BOARD.

The Board has unanimously approved the issuance of 510,000 shares of
the Company's Common Stock to the stockholders of Equis II in connection with
the possible purchase by the Company of stock of Equis II, which is owned by
Gary D. Engle, James A. Coyne and certain trusts for the benefit of Mr. Engle's
children. The Board recommends that the stockholders adopt the following
resolution which will be presented for a vote of the stockholders at the
Meeting:

RESOLVED, that the stockholders approve of the issuance of 510,000
shares of the Company's Common Stock to the stockholders of Equis II Corporation
at any future closing of the purchase by the Company of 15% of the stock of
Equis II Corporation, which is owned by Gary D. Engle, James A. Coyne and
certain trusts for the benefit of Mr. Engle's children.

VOTE REQUIRED. The affirmative vote of a majority of the shares present
in person or by proxy at the Meeting is required for approval of the issuance of
510,000 shares of the Company's Common Stock in connection with the acquisition
by the Company of 15% of Equis II.

<PAGE>

PROPOSAL 3: SELECTION OF INDEPENDENT AUDITOR

The Company's financial statements, including those for the fiscal year
ended December 31, 1998, are included in the Annual Report being furnished to
all stockholders with this Proxy Statement. The year-end statements have been
audited by the independent firm of Ernst & Young LLP, which has served as the
Company's independent auditor since the fiscal year ended December 31, 1989. The
Board believes that Ernst & Young LLP is knowledgeable about the Company's
operations and accounting practices and is well qualified to act in the capacity
of independent auditor. Therefore, the Board has selected Ernst & Young LLP as
the Company's independent auditor to examine its financial statements for the
fiscal year ended December 31, 1999. Although the selection of an auditor does
not require a stockholder vote, the Board believes it is desirable to obtain the
concurrence of the stockholders to this selection.

Representatives of Ernst & Young LLP are expected to be present at the
Meeting and will have the opportunity to make a statement if they so desire and
will be available to respond to appropriate questions.

RECOMMENDATION OF THE BOARD.

The Board considers Ernst & Young LLP to be well-qualified, and
recommends that the stockholders adopt the following resolution which will be
presented for a vote of the stockholders at the Meeting:

RESOLVED, that the stockholders concur in the appointment, by the
Board, of Ernst & Young LLP to serve as the Company's independent auditor for
the fiscal year ended December 31, 1999.

VOTE REQUIRED. The affirmative vote of a majority of the shares present
in person or by proxy at the Meeting is required for the adoption of the
foregoing resolution.

EXECUTIVE OFFICERS

The following table sets forth information with respect to the
Company's executive officers. Each officer is elected annually by the directors
and serves until his successor is elected and qualified or until his death,
resignation or removal by the directors:

NAME AGE PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS OFFICE AND YEAR FIRST ELECTED
- ---- --- ----------------------------------------- -----------------------------

<S> <C> <C> <C>
Gary D. Engle 51 See "Proposal 1 - Election of Directors Chairman and Chief Executive
- Continuing Directors" above Officer, 1997

James A. Coyne 39 See "Proposal 1 - Election of Directors President and Chief Operating
- Continuing Directors" above Officer, 1997

Gary M. Romano 40 Mr. Romano has been Chief Financial Chief Financial Officer, 1997
Officer of the Company since November
1997. Mr. Romano is Executive Vice
President and Chief Operating Officer of
EFG and clerk of certain of its
affiliates. Mr. Romano joined EFG in
November 1989 and was appointed
Executive Vice President and Chief
Operating Officer in April 1996. Prior
to joining EFG, Mr. Romano was Assistant
Controller for a privately-held real
estate company which he joined in 1987.
Previously, Mr. Romano was a Manager at
Ernst &

</TABLE>

<PAGE>

<TABLE>

<S> <C> <C> <C>
Whinney (now Ernst & Young LLP)
where he was employed from 1982 to
1986. Mr. Romano is a C.P.A.

Michael J. Butterfield 40 Mr. Butterfield has been Treasurer of Treasurer, 1997
the Company since November 1997.
Mr. Butterfield is Senior Vice
President, Finance, and Treasurer of EFG
and certain of its affiliates.
Mr. Butterfield joined EFG in June 1992
and was appointed Vice President,
Finance, and Treasurer in April 1996 and
Senior Vice President in July 1999.
Prior to joining EFG, Mr. Butterfield
was an audit manager with Ernst & Young
LLP, which he joined in 1987.
Mr. Butterfield was employed in public
accounting and industry positions in New
Zealand and London, England, prior to
coming to the United States in 1987.
Mr. Butterfield attained his Associate
Chartered Accountant (A.C.A.)
professional qualification in New
Zealand and has completed his C.P.A.
requirements in the United States.

</TABLE>

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

DIRECTOR COMPENSATION.

The directors are paid an annual fee of $15,000, payable quarterly,
plus $875 for each Board meeting, including meetings of the compensation and
audit committees, attended in person and $250 an hour for each Board meeting,
including meetings of the compensation and audit committees, attended via
telephonic conference call. In addition, each director is reimbursed for
out-of-pocket expenses incurred in attending meetings of the Board.

EXECUTIVE COMPENSATION.

Compensation paid to Messrs. Engle and Coyne for the years ended
December 31, 1998, and 1997, is as follows:

<PAGE>

Long-Term Compensation
----------------------

Annual Compensation Awards Payouts
------------------- ------ -------

Other
Name and Annual Restricted All Other
Principal Compen- Stock Options LTIP Compen-
Position Year Salary Bonus sation Award(s) Sars (#) Payouts sation
- -------- ---- ------ ----- ------ -------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gary D. Engle, 1998 $120,000(1) n/a n/a n/a n/a n/a n/a
Chairman and 1997(2) $ 48,383(1) n/a n/a n/a 40,000(4) n/a n/a
Chief
Executive
Officer

James A. 1998 $120,000(1) n/a n/a n/a n/a n/a n/a
Coyne, 1997(3) $ 48,383(1) n/a n/a n/a 40,000(4) n/a n/a
President and
Chief
Operating
Officer

</TABLE>

(1) Payment of these amounts has been deferred. The amounts are being held
for the account of the executive in the form of shares of Common Stock
of the Company in a rabbi trust. See discussion below.
(2) Mr. Engle became Chairman and Chief Executive Officer on November 10,
1997.
(3) Mr. Coyne became President and Chief Operating Officer on May 1, 1997.
(4) These options were canceled in connection with the purchase of 85% of
Equis II. See "Proposal 2."

Mr. Engle serves as Chief Executive Officer of the Company pursuant to
an executive employment agreement dated November 10, 1997, and Mr. Coyne serves
as Chief Operating Officer of the Company pursuant to an executive employment
agreement dated May 1, 1997. The provisions of the two agreements (the
"Agreements") are identical.

Pursuant to the Agreements, the Company paid each executive a base
salary of $48,383 for services rendered to the Company in 1997. For 1998 and
thereafter, the Agreements provide that the Company will pay each executive a
base salary at the rate of not less than $120,000 per year, subject to
adjustment by the Board of Directors based upon the performance by the executive
of his duties and the financial performance of the Company. The Company paid
each executive a base salary of $120,000 for services rendered to the Company in
1998, which both of the executives deferred. Under the Agreements, each
executive is also entitled to receive such incentive or performance cash bonuses
as the Board may determine from time to time.

The Agreements provide that the executives' salary under the Agreements
will be deferred under an incentive compensation plan (the "Incentive Plan")
established for the executives, unless the executive for any prospective period
elects to have his salary paid to him directly. The Agreements also provide that
the Company will defer, under the Incentive Plan on account of each executive
with respect to each fiscal year of the Company an incentive bonus amount equal
to 6% of the Company's pre-tax profits for that year, excluding results
attributable to the Company's Rancho Malibu property in Malibu, California. With
respect to the Rancho Malibu property, the Agreements provide that the Company
will contribute on account of each executive an incentive bonus amount equal to
10% of the amounts that the Company

<PAGE>

realizes in excess of its carrying value for the property. Finally, the Company
acting through the compensation committee of the Board of Directors may defer
from time to time under the Incentive Plan additional discretionary bonuses for
the executives. No incentive bonus amounts were paid to or deferred on account
of either executive for 1997 or 1998.

Pursuant to the Agreements and the Incentive Plan, Messrs. Engle and
Coyne each deferred his respective base salary for 1998 and 1997, which is being
held in the form of 28,442 and 28,441 shares of Common Stock, respectively, in a
rabbi trust established by the Company in connection with the Incentive Plan.
For 1997, the number of shares of Common Stock held for the account of each
executive was determined under the Incentive Plan by dividing the dollar amount
of the salary deferred by the closing price of a share of the Company's Common
Stock on December 30, 1997, the effective date of the Incentive Plan. For 1998
and thereafter, the number of shares of Common Stock held for the account of
each executive is determined under the Incentive Plan by dividing the dollar
amount of the salary deferred each month by the average of the closing prices of
a share of the Company's Common Stock for the last ten trading days of the
month. Each executive has also deferred his base salary for 1999. At the Record
Date, Messrs. Engle and Coyne had each deferred an aggregate of $120,000 for
1999, which is being held in the form of 27,464 shares of Common Stock for each
of them in the rabbi trust.

Amounts attributable to an executive's salary deferred under the
Incentive Plan are not subject to forfeiture. Amounts attributable to an
executive's bonuses deferred under the Incentive Plan are forfeited upon the
Company's termination of the executive for cause under his Agreement. All
amounts forfeited are returned to the Company. The Agreement provides that
"cause" means that the Board of Directors of the Company has determined that (i)
the executive has repeatedly failed or refused to perform his duties under the
Agreement and the failure or refusal has continued for 30 days following written
notice from the Board, (ii) the executive has breached his covenant not to use
or disclose proprietary information of the Company or his covenant not to
solicit employees to leave the Company or (iii) the executive has committed
fraud, embezzlement, misappropriation of funds, malfeasance or other act of
dishonesty against the Company which has a material adverse affect on the
Company.

Pursuant to the Agreements, incentive stock options to purchase 40,000
shares of Common Stock of the Company at an exercise price of $9.25 per share
were granted to each executive on December 30, 1997. These options were
cancelled in connection with the acquisition of 85% of Equis II. See "Proposal
2."

Additional benefits to which the executives are entitled under the
Agreements include such amount of paid vacation per calendar year and such
health, life and disability insurance protection as the executive reasonably
requests.

Each Agreement extends until December 31, 2000, and thereafter is
renewed for additional one-year terms unless either party gives written notice
to the other not less than 30 days prior to the end of the original term or any
renewal term that the party does not wish to renew the Agreement. The Company
may terminate the Agreements for cause, and the executive may terminate his
Agreement at any time upon 60 days' prior written notice. In addition, the
executive may terminate his Agreement effective immediately within 60 days of a
Change-in-Control, and in that event the Company must continue the executive's
salary and fringe benefits under his Agreement and his incentive compensation
under the Incentive Plan for a period of 18 months. For purposes of the
Agreement, a "Change-in-Control" means an occurrence whereby (i) any person,
partnership, corporation, entity or group (as that term is used in the
Securities Exchange Act of 1934), in any single transaction or series of related
transactions, directly or indirectly acquires beneficial ownership of more than
50% of the Company's voting securities or substantially all of the Company's
assets, or (ii) individuals who were members of the Board immediately prior to a
meeting of stockholders involving a contest for the election of directors do not
constitute a majority of the Board following such election or (iii) the
executive fails to be elected or re-elected to the Board, unless the executive
was not nominated with his consent. If the Company terminates an executive or
the Company elects not to renew an executive's Agreement within 24 months
following a Change-in-Control, the Company must pay to the executive in a lump
sum an amount equal to the greater of (i) three times the base salary paid to
the executive in the 36 months preceding the Change-in-Control and (ii) the base
salary

<PAGE>

due to be paid the executive through the end of the term (or renewal term) of
his Agreement. If the Company terminates the employment of an executive without
cause, all payments under his Agreement continue through the end of the then
term. If the Company elects not to renew an executive's Agreement at the end of
the original term or any renewal term, the executive will receive a termination
settlement equal to 12 months' salary and will continue to receive insurance
benefits for 12 months, unless such non-renewal occurs within 24 months
following a Change-in-Control, in which event the executive will receive the
benefits described above. Upon termination of an Agreement voluntarily by an
executive, upon the election by the executive not to renew his Agreement or by
the Company for cause, all payments and benefits under the Agreement cease on
the date of termination. If Mr. Engle ceases to be Chief Executive Officer and a
director of the Company and if Mr. Coyne ceases to be President and a director
of the Company, except if the executive resigns voluntarily or is terminated for
cause, certain of the notes issued by the Company in the Equis II acquisition
become immediately due and payable. See "Proposal 2 - Source of Funds."

EXECUTIVE AND DIRECTOR STOCK OPTION PLAN.

No stock options were granted or exercised under the Company's 1994
Executive and Director Stock Option Plan by executive officers in 1998. During
1998, in connection with the resignation of Gerald L. Nudo as a director, the
Company paid Mr. Nudo $20,000 in consideration of the cancellation and surrender
of unexercised nonstatutory options held by him.

AGGREGATED OPTION/SAR EXERCISES IN 1998
AND DECEMBER 31, 1998, OPTION/SAR VALUES

Number of Securities Value of Unexercised
Shares Underlying Unexercised In-The-Money Options/SARs
Acquired Options/SARs at Options/SARs at
on Values December 31 December 31
Name Exercise Realized Exercisable/unexercisable Exercisable/unexercisable
- ---- -------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Gary D. Engle None $0 13,320/26,680(1) n/a / n/a

James A. Coyne None $0 13,320/26,680(1) n/a / n/a

</TABLE>

(1) These options were cancelled in connection with the purchase of 85% of
Equis II. See "Proposal 2."

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

On August 31, 1998, the Company acquired all the Common Stock of
Ariston Corporation, a Delaware corporation, for $12,450,000. The Company
acquired Ariston from EFG, which is controlled by Gary D. Engle. Ariston is a
holding company with two investments, (i) a 99% limited partnership interest in
AFG Eireann Limited Partnership ("AFG Eireann"), a Massachusetts limited
partnership with a tax interest in a diversified pool of lease contracts owned
by an institutional investor and (ii) a 98% limited partnership interest in Old
North Capital Limited Partnership ("ONC"), a Massachusetts limited partnership
with investments in cash and notes, equipment leases and limited partnerships
which are engaged in either equipment leasing or real estate, including the
ownership of two commercial buildings in Washington, D.C., and Sydney,
Australia, that are leased to an investment-grade educational institution.
Messrs. Engle and Coyne are both affiliated with ONC and Mr. Engle is affiliated
with AFG Eireann.

<PAGE>

Effective May 6, 1997, EFG entered into an agreement to provide
administrative services to the Company. Administrative costs, primarily salaries
and general and administrative expenses, of $113,842 in the nine months ended
September 30, 1999, $152,201 in 1998 and $49,166 in 1997 were incurred by EFG on
behalf of the Company for services provided by EFG personnel on Company-related
matters. As one of its administrative services, EFG serves as the paying agent
for general and administrative costs of the Company. As part of providing this
payment service, EFG maintains a bank account on behalf of the Company.

On April 30, 1997, the Company entered into an Exchange Agreement (as
amended August 7, 1997) with Equis Exchange L.L.C., EFG and three partnerships
managed by EFG, AFG Hato Arrow Limited Partnership, AFG Dove Arrow Limited
Partnership and AIP/Larkfield Limited Partnership (the "Partnerships"). The
Partnerships are effectively controlled by Mr. Engle. Pursuant to the Agreement,
the Company issued 198,700 shares of the Company's Common Stock to the
Partnerships at a price of $15.00 per share and received cash proceeds of
$2,480,500, net of related costs of $500,000. In addition, the Partnerships made
a three-year loan to the Company in the amount of $4,419,500. The loan, which
matures on April 30, 2000, bears interest at the rate of 10% per annum with
mandatory principal reductions prior to maturity if and to the extent net
proceeds are received from the sale or refinancing of the Company's Rancho
Malibu property.

See also "Proposal 2" for a discussion of the acquisition by the
Company from EFG of the Special Beneficiary Interests in four Delaware business
trusts and the acquisition by the Company of 85% of the stock, and the potential
purchase of the 15% balance, of Equis II Corporation, whose principal
stockholders are Messrs. Engle and Coyne.

STOCKHOLDER PROPOSALS

Stockholder proposals for the 2000 Annual Meeting of Stockholders must
be received by the Company at its executive office in Stamford, Connecticut, on
or prior to __________, 2000, for inclusion in the Company's Proxy Statement for
that meeting. Any stockholder proposal must also meet the other requirements for
stockholder proposals as set forth in the rules of the SEC relating to
stockholder proposals.

OTHER MATTERS

As of the date of this Proxy Statement, no business other than that
discussed above is to be acted upon at the Meeting. If other matters not known
to the Board should, however, properly come before the Meeting, the persons
appointed by the signed proxy intend to vote it in accordance with their best
judgment.

YOUR VOTE IS IMPORTANT. THE PROMPT RETURN OF PROXIES WILL SAVE THE
COMPANY THE EXPENSE OF FURTHER REQUESTS FOR PROXIES. PLEASE PROMPTLY
MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED
ENVELOPE.

69
<PAGE>

[Letterhead of Josephthal & Co. Inc.]

Appendix A

December 16, 1999

The Board of Directors
Semele Group Inc.
One Canterbury Green
Stamford, CT 06901

Dear Board of Directors:

Josephthal & Co. Inc. ("Josephthal", "we", or "us") understands that
Semele Group, Inc. ("Semele" or the "Company") has entered into an agreement to
acquire 85% of the common stock, $.01 par value of Equis II Corporation, a
Delaware corporation ("Equis II") from Gary D. Engle and James A. Coyne (the
"Shareholders") for three notes aggregating $19,586,192 (the "Notes"). The first
Note in the aggregate amount of $14.6 million will bear interest at a rate equal
to 7% per annum (of which 3% will be paid currently and 4% will accrue) and will
have a six-year term commencing upon closing. Principal payments of $3.6 million
will be due in May 2000, $4.0 million will be due in October 2002, $4.0 million
will be due in May 2003 and the balance will be due in October 2005. The note
will have no prepayment penalty. The second note, in the amount of $1,900,668
(at 9/30/99, including accrued interest) will bear interest at a rate of 7.2%
per annum and shall be due in full on August 8, 2007. There is no prepayment
penalty and no amount shall be paid under this note unless simultaneously with
such payment an aggregate payment of like kind and amount is paid by Messrs.
Engle and Coyne on a note they owe Equis II Corporation. The third note is a
demand note in the amount of $3,085,524 (at 9/30/99, including accrued interest)
and will bear interest at an annual rate of 11.5%. There is no prepayment
penalty and no amount shall be paid under this note unless simultaneously with
such payment a payment of like kind and amount is made by Messrs. Engle and
Coyne on a note they owe to Old North Capital Corporation.

The Shareholders have also agreed to return all options to purchase
shares of Semele's common stock (aggregating 80,000 shares) to Semele (the
"Management Options"). These options will then be cancelled by Semele. In
addition, the shareholders of Equis II will grant Semele an option to purchase
the remaining 15% of Equis II common stock and Semele will grant an option to
each of the Equis II shareholders to sell all the shares representing the
remaining 15% of Equis II common stock to Semele (collectively, the "Purchase
Options"). In both cases, the purchase price of the remaining 15% of Equis II
common stock will be paid by Semele issuing 510,000 shares of its common stock
to the Equis II shareholders. We understand that the exercise of either option
is subject to approval by stockholders of Semele. If approval is not obtained,
the options will automatically be cancelled. The purchase by Semele of some or
all of the outstanding common stock of Equis II and the purchase of the Special
Beneficiary interest (described below) are collectively referred to herein as
the "Acquisition."

<PAGE>

Equis II is a special purpose S-Corporation formed for the purpose
of acquiring and holding interests in four Delaware Business Trusts, namely
AFG Investment Trusts A, B, C and D (collectively the "Trusts"). Equis II
currently owns 99% of the total Class B shares in the Trusts as well as a 1%
managing interest, a 1% annual management fee on securities, debt and other
non-equipment assets (other than cash and cash equivalents) in the Trusts.
Analyses performed by us, Equis II and Semele management assume that the
Trusts will make distributions to their respective class B holders, of
amounts necessary to satisfy the preferred return payable to such class B
holders (the "Payout").(1) Following the Payout, holders of the class B
interests in the Trusts will receive approximately 20% of any distribution
paid by the Trusts. Analyses of the Payout were calculated as of September
30, 1999. To the extent the Payout is at a later date, the reduction in the
amount is approximately offset by the reduction in debt owed by Equis II.
Subsequent to Payout, the Equis II shareholders will receive $25,708,836 in
cash to repay debt and maintain the rights to 23.5%, 23.7%, 21.2% and 19.5%
of all future cash distributions of Trusts A, B, C and D respectively, net of
the Special Beneficiary and Managing Trustee share of the distributions. The
Class B shares owned by Equis II comprise approximately 62.5% of the total
voting shares of the Trusts and that voting percentage will not be impacted
by the Payout.

We understand that on November 18, 1999, Semele purchased the "Special
Beneficiary Interest" in each Trust representing an 8.25% interest in all cash
distributed by the Trusts. The purchase of the Special Beneficiary Interest is
contingent upon the receipt of a favorable fairness opinion. In the event that
such fairness opinion on the purchase of the Special Beneficiary Interest is not
received, the purchase will be rescinded. The purchase price was approximately $
9.7 million for which Semele issued a non-recourse Purchase Money Note ("PM
Note") in the full amount of the Purchase Price. The PM Note will bear interest
at a rate equal to 7% and mature on November 18, 2009. Interest accrues on the
PM Note and is payable monthly only out of distributions received by Semele in
respect of the Special Beneficiary Interest. The aggregate payments of interest
and principal on the PM Note by Semele will at no time exceed actual aggregate
monies received by Semele by virtue of the Special Beneficiary Interest.

We also understand that Gary D. Engle, Chairman, Chief Executive
Officer and a Director of Semele, and James A. Coyne, President, Chief Operating
Officer and a Director of Semele are the sole shareholders (either directly or
through trusts) and serve in management capacities for Equis II. We also
understand that Messrs. Engle and Coyne elected to abstain from any votes
conducted by Semele's Board of Directors in connection with the Acquisition.

You have requested our opinion as to the fairness from a financial
point of view to the Company and its stockholders of the consideration to be
paid by Semele for (i) the Special Beneficiary Interest; (ii) 85% of the
outstanding common stock of Equis II with the Purchase Options, assuming no
exercise of the Purchase Options; and (iii) 100% of the outstanding common stock
of Equis II assuming exercise of the Purchase Options. We express no opinion as
to the ability of Semele or its management to successfully realize the benefits
it believes will result from the Acquisition, including its ability to minimize
taxable income and/or gains. Our opinion does not address the likelihood or
timing of the Payout, the adequacy of funds or availability of financing. Also,
we make no representations as to Semele's or Equis II's use of

- --------
(1) As a result of disparate distributions to Class A versus Class B holders in
a prior unrelated transaction, Class B holders are presently entitled to greater
distributions until their cumulative distributions are in parity with the Class
A holders. Payout is the distribution necessary to achieve parity and
consequently equalize rights of Class A and Class B holders to identical
distributions thereafter.

2
<PAGE>

proceeds or as to any issues of fairness with respect to Equis II or its
shareholders. Josephthal does not provide legal, tax or accounting services or
render such advice.

In conducting our analyses and arriving at the opinion expressed
herein, we have reviewed such materials and considered such financial and other
factors as we deemed relevant under the circumstances, including, among others,
the following: (i) certain historical financial, operating and other data that
were publicly available or were furnished to us by Semele regarding the
Acquisition including, but not limited to: (a) projections and consolidated
financials prepared by management; (b) Form 10-K for the period ended 12/31/98
and Form 10-Q for the periods ended 3/31/99, 6/30/99 and 9/30/99 for Semele;
Initial Offering Prospectus dated 6/10/97, Form 10-K for the period ended
12/31/98 and Form 10-Q for the periods ended 3/31/99, 6/30/99 and 9/30/99 for
AFG Investment Trust A; Initial Offering Prospectus dated 6/10/97, Form 10-K for
the period ended 12/31/98 and Form 10-Q for the periods ended 3/31/99, 6/30/99
and 9/30/99 for AFG Investment Trust B; Initial Offering Prospectus dated
6/10/97, Form 10-K for the period ended 12/31/98 and Form 10-Q for the periods
ended 3/31/99, 6/30/99 and 9/30/99 for AFG Investment Trust C; Initial Offering
Prospectus dated 6/10/97, Form 10-K for the period ended 12/31/98 and Form 10-Q
for the periods ended 3/31/99, 6/30/99 and 9/30/99 for AFG Investment Trust D;
and the 10-K for the period ended 12/31/98 and 10-Q for the periods ended
3/31/99, 6/30/99 and 9/30/99 for Equis II; (c) internally generated operating
reports prepared by management of Equis II and Semele; (ii) publicly available
financial, operating and stock market data for companies engaged in business
deemed comparable to Semele and Equis II; (iii) real estate and equipment
valuations prepared by management of Equis II and Semele for each of the assets;
(iv) Acquisition Credit Agreement among Equis II and Fleet Bank dated July 17th,
1997; (iv) Promotional brochures and other descriptive material including
projections and a limited appraisal report prepared by Limdsay Salton Appraisals
June 21, 1999 for Kettle Valley; (v) an appraisal of the Boeing 767-300ER plane
related to the Kettle Valley real estate project; (vi) Financing Request
Memorandum including business plan, industry information and projections for
Kirkwood Associates, Inc., prepared by Equis Financial Group, Cobb Partners and
Kirkwood Ski & Summer Resort; (vii) Operating Agreement of EFG/Kirkwood Capital
LLC as of May 1, 1999; (viii) the Annual Audited Financial Statements for the
year ended April 30, 1999 for Kirkwood Associates Inc. and Subsidiary prepared
by Grant Thornton LLP; and (ix) such other factors as we deemed appropriate. We
have met with senior officers of Semele and Equis II to discuss the prospects
for Semele, both pre and post Acquisition, and such other matters as we believed
relevant. Our opinion was necessarily based on economic, financial and market
conditions as they exist and can be evaluated as of the date hereof.

Semele does not have separate, distinct and independent employees apart
from Equis II. Consequently, information on Equis and Semele were necessarily
furnished by the same people. However, structuring, negotiations and analyses of
the Acquisition on behalf of Semele were conducted by a Special Committee of
outside Directors, unaffiliated with Equis.

In connection with our review and analyses and in arriving at our
opinion, we have assumed and relied upon the accuracy and completeness of the
financial and other information provided to us or which is public, and have not
attempted to verify independently any such information. We have relied solely on
the information and estimates provided to us by management of Semele and Equis
II and have neither made nor obtained any independent appraisals of any
properties, other assets or facilities of Equis II and/or Semele. With respect
to certain financial information, including financial analyses and projections,
relating to the business or prospects of Equis II and/or Semele, provided to us
by management of Semele and Equis II, we have assumed that the financial
information has been reasonably prepared and that the financial projections
present Semele management's best currently available estimates and

3
<PAGE>

judgments as to the future financial performance of Equis II. Further, the
Company represents and warrants the accuracy and completeness of the information
it has provided. Josephthal was not requested to, nor did we, inspect any of the
assets of Semele and/or Equis II.

As you know, Josephthal has been retained by Semele to render this
opinion and provide other financial advisory services, and will receive fees for
such services. In addition, in the ordinary course of business, Josephthal may
actively trade the shares of Semele for its own account and for the accounts of
customers, and, accordingly, may at any time hold a long or short position in
such securities. The following pages comprise Josephthal's work papers in
connection with our opinion. This opinion is solely for the use of the Board of
Directors of Semele and is not to be publicly disclosed, used, excerpted from,
reproduced or disseminated, quoted from or referred to at any time, in any
manner or for any purpose, without the prior written consent of Josephthal;
provided, however, that Semele may include the Fairness Opinion in whole, but
not in part, as an appendix to the Proxy Statement to be filed with the
Securities and Exchange Commission and delivered to the stockholders of Semele.
This opinion does not constitute a recommendation to any holder of Semele Common
Stock as to how any such stockholder should vote on any aspect of the
Acquisition, including whether Semele should issue 510,000 shares of its common
stock to acquire the remaining 15% of Equis II, nor does this opinion address
the relative merits of the Acquisition or any other transactions or business
strategies or the decision of the Board of Directors of Semele to proceed with
the Acquisition.

Based upon and subject to the foregoing it is our opinion that, as of
the date hereof, the consideration to be paid in the Acquisition is fair to
Semele and its stockholders (other than Equis II and its affilates) from a
financial point of view.

Very truly yours,

/s/

JOSEPHTHAL & CO. INC.

4
<PAGE>

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-KSB

|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________.

Commission File Number 0-16886

SEMELE GROUP INC.
-----------------
(Name of Small Business Issuer in its charter)

Delaware 36-3465422
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

One Canterbury Green, Stamford, Connecticut 06901
(Address of principal executive offices) (Zip Code)

Issuer's telephone number (203) 363-0849

Securities registered under Section 12(b) of the Exchange Act:

Title of each class Name of each exchange on which registered
None None

Securities registered under Section 12(g) of the Exchange Act:

Shares of Common Stock
(Title of Class)

Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES |_| NO |X|.

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. |_|

The Issuer's revenues for the fiscal year ended December 31, 1998 were
$1,158,216. Shares of common stock outstanding as of March 2, 1999: 1,145,491.
The aggregate market value of the Issuer's shares of common stock held by
non-affiliates on such date was approximately $3,550,466

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Annual Report to security holders for the year
ended December 31, 1998 (Part I and II)

Transitional Small Business Disclosure Format: YES |_| NO |X|.

<PAGE>

TABLE OF CONTENTS

- --------------------------------------------------------------------------------

PART I

ITEM 1 DESCRIPTION OF BUSINESS 1
ITEM 2 DESCRIPTION OF PROPERTY 2
ITEM 3 LEGAL PROCEEDINGS 3
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 3

PART II

ITEM 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 4
ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 4
ITEM 7 FINANCIAL STATEMENTS 5
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE 5

PART III

ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 6
ITEM 10 EXECUTIVE COMPENSATION 7
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 11
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 13
ITEM 13 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K 14

SIGNATURES 17

<PAGE>

PART I

ITEM 1. DESCRIPTION OF BUSINESS

BUSINESS OPERATION

The Issuer, Semele Group Inc. (the "Company"), formerly known as Banyan
Strategic Land Fund II, is a Delaware corporation, organized pursuant to a
Certificate of Incorporation filed on April 14, 1987 under the name VMS
Strategic Land Fund II.

The Company was originally established to invest primarily in short-term,
junior, pre-development and construction mortgage loans. The borrowers
subsequently defaulted on these mortgage loan obligations, adversely affecting
the Company. As a result of these defaults, the Company suspended the making of
new loans, except for advances of additional funds under circumstances in which
it was deemed necessary to preserve the value of existing collateral, including
instances where it had foreclosed upon or taken title, directly or indirectly,
to the collateral. In 1990, the Company implemented a plan designed to preserve
its assets and manage its properties acquired through foreclosure or otherwise
until they would be disposed of in an orderly manner. On February 25, 1997, the
Directors of the Company authorized management to engage an investment banking
firm for purposes of evaluating strategic alternatives for maximizing
stockholder value. The Company executed and delivered an Exchange Agreement
dated April 30, 1997 (amended as of August 7, 1997, the "Agreement") among the
Company, Equis Exchange L.L.C., a Massachusetts limited liability company
("Equis"), Equis Financial Group Limited Partnership ("EFG") and certain
partnerships managed by EFG ("the Partnerships"). Pursuant to the Agreement, on
April 30, 1997, the Company issued to the Partnerships 198,700 shares of the
Company's common stock at the price of $15.00 per share. Cash proceeds received
by the Company, $2,480,500, were net of related costs of $500,000. In addition,
the Partnerships made a three-year loan (the "Loan") to the Company in the
amount of $4,419,500. The Loan has an interest rate of 10% per annum with
mandatory principal reductions, if and to the extent net proceeds are received
from the sale or refinancing of the Company's property known as Rancho Malibu.
The transaction also called for a one time $2.00 per share cash dividend to be
paid in the event certain stockholder proposals were approved. The Consent of
the stockholders was obtained and the proposals were adopted on October 21,
1997.

On August 31, 1998, the Company executed an agreement to acquire all of
the common stock of Ariston Corporation ("Ariston") for a total purchase price
of $12,450,000. Ariston is a holding company having two investments: (i) a 99%
limited partnership interest in AFG Eireann Limited Partnership ("AFG Eireann"),
a Massachusetts limited partnership having a tax interest in a diversified pool
of lease contracts owned by an institutional investor and (ii) a 98% limited
partnership interest in Old North Capital Limited Partnership ("ONC"), a
Massachusetts limited partnership with investments in cash and notes, equipment
leases, and limited partnerships that are engaged in either equipment leasing or
real estate. The latter includes two commercial buildings located in Washington
D.C. and Sydney, Australia that are leased to an investment-grade educational
institution. Gary D. Engle, Chairman, Chief Executive Officer and a director of
the Company and James A. Coyne, President, Chief Operating Officer and a
director of the Company both are affiliated with ONC and Gary D. Engle is
affiliated with AFG Eireann. Ariston was organized on July 31, 1998 as a
Delaware corporation. On August 3, 1998, Equis Financial Group Limited
Partnership ("EFG") contributed its limited partnership interests in AFG Eireann
and ONC to Ariston in exchange for Ariston common stock. Ariston was a
wholly-owned subsidiary of EFG until its acquisition by the Company and was
formed principally to facilitate the transfer of limited partnership interests
held by EFG in AFG Eireann and ONC. Gary D. Engle controls EFG and is the sole
director of Ariston.

The acquisition of Ariston was approved by the Company's independent
directors. (Both Messrs. Engle and Coyne elected to abstain from any votes
conducted by the Company's Board of Directors in connection with this
acquisition.) In addition, the Company, through its independent directors,
engaged an independent investment banking firm (the "Investment Banker"), to
evaluate the transaction and express its opinion as to whether the acquisition
was fair to the Company's shareholders from a financial point of view. The
Investment Banker concluded that the terms of the acquisition were fair to the
Company's shareholders.

1
<PAGE>

The Company purchased all of the common stock of Ariston from EFG for cash
of $2 million and a purchase-money note of $10,450,000 (the "Note"). The Ariston
acquisition was accounted for under the purchase method of accounting. The
balance sheet and statement of operations of Ariston were consolidated effective
September 1, 1998. The Note bears interest at the annualized rate of 7%, payable
quarterly in arrears, and requires principal reductions based upon the cash
flows generated by the limited partnership interests owned by Ariston. The Note
matures on August 31, 2003 and is recourse only to the common stock of Ariston.
The cost of the Ariston acquisition was allocated on the basis of the estimated
fair value of the assets acquired and liabilities assumed. In October 1998,
Ariston declared and paid a cash distribution of $2,020,000 to the Company.
Until the Note is retired, future cash distributions by Ariston require the
consent of EFG.

AFG Eireann is a special purpose limited partnership created in 1994
having a "tax interest" in a diversified pool of lease contracts owned by an
institutional investor. Gary D. Engle is a 50% owner and a director of the
general partner of AFG Eireann. ONC is a Massachusetts limited partnership
established in 1995. ONC has investments in (i) cash, (ii) a portfolio of
equipment leases, (iii) limited partnership units of several
direct-participation equipment leasing programs sponsored and managed by EFG,
(iv) general and limited partnership interests in a real estate partnership
sponsored by EFG that owns two commercial buildings leased to an
investment-grade educational institution, and (v) a note receivable having a
principal balance of approximately $2.7 million that is due from Messrs. Engle
and Coyne. Gary D. Engle owns all of the voting stock, and has a one-third
equity interest in, and is a director of the general partner of ONC. James A.
Coyne owns non-voting stock, and has a one-third equity interest in, and is a
director of the general partner of ONC.

The Company's business plan contemplates making additional acquisitions or
other investments where its sizable net operating loss carryforward can make it
a value added buyer.

Certain statements in this annual report that are not historical fact
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Without limiting the foregoing, words
such as "anticipates", "expects", "intends", "plans" and similar expressions are
intended to identify forward-looking statements. These statements are subject to
a number of risks and uncertainties including the Company's ability to
successfully implement a new growth-oriented business plan. Actual results could
differ materially from those projected in the forward-looking statements.

The Company currently holds an ownership interest in a 274 acre land
parcel in Southern California known as the Rancho Malibu property. The Company's
investment in the Rancho Malibu property is not subject to any competition. The
Company also holds a 0.3% beneficial interest in a liquidating trust,
established for the benefit of a group of unsecured creditors of a previous
borrower of the Company, which holds interests in various assets.

OTHER INFORMATION

The Company has two employees who serve as directors and executive
officers.

On February 23, 1998, new requirements for continued inclusion on the
NASDAQ National Market system became effective. The Company has not consistently
met the new bid price criteria for continued listing based on the Company's
stock price. Effective January 8, 1999, the Company's began trading on the
NASDAQ SmallCap system.

The Company reviews and monitors compliance with federal, state and local
ordinances that have been enacted or adopted regulating the discharge of
material into the environment, or otherwise relating to the protection of the
environment. For the year ended December 31, 1998, the Company did not incur any
material environmental expenditures.

ITEM 2. DESCRIPTION OF PROPERTY

Incorporated herein by reference to Note 4 to the Consolidated Financial
Statements in the 1998 annual report.

2
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

Incorporated herein by reference to Notes 4 and 15 to the Consolidated
Financial Statements in the 1998 annual report.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

3
<PAGE>

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

On June 30, 1998, the stockholders approved a 1-for-300 reverse stock
split followed by a 30-for-1 forward stock split. As a result of the reverse
stock split, each stockholder of record who owned less than 300 shares of common
stock immediately prior to the reverse stock split received in lieu of the
fractional share resulting from the reverse split, cash in the amount of
$.790625 per share (the average daily closing price per share of common stock on
the NASDAQ Stock Exchange for the ten trading days prior to effective date)
multiplied by the number of shares of common stock owned by such stockholder
immediately prior to the reverse stock split. Immediately after the reverse
stock split, the number of shares of common stock of each holder (excluding
stockholders who held less than 300 shares immediately prior to the reverse
split) was converted in a forward split into multiple shares of common stock on
the basis of 30 shares of common stock for each share or fraction thereof then
held. The Company paid $356,098 to fractional stockholders on July 17, 1998 as a
result of the reverse stock split. All share and per share data for prior
periods presented have been restated to reflect the stock splits.

The Company's shares were included for quotation on the NASDAQ National
Market (symbol - VSLF) during 1998 and 1997 (see Item 1). The table below shows
the quarterly high and low bid prices as reported by NASDAQ National Market for
the years ended December 31, 1998 and 1997:

Share Price
Quarter ----------------------------------
Ended 1998 1997
------- ---- ----
3/31 High $10.000 $11.250
Low $5.000 $9.063

6/30 High $9.375 $10.000
Low $7.500 $8.125

9/30 High $8.500 $12.500
Low $4.625 $6.875

12/31 High $4.750 $12.500
Low $3.750 $4.063

In connection with the Consent of the stockholders (described in Item 1),
the Company declared a one-time cash dividend to its stockholders of $2.00 per
share during the fourth quarter of 1997. The Company had not paid a dividend to
its stockholders since 1990 as a result of the defaults by borrowers on the
Company's mortgage loans, the resultant interruption in the Company's cash flow,
the uncertainties regarding its assets and the Company's future cash
requirements. The Company will continue to periodically evaluate its dividend
policy, however, the Company's management currently does not anticipate
additional dividends in the foreseeable future.

The Company's ability to pay future dividends to its stockholders is
dependent upon, among other things, the level of liquidity required to
successfully implement a growth-oriented business plan and the Company's ability
to control its property and Company level operating expenses. The Company will
have future cash inflows as a result of the Ariston acquisition (see Item 1),
which will be used to service associated acquisition indebtedness.

At March 2, 1999, there were 1,479 record holders of the Company's shares
of common stock.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Incorporated herein by reference to the section entitled "Management's
Discussion and Analysis or Plan of Operation" in the 1998 annual report.

4
<PAGE>

ITEM 7. FINANCIAL STATEMENTS

Incorporated herein by reference to the Company's Consolidated Financial
Statements included in the 1998 annual report.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There have been no changes in, or disagreements with, the accountants on
any matter of accounting principles, practices or financial statement
disclosure.

5
<PAGE>

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

The directors and executive officers of the Company are:

Walter E. Auch, Sr. Director
Robert M. Ungerleider Director
Joseph W. Bartlett Director
Gary D. Engle Chairman, Chief Executive Officer and Director
James A. Coyne President, Chief Operating Officer and Director
Gary M. Romano Chief Financial Officer
Michael J. Butterfield Treasurer

WALTER E. AUCH, SR., age 76, was the Chairman and Chief Executive Officer
of the Chicago Board Options Exchange. Prior to that time, Mr. Auch was
Executive Vice President, Director and a member of the executive committee of
Paine Webber. Mr. Auch is a Director of Pimco Advisors L.P., Geotek
Communications, Inc., Smith Barney Concert Series Funds, Smith Barney Trak Fund,
The Brinson Partners Funds, and Nicholas Applegate Funds. He is also a Trustee
of Hillsdale College and the Arizona Heart Institute. Mr. Auch has been a
Director of the Company since 1987. Mr. Auch is also a Trustee of Banyan
Strategic Realty Trust and a Director of Legend Properties, Inc. (f/k/a Banyan
Mortgage Investment Fund) and Banyan Management Corp.

ROBERT M. UNGERLEIDER, age 57, is presently the President of Pilot Books,
a book publisher located in Greenport, New York. Mr. Ungerleider has founded,
developed and sold a number of start-up ventures including Verifone Finance, an
equipment leasing service, SmartPage, a paging service company and Financial
Risk Underwriting Agency, Inc., an insurance firm specializing in financial
guarantee transactions. Prior to these endeavors, Mr. Ungerleider practiced real
estate and corporate law in New York City for ten years. Mr. Ungerleider
received his B. A. Degree from Colgate University and his Law Degree from
Columbia University Law School. Mr. Ungerleider has been a Director of the
Company since 1987. Mr. Ungerleider is also a Director of Legend Properties,
Inc. (f/k/a Banyan Mortgage Investment Fund) and Banyan Management Corp. and is
counsel to the law firm of Lane Felcher Kurlander & Fox.

JOSEPH W. BARTLETT, age 65, is a partner in the law firm of Morrison &
Foerster LLP, which he joined in March 1996. From July 1991 until March 1996 he
was a partner in the law firm of Mayer, Brown & Platt. Mr. Bartlett is also a
Director of Cyrk, Inc., which designs, manufactures and distributes products for
promotional programs and custom-designed sports apparel and accessories. Mr.
Bartlett became a Director of the Company in October 1997.

GARY D. ENGLE, age 50, is Chairman and Chief Executive Officer of the
Company which position he assumed in November 1997. Mr. Engle is President and
Chief Executive Officer of EFG, which he joined in 1990 as Executive Vice
President. Mr. Engle purchased a controlling interest in EFG in December, 1994.
He is also President of AFG Realty, Inc. From 1987 to 1990, Mr. Engle was a
principal and co-founder of Cobb Partners Development, Inc., a real estate and
mortgage banking company, with principal offices in Florida. From 1980 to 1987,
Mr. Engle served in various capacities with Arvida Disney Company, a large scale
community real estate development company owned by the Walt Disney Company with
real estate development projects worldwide. Mr. Engle became a Director of the
Company in May 1997.

JAMES A. COYNE, age 38, is President and Chief Operating Officer of the
Company which position he assumed in 1997. Mr. Coyne is Executive Vice
President, Capital Markets of EFG and is also Vice President of AFG Realty Inc.,
an affiliate of EFG. He is responsible for EFG's real estate activities in both
the United States and Australia. Mr. Coyne joined EFG in 1989, remained until
May 1993, and rejoined EFG in November 1994. In September 1997, Mr. Coyne was
appointed Executive Vice President of EFG. From May 1993 through November 1994,
he was employed by the Raymond Company, a private investment firm, where he was
responsible for financing corporate and real estate acquisitions. From 1985
through 1989, Mr. Coyne was affiliated with a real estate investment company and
an equipment leasing company. Prior to 1985, he was with the accounting firm of
Ernst & Whinney

6
<PAGE>

(now Ernst & Young LLP). He has a BS in Business Administration from John
Carroll University, a Masters Degree in Accounting from Case Western Reserve
University and is a Certified Public Accountant. Mr. Coyne became a Director of
the Company in October 1997.

GARY M. ROMANO, 39, is Chief Financial Officer of the Company which
position he assumed in November 1997. Mr. Romano is Executive Vice President and
Chief Operating Officer of EFG and certain of its affiliates. Mr. Romano joined
EFG in November 1989, became Vice President and Controller in April 1993 and
Chief Financial Officer in April 1995. Mr. Romano assumed his current position
at EFG in April 1996. Prior to joining EFG, Mr. Romano was Assistant Controller
for a privately held real estate development and mortgage origination company
that he joined in 1987. Previously, Mr. Romano was an Audit Manager at Ernst &
Whinney (now Ernst & Young LLP), where he was employed from 1982 to 1986. Mr.
Romano is a Certified Public Accountant and holds a B.S. degree from Boston
College.

MICHAEL J. BUTTERFIELD, 39, is Treasurer of the Company which position he
assumed in November 1997. Mr. Butterfield joined EFG in June 1992, became Vice
President, Finance and Treasurer of EFG and certain of it's affiliates in April
1996 and in July 1998, was promoted to Senior Vice President, Finance and
Treasurer of EFG and certain of its affiliates. Prior to joining EFG, Mr.
Butterfield was an Audit Manager with Ernst & Young LLP, which he joined in
1987. Mr. Butterfield was employed in public accounting and industry positions
in New Zealand and London (UK) prior to coming to the United States in 1987. Mr.
Butterfield attained his Associate Chartered Accountant (A.C.A.) professional
qualification in New Zealand and has completed his CPA requirements in the
United States. He holds a Bachelor of Commerce degree from the University of
Otago, Dunedin, New Zealand.

ITEM 10. EXECUTIVE COMPENSATION

A. DIRECTOR COMPENSATION

The Directors are paid an annual fee of $15,000, payable quarterly, plus
$875 for each board meeting, including meetings of the compensation and audit
committees, attended in person and $250 an hour for each board meeting,
including meetings of the compensation and audit committees, attended via
telephonic conference call. In addition, each Director is reimbursed for
out-of-pocket expenses incurred in attending meetings of the board.

B. EXECUTIVE COMPENSATION

Compensation paid to Mr. Engle for the years ended December 31, 1998 and
1997, Mr. Coyne for the year ended December 31, 1998 and Mr. Levine, the former
President and Chief Executive Officer of the Company, for the years ended
December 31, 1997 and 1996 is as follows:

Annual Compensation (1)
-----------------------

<TABLE>
<CAPTION>
Other Annual
Year Salary Bonus (3) Compensation
---- ------------ ------------- -----------------
<S> <C> <C> <C> <C>
Gary D. Engle, (2) 1998 $ 120,000 n/a n/a
Chairman and Chief 1997 $ 48,383 n/a n/a
Executive Officer

James A. Coyne, 1998 $ 120,000 n/a n/a
President and Chief 1997 $ 48,383 n/a n/a
Operating Officer

Leonard G. Levine, 1997 $ 111,926 $ 7,164 n/a
Former President and Chief 1996 $ 108,141 $ 217,135 n/a
Executive Officer
</TABLE>

7
<PAGE>

Long-Term Compensation (1)
--------------------------

<TABLE>
<CAPTION>
Awards Payouts
---------------------------- ---------------------------------
Restricted
Stock Options/ LTIP All Other
Year Awards SARSs (#) Payouts Compensation
---- ---------- ---------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Gary D. Engle, (2) 1998 n/a n/a n/a n/a
Chairman and Chief 1997 n/a n/a n/a n/a
Executive Officer

James A. Coyne, 1998 n/a n/a n/a n/a
President and Chief
Operating Officer

Leonard G. Levine, 1997 n/a n/a n/a $ 400,000
Former President and Chief 1996 n/a n/a n/a n/a
Executive Officer
</TABLE>

(1) Total compensation for each of the next three highest paid executive
officers did not exceed $100,000 in 1998, 1997 or 1996.

(2) Mr. Engle became Chairman and Chief Executive Officer on November 10,
1997, following Mr. Levine's resignation.

(3) Pursuant to Mr. Levine's employment agreement the incentive amounts which
were earned in 1996 and 1995 were paid or awarded to him by the Company in
1997 and 1996, respectively.

Mr. Engle serves as Chief Executive Officer of the Company pursuant to an
Executive Employment Agreement dated November 10, 1997, and Mr. Coyne serves as
Chief Operating Officer of the Company pursuant to an Executive Employment
Agreement dated May 1, 1997. The provisions of the two Agreements (the
"Agreements") are identical.

Pursuant to the Agreements, the Company paid each executive a base salary
of $120,000 and $48,383 for services rendered to the Company in 1998 and 1997,
respectively. For 1998 and thereafter, the Agreements provide that the Company
will pay each executive a base salary at the rate of not less than $120,000 per
year, subject to adjustment by the Board of Directors based upon performance by
the executive of his duties and the financial performance of the Company. Under
the Agreements, each executive is also entitled to receive such incentive or
performance cash bonuses as the Board may determine from time to time.

The Agreements provide that the executives' salary will be deferred under
an Incentive Compensation Plan, unless the executive in any prospective period
elects to have such salary paid to him directly. Pursuant to the Agreements and
the Incentive Plan, the Participants deferred $240,000 and $96,766 of
compensation during the years ended December 31, 1998 and 1997, respectively,
which represented 41,400 and 15,483 shares of common stock, respectively. During
1997, the number of shares of Common Stock was determined by dividing the dollar
amount of the salary deferred by $6.25, the closing price of a share of the
Company's Common Stock on December 30, 1997, the effective date of the Incentive
Plan. During 1998, such shares of Common Stock was determined by dividing the
dollar amount of the salary deferred each month by the average of the closing
prices of a share of the Company's Common Stock for the last ten trading days of
the month.

The Agreements also provide for the grant of 40,000 options to each
executive, subject to approval by the stockholders. Incentive stock options to
purchase 40,000 shares of Common Stock of the Company at an exercise price of
$9.25 per share were granted to each executive on December 30, 1997. These
grants were approved by stockholders at the 1998 Annual Meeting. One-third of
such options vest on each anniversary of the date of grant, subject to
acceleration in the event of a Change-in-Control, which is defined as an
occurrence whereby (i) any person, partnership, corporation, entity or group (as
such term is used in the Exchange Act), in a single transaction or series of

8
<PAGE>

related transactions, directly or indirectly, acquires beneficial ownership of
more than 50 percent of the Company's securities or substantially all of the
Company's assets, or (ii) individuals who were members of the Board immediately
prior to a meeting of stockholders involving a contest for directors do not
constitute a majority of the Board following such election or (iii) the
executive fails to be elected or re-elected to the Board, unless the executive
was not nominated with his consent.

Each Agreement extends until December 31, 2000, and thereafter is renewed
for additional one-year terms unless either party gives written notice to the
other not less than 30 days prior to the end of the original term or any renewal
term that the party does not wish to renew the Agreement. The Company may
terminate the Agreements for cause, and the executive may terminate his
Agreement at any time upon 60 days' prior written notice. In addition, the
executive may terminate his Agreement effective immediately within 60 days of a
Change-in-Control, and in that event the Company must continue the executive's
salary and fringe benefits under his Agreement and his incentive compensation
under the Incentive Plan for a period of 18 months. If the Company terminates an
executive or the Company elects not to renew an executive's Agreement within 24
months following a Change-in-Control, the Company must pay to the executive in a
lump sum an amount equal to the greater of (i) three times the base salary paid
to the executive in the 36 months preceding the Change-in-Control and (ii) the
base salary due to be paid the executive through the end of the term (or renewal
term) of his Agreement. If the Company terminates the employment of an executive
without cause, all payments under his Agreement continue through the end of the
then term. If the Company elects not to renew an executive's Agreement at the
end of the original term or any renewal term, the executive will receive a
termination settlement equal to 12 months' salary and will continue to receive
insurance benefits for 12 months, unless such non-renewal occurs within 24
months following a Change-in-Control, in which event the executive will receive
the benefits he would have received if he had terminated the Agreement following
a Change-in-Control. Upon termination of an Agreement voluntarily by an
executive, upon the election by the executive not to renew his Agreement or by
the Company for cause, all payments and benefits under the Agreement cease on
the date of termination.

Until November 10, 1997, Mr. Levine served as Chief Executive Officer of
the Company pursuant to an employment agreement entered into on January 1, 1990
, which was amended and restated effective May 1, 1997 (together, the "Levine
Agreement"). Under the Levine Agreement, Mr. Levine was paid a salary for the
calendar year 1997 equal to $111,926 per year.

Under the Levine Agreement, Mr. Levine received incentive compensation
under an incentive program included in the agreement, calculated as follows: (i)
1.00% of the Company's collateralized claims which were converted into cash;
(ii) 3.00% of the Company's unsecured claims which were converted into cash;
(iii) 0.1% of all cash distributions of capital; and (iv) 0.14% of all
distributions of income to stockholders of the Company. Pursuant to the Levine
Agreement, incentive earned was paid 80% in cash on or before March 15th of the
following year and 20% in phantom stock rights (the "Phantom Stock").

On April 1, 1997 and March 1, 1996, Mr. Levine was paid (i) $7,164 and
$217,135, respectively, in cash, representing 80% of his incentive compensation
earned for the fiscal years ended December 31, 1996 and 1995, respectively; and
(ii) received 191 shares and 4,308.3 shares, respectively, of Phantom Stock,
representing 20% of the incentive compensation earned for those years. The value
of the Phantom Stock on the date of grant was $9.375 per share or $1,790 for
shares issued in 1997, $12.60 per share or $54,284 for shares issued in 1996.

Under the Levine Agreement, Mr. Levine received a termination fee of
$400,000 in connection with the termination of his employment, and all of his
Phantom Shares were forfeited by him.

C. EXECUTIVE AND DIRECTORS STOCK OPTION PLAN

9
<PAGE>

stock options within the meaning of Section 422 of the Internal Revenue Code.
The stockholders approved the Amendment to the Plan at the 1998 Annual Meeting
of Stockholders. The Plan granted the Board of Directors the authority to issue
up to 100,000 shares of the Company's common stock for stock option awards. The
Plan consists of an Executive Option Grant Program and a Director Option Grant
Program. Under the Director Option Grant Program, each of the Directors, in
consideration of their length of service on the Board, received an option to
acquire 5,000 shares. The exercise price of the options initially granted to the
Board of Directors on July 15, 1994 under the Director Option Grant Program was
$11.25. The exercise price was reduced to $9.25 by a vote of the Board of
Directors on December 30, 1997. No executive is eligible to receive options
under the Director Option Grant Program.

The Board administers the Executive Option Grant Program and has the
authority to determine, among other things, the individuals to be granted
Executive Options, the exercise price at which shares may be acquired, the
number of shares subject to each option and the exercise period of each option.
The Board is also authorized to construe and interpret the Executive Option
Grant Program and to prescribe additional terms and conditions of exercise in
option agreements and provide the form of option agreement to be utilized with
the Executive Option Grant Program. No Director is eligible to receive options
under the Executive Option Grant Program.

Options are not transferable except by will or by the laws of descent and
distribution, and are exercisable during an optionee's lifetime only by the
optionee or the appointed guardian or legal representative of the optionee. Upon
the: (a) death or permanent and total disability of an optionee; or (b)
retirement in accord with the Company's retirement practices, any unexercised
options will be exercisable at any time within one year in the case of (a) and
ninety days in the case of (b) (but in no case beyond the expiration date
specified in the Option Agreement). If, while unexercised options remain
outstanding under the Plan, the Company ceases to be a publicly-traded company,
or if the Company merges with another entity or a similar event occurs, all
options outstanding under the Plan shall immediately become exercisable at that
time.

The Plan requires the optionee to pay, at the time of exercise, for all
shares acquired on exercise in cash, shares, or in the case of the Executive
Option Program, other forms of consideration acceptable to the Board.

If the Company declares a stock dividend, splits its stock, combines or
exchanges its shares, or engages in any other transactions which results in a
change in capital structure such as a merger, consolidation, dissolution,
liquidation or similar transaction, the Board may adjust or substitute, as the
case may be, the number of shares available for options under the Plan, the
number of shares covered by outstanding options, the exercise price per share of
outstanding options, any target price levels for vesting of the options and any
other characteristics of the options as the Board deems necessary to equitably
reflect the effects of those changes on the option holders.

The Board granted 9,000 options on each of April 16, 1996, July 11, 1995
and January 18, 1994 (27,000 options in total) to management under the Plan, at
a price equal to the closing price of the Company's stock as reported by NASDAQ
on the day of the grant of options ($12.50 per share at April 16, 1996, $15.00
per share at July 11, 1995 and $11.25 per share at January 18, 1994).

Pursuant to the terms of the grants, options for all shares granted under
the Executive Option Grant Program are exercisable and vested in installments as
follows: (i) 33.3% of the number of shares commencing on the first anniversary
of the date of grant; (ii) an additional 33.3% of the shares commencing on the
second anniversary of the date of the grant; and (iii) an additional 33.4% of
shares commencing on the third anniversary of the date of grant. Options for all
shares as granted under the Director Option Grant Program are exercisable in
installments as follows: (i) 50.0% of the number of shares commencing on the
first anniversary of the date of grant; and (ii) an additional 50.0% of the
number of shares commencing on the second anniversary of the date of grant. The
Board is granted discretion to determine the term of each option granted under
the Executive Option Grant Program, but in no event will the term exceed ten
years and one day from the date of grant.

During 1998, unexercised stock options issued to a former Director, Mr.
Nudo under the Director Option Grant Program were canceled and surrendered in
connection with his resignation. Mr. Nudo was paid $20,000 by the Company as
consideration for his options.

10
<PAGE>

During 1997, the Company's former executives who held unexercised options
issued under the Executive Option Grant Program agreed to cancel and surrender
these options in consideration of the Company paying each holder $2.00 in cash
for each share of Common Stock subject to such holder's options. The Company
retired 6,850 options to purchase shares of the Company's common stock at a
price of $2.00 per share or $13,700. The options held by Mr. Levine (18,000
options), were canceled and surrendered in connection with his resignation.

On December 30, 1997, the Board voted to grant nonstatutory stock options
for 5,000 shares at an exercise price of $9.25 per share to Joseph W. Bartlett
under the Director Option Grant Program and incentive stock options for 40,000
shares at an exercise price of $9.25 per share to each of Gary D. Engle and
James A. Coyne under the Executive Option Grant Program. These grants were
approved by the stockholders at the June 30, 1998 Annual Meeting. The closing
price for a share of the Company's Common Stock as reported by NASDAQ was $6.25
and $8.125 at December 30, 1997 and June 30, 1998, respectively.

Stock Options granted or exercised under the Option Plan by executive
officers named in the executive compensation table for the year ended December
31, 1998, are as follows:

STOCK OPTION GRANTS IN 1998 FISCAL YEAR

<TABLE>
<CAPTION>
Number of Securities % of Total Options Granted
Underlying to Employees Exercise or Expiration
Name Options Granted in Fiscal Year Base Price Date
- ----------------- --------------- -------------- ---------- -------
<S> <C> <C> <C> <C>
Gary D. Engle none n/a n/a n/a
James A. Coyne none n/a n/a n/a
</TABLE>

AGGREGATED STOCK OPTION EXERCISES DURING 1998
AND DECEMBER 1998 OPTION VALUES

<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options In-the-Money Options
at December 31 at December 31
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
- ---------------- ------------ --------- -------------- -------------
<S> <C> <C> <C> <C>
Gary D. Engle None $0 13,320/26,680 n/a / n/a
James A. Coyne None $0 13,320/26,680 n/a / n/a
</TABLE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding beneficial
owners of Common Stock as of March 2, 1999 by: (i) each person or entity who is
known by the Company to own more than five percent of the Common Stock (together
with such person's address); (ii) each director and each executive officer of
the Company named in the executive compensation table; and (iii) all current
directors and officers as a group. Share amounts and percentages shown for each
person or entity are adjusted to give effect to shares of Common Stock that are
not outstanding but may be acquired by that person or entity upon exercise of
all options and warrants exercisable by that person or entity within 60 days.
However, such shares of Common Stock are not deemed to be outstanding for the
purpose of computing the percentage of outstanding shares beneficially owned by
any other person or entity. Messrs. Romano and Butterfield do not own any shares
of Common Stock of the Company.

11
<PAGE>

<TABLE>
<CAPTION>
Name of Person or Entity Number of Shares Percent of Total Shares
- ------------------------ ---------------- -----------------------
<S> <C> <C>
AFG Hato Arrow Limited Partnership 198,700 (1) 17.5%
AFG Dove Arrow Limited Partnership
AIP/Larkfield Limited Partnership
c/o Equis Corporation
88 Broad Street
Boston, Massachusetts 02110

Gary D. Engle, Chairman, Chief Executive 34,857 (2) (3) 3%
Officer and Director

James A. Coyne, President, Chief Operating 36,757 (4) 3.2%
Officer and Director

Joseph W. Bartlett, Director 5,000 (5) Less than 1%

Robert M. Ungerleider, Director 5,600 (5) Less than 1%

Walter E. Auch, Sr., Director 6,600 (5) Less than 1%

All Directors and Officers of the Company, 21,300 1.9%
as a group (7 persons)
</TABLE>

(1) Certain affiliates of EFG have filed reports with the Securities and
Exchange Commission (the "SEC") pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
indicating ownership of five percent or more of the outstanding Common
Stock. At March 2, 1999: (i) AFG Hato Arrow Limited Partnership owns
63,544 shares, amounting to 5.5% of the outstanding Common Stock; (ii) AFG
Dove Arrow Limited Partnership owns 61,673 shares, amounting to 5.4% of
the outstanding Common Stock and (iii) AIP/Larkfield Limited Partnership
owns 73,483 shares, amounting to 6.4% of the outstanding Common Stock.
Gary D. Engle, Chairman, Chief Executive Officer and a director of the
Company, has effective control over the operation of each of these limited
partnerships.

(2) Because Mr. Engle has effective control over AFG Hato Arrow Limited
Partnership, AFG Dove Arrow Limited Partnership and AIP/Larkfield Limited
Partnership, he is also deemed to beneficially own 198,700 shares owned by
those partnerships.

(3) Includes 33,757 shares held by a rabbi trust for the benefit of Mr. Engle
representing salary deferred by the officer through March 2, 1999 pursuant
to the Company's Incentive Compensation Plan.

(4) Includes 33,757 shares held by a rabbi trust for the benefit of Mr. Coyne
representing salary deferred by the officer through March 2, 1999 pursuant
to the Company's Incentive Compensation Plan.

(5) Includes currently exercisable options granted under the Company's 1994
Executive and Director Stock Option Plan to purchase 5,000 shares of
Common Stock.

The Company is not aware of any other person who, alone or as part of a
group, beneficially owns more than five percent of the outstanding shares of
Common Stock at March 2, 1999. The Company is not aware of any arrangement, the
operation of which may at a subsequent date result in a change of control of the
Company.

Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file initial statements of beneficial
ownership (Form 3), and statements of changes in beneficial ownership (Forms 4
and 5), of Common Stock and other equity

12
<PAGE>

securities of the Company with the SEC and the National Association of
Securities Dealers, Inc. (the "NASD"). The SEC requires officers, directors and
greater than ten percent stockholders to furnish the Company with copies of all
these forms filed with the SEC and NASD.

To the Company's knowledge, based solely on its review of the copies of
these forms received by it, or written representations from certain reporting
persons that no additional forms were required for those persons, the Company
believes that all filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with during 1998.

See Item 10, Executive Compensation, for information on Stock Options of
the Company held by officers and directors pursuant to the 1994 Executive and
Directors Stock Option Plan and for information on shares held by a rabbi trust
for the benefit of certain officers pursuant to the Company's Incentive
Compensation Plan.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ACQUISITION OF ARISTON CORPORATION

As described in Item 1, the Company acquired Ariston on August 31, 1998
for a total purchase price of $12,450,000. Ariston is a holding company having
two investments: (i) a 99% limited partnership interest in AFG Eireann Limited
Partnership ("AFG Eireann"), a Massachusetts limited partnership having a tax
interest in a diversified pool of lease contracts owned by an institutional
investor and (ii) a 98% limited partnership interest in Old North Capital
Limited Partnership ("ONC"), a Massachusetts limited partnership with
investments in cash and notes, equipment leases, and limited partnerships that
are engaged in either equipment leasing or real estate. The latter includes two
commercial buildings located in Washington D.C. and Sydney, Australia that are
leased to an investment-grade educational institution. Gary D. Engle, Chairman,
Chief Executive Officer and a director of the Company and James A. Coyne,
President, Chief Operating Officer and a director of the Company both are
affiliated with ONC and Gary D. Engle is affiliated with AFG Eireann.

OTHER RELATED PARTY TRANSACTIONS

As described in Item 1, The Company executed and delivered an Exchange
Agreement dated April 30, 1997 (amended as of August 7, 1997, the "Agreement")
among the Company, Equis, EFG and certain partnerships managed by EFG. Pursuant
to the Agreement, the Administrative Services Agreement between the Company and
Banyan Management Corp. ("BMC") was amended to provide, among other things, for
the payment to BMC of a termination fee in the amount of $251,823 and the
transfer of the Company's ownership interest in BMC to BMC's designee. Effective
May 6, 1997, EFG entered into an Administrative Services Agreement to provide
administrative services to the Company, replacing BMC. Administrative costs,
primarily salaries and general and administrative expenses, of $152,201 were
incurred on the Company's behalf by EFG during the year ended December 31, 1998.
During the year ended December 31, 1997, the Company incurred $49,166 in
administrative costs for services provided by EFG and $107,781 for services
provided by BMC. The costs incurred by EFG on behalf of the Company are
reflected as Administrative Reimbursement - Affiliate on the Consolidated
Statements of Operations. The costs incurred by BMC on behalf of the Company are
included in General and Administrative expenses on the Consolidated Statements
of Operations.

Pursuant to the Agreement, on April 30, 1997, the Company issued to the
Partnerships 198,700 shares of the Company's common stock at the price of $15.00
per share. Cash proceeds received by the Company, $2,480,500, were net of
related costs of $500,000. In addition, the Partnerships made a three-year loan
to the Company in the amount of $4,419,500. The Loan has an interest rate of 10%
per annum with mandatory principal reductions, if and to the extent net proceeds
are received from the sale or refinancing of the Rancho Malibu property.

13
<PAGE>

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1) Financial Statements

The following consolidated financial statements of Semele Group Inc. included in
its Annual Report for the year ended December 31, 1998 are incorporated by
reference in Item 7 hereof:

Consolidated Balance sheets as of December 31, 1998 and 1997
Consolidated Statements of Operations For the Years Ended December
31, 1998 and 1997
Consolidated Statements of Stockholders' Equity For the Years Ended
December 31, 1998 and 1997
Consolidated Statements of Cash Flows For the Years Ended December
31, 1998 and 1997
Notes to Consolidated Financial Statements

(2) Financial Statement Schedules

None required.

(3) Exhibits

A list of exhibits filed or incorporated by reference is as follows:

3.1 Restated Certificate of Incorporation (filed with the Securities and
Exchange Commission as Exhibit (3)(i) to the Registrant's Report on
Form 8-K dated October 21, 1997 and incorporated by reference)

3.2 Amended and Restated By-Laws (filed with the Securities and Exchange
Commission as Exhibit (3)(ii) to the Registrant's Report on Form 8-K
dated October 21, 1997 and incorporated by reference)

4 Form of new stock certificate (filed with the Securities and
Exchange Commission as Exhibit (4) to the Registrant's Quarterly
Report on Form 10-QSB for the quarter ended September 30, 1997 and
incorporated by reference)

10.1 Executive Employment Agreement for Gary D. Engle (filed in the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1997 as Exhibit 10.1 and is incorporated herein by reference)

10.2 Executive Employment Agreement for James A. Coyne (filed in the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1997 as Exhibit 10.2 and is incorporated herein by reference)

10.3 Amended 1994 Executive and Director Stock Option Plan (filed in the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1997 as Exhibit 10.3 and is incorporated herein by reference)

10.4 Incentive Compensation Plan (filed in the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1997 as Exhibit 10.4
and is incorporated herein by reference)

10.5 Trust under Semele Group Inc. Incentive Compensation Plan (filed in
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997 as Exhibit 10.5 and is incorporated herein by
reference)

10.6 Qualified Stock Option Agreement Executive Option Grant Program
dated December 30, 1997 between Semele Group Inc. and Gary D. Engle
(filed in the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997 as Exhibit 10.6 and is incorporated herein
by reference)

14
<PAGE>

10.7 Qualified Stock Option Agreement Executive Option Grant Program
dated December 30, 1997 between Semele Group Inc. and James A. Coyne
(filed in the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997 as Exhibit 10.7 and is incorporated herein
by reference)

10.8 Director Stock Option Agreement Director Option Grant Program (filed
in the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997 as Exhibit 10.8 and is incorporated herein by
reference)

10.9 Amendment to Director Stock Option Agreement Director Option Grant
Program dated December 30, 1997 between Semele Group Inc. and Gerald
L. Nudo (filed in the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1997 as Exhibit 10.9 and is incorporated
herein by reference)

10.10 Amendment to Director Stock Option Agreement Director Option Grant
Program dated December 30, 1997 between Semele Group Inc. and Robert
M. Ungerleider (filed in the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1997 as Exhibit 10.10 and is
incorporated herein by reference)

10.11 Amendment to Director Stock Option Agreement Director Option Grant
Program dated December 30, 1997 between Semele Group Inc. and Walter
E. Auch (filed in the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1997 as Exhibit 10.11 and is
incorporated herein by reference)

10.12 Third Amended and Restated Employment Agreement for Leonard G.
Levine dated May 1, 1997 (filed with the Securities and Exchange
Commission as Exhibit (10)(i) to the Registrant's Quarterly Report
on Form 10-QSB for the quarter ended June 30, 1997 and incorporated
by reference)

10.13 Amendment No. 1 to Exchange Agreement dated August 7, 1997 (filed
with the Securities and Exchange Commission as Exhibit (10)(ii) to
the Registrant's Quarterly Report on Form 10-QSB for the quarter
ended June 30, 1997 and incorporated by reference)

10.14 Exchange Agreement dated April 30, 1997 by and among AFG Hato Arrow
Limited Partnership, AFG Dove Arrow Limited Partnership,
AIP/Larkfield Limited Partnership, Equis Exchange LLC, Equis
Financial Group Limited Partnership and the Registrant and related
exhibits (filed with the Securities and Exchange Commission as
Exhibit (10)(i) to the Registrant's Quarterly Report on Form 10-QSB
for the quarter ended March 31, 1997 and incorporated by reference)

10.15 Directors Stock Option Agreement dated July 15, 1994

10.16 Executive Stock Option Agreements dated July 1, 1994, July 11, 1995
and April 16, 1996.

13 The Company's Annual Report to Stockholders for the year ended
December 31, 1998

21 Subsidiaries of the Company

23 Consent of Independent Auditors

27 Financial Data Schedule (such schedule is not deemed filed as part
of this report)

99.1 Press Release dated October 21, 1997 (filed with the Securities and
Exchange Commission as Exhibit (99)(i) to the Registrant's Report on
Form 8-K dated October 21, 1997 and incorporated by reference)

(b) No Reports on Form 8-K were filed during the quarter ended December
31, 1998.

15
<PAGE>

(d) None.

An annual report will be sent to the stockholders subsequent to this
filing and the Company will furnish copies of such report to the Commission at
that time.

16
<PAGE>

SIGNATURES

IN ACCORDANCE WITH Section 13 or 15(d) of the Exchange Act, the Issuer has
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.

SEMELE GROUP INC.

By: /s/Gary D. Engle Date: April 15, 1999
Gary D. Engle, Chairman, Chief Executive
Officer and Director

IN ACCORDANCE WITH the Exchange Act, this Annual Report has been signed
below by the following persons on behalf of the Issuer and in the capacities and
on the dates indicated.

By: /s/Gary D. Engle Date: April 15, 1999
Gary D. Engle, Chairman, Chief Executive
Officer and Director

By: /s/James A. Coyne Date: April 15, 1999
James A. Coyne, President, Chief
Operating Officer and Director

By: /s/Gary M. Romano Date: April 15, 1999
Gary M. Romano, Vice President and
Chief Financial Officer

By: /s/Walter E. Auch Date: April 15, 1999
Walter E. Auch, Sr., Director

By: /s/Robert M. Ungerleider Date: April 15, 1999
Robert M. Ungerleider, Director

By: /s/Joseph W. Bartlett Date: April 15, 1999
Joseph W. Bartlett, Director

17
<PAGE>

SIGNATURES

IN ACCORDANCE WITH Section 13 or 15(d) of the Exchange Act, the Issuer has
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.

SEMELE GROUP INC.

By: ____________________________________ Date: April 15, 1999
Gary D. Engle, Chairman, Chief Executive
Officer and Director

IN ACCORDANCE WITH the Exchange Act, this Annual Report has been signed
below by the following persons on behalf of the Issuer and in the capacities and
on the dates indicated.

By: ____________________________________ Date: April 15, 1999
Gary D. Engle, Chairman, Chief Executive
Officer and Director

By: ____________________________________ Date: April 15, 1999
James A. Coyne, President, Chief Operating
Officer and Director

By: ____________________________________ Date: April 15, 1999
Gary M. Romano, Vice President and
Chief Financial Officer

By: ____________________________________ Date: April 15, 1999
Walter E. Auch, Sr., Director

By: ____________________________________ Date: April 15, 1999
Robert M. Ungerleider, Director

By: ____________________________________ Date: April 15, 1999
Joseph W. Bartlett, Director

17
<PAGE>

EXHIBIT 13

SEMELE GROUP INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Pages
-----
<S> <C>
Management's Discussion and Analysis of Financial Condition or Plan of Operation 19-23

Report of Independent Auditors 24

Consolidated Balance Sheets as of December 31, 1998 and 1997 25

Consolidated Statements of Operations
For the Years Ended December 31, 1998 and 1997 26

Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 1998 and 1997 27

Consolidated Statements of Cash Flows
For the Years Ended December 31, 1998 and 1997 28

Notes to Consolidated Financial Statements 29-41
</TABLE>

All schedules are omitted since the required information is not present or is
not present in amounts sufficient to require submission of the schedule or
because the information required is included in the consolidated financial
statements and notes thereto.

18
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION OR PLAN OF OPERATION

GENERAL

The Company, formerly known as Banyan Strategic Land Fund II, was
originally established to invest primarily in short-term, junior,
pre-development and construction mortgage loans. The borrowers subsequently
defaulted on these mortgage loan obligations, adversely affecting the Company.
As a result of these defaults, the Company suspended the making of new loans,
except for advances of additional funds under circumstances in which it was
deemed necessary to preserve the value of existing collateral, including
instances where the Company had foreclosed upon or taken title, directly or
indirectly, to the collateral. In 1990, the Company implemented a plan designed
to preserve its assets and manage its properties acquired through foreclosure or
otherwise until they would be disposed of in an orderly manner. On February 25,
1997, the Directors of the Company authorized management to engage an investment
banking firm for purposes of evaluating strategic alternatives for maximizing
stockholder value. The Company executed and delivered an Exchange Agreement
dated April 30, 1997 (amended as of August 7, 1997, the "Agreement") among the
Company, Equis Exchange L.L.C., a Massachusetts limited liability company
("Equis"), Equis Financial Group Limited Partnership ("EFG") and certain
partnerships affiliated with EFG (the "Partnerships"). Pursuant to the
Agreement, the Company issued to the Partnerships 198,700 shares of the
Company's common stock at the price of $15.00 per share. Cash proceeds received
by the Company, $2,480,500, were net of related costs of $500,000. In addition,
the Partnerships made a three-year loan to the Company in the amount of
$4,419,500. These transactions are intended to provide capital to assist the
Company in a new growth-oriented business plan, which includes the development
of the Company's property known as Rancho Malibu. The transaction also called
for a one time $2.00 per share cash dividend to be paid in the event certain
stockholder proposals were approved. The Consent of the stockholders was
obtained and the proposals were adopted on October 21, 1997.

Pursuant to the Agreement, the Administrative Services Agreement between
the Company and Banyan Management Corp. ("BMC") was amended to provide, among
other things, for the immediate payment to BMC of a termination fee in the
amount of $251,823 and the transfer of the Company's ownership interest in BMC
to BMC's designee. Pursuant to the Agreement, the Company also entered into a
new Administrative Services Agreement with EFG (see Note 5 to the consolidated
financial statements).

On August 31, 1998, the Company executed an agreement to acquire all of
the common stock of Ariston Corporation ("Ariston") for a total purchase price
of $12,450,000. Ariston is a holding company having two investments: (i) a 99%
limited partnership interest in AFG Eireann Limited Partnership ("AFG Eireann"),
a Massachusetts limited partnership having a tax interest in a diversified pool
of lease contracts owned by an institutional investor and (ii) a 98% limited
partnership interest in Old North Capital Limited Partnership ("ONC"), a
Massachusetts limited partnership with investments in cash and notes, equipment
leases, and limited partnerships that are engaged in either equipment leasing or
real estate. The latter includes two commercial buildings located in Washington
D.C. and Sydney, Australia that are leased to an investment-grade educational
institution. Gary D. Engle, Chairman, Chief Executive Officer and a director of
the Company and James A. Coyne, President, Chief Operating Officer and a
director of the Company both are affiliated with ONC and Gary D. Engle is
affiliated with AFG Eireann. Ariston was organized on July 31, 1998 as a
Delaware corporation. On August 3, 1998, EFG contributed its limited partnership
interests in AFG Eireann and ONC to Ariston in exchange for Ariston common
stock. Ariston was a wholly-owned subsidiary of EFG until its acquisition by the
Company and was formed principally to facilitate the transfer of limited
partnership interests held by EFG in AFG Eireann and ONC. Gary D. Engle controls
EFG and is the sole director of Ariston.

19
<PAGE>

acquisition.) In addition, the Company, through its independent directors,
engaged an independent investment banking firm (the "Investment Banker"), to
evaluate the transaction and express its opinion as to whether the acquisition
was fair to the Company's shareholders from a financial point of view. The
Investment Banker concluded that the terms of the acquisition were fair to the
Company's shareholders.

The Company currently holds an ownership interest in a 274 acre land
parcel located in Southern California known as the Rancho Malibu property. The
Company also holds a 0.3% beneficial interest in a liquidating trust,
established for the benefit of a group of unsecured creditors of a previous
borrower of the Company, which holds interests in various assets.

Year 2000 Issue

The Year 2000 Issue generally refers to the capacity of computer
programming logic to correctly identify the calendar year. Many companies
utilize computer programs or hardware with date sensitive software or embedded
chips that could interpret dates ending in "00" as the year 1900 rather than the
year 2000. In certain cases, such errors could result in system failures or
miscalculations that disrupt the operations of the affected businesses. The
Company uses information systems provided by EFG and has no information systems
of its own. EFG has adopted a plan to address the Year 2000 Issue that consists
of four phases: assessment, remediation, testing, and implementation and has
elected to utilize principally internal resources to perform all phases. EFG
completed substantially all of its Year 2000 project by December 31, 1998 at an
aggregate cost of less than $50,000 and at a di minimus cost to the Company. All
costs incurred in connection with EFG's Year 2000 project have been expensed as
incurred.

EFG's primary information software was coded by IBM at the point of
original design to use a four digit field to identify calendar year. All of the
Company's lease billings, cash receipts and equipment remarketing processes are
performed using this proprietary software. In addition, EFG has gathered
information about the Year 2000 readiness of significant vendors and third party
servicers and continues to monitor developments in this area. All of EFG's
peripheral computer technologies, such as its network operating system and
third-party software applications, including payroll and electronic banking,
have been evaluated for potential programming changes and have required only
minor modifications to function properly with respect to dates in the year 2000
and thereafter. EFG understands that each of its and the Company's significant
vendors and third-party servicers are in the process, or have completed the
process, of making their systems Year 2000 compliant. Substantially all parties
queried have indicated that their systems would be Year 2000 compliant by the
end of 1998.

Presently, EFG is not aware of any outside customer with a Year 2000 Issue
that would have a material effect on the Company's results of operations,
liquidity, or financial position. The Company's equipment leases were structured
as triple net leases, meaning that the lessees are responsible for, among other
things, (i) maintaining and servicing all equipment during the lease term, (ii)
ensuring that all equipment functions properly and is returned in good
condition, normal wear and tear excepted, and (iii) insuring the assets against
casualty and other events of loss. Non-compliance with lease terms on the part
of a lessee, including failure to address Year 2000 Issues, could result in lost
revenues and impairment of residual values of the Company's equipment assets
under a worst-case scenario.

20
<PAGE>

EFG believes that its Year 2000 compliance plan will be effective in
resolving all material Year 2000 risks in a timely manner and that the Year 2000
Issue will not pose significant operational problems with respect to its
computer systems or result in a system failure or disruption of its or the
Company's business operations. However, EFG has no means of ensuring that all
customers, vendors and third-party servicers will conform ultimately to Year
2000 standards. The effect of this risk to the Company is not determinable.

Liquidity and Capital Resources

Cash and cash equivalents consist of cash and short-term investments. The
Company's cash and cash equivalents balance at December 31, 1998 and 1997 was
$7,788,124 and $7,884,593, respectively. The decrease in total cash and cash
equivalents of $96,469 was the result of cash used in financing activities
offset by cash provided by operating and investing activities (see below).

Cash Flow From Operating Activities: Net cash from operating activities
was $279,607 during the year ended December 31, 1998 compared to net cash used
in operating activities of $2,103,061 for the same period in 1997. Net cash used
in 1997 resulted from cash used to engage an investment banking firm for
purposes of evaluating strategic alternatives for maximizing shareholder value
and costs incurred to implement a growth-oriented business plan. See Results of
Operations for additional discussion.

Cash Flow From Investing Activities: During the year ended December 31,
1998, net cash provided by investing activities resulted from $475,000 of
principal repayments on the Hemet IV and Lindfield Tract A loans (see below)
and $148,843 from investment in partnerships and trusts offset by cash used
to acquire Ariston. During the year ended December 31, 1997, net cash
provided by investing activities was $5,330,489 resulting from distributions
from the Company's investment in a real estate venture of $4,713,101 (see
below) and proceeds received from the sale of foreclosed real estate of
$617,388 (see below).

Cash Flow From Financing Activities: During the year ended December 31,
1998, net cash used in financing activities resulted from $356,098 of cash
used to pay fractional shareholders as a result of the reverse stock split,
$354,768 to purchase 69,223 shares of the Company's common stock, $72,755 to
repay certain debt obligations assumed in connection with the Ariston
acquisition and $105,232 to pay certain distributions as a result of the
Ariston acquisition. During the year ended December 31, 1997, net cash
provided by financing activities was $4,511,830 resulting from the issuance
of stock pursuant to the Exchange Agreement described above, offset by
$2,388,170 cash used in connection with the dividend to stockholders and
proceeds of $4,419,500 from note payable - affiliate received pursuant to the
Exchange Agreement described above.

At December 31, 1997, the Company's mortgage loan portfolio consisted of
two loans with a carrying value totaling $475,000. During the year ended
December 31, 1998, the Company received final principal and interest payments on
these loans (Lindfield Tract A and Hemet IV loans).

The Company's future liquidity needs will be dependent upon, among other
things, the level of liquidity required to successfully implement a
growth-oriented business plan and the Company's ability to control its property
and Company level operating expenses. The Company will have future cash inflows
as a result of the Ariston acquisition (see above), which will be used to
service associated acquisition indebtedness.

Results of Operations

Total income for the year ended December 31, 1998 increased to $1,158,216
from $234,641 for the same period in 1997. Income from lending and investing
activities increased due to (i) interest received on the Hemet IV loan of
$244,795 (see Note 8 to the financial statements) and (ii) an increase in
interest earned on investments, resulting from additional cash available for
investment due to the issuance of stock and cash distributions received related
to the Company's investment in the real estate venture (see below). Other income
during 1998 resulted from the acquisition of Ariston (see above) which included:
(i) property and equipment on operating leases generating rental income and (ii)
a note receivable-affiliates generating interest income. Interest income on the
note receivable-

21
<PAGE>

affiliates is subordinate to the repayment of certain institutional
indebtedness. Ariston's operating results are consolidated in the Company's
financial statements.

Total expenses for the year ended December 31, 1998 decreased to
$2,618,063 from $3,339,108 for the same period in 1997. This decrease of
$721,045 for the year ended December 31, 1998 when compared to the same period
in 1997 is due to an increase in total expenses from property operating
activities offset by a decrease in total other expenses. The increase in total
property operating expenses is due primarily to costs incurred in connection
with the Rancho Malibu property relating to entitlement activities, holding
costs and litigation (see Note 4 to the consolidated financial statements for
discussion of settlement). The Company also recognized net income from
operations of the real estate venture of $412,236, relating to the Company's
interest in the H Street property (see discussion below) during 1997. The
decrease in total other expenses is due to a decrease in other professional fees
and general and administrative expenses and an offset in 1998 of $383,176
reflecting a recovery of amounts previously charged to losses on loans, notes,
advances and interest receivable. During 1997, the Company recorded a provision
for losses on loans, notes, advances and interest receivable in the amount of
$1,166,246 in connection with amounts loaned to Northholme Partners (see Note 8
to the Consolidated Financial Statements). Other professional fees were higher
during 1997 due to legal costs related to the Winding River litigation as
discussed below and costs incurred to engage an investment banking firm for
purposes of evaluating strategic alternatives for maximizing shareholder value.
General and administrative expenses were higher in 1997 due to a termination fee
of $251,823 paid to BMC in connection with the Exchange Agreement (see Note 5 to
the consolidated financial statements) and incentive compensation accrued in
connection with the H-Street sale. Other expenses in 1998 include interest
expense of $685,783 related to the loan from the Partnerships as a result of the
Exchange Agreement (see above) and the purchase money note to EFG as a result of
the Ariston acquisition (see above). Interest expense during 1997 was $108,947
related to the loan from the Partnerships.

During the year ended December 31, 1997, the Company recorded net income
of $412,236 from the operations of a real estate venture. This net income
reflects the Company's 47% interest in the H Street Venture (the "Venture"). The
Venture owned an office building with approximately 55,900 square feet of gross
leasable area (the "Victor Building") and an adjacent land parcel consisting of
36,100 square feet (the "H Street Assemblage") located in Washington, D.C. On
March 20, 1997, the Venture sold approximately 3,500 square feet of the
Venture's land to the United States General Services Administration ("GSA") for
a net purchase price of $1,828,900, including $150,000 paid by the GSA as a
reimbursement of expenses that the Venture incurred in anticipation of this
transaction. On July 29, 1997, the Venture sold the remaining land and office
building to an unaffiliated third party for net sale proceeds of $8,469,821. The
Company's share of the gain on disposition recognized by the Venture was
$371,979 and is included in net income from operations of real estate venture
for the year ended December 31, 1997 on the accompanying Consolidated Statement
of Operations. During the year ended December 31, 1997, the Company received
aggregate distributions from the Venture of $4,713,101, including its allocation
of such sales proceeds. The Venture has no further ownership interest in the H
Street Assemblage property. See Note 7 to the consolidated financial statements
for additional information regarding the sale of this property and subsequent
cash distribution from the Venture.

On June 23, 1997, the Company sold the Lindfield Tract D property, having
a carrying value of $650,000, to an unaffiliated third party for a purchase
price of $675,000. Cash proceeds received, net of transaction costs, were
$617,388 resulting in a loss on disposition of $32,612 for financial reporting
purposes.

The above discussed changes resulted in a decrease in the net loss for the
year ended December 31, 1998 to $1,459,847 ($1.23 per share) from $3,104,467
($2.75 per share) for the year ended December 31, 1997. On April 30, 1997, the
Company issued 198,700 shares of stock. In addition, the Company issued 15,483
shares of common stock on December 30, 1997 and 41,400 shares of common stock
during 1998 in connection with the incentive compensation plan (see Note 10 to
the consolidated financial statements). On September 23, 1998, the Company
purchased 69,223 shares of common stock, which are reflected as treasury stock
on the accompanying balance sheet at December 31, 1998. As a result of these
changes, the net loss per share for the year ended December 31, 1998 is based on
the weighted average number of shares outstanding during the period of 1,182,810
as compared to 1,127,645 for the same period in 1997.

22
<PAGE>

On a quarterly basis, management reviews the investment properties held by
the Company and, when it has been determined that a permanent impairment in the
value of a given property has occurred, the carrying value of the property is
then written down to its fair market value. Management has determined that no
reductions are necessary for the year ended December 31, 1998.

Litigation

In connection with the Company's interest in a joint venture which owns
the Rancho Malibu property (the "Venture"), the Venture had been engaged in
zoning and entitlement activities which have been opposed by the City of
Malibu and various citizen groups. During the year ended December 31, 1998,
the Venture incurred approximately $730,000 in costs in connection with
Rancho Malibu relating principally to litigation. These costs, treated as
capital contributions to the Venture by the Company, were included in total
expenses from property operating activities on the Company's consolidated
statements of operations. See Note 4 to the consolidated financial statements
for discussion of settlement.

The Company has been engaged in litigation involving a real estate
development project known as "Winding River." On December 15, 1998 the Court
granted summary judgments in favor of BMC Westholme Corporation (a wholly owned
subsidiary of the Company and a defendant in this lawsuit) on all remaining
counts of the complaint and also granted BMC Westholme's motions for
reimbursement of certain attorney's fees and costs. On January 21, 1999 the same
Court awarded the sum of $15,178 to BMC Westholme in consideration of attorney's
fees and expenses. The Court's order of December 15, 1998, granting summary
judgment in favor of BMC Westholme has been appealed by Coastal Group, Inc. See
Note 15 to the consolidated financial statements for discussion of settlement.

23
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Stockholders of Semele Group Inc.

We have audited the accompanying consolidated balance sheets of Semele
Group Inc. (formerly Banyan Strategic Land Fund II) as of December 31, 1998 and
1997, and the related consolidated statements of operations, stockholders'
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Semele Group
Inc. at December 31, 1998 and 1997, and the consolidated results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

ERNST & YOUNG LLP

Boston, Massachusetts
April 13, 1999

24
<PAGE>

SEMELE GROUP INC.
Consolidated Balance Sheets

December 31, 1998 and 1997

<TABLE>
<CAPTION>
1998 1997
---------------- ----------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents.......................................... $ 7,788,124 $ 7,884,593
Interest Receivable on Loans....................................... -- 3,565
Loans Receivable................................................... -- 475,000
Rents Receivable................................................... 91,038 --
Accounts Receivable - Affiliate.................................... 6,652 --
Interest Receivable - Affiliates................................... 125,382 --
Note Receivable - Affiliates....................................... 2,725,695 --
Foreclosed Real Estate Held for Sale, Net.......................... 9,961,991 9,961,991
Investment in Partnerships and Trusts.............................. 3,884,755 --
Land .............................................................. 1,929,000 --
Building, net of accumulated depreciation of $820,478
at December 31, 1998.............................................. 11,112,519 --
Other Assets....................................................... 543,763 --
---------------- ----------------
Total Assets....................................................... $ 38,168,919 $ 18,325,149
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Notes Payable - Affiliates......................................... $ 14,869,500 $ 4,419,500
Notes Payable...................................................... 7,011,202 --
Accrued Interest - Affiliate....................................... 243,833 --
Accrued Interest................................................... 67,659 --
Accrued Expenses - Affiliates...................................... 71,118 49,166
Accounts Payable and Accrued Expenses.............................. 853,189 404,358
Distributions Payable.............................................. 48,875 --
Minority Interest.................................................. 3,722,131 --
---------------- ----------------
Total Liabilities.................................................. 26,887,507 4,873,024
---------------- ----------------
Stockholders' Equity
Shares of Common Stock, $0.01 Par Value,
5,000,000 Authorized, 2,080,185 and 2,125,327 Shares Issued
at December 31, 1998 and 1997, respectively...................... 170,663,365 171,019,463
Accumulated Deficit................................................ (143,172,978) (141,713,131)
Deferred Compensation, 56,883 and 15,483 Shares at
December 31, 1998 and 1997, respectively......................... (967,004) (263,204)
Treasury Stock at Cost, 945,325 and 917,502 Shares at
December 31, 1998 and 1997, respectively......................... (15,241,971) (15,591,003)
---------------- ----------------
Total Stockholders' Equity........................................ 11,281,412 13,452,125
---------------- ----------------
Total Liabilities and Stockholders' Equity........................ $ 38,168,919 $ 18,325,149
================ ================
Book Value Per Share of Common Stock
(1,134,860 and 1,207,825 Shares Outstanding at
December 31, 1998 and 1997, respectively)........................ $ 9.94 $ 11.14
================ ================
</TABLE>

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

25
<PAGE>

SEMELE GROUP INC.
Consolidated Statements of Operations

For the Years ended December 31, 1998 and 1997

<TABLE>
<CAPTION>
1998 1997
---------------- ----------------
<S> <C> <C>
INCOME
Income From Lending and Investing Activities:
Interest on Loans Receivable......................................... $ 269,000 $ 28,333
Income on Investments ............................................... 382,282 206,308
---------------- ----------------
Total Income From Lending and Investing Activities..................... 651,282 234,641
---------------- ----------------
Other Income:
Rental Income........................................................ 395,163 --
Interest on Note Receivable - Affiliates............................. 104,771 --
Gain on Sale of Equipment ........................................... 7,000 --
---------------- ----------------
Total Other Income..................................................... 506,934 234,641
---------------- ----------------
Total Income........................................................... 1,158,216 234,641
---------------- ----------------
EXPENSES
Expenses From Property Operating Activities:
Net Loss From Operations of Foreclosed Real Estate Held for Sale..... 730,249 660,994
Net Loss From Disposition of Foreclosed Real Estate Held for Sale.... -- 32,612
Net Income From Operations of Real Estate Venture ................... -- (412,236)
---------------- ----------------
Total Expenses From Property Operating Activities...................... 730,249 281,370
---------------- ----------------
Other Expenses:
Stockholder Expenses ................................................ 138,549 120,031
Directors' Fees, Expenses, and Insurance ............................ 234,709 234,075
Other Professional Fees ............................................. 124,091 371,966
General and Administrative .......................................... 496,836 1,007,307
Administrative Reimbursement - Affiliate ............................ 152,201 49,166
Interest Expense - Affiliates ....................................... 685,783 108,947
Interest Expense .................................................... 187,006 --
Depreciation and Amortization Expense .............................. 251,815 --
(Recovery of) Provision for Losses on Loans, Notes, Advances
and Interest Receivable............................................ (383,176) 1,166,246
---------------- ----------------
Total Other Expenses .................................................. 1,887,814 3,057,738
---------------- ----------------
Total Expenses ........................................................ 2,618,063 3,339,108
---------------- ----------------

Net Loss .............................................................. $ (1,459,847) $ (3,104,467)
================ ================
Net Loss Per Share of Common Stock Basic
(Based on the Weighted Average Number of Shares
Outstanding of 1,182,810 and 1,127,645, respectively)................ $ (1.23) $ (2.75)
================ ================
</TABLE>

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

26
<PAGE>

SEMELE GROUP INC.
Consolidated Statements of Stockholders' Equity

For the years ended December 31, 1998 and 1997

<TABLE>
<CAPTION>
Common Stock
------------------------------ Accumulated Deferred Treasury
Shares Amount Deficit Compensation Stock Total
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stockholder's Equity,
December 31, 1996 ............. 1,926,627 $ 170,927,133 $(138,608,664) $ -- $ (15,854,207) $ 16,464,262

Issuance of Stock, Net .......... 198,700 2,480,500 -- -- -- 2,480,500

Dividend to Stockholders ........ -- (2,388,170) -- -- -- (2,388,170)

Deferred Compensation
15,483 Shares of Stock ........ -- -- -- (263,204) 263,204 --

Net Loss ........................ -- -- (3,104,467) -- -- (3,104,467)
------------- ------------- ------------- ------------- ------------- -------------

Stockholder's Equity,
December 31, 1997 ............. 2,125,327 171,019,463 (141,713,131) (263,204) (15,591,003) 13,452,125

Deferred Compensation
41,400 Shares of Stock ........ -- -- -- (703,800) 703,800 --

1-for-300 reverse stock split and
30-for-1 forward stock split
(including $356,098 paid for
fractional shares) ........... (45,142) (356,098) -- -- -- (356,098)

Acquisition of 69,223 Shares of
Treasury Stock, at Cost ....... -- -- -- -- (354,768) (354,768)

Net Loss ........................ -- -- (1,459,847) -- -- (1,459,847)
------------- ------------- ------------- ------------- ------------- -------------

Stockholder's Equity,
December 31, 1998 ............. 2,080,185 $ 170,663,365 $(143,172,978) $ (967,004) $ (15,241,971) $ 11,281,412
============= ============= ============= ============= ============= =============
</TABLE>

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

27
<PAGE>

SEMELE GROUP INC.
Consolidated Statements of Cash Flows

For the Years ended December 31, 1998 and 1997

<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss...................................................................... $ (1,459,847) $ (3,104,467)
Adjustments to Reconcile Net Loss to Net Cash Provided By (Used In)
Operating Activities:
Provision for Losses on Loans, Notes, Advances and Interest Receivable...... -- 1,166,246
Net Loss From Disposition of Foreclosed Real Estate Held For Sale........... -- 32,612
Net Income From Operations of Real Estate Venture........................... -- (412,236)
Depreciation and Amortization Expense....................................... 251,815 --
Minority Interest........................................................... 31,315 --
Net Change In:
Interest Receivable on Loans................................................ 3,565 657
Rents Receivable............................................................ 977,678 --
Accounts Receivable - Affiliate............................................. 36,912 --
Interest Receivable - Affiliate............................................. (104,771) --
Other Receivables........................................................... 65,374 --
Other Assets................................................................ (7,375) 60,221
Accrued Interest - Affiliate................................................ 243,833 --
Accrued Interest............................................................ 14,387 --
Accrued Expenses - Affiliates............................................... 25,681 49,166
Accounts Payable and Accrued Expenses....................................... 198,914 104,740
Distributions Payable....................................................... 2,126 --
--------------- ---------------
Net Cash Provided By (Used In) Operating Activities........................... 279,607 (2,103,061)
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Ariston Corporation.......................................... (111,066) --
Collection of Loans Receivable.............................................. 475,000 --
Investment in Partnerships and Trusts....................................... 148,843 --
Distributions from Investment in Real Estate Venture........................ -- 4,713,101
Proceeds from the Sale of Foreclosed Real Estate Held for Sale.............. -- 617,388
--------------- ---------------
Net Cash Provided By Investing Activities..................................... 512,777 5,330,489
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment for Fractional Shares as a Result of Reverse Stock Split............ (356,098) --
Acquisition of Treasury Stock............................................... (354,768) --
Principal Payments on Notes Payable......................................... (72,755) --
Proceeds from Note Payable - Affiliate...................................... -- 4,419,500
Issuance of Stock, Net...................................................... -- 2,480,500
Distributions Paid by Investee.............................................. (105,232) --
Dividend to Stockholders.................................................... -- (2,388,170)
--------------- ---------------
Net Cash (Used In) Provided By Financing Activities........................... (888,853) 4,511,830
--------------- ---------------
Net (Decrease) Increase in Cash and Cash Equivalents.......................... (96,469) 7,739,258

Cash and Cash Equivalents at Beginning of Year................................ 7,884,593 145,335
--------------- ---------------
Cash and Cash Equivalents at End of Year...................................... $ 7,788,124 $ 7,884,593
============== ==============
Supplemental disclosure of cash flow information:
Cash paid during the year for interest ..................................... $ 463,151 $ 108,947
============== ==============
</TABLE>

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

28
<PAGE>

SEMELE GROUP INC.

Notes To Consolidated Financial Statements
December 31, 1998

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

Semele Group Inc. (the "Company"), formerly known as Banyan Strategic Land
Fund II, was organized as a corporation under the laws of the State of Delaware,
pursuant to the Certificate of Incorporation filed April 14, 1987.

The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries and consolidated ventures which
hold title to the Company's property. In August 1998, the Company acquired
Ariston Corporation, the results of which are consolidated in the Company's
financial statements (see Transactions with Affiliates and Related Parties -
Note 5 herein). All intercompany balances and transactions have been
eliminated in consolidation. The Company's 47% interest in the H Street
Assemblage was accounted for under the equity method and was reported as an
investment in real estate venture (see Note 7 for discussion of sale).

The Company accounts for its investment in partnerships and trusts
using the cost method as the investment in each partnership or trust is minor.

REVENUE RECOGNITION

Interest income is accrued when earned. The accrual of interest is
discontinued when the borrower acknowledges its inability to make payments or
when payments become contractually delinquent ninety days or more, unless the
loan is in the process of collection. Once a loan has been placed in a
non-accrual status, all cash received is applied against the outstanding loan
balance until such time as the borrower has demonstrated an ability to make
payments under the terms of the then current loan agreement. That portion of
accrued interest income which the Company considers to be unlikely of collection
is reflected in the accompanying consolidated statements of operations in the
provision for losses on loans, notes, advances and interest receivable. However,
the Company intends to pursue the collection of all amounts contractually due
from the borrowers.

Rental income from operating leases is recognized on a straight-line
basis over the life of the lease agreements.

FORECLOSED REAL ESTATE HELD FOR SALE

Foreclosed real estate held for sale is recorded at its estimated fair
market value, net of selling costs.

INCOME TAXES

Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes". Tax provisions are
made based upon earnings reported for financial statement purposes and includes
deferred taxes for the effects of timing differences between financial
accounting and taxable earnings. Reserves are recorded against deferred tax
assets in accordance with FAS 109.

CASH EQUIVALENTS

The Company considers liquid debt instruments with a maturity of three
months or less when purchased to be cash equivalents. From time to time, the
Company invests excess cash with large institutional banks in federal agency
discount notes and reverse repurchase agreements with overnight maturities.
Under the terms of the agreements, title to the underlying securities passes to
the Company. The securities underlying the agreements are book entry securities.
At December 31, 1998, the Company had $5,747,945 invested in federal agency
discount notes and reverse repurchase agreements secured by U.S. Treasury Bills
or interests in U.S. Government securities.

29
<PAGE>

SEMELE GROUP INC.

Notes to the Consolidated Financial Statements
(Continued)

INVESTMENTS IN REAL ESTATE PROPERTY

Investments in real estate property, consisting of buildings and land,
are recorded at cost. Impairment losses on investments are recognized where
indicators of impairment are present and the undiscounted cash flows (net
realizable value) estimated to be generated by the Company's investments is
less than the carrying amount of such investments. The determination of net
realizable value includes consideration of many factors including income to
be earned from the investment, holding costs (exclusive of interest),
estimated selling prices, and prevailing economic and market conditions.

DEPRECIATION AND AMORTIZATION

Depreciation is computed using the straight-line depreciation method over
the estimated useful lives of the related assets (2 years for equipment of
operating leases and 27.5 and 40 years for buildings). Amortization is computed
using the straight-line depreciation method over the estimated useful lives of
the related intangible assets.

VALUATION OF STOCK OPTIONS

The Company's Stock Options awarded pursuant to its 1994 Directors and
Executive Option Plans are accounted for in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

MINORITY INTEREST

Ariston owns approximately 51% of a real estate investment program that is
consolidated in the Company's financial statements. The outside investors'
interest in this investment is reflected on the accompanying consolidated
balance sheet as minority interest and its share of the respective loss is
included in general and administrative expenses on the accompanying consolidated
statement of operations. Additionally, Ariston's investments include a 98%
interest in Old North Capital Limited Partnership ("ONC"). The remaining 2%
interest has been recorded as a minority interest adjustment.

RECLASSIFICATION

Certain 1997 balances have been reclassified to conform to the 1998
presentation.

2. OTHER ASSETS

Other assets principally include equipment on operating lease and deferred
financing costs, both of which pertain to Ariston. The deferred financing costs
are being amortized over the life of the loan to which they pertain and
equipment on operating leases is being depreciated using the straight-line
method over the equipment's remaining estimated useful life. Rental income and
interest expense associated with equipment on operating leases are recognized as
earned and incurred, respectively. At December 31, 1998, future minimum rents
due in connection with equipment on operating leases was as follows:

For the year ending December 31, 1999 $ 139,551
2000 68,673
-----------
Total $ 208,224
===========

In addition, the Company, through its consolidation of Ariston, has an
interest in future rental income from leasing two commercial buildings to an
investment-grade educational institution. Future minimum lease payments
pertaining to these contracts are as follows:

30
<PAGE>

SEMELE GROUP INC.

Notes to the Consolidated Financial Statements
(Continued)

For the year ending December 31, 1999 $ 985,000
2000 1,005,000
2001 786,500
2002 786,500
-----------
Total $ 3,563,000
===========

3. NOTES PAYABLE

Through its acquisition of Ariston, the Company acquired a limited
partnership interest in a real estate investment program and assumed related
debt. The note bears a fluctuating interest rate based on Prime plus a margin
and requires quarterly payments of principal and interest. The note matures on
January 15, 2003 and is secured by the associated limited partnership interest.
Repayment of the debt is partially guaranteed by certain individuals, including
Messrs. Engle and Coyne. In connection with the acquisition of Ariston, the
Company has consolidated certain additional indebtedness pertaining to a
commercial property leased to an investment-grade educational institution. The
interest rate on this debt is fixed at 7.86%.

Additionally, the Company assumed non-recourse debt, consisting of
installment notes that are collateralized by certain equipment held on operating
leases. The installment notes will be repaid fully by non-cancelable rents
generated by the associated lease agreements. At December 31, 1998, the interest
rate on these obligations was 7.1%.

The annual maturities of the notes payable are as follows:

For the year ending December 31, 1999 $ 446,429
2000 399,054
2001 546,607
2002 593,781
2003 643,321
Thereafter 4,382,010
-----------
Total $ 7,011,202
===========

The notes payable balance sheet value approximates fair value at
December 31, 1998.

4. FORECLOSED REAL ESTATE HELD FOR SALE

Rancho Malibu is a 274-acre parcel of undeveloped land north of Malibu,
California ("Project"). On July 1, 1992, a joint venture (the "Venture") between
the Company and Legend Properties, Inc. (f/k/a Banyan Mortgage Investment Fund)
("Legend") acquired title to the property pursuant to a deed in lieu of
foreclosure agreement. The Company owns a 98.6% general partner interest in the
Venture while Legend holds the remaining 1.4% interest as a limited partner. The
Venture's results are consolidated in the accompanying financial statements.

The Venture has engaged in zoning and entitlement activities that have
been opposed by the City of Malibu and various citizen groups since the
acquisition of the property. The city initiated two separate legal actions
intended to preclude the issuance of a Coastal Development Permit, both of which
were ultimately resolved in favor of the Venture.

1995 - 1996 County of Los Angeles Action on Project

Concurrent with the aforementioned litigation, the Venture pursued
entitlements before the Board of Supervisors for the County of Los Angeles. In
September 1995, the Los Angeles County Regional Planning

31
<PAGE>

SEMELE GROUP INC.

Notes to the Consolidated Financial Statements
(Continued)

Commission, by a 3 to 2 vote, approved a revised plan to develop a fifty-one
unit housing community on the Rancho Malibu property. The Los Angeles County
Regional Planning Commission's approval was appealed to the Los Angeles County
Board of Supervisors. On May 14, 1996, the Los Angeles County Board of
Supervisors approved a compromise project (the "Project") to create forty-six
single family lots. These approvals are specified in Los Angeles County CUP No.
91-315(3), Oak Tree Permit No. 91-315(3) and Tentative Tract No. 46277
(revised), approved May 14, 1996.

Litigation on 1996 County Project Approval

On June 17, 1996, a neighboring homeowners association filed an action
entitled La Chusa Highlands Property Owners Association, Inc. v. Los Angeles
County, et al., Los Angeles County Superior Court Case No. BS039789 (the "La
Chusa Litigation"), challenging the aforesaid approvals. The Company, Legend and
the Venture were named as real parties in interest. The La Chusa Litigation was
tried before a Court on January 27, 1997. On February 5, 1997, the Court issued
its ruling, granting the Petitioner's Writ and remanding the matter to the
County Board of Supervisors for further action on three separate grounds: (i)
the Supervisors' analyses and findings relating to the consistency of the
Projects' cul de sacs and streets within certain County of Los Angeles Code
provisions restricting the length of cul de sacs to 1,000 feet were deemed
inadequate; (2) a proposed deed restriction requiring the Venture to "diligently
seek" approval for a second living unit on five of the forty-six lots was held
to be too abstract to comply with the low income housing requirement of state
law and (3) the Court found that the County acted improperly when it approved
the Project in January of 1996 and later approved a Supplemental Environmental
Impact Report ("SEIR") in May of 1996 ("Court Writ"). The Court's Writ
specifically rejected challenges to the Project's entitlements predicated on (i)
the adequacy of the Supervisors' analyses of the environmental impacts of the
Project under the SEIR; (ii) the consistency of the Project with the County
General Plan; (iii) the approval of a sewage treatment plant and (iv) the
density of the Project under the Hillside Management Ordinance.

The Court entered a final judgment in the La Chusa Litigation on March 25,
1997. The Venture filed a notice of appeal ("Appeal") of the Court Writ on April
25, 1997. On April 29, 1997, counsel for La Chusa Highlands Property Owners
Association, Inc., presented a petition for an award of attorney's fees in
connection with the Court's judgment of March 25, 1997. The Court heard argument
on the petition and on April 30, 1997 awarded the petitioner's counsel the sum
of $126,711 in attorney's fees and related costs. An appeal of this order was
incorporated into the Company's Appeal of the March 25, 1997 judgment discussed
above. The Company's initial brief on appeal was filed on October 9, 1997. The
petitioner's response was filed on February 9, 1998. On March 2, 1998, the
Company filed its reply brief. On or about October 27, 1998, the Venture and the
County filed a Request for Dismissal of the Appeal pursuant to the Settlement
Agreement (see discussion below). On or about October 29, 1998, at the request
of the court of appeal, the Venture, the County and La Chusa filed a stipulation
in the court of appeal stipulating that each party shall bear its own costs in
connection with the Appeal. The court of appeal issued an order dismissing the
Appeal on October 30, 1998.

1997 - 1998 Action on Project Pursuant to Court Writ

In addition to appealing the Court Writ, the Venture sought further action
by the Supervisors to address the three issues specified in the Court Writ in
order to reinstate the entitlements set aside by the Court. The Venture appeared
before the Supervisors at a public hearing on November 6, 1997. The matter was
heard and continued with no action taken. On January 27, 1998, the Supervisors
held a continued public hearing and directed County staff to present the Final
SEIR and environmental finding at a future meeting (scheduled for February 24,
1998) for review and consideration for approval. On February 24, 1998, the
Supervisors certified the Final SEIR and adopted environmental findings for the
Project. The public hearing was continued for the Board to review and consider
approval of Project entitlements. On March 31, 1998, the Supervisors considered
the Project entitlements. The Supervisors directed the Venture to revise the
proposed tract map to relocate lots 23 and 24 from the eastern ridge to the main
development cluster and present the revised tract map to the Supervisors for
their review and consideration at a future meeting. On June 9, 1998, the
Supervisors approved Tentative Tract Map No. 46277 (revised), CUP No.

32
<PAGE>

SEMELE GROUP INC.

Notes to the Consolidated Financial Statements
(Continued)

91-315(3) and Oak Tree Permit No. 91-315(3) for a 46 residential lot and 5
second unit project ("1998 County Project"). Pursuant to the Board's direction,
the new tract map relocates former lots 23 and 24 to the northeastern portion of
the main development cluster. The statute of limitations to challenge the
environmental review for the 1998 County Project under the California
Environmental Quality Act expired on July 16, 1998. Neither the County nor the
Venture has been served with a lawsuit under the California Environmental
Quality Act at this time and the Venture is not aware of any lawsuit having
being filed. The statute of limitations to challenge the Project entitlements
themselves expired on September 9, 1998. The Venture and La Chusa extended this
statute of limitations for La Chusa only until October 23, 1998, in order to
discuss settlement. Since a settlement agreement was entered into between the
Venture, the County, and La Chusa on October 22, 1998 (see discussion below), no
lawsuit was filed by La Chusa prior to the expiration of the extended statute of
limitations. Neither the County nor the Venture has been served with a lawsuit
challenging the Project entitlements at this time and the Venture is not aware
of any lawsuit having been filed.

On August 6, 1998, in compliance with the Court Writ, the County and
Venture filed a motion seeking a court finding that the 1998 County Project is
in compliance with the Court Writ and discharging the Writ. The motion was
scheduled to be heard on August 21, 1998. The Venture took the motion off the
calendar to discuss settlement with La Chusa. On or about October 30, 1998, the
Venture filed in the trial court a stipulation signed by La Chusa, the County
and the Venture requesting the court to discharge the writ and dismiss the
action with prejudice. The trial court rejected the stipulation and requested a
formal, noticed motion. On November 13, 1998 the Venture, the County and La
Chusa requested the trial court to discharge the writ. The Court issued a minute
order on November 13, 1998 discharging the Court Writ. On November 19, 1998, the
Court entered a final order dismissing the Writ proceedings.

Settlement Agreement with La Chusa on Project

On October 22, 1998, the Venture, the County and La Chusa entered into a
Settlement Agreement to resolve the La Chusa Litigation, the appeal, and any
challenge to the 1998 County Project or future Coastal Commission action on the
1998 County Project. The settlement was contingent upon dismissal of the La
Chusa action. On October 23, 1998, the Venture transferred the amount of One
Hundred and Twenty Five Thousand Dollars ($125,000) to a trust account pursuant
to the Settlement Agreement. This amount was released to La Chusa's counsel of
record after the Court dismissed the Court Writ on November 18, 1998. On October
23, 1998, the Venture transferred an additional amount of One Hundred and Twenty
Five Thousand Dollars ($125,000) to an escrow account established at Boston
Private Bank & Trust Company. This amount was released to La Chusa's counsel of
record after the Coastal Commission approved the 1998 County Project on November
4, 1998.

1998 Coastal Commission Action on Project

On November 4, 1998, the California Coastal Commission unanimously
approved an amendment to the Coastal Development Permit for the 51 lot Project
previously approved in 1993. The amendment revised the Coastal Development
Permit to conform to the 46 lot 1998 County Project. On November 4, 1998, the
California Coastal Commission also approved an extension of the term of the
Coastal Development Permit to August 11, 1999. The statute of limitations to
challenge the Coastal Commission actions expired on January 4, 1999. Neither the
Coastal Commission nor the Venture has been served with a lawsuit at this time
and the Venture is not aware of any lawsuit being filed.

Litigation and Settlement Agreement with City of Malibu on Project

In an earlier action, the Venture challenged the General Plan and the
Environmental Impact Report adopted by the City of Malibu on November 20, 1995
in a lawsuit entitled BMIF/BSLFII Rancho Malibu Limited Partnership v. City of
Malibu, Los Angeles County Superior Court Case No. SS006374. On July 31, 1996,
the Venture and the City of Malibu executed and delivered a settlement agreement
which, among other things, resulted in a dismissal of the lawsuit challenging
the City's General Plan and which precludes the City from challenging the
Venture's

33
<PAGE>

SEMELE GROUP INC.

Notes to the Consolidated Financial Statements
(Continued)

entitlements before any public body (in the absence of a significant requested
change). The City also was precluded by the settlement agreement from
participating in the La Chusa Litigation.

During the year ended December 31, 1998, the Venture incurred
approximately $730,000 in costs in connection with Rancho Malibu relating
principally to litigation. These costs, treated as capital contributions to
the Venture by the Company, were included in total expenses from property
operating activities on the Company's consolidated statements of operations.
At December 31, 1998, the Company's carrying balance for the property is
$9,961,991.

5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

ACQUISITION OF ARISTON CORPORATION

The Company purchased all of the common stock of Ariston from EFG for
cash of $2 million and a purchase-money note of $10,450,000 (the "Note"). The
total fair value of assets acquired was $12,450,000. The Ariston acquisition
was accounted for under the purchase method of accounting. The balance sheet
and statement of operations of Ariston were consolidated effective September
1, 1998. The Note bears interest at the annualized rate of 7%, payable
quarterly in arrears, and requires principal reductions based upon the cash
flows generated by the limited partnership interests owned by Ariston. The
Note matures on August 31, 2003 and is recourse only to the common stock of
Ariston. The cost of the Ariston acquisition has been allocated on the basis
of the estimated fair value of the assets acquired and liabilities assumed.
In October 1998, Ariston declared and paid a cash distribution of $2,020,000
to the Company. Until the Note is retired, future cash distributions by
Ariston require the consent of EFG.

The following summarized, unaudited pro forma results of operations for
the years ended December 31, 1998 and 1997, assume that the Company effected the
acquisition at the beginning of the respective periods:

34
<PAGE>

SEMELE GROUP INC.

Notes to the Consolidated Financial Statements
(Continued)

<TABLE>
<CAPTION>
1998 1997
--------------- --------------
<S> <C> <C>
Revenue and Other Income $ 6,808,297 $ 5,886,149

Net Income $ 3,616,802 $ 1,560,358

Net Income Per Share of Common Stock Basic $ 3.06 $ 1.38
</TABLE>

The combined pro forma results of operations includes activities that
were not ongoing as of the date of the Ariston purchase.

AFG Eireann is a special purpose limited partnership created in 1994
having a tax interest in a diversified pool of lease contracts owned by a
institutional investor. Gary D. Engle is a 50% owner and a director of the
general partner of AFG Eireann. ONC is a Massachusetts limited partnership
established in 1995. ONC has investments in (i) cash, (ii) a portfolio of
equipment leases, (iii) limited partnership units of several
direct-participation equipment leasing programs sponsored and managed by EFG,
(iv) general and limited partnership interests in a real estate partnership
sponsored by EFG that owns two commercial buildings leased to an
investment-grade educational institution, and (v) a note receivable having a
principal balance of approximately $2.7 million that is due from Messrs. Engle
and Coyne. Gary D. Engle owns all of the voting stock, and has a one-third
equity interest in, and is a director of the general partner of ONC. James A.
Coyne owns non-voting stock, and has a one-third equity interest in, and is a
director of the general partner of ONC.

OTHER RELATED PARTY TRANSACTIONS

The Company executed and delivered an Exchange Agreement dated April 30,
1997 (amended as of August 7, 1997, the "Agreement") among the Company, Equis
Exchange L.L.C., a Massachusetts limited liability company ("Equis"), EFG and
certain partnerships managed by EFG ("the Partnerships"). Pursuant to the
Agreement, on April 30, 1997, the Company issued to the Partnerships 198,700
shares of the Company's common stock at the price of $15.00 per share. Cash
proceeds received by the Company, $2,480,500, were net of related costs of
$500,000. In addition, the Partnerships made a three-year loan (the "Loan") to
the Company in the amount of $4,419,500. The Loan has an interest rate of 10%
per annum with mandatory principal reductions, if and to the extent net proceeds
are received from the sale or refinancing of the Rancho Malibu property. At
December 31, 1998, the carrying value of the note payable approximates fair
value.

Pursuant to the Agreement, the Administrative Services Agreement between
the Company and Banyan Management Corp. ("BMC") was amended to provide, among
other things, for the payment to BMC of a termination fee in the amount of
$251,823 and the transfer of the Company's ownership interest in BMC to BMC's
designee. Effective May 6, 1997, EFG entered into an Administrative Services
Agreement to provide administrative services to the Company, replacing BMC.
Administrative costs, primarily salaries and general and administrative
expenses, of $152,201 were incurred on the Company's behalf by EFG during the
year ended December 31, 1998. During the year ended December 31, 1997, the
Company incurred $49,166 in administrative costs for services provided by EFG
and $107,781 for services provided by BMC. The costs incurred by EFG on behalf
of the Company are reflected as Administrative Reimbursement - Affiliate on the
Consolidated Statements of Operations. The costs incurred by BMC on behalf of
the Company are included in General and Administrative expenses on the
Consolidated Statements of Operations.

6. DISPOSITION OF FORECLOSED REAL ESTATE HELD FOR SALE

The Lindfield Tract D property is an 8.5-acre parcel of land zoned for
commercial use within a multi-use planned unit development, located in
Kissimmee, Florida. On June 23, 1997, the Company sold the Lindfield Tract D
property to an unaffiliated third party for a purchase price of $675,000. The
Company's carrying value for this

35
<PAGE>

SEMELE GROUP INC.

Notes to the Consolidated Financial Statements
(Continued)

property at the time of the sale was $650,000. Cash proceeds received, net of
transaction costs, were $617,388, resulting in a net loss on disposition of
$32,612 for financial reporting purposes.

7. DISPOSITION OF INVESTMENT IN REAL ESTATE VENTURE

On October 22, 1990, the Company acquired title to the property known as
the H Street Assemblage located in Washington, D.C. pursuant to an agreement
with Banyan Strategic Realty Trust ("BSRT"). On June 5, 1992, the Company and
BSRT formed a joint venture (the "Venture") to pursue its development rights.
The Company had a 47% interest in the Venture while BSRT owned the remaining
53%. This property consisted of 36,100 square feet of undeveloped land in
downtown Washington D.C. plus an approximately 55,900 square foot office
building. The entire property was zoned for office development.

On March 20, 1997, the Venture sold approximately 3,500 square feet of the
Venture's land to the United States General Services Administration ("GSA") for
a purchase price of $1,828,900, including $150,000 paid by GSA for reimbursement
of expenses that the Venture incurred in anticipation of this transaction. On
July 29, 1997, the Venture sold the remaining land and office building to an
unaffiliated third party for net sale proceeds of $8,469,821. The Company's
share of the gain on disposition recognized by the Venture was $371,979 and is
included in net income from operations of real estate venture for the year ended
December 31, 1997 on the accompanying consolidated statement of operations.
During the year ended December 31, 1997, the Company received aggregate
distributions from the Venture of $4,713,101, including its allocation of sales
proceeds. The Venture has no further ownership interest in the H Street
Assemblage property.

8. (RECOVERY OF) PROVISION FOR LOSSES ON LOANS, NOTES, ADVANCES AND INTEREST
RECEIVABLE

During 1998, the Company received cash distributions of $18,423 related to
its interest in a liquidating trust established for the benefit of the unsecured
creditors (including the Company) of VMS Realty Partners and its affiliates. In
addition, the Company received $89,753 from its interest in Springtown Partners,
a California limited partnership formed by three land owners, including the
Company, for the purpose of merging land parcels in order to option them to a
third party for use as a wetland mitigation bank. The Company acquired the land
from Anden Group as a result of a loan default, but fully reserved for the asset
as the land was determined to be "undevelopable" due to certain environmental
issues. Since 1993, the Company has sought to realize value from this asset. The
Company has treated both amounts as a recovery of amounts previously charged to
losses on loans, notes, advances and interest receivable on its consolidated
statement of operations for the year ended December 31, 1998.

During 1994, in connection with the restructuring of Anden, the Company
was conveyed an interest in a first mortgage loan collateralized by a parcel of
land located in Hemet, California. The borrower was Hemet Phase IV Partners,
L.P. ("Hemet"). The Company also was conveyed a limited partnership interest in
Hemet. The Company recorded its interest in the loan acquired at $500,000 as of
the date of foreclosure. During 1994, the Company recorded a provision for
losses on loans, notes, advances and interest receivable relating to the Hemet
loan in the amount of $275,000. Pursuant to the Company's valuation of the
underlying collateral, the loan was placed on non-accrual status. On October 8,
1998, the Company received $744,795 as payment in full on the loan and interest.
The Company recorded $225,000 as a principal repayment, $275,000 as a recovery
of amounts previously charged to losses on loans, notes, advances and interest
receivable and the remainder as interest income.

Northholme Partners ("Northholme"), of which the Company holds an 80%
limited partnership interest, was created by the Company and a partner of the
Anden Group on August 31, 1992. On September 2, 1992, the Company and Northholme
entered into a loan agreement whereby the Company committed to lend Northholme
$700,000. The

36
<PAGE>

SEMELE GROUP INC.

Notes to the Consolidated Financial Statements
(Continued)

partner associated with the Anden Group, Eugene S. Rosenfeld, owns a 20%
participation in the loan. The loan pertains to a 1,000-acre land parcel located
north of Los Angeles, California which is owned by a third party (the "Owner").
The Company also advanced $491,647 for costs associated with the completion of
the zoning and entitlement work for the property. Northholme has a profit
participation arrangement with the Owner based on the proceeds received from the
sale or refinancing of the property. Based on the Owner's disclosure related to
the property, it was determined that a reserve should be established in the
amount of the loan and all advances plus accrued interest. The Company recorded
a provision for losses on loans, notes, advances and interest receivable in the
amount of $1,166,246 for the year ended December 31, 1997. Notwithstanding the
reserve, the Company intends to pursue its rights to collect on its investment.

9. EXECUTIVE AND DIRECTOR STOCK OPTION PLAN

On June 30, 1994, the stockholders approved and adopted the 1994 Executive
and Directors Stock Option Plan (the "Plan"). As originally adopted, the Plan
authorized the grant of non-statutory stock options only. On December 30, 1997,
the Board of Directors of the Company adopted an amendment to the Plan to permit
the grant of incentive stock options within the meaning of Section 422 of the
Internal Revenue Code. The stockholders approved the Amendment to the Plan at
the 1998 Annual Meeting of Stockholders. The Plan granted the Board of Directors
the authority to issue up to 100,000 shares of the Company's common stock for
stock option awards. The Plan consists of an Executive Option Grant Program and
a Director Option Grant Program. Under the Director Option Grant Program, each
of the Directors, in consideration of their length of service on the Board,
received an option to acquire 5,000 shares. The exercise price of the options
initially granted to the Board of Directors on July 15, 1994 under the Director
Option Grant Program was $11.25. The exercise price was reduced to $9.25 by a
vote of the Board of Directors on December 30, 1997. No executive is eligible to
receive options under the Director Option Grant Program.

37
<PAGE>

SEMELE GROUP INC.

Notes to the Consolidated Financial Statements
(Continued)

SFAS No. 123 "Accounting for Stock-Based Compensation," became effective
for 1996. This statement addresses accounting and reporting standards for
stock-based employee compensation plans. The Company has elected to continue to
recognize compensation expense using the intrinsic value-based method of
accounting prescribed by APB Opinion No. 25. Proforma information regarding net
income and earnings per share is required by SFAS 123. Proforma disclosures must
include all stock-based compensation grants made in fiscal years that begin
after December 15, 1994.

Proforma results of net income and earnings per share using the fair value
method for accounting for stock-based employer compensation plans for the year
ended December 31, 1998 and 1997 are not presented, as results differ by two or
less percent from those reported. For the purpose of SFAS 123, compensation
expense was not recognized in 1997 for the 24,850 options canceled.

For purposes of estimating the fair value of the Company's employee stock
options at the grant date, a Black-Scholes option pricing model was used with
the following weighted average assumptions for 1998: risk-free interest rate of
6.01%, dividend yield of 0%, and volatility factors of the expected market price
of the Company's common stock of .474. The weighted average life of the stock
options was 2.5 and 3 years as of December 31, 1998 and 1997, respectively. For
purposes of the proforma calculation, the estimated fair value of the options
was amortized to expense over the options vesting period.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of Options.

The effects on 1998 and 1997 pro forma net income and pro forma basic
earnings per common share and common share equivalent of amortizing to expense
the estimated fair value of stock options are not necessarily representative of
the effects on net income to be reported in future years due to such things as
the vesting period of the stock options, and the potential for issuance of
additional stock options in future years.

A summary of the Company's stock option activity, and related information
for the years ended December 31, 1998 and 1997 is as follows:

38
<PAGE>

SEMELE GROUP INC.

Notes to the Consolidated Financial Statements
(Continued)

<TABLE>
<CAPTION>
Weighted Average
Shares Subject to Exercise Price Per
Option Share
------------------ -------------------
<S> <C> <C>
Balance at January 1, 1997...... 39,850 12.31
Options canceled............. (24,850) 12.94
------------------ -------------------
Balance at December 31, 1997.... 15,000 9.25
Options granted.............. 85,000 9.25
Options canceled............. (5,000) 9.25
------------------ -------------------
Balance at December 31, 1998 ... $ 95,000 $ 9.25
================== ===================
</TABLE>

At December 31, 1998, Options on 39,140 shares were exercisable. The
exercise price of these options was $9.25 per share.

10. DEFERRED COMPENSATION

In December 1997, the Company established an incentive compensation plan
(the "Plan") for Messrs. Engle and Coyne (the "Participants"). The Plan provides
for all or some of the Participants' salary to be deferred. All such deferred
compensation is held subject to the claims of creditors of the Company in a
"rabbi" trust until paid to the Participants following the Participants'
termination of employment. The amounts deferred are invested in common stock of
the Company. Pursuant to the Plan, the Participants deferred $240,000 of
compensation during the year ended December 31, 1998 which represented 41,400
shares of common stock. The number of shares of common stock was determined by
dividing the dollar amount of the salary deferred each month by the average of
the closing prices of the Company's common stock for the last ten trading days
of the month. The Participants deferred $96,766 of compensation during 1997
which represented 15,483 shares of common stock using the December 30, 1997
closing price of $0.625. The Company transfers these shares from treasury stock
to the rabbi trust. The deferred amounts were expensed by the Company during
1998 and 1997 and are included in general and administrative expenses on the
consolidated statements of operations for the years ended December 31, 1998 and
1997. Future compensation will be deferred and invested in common stock which
will be issued on a monthly basis to the trust for the benefit of the
Participants.

11. STOCK SPLITS

Effective June 30, 1998, the stockholders approved a 1-for-300 reverse
stock split followed by a 30-for-1 forward stock split. As a result of the
reverse stock split, each stockholder of record who owned less than 300 shares
of common stock immediately prior to the reverse stock split received in lieu of
the fractional share resulting from the reverse split, cash in the amount of
$.790625 per share (the average daily closing price per share of common stock on
the NASDAQ Stock Exchange for the ten trading days prior to effective date)
multiplied by the number of shares of common stock owned by such stockholder
immediately prior to the reverse stock split. Immediately after the reverse
stock split, the number of shares of common stock of each holder (excluding
stockholders who held less than 300 shares immediately prior to the reverse
split) was converted in a forward split into multiple shares of common stock on
the basis of 30 shares of common stock for each share or fraction thereof then
held. The Company paid $356,098 to fractional stockholders on July 17, 1998 as a
result of the reverse stock split. All share and per share data for prior
periods presented have been restated to reflect the stock splits.

39
<PAGE>

SEMELE GROUP INC.

Notes to the Consolidated Financial Statements
(Continued)

12. TREASURY STOCK

On September 23, 1998, the Company purchased 69,223 shares of common
stock, or approximately 6.1% of the Company's common stock outstanding. The
Company paid cash in the amount of $5 1/8 per share, for a total purchase price
of $354,768.

13. NASDAQ SMALLCAP MARKET STOCK LISTING

14. INCOME TAXES

Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts reported for income tax purposes. Deferred income taxes
consist of the following at December 31,:

<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
Deferred tax assets:
Loans receivable $ -- $ 93,000
Mortgage loans in substantive foreclosure 2,327,000 2,327,000
Foreclosed real estate held for sale, net 1,195,000 1,195,000
Investment in real estate venture 40,000 40,000
Net operating loss carry forwards 30,035,000 28,558,000
--------------- ---------------
Sub-total 33,597,000 32,213,000
Less valuation allowance for deferred tax assets (33,597,000) (32,213,000)
--------------- ---------------
Total deferred tax assets -- --
Deferred tax liabilities:
Note payable -- --
--------------- ---------------
Net deferred tax assets $ -- $ --
=============== ===============
</TABLE>

As of December 31, 1998, the Company had net operating loss carry forwards
of approximately $83,995,000 which expire as follows: $18,817,000 in 2005;
$47,337,000 in 2006; $281,000 in 2007; $2,981,000 in 2008; $4,086,000 in 2009;
$1,265,000 in 2010; $2,028,000 in 2011 and $7,200,000 in 2012.

15. LITIGATION

On June 16, 1994, Coastal Group, Inc. brought an action against Westholme
Partners, (an entity in which the Company has a limited partnership interest),
Bank of America (f/k/a Continental Bank, N.A.) ("CINB"), BMC Westholme Corp., (a
wholly owned subsidiary of the Company); the Anden Group ("Anden"), William A.
Brandt, Jr. and Kent Kneblekamp in the New Jersey Superior Court, Middlesex
County. The case was subsequently removed to the United States District Court
for the District of New Jersey and assigned case # 94-3010. The case involves a
real estate development project located in New Jersey known as "Winding River."

40
<PAGE>

SEMELE GROUP INC.

Notes to the Consolidated Financial Statements
(Continued)

BMC Westholme Corp. was served with Summons and Complaint in June of 1994,
but was not actively involved in the various motions and other procedural
matters which extended for approximately thirty months. On February 10, 1997,
BMC Westholme Corp. filed its Answer and began to take a more active role in the
case.

The plaintiff's complaint was substantially reduced by favorable rulings,
entered October 3, 1996, on various motions to dismiss whereby ten of
plaintiff's sixteen counts were dismissed and another count was limited in
scope. The reduced complaint alleged breach of contract, unjust enrichment,
breach of the implied covenant of good faith and fair dealing, fraudulent
transfer and also sought relief under a theory of promissory estoppel and
requested the creation of a constructive trust for the benefit of plaintiff.

The case arose from a failed development and a subsequent foreclosure
filed by defendant CINB. The plaintiff alleged, among other things, that CINB
and BMC Westholme conspired with Anden to deprive the plaintiff of its interest
in the Winding River project, damaging plaintiff's reputation as a homebuilder
and causing it to lose business opportunities. A motion for summary judgment was
filed by CINB. The Company joined in that motion.

On December 15, 1998 the Court granted summary judgments in favor of BMC
Westholme Corporation on all remaining counts of the complaint and also granted
BMC Westholme's motions for reimbursement of certain attorney's fees and costs.
On January 21, 1999 the same Court awarded the sum of $15,178 to BMC Westholme
in consideration of attorney's fees and expenses.

The Court's order of December 15, 1998, granting summary judgment in favor
of BMC Westholme has been appealed by Coastal Group, Inc. Management does not
believe that the resolution of the appeal will have a material adverse effect on
the Company's financial position or results of operations.

<PAGE>

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
------------ ------------

Commission File Number 0-16886

SEMELE GROUP INC.
(Name of Small Business Issuer in its charter)

DELAWARE 36-3465422
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

ONE CANTERBURY GREEN, STAMFORD, CONNECTICUT 06901
(Address of principal executive offices) (Zip Code)

Issuer's telephone number, including area code: (203) 363-0849

Shares of common stock outstanding as of November 4, 1999: 1,182,593

Transitional Small Business Disclosure Format: YES / / NO /X/

<PAGE>

PART I--FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SEMELE GROUP INC.
CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents ..................................... $ 5,198,924 $ 7,788,124
Rents Receivable .............................................. 89,517 91,038
Accounts Receivable--Affiliates ............................... 11,401 6,652
Interest Receivable--Affiliates ............................... 359,829 125,382
Note Receivable--Affiliates ................................... 2,725,695 2,725,695
Foreclosed Real Estate Held for Sale, Net ..................... 10,024,793 9,961,991
Other Investments ............................................. 750,000 --
Investment in Partnerships and Trusts ......................... 3,603,999 3,884,755
Land .......................................................... 1,929,000 1,929,000
Building, net of accumulated depreciation of $1,086,975
and $820,478 at September 30, 1999 and ....................... 10,846,022 11,112,519
December 31, 1998, respectively
Other Assets .................................................. 453,952 543,763
------------- -------------

Total Assets .................................................. $ 35,993,132 $ 38,168,919
------------- -------------
------------- -------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Notes Payable--Affiliates ..................................... $ 14,869,500 $ 14,869,500
Notes Payable ................................................. 6,695,193 7,011,202
Accrued Interest--Affiliates .................................. -- 243,833
Accrued Interest .............................................. 58,919 67,659
Accrued Expenses--Affiliate ................................... 71,118 71,118
Accounts Payable and Accrued Expenses ......................... 895,917 853,189
Deferred Rental Income ........................................ 28,614 --
Distributions Payable ......................................... 45,342 48,875
Minority Interest ............................................. 3,779,262 3,722,131
------------- -------------

Total Liabilities ............................................. 26,443,865 26,887,507
------------- -------------

Stockholders' Equity
Shares of Common Stock, $0.01 Par Value,
5,000,000 Authorized, 2,080,185 Shares Issued ............... 170,663,365 170,663,365
Accumulated Deficit ........................................... (144,905,123) (143,172,978)
Deferred Compensation, 101,183 and 56,883 Shares at
September 30, 1999 and December 31, 1998, respectively ...... (1,720,104) (967,004)
Treasury Stock at Cost, 901,025 and 945,325 Shares at
September 30, 1999 and December 31, 1998, respectively ...... (14,488,871) (15,241,971)
------------- -------------

Total Stockholders' Equity ................................... 9,549,267 11,281,412
------------- -------------

Total Liabilities and Stockholders' Equity .................... $ 35,993,132 $ 38,168,919
------------- -------------
------------- -------------
Book Value Per Share of Common Stock
(1,179,160 and 1,134,860 Shares Outstanding at
September 30, 1999 and December 31, 1998, respectively) ..... $ 8.10 $ 9.94
------------- -------------
------------- -------------

</TABLE>

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

<PAGE>

SEMELE GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)

1999 1998
----------- -----------
<S> <C> <C>
INCOME
Income From Lending and Investing Activities:
Interest on Loans Receivable ....................................... $ -- $ 24,705
Income on Investments .............................................. 215,814 290,880
----------- -----------

Total Income From Lending and Investing Activities ................... 215,814 315,585
----------- -----------

Other Income:
Lease Revenue ...................................................... 895,957 28,590
Interest on Note Receivable - Affiliates ........................... 234,447 25,763
Gain on Sale of Equipment .......................................... 17,250 3,400
Other Income ....................................................... 19,132 --
----------- -----------
Total Other Income ................................................... 1,166,786 57,753
----------- -----------
Total Income ......................................................... 1,382,600 373,338
----------- -----------
EXPENSES
Expenses From Property Operating Activities:
Net Loss From Operations of Foreclosed Real Estate Held for Sale ... 473,163 605,094
----------- -----------
Total Expenses From Property Operating Activities .................... 473,163 605,094
----------- -----------
Other Expenses:
Stockholder Expenses ............................................... 31,671 73,960
Directors' Fees, Expenses, and Insurance ........................... 136,773 173,828
Other Professional Fees ............................................ 225,289 84,800
General and Administrative ......................................... 419,103 229,845
Administrative Reimbursement - Affiliate ........................... 113,842 113,201
Interest Expense - Affiliates ...................................... 879,179 391,512
Depreciation and Amortization Expense .............................. 405,839 13,518
Interest Expense ................................................... 407,596 7,067
Recovery of Losses on Loans, Notes and Interest Receivable ......... (77,120) (108,176)
----------- -----------

Total Other Expenses ................................................. 2,542,172 979,555
----------- -----------

Total Expenses ....................................................... 3,015,335 1,584,649
----------- -----------

Net Loss ............................................................. $(1,632,735) $(1,211,311)
----------- -----------
----------- -----------
Net Loss Per Share of Common Stock Basic
(Based on the Weighted Average Number of Shares
Outstanding of 1,156,074 and 1,202,287, respectively) .............. $ (1.41) $ (1.01)
----------- -----------
----------- -----------
</TABLE>

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

<PAGE>

SEMELE GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)

<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
INCOME
Income From Lending and Investing Activities:
Income on Investments .............................................. 68,315 94,176
----------- -----------
Total Income From Lending and Investing Activities ................... 68,315 94,176
----------- -----------
Other Income:
Lease Revenue ...................................................... 308,399 28,590
Interest on Note Receivable--Affiliates ............................ 79,008 25,763
Gain on Sale of Equipment .......................................... 5,925 3,400
----------- -----------
Total Other Income ................................................... 393,332 57,753
----------- -----------
Total Income ......................................................... 461,647 151,929
----------- -----------

EXPENSES
Expenses From Property Operating Activities:
Net Loss From Operations of Foreclosed Real Estate Held for Sale ... 180,242 247,201
----------- -----------

Total Expenses From Property Operating Activities .................... 180,242 247,201
----------- -----------

Other Expenses:
Stockholder Expenses ............................................... 7,284 39,036
Directors' Fees, Expenses, and Insurance ........................... 44,317 70,459
Other Professional Fees ............................................ 62,218 23,108
General and Administrative ......................................... 216,828 89,955
Administrative Reimbursement--Affiliate ............................ 37,524 37,770
Interest Expense--Affiliates ....................................... 294,270 169,309
Depreciation and Amortization Expense .............................. 135,105 13,518
Interest Expense ................................................... 134,570 7,067
Recovery of Losses on Loans, Notes and Interest Receivable ......... (77,120) --
----------- -----------

Total Other Expenses ................................................. 854,996 450,222
----------- -----------

Total Expenses ....................................................... 1,035,238 697,423
----------- -----------

Net Loss ............................................................. $ (573,591) $ (545,494)
----------- -----------
----------- -----------
Net Loss Per Share of Common Stock Basic
(Based on the Weighted Average Number of Shares
Outstanding of 1,170,889 and 1,176,346, respectively) .............. $ (0.49) $ (0.46)
----------- -----------
----------- -----------

</TABLE>

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

<PAGE>

SEMELE GROUP INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)

<TABLE>
<CAPTION>
COMMON STOCK
-------------------------- ACCUMULATED DEFERRED TREASURY
SHARES AMOUNT DEFICIT COMPENSATION STOCK TOTAL
---------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stockholder's Equity,
December 31, 1998 ................ 2,080,185 $ 170,663,365 $(143,172,978) $ (967,004) $ (15,241,971) $ 11,281,412

Deferred Compensation
44,300 Shares of Stock ........... -- -- -- (753,100) 753,100 --

Distributions Declared
By Subsidiary .................... -- -- (99,410) -- -- (99,410)

Net Loss ........................... -- -- (1,632,735) -- -- (1,632,735)
---------- ------------- ------------- ------------- ------------- -------------
Stockholder's Equity,
September 30, 1999 ............... 2,080,185 $ 170,663,365 $(144,905,123) $ (1,720,104) $ (14,488,871) $ 9,549,267
---------- ------------- ------------- ------------- ------------- -------------
---------- ------------- ------------- ------------- ------------- -------------

</TABLE>

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

<PAGE>

SEMELE GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)

<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss ...................................................................... $(1,632,735) $(1,211,311)
Adjustments to Reconcile Net Loss to Net Cash Used In Operating Activities:
Depreciation and Amortization Expense ....................................... 405,839 13,518
Minority Interest ........................................................... 57,131 (373)

Net Change In:
Interest Receivable on Loans ................................................ -- 3,565
Rents Receivable ............................................................ 1,521 1,027,638
Accounts Receivable--Affiliates ............................................. (4,749) (1,061,605)
Interest Receivable--Affiliates ............................................. (234,447) (25,763)
Foreclosed Real Estate Held For Sale, Net ................................... (62,802) --
Investment in Partnerships and Trusts ....................................... 280,756 8,607
Other Assets ................................................................ (49,531) (159,578)
Accrued Interest--Affiliates ................................................ (243,833) 60,958
Accrued Interest ............................................................ (8,740) 7,067
Accrued Expenses--Affiliate ................................................. -- (11,396)
Accounts Payable and Accrued Expenses ....................................... 42,728 322,105
Deferred Rental Income ...................................................... 28,614 43,218
----------- -----------

Net Cash Used In Operating Activities ......................................... (1,420,248) (983,350)
----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in Ariston ....................................................... -- (111,067)
Other Investments ........................................................... (750,000) --
Collection of Loans Receivable .............................................. -- 250,000
----------- -----------

Net Cash Provided By (Used In) Investing Activities ........................... (750,000) 138,933
----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment for Fractional Shares as a Result of Reverse Stock Split ............ -- (356,098)
Acquisition of Treasury Stock ............................................... -- (354,768)
Principal Payments on Notes Payable ......................................... (316,009) --
Distributions Paid By Subsidiary ............................................ (102,943) --
----------- -----------

Net Cash Used In Financing Activities ......................................... (418,952) (710,866)
----------- -----------

Net Decrease in Cash and Cash Equivalents ..................................... (2,589,200) (1,555,283)

Cash and Cash Equivalents at Beginning of Period .............................. 7,788,124 7,884,593
----------- -----------

Cash and Cash Equivalents at End of Period .................................... $ 5,198,924 $ 6,329,310
----------- -----------
----------- -----------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest .................................... $ 1,539,348 $ 330,554
----------- -----------
----------- -----------

</TABLE>

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

<PAGE>

SEMELE GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1999
(UNAUDITED)

Readers of this quarterly report should refer to the audited consolidated
financial statements of Semele Group Inc. (the "Company"), formerly known as
Banyan Strategic Land Fund II, for the year ended December 31, 1998, which are
included in the Company's 1998 Annual Report on Form 10-KSB, as certain footnote
disclosures which would substantially duplicate those contained in such audited
statements have been omitted from this report.

In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary to present fairly the financial
position at September 30, 1999 and December 31, 1998 and results of operations
for the three and nine month periods ended September 30, 1999 and 1998 have been
made and are reflected.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The Company's investment in partnerships and trusts consists of limited
partner or beneficiary interests that represent less than a 20% ownership
interest in the investees and are accounted for using the cost method.

CASH EQUIVALENTS

The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.

2. OTHER ASSETS

Other assets principally include equipment on operating lease and deferred
financing costs, both of which pertain to Ariston. The deferred financing costs
are being amortized over the life of the loan to which they pertain and
equipment on operating leases is being depreciated using the straight-line
method over the equipment's remaining estimated useful life. Rental income and
interest expense associated with equipment on operating leases are recognized as
earned and incurred, respectively. Future minimum rents of $137,346 are due in
the year ending September 30, 2000 in connection with equipment on operating
leases.

In addition, the Company, through its consolidation of Ariston, has an
interest in future rental income from two commercial buildings that are leased
to an investment-grade educational institution. Future minimum lease payments
pertaining to these contracts are as follows:

<TABLE>

<S> <C>
For the year ending September 30, 2000 $ 986,996
2001 1,123,586
2002 1,150,504
2003 313,084
-----------
Total $3,574,170
-----------
-----------

</TABLE>

<PAGE>

SEMELE GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

3. NOTES PAYABLE

Through its acquisition of Ariston, the Company acquired a limited
partnership interest in a real estate investment program and assumed related
indebtedness. The note bears a fluctuating interest rate based on Prime plus a
margin and requires quarterly payments of principal and interest. The note
matures on January 15, 2003 and is secured by the associated limited partnership
interest. Repayment of the debt is partially guaranteed by Messrs. Engle and
Coyne. In addition, the Company has consolidated certain additional indebtedness
pertaining to a commercial property leased to an investment-grade educational
institution. The interest rate on this debt is fixed at 7.86%.

Additionally, the Company assumed non-recourse debt, consisting of
installment notes that are collateralized by certain equipment held on operating
leases. The installment notes will be repaid fully by non-cancelable rents
generated by the associated lease agreements. At September 30, 1999, the
interest rate on these obligations was 7.1%.

The annual maturities of all notes payable are as follows:

<TABLE>

<S> <C>
For the year ending September 30, 2000 $ 440,513
2001 495,565
2002 581,620
2003 686,403
2004 449,467
Thereafter 4,041,625
-----------
Total $ 6,695,193
-----------
-----------

</TABLE>

The notes payable balance sheet value approximates fair value at
September 30, 1999.

4. FORECLOSED REAL ESTATE HELD FOR SALE

Since 1992, the Venture has been engaged in zoning and entitlement
activities that have been opposed by the City of Malibu and various citizen
groups. The city and a neighboring homeowners association initiated several
legal actions intended to preclude the development of the property, all of which
were ultimately resolved in favor of the Venture or settled during 1998. The
Venture currently is entitled to develop a 46 unit housing community on
approximately 40 acres of the property. The remaining 234 acres will be
allocated as follows: (i) 167 acres will be dedicated to a public agency, (ii)
approximately 47 acres will be deed restricted within privately owned lots and
(iii) approximately 20 acres will be preserved as private open space.

During the nine months ended September 30, 1999, the Venture incurred
approximately $473,000 of costs in connection with Rancho Malibu. The expenses
are primarily related to the Venture's efforts to successfully satisfy a number
of complex requirements imposed by various state, local and federal entities
which requirements must be met prior to commencement of development. These
costs, treated as capital contributions to the Venture by the Company, were
included in total expenses from property operating activities on the Company's
consolidated statements of operations. The Venture also capitalized $62,802 of
costs for transfer development credits during the nine months ended September
30, 1999. At September 30, 1999, the Company's carrying balance for the property
is $10,024,793.

<PAGE>

SEMELE GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

ACQUISITION OF ARISTON CORPORATION

The Company purchased all of the common stock of Ariston from Equis
Financial Group Limited Partnership ("EFG") for cash of $2 million and a
purchase-money note of $10,450,000 (the "Note") on September 1, 1998. The total
fair value of the assets acquired was estimated to be $12,450,000. The Ariston
acquisition was accounted for under the purchase method of accounting and the
balance sheet and statement of operations of Ariston were consolidated effective
September 1, 1998. The Note bears interest at the annualized rate of 7%, payable
quarterly in arrears, and requires principal reductions based upon the cash
flows generated by Ariston. The Note matures on August 31, 2003 and is recourse
only to the common stock of Ariston. The cost of the Ariston acquisition was
allocated on the basis of the estimated fair value of the assets acquired and
liabilities assumed. In October 1998, Ariston declared and paid a cash
distribution of $2,020,000 to the Company. Until the Note is retired, future
cash distributions by Ariston require the consent of EFG.

INDEBTEDNESS

The Company obtained a loan of $4,419,500 from certain affiliates in 1997.
The loan bears interest at an annualized rate of 10% and provides for mandatory
principal reductions, if and to the extent the Company realizes any net cash
proceeds from the sale or refinancing of the Rancho Malibu property.
Notwithstanding the foregoing, the loan is scheduled to mature in full on April
30, 2000. During each of the nine month periods ended September 30, 1999 and
1998, the Company incurred interest expense of $330,554 in connection with this
indebtedness. At September 30, 1999, the carrying value of the note approximates
its estimated fair value.

ADMINISTRATIVE SERVICES

The Company's administrative functions are performed by an affiliate, EFG,
pursuant to an Administrative Services Agreement between the Company and EFG
dated May 7, 1997. EFG is reimbursed at actual cost for expenses it incurs on
the Company's behalf. Administrative expenses consist primarily of professional
and clerical salaries and certain rental expenses. The Company incurred total
administrative costs of $113,842 and $113,201 during the nine month periods
ended September 30, 1999 and 1998, respectively.

6. DEFERRED COMPENSATION

The Company established an incentive compensation plan (the "Plan") for
certain executives (the "Participants"). The Plan provides for all or some of
the Participants' salary to be deferred. All such deferred compensation is held
subject to the claims of creditors of the Company in a "rabbi" trust until paid
to the Participants following the Participants' termination of employment. The
amounts deferred are invested in common stock of the Company. Pursuant to the
Plan, the Participants deferred $180,000 of compensation during each of the nine
months ended September 30, 1999 and 1998 which represented 44,300 and 26,469
shares of common stock, respectively. The deferred amounts were expensed by the
Company during 1999 and 1998 and are included in general and administrative
expenses on the consolidated statements of operations for the nine months ended
September 30, 1999 and 1998.

7. OTHER INVESTMENTS

On May 1, 1999, the Company and certain affiliates formed EFG/Kirkwood
Capital LLC ("EFG/Kirkwood") for the purpose of acquiring preferred and common
stock interests in Kirkwood Associates Inc. ("KAI"). The Company purchased Class
B Interests in EFG/Kirkwood and the other affiliates purchased Class A Interests
in EFG/Kirkwood. Generally, the Class A Interest holders are entitled to certain
preferred returns prior to distributions being paid to the Company, as Class B
Interest holder. KAI owns a ski resort, a local public utility, and land which
is held for development. The resort is located in Kirkwood, California and is
approximately 30 miles from South Lake Tahoe, Nevada. The Company's investment
in EFG/Kirkwood had a cost of $750,000.

<PAGE>

SEMELE GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

8. RECOVERY OF LOSSES ON LOANS, NOTES AND INTEREST RECEIVABLE

During 1998, the Company received cash distributions of $18,423 related to
its interest in a liquidating trust established for the benefit of the unsecured
creditors (including the Company) of VMS Realty Partners and its affiliates. In
addition, the Company received $89,753 from its interest in Springtown Partners,
a California limited partnership formed by three land owners, including the
Company, for the purpose of merging land parcels in order to option them to a
third party for use as a wetland mitigation bank. The Company acquired the land
from Anden Group as a result of a loan default, but fully reserved for the asset
as the land was determined to be "undevelopable" due to certain environmental
issues. Since 1993, the Company has sought to realize value from this asset. The
Company has treated both of the above-referenced amounts as a recovery of
amounts previously charged to losses on loans, notes and interest receivable on
its consolidated statement of operations for the nine months ended September 30,
1998.

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATION

GENERAL

Certain statements in this quarterly report that are not historical fact
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Without limiting the foregoing, words
such as "anticipates", "expects", "intends", "plans" and similar expressions are
intended to identify forward-looking statements. These statements are subject to
a number of risks and uncertainties including the Company's ability to
successfully implement a growth-oriented business plan. Actual results could
differ materially from those projected in any forward-looking statements.

The Company, formerly known as Banyan Strategic Land Fund II, currently
holds an ownership interest in a 274 acre land parcel located in Southern
California known as the Rancho Malibu property. The Company also holds a 0.3%
beneficial interest in a liquidating trust, established for the benefit of a
group of unsecured creditors of a previous borrower of the Company. In August
1998, the Company acquired Ariston Corporation ("Ariston"), a holding company
having two investments: (i) a 99% limited partnership interest in AFG Eireann
Limited Partnership, a Massachusetts limited partnership having a tax interest
in a diversified pool of lease contracts owned by an institutional investor and
(ii) a 98% limited partnership interest in Old North Capital Limited
Partnership, a Massachusetts limited partnership with investments in cash and
notes, equipment leases, and limited partnerships that are engaged in either
equipment leasing or real estate. The latter includes two commercial buildings,
one located in Washington D.C. and one in Sydney, Australia that are leased to
an investment-grade educational institution. In May 1999, the Company and
certain affiliates formed EFG/Kirkwood Capital LLC ("EFG/Kirkwood") for the
purpose of acquiring preferred and common stock interests in Kirkwood Associates
Inc. ("KAI"). KAI owns a ski resort, a local public utility, and land which is
held for development. The resort is located in Kirkwood, California and is
approximately 30 miles from South Lake Tahoe, Nevada.

YEAR 2000 ISSUE

The Year 2000 Issue generally refers to the capacity of computer
programming logic to correctly identify the calendar year. Many companies
utilize computer programs or hardware with date sensitive software or embedded
chips that could interpret dates ending in "00" as the year 1900 rather than the
year 2000. In certain cases, such errors could result in system failures or
miscalculations that disrupt the operations of the affected businesses. The
Company uses information systems provided by EFG and has no information systems
of its own. EFG has adopted a plan to address the Year 2000 Issue that consists
of four phases: assessment, remediation, testing, and implementation and has
elected to utilize principally internal resources to perform all phases. EFG has
completed its Year 2000 project at an aggregate cost of less than $50,000 and at
a di minimus cost to the Company. All costs incurred in connection with EFG's
Year 2000 project have been expensed as incurred.

EFG's primary information software was coded by a third party at the point
of original design to use a four digit field to identify calendar year. All of
the Company's lease billings, cash receipts and equipment remarketing processes
are performed using this proprietary software. In addition, EFG has gathered
information about the Year 2000 readiness of significant vendors and third party
servicers and continues to monitor developments in this area. All of EFG's
peripheral computer technologies, such as its network operating system and
third-party software applications, including payroll and electronic banking,
have been evaluated for potential programming changes and have required only
minor modifications to function properly with respect to dates in the year 2000
and thereafter. EFG understands that each of its and the Company's significant
vendors and third-party servicers are in the process, or have completed the
process, of making their systems Year 2000 compliant. Substantially all parties
queried have indicated that their systems are Year 2000 compliant.

<PAGE>

in a system failure or disruption of its or the Company's business operations.
However, EFG has no means of ensuring that all customers, vendors and
third-party servicers will conform ultimately to Year 2000 standards. The effect
of this risk to the Company is not determinable.

LIQUIDITY AND CAPITAL RESOURCES

During recent years, the Company's operating activities have been limited
to the disposal of certain real estate assets and efforts to secure the
entitlements necessary to develop the Company's Rancho Malibu property. The
Company's cash and cash equivalents balance declined from $7,788,124 at December
31, 1998 to $5,198,924 at September 30, 1999 principally as a result of (i) the
Company's $750,000 investment in EFG/Kirkwood; (ii) interest expense incurred in
connection with the acquisition of Ariston and (iii) costs related to the Malibu
property incurred in an effort to successfully satisfy a number of complex
requirements imposed by various state, local and federal entities which
requirements must be met prior to commencement of development. In addition,
during the nine months ended September 30, 1999, the Company used $316,009 of
cash to repay certain debt obligations assumed in connection with the Ariston
acquisition and $102,943 to pay cash distributions. The latter represents
customary distributions paid to third-parties from a real estate investment in
which Ariston has an ownership interest.

In May 1999, the Company and certain affiliates formed EFG/Kirkwood for the
purpose of acquiring preferred and common stock interests in KAI. In June 1999,
the Company acquired a Class B equity interest in EFG/Kirkwood for $750,000 (see
Note 7). Affiliates of the Company acquired Class A Interests in EFG/Kirkwood
that are entitled to certain preferred returns prior to distribution payments
being paid to the Company, as Class B Interest holder.

The Company's principal future liquidity needs will be dependent upon,
among other things, development plans for the Rancho Malibu property, which
remain pending. In addition, the Company will continue to incur expenses for
professional services and other operating costs. The Company will realize future
cash inflows as a result of the Ariston acquisition, which will be used to
service associated acquisition indebtedness.

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998:

Total gross income for the nine months ended September 30, 1999 increased
to $1,382,600 from $373,338 for the same period in 1998. The increase in total
gross income from 1998 to 1999 resulted principally from the acquisition of
Ariston and includes (i) rental income from property and equipment on operating
leases and (ii) interest income from a note receivable from affiliates. Interest
income on note receivable from affiliates is subordinate to the affiliate's
repayment of certain institutional indebtedness. Ariston's operating results are
consolidated in the Company's financial statements.

Total gross expenses for the nine months ended September 30, 1999 increased
to $3,015,335 from $1,584,649 for the same period in 1998. The increase of
$1,430,686 was caused mostly by the acquisition of Ariston which includes (i)
interest expense of $548,625 related to a purchase money note to EFG, (ii)
depreciation and amortization expense related to equipment on operating leases
and deferred financing costs, and (iii) interest expense incurred in connection
with equipment on operating leases. Increases in other professional fees and
general and administrative expenses further contributed to the overall increase
in total gross expenses during the nine months ended September 30, 1999 compared
to the same period in 1998. Expenses during 1999 and 1998 include a credit of
$77,120 and $108,176, respectively, reflecting a recovery of amounts previously
charged to losses on loans, notes and interest receivable. The decrease in
property operating expenses for the nine months ended September 30, 1999
resulted from the settlement of the Rancho Malibu litigation in 1998.

The above discussed changes resulted in an increase in the Company's net
loss for the nine months ended September 30, 1999 to $1,632,735 ($1.41 per
share) from $1,211,311 ($1.01 per share) for the same period in 1998. The net
loss per share for the nine months ended September 30, 1999 is based on the
weighted average number of shares outstanding during the period of 1,156,074 as
compared to 1,202,287 for the same period in 1998.

<PAGE>

THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1998:

Total gross income for the three months ended September 30, 1999 increased
to $461,647 from $151,929 for the same period in 1998. The increase in total
gross income from 1998 to 1999 resulted principally from the acquisition of
Ariston and includes (i) rental income from property and equipment on operating
leases and (ii) interest income from a note receivable from affiliates. Interest
income on note receivable from affiliates is subordinate to the affiliate's
repayment of certain institutional indebtedness. Ariston's operating results are
consolidated in the Company's financial statements.

Total gross expenses for the three months ended September 30, 1999
increased to $1,035,238 from $697,423 for the same period in 1998. The increase
of $337,815 was caused mostly by the acquisition of Ariston which includes (i)
interest expense of $182,875 related to a purchase money note to EFG, (ii)
depreciation and amortization expense related to equipment on operating leases
and deferred financing costs, and (iii) interest expense incurred in connection
with equipment on operating leases. Partially offsetting the increase was a
credit in 1999 of $77,120 reflecting a recovery of amounts previously charged to
losses on loans, notes and interest receivable. Property operating expenses
during the three months ended September 30, 1999 decreased as a result of the
settlement of the Rancho Malibu litigation in 1998.

The above discussed changes resulted in an increase in the Company's net
loss for the three months ended September 30, 1999 to $573,591 ($0.49 per share)
from $545,494 ($0.46 per share) for the same period in 1998. The net loss per
share for the three months ended September 30, 1999 is based on the weighted
average number of shares outstanding during the period of 1,170,889 as compared
to 1,176,346 for the same period in 1998.

<PAGE>

PART II--OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) A list of exhibits filed or incorporated by reference is as follows:

3.1 Certificate of Amendment to Amended and Restated Certificate of
Incorporation (filed with the Securities and Exchange Commission as
Exhibit (3.1) to the Registrant's Quarterly Report on Form 10-QSB for
the quarter ended September 30, 1998 and incorporated by reference)

3.2 Restated Certificate of Incorporation (filed with the Securities and
Exchange Commission as Exhibit (3)(i) to the Registrant's Report on
Form 8-K dated October 21, 1997 and incorporated by reference)

3.3 Amended and Restated By-Laws (filed with the Securities and Exchange
Commission as Exhibit (3)(ii) to the Registrant's Report on Form 8-K
dated October 21, 1997 and incorporated by reference)

4 Form of new stock certificate (filed with the Securities and Exchange
Commission as Exhibit (4) to the Registrant's Quarterly Report on Form
10-QSB for the quarter ended September 30, 1997 and incorporated by
reference)

10.1 Executive Employment Agreement for Gary D. Engle (filed with the
Securities and Exchange Commission as Exhibit 10.1 to the Registrant's
Annual Report on Form 10-KSB for the year ended December 31, 1997 and
incorporated by reference)

10.2 Executive Employment Agreement for James A. Coyne (filed with the
Securities and Exchange Commission as Exhibit 10.2 to the Registrant's
Annual Report on Form 10-KSB for the year ended December 31, 1997 and
incorporated by reference)

10.3 Amended 1994 Executive and Director Stock Option Plan (filed with the
Securities and Exchange Commission as Exhibit 10.3 to the Registrant's
Annual Report on Form 10-KSB for the year ended December 31, 1997 and
incorporated by reference)

10.4 Incentive Compensation Plan (filed with the Securities and Exchange
Commission as Exhibit 10.4 to the Registrant's Annual Report on Form
10-KSB for the year ended December 31, 1997 and incorporated by
reference)

10.5 Trust under Semele Group Inc. Incentive Compensation Plan (filed with
the Securities and Exchange Commission as Exhibit 10.5 to the
Registrant's Annual Report on Form 10-KSB for the year ended December
31, 1997 and incorporated by reference)

10.6 Qualified Stock Option Agreement Executive Option Grant Program dated
December 30, 1997 between Semele Group Inc. and Gary D. Engle (filed
with the Securities and Exchange Commission as Exhibit 10.6 to the
Registrant's Annual Report on Form 10-KSB for the year ended December
31, 1997 and incorporated by reference)

10.7 Qualified Stock Option Agreement Executive Option Grant Program dated
December 30, 1997 between Semele Group Inc. and James A. Coyne (filed
with the Securities and Exchange Commission as Exhibit 10.7 to the
Registrant's Annual Report on Form 10-KSB for the year ended December
31, 1997 and incorporated by reference)

10.8 Director Stock Option Agreement Director Option Grant Program (filed
with the Securities and Exchange Commission as Exhibit 10.8 to the
Registrant's Annual Report on Form 10-KSB for the year ended December
31, 1997 and incorporated by reference)

<PAGE>

10.9 Amendment to Director Stock Option Agreement Director Option Grant
Program dated December 30, 1997 between Semele Group Inc. and Gerald L.
Nudo (filed with the Securities and Exchange Commission as Exhibit 10.9
to the Registrant's Annual Report on Form 10-KSB for the year ended
December 31, 1997 and incorporated by reference)

10.10 Amendment to Director Stock Option Agreement Director Option Grant
Program dated December 30, 1997 between Semele Group Inc. and Robert M.
Ungerleider (filed with the Securities and Exchange Commission as
Exhibit 10.10 to the Registrant's Annual Report on Form 10-KSB for the
year ended December 31, 1997 and incorporated by reference)

10.11 Amendment to Director Stock Option Agreement Director Option Grant
Program dated December 30, 1997 between Semele Group Inc. and Walter E.
Auch (filed with the Securities and Exchange Commission as Exhibit
10.11 to the Registrant's Annual Report on Form 10-KSB for the year
ended December 31, 1997 and incorporated by reference)

10.12 Third Amended and Restated Employment Agreement for Leonard G. Levine
dated May 1, 1997 (filed with the Securities and Exchange Commission as
Exhibit (10)(i) to the Registrant's Quarterly Report on Form 10-QSB for
the quarter ended September 30, 1997 and incorporated by reference)

10.13 Amendment No. 1 to Exchange Agreement dated August 7, 1997 (filed with
the Securities and Exchange Commission as Exhibit (10)(ii) to the
Registrant's Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1997 and incorporated by reference)

10.14 Exchange Agreement dated April 30, 1997 by and among AFG Hato Arrow
Limited Partnership, AFG Dove Arrow Limited Partnership, AIP/Larkfield
Limited Partnership, Equis Exchange LLC, Equis Financial Group Limited
Partnership and the Registrant and related exhibits (filed with the
Securities and Exchange Commission as Exhibit (10)(i) to the
Registrant's Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1997 and incorporated by reference)

10.15 Directors Stock Option Agreement dated July 15, 1994

10.16 Executive Stock Option Agreements dated July 1, 1994, July 11, 1995 and
April 16, 1996

10.17 Agreement for Purchase and Sale of Stock dated August 31, 1998 between
Semele Group Inc. and Equis Financial Group Limited Partnership (filed
with the Securities and Exchange Commission as Exhibit (10)(17) to the
Registrant's Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1998 and incorporated by reference)

10.18 Promissory Note dated August 31, 1998 between Semele Group Inc. and
Equis Financial Group Limited Partnership (filed with the Securities
and Exchange Commission as Exhibit (10)(18) to the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended September 30,
1998 and incorporated by reference)

10.19 Security Agreement dated August 31, 1998 between Semele Group Inc. and
Equis Financial Group Limited Partnership (filed with the Securities
and Exchange Commission as Exhibit (10)(19) to the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended September 30,
1998 and incorporated by reference)

21 Subsidiaries of the Company

27 Financial Data Schedule (such schedule is not deemed filed as part of
this report)

(b) No report on Form 8-K was filed by the Registrant during the quarter
ended September 30, 1999.

<PAGE>

SIGNATURES

PURSUANT to the requirements of the Exchange Act, the Issuer has duly caused
this Report to be signed on its behalf by the undersigned thereunto duly
authorized.

SEMELE GROUP INC.

By: /s/ Gary D. Engle Date: November 4, 1999
----------------------------------------
Gary D. Engle, Chairman, Chief Executive
Officer and Director

By: /s/ Gary M. Romano Date: November 4, 1999
----------------------------------------
Gary M. Romano, Vice President and
Chief Financial Officer

<PAGE>

STOCK PURCHASE AGREEMENT

THIS AGREEMENT, made as of December 16, 1999, by and between (i) Gary
D. Engle; James A. Coyne; Wayne Ellis Engle, Trustee, Staci Albury Trust u/i/t
dated July 21, 1998; Wayne Ellis Engle, Trustee, Kristen Engle Trust u/i/t dated
July 21, 1998; Wayne Ellis Engle, Trustee, Sydney Peyton Engle Trust u/i/t dated
July 21, 1998; and Wayne Ellis Engle, Trustee, Zoe P. Engle Trust u/i/t dated
July 21, 1998 (each a "Seller" and collectively the "Sellers"); and (ii) Semele
Group Inc., a Delaware corporation (the "Buyer");

W I T N E S S E T H:

WHEREAS, the Sellers are the owners of all the issued and outstanding
shares of capital stock of Equis II Corporation, a Delaware corporation (the
"Company");

WHEREAS, the Sellers desire to sell to the Buyer, and the Buyer desires
to purchase from the Sellers, 85 percent of such shares upon the terms and
subject to the conditions set forth herein;

WHEREAS, the Buyer has received from Josephthal & Co. Inc. a "fairness
opinion" with respect to the fairness to the Buyer from a financial point of
view of this acquisition and a related acquisition by the Buyer from Equis
Financial Group Limited Partnership of the entire Special Beneficiary Interest
in four Delaware business trusts, which opinion is acceptable to the Special
Committee of the Board of Directors of the Buyer consisting of the Buyer's
independent directors;

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

ARTICLE I

PURCHASE AND SALE OF SHARES

1.1. PURCHASE AND SALE OF SHARES. At the Closing, as defined in Section
1.3 hereof, the Sellers shall sell, assign, transfer and deliver to the Buyer,
and the Buyer shall purchase, acquire and accept from the Sellers, the number of
shares of Voting Common Stock and Non-Voting Common Stock, each $.01 par value,
of the Company set forth opposite their respective names on EXHIBIT A-1 under
the heading "Number of Shares to be Sold" (collectively, the "Shares"). The
Shares comprise 85 percent of the shares of Voting and Non-Voting Common Stock
of the Company owned by each Seller. At the Closing, the Buyer and the Sellers
will enter into an agreement giving the Buyer a call right to purchase from the
Sellers, and giving the Sellers a put right to sell to the Buyer, the 15 percent
of the shares of Voting and Non-Voting Common Stock of the Company not being
sold to the Buyer hereunder. The purchase price for such 15 percent will be
510,000 shares of the Common Stock, $.10 par value, of the Buyer. Such rights to
purchase and sell will only be exercisable, however, if the stockholders of the
Buyer approve of such payment in shares of Common Stock of the Buyer. If
stockholder approval is not obtained, the purchase and sale rights will
terminate.

1.2. PURCHASE PRICE; DELIVERY OF SHARES. In consideration of the sale
of the Shares to the Buyer, subject to the terms and conditions provided herein,
the Buyer shall pay to the Sellers a total purchase price of $19,586,000 (the
"Purchase Price"). The Purchase Price shall be paid at the Closing by the Buyer
to the Sellers by delivery of Promissory Notes of the Buyer (the "Notes"), each
in the form of EXHIBIT B-1 as to $14,600,000, in the form of EXHIBIT B-2 as to
$3,085,000 and in the form of EXHIBIT B-3 as to $1,901,000, payable to the
Sellers in the principal amounts shown on EXHIBIT A-2. The Buyer acknowledges
that the Shares are currently subject to a pledge executed by the Sellers
securing indebtedness of the Company totalling approximately $19.5 million at
September 30, 1999. The Buyer agrees that it will secure its obligations under
the Notes by a pledge of the Shares to the Sellers pursuant to a Security
Agreement and Collateral Agency Agreement in the form of EXHIBIT C hereto, which
pledge shall be junior only to the currently existing pledge and which pledge
shall be a first priority pledge as soon as such consent of existing
indebtedness has been repaid and such currently existing pledge has been
released. At the Closing, each Seller shall deliver to the Buyer the certificate
or certificates representing the Shares being sold by such Seller accompanied by
a stock power duly endorsed in blank by such Seller and otherwise in form
reasonably acceptable to the Buyer. Gary D. Engle and James A Coyne agree that,
effective as of the Closing the Buyer shall also cancel the option dated

<PAGE>

December 30, 1997, held by Gary D. Engle to purchase 40,000 shares of Common
Stock of the Buyer and the option dated December 30, 1997, held by James A.
Coyne to purchase 40,000 shares of Common Stock of the Buyer (together, the
"Options").

1.3. CLOSING. The closing of the transaction provided for in this
Agreement (the "Closing") shall take place at the offices of Nixon Peabody LLP,
101 Federal Street, Boston, Massachusetts, at 10:00 a.m. on December 22, 1999,
or such other date as may be mutually agreed upon in writing by the parties (the
"Closing Date").

ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS

The Sellers jointly and severally represent and warrant to the Buyer as
follows:

2.1. OWNERSHIP OF SHARES.

(a) Each Seller has good and marketable title to the Shares to
be sold to the Buyer by him pursuant to this Agreement, free and clear of all
restrictions, liens, charges, encumbrances, options and adverse claims or rights
whatsoever except as set forth on SCHEDULE 2.1. Except as set forth on SCHEDULE
2.1, there are no voting trusts, proxies or other arrangements or understandings
to which any Seller is a party with respect to the Shares. EXHIBIT A-1 sets
forth a true and correct listing of (i) all shares of Voting and Non-Voting
Common Stock of the Company owned by each Seller and (ii) the Shares to be sold
to the Buyer by each Seller hereunder.

(b) Each Seller has the full right, power and authority to
enter into this Agreement and to transfer, convey and sell to the Buyer the
Shares to be sold by him pursuant to this Agreement and, upon consummation of
the purchase contemplated by this Agreement, the Buyer will acquire from each
Seller good and marketable title to such Shares, free and clear of all
restrictions, liens, charges, encumbrances, options and adverse claims or rights
whatsoever except as set forth on SCHEDULE 2.1. This Agreement constitutes the
valid and binding obligation of each Seller enforceable in accordance with its
terms.

(c) No Seller is a party to, subject to or bound by any
agreement or any judgment, order, writ, prohibition, injunction or decree of any
court or other governmental body that would prevent the execution or delivery of
this Agreement by him or the transfer, conveyance and sale of the Shares to be
sold by him to the Buyer pursuant to this Agreement.

2.2. ORGANIZATION, GOOD STANDING AND AUTHORITY OF THE COMPANY. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite power and
authority to own its properties and assets and to carry on its business as it is
now being conducted. The Company is duly qualified to do business and is in good
standing as a foreign corporation in the Commonwealth of Massachusetts.

2.3. CHARTER DOCUMENTS OF THE COMPANY. The Sellers have provided the
Buyer with true, accurate and complete copies of the Certificate of
Incorporation and By-Laws of the Company. Such Certificate of Incorporation and
By-Laws are in full force and effect. The Company is not in default under or in
violation of any provision of its Certificate of Incorporation or By-Laws. The
minute and stock record book of the Company (which has been made available for
inspection by the Buyer and its representatives) is true and complete in all
material respects.

2.4. NO COMPANY DEFAULT; NO CONFLICT WITH OTHER INSTRUMENTS. The
Company is not in default under or in violation of any material agreement or
other instrument or contract to which it is a party or by which it or any of its
properties or assets is bound or any judgment, decree, order, statute, rule or
regulation to which it is subject or by which it or any of its properties or
assets is bound. The execution, delivery and performance of this Agreement by
the Sellers and the consummation of the transactions contemplated hereby do not
and will not constitute a default under any of the terms, conditions or
provisions of (i) the Certificate of Incorporation or By-Laws of the Company or
(ii) any material agreement or other instrument or contract or any judgment,
decree, order, statute, rule or regulation to which the Company is a party or
subject or result in the creation of any lien, charge or encumbrance on any of
the properties or assets of the Company or the Shares.

<PAGE>

2.5. CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists of 500 shares of Voting Common Stock, $.01 par value, and 2,500
shares of Non-Voting Common Stock, $.01 par value. All such shares are issued
and outstanding. The Shares are duly authorized, validly issued, fully paid and
nonassessable. There are no outstanding options, convertible securities,
warrants, rights agreements, restrictions, contracts, calls or commitments of
any character which entitle any person to acquire from the Company or otherwise
relate to the issuance by the Company of any shares of capital stock of the
Company or, except as set forth in SCHEDULE 2.1, which restrict or otherwise
relate to or provide for the transfer of any of such shares. Except as set forth
on SCHEDULE 2.1, there are no voting trusts, proxies or other arrangements or
understandings to which the Company or a Seller is a party with respect to the
voting of the Shares.

2.6. SUBSIDIARIES, OTHER INTERESTS, ETC., OF THE COMPANY. The Company
has one subsidiary, AFG ASIT Corporation ("AFG ASIT"). AFG ASIT is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has the requisite power and authority to own
its properties and assets and to carry on its business as it is now being
conducted. AFG ASIT is the Managing Trustee of four Delaware business trusts,
AFG Investment Trust A, AFG Investment Trust B, AFG Investment Trust C and AFG
Investment Trust D (collectively the "Trusts"), each of which is a reporting
company under the Securities Exchange Act of 1934 (the "'34 Act"). The
authorized capital stock of AFG ASIT consists of 30,000 shares of Common Stock,
$.01 par value, of which 1,000 shares are issued and outstanding and owned by
the Company (the "AFG ASIT Shares"). The AFG ASIT Shares are duly authorized,
validly issued, fully paid and nonassessable. There are no outstanding options,
convertible securities, warrants, rights agreements, restrictions, contracts,
calls or commitments of any character which entitle any person to acquire from
AFG ASIT or otherwise relate to the issuance by AFG ASIT of any shares of
capital stock of AFG ASIT or, except as set forth on SCHEDULE 2.6, which
restrict or otherwise relate to or provide for the transfer of any of such
shares. Except for the Voting Trust Agreement dated December 16, 1999, between
the Company and Gary D. Engle, as Trustee, and except as set forth on SCHEDULE
2.6, there are no voting trusts, proxies or other arrangements or understandings
to which AFG ASIT or the Company is a party with respect to the voting of the
AFG ASIT Shares. The Company also owns an aggregate of 7,980,139 Class B
Subordinated Beneficiary Interests in the Trusts, as shown on SCHEDULE 2.6 (the
"Class B Interests"). AFG ASIT as Managing Trustee has the powers, duties,
rights, obligations and economic interests set forth in the Second Amended and
Restated Declaration of Trust, as amended to date, of each of the Trusts (each a
"Declaration of Trust" and collectively the "Declarations of Trust"). The
Company, as record and beneficial owner of the Class B Interests, is entitled to
all rights with respect to the Class B Interests set forth in the Declaration of
Trust of each of the Trusts, including the rights to distributions and
allocations set forth therein. Except as provided in the Declaration of Trust of
each of the Trusts and except as set forth on SCHEDULE 2.6, there are no
agreements, restrictions, contracts, calls or commitments which restrict or
otherwise relate to or provide for the transfer of any of the Class B Interests.
Except for the Voting Trust Agreement dated December 16, 1999, between the
Company and Gary D. Engle, as Trustee, and except as set forth on SCHEDULE 2.6,
there are no voting trusts, proxies or other arrangements or understandings to
which the Company is a party with respect to the voting of the Class B
Interests. The Company has good and marketable title to the AFG ASIT Shares and
the Class B Interests, free and clear of all restrictions, liens, charges,
encumbrances, options and adverse claims or rights whatsoever except as set
forth on SCHEDULE 2.6. The Company does not own, directly or indirectly, any
capital stock or other equity or ownership interest in any other corporation,
partnership, association, trust, joint venture or other entity.

2.7. ORGANIZATIONAL DOCUMENTS OF AFG ASIT, TRUSTS. The Sellers have
provided the Buyer with true, accurate and complete copies of the Articles of
Organization and By-Laws of AFG ASIT and with the Declaration of Trust of each
of the Trusts, all as amended to date. Such Articles of Organization, By-Laws
and Declarations of Trust are in full force and effect. AFG ASIT is not in
violation of any provision of its Articles of Organization or By-Laws or of the
Declaration of Trust of any of the Trusts. None of the Trusts is in violation of
its Declaration of Trust. The minute and stock record books of AFG ASIT (which
have been made available for inspection by the Buyer and its representatives)
are true and complete in all material respects.

2.8. NO AFG ASIT DEFAULT; NO CONFLICT WITH OTHER INSTRUMENTS. AFG ASIT
is not in default under or in violation of any material agreement or other
instrument or contract to which it is a party or by which it or any of its
properties or assets is bound or any judgment, decree, order, statute, rule or
regulation to which it is subject or by which it or any of its properties or
assets is bound. The execution, delivery and performance of this Agreement by
the Sellers and the consummation of the transactions contemplated hereby do not
and will not constitute a default under any of the terms, conditions or
provisions of (i) the Articles of Organization or By-Laws of AFG ASIT or the
Declarations of Trust of the Trusts or (ii) any material agreement or other
instrument or contract or any judgment, decree, order, statute rule or
regulation to which AFG ASIT is a party or subject or result in the creation of
any lien, charge or encumbrance on any of the properties or assets of AFG ASIT.

<PAGE>

2.9. SEC FILINGS. The Managing Trustee on behalf of the Trusts has
filed all forms, reports and documents required to be filed by them with the
Securities and Exchange Commission (the "SEC") since December 31, 1995 (the "SEC
Reports"). The SEC Reports, including all SEC Reports filed after the date
hereof and prior to the Closing, (i) were or will be prepared in accordance with
the Securities Act of 1933 (the "'33 Act") and the '34 Act, as the case may be,
and the rules and regulations thereunder and (ii) did not at the time they were
filed, or will not at the time they are filed, contain any untrue statement of a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. The Sellers have provided the Buyer with true, accurate
and complete copies of the Annual Report on Form 10-K for the year ended
December 31, 1998, and the Quarterly Report on Form 10-Q for the periods ended
June 30 and September 30, 1999, filed with the SEC under the '34 Act by each of
the Trusts and (ii) the Prospectus dated June 10, 1997, of each of the Trusts
relating to the offering by such Trust under the '33 Act of the Class B
Subordinated Interests of which the Class B Interests are a part.

2.10. FINANCIAL STATEMENTS; ABSENCE OF UNDISCLOSED LIABILITIES. The
Sellers have delivered to the Buyer a copy of the audited consolidated balance
sheet of the Company as of December 31, 1998, and the related consolidated
statement of operations, consolidated statement of changes in stockholders'
equity and consolidated statement of cash flows and the notes thereto for the
period then ended and the unaudited consolidated balance sheet of the Company as
of September 30, 1999 (the September 1999 balance sheet is hereinafter referred
to as the "Balance Sheet"). All such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated (except as otherwise indicated in the
notes to such financial statements and, in the case of the Balance Sheet,
subject to year end adjustments) and fairly present the financial condition and
results of operations of the Company as, at and for the periods indicated.
Except as set forth on SCHEDULE 2.10 or incurred in connection with the
transactions contemplated hereby, the Company is not subject to any liability
other than (i) liabilities reflected, reserved against or otherwise disclosed in
the Balance Sheet and (ii) liabilities arising since the date of the Balance
Sheet in the ordinary course of business consistent (in amount and kind) with
past practice which do not, individually or in the aggregate, materially
adversely affect the business, assets, liabilities, condition (financial or
otherwise), results of operations or prospects of the Company.

2.11. OTHER PERSONAL PROPERTY. Except as described in SECTION 2.6,
neither the Company nor AFG ASIT has any personal property.

2.12. REAL PROPERTY. Neither the Company nor AFG ASIT currently owns
or leases nor has the Company or AFG ASIT ever owned or leased any real property
or interests in real property.

2.13. NO MATERIAL ADVERSE CHANGE. Except as set forth on SCHEDULE 2.13
since the date of the Balance Sheet there has not been any material adverse
change in, relating to or affecting the business, assets, condition (financial
or otherwise), results of operations or prospects of the Company, and no facts
are known which may reasonably be expected to give rise to any such material
change.

2.14. TAXES. All taxes have been properly paid or accrued and all tax
returns currently required to be filed have been properly filed with respect to
the Company and all of its operations, income, profits and assets in accordance
with the requirements of the applicable laws of all federal, state, local and
foreign jurisdictions. No waivers of the statute of limitations are in effect
with respect to federal or state income taxes payable by or on behalf of the
Company. Except as set forth on SCHEDULE 2.14, none of the federal or state
income tax returns filed by the Company with respect to its last six fiscal
years have been examined by the Internal Revenue Service (the "IRS") or any
similar state, local or foreign tax authority, and none of the periods during
which any assessment may be made by the IRS or any similar state, local or
foreign tax authority has been extended.

2.15. CONTRACTS, COMMITMENTS, ETC. Except as set forth in SCHEDULE 2.15
and except for the Declarations of Trust of each of the Trusts, neither the
Company nor AFG ASIT is, as of the date of this Agreement, a party to or bound
by any contracts or agreements with third parties.

2.16. COMPLIANCE WITH LAWS. The Company and AFG ASIT are in compliance
with all applicable federal, state and local laws, rules, regulations and
ordinances.

2.17. LITIGATION. Except as described in SCHEDULE 2.17, no action,
suit, arbitration, mediation, investigation or proceeding is pending or, to the
knowledge of the Sellers, threatened before any court, administrative agency or
tribunal which affects or involves the Company, AFG ASIT or any of the Sellers
or any of their respective rights or properties or which seeks

<PAGE>

to prevent or challenge the transactions contemplated hereby. There is no
existing state of facts, circumstances or contemplated events that is likely to
give rise to an action, proceeding or investigation against the Company or AFG
ASIT.

2.18. ENVIRONMENTAL PROTECTION.

(a) The Company and AFG ASIT have complied in all material
respects with all federal and state environmental, health and safety laws, codes
and ordinances and all rules, regulations and ecological standards promulgated
thereunder ("Environmental Laws").

(b) There is no pending or, to the knowledge of the Sellers,
threatened civil, criminal or administrative action, demand, hearing, notice of
violation, notice or demand letter that affects or applies to the Company or AFG
ASIT, or their respective businesses, properties or assets, relating in any way
to any Environmental Laws or any regulation, code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered, promulgated or
approved thereunder.

2.19. DIVIDENDS AND DISTRIBUTIONS TO THE SELLERS. Except as described
in SCHEDULE 2.19, the Company has never declared or paid any dividends or made
any other distributions to any holder of its outstanding capital stock or
redeemed any shares of its capital stock.

2.20. INSURANCE. The Company and AFG ASIT are named insureds on
policies of insurance purchased and maintained by an affiliate of the Company
providing coverage to the Company and AFG ASIT of such types and in such amounts
as are legally required or are otherwise appropriate for their respective
businesses. Each such policy of insurance is legal, valid, binding, enforceable
and in full force and effect. Following the consummation of the transaction
contemplated hereby, neither the Company nor AFG ASIT will be covered by any of
such policies. There is no default with respect to any provision contained in
any such policy, nor has the Company or AFG ASIT failed to give any notice or
present any claim under any such policy in due and timely fashion. None of the
Trusts is a named insured on policies of insurance, but each lessee of equipment
owned by any of the Trusts is required to insure the leased equipment under the
terms if its equipment lease.

2.21. REQUIRED CONSENTS AND APPROVALS. Except as set forth on SCHEDULE
2.21, the execution and delivery of this Agreement by the Sellers does not, and
the performance of this Agreement by the Sellers will not, require any consent,
approval, order, authorization, registration, qualification or designation from
any governmental authority or pursuant to any agreement or other instrument by
which the Sellers, the Company or AFG ASIT or any of their respective properties
is bound.

2.22. EMPLOYEE BENEFITS. Neither the Company nor AFG ASIT now has, or
has ever had, any employees. Neither the Company nor AFG ASIT has ever made, or
had any obligation to make, any contributions to any employee benefit plan
within the meaning of Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended. Neither the Company nor AFG ASIT has any liability with
respect to any such employee benefit plan maintained by an affiliate.

2.23. LICENSES AND PERMITS. The Company, AFG ASIT and the Trusts have
each obtained all licenses, permits and other approvals required from federal,
state or local authorities, if any, in order for them to conduct their
respective businesses as currently conducted.

2.24. NO BROKER. No broker, finder or investment banker is entitled to
any brokerage, finders or other fee or commission in connection with the
transaction contemplated by this Agreement based upon arrangements made by or on
behalf of the Company, AFG ASIT or the Sellers.

2.25. DISCLOSURE. The representations and warranties contained in this
Article II (including the schedules required to be delivered by the Sellers to
the Buyer pursuant to this Agreement) and any certificate or other instrument
furnished or to be furnished by the Sellers to the Buyer hereunder do not
contain and will not contain any untrue statement of a material fact or omit to
state any fact necessary in order to make the statements and information
contained in this Article II not misleading. There is no material fact relating
to the Company or AFG ASIT or their respective assets, properties or businesses
which may materially adversely affect the same which has not been disclosed in
writing in this Agreement to the Buyer.

<PAGE>

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER

The Buyer represents and warrants to each of the Sellers as follows:

3.1. ORGANIZATION, GOOD STANDING AND AUTHORITY OF THE BUYER. The Buyer
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite power and authority to own,
lease and operate all its properties and assets and to carry on its business as
it is now being conducted.

3.2. AUTHORIZATION. The Buyer has full corporate power and authority to
enter into this Agreement and the other transactions contemplated hereby and to
carry out its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by the Board of Directors of the Buyer and, except for the
approval of the stockholders of the Buyer to the issuance of the shares of
Common Stock of the Buyer contemplated to be issued to the Sellers no other
corporate proceedings or actions on the part of the Buyer are necessary to
authorize this Agreement and the transactions contemplated herein. This
Agreement constitutes a valid and binding obligation of the Buyer enforceable in
accordance with its terms.

3.3. NO BROKER. Except for Josephthal & Co. Inc. in connection with
its "fairness opinion," no broker, finder or investment banker is entitled to
any brokerage, finders or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Buyer.

ARTICLE IV
COVENANTS OF SELLERS

The Sellers will comply with the following covenants during the period
between the date hereof and the earlier of the date on which the Buyer purchases
15 percent of the Company not being purchased by the Buyer hereunder or the put
and call agreement relating to the purchase of such 15 percent expires:

4.1. ACCESS. The Sellers shall give the Buyer and its counsel,
accountants and other representatives full access, at reasonable times on
reasonable notice, throughout the period prior to the Closing Date, to all of
the properties, assets, books and records of the Company or relating thereto and
the Sellers shall furnish to the Buyer during such period all information
concerning the Company and its affairs as the Buyer may reasonably request.

4.2. MAINTENANCE OF EXISTENCE AND GOOD STANDING. The Sellers shall
cause the Company, AFG ASIT and the Trusts to maintain their respective
existences as corporations or business trusts, as applicable, in good standing
under the laws of the State of Delaware and the Commonwealth of Massachusetts,
as applicable, and under the laws of any other jurisdiction in which they are
qualified to do business as foreign corporations or entities.

4.3. CONDUCT OF BUSINESS IN ORDINARY COURSE. The Sellers shall cause
the Company, AFG ASIT and the Trusts to conduct their respective businesses only
in the ordinary course, unless the Sellers shall obtain the written consent of
the Buyer to any act or transaction by the Company, AFG ASIT or any of the
Trusts or on behalf of any of them which is not in the ordinary course of its
business.

4.4. PRESERVATION OF ORGANIZATION. The Sellers shall cause the Company,
AFG ASIT and the Trusts to preserve their respective business organizations, and
use their best efforts to preserve their business relations and to retain the
services of their present officers.

4.5. PRESERVATION OF PROPERTIES. The Sellers shall cause the Company,
AFG ASIT and the Trusts to maintain and preserve the properties owned or used by
them in their respective businesses.

4.6. PERFORMANCE OF CONTRACTS. The Sellers shall cause the Company,
AFG ASIT and the Trusts to fulfill their respective contractual obligations in
all material respects.

4.7. TAXES AND SIMILAR CHARGES. The Sellers shall cause the Company,
AFG ASIT and the Trusts to punctually pay and discharge all taxes, assessments
and governmental charges lawfully imposed upon them or any of their respective

<PAGE>

properties or those properties used by them in their respective businesses or
upon the income and profits thereof and to file all tax returns required to be
filed by them.

4.8. COMPLIANCE WITH LAWS. The Sellers shall cause the Company, AFG
ASIT and the Trusts to comply in all material respects with all laws,
governmental regulations, rules and ordinances, and judicial orders, judgments,
decrees and similar determinations to which they and their respective properties
are subject.

4.9. INSURANCE. The Sellers shall cause the Company and AFG ASIT to
continue as named insureds on the insurance policies referred to in Section
2.21, and shall cause such policies to be continued in full force and effect or
be replaced with other policies providing substantially equivalent or greater
coverage.

4.10. NOTICE OF BREACH, LITIGATION, ETC. The Sellers will promptly give
written notice to the Buyer of (i) the occurrence of any event or the failure of
any event to occur which results or will result in a breach of or a failure to
comply with any representation, warranty, covenant, condition or agreement by
the Sellers contained herein or (ii) the commencement of any litigation,
proceeding, investigation or inquiry seeking to enjoin or prevent the
consummation of the transactions contemplated by this Agreement or to obtain
damages or other relief by reason of such consummation.

4.11. CONSENTS FROM THIRD PARTIES. The Sellers will use their best
efforts to obtain the consent of any party necessary to approve the transactions
contemplated hereby.

4.12. SATISFACTION OF REPRESENTATIONS AND CONDITIONS. The Sellers will
use their best efforts to take all actions necessary to render all
representations and warranties made by them herein accurate on and as of the
Closing Date in all material respects and to satisfy each covenant or condition
to be performed or satisfied by them on or before the Closing Date.

4.13. AMENDMENT OF ARTICLES OR BY-LAWS. The Sellers will not amend nor
permit to be amended the Certificate of Incorporation of the Company, the
Articles of Organization of AFG ASIT or the By-Laws of either of them or the
Declaration of Trust of any of the Trusts or make any change in the authorized
or issued capital stock of either the Company or AFG ASIT or the beneficiary
interests of any of the Trusts without the written consent of the Buyer.

4.14. PUBLIC ANNOUNCEMENTS. The Sellers will not make or permit to be
made any public announcement or disclosure concerning the transactions
contemplated hereby without the written consent of the Buyer.

ARTICLE V
COVENANTS OF THE BUYER

The Buyer covenants as follows with respect to the period between the
date hereof and the Closing Date:

5.1. CONSENTS FROM THIRD PARTIES. The Buyer will use its best efforts
to obtain the consent of any party, including its stockholders and any
governmental authority, necessary to approve the transactions contemplated
hereby.

ARTICLE VI
CONDITIONS TO OBLIGATIONS OF SELLERS

The obligation of the Sellers to sell and deliver the Shares is subject
to the satisfaction (or waiver by the Sellers) on or prior to the Closing Date
of the following conditions:

6.1. REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties of the Buyer contained in this Agreement shall be true and correct on
and as of the Closing Date as if such representations and warranties were made
on and as of that date.

6.2. COMPLIANCE WITH AGREEMENT. The Buyer shall have performed and
complied in all material respects with all its obligations and covenants under
this Agreement to be performed or complied with by it prior to the Closing Date.

<PAGE>

6.3. CONSENTS. The consent of every party necessary to approve the
transactions contemplated hereby shall have been obtained.

6.4. NO LITIGATION. At the Closing Date, no litigation, proceeding,
investigation or inquiry shall be pending or threatened seeking to enjoin or
prevent the consummation of the transactions contemplated by this Agreement or
to obtain damages or other relief by reason of such consummation.

6.5. PUT/CALL AGREEMENT. The Buyer and the Sellers shall have executed
and delivered an agreement in the form of EXHIBIT D hereto giving the Buyer a
call right to purchase from the Sellers, and giving the Sellers a put right to
sell to the Buyer, the 15 percent of the Voting and Non-Voting Common Stock of
the Company not being sold to the Buyer hereunder.

6.6. REGISTRATION RIGHTS AGREEMENT. The Buyer and the Sellers shall
have executed and delivered a registration rights agreement in the form of
EXHIBIT E hereto.

6.7. OPINION OF COUNSEL. The Sellers shall have received from Shefsky &
Froelich Ltd., counsel to the Special Committee of the Board of Directors of the
Buyer, an opinion as of the Closing Date in form and substance reasonably
acceptable to counsel to the Sellers as to certain tax matters.

ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE BUYER

The obligation of the Buyer to purchase and pay for the Shares is
subject to the satisfaction (or waiver by the Buyer, provided, however, that the
Buyer cannot waive obtaining the consent of its stockholders) on or prior to the
Closing Date of the following conditions:

7.1. REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties of the Sellers contained in this Agreement shall be true and correct
on and as of the Closing Date as if such representations and warranties were
made on and as of that date.

7.2. COMPLIANCE WITH AGREEMENT. The Sellers shall have performed and
complied in all material respects with all their obligations and covenants under
this Agreement to be performed or complied with prior to the Closing Date.

7.3. SELLERS' CERTIFICATE. The Buyer shall have received a Certificate
dated as of the Closing Date executed by each of the Sellers to the effect that
the representations and warranties of the Sellers contained in this Agreement
are true and correct on and as of that date and that the Sellers have performed
or complied with all their obligations and covenants to be performed or complied
with by them prior to the Closing Date.

7.4. CONSENTS. The consent of every party necessary to approve the
transactions contemplated hereby shall have been obtained.

7.5. NO LITIGATION. At the Closing Date, no litigation, proceeding,
investigation or inquiry shall be pending or threatened seeking to enjoin or
prevent the consummation of the transactions contemplated by this Agreement or
to obtain damages or other relief by reason of such consummation.

7.6. DUE DILIGENCE REVIEW. The Buyer and its representatives shall have
conducted a due diligence review of the Company and in the Buyer's sole
discretion, the Buyer shall be satisfied on the basis of such review that Buyer
should proceed with the transactions contemplated hereby.

7.7. PUT/CALL AGREEMENT. The Buyer and the Sellers shall have executed
and delivered an agreement in the form of EXHIBIT D hereto giving the Buyer a
call right to purchase from the Sellers, and giving the Sellers a put right to
sell to the Buyer, the 15 percent of the Voting and Non-Voting Common Stock of
the Company not being sold to the Buyer hereunder.

7.8. OPTIONS. The Options shall have been canceled with the consent
of Gary D. Engle and James A. Coyne.

<PAGE>

7.9. OPINION OF COUNSEL. The Buyer shall have received from Nixon
Peabody LLP, counsel to the Sellers, an opinion as of the Closing Date in form
and substance reasonably acceptable to counsel to the Special Committee of the
Board of Directors of the Buyer as to ownership of the shares and certain
corporate and trust matters.

ARTICLE VIII
INDEMNIFICATION; SET OFF

8.1. INDEMNIFICATION BY THE SELLERS. The Sellers, jointly and
severally, shall indemnify and hold harmless the Buyer, its officers, directors,
controlling persons and affiliates (including, without limitation, the Company)
from and against any loss, liability, claim, damage (including, incidental and
consequential damages), expense (including reasonable legal fees and costs), or
diminution in value arising, directly or indirectly, from or in connection with
any (i) breach or inaccuracy of any of the representations or warranties made by
the Sellers in this Agreement, (ii) breach of any covenant or agreement of the
Sellers contained in this Agreement, and (iii) any and all costs and expenses
(including but not limited to legal costs and expenses) incurred by the Buyer in
connection with the enforcement of its rights hereunder. The representations and
warranties of the Sellers contained in this Agreement or any Schedules hereto,
other than the Special Warranties as defined below, shall survive until the
18-month anniversary of the Closing Date and thereafter shall terminate and be
of no further force or effect, except as to matters as to which the Buyer has
given notice to the Sellers of the basis for indemnification during such
18-month period.

For purposes of this Agreement, the Special Warranties shall be the
representations and warranties of the Sellers contained in (i) Section 2.1
hereof regarding the Shares and (ii) Section 2.14 hereof regarding certain tax
matters. The Special Warranties shall survive indefinitely. This Section 8.1 may
not be amended without the approval of a majority of the independent directors
of the Buyer.

8.2. INDEMNIFICATION BY THE BUYER. The Buyer shall indemnify and hold
harmless the Sellers from and against any and all loss, liability, claim,
damage, expense (including reasonable legal fees and costs), or diminution in
value arising, directly or indirectly, from or in connection with any (i) breach
or inaccuracy of any of the representations or warranties made by the Buyer in
this Agreement and (ii) breach of any covenant or agreement of the Buyer
contained in this Agreement.

8.3. PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS.

(a) Promptly after receipt by an indemnified party under
Section 8.1 or 8.2 hereof of notice of the commencement of any claim, demand,
action or proceeding ("Proceeding") against it, such indemnified party will, if
a claim is to be made against an indemnifying party under such Section, give
notice to indemnifying party of the commencement of such claim, but the failure
to notify the indemnifying party will not relieve the indemnifying party of any
liability that it may have to any indemnified party, except to the extent that
the indemnifying party demonstrates that the defense of such action is
prejudiced by the indemnifying party's failure to give such notice.

(b) If any Proceeding referred to in Section 8.3(a) is brought
against an indemnified party and it gives notice to the indemnifying party of
the commencement of such Proceeding, the indemnifying party will be entitled to
participate in such Proceeding and, to the extent that it wishes (unless the
indemnifying party fails to provide reasonable assurance to the indemnified
party of its financial capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding), to assume the defense of such
Proceeding with counsel satisfactory to the indemnified party and, after notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified party under this
Article IV for any fees of other counsel or any other expenses with respect to
the defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding, other than
reasonable costs of investigation. If the indemnifying party assumes the defense
of a Proceeding, (i) it will be conclusively established for purposes of this
Agreement that the claims made in that Proceeding are within the scope of and
subject to indemnification and (ii) no compromise or settlement of such claims
may be effected by the indemnifying party without the indemnified party's
written consent. If notice is given to an indemnifying party of the commencement
of any Proceeding and the indemnifying party does not, within ten days after the
indemnified party's notice is given, give notice to the indemnified party of its
election to assume the defense of such Proceeding, the indemnifying party will
be bound by any determination made in such Proceeding

<PAGE>

or any compromise or settlement effected by the indemnified party.

8.4. BUYER'S RIGHT OF OFFSET. In addition to other remedies available
to the Buyer at law or in equity, the Buyer shall have the right to offset any
and all sums due from the Sellers to the Buyer pursuant to Section 8.1 hereof
against future payments due from the Buyer to the Sellers under the Notes. As an
absolute condition precedent, at least ten days prior to any such offset, the
Buyer shall provide the Sellers with a written notice describing in reasonable
detail the basis for such offset.

ARTICLE IX
RIGHT TO PROCEED, WAIVER, MODIFICATION AND TERMINATION

9.1. RIGHT TO PROCEED. Anything in this Agreement to the contrary
notwithstanding, if any of the conditions specified in Article VII has not been
satisfied at the Closing, the Buyer shall have the right to proceed with the
transactions contemplated hereby; if any of the conditions specified in Article
VI hereof has not been satisfied at the Closing, the Sellers shall have the
right to proceed with the transactions contemplated hereby.

9.2. TERMINATION AND ABANDONMENT. This Agreement may be terminated
and the transactions hereby provided for may be abandoned:

(a) by mutual consent of the Buyer and the Sellers;

(b) by the Buyer if any of the conditions provided for in
Article VII of this Agreement has not been satisfied on or before the Closing
Date or in the reasonable judgment of the Buyer will not be satisfied at any
time prior to the Closing Date and has not been waived by the Buyer;

(c) by the Sellers if any of the conditions provided for in
Article VI has not been satisfied on or before the Closing Date or in the
reasonable judgment of the Sellers will not be satisfied at any time prior to
the Closing Date and has not been waived by the Sellers; and

(d) by of the Buyer or by the Sellers if the Closing shall not
have occurred by March 31, 2000; PROVIDED, HOWEVER, that the party terminating
this Agreement in accordance with Sections 9.2(b), (c) or (d) has satisfied or
is ready, willing and able to satisfy all of its conditions to Closing and is
not then in breach of any of its obligations hereunder.

ARTICLE X
OTHER PROVISIONS

10.1. GOVERNING LAW AND JURISDICTION. This Agreement and the rights and
obligations of the parties hereunder shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts without regard to
choice or conflict of law principles. The parties hereby submit to the
jurisdiction of the courts of The Commonwealth of Massachusetts and the United
States District Court for the Eastern District of Massachusetts in any action or
proceeding arising out of or relating to this Agreement. The parties hereby
waive any objection they may have to venue to any such action or proceeding and
to the defense of an inconvenient forum with respect thereto. Each party
consents to service of process in the manner provided for notices herein.

10.2. NOTICES. Unless otherwise provided herein, all notices required
or permitted by the terms hereof shall be in writing. Any written notice shall
become effective when received. All notices and other communications hereunder
shall be deemed to have been duly received if hand delivered or mailed, by
certified or registered mail, return receipt requested, postage prepaid or by
overnight delivery service to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section):

If to the Sellers:

Gary D. Engle
Equis Financial Group Limited Partnership
88 Broad Street

<PAGE>

Boston, MA 02110

with a copy to:

Nixon Peabody LLP
101 Federal Street
Boston, Massachusetts 02110-1832
Attn: Joan Barkhorn Hass

and, if to the Buyer:

Semele Group Inc.
One Canterbury Green, 8th Floor
Stamford, CT 06901
Attn: James A. Coyne

with a copy to:

Shefsky & Froelich Ltd.
444 North Michigan Avenue
Chicago, IL 60611
Attn: Michael J. Choate

10.3. AMENDMENT AND ALTERATION. No amendment or alteration of the terms
of this Agreement shall be valid or binding unless made in writing signed by the
appropriate parties to this Agreement specifically referring to this Agreement.

10.4. BINDING AGREEMENT/ASSIGNMENT. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors, permitted assigns and legal
representatives, PROVIDED, HOWEVER, that neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of each of the other parties.

10.5. COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

10.6. INTEGRATION. This Agreement represents the entire agreement among
the parties hereto with respect to the subject matter hereof and supersedes any
prior agreements, negotiations, discussions or understandings with respect to
the subject matter hereof.

IN WITNESS WHEREOF, the Buyer has caused this Agreement to be executed
by its duly authorized representative and the Sellers have executed this
Agreement, under seal, as of the date first set forth above.

THE SELLERS: SEMELE GROUP INC.

/s/ Gary D. Engle By: /s/ Gary M. Romano
- ------------------------------- ---------------------------
Gary D. Engle Gary M. Romano, Chief Financial
Officer

/s/ James A. Coyne
- -------------------------------
James A. Coyne

/s/ Wayne E. Engle
- -------------------------------
Wayne Ellis Engle, Trustee, Staci
Albury Trust u/i/t dated July 21, 1998

<PAGE>

/s/ Wayne E. Engle
- -------------------------------
Wayne Ellis Engle, Trustee, Kristen
Engle Trust u/i/t dated July 21, 1998

/s/ Wayne E. Engle
- -------------------------------
Wayne Ellis Engle, Trustee, Sydney
Peyton Engle Trust u/i/t dated July 21, 1998

/s/ Wayne E. Engle
- -------------------------------
Wayne Ellis Engle, Trustee, Zoe P.
Engle Trust u/i/t dated July 21, 1998

<PAGE>

EXHIBIT A-1

<TABLE>
<CAPTION>
Number of Shares Number of Shares
Name Owned to be Sold
---- ----- ----------

Voting Non-voting Voting Non-voting
------ ---------- ------ ----------

<S> <C> <C> <C> <C>
Gary D. Engle 450 1,240 382 1,054

James A. Coyne 50 960 42 816

Wayne Ellis Engle, Trustee, Staci Albury Trust None 75 None 64
u/i/t dated July 21, 1998

Wayne Ellis Engle, Trustee, Kristen Engle Trust None 75 None 64
u/i/t dated July 21, 1998

Wayne Ellis Engle, Trustee, Sydney Peyton Engle None 75 None 64
Trust u/i/t dated July 21, 1998

Wayne Ellis Engle, Trustee, Zoe P. Engle Trust None 75 None 64
---- -- ---- --
u/i/t dated July 21, 1998

TOTALS 500 2,500 424 2,126

</TABLE>

<PAGE>

EXHIBIT A-2

PURCHASE PRICE
--------------
NAME
----
Note B-1 Note B-2 Note B-3
-------- -------- --------

<S> <C> <C> <C>
Gary D. Engle $8,224,667 $1,737,883 $1,070,897

James A. Coyne 4,915,333 1,038,617 640,003

Wayne Ellis Engle, Trustee, Staci Albury Trust 365,000 77,125 47,525
u/i/t dated July 21, 1998

Wayne Ellis Engle, Trustee, Kristen Engle Trust 365,000 77,125 47,525
u/i/t dated July 21, 1998

Wayne Ellis Engle, Trustee, Sydney Peyton 365,000 77,125 47,525
Engle Trust u/i/t dated July 21, 1998

Wayne Ellis Engle, Trustee, Zoe P. Engle Trust 365,000 77,125 47,525
u/i/t dated July 21, 1998 -------- ------------- ------------

TOTALS $14,600,000 $3,085,000 $1,901,000

</TABLE>

<PAGE>

SEMELE GROUP INC.
ONE CANTERBURY GREEN
201 BROAD STREET
STAMFORD, CONNECTICUT 06901

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.

The undersigned hereby appoints Gary D. Engle and James A. Coyne, and
each of them, as Proxies, with the power to appoint their substitutes, and
hereby authorizes them to represent and vote, as designated below, all the
shares of Common Stock, par value $.10 per share ("Common Stock"), of Semele
Group Inc. (the "Company") held of record by the undersigned on _______________,
at the Annual Meeting of Stockholders when convened on __________________, and
any adjournment thereof.

THIS PROXY, IF PROPERLY EXECUTED AND RECEIVED IN TIME FOR VOTING, WILL
BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY, IF PROPERLY EXECUTED AND RECEIVED IN TIME FOR
VOTING, WILL BE VOTED FOR PROPOSALS 1 THROUGH 3, AND IN ACCORDANCE WITH THE
JUDGMENT OF THE PERSONS ACTING UNDER THE PROXIES ON OTHER MATTERS PRESENTED FOR
A VOTE.

/x/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.

1. Election of FOR AGAINST PROPOSAL to elect two directors
Directors / / / / to hold office until the 2002

Annual Meeting of Stockholders,
or otherwise as provided in the
Company's By-Laws(check one box).
NOMINEES: Joseph W. Bartlett,
Robert M. Ungerleider

For, except vote withheld from the following nominee(s):

- -------------------------------------------

2. Approval of FOR AGAINST ABSTAIN PROPOSAL to issue shares of the
Issuance of / / / / / / Company's Common Stock in
Stock to connection with the potential
Acquire 15% of acquisition of 15% of Equis II
Equis II which is owned by Gary D.
Engle,James A. Coyne and
certain trusts for the benefit
of Mr. Engle's children (check
one box).

3. Selection of FOR AGAINST ABSTAIN PROPOSAL to concur in the
Independent / / / / / / appointment of Ernst & Young
Auditor LLP as the Company's
independent auditor for the
fiscal year ending December
31, 1999.

PLEASE PROMPTLY MARK, DATE, SIGN AND RETURN
THIS CARD USING THE ENCLOSED ENVELOPE

SIGNATURE(S)___________________________________________ DATE___________________

NOTE: Sign exactly as name appears above. If joint tenant, both should
sign. If attorney, executor, administrator, trustee or guardian, give
full title as such. If corporation, please sign in corporate

<PAGE>

name by President or authorized officer. If partnership, sign in full
partnership name by authorized person.