<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
---------------------------------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------------ --------------------
------------------------
For Quarter Ended September 30, 1997 Commission File No. 0-21396
AFG Investment Trust A
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3145953
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
88 Broad Street, Boston, MA 02110
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 854-5800
-------------------
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes No
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<PAGE>
AFG Investment Trust A
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
--------
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Statement of Financial Position
at September 30, 1997 and December 31, 1996........................................................3
Statement of Operations
for the three and nine months ended September 30, 1997 and 1996....................................4
Statement of Cash Flows
for the nine months ended September 30, 1997 and 1996..............................................5
Notes to the Financial Statements..................................................................6-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.........................................................12-17
PART II. OTHER INFORMATION:
Items 1-6..............................................................................................18
</TABLE>
2
<PAGE>
AFG Investment Trust A
STATEMENT OF FINANCIAL POSITION
September 30, 1997 and December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents.......................................................... $ 2,812,273 $ 1,832,248
Restricted cash.................................................................... 3,280,693 --
Rents receivable................................................................... 536,577 623,237
Accounts receivable--affiliate..................................................... 173,170 55,849
Note receivable--Banyan............................................................ 462,353 --
Investment in Banyan............................................................... 314,541 --
Equipment at cost, net of accumulated depreciation of $11,723,782
and $11,280,817 at September 30, 1997 and December 31, 1996, respectively........ 7,780,141 11,663,702
Organization costs, net of accumulated amortization of $5,000
and $4,667 at September 30, 1997 and December 31, 1996, respectively............. -- 333
----------- -----------
Total assets................................................................... $15,359,748 $14,175,369
----------- -----------
----------- -----------
LIABILITIES AND PARTICIPANTS' CAPITAL
Notes payable...................................................................... $ 2,756,322 $ 4,249,311
Accrued interest................................................................... 34,990 62,360
Accrued liabilities................................................................ 22,500 23,250
Accrued liabilities--affiliate..................................................... 44,577 38,293
Deferred rental income............................................................. 11,548 18,721
Cash distributions payable to participants......................................... 195,306 165,220
----------- -----------
Total liabilities.............................................................. 3,065,243 4,557,155
----------- -----------
----------- -----------
Participants' capital (deficit):
Managing Trustee................................................................. (33,364) (27,148)
Special Beneficiary.............................................................. (280,902) (231,225)
Class A Beneficiary Interests (549,218 Interests;
initial purchase price of $25 each)............................................ 8,630,426 9,876,587
Class B Beneficiary Interests (826,072 Interests;
initial purchase price of $5 each)............................................. 3,978,345 --
----------- -----------
Total participants' capital.................................................... 12,294,505 9,618,214
----------- -----------
Total liabilities and participants' capital.................................... $15,359,748 $14,175,369
----------- -----------
------------- -------------
</TABLE>
The accompanying notes are an integral part
of these financial statements.
3
<PAGE>
AFG Investment Trust A
STATEMENT OF OPERATIONS
for the three and nine months ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
---------------------- -----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Income:
Lease revenue............................... $1,010,273 $1,204,560 $3,577,408 $3,632,314
Interest income............................. 69,609 22,647 122,528 61,448
Gain (loss) on sale/exchange of equipment... 48,274 (3,362) (314,532) (153,423)
---------- ---------- ---------- ----------
Total income............................. 1,128,156 1,223,845 3,385,404 3,540,339
---------- ---------- ---------- ----------
Expenses:
Depreciation and amortization............... 823,115 885,534 2,617,136 2,749,045
Interest expense............................ 48,066 84,429 158,653 301,126
Equipment management fees--affiliate........ 44,045 46,024 138,430 139,027
Operating expenses--affiliate............... 130,518 30,102 229,778 87,639
---------- ---------- ---------- ----------
Total expenses......................... 1,045,744 1,046,089 3,143,997 3,276,837
---------- ---------- ---------- ----------
Net income.................................... $ 82,412 $ 177,756 $ 241,407 $ 263,502
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income
per Class A Beneficiary Interest............ $ -- $ 0.29 $ 0.26 $ 0.44
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
per Class B Beneficiary Interest............ $ -- $ -- $ -- $ --
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Cash distributions declared
per Class A Beneficiary Interest............ $ 1.71 $ 0.38 $ 2.53 $ 1.01
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
per Class B Beneficiary Interest............ $ 0.13 $ -- $ 0.13 $ --
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of
these financial statements.
4
<PAGE>
AFG Investment Trust A
STATEMENT OF CASH FLOWS
for the nine months ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from (used in) operating activities:
Net income............................................................................. $ 241,407 $ 263,502
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization........................................................ 2,617,136 2,749,045
Loss on sale/exchange of equipment................................................... 314,532 153,423
Changes in assets and liabilities
Decrease (increase) in:
rents receivable................................................................... 86,660 40,011
accounts receivable--affiliate..................................................... (117,321) 26,739
Increase (decrease) in:
accrued interest................................................................... (27,370) (23,176)
accrued liabilities................................................................ (750) (3,185)
accrued liabilities--affiliate..................................................... 6,284 12,073
deferred rental income............................................................. (7,173) (869)
---------- -----------
Net cash from operating activities............................................... 3,113,405 3,217,563
---------- -----------
Cash flows from (used in) investing activities:
Investment in Banyan stock........................................................... (314,541) --
Note receivable--Banyan.............................................................. (462,353) --
Purchase of equipment................................................................ -- (1,441,796)
Proceeds from equipment sales........................................................ 952,226 1,417,927
----------- -----------
Net cash from (used in) investing activities..................................... 175,332 (23,869)
----------- -----------
Cash flows from (used in) financing activities:
Proceeds from capital contributions.................................................. 4,130,360 --
Payment of offering costs............................................................ (41,304) --
Proceeds from notes payable.......................................................... -- 997,888
Principal payments--notes payable.................................................... (1,492,989) (2,338,385)
Distributions paid................................................................... (1,624,086) (571,912)
----------- -----------
Net cash from (used in) financing activities........................................... 971,981 (1,912,409)
----------- ------------
Net increase in cash and cash equivalents and restricted cash.......................... 4,260,718 1,281,285
Cash and cash equivalents at beginning of period....................................... 1,832,248 455,262
----------- -----------
Cash and cash equivalents and restricted cash at end of period......................... $ 6,092,966 $ 1,736,547
----------- -----------
----------- -----------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest.............................................. $ 186,023 $ 324,302
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part
of these financial statements.
5
<PAGE>
AFG Investment Trust A
Notes to the Financial Statements
September 30, 1997
(Unaudited)
NOTE 1--BASIS OF PRESENTATION
The financial statements presented herein are prepared in conformity with
generally accepted accounting principles and the instructions for preparing Form
10-Q under Rule 10-01 of Regulation S-X of the Securities and Exchange
Commission and are unaudited. As such, these financial statements do not include
all information and footnote disclosures required under generally accepted
accounting principles for complete financial statements and, accordingly, the
accompanying financial statements should be read in conjunction with the
footnotes presented in the 1996 Annual Report. Except as disclosed herein, there
has been no material change to the information presented in the footnotes to the
1996 Annual 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, 1997 and December 31, 1996 and results of operations
for the three and nine month periods ended September 30, 1997 and 1996 have been
made and are reflected.
NOTE 2--CASH
At September 30, 1997, the Trust had $5,985,000 invested in reverse
repurchase agreements secured by U.S. Treasury Bills or interests in U.S.
Government securities.
NOTE 3--REVENUE RECOGNITION
Rents are payable to the Trust monthly, quarterly or semi-annually and no
significant amounts are calculated on factors other than the passage of time.
Rents from Reno Air, Inc. ("Reno Air"), as provided for in the lease agreement
are adjusted monthly for changes in the London Inter-Bank Offered Rate
("LIBOR"). Future rents from Reno Air, included below, reflect the most recent
LIBOR effected rental payment. The leases are accounted for as operating leases
and are noncancellable. Rents received prior to their due dates are deferred.
Future minimum rents of $3,311,369 are due as follows:
For the year ending September 30, 1998.......... $2,117,491
1999.......... 522,031
2000.......... 257,249
2001.......... 189,023
2002.......... 179,149
Thereafter.......... 46,426
----------
Total.......... $3,311,369
----------
----------
6
<PAGE>
AFG Investment Trust A
Notes to the Financial Statements
(Continued)
NOTE 4--EQUIPMENT
The following is a summary of equipment owned by the Trust at September 30,
1997. In the opinion of Equis Financial Group Limited Partnership ("EFG"), the
acquisition cost of the equipment did not exceed its fair market value.
<TABLE>
<CAPTION>
Remaining
Lease Term Equipment
Equipment Type (Months) at Cost
- -------------- ------------- -------------
<S> <C> <C>
Aircraft............................................ 3-63 $ 6,814,662
Materials handling.................................. 0-36 3,378,952
Retail store fixtures............................... 0-18 2,992,236
Construction and mining............................. 0-63 1,945,484
Communications...................................... 15 1,802,423
Computers and peripherals........................... 0-62 1,539,743
Research and test................................... 0 459,282
Manufacturing....................................... 9 442,590
Energy systems...................................... 3 108,975
Photocopying........................................ 0-1 19,576
------------
Total equipment cost 19,503,923
Accumulated depreciation (11,723,782)
------------
Equipment, net of accumulated depreciation $ 7,780,141
------------
------------
</TABLE>
At September 30, 1997, the Trust's equipment portfolio included equipment
having a proportionate original cost of $6,322,233, representing approximately
32% of total equipment cost.
The summary above includes equipment held for sale or re-lease with a cost
and net book value of approximately $74,500 and $15,400, respectively, at
September 30, 1997. The Managing Trustee is actively seeking the sale or
re-lease of all equipment not on lease. In addition, the summary above also
includes equipment being leased on a month-to-month basis.
NOTE 5--INVESTMENT IN BANYAN
On April 30, 1997, the vessel partnerships, in which the Trust and
certain affiliated investment programs are limited partners and through which
the Trust and the affiliated investment programs shared economic interests in
three cargo vessels (the "Vessels") leased by KGJS/Gearbulk Holdings Limited
(the "Lessee"), exchanged their ownership interests in the Vessels for
aggregate consideration of $11,565,375, including 1,987,000 shares (at $1.50
per share) of common stock in Banyan Strategic Land Fund II ("Banyan") and a
purchase money note of $8,219,500 (the "Note"). Banyan is a Delaware
corporation organized on April 14, 1987 and has its common stock listed on
NASDAQ. Banyan, at the time of the exchange transaction, held certain real
estate investments, the only one of which remained unsold at September 30,
1997 being a 274 acre site near Malibu, California ("Rancho Malibu").
7
<PAGE>
AFG Investment Trust A
Notes to the Financial Statements
(Continued)
The exchange was organized through an intermediary company (Equis Exchange
LLC, 99% owned by Banyan and 1% owned by EFG), which was established for the
sole purpose of facilitating the exchange. There were no fees paid to EFG by
Equis Exchange LLC or Banyan or by any other party that otherwise would not have
been paid to EFG had the Trust sold its beneficial interest in the Vessels
directly to the Lessee. The Lessee prepaid all of its remaining contracted
rental obligations and purchased the Vessels in two closings occurring on May 6,
1997 and May 12, 1997. The Note was repaid with $3,800,000 of cash and delivery
of a $4,419,500 note from Banyan (the "Banyan Note").
As a result of the exchange transaction and its original 33% beneficial
ownership interest in Hato Arrow, one of the three Vessels, the Trust received
$433,036 in cash and is the beneficial owner of 209,694 shares of Banyan common
stock valued at $314,541 ($1.50 per share) and holds a beneficial interest in
the Banyan Note of $462,353. The Banyan Note will be amortized over three years
and bear an annual interest rate of 10%.
Cash equal to the amount of the Banyan Note was placed in escrow for the
benefit of Banyan in a segregated account pending the outcome of certain
shareholder proposals. Specifically, as part of the exchange, Banyan agreed to
seek consent ("Consent") from its shareholders to: (1) amend its certificate of
incorporation and by-laws; (2) make additional amendments to restrict the
acquisition of its common stock in a way to protect Banyan's net operating loss
carry-forwards, and (3) engage EFG to provide administrative services to Banyan,
which services EFG will provide at cost. On October 21, 1997, such Consent was
obtained from Banyan's shareholders. The Consent also allowed for (i) the
election of a new Board of Directors nominated by EFG for terms of up to three
years and an increase in size of the Board to as many as nine members, provided
a majority of the Board shall consist of members independent of Banyan, EFG or
any affiliate; and (ii) an amendment extending Banyan's life to perpetual and
changing its name. Contemporaneously with the Consent being obtained, Banyan
declared a $0.20 per share distribution to be paid on all shares, including
those beneficially owned by the Trust. A distribution of $41,939 is scheduled to
be paid to the Trust on or before November 15, 1997.
In connection with the Banyan transaction, Gary D. Engle, President and
Chief Executive Officer of EFG, joined the Board of Directors of Banyan and
James A. Coyne, Senior Vice President of EFG became Banyan's Chief Operating
Officer. The Managing Trustee believes that the underlying tangible assets of
Banyan, particularly the Rancho Malibu property, can be sold or developed on a
tax free basis due to Banyan's net operating loss carryforwards and can provide
an attractive economic return to the Trust.
NOTE 6--RELATED PARTY TRANSACTIONS
All operating expenses incurred by the Trust are paid by EFG on behalf of
the Trust and EFG is reimbursed at its actual cost for such expenditures.
Fees and other costs incurred during the nine month periods ended September
30, 1997 and 1996, which were paid or accrued by the Trust to EFG or its
Affiliates, are as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Reimbursement of offering costs................................ $ 41,304 $ --
Equipment acquisition fees..................................... -- 36,109
Equipment management fees...................................... 138,430 139,027
Administrative charges......................................... 51,736 15,750
Reimbursable operating expenses
due to third parties.......................................... 178,042 71,889
-------- --------
Total..................................................... $409,512 $262,775
-------- --------
-------- --------
</TABLE>
8
<PAGE>
AFG Investment Trust A
Notes to the Financial Statements
(Continued)
All rents and proceeds from the sale of equipment are paid 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 Trust. At
September 30, 1997, the Trust was owed $173,170 by EFG for such funds and the
interest thereon. These funds were remitted to the Trust in October 1997.
NOTE 7--NOTES PAYABLE
Notes payable at September 30, 1997 consisted of installment notes of
$2,756,322 payable to banks and institutional lenders. The notes bear interest
rates ranging between 5.7% and 9.17%, except for one note which bears a
fluctuating interest rate based on LIBOR (5.66% at September 30, 1997) 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
Trust has a balloon payment obligation at the expiration of the primary lease
term related to the Reno Aircraft of $282,421. The carrying amount of notes
payable approximates fair value at September 30, 1997.
The annual maturities of the notes payable are as follows:
For the year ending September 30, 1998.......... $1,759,603
1999.......... 325,386
2000.......... 116,162
2001.......... 125,623
2002.......... 135,855
Thereafter.......... 293,693
----------
Total.......... $2,756,322
----------
----------
NOTE 8--PROFIT AND LOSS ALLOCATION AND DISTRIBUTION OF DISTRIBUTABLE CASH
Effective for the third quarter of 1997, the allocation of net income or
loss, for financial statement purposes, and distributions of distributable cash
are made to each Participant in accordance with the Trust Agreement, as Amended
(see Note 10).
NOTE 9--LEGAL PROCEEDINGS
On July 27, 1995, EFG, on behalf of the Trust and other EFG-sponsored
investment programs, filed an action in the Commonwealth of Massachusetts
Superior Court Department of the Trial Court in and for the County of Suffolk,
for damages and declaratory relief against a lessee of the Trust, National Steel
Corporation ("National Steel"), under a certain Master Lease Agreement ("MLA")
for the lease of certain equipment. EFG is seeking the reimbursement by National
Steel of certain sales and/or use taxes paid to the State of Illinois and other
remedies provided by the MLA. On August 30, 1995, National Steel filed a Notice
of Removal which removed the case to the United States District Court, District
of Massachusetts. On September 7, 1995, National Steel filed its Answer to EFG's
Complaint along with Affirmative Defenses and Counterclaims, seeking declaratory
relief and specific performance and alleging, among other things, breach of
contract and breach of the implied covenant of good faith and fair dealing. EFG
filed its Answer to these counterclaims on September 29, 1995. Though the
parties have been discussing settlement with respect to this matter for some
time, to date, the negotiations have been unsuccessful. Notwithstanding these
discussions, EFG recently filed an Amended and Supplemental Complaint
9
<PAGE>
AFG Investment Trust A
Notes to the Financial Statements
(Continued)
alleging a further default by National Steel under the MLA and EFG recently
filed a request for Summary Judgment on all claims and counterclaims. The
matter remains pending before the Court and is scheduled for a hearing on
EFG's motion in December 1997. The Trust has not experienced any material
losses as a result of this action.
On June 24, 1997, four plaintiffs (the "Plaintiffs") owning limited
partner units or beneficiary interests in eight investment programs sponsored
by EFG filed a lawsuit, as a derivative action, on behalf of the Trust and 27
other investment programs (collectively, the "Nominal Defendants") in the
Superior Court of the Commonwealth of Massachusetts for the County of Suffolk
against EFG and certain of EFG's affiliates, including the Managing Trustee
of the Trust and four other wholly-owned subsidiaries of EFG which are the
general partner or managing trustee of one or more of the investment
programs, (collectively, the "Managing Defendants"), and certain other
entities and individuals that have control of the Managing Defendants and the
Nominal Defendants (the "Controlling Defendants"). The Plaintiffs assert
claims of breach of fiduciary duty, breach of contract, unjust enrichment,
and equitable relief and seek various remedies, including compensatory and
punitive damages to be determined at trial.
The Managing Trustee and EFG are in the early stages of evaluating the
nature and extent of the claims asserted in this lawsuit and cannot predict its
outcome with any degree of certainty. However, based upon all of the facts
presently being considered by management, the Managing Trustee and EFG do not
believe that any likely outcome will have a material adverse effect on the
Trust. The Managing Trustee, EFG and their affiliates intend to vigorously
defend against the lawsuit.
On July 7, 1997, a lessee of the Trust, Montgomery Ward and Company, Inc.,
filed for protection under Chapter 11 of the Bankruptcy Code. The Trust has
filed an appearance of counsel in the Bankruptcy Court process. Equipment leased
to this lessee by the Trust had a cost and net book value of approximately
$1,800,000 and $570,000, respectively, at September 30, 1997. The Trust, through
counsel, has had preliminary discussions with the counsel to the lessee to
determine the intentions of the lessee regarding the lease. Due to the
preliminary nature of the discussions, at this time the Trust is unable to
determine the impact of this bankruptcy proceeding.
NOTE 10--ISSUANCE OF CLASS B INTERESTS
On October 26, 1996, the Trust filed a Solicitation Statement with the
United States Securities and Exchange Commission (the "SEC") which subsequently
was sent to the Beneficiaries pursuant to Regulation 14A of Section 14 of the
Securities Exchange Act. The Solicitation Statement sought the consent of the
Beneficiaries to a proposed amendment (the "Amendment") to the Amended and
Restated Declaration of Trust (the "Trust Agreement") which would (i) amend the
provisions of the Trust Agreement governing the redemption of Beneficiary
Interests to permit the Trust to offer to redeem outstanding Beneficiary
Interests at such times, in such amounts, in such manner and at such prices as
the Managing Trustee might determine from time to time, in accordance with
applicable law; and (ii) add a provision to the Trust Agreement that would
permit the Trust to issue, at the discretion of the Managing Trustee and without
further consent or approval of the Beneficiaries, an additional class of
security with such designations, preferences and relative, participating,
optional or other special rights, powers and duties as the Managing Trustee
might affix. The funds obtained through the issuance of such a security would be
used by the Trust to (a) expand redemption opportunities for Beneficiaries
without using Trust funds which might otherwise be available for cash
distributions; and (b) make a special one-time cash distribution to the
Beneficiaries.
Pursuant to the Trust Agreement, the adoption of the Amendment required the
consent of the Beneficiaries holding more than 50% in the aggregate of the
Beneficiary Interests held by all Beneficiaries. A majority of Beneficiary
Interests, representing 286,868 or 52.2% of all Beneficiary Interests, voted in
favor of the Amendment; 49,019 or 8.9% of all Beneficiary Interests voted
against the Amendment; and 16,104 or 2.9% of all Beneficiary
10
<PAGE>
AFG Investment Trust A
Notes to the Financial Statements
(Continued)
Interests abstained. Approximately 64% of all Beneficiary Interests
participated in the vote. Accordingly, the Trust Agreement was amended.
On February 12, 1997, the Trust filed a Registration Statement on Form S-1
with the SEC, which became effective June 10, 1997. The Registration Statement
covered the issuance and sale of a new class of beneficiary interests in the
Trust (the "Class B Interests"). The characteristics of the Class B Interests,
associated risk factors and other matters of importance to the Beneficiaries and
purchasers of the Class B Interests were set forth in a Prospectus sent to the
Beneficiaries. On July 17, 1997, the offering closed and on July 18, 1997 the
Trust issued 826,072 Class B Interests at $5.00 per interest, thereby generating
$4,130,360 in aggregate Class B capital contributions. Class A Beneficiaries
purchased 3,209 Class B Interests, generating $16,045 of such aggregate capital
contributions, and the Special Beneficiary, EFG, purchased 822,863 Class B
Interests, generating $4,114,315 of such aggregate capital contributions.
Subsequently, EFG transferred its Class B Interests to a special-purpose
company, Equis II Corporation, a Delaware corporation. EFG also transferred its
ownership of AFG ASIT Corporation, the Managing Trustee of the Trust, to Equis
II Corporation. As a result, Equis II Corporation has voting control of the
Trust through its ownership of the majority of all of the Trust's outstanding
voting interests, as well as its ownership of AFG ASIT Corporation. Equis II
Corporation is controlled by EFG's President and Chief Executive Officer, Gary
D. Engle. Accordingly, control of the Managing Trustee did not change as a
result of the foregoing transactions.
As described in the Prospectus for the offering of the Class B Interests,
the Managing Trustee used a portion of the net cash proceeds realized from the
offering of the Class B Interests to pay a one-time special cash distribution of
approximately $1.47 per Class A Beneficiary Interest to the Class A
Beneficiaries of the Trust. The Managing Trustee declared and paid this special
cash distribution, aggregating $808,363, to the Class A Beneficiaries on August
15, 1997.
NOTE 11--OFFER TO REDEEM CLASS A INTERESTS
On August 7, 1997, the Trust commenced an offer to purchase up to 45% of the
outstanding Class A Beneficiary Interests of the Trust by filing a Form 13E-4,
Issuer Tender Offer Statement, with the SEC and distributing to the Class A
Beneficiaries information (the "Tender Documents") concerning the offer. On
October 10, 1997, the Trust used $620,011 of the net proceeds realized from the
offering of the Class B Interests to purchase 65,402 of the Class A Beneficiary
Interests tendered as a result of the offer.
11
<PAGE>
AFG Investment Trust A
FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
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 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 ability of EFG to collect all rents due under the attendant
lease agreements and successfully remarket the Trust's equipment upon the
expiration of such leases.
Three and nine months ended September 30, 1997 compared to the three and nine
months ended September 30, 1996:
Overview
As an equipment leasing trust, AFG Investment Trust A ("the Trust") was
organized to acquire a diversified portfolio of capital equipment subject to
lease agreements with third parties. The Trust was designed to progress
through three principal phases: acquisitions, operations, and liquidation.
During the operations phase, a period of approximately six years, all
equipment in the Trust's portfolio will progress through various stages.
Initially, all equipment will generate rental revenues under primary term
lease agreements. During the life of the Trust, these agreements will expire
on an intermittent basis and equipment held pursuant to the related leases
will be renewed, re-leased or sold, depending on prevailing market conditions
and the assessment of such conditions by EFG to obtain the most advantageous
economic benefit. Over time, a greater portion of the Trust's original
equipment portfolio will become available for remarketing and cash generated
from operations and from sales or refinancings will begin to fluctuate.
Ultimately, all equipment will be sold and the Trust will be dissolved. The
Trust's operations commenced in 1992.
Results of Operations
For the three and nine months ended September 30, 1997, the Trust
recognized lease revenue of $1,010,273 and $3,577,408, respectively, compared
to $1,204,560 and $3,632,314 for the same periods in 1996. The decrease in
lease revenue from 1996 to 1997 resulted principally from primary lease term
expirations and the sale of equipment. Partially offsetting this decrease
was the receipt in 1997 of prepaid contractual rental obligations of $432,604
associated with the sale of its interest in a vessel (see discussion below).
Over time, the level of lease revenue will continue to decline due to the
expiration of the Trust's primary lease term agreements and the sale of
equipment. The Trust also earns interest income from temporary investments
of rental receipts and equipment sales proceeds in short-term instruments.
The Trust's equipment portfolio includes certain assets in which the Trust
holds a proportionate ownership interest. In such cases, the remaining
interests are owned by EFG or an affiliated equipment leasing program
sponsored by EFG. Proportionate equipment ownership enables the Trust to
further diversify its equipment portfolio by participating in the ownership
of selected assets, thereby reducing the general levels of risk which could
result from a concentration in any single equipment type, industry or lessee.
The Trust and each affiliate individually report, in proportion to their
respective ownership interests, their respective shares of assets,
liabilities, revenues, and expenses associated with the equipment.
During the three months ended September 30, 1997, the Trust sold equipment
having a net book value of $11,526 to existing lessees and third parties.
These transactions resulted in a net gain, for financial statement purposes,
of $48,274. During the nine months ended September 30, 1997, the Trust sold
or exchanged equipment having a net book value of $1,266,758 to existing
lessees and third parties. These sales resulted in a
12
<PAGE>
AFG Investment Trust A
FORM 10-Q
PART I. FINANCIAL INFORMATION
net loss for financial statement purposes of $314,532. The equipment
transactions during the nine months ended September 30, 1997 included the
Trust's interest in a vessel with an original cost and net book value of
$2,399,580 and $1,185,726, respectively. In connection with this
transaction, the Trust realized proceeds of $777,326, which resulted in a net
loss, for financial statement purposes, of $408,400. In addition, as this
vessel was disposed of prior to the expiration of the related lease term, the
Trust received a prepayment of the remaining contracted rent due under the
vessel's lease agreement, as described above. See below for further
discussion related to the vessel.
On April 30, 1997, the vessel partnerships, in which the Trust and certain
affiliated investment programs are limited partners and through which the
Trust and the affiliated investment programs shared economic interests in
three cargo vessels (the "Vessels") leased by KGJS/Gearbulk Holdings Limited
(the "Lessee"), exchanged their ownership interests in the Vessels for
aggregate consideration of $11,565,375, including 1,987,000 shares (at $1.50
per share) of common stock in Banyan Strategic Land Fund II ("Banyan") and a
purchase money note of $8,219,500 (the "Note"). Banyan is a Delaware
corporation organized on April 14, 1987 and has its common stock listed on
NASDAQ. Banyan, at the time of the exchange transaction, held certain real
estate investments, the only one of which remained unsold at September 30,
1997 being a 274 acre site near Malibu, California ("Rancho Malibu").
The exchange was organized through an intermediary company (Equis Exchange
LLC, 99% owned by Banyan and 1% owned by EFG), which was established for the
sole purpose of facilitating the exchange. There were no fees paid to EFG by
Equis Exchange LLC or Banyan or by any other party that otherwise would not
have been paid to EFG had the Trust sold its beneficial interest in the
Vessels directly to the Lessee. The Lessee prepaid all of its remaining
contracted rental obligations and purchased the Vessels in two closings
occurring on May 6, 1997 and May 12, 1997. The Note was repaid with
$3,800,000 of cash and delivery of a $4,419,500 note from Banyan (the "Banyan
Note").
As a result of the exchange transaction and its original 33% beneficial
ownership interest in Hato Arrow, one of the three Vessels, the Trust
received $433,036 in cash and is the beneficial owner of 209,694 shares of
Banyan common stock valued at $314,541 ($1.50 per share) and holds a
beneficial interest in the Banyan Note of $462,353. The Banyan Note will be
amortized over three years and bear an annual interest rate of 10%.
Cash equal to the amount of the Banyan Note was placed in escrow for the
benefit of Banyan in a segregated account pending the outcome of certain
shareholder proposals. Specifically, as part of the exchange, Banyan agreed
to seek consent ("Consent") from its shareholders to: (1) amend its
certificate of incorporation and by-laws; (2) make additional amendments to
restrict the acquisition of its common stock in a way to protect Banyan's net
operating loss carry-forwards, and (3) engage EFG to provide administrative
services to Banyan, which services EFG will provide at cost. On October 21,
1997, such Consent was obtained from Banyan's shareholders. The Consent also
allowed for (i) the election of a new Board of Directors nominated by EFG for
terms of up to three years and an increase in size of the Board to as many as
nine members, provided a majority of the Board shall consist of members
independent of Banyan, EFG or any affiliate; and (ii) an amendment extending
Banyan's life to perpetual and changing its name. Contemporaneously with the
Consent being obtained, Banyan declared a $0.20 per share distribution to be
paid on all shares, including those beneficially owned by the Trust. A
dividend of $41,939 is scheduled to be paid to the Trust on or before
November 15, 1997.
The Managing Trustee believes that the underlying tangible assets of
Banyan, particularly the Rancho Malibu property, can be sold or developed on
a tax free basis due to Banyan's net operating loss carryforwards and can
provide an attractive economic return to the Trust.
On February 5, 1996, the Trust concluded the sale of its interest in the
United Aircraft to the lessee, United Air Lines, Inc., ("United"), as
reported in Note 3 to the Trust's 1996 Annual Report. The Trust recognized a
net loss of
13
<PAGE>
AFG Investment Trust A
FORM 10-Q
PART I. FINANCIAL INFORMATION
$458,638 in connection with this transaction, of which $311,621 was
recognized as Write-Down of Equipment in 1995. The remainder of $147,017 was
recognized as a loss on sale of equipment on the accompanying Statement of
Operations for the nine months ended September 30, 1996. In addition to
lease rents, the Trust received net sale proceeds of $1,392,779 from United
for the aircraft. A portion of such sale proceeds was reinvested in other
equipment in March 1996 through the acquisition of an 8.86% ownership
interest in an aircraft (the "Reno Aircraft") at an aggregate cost to the
Trust of $1,239,741. To acquire its interest in the Reno Aircraft, the Trust
obtained long-term financing of $997,888 from a third-party lender and
utilized cash proceeds of $241,853 from the sale of the United Aircraft.
During the three and nine months ended September 30, 1996, the Trust sold
other equipment having a net book value of $10,997 and $31,554, respectively,
to existing lessees and third parties. These sales resulted in a net loss,
for financial statement purposes, of $3,362 and $6,406, respectively.
It cannot be determined whether future sales of equipment will result in a
net gain or a net loss to the Trust, 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 the Trust and which will
maximize total cash returns for each asset.
The total economic value realized upon final disposition of 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. The Trust classifies such residual rental payments as lease revenue.
Consequently, the amount of gain or loss reported in the financial statements
is not necessarily indicative of the total residual value the Trust achieved
from leasing the equipment.
Depreciation and amortization expense was $823,115 and $2,617,136 for the
three and nine months ended September 30, 1997, respectively, compared to
$885,534 and $2,749,045 for the same periods in 1996. For financial
reporting purposes, to the extent that an asset is held on primary lease
term, the Trust 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, the Trust 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 was $48,066 and $158,653 or 4.8% and 4.4% of lease
revenue for the three and nine months ended September 30, 1997, respectively,
compared to $84,429 and $301,126 or 7% and 8.3% of lease revenue for the same
periods in 1996. Interest expense is expected to continue to decrease in
amount as the principal balance of notes payable is reduced through the
application of rent receipts to outstanding debt.
Management fees were 4.4% and 3.9% of lease revenue for the three and nine
months ended September 30, 1997 compared to 3.8% of lease revenue for each of
the same periods in 1996. 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.
14
<PAGE>
AFG Investment Trust A
FORM 10-Q
PART I. FINANCIAL INFORMATION
Operating expenses consist principally of administrative charges,
professional service costs, such as audit and legal fees, as well as
printing, distribution and remarketing expenses. Collectively, operating
expenses represented 12.9% and 6.4% of lease revenue for the three and nine
months ended September 30, 1997, respectively, compared to 2.5% and 2.4% of
lease revenue for the same periods in 1996. The increase in operating
expenses from 1996 to 1997 was due primarily to costs incurred in connection
with the Solicitation and Registration Statements described in Note 10 to the
accompanying financial statements and increases in administrative charges
and professional service costs. The amount of future operating expenses
cannot be predicted with certainty; however, such expenses are usually higher
during the acquisition and liquidation phases of a trust.
Liquidity and Capital Resources and Discussion of Cash Flows
The Trust by its nature is a limited life entity which was established for
specific purposes described in the preceding "Overview". As an equipment
leasing program, the Trust's principal operating activities derive from asset
rental transactions. Accordingly, the Trust's principal source of cash from
operations is provided by the collection of periodic rents. These cash
inflows are 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 $3,113,405 and $3,217,563 for the
nine months ended September 30, 1997 and 1996, respectively. Future renewal,
re-lease and equipment sale activities will cause a gradual decline in the
Trust's primary-term lease revenue and corresponding sources of operating
cash. Overall, expenses associated with rental activities, such as
management fees, and net cash flow from operating activities will decline as
the Trust experiences a higher frequency of remarketing events.
The Trust's equipment is leased by a number of creditworthy,
investment-grade companies and, to date, the Trust 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 the Trust's lessees will be
maintained. Collection risk could increase in the future, particularly as
the Trust remarkets its equipment and enters re-lease agreements with
different lessees. The Managing Trustee will continue to evaluate and
monitor the Trust's experience in collecting accounts receivable to determine
whether a future allowance for doubtful accounts may become appropriate.
Ultimately, the Trust will dispose of all assets under lease. This will
occur principally through sale transactions whereby each asset will be sold
to the existing lessee or to a third party. Generally, this will occur upon
expiration of each asset's primary or renewal/re-lease term. In certain
instances, casualty or early termination events may result in the disposal of
an asset. Such circumstances are infrequent and usually result in the
collection of stipulated cash settlements pursuant to terms and conditions
contained in the underlying lease agreements.
Cash expended for asset acquisitions and cash realized from asset disposal
transactions are reported under investing activities on the accompanying
Statement of Cash Flows. During the nine months ended September 30, 1997,
the Trust realized net cash proceeds of $952,226, including proceeds from the
exchange transaction, compared to $1,417,927 for the same period in 1996.
Future inflows of cash from asset disposals 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. During the nine months
ended September 30, 1996, the Trust expended $1,441,796 to acquire equipment.
This amount reflects the acquisition of an ownership interest in a
commercial jet aircraft at a cost of $1,239,741, pursuant to the reinvestment
provisions of the Trust Agreement and an original equipment acquisition of
$202,055. There were no equipment acquisitions during the same period in
1997.
15
<PAGE>
AFG Investment Trust A
FORM 10-Q
PART I. FINANCIAL INFORMATION
As a result of the exchange transaction (see Results of Operations) the
Trust became the beneficial owner of 209,694 shares of Banyan common stock
valued at $314,541 ($1.50 per share) and holds a beneficial interest in the
Banyan Note of $462,353.
The Trust obtained long-term financing in connection with certain
equipment leases. The origination of such indebtedness and the subsequent
repayments of principal are reported as components of financing activities.
Cash inflows of $997,888 in 1996 resulted from leveraging a portion of the
Trust's equipment portfolio with third-party lenders. 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 future periods, the amount of cash used to repay
debt obligations will decline as the principal balance of notes payable is
reduced through the collection and application of rents. However, the Trust
has a balloon payment obligation of $282,421 at the expiration of the primary
lease term related to the Reno Aircraft. In addition, the Managing Trustee
expects to use a portion of the Trust's available cash to retire certain
indebtedness.
For financial reporting purposes, the Managing Trustee and the Special
Beneficiary each have accumulated a capital deficit at September 30, 1997.
This is the result of aggregate cash distributions to these Participants
being in excess of their aggregate capital contributions ($1,000 each) and
their respective allocations of financial statement net income or loss.
Ultimately, the existence of a capital deficit for the Managing Trustee or
the Special Beneficiary for financial reporting purposes is not indicative of
any further capital obligations to the Trust by either the Managing Trustee
or the Special Beneficiary. For income tax purposes, income is allocated
first to those Participants having negative tax capital account balances so
as to eliminate any such balances. In accordance with the Trust Agreement,
upon the dissolution of the Trust, the Managing Trustee will be required to
contribute to the Trust an amount equal to any negative balance which may
exist in the Managing Trustee's tax capital account. No such requirement
exists with respect to the Special Beneficiary. At December 31, 1996, the
Managing Trustee had a positive tax capital account balance.
At September 30, 1997, the Trust had aggregate future minimum lease
payments of $3,311,369 from contractual lease agreements (see Note 3 to the
financial statements), a portion of which will be used to amortize the
principal balance of notes payable (see Note 7 to the financial statements).
Additional cash inflows will be realized from future remarketing activities,
such as lease renewals and equipment sales, the timing and extent of which
cannot be predicted with certainty. This is because the timing and extent of
equipment sales is often dependent upon the needs and interests of the
existing lessees. Some lessees may choose to renew their lease contracts,
while others may elect to return the equipment. In the latter instances, the
equipment could be re-leased to another lessee or sold to a third party.
Accordingly, as the Trust matures and a greater level of its equipment assets
become available for remarketing, the cash flows of the Trust will become
less predictable. In addition, the Trust will have cash outflows to satisfy
interest on indebtedness and to pay management fees and operating expenses.
Ultimately, the Trust is expected to meet its future disbursement obligations
and to distribute any excess of cash inflows over cash outflows to the
Participants in accordance with the Trust Agreement. However, several
factors, including month-to-month lease extensions, lessee defaults,
equipment casualty events, and early lease terminations could alter the
Trust's anticipated cash flows as described herein and in the accompanying
financial statements and result in fluctuations to the Trust's periodic cash
distribution payments.
On February 12, 1997, the Trust filed a Registration Statement on Form S-1
with the SEC, which became effective June 10, 1997. The Registration
Statement covered the issuance and sale of a new class of beneficiary
interests in the Trust (the "Class B Interests"). The characteristics of the
Class B Interests, associated risk factors and other matters of importance to
the Beneficiaries and purchasers of the Class B Interests were set forth in a
Prospectus sent to the Beneficiaries. On July 17, 1997, the offering closed
and on July 18, 1997 the Trust issued 826,072 Class B Interests at $5.00 per
interest, thereby generating $4,130,360 in aggregate Class B capital
16
<PAGE>
AFG Investment Trust A
FORM 10-Q
PART I. FINANCIAL INFORMATION
contributions. Class A Beneficiaries purchased 3,209 Class B Interests,
generating $16,045 of such aggregate capital contributions, and the Special
Beneficiary, EFG, purchased 822,863 Class B Interests, generating $4,114,315
of such aggregate capital contributions. The Trust incurred costs in the
amount of $41,304 in connection with this offering.
Subsequently, EFG transferred its Class B Interests to a special-purpose
company, Equis II Corporation, a Delaware corporation. EFG also transferred
its ownership of AFG ASIT Corporation, the Managing Trustee of the Trust, to
Equis II Corporation. As a result, Equis II Corporation has voting control
of the Trust through its ownership of the majority of all of the Trust's
outstanding voting interests, as well as its ownership of AFG ASIT
Corporation. Equis II Corporation is controlled by EFG's President and Chief
Executive Officer, Gary D. Engle. Accordingly, control of the Managing
Trustee did not change as a result of the foregoing transactions.
As described in the Prospectus for the offering of the Class B Interests,
the Managing Trustee used a portion of the net cash proceeds realized from
the offering of the Class B Interests to pay a one-time special cash
distribution to the Class A Beneficiaries of the Trust. The Managing Trustee
declared and paid this special cash distribution of approximately $1.47 per
Class A Beneficiary Interest, aggregating $808,363, to Class A Beneficiaries
on August 15, 1997.
On August 7, 1997, the Trust commenced an offer to purchase up to 45% of
the outstanding Class A Beneficiary Interests of the Trust by filing a Form
13E-4, Issuer Tender Offer Statement, with the SEC and distributing to the
Class A Beneficiaries information (the "Tender Documents") concerning the
offer. On October 10, 1997, the Trust used $620,011 of the net proceeds
realized from the offering of the Class B Interests to purchase 65,402 of the
Class A Beneficiary Interests tendered as a result of the offer.
Cash distributions paid to the Participants consist of both a return of
and a return on capital. Cash distributions do not represent and are not
indicative of yield on investment. Actual yield on investment cannot be
determined with any certainty until conclusion of the Trust and will be
dependent upon the collection of all future contracted rents, the generation
of renewal and/or re-lease rents, and the residual value realized for each
asset at its disposal date. Future market conditions, technological changes,
the ability of EFG to manage and remarket the assets, and many other events
and circumstances, could enhance or detract from individual asset yields and
the collective performance of the Trust's equipment portfolio.
It is the intention of the Managing Trustee to maintain a cash
distribution level that is consistent with the operating cash flows of the
Trust and to optimize the long-term value of the Trust. A distribution level
that is higher than the Trust's operating cash flows could compromise the
Trust's working capital position, as well as its ability to refurbish or
upgrade equipment in response to lessee requirements or other market
circumstances. Accordingly, in order to better align monthly cash
distributions with the Trust's operating cash flows, the Managing Trustee
reduced the level of monthly cash distributions from an annualized rate of
$2.52 per Class A Beneficiary Interest (the rate established and paid from
the Trust's inception through September 1995) to an annualized rate of $1.26
per Class A Beneficiary Interest commencing in October 1995. In October
1996, the Managing Trustee increased the annualized distribution rate to
$1.64 per Class A Beneficiary Interest and expects that the Trust will be
able to sustain this distribution rate throughout 1997. For the Class B
Beneficiaries, the Managing Trustee established an annualized distribution of
$0.66 per Class B Beneficiary Interest commencing in August 1997. The
Managing Trustee expects to maintain this distribution throughout 1997.
Future distributions, with respect to Class B Interests, will be subordinate
to certain distributions to Class A Interests.
The nature of the Trust's principal cash flows gradually will shift from
rental receipts to equipment sale proceeds as the Trust matures. As this
occurs, the Trust's cash flows will become more volatile in that certain of
the Trust's equipment leases will be renewed and certain of its assets will
be sold. In some cases, the Trust may be required to expend funds to
refurbish or otherwise improve the equipment being remarketed in order to
make it
17
<PAGE>
AFG Investment Trust A
FORM 10-Q
PART I. FINANCIAL INFORMATION
more desirable to a potential lessee or purchaser. The Trust's Advisor, EFG,
and the Managing Trustee will attempt to monitor and manage these events to
maximize the residual value of the Trust's equipment and will consider these
factors, in addition to the collection of contractual rents, the retirement
of scheduled indebtedness and the Trust's future working capital and
equipment requirements, in establishing future cash distribution rates.
Ultimately, the Beneficiaries should expect that cash distribution rates will
fluctuate over the long term as a result of future remarketing activities.
Cash distributions to the Managing Trustee, the Special Beneficiary and
the Beneficiaries are declared and generally paid within 45 days following
the end of each calendar month. The payment of such distributions is
presented as a component of financing activities. For the nine months ended
September 30, 1997, the Trust declared total cash distributions of
Distributable Cash From Operations and Distributable Cash From Sales and
Refinancings of $1,654,172. In accordance with the Trust Agreement, as
Amended, the Beneficiaries were allocated 90.75% of these distributions, or
$1,501,160 ($1,390,449 to Class A Beneficiaries, inclusive of the special
cash distribution, and $110,711 to Class B Beneficiaries); the Special
Beneficiary was allocated 8.25%, or $136,470; and the Managing Trustee was
allocated 1%, or $16,542.
18
<PAGE>
AFG Investment Trust A
FORM 10-Q
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Response:
Refer to Note 9 to the financial statements herein.
Item 2. Changes in Securities
Response:
On July 18, 1997, the Trust issued 826,072 Class B
Interests at $5.00 per interest, generating $4,130,360
in aggregate Class B capital contributions. Class A
Beneficiaries purchased 3,209 Class B Interests,
generating $16,045 of such aggregate capital
contributions, and the Special Beneficiary, EFG,
purchased 822,863 Class B Interests, generating
$4,114,315 of such aggregate capital contributions.
Subsequently, EFG transferred its Class B Interests to a
special-purpose company, Equis II Corporation. (See
Note 10 to the accompanying financial statements.)
The Trust Agreement grants limited voting rights to the
Class A Beneficiaries and Class B Beneficiaries.
However, each Class A Beneficiary and Class B
Beneficiary is entitled to cast one vote for each
Interest owned by him or her. Equis II Corporation has
voting control of the Trust through its ownership of its
Class B Interests.
Future cash distributions with respect to the Class B
Interests will be subordinate to certain distributions
with respect to the Class A Interests.
Item 3. Defaults upon Senior Securities
Response: None
Item 4. Submission of Matters to a Vote of Security Holders
Response: None
Item 5. Other Information
Response: None
Item 6(a). Exhibits
Response: None
Item 6(b). Reports on Form 8-K
Response: None
19
<PAGE>
SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on behalf of the registrant and in the capacity
and on the date indicated.
AFG Investment Trust A
By: AFG ASIT Corporation, a Massachusetts
corporation and the Managing Trustee of
the Registrant.
By: /s/ Michael J. Butterfield
--------------------------------------
Michael J. Butterfield
Treasurer of AFG ASIT Corporation
(Duly Authorized Officer and
Principal Accounting Officer)
Date: November 14, 1997
----------------------------------------
By: /s/ Gary M. Romano
----------------------------------------
Gary M. Romano
Clerk of AFG ASIT Corporation
(Duly Authorized Officer and
Principal Financial Officer)
Date: November 14, 1997
-----------------------------------------
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 6,092,966
<SECURITIES> 314,541
<RECEIVABLES> 1,172,100
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,579,607
<PP&E> 19,503,923
<DEPRECIATION> 11,723,782
<TOTAL-ASSETS> 15,359,748
<CURRENT-LIABILITIES> 308,921
<BONDS> 2,756,322
0
0
<COMMON> 0
<OTHER-SE> 12,294,505
<TOTAL-LIABILITY-AND-EQUITY> 15,359,748
<SALES> 0
<TOTAL-REVENUES> 3,385,404
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,985,344
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 158,653
<INCOME-PRETAX> 241,407
<INCOME-TAX> 0
<INCOME-CONTINUING> 241,407
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 241,407
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
