AFG INVESTMENT TRUST B, SC 13E4, 1997-08-07

AFG INVESTMENT TRUST B
SC 13E4, 1997-08-07
EQUIPMENT RENTAL & LEASING, NEC

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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SCHEDULE 13E-4
Issuer Tender Offer Statement (Pursuant to Section 13(e)(1)
of the Securities Exchange Act of 1934)

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AFG INVESTMENT TRUST B
(Name of Issuer and Name of Person Filing Statement)

CLASS A BENEFICIARY INTERESTS
(Title of Class of Securities)

NONE
(CUSIP Number of Class of Securities)

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

Copy to:
James A. Coyne Thomas F. Gloster III, Esq.
c/o Equis Financial Group Limited Partnership Peabody & Brown
98 North Washington Street 101 Federal Street
Boston, Massachusetts 02114 Boston, Massachusetts 02110
(617) 854-5800 (617) 345-1141
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of Person Filing Statement)

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August 7, 1997
(Date Tender Offer First Published, Sent or Given to Securityholders)

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Calculation of Filing Fee

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Transaction Amount of
Valuation* Filing Fee
----------- ----------

$2,919,852 $584

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*For purposes of calculating the filing fee only. This amount assumes the
purchase of 299,472 Class A Beneficiary Interests (the "Class A Interests") of
the Issuer for $9.75 per Class A Interest in cash.

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

Amount Previously Paid: N.A.

Form or Registration Number: N.A.

Filing Party: N.A.

Date Filed: N.A.

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Item 1. Security and Issuer.

(a) The name of the issuer is AFG Investment Trust B, a Delaware
business trust (the "Trust"), which has its principal executive office at 98
North Washington Street, Boston, Massachusetts 02114.

(b) This Statement relates to the offer by the Trust to purchase up
to 299,472 of the outstanding Class A Beneficiary Interests (the "Class A
Interests") of the Trust at $9.75 per Class A Interest, net to the seller in
cash, without interest, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated August 7, 1997 (the "Offer to
Purchase"), and in the related Letter of Transmittal, copies of which are
attached hereto as Exhibits (a)(1) and (a)(2), respectively. The number of
Class A Interests outstanding is set forth under "INTRODUCTION" of the Offer
to Purchase and is incorporated herein by reference. The amount of Class A
Interests that may be purchased from any officer or director of AFG ASIT
Corporation, a Massachusetts corporation that is the Managing Trustee of the
Trust (the "Managing Trustee"), or from any affiliate of the Managing
Trustee, is set forth under "INTRODUCTION" of the Offer to Purchase and is
incorporated herein by reference.

(c) The information set forth under "THE TENDER OFFER -- Section 7.
Effects of the Offer" and "THE TENDER OFFER -- Section 12. Background of the
Offer" of the Offer to Purchase is incorporated herein by reference.

(d) Not applicable.

Item 2. Source and Amount of Funds or Other Consideration.

(a) The information set forth in "THE TENDER OFFER -- Section 11.
Source of Funds" of the Offer to Purchase is incorporated herein by reference.

(b) Not applicable.

Item 3. Purpose of the Tender Offer and Plans or
Proposals of the Issuer or Affiliate.

(a)-(j) The information set forth in "THE TENDER OFFER -- Section 8.
Future Plans" and "THE TENDER OFFER -- Section 12. Background of the Offer" of
the Offer to Purchase is incorporated herein by reference.

Item 4. Interest in Securities of the Issuer.

Neither the Trust nor, to its knowledge, the Managing Trustee, any
executive officer or director of the Managing Trustee, any person controlling
the Managing Trustee or any associate of any such person has engaged in any
transaction involving the Class A Interests during the 40 business days
preceding the date hereof.

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Item 5. Contracts, Arrangements, Understandings or Relationships
With Respect to the Issuer's Securities.

None.

Item 6. Persons Retained, Employed or to be Compensated.

The information set forth in "THE TENDER OFFER -- Section 15. Certain Fees
and Expenses" of the Offer to Purchase is incorporated herein by reference.

Item 7. Financial Information.

(a) The information set forth in "THE TENDER OFFER -- Section 9.
Certain Information Concerning the Trust -- Financial Information" of the Offer
to Purchase and the Financial Statements of the Trust set forth at the end of
the Offer to Purchase are incorporated herein by reference.

(b) Not applicable.

Item 8. Additional Information.

(a) None.

(b)-(d) The information set forth in "THE TENDER OFFER --
Section 14. Certain Legal Matters" of the Offer to Purchase is incorporated
herein by reference.

(e) None.

Item 9. Material to be Filed as Exhibits.

(a)(1) Offer to Purchase dated August 7, 1997.
(a)(2) Letter of Transmittal.
(a)(3) Cover Letter dated August 7, 1997, from the Trust to
Beneficiaries.
(b) Not applicable.
(c) None.
(d) None.
(e)-(f) Not applicable.

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SIGNATURES

After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.

Dated: August 7, 1997

AFG INVESTMENT TRUST B
By: AFG ASIT Corporation,
its Managing Trustee

By: ___________________________
Name: James A. Coyne
Title: Vice President

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EXHIBIT INDEX

Exhibit Sequentially
No. Description Numbered Page
- ------- ----------- -------------

(a)(1) Offer to Purchase dated August 7, 1997.

(a)(2) Letter of Transmittal.

(a)(3) Cover Letter dated August 7, 1997,
from the Trust to Beneficiaries.

(b) Not applicable.

(d) None.

(e)-(f) Not applicable.

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Offer to Purchase for Cash
by
AFG INVESTMENT TRUST B
of
Up to 299,472 of its Class A Beneficiary Interests
at
$9.75 Net Per Class A Interest

THE OFFER, WITHDRAWAL RIGHTS AND THE PRORATION PERIOD WILL
EXPIRE AT 5:00 P.M., EASTERN TIME, ON SEPTEMBER 12, 1997, UNLESS THE
OFFER IS EXTENDED.

AFG Investment Trust B, a Delaware business trust (the "Trust"), hereby
offers to redeem up to 299,472 of its outstanding Class A Beneficiary Interests
(the "Class A Interests"), at a price of $9.75 per Class A Interest, net to the
seller in cash, without interest, upon the terms and subject to the conditions
set forth in this Offer to Purchase (the "Offer to Purchase") and in the related
Letter of Transmittal, as each may be supplemented or amended from time to time
(which together constitute the "Offer"). The Offer is made to Class A
Beneficiaries of record as of August 1, 1997. The 299,472 Class A Interests
sought pursuant to the Offer represent approximately 45% of the Class A
Interests outstanding as of August 1, 1997.

The Offer is not conditioned upon any minimum number of Class A Interests
being tendered. If more than 299,472 Class A Interests are validly tendered and
not withdrawn, the Trust will accept for purchase, on a pro rata basis,
299,472 Class A Interests, subject to the terms and conditions herein.

Each Class A Beneficiary should consider carefully the following factors:

- The Purchase Price of $9.75 per Class A Interest is less than what the
Managing Trustee believes the liquidation value of the Class A
Interests might be ($14.34 per Class A Interest) but in excess of the
recent prices at which the Class A Interests have traded in the
secondary market (after discounting such prices by the special
distribution being made to the Class A Beneficiaries by the Trust.)
(See "Section 12. Background of the Offer" for a discussion of the
Managing Trustee's determination of the Purchase Price and liquidation
value, and the related assumptions and other factors relating to such
determination.)

- This Offer to redeem Class A Interests is intended to be carried out
by the Trust at a price which will increase distributions with
respect to the Class A Interests not redeemed.

- A lawsuit has recently been filed, asserting, among other things, that
the recent offering by the Trust of its Class B Subordinated Interests
was intended by the Managing Trustee and its Affiliates to ensure that
they would obtain voting control of the Trust and that the offering
was conducted upon one-sided terms and conditions. (See "Section 14.
Certain Legal Matters" for a description of this lawsuit.)

- Class A Beneficiaries who tender Class A Interests will not be
entitled to any future distributions from the Trust (other than the
special distribution), including, without limitation, any
distributions to be made to Class A Beneficiaries upon liquidation of
the Trust. (Distributions to Class A Beneficiaries made by the Trust
after August 1, 1997 (excluding the special

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distribution) will either be assigned to the Trust or will
correspondingly reduce the Purchase Price.) Such future distributions
are expected by the Managing Trustee to exceed the Purchase Price
substantially.

- In deciding whether or not to tender their Class A Interests, Class A
Beneficiaries should consider the time (presently anticipated to be
December 31, 2003) until the Trust's assets are liquidated and the
Trust is terminated.

- Class A Beneficiaries who tender their Class A Interests will on
average have received $11.72 per Class A Interest in cash
distributions (including the special distribution) which when added to
the Purchase Price of $9.75 will result in total cash paid to the
tendering Class A Beneficiaries of $21.47 per Class A Interest. The
original cost was $25.00 per Class A Interest.

NEITHER THE TRUST NOR THE MANAGING TRUSTEE MAKES ANY RECOMMENDATION TO ANY
CLASS A BENEFICIARY WHETHER TO TENDER ALL OR ANY OF HIS CLASS A INTERESTS. EACH
CLASS A BENEFICIARY MUST MAKE HIS OWN DECISION WHETHER TO TENDER CLASS A
INTERESTS AND, IF SO, HOW MANY CLASS A INTERESTS TO TENDER.

NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
TRUST AS TO WHETHER CLASS A BENEFICIARIES SHOULD TENDER CLASS A INTERESTS
PURSUANT TO THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE
CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL. ANY RECOMMENDATION,
INFORMATION OR REPRESENTATION SO GIVEN OR MADE MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE TRUST OR THE MANAGING TRUSTEE.

In order for his tender to be valid, a Class A Beneficiary must tender
either (i) all Class A Interests owned by such Class A Beneficiary or (ii) a
portion of his Class A Interests but not fewer than the minimum investment
amount of 200 Class A Interests (80 Class A Interests for IRAs or other
Qualified Plans).

The Trust expressly reserves the right, in its sole discretion, at any time
and from time to time, (i) to extend the period of time during which the Offer
is open and thereby delay acceptance for payment of, and the payment for, any
Class A Interests, (ii) to terminate the Offer and not accept for payment any
Class A Interests not theretofore accepted for payment or paid for, (iii) upon
the occurrence of any of the conditions specified in Section 14, to delay the
acceptance for payment of, or payment for, any Class A Interests not theretofore
accepted for payment or paid for, and (iv) to amend the Offer in any respect
(including, without limitation, by increasing or decreasing the consideration
offered, increasing or decreasing the number of Class A Interests being sought
or both). Notice of any such extension, termination or amendment will promptly
be disseminated to Class A Beneficiaries in a manner reasonably designed to
inform Class A Beneficiaries of such change in compliance with Rule 13e-4(e)(2)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In
the case of an extension of the Offer, such extension will be followed by a
press release or public announcement which will be issued no later than
9:00 a.m., Eastern time, on the next business day after the scheduled Expiration
Date, in accordance with Rule 14e-1(d) under the Exchange Act.

August 7, 1997

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TABLE OF CONTENTS

Page
----
INTRODUCTION..................................................................4

THE TENDER OFFER..............................................................7
Section 1. Terms of the Offer.........................................7
Section 2. Proration; Acceptance for Payment and Payment for
Class A Interests........................................7
Section 3. Procedures for Tendering Class A Interests.................8
Section 4. Withdrawal Rights..........................................9
Section 5. Extension of Tender Period; Termination; Amendment........10
Section 6. Certain Federal Income Tax Consequences...................11
Section 7. Effects of the Offer......................................14
Section 8. Future Plans..............................................14
Section 9. Certain Information Concerning the Trust..................15
Section 10. Conflicts of Interest.....................................26
Section 11. Source of Funds...........................................26
Section 12. Background of the Offer...................................26
Section 13. Conditions of the Offer...................................29
Section 14. Certain Legal Matters.....................................30
Section 15. Certain Fees and Expenses.................................31
Section 16. Miscellaneous.............................................32

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To the Class A Beneficiaries of
AFG Investment Trust B

INTRODUCTION

AFG Investment Trust B, a Delaware business trust (the "Trust"), hereby
offers to purchase up to 299,472 of its outstanding Class A Beneficiary
Interests (the "Class A Interests"), at a price of $9.75 per Class A Interest,
net to the seller in cash, without interest, upon the terms and subject to the
conditions set forth in this Offer to Purchase (the "Offer to Purchase") and in
the related Letter of Transmittal, as each may be supplemented or amended from
time to time (which together constitute the "Offer"). The Offer is made to
Class A Beneficiaries of record as of August 1, 1997. The 299,472 Class A
Interests sought pursuant to the Offer represent approximately 45% of the
Class A Interests outstanding as of August 1, 1997.

The Trust has obtained funds for the purchase of the Class A Interests
pursuant to this Offer from the offering of 1,000,961 Class B Subordinated
Interests in the Trust (the "Class B Offering") pursuant to the prospectus dated
June 10, 1997 as supplemented (as so supplemented, the "Prospectus"). (See
"Section 11. Source of Funds.")

Each Class A Beneficiary should consider carefully the following factors:

- The Purchase Price of $9.75 per Class A Interest is less than what the
Managing Trustee believes the liquidation value of the Class A
Interests might be ($14.34 per Class A Interest) but in excess of the
recent prices at which the Class A Interests have traded in the
secondary market (after discounting such prices by the special
distribution being made to the Class A Beneficiaries by the Trust).
(See "Section 12. Background of the Offer" for a discussion of the
Managing Trustee's determination of the Purchase Price and liquidation
value, and the related assumptions and other factors relating to such
determination.)

- This Offer to redeem the Class A Interests is intended to be carried
out by the Trust at a price which will increase distributions with
respect to the Class A Interests not redeemed.

- A lawsuit was recently filed asserting, among other things, that the
recent offering by the Trust of its Class B Subordinated Interests was
intended by the Managing Trustee and its Affiliates to ensure that
they would obtain voting control of the Trust and that the offering
was conducted upon one-sided terms and conditions. (See "Section 14.
Certain Legal Matters" for a description of this lawsuit.)

- Class A Beneficiaries who tender Class A Interests will not be
entitled to any future distributions from the Trust, including,
without limitation, any distributions to be made to Class A
Beneficiaries upon liquidation of the Trust. (Distributions to
Class A Beneficiaries made by the Trust after August 1, 1997
(excluding the special distribution) will either be assigned to the
Trust or will correspondingly reduce the Purchase Price.) Such future
distributions are expected by the Managing Trustee to exceed the
Purchase Price substantially.

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- Class A Beneficiaries who tender their Class A Interests will, on
average, have received $11.72 per Class A Interest in cash
distributions (including the special distribution) from the Trust
which, when added to the Purchase Price of $9.75, will result in total
cash paid to the tendering Class A Beneficiaries of $21.47 per Class A
Interest. The original cost was $25.00 per Class A Interest.

The Offer will provide Class A Beneficiaries with an opportunity to
liquidate their investment without the usual transaction costs associated with
market sales. Class A Beneficiaries may no longer wish to continue their
investment in the Trust for a number of reasons, including:

- The absence of a formal trading market for Class A Interests, although
there are some limited resale mechanisms which were considered by the
Managing Trustee in establishing the Purchase Price and may be
available to Class A Beneficiaries wishing to sell their Class A
Interests

- General disenchantment with long-term investments in limited
partnerships or trusts

- The complexities and costs of preparing and filing personal federal,
state and local income tax returns resulting from an investment in the
Class A Interests, particularly for Class A Beneficiaries with a small
investment in the Trust

- For Class A Beneficiaries which are IRAs or other qualified pension,
profit-sharing or stock bonus plans (collectively, "Qualified Plans"),
the further complexity and costs of preparing income tax returns, and
the potential tax liability, resulting from the generation by the
Trust of "unrelated business taxable income"

- The opportunity to transfer Class A Interests without the commissions
and other costs normally associated with a transfer

- More immediate use for the cash tied up in an investment in the
Class A Interests

There are 665,494 Class A Interests issued and outstanding held of record
by Class A Beneficiaries as of August 1, 1997. As of the date of the Offer, the
Managing Trustee owns 40 Class A Interests and Affiliates of the Managing
Trustee own 879 Class A Interests. Neither the Managing Trustee nor such
Affiliates intend to tender any of their Class A Interests.

The Offer is not conditioned upon any minimum number of Class A Interests
being tendered. If more than 299,472 Class A Interests are validly tendered and
not withdrawn, the Trust will accept for purchase on a pro rata basis
299,472 Class A Interests, subject to the terms and conditions herein.

CLASS A BENEFICIARIES DESIRING TO TENDER ALL OR A PORTION OF THEIR CLASS A
INTERESTS, AS DESCRIBED ABOVE, SHOULD COMPLETE AND

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SIGN THE RELATED LETTER OF TRANSMITTAL ENCLOSED HEREWITH AND FORWARD THE LETTER
OF TRANSMITTAL TO THE DEPOSITARY. INSTRUCTIONS FOR COMPLETING THE LETTER OF
TRANSMITTAL ARE ATTACHED THERETO AND A PREADDRESSED ENVELOPE TO THE DEPOSITARY
IS ENCLOSED.

The Trust was organized as a business trust to acquire a diversified
portfolio of capital equipment subject to various full payout and operating
leases. (See "Section 9. Certain Information Concerning the Trust.") The
Managing Trustee of the Trust and three other Delaware business trusts
(collectively, the "AFG Investment Trusts" or the "Trusts") is AFG ASIT
Corporation, a Massachusetts corporation, which was organized on August 13, 1991
and is an Affiliate of Equis Financial Group Limited Partnership (formerly
American Finance Group), a Massachusetts limited partnership ("EFG" or the
"Advisor"). EFG is the Special Beneficiary of, and advisor to, the Trust.

Under the terms of the Trust Agreement, Class A Beneficiaries are permitted
to assign their Class A Interests and the Managing Trustee has indicated that it
will consent to any transfer made pursuant to the Offer.

No independent person has been retained to evaluate or render any opinion
with respect to the fairness of the Purchase Price. Accordingly, Class A
Beneficiaries are urged to consider carefully all of the information contained
herein before accepting the Offer. (See "Section 12. Background of the
Offer.")

The Trust made a cash distribution on July 15, 1997 to Class A
Beneficiaries of record as of July 1, 1997 in the amount of $0.14 per Class A
Interest and will make a special distribution to Class A Beneficiaries in the
amount of $1.47 per Class A Interest (the "Special Distribution") on or about
August 15, 1997. Any future distributions from the Trust with respect to
tendered Class A Interests accepted for payment by the Trust will be made to the
Trust or, to the extent such distributions are made to the tendering Class A
Beneficiaries, will reduce the Purchase Price for such Class A Interests.

Certain information contained in this Offer to Purchase which relates to
the Trust has been taken from the Trust's 1996 Annual Report on Form 10-K and
its Quarterly Reports on Form 10-Q for the first quarter of 1997. (See
"Section 9. Certain Information Concerning the Trust.")

Class A Beneficiaries are urged to read this Offer to Purchase and the
accompanying Letter of Transmittal carefully and consult with their financial
and tax advisors before deciding whether to tender their Class A Interests.

THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF CLASS A INTERESTS
BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN CONDITIONS. (See
"Section 13. Conditions of the Offer.") NEITHER THE TRUST NOR THE MANAGING
TRUSTEE MAKES ANY RECOMMENDATION TO ANY BENEFICIARY WHETHER TO TENDER ALL OR ANY
CLASS A INTERESTS. EACH CLASS A BENEFICIARY MUST MAKE HIS OWN DECISION WHETHER
TO TENDER SHARES AND, IF SO, HOW MANY CLASS A INTERESTS TO TENDER.

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THE TENDER OFFER

Section 1. Terms of the Offer. Upon the terms of the Offer, the Trust
will pay for Class A Interests validly tendered on or prior to the Expiration
Date and not withdrawn in accordance with Section 4 of this Offer to Purchase.
The term "Expiration Date" shall mean 5:00 p.m., Eastern time, on September 12,
1997, unless and until the Trust shall have extended the period of time for
which the Offer is open. In the event the Offer is extended, the term
"Expiration Date" shall mean the latest time and date on which the Offer, as
extended by the Trust, shall expire.

The Offer is conditioned on satisfaction of certain conditions. See
Section 13, which sets forth in full the conditions of the Offer. The Trust
reserves the right (but shall not be obligated), in its sole discretion, to
waive any or all of such conditions. If, on or prior to the Expiration Date,
any or all of such conditions have not been satisfied or waived, the Trust
reserves the right, by giving written notice thereof to the Depositary, to
(i) decline to purchase any of the Class A Interests tendered, terminate the
Offer and return all tendered Class A Interests to tendering Class A
Beneficiaries, (ii) waive all the unsatisfied conditions and, subject to
complying with applicable rules and regulations of the Securities and Exchange
Commission (the "Commission"), purchase all Class A Interests validly tendered,
(iii) extend the Offer and, subject to the right of Class A Beneficiaries to
withdraw Class A Interests until the Expiration Date, retain the Class A
Interests that have been tendered during the period or periods for which the
Offer is extended, or (iv) amend the Offer.

If, prior to the Expiration Date, the Trust shall increase the
consideration offered to Class A Beneficiaries pursuant to the Offer then, as
required by Exchange Act rules, such increased consideration shall be paid for
all Class A Interests accepted for payment pursuant to the Offer, whether or not
such Class A Interests were tendered prior to such increase.

This Offer to Purchase and the related Letter of Transmittal are being
mailed by the Trust to Class A Beneficiaries or beneficial owners of Class A
Interests (in the case of Qualified Plans) of record as of August 1, 1997.

In the event that proration is required because the number of Class A
Interests validly tendered on or prior to the Expiration Date and not withdrawn
exceeds 299,472, the Trust will announce the results of prorations promptly
after such results become available but in no event more than seven business
days following the Expiration Date.

Section 2. Proration; Acceptance for Payment and Payment for Class A
Interests. If the number of Class A Interests validly tendered on or prior to
the Expiration Date and not withdrawn is 299,472 or less, the Trust will accept
for payment, subject to the terms and conditions of the Offer, all Class A
Interests so tendered.

If the number of Class A Interests validly tendered on or prior to the
Expiration Date and not withdrawn exceeds 299,472, the Trust will accept for
payment, subject to the terms and conditions of the Offer, Class A Interests so
tendered on a pro rata basis (with appropriate adjustments to avoid purchase of
fractional Class A Interests). In the event that proration is required, because
of the difficulty of immediately determining the precise number of Class A
Interests to be accepted, the Trust does not expect to announce the final
results of prorations until at least ten business days following the Expiration
Date. The Trust will not pay for any Class A Interests tendered until after the
final proration factor has been determined. Notwithstanding any such delay in
payment, no interest will be paid on the Purchase Price.

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The Trust will pay for Class A Interests validly tendered and not withdrawn
in accordance with Section 4 as promptly as practicable following the Expiration
Date. In all cases, payment for Class A Interests purchased pursuant to the
Offer will be made only after timely receipt by the Depositary of a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) and any
other documents required by the Letter of Transmittal. (See "Section 3.
Procedures for Tendering Class A Interests.") Under no circumstances will
interest be paid on the Purchase Price by reason of any delay in making such
payment.

If any tendered Class A Interests are not purchased for any reason, the
Letter of Transmittal with respect to such Class A Interests will be destroyed
by the Depositary. If for any reason acceptance for payment of, or payment for,
any Class A Interests tendered pursuant to the Offer is delayed or the Trust is
unable to accept for payment, purchase or pay for Class A Interests tendered
pursuant to the Offer, then, without prejudice to the Trust's rights under
Section 13, the Trust may retain tendered Class A Interests and such Class A
Interests may not be withdrawn except to the extent that the tendering Class A
Beneficiaries are entitled to withdrawal rights as described in Section 4;
provided, however, that the Trust is required, pursuant to Rule 14e-1(c) under
the Exchange Act, to pay Class A Beneficiaries the Purchase Price in respect of
Class A Interests tendered or return such Class A Interests promptly after
termination or withdrawal of the Offer.

Section 3. Procedures for Tendering Class A Interests.

Valid Tender. To tender Class A Interests validly, a properly completed
and duly executed Letter of Transmittal and any other documents required by the
Letter of Transmittal must be received by the Depositary on or prior to the
Expiration Date at the address or by means of facsimile transmission at the
facsimile number set forth on the back cover of this Offer to Purchase. In
order for his tender to be valid, a Class A Beneficiary must tender either
(i) all Class A Interests owned by such Class A Beneficiary or (ii) a portion of
his Class A Interests but not fewer than the minimum investment amount of 200
Class A Interests (80 Class A Interests for IRAs or other Qualified Plans).

Although the Trust has included a preaddressed envelope to the Depositary
with this Offer for the convenience of the Class A Beneficiaries, the method of
delivery of the Letter of Transmittal is at the option and sole risk of the
tendering Class A Beneficiary and the delivery will be deemed made only when
actually received by the Depositary. If delivery is by mail, registered mail,
with return receipt requested, is recommended. In all cases, sufficient time
should be allowed to ensure timely delivery.

Signature Requirements. If the Letter of Transmittal is signed by the
registered holder of the Class A Interests and payment is to be made directly to
that holder, then no notarization or signature guarantee is required on the
Letter of Transmittal. Similarly, if the Class A Interests are tendered for the
account of a member firm of a registered national securities exchange, a member
of the National Association of Securities Dealers, Inc. or a commercial bank,
savings bank, credit union, savings and loan association or trust company having
an office, branch or agency in the United Stated (each, an "Eligible
Institution"), no notarization or signature guarantee is required on the Letter
of Transmittal. However, in all other cases, all signatures on the Letter of
Transmittal must either be notarized or guaranteed by an Eligible Institution.

<PAGE>

In order for a tendering Class A Beneficiary to participate in the Offer,
Class A Interests must be validly tendered and not withdrawn on or prior to the
Expiration Date, which is 5:00 p.m., Eastern time, on September 12, 1997.

Other Requirements. By executing a Letter of Transmittal, a tendering
Class A Beneficiary irrevocably (i) appoints the Managing Trustee as such
Class A Beneficiary's agent, in the manner set forth in the Letter of
Transmittal, with full power of substitution, to the full extent of such Class A
Beneficiary's rights with respect to the Class A Interests tendered by such
Class A Beneficiary and accepted for payment by the Trust and (ii) assigns to
the Trust all future distributions (excluding the special distribution) from the
Trust with respect to such Class A Interests to the extent such distributions
are not paid to the tendering Class A Beneficiary. (To the extent such
distributions are paid to the tendering Class A Beneficiary, the Purchase Price
for such Class A Interests will be automatically reduced by a like amount.)
Such appointment and assignment will be effective when, and only to the extent
that, the Trust accepts such Class A Interests for payment. Upon such
acceptance for payment, all prior proxies, assignments and consents given by
such Class A Beneficiary with respect to such Class A Interests will, without
further action, be revoked, and no subsequent proxies, assignments or consents
may be given (and if given will not be effective). The designees of the Trustee
will, as to such Class A Interests, be empowered to exercise all voting and
other rights of such Class A Beneficiary as they in their sole discretion may
deem proper at any meeting of Class A Beneficiaries, by written consent or
otherwise.

Determination of Validity; Rejection of Class A Interests; Waiver of
Defects; No Obligation to Give Notice of Defects. All questions as to the
validity, form, eligibility (including time of receipt) and acceptance for
payment of any tender of Class A Interests pursuant to the procedures described
above will be determined by the Managing Trustee, in its sole discretion, which
determination shall be final and binding. The Managing Trustee reserves the
absolute right to reject any or all tenders if not in proper form or if the
acceptance of, or payment for, the Class A Interests tendered may, in the
opinion of the Managing Trustee's counsel, be unlawful or in violation of the
Trust Agreement. The Managing Trustee also reserves the right to waive any
defect or irregularity in any tender with respect to any particular Class A
Interests of any particular Class A Beneficiary, and the Managing Trustee's
interpretation of the terms and conditions of the Offer (including the Letter of
Transmittal and the Instructions thereto) will be final and binding. Neither
the Trust, the Managing Trustee, the Information Agent, the Depositary nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any Class A Interests or will incur any
liability for failure to give any such notification.

A tender of Class A Interests pursuant to the procedures described above
will constitute a binding agreement between the tendering Class A Beneficiary
and the Trust on the terms set forth in the Offer.

Section 4. Withdrawal Rights. Except as otherwise provided in this
Section 4, all tenders of Class A Interests pursuant to the Offer are
irrevocable, provided that Class A Interests tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date and, unless already
accepted for payment as provided in this Offer to Purchase, may also be
withdrawn at any time after September 12, 1997.

For withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Depositary at the address or
facsimile number set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Class A Interests to be withdrawn and the

<PAGE>

number of Class A Interests to be withdrawn and must be signed by the person(s)
who signed the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed.

If purchase of, or payment for, Class A Interests is delayed for any reason
or if the Trust is unable to purchase or pay for Class A Interests for any
reason, then, without prejudice to the Trust's rights under the Offer, tendered
Class A Interests may be retained by the Depositary on behalf of the Trust and
may not be withdrawn except to the extent that tendering Class A Beneficiaries
are entitled to withdrawal rights as set forth in this Section 4; provided,
however, that the Trust is required, pursuant to Rule 14e-1(c) under the
Exchange Act, to pay Class A Beneficiaries the Purchase Price in respect of
Class A Interests tendered or return such Class A Interests promptly after
termination or withdrawal of the Offer.

Any Class A Interests properly withdrawn will be deemed not to be validly
tendered for purposes of the Offer. Withdrawn Class A Interests may be
re-tendered, however, by following the procedures described in Section 3 at any
time prior to the Expiration Date.

Section 5. Extension of Tender Period; Termination; Amendment. The Trust
expressly reserves the right, in its sole discretion, at any time and from time
to time, (i) to extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, and the payment for, any Class A
Interests, (ii) to terminate the Offer and not accept for payment any Class A
Interests not already accepted for payment or paid for, (iii) upon the
occurrence of any of the conditions specified in Section 13, to delay the
acceptance for payment of, or payment for, any Class A Interests not already
accepted for payment or paid for, and (iv) to amend the Offer in any respect
(including, without limitation, by increasing or decreasing the consideration
offered, increasing or decreasing the number of Class A Interests being sought,
or both). Notice of any such extension, termination or amendment will promptly
be disseminated to Class A Beneficiaries in a manner reasonably designed to
inform Class A Beneficiaries of such change in compliance with
Rule 13(e)-4(e)(2) under the Exchange Act. In the case of an extension of the
Offer, such extension will be followed by a press release or public announcement
which will be issued no later than 9:00 a.m., Eastern time, on the next business
day after the scheduled Expiration Date, in accordance with Rule 14e-1(d) under
the Exchange Act.

If the Trust extends the Offer, or if the Trust (whether before or after
its acceptance for payment of Class A Interests) is delayed in its payment for
Class A Interests or is unable to pay for Class A Interests pursuant to the
Offer for any reason, then, without prejudice to the Trust's rights under the
Offer, the Trust may retain tendered Class A Interests and such Class A
Interests may not be withdrawn except to the extent tendering Class A
Beneficiaries are entitled to withdrawal rights as described in Section 4;
provided, however, that the Trust is required, pursuant to Rule 14e-1(c) under
the Exchange Act, to pay Class A Beneficiaries the Purchase Price in respect of
Class A Interests tendered or return such Class A Interests promptly after
termination or withdrawal of the Offer.

If the Trust makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Trust will extend the Offer and disseminate additional tender offer
materials to the extent required by Rules 13e-4(e)(2) under the Exchange Act.
The minimum period during which an offer must remain open following a material
change in the terms of the offer or information concerning the offer will depend
upon the facts and circumstances, including the relative materiality of the
change in the terms or information. In the Commission's view, an offer should
remain open for a minimum of ten business days from the date the material change
is first published, sent or given to securityholders, and if material changes
are made with respect to

<PAGE>

information that approaches the significance of price or the percentage of
securities sought, a minimum of five business days may be required to allow for
adequate dissemination to securityholders and for investor response. As used in
this Offer to Purchase, "business day" means any day other than Saturday, Sunday
or a federal holiday, and consists of the time period from 12:01 a.m. through
12:00 midnight, Eastern time.

The Trust intends to consummate the transactions contemplated by the Offer
if the conditions for closing, in the reasonable judgment of the Managing
Trustee, are satisfied.

Section 6. Certain Federal Income Tax Consequences. The following summary
is a general discussion of certain federal income tax consequences of a sale of
Class A Interests pursuant to the Offer. This summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), applicable Treasury regulations
thereunder, administrative rulings, practices and procedures and judicial
authority as of the date of the Offer. All of the foregoing are subject to
change, and any such change could affect the continuing accuracy of this
summary. This summary does not discuss all aspects of federal income taxation
that may be relevant to a particular Class A Beneficiary in light of such
Class A Beneficiary's specific circumstances or to certain types of Class A
Beneficiaries subject to special treatment under the federal income tax laws
(for example, foreign persons, dealers in securities, banks, insurance companies
and tax-exempt organizations), nor does it discuss any aspect of state, local,
foreign or other tax laws. Sales of Class A Interests pursuant to the Offer will
be taxable transactions for federal income tax purposes and may also be taxable
transactions under applicable state, local, foreign and other tax laws. EACH
CLASS A BENEFICIARY SHOULD CONSULT HIS TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES OF SELLING CLASS A INTERESTS PURSUANT TO THE OFFER.

The purchase of a partner's interest by the partnership is generally
treated as a redemption of the partner's interest which is taxable in accordance
with special rules which apply only to redemptions. The purchase of Class A
Interests by the Trust pursuant to the Offer to Purchase, however, differs from
a typical purchase in that (a) the Purchase Price will be paid from the proceeds
of the Class B Offering and (b) the admission of Class B Beneficiaries and the
corresponding purchase of Class A Interests will result in a reduction of the
interests of the Class A Beneficiaries in the Trust and an increase in the
interests of the Class B Beneficiaries in the Trust. It is likely that the
transaction will be treated as a sale of the Class A Interests to the Class B
Beneficiaries for federal income tax purposes. The following discussion assumes
that the transaction will be treated as a sale for federal income tax purposes
and that each Class A Beneficiary who tenders his Class A Interests disposes of
all his Class A Interests.

A taxable Class A Beneficiary will recognize gain or loss on a sale of
Class A Interests pursuant to the Offer equal to the difference between (i) the
Class A Beneficiary's "amount realized" on the sale and (ii) the Class A
Beneficiary's adjusted tax basis in the Class A Interests sold. The amount of a
Class A Beneficiary's adjusted tax basis in such Class A Interests will vary
depending upon such Class A Beneficiary's particular circumstances. The "amount
realized" with respect to a Class A Interest will be a sum equal to the amount
of cash received by the Class A Beneficiary for the Class A Interest pursuant to
the Offer plus the amount of Trust liabilities allocable to the Class A Interest
(as determined under Code Section 752) of which the Class A Beneficiary is
relieved.

As a general rule, the gain or loss recognized by a Class A Beneficiary on
a sale of a Class A Interest pursuant to the Offer should be treated as a
capital gain or loss if the Class A Interest was held by the Class A Beneficiary
as a capital asset. However, if any portion of the amount realized by a Class A
Beneficiary is attributable to "unrealized

<PAGE>

receivables" or "substantially appreciated inventory" as defined in Code
Section 751, then a portion of the Class A Beneficiary's gain or loss will be
ordinary rather than capital. The term "unrealized receivables" includes all
Trust assets subject to recapture of cost recovery deductions determined as if a
selling Class A Beneficiary's proportionate share of all of the Trust's assets
had been sold at that time. Because the ordinary gain or loss from a Class A
Beneficiary's share of unrealized receivables and substantially appreciated
inventory is computed separately from his gain or loss attributable to other
Trust assets, a Class A Beneficiary could have ordinary income and capital loss
(which can be used only to a limited extent to offset the ordinary income) on
the sale of his Class A Interests. Each Class A Beneficiary who has tendered
his Class A Interests has agreed that the Purchase Price be allocated first, to
cash, second, to the Trust assets and third, to goodwill and going concern
value. Based on the results of Trust operations through March 31, 1997, it is
estimated (based on computations utilizing averages for the Class A
Beneficiaries as a whole) that a Class A Beneficiary who tenders Class A
Interests may not recognize any ordinary income or ordinary loss, but may
recognize a capital loss of approximately $1.79 per Class A Interest for federal
income tax purposes.

Capital losses are deductible only to the extent of capital gains, except
that non-corporate taxpayers may deduct up to $3,000 of capital losses in excess
of the amount of their capital gains against ordinary income. Excess capital
losses generally may be carried forward to succeeding years (a corporation's
carryforward period is five years and a non-corporate taxpayer can carry forward
such losses indefinitely); in addition, corporations are allowed to carry back
excess capital losses to the three preceding taxable years. If a Class A
Beneficiary recognizes both ordinary income and capital loss as a result of the
sale of his Class A Interests, the limitations on the deductibility of capital
losses will restrict his ability to offset such ordinary income with such
capital loss. Long-term capital gains (gains from capital assets held for more
than one year) of individuals and other non-corporate taxpayers are taxed at a
maximum marginal federal income tax rate of 28%, whereas the maximum marginal
federal income tax rate for ordinary income of such persons is 39.6%. The
United States Senate and House of Representatives have passed the Taxpayer
Relief Act of 1997 (the "1997 Act") which was signed into law by President
Clinton on August 5, 1997. Class A Beneficiaries are urged to consult with
their tax advisors regarding the affect of the 1997 Act on the sale of their
Class A Interests.

Under Code Section 469, a non-corporate taxpayer or personal service
corporation can deduct passive activity losses in any year only to the extent of
such person's passive activity income for such year, and closely held
corporations may not offset such losses against so-called "portfolio" income.
The Trust constitutes a passive activity with respect to all Class A
Beneficiaries. Consequently, a loss recognized by a Class A Beneficiary upon a
sale of a Class A Interest pursuant to the Offer can be utilized to offset
(subject to other applicable limitations, e.g. the limitation on the deduction
of capital losses to not more than $3,000 of ordinary income, discussed above)
such Class A Beneficiary's allocable share of passive income from the Trust or
other passive activities for that year. Gain recognized by a Class A
Beneficiary upon such sale can be offset by such Class A Beneficiary's passive
activity losses (if any) from the Trust or other passive activities (subject to
other applicable limitations, e.g. the limitations on the deduction of capital
losses, discussed above). If a Class A Beneficiary disposes of all of his
Class A Interests pursuant to the Offer, such Class A Beneficiary generally will
be able to deduct his passive activity losses (if any) from the Trust that could
not previously be deducted due to the passive loss restrictions. However, such
suspended losses must be used first by such Class A Beneficiary against his gain
(if any) from the sale of his Class A Interests and his share of income or gain
of the Trust. Any excess suspended losses may be used to offset non-passive
income, ordinary or capital, subject to other applicable limitations, e.g. the
limitations on capital losses, discussed above.

<PAGE>

The estimated capital loss of approximately $1.79 per Class A Interest is
based on the results of Trust operations through March 31, 1997. Final
computations of income and/or loss will be prepared by the Trust when it
prepares its federal income tax return for the year 1997. The Trust will
provide the Class A Beneficiaries with the information necessary to determine a
purchase price allocation. The estimated loss is calculated as if the sale of
Class A Interests occurred on March 31, 1997 and it does not take into account
Trust operations and cash distributions declared after March 31, both of which
will affect the actual amount and character (as capital gain or ordinary income)
of the income and/or loss realized as a result of a sale of Class A Interests.
Consequently, the actual amount of income and/or loss realized by a Class A
Beneficiary as a result of a sale of Class A Interests may differ substantially
from the estimated $1.79 of capital loss. This estimate is based on
computations utilizing averages for the Class A Beneficiaries as a whole. The
estimate does not consider any tax attributes, such as passive losses or losses
suspended due to basis or at risk limitations, and it does not include
alternative minimum tax or unrelated business income tax implications. This
estimate also does not address any state tax consequences.

Gain realized by a foreign person on a sale of Class A Interests pursuant
to the Offer will be subject to federal income tax at the graduated rates
applicable to United States citizens or corporations under the regular tax or
alternative minimum tax. The treatment of gain as ordinary income or capital
gain and the application of Section 751 of the Code is the same for foreign
Class A Beneficiaries as for United States Class A Beneficiaries.

The income earned by a Qualified Plan or tax-exempt organization is
generally exempt from taxation. If, however, the Qualified Plan or tax-exempt
organization earns "unrelated business taxable income" ("UBTI"), this income is
subject to tax at trust or corporate income tax rates to the extent it exceeds
$1,000 during any fiscal year. The Internal Revenue Service (the "Service") may
assert that gain realized by a Class A Beneficiary that is a Qualified Plan or
tax-exempt organization on a sale of Class A Interests constitutes UBTI to the
extent of such Class A Beneficiary's allocable share of "unrealized receivables"
(including depreciation recapture) for purposes of Section 751 of the Code,
discussed above. In addition, all or a portion of any gain recognized on the
sale of Class A Interests will constitute UBTI if the Class A Interests
constitute debt-financed property, defined as property which is subject to
indebtedness incurred directly or indirectly in connection with the acquisition
or improvement of the property ("acquisition indebtedness"). Class A Interests
will constitute debt-financed property as a result of any indebtedness incurred
in connection with their acquisition. In addition, the Service may assert that
Class A Interests constitute debt-financed property as a result of a Class A
Beneficiary's allocable share of acquisition indebtedness of the Trust. Any
gain recognized by Qualified Plans or tax-exempt organizations as a result of a
sale of Class A Interests can be offset by such Class A Beneficiary's passive
activity losses (if any) from the Trust (subject to other applicable
limitations, e.g. the limitations on the deduction of capital losses, discussed
above). Qualified Plans and tax-exempt organizations are urged to consult with
their tax advisors with respect to the tax consequences of selling Class A
Interests pursuant to the Offer.

<PAGE>

Section 7. Effects of the Offer.

Limitations on Resales. Under the Trust Agreement, no Class A Interest may
be assigned or otherwise transferred to any person if, in the opinion of Trust
counsel, such transfer will result in the termination under the Code of the
Trust's taxable year (which termination may occur when more than 50% of the
Class A Interests are transferred in a twelve-month period) or its status as a
Trust unless the express written consent of the Managing Trustee is obtained.
Accordingly, sales of Class A Interests on the secondary market during the
twelve-month period following completion of the Offer may be limited. The Trust
will not process any request for a transfer of Class A Interests during such
twelve-month period which the Managing Trustee believes may cause a tax
termination.

Class A Interests Registered. The Class A Interests are registered under
the Exchange Act, which requires, among other things, that the Trust furnish
certain information to its Class A Beneficiaries and to the Commission and
comply with the Commission's proxy rules in connection with meetings of, and
solicitation of consents from, Class A Beneficiaries. The Trust does not expect
or intend that consummation of the Offer will result in the Class A Interests
becoming eligible for termination of registration under Section 12(g) of the
Exchange Act. If the Class A Interests were to be held of record by fewer than
300 persons, the Trust could terminate the registration of the Class A Interests
under the Exchange Act. Because the Class A Interests are widely held and the
Trust will only acquire up to 45% of the Class A Interests outstanding, however,
the Trust expects that the Class A Interests will continue to be held of record
by substantially more than 300 persons.

Effect on Trading Market and Price Range of Class A Interests. There is no
established public trading market for the Class A Interests. The Class A
Interests are not listed on any securities exchange and are not quoted on the
National Association of Securities Dealers Automated Quotation System
("NASDAQ"). Therefore, a reduction in the number of Class A Beneficiaries
should not materially further restrict the Class A Beneficiaries' ability to
find purchasers for their Class A Interests.

Secondary sales activity for the Class A Interests have been limited and
sporadic. For a description of such activity, see "Section 12. Background of
the Offer."

Section 8. Future Plans. The Trust will pay for the Class A Interests
that it is seeking to acquire pursuant to the Offer with a portion of the net
proceeds of its recent Class B Offering. The Trust will seek to acquire
additional Class A Interests following the completion of the Offer with the
remaining net proceeds of the Class B Offering. Any such acquisition may be
made through private purchases, through one or more future tender offers or by
any other means deemed advisable. Any such acquisition may be at a price higher
or lower than the price to be paid for the Class A Interests purchased pursuant
to the Offer. Neither the Trust nor the Managing Trustee has any present plans
or intentions with respect to a liquidation, sale of assets or refinancing of
the Trust's equipment and other assets except in the ordinary course of business
and in order to effectuate the investment objectives of the Trust. (See
"Section 9. Certain Information Concerning the Trust.") However, the Managing
Trustee will continue to review any opportunities such as sale, re-lease or
refinancing of the Trust's equipment and will seek to maximize returns to the
Class A Beneficiaries in accordance with the investment objectives of the Trust.

<PAGE>

Section 9. Certain Information Concerning the Trust.

General Information. The Trust was created as a Delaware business trust in
accordance with the Delaware Business Trust Act on May 28, 1992 for the purpose
of acquiring and leasing to third parties a diversified portfolio of capital
equipment. Participants' capital initially consisted of contributions of $1,000
from the Managing Trustee, $1,000 from the Special Beneficiary and $100 from the
Initial Beneficiary. The Trust issued 665,494 Class A Interests to 803 investors
for an aggregate purchase price of $16,637,350 on September 8, 1992. The Trust
has one Managing Trustee, AFG ASIT Corporation, an Affiliate of EFG, and one
Special Beneficiary, EFG. The Managing Trustee and the Special Beneficiary are
not required to make any other capital contributions.

The Trust issued 1,000,961 Class B Subordinated Interests on July 18, 1997
for $5 per interest for a total of $5,004,805, of which the designee of the
Special Beneficiary acquired 997,373 and the Class A Beneficiaries acquired
3,588 of the Class B Subordinated Interests. (See "Section 11 - Source of
Funds.")

Financial Information. Set forth below is certain selected financial
information relating to the Trust which has been excerpted or derived from the
financial statements contained in the Trust's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 (the "1996 Form 10-K") and its Quarterly
Report on Form 10-Q for the three months ended March 31, 1997 (the "March 1997
Form 10-Q") filed by the Trust with the Commission. The financial information
is qualified in its entirety by reference to such reports, including the
financial statements and related notes contained therein. Such reports and
other documents may be examined at and copies may be obtained from the offices
of the Commission at 450 Fifth Street, N.W., Washington, DC 20549, and
73 Tremont Street, Boston, Massachusetts 02108.

<PAGE>

SELECTED FINANCIAL DATA

The following data should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations and
the financial statements.

For the years ended December 31, 1996, 1995, 1994 and 1993 and for the
period September 8, 1992 (commencement of operations) to December 31, 1992:

Summary of
Operations 1996 1995 1994 1993 1992
- -------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Lease revenue....... $ 5,809,086 $ 6,173,972 $ 5,507,765 $ 5,611,138 $ 450,996
Net income (loss)... $ 807,840 $ 527,564 $ 1,771,705 $ 710,004 $ (140,780)
Per Beneficiary
Interest:
Net income (loss). $ 1.10 $ 0.72 $ 2.42 $ 0.97 $ (0.19)
Cash distributions $ 1.42 $ 2.00 $ 2.52 $ 2.52 $ 0.84

Financial Position

Total assets........ $16,631,159 $19,573,350 $22,320,875 $25,677,488 $28,928,691
Total long-term
obligations....... $ 4,352,811 $ 7,097,113 $ 8,713,009 $11,971,262 $13,155,157
Participants'
capital........... $11,925,600 $12,157,251 $13,092,674 $13,168,952 $14,306,931

</TABLE>

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS

Overview

As an equipment leasing trust, AFG Investment Trust B (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.

Three months ended March 31, 1997 compared
to the three months ended March 31, 1996

Results of Operations

For the three months ended March 31, 1997, the Trust recognized lease
revenue of $1,348,618 compared to $1,479,254 for the same period in 1996. The
decrease in lease revenue from 1996 to 1997 is due to the Trust's sale of its
interest in a Boeing 747-SP aircraft leased to United Air Lines, Inc. (the
"United Aircraft") in February 1996, as discussed below, primary lease term
expirations and the sale of other 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 March 31, 1997, the Trust sold equipment
having a net book value of $11,554 to existing lessees and third parties. These
sales resulted in a net gain, for financial statement purposes, of $3,160.

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 $560,982 in connection with this transaction, of which $384,782 was
recognized as Write-Down of Equipment in 1995. The remainder of $176,200 was
recognized as a loss on sale of equipment on the accompanying Statement of
Operations for the three months ended March 31, 1996. In addition to lease
rents, the Trust received net sale proceeds of $1,684,292 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

<PAGE>

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 months ended March 31, 1996, the Trust sold other equipment having a
net book value of $18,037 to existing lessees and third parties. These sales
resulted in a net loss, for financial statement purposes, of $7,816.

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 $1,020,428 and $1,145,057 for
the three months ended March 31, 1997 and 1996, respectively. 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 $45,110 or 3.3% of lease revenue for the three
months ended March 31, 1997 compared to $110,025 or 7.4% of lease revenue for
the same period in 1996. Interest expense in future periods will continue to
decline as the principal balance of notes payable is reduced through the
application of rent receipts to outstanding indebtedness.

Management fees were 4.2% of lease revenue during each of the three
month periods ended March 31, 1997 and 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.

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 3.1% and 1.1% of lease revenue during the three months ended March
31, 1997 and 1996, respectively. The increase in operating expenses from 1996 to
1997 was due primarily to professional service costs incurred in connection with
the Solicitation and Registration Statements described in Note 8 to the
accompanying financial statements. The amount of future operating expenses
cannot be predicted with

<PAGE>

certainty; however, such expenses are usually higher during the acquisition and
liquidation phases of a trust. Other fluctuations typically occur in relation to
the volume and timing of remarketing activities.

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 $1,231,298 and $1,517,207 in the three months ended March
31, 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. The Trust expended $1,441,796 to acquire
equipment during the three months ended March 31, 1996. 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's prospectus
and an original equipment acquisition of $202,055. The reinvestment equipment
was financed through a combination of leveraging and the sale proceeds available
from the aircraft transaction, discussed above. There were no equipment
acquisitions during the same period in 1997. During the three months ended
March 31, 1997, the Trust realized equipment sale proceeds of $14,714. During
the same period in 1996, the Trust realized equipment sale proceeds of
$1,694,513, including $1,684,292 of proceeds from the United Aircraft. 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.

The Trust obtained long-term financing in connection with certain
equipment leases. The origination of such indebtedness and the subsequent
repayments of principal are
19

<PAGE>

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.

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 three months ended March 31, 1997,
the Trust declared total cash distributions of Distributable Cash From
Operations and Distributable Cash From Sales and Refinancings of $300,297. In
accordance with the Trust Agreement, the Beneficiaries were allocated 90.75% of
these distributions, or $272,520; the Special Beneficiary was allocated 8.25%,
or $24,774; and the Managing Trustee was allocated 1%, or $3,003.

For financial reporting purposes, the Managing Trustee and the Special
Beneficiary each have accumulated a capital deficit at March 31, 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. However, for income tax purposes, the Trust Agreement requires that
income be 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 March 31, 1997, the Trust had aggregate future minimum lease
payments of $6,300,854 from contractual lease agreements (see Note 3 to the
financial statements), of which $3,915,823 will be used to amortize the
principal balance of notes payable (see Note 6 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.

<PAGE>

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 Beneficiary Interest
(the rate established and paid from the Trust's inception through
September 1995) to an annualized rate of $1.26 per Beneficiary Interest
commencing in October 1995. In October 1996, the Managing Trustee increased the
annualized distribution rate to $1.64 per Beneficiary Interest and expects that
the Trust will be able to sustain this distribution rate throughout 1997.
However, 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 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 Participants
should expect that cash distribution rates will fluctuate over the long term as
a result of future remarketing activities.

Year ended December 31, 1996 compared to the year
ended December 31, 1995 and the year ended December 31, 1995
compared to the year ended December 31, 1994

Results of Operations

For the year ended December 31, 1996, the Trust recognized lease
revenue of $5,809,086 compared to $6,173,972 and $5,507,765 for the years ended
December 31, 1995 and 1994, respectively. The decrease in lease revenue from
1995 to 1996 is due primarily to the Trust's sale of its interest in a Boeing
747-SP aircraft leased to United Air Lines, Inc. (the "United Aircraft") in
February 1996, as discussed below. The increase in lease revenue from 1994 to
1995 was due to the acquisition of additional equipment during 1995, including
the effects of reinvestment. The Trust also earns interest income from temporary
investments of rental receipts and equipment sales proceeds in short-term
instruments.

<PAGE>

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.

On February 5, 1996, the Trust concluded the sale of its interest in
the United Aircraft to the lessee, United Air Lines Inc., ("United"). The Trust
recognized a net loss of $560,982 in connection with this transaction, of which
$384,782 was recognized as Write-Down of Equipment in 1995. The remainder of
$176,200 was recognized as a loss on sale of equipment on the accompanying
financial statements for the year ended December 31, 1996. In addition to lease
rents, the Trust received net sale proceeds of $1,684,292 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 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 year ended December 31, 1996, the
Trust sold other equipment having a net book value of $389,885 to existing
lessees and third parties. These sales resulted in a net loss, for financial
statement purposes, of $48,394.

During 1995, the Trust sold equipment having a net book value of
$4,084,735 to existing lessees and third parties. These sales resulted in a net
loss, for financial statement purposes, of $225,037. The equipment sales
included the Trust's interest in a vessel with an original cost and net book
value of $5,406,468 and $4,023,021, respectively, which the Trust sold to an
existing lessee in June 1995. In connection with this sale, the Trust realized
sale proceeds of $3,567,942 and the purchaser assumed related debt and interest
of $269,023 and $1,734, respectively, which resulted in a net loss, for
financial statement purposes, of $184,322. This equipment was sold prior to the
expiration of the related lease term. The sale proceeds related to this
transaction were fully reinvested in other equipment in 1995. The Trust received
$199,450 in 1996 from the lessee related to a residual sharing agreement between
the lessee and the Trust. In connection with this agreement, the Trust was
entitled to a portion of the sale proceeds realized by the lessee upon its
ultimate disposition of the vessel to a third party. This amount is reflected as
Other Income on the accompanying Statement of Operations.

During 1994, the Trust sold equipment having a net book value of
$4,290,653 to existing lessees and third parties. These sales resulted in a net
gain, for financial statement purposes, of $638,594. The equipment sales
included certain railroad equipment with an original cost and net book value of
$4,848,839 and $4,099,823, respectively, which the Trust sold to a third party
in March 1994. In connection with this sale, the Trust realized sales proceeds
of $1,347,625 and the purchaser assumed related debt of $3,446,759, which
resulted in a net gain, for financial statement purposes, of $694,561. This
equipment was sold prior to the expiration of the related lease term. The sale
proceeds were fully reinvested in other equipment in 1994.

<PAGE>

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.

Depreciation and amortization expense was $4,284,049, $4,176,540 and
$3,559,119 for the years ended December 31, 1996, 1995 and 1994, respectively.
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. The increase in
depreciation expense from 1994 to 1996 reflects the acquisition of equipment
during 1994, 1995 and 1996.

Interest expense was $408,153 or 7% of lease revenue in 1996, $539,047
or 8.7% of lease revenue in 1995 and $635,157 or 11.5% of lease revenue in 1994.
Interest expense in future periods will continue to decline in amount and as a
percentage of lease revenue as the principal balance of notes payable is reduced
through the application of rent receipts to outstanding indebtedness.

Management fees were 4.3%, 4% and 3.4% of lease revenue during the
years ended December 31, 1996, 1995 and 1994, respectively. 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.

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 2.4%, 2% and 1.3% of lease revenue during the years ended December
31, 1996, 1995 and 1994, respectively. The overall increase in operating
expenses from 1994 to 1996 was due primarily to an increase in administrative
and professional service costs and expenses incurred in connection with the
sale of the Trust's interest in the vessel and aircraft described above. 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. Other fluctuations typically occur in relation to the volume and
timing of remarketing activities.

Liquidity and Capital Resources and Discussion of Cash Flows

<PAGE>

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 monitor the Trust's 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 Statement of Cash Flows. The Trust expended $1,441,796, $5,605,829
and $5,427,991 to acquire equipment during the years ended December 31, 1996,
1995 and 1994, respectively, including new equipment acquired pursuant to the
reinvestment provisions of the Trust Agreement of approximately $1,400,000,
$3,500,000 and $5,000,000 during the years ended December 31, 1996, 1995 and
1994, respectively. The reinvestment equipment was financed through a
combination of leveraging and the sale proceeds available from the aircraft,
vessel and rail transactions, discussed above. During 1996, the Trust realized
equipment sale proceeds of $2,025,783, including $1,684,292 of proceeds from the
United Aircraft. In 1995, the Trust received sale proceeds of $3,588,941,
including $3,567,942 of proceeds from the vessel transaction and; in 1994, the
Trust received sale proceeds of $1,482,488, including $1,347,625 of proceeds
from the rail transaction. 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.

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, $2,296,728 and $3,982,078 in 1996, 1995 and 1994,
respectively, resulted from leveraging a portion of the Trust's equipment
portfolio with third-party lenders. EFG also provided interim financing to the
Trust of $41,440 during 1994, until third-party financing was finalized. No
interim financing was provided during the same periods in 1996 and 1995. 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
24

<PAGE>

payment obligation of $282,421 at the expiration of the primary lease term
related to the Reno Aircraft.

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 year ended December 31, 1996, the
Trust declared total cash distributions of Distributable Cash From Operations
and Distributable Cash From Sales and Refinancings of $1,039,491. In accordance
with the Trust Agreement, the Beneficiaries were allocated 90.75% of these
distributions, or $943,338; the Special Beneficiary was allocated 8.25%, or
$85,758; and the Managing Trustee was allocated 1%, or $10,395.

For financial reporting purposes, the Managing Trustee and the Special
Beneficiary each has accumulated a capital deficit at December 31, 1996. 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. (See Note 2 to the
financial statements - Allocation of Profits and Losses.) 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. However, for income tax purposes, the Trust Agreement requires that
income be 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 has a positive tax capital account balance. (See Note
6 to the financial statements.)

At December 31, 1996, the Trust had aggregate future minimum lease
payments of $7,370,938 from contractual lease agreements (see Note 2 to the
financial statements), of which $4,352,811 will be used to amortize the
principal balance of notes payable (see Note 5 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.

<PAGE>

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 and,
during its reinvestment period, to purchase replacement equipment as original
equipment is remarketed. 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 Beneficiary Interest (the rate established and paid from the Trust's
inception through September 1995) to an annualized rate of $1.26 per Beneficiary
Interest commencing in October 1995. In October 1996, the Managing Trustee
increased the annualized distribution rate to $1.64 per Beneficiary Interest and
expects that the Trust will be able to sustain this distribution rate throughout
1997. However, 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 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 Participants
should expect that cash distribution rates will fluctuate over the long term as
a result of future remarketing activities.

Section 10. Conflicts of Interest. The Managing Trustee and its
Affiliates own in the aggregate 919 Class A Interests and acquired 997,373 of
the 1,000,961 Class B Subordinated Interests issued pursuant to the Class B
Offering. Accordingly, it is in the best interest of the Managing Trustee and
such Affiliates that a significant number of Class A Interests be tendered
pursuant to the Offer at a price which will enable the Trust to make
distributions in the future with respect to their Class A Interests and Class B
Interests in greater amounts than would otherwise be the case if such Class A
Interests were not tendered pursuant to the Offer.

Section 11. Source of Funds. The Trust issued 1,000,961 Class B
Subordinated Interests (the "Class B Interests") at the closing of the Class B
Offering on July 18, 1997 for which it received total proceeds of $5,004,805.
Of these proceeds approximately $107,560 is expected to be used to pay the
expenses of the Class B Offering, $979,449 will be used to make a special
distribution to the Class A Beneficiaries (the "Special Distribution") and the
approximate balance of $3,917,796 is now available to the Trust to redeem
Class A Interests pursuant to the Offer and in future transactions.

Section 12. Background of the Offer. In the fall of 1996, the
Managing Trustee began to give serious consideration to a tender offer to
acquire Class A Interests from Class A Beneficiaries who chose to participate in
such an offer. The Managing Trustee was aware of the then market for tender
offers and the desire for liquidity on the part of some investors, which made
many such offers successful for the buyers. The Managing Trustee then began to
give serious consideration to having the Trust itself make the offer, and to the
possibility of structuring a new securities offering by the Trust that would
provide the Trust with the funds necessary to implement a self-tender. The
self-tender would permit the non-tendering Class A Beneficiaries to benefit from
any economic benefits

<PAGE>

realized from the redemption of Class A Interests. The Trust's decision to
proceed with this course of action was based on a number of factors and in part
on discussions with representatives of certain securities firms that
participated in the offering of the Class A Interests. After considering the
prices available to sellers of Class A Interests in the Trust and other similar
issuers, the Managing Trustee concluded that a self-tender would afford the
non-tendering Class A Beneficiaries an opportunity to realize increased
distributions in the future, a benefit to the existing investors that would not
be present in the case of a third-party tender. Further, the Managing Trustee
determined to structure the transaction as an equity transaction so as to avoid
the incurring of additional debt by the Trust that could lead to reduced cash
distributions. Any use by the Trust in a self- tender of cash generated from
asset sales or Trust operations could similarly have reduced future
distributions.

The following table sets forth the reported secondary market sale
prices for Class A Interests over the past two years:

Quarter Ended High Low Volume
------------- ------ ------ ------
6/30/95 $16.71 $16.71 2,000
9/30/95 $14.75 $14.75 760
12/31/95 $14.75 $10.00 5,600
3/31/96 NA NA NA
6/30/96 $ 7.97 $ 7.00 1,000
9/30/96 NA NA NA
12/31/96 $ 8.61 $ 8.61 800
3/31/97 $ 9.10 $ 9.10 320
6/30/97 N/A N/A N/A

NA - No Activity

At the time of the original offering of Class A Interests, the Managing
Trustee expected that liquidation of the Trust would occur within approximately
seven years of its formation. However, based upon the current portfolio of
equipment owned by the Trust, the Managing Trustee now believes that the
liquidation date of seven years will not be attained and the liquidation date
will now be approximately 11 years from organization (i.e., by 2003).

The Managing Trustee estimates that the current liquidation value of a
Class A Interest is approximately $14.34, after giving effect to the Special
Distribution. The net book value per Class A Interest at March 31, 1997 was
$18.25 (which does not take into account the 9.25% combined participation of the
Managing Trustee and Special Beneficiary in Trust distributions on the Special
Distribution). Average cumulative distributions since inception of the Trust
including the Special Distribution are $21.47 per Class A Interest.

The estimated fair market value of the Trust's Assets is based upon the
Managing Trustee's assessment of the net present value of the distributions that
a Class A Interest might realize (the "NPV"), assuming a discount rate of 10%
per annum and reducing such distributions by the Special Distribution.
(Assuming discount rates of 8% and 15%, the NPV would be $15.58 and $11.70,
respectively.) The Managing Trustee believes that the NPV is in excess of the
amount of cash consideration which an independent third party buyer would be
willing to pay for the Trust's assets, after taking into account lease
encumbrances and related indebtedness. In determining the NPV, the Managing
Trustee

<PAGE>

estimated that the Trust's 39.59% equity interest in a MD-82 aircraft currently
on lease to Alaska Airlines, Inc. ("Alaska") is valued at approximately $4.25
million or approximately 40% of the estimated fair market value of the Trust's
Assets. The lease with Alaska expires on December 31, 1997 and Alaska has
informed the Managing Trustee that it will return the aircraft on or about
January 20, 1998. The Managing Trustee has had, and continues to have,
discussions with both potential end users and remarketing agents regarding sale
or re-lease of the aircraft. However, no agreement has yet been reached. The
Managing Trustee believes that the Trust's interest in the aircraft has a value
of between $4.25 million and $4.95 million, depending on the condition of the
aircraft when it is returned. It is uncertain when the Trust will sell or
re-lease the aircraft and what improvements, if any, will be required to be made
and off-lease charges will be required to be incurred prior to that time. It is
important to note that in many cases assets are re-leased by lessees instead of
being purchased at the end of the lease terms and it is difficult to predict
accurately the amount and time of receipt of any residual proceeds. Further,
the NPV will be affected by the number of Class A Interests redeemed by the
Trust from time to time and the price paid by the Trust therefor.

Current net book value of the Trust's assets results in part from the
Trust's depreciation policy which is intended to allocate the cost of assets
over the period during which they produce economic benefit. The period of
greatest economic benefit is considered to correspond to each asset's primary
Lease term. Accordingly, the Trust depreciates the difference between the cost
of each asset and its estimated end-of-primary lease residual value over the
primary lease term. To the extent that an asset is leased beyond its primary
Lease term, the Trust continues to depreciate the then remaining net book value
over the asset's then remaining economic life. Using this methodology, the
Managing Trustee expects that the periodic reductions in net book value,
resulting from depreciation, will be consistent with corresponding reductions in
fair market value, resulting from normal wear and tear, age and obsolescence.
However, the Managing Trustee periodically evaluates the net carrying value of
the Trust's assets to determine whether it exceeds estimated net realizable
value. In accordance with FAS No. 121, adjustments to reduce the net carrying
value of assets to estimated fair market value are recorded in those instances
where estimated net realizable value is considered to be less than net carrying
value. In the judgment of the Managing Trustee, the current fair market value
of the Trust's assets is not representative of net realizable value, which is
greater than fair market value as it gives consideration to the aggregate
undiscounted future cash flows resulting from future contracted lease payments
plus the estimated residual value of the Trust's assets.

The Managing Trustee considered the foregoing factors, in particular
the reported secondary market sales prices of Class A Interests, and established
a Purchase Price of $9.75 per Class A Interest for the Offer. The Managing
Trustee believes that the Purchase Price is somewhat in excess of the price
available to Class A Beneficiaries in a secondary market and should enable the
Trust to accomplish the objectives of the Class B Offering in permitting the
Class A Beneficiaries desiring to do so to liquidate their investment in the
Trust while increasing future distributions to the Class A Beneficiaries who
determine not to tender their Class A Interests.

NO INDEPENDENT PERSON HAS BEEN RETAINED TO EVALUATE OR RENDER ANY
OPINION WITH RESPECT TO THE FAIRNESS OF THE PURCHASE PRICE AND NO REPRESENTATION
IS MADE BY THE TRUST OR ANY AFFILIATE OF THE TRUST AS TO SUCH FAIRNESS. THE
TRUST DID NOT ATTEMPT TO OBTAIN CURRENT INDEPENDENT VALUATIONS OR APPRAISALS OF
THE EQUIPMENT AND OTHER ASSETS OWNED BY THE TRUST. OTHER MEASURES OF THE
VALUE OF THE CLASS A INTERESTS MAY BE RELEVANT TO CLASS A BENEFICIARIES AND
CLASS A BENEFICIARIES SHOULD DETERMINE FOR THEMSELVES

<PAGE>

WHETHER THE METHOD EMPLOYED BY THE TRUST, AND THE UNDERLYING ASSUMPTIONS, ARE
REASONABLE. CLASS A BENEFICIARIES ARE URGED TO CONSIDER CAREFULLY ALL OF THE
INFORMATION CONTAINED HEREIN AND CONSULT WITH THEIR OWN ADVISORS, TAX, FINANCIAL
OR OTHERWISE, IN EVALUATING THE TERMS OF THE OFFER BEFORE DECIDING WHETHER TO
TENDER CLASS A INTERESTS.

Section 13. Conditions of the Offer. Notwithstanding any other term
of the Offer, the Trust shall not be required to accept for payment or to pay
for any Class A Interests tendered if all authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations of waiting periods
imposed by, any court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, necessary for the
consummation of the transactions contemplated by the Offer shall not have been
filed, occurred or been obtained. Furthermore, notwithstanding any other term
of the Offer, the Trust shall not be required to accept for payment or pay for
any Class A Interests not theretofore accepted for payment or paid for and may
terminate or amend the Offer as to such Class A Interests if, at any time on or
after the date of the Offer and before the acceptance of such Class A Interests
for payment or the payment therefor, any of the following conditions exists:

(a) a preliminary or permanent injunction or other order of any
federal or state court, government or governmental authority or agency
shall have been issued and shall remain in effect which (i) makes
illegal, delays or otherwise directly or indirectly restrains or
prohibits the making of the Offer or the acceptance for payment of or
payment for any Class A Interests by the Trust, (ii) causes any
material diminution of the benefits to be derived by the Trust as a
result of the transactions contemplated by the Offer, or (iii) might
materially adversely affect the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Trust;

(b) there shall be any action taken, or any statute, rule,
regulation or order proposed, enacted, enforced, promulgated, issued or
deemed applicable to the Offer by any federal or state court,
government or governmental authority or agency, which might, directly
or indirectly, result in any of the consequences referred to in
clauses (i) through (iii) of paragraph (a) above;

(c) any change or development shall have occurred or been
threatened since the date hereof, in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Trust, which, in the sole judgment of the Trust, is or
may be materially adverse to the Trust, including without limitation
any adverse developments with respect to any lease of Trust equipment,
or the Trust shall have become aware of any fact that, in the sole
judgment of the Trust, does or may have a material adverse effect on
the value of the Class A Interests;

(d) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on any national
securities exchange or in the over-the-counter market in the United
States, (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States; (iii) any limitation
by any governmental authority on, or other event which might affect,
the extension of credit by lending institutions or result in any
imposition of currency controls in the United States, (iv) a
commencement of a war or armed hostilities or other national or
international calamity directly or indirectly involving the United
States, (v) a material change in United States or other currency
exchange rates or a suspension of a limitation on the markets thereof,
or (vi) in the case of any of the

<PAGE>

foregoing existing at the time of the commencement of the Offer, a material
acceleration or worsening thereof;

(e) a tender or exchange offer for some or all of the Class A
Interests is made by another person; or

(f) it shall have been publicly disclosed or the Trust shall
have otherwise learned that (i) more than ten percent of the
outstanding Class A Interests have been or are proposed to be acquired
by another person (including a "group" within the meaning of
Section 13(d)(3) of the Exchange Act), or (ii) any person or group that
prior to such date had filed a Statement with the Commission pursuant
to Section 13(d) or (g) of the Exchange Act has increased or proposes
to increase the number of Class A Interests beneficially owned by such
person or group as disclosed in such Statement by two percent or more
of the outstanding Class A Interests.

The foregoing conditions are for the sole benefit of the Trust and may
be asserted by the Trust regardless of the circumstances giving rise to such
conditions or may be waived by the Trust in whole or in part at any time and
from time to time in its sole discretion. Any determination by the Trust
concerning the events described above will be final and binding upon all
parties.

The Trust will purchase the Class A Interests tendered in accordance
with the Offer if, in the exercise of its reasonable judgment, it determines
that the conditions to the Offer have been satisfied.

Section 14. Certain Legal Matters.

General. Except as set forth in this Section 14, the Trust is not
aware of any filings, approvals or other actions by any domestic or foreign
governmental or administrative agency that would be required prior to the
acquisition of Class A Interests by the Trust pursuant to the Offer. Should any
such approval or other action be required, it is the Trust's present intention
that such additional approval or action would be sought. While there is no
present intention to delay the purchase of Class A Interests tendered pursuant
to the Offer pending receipt of any such additional approval or the taking of
any such action, there can be no assurance that any such additional approval or
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to the Trust's business, or that certain
parts of the Trust's business might not have to be disposed of or held separate
or other substantial conditions complied with in order to obtain such approval
or action, any of which could cause the Trust to elect to terminate the Offer
without purchasing Class A Interests thereunder. The Trust's obligation to
purchase and pay for Class A Interests is subject to certain conditions,
including conditions relating to the legal matters discussed in this Section 14.

Pending Lawsuit. On June 24, 1997, Leonard Rosenblum, J/B Investment
Partners, Small and Rebecca Barmack, Partners, and Barbara Hall (collectively,
the "Plaintiffs") commenced a derivative action in the Suffolk Superior Court of
the Commonwealth of Massachusetts against Equis Financial Group Limited
Partnership ("Equis" or "EFG") and a number of its Affiliates, including the
Managing Trustee of the Trust, Gary D. Engle and Geoffrey A. MacDonald as
defendants (the "Defendants") and a number of investment programs, including the
Trust, sponsored by Equis as nominal defendants (the "Nominal Defendants").

The Plaintiffs asserted claims on behalf of the Nominal Defendants for
common law fraud, breach of contract, breach of

<PAGE>

fiduciary duty and/or aiding or abetting the breach of fiduciary duty owed to
the Nominal Defendants against the various managing general partners and the
managing trustee of the investment programs, including the Trust, and other
entities and individuals (collectively, the "Managing Defendants") that
allegedly exercise control over the Nominal Defendants.

The Plaintiffs allege, among other things, that the Managing Defendants
have exploited and are continuing to exploit the fiduciary positions through
which they control the Nominal Defendants for improper purposes by causing them
to enter into numerous transactions that are ultra vires and/or lack valid
business purposes which have resulted in the misappropriation and waste of the
Nominal Defendants' assets in order to further the Managing Defendants'
financial interests and to entrench them in their positions of control over the
Nominal Defendants. The Plaintiffs assert as an example of this conduct the
causing of the Trust to issue the Class B Interests and the efforts of the
Managing Defendants to sell the Class B Interests upon one-sided terms and
conditions that are designed to ensure that certain Managing Defendants are able
to acquire voting control over the Trust. Among other things, the Plaintiffs
requested that Managing Defendants be required to make restitution to the Trust
and the other Nominal Defendants.

The Managing Defendants believe that the lawsuit is without merit and
intend to defend vigorously against the lawsuit.

Antitrust. The Trust does not believe that the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, is applicable to the acquisition
of Class A Interests contemplated by the Offer.

Margin Requirements. The Class A Interests are not "margin securities"
under the regulations of the Board of Governors of the Federal Reserve System
and, accordingly, such regulations are not applicable to the Offer.

State Takeover Laws. Certain states, including the State of Delaware
where the Trust has been organized and the Commonwealth of Massachusetts where
the Trust is located, have adopted so-called "anti-takeover laws and
regulations" which purport, to varying degrees, to apply to attempts to acquire
securities of entities which are organized in such states or which have assets,
security holders, principal executive offices or a principal place of business
therein. The Trust believes that such anti-takeover laws do not apply to the
Offer. If any state anti-takeover statute is applicable to the Offer, the Trust
might be unable to accept for payment or purchase Class A Interests tendered
pursuant to the Offer or be delayed in continuing or consummating the Offer. In
such case, the Trust may not be obligated to accept for purchase or pay for any
Class A Interests tendered.

Section 15. Certain Fees and Expenses. Except as set forth in this
Section 15, the Trust will not pay any fees or commissions to any broker, dealer
or other person for soliciting tenders of Class A Interests pursuant to the
Offer. The Trust has retained Corporate Investor Communications, Inc. to act as
Information Agent and Trust Company of America to act as Depositary. The Trust
will pay the Information Agent and the Depositary reasonable and customary
compensation for their services in connection with the Offer, plus reimbursement
for reasonable out-of-pocket expenses, and will indemnify the Information Agent
against certain liabilities and expenses in connection therewith, including
liabilities under the federal securities laws. Further, the Trust reserves the
right to retain a broker/dealer registered to do business in various states to
the extent that the Trust determines that utilization of such broker/dealer
would be appropriate in connection with the Offer. In the event that any
broker/dealer is so retained, the Trust will pay all of its fees and expenses.
The Trust will also pay all costs and expenses of printing and mailing the
Offer.
31

<PAGE>

Section 16. Miscellaneous. The Trust is not aware of any jurisdiction in
which the making of the Offer is not in compliance with applicable law. If the
Trust becomes aware of any jurisdiction in which the making of the Offer would
not be in compliance with applicable law, the Trust will make a good faith
effort to comply with any such law. If, after such good faith effort, the Trust
cannot comply with any such law, the Offer will not be made to (nor will tenders
be accepted from or on behalf of) the holders of Class A Interests residing in
such jurisdiction.

No person has been authorized to give any information or to make any
representation on behalf of the Trust not contained herein or in the Letter of
Transmittal and, if given or made, such information or representation must not
be relied upon as having been authorized.

The Trust has filed with the Commission a Schedule 13E-4 pursuant to
Rule 13e-4 under the Exchange Act, furnishing certain additional information
with respect to the Offer, and may file amendments thereto. The Schedule 13E-4
and any amendments thereto, including exhibits, may be inspected and copies may
be obtained at the same places and in the same manner as set forth in Section 9
hereof (except that they will not be available at the regional offices of the
Commission).

AFG Investment Trust B
August 7, 1997

<PAGE>

Facsimile copies of the Letters of Transmittal, properly completed and duly
executed will be accepted. The Letter of Transmittal and any other required
documents should be sent or delivered by each Class A Beneficiary or his broker,
dealer, commercial bank, trust company or other nominee to the Depositary at his
address set forth below:

The Depositary for this Offer is:

TRUST COMPANY OF AMERICA

By First Class Mail:

Trust Company of America
c/o Gemisys Corp.
7103 South Revere Parkway
Englewood, Colorado 80112
Attn: AFG Investment Trust B

By Facsimile: (800) 387-7365
Confirm by Telephone: (800) 387-7391

The Information Agent for this Offer is:

CORPORATE INVESTOR COMMUNICATIONS, INC.
111 Commerce Road
Carlstadt, NJ 07072-2586
Telephone: (800) 631-0988

Questions and requests for assistance may be directed to Corporate
Investor Communications, Inc. at the address and telephone number listed
above. Additional copies of this Offer to Purchase, the Letter of
Transmittal and other tender offer materials may also be obtained from
Corporate Investor Communications, Inc. as set forth above and will be
furnished promptly at the Trust's expense.

<PAGE>

Financial Statements
AFG Investment Trust B
INDEX TO FINANCIAL STATEMENTS

Page
----
FINANCIAL STATEMENTS................................................ F-1

Statement of Financial Position at March 31, 1997 and December 31
1996......................................................... F-2

Statement of Operations for the three months ended March 31, 1997 and
1996......................................................... F-3

Statement of Cash Flows for the three months ended March 31, 1997 and
1996......................................................... F-4

Notes to the Financial Statements................................... F-5

Report of Independent Auditors...................................... F-9

Statement of Financial Position at December 31, 1996 and 1995....... F-10

Statement of Operations for the years ended December 31, 1996, 1995
and 1994..................................................... F-11

Statement of Changes in Participants' Capital for the years ended
December 31, 1996, 1995 and 1994............................. F-12

Statement of Cash Flows for the years ended December 31, 1996, 1995
and 1994..................................................... F-13

Notes to the Financial Statements................................... F-14

F-1

<PAGE>

AFG Investment Trust B

STATEMENT OF FINANCIAL POSITION
March 31, 1997 and December 31, 1996

(Unaudited)

March 31, December 31,
1997 1996
--------- ------------

ASSETS
Cash and cash equivalents.......................... $3,337,820 $2,829,093
Rents receivable................................... 366,938 339,293
Accounts receivable - affiliate.................... 225,359 154,395
Equipment at cost, net of accumulated depreciation
of $13,171,894 and $12,161,949 at March 31, 1997
and December 31, 1996, respectively................ 12,275,979 13,307,711
Organization costs, net of accumulated amortization
of $4,583 and $4,333 at March 31, 1997 and
December 31, 1996, respectively.................... 417 667
----------- -----------
Total assets.............................. $16,206,513 $16,631,159
----------- -----------
----------- -----------

LIABILITIES AND PARTICIPANTS' CAPITAL
Notes payable...................................... $ 3,915,823 $ 4,352,811
Accrued interest................................... 41,956 36,571
Accrued liabilities................................ 18,750 23,250
Accrued liabilities - affiliate.................... 53,178 47,178
Deferred rental income............................. 124,760 45,550
Cash distributions payable to participants......... 200,199 200,199
----------- -----------
Total liabilities.................... $ 4,354,666 $ 4,705,559
----------- -----------

Participants' capital (deficit):
Managing Trustee............................... (31,120) (30,382)
Special Beneficiary............................ (263,978) (257,894)
Beneficiary Interests (665,494 Interests;
initial purchase price of $25 each).......... 12,146,945 12,213,876
----------- -----------
Total participants' capital................. 11,851,847 11,925,600
----------- -----------

Total liabilities and participants' capital. $16,206,513 $16,631,159
----------- -----------
----------- -----------

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

F-2

<PAGE>

AFG Investment Trust B

STATEMENT OF OPERATIONS
for the three months ended March 31, 1997 and 1996

(Unaudited)

1997 1996
---------- ----------

Income:
Lease revenue....................................... $1,348,618 $1,479,254
Interest income..................................... 39,200 4,551
Gain (loss) on sale of equipment.................... 3,160 (184,016)
---------- ----------
Total income...................................... 1,390,978 1,299,789
---------- ----------

Expenses:
Depreciation and amortization....................... 1,020,428 1,145,057
Interest expense.................................... 45,110 110,025
Equipment management fees - affiliate............... 57,259 62,453
Operating expenses - affiliate...................... 41,637 16,893
---------- ----------
Total expenses.................................... 1,164,434 1,334,428
---------- ----------
Net income (loss)..................................... $226,544 $(34,639)
---------- ----------

Net income (loss) per Beneficiary Interest............ $0.31 $(0.05)
---------- ----------

Cash distributions declared per Beneficiary Interest . $0.41 $0.32
---------- ----------

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

F-3

<PAGE>

AFG Investment Trust B

STATEMENT OF CASH FLOWS
for the three months ended March 31, 1997 and 1996
(Unaudited)

1997 1996
---------- ----------

Cash flows from (used in) operating activities:
Net income (loss)..................................... $226,544 $(34,639)
Adjustments to reconcile net income (loss) to net
cash from operating activities:
Depreciation and amortization..................... 1,020,428 1,145,057
(Gain) loss on sale of equipment.................. (3,160) 184,016
Changes in assets and liabilities
Decrease (increase) in:
rents receivable.................................. (27,645) 277,621
accounts receivable - affiliate................... (70,964) (112,870)
Increase (decrease) in:
accrued interest.................................. 5,385 (50,495)
accrued liabilities............................... (4,500) (250)
accrued liabilities - affiliate................... 6,000 21,225
deferred rental income............................ 79,210 87,542
---------- ----------
Net cash from operating activities............. 1,231,298 1,517,207
---------- ----------
Cash flows from (used in) investing activities:
Purchase of equipment............................... -- (1,441,796)
Proceeds from equipment sales....................... 14,714 1,694,513
---------- ----------
Net cash from investing activities............. 14,714 252,717
---------- ----------
Cash flows from (used in) financing activities:
Proceeds from notes payable......................... -- 997,888
Principal payments - notes payable.................. (436,988) (1,251,120)
Distributions paid.................................. (300,297) (230,998)
---------- ----------
Net cash used in financing activities.......... (737,285) (484,230)
---------- ----------
Net increase in cash and cash equivalents............. 508,727 1,285,694
Cash and cash equivalents at beginning of period...... 2,829,093 337,293
---------- ----------
Cash and cash equivalents at end of period............ $3,337,820 $1,622,987
---------- ----------

Supplemental disclosure of cash flow information:
Cash paid during the period for interest.......... $39,725 $160,520
---------- ----------

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

F-4

<PAGE>

AFG Investment Trust B

Notes to the Financial Statements

March 31, 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 allinformation 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 March 31, 1997 and December 31, 1996 and results of operations
for the three month periods ended March 31, 1997 and 1996 have been made and
are reflected.

NOTE 2 -- CASH

At March 31, 1997, the Trust had $3,225,000 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 $6,300,854 are due as follows:

For the year ending March 31, 1998......................... $4,569,601
1999......................... 941,638
2000......................... 284,922
2001......................... 225,603
2002......................... 159,480
Thereafter................... 119,610
---------

Total................................ $6,300,854
----------
----------

F-5

<PAGE>

NOTE 4 -- EQUIPMENT

The following is a summary of equipment owned by the Trust at March 31,
1997. In the opinion of Equis Financial Group ("EFG"), (formerly American
Finance Group), the acquisition cost of the equipment did not exceed its fair
market value.

Remaining
Lease Term Equipment
Equipment Type (Months) at Cost
-------------- --------- ----------

Aircraft............................... 9-71 $8,018,105
Computers and peripherals.............. 1-21 4,509,566
Materials handling..................... 1-43 4,466,295
Communications......................... 12-21 3,039,531
General plant and warehouse............ 9 1,576,077
Construction and mining................ 1-46 1,200,577
Retail store fixtures.................. 6-12 1,107,881
Tractors and heavy duty trucks......... 8-30 605,644
Manufacturing.......................... 5-9 449,902
Furniture and fixtures................. 7 284,019
Trailers/intermodal containers......... 9-15 128,443
Photocopying........................... 1-8 61,833
-----------
Total equipment cost......... 25,447,873
Accumulated depreciation..... (13,171,894)
-----------
Equipment, net of accumulated
depreciation................. $12,275,979
-----------

At March 31, 1997, the Trust's equipment portfolio included equipment
having a proportionate original cost of $11,023,146, representing
approximately 43% of total equipment cost.

At March 31, 1997, the cost and net book value of equipment held for sale
or re-lease was approximately $451,000 and $100,000, respectively. The
Managing Trustee is actively seeking the sale or re-lease of all equipment
not on lease.

NOTE 5 -- 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 three month periods ended March 31,
1997 and 1996, which were paid or accrued by the Trust to EFG or its
Affiliates, are as follows:

1997 1996
---- ----

Equipment acquisition fees...................... -- $52,786
Equipment management fees....................... $57,259 62,453
Administrative charges.......................... 10,530 5,250
Reimbursable operating expenses
due to third parties.......................... 31,107 11,643
------- --------
Total.................................. $98,896 $132,132
------- --------
------- --------

F-6

<PAGE>

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
March 31, 1997, the Trust was owed $225,359 by EFG for such funds and the
interest thereon. These funds were remitted to the Trust in April 1997.

NOTE 6 -- NOTES PAYABLE

Notes payable at March 31, 1997 consisted of installment notes of
$3,915,823 payable to banks and institutional lenders. The notes bear
interest rates ranging between 5.7% and 7.7%, except for one note which bears
a fluctuating interest rate based on LIBOR plus a margin (5.7% at March 31,
1997). 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 of $282,421 at the expiration of
the primary lease term related to the Reno Air aircraft. The carrying amount
of notes payable approximates fair value at March 31, 1997.

The annual maturities of the notes payable are as follows:

For the year ending March 31, 1998.................... $2,650,656
1999.................... 542,127
2000.................... 111,702
2001.................... 120,800
2002.................... 130,639

Thereafter.............. 359,899
----------

Total......................... $3,915,823
----------
----------

NOTE 7 -- 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 alleging breach of
contract, implied covenant of good faith and fair dealing and specific
performance. 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 alleging a further default by National Steel under the
MLA and EFG recently filed a Summary Judgment on all claims and
counterclaims. The matter remains pending before the Court. The Trust has not
experienced any material losses as a result of this action.

NOTE 8 -- SOLICITATION AND REGISTRATION STATEMENTS

On October 26, 1996, the Managing Trustee, on behalf of the Trust, filed a
Solicitation

F-7

<PAGE>

Statement with the Securities and Exchange Commission which was subsequently
sent to the Beneficiaries pursuant to Regulation 14A of Section 14 of the
Securities Exchange Act. The Solicitation Statement sought to solicit the
consent of the Beneficiaries to a proposed amendment ("the Amendment") to the
Amended and Restated Declaration of Trust (the "Trust Agreement").

The Amendment would (i) amend the provisions of the Trust Agreement
governing the redemption of Interests to permit the Trust to offer to redeem
outstanding interests at such times, in such amounts, in such manner and at
such prices as the Managing Trustee may 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 may fix. Such a security, if it
were to be offered and sold, would provide the Trust with the funds to (a)
implement more expansive Interest redemption opportunities for Beneficiaries
without using Trust funds which may otherwise be available for current cash
distributions; and (b) make a special one-time distribution to the
Beneficiaries.

Pursuant to the Trust Agreement, the adoption of the Amendment required
the consent of the Beneficiaries holding more than fifty percent in the
aggregate of the Interests held by all Beneficiaries. A majority of
Beneficiary Interests, representing 369,960 or 55.6% of all Beneficiary
Interests, voted in favor of the Amendment; 69,792 or 10.5% of all
Beneficiary Interests voted against the Amendment; and 24,444 or 3.7% of all
Beneficiary Interests abstained. Approximately 69.8% of all Beneficiary
Interests participated in the vote. Accordingly, the Amendment was adopted.

On February 12, 1997, the Trust filed a Registration Statement on Form
S-1 (which was amended on April 11, 1997 and May 9, 1997) with the Securities
and Exchange Commission which covers, among other things, the creation and
sale of a new class of beneficiary interests in the Trust (the "Class B
Interests"). A portion of the proceeds from the offering of the Class B
Interests would be used to make a one-time special cash distribution to
existing Beneficiaries (the "Class A Beneficiaries") of the Trust and to
enable the Trust to redeem a portion of the existing Beneficiary Interests
(the "Class A Interests"). The characteristics of the Class B Interests,
associated risk factors, and other matters of importance to the Beneficiaries
and prospective purchasers of the Class B Interests are contained in the
Registration Statement. Presently, the Registration Statement is undergoing
regulatory review and has not been declared effective.

F-8

<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Participants of AFG Investment Trust B:

We have audited the accompanying statements of financial position of AFG
Investment Trust B as of December 31, 1996 and 1995, and the related
statements of operations, changes in participants' capital, and cash flows
for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Trust'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.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of AFG Investment
Trust B at December 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Boston, Massachusetts
March 14, 1997

F-9

<PAGE>

AFG Investment Trust B
STATEMENT OF FINANCIAL POSITION
December 31, 1996 and 1995

<TABLE>
<CAPTION>
1996 1995
---- ----

<S> <C> <C>
ASSETS

Cash and cash equivalents.............................. $ 2,829,093 $ 337,293
Rents receivable....................................... 339,293 729,555
Accounts receivable -- affiliate....................... 154,395 105,494
Equipment at cost, net of accumulated depreciation
of $12,161,949 and $9,940,387 at December 31, 1996
and 1995, respectively............................... 13,307,711 18,399,341
Accumulated amortization of $4,333 and $3,333 at
December 31, 1996 and 1995, respectively............. 667 1,667
----------- -----------
Total assets....................................... $16,631,159 $19,573,350
----------- -----------

LIABILITIES AND PARTICIPANTS' CAPITAL

Notes payable.......................................... $ 4,352,811 $ 7,097,113
Accrued interest....................................... 36,571 124,186
Accrued liabilities.................................... 23,250 20,000
Accrued liabilities -- affiliate....................... 47,178 --
Deferred rental income................................. 45,550 20,802
Cash distributions payable to participants............. 200,199 153,998
----------- -----------
Total liabilities.................................. 4,705,559 7,416,099

Participants' capital (deficit):
Managing Trustee..................................... (30,382) (28,065)
Special Beneficiary.................................. (257,894) (238,783)
Beneficiary Interests (665,494 Interests; initial
purchase price of $25 each)........................ 2,213,876 12,424,099
----------- -----------
Total participants' capital........................ 11,925,600 12,157,251
----------- -----------
Total liabilities and participants' capital........ $16,631,159 $19,573,350
----------- -----------
----------- -----------
</TABLE>

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

F-10

<PAGE>

AFG Investment Trust B

STATEMENT OF OPERATIONS

for the years ended December 31, 1996, 1995 and 1994

1996 1995 1994
---- ---- ----
Income:
Lease revenue......................... $5,809,086 $6,173,972 $5,507,765
Interest income....................... 106,186 45,156 77,799
Other income.......................... 199,450 -- --
Gain (loss) on sale of equipment...... (224,594) (225,037) 638,594
---------- ---------- ----------
Total income...................... 5,890,128 5,994,091 6,224,158
---------- ---------- ---------
Expenses:
Depreciation and amortization......... 4,284,049 4,176,540 3,559,119
Write-down of equipment............... -- 384,782 --
Interest expense...................... 408,153 539,047 634,716
Interest expense -- affiliate......... -- -- 441
Equipment management fees --
affiliate........................... 249,205 244,800 188,998
Operating expenses -- affiliate....... 140,881 121,358 69,179
---------- ---------- ----------
Total expenses.................... 5,082,288 5,466,527 4,452,453
---------- ---------- ----------
Net income............................ $807,840 $527,564 $1,771,705
---------- ---------- ----------

Net income per Beneficiary
Interest........................ $1.10 $0.72 $2.42
----- ----- -----
Cash distributions declared
per Beneficiary Interest........ $1.42 $2.00 $2.52
----- ----- -----

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

F-11

<PAGE>

AFG Investment Trust B

STATEMENT OF CHANGES IN PARTICIPANTS' CAPITAL

for the years ended December 31, 1996, 1995 and 1994

Managing Special Beneficiaries
Trustee Beneficiary ---------------------
Amount Amount Interests Amount Total
-------- ----------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>

Balance at December 31, 1993........... $(17,948) $(155,318) 665,494 $13,342,218 $13,168,952
Net income -- 1994..................... 17,717 146,166 -- 1,607,822 1,771,705
Cash distributions declared............ (18,480) (152,459) -- (1,677,044) (1,847,983)
-------- --------- --------- ----------- -----------
Balance at December 31, 1994........... (18,711) (161,611) 665,494 13,272,996 13,092,674
Net income -- 1995..................... 5,276 43,524 -- 478,764 527,564
Cash distributions declared............ (14,630) (120,696) -- (1,327,661) (1,462,987)
-------- --------- --------- ----------- -----------
Balance at December 31, 1995........... (28,065) (238,783) 665,494 12,424,099 12,157,251
Net income -- 1996..................... 8,078 66,647 -- 733,115 807,840
Cash distributions declared............ (10,395) (85,758) -- (943,338) (1,039,491)
-------- --------- --------- ----------- ------------
Balance at December 31, 1996........... $(30,382) $(257,894) 665,494 $12,213,876 $11,925,600
-------- --------- --------- ----------- -----------
-------- --------- --------- ----------- -----------

</TABLE>

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

F-12

<PAGE>

AFG Investment Trust B

STATEMENT OF CASH FLOWS

for the years ended December 31, 1996, 1995 and 1994

1996 1995 1994
---- ---- ----
<S> <C> <C> <C>

Cash flows from (used in) operating activities:
Net income....................................... $ 807,840 $ 527,564 $ 1,771,705
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization................ 4,284,049 4,176,540 3,559,119
Write-down of equipment...................... -- 384,782 --
(Gain) loss on sale of equipment............. 224,594 225,037 (638,594)
Changes in assets and liabilities:
Decrease (increase) in:
Rents receivable............................. 390,262 (329,882) 67,264
Accounts receivable -- affiliate............. (48,901) (66,857) 30,399
Increase (decrease) in:
Accrued interest............................. (102,023) 80,950 (68,579)
Deferred interest............................ 14,408 -- --
Accrued liabilities.......................... 3,250 4,500 --
Accrued liabilities -- affiliate............. 47,178 (83,863) 83,863
Deferred rental income......................... 24,748 (40,850) (37,366)
------------ ----------- -----------
Net cash from operating activities......... 5,645,405 4,877,921 4,767,811
----------- ----------- ----------
----------- ----------- ----------
Cash flows from (used in) investing activities:
Purchase of equipment.......................... (1,441,796) (5,605,829) (5,427,991)
Proceeds from equipment sales.................. 2,025,783 3,588,941 1,482,488
----------- ----------- ----------
Net cash from (used in) investing
activities............................... 583,987 (2,016,888) (3,945,503)
----------- ----------- -----------
----------- ----------- -----------
Cash flows from (used in) financing activities:
Proceeds from notes payable.................... 997,888 2,296,728 3,982,078
Proceeds from notes payable -- affiliate....... -- -- 41,440
Principal payments -- notes payable............ (3,742,190) (3,643,601) (3,793,572)
Principal payments -- notes payable --
affiliate.................................... -- -- (41,440)
Distributions paid............................. (993,290) (1,618,196) (1,847,983)
----------- ----------- -----------
Net cash used in financing activities...... (3,737,592) (2,965,069) (1,659,477)
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents............................... 2,491,800 (104,036) (837,169)
Cash and cash equivalents at beginning of year... 337,293 441,329 1,278,498
----------- ----------- -----------
Cash and cash equivalents at end of year......... $2,829,093 $337,293 $441,329
----------- ----------- -----------
Supplemental disclosure of cash flow information:
Cash paid during the year for interest......... $495,768 $458,097 $703,736
----------- ----------- -----------
----------- ----------- -----------

</TABLE>

Supplemental schedule of non-cash investing and financing activities:

During 1995, the Trust sold equipment to a lessee which assumed related
debt and interest of $269,023 and $1,734, respectively. During 1994, the
Trust sold equipment to a third party which assumed related debt of
$3,446,759.

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

F-13

<PAGE>

AFG Investment Trust B

Notes to the Financial Statements

December 31, 1996

NOTE 1 -- ORGANIZATION AND TRUST MATTERS

The Trust was organized as a Delaware business trust in accordance with
the Delaware Business Trust Act on May 28, 1992 for the purpose of acquiring
and leasing to third parties a diversified portfolio of capital equipment.
Participants' capital initially consisted of contributions of $1,000 from the
Managing Trustee, AFG ASIT Corporation, $1,000 from the Special Beneficiary,
Equis Financial Group Limited Partnership (formerly American Finance Group),
a Massachusetts limited partnership ("EFG"), and $100 from the Initial
Beneficiary, AFG Assignor Corporation, a wholly-owned affiliate of EFG. The
Trust issued 665,494 Beneficiary Interests to 803 investors on September 8,
1992. The Trust's Managing Trustee, AFG ASIT Corporation, a Massachusetts
corporation and an Affiliate of EFG, is responsible for the general
management and business affairs of the Trust. EFG, is the sole Special
Beneficiary of the Trust and also acts as Advisor to the Trust. As Advisor,
EFG provides services in connection with the acquisition and remarketing of
the Trust's assets. The Managing Trustee and the Special Beneficiary are not
required to make any other capital contributions except as may be required
under the Amended and Restated Declaration of Trust (the "Trust Agreement").

Significant operations commenced September 8, 1992 when the Trust made
its initial equipment purchase. Pursuant to the Trust Agreement, each
distribution of Distributable Cash From Operations and Distributable Cash
From Sales or Refinancings of the Trust shall be made 90.75% to the
Beneficiaries, 8.25% to the Special Beneficiary and 1% to the Managing
Trustee.

Under the terms of the Advisory Agreement between the Trust and EFG,
management services are provided by EFG to the Trust at fees which the
Managing Trustee believes to be competitive for similar services. (Also see
Note 4.)

EFG is a Massachusetts limited partnership formerly known as American
Finance Group ("AFG"). AFG was established in 1988 as a Massachusetts general
partnership and succeeded American Finance Group, Inc., a Massachusetts
corporation organized in 1980. EFG and its subsidiaries (collectively, the
"Company") are engaged in various aspects of the equipment leasing business,
including EFG's role as Equipment Manager or Advisor to the Trust and several
other Direct-Participation equipment leasing programs sponsored or
co-sponsored by EFG (the "Other Investment Programs"). The Company arranges
to broker or originate equipment leases, acts as remarketing agent and asset
manager, and provides leasing support services, such as billing, collecting,
and asset tracking.

The general partner of EFG, with a 1% controlling interest, is Equis
Corporation, a Massachusetts corporation owned and controlled entirely by
Gary D. Engle, its President and Chief Executive Officer. Equis Corporation
also owns a controlling 1% general partner interest in EFG's 99% limited
partner, GDE Acquisition Limited Partnership ("GDE LP"). Equis Corporation
and GDE LP were established in December 1994 by Mr. Engle for the sole
purpose of acquiring the business of AFG.

In January 1996, the Company sold certain assets of AFG relating primarily
to the business of originating new leases, and the name "American Finance
Group," and its acronym to a third party (the "Buyer"). AFG changed its name to
Equis Financial Group Limited Partnership after the sale was concluded. Pursuant
to terms of the sale agreements, EFG

F-14

<PAGE>

agreed not to compete with the Buyer's lease origination business for a
period of five years; however, EFG is permitted to originate certain
equipment leases, principally those involving non-investment grade lessees
and ocean-going vessels, which are not in competition with the Buyer. In
addition, the sale agreements specifically reserved to EFG the rights to
continue using the name American Finance Group and its acronym in connection
with the Trust and the Other Investment Programs and to continue managing all
assets owned by the Trust and the Other Investment Programs, including the
right to satisfy all required equipment acquisitions utilizing either brokers
or the Buyer. Geoffrey A. MacDonald, Chairman of Equis Corporation and Gary
D. Engle agreed not to compete with the sold business on terms and conditions
similar to those for the Company.

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Cash Flows

The Trust considers liquid investment instruments purchased with a
maturity of three months or less to be cash equivalents. From time to time,
the Trust invests excess cash with large institutional banks in reverse
repurchase agreements with overnight maturities. Under the terms of the
agreements, title to the underlying securities passes to the Trust. The
securities underlying the agreements are book entry securities. At December
31, 1996, the Trust had $2,725,000 invested in reverse repurchase agreements
secured by U.S. Treasury Bills or interests in U.S. Government securities.

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.
The leases are accounted for as operating leases and are noncancellable.
Rents received prior to their due dates are deferred. In certain instances,
the Trust may enter primary-term, renewal or re-lease agreements which expire
beyond the Trust's anticipated dissolution date. This circumstance is not
expected to prevent the orderly wind-up of the Trust's business activities as
the Managing Trustee and the Advisor would seek to sell the then-remaining
equipment assets either to the lessee or to a third party, taking into
consideration the amount of future non-cancelable rental payments associated
with the attendant lease agreements. Future minimum rents of $7,370,938 are
due as follows:

For the year ending December 31,
- --------------------------------
1997....................................................... $5,019,911
1998....................................................... 1,485,583
1999....................................................... 297,408
2000....................................................... 249,076
2001....................................................... 159,480
Thereafter................................................. 159,480
-----------
Total.................................................. $7,370,938
-----------
-----------

Revenue from major individual lessees which accounted for 10% or more of
lease revenue during the years ended December 31, 1996, 1995 and 1994 is as
follows:

1996 1995 1994
---- ---- ----

Alaska Airlines, Inc.................. $1,004,770 $1,004,770 $1,004,770
OMI Corporation....................... -- $623,598 $1,184,759
Tarmac Mid-Atlantic, Incorporated..... -- -- $591,040

F-15

<PAGE>

During March 1996, the Trust acquired an 8.86% proportionate ownership
interest in an MD-87 jet aircraft leased by Reno Air, Inc. (the "Reno
Aircraft") - See Note 3 herein. The Trust will receive approximately $159,000
of rental revenue in each of the years in the period ending December 31,
2002. Rents from the Reno Aircraft, as provided for in the lease agreement,
are adjusted monthly for changes of the London Inter-Bank Offered Rate
("LIBOR"). Future rents from the Reno Aircraft included above reflect the
most recent LIBOR effected rental payment.

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.

Equipment on Lease

All equipment was acquired from EFG, one of its Affiliates or from
third-party sellers. Equipment cost represents Asset Base Price plus
acquisition fees and was determined in accordance with the Trust Agreement
and certain regulatory guidelines. Asset Base Price is affected by the
relationship of the seller to the Trust as summarized herein. Where the
seller of the equipment was EFG or an Affiliate, Asset Base Price was the
lower of (i) the actual price paid for the equipment by EFG or the Affiliate
plus all actual costs accrued by EFG or the Affiliate while carrying the
equipment less the amount of all primary term rents earned by EFG or the
Affiliate prior to selling the equipment or (ii) fair market value as
determined by the Managing Trustee in its best judgment, including all liens
and encumbrances on the equipment and other actual expenses. Where the seller
of the equipment was a third party who did not manufacture the equipment,
Asset Base Price was the lower of (i) the price invoiced by the third party
or (ii) fair market value as determined by the Managing Trustee. Where the
seller of the equipment was a third party who also manufactured the
equipment, Asset Base Price was the manufacturer's invoice price, net of any
manufacturer rebates or incentives, which price was considered to be
representative of fair market value.

Depreciation and Amortization

The Trust's 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 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. Periodically, the Managing Trustee 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 Trust's
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 Trust's equipment. The
Managing Trustee evaluates significant equipment assets, such as aircraft and
vessels, individually. All other assets are evaluated collectively by
equipment type unless the Managing Trustee learns of specific circumstances,
such as a lessee default, technological obsolescence, or other market
developments, which could affect the net realizable value of

F-16

<PAGE>

particular assets. In accordance with FAS No. 121, adjustments to reduce the
net carrying value of equipment to estimated fair market value are recorded
in those instances where estimated net realizable value is considered to be
less than net carrying value. Such adjustments 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 Trust and which will
maximize total cash returns for each asset.

Organization costs are amortized using the straight-line method over a
period of five years.

Accrued Liabilities -- Affiliate

Unpaid fees and operating expenses paid by EFG on behalf of the Trust and
accrued but unpaid administrative charges are reported as Accrued Liabilities
- -- Affiliate. (See Note 4.)

Allocation of Profits and Losses

For financial statement purposes, net income or loss is allocated to each
Participant according to their respective ownership percentages (90.75% to
the Beneficiaries, 8.25% to the Special Beneficiary and 1% to the Managing
Trustee). See Note 6 for allocation of income or loss for income tax
purposes.

Net Income and Cash Distributions Per Beneficiary Interest

Net income and cash distributions per Beneficiary Interest are based on
665,494 Beneficiary Interests outstanding during each of the three years in
the period ended December 31, 1996 and computed after allocation of the
Managing Trustee's and Special Beneficiary's shares of net income and cash
distributions.

Provision for Income Taxes

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

Impact of Recently Issued Accounting Standards

In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amounts.
Statement 121 also addresses the accounting for long-lived assets that are
expected to be disposed of. The Trust adopted Statement 121 in the first
quarter of 1996. The adoption of Statement 121 did not have a material effect
on the financial statements of the Trust.

NOTE 3 - EQUIPMENT

The following is a summary of equipment owned by the Trust at December
31, 1996. Remaining Lease Term (Months), as used below, represents the number
of months remaining

F-17

<PAGE>

from December 31, 1996 under contracted lease terms and is presented as a
range when more than one lease agreement is contained in the stated equipment
category. In the opinion of EFG, the acquisition cost of the equipment did
not exceed its fair market value.

Remaining
Lease Term Equipment
Equipment Type (Months) at Cost Location
- -------------- ---------- ---------- --------

Aircraft..................... 12-74 $ 8,018,105 NV/WA
Computers and peripherals.... 1-24 4,512,362 AL/AZ/CA/CO/FL/GA/IL/
IN/KS/KY/LA/MA/MD/MI/
MN/NC/NJ/NM/NY/OH/
OK/OR/PA/SC/TN/TX/VA/
WI/WV
Materials handling........... 1-46 4,466,295 AR/CA/FL/GA/IL/IN/MI/
NC/NY/OH/PA/TX/VA/WV
Communications............... 15-24 3,039,531 AL/AR/AZ/CA/CO/FL/GA/
IA/ID/IL/IN/KS/KY/LA/MA
/MD/MI/MN/MO/MT/NC/
ND/NE/NH/NM/NV/NY/
OH/OK/OR/PA/SC/TN/TX/
VA/VT/WA/WI/WV/WY
General plant and warehouse.. 12 1,576,077 VA
Construction and mining...... 1-49 1,200,577 MI/NV/VA
Retail store fixtures........ 9-15 1,126,872 CO/FL/GA/LA/TX
Tractors and heavy duty
trucks..................... 11-33 605,644 CO/FL/KY/MI/VA
Manufacturing................ 8-12 449,902 IL/VA
Furniture and fixtures....... 10 284,019 PA
Trailers/intermodal
containers................. 12-18 128,443 OH/VA
Photocopying................. 1-11 61,833 CT/IN
-----------
Total equipment cost..... 25,469,660
Accumulated
depreciation........... (12,161,949)
-----------
Equipment, net of
accumulated
depreciation........... $ 13,307,711
------------

</TABLE>

On September 29, 1995, the Trust entered into an agreement with United
Air Lines, Inc. ("United") to sell the Trust's proportionate ownership
interest in a Boeing 747-SP aircraft (the "United Aircraft"), to United for
cash consideration of $1,946,849 including unpaid rents through the date of
sale, which event concluded in February 1996. In March 1996, the Trust
acquired an 8.86% ownership interest in a replacement aircraft (the "Reno
Aircraft"), pursuant to the reinvestment provisions of the Trust's
prospectus, at a cost of $1,239,741. To acquire its interest in the Reno
Aircraft, the Trust obtained leveraging of $997,888 from a third-party lender
and utilized cash proceeds of $241,853 from the sale of the United Aircraft.

In certain cases, the cost of the Trust's equipment represents a
proportionate ownership interest. The remaining interests are owned by EFG or
an affiliated equipment leasing program sponsored by EFG. 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. 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. At December 31, 1996

F-18

<PAGE>

the Trust's equipment portfolio included equipment having a proportionate
original cost of $11,023,146, representing approximately 43% of total
equipment cost.

Certain of the equipment and related lease payment streams were used to
secure term loans with third-party lenders. The preceding summary of
equipment includes leveraged equipment having an original cost of
approximately $15,448,000 and a net book value of approximately $9,643,000 at
December 31, 1996. (See Note 5.)

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

As equipment is sold to third parties, or otherwise disposed of, the
Trust will 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 will be 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,
1996, the Trust held equipment for sale or re-lease with an original cost and
net book value of approximately $451,000 and $119,000, respectively. The
Managing Trustee is actively seeking the sale or re-lease of this equipment.

NOTE 4 -- 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 years ended December 31, 1996, 1995
and 1994, which were paid or accrued by the Trust to EFG or its Affiliates,
are as follows:

1996 1995 1994
---- ---- ----

Equipment acquisition fees............ $36,673 $107,415 $147,800
Equipment management fees............. 249,205 244,800 188,998
Administrative charges................ 42,123 21,000 12,000
Reimbursable operating expenses due
to third parties.................... 98,758 100,358 57,179
Interest on notes payable --
affiliate........................... -- -- 441
-------- -------- --------
Total................................. $426,759 $473,573 $406,418
-------- -------- --------
-------- -------- --------

As provided under the terms of the Trust Agreement, EFG is compensated
for its services to the Trust. Such services include all aspects of
acquisition, management and sale of equipment. For acquisition services, EFG
is compensated by an amount equal to .28% of Equipment Base Price paid by the
Trust. For acquisition services resulting from reinvestment, EFG is
compensated by an amount equal to 3% of Equipment Base Price paid by the
Trust. For management services, EFG is compensated by an amount equal to the
lesser of (i) 5% of gross operating lease rental revenues and 2% of gross
full payout lease rental revenues received by the Trust or (ii) fees which
the Managing Trustee reasonably believes to be competitive for similar
services for similar equipment. Both of these fees are subject to certain
limitations defined in the Trust Agreement. Compensation to EFG for services
connected to the remarketing of equipment is calculated as the lesser of (i)
3% of gross sale proceeds or (ii) one-half of reasonable brokerage fees
otherwise payable under arm's length circumstances. Payment of the
remarketing fee is subordinated to Payout and is subject to certain
limitations defined in the Trust Agreement.

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

F-19

<PAGE>

administrative services to the Trust. Reimbursable operating expenses due to
third parties represent costs paid by EFG on behalf of the Trust which are
reimbursed to EFG.

All equipment was purchased from EFG, one of its Affiliates or from
third-party sellers. The Trust's Purchase Price is determined by the method
described in Note 2, Equipment on Lease.

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
December 31, 1996, the Trust was owed $154,395 by EFG for such funds and the
interest thereon. These funds were remitted to the Trust in January 1997.

NOTE 5 -- NOTES PAYABLE

Notes payable at December 31, 1996 consisted of installment notes of
$4,352,811 payable to banks and institutional lenders. The notes bear
interest rates ranging between 5.7% and 7.7%, except for one note which bears
a fluctuating interest rate based on LIBOR plus a margin (5.5% at December
31, 1996). 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 of $282,421 at the
expiration of the primary lease term related to the Reno Aircraft. The
carrying amount of notes payable approximates fair value at December 31,
1996.

The annual maturities of the notes payable are as follows:

For the year ending December 31,
- --------------------------------

1997.................................................. $2,721,044
1998.................................................. 890,793
1999.................................................. 109,537
2000.................................................. 118,459
2001.................................................. 128,106
Thereafter............................................ 384,872
-----------
Total............................................. $4,352,811
----------
----------

The weighted average interest rate on short-term borrowings from EFG for
the purchase of equipment was 9.25% during the year ended December 31, 1994.

NOTE 6 -- INCOME TAXES

The Trust is not a taxable entity for federal income tax purposes.
Accordingly, no provision for income taxes has been recorded in the accounts
of the Trust.

For financial statement purposes, the Trust allocates net income or loss
to each class of participant according to their respective ownership
percentages (90.75% to the Beneficiaries, 8.25% to the Special Beneficiary
and 1% to the Managing Trustee). This convention differs from the income or
loss allocation requirements for income tax and Dissolution Event purposes as
delineated in the Trust Agreement. Pursuant to the Trust Agreement, for
income tax purposes, the Trust allocates net income, to the extent available,
pro-rata to any Participant with a negative capital account balance so as to
eliminate any such balance. In accordance with the Trust Agreement, upon
dissolution of the Trust, the Managing Trustee will be required to contribute
to the Trust an amount equal to any negative

F-20

<PAGE>

balance which may exist in the Managing Trustee's tax capital account. At
December 31, 1996, the Managing Trustee had a positive tax capital account
balance.

The following is a reconciliation between net income reported for
financial statement and federal income tax reporting purposes for the years
ended December 31, 1996, 1995 and 1994:

1996 1995 1994
---- ---- ----
<S> <C> <C> <C>

Net income............................ $ 807,840 $ 527,564 $ 1,771,705
Tax depreciation in excess of
financial statement
depreciation...................... (279,916) (830,733) (2,249,966)
Tax gain in excess of book gain
(loss)............................ 619,935 865,755 728,516
Prepaid rental income............... 24,748 (40,850) (37,366)
Other............................... 21,123 -- --
----------- --------- ----------
Net income for federal income tax
reporting purposes.................. $1,193,730 $ 521,736 $ 212,889
----------- --------- -----------

</TABLE>

The following is a reconciliation between participants' capital reported
for financial statement and federal income tax reporting purposes for the
years ended December 31, 1996 and 1995:

1996 1995
---- ----

Participant's capital.................... $11,925,600 $12,157,251
Add back selling commissions and
organization and offering costs...... 1,575,644 1,575,644
Financial statement distributions in
excess of tax distributions.......... 18,518 14,245
Cumulative difference between federal
income tax and financial statement
income (loss)........................ (5,881,402) (6,267,292)
----------- -----------
Participants' capital for federal income
tax reporting purposes................. $ 7,638,360 $ 7,479,848
----------- -----------
----------- -----------

Financial statement distributions in excess of tax distributions and
cumulative difference between federal income tax and financial statement
income (loss) represent timing differences.

NOTE 7 -- LEGAL PROCEEDINGS

F-21

<PAGE>

and Supplemental Complaint alleging further default under the MLA and the
matter remains pending before the Court. The Trust has not experienced any
material losses as a result of this action.

NOTE 8 -- SOLICITATION STATEMENT

On October 26, 1996, the Managing Trustee, on behalf of the Trust, filed
a Solicitation Statement with the Securities and Exchange Commission which
was subsequently sent to the Beneficiaries pursuant to Regulation 14A of
Section 14 of the Securities Exchange Act. The Solicitation Statement sought
to solicit the consent of the Beneficiaries to a proposed amendment ("the
Amendment") to the Trust Agreement.

Pursuant to the Trust Agreement, the adoption of the Amendment required
the consent of the Beneficiaries holding more than fifty percent in the
aggregate of the Interests held by all Beneficiaries. To be valid, consent
forms were to be received by the Managing Trustee by December 6, 1996. A
majority of Beneficiary Interests, representing 369,960 or 55.6% of all
Beneficiary Interests, voted in favor of the Amendment; 69,792 or 10.5% of
all Beneficiary Interests voted against the Amendment; and 24,444 or 3.7% of
all Beneficiary Interests abstained. Approximately 69.8% of all Beneficiary
Interests participated in the vote. Accordingly, the Amendment was adopted.

NOTE 9 -- SUBSEQUENT EVENT

On February 12, 1997, the Trust filed a Registration Statement on Form
S-1 with the United States Securities and Exchange Commission which covers,
among other things, the creation and sale of a new class of beneficiary
interest in the Trust (the "Class B Interests"). A portion of the proceeds
from the offering of the Class B Interests would be used to make a one-time
special cash distribution to existing Beneficiaries (the "Class A
Beneficiaries") of the Trust and to enable the Trust to redeem a portion of
the existing Beneficiary Interests (the "Class A Interests"). The
characteristics of the Class B Interests, associated risk factors, and other
matters of importance to the Beneficiaries and prospective purchasers of the
Class B Interests are contained in the Registration Statement. Presently, the
Registration Statement is undergoing regulatory review and has not been
declared effective.

F-22

<PAGE>

We agree to the inclusion in this tender offer of our report dated March 14,
1997, with respect to the 1996 financial statements of AFG Investment Trust B.

ERNST & YOUNG LLP

F-23

<PAGE>
AFG INVESTMENT TRUST A
AFG INVESTMENT TRUST B
AFG INVESTMENT TRUST C
AFG INVESTMENT TRUST D
LETTER OF TRANSMITTAL

THE OFFERS, WITHDRAWAL RIGHTS AND PRORATION PERIODS WILL EXPIRE AT 5:00
P.M., EASTERN TIME, ON SEPTEMBER 12, 1997 UNLESS EXTENDED (such date, as it may
be extended, the "Expiration Date").

To Depositary:
TRUST COMPANY OF AMERICA

By First Class Mail, Overnight Courier or Hand:

c/o Trust Company of America
7103 South Revere Parkway
Englewood, CO 80112
Attn: AFG Investment Trust

By Facsimile:

(800) 387-7365

Confirm Facsimile by Telephone:

(800) 387-7391

To participate in the Offers, a duly executed copy of this Letter of
Transmittal (or facsimile hereof) must be received by the Depositary on or prior
to the Expiration Date. Delivery of this Letter of Transmittal or any other
required documents to an address or facsimile number other than as set forth
above does not constitute valid delivery. The method of delivery of all
documents is at the election and risk of the tendering Class A Beneficiary.
ALTHOUGH A PRE-ADDRESSED POSTAGE-PAID ENVELOPE TO THE DEPOSITARY HAS BEEN
PROVIDED FOR THE CONVENIENCE OF TENDERING CLASS A BENEFICIARIES, THE METHOD OF
DELIVERY OF THIS LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS IS AT
THE OPTION AND SOLE RISK OF THE TENDERING CLASS A BENEFICIARY, AND DELIVERY WILL
BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL, WITH RETURN RECEIPT REQUESTED, IS RECOMMENDED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.

This Letter of Transmittal is to be completed by Class A Beneficiaries of
record as of August 1, 1997, of AFG Investment Trusts A, B, C and D, each a
Delaware business trust (the "Trusts"), pursuant to the procedures set forth in
the respective Offer to Purchase (as defined below) of each Trust.

PLEASE CAREFULLY READ THE ACCOMPANYING INSTRUCTIONS

Gentlemen:

Upon the terms and subject to the conditions set forth in the applicable
Offer to Purchase dated August 7, 1997 (with respect to each Trust, the "Offer
to Purchase"), and this Letter of Transmittal (which together constitute the
"Offer" with respect to each Trust and collectively constitute the "Offers"),
the undersigned hereby tenders to the appropriate Trust(s) the
following-described Class A Interests at the respective prices per Class A
Interest, net to the seller in cash, set forth in the applicable Offer to
Purchase. Receipt of the Offer to Purchase of each Trust with respect to which
the undersigned is tendering Class A Interests is hereby acknowledged.
NUMBER OF CLASS A INTERESTS TENDERED

<TABLE>
<S> <C>
Name(s) and Address(es) of Registered Number of Class A Interests Tendered(1)
Holder(s) (Please fill in, if blank) (i) All / /
(Please check box if all
Class A Interests tendered)

OR
(ii) Number Tendered:
Trust A:
Trust B:
Trust C:
Trust D:
</TABLE>

<PAGE>
- ------------------------
(1) In order for the tender to be valid, a Class A Beneficiary must tender with
respect to any Trust either (i) all Class A Interests owned by such Class A
Beneficiary in such Trust OR (ii) a portion of the Class A Interests owned
by such Class A Beneficiary in such Trust but not fewer than 200 Class A
Interests (80 Class A Interests for IRAs or other Qualified Plans) (the
"Minimum Investment Amount"). If a Class A Beneficiary does not indicate the
number of Class A Interests tendered, the Trusts will assume that such Class
A Beneficiary has tendered all Class A Interests owned of record by him. If
a Class A Beneficiary who tenders only a portion of his Class A Interests
indicates a number of Class A Interests tendered that is less than the
Minimum Investment Amount, the applicable Trust will assume that such Class
A Beneficiary has tendered the Minimum Investment Amount.

Subject to and effective upon acceptance for payment of any of the Class A
Interests tendered hereby, the undersigned hereby sells, assigns and transfers
to, or upon the order of, each applicable Trust all right, title and interest in
and to such Class A Interests tendered hereby. The undersigned hereby
irrevocably (i) constitutes and appoints each applicable Trust as the true and
lawful agent and attorney-in-fact of the undersigned with respect to such Class
A Interests, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to the full extent
of such Class A Beneficiary's rights with respect to the Class A Interests
tendered by such Class A Beneficiary and accepted for payment by such Trust and
(ii) assigns to each applicable Trust all future distributions from such Trust
with respect to such Class A Interests (excluding the Special Distribution as
defined in the Offer) for periods ending after August 1, 1997, to the extent
such distributions are not paid to the undersigned (the undersigned recognizes
that future distributions with respect to such Class A Interests for periods
ending after August 1, 1997, that are paid to the undersigned will automatically
reduce the purchase price for such Class A Interests by a like amount), all in
accordance with the terms of the Offers. Upon the purchase of Class A Interests
pursuant to the Offers, all prior proxies, assignments and consents given by the
undersigned with respect to such Class A Interests will be revoked and no
subsequent proxies, assignments or consents may be given (and if given will not
be deemed effective).

The undersigned recognizes that, with respect to each Trust, if more than
the maximum number of Class A Interests that such Trust is offering to redeem
are validly tendered prior to or on the Expiration Date and not properly
withdrawn, such Trust will, upon the terms of the applicable Offer, accept for
payment from among those Class A Interests tendered prior to or on the
Expiration Date such maximum number of Class A Interests on a pro rata basis,
with adjustments to avoid purchases of certain fractional Class A Interests,
based upon the number of Class A Interests validly tendered prior to the
Expiration Date and not withdrawn. The undersigned further recognizes that if no
more than such maximum number of Class A Interests are validly tendered prior to
the Expiration Date and not withdrawn, such Trust will, upon the terms of the
applicable Offer, accept for payment all such Class A Interests.

ALLOCATION OF PURCHASE PRICE. The undersigned understands and agrees that
the purchase price to be paid by each applicable Trust for the Class A Interests
tendered hereby will be allocated for federal income tax purposes as follows:
first, to Trust cash, second, to Trust assets and, finally, to goodwill and
going concern value.

The undersigned hereby represents and warrants that the undersigned owns the
Class A Interests tendered hereby within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, and has full power and authority to
validly tender, sell, assign and transfer the Class A Interests tendered hereby,
and that when any such Class A Interests are accepted for payment by the
applicable Trust, such Trust will acquire good, marketable and unencumbered
title thereto, free and clear of all liens, restrictions, charges, encumbrances,
conditional sales agreements or other obligations relating to the sale or
transfer thereof, and such Class A Interests will not be subject to any adverse
claim. Upon request, the undersigned will execute and deliver any additional
documents deemed by the applicable Trust to be necessary or desirable to
complete the assignment, transfer and purchase of Class A Interests tendered
hereby.

The undersigned understands that a tender of Class A Interests to the
Trust(s) will constitute a binding agreement between the undersigned and the
applicable Trust(s) upon the terms and subject to the conditions of the
applicable Offer. The undersigned recognizes that in certain circumstances set
forth in the Offers to Purchase, the Trusts may not be required to accept for
payment any of the Class A Interests tendered hereby. In such event, the
undersigned understands that any Letter of Transmittal for Class A Interests not
accepted for payment will be destroyed by the Depositary. All authority herein
conferred or agreed to be conferred shall survive the death or incapacity of the
undersigned and any obligations of the undersigned shall be binding upon the
heirs, personal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.

THERE ARE NO CERTIFICATES TO BE INCLUDED
WITH THIS LETTER OF TRANSMITTAL

2
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED ON THE FOLLOWING PAGES, PLEASE READ THE
ACCOMPANYING INSTRUCTIONS CAREFULLY

The Class A Beneficiary hereby tenders Class A Interests pursuant to the
terms of the Offers. The Class A Beneficiary hereby certifies, under penalties
of perjury, that the information and representations provided herein, including
in Box A of this Letter of Transmittal, which has been duly completed by the
Class A Beneficiary, are true, complete and correct as of the date hereof.

SIGNATURE BOX (ALL OWNERS)
(Attach additional sheets, if necessary)
(See Instruction 1)

Please sign exactly as your name(s) appear(s) above on this Letter of
Transmittal. For joint owners, each joint owner must sign. General partners,
corporate officers or other persons acting in a fiduciary or representative
capacity, please complete this box and see Instruction 1.

X ____________________________________
(Signature of owner)

X ____________________________________
(Signature of joint owner)

Fiduciary: X ____________________________________

Print Name and Title (Fiduciaries only): ____________________________________

Address (Fiduciaries only): ________________________________________________

________________________________________________________________________

Date:_____________________________________________

Tel.: (Day) (__) ____________________________________

Tel.: (Eve) (__) ____________________________________

3
<PAGE>
BOX A

SUBSTITUTE FORM W-9
Department of the Treasury
Internal Revenue Service
(See Instruction 3)

The Class A Beneficiary submitting this Letter of Transmittal hereby certifies
the following under penalties of perjury:

Social Security Number or Employer Identification Number:
__________________________

(1) THE TAXPAYER IDENTIFICATION NUMBER ("TIN") SHOWN ABOVE IS THE CORRECT TIN OF
THE CLASS A BENEFICIARY WHO IS SUBMITTING THIS LETTER OF TRANSMITTAL; OR IF NO
TIN IS PROVIDED ABOVE AND THIS BOX / / IS CHECKED, THE CLASS A BENEFICIARY HAS
APPLIED FOR A TIN. If the Class A Beneficiary has applied for a TIN, a TIN has
not been issued to the Class A Beneficiary, and either (a) the Class A
Beneficiary has mailed or delivered an application to receive a TIN to the
appropriate IRS Center or Social Security Administration Office, or (b) the
Class A Beneficiary intends to mail or deliver an application in the near
future. The Class A Beneficiary understands that if such Class A Beneficiary
does not provide a TIN to the appropriate Trust within sixty (60) days, 31% of
all reportable payments made to the Class A Beneficiary thereafter will be
withheld until a TIN is provided to the Trust; and

(2) UNLESS THIS BOX / / IS CHECKED, SUCH CLASS A BENEFICIARY IS NOT SUBJECT TO
BACKUP WITHHOLDING EITHER BECAUSE SUCH CLASS A BENEFICIARY HAS NOT BEEN NOTIFIED
BY THE IRS THAT SUCH CLASS A BENEFICIARY IS SUBJECT TO BACKUP WITHHOLDING AS A
RESULT OF A FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR BECAUSE THE IRS HAS
NOTIFIED SUCH CLASS A BENEFICIARY THAT SUCH CLASS A BENEFICIARY IS NO LONGER
SUBJECT TO BACKUP WITHHOLDING.

(NOTE: YOU MUST PLACE AN "X" IN THE BOX IN (2) ABOVE IF YOU HAVE BEEN NOTIFIED
BY THE IRS THAT YOU ARE CURRENTLY SUBJECT TO BACKUP WITHHOLDING BECAUSE YOU HAVE
FAILED TO REPORT ALL INTEREST AND DIVIDENDS ON YOUR TAX RETURN.)

Tendering Class A Beneficiaries who are "Foreign Persons," i.e., who are not
U.S. citizens or resident alien individuals, domestic corporations, domestic
partnerships, domestic trusts or domestic estates, must make a certification to
qualify as exempt from 31% backup withholding. If you are a Foreign Person,
please contact the Information Agent to obtain a copy of the certification.

4
<PAGE>
BOX B

NOTARIZATION OF SIGNATURE
(If required. See Instruction 1)

STATE OF _________________________________)
)

COUNTY OF _______________________________)

On this day of , 1997, before me came personally
to me known to be the person who executed the foregoing Letter of Transmittal.

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

Notary Public

GUARANTEE OF SIGNATURE
(If required. See Instruction 1)

Name of Firm: _______________________________________________________

5
<PAGE>
AFG Investment Trust
LETTER OF TRANSMITTAL INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer

1. TENDER, SIGNATURE REQUIREMENTS; DELIVERY. After carefully reading and duly
completing this Letter of Transmittal, to tender Class A Interests a Class A
Beneficiary must sign in the signature block on the front of this Letter of
Transmittal. If this Letter of Transmittal is signed by the registered Class A
Beneficiary(ies) of the Class A Interests as printed on the front of this Letter
of Transmittal without any change whatsoever, no notarization or signature
guarantee on this Letter of Transmittal is required. Similarly, if Class A
Interests are tendered for the account of a member firm of a registered national
security exchange, a member firm of the National Association of Securities
Dealers, Inc., or a commercial bank, savings bank, credit union, savings and
loan association or trust company having an office, branch or agency in the
United States (each, an "Eligible Institution"), no notarization or signature
guarantee is required on this Letter of Transmittal. In all other cases,
signatures on this Letter of Transmittal must either be notarized or guaranteed
by an Eligible Institution, by completing the Notarization or Guarantee of
Signature set forth in BOX B of this Letter of Transmittal. If any tendered
Class A Interests are registered in the names of two or more joint holders, all
such holders must sign this Letter of Transmittal. If this Letter of Transmittal
is signed by trustees, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and must submit proper evidence
satisfactory to the Trust of their authority to so act. For Class A Interests to
be validly tendered, a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), together with any required notarizations or
signature guarantees in BOX B and any other documents required by this Letter of
Transmittal must be received by the Depositary prior to or on the Expiration
Date at its address or to its facsimile number set forth herein. No alternative,
conditional or contingent tenders will be accepted. All tendering Class A
Beneficiaries by execution of this Letter of Transmittal waive any right to
receive any notice of the acceptance of their tender.

2. TRANSFER TAXES. Each Trust will pay or cause to be paid all transfer taxes,
if any, payable on the transfer to it of Class A Interests pursuant to the
Offer.

3. SUBSTITUTE FORM W-9. In order to avoid 31% federal income tax backup
withholding on the payment of the purchase price for Class A Interests
purchased, the tendering Class A Beneficiary must provide to the Trust(s) the
Class A Beneficiary's correct Taxpayer Identification Number ("TIN") and
certify, under penalties of perjury, that such Class A Beneficiary is not
subject to such backup withholding by completing the Substitute Form W-9 set
forth in BOX A of this Letter of Transmittal. If a correct TIN is not provided,
penalties may be imposed by the Internal Revenue Service ("IRS") in addition to
the Class A Beneficiary being subject to backup withholding. Certain Class A
Beneficiaries (including, among others, all corporations) are not subject to
backup withholding. Backup withholding is not an additional tax. If withholding
results in an overpayment of taxes, a refund may be obtained from the IRS.

6
<PAGE>
The TIN that must be provided on the Substitute Form W-9 is that of the
registered Class A Beneficiary(ies) indicated on the front of this Letter of
Transmittal. If the tendering Class A Beneficiary has applied for but has not
been issued a TIN or intends to apply for a TIN in the near future and the
appropriate Trust is not provided with the Class A Beneficiary's TIN within 60
days, the Trust will withhold 31% of all subsequent payments, if any, of the
purchase price for the Class A Interests until such TIN is provided to the
Trust.

4. ADDITIONAL COPIES OF OFFER TO PURCHASE AND LETTER OF TRANSMITTAL. Requests
for assistance or additional copies of the Offer to Purchase and this Letter of
Transmittal may be obtained from the Information Agent at the address or
telephone number set forth below:

The Information Agent is:

Corporate Investor Communications, Inc.
111 Commerce Road
Carlstadt, NJ 07072-2586
(800) 631-0988

IMPORTANT: IN ORDER TO PARTICIPATE IN THE OFFER, THIS LETTER OF
TRANSMITTAL (OR FACSIMILE HEREOF) MUST BE RECEIVED BY THE
DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE.

<PAGE>

AFG INVESTMENT TRUST B
88 Broad Street
Boston, MA 02110

Dear Investor:

AFG Investment Trust B (the "Trust") is offering to purchase from its Class A
Beneficiaries up to 299,472 Class A Beneficiary Interests ("Class A
Interests"), which represents 45% of the outstanding Class A Interests, at a
purchase price of $9.75 per Class A Interest.

On July 18, 1997, the Trust completed its offering of Class B Subordinated
Interests. As previously communicated to you, the purpose of the Class B
offering was to provide funds to the Trust to make a special distribution to
the Class A Beneficiaries and purchase Class A Interests. The special
distribution will be paid prior to August 25, 1997 in the amount of $1.47 per
Class A Interest. When combined with other monthly distributions previously
made since inception of the Trust (through August 1, 1997), the average
cumulative distributions per Class A Interest will be $11.72. If you choose
to sell your Class A Interests pursuant to this offer, the purchase price
combined with the average cumulative distributions will have provided
investors a total amount of $21.47 per Class A Interest. The original
purchase price per Class A Interest was $25.00. Whether or not you sell your
Class A Interests, you will retain the special distribution.

The Managing Trustee set the purchase price at an amount which, when combined
with the special distribution, is in excess of the prices that Class A
Interests have been selling for in the secondary market and also at a price
which it believes will enable the Trust to make distributions to the
non-tendering Class A Beneficiaries in an amount greater than the Trust would
otherwise be able to make.

The offer will provide you the opportunity to sell your Class A Interests
without incurring brokerage commissions and other transfer fees normally
associated with the sale of Class A Interests. The offer is explained in
detail in the Offer to Purchase and related Letter of Transmittal. If you
wish to tender your Class A Interests, deliver (using the enclosed
pre-addressed, postage paid envelope) or telecopy a duly completed copy of
the enclosed Letter of Transmittal to the Depository, Trust Company of
America. We encourage you to review these materials with your financial and
tax advisor.

Neither the Trust nor the Managing Trustee makes any recommendation to any
Class A Beneficiary whether to tender Class A Interests.

If you have questions regarding the offer or need assistance in tendering
your Class A Interests, please call the Information Agent, Corporate Investor
Communications, Inc. toll free at (800) 631-0988.

AFG INVESTMENT TRUST B