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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 1
to
SCHEDULE 13E-4
Issuer Tender Offer Statement (Pursuant to Section 13(e)(1)
of the Securities Exchange Act of 1934)
------------------------
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
88 Broad Street 101 Federal Street
Boston, Massachusetts 02110 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)
-------------------------------------
August 7, 1997
(Date Tender Offer First Published, Sent or Given to Securityholders)
-------------------------------------
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Item 1. SECURITY AND ISSUER.
(b) This Amendment relates to amendments to the Offer to Purchase dated
August 7, 1997, and the related Letter of Transmittal. Copies of such
amendments, in the forms of a Supplement to Offer to Purchase dated September
12, 1997, and a revised Letter of Transmittal, are attached hereto as
Exhibits (a)(4) and (a)(5), respectively.
Item 7. FINANCIAL INFORMATION.
(a) The information set forth in Exhibit A to the Supplement to Offer to
Purchase dated September 12, 1997, is incorporated herein by reference.
Item 9. MATERIAL TO BE FILED AS EXHIBITS.
(a)(4) Supplement to Offer to Purchase dated September 12, 1997.
(a)(5) Revised Letter of Transmittal.
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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: September 12, 1997
AFG INVESTMENT TRUST B
By: AFG ASIT Corporation,
its Managing Trustee
By: /s/ James A. Coyne
---------------------------
Name: James A. Coyne
Title: Vice President
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EXHIBIT INDEX
Exhibit Sequentially
No. Description Numbered Page
- ----------- ------------- -------------
(a)(4) Supplement to Offer to Purchase dated September 12, 1997.
(a)(5) Revised Letter of Transmittal.
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Exhibit (a)(4)
SUPPLEMENT TO
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 30, 1997, UNLESS THE OFFER IS EXTENDED
FURTHER.
AFG Investment Trust B, a Delaware business trust (the "Trust"), hereby
supplements and amends its offer 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 the Offer to Purchase dated
August 7, 1997 (the "Offer to Purchase") and in the related Letter of
Transmittal. (Such Offer to Purchase and Letter of Transmittal, as
supplemented by this Supplement and as they may be further supplemented from
time to time, are herein collectively referred to as the "Offer.")
(Capitalized terms used in this Supplement and not otherwise defined herein
have the respective meanings specified in the Offer to Purchase.)
In addition to the factors set forth in the Offer to Purchase, each Class
A Beneficiary should consider carefully the following factors:
- On August 15, 1997 the Trust made a special distribution of $1.47 per
Class A Interest to all Class A Beneficiaries of record as of July
31, 1997. Any distributions from the Trust after August 1, 1997
(excluding the special distribution) with respect to tendered Class A
Interests accepted for payment by the Trust will be retained by the
Trust or, to the extent such distributions are made to tendering
Class A Beneficiaries, will reduce the purchase price for such Class
A Interests.
- Affiliates of the Managing Trustee have obtained a 60% participation
in all matters on which the Beneficiaries of the Trust may vote as a
result of the recent offering by the Trust of its Class B
Subordinated Interests. A lawsuit has recently been filed asserting,
among other things, that such offering was conducted to ensure that
such affiliates would obtain voting control of the Trust (See
"Section 14 - Certain Legal Matters" in the Offer to Purchase for a
description of this lawsuit.)
SEPTEMBER 12, 1997
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To the Class A Beneficiaries of
AFG Investment Trust B
On August 7, 1997, AFG Investment Trust B offered to purchase Class A
Beneficiary Interests (the "Class A Interests") for $9.75 per Class A
Interest in cash pursuant to the Offer to Purchase. This document
constitutes a supplement to the Offer to Purchase (this "Supplement") and
should be read in conjunction with the Offer to Purchase.
INTRODUCTION
The following amends and supplements the Introduction to the Offer to
Purchase. (Cross-references in this Supplement are to Sections of the Offer
to Purchase, unless otherwise indicated. To the extent statements are made
in this Supplement which are inconsistent with statements made in the Offer
to Purchase, the statements herein shall control.)
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 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 prior to the Expiration Date. 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.
At September 11, 1997, 61,690 Class A Interests, representing 9.3% of all
outstanding Class A Interests, had been offered for tender by the Class A
Beneficiaries of the Trust.
The Expiration Date for the Offer to Purchase is hereby extended to
September 30, 1997. If you are interested in accepting the Offer of the
Trust to purchase your Class A Beneficiary Interests and have not already
done so, please execute the enclosed green Letter of Transmittal and mail it
in the enclosed postage paid envelope.
Additional financial information with respect to the Trust for the period
ended June 30, 1997 is attached hereto as Exhibit A.
In addition to the factors set forth in the Offer to Purchase, each Class
A Beneficiary should consider carefully the following factors:
- On August 15, 1997 the Trust made a special distribution of $1.47 per
Class A Interest to the Class A Beneficiaries. Any distributions from
the Trust after August 1, 1997 (excluding the special distribution)
with respect to tendered Class A Interests accepted for payment by the
Trust will be retained by the Trust or, to the extent such
distributions are made to tendering Class A Beneficiaries, will reduce
the purchase price for such Class A Interests.
- Affiliates of the Managing Trustee have obtained a 60% participation
in all matters on which the Beneficiaries of the Trust may vote as a
result of the recent offering by the Trust of its Class B Subordinated
Interests. A lawsuit has recently been filed asserting, among other
things, that such offering was conducted to ensure that such
affiliates would obtain voting control of the Trust (See "Section 14 -
Certain Legal Matters" in the Offer to Purchase for a description of
this lawsuit.)
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"SECTION 2. PRORATION: ACCEPTANCE FOR PAYMENT AND PAYMENT FOR INTERESTS"
is hereby supplemented to include the following:
In the event that proration is required because the number of Interests
validly tendered on or prior to the Expiration Date and not withdrawn exceeds
299,472 (which the Trust does not expect to be the case), 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 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT" is hereby
supplemented to include the following:
The Purchaser intends to consummate the transactions contemplated by the
Offer if the conditions for closing, in the reasonable judgment of the
Purchaser, are satisfied.
"SECTION 10. CONFLICTS OF INTERESTS IN TRANSACTIONS WITH AFFILIATES AND
RELATED PARTIES" is hereby supplemented to include the following:
Through their acquisition of 997,373 Class B Interests (which represents
99.6% of all outstanding Class B Interests), Affiliates of the Managing
Trustee have obtained a 60% participation in all matters on which the
Beneficiaries may vote. The relative rights and limitations of the Class A
Interests and the Class B Interests were described in the prospectus for the
offering of the Class B Interests, an additional copy of which will be
provided to each Class A Beneficiary upon request.
"SECTION 13. CONDITIONS OF THE OFFER" is hereby amended by replacing the
first sentence and the first clause of the second sentence as follows:
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 prior to the Expiration Date. 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 prior to the Expiration
Date, any of the following conditions exists:
"SECTION 13. CONDITIONS OF THE OFFER" is hereby further amended as
follows:
References to the "sole judgment of the Trust" are hereby changed to
"reasonable judgment of the Trust".
AFG INVESTMENT TRUST B
September 12, 1997
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Exhibit A
AFG INVESTMENT TRUST B
INDEX TO FINANCIAL STATEMENTS
<TABLE>
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PAGE
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Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 2
Statement of Financial Position at June 30, 1997 and December 31, 1996..................................... F-1
Statement of Operations for the three and six months ended June 30, 1997 and 1996.......................... F-2
Statement of Cash Flows for the six months ended June 30, 1997 and 1996.................................... F-3
Notes to the Financial Statements.......................................................................... F-4
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION 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.
Certain statements in this quarterly report that are not historical fact
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 and are subject to a variety of
risks and uncertainties. There are a number of important factors that could
cause actual results to differ materially from those expressed in any
forward-looking statements made herein. These factors include, but are not
limited to, the ability of EFG to collect all rents due under the attendant
lease agreements and successfully remarket the Trust's equipment upon the
expiration of such leases.
Three and six months ended June 30, 1997 compared
to the three and six months ended June 30, 1996:
RESULTS OF OPERATIONS
For the three and six months ended June 30, 1997, the Trust recognized
lease revenue $1,361,952 and $2,710,570, respectively, compared to $1,405,472
and $2,884,726 for the same periods in 1996. The decrease in lease revenue
from 1996 to 1997 is due to primary lease term expirations and the sale of
equipment. In the future, the level of lease revenue will continue to decline
due to the continued expiration of the Trust's primary lease term agreements
and equipment sales. 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 and six months ended June 30, 1997, the Trust sold
equipment having a net book value of $8,367 and $19,921, respectively to
existing lessees and third parties. These sales resulted in a net gain, for
financial statement purposes, of $3,303 and $6,463, respectively.
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 six months ended June 30, 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 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
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the sale of the United Aircraft. During the three and six months ended June
30, 1996, the Trust sold other equipment having a net book value of $172,457
and $190,494, respectively, to existing lessees and third parties. These
sales resulted in a net loss, for financial statement purposes, of $90,809
and $98,625, respectively.
It cannot be determined whether future sales of equipment will result in
a net gain or a net loss to the Trust, as such transactions will be dependent
upon the condition and type of equipment being sold and its marketability at
the time of sale. In addition, the amount of gain or loss reported for
financial statement purposes is partly a function of the amount of
accumulated depreciation associated with the equipment being sold.
The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including EFG's ability to sell and re-lease
equipment. Changing market conditions, industry trends, technological
advances, and many other events can converge to enhance or detract from asset
values at any given time. EFG attempts to monitor these changes in order to
identify opportunities which may be advantageous to the Trust and which will
maximize total cash returns for each asset.
The total economic value realized upon final disposition of each asset is
comprised of all primary lease term revenue generated from that asset,
together with its residual value. The latter consists of cash proceeds
realized upon the asset's sale in addition to all other cash receipts
obtained from renting the asset on a re-lease, renewal or month-to-month
basis. The Trust classifies such residual rental payments as lease revenue.
Consequently, the amount of gain or loss reported in the financial statements
is not necessarily indicative of the total residual value the Trust achieved
from leasing the equipment.
Depreciation and amortization expense for the three and six months ended
June 30, 1997 was $1,010,685 and $2,031,113, respectively, compared to
$1,086,792 and $2,231,849 for the same periods in 1996. For financial
reporting purposes, to the extent that an asset is held on primary lease
term, the Trust depreciates the difference between (i) the cost of the asset
and (ii) the estimated residual value of the asset on a straight-line basis
over such term. For purposes of this policy, estimated residual values
represent estimates of equipment values at the date of primary lease
expiration. To the extent that an asset is held beyond its primary lease
term, the Trust continues to depreciate the remaining net book value of the
asset on a straight-line basis over the asset's remaining economic life.
Interest expense was $70,676 and $115,786 or 5.2% and 4.3% of lease
revenue for the three and six months ended June 30, 1997, respectively,
compared to $113,169 and $223,194 or 8.1% and 7.7% of lease revenue for the
same periods in 1996. In the future, interest expense is expected 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 debt.
Management fees were approximately 4.2% of lease revenue for each of the
three and six month periods ended June 30, 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 4% and 3.6% of lease revenue for the three and six
months ended June 30, 1997, respectively, compared to 2.2% and 1.7% of lease
revenue for each of the same periods in 1996. 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 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
3
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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 $2,085,084 and $2,623,157 for the
six months ended June 30, 1997 and 1996, respectively. Future renewal,
re-lease and equipment sale activities will cause a gradual decline in the
Trust's primary-term lease revenue and corresponding sources of operating
cash. Overall, expenses associated with rental activities, such as management
fees, and net cash flow from operating activities will decline as the Trust
experiences a higher frequency of remarketing events.
The Trust's equipment is leased by a number of creditworthy,
investment-grade companies and, to date, the Trust has not experienced any
material collection problems and has not considered it necessary to provide
an allowance for doubtful accounts. Notwithstanding a positive collection
history, there is no assurance that all future contracted rents will be
collected or that the credit quality of the Trust's lessees will be
maintained. Collection risk could increase in the future, particularly as the
Trust remarkets its equipment and enters re-lease agreements with different
lessees. The Managing Trustee will continue to evaluate and monitor the
Trust's experience in collecting accounts receivable to determine whether a
future allowance for doubtful accounts may become appropriate.
Ultimately, the Trust will dispose of all assets under lease. This will
occur principally through sale transactions whereby each asset will be sold
to the existing lessee or to a third party. Generally, this will occur upon
expiration of each asset's primary or renewal/re-lease term. In certain
instances, casualty or early termination events may result in the disposal of
an asset. Such circumstances are infrequent and usually result in the
collection of stipulated cash settlements pursuant to terms and conditions
contained in the underlying lease agreements.
Cash expended for asset acquisitions and cash realized from asset
disposal transactions are reported under investing activities on the
accompanying Statement of Cash Flows. During the six months ended June 30,
1997, the Trust realized equipment sale proceeds of $26,384. During the same
period in 1996, the Trust realized equipment sale proceeds of $1,776,161,
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 expended $1,441,796 to
acquire equipment during the six months ended June 30, 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.
The Trust obtained long-term financing in connection with certain
equipment leases. The origination of such indebtedness and the subsequent
repayments of principal are reported as components of financing activities.
Cash inflows of $997,888 in 1996, resulted from leveraging a portion of the
Trust's equipment portfolio with third-party lenders. Each note payable is
recourse only to the specific equipment financed and to the minimum rental
payments contracted to be received during the debt amortization period (which
period generally coincides with the lease rental term). As rental payments
are collected, a portion or all of the rental payment is used to repay the
associated indebtedness. In future periods, the amount of cash used to repay
debt obligations will decline as the principal balance of notes payable is
reduced through the collection and application of rents. However, the Trust
has a balloon payment obligation of $282,421 at the expiration of the primary
lease term related to the Reno Aircraft.
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 six months ended
June 30, 1996, the Trust declared total cash distributions of Distributable
Cash From Operations and Distributable Cash From Sales and Refinancings of
$600,595. In accordance with the Trust Agreement, the Beneficiaries were
allocated 90.75% of these distributions, or $545,040; the Special Beneficiary
was allocated 8.25%, or $49,549; and the Managing Trustee was allocated 1%,
or $6,006.
For financial reporting purposes, the Managing Trustee and the Special
Beneficiary each have accumulated a capital deficit at June 30, 1997. This is
the result of aggregate cash distributions to these Participants being in
excess of their aggregate capital contributions ($1,000 each) and their
respective allocations of financial
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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 June 30, 1997, the Trust had aggregate future minimum lease payments
of $4,733,092 from contractual lease agreements (see Note 3 to the financial
statements), of which $3,416,423 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.
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.
On February 12, 1997, the Trust filed a Registration Statement on Form
S-1 with the SEC, which became effective June 10, 1997. The Registration
Statement covered the issuance and sale of a new class of beneficiary
interests in the Trust (the "Class B Interests"). The characteristics of the
Class B Interests, associated risk factors and other matters of importance to
the Beneficiaries and purchasers of the Class B Interests were set forth in a
Prospectus sent to the Beneficiaries. On July 17, 1997, the offering closed
and on July 18, 1997 the Trust
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issued 1,000,961 Class B Interests at $5.00 per interest, thereby generating
$5,004,805 in aggregate Class B capital contributions. Class A Beneficiaries
purchased 3,588 Class B Interests, generating $17,940 of such aggregate
capital contributions, and the Special Beneficiary, EFG, purchased 997,373 of
such Class B Interests, generating $4,986,865 of such aggregate capital
contributions.
As described in the Prospectus for the offering of the Class B Interests,
the Managing Trustee intends to use a portion of the net cash proceeds
realized from the offering of the Class B Interests to pay a one-time special
cash distribution to the Class A Beneficiaries of the Trust. The Managing
Trustee expects to declare and pay this special cash distribution on or
before August 31, 1997.
On August 7, 1997, the Trust commenced an offer to purchase up to 45% of
the outstanding Class A Beneficiary Interests of the Trust by filing a Form
13E-4, Issuer Tender Offer Statement, with the SEC and distributing to the
Class A Beneficiaries information (the "Tender Documents") concerning the
offer. The Trust will use a portion of the net proceeds realized from the
offering of the Class B Interests to purchase the Class A Beneficiary
Interests tendered as a result of the offer. The Tender Documents describe,
among other things, the terms of the offer and the purchase price per Class A
Beneficiary Interest being offered by the Trust.
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AFG INVESTMENT TRUST B
STATEMENT OF FINANCIAL POSITION
JUNE 30, 1997 AND DECEMBER 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
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<S> <C> <C>
ASSETS
Cash and cash equivalents......................................................... $ 3,403,578 $ 2,829,093
Rents receivable.................................................................. 721,966 339,293
Accounts receivable--affiliate.................................................... 207,538 154,395
Equipment at cost, net of accumulated depreciation of $14,162,079 and $12,161,949
at June 30, 1997 and December 31, 1996, respectively............................ 11,257,177 13,307,711
Organization costs, net of accumulated amortization of $4,833 and $4,333 at June
30, 1997 and December 31, 1996, respectively.................................... 167 667
------------- -------------
Total assets............................................................... $ 15,590,426 $ 16,631,159
------------- -------------
------------- -------------
LIABILITIES AND PARTICIPANTS' CAPITAL
Notes payable..................................................................... $ 3,416,423 $ 4,352,811
Accrued interest.................................................................. 57,847 36,571
Accrued liabilities............................................................... 15,000 23,250
Accrued liabilities--affiliate.................................................... 37,200 47,178
Deferred rental income............................................................ 101,626 45,550
Cash distributions payable to participants........................................ 200,199 200,199
------------- -------------
Total liabilities.......................................................... 3,828,295 4,705,559
------------- -------------
Participants' capital (deficit):
Managing Trustee................................................................ (32,017) (30,382)
Special Beneficiary............................................................. (271,380) (257,894)
Beneficiary Interests
(665,494 Interests; initial purchase price of $25 each)......................... 12,065,528 12,213,876
------------- --------------
Total participants' capital................................................ 11,762,131 11,925,600
------------- --------------
Total liabilities and participants' capital................................ $ 15,590,426 $ 16,631,159
------------- --------------
------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-1
<PAGE>
AFG INVESTMENT TRUST B
STATEMENT OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------------- --------------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
------------ ------------ ------------ ------------
Income:
Lease revenue.......................................... $ 1,361,952 $ 1,405,472 $ 2,710,570 $ 2,884,726
Interest income........................................ 38,874 37,459 78,074 42,010
Gain (loss) on sale of equipment....................... 3,303 (90,809) 6,463 (274,825)
------------ ------------ ------------ ------------
Total income......................................... 1,404,129 1,352,122 2,795,107 2,651,911
------------ ------------ ------------ ------------
Expenses:
Depreciation and amortization.......................... 1,010,685 1,086,792 2,031,113 2,231,849
Interest expense....................................... 70,676 113,169 115,786 223,194
Equipment management fees
--affiliate.......................................... 57,244 59,042 114,503 121,495
Operating expenses--affiliate.......................... 54,942 31,397 96,579 48,290
------------ ------------ ------------ ------------
Total expenses....................................... 1,193,547 1,290,400 2,357,981 2,624,828
------------ ------------ ------------ ------------
Net income............................................... $ 210,582 $ 61,722 $ 437,126 $ 27,083
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income per Beneficiary Interest...................... $ 0.29 $ 0.08 $ 0.60 $ 0.04
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Cash distributions declared per Beneficiary Interest..... $ 0.41 $ 0.32 $ 0.82 $ 0.63
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
AFG INVESTMENT TRUST B
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
----------------- -----------
<S> <C> <C>
Cash flows from (used in) operating activities:
Net income.................................................................. $ 437,126 $ 27,083
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization............................................. 2,031,113 2,231,849
(Gain) loss on sale of equipment.......................................... (6,463) 274,825
Changes in assets and liabilities
Decrease (increase) in:
rents receivable........................................................ (382,673) 81,710
accounts receivable--affiliate.......................................... (53,143) (112,210)
Increase (decrease) in:
accrued interest........................................................ 21,276 (9,541)
accrued liabilities..................................................... (8,250) (7,500)
accrued liabilities--affiliate.......................................... (9,978) 10,513
deferred rental income.................................................. 56,076 126,428
------------ ----------
Net cash from operating activities.................................... 2,085,084 2,623,157
------------ ----------
Cash flows from (used in) investing activities:
Purchase of equipment..................................................... -- (1,441,796)
Proceeds from equipment sales............................................. 26,384 1,776,161
------------ ----------
Net cash from investing activities.................................... 26,384 334,365
------------ ----------
Cash flows from (used in) financing activities:
Proceeds from notes payable............................................... -- 997,888
Principal payments--notes payable......................................... (936,388) (1,808,366)
Distributions paid........................................................ (600,595) (461,996)
------------ -----------
Net cash used in financing activities................................. (1,536,983) (1,272,474)
------------ -----------
Net increase in cash and cash equivalents................................... 574,485 1,685,048
Cash and cash equivalents at beginning of period............................ 2,829,093 337,293
------------ -----------
Cash and cash equivalents at end of period.................................. $ 3,403,578 $ 2,022,341
------------ -----------
------------ -----------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest.................................. $ 94,510 $ 232,735
------------ -----------
------------ -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
AFG INVESTMENT TRUST B
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
The financial statements presented herein are prepared in conformity with
generally accepted accounting principles and the instructions for preparing
Form 10-Q under Rule 10-01 of Regulation S-X of the Securities and Exchange
Commission and are unaudited. As such, these financial statements do not
include all information and footnote disclosures required under generally
accepted accounting principles for complete financial statements and,
accordingly, the accompanying financial statements should be read in
conjunction with the footnotes presented in the 1996 Annual Report. Except as
disclosed herein, there has been no material change to the information
presented in the footnotes to the 1996 Annual Report.
In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary to present fairly the financial
position at June 30, 1997 and December 31, 1996 and results of operations for
the three and six month periods ended June 30, 1997 and 1996 have been made
and are reflected.
NOTE 2--CASH
At June 30, 1997, the Trust had $3,300,000 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 $4,733,092 are due as follows:
<TABLE>
<S> <C> <C>
For the year ending June 30, 1998 $3,321,864
1999 697,443
2000 271,003
2001 203,562
2002 159,480
Thereafter 79,740
----------
Total $4,733,092
----------
----------
</TABLE>
NOTE 4--EQUIPMENT
The following is a summary of equipment owned by the Trust at June 30,
1997. In the opinion of Equis Financial Group ("EFG"), the acquisition cost
of the equipment did not exceed its fair market value.
F-4
<PAGE>
<TABLE>
<CAPTION>
REMAINING
LEASE TERM EQUIPMENT
EQUIPMENT TYPE (MONTHS) AT COST
- ------------------------------------------- --- -------- ------------
<S> <C> <C>
Aircraft 6-68 $ 8,018,105
Computers and peripherals 1-18 4,506,396
Materials handling 1-40 4,466,295
Communications 9-18 3,039,422
General plant and 6 1,576,077
Construction and 1-43 1,200,577
Retail store fixtures 3-9 1,101,551
Tractors and heavy duty 5-27 605,644
Manufacturing 2-6 449,902
Furniture and fixtures 4 284,019
Trailers/intermodal containers 6-12 128,443
Photocopying 1-5 42,825
------------
Total equipment cost 25,419,256
Accumulated depreciation (14,162,079)
------------
Equipment, net of accumulated depreciation $ 11,257,177
------------
------------
</TABLE>
At June 30, 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 June 30, 1997, the cost and net book value of equipment held for sale
or re-lease was approximately $382,000 and $84,000, 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 six month periods ended June 30,
1997 and 1996, which were paid or accrued by the Trust to EFG or its
Affiliates, are as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Equipment acquisition fees -- $ 52,786
Equipment management fees $ 114,503 121,495
Administrative charges 30,654 10,500
Reimbursable operating expenses due to third parties 65,925 37,790
---------- ----------
Total $ 211,082 $ 222,571
---------- ----------
---------- ----------
</TABLE>
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
June 30, 1997, the Trust was owed $207,538 by EFG for such funds and the
interest thereon. These funds were remitted to the Trust in July 1997.
NOTE 6--NOTES PAYABLE
F-5
<PAGE>
Notes payable at June 30, 1997 consisted of installment notes of
$3,416,423 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 (5.69% at June 30,
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 Aircraft. The carrying amount of
notes payable approximates fair value at June 30, 1997.
The annual maturities of the notes payable are as follows:
<TABLE>
<S> <C> <C>
For the year ending June 30, 1998 $2,330,118
1999 388,838
2000 113,911
2001 123,188
2002 133,221
Thereafter 327,147
---------
Total $3,416,423
---------
---------
</TABLE>
NOTE 7--LEGAL PROCEEDINGS
On June 24, 1997, four plaintiffs (the "Plaintiffs") owning limited
partner units or beneficiary interests in eight investment programs sponsored
by EFG filed a lawsuit, as a derivative action, on behalf of the Trust and 27
other investment programs (collectively, the "Nominal Defendants") in the
Superior Court of the Commonwealth of Massachusetts for the County of Suffolk
against EFG and certain of EFG's affiliates, including the Managing Trustee
of the Trust and four other wholly-owned subsidiaries of EFG which are the
general partner or managing trustee of one or more of the investment
programs, (collectively, the "Managing Defendants"), and certain other
entities and individuals that have control of the Managing Defendants and the
Nominal Defendants (the "Controlling Defendants"). The Plaintiffs assert
claims of breach of fiduciary duty, breach of contract, unjust enrichment,
and equitable relief and seek various remedies, including compensatory and
punitive damages to be determined at trial.
The Managing Trustee and EFG are in the early stages of evaluating the
nature and extent of the claims asserted in this lawsuit and cannot predict
its outcome with any degree of certainty. However, based upon all of the
facts presently being considered by management, the Managing Trustee and EFG
do not believe that any likely outcome will have a material adverse effect on
the Trust. The Managing Trustee, EFG and their affiliates intend to
vigorously defend against the lawsuit.
On July 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- ISSUANCE OF CLASS B INTERESTS AND OFFER TO REDEEM CLASS A INTERESTS
F-6
<PAGE>
On October 26, 1996, the Trust filed a Solicitation Statement with the
United States Securities and Exchange Commission (the "SEC") which
subsequently was sent to the Beneficiaries pursuant to Regulation 14A of
Section 14 of the Securities Exchange Act. The Solicitation Statement sought
the consent of the Beneficiaries to a proposed amendment (the "Amendment") to
the Amended and Restated Declaration of Trust (the "Trust Agreement") which
would (i) amend the provisions of the Trust Agreement governing the
redemption of Beneficiary Interests to permit the Trust to offer to redeem
outstanding Beneficiary Interests at such times, in such amounts, in such
manner and at such prices as the Managing Trustee might determine from time
to time, in accordance with applicable law; and (ii) add a provision to the
Trust Agreement that would permit the Trust to issue, at the discretion of
the Managing Trustee and without further consent or approval of the
Beneficiaries, an additional class of security with such designations,
preferences and relative, participating, optional or other special rights,
powers and duties as the Managing Trustee might affix. The funds obtained
through the issuance of such a security would be used by the Trust to (a)
expand redemption opportunities for Beneficiaries without using Trust funds
which might otherwise be available for cash distributions; and (b) make a
special one-time cash distribution to the Beneficiaries.
Pursuant to the Trust Agreement, the adoption of the Amendment required
the consent of the Beneficiaries holding more than 50% in the aggregate of
the Beneficiary Interests held by all Beneficiaries. A majority of
Beneficiary Interests, representing 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 Trust Agreement was
amended.
On February 12, 1997, the Trust filed a Registration Statement on Form
S-1 with the SEC, which became effective June 10, 1997. The Registration
Statement covered the issuance and sale of a new class of beneficiary
interests in the Trust (the "Class B Interests"). The characteristics of the
Class B Interests, associated risk factors and other matters of importance to
the Beneficiaries and purchasers of the Class B Interests were set forth in a
Prospectus sent to the Beneficiaries. On July 17, 1997, the offering closed
and on July 18, 1997 the Trust issued 1,000,961 Class B Interests at $5.00
per interest, thereby generating $5,004,805 in aggregate Class B capital
contributions. Class A Beneficiaries purchased 3,588 Class B Interests,
generating $17,940 of such aggregate capital contributions, and the Special
Beneficiary, EFG, purchased 997,373 Class B Interests, generating $4,986,865
of such aggregate capital contributions.
Subsequently, EFG transferred its Class B Interests to a special-purpose
company, Equis II Corporation, a Delaware corporation. EFG also transferred
its ownership of AFG ASIT Corporation, the Managing Trustee of the Trust, to
Equis II Corporation. As a result, Equis II Corporation has voting control of
the Trust through its ownership of the majority of all of the Trust's
outstanding voting interests, as well as its ownership of AFG ASIT
Corporation. Equis II Corporation is controlled by EFG's President and Chief
Executive Officer, Gary D. Engle. Accordingly, control of the Managing
Trustee did not change as a result of the foregoing transactions.
As described in the Prospectus for the offering of the Class B Interests,
the Managing Trustee intends to use a portion of the net cash proceeds
realized from the offering of the Class B Interests to pay a one-time special
cash distribution to the Class A Beneficiaries of the Trust. The Managing
Trustee expects to declare and pay this special cash distribution on or
before August 31, 1997.
On August 7, 1997, the Trust commenced an offer to purchase up to 45% of
the outstanding Class A Beneficiary Interests of the Trust by filing a Form
13E-4, Issuer Tender Offer Statement, with the SEC and distributing to the
Class A Beneficiaries information (the "Tender Documents") concerning the
offer. The Trust will use a portion of the net proceeds realized from the
offering of the Class B Interests to purchase the Class A Beneficiary
Interests tendered as a result of the offer. The Tender Documents describe,
among other things, the terms of the offer and the purchase price per Class A
Beneficiary Interest being offered by the Trust.
NOTE 9- SUBSEQUENT EVENT
F-7
<PAGE>
On July 7, 1997, a lessee of the Trust, Montgomery Ward and Company,
Inc., filed for protection under Chapter 11 of the Bankruptcy Code. The Trust
has not been officially notified by the Bankruptcy Court to date. Equipment
leased to this lessee had a cost and net book value of approximately
$2,700,000 and $990,000, respectively, at the time of the bankruptcy filing.
Currently, the Trust is unable to make a determination as to the significance
of this bankruptcy.
F-8
<PAGE>
Exhibit (a)(5)
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 30, 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 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, as supplemented September 12, 1997, and
as may be further supplemented from time to time (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
OR
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.
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. 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.
7
