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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
AFG Investment Trust B
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
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previously. Identify the previous filing by registration statement number,
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DRAFT
AFG INVESTMENT TRUST B
88 Broad Street
Boston, Massachusetts 02110
This Solicitation Statement is being furnished to each holder
(individually, a "Beneficiary," and, collectively, the "Beneficiaries") of
Class A Beneficiary Interests ("Class A Interests") and Class B Subordinated
Beneficiary Interests ("Class B Interests; the Class A Interests and the
Class B Interests, collectively, the "Interests") in AFG Investment Trust B,
a Delaware business trust (the "Trust"), in connection with the solicitation
by the Trust of the consent of the Beneficiaries to a proposed amendment
(the "Amendment") to the Second Amended and Restated Declaration of Trust of
the Trust (the "Trust Agreement"). AFG ASIT Corporation, a Massachusetts
corporation, is the Managing Trustee of the Trust (the "Managing Trustee").
The Managing Trustee is proposing the Amendment for consideration by
the Beneficiaries for two primary reasons. First, the Managing Trustee
believes that investing Trust funds in additional assets other than
equipment may provide returns in excess of those currently available to the
Trust. Second, the Amendment will implement certain provisions of a
memorandum of understanding to settle a pending class and derivative action
brought on behalf of various entities and investors, including the
Beneficiaries, in the event that the parties to the action are able to agree
upon a final settlement of the action. The Amendment would modify the Trust
Agreement so that:
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- in the event of final settlement of the action, the Trust
would be required to grant certain rights (including a
special cash distribution) to the Class A Beneficiaries;
- the Trust would be permitted to invest in instruments that
the Managing Trustee believes would provide higher rates of
return to the Trust; and
- expenses of the Trust could be reduced through the
acquisition of indebtedness at a lower cost.
Specifically, the Amendment would:
(i) subject to attaining a settlement in the class and derivative
action, (a) provide for a special distribution of $500,709 (the "1998 Special
Distribution") to the Class A Beneficiaries of record as of September 1,
1997, or their successors and assigns from the proceeds of the offering of
the Class B Interests (the "Class B Proceeds"); (b) provide for the retention
of $1,126,596 by the Trust which would otherwise be distributed to Equis II
Corporation, an Affiliate of the sponsor of the Trust, Equis Financial Group
Limited Partnership ("EFG"), and provide that such amount will be retained
and invested by the Trust in additional Assets (as defined below); and (c)
require Equis II Corporation to vote its Class B Interests in proportion to
the votes of the Class A Beneficiaries on matters concerning related party
transactions, management fees and acquisition fees and other compensation;
(ii) permit the Trust, directly or indirectly, to (a) invest in,
acquire, own, lease, hold, manage, operate, sell, exchange or otherwise
dispose of any personal
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property, including equipment and other personal property and securities of
any type and description, whether or not related to such personal property
(such personal property, including securities, collectively, "Assets"), and
(b) enter into any lawful transaction and engage in any business lawful
activities related or incidental thereto or in furtherance of the foregoing;
(iii) permit the Trust to lease assets to any lessee selected by
the Managing Trustee as an appropriate lessee, without the need to meet a
minimum credit rating, and so to modify the definition of "Creditworthy" as
it currently appears in the Trust Agreement; permit the Trust to incur
recourse and cross-collateralized debt and remove the current limitation as
to the amount of debt which may be incurred by the Trust; modify the
requirements with respect to joint ventures with Affiliates of the Managing
Trustee and EFG; and otherwise modify the investment objectives and policies
of the Trust, as hereinafter described in this Solicitation Statement;
(iv) permit the Managing Trustee to reinvest the Trust's cash from
sales or refinancings of Assets for the period commencing on the date of
adoption of the Amendment (the "Amendment Date") through December 31, 2001;
(v) provide that the acquisition fee payable by the Trust on Assets
purchased from reinvestment proceeds after the Amendment Date be reduced
from 3% to 1% and the annual management fee with respect to all equipment
acquired after the Amendment Date be reduced from 5% to 2%, and the Managing
Trustee will receive an annual management fee on securities and other
non-equipment
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Assets (other than cash and cash equivalents) equal to 1% of the fair market
value (or, if unobtainable, the cost) of such Assets; and
(vi) make various other changes to the Trust Agreement necessary or
appropriate to effectuate the foregoing.
This Solicitation Statement and the accompanying consent form are being
mailed to Beneficiaries of record as of the close of business on _________,
1998. Pursuant to Section 11.2 of the Trust Agreement, the adoption of the
Amendment requires the consent of Beneficiaries holding more than 50% in the
aggregate of the Interests held by all Beneficiaries. As of the date of
this Solicitation Statement, there were 582,657 Class A Interests and
1,000,961 Class B Interests outstanding. Accordingly, under the Trust
Agreement, the consent of Beneficiaries holding more than 791,809 Interests
will be required for the adoption of the Amendment.
Affiliates of the Managing Trustee own 839 Class A Interests, all of
which will be voted in favor of the Amendment.
While under no requirement to do so, Equis II Corporation has advised
the Managing Trustee that it will vote all of its 997,373 Class B Interests
with respect to the Amendment in the same manner in which the majority of
the Class A Interests are actually voted (i.e., for this purpose the Class A
Interests for which no consent form is actually received or which abstain
will not be taken into account). Accordingly, the Amendment will be adopted
or rejected based upon the majority of the Class A Interests actually voted.
This undertaking by Equis II Corporation relates solely to the Amendment and
is made in connection with the memorandum of understanding relating to the
class and derivative action hereinafter described.
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In the event that a settlement in the class and derivative action is not
attained in accordance with the memorandum of understanding,
Equis II Corporation will no longer be bound by this undertaking with
respect to any future votes by Beneficiaries.
Under applicable law, no dissenters' rights (i.e., rights of
nonconsenting Beneficiaries to exchange their Interests in the Trust for
payment of their fair value) are available to any Beneficiary of the Trust
regardless of whether such Beneficiary has or has not consented to the
Amendment.
The consent form enclosed with this Solicitation Statement, to be
valid, must be signed by the record owner(s) of the Interests and returned
to the Managing Trustee by _______________ (subject to extension at the
discretion of the Managing Trustee). A properly executed consent form
received by the Managing Trustee will be voted in accordance with the
direction indicated on the form. If no direction is indicated, a properly
executed consent form received by the Managing Trustee will be voted in
favor of the Amendment. Voting on the Amendment will be conducted only by
written consent and no formal meeting of the Beneficiaries will be held.
THE MANAGING TRUSTEE RECOMMENDS THAT YOU CONSENT TO THE AMENDMENT.
BENEFICIARIES ARE ASKED TO VOTE BY MARKING AND SIGNING THE ACCOMPANYING
CONSENT FORM AND RETURNING IT PROMPTLY IN THE ENCLOSED ENVELOPE SO THAT IT
IS RECEIVED BY _________, 1998. THE CONSENT FORM MAY ALSO BE RETURNED BY
FACSIMILE AT (201) 804-8693.
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TABLE OF CONTENTS
SUMMARY OF AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
BACKGROUND AND PURPOSES OF AMENDMENT . . . . . . . . . . . . . . . . . . . . 9
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
CONFLICTS OF INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . . . .22
CONSENT OF BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . .23
ADDITIONAL INFORMATION CONCERNING THE TRUST. . . . . . . . . . . . . . . . .25
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SUMMARY OF AMENDMENT
Consenting to the Amendment would, among other things, permit the Trust
to do the following:
1. Provide for a Special Distribution to Class A Beneficiaries.
Subject to attaining a settlement in the Class Action Lawsuit (as
hereafter defined), the Amendment would require that the Trust make a special
distribution to the Class A Beneficiaries of record as of September 1, 1997,
or their successors and assigns of $500,709 for all Class A Interests (or
approximately $0.75 per Class A Interest) (the "1998 Special Distribution").
See "BACKGROUND AND PURPOSES OF AMENDMENT - Pending Litigation." In July,
1997, the Trust issued 1,000,961 Class B Interests for $5,004,805 (the "Class
B Proceeds") and made a special distribution from such proceeds to the Class
A Beneficiaries. The 1998 Special Distribution also will be made from the
Class B Proceeds and will correspondingly reduce the amounts which may be
returned to Equis II Corporation as a Class B Capital Distribution.
2. Provide for an Additional Commitment of Funds to the Trust.
Subject to reaching final settlement of the Class Action Lawsuit,
the Amendment would require Equis II Corporation unconditionally to commit
$1,126,596 of the Class B Proceeds to the Trust to be used exclusively for
Trust purposes and waive all rights to receive a return of such funds as a
Class B Capital Distribution.
3. Permit the Trust to Acquire Property in Addition to Equipment.
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Previously, the Trust was permitted to acquire only equipment to
be leased to creditworthy lessees. The Amendment would permit the Trust to
acquire equipment for lease to lessees whose credit rating is less than
would be otherwise required pursuant to the current Trust Agreement, and to
acquire securities and other personal property. See Background and Purposes
of Amendment for a discussion of the reasons for these proposed changes in
the acquisition policies of the Trust and the investment intentions of the
Managing Trustee if the Amendment is adopted.
4. Make Other Changes to the Trust Agreement.
The Amendment would also effect other changes to the Trust
Agreement, including permitting the Trust to incur recourse and
cross-collateralized debt and removing the current limitation on the amount
of debt which may be incurred by the Trust, and modifying the requirements
with respect to joint ventures with affiliates and the investment objectives
and policies of the Trust.
5. Reinstate the Trust's Reinvestment Period.
The period of time during which the Trust was permitted to
reinvest proceeds from sales or refinancings in additional equipment expired
on September 8, 1996. The Amendment would reinstate the reinvestment period
from the Amendment Date through December 31, 2001 (the "Additional
Reinvestment Period").
6. Modify Certain Fees Payable to the Managing Trustee and EFG.
The Amendment would reduce acquisition fees payable by the Trust
on assets purchased from reinvestment proceeds during the Additional
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Reinvestment Period from 3% to 1% and reduce the annual management fee with
respect to equipment acquired after the Amendment Date from 5% to 2% on all
leases and also provide that the Managing Trustee will receive an annual
management fee on securities and other non-equipment Assets (other than cash
or cash equivalents) equal to 1% of the fair market value (or, if
unobtainable, the cost) of such assets.
7. Impose Voting Restrictions on Class B Interests.
Subject to obtaining a settlement in the Class Action Lawsuit as
described herein, the Amendment would require Equis II Corporation to vote
its Class B Interests in proportion to the votes of the Class A
Beneficiaries on matters concerning related party transactions, management
fees and acquisition fees and other compensation.
BACKGROUND AND PURPOSES OF AMENDMENT
The Trust is soliciting the consent of the Beneficiaries to permit the
Trust to do various things, including to acquire assets in addition to
equipment. The following is a discussion of the background of the Trust,
certain pending litigation and purposes of the Amendment. The exact
language of the Amendment is set forth in Exhibit A to this Solicitation
Statement.
Organization of Trust
AFG Investment Trust B is a Delaware business trust which was created
on May 28, 1992, for the purpose of acquiring and leasing to third parties a
diversified portfolio of capital equipment. The Managing Trustee of the
Trust and three other Delaware business trusts (collectively, the "AFG
Investment Trusts" or the
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"Trusts") is AFG ASIT Corporation, a Massachusetts corporation which was
organized on August 13, 1991, and is a wholly-owned subsidiary of Equis II
Corporation and 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. The principal executive office of the Trust, the Managing
Trustee and EFG is at 88 Broad Street, Boston, Massachusetts 02110.
The Trust issued 665,494 beneficiary interests on September 8, 1992
(the "Class A Interests") , which are currently held by 674 investors (the
"Class A Beneficiaries"). On July 18, 1997, the Trust issued 1,000,961
Class B Subordinated Interests (the "Class B Interests") of which
(i) 997,373 are currently held by Equis II Corporation, and (ii) 3,588 are
held by 5 other investors (collectively, the "Class B Beneficiaries").
Class A Interests and Class B Interests basically have identical voting
rights and, therefore, Equis II Corporation has control over the Trust on
all matters on which Beneficiaries may vote.
The net proceeds of the offering of the Class B Interests (the "Class B
Proceeds") were intended to be applied to make a one-time special cash
distribution to the Class A Beneficiaries of $1.47 per Class A Interest (the
"Special Class A Distribution") and thereafter were intended by the Managing
Trustee to be applied for a period of 24 months (i.e. through July 17, 1999)
to redeem a portion of the Class A Interests. Any Class B Proceeds not so
applied during the 24-month period were intended to be distributed in
accordance with the Trust Agreement to the Class B Beneficiaries as the
Class B Capital Distribution. The Trust has paid $1.47
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as the Special Class A Distribution and has applied $785,295 to redeem
Class A Interests through March 6, 1998. The Trust currently retains
$3,127,843 in Class B Proceeds.
Pending Litigation
On June 24, 1997, Leonard Rosenblum, J/B Investment Partners, Small and
Rebecca Barmack, Partners, and Barbara Hall (collectively, the "Plaintiffs")
commenced an action (the "Class Action Lawsuit") on behalf of a proposed
class of investors in a number of investment programs sponsored by EFG,
including the Trust (the "EFG Programs"), and derivatively on behalf of the
EFG Programs against EFG and a number of its Affiliates, including the
Managing Trustee, as defendants (collectively, the "Defendants"). The Class
Action Lawsuit is currently pending in the United States District Court for
the Southern District of Florida.
The Plaintiffs asserted, among other things, claims on behalf of the
Trusts for violations of the Securities Act of 1934 and claims on behalf of
the proposed class and the EFG Programs for common law fraud, breach of
contract, breach of fiduciary duty and/or aiding and abetting the breach of
fiduciary duty against the various managing general partners and the
managing trustee of the EFG Programs, including the Managing Trustee of the
Trust, and other entities and individuals.
The Defendants have denied, and continue to deny, that any of them have
committed or threatened to commit any violations of law or breaches of duty
to the Plaintiffs or any of the EFG Programs, including the Trusts. The
Defendants and Plaintiffs have entered into a memorandum of understanding
(the "Memorandum of Understanding") setting forth terms pursuant to which a
Stipulation of the Action
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may be agreed upon (the "Settlement"). The Defendants entered into the
Memorandum of Understanding and will be seeking to effectuate the Settlement
because, among other things, the Settlement would eliminate the burden and
expense of further litigation.
Several of the terms of the Memorandum of Understanding are reflected
in the proposed Amendment. Subject to attaining the Settlement, the
Managing Trustee will agree to:
(a) cause the Trust to make the 1998 Special Distribution in the
amount of $500,709 from the Class B Proceeds to the Class A
Beneficiaries of record as of September 1, 1997 or their
successors and assigns;
(b) cause the Trust to retain $1,126,596 from the portion of the
Class B Proceeds which would otherwise be distributed to Equis II
Corporation as a Class B Capital Distribution; and
(c) restrict the exercise of voting rights by Equis II
Corporation by requiring it to vote its Class B Interests in
accordance with the majority of Class A Interests on matters
concerning related party transactions, management fees and
acquisition fees and other compensation.
The terms of the proposed Settlement providing for the 1998 Special
Distribution and limiting the Class B Capital Distribution are expected to
provide additional cash to Class A Beneficiaries and to the Trust, to align
more closely the economic interests of the Class A and Class B
Beneficiaries, and to increase substantially the continued investment by
Equis II Corporation in and its dependence on the long term economic results
of the Trust. The Managing Trustee
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desires and recommends that the Amendment be adopted because it believes the
Trust and in turn the Class A Beneficiaries and Class B Beneficiaries would
earn higher rates of return if the investment objectives and policies of the
Trust are modified as described herein.
There is no assurance that the Settlement will be attained. However,
Equis II Corporation will vote its Class B Interests with respect to the
Amendment in the same manner in which the majority of the Class A Interests
are actually voted.
Purposes of Amendment
The Trust was formed to acquire and thereafter lease a diversified
portfolio of equipment to third parties. The primary investment objectives
of the Trust currently are to: (1) preserve and protect Trust capital by
leasing equipment to creditworthy lessees to obtain a creditworthy lease
portfolio; (2) generate cash distributions to the Beneficiaries; and
(3) acquire leases of a diversified portfolio of equipment and to maximize
proceeds to the Trust from the ultimate sale of such equipment.
The proposed Amendment would significantly modify these investment
objectives, primarily by permitting the Trust to acquire personal property
in addition to equipment, including securities. If the Amendment is
adopted, the primary investment objectives of the Trust will be to:
(1) preserve and protect Trust capital; (2) generate cash distributions to
the Beneficiaries from Assets; and (3) acquire, own, lease and manage
Assets, including securities, and (4) maximize proceeds to the Trust from
the ultimate sale of such Assets. The achievement of the
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Trust of any of these objectives, including the generation of any specific
level of distributions, cannot be assured or guaranteed.
To attain its original investment objectives, the Trust had established
certain investment policies with respect to, among other things, the
selection of lessees, the types of assets which may be acquired and other
matters. If the proposed Amendment is adopted, these policies will be
revised in a manner which the Managing Trustee believes will enable the
Trust better to attain its revised investment objectives. This Solicitation
Statement should be read carefully as it describes certain consequences of,
and risks and conflicts of interest related to these changes. See "RISK
FACTORS" and "CONFLICTS OF INTEREST."
The Managing Trustee believes that investing Trust funds in assets in
addition to equipment could provide returns in excess of those currently
available to the Trust, thereby resulting in increased cash distributions to
the Beneficiaries. The current investment policies of the Trust, in the
judgment of the Managing Trustee, are narrow and limit the ability of the
Managing Trustee to take advantage of opportunities to acquire assets for
the Trust which may provide attractive returns to the Beneficiaries,
including to Equis II Corporation.
The Managing Trustee believes that recent declines in interest rates
enhance the desirability of the Trust's equipment already subject to fixed
rate leases with creditworthy lessees. This may present opportunities for
the Trust to generate cash by selling a portion of such equipment at prices
favorable to the Trust or by refinancing certain leases at favorable
interest rates. This in turn would allow the Trust to seek to attain its
investment objective of providing higher distributions to
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the Beneficiaries, but only if the Trust could reinvest the proceeds of such
sales or refinancings in assets that generate higher rates of return. (It
should be noted that the Trust will continue its present policy of not
reinvesting unless sufficient distributions are made by the Trust during the
relevant period of operations to enable the Beneficiaries to pay any state
and federal income taxes arising from sale or refinancing transactions.)
The Managing Trustee believes that in order to improve total returns to
the Beneficiaries it needs maximum flexibility to pursue attractive
investment opportunities, the timing and extent of which vary in relation to
changes in the economy and financial markets.
If the Amendment is adopted, the types of assets which the Trust may
acquire will be substantially expanded and the Trust will no longer be
limited by asset or lessee concentration requirements. Further, the Trust
will not be required to lease Assets to only those lessees whose senior debt
obligations have been assigned a credit rating of at least "B" by Moody's
Investor Service, Inc. (or its equivalent as assigned by another nationally
recognized credit agency or determined by the Managing Trustee) as currently
required.
Nonetheless, the Managing Trustee currently anticipates continuing
investment by the Trust primarily in the equipment leasing or equipment
finance business. Such investment may take place through the acquisition of
debt and equity securities of leasing companies or equipment leasing limited
partnerships, direct finance leases, loans secured by equipment and variable
rate leases. The Managing Trustee also may consider leasing equipment to
companies in exchange
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for lease payments made through a combination of both cash and securities of
the lessee (e.g., options and warrants).
The equity securities in which the Trust may invest may include common
stocks, preferred stocks and securities convertible into common stocks, as
well as warrants to purchase such securities. The debt securities in which
the Trust may invest may include equipment trust certificates, bonds,
debentures, notes, and mortgage-related securities. Certain of such
securities may include lower-rated securities which may provide the
potential for higher yields and therefore may entail higher risk.
The Trust's investments in securities may be subject to significant
business, financial, market and other risks. There can be no assurance that
the Trust will correctly evaluate such investments and their attendant risks
or that such investments will be profitable to the Trust. In addition, the
securities may fluctuate in value and such fluctuations could be material.
See "RISK FACTORS."
The period of time during which the Trust was permitted to reinvest
proceeds from sales or refinancings in additional equipment expired on
September 8, 1996. The Amendment would reinstate the reinvestment period
from the Amendment Date through December 31, 2001 (the "Additional
Reinvestment Period").
Under the Trust Agreement, the Trust may enter into joint ventures with
Affiliates of the Managing Trustee or EFG or any other investment programs
sponsored by EFG; provided that, among other things, the affiliated joint
venturers have substantially identical investment objectives and the
investment by each
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participant in the joint venture is on substantially the same terms and
conditions. If the Amendment is adopted, the Trust will be permitted to
enter into joint ventures with affiliated joint venturers that have
different investment objectives. Investment by the joint venturers may be
on varying terms and conditions reflecting their respective participations;
provided that the Managing Trustee will enter into such joint ventures only
if it believes that it is in the best interests of the Beneficiaries to do
so, and the Trust's participation is on terms and conditions which are fair
to the Trust and the Beneficiaries, taking into account the participation of
the other affiliated venturers, and will allow the Trust to better attain
its revised investment objectives. See "CONFLICTS OF INTEREST."
The Managing Trustee believes that the requirements that all affiliated
venturers have substantially identical objectives and invest on
substantially the same terms and conditions unnecessarily limit the
opportunity of the Trust to co-invest with Affiliates of the Managing
Trustee. It may be beneficial to each venturer, including the Trust, that
the venture be structured so that each venturer participates in a manner
taking into account its particular investment objectives. For example, if
an Affiliate of the Trust does not have as one of its primary objectives
current cash distributions, it may be beneficial to provide the Trust a
priority return on current cash flow while the other venturer has a priority
return on sale or residual proceeds. Further, the Trust has a finite life
and is not a taxable entity whereas another venturer may have an infinite
life and may be a taxable entity.
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The Trust requires liquid assets to fund the repair, maintenance or
upgrading of equipment. Most of the Trust's leases are triple net,
requiring the lessee to maintain and repair equipment during the lease term.
However, as equipment ages and is returned to the Trust, upgrades or other
improvements thereto may be required to improve the marketability of the
equipment. In instances where a lease has a number of years to run prior to
expiration, the Trust may hold significant liquid assets to satisfy
potential upgrades and improvements, while not needing to use such assets in
the near term. Currently, the Trust is permitted only to invest its cash in
certain limited investments, generally bank deposits and government
securities. The Managing Trustee believes that permitting the Trust to
invest in other types of securities with varying terms, including
longer-term securities that are marketable or traded on an exchange, will
provide a greater overall return to the Trust.
Currently, the amount of outstanding debt which may be incurred by the
Trust may not exceed 60% of the purchase price of assets owned by the Trust.
The Amendment would remove this limitation. The Managing Trustee believes
that it may be advisable in the future for the Trust to increase its debt
obligations. Further, long-term debt financing for the Trust currently is
required to be nonrecourse to the Trust and may not be secured by assets of
the Trust other than the assets purchased with the proceeds of the loan.
The Amendment would permit the Trust to issue cross-collateralized and
recourse debt. Although the Trust does not anticipate obtaining recourse
debt, it may be advisable from time to time to borrow against an asset with
a limited lease payment stream. In such event, the
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interest rate a lender would charge would be substantially higher than a
recourse loan to the Trust. Further, the use of cross-collateralized debt
might permit the Trust to obtain a lower cost of financing. Securitized
debt, which includes debt secured by a group of leases (and as such is
cross-collateralized) is among the lowest cost debt available to leasing and
finance companies.
The proportion of the Trust's assets invested in any one type of
security or any single issuer will not be limited. The Managing Trustee
will have full authority relating to the bases and methods for selection of
securities, and the Trust will not be subject to any policy limitations on
the amounts and nature of any non-equipment related securities purchased,
sold or held, provided that the Trust will conduct its activities in such a
manner so as not to be deemed an investment company under the Investment
Company Act of 1940, as amended (the "1940 Act").
Conducting activities in such a manner so as not to be deemed an
investment company under the 1940 Act generally means that the Trust does
not intend to enter the business of investing in securities and that no more
than 40% of the Trust's total assets will be invested in securities. While
the Trust intends to operate so as to not be treated as an investment
company under the 1940 Act, if it did not meet the exclusions under the 1940
Act in the future, the Trust would be required to register as an investment
company under the 1940 Act.
RISK FACTORS
Introduction. The Trust was created for the purpose of acquiring and
leasing to third parties a diversified portfolio of capital equipment and
will continue to be subject to the business, investment and tax risks
associated with such activities. In
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addition, adoption of the Amendment will subject the Trust and its
Beneficiaries to additional risks, including those hereinafter discussed.
Additional Investments in General. Under terms of the Trust Agreement,
the Managing Trustee has full power over the business and affairs of the
Trust. Therefore, Beneficiaries are not given an opportunity to approve or
disapprove of decisions, including potential investments, made by the Trust
and the Trust will be able to invest in assets in addition to equipment
without further consent of the Beneficiaries.
The Managing Trustee will have full authority relating to the bases and
methods for selection of securities, and the Trust will not be subject to
any policy limitations on the amounts and nature of any securities
purchased, sold or held, provided that the Trust will conduct its activities
in such a manner so as not to be deemed an investment company under the 1940
Act.
Lessees with Lower Credit Rating. The Managing Trustee may cause the
Trust to lease assets to lessees whose credit rating is lower than the
credit standards currently in effect. There can be no assurance as to the
ability of any lessee to perform its financial and other obligations under
its lease. New lessees may have a lower credit rating than that of the
original lessees, thereby increasing the possibility of default.
Investments in Securities. Investments in securities will pose risks
different from those associated with investments in equipment. For example,
equity securities fluctuate in value, often based on factors unrelated to
the value of the issuer of the securities, and such fluctuations can be
pronounced. In addition, even
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though interest-bearing debt securities are investments which may promise a
stable stream of income, the prices of such securities generally are
inversely affected by changes in interest rates and, therefore, are subject
to the risk of market price fluctuations. Also, some securities which may
provide the potential for higher yields may also entail a commensurately
greater risk of loss.
Reinvestment Period Reinstated. The Amendment will reinstate the
reinvestment period from the Amendment Date through December 31, 2001 and
the Managing Trustee will seek to invest in additional assets which will
increase the level of distributions to the Beneficiaries. However,
reinvestment will have the effect of significantly deferring distributions
which would otherwise have been made from proceeds of sales or refinancings,
and there is no assurance that the future distributions will be
significantly increased as a result.
Cross-Collateralized, Recourse and Increased Debt. Permitting the
Trust to issue cross-collateralized debt or recourse debt may result in a
significantly greater loss to the Trust than from non-recourse or
non-cross-collateralized debt in the event that the Trust defaults on such
debt. Further, permitting the Trust to increase its debt level above current
limitations may subject the Trust to increased risk of default and loss of
its assets.
The 1940 Act. The Trust intends to conduct its activities so as not to
be deemed an investment company under the 1940 Act. However, if it does not
in the future meet the requirements for exclusion from the 1940 Act, the
Trust would be subjected to substantial reporting and regulatory constraints
which could adversely affect its operations and the level of distributions
made to the Beneficiaries.
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1998 Special Distribution and Other Benefits of Settlement. The 1998
Special Distribution, the reduction in the Class B Capital Distribution and
restrictions on the voting of Equis II Corporation as Class B Beneficiary
will be made or effected only if the Settlement is attained in the Class
Action Lawsuit, as to which there can be no assurance.
CONFLICTS OF INTEREST
The Managing Trustee's selection of non-equipment investments may be
influenced by factors other than the best interests of the Trust and
maximization of Beneficiary distributions. Such factors may include, but
are not limited to, whether EFG or its Affiliates have independent
investments in such assets which may benefit from investments by the Trust.
The Amendment would permit the Trust to engage in joint ventures with
affiliates which have differing investment objectives and policies and on
terms which differ significantly from those of the Trust. While the
Managing Trustee is required to structure such transactions so that they are
fair to the Trust, the Managing Trustee and its Affiliates will have a
conflict of interest because of participation by EFG and its Affiliates.
Further, it should be noted that the Trust Agreement provides that the
Managing Trustee and its Affiliates are permitted to have other business
interests and may engage in other business ventures of any nature
whatsoever, and may compete directly or indirectly with the business of the
Trust.
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CONSENT OF BENEFICIARIES
This Solicitation Statement is being furnished to Beneficiaries in
connection with the solicitation by the Trust of the consent of the
Beneficiaries to the Amendment. NO FORMAL MEETING OF BENEFICIARIES WILL BE
HELD.
A properly executed consent form received by the Managing Trustee will
be voted in accordance with the direction indicated by the Beneficiary on
the form. If no direction is indicated, a properly executed consent form
received by the Managing Trustee will be voted in favor of the Amendment.
To be counted, a consent form must be received by the Managing Trustee no
later than _____________, 1998, subject to extension at the discretion of
the Managing Trustee. The consent form may be returned to the Managing
Trustee by mail or hand-delivery c/o Corporate Investor Communications,
Inc., 111 Commerce Road, Carlstadt, NJ 07072. A stamped envelope addressed
to the Managing Trustee is enclosed. The consent form may also be returned
to the Managing Trustee by facsimile at (201) 804-8693. To be valid, a
consent form must be signed by the record owner(s) of the Interests
represented thereby as listed in the records of the Trust as of ___________,
1998. Pursuant to Section 12.1 of the Trust Agreement, a written consent
may not be withdrawn or voided once it is received by the Managing Trustee.
All questions as to the validity (including time of receipt) of all consent
forms will be determined by the Managing Trustee, which determinations will
be final and binding. As of _________, 1998, there were 582,657 Class A
Interests and 1,000,961 Class B Interests outstanding. Accordingly, under
the Trust Agreement,
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the Consent of Beneficiaries holding more than 791,809 Interests will be
required for the adoption of the Amendment.
Affiliates of the Managing Trustee own 839 Class A Interests, all of
which will be voted in favor of the Amendment.
While under no obligation to do so, Equis II Corporation has advised
the Managing Trustee that it will vote all of its Class B Interests with
respect to the Amendment in the same manner in which the majority of the
Class A Interests are actually voted (i.e., for this purpose, the Class A
Interests for which no consent form is actually received or which abstain
will not be taken into account.) The Amendment will be adopted or rejected
based upon the vote of the majority of the Class A Interests actually voted
(including the votes of Affiliates of the Managing Trustee). Accordingly,
the Amendment will be adopted no matter how few Class A Interests are voted,
provided a majority of those Interests are voted in favor of the Amendment.
This Solicitation Statement has been prepared under the direction of
the Managing Trustee. The costs of preparing and mailing this Solicitation
Statement and the enclosed consent form and soliciting consent will be paid
by the Trust. In addition to soliciting the consent of Beneficiaries by
mail, representatives of the Managing Trustee may, at the Trust's expense,
solicit the consent of Beneficiaries by telephone, telegraph, in person or
by other means. In addition, the Managing Trustee has retained Corporate
Investor Communications, Inc. to solicit the consent. The fees of Corporate
Investor Communications, Inc. will be paid by the Trust and are estimated to
be $2,000.
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Pursuant to Section 11.2 of the Trust Agreement, the consent of
Beneficiaries holding more than 50% in the aggregate of the Interests held
by all Beneficiaries is required for approval of the Amendment. Upon
receipt of the requisite approval, it will be binding on all Beneficiaries,
whether or not they consented.
THE MANAGING TRUSTEE RECOMMENDS THAT THE AMENDMENT BE APPROVED AND
URGES EACH BENEFICIARY TO COMPLETE AND RETURN THE ENCLOSED CONSENT FORM
IMMEDIATELY. ANY BENEFICIARY WITH QUESTIONS RELATING TO THE AMENDMENT
SHOULD TELEPHONE THE TRUST AT (888) 204-8031.
ADDITIONAL INFORMATION CONCERNING THE TRUST
The Class A Interests are registered under the Securities Exchange Act
of 1934 and as a result the Trust files annual and quarterly reports and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information may be inspected at the
Commission's public reference facilities, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as the following regional offices: 7 World
Trade Center, 13th floor, New York, New York 10048, and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and
copies of such materials may be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, the Trust's Annual Report on Form 10-K for
the year ended December 31, 1996, and its Quarterly Reports for the
three-month, six and nine periods ended March 31, 1997, June 30 and
September 30, respectively, may be obtained by Beneficiaries from the Trust
by writing to the Trust c/o Equis Financial Group at 88 Broad Street,
Boston, Massachusetts 02110.
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EXHIBIT A
The full text of the proposed Amendment to the Trust Agreement
is as follows:
AMENDMENT NO. 1
to
SECOND AMENDED AND RESTATED DECLARATION OF TRUST
THE SECOND AMENDED AND RESTATED DECLARATION OF TRUST OF AFG
INVESTMENT TRUST B made and agreed to by the Trustees and the Beneficiaries
as of July 15, 1997, (the "Trust Agreement"), is hereby amended as of
_________, 1998, as follows:
1. "Section 1.2 Location" is hereby deleted and the
following substituted in lieu thereof: The Trust shall maintain an office at
88 Broad Street, Boston, Massachusetts 02110, and may have such other
offices or places of business as the Managing Trustee may from time to time
determine as necessary or expedient.
2. The purposes of the Trust are as set forth in Section 1.4, as
supplemented and modified by the Solicitation Statement.
3. The following terms are hereby added to "ARTICLE II
- --Definitions" in replacement of the corresponding terms in such Article:
"Assets" means, collectively, any personal property, including
equipment, other personal property and Securities of any type and
description, whether or not related to such personal property, and any
interest of the Trust therein, whether directly or indirectly through a
nominee, Joint Venture or otherwise.
<PAGE>
"Asset Management" means personnel and services necessary to the
activities of the Trust relating to its Assets including but not limited to
leasing and re-leasing of Assets, collecting revenues, paying operating
expenses, determining that the Assets are used in accordance with all
operative contractual arrangements, providing clerical and bookkeeping
services necessary to the operation of Assets and management of any
Securities.
4. The following terms are hereby added to "ARTICLE -- II
Definitions" in their proper alphabetical position:
"Class Action Lawsuit" means the class and derivative action brought
on June 24, 1997, by Leonard Rosenblum, J/B Investment Partners, Small and
Barbara Barmack, Partners, and Barbara Hall against EFG and a number of its
Affiliates, together with any related class and derivative actions.
"Securities" means securities of any type or description which are
acquired by the Trust.
"Solicitation Statement" means the Solicitation Statement of the Trust
dated _________, 1998, as amended or supplemented from time to time, pursuant
to which the Consent of the Beneficiaries was obtained, among other things,
to modify the investment objectives and policies of the Trust.
5. Section 4.2(b)(iv) is hereby deleted and the following
substituted in lieu thereof:
(iv) for a period continuing through September 8, 1996, and for
an additional period commencing as of
[insert effective date of Amendment No. 1] and continuing through
December 31, 2001, to reinvest Cash from Sales and
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Refinancings in additional Assets; provided, however, that the
Lease of any Asset so acquired shall have a term which shall
expire not later than eleven years after Final Closing, or, if
such term is scheduled to expire more than eleven years after
Final Closing, that such asset will be sold within such period;
and provided, further, that sufficient Distributions are made
during the relevant period of Trust operations to enable the
Beneficiaries to pay any state and federal income taxes arising
from the Sale or Refinancing transaction (assuming the
Beneficiaries are in a combined federal and state marginal tax
bracket of 33% or the rate effective at the time of the Sale or
Refinancing transaction);
6. Clause (vii) of Section 4.5 is hereby deleted.
7. The first sentence of Section 5.1(c) of the Trust Agreement is
hereby deleted and the following inserted in lieu thereof:
(c) For Asset Management, the Trust shall pay an Asset
Management Fee, payable monthly, equal to the lesser of (A) the
fees which the Managing Trustee reasonably believes to be
competitive for similar services for similar assets or (B) either
(i) 5% of gross lease rental revenues of the Trust from Operating
Leases and 2% of gross lease rental revenues of the Trust from
Full Payout Leases for the month for which such payment is being
made with respect to any Assets acquired by the Trust on or prior
to March 31, 1998, or (ii) 2% of gross lease rentals with respect
to leases of Assets acquired on or after April 1, 1998, or (iii)
1/12th of 1% of the fair market value (or, if
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<PAGE>
unattainable, the cost) of any Securities or other Assets (other
than equipment).
8. Section 7.1 of the Trust Agreement is hereby deleted and the
following inserted in lieu thereof:
The Managing Trustee shall use its best efforts to cause the Trust to
follow the investment objectives and policies set forth in the Class A
Prospectus, as modified by the Solicitation Statement. The Managing Trustee
may not make substantial or material modifications in such investment
objectives without Majority Consent. All funds held by the Trust which are
not invested in Assets (including subscription payments upon their release
to the Trust) may be invested by the Trust in Permitted Investments. The
Trust shall not redeem or repurchase Interests except to the extent that
such Interests are forfeited in order to (a) prevent the assets of the Trust
from being deemed plan assets or (b) prevent Foreign Beneficiaries from
remaining Trust Beneficiaries under certain circumstances provided herein or
(c) as permitted by Section 9.6. The Managing Trustee shall use its best
efforts and in particular shall only acquire Securities in such a manner to
ensure that the Trust shall not be deemed an investment company, as such
term is defined in the Investment Company Act of 1940.
9. Section 8.1(d) is hereby deleted and the following is hereby
substituted in lieu thereof:
(d) Promptly after the Class B Closing the Trust will make the
Special Class A Distribution to the Class A Beneficiaries.
Promptly after settlement of the Class Action Lawsuit, the Trust
will make the Second Special
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Class A Distribution to the Class A Beneficiaries of record as of
September 1, 1997, or their successors and assigns.
10. The following sentence is hereby added at the end of
Section 8.1(e). In the event that a final settlement of the Class Action
Lawsuit has been attained on or prior to July 17, 1999, then up to
$1,126,596 of any remaining Class B Proceeds will be retained by the Trust
and invested in additional Assets.
11. Except as specifically amended hereby, the Trust Agreement as in
effect prior to this Amendment thereof remains in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment No. 1 as of __________________, 1998.
MANAGING TRUSTEE: CLASS A AND B BENEFICIARIES:
AFG ASIT Corporation By: AFG ASIT Corporation, as
By: _______________________________ Attorney-in-Fact for each such Person
Authorized Officer pursuant to Article XIII of the
Trust Agreement
DELAWARE TRUSTEE:
Wilmington Trust Company By: ________________________________
Authorized Officer
By: ________________________________
Authorized Officer
SPECIAL BENEFICIARY:
Equis Financial Group
(formerly named American Finance
Group)
By: ________________________________
Authorized Officer
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<PAGE>
AFG INVESTMENT TRUST B
88 Broad Street
Boston, Massachusetts 02110
Consent of Beneficiary
(SOLICITED ON BEHALF OF THE MANAGING TRUSTEE)
I have received and reviewed the Solicitation Statement dated
_______________, 1998 (the "Solicitation Statement"), from AFG Investment
Trust B (the "Trust") concerning the proposed amendment to the Trust
Agreement of the Trust. I hereby vote
______ FOR ______ AGAINST ______ ABSTAIN
for purposes of Article XII, Section 12.1, of the Trust Agreement to the
amendment of the Trust Agreement as set forth in the Solicitation Statement.
A properly executed Consent of Beneficiary received by the Managing
Trustee will be voted in accordance with the direction indicated hereby. If
no direction is indicated, a properly executed Consent of Beneficiary
received by the Managing Trustee will be voted in favor of the Amendment.
Aggregate Number of Class A and Class B Beneficiary Interests: __________
IF THE BENEFICIARY IS AN INDIVIDUAL
(IF JOINT TENANTS OR TENANTS-IN-COMMON,
BOTH OWNERS MUST SIGN):
____________________________ ____________________________
Signature Date Signature Date
____________________________ ____________________________
Print Name Print Name
IF THE BENEFICIARY IS A CORPORATION,
PARTNERSHIP OR TRUST:
___________________________
Print Name of Entity
By:
_______________________
Signature Date
________________________
Print Name and, if applicable, Title
PLEASE RETURN THIS CONSENT FORM NO LATER THAN _______________________
(SUBJECT TO EXTENSION AT THE DISCRETION OF THE MANAGING TRUSTEE), TO:
CORPORATE INVESTOR COMMUNICATIONS, INC.
111 COMMERCE ROAD
CARLSTADT, NEW JERSEY 07072-2586
UNIT HOLDER QUESTIONS: CALL (888) 204-8031
FAX VOTES TO: (201) 804-8693
