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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 C
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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DRAFT
AFG INVESTMENT TRUST C
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 C,
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 $1,513,639 (the "1998
Special Distribution") to the Class A Beneficiaries of record as of
September 1, 1997, or their successors and assigns for the proceeds of the
offering of the Class B Interests (the "Class B Proceeds"); (b) provide
for the retention of $3,405,688 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 property, including equipment and other
personal property and securities of any
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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-collaterialized 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,
2002;
(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 Assets (other than cash and cash
equivalents) equal to 1% of the fair market value (or, if unobtainable,
the cost) of such Assets; and
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(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 1,792,353 Class A Interests and 3,024,740
Class B Interests outstanding. Accordingly, under the Trust Agreement, the
consent of Beneficiaries holding more than 2,408,547 Interests will be
required for the adoption of the Amendment.
Affiliates of the Managing Trustee own 9,210 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 3,019,220 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. 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
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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
<TABLE>
<S> <C>
SUMMARY OF AMENDMENT 7
BACKGROUND AND PURPOSES OF AMENDMENT 9
RISK FACTORS 19
CONFLICTS OF INTEREST 21
CONSENT OF BENEFICIARIES 22
ADDITIONAL INFORMATION CONCERNING THE TRUST 24
</TABLE>
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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 $1,513,639 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 3,024,740 Class B Interests for
$15,123,700 (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 $3,405,688 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.
Previously, the Trust was permitted to acquire only
equipment to be leased to creditworthy lessees. The Amendment would permit
the Trust to acquire
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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 limitations 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 2, 1997. The Amendment would reinstate the reinvestment
period from the Amendment Date through December 31, 2002 (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 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
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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 C is a Delaware business trust which was
created on August 31, 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 "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
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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 an aggregate of 2,011,014 beneficiary
interests through 9 serial closings during the period commencing December 15,
1992 and ending September 2, 1993 (the "Class A Interests") , which are
currently held by 1,928 investors (the "Class A Beneficiaries"). On July 18,
1997, the Trust issued 3,024,740 Class B Subordinated Interests (the "Class B
Interests") of which (i) 3,019,220 are currently held by Equis II
Corporation, and (ii) 5,520 are held by 10 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 as the Special Class A
Distribution and has applied $2,291,567 to redeem Class A Interests through
March 6, 1998. The Trust currently retains $9,566,189 in Class B Proceeds.
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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 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.
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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 $1,513,639 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 $3,405,688 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 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.
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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 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
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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 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.)
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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 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
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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 2, 1997. The Amendment would reinstate the reinvestment period
from the Amendment Date through December 31, 2002 (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 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
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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.
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
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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 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
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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 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,
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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 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, 2002 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.
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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.
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
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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.
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, N.J. 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
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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 1,792,353 Class A Interests and 3,024,740 Class B Interests outstanding.
Accordingly, under the Trust Agreement, the Consent of Beneficiaries holding
more than 2,408,547 Interests will be required for the adoption of the
Amendment.
Affiliates of the Managing Trustee own 9,210 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
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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.
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
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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 C 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 2, 1997,
and for an additional period commencing as of [insert effective
date of Amendment No. 1] and continuing through December 31,
2002, to reinvest Cash from Sales and Refinancings in
additional Assets; provided, however, that the Lease of any
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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 unattainable, the cost) of any Securities or other
Assets (other than equipment).
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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 Class A
Distribution to the Class A Beneficiaries of record as of
September 1, 1997, or their successors and assigns.
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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 $3,405,688
of any remaining Class B Proceeds will be retained by the Trust and invested
in additional Assets.
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
Attorney-in-Fact for each such Person
By: pursuant to Article XIII of the Trust
------------------------------- Agreement
Authorized Officer
By:
DELAWARE TRUSTEE: -------------------------------
Wilmington Trust Company Authorized Officer
By:
--------------------------------
Authorized Officer
SPECIAL BENEFICIARY:
Equis Financial Group
(formerly named American Finance Group)
By:
-------------------------------
Authorized Officer
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AFG INVESTMENT TRUST C
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 C (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
